<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 33-40991
File No. 811-6322
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No._____
Post-Effective Amendment No. 29 [X]
----
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 29 [X]
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DELAWARE POOLED TRUST, INC.
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(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 255-1244
--------------
Richard J. Flannery, 1818 Market Street, Philadelphia, PA 19103
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(Name and Address of Agent for Service)
Approximate Date of Public Offering: November 15, 1999
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[x] on November 15, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate:
[ ] This post-effective amendment designates a new effective date for
a previously filed post-effective amendment
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 29 to Registration File No. 33-40991 includes
the following:
1. Facing Page
2. Contents Page
3. Part A - Prospectus(es)
4. Part B - Statement of Additional Information
5. Part C - Other Information
Signatures
The Prospectuses dated March 1, 1999 describing the Class A Shares, Class B
Shares, Class C Shares and Institutional Class Shares of The Real Estate
Investment Trust Portfolio have not been affected by this Amendment No. 29 to
the Registration Statement and remain current until such time in the future that
the Registrant deems their amendment necessary.
<PAGE>
DELAWARE POOLED TRUST, INC.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103
Prospectus
November 15, 1999
This Prospectus offers 24 Portfolios. Each Portfolio provides a no-load
investment alternative for institutional clients and high net-worth individuals.
Delaware Pooled Trust, Inc. (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.
<TABLE>
<S> <C>
EQUITY ORIENTED FIXED-INCOME ORIENTED
The Large-Cap Value Equity Portfolio The Intermediate Fixed Income Portfolio
The Core Equity Portfolio The Aggregate Fixed Income Portfolio
(formerly The Growth and Income Portfolio) The High-Yield Bond Portfolio
The Balanced Portfolio The Diversified Core Fixed Income Portfolio
The Equity Income Portfolio The Global Fixed Income Portfolio
The Select Equity Portfolio The International Fixed Income Portfolio
The Mid-Cap Growth Equity Portfolio
(formerly named The Aggressive Growth Portfolio)
The Mid-Cap Value Equity Portfolio
(formerly named The Small/Mid-Cap
Value Equity Portfolio)
The Small-Cap Value Equity Portfolio
The Small-Cap Growth Equity Portfolio
The Real Estate Investment Trust Portfolio + ASSET ALLOCATION
The Real Estate Investment Trust Portfolio II ++ The Asset Allocation Portfolio
The Global Equity Portfolio
The International Equity Portfolio
The Labor Select International Equity Portfolio
The Emerging Markets Portfolio
The International Small-Cap Portfolio
The International Large-Cap Equity Portfolio
</TABLE>
+ The Real Estate Investment Trust Portfolio offers five classes of shares.
This Prospectus relates only to The Real Estate Investment Trust Portfolio
class, which commenced operations on November 4, 1997.
++ The Real Estate Investment Trust Portfolio and The Real Estate Investment
Trust Portfolio II are sometimes referred to collectively as "The Real
Estate Investment Trust Portfolios" in this Prospectus.
The Asset Allocation Portfolio is a "fund of funds" which primarily invests in
several of the Portfolios of the Fund. It is a series of Delaware Group
Foundation Funds (Foundation Funds), which is also a mutual fund. Although The
Asset Allocation Portfolio is technically not a Portfolio of the Fund, all
references in this Prospectus to "Portfolio" or "the Fund" shall include The
Asset Allocation Portfolio, where appropriate.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS AND ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Risk/Return Summary: Investments, Risks and Performance
The Large-Cap Value Equity Portfolio Page
The Core Equity Portfolio
The Balanced Portfolio
The Equity Income Portfolio
The Select Equity Portfolio
The Mid-Cap Growth Equity Portfolio
The Mid-Cap Value Equity Portfolio
The Small-Cap Value Equity Portfolio
The Small-Cap Growth Equity Portfolio
The Real Estate Investment Trust Portfolios
The Global Equity Portfolio
The International Equity Portfolio
The Labor Select International Equity Portfolio
The Emerging Markets Portfolio
The International Small-Cap Portfolio
The International Large-Cap Equity Portfolio
The Intermediate Fixed Income Portfolio
The Aggregate Fixed Income Portfolio
The High-Yield Bond Portfolio
The Diversified Core Fixed Income Portfolio
The Global Fixed Income Portfolio
The International Fixed Income Portfolio
The Asset Allocation Portfolio
Additional Investment Information
Risk Factors Page
Management of the Fund
Shareholder Services
How to Purchase Shares
Redemption of Shares
Valuation of Shares
Dividends and Capital Gains Distributions
Taxes
Financial Highlights
Appendix A
Appendix B
-2-
<PAGE>
Profile: The Large-Cap Value Equity Portfolio
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What is the Portfolio's Goal?
The Large-Cap Value Equity Portfolio seeks maximum long-term total return,
consistent with reasonable risk. Although the Portfolio will strive to
achieve its goal, there is no assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio invests 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, we place 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 it will
invest in sponsored or unsponsored American Depositary Receipts actively traded
in the United States. Under normal market conditions, at least 65% of the
Portfolio's total assets will be invested in large-cap equity securities which
include common stocks, securities convertible into common stocks and securities
having common stock characteristics, such as rights and warrants to purchase
common stocks, and preferred stock. The Portfolio may hold cash or invest in
short-term debt securities or other money market instruments (normally, not more
than 5% of its total assets) when, in our opinion, such holdings are prudent
given the prevailing market conditions. For purposes of this Portfolio, large
capitalization stocks will be defined to mean those whose issuers have a market
capitalization of $5 billion or more (at the time of purchase).
We seek to invest in high-yielding equity securities and believe that, although
capital gains are important, the dividend return component will be a significant
portion of the expected total return. We believe 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.
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. This Portfolio
will be affected primarily by changes in stock prices.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-3-
<PAGE>
How has The Large-Cap Value Equity Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in The Large-Cap Value Equity Portfolio. We show how returns for The Large-Cap
Value Equity Portfolio have varied over the past six calendar years, as well as
average annual returns for one and five years and since inception - with average
annual returns compared to the performance of the S&P 500 Composite Stock Price
Index. The S&P 500 Index is an unmanaged index of 500 widely held common stocks
that is often used to represent performance of the U.S. stock market. The index
is unmanaged and doesn't include the actual costs of buying, selling, and
holding securities. The Portfolio's past performance does not necessarily
indicate how it will perform in the future. During the periods shown, Delaware
Management Company has voluntarily waived and paid expenses of The Large-Cap
Value Equity Portfolio. Returns would be lower without the voluntary waiver and
payment.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN
(THE LARGE-CAP VALUE EQUITY PORTFOLIO)]
Year-by-year total return (The Large-Cap Value Equity Portfolio)
The Large-Cap Value Equity Portfolio
1993 19.44%
1994 3.42%
1995 34.06%
1996 20.60%
1997 30.53%
1998 11.84%
As of September 30, 1999, The Large-Cap Value Equity Portfolio had a calendar
year-to-date return of -3.13%. During the periods illustrated in this bar chart,
The Large-Cap Value Equity Portfolio's highest quarterly return was 14.92% for
the quarter ended June 30, 1997 and its lowest quarterly return was -10.87% for
the quarter ended September 30, 1998.
Average annual returns for periods ending 12/31/98
The Large-Cap Value Equity S&P 500
Portfolio
1 year 11.84% 28.56%
5 years 19.54% 24.03%
Since inception (2/3/92) 18.92% 20.11%
-4-
<PAGE>
What are The Large-Cap Value Equity Portfolio's fees and expenses? Shareholder
fees are fees paid directly from your investment.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None
a percentage of offering price
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None
dividends
----------------------------------------------------------------
Purchase reimbursement fees None
----------------------------------------------------------------
Redemption reimbursement fees None
----------------------------------------------------------------
Exchange fees None
----------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Large-Cap Value Equity
Portfolio's assets.
-----------------------------------------------------------------
Investment advisory fees(1) 0.55%
-----------------------------------------------------------------
Distribution and service (12b-1) fees None
-----------------------------------------------------------------
Other expenses(1) 0.16%
-----------------------------------------------------------------
Total operating expenses(1) 0.71%
-----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(2) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
---------------------------
1 year $73
---------------------------
3 years $227
---------------------------
5 years $395
---------------------------
10 years $883
---------------------------
(1) Delaware Management Company has agreed to waive fees and pay expenses
through April 30, 2000 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 0.68% of average daily net assets. The fees and expenses
shown in the table do not reflect this voluntary expense cap.
(2) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
-5-
<PAGE>
Profile: The Core Equity Portfolio
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What are the Portfolio's Goals?
The Core Equity Portfolio seeks capital appreciation and income. Although
the Portfolio will strive to achieve its goals, there is no assurance that
it will.
What are the Portfolio's main investment strategies? The Portfolio seeks to
achieve its objectives by investing primarily in income-producing common stocks,
with a focus on common stocks that we believe have the potential for above
average dividend increases over time. Under normal circumstances, the Portfolio
will generally invest at least 65% of its total assets in dividend paying common
stocks.
In selecting stocks for the Portfolio, we will focus primarily on dividend
paying common stocks issued by companies with market capitalizations in excess
of $100 million but we are not precluded from purchasing shares of companies
with market capitalizations of less than $100 million. In seeking stocks with
potential for above average dividend increases, we will consider such factors as
the historical growth rate of a company's dividends, the frequency of prior
dividend increases, the issuing company's potential to generate cash flows and
the price/earnings multiple of the stock relative to the market. We will
generally avoid stocks that we believe are overvalued and may select stocks with
current dividend yields that are lower than the current yield of the S&P 500
Index in exchange for anticipated dividend growth.
While the Portfolio's objectives may best be attained by investing in common
stocks, it may also invest in other securities including, but not limited to,
convertible and preferred securities, shares or convertible bonds issued by real
estate investment trust (REITS), rights and warrants to purchase common stock
and various types of fixed-income securities, such as U.S. government and
government agency securities, corporate debt securities, and bank obligations,
and may also engage in options and futures transactions. The Portfolio may
invest up to 5% of its assets in foreign securities and, without limitation in
sponsored and unsponsored ADRs that are actively traded in the U.S.
In addition, in unusual market conditions, in order to meet redemption requests,
for temporary defensive purposes and pending investment, the Portfolio may hold
a substantial portion of its assets in cash or short-term fixed-income
obligations. During such temporary periods, the Portfolio may not be able to
achieve its investment goals.
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. The Portfolio
will be affected primarily by changes in stock prices.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-6-
<PAGE>
What are The Core Equity Portfolio's fees and expenses?
Shareholder fees are fees paid directly from your investment.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None
a percentage of offering price
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None
dividends
----------------------------------------------------------------
Purchase reimbursement fees None
----------------------------------------------------------------
Redemption reimbursement fees None
----------------------------------------------------------------
Exchange fees None
----------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Core Equity
Portfolio's assets.
-----------------------------------------------------------------
Investment advisory fees(1) 0.55%
-----------------------------------------------------------------
Distribution and service (12b-1) fees None
-----------------------------------------------------------------
Other expenses(1/2) 1.19%
-----------------------------------------------------------------
Total operating expenses(1) 1.74%
-----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(3) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
---------------------------
1 year $177
---------------------------
3 years $548
---------------------------
(1) Delaware Management Company has agreed to waive fees and pay expenses
through April 30, 2000 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 0.68% of average daily net assets. The fees and expenses
shown in the table do not reflect this voluntary expense cap.
(2) Other expenses are based on estimated amounts for the current fiscal year.
(3) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
-7-
<PAGE>
Profile: The Balanced Portfolio
- -------------------------------
What is the Portfolio's goal?
The Portfolio seeks a balance of capital appreciation, income and
preservation of capital. Although the Portfolio will strive to achieve
its goal, there is no assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio invests
primarily in common stocks of established companies that we believe have the
potential for long-term capital appreciation. We focus on dividend-paying,
undervalued stocks. In addition, the Portfolio invests at least 25% of its
assets in various types of fixed-income securities, including U.S. government
securities and corporate bonds. Portfolios with this mix of stocks and bonds are
commonly known as "balanced" portfolios.
To seek current income and help preserve capital, we generally invest in bonds
that have bond ratings in the top four grades according to a nationally
recognized statistical rating organization at the time we buy them. We buy
unrated bonds only if we determine them to be equivalent to one of the top four
grades. Each bond in the portfolio will have a maturity between five and 30
years, and the average maturity of the portfolio will typically be between five
and ten years.
We conduct ongoing analysis of the different markets to select an appropriate
mix of stocks and bonds for the current economic and investment environment.
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. This Portfolio
will be affected primarily by declines in stock and bond prices which can be
caused by a drop in the stock or bond market, an adverse change in interest
rates or poor performance in specific industries or companies.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-8-
<PAGE>
What are The Balanced Portfolio's fees and expenses?
Shareholder fees are fees paid directly from your investment.
- -------------------------------------------------------------------
Maximum sales charge (load) imposed on None
purchases as a percentage of offering price
- -------------------------------------------------------------------
Maximum sales charge (load) imposed on None
reinvested dividends
- -------------------------------------------------------------------
Purchase reimbursement fees None
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Redemption reimbursement fees None
- -------------------------------------------------------------------
Exchange fees None
- -------------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Balanced Portfolio's
assets.
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Investment advisory fees(1) 0.55%
- -------------------------------------------------------------------
Distribution and service (12b-1) fees None
- -------------------------------------------------------------------
Other expenses(1/2) 0.16%
- -------------------------------------------------------------------
Total operating expenses(1) 0.71%
- -------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(3) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
- ---------------------------------
1 year $ 73
- ---------------------------------
3 years $ 227
- ---------------------------------
(1) Delaware Management Company has agreed to waive fees and pay expenses
through April 30, 2000 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 0.68% of average daily net assets. The fees and expenses
shown in the table do not reflect this voluntary expense cap.
(2) Other expenses are based on estimates for the current fiscal year.
(3) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
-9-
<PAGE>
Profile: The Equity Income Portfolio
- ------------------------------------
What is the Portfolio's goal?
The Equity Income Portfolio seeks to provide the highest possible current
income by investing primarily in common stocks that provide the potential
for income and capital appreciation without undue risk to principal.
Although the Portfolio will strive to achieve its goal, there is no
assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio invests
primarily in dividend-paying stocks of large companies that we believe have
long-term total return potential. That is, they offer both current income
through dividends and capital growth potential through increases in stock
prices. Our focus on stocks with high dividend yields is generally considered to
be a value-oriented investment approach. Typically, we consider buying a stock
when its dividend yield is higher than the average of the unmanaged S&P 500
Composite Stock Price Index. We then consider the financial strength of the
company, its management and developments affecting the security, the company or
its industry. If the yield on a stock in the portfolio falls below the average
of the S&P 500, the Portfolio generally sells that stock.
The Equity Income Portfolio also may invest up to 15% of its net assets in
high-yield, higher risk corporate bonds, commonly known as junk bonds. These
bonds involve the risk that the issuing company may be unable to pay interest or
repay principal. However, they can offer high income potential, which we believe
can make a positive contribution to the Portfolio's performance. We carefully
evaluate individual bonds before they are purchased and monitor them carefully
while in the Portfolio. We look closely at each company and the characteristics
of the bond to judge the ability of the company to pay interest and repay
principal.
We conduct ongoing analysis of both the stock and bond markets to determine how
much of the Portfolio should be allocated to stocks and how much to high-yield
bonds.
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. This Portfolio
will be affected by declines in stock and high-yield bond prices, which could be
caused by a drop in the stock market, interest rate changes, problems in the
economy or poor performance of particular companies or sectors.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-10-
<PAGE>
What are The Equity Income Portfolio's fees and expenses?
Shareholder fees are fees paid directly from your investment.
- -------------------------------------------------------------------
Maximum sales charge (load) imposed on None
purchases as a percentage of offering price
- -------------------------------------------------------------------
Maximum sales charge (load) imposed on None
reinvested dividends
- -------------------------------------------------------------------
Purchase reimbursement fees None
- -------------------------------------------------------------------
Redemption reimbursement fees None
- -------------------------------------------------------------------
Exchange fees None
- -------------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Equity Income
Portfolio's assets.
- -------------------------------------------------------------------
Investment advisory fees(1) 0.55%
- -------------------------------------------------------------------
Distribution and service (12b-1) fees None
- -------------------------------------------------------------------
Other expenses(1/2) 0.17%
- -------------------------------------------------------------------
Total operating expenses(1) 0.72%
- -------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(3) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
- ---------------------------------
1 year $ 74
- ---------------------------------
3 years $ 230
- ---------------------------------
1 Delaware Management Company has agreed to waive fees and pay expenses
through April 30, 2000 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 0.68% of average daily net assets. The fees and expenses
shown in the table do not reflect this voluntary expense cap.
(2) Other expenses are based on estimates for the current fiscal year.
(3) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
-11-
<PAGE>
Profile: The Select Equity Portfolio
- ------------------------------------
What is the Portfolio's goal?
The Select Equity Portfolio seeks to provide maximum long-term capital
appreciation. Although the Portfolio will strive to achieve its goal,
there is no assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio invests
primarily in exchange-traded equity securities. At any point in time, the
Portfolio will hold between 20 and 30 different stocks. The securities we select
must pass through three screens. First, we only look at stocks that have already
been picked by our portfolio managers for inclusion in other funds in the
Delaware Investments Family of Funds. Second, we apply quantitative models which
rank these stocks based on a combination of their value, growth and risk
characteristics. Third, we perform fundamental analysis on the companies in the
top 25% of the ranking to narrow the list down to the 20 to 30 individual
securities selected for the Portfolio. When a security which is held by the
Portfolio no longer passes these screens, it is generally sold and replaced by a
new security that meets our selection criteria. Because the Portfolio will
continually purchase and sell securities according to the screening process, and
will also purchase or sell securities to maintain an approximately equal
weighting for each security, portfolio turnover is expected to be high, perhaps
between 200% and 300%.
The Portfolio is "non-diversified," which means that it can invest a much
greater portion of its assets in any one company than a "diversified" portfolio
(although the Portfolio does intend to be treated as "diversified" for tax
purposes). The Portfolio may invest in companies of all sizes, including small
capitalization, or "small cap," companies. The Portfolio may be highly
concentrated in particular industries or in closely related industries, although
in general it will not invest more than 25% of its net assets in any one
industry.
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. The Portfolio
will be affected by declines in stock prices, which could be caused by a drop in
the stock market, problems in the economy or poor performance of particular
companies or industry sectors. In particular, because of the small number of
different stocks held by the Portfolio, the effect of a change in the price of
any single stock holding may be magnified. Because the Portfolio may be highly
concentrated in particular industries or in closely related industries, the
Portfolio may be particularly sensitive to changes in economic conditions in
those industries. Small cap stocks may experience much more drastic changes in
prices than stocks of larger capitalized companies because small cap companies
are typically much more sensitive to changes in economic conditions. In
addition, high portfolio turnover can result in higher brokerage costs to the
Portfolio and in higher net taxable gains for you as an investor.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-12-
<PAGE>
What are The Select Equity Portfolio's fees and expenses?
Shareholder fees are fees paid directly from your investment.
- -------------------------------------------------------------------
Maximum sales charge (load) imposed on None
purchases as a percentage of offering price
- -------------------------------------------------------------------
Maximum sales charge (load) imposed on None
reinvested dividends
- -------------------------------------------------------------------
Purchase reimbursement fees None
- -------------------------------------------------------------------
Redemption reimbursement fees None
- -------------------------------------------------------------------
Exchange fees None
- -------------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Select Equity
Portfolio's assets.
- -------------------------------------------------------------------
Investment advisory fees(1) 1.00%
- -------------------------------------------------------------------
Distribution and service (12b-1) fees None
- -------------------------------------------------------------------
Other expenses(1/2) 0.26%
- -------------------------------------------------------------------
Total operating expenses(1) 1.26%
- -------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(3) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
- ---------------------------------
1 year $ 128
- ---------------------------------
3 years $ 400
- ---------------------------------
(1) Delaware Management Company has agreed to waive fees and pay expenses
through April 30, 2000 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 1.20% of average daily net assets. The fees and expenses
shown in the table do not reflect this voluntary expense cap.
(2) Other expenses are based on estimates for the current fiscal year.
(3) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
-13-
<PAGE>
Profile: The Mid-Cap Growth Equity Portfolio
- --------------------------------------------
What is the Portfolio's Goal?
The Mid-Cap Growth Equity Portfolio seeks maximum long-term capital growth.
Current income is expected to be incidental. Although the Portfolio will
strive to achieve its goal, there is no assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio seeks to
attain its objective by investing in equity securities of medium-sized companies
which we believe present, at the time of purchase, significant long-term growth
potential. Under normal market conditions, the Portfolio invests at least 65% of
its total assets in growth-oriented common stocks of U.S. corporations. For
purposes of the Portfolio, we will generally consider medium-sized companies to
be those that have total market capitalizations between $1 billion and $10
billion at the time of purchase. The Portfolio may invest in securities issued
by companies having a capitalization outside that range when, in our opinion,
such companies exhibit 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.
We assess 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 our judgment, provides the potential for significant capital
appreciation.
Although we do 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 our opinion, such holdings are prudent given the prevailing
market conditions. Generally, the Portfolio 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. 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.
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. This Portfolio
will be affected primarily by changes in stock prices. Because the Portfolio
seeks long-term total return by investing primarily in mid-cap companies, its
investments are likely to involve a higher degree of liquidity risk and price
volatility than investments in larger capitalization securities.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-14-
<PAGE>
How has The Mid-Cap Growth Equity Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in The Mid-Cap Growth Equity Portfolio. We show how returns for The Mid-Cap
Growth Equity Portfolio have varied over the past six calendar years, as well as
average annual returns for one and five years and since inception - with the
average annual returns compared to the performance of the Russell 2000 Stock
Index. The Russell 2000 Stock Index measures the performance of the 2000
smallest companies in the Russell 3000 Index, which represents approximately 10%
of the total market capitalization of the Russell 3000 Index. The index is
unmanaged and doesn't include the actual costs of buying, selling, and holding
securities. The Portfolio's past performance does not necessarily indicate how
it will perform in the future. During the periods shown, Delaware Management
Company has voluntarily waived and paid expenses of The Mid-Cap Growth Equity
Portfolio. Returns would be lower without the voluntary waiver and payment.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN
(The Mid-Cap Growth Equity Portfolio)]
Year-by-year total return (The Mid-Cap Growth Equity Portfolio)
The Mid-Cap Growth Equity Portfolio
1993 12.76%
1994 -4.01%
1995 29.69%
1996 13.40%
1997 13.00%
1998 20.14%
As of September 30, 1999, The Mid-Cap Growth Equity Portfolio had a calendar
year-to-date return of 12.73%. During the periods illustrated in this bar chart,
The Mid-Cap Growth Equity Portfolio's highest quarterly return was 25.17% for
the quarter ended December 31, 1998 and its lowest quarterly return was -15.15%
for the quarter ended September 30, 1998.
Average annual returns for periods ending 12/31/98
The Mid-Cap Growth Russell 2000
Equity Portfolio Stock Index
1 year 20.14% -2.55%
5 years 13.90% 11.86%
Since inception (2/3/92) 12.14% 12.35%
-15-
<PAGE>
What are The Mid-Cap Growth Equity Portfolio's fees and expenses? Shareholder
fees are fees paid directly from your investment.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None
a percentage of offering price
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None
dividends
----------------------------------------------------------------
Purchase reimbursement fees None
----------------------------------------------------------------
Redemption reimbursement fees None
----------------------------------------------------------------
Exchange fees None
----------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Mid-Cap Growth Equity
Portfolio's assets. The following expense information has been restated to
reflect current fees.
-----------------------------------------------------------------
Investment advisory fees(1) 0.75%
-----------------------------------------------------------------
Distribution and service (12b-1) fees None
-----------------------------------------------------------------
Other expenses(1) 0.91%
-----------------------------------------------------------------
Total operating expenses(1) 1.66%
-----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(2) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
---------------------------
1 year $169
---------------------------
3 years $523
---------------------------
5 years $902
---------------------------
10 years $1,965
---------------------------
(1) Delaware Management Company has agreed to waive fees and pay expenses
through April 30, 2000 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 0.93% of average daily net assets. The fees and expenses
shown in the table do not reflect this voluntary expense cap.
(2) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
-16-
<PAGE>
Profile: The Mid-Cap Value Equity Portfolio
- -------------------------------------------
What is the Portfolio's Goal?
The Mid-Cap Value Equity Portfolio seeks maximum long-term total return.
Although the Portfolio will strive to achieve its goal, there is no
assurance that it will.
What are the Portfolio's main investment strategies? The Mid-Cap Value Equity
Portfolio seeks to achieve its objective by investing primarily in equity
securities of companies which, at the time of purchase, have market
capitalizations of between $1 billion and $10 billion and are listed on a
national securities exchange or NASDAQ, and which, in our opinion, offer capital
gains potential.
In selecting Portfolio securities, we place 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
described above. Equity securities for this purpose include common stocks,
securities convertible into common stocks, securities having common stock
characteristics, such as rights and warrants to purchase common stocks,
preferred stock, and certain other non-traditional equity securities.
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 or entity) but which have
the potential, in our judgment, to provide long-term total return. The Portfolio
may also invest in futures contracts and options on futures contracts subject to
certain limitations.
The Portfolio may hold cash or invest in short-term debt securities and other
money market instruments when, in our opinion, such holdings are prudent given
then prevailing market conditions. Except when we believe a temporary defensive
approach is appropriate, the Portfolio normally will limit its holdings in cash
or short-term debt instruments to 5% of its assets.
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. This Portfolio
will be affected primarily by changes in stock prices. Because the Portfolio
seeks long-term total return by investing primarily in mid-cap companies, its
investments are likely to involve a higher degree of liquidity risk and price
volatility than investments in larger capitalization securities.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-17-
<PAGE>
The Mid-Cap Value Equity Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in The Mid-Cap Value Equity Portfolio. We show returns for The Mid-Cap Value
Equity Portfolio for the past calendar year, as well as average annual returns
for one year and since inception - with average annual returns compared to the
performance of the Russell MidCap Value Index. The Russell MidCap Value Index
contains stocks from the Russell MidCap Index with a less-than-average growth
orientation. The index is unmanaged and doesn't include the actual costs of
buying, selling, and holding securities. The Portfolio's past performance does
not necessarily indicate how it will perform in the future. During the periods
shown, Delaware Management Company has voluntarily waived and paid expenses of
The Mid-Cap Value Equity Portfolio. Returns would be lower without the voluntary
waiver and payment.
[GRAPHIC OMITTED: BAR CHART SHOWING TOTAL RETURN
(The Mid-Cap Value Equity Portfolio)]
Total return (The Mid-Cap Value Equity Portfolio)
The Mid-Cap Value Equity Portfolio
1998 -3.90%
As of September 30, 1999, The Mid-Cap Value Equity Portfolio had a calendar
year-to-date return of -7.79%. During the period illustrated in this bar chart,
The Mid-Cap Value Equity Portfolio's highest quarterly return was 10.06% for the
quarter ended March 31, 1998 and its lowest quarterly return was -15.25% for the
quarter ended September 30, 1998.
Average annual returns for periods ending 12/31/98
The Mid-Cap Value Russell MidCap
Equity Portfolio Value Index
1 year -3.90% 5.08%
Since inception (12/29/97) -3.27% 5.08%
-18-
<PAGE>
What are The Mid-Cap Value Equity Portfolio's fees and expenses?
Shareholder fees are fees paid directly from your investment.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None
a percentage of offering price
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None
dividends
----------------------------------------------------------------
Purchase reimbursement fees None
----------------------------------------------------------------
Redemption reimbursement fees None
----------------------------------------------------------------
Exchange fees None
----------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Mid-Cap Value Equity
Portfolio's assets.
-----------------------------------------------------------------
Investment advisory fees(1) 0.75%
-----------------------------------------------------------------
Distribution and service (12b-1) fees None
-----------------------------------------------------------------
Other expenses(1) 0.62%
-----------------------------------------------------------------
Total operating expenses(1) 1.37%
-----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(2) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
---------------------------
1 year $139
---------------------------
3 years $434
---------------------------
5 years $750
---------------------------
10 years $1,646
---------------------------
(1) Delaware Management Company has agreed to waive fees and pay expenses
through April 30, 2000 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 0.89% of average daily net assets. The fees and expenses
shown in the table do not reflect this voluntary expense cap.
(2) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
-19-
<PAGE>
Profile: The Small-Cap Value Equity Portfolio
- ---------------------------------------------
What is the Portfolio's Goal?
The Small-Cap Value Equity Portfolio seeks long-term capital appreciation.
Although the Portfolio will strive to achieve its goal, there is no
assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio seeks to
achieve its objective by investing primarily in equity securities of small
capitalization companies which, at the time of purchase, generally have market
capitalizations of between $500 million and $1.5 billion and are listed on a
national securities exchange or NASDAQ.
The Portfolio will purchase securities that we believe are undervalued relative
to the asset value of long-term earnings power of the companies concerned. 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 that are actively traded in the United States. Under normal
market conditions, the Portfolio intends to invest at least 65% of its net
assets in equity securities issued by small-cap companies. Equity securities for
this purpose, include, among others, common stock, securities convertible into
common stock, warrants and preferred stock.
The Portfolio may invest up to 25% of its net assets in equity securities of
foreign companies. The Portfolio also may invest up to 25% of its net assets in
fixed-income securities and convertible securities rated below Baa by Moody's or
BBB by S&P when we believe that capital appreciation is likely. High-yield, high
risk securities are also known as "junk bonds." The Portfolio also may use
option strategies.
For temporary defensive purposes, the Portfolio may invest in fixed-income
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities, as well as money market instruments and corporate bonds rated
A or above by Moody's or S&P.
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. The Portfolio
will be affected primarily by changes in stock prices. Because the Portfolio
seeks long-term capital appreciation by investing primarily in small-cap
companies, its investments are likely to involve a higher degree of liquidity
and price volatility than investments in larger capitalization securities.
Because the Portfolio may invest up to 25% of its net assets in foreign
securities, the Portfolio may be adversely affected by changes in currency rates
and exchange control regulations, and may incur costs in connection with
currency exchange rates. Investing in high-yield, high risk debt securities
entails certain risks, including the risk of loss of principal, which may be
greater than the risks involved in higher rated debt securities.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-20-
<PAGE>
What are The Small-Cap Value Equity Portfolio's fees and expenses?
Shareholder fees are fees paid directly from your investment.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None
a percentage of offering price
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None
dividends
----------------------------------------------------------------
Purchase reimbursement fees None
----------------------------------------------------------------
Redemption reimbursement fees None
----------------------------------------------------------------
Exchange fees None
----------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Small-Cap Value Equity
Portfolio's assets.
-----------------------------------------------------------------
Investment Advisory fees(1) 0.75%
-----------------------------------------------------------------
Distribution and service (12b-1) fees None
-----------------------------------------------------------------
Other expenses(1/2) 0.28%
-----------------------------------------------------------------
Total operating expenses(1) 1.03%
-----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(3) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
---------------------------
1 year $105
---------------------------
3 years $328
---------------------------
(1) Delaware Management Company has agreed to waive fees and pay expenses
through April 30, 2000 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 0.89% of average daily net assets. The fees and expenses
shown in the table do not reflect this voluntary expense cap.
(2) Other expenses are based on estimated amounts for the current fiscal year.
(3) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
-21-
<PAGE>
Profile: The Small-Cap Growth Equity Portfolio
- ----------------------------------------------
What is the Portfolio's Goal?
The Small-Cap Growth Equity Portfolio seeks long-term capital appreciation.
Although the Portfolio will strive to achieve its goal, there is no
assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio will invest
primarily in equity securities of companies that we believe have the potential
for high earnings growth, and which generally represent the smallest 25% in
terms of market capitalization of U.S. equity securities listed on a national
securities exchange or NASDAQ. The Portfolio has been designed to provide
investors with potentially greater long-term rewards than provided by an
investment in a fund that seeks capital appreciation from common stocks of
companies with more established earnings histories. In pursuing its objective,
the Portfolio anticipates that it will invest substantially all, and under
normal conditions not less than 65%, of its assets in common stocks, preferred
stocks, convertible bonds, convertible debentures, convertible notes,
convertible preferred stocks and warrants or rights. To the extent that the
Portfolio invests in convertible debt securities, those securities will be
purchased on the basis of their equity characteristics, and the ratings, if any,
of those securities will not be an important factor in their selection. In
addition, under normal market conditions, no more than 35% of the Portfolio's
total assets may be invested in debt securities of corporate and governmental
issues.
The Portfolio will invest in equity securities of companies that we believe are
undervalued and to have the potential for high earnings growth. Companies in
which the Portfolio invests generally will meet one or more of the following
criteria: high historical earnings-per-share (EPS) growth; high projected future
EPS growth; an increase in research analyst earnings estimates; attractive
relative price to earning ratios; and high relative discounted cash flows. In
selecting the Portfolio's investments, we also focus on companies with capable
management teams, strong industry positions, sound capital structures, high
returns on equity, high reinvestment rates and conservative financial accounting
policies.
At no time will the investments of the Portfolio in bank obligations, including
time deposits, exceed 25% of the value of the Portfolio's assets. The Portfolio
may also engage in options and futures transactions. In addition, the Portfolio
may invest up to 10% of its assets in foreign securities which may include
Global Depositary Receipts and, without limitation, in sponsored and unsponsored
American Depositary Receipts that are actively traded in the U.S.
In unusual market conditions, in order to meet redemption requests, for
temporary defensive purposes and pending investment, the Portfolio may hold a
substantial portion of its assets in cash or short-term fixed-income
obligations. In such situations the Portfolio may not be able to achieve its
investment goal.
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. The Portfolio
primarily will be affected by changes in stock prices. Because the Portfolio
seeks long-term capital appreciation by investing primarily in small-cap
companies, its investments are likely to involve a higher degree of liquidity
and price volatility than investments in larger capitalization securities.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-22-
<PAGE>
What are The Small-Cap Growth Equity Portfolio's fees and expenses?
Shareholder fees are fees paid directly from your investment.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None
a percentage of offering price
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None
dividends
----------------------------------------------------------------
Purchase reimbursement fees None
----------------------------------------------------------------
Redemption reimbursement fees None
----------------------------------------------------------------
Exchange fees None
----------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Small-Cap Growth
Equity Portfolio's assets.
-----------------------------------------------------------------
Investment Advisory fees(1) 0.75%
-----------------------------------------------------------------
Distribution and service (12b-1) fees None
-----------------------------------------------------------------
Other expenses(1/2) 1.03%
-----------------------------------------------------------------
Total operating expenses(1) 1.78%
-----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(3) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
---------------------------
1 year $181
---------------------------
3 years $560
---------------------------
(1) Delaware Management Company has agreed to waive fees and pay expenses
through April 30, 2000 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 0.89% of average daily net assets. The fees and expenses
shown in the table do not reflect this voluntary expense cap.
(2) Other expenses are based on estimated amounts for the current fiscal year.
(3) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
-23-
<PAGE>
Profile: The Real Estate Investment Trust Portfolio and The Real Estate
Investment Trust Portfolio II
---------------------------------------------------------------
What are each Portfolio's Goals?
Each Portfolio seeks maximum long-term total return, with capital
appreciation as a secondary objective. Although each Portfolio will strive
to achieve its goals, there is no assurance that it will.
What are each Portfolio's main investment strategies? Each Portfolio invests 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). The
Portfolios are considered "non-diversified" under the federal laws and
regulations that regulate mutual funds. Thus, adverse effects on the Portfolios'
investments may affect a larger portion of its overall assets and subject the
Portfolios to greater risks.
Each Portfolio 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 Portfolios, REITs are not taxed on income distributed to
shareholders provided they comply with several requirements in the Internal
Revenue Code of 1986, as amended. 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 Investment Company Act of 1940. By investing in REITs
indirectly through a 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 special risks presented by
investing in REITs, see "Risk Factors - Real Estate Industry Risk" and
"Additional Investment information - Real Estate Investment Trusts (REITs)."
Each Portfolio also invests in equity securities of other real estate industry
operating companies (REOCs). We define a REOC as 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. A
Portfolio'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, preferred 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, 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.
-24-
<PAGE>
What are each Portfolio's main investment strategies? (continued)
Each Portfolio may hold cash or invest in short-term debt securities and other
money market instruments when we believe such holdings are prudent given current
market conditions. Except when we believe a temporary defensive approach is
appropriate, a 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
we determine.
We do not normally intend to respond to short-term market fluctuations or to
acquire securities for the purpose of short-term trading; however, we may take
advantage of short-term opportunities that are consistent with a Portfolio's
investment objectives.
What are the main risks of investing in each Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of a Portfolio's investments. In addition, a
Portfolio's share prices and yields will fluctuate in response to movements in
stock prices. Because the Portfolios concentrate their investments in the real
estate industry, an investment in either Portfolio may be subject to special
risks associated with direct ownership of real estate and with the real estate
industry in general and their investments may tend to fluctuate more in value
than a portfolio that invests in a broader range of industries. To the extent
that a Portfolio holds real estate directly, as a result of defaults, or
receives rental income from its real estate holdings, its tax status as a
regulated investment company may be jeopardized. 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.
An investment in a Portfolio is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in a Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss these Portfolios with your investment
consultant to determine whether they are an appropriate investment for you.
-25-
<PAGE>
How has The Real Estate Investment Trust Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in The Real Estate Investment Trust Portfolio. We show how returns for The Real
Estate Investment Trust Portfolio have varied over the past three calendar
years, as well as average annual returns for one year and since inception --
with average annual total return compared to the performance of the NAREIT
Equity REIT Index. The NAREIT Equity REIT Index is a benchmark of real estate
investment trusts that invest in many types of U.S. property. The index is
unmanaged and doesn't include the actual costs of buying, selling, and holding
securities. The Real Estate Investment Trust Portfolio class commenced
operations on November 4, 1997. Pursuant to applicable regulation, total return
shown for periods prior to commencement of operations is that of the original
(and then only) class of shares offered by the Real Estate Investment Trust
Portfolio, which commenced operations on December 6, 1995. That original class
has been redesignated 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.
The Portfolio's past performance does not necessarily indicate how it will
perform in the future. During the periods shown, Delaware Management Company has
voluntarily waived and paid expenses of The Real Estate Investment Trust
Portfolio. Returns would be lower without the voluntary waiver and payment.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (The Real
Estate Investment Trust Portfolio)]
Year-by-year total return (The Real Estate Investment Trust Portfolio)
The Real Estate Investment Trust Portfolio
1996 41.81%
1997 31.34%
1998 -12.09%
As of September 30, 1999, The Real Estate Investment Trust Portfolio had a
calendar year-to-date return of -2.64%. During the periods illustrated in this
bar chart, The Real Estate Investment Trust Portfolio's highest quarterly return
was 21.32% for the quarter ended December 31, 1996 and its lowest quarterly
return was -8.93% for the quarter ended September 30, 1998.
Average annual returns for periods ending 12/31/98
The Real Estate
Investment Trust Portfolio NAREIT Equity REIT
Index
1 year -12.09% -17.51%
Since 12/6/95 18.93% 10.31%
-26-
<PAGE>
What are The Real Estate Investment Trust Portfolio's fees and expenses?
Shareholder fees are fees paid directly from your investment.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None
a percentage of offering price
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None
dividends
----------------------------------------------------------------
Purchase reimbursement fees None
----------------------------------------------------------------
Redemption reimbursement fees None
----------------------------------------------------------------
Exchange fees None
----------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Real Estate Investment
Trust Portfolio's assets.
-----------------------------------------------------------------
Investment advisory fees(1) 0.75%
-----------------------------------------------------------------
Distribution and service (12b-1) fees None
-----------------------------------------------------------------
Other expenses(1) 0.27%
-----------------------------------------------------------------
Total operating expenses(1) 1.02%
-----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(2) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
---------------------------
1 year $104
---------------------------
3 years $325
---------------------------
5 years $563
---------------------------
10 years $1,248
---------------------------
(1) Delaware Management Company has agreed to waive fees and pay expenses from
November 11, 1998 through April 30, 2000 in order to prevent total
operating expenses (excluding any taxes, interest, brokerage fees and
extraordinary expenses) from exceeding 0.95% of average daily net assets.
The fees and expenses shown in the table do not reflect this voluntary
expense cap.
(2) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
-27-
<PAGE>
How has The Real Estate Investment Trust Portfolio II performed?
This bar chart and table can help you evaluate the potential risks of investing
in The Real Estate Investment Trust Portfolio II. We show average annual return
for The Real Estate Investment Trust Portfolio II for the past calendar year, as
well as average annual returns for one year and since inception - with average
annual returns compared to the performance of the NAREIT Equity REIT Index. The
NAREIT Equity REIT Index is a benchmark of real estate investment trusts that
invest in many types of U.S. property. The index is unmanaged and doesn't
include the actual costs of buying, selling, and holding securities. The
Portfolio's past performance does not necessarily indicate how it will perform
in the future. During the periods shown, Delaware Management Company has
voluntarily waived and paid expenses of The Real Estate Investment Trust
Portfolio II. Returns would be lower without the voluntary waiver and payment.
[GRAPHIC OMITTED: BAR CHART SHOWING TOTAL RETURN
(The Real Estate Investment Trust Portfolio II)]
Total return (The Real Estate Investment Trust Portfolio II)
The Real Estate Investment Trust Portfolio II
1998 -12.97%
As of September 30, 1999, The Real Estate Investment Trust Portfolio II had a
calendar year-to-date return of -2.09%. During the period illustrated in this
bar chart, The Real Estate Investment Trust Portfolio II's highest return was
3.95% for the quarter ended December 31, 1998 and its lowest quarterly return
was -9.37% for the quarter ended September 30, 1998.
Average annual returns for periods ending 12/31/98
The Real Estate Investment NAREIT
Trust Portfolio II Equity REIT
Index
1 year -12.97% -17.51%
Since inception (11/4/97) -8.29% -14.46%
-28-
<PAGE>
What are The Real Estate Investment Trust Portfolio II's fees and expenses?
Shareholder fees are fees paid directly from your investment.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None
a percentage of offering price
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None
dividends
----------------------------------------------------------------
Purchase reimbursement fees None
----------------------------------------------------------------
Redemption reimbursement fees None
----------------------------------------------------------------
Exchange fees None
----------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Real Estate Investment
Trust Portfolio II's assets.
-----------------------------------------------------------------
Investment advisory fees(1) 0.75%
-----------------------------------------------------------------
Distribution and service (12b-1) fees None
-----------------------------------------------------------------
Other expenses(1) 0.68%
-----------------------------------------------------------------
Total operating expenses(1) 1.43%
-----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(2) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
---------------------------
1 year $146
---------------------------
3 years $452
---------------------------
5 years $782
---------------------------
10 years $1,713
---------------------------
(1) Delaware Management Company has agreed to waive fees and pay expenses
through April 30, 2000 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 0.86% of average daily net assets. The fees and expenses
shown in the table do not reflect this voluntary expense cap.
(2) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
-29-
<PAGE>
Profile: The Global Equity Portfolio
- ------------------------------------
What is the Portfolio's Goal?
The Global Equity Portfolio seeks long-term growth without undue risk to
principal. Although the Portfolio will strive to achieve its goal, there is
no assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio seeks to
achieve its objective by investing, under normal circumstances, at least 65% of
its total assets in equity securities of companies 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. Such
securities will normally, in our opinion, be undervalued at the time of purchase
based on our fundamental analysis. Investments will be mainly in marketable
securities of companies located in developed markets.
The Portfolio will invest in securities traded in equity markets and currencies
that we believe offer the best relative values within the global investment
universe. Equity securities in which the Portfolio may invest include, among
others, common stocks, 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 currencies, including the
Euro) or may invest in short-term debt securities or other money market
instruments, as described below.
Our approach in selecting investments for the Portfolio is oriented to
individual stock selection and is value driven. In selecting stocks for the
Portfolio, we consider movement in the price of individual securities, and the
impact of currency adjustment on a United States domiciled, dollar-based
investor. We also conduct research on a global basis in an effort to identify
securities that have the potential for long-term total return. The center of the
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. Our approach is long-term in orientation, and it is expected that the
annual turnover rate of the Portfolio will not exceed 75% under normal
circumstances.
In a global portfolio, currency return can be an integral component of an
investment's total return. We will use a purchasing power parity approach to
assess the value of individual currencies. Purchasing power parity 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. 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 overvalued. When the dollar buys
more, the foreign currency may be undervalued. Securities available in an
undervalued currency may offer greater return potential and may be an attractive
investment.
-30-
<PAGE>
What are the Portfolio's main investment strategies? (continued)
The Portfolio may invest of up to 35% of its assets in fixed-income securities
when, in our opinion, attractive opportunities exist relative to those available
through equity or short-term investments. The fixed-income securities in which
the Portfolio may invest include U.S. dollar or foreign currency-denominated
government, government agency or corporate bonds and bonds of supranational
organizations. A supranational organization 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, among others. 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, 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. In taking such temporary defensive positions, the
Portfolio may not be able to achieve its investment objective. 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.
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. This Portfolio
primarily will be affected by changes in stock and bond prices and currency
exchange rates. Investments in securities of non-U.S. companies are generally
denominated in foreign currencies and involve certain risk and opportunity
considerations not typically associated with investing in U.S. companies. The
Portfolio may be affected by changes in currency rates and exchange control
regulations and may incur costs in connection with conversions between
currencies. To the extent that we invest in forward foreign currency contracts
or use other instruments to hedge against currency risks the Portfolio will be
subject to the special risks associated with those activities. In addition, to
the extent that the Portfolio invests in securities of companies in emerging
markets, those investments present a greater degree of risk than tends to be the
case for foreign investments in Western Europe and other developed markets.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these instruments.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-31-
<PAGE>
How has The Global Equity Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in The Global Equity Portfolio. We show returns for The Global Equity Portfolio
for the past calendar year, as well as average annual returns for one year and
since inception -- with average annual returns compared to the performance of
the Morgan Stanley Capital International World Stock Index. The Morgan Stanley
Capital International World Stock Index is an international index that includes
stocks traded in Europe, Australia, the Far East, plus the U.S., and Canada, and
South Africa, weighted by capitalization. The index is unmanaged and does not
include the actual costs of buying, selling, and holding securities. The
Portfolio's past performance does not necessarily indicate how it will perform
in the future. During the periods shown, Delaware International Advisers Ltd.
has voluntarily waived and paid expenses of The Global Equity Portfolio. Returns
would be lower without the voluntary waiver and payment.
[GRAPHIC OMITTED: BAR CHART SHOWING TOTAL RETURN (The Global Equity Portfolio)]
Total return (The Global Equity Portfolio)
The Global Equity Portfolio
1998 11.15%
As of September 30, 1999, The Global Equity Portfolio had a calendar
year-to-date return of -0.45%. During the period illustrated in this bar chart,
The Global Equity Portfolio's highest quarterly return was 12.51% for the
quarter ended December 31, 1998 and its lowest quarterly return was -10.57% for
the quarter ended September 30, 1998.
Average annual returns for periods ending 12/31/98
The Global Equity Morgan Stanley Capital
Portfolio International World
Stock Index
1 year 11.15% 24.34%
Since inception (10/15/97) 7.83% 23.60%
-32-
<PAGE>
What are The Global Equity Portfolio's fees and expenses?
Shareholder fees are fees paid directly from your investment.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None
a percentage of offering price
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None
dividends
----------------------------------------------------------------
Purchase reimbursement fees(1) 0.40%
----------------------------------------------------------------
Redemption reimbursement fees(1) 0.30%
----------------------------------------------------------------
Exchange fees None
----------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Global Equity
Portfolio's assets.
-----------------------------------------------------------------
Investment advisory fees(2) 0.75%
-----------------------------------------------------------------
Distribution and service (12b-1) fees None
-----------------------------------------------------------------
Other expenses(2) 1.56%
-----------------------------------------------------------------
Total operating expenses(2) 2.31%
-----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(3) This is an example only, and does not represent future expenses, which
may begreater or less than those shown here.
--------------------------------------------------------
Assumes Assumes no
redemption redemption
--------------------------------------------------------
1 year $303 $273
--------------------------------------------------------
3 years $788 $758
--------------------------------------------------------
5 years $1,300 $1,270
--------------------------------------------------------
10 years $2,705 $2,675
--------------------------------------------------------
(1) The purchase reimbursement fee and redemption reimbursement fee are paid to
the Portfolio. These fees are designed to reflect an approximation of the
brokerage and related transaction costs associated with the investment of
an investor's purchase amount or the disposition of assets to meet
redemptions, and to limit the extent to which the Portfolio (and,
indirectly, the Portfolio's existing shareholders) would have to bear such
costs. In lieu of the purchase reimbursement fee, investors in The Global
Equity Portfolio, with the concurrence of the investment adviser, may elect
to invest by a contribution of securities or follow procedures that would
have the same economic effect as such a contribution.
(2) Delaware International Advisers Ltd. has agreed to waive fees and pay
expenses through April 30, 2000 in order to prevent total operating
expenses (excluding any taxes, interest, brokerage fees and extraordinary
expenses) from exceeding 0.96% of average daily net assets. The fees and
expenses shown in the table do not reflect this voluntary expense cap.
(3) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 2.
-33-
<PAGE>
Profile: The International Equity Portfolio
- -------------------------------------------
What is the Portfolio's Goal?
The International Equity Portfolio seeks maximum long-term total return.
Although the Portfolio will strive to achieve its goal, there is no
assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio seeks to
achieve its objective by investing, under normal market conditions, at least 65%
of its total assets in equity securities of companies 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, in our
opinion, are undervalued at the time of purchase based on our fundamental
analysis. Investments will be made mainly in marketable securities of companies
located in developed countries.
Equity securities in which the Portfolio may invest include, among others,
common stocks, 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 currencies, including the Euro), or
may invest in short-term debt securities or other money market instruments.
Except when we believe 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. When taking a temporary defensive position the Portfolio
may not be able to attain its investment objective.
Our approach in selecting investments for the Portfolio is oriented to
individual stock selection and is value driven. In selecting stocks for the
Portfolio, we consider movement in the price of individual securities, and the
impact of currency adjustment on a United States domiciled, dollar-based
investor. We also conduct research on a global basis in an effort to identify
securities that have the potential for long-term total return. The center of the
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. Our approach is long-term in orientation, and it is expected that the
annual turnover rate of the Portfolio will not exceed 75% under normal
circumstances.
In an international portfolio, currency return can be an integral component of
an investment's total return. We will use a purchasing power parity approach to
assess the value of individual currencies. Purchasing power parity 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. 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 overvalued. When the dollar buys
more, the foreign currency may be undervalued. Securities available in an
undervalued currency may offer greater return potential and may be an attractive
investment.
The Portfolio may make limited use (not more than 15% of its assets) of foreign
fixed-income securities when, in our opinion, attractive opportunities exist
relative to those available through 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 Euro, and may include obligations of foreign governments, foreign
government agencies, supranational organizations or corporations and other
private entities. Such governmental 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. Corporate fixed-income securities will be, at the time of
purchase, rated in one of the top two rating categories (e.g., AAA and AA by S&P
or Aaa and Aa by Moody's) or of comparable quality.
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
-34-
<PAGE>
according to changes in the value of the Portfolio's investments. This Portfolio
primarily will be affected by changes in the stock and bond prices and currency
exchange rates. Investments in securities of non-U.S. issuers are generally
denominated in foreign currencies and involve certain risk and opportunity
considerations not typically associated with investing in U.S. companies.
Foreign securities may be adversely affected by political instability, foreign
economic conditions or inadequate regulatory and accounting standards. In
addition, 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. The Portfolio may
be affected by changes in currency rates which may reduce or eliminate any gains
produced by investments and exchange control regulations and may incur costs in
connection with conversions between currencies. To the extent that we invest in
forward foreign currency contracts or use other instruments to endeavor to hedge
against currency risks, the Portfolio will be subject to the special risks
associated with those activities. In addition, to the extent that the Portfolio
invests in securities of companies in emerging markets, those investments
present a greater degree of risk than tends to be the case for foreign
investments in Western Europe and other developed markets.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-35-
<PAGE>
How has The International Equity Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in The International Equity Portfolio. We show how returns for The International
Equity Portfolio have varied over the past six calendar years, as well as
average annual returns for one and five years and since inception-- with average
annual returns compared to the performance of the Morgan Stanley Capital
International EAFE Stock Index. The Morgan Stanley Capital International EAFE
Stock Index is an international index including stocks traded on 20 exchanges in
Europe, Australia and the Far East, weighted by capitalization. The index is
unmanaged and does not include the actual costs of buying, selling, and holding
securities. The Portfolio's past performance does not necessarily indicate how
it will perform in the future. During the periods shown, Delaware International
Advisers Ltd. has voluntarily waived and paid expenses of The International
Equity Portfolio. Returns would be lower without the voluntary waiver and
payment.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN
(The International Equity Portfolio)]
Year-by-year total return (The International Equity Portfolio)
The International Equity Portfolio
1993 29.72%
1994 3.59%
1995 13.02%
1996 20.35%
1997 5.13%
1998 10.01%
As of September 30, 1999, The International Equity Portfolio had a calendar
year-to-date return of 7.20%. During the periods illustrated in this bar chart,
The International Equity Portfolio's highest quarterly return was 13.70% for the
quarter ended December 31, 1998 and its lowest quarterly return was -12.33% for
the quarter ended September 30, 1998.
Average annual returns for periods ending 12/31/98
Morgan Stanley
The International Capital International
Equity Portfolio EAFE Stock Index
1 year 10.01% 20.00%
5 years 10.26% 9.19%
Since inception (2/4/92) 11.38% 9.98%
-36-
<PAGE>
What are The International Equity Portfolio's fees and expenses?
Shareholder fees are fees paid directly from your investment.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None
a percentage of offering price
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None
dividends
----------------------------------------------------------------
Purchase reimbursement fees None
----------------------------------------------------------------
Redemption reimbursement fees None
----------------------------------------------------------------
Exchange fees None
----------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The International Equity
Portfolio's assets.
-----------------------------------------------------------------
Investment advisory fees(1) 0.75%
-----------------------------------------------------------------
Distribution and service (12b-1) fees None
-----------------------------------------------------------------
Other expenses(1) 0.16%
-----------------------------------------------------------------
Total operating expenses(1) 0.91%
-----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(2) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
---------------------------
1 year $93
---------------------------
3 years $290
---------------------------
5 years $504
---------------------------
10 years $1,120
---------------------------
(1) Delaware International Advisers Ltd. has agreed to waive fees and pay
expenses through April 30, 2000 in order to prevent total operating
expenses (excluding any taxes, interest, brokerage fees and extraordinary
expenses) from exceeding 0.96% of average daily net assets.
(2) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show.
-37-
<PAGE>
Profile: The Labor Select International Equity Portfolio
- --------------------------------------------------------
What is the Portfolio's Goal?
The Labor Select International Equity Portfolio seeks maximum long-term
total return. Although the Portfolio will strive to achieve its goal, there
is no assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio, under normal
market conditions, will invest at least 65% of its total assets in equity
securities of companies organized or having a majority of their assets or
deriving a majority of their operating income in at least three different
countries outside of the United States, and which, in our opinion, are
undervalued at the time of purchase based on rigorous fundamental analysis that
we employ. In addition to following these quantitative guidelines, we 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, we emphasize 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, securities convertible into common stocks 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 Euro) or may
invest in short-term debt securities or other money market instruments. Except
when 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. When
taking a temporary defensive position the Portfolio may not be able to attain
its investment objective.
The Portfolio may make limited use (not more than 15% of its assets) of foreign
fixed-income securities when, in our opinion, attractive opportunities exist
relative to those available through 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 Euro, and may include obligations of foreign governments, foreign
government agencies, supranational organizations or corporations and other
private entities. Such governmental 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. Corporate fixed-income securities will be, at the time of
purchase, rated in one of the top two rating categories (e.g., AAA and AA by S&P
or Aaa and Aa by Moody's) or of comparable quality.
-38-
<PAGE>
What are the Portfolio's main investment strategies? (continued)
Our 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, we identify those stocks which 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. We conduct extensive fundamental research
on a global basis, and it is through this research effort that securities with
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. Our 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 our quantitative approach to stock selection, we 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 companies 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 currently 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 we
perceive 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 our
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. 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 we will utilize in selecting securities will vary
over time, and will be solely in our discretion.
We do not normally intend to respond to short-term market fluctuations or to
acquire securities for the purpose of short-term trading; however, we may take
advantage of short-term opportunities that are consistent with the Portfolio's
investment objective. It is anticipated that the annual turnover rate of the
Portfolio, under normal circumstances, will generally not exceed 100%.
Currency considerations carry a special risk for a portfolio of international
securities, and we use 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.
-39-
<PAGE>
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. The
Portfolio's share prices and yields will fluctuate in response to movements in
stock prices and currency exchange rates. Investments in securities of non-U.S.
issuers are generally denominated in foreign currencies and involve certain risk
and opportunity considerations not typically associated with investing in U.S.
companies. Foreign securities may be adversely affected by political
instability, foreign economic conditions or inadequate regulatory and accounting
standards. In addition, 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.
The Portfolio also may be affected by changes in currency rates which may reduce
or eliminate any gains produced by investment and exchange control regulations
and may incur costs in connection with conversions between currencies. To the
extent that we invest in forward foreign currency contracts or use other
investments to hedge against currency risks, the Portfolio will be subject to
the special risks associated with those activities. In addition, to the extent
the Portfolio invests in securities of companies in emerging markets, those
investments present a greater degree of risk than tends to be the case for
foreign investments in Western Europe and other developed markets.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-40-
<PAGE>
How has The Labor Select International Equity Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in The Labor Select International Equity Portfolio. We show how returns for The
Labor Select International Equity Portfolio have varied over the past three
calendar years, as well as average annual returns for one year and since
inception - with average annual returns compared to the performance of the
Morgan Stanley Capital International EAFE Stock Index. The Morgan Stanley
Capital International EAFE Stock Index is an international index including
stocks traded on 16 exchanges in Europe, Australia and the Far East, weighted by
capitalization. The index is unmanaged and doesn't include the actual costs of
buying, selling, and holding securities. The Portfolio's past performance does
not necessarily indicate how it will perform in the future. During the periods
shown, Delaware International Advisers Ltd. has voluntarily waived and paid
expenses of The Labor Select International Equity Portfolio. Returns would be
lower without the voluntary waiver and payment.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN
(The Labor Select International Equity Portfolio)]
Year-by-year total return (The Labor Select International Equity Portfolio)
The Labor Select International Equity Portfolio
1996 22.08%
1997 10.83%
1998 11.90%
As of September 30, 1999, The Labor Select International Equity Portfolio had a
calendar year-to-date return of 3.72%. During the periods illustrated in this
bar chart, The Labor Select International Equity Portfolio's highest quarterly
return was 13.01% for the quarter ended December 31, 1998 and its lowest
quarterly return was -12.04% for the quarter ended September 30, 1998.
Average annual returns for periods ending 12/31/98
The Labor Select Morgan Stanley Capital
International Equity International EAFE
Portfolio Stock Index
1 year 11.90% 20.00%
Since inception (12/19/95) 15.62% 9.00%
-41-
<PAGE>
What are The Labor Select International Equity Portfolio's fees and expenses?
Shareholder fees are fees paid directly from your investment.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None
a percentage of offering price
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None
dividends
----------------------------------------------------------------
Purchase reimbursement fees None
----------------------------------------------------------------
Redemption reimbursement fees None
----------------------------------------------------------------
Exchange fees None
----------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Labor Select
International Equity Portfolio's assets.
-----------------------------------------------------------------
Investment advisory fees(1) 0.75%
-----------------------------------------------------------------
Distribution and service (12b-1) fees None
-----------------------------------------------------------------
Other expenses(1) 0.18%
-----------------------------------------------------------------
Total operating expenses(1) 0.93%
-----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(2) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
---------------------------
1 year $95
---------------------------
3 years $296
---------------------------
5 years $515
---------------------------
10 years $1,143
---------------------------
(1) Delaware International Advisers Ltd. has agreed to waive fees and pay
expenses through April 30, 2000 in order to prevent total operating
expenses (excluding any taxes, interest, brokerage fees and extraordinary
expenses) from exceeding 0.96% of average daily net assets.
(2) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show.
-42-
<PAGE>
Profile: The Emerging Markets Portfolio
- ----------------------------------------
What is the Portfolio's Goal?
The Emerging Markets Portfolio seeks long-term capital appreciation.
Although the Portfolio will strive to achieve its goal, there is no
assurance that it will.
What are the Portfolio's main investment strategies? The Emerging Markets
Portfolio is an international fund. The Portfolio, under normal market
conditions, will invest at least 65% of its assets in equity securities of
companies 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, certain non-traditional equity securities and warrants issued by
companies located or operating in emerging countries. The Portfolio is
considered "non-diversified" under the federal laws and regulations that
regulate mutual funds. Thus, adverse effects on the Portfolio's investments may
affect a larger portion of its overall assets and subject the Portfolio to
greater risks.
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 International Finance Corporation
Free Index or Morgan Stanley Capital International Emerging Markets Free Index
will be considered to be an "emerging country." There are more than 130
countries that are generally considered to be emerging or developing countries
by the international financial community, approximately 40 of which currently
have stock markets. Almost every nation in the world is included within this
group of developing or emerging countries except the United States, Canada,
Japan, Australia, New Zealand and most nations located in Western and Northern
Europe.
Currently, investing in many emerging countries is not feasible, or may, in our
opinion, involve unacceptable political risks. The Portfolio will focus its
investments in those emerging countries where we consider the economies to be
developing strongly and where the markets are becoming more sophisticated. We
believe that investment opportunities may result from an evolving long-term
international trend favoring more market-oriented economies, a trend that may
particularly benefit certain countries having developing markets. 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, we
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. We
currently anticipate that the countries in which the Portfolio may invest will
include, among others, Argentina, Brazil, Chile, China, Columbia, Croatia, The
Czech Republic, Egypt, Estonia, Ghana, Greece, Hong Kong, Hungary, India,
Indonesia, Israel, Jordan, Kazakhstan, Kenya, Korea, Malaysia, Mexico, Pakistan,
Peru, the Philippines, Poland, Romania, Russia, Slovenia, South Africa, Sri
Lanka, Taiwan, Thailand, Turkey, Venezuela and Zimbabwe. As markets in other
emerging countries develop, we expect to expand and further diversify the
countries in which the Portfolio invests.
Although this is not an exclusive list, we consider an emerging country equity
security to be one that is issued by a company that 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. We will determine eligibility based on publicly
available information and inquiries made of the companies.
-43-
<PAGE>
What are the Portfolio's main investment strategies? (continued)
Up to 35% of the Portfolio's net assets may be invested in debt 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, considered to be of equivalent quality. The Portfolio may also
invest in Brady Bonds and zero coupon bonds. 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 the Euro. For temporary
defensive purposes, the Portfolio may invest all or a substantial portion of its
assets in high quality debt instruments. When taking a temporary defensive
position, the Portfolio may not be able to achieve its investment objective.
Currency considerations carry a special risk for a portfolio of international
securities. We use 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.
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. This Portfolio
primarily will be affected by changes in stock and bond prices and currency
exchange rates. Investments in securities of non-U.S. companies are generally
denominated in foreign currencies involve certain risk and opportunity
considerations not typically associated with investing in U.S. companies. The
Portfolio may be affected by changes in currency rates and exchange control
regulations and may incur costs in connection with conversions between
currencies. To the extent that we invest in forward foreign currency contracts
or use other investments to hedge against currency risks, the Portfolio will be
subject to the special risks associated with those activities. In addition,
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.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-44-
<PAGE>
How has The Emerging Markets Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in The Emerging Markets Portfolio. We show returns for The Emerging Markets
Portfolio for the past calendar year, as well as average annual returns for one
year and since inception--with average annual returns compared to the
performance of the Morgan Stanley Capital International Emerging Markets Free
Equity Index. The Morgan Stanley Capital International Emerging Markets Free
Equity Index is a U.S. dollar dominated index comprised of stocks of countries
with below average per capita GDP as defined by the World Bank, foreign
ownership restrictions, a tax regulatory environment, and greater perceived
market risk than in the developed countries. Within this index, MSCI aims to
capture an aggregate of 60% of local market capitalization. The index is
unmanaged and does not include the actual costs of buying, selling, and holding
securities. The Portfolio's past performance does not necessarily indicate how
it will perform in the future. During the periods shown, Delaware International
Advisers Ltd. has voluntarily waived and paid expenses of The Emerging Markets
Portfolio. Returns would be lower without the voluntary waiver and payment.
[GRAPHIC OMITTED: BAR CHART SHOWING TOTAL RETURN
(The Emerging Markets Portfolio)]
Total return (The Emerging Markets Portfolio)
The Emerging Markets Portfolio
1998 -34.88%
As of September 30, 1999, The Emerging Markets Portfolio had a calendar
year-to-date return of 27.81%. During the periods illustrated in this bar chart,
The Emerging Markets Portfolio's highest quarterly return was 7.03% for the
quarter ended March 31, 1998 and its lowest was -24.26% for the quarter ended
June 30, 1998.
Average annual returns for periods ending 12/31/98
Morgan Stanley
Capital International
The Emerging Emerging Markets
Markets Portfolio Free Equity Index
1 year -34.88% -25.34%
Since inception (4/14/97) -26.85% -25.85%
-45-
<PAGE>
What are The Emerging Markets Portfolio's fees and expenses? Shareholder fees
are fees paid directly from your investment.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None
a percentage of offering price
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None
dividends
----------------------------------------------------------------
Purchase reimbursement fees(1) 0.75%
----------------------------------------------------------------
Redemption reimbursement fees(1) 0.75%
----------------------------------------------------------------
Exchange fees None
----------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Emerging Markets
Portfolio's assets. The following expense information has been restated to
reflect current fees.
-----------------------------------------------------------------
Investment advisory fees(2) 1.00%
-----------------------------------------------------------------
Distribution and service (12b-1) fees None
-----------------------------------------------------------------
Other expenses(2) 0.49%
-----------------------------------------------------------------
Total operating expenses(2) 1.49%
-----------------------------------------------------------------
-46-
<PAGE>
What are The Emerging Markets Portfolio's fees and expenses? (continued)
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(3) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
--------------------------------------------------------
Assumes Assumes no
redemption redemption
--------------------------------------------------------
1 year $300 $225
--------------------------------------------------------
3 years $617 $542
--------------------------------------------------------
5 years $957 $882
--------------------------------------------------------
10 years $1,916 $1,841
--------------------------------------------------------
(1) The purchase reimbursement fee and redemption reimbursement fee are paid to
the Portfolio. These fees are designed to reflect an approximation of the
brokerage and related transaction costs associated with the investment of
an investor's purchase amount or the disposition of assets to meet
redemptions, and to limit the extent to which the Portfolio (and,
indirectly, the Portfolio's existing shareholders) would have to bear such
costs.
(2) Delaware International Advisers Ltd. has agreed to waive fees and pay
expenses through April 30, 2000 in order to prevent total operating
expenses (excluding any taxes, interest, brokerage fees and extraordinary
expenses) from exceeding 1.55% of average daily net assets.
(3) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show.
-47-
<PAGE>
Profile: The International Small-Cap Portfolio
- -----------------------------------------------
What is the Portfolio's goal?
The International Small-Cap Portfolio seeks long-term capital
appreciation. Although, the Portfolio will strive to achieve its goal,
there is no assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio seeks to
achieve its objective by investing primarily in smaller non-U.S. companies,
which may include companies located or operating in established or emerging
countries. Under normal circumstances, at least 65% of the Portfolio's total
assets will be invested in equity securities of companies 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. The current
market capitalization of the companies in which the Portfolio intends to focus
its investments will generally be $2.5 billion or less (at the time of
purchase).
By focusing on smaller, non-U.S. companies, we try to identify equity securities
of companies that we believe are responsive to changes within their markets and
have the potential for strong real earnings and dividend growth. We will look
for changing and dominant trends within the relevant markets and purchase
securities of companies that we believe will benefit from these trends. In
addition, we will consider the financial strength of a company or its industry.
We may invest in smaller capitalization companies that are temporarily out of
favor or overlooked by securities analysts and whose value, therefore, may not
be fully recognized by the market.
The equity securities in which the Portfolio will primarily invest include
common stocks and sponsored or unsponsored Depositary Receipts, preferred
stocks, rights or warrants to purchase common stocks and securities convertible
into common stocks. Depositary Receipts are receipts typically issued by a bank
or trust company evidencing ownership of underlying securities issued by a
foreign company. The Portfolio will invest primarily in the securities of
foreign companies.
In selecting investments for the Portfolio, we use a dividend discount analysis
across country boundaries and a purchasing power parity approach to identify
currencies and markets that are overvalued or undervalued relative to the U.S.
dollar. We use the dividend discount analysis to compare the value of different
investments by looking at future anticipated dividends and discounting the value
of those dividends back to what they would be worth if they were being paid
today. With a purchasing power parity approach, we determine the amount 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. When the dollar buys less, the foreign currency may
be overvalued. Conversely, when the dollar buys more, the foreign currency may
be undervalued.
While the Portfolio may purchase securities in any foreign country, developed
and developing, or emerging market countries, it is currently anticipated that
the countries in which the Portfolio is more likely to invest will include
Australia, Belgium, Canada, France, Germany, Hong Kong, Japan, Malaysia, the
Netherlands, New Zealand, Singapore, Spain, Switzerland, and the United Kingdom.
Emerging market countries are also permitted, such as, Argentina, Brazil, Chile,
Egypt, Greece, India, Indonesia, Korea, Peru, the Philippines, South Africa,
Taiwan, Thailand and Turkey but are not likely to be a major focus at this time.
These lists are representative, and we may invest in additional countries from
time to time.
The Portfolio may also invest in convertible preferred stocks that offer
enhanced yield features, such as Preferred Equity Redemption Cumulative Stock,
and certain other non-traditional equity securities.
The Portfolio may invest up to 15% of its net assets in fixed-income securities,
some or 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 the
investment adviser to be of equivalent quality, and which present special
investment risks. Convertible bonds are treated as equity securities and are not
subject to the 15% limit.
For temporary defensive purposes, the Portfolio may invest all or a substantial
portion of its assets in high quality U.S. and foreign governmental and
corporate debt instruments. The Portfolio may also hold these securities pending
investment of proceeds from new sales of Portfolio shares and to maintain
sufficient cash to meet redemption requests.
-48-
<PAGE>
What are the main risks of investing in the Portfolio?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Portfolio shares will increase
and decrease according to changes in the value of the Portfolio's investments.
The Portfolio will be adversely affected by declines in stock and bond prices,
which can be caused by a drop in the stock or bond market, an adverse change in
interest rates, or poor performance in specific geographic regions, industries
or companies. Investments in foreign securities, whether equity or fixed-income,
involve special risks, including those related to currency fluctuations, as well
as to political, economic and social situations different from and potentially
more volatile than those in the U.S. In addition, the accounting, tax and
financial reporting standards of foreign countries are different from and may be
less reliable or comprehensive than those relating to U.S. issuers. The
Portfolio may invest up to 15% of its net assets in high-yield, high risk
foreign fixed-income securities, which are subject to substantial risks,
particularly during periods of economic downturns or rising interest rates.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these instruments.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-49-
<PAGE>
What are The International Small-Cap Portfolio's fees and expenses?
Shareholder fees are fees paid directly from your investment.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None
a percentage of offering price
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None
dividends
----------------------------------------------------------------
Purchase reimbursement fees(1) 0.55%
----------------------------------------------------------------
Redemption reimbursement fees(1) 0.45%
----------------------------------------------------------------
Exchange fees None
----------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The International
Small-Cap Portfolio's assets.
- -------------------------------------------------------------------
Investment advisory fees(2) 1.00%
- -------------------------------------------------------------------
Distribution and service (12b-1) fees None
- -------------------------------------------------------------------
Other expenses(2/3) 0.24%
- -------------------------------------------------------------------
Total operating expenses(2) 1.24%
- -------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(4) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
--------------------------------------------------------
Assumes Assumes no
redemption redemption
--------------------------------------------------------
1 year $226 $181
--------------------------------------------------------
3 years $491 $446
--------------------------------------------------------
(1) The purchase reimbursement fee and redemption reimbursement fee are paid to
the Portfolio. These fees are designed to reflect an approximation of the
brokerage and related transaction costs associated with the investment of
an investor's purchase amount or the disposition of assets to meet
redemptions, and to limit the extent to which the Portfolio (and,
indirectly, the Portfolio's existing shareholders) would have to bear such
costs. In lieu of the purchase reimbursement fee, investors in The
International Small-Cap Portfolio, with the concurrence of the investment
adviser, may elect to invest by a contribution of securities or follow
procedures that would have the same economic effect as such a contribution.
(2) Delaware International Advisers Ltd. has agreed to waive fees and pay
expenses through April 30, 2000 in order to prevent total operating
expenses (excluding any taxes, interest, brokerage fees and extraordinary
expenses) from exceeding 1.20% of average daily net assets. The fees and
expenses shown in the table do not reflect this voluntary expense cap.
(3) Other expenses are based on estimates for the current fiscal year.
(4) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 2.
-50-
<PAGE>
Profile: The International Large-Cap Equity Portfolio
- -----------------------------------------------------
What is the Portfolio's Goal?
The International Large-Cap Equity Portfolio seeks maximum long-term total
return. Although the Portfolio will strive to achieve its goal, there is no
assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio seeks to
achieve its objective by investing, under normal market conditions, at least 65%
of its total assets in large-cap equity securities of companies 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, in our opinion, are undervalued at the time of purchase based on our
fundamental analysis. Investments will be made mainly in marketable securities
of companies located in developed countries. For purposes of this Portfolio,
large capitalization stocks will be defined to mean those whose issuers have a
market capitalization of $5 billion or more (at the time of purchase).
Equity securities in which the Portfolio may invest include, but are not limited
to, common stocks, 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
Euro), or may invest in short-term debt securities or other money market
instruments. Except when we believe a temporary defensive approach is
appropriate or during temporary periods of portfolio repositioning, the
Portfolio generally will not hold more than 5% of its assets in cash or such
short-term instruments. During such periods, the Portfolio may not be able to
attain its investment objective.
Our approach in selecting investments for the Portfolio is oriented to
individual stock selection and is value driven. In selecting stocks for the
Portfolio, we consider movement in the price of individual securities, and the
impact of currency adjustments on a United States domiciled, dollar-based
investor. We also conduct research on a global basis in an effort to identify
securities that have the potential for long-term total return. The center of the
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. Our approach is long-term in orientation, and it is expected that the
annual turnover rate of the Portfolio will not exceed 75% under normal
circumstances.
In an international portfolio, currency return can also be an integral component
of an investment's total return. We will use a purchasing power parity approach
to assess the value of individual currencies. Purchasing power parity 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. 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 overvalued. When the dollar
buys more, the foreign currency may be undervalued. Securities available in an
undervalued currency may be an attractive investment.
The Portfolio may make limited use (not more than 15% of its assets) of foreign
fixed-income securities when, in our opinion, attractive opportunities exist
relative to those available through 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 Euro, and may include obligations of foreign governments, foreign
government agencies, supranational organizations or corporations and other
private entities. Such governmental 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. Corporate fixed-income securities will be, at the time of
purchase, rated in one of the top two rating categories (e.g., AAA and AA by S&P
or Aaa and Aa by Moody's) or of comparable quality.
-51-
<PAGE>
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. This Portfolio
primarily will be affected by changes in stock and bond prices and currency
exchange rates. Investments in securities of non-U.S. companies are generally
denominated in foreign currencies and involve certain risk and opportunity
considerations not typically associated with investing in U.S. companies.
Foreign securities may be adversely affected by political instability, foreign
economic conditions or inadequate regulatory and accounting standards. In
addition, 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. The Portfolio also
may be affected by changes in currency rates which may reduce or eliminate any
gains produced by investments and exchange control regulations and may incur
costs in connection with conversions between currencies. To the extent that we
invest in forward foreign currency contracts or use other instruments to hedge
against currency risks the Portfolio will be subject to the special risks
associated with those activities. In addition, to the extent that the Portfolio
invests in securities of companies in emerging markets, those investments
present a greater degree of risk than tends to be the case for foreign
investments in Western Europe and other developed markets.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-52-
<PAGE>
What are The International Large-Cap Equity Portfolio's fees and expenses?
Shareholder fees are fees paid directly from your investment.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None
a percentage of offering price
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None
dividends
----------------------------------------------------------------
Purchase reimbursement fees(1) 0.45%
----------------------------------------------------------------
Redemption reimbursement fees(1) 0.35%
----------------------------------------------------------------
Exchange fees None
----------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The International
Large-Cap Equity Portfolio's assets.
-----------------------------------------------------------------
Investment advisory fees(2) 0.75%
-----------------------------------------------------------------
Distribution and service (12b-1) fees None
-----------------------------------------------------------------
Other expenses(2/3) 0.23%
-----------------------------------------------------------------
Total operating expenses(2) 0.98%
-----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(4) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
Assumes Assumes no
Redemption Redemption
---------------------------------------
year 1 $180 $145
---------------------------------------
3 years $391 $356
---------------------------------------
(1) The purchase reimbursement fee and redemption reimbursement fee are paid to
the Portfolio. These fees are designed to reflect an approximation of the
brokerage and related transaction costs associated with the investment of
an investor's purchase amount or the disposition of assets to meet
redemptions, and to limit the extent to which the Portfolio (and,
indirectly, the Portfolio's existing shareholders) would have to bear such
costs. In lieu of the purchase reimbursement fee, investors in The
International Large-Cap Equity Portfolio, with the concurrence of the
investment adviser, may elect to invest by a contribution of securities or
follow procedures that would have the same economic effect as such a
contribution.
(2) Delaware International Advisers Ltd. has agreed to waive fees and pay
expenses through April 30, 2000 in order to prevent total operating
expenses (excluding any taxes, interest, brokerage fees and extraordinary
expenses) from exceeding 0.96% of average daily net assets. The fees and
expenses shown in the table do not reflect this voluntary expense cap.
(3) Other expenses are based on estimates for the current fiscal year.
(4) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 2.
-53-
<PAGE>
Profile: The Intermediate Fixed Income Portfolio
- ------------------------------------------------
What is the Portfolio's Goal?
The Intermediate Fixed Income Portfolio seeks maximum long-term total
return, consistent with reasonable risk. Although the Portfolio will strive
to achieve its goal, there is no assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio 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. The benchmark against which the Portfolio's performance
will be measured is the Lehman Brothers Government/Corporate Intermediate Bond
Index.
The Portfolio 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) between one to ten years.
Short- and intermediate-term debt securities (under ten years) form the core of
the Portfolio. Long-term bonds (over ten years) are purchased when they will
enhance return without significantly increasing risk. Average effective maturity
may exceed the above range when we believe 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 that we deem to
be of comparable quality. 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.
The Portfolio will normally experience an annual portfolio turnover rate
exceeding 100%, but that rate is not expected to exceed 250%. High portfolio
turnover (over 100%) involves correspondingly greater 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.
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. This Portfolio
will be affected by changes in interest rates because the value of fixed-income
securities held by the Portfolio, particularly those with longer maturities,
will decrease if interest rates rise. The Portfolio also will be affected by
prepayment risk due to its holdings of mortgage-backed securities. With
prepayment risks, when homeowners prepay mortgages during periods of low
interest rates the Portfolio may be forced to re-deploy its assets in lower
yielding securities.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these instruments.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
How has The Intermediate Fixed Income Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in The Intermediate Fixed Income Portfolio. We show how returns for The
Intermediate Fixed Income Portfolio have varied over the past two calendar
years, as well as average annual returns for one year and since inception--with
-54-
<PAGE>
average annual returns compared to the performance of the Lehman Brothers
Government/Corporate Intermediate Bond Index. The Lehman Brothers
Government/Corporate Intermediate Bond Index is an index composed of 5,400
publicly issued corporate and U.S. government debt rated Baa or better, with at
least one year to maturity and at least $25 million par outstanding. The index
is unmanaged and does not include the actual costs of buying, selling, and
holding securities. The Portfolio's past performance does not necessarily
indicate how it will perform in the future. During the periods shown, Delaware
Management Company has voluntarily waived and paid expenses of The Intermediate
Fixed Income Portfolio. Returns would be lower without the voluntary waiver and
payment.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN
(The Intermediate Fixed Income Portfolio)]
Year-by-year total return (The Intermediate Fixed Income Portfolio)
The Intermediate Fixed Income Portfolio
1997 7.37%
1998 7.07%
As of September 30, 1999, The Intermediate Fixed Income Portfolio had a calendar
year-to-date return of 0.23%. During the periods illustrated in this bar chart,
The Intermediate Fixed Income Portfolio's highest quarterly return was 3.16% for
the quarter ended September 30, 1998 and its lowest quarterly return was -0.02%
for the quarter ended March 31, 1997.
Average annual returns for periods ending 12/31/98
Lehman Brothers
The Intermediate Fixed Government/Corporate
Income Portfolio Intermediate Bond Index
1 year 7.07% 7.73%
Since inception (3/12/96) 6.84% 8.44%
-55-
<PAGE>
What are The Intermediate Fixed Income Portfolio's fees and expenses?
Shareholder fees are fees paid directly from your investment.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None
a percentage of offering price
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None
dividends
----------------------------------------------------------------
Purchase reimbursement fees None
----------------------------------------------------------------
Redemption reimbursement fees None
----------------------------------------------------------------
Exchange fees None
----------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Intermediate Fixed
Income Portfolio's assets.
-----------------------------------------------------------------
Investment advisory fees(1) 0.40%
-----------------------------------------------------------------
Distribution and service (12b-1) fees None
-----------------------------------------------------------------
Other expenses(1) 0.61%
-----------------------------------------------------------------
Total operating expenses(1) 1.01%
-----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(2) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
---------------------------
1 year $103
---------------------------
3 years $322
---------------------------
5 years $558
---------------------------
10 years $1,236
---------------------------
(1) Delaware Management Company has agreed to waive fees and pay expenses
through April 30, 2000 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 0.53% of average daily net assets. The fees and expenses
shown in the table do not reflect this voluntary expense cap.
(2) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
-56-
<PAGE>
Profile: The Aggregate Fixed Income Portfolio
- ---------------------------------------------
What is the Portfolio's Goal?
The Aggregate Fixed Income Portfolio seeks maximum long-term total return,
consistent with reasonable risk. Although the Portfolio will strive to
achieve its goal, there is no assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio 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. The benchmark against which the Portfolio's performance
will be measured is the Lehman Brothers Aggregate Bond Index.
The Portfolio seeks maximum long-term total return by investing in debt
securities having a broad range of maturities. However, the Portfolio typically
will have 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 when they will
enhance return without significantly increasing risk. Average effective maturity
may exceed the above range when 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 that we deem to
be of comparable quality. 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.
The Portfolio will normally experience an annual portfolio turnover rate
exceeding 100%, but that rate is not expected to exceed 250%. High portfolio
turnover (over 100%) involves correspondingly greater 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.
-57-
<PAGE>
Profile: The Aggregate Fixed Income Portfolio (continued)
- ---------------------------------------------
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. The Portfolio
will be affected by changes in interest rates because the value of fixed- income
securities held by the Portfolio, particularly those with longer maturities,
will decrease if interest rates rise. The Portfolio will also be affected by
prepayment risk due to its holdings of mortgage-backed securities. With
prepayment risk, when homeowners prepay mortgages during periods of low interest
rates, the Portfolio may be forced to re-deploy its assets in lower yielding
securities.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-58-
<PAGE>
How has The Aggregate Fixed Income Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in The Aggregate Fixed Income Portfolio. We show returns for The Aggregate Fixed
Income Portfolio for the past calendar year, as well as average annual returns
for one year and since inception--with average annual returns compared to the
performance of the Lehman Brothers Aggregate Bond Index. The Lehman Brothers
Aggregate Bond Index is comprised of approximately 6,000 publicly traded bonds
including U.S. government, mortgage-backed, corporate and Yankee bonds with an
average maturity of approximately 10 years. The index is weighted by the market
value of the bonds included in the index. The index is unmanaged and does not
include the actual costs of buying, selling, and holding securities. The
Portfolio's past performance does not necessarily indicate how it will perform
in the future. During the periods shown, Delaware Management Company has
voluntarily waived and paid expenses of The Aggregate Fixed Income Portfolio.
Returns would be lower without the voluntary waiver and payment.
[GRAPHIC OMITTED: BAR CHART SHOWING TOTAL RETURN
(The Aggregate Fixed Income Portfolio)]
Total return (The Aggregate Fixed Income Portfolio)
The Aggregate Fixed Income Portfolio
1998 8.58%
As of September 30, 1999, The Aggregate Fixed Income Portfolio had a calendar
year-to-date return of -2.22%. During the period illustrated in this bar chart,
The Aggregate Fixed Income Portfolio's highest quarterly return was 4.20% for
the quarter ended September 30, 1998 and its lowest quarterly return was 0.54%
for the quarter ended December 31, 1998.
Average annual returns for periods ending 12/31/98
The Aggregate Fixed Lehman Brothers
Income Portfolio Aggregate Bond Index
1 year 8.58% 8.69%
Since inception (12/29/97) 8.39% 8.69%
-59-
<PAGE>
What are The Aggregate Fixed Income Portfolio's fees and expenses? Shareholder
fees are fees paid directly from your investment.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None
a percentage of offering price
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None
dividends
----------------------------------------------------------------
Purchase reimbursement fees None
----------------------------------------------------------------
Redemption reimbursement fees None
----------------------------------------------------------------
Exchange fees None
----------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Aggregate Fixed Income
Portfolio's assets.
-----------------------------------------------------------------
Investment advisory fees(1) 0.40%
-----------------------------------------------------------------
Distribution and service (12b-1) fees None
-----------------------------------------------------------------
Other expenses(1) 1.67%
-----------------------------------------------------------------
Total operating expenses(1) 2.07%
-----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(2) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
---------------------------
1 year $210
---------------------------
3 years $649
---------------------------
5 years $1,114
---------------------------
10 years $2,400
---------------------------
(1) Delaware Management Company has agreed to waive fees and pay expenses
through April 30, 2000 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 0.53% of average daily net assets. The fees and expenses
shown in the table do not reflect this voluntary expense cap.
(2) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
-60-
<PAGE>
Profile: The High-Yield Bond Portfolio
- --------------------------------------
What is the Portfolio's Goal?
The High-Yield Bond Portfolio seeks high total return. Although the
Portfolio will strive to achieve its goal, there is no assurance that it
will.
What are the Portfolio's main investment strategies? 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, that we judge to be of comparable
quality. Of these categories of securities, we anticipate investing primarily in
corporate bonds. 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 speculative. 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 our opinion, such
holdings are prudent given then prevailing market conditions. Except when we
believe 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. When taking a temporary defensive position the Portfolio may not be
able to achieve its investment objective.
From time to time, the Portfolio may acquire zero coupon bonds and, to a lesser
extent, pay-in-kind ("PIK") bonds, however, the Portfolio generally does not
purchase a substantial amount of these securities. Zero coupon bonds and PIK
bonds are 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.
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.
We do not normally intend to respond to short-term market fluctuations or to
acquire securities for the purpose of short-term trading; however, we may take
advantage of short-term opportunities that are consistent with the Portfolio's
investment objective.
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. We will attempt to reduce such risks through portfolio
diversification, credit analysis, and attention to trends in the economy,
industries and financial markets.
-61-
<PAGE>
Profile: The High-Yield Bond Portfolio (continued)
- --------------------------------------
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. Investing in 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.
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 ratio 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. A less liquid secondary
market may have an adverse effect on the Portfolio's ability to sell particular
bonds, 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.
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Portfolio shares will increase
and decrease according to changes in the value of the Portfolio's investments.
The Portfolio will be affected by changes in bond prices. The Portfolio's
investments in securities issued by non-U.S. companies are generally denominated
in foreign currencies and involve certain risk and opportunity considerations
not typically associated with investing in bonds issued by U.S. companies.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-62-
<PAGE>
How has The High-Yield Bond Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in The High-Yield Bond Portfolio. We show how returns for The High-Yield Bond
Portfolio have varied over the past two calendar years, as well as average
annual returns for one year and since inception--with average annual returns
compared to the performance of the Salomon Smith Barney High-Yield Cash Pay
Index. The Salomon Smith Barney High-Yield Cash Pay Index includes cash-pay and
deferred-interest bonds, but excludes bankrupt bonds. When an issuer misses or
expects to miss an interest payment or enters into Chapter 11 bankruptcy, the
corresponding bonds exit the index at month end, reflecting the loss of the
coupon payment or accrued interest. You should remember that, unlike the
Portfolio, the index is unmanaged and does not include the actual costs of
buying, selling, and holding securities. The Portfolio's past performance does
not necessarily indicate how it will perform in the future. During the periods
shown, Delaware Management Company has voluntarily waived and paid expenses of
The High-Yield Bond Portfolio. Returns would be lower without the voluntary
waiver and payment.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN
(The High-Yield Bond Portfolio)]
Year-by-year total return (The High-yield Bond Portfolio)
The High-Yield Bond Portfolio
1997 18.14%
1998 1.75%
As of September 30, 1999, The High-Yield Bond Portfolio had a calendar
year-to-date return of -1.68%. During the periods illustrated in this bar chart,
The High-Yield Bond Portfolio's highest quarterly return was 6.39% for the
quarter ended June 30, 1997 and its lowest quarterly return was -5.42% for the
quarter ended September 30, 1998.
Average annual returns for periods ending 12/31/98
The High-Yield Bond Salomon Smith Barney
Portfolio High-Yield Cash Pay Index
1 year 1.75% 4.42%
Since inception (12/2/96) 9.90% 8.69%
-63-
<PAGE>
What are The High-Yield Bond Portfolio's fees and expenses?
Shareholder fees are fees paid directly from your investment.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None
a percentage of offering price
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None
dividends
----------------------------------------------------------------
Purchase reimbursement fees None
----------------------------------------------------------------
Redemption reimbursement fees None
----------------------------------------------------------------
Exchange fees None
----------------------------------------------------------------
Annual Portfolio operating expenses are deducted from The High-Yield Bond
Portfolio's assets.
-----------------------------------------------------------------
Investment advisory fees(1) 0.45%
-----------------------------------------------------------------
Distribution and service (12b-1) fees None
-----------------------------------------------------------------
Other expenses(1) 0.30%
-----------------------------------------------------------------
Total operating expenses(1) 0.75%
-----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(2) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
---------------------------
1 year $77
---------------------------
3 years $240
---------------------------
5 years $417
---------------------------
10 years $930
---------------------------
(1) Delaware Management Company has agreed to waive fees and pay expenses
through April 30, 2000 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 0.59% of average daily net assets. The fees and expenses
shown in the table do not reflect this voluntary expense cap.
(2) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
-64-
<PAGE>
Profile: The Diversified Core Fixed Income Portfolio
What is the Portfolio's Goal?
The Diversified Core Fixed Income Portfolio seeks maximum long-term total
return, consistent with reasonable risk. Although the Portfolio will strive
to achieve its goal, there is no assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio seeks to
achieve its objective by allocating its investments principally among the
following three sectors of the fixed-income securities markets: the U.S.
Investment Grade Sector, the U.S. High-Yield Sector, and the International
Sector. We will determine the amount of assets of the Portfolio that will be
allocated to each of the three sectors, based on our evaluation of economic and
market conditions and our assessment of the returns and potential for
appreciation that can be achieved from investments in each of the three sectors.
We will periodically reallocate the Portfolio's assets, as deemed necessary. The
relative proportion of the Portfolio's assets to be allocated among sectors is
described below.
o U.S. Investment Grade Sector Under normal circumstances, between 50% and
90% of the Portfolio's total assets will be invested in the U.S. investment
grade sector. In managing the Portfolio's assets allocated to the
investment grade sector, we will invest principally in debt obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities and by U.S. corporations. The corporate debt obligations
in which the Portfolio may invest include bonds, notes, debentures and
commercial paper of U.S. companies. The U.S. government securities in which
the Portfolio may invest 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.
The investment grade sector of the Portfolio's assets may also be invested
in mortgage-backed securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities or by government sponsored corporations.
Other mortgage-backed securities in which the Portfolio may invest are
issued by certain private, non-government entities. Subject to the quality
limitations, the Portfolio may also invest in securities which are backed
by assets such as receivables on home equity and credit card loans,
automobile, mobile home, recreational vehicle and other loans, wholesale
dealer floor plans and leases.
Securities purchased by the Portfolio will be rated in one of the four
highest rating categories or will be unrated securities that we determine
are of comparable quality. See Appendix A for additional rating
information.
o U.S. High-Yield Sector Under normal circumstances, between 5% and 30% of
the Portfolio's total assets will be allocated to the U.S. High-Yield
Sector. We will invest the Portfolio's assets that are allocated to the
domestic high-yield sector primarily in those securities having a liberal
and consistent yield and those tending to reduce the risk of market
fluctuations. The Portfolio may invest in domestic corporate debt
obligations, including, notes, which may be convertible or non-convertible,
commercial paper, units consisting of bonds with stock or warrants to buy
stock attached, debentures, convertible debentures, zero coupon bonds and
pay-in-kind securities ("PIKs").
The Portfolio will invest in both rated and unrated bonds. The rated bonds
that the Portfolio may purchase in this sector will generally be rated BB
or lower by S&P or Fitch, Ba or lower by Moody's, or similarly rated by
another nationally recognized statistical rating organization. Unrated
bonds may be more speculative in nature than rated bonds.
-65-
<PAGE>
What are the Portfolio's main investment strategies? (continued)
o International Sector Under normal circumstances, between 5% and 20% of the
Portfolio's total assets will be invested in the International Sector. The
International Sector invests primarily in fixed-income securities of
issuers organized or having a majority of their assets or deriving a
majority of their operating income in foreign countries. These fixed-income
securities include foreign government securities, debt obligations of
foreign companies, and securities issued by supranational entities. 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 International Bank for Reconstruction and Development (more commonly
known as the World Bank), the European Economic Community, the European
Investment Bank, the Inter-Development Bank and the Asian Development Bank.
The Portfolio may invest in securities issued in any currency and may hold
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 the Euro. The Portfolio may, 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.
The Portfolio will invest in both rated and unrated foreign securities. It
may purchase securities of issuers in any foreign country, developed and
underdeveloped. These investments may include direct obligations of issuers
located in emerging markets countries and so-called Brady Bonds. However,
investments in emerging markets, Brady Bonds and in foreign securities that
are rated below investment grade (e.g. lower than BBB by S&P), or if
unrated, judged to be of comparable quality, will, in the aggregate, be
limited to no more than 5% of the Portfolio's total assets. In addition,
the Portfolio may invest in sponsored and unsponsored American Depositary
Receipts, European Depositary Receipts, or Global Depositary Receipts. The
Portfolio may also invest in zero coupon bonds and may purchase shares of
other investment companies.
In unusual market conditions, in order to meet redemption requests, for
temporary defensive purposes, and pending investment, the Portfolio may
hold a substantial portion of its assets in cash or short-term fixed-income
obligations. The Portfolio may also use a wide range of hedging
instruments, including options, futures contracts and options on futures
contracts subject to certain limitations.
-66-
<PAGE>
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. The Portfolio
will be affected by changes in bond prices and currency exchange rates.
Investments in high-yield, high risk bonds entails certain risk, including the
risk of loss of principal which may be greater than the risks presented by
investment grade bonds and which should be considered by investors contemplating
an investment in the Portfolio. Investments in securities of non-U.S. issuers
are generally denominated in foreign currencies and involve certain risk and
opportunity considerations not typically associated with investing in U.S.
issuers. The Portfolio will also be affected by prepayment risk due to its
holdings of mortgage-backed securities. With prepayment risk, when homeowners
prepay mortgages during periods of low interest rates, the Portfolio may be
forced to re-deploy its assets in lower yielding securities.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-67-
<PAGE>
How has The Diversified Core Fixed Income Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in The Diversified Core Fixed Income Portfolio. We show returns for The
Diversified Core Fixed Income Portfolio for the past calendar year, as well as
average annual returns for one year and since inception--with the average annual
returns compared to the performance of the Lehman Brothers Aggregate Bond Index.
The Lehman Brothers Aggregate Bond Index is comprised of approximately 6,000
publicly traded bonds including U.S. government, mortgage-backed, corporate and
Yankee bonds with an average maturity of approximately 10 years. The index is
weighted by the market value of the bonds included in the index. The index is
unmanaged and does not include the actual costs of buying, selling, and holding
securities. The Portfolio's past performance does not necessarily indicate how
it will perform in the future. During the periods shown, Delaware Management
Company has voluntarily waived and paid expenses of The Diversified Core Fixed
Income Portfolio. Returns would be lower without the voluntary waiver and
payment.
[GRAPHIC OMITTED: BAR CHART SHOWING TOTAL RETURN (The Diversified Core
Fixed Income Portfolio)]
Total return (The Diversified Core Fixed Income Portfolio)
The Diversified Core Fixed Income Portfolio
1998 10.28%
As of September 30, 1999, The Diversified Core Fixed Income Portfolio had a
calendar year-to-date return of 1.08%. During the periods illustrated in this
bar chart, The Diversified Core Fixed Income Portfolio's highest quarterly
return was 3.65% for the quarter ended March 31, 1998 and its lowest quarterly
return was 1.10% for the quarter ended September 30, 1998.
Average annual returns for periods ending 12/31/98
The Diversified Core Lehman Brothers
Fixed Income Portfolio Aggregate Bond Index
1 year 10.28% 8.69%
Since inception (12/29/97) 9.92% 8.69%
-68-
<PAGE>
What are The Diversified Core Fixed Income Portfolio's fees and expenses?
Shareholder fees are fees paid directly from your investment.
- ----------------------------------------------------------
Maximum sales charge (load) imposed on None
purchases as a percentage of offering price
- ----------------------------------------------------------
Maximum sales charge (load) imposed on None
reinvested dividends
- ----------------------------------------------------------
Purchase reimbursement fees None
- ----------------------------------------------------------
Redemption reimbursement fees None
- ----------------------------------------------------------
Exchange fees None
- ----------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Diversified Core Fixed
Income Portfolio's assets.
- ----------------------------------------------------------
Investment advisory fees(1) 0.43%
- ----------------------------------------------------------
Distribution and service (12b-1) fees None
- ----------------------------------------------------------
Other expenses(1) 1.31%
- ----------------------------------------------------------
Total operating expenses(1) 1.74%
- ----------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(2) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
- --------------------------
1 year $177
- --------------------------
3 years $548
- --------------------------
5 years $944
- --------------------------
10 years $2,052
- --------------------------
(1) Delaware Management Company has agreed to waive fees and pay expenses
through April 30, 2000 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 0.57% of average daily net assets. The fees and expenses
shown in the table do not reflect this voluntary expense cap.
(2) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
-69-
<PAGE>
Profile: The Global Fixed Income Portfolio
What is the Portfolio's Goal?
The Global Fixed Income Portfolio seeks current income consistent with the
preservation of principal. Although the Portfolio will strive to achieve its
goal, there is no assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio 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 Euro.
The Portfolio is considered "non-diversified" under the federal laws and
regulations that regulate mutual funds. Thus, adverse effects on the Portfolio's
investments may affect a larger portion of its overall assets and subject the
Portfolio to greater risks.
Our approach in selecting investments for the Portfolio is oriented to country
selection and is value driven. In selecting fixed-income instruments for the
Portfolio, we identify those countries' fixed-income markets which 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.
We conduct 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.
Our 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. High portfolio turnover involves correspondingly greater
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 Portfolio will attempt to achieve its objective by investing in a broad
range of fixed-income securities, including debt 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, as well as foreign and U.S.
government securities with the limitations 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.
It is anticipated that the average weighted maturity of the Portfolio will be in
the five-to-ten year range. If, however, we anticipate a declining interest rate
environment, the average weighted maturity may be extended beyond ten years.
Conversely, if we anticipate a rising rate environment, the average weighted
maturity may be shortened to less than five years.
The Portfolio may also invest in zero coupon bonds, and in the debt securities
of supranational entities denominated in any currency. 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 International Bank for
Reconstruction and Development (more commonly known as the World Bank), the
European Economic Community, the European Investment Bank, the Inter-Development
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, foreign government securities and securities of
supranational entities.
-70-
<PAGE>
What are the Portfolio's main investment strategies? (continued)
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. These obligations
differ mainly in interest rates, maturities and dates of issuance. When we
believe 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. When taking a temporary defensive position, the
Portfolio may not be able to achieve its investment objective.
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 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. 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 developing, 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
Investment Company Act of 1940 and would involve the indirect payment of a
portion of the expenses, including advisory fees, of such other investment
companies.
Currency considerations carry a special risk for a portfolio of international
securities. We use 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 its portfolio of securities.
-71-
<PAGE>
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. The Portfolio
will be affected by changes in bond prices and currency exchange rates.
Investments in securities of non-U.S. issuers are generally denominated in
foreign currencies and involve certain risk and opportunity considerations not
typically associated with investing in U.S. issuers. Foreign securities may be
adversely affected by political instability, foreign economic conditions or
inadequate regulatory and accounting standards. In addition, 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. The Portfolio also may be affected by changes in
currency rates, which may reduce or eliminate any gains produced by investment,
and exchange control regulations and may incur costs in connection with
conversions between currencies. To the extent the Portfolio invests in
securities of companies in emerging markets, such investments present a greater
degree of risk than tends to be the case for investments in Western Europe and
other developed markets. To the extent the investment adviser invests in forward
foreign currency contracts or uses other investments to endeavor to hedge
against currency risks, the Portfolio will be subject to the special risks
associated with that activity.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-72-
<PAGE>
How has The Global Fixed Income Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in The Global Fixed Income Portfolio. We show how returns for The Global Fixed
Income Portfolio have varied over the past six calendar years, as well as
average annual returns for one and five years and since inception --with the
average annual returns compared to the performance of the Salomon Smith Barney
World Government Bond Index. The Salomon Smith Barney World Government Bond
Index is an index of bonds from 14 world government bond markets with maturities
of at least 1 year. The index is unmanaged and does not include the actual costs
of buying, selling, and holding securities. The Portfolio's past performance
does not necessarily indicate how it will perform in the future. During the
periods shown, Delaware International Advisers Ltd. has voluntarily waived and
paid expenses of The Global Fixed Income Portfolio.
Returns would be lower without the voluntary waiver and payment.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (The Global Fixed
Income Portfolio)]
Year-by-year total return (The Global Fixed Income Portfolio)
The Global Fixed Income Portfolio
1993 19.16%
1994 1.24%
1995 18.96%
1996 14.96%
1997 1.73%
1998 8.68%
As of September 30, 1999, The Global Fixed Income Portfolio had a calendar
year-to-date return of -1.50%. During the periods illustrated in this bar chart,
The Global Fixed Income Portfolio's highest quarterly return was 6.33% for the
quarter ended March 31, 1993 and its lowest quarterly return was -2.50% for the
quarter ended June 30, 1994.
Average annual returns for periods ending 12/31/98
The Global Fixed Solomon Brothers World
Income Portfolio Government Bond Index
1 year 8.68% 15.29%
5 years 8.88% 7.85%
Since inception (11/30/92) 10.57% 8.72%
-73-
<PAGE>
What are The Global Fixed Income Portfolio's fees and expenses? Shareholder fees
are fees paid directly from you investment.
- ----------------------------------------------------------
Maximum sales charge (load) imposed on None
purchases as a percentage of offering price
- ----------------------------------------------------------
Maximum sales charge (load) imposed on None
reinvested dividends
- ----------------------------------------------------------
Purchase reimbursement fees None
- ----------------------------------------------------------
Redemption reimbursement fees None
- ----------------------------------------------------------
Exchange fees None
- ----------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Global Fixed Income
Portfolio's assets.
- ----------------------------------------------------------
Investment advisory fees(1) 0.50%
- ----------------------------------------------------------
Distribution and service (12b-1) fees None
- ----------------------------------------------------------
Other expenses(1) 0.12%
- ----------------------------------------------------------
Total operating expenses(1) 0.62%
- ----------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(2) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
- --------------------------
1 year $63
- --------------------------
3 years $199
- --------------------------
5 years $346
- --------------------------
10 years $774
- --------------------------
(1) Delaware International Advisers Ltd. has agreed to waive fees and pay
expenses through April 30, 2000 in order to prevent total operating
expenses (excluding any taxes, interest, brokerage fees and extraordinary
expenses) from exceeding 0.60% of average daily net assets. The fees and
expenses shown in the table do not reflect this voluntary expense cap.
(2) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
-74-
<PAGE>
Profile: The International Fixed Income Portfolio
What is the Portfolio's Goal?
The International Fixed Income Portfolio seeks current income consistent with
the preservation of principal. Although the Portfolio will strive to achieve
its goal, there is no assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio 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 such country, in
the currency of another country or in multinational currency units, such as the
Euro. 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, as well as, foreign government
securities with the limitation noted below. The Portfolio is considered
"non-diversified" under the federal laws and regulations that regulate mutual
funds. Thus, adverse effects on the Portfolio's investments may affect a larger
portion of its overall assets and subject the Portfolio to greater risks.
Our approach in selecting investments for the Portfolio is oriented to country
selection and is value driven. In selecting fixed-income instruments for the
Portfolio, we identify those countries' fixed-income markets that we believe
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. We conduct 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 Portfolio may also invest in zero coupon bonds, and in the debt securities
of supranational entities denominated in any currency. 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 International Bank for
Reconstruction and Development (more commonly known as the World Bank), the
European Economic Community, the European Investment Bank, the Inter-Development
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.
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. When we believe 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. When taking a temporary defensive position, the Portfolio may not
achieve its investment objective.
-75-
<PAGE>
What are the Portfolio's main investment strategies? (continued)
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 to be of comparable quality. 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. 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 developing, 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 Investment Company Act
of 1940 and would involve the indirect payment of a portion of the expenses,
including advisory fees, of such other investment companies.
Currency considerations carry a special risk for a portfolio of international
securities. We use a purchasing power parity approach to evaluate currency risk.
In this regard, the Portfolio may 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 portfolio securities.
It is anticipated that the average weighted maturity of the Portfolio will be in
the five-to-ten year range. If we anticipate a declining interest rate
environment, the average weighted maturity may be extended beyond ten years.
Conversely, if we anticipate a rising rate environment, the average weighted
maturity may be shortened to less than five years.
Our 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. High portfolio turnover involves correspondingly greater
transaction costs and may affect taxes payable by the Portfolio's shareholder
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.
-76-
<PAGE>
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. The Portfolio
will be affected by changes in bond prices and currency exchange rates.
Investments in securities of non-U.S. issuers are generally denominated in
foreign currencies and involve certain risk and opportunity considerations not
typically associated with investing in securities of U.S. issuers. Foreign
securities may be adversely affected by political instability, foreign economic
conditions or inadequate regulatory and accounting standards. In addition, 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. The Portfolio may also be affected by changes
in currency rates, which may reduce or eliminate any gains produced by
investment, and exchange control regulations and may incur costs in connection
with conversions between currencies. To the extent the Portfolio invests in
securities of companies in emerging markets, such investments present a greater
degree of risk than tends to be the case for foreign investments in Western
Europe and other developed markets. To the extent that we invest in forward
foreign currency contracts or use other investments to hedge against currency
risks, the Portfolio will be subject to the special risks associated with those
activities.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-77-
<PAGE>
How has The International Fixed Income Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in The International Fixed Income Portfolio. We show returns for The
International Fixed Income Portfolio for the past calendar year, as well as
average annual returns for one year and since inception--with the average annual
return compared to the performance of the Salomon Smith Barney Non-U.S. World
Government Bond Index. The Salomon Smith Barney Non-U.S. World Government Bond
Index is a market-capitalization weighted benchmark that tracks the performances
of the Government bond markets of Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Portugal,
Spain, Sweden, Switzerland and the United Kingdom. The index is unmanaged and
does not include the actual costs of buying, selling, and holding securities.
The Portfolio's past performance does not necessarily indicate how it will
perform in the future. During the periods shown, Delaware International Advisers
Ltd. has voluntarily waived and paid expenses of The International Fixed Income
Portfolio. Returns would be lower without the voluntary waiver and payment.
[GRAPHIC OMITTED: BAR CHART SHOWING TOTAL RETURN (The International Fixed Income
Portfolio)]
Total return (The International Fixed Income Portfolio)
The International Fixed Income Portfolio
1998 9.68%
As of September 30, 1999, The International Fixed Income Portfolio had a
calendar year-to-date return of -2.01%. During the periods illustrated in this
bar chart, The International Fixed Income Portfolio's highest quarterly return
was 5.52% for the quarter ended September 30, 1998 and its lowest quarterly
return was 0.30% for the quarter ended June 30, 1998.
Average annual returns for periods ending 12/31/98
The International Salomon Smith Barney
Fixed Income Non-U.S. World
Portfolio Government Bond Index
1 year 9.68% 17.80%
Since inception (4/11/97) 7.87% 12.77%
-78-
<PAGE>
What are The International Fixed Income Portfolio's fees and expenses?
Shareholder fees are fees paid directly from your investment.
- ----------------------------------------------------------
Maximum sales charge (load) imposed on None
purchases as a percentage of offering price
- ----------------------------------------------------------
Maximum sales charge (load) imposed on None
reinvested dividends
- ----------------------------------------------------------
Purchase reimbursement fees None
- ----------------------------------------------------------
Redemption reimbursement fees None
- ----------------------------------------------------------
Exchange fees None
- ----------------------------------------------------------
Annual Portfolio operating expenses are deducted from The International Fixed
Income Portfolio's assets.
- ----------------------------------------------------------
Investment advisory fees(1) 0.50%
- ----------------------------------------------------------
Distribution and service (12b-1) fees None
- ----------------------------------------------------------
Other expenses(1) 0.17%
- ----------------------------------------------------------
Total operating expenses(1) 0.67%
- ----------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(2) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
- --------------------------
1 year $68
- --------------------------
3 years $214
- --------------------------
5 years $373
- --------------------------
10 years $835
- --------------------------
(1) Delaware International Advisers Ltd. has agreed to waive fees and pay
expenses through April 30, 2000 in order to prevent total operating
expenses (excluding any taxes, interest, brokerage fees and extraordinary
expenses) from exceeding 0.60% of average daily net assets. The fees and
expenses shown in the table do not reflect this voluntary expense cap.
(2) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
-79-
<PAGE>
Profile: The Asset Allocation Portfolio
What are the Portfolio's Goals?
The Asset Allocation Portfolio seeks capital appreciation with current income
as a secondary objective. Although the Portfolio will strive to achieve its
goals, there is no assurance that it will.
What are the Portfolio's main investment strategies? The Portfolio seeks to
achieve its objectives by investing primarily in domestic equity and
fixed-income securities, including domestic equity and fixed-income Portfolios
of the Fund. The Portfolio may also invest in international equity and
fixed-income securities, including international equity and fixed-income
Portfolios of the Fund. The Portfolio will generally invest at least 20% of its
net assets in fixed-income securities, including fixed-income Portfolios of the
Fund. The Portfolio will pursue its investment objectives through active asset
allocation implemented primarily with investments in a combination of the
Portfolios of the Fund. The Portfolio may also separately invest directly in the
same securities and employ the same investment strategies as any of the
Portfolios of the Fund, to the extent consistent with the Portfolio's investment
objectives. The Portfolio may invest directly in securities or other investment
instruments for such purposes as avoiding undue disruption of the activities of
the Portfolios of the Fund, hedging of the Portfolios' investment positions, or
to make investments in asset classes not available in the Portfolios of the
Fund. While it is anticipated that at most times the Portfolio will be primarily
invested in the Portfolios of the Fund, it is possible, from time to time, for
the Portfolio to be substantially invested directly in securities. The Portfolio
is considered "non-diversified" under the federal laws and regulations that
regulate mutual funds. Thus, adverse effects on the Portfolio's investments may
affect a larger portion of its overall assets and subject the Portfolio to
greater risks.
As described above, the Portfolios of the Fund include funds investing in U.S.
and foreign stocks, bonds, and money market instruments. At any point in time,
it can be expected that the Portfolio will invest in a different combination of
securities and Portfolios of the Fund. In allocating the Portfolio's assets, we
will evaluate the expected return of the Portfolios of the Fund, the volatility
of the Portfolios of the Fund (i.e., the variability of returns from one period
to the next), and the correlation of the Portfolios of the Fund (i.e. the degree
to which the Portfolios of the Fund move together).
The Portfolios of the Fund that will currently be considered for investment by
The Asset Allocation Portfolio are listed below, grouped within broad asset
classes. The asset class headings below are provided for convenience and are
approximate in nature. For more detailed information on the investment policies
of each Portfolio of the Fund, see the discussion of each such Portfolio in this
Prospectus. The list of Portfolios of the Fund may change from time to time, and
Portfolios of the Fund may be added or deleted upon our recommendation without
shareholder approval.
-80-
<PAGE>
What are the Portfolio's main investment strategies? (continued)
Asset Class Portfolio of the Fund
----------- ---------------------
U.S. Equity The Mid-Cap Growth Equity Portfolio
The Large-Cap Value Equity Portfolio
The Core Equity Portfolio
The Select Equity Portfolio
The Small-Cap Growth Equity Portfolio
The Real Estate Investment Trust Portfolio II
The Mid-Cap Value Equity Portfolio
The Small-Cap Value Equity Portfolio
International Equity The Emerging Markets Portfolio
The Global Equity Portfolio
The International Equity Portfolio
The International Large-Cap Equity Portfolio
The Labor Select International Equity Portfolio
The International Small-Cap Portfolio
Fixed Income The Aggregate Fixed Income Portfolio
The Diversified Core Fixed Income Portfolio
The Intermediate Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio
The International Fixed Income Portfolio
The percentage ranges targeted for the Portfolio by broad asset class are set
forth below. We may change the percentage ranges applicable to each asset class
for the Portfolio may be changed from time to time by us without the approval of
shareholders.
Asset Class Percentage Ranges of Investment in Asset Classes
- --------------------------------------------------------------------------------
U.S. Equity 30% - 70%
International Equity 5% - 30%
Fixed Income 20% - 65%
Cash 0% - 35%
The Portfolio will generally be invested in at least three Portfolios of the
Fund, consistent with the table above. The Portfolio may invest up to 100% of
its total assets in cash or other money market instruments for temporary,
defensive purposes. When taking a temporary defensive position the Portfolio may
not be able to achieve its investment objective.
The Portfolio will indirectly bear its pro rata share of the fees and expenses
incurred by the Portfolios of the Fund that are applicable to direct
shareholders of such Portfolios of the Fund. The investment returns of the
Portfolio, therefore, will be net of the expenses of the Portfolios of the Fund
in which it is invested.
-81-
<PAGE>
What are the Portfolio's main investment strategies? (continued)
The Portfolio may, to the extent consistent with its investment objectives,
invest its assets directly in the same types of securities and engage in the
same types of investment strategies as those in which the Portfolios of the Fund
invest. The Portfolio may use such investment strategies to hedge investment
positions, including investments directly in securities and investments in the
Portfolios of the Fund, to help protect the Portfolio against a decline in the
value of the Portfolios of the Fund. The Portfolio does not intend to engage in
these investment strategies for non-hedging purposes such that more than 5% of
its assets will be exposed.
The Portfolio, to the extent consistent with its investment objective, and
certain of the Portfolios of the Fund, may purchase foreign securities; purchase
high-yielding, high risk debt securities (commonly referred to as "junk bonds");
enter into foreign currency transactions; engage in options transactions; engage
in futures contracts and options on futures; purchase zero coupon bonds and
pay-in-kind bonds; purchase restricted and illiquid securities; and enter into
forward roll transactions.
What are the main risks of investing in the Portfolio? Investing in any mutual
fund involves risk, including the risk that you may lose part or all of the
money you invest. The price of Portfolio shares will increase and decrease
according to changes in the value of the Portfolio's investments. The
Portfolio's assets may be primarily invested in a combination of the Portfolios
of the Fund. As a result, the Portfolio's investment performance may be directly
related to the investment performance of the Portfolios of the Fund held by it.
The ability of the Portfolio to meet its investment objective may thus be
directly related to the ability of the Portfolios of the Fund to meet their
objectives as well as our allocation among those Portfolios of the Fund. In
addition, the Portfolio's share prices and yields will fluctuate in response to
movements in the securities markets as a whole.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
See "Additional Investment Information" and "Risk Factors" for further details
concerning these and other investment policies and risks.
You should keep in mind that an investment in the Portfolio is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Portfolio with your investment
consultant to determine whether it is an appropriate investment for you.
-82-
<PAGE>
What are The Asset Allocation Portfolio's fees and expenses? Shareholder fees
are fees paid directly from your investment.
- ----------------------------------------------------------
Maximum sales charge (load) imposed on None
purchases as a percentage of offering price
- ----------------------------------------------------------
Maximum sales charge (load) imposed on None
reinvested dividends
- ----------------------------------------------------------
Purchase reimbursement fees None
- ----------------------------------------------------------
Redemption reimbursement fees None
- ----------------------------------------------------------
Exchange fees None
- ----------------------------------------------------------
Annual Portfolio operating expenses are deducted from The Asset Allocation
Portfolio's assets.
- ----------------------------------------------------------
Investment Advisory fees(1) 0.05%
- ----------------------------------------------------------
Distribution and service (12b-1) fees None
- ----------------------------------------------------------
Other expenses(1)(2) 0.23%
- ----------------------------------------------------------
Total operating expenses(1) 0.28%
- ----------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Portfolio expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(3) This is an example only, and does not represent future expenses, which
may be greater or less than those shown here.
- --------------------------
1 year $29
- --------------------------
3 years $90
- --------------------------
This example is calculated based on the same hypothetical investment of $10,000
with an annual 5% return over the time shown as used above, and assuming the
estimated total operating expenses of The Asset Allocation Portfolio noted
above, but also assuming the estimated average aggregate total operating
expenses of the Portfolios of the Fund described below. 4 This is an example
only, and does not represent future expenses, which may be greater or less than
those shown here.
- --------------------------
1 year $103
- --------------------------
3 years $322
- --------------------------
(1) Delaware Management Company has agreed to waive fees and pay expenses
through April 30, 2000 in order to prevent total direct operating expenses
of the Portfolio (excluding any taxes, interest, brokerage fees and
extraordinary expenses) from exceeding 0.15% of average daily net assets.
The fees and expenses shown in the table do not reflect this voluntary
expense cap.
(2) Other expenses are based on estimated amounts for the current fiscal year.
(3) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolio's total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1.
(4) The Portfolio's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Portfolios' total operating expenses remain unchanged in each of the
periods we show. This example does not assume the voluntary expense cap
described in footnote 1, but does assume the voluntary expense caps of the
other Portfolios of the Fund.
-83-
<PAGE>
What are The Asset Allocation Portfolio's fees and expenses? (continued)
The Asset Allocation Portfolio, as a shareholder in the Portfolios of the Fund,
will indirectly bear its proportionate share of any management fees and other
expenses paid by the Portfolios of the Fund. These fees and expenses, which are
embedded in the prices of the Portfolios of the Fund shares purchased by The
Asset Allocation Portfolio, are in addition to the fees and expenses of The
Asset Allocation Portfolio shown above. The average aggregate total operating
expenses of the Portfolios of the Fund (including any voluntary expense caps)
are estimated to be 0.73%, based on the actual operating expenses of the
Portfolios of the Fund for the most recent fiscal year and the following static
asset allocation assumptions: The Mid-Cap Growth Equity Portfolio - 25%; The
Large-Cap Value Equity Portfolio - 25%; The International Equity Portfolio -
15%; The High-Yield Bond Portfolio - 10%; and The Aggregate Fixed Income
Portfolio - 25%. Actual expenses will differ depending on the actual asset
allocations among the Portfolios of the Fund in effect from time to time.
-84-
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
The Portfolios may invest in a broad selection of securities consistent with
their respective investment objective and policies. The following chart gives a
brief description of the securities that the Portfolios may invest in. Please
see the Statement of Additional Information for additional descriptions and risk
information on these investments as well as other investments for the
Portfolios.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ---------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
Common Stocks: Securities that represent shares of ownership in The Large-Cap Value Equity, The Core Equity, The Equity
a corporation. Stockholders participate in the corporation's Income, The Select Equity, The Mid-Cap Growth Equity, The
profits and losses indirectly, as the value of a corporation's Mid-Cap Value Equity, The Small-Cap Value Equity, The
shares tends to change as the corporation's earnings fluctuate. Small-Cap Growth Equity, The Real Estate Investment Trust,
The Global Equity, The International Equity, The Labor Select
International Equity, The Emerging Markets, The International
Small-Cap, The International Large-Cap Equity and The Asset
Allocation Portfolios focus their investments on common
stocks, some of which will be dividend paying stocks.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Corporate Bonds: Debt obligations issued by a corporation. The Balanced, The Intermediate Fixed Income and The Aggregate
Fixed Income Portfolios may invest in corporate bonds rated in
one of the four highest categories by an NRSRO (e.g., at least
BBB by S&P or Baa by Moody's), or deemed equivalent. The Global
Fixed Income Portfolio may invest in foreign and U.S. corporate
bonds which are generally rated A or better by S&P or Moody's or
deemed to be of comparable quality. The International Fixed
Income Portfolio may invest in foreign corporate bonds which are
generally rated A or better by S&P or Moody's or deemed to be of
comparable quality. The High-Yield Bond Portfolio will focus its
investments on corporate bonds rated at least B- by S&P or B3 by
Moody's. The Diversified Core Fixed Income Portfolio may invest
in bonds rated in one of the four highest rating categories for
its U.S. Investment Grade Sector, and it may invest in bonds
rated BB or lower by S&P or Fitch and Ba or lower by Moody's for
its U.S. High-Yield Sector and International Sector. Up to 35%
of The Emerging Markets Portfolio's net assets may be invested
in debt securities issued by emerging country companies. The
Small-Cap Growth Equity Portfolio may invest up to 35% of its
assets in debt securities, all of which must be rated within the
four highest categories or deemed to be of comparable quality.
The Small-Cap Value Equity Portfolio may invest up to 25% of its
net assets in corporate bonds rated B or below when we believe
that capital appreciation from those securities is likely. Debt
securities may be acquired by The Mid-Cap Value Equity, The Core
Equity and The Asset Allocation Portfolios and those securities
may be rated below investment grade or, unrated. In the case of
The Core Equity Portfolio, investments in such securities that
are rated below investment grade or unrated will be limited to
no more than 5% of its assets. The Global Equity Portfolio may
invest up to 35% of its assets in corporate bonds rated in one
of the top two rating categories, or, if unrated, deemed to be
of comparable quality. The International Small-Cap Portfolio may
invest up to 15% of its net assets in fixed-income securities
some or all of which may be corporate bonds, and some or all of
which may be investment grade, below investment grade, or
unrated. The International Equity, The International Large-Cap
Equity and The Labor Select International Equity Portfolios may
invest up to 15% of their assets in foreign debt instruments
when attractive opportunities are available. The Equity Income
Portfolio may invest up to 15% of net assets in bonds rated
below investment grade, typically they are rated B or BB. The
Balanced Portfolio may invest in Yankee and Euro Bonds.
</TABLE>
-85-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ---------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
Convertible Securities: Usually preferred stocks or corporate The Balanced, The Equity Income, The Select Equity, The
bonds that can be exchanged for a set number of shares of Mid-Cap Value Equity, The Small-Cap Value Equity, The
common stock at a predetermined price. These securities offer Small-Cap Growth Equity, The Core Equity, The High-Yield
higher appreciation potential than nonconvertible bonds and Bond, The International Small-Cap, The International Equity,
greater income potential than nonconvertible preferred stocks. The International Large-Cap Equity and The Asset Allocation
Portfolios may invest a portion of their assets in
convertible securities in any industry, and The Real Estate
Investment Trust Portfolios' assets may be invested in
convertible securities of issuers in the real estate
industry. Convertible securities acquired by The Mid-Cap
Value Equity, The Small-Cap Value Equity, The Real Estate
Investment Trust, The High-Yield Bond, The International
Small-Cap and The Asset Allocation Portfolios may be rated
below investment grade or unrated. In the case of The Core
Equity and The Balanced Portfolios, such securities that are
rated below investment grade, or unrated, will be limited to
no more than 5% of net assets. The Mid-Cap Value Equity, The
Real Estate Investment Trust, The High-Yield Bond, The
Emerging Markets, The International Small-Cap and The Asset
Allocation Portfolios may invest in convertible preferred
stocks that offer various yield, dividend or other
enhancements. Such enhanced convertible preferred securities
include instruments like PERCS (Preferred Equity Redemption
Cumulation Stock), PRIDES (Preferred Redeemable Increased
Dividend Equity Securities) and DECS (Dividend Enhanced
Convertible Securities).
- ----------------------------------------------------------------- ---------------------------------------------------------------
Mortgage-Backed Securities: Fixed-income securities that The Aggregate Fixed Income, The Diversified Core Fixed
represent pools of mortgages, with investors receiving Income, The Intermediate Fixed Income, The Real Estate
principal and interest payments as the underlying mortgage Investment Trust, The Global Fixed Income, The Asset
loans are paid back. Many are issued and guaranteed against Allocation, The Core Equity, The Balanced and The Select
default by the U.S. government or its agencies or Equity Portfolios may invest in mortgage-backed securities
instrumentalities, such as the Federal Home Loan Mortgage issued or guaranteed by the U.S. government, its agencies or
Corporation, the Fannie Mae and the Government National instrumentalities or by government sponsored corporations.
Mortgage Association. Others are issued by private financial For the Aggregate Fixed Income and The Intermediate Fixed
institutions, with some fully collateralized by certificates Income Portfolios, all securities will be rated investment
issued or guaranteed by the government or its agencies or grade at the time of purchase.
instrumentalities.
- ----------------------------------------------------------------- ---------------------------------------------------------------
</TABLE>
-86-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ---------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
Collateralized Mortgage Obligations (CMOs) and Real Estate The Aggregate Fixed Income, The Diversified Core Fixed
Mortgage Investment Conduits (REMICs): CMOs are privately Income, The Intermediate Fixed Income, The Real Estate
issued mortgage-backed bonds whose underlying value is the Investment Trust, The Global Fixed Income, The Asset
mortgages that are collected into different pools according to Allocation, The Balanced and The Core Equity Portfolios may
their maturity. They are issued by U.S. government agencies and invest in CMOs and REMICs. Certain CMOs and REMICs may have
private issuers. REMICs are privately issued mortgage-backed variable or floating interest rates and others may be
bonds whose underlying value is a fixed pool of mortgages stripped. Stripped mortgage securities are generally
secured by an interest in real property. Like CMOs, REMICs considered illiquid and to such extent, together with any
offer different pools. other illiquid investments, will not exceed 10% of a
Portfolio's net assets. In addition, subject to certain
quality and collateral limitations, The Intermediate Fixed
Income, The Aggregate Fixed Income, The Diversified Core
Fixed Income and The Asset Allocation Portfolios may each
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. The Balanced Portfolio may invest up to
20% of net assets in CMOs or REMICs rated at the time of
purchase in one of the four highest categories by an NRSRO,
whether or not the securities are 100% collateralized.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Asset-Backed Securities: Bonds or notes backed by accounts The Intermediate Fixed Income, The Aggregate Fixed Income,
receivables, including home equity, automobile or credit loans. The Diversified Core Fixed Income, The Asset Allocation, The
Balanced and The Core Equity Portfolios may invest in
asset-backed securities rated in one of the four highest
rating categories by an NRSRO.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Real Estate Investment Trusts (REITs): REITs are pooled The Real Estate Investment Trust Portfolios may invest
investment vehicles which invest primarily in income-producing without limitation in shares of REITs. The Balanced, The
real estate or real estate related loans or interests. REITs Select Equity, The Core Equity, The Small-Cap Value Equity,
are generally classified as equity REITs, mortgage REITs or a The International Small-Cap and The Asset Allocation
combination of equity and mortgage REITs. Equity REITs invest Portfolios may also invest in REITs consistent with their
the majority of their assets directly in real property and investment objectives and policies.
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.
- ----------------------------------------------------------------- ---------------------------------------------------------------
</TABLE>
-87-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ---------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
U.S. Government Securities: U.S. Treasury securities are backed Each Portfolio may invest in U.S. government securities for
by the "full faith and credit" of the United States. Securities temporary purposes and otherwise, as is consistent with its
issued or guaranteed by federal agencies and U.S. government investment objectives and policies. These securities are
sponsored instrumentalities may or may not be backed by the issued or guaranteed as to the payment of principal and
"full faith and credit" of the United States. In the case of interest by the U.S. government, or by various agencies or
securities not backed by the "full faith and credit" of the instrumentalities which have been established or sponsored by
United States, investors in such securities look principally to the U.S. government.
the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Foreign Government Securities: Debt issued by a government Foreign government securities purchased by The Global Fixed
other than the United States or by an agency, instrumentality Income and The International Fixed Income Portfolios will
or political subdivision of such governments. generally be rated in one of the top two rating categories
or, if unrated, deemed to be of comparable quality. However,
each such Portfolio may invest up to 5% of its assets in
fixed-income securities rated, or comparable to securities
rated, below BBB. The fixed-income securities in which The
International Equity Portfolio, The Labor Select
International Equity Portfolio, The Emerging Markets
Portfolio, The International Small-Cap Portfolio, The
International Large-Cap Equity Portfolio and The Diversified
Core Fixed Income Portfolio may invest include those issued
by foreign governments.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Repurchase Agreements: An agreement between a buyer and seller While each Portfolio is permitted to do so, it normally does
of securities in which the seller agrees to buy the securities not invest in repurchase agreements except to invest cash
back within a specified time at the same price the buyer paid balances or for temporary defensive purposes. The Large-Cap
for them, plus an amount equal to an agreed upon interest rate. Value Equity, The Mid-Cap Growth Equity, The International
Repurchase agreements are often viewed as equivalent to cash. Equity, The Intermediate Fixed Income and The Global Fixed
Income Portfolios may invest no more than 10% of net assets
in repurchase agreements having a maturity in excess of seven
days. The Diversified Core Fixed Income, The Aggregate Fixed
Income, The Mid-Cap Value Equity, The Small-Cap Value Equity,
The Labor Select International Equity, The Real Estate
Investment Trust, The High-Yield Bond, The International
Fixed Income, The Global Equity, The Emerging Markets, The
International Small-Cap, The International Large-Cap Equity,
The Asset Allocation, The Small-Cap Growth Equity, The
Balanced, The Equity Income, The Select Equity and The Core
Equity Portfolios may invest no more than 15% of net assets
in repurchase agreements having a maturity in excess of seven
days.
- ----------------------------------------------------------------- ---------------------------------------------------------------
</TABLE>
-88-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ---------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
Restricted Securities: Privately placed securities whose resale Each Portfolio may invest in restricted securities, including
is restricted under securities law. securities eligible for resale without registration pursuant
to Rule 144A under the Securities act of 1933. To the extent
restricted securities are illiquid, a Portfolio will limit
its investments in them in accordance with its policy
concerning illiquid securities. See "Illiquid Securities"
below.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Illiquid Securities: Securities that do not have a ready The Large-Cap Value Equity, The Mid-Cap Growth Equity, The
market, and cannot be easily sold, if at all, at approximately International Equity, The Intermediate Fixed Income and The
the price that the Fund has valued them. Illiquid securities Global Fixed Income Portfolios may invest no more than 10% of
include repurchase agreements maturing in more than seven days. net assets in illiquid securities. The Diversified Core
Fixed Income, The Aggregate Fixed Income, The Mid-Cap Value
Equity, The Small-Cap Value Equity, The Labor Select
International Equity, The Real Estate Investment Trust, The
High-Yield Bond, The International Fixed Income, The Global
Equity, The Emerging Markets, The International Small-Cap,
The International Large-Cap Equity, The Asset Allocation, The
Small-Cap Growth Equity, The Balanced, The Equity Income, The
Select Equity and The Core Equity Portfolios may invest no
more than 15% of net assets in illiquid securities.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Short-Term Debt Investments: These instruments include (1) time Each Portfolio may invest in these instruments either as a
deposits, certificates of deposit and bankers acceptances means to achieve its investment objective or, more commonly,
issued by a U.S. commercial bank; (2) commercial paper of the as temporary defensive investments or pending investment in
highest quality rating; (3) short-term debt obligations with the Portfolio's principal investment securities.
the highest quality rating; (4) U.S. government securities; and
(5) repurchase agreements collateralized by those instruments.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Time Deposits: Time deposits are non-negotiable deposits Time deposits maturing in more than seven days will not be
maintained in a banking institution for a specified period of purchased by any of the following Portfolios, and time
time at a stated interest rate. deposits maturing from two business days through seven
calendar days will not exceed 10% of the total assets of The
Large-Cap Value Equity, The Mid-Cap Growth Equity, The
International Equity, The Intermediate Fixed Income and The
Global Fixed Income Portfolios; and 15% of the total assets
of The Aggregate Fixed Income, The Mid-Cap Value Equity, The
Small-Cap Value Equity, The Diversified Core Fixed Income,
The Labor Select International Equity, The International
Small-Cap, The International Large-Cap Equity, The Real
Estate Investment Trust, The International Fixed Income, The
Global Equity, The Emerging Markets, The High-Yield Bond, The
Asset Allocation, The Small-Cap Growth Equity, The Core
Equity, The Balanced, The Equity Income and The Select Equity
Portfolios.
- ----------------------------------------------------------------- ---------------------------------------------------------------
When-Issued and Delayed-Delivery Securities: In these Each Portfolio may purchase securities on a when-issued or
transactions, instruments are purchased with payment and delayed delivery basis. The Portfolios may not enter into
delivery taking place in the future in order to secure what is when-issued commitments exceeding in the aggregate 15% of the
considered to be an advantageous yield or price at the time of market value of the Portfolio's total assets less liabilities
the transaction. The payment obligations and the interest rates other than the obligations created by these commitments. Each
that will be received are each fixed at the time a Portfolio Portfolio will designate on Fund records, a portfolio of
enters into the commitment and no interest accrues to the securities in an amount at least equal to these commitments.
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.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Securities Lending: These transactions involve the loan of Each Portfolio may loan up to 25% of its assets to qualified
securities owned by the Fund to qualified dealers and investors brokers/dealers or institutional investors. These
for their use relating to short-sales or other securities transactions will generate additional income for the
transactions. Portfolios.
- ----------------------------------------------------------------- ---------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
Investment Company Securities: Investment company securities The Asset Allocation Portfolio operates as a "fund of funds"
issued by registered or unregistered domestic or foreign and its assets will consist largely of investments that it
investment companies. makes in other investment companies, consistent with the 1940
Act requirements. These investments involve an indirect
payment of a portion of the expenses, including advisory
fees, of such other investment companies.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Borrowing From Banks: The Portfolios may have pre-existing Each Portfolio may borrow money as a temporary measure or to
arrangements with banks that permit them to borrow money from facilitate redemptions. No Portfolio has the intention of
time to time. increasing its net income through borrowing.
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Zero Coupon and Pay-In-Kind Bonds: Zero coupon bonds are debt The Emerging Markets Portfolio may invest up to 35% and The
obligations which do not entitle the holder to any periodic International Small-Cap Portfolio may invest up to 15% of its
payments of interest prior to maturity or a specified date when respective net assets in fixed-income securities, including
the securities begin paying current interest, and therefore are zero coupon bonds. The High-Yield Bond Portfolio may also
issued and traded at a discount from their face amounts or par purchase zero coupon bonds and PIK bonds, although it
value. Pay-in-kind ("PIK") bonds pay interest through the generally does not purchase a substantial amount of these
issuance to holders of additional securities. bonds. The Diversified Core Fixed Income Portfolio may also
purchase these securities consistent with its investment
objective.
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Securities How we use them
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American Depositary Receipts (ADRs), European Depositary The Balanced, The Equity Income, The Select Equity, The
Receipts (EDRs), and Global Depositary Receipts (GDRs): ADRs Small-Cap Growth Equity, The Core Equity, The Large-Cap Value
are receipts issued by a U.S. depositary (usually a U.S. bank) Equity, The International Equity, The Labor Select
and EDRs and GDRs are receipts issued by a depositary outside International Equity, The International Large-Cap Equity, The
of the U.S. (usually a non-U.S. bank or trust company or a Mid-Cap Value Equity, The Small-Cap Value Equity, The Real
foreign branch of a U.S. bank). Depositary receipts represent Estate Investment Trust, The Diversified Core Fixed Income,
an ownership interest in an underlying security that is held by The Global Fixed Income, The International Fixed Income, The
the depositary. Generally, the underlying security represented Global Equity, The Emerging Markets, The International
by an ADR is issued by a foreign issuer and the underlying Small-Cap and The Asset Allocation Portfolios may invest in
security represented by an EDR or GDR may be issued by a sponsored and unsponsored ADRs. Such ADRs that The
foreign or U.S. issuer. Sponsored depositary receipts are Balanced, The Equity Income, The Select Equity, The Small-Cap
issued jointly by the issuer of the underlying security and the Growth Equity, The Core Equity, The Large-Cap Value Equity,
depositary, and unsponsored depositary receipts are issued by The Mid-Cap Value Equity Portfolio, The Small-Cap Value
the depositary without the participation of the issuer of the Equity, The Real Estate Investment Trust, The Diversified
underlying security. Generally, the holder of the depositary Core Fixed Income, and The Asset Allocation Portfolios may
receipt is entitled to all payments of interest, dividends or invest in will be those that are actively traded in the
capital gains that are made on the underlying security. United States.
In conjunction with their investments in foreign securities,
The Equity Income, The Select Equity, The International
Equity, The Labor Select International Equity, The
International Large-Cap Equity, The Global Equity, The
Emerging Markets, The International Small-Cap, The Global
Fixed Income, The International Fixed Income, The Diversified
Core Fixed Income and The Asset Allocation Portfolios may
also invest in sponsored and unsponsored EDRs and GDRs. In
addition, The Small-Cap Growth Equity Portfolio may invest in
sponsored and unsponsored GDRs subject to its 10% limit on
investments in foreign securities.
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Brady Bonds: These are debt securities issued under the The Global Fixed Income, The International Fixed Income, The
framework of the Brady Plan, an initiative announced by the Diversified Core Fixed Income, The Emerging Markets and The
U.S. Treasury Secretary Nicholas F. Brady in 1989, as a Asset Allocation Portfolios may invest in Brady Bonds
mechanism for debtor nations to restructure their outstanding consistent with their respective investment objectives. We
external indebtedness (generally, commercial bank debt). believe that economic reforms undertaken by countries in
connection with the issuance of Brady Bonds may make the debt
of countries which have issued or have announced plans to
issue Brady Bonds a viable opportunity for investment.
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Securities How we use them
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Futures and Options: A futures contract is a bilateral The Balanced, The Equity Income, The Select Equity, The
agreement providing for the purchase and sale of a specified Mid-Cap Growth Equity, The Real Estate Investment Trust, The
type and amount of a financial instrument, or for the making Diversified Core Fixed Income, The Emerging Markets, The
and acceptance of a cash settlement, at a stated time in the Global Equity, The International Large-Cap Equity, The Asset
future for a fixed price. A call option is a short-term Allocation, The Small-Cap Growth Equity, The Mid-Cap Value
contract pursuant to which the purchaser of the call option, in Equity, The Small-Cap Value Equity, The International
return for the premium paid, has the right to buy the security Small-Cap and The Core Equity Portfolios may invest in
or other financial instrument underlying the option at a futures, options and closing transactions related thereto.
specified exercise price at any time during the term of the These activities will not be entered into for speculative
option. A put option is a similar contract which gives the purposes, but rather for hedging purposes and to facilitate
purchaser of the put option, in return for a premium, the right the ability to quickly deploy into the stock market a
to sell the underlying security or other financial instrument Portfolio's cash, short-term debt securities and other money
at a specified price during the term of the option. market instruments at times when the Portfolio's assets are
not fully invested in equity securities. A Portfolio may only
enter into these transactions for hedging purposes if it is
consistent with its respective investment objective and
policies. A Portfolio may not engage in such transactions to
the extent that obligations resulting from these activities
in the aggregate exceed 25% of the Portfolio's assets. In
addition, The International Fixed Income, The Global Equity,
The International Large-Cap Equity, The Emerging Markets, The
Diversified Core Fixed Income and The Asset Allocation
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. Generally,
futures contracts on foreign currencies operate similarly to
futures contracts concerning securities, and options on
foreign currencies operate similarly to options on
securities. See also "Foreign Currency Transactions" below.
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Foreign Currency Transactions: Several Portfolios will invest Although The International Equity, The International
in securities of foreign issuers and may hold foreign currency. Large-Cap Equity, The Labor Select International Equity, The
In addition, several Portfolios may enter into contracts to Real Estate Investment Trust, The Diversified Core Fixed
purchase or sell foreign currencies at a future date (i.e., a Income, The Global Fixed Income, The International Fixed
"forward foreign currency" contract or "forward" contract). A Income, The Global Equity, The Emerging Markets, The
forward contract involves an obligation to purchase or sell a International Small-Cap, The Asset Allocation, The Small-Cap
specific currency at a future date, which may be any fixed Value Equity, The Small-Cap Growth Equity and The Core Equity
number of days from the date of the contract, agreed upon by Portfolios value their assets daily in terms of U.S. dollars,
the parties, at a price set at the time of the contract. A they do not intend to convert their holdings of foreign
Portfolio may enter into forward contracts to "lock-in" the currencies into U.S. dollars on a daily basis. A Portfolio
price of a security it has agreed to purchase or sell, in terms may, however, from time to time, purchase or sell foreign
of U.S. dollars or other currencies in which the transaction currencies and/or engage in forward foreign currency
will be consummated. transactions in order to expedite settlement of Portfolio
transactions and to minimize currency value fluctuations.
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Interest Rate Swap and Index Swap Agreements: In an interest The Balanced, The Intermediate Fixed Income, The Aggregate
rate swap, a fund receives payment from another party based on Fixed Income and The Diversified Core Fixed Income Portfolios
a floating interest rate in return for making payments based on may use interest rate swaps to adjust each Portfolio's
a fixed interest rate. An interest rate swap can also work in sensitivity to interest rates by changing its duration. We
reverse, with a fund receiving payments based on a fixed may also use interest rate swaps to hedge against changes in
interest rate and making payments based on a floating interest interest rates. We use index swaps to gain exposure to
rate. In an index swap, a fund receives gains or incurs losses markets that the Portfolios invest in, such as the corporate
based on the total return of an index, in exchange for making bond market. We may also use index swaps as a substitute for
fixed or floating interest rate payments to another party. futures, options or forward contracts if such contracts are
not directly available to the Portfolios on favorable terms.
Interest rate swaps and index swaps will be considered
illiquid securities.
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RISK FACTORS
An investment in the Portfolios entails certain risks and considerations about
which an investor should be aware. The following chart gives a brief description
of some of the risks of investing in the Portfolios. Please see the Statement of
Additional Information for additional descriptions and risk information.
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Risks How we strive to manage them
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Market Risk is the risk that all or a majority of the The value of each Portfolio's holdings, whether equity or fixed
securities in a certain market-like the stock or bond income in orientation, fluctuates in response to events affecting
market-will decline in value because of factors such markets. In a declining market environment, the value of the
as economic conditions, future expectations or Portfolios' securities will generally decline as well. We
investor confidence. maintain a long-term approach and focus on securities that we
believe can continue to provide returns over an extended period
Index swaps are subject to the same market risks as of time regardless of these interim market fluctuations. We do
the investment market or sector that the index not try to predict overall market movements and do not try to
represents. Depending on the actual movements of the trade for short-term purposes.
index and how well the portfolio manager forecasts
those movements, a fund could experience a higher or In evaluating the use of an index swap for The Balanced, The
lower return than anticipated. Intermediate Fixed Income, The Aggregate Fixed Income and The
Diversified Core Fixed Income Portfolios, we carefully consider
how market changes could affect the swap and how that compares to
us investing directly in the market the swap is intended to
represent. When selecting dealers with whom we would make
interest rate or index swap agreements for these Portfolios, we
focus on those dealers with high quality ratings and do careful
credit analysis before investing.
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Industry and Security Risk is the risk that the value The Real Estate Investment Trust Portfolios concentrate their
of securities in a particular industry or the value of investments in the real estate industry. As a consequence, the
an individual stock or bond will decline because of net asset value of each Portfolio can be expected to fluctuate in
changing expectations for the performance of that light of the factors affecting that industry, and may fluctuate
industry or for the individual company issuing the more widely than a portfolio that invests in a broader range of
stock or bond. Portfolios that concentrate their industries. Each Real Estate Investment Trust Portfolio may be
investments in a particular industry or individual more susceptible to any single economic, political or regulatory
security are considered to be subject to greater risks occurrence affecting the real estate industry.
than Portfolios that are not concentrated.
Although The Select Equity Portfolio will not invest more than
25% of its net assets in any one industry, it may from time to
time, invest up to that amount in any one industry, and may also,
from time to time, be highly concentrated in closely related
industries. As a result, the Portfolio may be more susceptible
to any single economic, political or regulatory occurrence
affecting a particular industry or closely related industries.
With the exception of The Real Estate Investment Trust
Portfolios, we limit the amount of each Portfolio's assets
invested in any one industry, as is consistent with that
Portfolio's investment objective.
To seek to reduce these risks for all Portfolios, we limit
investments in any individual security and we follow a rigorous
selection process before choosing securities for the Portfolios.
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Risks How we strive to manage them
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Interest Rate Risk is the risk that securities, The Portfolios, especially those that invest significantly in
particularly bonds with longer maturities, will fixed-income securities, are subject to various interest rate
decrease in value if interest rates rise and increase risks depending upon their investment objectives and policies.
in value if interest rates fall. Investments in We cannot eliminate that risk, but we do try to address it by
equity securities issued by small and medium sized monitoring economic conditions, especially interest rate trends
companies, which often borrow money to finance and their potential impact on the Portfolios. The Portfolios do
operations, may also be adversely affected by rising not try to increase returns on their investments in debt
interest rates. securities by predicting and aggressively capitalizing on
interest rate movements. The Intermediate Fixed Income and the
Swaps may be particularly sensitive to interest rate Aggregate Fixed Income Portfolios seek to maintain as the core of
changes. Depending on the actual movements of their investment portfolios, short and intermediate-term debt
interest rates and how well the portfolio manager securities (under 10 years). The Global Fixed Income and The
anticipates them, the Fund could experience a higher Intermediate Fixed Income Portfolios anticipate that average
or lower return than anticipated. For example, if the weighted maturity will be in the five-to-ten year range, with a
Fund holds interest rate swaps and is required to make possible shift beyond ten years in a declining interest rate
payments based on variable interest rates, it will environment and a possible shortening below five years in a
have to make increased payments if interest rates rising interest rate environment.
rise, which will not necessarily be offset by the
fixed-rate payments it is entitled to receive under The High-Yield Bond Portfolio, by investing primarily in bonds
the swap agreement. rated B- or higher by S& P or B3 or higher by Moody's, or unrated
bonds, are subject to interest rate risks. See "Lower Rated
Fixed-Income Securities" below. The Real Estate Investment
Trust Portfolios, by investing primarily in securities of real
estate investment trusts, and the other Portfolios that invest in
those securities to a lesser degree, 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. However, lower interest rates tend to increase the
level of refinancing, which can hurt returns on REITS that hold
fixed-income obligations.
The Balanced, The Intermediate Fixed Income, The Aggregate Fixed
Income and The Diversified Core Fixed Income Portfolios, by
investing in swaps, are subject to additional interest rate
risk. The Portfolios will not invest in interest rate or index
swaps with maturities of more than two years. Each business day
we will calculate the amount the Portfolios must pay for any
swaps they hold and will segregate enough cash or other liquid
securities to cover that amount.
The Mid-Cap Value Equity, The Mid-Cap Growth Equity, The
Small-Cap Value Equity, The Small-Cap Growth Equity and The
International Small-Cap Portfolios and, to a lesser extent, The
Select Equity Portfolio, invest in small or mid-cap companies and
we seek to address the potential interest rate risks by analyzing
each company's financial situation and its cash flow to determine
the company's ability to finance future expansion and
operations. The potential impact that rising interest rates
might have on a stock is taken into consideration before a stock
is purchased.
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Foreign Risk is the risk that foreign securities may The International Equity, The International Large-Cap Equity, The
be adversely affected by political instability, Labor Select International Equity, The Global Fixed Income, The
changes in currency exchange rates, foreign economic International Fixed Income, The Global Equity, The Emerging
conditions or inadequate regulatory and accounting Markets and The International Small-Cap Portfolios will invest in
standards. In addition, there is the possibility of securities of foreign issuers, which normally are denominated in
expropriation, nationalization or confiscatory foreign currencies, and may hold foreign currencies directly.
taxation, taxation of income earned in foreign nations The Core Equity Portfolio may invest up to 5% of its assets; The
or other taxes imposed with respect to investments in Real Estate Investment Trust, The High-Yield Bond and The
foreign nations, foreign exchange controls, which may Small-Cap Growth Equity Portfolios may invest up to 10% of their
include suspension of the ability to transfer currency respective total assets; The Diversified Core Fixed Income
from a given country, and default in foreign Portfolio may invest up to 20% of its total assets; and The
government securities. As a result of these factors, Small-Cap Value Equity may invest up to 25% of its assets in
foreign securities markets may be less liquid and more foreign securities. Investments in securities of non-United
volatile than U.S. markets and the Portfolios may States issuers involve certain risk and opportunity
experience difficulties and delays in converting considerations not typically associated with investing in United
foreign currencies back into U.S. dollars. Such States companies. The Balanced, The Equity Income and The Select
events may cause the value of certain foreign Equity Portfolios typically invest only a small portion of their
securities to fluctuate widely and may make it assets in foreign securities, usually through depositary receipts
difficult to accurately value foreign securities. denominated in U.S. dollars and traded on a U.S. exchange. We
attempt to reduce these risks by conducting world-wide
fundamental research with an emphasis on company visits. In
addition, we monitor current economic and market conditions and
trends, the political and regulatory environment and the value of
currencies in different countries in an effort to identify the
most attractive countries and securities. Additionally, when
currencies appear significantly overvalued compared to average
real exchange rates, a Portfolio may hedge exposure to those
currencies for defensive purposes.
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Currency Risk is the risk that the value of an The Portfolios described above that are subject to foreign risk
investment may be negatively affected by changes in may be affected by changes in currency rates and exchange control
foreign currency exchange rates. Adverse changes in regulations and may incur costs in connection with conversions
exchange rates may reduce or eliminate any gains between currencies. To hedge this currency risk associated with
produced by investments that are denominated in investments in non-U.S. dollar denominated securities, the
foreign currencies and may increase losses. Portfolios that focus on global and international investments 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, The Diversified Core Fixed Income, The
International Large-Cap Equity and The Emerging Markets
Portfolios may engage in foreign currency options and futures
transactions.
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Emerging Markets Risk is the possibility that the The Emerging Markets Portfolio focuses its investments on
risks associated with international investing will be companies in these markets and The International Equity, The
greater in emerging markets than in more developed International Large-Cap Equity, The Labor Select International
foreign markets because, among other things, emerging Equity, The Global Equity, The International Small-Cap, The
markets may have less stable political and economic Global Fixed Income, The International Fixed Income, and The
environments. In addition, in many emerging markets, High-Yield Bond Portfolios may invest a portion of their assets
there is substantially less publicly available in securities of issuers located in emerging markets. The
information about issuers and the information that is Portfolios cannot eliminate these risks but will attempt to
available tends to be of a lesser quality. Economic reduce these risks through portfolio diversification, credit
markets and structures tend to be less mature and analysis, and attention to trends in the economy, industries and
diverse and the securities markets which are subject financial markets and other relevant factors.
to less government regulation or supervision may also
be smaller, less liquid and subject to greater price
volatility.
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<S> <C>
Lower Rated Fixed-Income Securities (high-yield, high The International Fixed Income, The Global Fixed Income and The
risk securities), while generally having higher Asset Allocation Portfolios may invest up to 5%, 5% and 55%,
yields, are subject to reduced creditworthiness of respectively, of its assets in high risk, high-yield fixed-income
issuers, increased risks of default and a more limited securities of foreign governments including, with specified
and less liquid secondary market than higher rated limitations, Brady Bonds. The High-Yield Bond Portfolio invests
securities. These securities are subject to greater primarily in lower-rated fixed-income securities in an effort to
price volatility and risk of loss of income and attain higher yields, and this is a primary risk of investing in
principal than are higher rated securities. Lower this Portfolio. The Diversified Core Fixed Income Portfolio,
rated and unrated fixed-income securities tend to which may invest in lower rated fixed-income securities, will
reflect short-term corporate and market developments limit its investments in such securities to 30% of its total
to a greater extent than higher rated fixed-income assets. The Emerging Markets Portfolio may invest up to 35% of
securities, which react primarily to fluctuations in its assets and The International Small-Cap Portfolio may invest
the general level of interest rates. Fixed-income up to 15% of its net assets in high-yield, high risk fixed-income
securities of this type are considered to be of poor securities, including Brady Bonds. See "Emerging Markets Risk"
standing and primarily speculative. Such securities above. The Small-Cap Value Equity Portfolio may invest up to 25%
are subject to a substantial degree of credit risk. of its net assets in high-yield, high risk securities rated below
Baa by Moody's or BBB by S&P when the Portfolio's manager believes
that capital appreciation from those securities is likely. The
Equity Income Portfolio may invest up to 15% of net assets in
high-yield, high risk securities rated BB or B by an NRSRO or, if
unrated, deemed to be of equivalent quality. The Portfolios will
attempt to reduce these risks through portfolio diversification,
credit analysis, attention to trends in the economy, industries and
financial markets, and complying with the limits on the exposure
to this asset class described in this Prospectus.
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Liquidity Risk is the possibility that securities We limit each Portfolio's exposure to illiquid securities as
cannot be readily sold, if at all, at approximately described under "Additional Investment Information - Illiquid
the price that the Portfolio values them. Securities."
Swap agreements entered into by The Balanced, The Intermediate
Fixed Income, The Aggregate Fixed Income and The Diversified Core
Fixed Income Portfolios will be treated as illiquid securities.
However, most swap dealers will be willing to repurchase interest
rate swaps.
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Risks How we strive to manage them
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Futures Contracts, Options on Futures Contracts, The Mid-Cap Growth Equity, The Mid-Cap Value Equity, The
Forward Contracts, and Certain Options used as Small-Cap Value Equity, The Real Estate Investment Trust, The
investments for hedging and other non-speculative Small-Cap Growth Equity, The Balanced, The Equity Income, The
purposes involve certain risks. For example, a lack of Select Equity, The Core Equity, The Global Equity, The
correlation between price changes of an option or Diversified Core Fixed Income, The Emerging Markets, The
futures contract and the assets being hedged could International Small-Cap, The International Large-Cap Equity and
render a Portfolio's hedging strategy unsuccessful and The Asset Allocation Portfolios may use certain options
could result in losses. The same results could occur strategies or may use futures contracts and options on futures
if movements of foreign currencies do not correlate as contracts. The Portfolios will not enter into futures contracts
expected by the investment adviser at a time when a and options thereon to the extent that more than 5% of a
Portfolio is using a hedging instrument denominated in Portfolio's assets are required as futures contract margin
one foreign currency to protect the value of a deposits and premiums on options and only to the extent that
security denominated in a second foreign currency obligations under such futures contracts and options thereon
against changes caused by fluctuations in the exchange would not exceed 20% of the Portfolio's total assets.
rate for the dollar and the second currency. If the
direction of securities prices, interest rates or See also "Foreign Risk" and "Currency Risk" above.
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.
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Zero Coupon and Pay-In-Kind Bonds are generally The Emerging Markets, The International Small-Cap, The High-Yield
considered to be more interest sensitive than income Bond and The Diversified Core Fixed Income Portfolios may invest
bearing bonds, to be more speculative than in zero coupon and pay-in-kind bonds to the extent consistent
interest-bearing bonds, and to have certain tax with each Portfolio's investment objective. We cannot eliminate
consequences which could, under certain circumstances the risks of zero coupon bonds, but we do try to address them by
be adverse to a Portfolio. For example, the Portfolio monitoring economic conditions, especially interest rate trends
accrues, and is required to distribute to shareholders and their potential impact on the Portfolios.
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 does 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.
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Portfolio Turnover rates reflect the amount of The Select Equity, The Intermediate Fixed Income, The Aggregate
securities that are replaced from the beginning of the Fixed Income, The Global Fixed Income, The International Fixed
year to the end of the year by a Portfolio. The higher Income and The Diversified Core Fixed Income Portfolios will
the amount of portfolio activity, the higher the normally experience annual portfolio turnover rates exceeding
brokerage costs and other transaction costs of a 100%, but those rates are not expected to exceed, 300% with
Portfolio are likely to be. The amount of portfolio respect to The Select Equity Portfolio, 250% with respect to The
activity will also affect the amount of taxes payable Intermediate Fixed Income, The Aggregate Fixed Income and The
by Portfolios' shareholders that are subject to Diversified Core Fixed Income Portfolios and 200% with respect to
federal income tax, as well as the character (ordinary The Global Fixed Income and The International Fixed Income
income vs. capital gains) of such tax obligations. Portfolios.
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Company Size Risk is the risk that small or medium The Mid-Cap Value Equity, The Mid-Cap Growth Equity, The
size companies may be more volatile than larger Small-Cap Value Equity, The Small-Cap Growth Equity and The
companies because of limited financial resources or International Small-Cap Portfolios maintain a well diversified
dependence on narrow product lines. portfolio and, together with The Select Equity Portfolio, select
stocks carefully and monitor them continuously in an effort to
manage this risk.
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Prepayment Risk is the risk that homeowners will The Aggregate Fixed Income, The Diversified Core Fixed Income,
prepay mortgages during periods of low interest rates, The Intermediate Fixed Income, The Real Estate Investment Trust,
forcing an investor to reinvest money at interest The Global Fixed Income, The Asset Allocation, The Core Equity,
rates that might be lower than those on the prepaid The Balanced and The Select Equity Portfolios may invest in
mortgage. Mortgage-Backed Securities, Collateralized Mortgage Obligations
(CMOs) and Real Estate Mortgage Investment Conduits (REMICS).
These Portfolios take into consideration the likelihood of
prepayment when mortgages are selected. The Portfolios may look
for mortgage securities that have characteristics that make them
less likely to be prepaid, such as low outstanding loan balances
or below-market interest rates.
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Real Estate Industry Risk include among others: The Real Estate Investment Trust Portfolios operate as
possible declines in the value of real estate; risks "non-diversified" funds as defined by the 1940 Act. Since each
related to general and local economic conditions; Portfolio invests principally in REITS it is more subject to the
possible lack of availability of mortgage funds; risks associated with the real estate industry. Investors should
overbuilding; extended vacancies of properties; carefully consider these risks before investing in the Portfolio.
increases in competition; property taxes and operating To the extent The Asset Allocation, The Balanced, The Select
expenses; changes in zoning laws; costs resulting from Equity, The Core Equity, The International Small-Cap and The
the clean-up of, and liability to third parties Small-Cap Value Equity Portfolios invest in REITs, those
resulting from, environmental problems; casualty for Portfolios, although to a lesser degree than The Real Estate
condemnation losses; uninsured damages from floods, Investment Trust Portfolios, are subject to the same risks.
earthquakes or other natural disasters; limitations on
and variations in rents; and changes in interest
rates. REITS are subject to substantial cash flow
dependency, defaults by borrowers, self-liquidation,
and the risk of failing to qualify for tax-free
pass-through of income under the Internal Revenue Code
of 1986, as amended and/or to maintain exemptions from
the 1940 Act.
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Non-Diversified Portfolios are believed to be subject The Real Estate Investment Trust, The Global Fixed Income, The
to greater risks because adverse effects on their International Fixed Income, The Emerging Markets, The Select
security holdings may affect a larger portion of their Equity and The Asset Allocation Portfolios will not be
overall assets. diversified under the 1940 Act. This means these Portfolios may
invest in securities of any one issuer in an amount greater than
5% of the Portfolio's total assets. However, each Portfolio will
satisfy the Internal Revenue Code's diversification requirement,
which requires that 50% of the Portfolio's assets 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. With the
exception of The Select Equity and The Asset Allocation
Portfolios, these Portfolios, in practice, do not intend to be
heavily invested in any single particular industry. The Select
Equity Portfolio will always be invested in at least 20 issuers,
and in general will not hold more than a 5% position in each
issuer. Although the Asset Allocation Portfolio may be
substantially invested in a relatively small number of
Portfolios, most of these Portfolios are diversified or, if
non-diversified, are nonetheless not heavily invested in any
single issuer.
- -------------------------------------------------------- -------------------------------------------------------------------
</TABLE>
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, each Portfolio couled be adversely affected if the computer
systems used by its service providers do not properly process and callculate
date-related information on and after January 1, 2000. This is commonly known as
the "Year 2000 Problem." The Fund is taking steps to obtain satisfactory
assurances that each Portfolio's major service providers are taking steps
reasonably designed to address the Year 2000 Problem with respect to the
computer systems that such service providers use. There can be no assurance
that these steps will be sufficient to avoid any adverse impact on the business
of any of the Portfolios. The Year 2000 Problem may also adversely affect the
issuers of securities in which each Portfolio invests. The portfolio managers
and investment professionals of each Portfolio consider Year 2000 compliance
(including, but not limited to, any or all of the following: impact on business;
cost of compliance plan review and contingency planning; and vendor compliance)
in the securities selection and investment process. However, there can be no
guarantee that, even with their due diligence efforts, they will be able to
predict the effect of Year 2000 on any company or the performance of its
securities.
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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. The business and affairs of
Foundation Funds and its series, The Asset Allocation Portfolio, are managed
under the direction of Foundation Funds' Board of Trustees. See the Fund's
Statement of Additional Information for additional information about the Fund's
and Foundation Funds' officers and directors/trustees.
Fund Officers and Portfolio Managers
Robert Akester
Senior Portfolio Manager - Delaware International Advisers Ltd. (The Emerging
Markets Portfolio) Prior to joining Delaware International in 1996, Mr. Akester,
who began his investment career in 1969, was most recently a Director of Hill
Samuel Investment Management Ltd., which he joined in 1985. His prior experience
included working as a Senior Analyst and head of the South-East Asian Research
team at James Capel, and as a Fund Manager at Prudential
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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.
Damon J. Andres
Vice President/Portfolio Manger - The Real Estate Investment Trust Portfolios
Mr. Andres earned a BS in Business Administration with an emphasis in Finance
and Accounting from the University of Richmond. Prior to joining Delaware
Investments in 1994, he provided investment consulting services as a Consulting
Associate with Cambridge Associates, Inc. in Arlington, Virginia. Mr. Andres has
been on The Real Estate Investment Trust Portfolios' management teams since
1997.
Robert L. Arnold
Vice President/Senior 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
Investments, he was a financial analyst focusing on the financial services
industry, including banks, thrifts, insurance companies and consumer finance
companies. Prior to joining Delaware Investments 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. Delaware acts as
sub-adviser to The Global Equity Portfolio, managing the U.S. securities portion
of the Portfolio. In that capacity, Mr. Arnold furnishes investment
recommendations, asset allocation advice, research and other services with
respect to U.S. securities. Mr. Arnold has managed the U.S. component of The
Global Equity Portfolio since its inception.
Fiona A. Barwick
Senior Portfolio Manager - Delaware International Advisers Ltd. (The
International Equity Portfolio and The International Large-Cap Equity Portfolio)
Ms. Barwick is a graduate of University College, London. She joined Delaware
International in the Spring of 1993 to cover the Pacific Basin markets. Prior to
joining Delaware International, she spent three years at Touche Remnant & Co. in
London as an assistant portfolio manager and research analyst. Ms. Barwick has
managed The International Equity Portfolio since October 1999 and The
International Large-Cap Equity Portfolio since its inception.
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Joanna Bates
Senior Portfolio Manager - Delaware International Advisers Ltd. (The Global
Fixed Income Portfolio, The International Fixed Income Portfolio and The
Diversified Core Fixed Income Portfolio) Ms. Bates is a graduate of London
University. She joined the Fixed Income team at Delaware International in June
1997. Prior to that, she was Associate Director, Fixed Interest at Hill Samuel
Investment Management which she joined in 1990. She had previously worked at
Fidelity International and Save & Prosper as fund manager and analyst for global
bond markets. Ms. Bates is an associate of the Institute of Investment
Management and Research. In making investment decisions for the Portfolios, Ms.
Bates regularly consults with David G. Tilles as well as four global
fixed-income team members. Ms. Bates has managed The Global Fixed Income
Portfolio, The International Fixed Income Portfolio and The Diversified Core
Fixed Income Portfolio since July 1999.
Christopher S. Beck
Vice President/Senior Portfolio Manager - The Small-Cap Value Equity Portfolio,
The Real Estate Investment Trust Portfolios and The Mid-Cap Value Equity
Portfolio Mr. Beck began his career in the investment business with Wilmington
Trust in 1981. Later, he became Director of Research at Cypress Capital
Management in Wilmington and Chief Investment Officer of the University of
Delaware Endowment Fund. Prior to joining Delaware Investments in May 1997, he
managed the Small Cap Fund for two years at Pitcairn Trust Company. He holds a
BS from the University of Delaware, an MBA from Lehigh University and is a CFA
charterholder. Mr. Beck has managed The Small-Cap Value Equity Portfolio since
its inception, The Real Estate Investment Trust Portfolios since May 1999 and
The Mid-Cap Value Equity Portfolio since January 1999.
Joshua H. Brooks
Senior Portfolio Manager - Delaware International Advisers Ltd. (The
International Small-Cap Portfolio) Mr. Brooks holds a bachelor's degree from
Yale University and holds an MBA from The London Business School. He began his
investment career with Delaware Investments in 1991. Prior to joining the
emerging markets team in London, he was based in Philadelphia with
responsibilities that included equity market analysis and acting as liaison with
Delaware International. Mr. Brooks has managed The International Small-Cap
Portfolio since its inception.
Timothy G. Connors
Vice President/Senior Portfolio Manager - The Select Equity Portfolio
Mr. Connors earned a bachelor's degree at the University of Virginia and a MBA
in Finance at Tulane University. He joined Delaware Investments in 1997 after
serving as a Principal at Miller, Anderson & Sherrerd, where he managed equity
accounts, conducted sector analysis and directed research. He previously held
positions at CoreStates Investment Advisers and Fauquier National Bank. He is a
CFA charterholder and a member of the Association for Investment Management and
Research. Mr. Connors has managed The Select Equity Portfolio since its
inception.
George E. Deming
Vice President/Senior Portfolio Manager - The Large-Cap Value Equity Portfolio
Mr. Deming received a 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 Investments 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 Large-Cap Value Equity Portfolio since its inception.
Elizabeth A. Desmond
Director/Senior Portfolio Manager - Delaware International Advisers Ltd. (The
International Equity Portfolio, The Global Equity Portfolio and The
International Large-Cap 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 Management Ltd. Ms. Desmond is a CFA charterholder. Ms.
Desmond has managed The International Large-Cap Equity Portfolio and the foreign
securities component of The Global Equity Portfolio since their respective dates
of inception and The International Equity Portfolio since October 1999.
J. Paul Dokas
Vice President/Senior Portfolio Manager - The Select Equity Portfolio and The
Asset Allocation Portfolio
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Mr. Dokas holds a BBA in Business from Loyola College and an MBA in Business
from the University of Maryland. Prior to joining Delaware Investments in 1997,
he was a Director of Trust Investments for Bell Atlantic Corporation in
Philadelphia. Mr. Dokas is a CFA charterholder. Mr. Dokas has managed The Select
Equity Portfolio since its inception and will manage The Asset Allocation
Portfolio when it commences operations.
Roger A. Early
Vice President/Senior Portfolio Manager - The Diversified Core Fixed Income
Portfolio Mr. Early has an undergraduate degree in economics from the University
of Pennsylvania's Wharton School and an MBA in finance and accounting from the
University of Pittsburgh. He is also a CPA and a CFA charterholder. Prior to
joining Delaware Investments, Mr. Early was a portfolio manager for Federated
Investment Counseling's fixed-income group, with over $1 billion in assets. Mr.
Early has managed The Diversified Core Fixed Income Portfolio since its
inception.
John B. Fields
Senior Vice President/Senior Portfolio Manager - The Equity Income Portfolio
Mr. Fields, who has 27 years experience in investment management, earned a
bachelor's degree and an MBA from Ohio State University. Before joining Delaware
Investments in 1992, he was Director of Domestic Equity Risk Management at
DuPont. Prior to that time, he was Director of Equity Research at Comerica Bank.
Mr. Fields is a member of the Financial Analysts Society of Wilmington,
Delaware. In researching securities and making investment decisions for the
Portfolio, Mr. Fields regularly consults with a team of Delaware portfolio
managers utilizing the same investment strategy. Mr. Fields has managed The
Equity Income Portfolio since its inception.
Gerald S. Frey
Senior Vice President/Senior Portfolio Manager - The Mid-Cap Growth Equity
Portfolio and The Small-Cap Growth Equity 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 Delaware Investments in 1996, he was a Senior
Director with Morgan Grenfell Capital Management in New York. Mr. Frey has
managed The Mid-Cap Growth Equity Portfolio since June 1996 and The Small-Cap
Growth Equity Portfolio since its inception.
Clive A. Gillmore
Director/Senior Portfolio Manager - Delaware International Advisers Ltd. (The
International Equity Portfolio, 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 International in 1990 after eight years of investment experience. His
most recent position prior to joining Delaware International was as a Pacific
Basin equity analyst and senior portfolio manager for Hill Samuel Investment
Management 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
The Labor Select International Equity Portfolio and The Emerging Markets
Portfolio since their respective dates of inception and The International Equity
Portfolio since March 1999.
Gavin A. Hall
Senior Portfolio Manager - Delaware International Advisers Ltd. (The
International Small-Cap Portfolio) Mr. Hall joined Delaware International
Advisers in 1991. He began his investment career with Barings Investment
Management Ltd. after attending Dulwich College. In 1988, he became a Portfolio
Manager and Research Analyst covering the United Kingdom market at Hill Samuel
Investment Advisers Ltd. At Delaware International his research responsibilities
have included covering the United Kingdom, Continental European and Asian equity
markets. Mr. Hall has managed The International Small-Cap Portfolio since its
inception.
John Kirk
Senior Portfolio Manager - Delaware International Advisers Ltd. (The Global
Fixed Income Portfolio, The International Fixed Income Portfolio and The
Diversified Core Fixed Income Portfolio) Prior to joining Delaware International
in September of 1998, Mr. Kirk was employed by Royal Bank of Canada, where he
held a number of positions including Head of Capital Markets at RBC (Suisse) in
Geneva and global Head of Assets Swaps in Surrey, England. His most recent role
at Royal Bank of Canada was as joint Head of Fixed Income, Europe and Asia. Mr.
Kirk has managed The Global Fixed-Income Portfolio, The International Fixed
Income Portfolio and The Diversified Core Fixed Income Portfolio since July
1999.
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<PAGE>
Paul A. Matlack
Vice President/Senior Portfolio Manager - The High-Yield Bond Portfolio and The
Diversified Core Fixed Income Portfolio Mr. Matlack is a graduate of the
University of Pennsylvania and received an 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 Investments in 1989. He is a CFA charterholder. Mr. Matlack has managed
The High-Yield Bond Portfolio and the U.S. high-yield component of The
Diversified Core Fixed Income Portfolio since their respective dates of
inception.
Frank X. Morris
Vice President/Senior Portfolio Manager - The Balanced Portfolio and The Core
Equity Portfolio Mr. Morris received a bachelor's degree at Providence College
and an MBA degree at Widener University. He joined Delaware Investments in 1997.
He previously served as Vice President and Director of Equity Research at PNC
Asset Management. He is President of the Financial Analysis Society of
Philadelphia and is a member of the Association of Investment Management and
Research and the National Association of Petroleum Investment Analysts. Mr.
Morris has managed The Balanced Portfolio since its inception and The Core
Equity Portfolio since March 1999.
Christopher A. Moth
Senior Portfolio Manager - Delaware International Advisers Ltd. (The Global
Fixed Income Portfolio, The International Fixed Income Portfolio and The
Diversified Core Fixed Income Portfolio) Mr. Moth is a graduate of The City
University London. He joined Delaware International in 1992, having previously
worked at the Guardian Royal Exchange in an actuarial capacity, where he was
responsible for technical analysis, quantitative models and projections. Mr.
Moth has been awarded the Certificate in Finance and Investment from the
Institute of Actuaries in London. In making investment decisions for the
Portfolios, Mr. Moth regularly consults with David G. Tilles as well as four
global fixed-income team members. Mr. Moth has managed The Global Fixed-Income
Portfolio, The International Fixed Income Portfolio and The Diversified Core
Fixed Income Portfolio since July 1999.
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
Investments 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 managed The High-Yield Bond Portfolio since its
inception.
Gary A. Reed
Vice President/Senior Portfolio Manager - The Intermediate Fixed Income
Portfolio, The Aggregate Fixed Income Portfolio and The Balanced 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 Investments 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 Intermediate
Fixed Income Portfolio, The Aggregate Fixed Income Portfolio and the
fixed-income portion of The Balanced Portfolio since their respective dates of
inception.
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 International in 1990 as Managing Director
and Chief Investment Officer, he spent 16 years with Hill Samuel Investment
Management Group in London, serving in a number of investment capacities. His
most recent position prior to joining Delaware International was Chief
Investment Officer of Hill Samuel Investment Management Ltd.
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Thomas J. Trotman
Vice President/Portfolio Manager - The Real Estate Investment Trust Portfolios
Mr. Trotman earned a bachelor's degree in Accounting from Muhlenberg College and
an MBA from Widener University. Prior to joining Delaware Investments in 1995,
he was Vice President and Director of Investment Research at Independence
Capital Management. Before that, he held credit-related positions at Marine
Midland Bank, U.S. Steel Corporation, and Amerada Hess. Mr. Trotman is a CFA
charterholder. Mr. Trotman has been on The Real Estate Investment Trust
Portfolios' management teams since 1998.
Investment Advisers
Delaware Management Company ("Delaware"), a series of Delaware Management
Business Trust, furnishes investment advisory services to The Large-Cap Value
Equity, The Balanced, The Equity Income, The Select Equity, The Mid-Cap Growth
Equity, The Mid-Cap Value Equity, The Small-Cap Value Equity, The Aggregate
Fixed Income, The Diversified Core Fixed Income, The Real Estate Investment
Trust, The Intermediate Fixed Income, The High-Yield Bond, The Asset Allocation,
The Small-Cap Growth Equity and The Core Equity Portfolios and furnishes
sub-investment advisory services to The Global Equity Portfolio 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, 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 Delaware Investments since 1938. 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.
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"), an affiliate of
Delaware, furnishes investment advisory services to The International Equity,
The International Large-Cap Equity, The Labor Select International Equity, The
Global Fixed Income, The International Fixed Income, The Global Equity, The
Emerging Markets and The International Small-Cap Portfolios and furnishes
sub-advisory services to The Diversified Core Fixed Income Portfolio related to
the foreign securities portion of that Portfolio. 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 Large-Cap Value Equity, The Balanced, The Equity Income, The Select
Equity, The Mid-Cap Growth Equity, The Mid-Cap Value Equity, The Small-Cap Value
Equity, The Diversified Core Fixed Income, The Aggregate Fixed Income, The Real
Estate Investment Trust, The Intermediate Fixed Income, The High-Yield Bond, The
Asset Allocation, The Small-Cap Growth Equity and The Core Equity Portfolios.
Delaware has also entered into a Sub-Advisory Agreement with Lincoln with
respect to The Real Estate Investment Trust Portfolios and with Delaware
International with respect to The Diversified Core Fixed Income Portfolio.
Delaware International has entered into Investment Advisory Agreements with the
Fund on behalf of The International Equity, The International Large-Cap Equity,
The Labor Select International Equity, The Global Fixed Income, The
International Fixed Income, The Global Equity, The Emerging Markets and The
International Small-Cap Portfolios. Delaware International has entered into a
Sub-Advisory Agreement with Delaware on behalf of The Global Equity 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 respective Portfolios,
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. The investment adviser and
sub-adviser, where applicable, were paid an aggregate fee for the last fiscal
year for which data are available (as a percentage of average daily net assets)
as follows:
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Investment Management
Fees Paid After Voluntary Waivers
For the Fiscal Year Ended October 31, 1998
Portfolio
The Large-Cap Value Equity Portfolio 0.50%
The Core Equity Portfolio 0.55%*
The Balanced Portfolio 0.55%*
The Equity Income Portfolio 0.55%*
The Select Equity Portfolio 1.00%*
The Mid-Cap Growth Equity Portfolio none
The Mid-Cap Value Equity Portfolio 0.75%*
The Small-Cap Value Equity Portfolio 0.75%*
The Small-Cap Growth Equity Portfolio 0.75%*
The Real Estate Investment Trust Portfolio 0.59%
The Real Estate Investment Trust Portfolio II 0.75%*
The Global Equity Portfolio none
The International Equity Portfolio 0.75%
The Labor Select International Equity Portfolio 0.72%
The Emerging Markets Portfolio 0.86%
The International Small-Cap Portfolio 1.00%*
The International Large-Cap Equity Portfolio 0.75%*
The Intermediate Fixed Income Portfolio none
The Aggregate Fixed Income Portfolio 0.40%*
The High-Yield Bond Portfolio 0.28%
The Diversified Core Fixed Income Portfolio 0.43%*
The Global Fixed Income Portfolio 0.48%
The International Fixed Income Portfolio 0.43%
The Asset Allocation Portfolio 0.05%*
* These Portfolios have not been operating for a full fiscal year or have not
yet commenced operations. The fee stated above is the fee that the investment
adviser is entitled to receive under its Investment Management Agreement with
the Portfolio.
Delaware is an indirect, wholly owned subsidiary of Delaware Management
Holdings, Inc. ("DMH). DMH, Delaware and Delaware International are indirect,
wholly owned subsidiaries, and subject to the ultimate control, of Lincoln
National Corporation ("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
Philadelphia, Pennsylvania is a diversified organization with operations in many
aspects of the financial services industry, including insurance and investment
management. Delaware's address is One Commerce Square, 2005 Market Street,
Philadelphia, PA 19103. Delaware International's address is 3rd Floor, 80
Cheapside, London, England EC2V 6EE. Lincoln's address currently is 200 East
Berry Street, Fort Wayne, IN 46802.
From time to time, certain institutional separate accounts advised by Delaware
International and an affiliate of Delaware, 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 and Delaware International, representing the
interests of the Portfolios, are committed to minimizing the impact of such
transactions on the Portfolios. In addition,
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the advisers to the institutional separate accounts, are 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.
If permitted under applicable law, in cases where a shareholder of any of the
Portfolios has an investment counseling relationship with Delaware, Delaware
International or their affiliates, Delaware 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, Delaware International or their affiliates
to avoid situations where excess advisory fees might be paid to Delaware 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. Such reductions would not
apply to The Asset Allocation Portfolio to the extent that management fees of
the Portfolios are indirectly charged to shareholders of The Asset Allocation
Portfolio.
Administrator
Delaware Service Company, Inc. ("DSC"), 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 Bank, 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 DSC will provide the
Fund with dividend disbursing and transfer agent services. DSC is located at
1818 Market Street, Philadelphia, PA 19103. For its services under the Amended
and Restated Shareholders Services Agreement, the Fund pays DSC an annual fixed
fee, payable monthly, and allocated among the Portfolios of the Fund based on
the relative percentage of assets of each Portfolio. DSC also provides
accounting services to the Fund pursuant to the terms of a separate Fund
Accounting Agreement. DSC provides The Asset Allocation Portfolio with similar
services pursuant to an Amended and Restated Shareholder Services Agreement with
the Fund and a Fund Accounting Agreement with Foundation Funds.
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 or Foundation Funds. DDLP provides The
Asset Allocation Portfolio with similar services to the Fund pursuant to a
Distribution Agreement with Foundation Funds. DDLP is an indirect, wholly owned
subsidiary of DMH.
Custodian Bank
The Chase Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245 serves as
custodian for each Portfolio.
Independent Auditors
Ernst & Young LLP, Two Commerce Square, 2001 Market Street, Suite 4000,
Philadelphia, PA 19103, serves as independent auditors for the Fund and for the
Foundation Funds.
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SHAREHOLDER SERVICES
Special Reports and Other Services. The Fund will provide client shareholders
with the following information:
o Audited annual financial reports
o Unaudited semi-annual financial reports.
o Detailed monthly appraisal of the status of their account and a complete
review of portfolio assets, performance results and other pertinent data.
In addition, 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. You may also obtain the net
asset values for the Portfolios by calling this number. Written correspondence
should be addressed to:
Delaware Pooled Trust, Inc.*
One Commerce Square
2005 Market Street
Philadelphia, PA 19103
Attention: Client Services
* Correspondence relating to The Asset Allocation Portfolio will be forwarded
to Foundation Funds.
Exchange Privilege
Each Portfolio's shares may be exchanged for shares of the other Portfolios or
the institutional class shares of the other funds in Delaware Investments based
on the respective net asset values of the shares involved and as long as a
Portfolio's minimum is satisfied. There are no minimum purchase requirements for
the institutional class shares of the other Delaware Investments funds, but
certain eligibility requirements must be satisfied. 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.
With respect to exchanges involving The Emerging Markets Portfolio, The Global
Equity Portfolio, The International Small-Cap Portfolio or The International
Large-Cap Equity Portfolio, an investor will be assessed a purchase
reimbursement fee by the respective Portfolio when exchanging from another
Portfolio into The Emerging Markets Portfolio, The Global Equity Portfolio, The
International Small-Cap Portfolio or The International Large-Cap Equity
Portfolio and a shareholder of The Emerging Markets Portfolio, The Global Equity
Portfolio, The International Small-Cap Portfolio or The International Large-Cap
Equity Portfolio will be assessed a redemption reimbursement fee by the
respective Portfolio when exchanging out of The Emerging Markets Portfolio, The
Global Equity Portfolio, The International Small-Cap Portfolio or The
International Large-Cap Equity Portfolio into another Portfolio. See "Redemption
of Shares" and "Purpose of Reimbursement Fees."
Please call the Fund for further information on how to exchange shares of the
Fund.
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How to purchase shares
Shares of each Portfolio described in this Prospectus are offered directly to
institutions and high net-worth individual investors at net asset value with no
sales commissions or 12b-1 charges.
Minimum Investments. The minimum investment is $1,000,000 and there are no
minimums for subsequent investments in a Portfolio where the minimum initial
investment has been satisfied.
Purchase Price. You may buy shares at the Portfolio's net asset value per share
(NAV), which is calculated as of the close of the New York Stock Exchange's
(NYSE) regular trading hours (usually 4:00 P.M. Eastern Time) every day the
exchange is open. Your order will be priced at the next NAV calculated after
your order is accepted by the Fund. Except in the case of in-kind purchases, an
order will be accepted by the Fund after (1) the Fund is notified by telephone
of your purchase order and (2) Federal Funds, or a check in good order, have
been delivered to the Fund's agent. If notice is given or Federal Funds are
delivered after that time, the purchase order will be priced at the close of the
following business day.
Purchase Reimbursement Fee. In the case of The Emerging Markets, The Global
Equity, The International Small-Cap and The International Large-Cap Equity
Portfolios, there is a purchase reimbursement fee that applies to all purchases,
including purchases made in an exchange from one Portfolio to another under the
exchange privilege or otherwise. That fee, which is paid by investors to the
relevant Portfolios, equals 0.75% of the dollar amount invested for The Emerging
Markets Portfolio, 0.40% of the dollar amount invested for The Global Equity
Portfolio, 0.55% of the dollar amount invested for The International Small-Cap
Portfolio and 0.45% of the dollar amount invested for The International
Large-Cap Equity Portfolio. This purchase reimbursement fee is deducted
automatically from the amount invested; it cannot be paid separately. The fee
does not apply to investments in the Portfolios that are made by contributions
of securities in-kind or reinvestments of dividends or other distributions. See
"Purpose of Reimbursement Fees" and "Redemption of Shares" below.
In-Kind Purchases. 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. Eligible investors in The
Emerging Markets Portfolio, The Global Equity Portfolio, The International
Small-Cap Portfolio and The International Large-Cap Equity Portfolio may elect
to pay the purchase reimbursement fee or, with the agreement of the Portfolio's
adviser, to invest by a contribution in-kind in securities or by following
another procedure that would have the same economic effect as an in-kind
purchase, including the procedure described 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
International or an affiliate of Delaware to make investments in any of the
Fund's Portfolios by a contribution of securities in-kind to such Portfolios.
Institutions proposing to invest an amount which at the time they telephone the
Fund 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 investors purchasing shares by an in-kind
procedure shall be the net asset value next determined after, as the case may
be, (1) delivery of cash or securities to The Chase Manhattan Bank, the Fund's
custodian bank 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." Investors
in The International Equity Portfolio required to follow these procedures and
those proposing to invest in The Emerging Markets Portfolio, The Global Equity
Portfolio, The
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<PAGE>
International Small-Cap Portfolio and The International Large-Cap Equity
Portfolio electing to do so should contact the Fund at (1-800-231-8002) for
further information.
How to Purchase Shares By Federal Funds Wire
Purchases of shares of a Portfolio may be made by having your bank wire Federal
Funds to First Union Bank 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:
o First, telephone the Fund at 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.
o Second, instruct your bank to wire the specified amount of Federal Funds to
First Union Bank, Philadelphia, PA, ABA #031201467, DSC Wire Purchase Bank
Account # 2014128934013. 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, First Union Bank and The Chase Manhattan Bank,
the Fund's custodian are open for business.
o Third, 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
* Account registrations for The Asset Allocation Portfolio will be forwarded to
Foundation Funds.
How to Purchase Shares 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. Please be sure to
complete an Investment Application and deliver it along with your check.
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:
o First, notify the Fund of your impending purchase by calling us at
1-800-231-8002.
o Then you must be sure that your bank follows the same procedures as described
above with respect to the wiring of Federal Funds to First Union Bank or
delivery of a check by mail.
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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. 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; for The Global Equity Portfolio, the
reimbursement fee paid to the Portfolio is equal to 0.30% of the amount
redeemed; for The International Small-Cap Portfolio, the reimbursement fee paid
to the Portfolio is equal to 0.45% of the amount redeemed; and for The
International Large-Cap Equity Portfolio, the reimbursement fee paid to the
Portfolio is equal to 0.35% of the amount redeemed.
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, The
International Small-Cap Portfolio, The International Large-Cap 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." "Good order" for purposes of
mail or FAX message redemptions means that the request to redeem must include
the following documentation:
o 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.
o 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, a separate written request must be submitted to the Fund at the address
listed below. Copies of this request must be 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.
Send your requests to:
Delaware Pooled Trust, Inc.*
Attn: Client Services
One Commerce Square
2005 Market Street
Philadelphia, PA 19103
FAX # 215-255-1162
* Requests relating to The Asset Allocation Portfolio will be forwarded to
Foundation Funds.
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<PAGE>
By Telephone
o 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 at 1-800-231-8002 and requesting the redemption proceeds be wired to the
commercial bank or account designation identified on the Account Registration
Form.
o 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 International Small-Cap Portfolio,
The Global Equity Portfolio, The International Large-Cap 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.
o Redemption requests will be priced at the net asset value next determined
after the request is received.
o The Fund will provide written confirmation for all purchase, exchange and
redemption transactions initiated by telephone.
o 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.
o 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.
o 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.
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.
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.
Redemptions In-Kind or Similar Procedures for The International Equity, The
Labor Select International Equity, The Global Fixed Income, The International
Fixed Income, The Global Equity, The International Small-Cap, The International
Large-Cap 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
International Small-Cap Portfolio, The Global Equity Portfolio, The
International Large-Cap 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. If a redemption of shares of The Emerging Markets Portfolio, The Global
Equity Portfolio, The International Small-Cap Portfolio and The International
Large-Cap Equity Portfolio is made in-kind, the redemption reimbursement fee
that is otherwise applicable will not be assessed. Investors in these Portfolios
should contact the Fund at 1-800-231-8002 for further information.
Eligible investors who have an existing investment counseling relationship with
Delaware or Delaware International, or their affiliates, 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
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<PAGE>
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 International
Small-Cap, The Global Equity, The International Large-Cap 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 for The Emerging Markets, The Global Equity, The
International Small-Cap and The International Large-Cap Equity Portfolios. The
purchase and redemption transaction fees are designed to reflect an
approximation of the brokerage and related transaction costs associated with the
investment of an investor's purchase amount or the disposition of assets to meet
redemptions, and to limit the extent to which The Emerging Markets Portfolio,
The Global Equity Portfolio, The International Small-Cap Portfolio or The
International Large-Cap Equity Portfolio (and, indirectly, such Portfolio's
existing shareholders) would have to bear such costs. These costs include: (1)
brokerage costs; (2) market impact costs, i.e., the increase in market prices
which may result when a Portfolio purchases or sells thinly traded stocks; and
(3) the effect of the "bid-asked" spread in international markets.
The fees represent the investment adviser's estimate of the brokerage and other
transaction costs incurred by a Portfolio in purchasing and selling portfolio
securities, especially international stocks. Without the fee, a Portfolio would
incur these costs directly, resulting in reduced investment performance for all
its shareholders. With the fee, the transaction costs of purchasing and selling
stocks are borne not by all existing shareholders, but only by those investors
making transactions. Also, when a portfolio acquires securities of companies in
emerging markets, transaction costs incurred when purchasing or selling stocks
are 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 those markets. In addition to these customary costs,
most foreign countries have exchange fees or stamp taxes.
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<PAGE>
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 at the time when net assets are
valued. Unlisted domestic equity securities are valued at the last sale price as
of the close of the NYSE. 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. Securities with remaining
maturities of 60 days or less are valued at amortized cost, if it approximates
market value.
Foreign securities may trade on weekends or other days when the Fund does not
price its shares. While the value of the Fund's assets may change on these days,
you will not be able to purchase or redeem Fund shares.
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.
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 exchange rate of such currencies against the U.S. dollar as
provided by an independent pricing service or any major financial institution,
including The Chase Manhattan Bank, the Fund's custodian.
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<PAGE>
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Intermediate Fixed Income Portfolio expects 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
Aggregate Fixed Income, The Diversified Core Fixed Income, The Large-Cap Value
Equity, The International Equity, The International Large-Cap Equity, The Labor
Select International Equity and The International Fixed Income Portfolios and
The Real Estate Investment Trust Portfolio expect to declare and distribute all
of their net investment income to shareholders as dividends quarterly. The
Balanced, The Equity Income, The Select Equity, The Mid-Cap Growth Equity, The
Mid-Cap Value Equity, The Small-Cap Value Equity, The Global Equity, The
International Small-Cap, The Small-Cap Growth Equity, The Asset Allocation, The
Core Equity and The Emerging Markets Portfolios and The Real Estate Investment
Trust Portfolio II 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 will 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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<PAGE>
TAXES
General
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 International Large-Cap Equity, The Labor Select International
Equity, The Global Equity, The Emerging Markets and The International Small-Cap
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.
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.
Additionally, the Fund is required to withhold 31% of taxable dividend 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.
Foreign Taxes
Each of The International Equity, The International Large-Cap Equity, The Labor
Select International Equity, The Global Fixed Income, The International Fixed
Income, The Global Equity, The Emerging Markets and The International Small-Cap
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.
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Financial Highlights
The financial highlights tables are intended to help you understand a
Portfolio's financial performance. The total returns in the tables represent the
rate that an investor would have earned or lost on an investment in a Portfolio,
assuming the reinvestment of all dividends and distributions. All "per share"
information reflects financial results for a single Portfolio share. The
information for the periods up to and including October 31, 1998 has been
audited by Ernst & Young LLP, whose reports, along with the Fund's financial
statements, is included in the Fund's annual reports. Unaudited financial
highlights for the period ended April 30, 1999 are also provided below for each
Portfolio that was operating on October 31, 1998. The unaudited financial
highlights and financial statements for the six months ended April 30, 1999 are
included in the Fund's semi-annual reports. The annual and semi-annual reports
are available upon request by calling 800-231-8002.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
The Large-Cap
Six Months Value Equity Portfolio
Ended
4/30/99(1)
(Unaudited) Year Ended 10/31
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $17.780 $18.530 $16.460 $14.660 $13.080 $12.730
Income from investment operations:
Net investment income 0.153 0.308 0.381 0.440 0.430 0.320
Net realized and unrealized
gain on investments 2.297 2.022 3.599 2.960 1.980 0.653
------- ------- ------- ------- ------- -------
Total from investment operations 2.450 2.330 3.980 3.400 2.410 0.973
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income (0.240) (0.380) (0.410) (0.440) (0.340) (0.280)
Distributions from net realized
gain on investments (2.140) (2.700) (1.500) (1.160) (0.490) (0.343)
------- ------- ------- ------- ------- -------
Total dividends and distributions (2.380) (3.080) (1.910) (1.600) (0.830) (0.623)
------- ------- ------- ------- ------- -------
Net asset value, end of period $17.850 $17.780 $18.530 $16.460 $14.660 $13.080
======= ======= ======= ======= ======= =======
Total return(2) 15.12% 13.50% 26.73% 24.87% 19.77% 7.96%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $161,825 $117,858 $81,102 $67,179 $51,947 $37,323
Ratio of expenses to average net assets 0.64% 0.68% 0.66% 0.67% 0.68% 0.68%
Ratio of expenses to average net assets
prior to expense limitation
and expenses paid indirectly 0.65% 0.71% 0.67% 0.70% 0.71% 0.82%
Ratio of net investment income
to average net assets 1.87% 1.91% 2.15% 2.85% 3.33% 3.26%
Ratio of net investment income
to average net assets
prior to expense limitation
and expenses paid indirectly 1.86% 1.88% 2.14% 2.83% 3.30% 3.12%
Portfolio turnover 46% 85% 73% 74% 88% 73%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Total return reflects voluntary expense limitations.
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<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
The Core
Equity Portfolio
Six Months Period
Ended 9/15/98(2)
4/30/99(1) through
(Unaudited) 10/31/98
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $8.970 $8.500
Income from investment operations:
Net investment income 0.009 0.012
Net realized and unrealized
gain on investments 0.866 0.458
------ ------
Total from investment operations 0.875 0.470
------ ------
Less dividends and distributions:
Dividends from net investment income (0.025) none
Distributions from net realized
gain on investments none none
------ ------
Total dividends and distributions (0.025) none
------ ------
Net asset value, end of period $9.820 $8.970
====== ======
Total return(3) 9.76% 5.53%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $2,317 $2,112
Ratio of expenses to average net assets 0.68% 0.68%
Ratio of expenses to average net assets
prior to expense limitation
and expenses paid indirectly 1.36% 1.74%
Ratio of net investment income
to average net assets 0.71% 1.15%
Ratio of net investment income
to average net assets
prior to expense limitation
and expenses paid indirectly 0.03% 0.09%
Portfolio turnover 71% 53%
- ----------------------------------------------------------------------------------------
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized but total
return has not been annualized.
(3) Total return reflects voluntary expense limitations.
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<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
The Mid-Cap
Value Equity Portfolio
Six Months Period
Ended 12/29/97(2)
4/30/99(1) through
(Unaudited) 10/31/98
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $7.720 $8.500
Income from investment operations:
Net investment income 0.044 0.096
Net realized and unrealized
gain (loss) on investments 0.476 (0.876)
------ ------
Total from investment operations 0.520 (0.780)
------ ------
Less dividends and distributions:
Dividends from net investment income (0.120) none
Distributions from net realized
gain on investments none none
------ ------
Total dividends and distributions (0.120) none
------ ------
Net asset value, end of period $8.120 $7.720
====== ======
Total return(3) 6.83% (9.18%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $2,912 $2,724
Ratio of expenses to average net assets 0.88% 0.87%
Ratio of expenses to average net assets
prior to expense limitation
and expenses paid indirectly 1.21% 1.37%
Ratio of net investment income
to average net assets 1.14% 1.34%
Ratio of net investment income
to average net assets
prior to expense limitation
and expenses paid indirectly 0.81% 0.84%
Portfolio turnover 113% 155%
- --------------------------------------------------------------------------------------
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized but total
return has not been annualized.
(3) Total return reflects voluntary expense limitations.
-117-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
The Small-Cap
Growth Equity Portfolio
Six Months Period
Ended 9/15/98(2)
4/30/99(1) through
(Unaudited) 10/31/98
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.400 $8.500
Income from investment operations:
Net investment income 0.007 0.019
Net realized and unrealized
gain on investments 2.248 0.881
------- ------
Total from investment operations 2.255 0.900
------- ------
Less dividends and distributions:
Dividends from net investment income (0.025) none
Distributions from net realized
gain on investments none none
------- ------
Total dividends and distributions (0.025) none
------- ------
Net asset value, end of period $11.630 $9.400
======= ======
Total return(3) 24.02% 10.59%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $4,114 $3,318
Ratio of expenses to average net assets 0.89% 0.89%
Ratio of expenses to average net assets
prior to expense limitation
and expenses paid indirectly 1.33% 1.78%
Ratio of net investment income
to average net assets 0.13% 1.72%
Ratio of net investment income (loss)
to average net assets
prior to expense limitation
and expenses paid indirectly (0.31%) 0.83%
Portfolio turnover 116% 98%
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(3) Total return reflects voluntary expense limitations.
-118-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
The Mid-Cap
Growth Equity Portfolio
Six Months
Ended
4/30/99(1)
(Unaudited) Year Ended 10/31
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.460 $13.680 $14.570 $12.860 $11.010 $11.200
Income from investment operations:
Net investment income (loss) 0.021 0.011 (0.117) (0.019) 0.043 0.008
Net realized and unrealized
gain on investments 1.869 0.009 1.607 2.392 2.055 0.032
------- ------- ------- ------- ------- -------
Total from investment operations 1.890 0.020 1.490 2.373 2.098 0.040
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income (0.010) none none (0.043) (0.012) (0.020)
Distributions from net realized
gain on investments (1.760) (6.240) (2.380) (0.620) (0.236) (0.210)
------- ------- ------- ------- ------- -------
Total dividends and distributions (1.770) (6.240) (2.380) (0.663) (0.248) (0.230)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 7.580 $ 7.460 $13.680 $14.570 $12.860 $11.010
======= ======= ======= ======= ======= =======
Total return(2) 28.98% 1.47% 11.84% 19.19% 19.61% 0.34%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $6,749 $4,879 $10,317 $28,526 $29,092 $22,640
Ratio of expenses to average net assets 0.92% 0.59% 0.93% 0.90% 0.93% 0.93%
Ratio of expenses to average net assets
prior to expense limitation
and expenses paid indirectly 1.13% 1.71% 1.40% 1.01% 1.08% 1.17%
Ratio of net investment income (loss)
to average net assets (0.34%) 0.13% (0.29%) (0.18%) 0.37% 0.07%
Ratio of net investment income (loss)
to average net assets
prior to expense limitation
and expenses paid indirectly (0.55%) (0.99%) (0.76%) (0.29%) 0.22% (0.17%)
Portfolio turnover 66% 154% 117% 95% 64% 43%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Total return reflects voluntary expense limitations.
-119-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
The Real Estate
Investment Trust Portfolio II
Six Months Period
Ended 11/4/97(2)
4/30/99(1) through
(Unaudited) 10/31/98
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $14.230 $16.340
Income from investment operations:
Net investment income 0.376 0.749
Net realized and unrealized
gain (loss) on investments 0.634 (2.739)
------- -------
Total from investment operations 1.010 (1.990)
------- -------
Less dividends and distributions:
Dividends from net investment income (0.770) (0.120)
Distributions from net realized
gain on investments none none
------- -------
Total dividends and distributions (0.770) (0.120)
------- -------
Net asset value, end of period $14.470 $14.230
======= =======
Total return(3) 7.42% (12.27%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $5,854 $5,763
Ratio of expenses to average net assets 0.86% 0.86%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 1.43% 1.43%
Ratio of net investment income
to average net assets 5.33% 5.34%
Ratio of net investment income
to average net assets
prior to expense limitation and
expenses paid indirectly 4.76% 4.77%
Portfolio turnover 56% 54%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(3) Total return reflects voluntary expense limitations.
-120-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
The Aggregate
Fixed Income Portfolio
Six Months Period
Ended 12/29/97(2)
4/30/99(1) through
(Unaudited) 10/31/98
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.130 $8.500
Income from investment operations:
Net investment income 0.234 0.415
Net realized and unrealized
gain (loss) on investments (0.234) 0.215
------- ------
Total from investment operations 0.000 0.630
------- ------
Less dividends and distributions:
Dividends from net investment income (0.190) none
Distributions from net realized
gain on investments (0.040) none
------- ------
Total dividends and distributions (0.230) none
------- ------
Net asset value, end of period $ 8.900 $9.130
======= ======
Total return(3) (0.04%) 7.41%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $6,371 $2,149
Ratio of expenses to average net assets 0.53% 0.53%
Ratio of expenses to average net assets
prior to expense limitation
and expenses paid indirectly 0.68% 2.07%
Ratio of net investment income
to average net assets 5.26% 5.62%
Ratio of net investment income
to average net assets
prior to expense limitation
and expenses paid indirectly 5.11% 4.08%
Portfolio turnover 460% 438%
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(3) Total return reflects voluntary expense limitations.
-121-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
The Diversified
Core Fixed Income Portfolio
Six Months Period
Ended 12/29/97(2)
4/30/99(1) through
(Unaudited) 10/31/98
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $9.110 $8.500
Income from investment operations:
Net investment income(3) 0.297 0.533
Net realized and unrealized
gain on investments
and foreign currencies 0.123 0.077
------ ------
Total from investment operations 0.420 0.610
------ ------
Less dividends and distributions:
Dividends from net investment income (0.650) none
Distributions from net realized
gain on investments (0.340) none
------ ------
Total dividends and distributions (0.990) none
------ ------
Net asset value, end of period $8.540 $9.110
====== ======
Total return(4) 4.86% 7.18%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $3,373 $3,216
Ratio of expenses to average net assets 0.57% 0.57%
Ratio of expenses to average net assets
prior to expense limitation
and expenses paid indirectly 0.85% 1.74%
Ratio of net investment income
to average net assets 6.86% 7.12%
Ratio of net investment income
to average net assets
prior to expense limitation
and expenses paid indirectly 6.58% 5.95%
Portfolio turnover 165% 312%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(3) Per share information for the period ended October 31, 1998 was based on the
average shares outstanding method.
(4) Total return reflects voluntary expense limitations.
-122-
<PAGE>
<TABLE>
<CAPTION>
The Real Estate Investment Trust Portfolio
Six Months Period Period
Ended 11/4/97(1) Year Ended 10/31 12/6/95(1)
4/30/99(5) through through
(Unaudited) 10/31/98(2) 1998(3) 1997(3) 10/31/96(3)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.990 $16.340 $16.260 $12.490 $10.000
Income from investment operations:
Net investment income 0.329 1.134 1.118 0.616 0.652
Net realized and unrealized
gain (loss) on investments 0.486 (2.769) (2.713) 4.664 1.938
----- ------- ------- ------- -------
Total from investment operations 0.815 (1.635) (1.595) 5.280 2.590
----- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment (0.500) (0.895) (0.865) (0.720) (0.100)
Income
Distributions from net realized
Gains on investments (0.675) (0.820) (0.820) (0.790) none
------- ------- ------- ------- ----
Total dividends and distributions (1.175) (1.715) (1.685) (1.510) (0.100)
------- ------- ------- ------- -------
Net asset value, end of period $12.630 $12.990 $12.980 $16.260 $12.490
======= ======= ======= ======= =======
Total return(4) 6.82% (11.17%) (10.98%) 46.50% 26.12%
Ratios and supplemental data:
Net assets, end of period (000 omitted $41,405 $40,807 $13,340 $60,089 $26,468
Ratio of expenses to average net
assets 0.95% 0.86% 1.11% 0.82% 0.89%
Ratio of expenses to average net
assets prior to expense limitation and expenses
paid indirectly 1.09% 1.02% 1.27% 0.99% 1.02%
Ratio of net investment income
to average net assets 5.21% 4.56% 4.31% 4.25% 6.70%
Ratio of net investment income
to average net assets
prior to expense limitation
and expenses paid indirectly 5.07% 4.40% 4.15% 4.08% 6.57%
Portfolio turnover 78% 51% 51% 58% 109%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(2) The data presented above is for The Real Estate Investment Trust Portfolio
class, which is the class of shares offered in this Prospectus and which
commenced operations on November 4, 1997. Like the original class prior to
its redesignation (see footnote 3), The Real Estate Investment Trust
Portfolio class carries no front-end or contingent deferred sales charges
and is not subject to Rule 12b-1 Distribution Plan fees.
(3) December 6, 1995 is the date of initial sale of the original (and then only)
class of shares offered by The Real Estate Investment Trust Portfolio. Data
represented above is for that class of shares which, as of November 4, 1997,
was redesigned the "REIT Fund A Class," became subject to Rule 12b-1
Distribution Plan fees and is offered in a separate prospectus.
-123-
<PAGE>
(4) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge. Total return
reflects voluntary expense limitations.
(5) Ratios have been annualized and total return has not been annualized.
-124-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
The Intermediate Fixed Income Portfolio
Six Months Period
Ended Year Ended 3/12/96(2)
4/30/99(1) 10/31 through
(Unaudited) 1998 1997 10/31/96
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.180 $10.090 $10.010 $10.000
Income from investment operations:
Net investment income 0.302 0.593 0.605 0.386
Net realized and unrealized
gain (loss) on investments (0.160) 0.100 0.080 0.010
------- ----- ----- -------
Total from investment operations 0.142 0.693 0.685 0.396
------- ----- ----- -------
Less dividends and distributions:
Dividends from net investment income (0.302) (0.593) (0.605) (0.386)
Distributions from net realized
gain on investments (0.160) (0.010) none none
------- ------- ------- -------
Total dividends and distributions (0.462) (0.603) (0.605) (0.386)
------- ------- ------- -------
Net asset value, end of period $9.860 $10.180 $10.090 $10.010
======= ======= ======= =======
Total return(3) 1.43% 7.06% 7.09% 4.08%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $19,700 $30,211 $30,366 $10,518
Ratio of expenses to average net assets 0.53% 0.53% 0.53% 0.53%
Ratio of expenses to average net assets
prior to expense limitation
and expenses paid indirectly 0.83% 1.01% 0.84% 1.20%
Ratio of net investment income
to average net assets 6.05% 5.86% 6.05% 6.14%
Ratio of net investment income
to average net assets
prior to expense limitation
and expenses paid indirectly 5.75% 5.38% 5.74% 5.47%
Portfolio turnover 166% 181% 205% 232%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
{1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(3) Total return reflects voluntary expense limitations.
-125-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
The High-Yield Bond Portfolio
Six Months Period
Ended Year Ended 12/2/96(2)
4/30/99(1) 10/31 through
(Unaudited) 1998 10/31/97
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period 10.070 $11.180 $10.000
Income from investment operations:
Net investment income 0.450 0.993 0.788
Net realized and unrealized
gain (loss) on investments 0.080 (0.925) 0.957
----- ------- -----
Total from investment operations 0.530 0.068 1.745
----- ------- -----
Less dividends and distributions:
Dividends from net investment income (0.700) (0.890) (0.565)
Distributions from net realized
gain on investments (0.180) (0.288) none
------- ------- -------
Total dividends and distributions (0.880) (1.178) (0.565)
------- ------- -------
Net asset value, end of period $9.720 $10.070 $11.180
======= ======= =======
Total return(3) 5.47% 0.30% 17.92%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $24,400 $20,706 $11,348
Ratio of expenses to average net assets 0.58% 0.59% 0.59%
Ratio of expenses to average net assets
prior to expense limitation
and expenses paid indirectly 0.78% 0.75% 0.79%
Ratio of net investment income
to average net assets 9.34% 9.53% 9.05%
Ratio of net investment income
to average net assets
prior to expense limitation
and expenses paid indirectly 9.14% 9.37% 8.85%
Portfolio turnover 517% 211% 281%
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(3) Total return reflects voluntary expense limitations.
-126-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
The Global Equity Portfolio
Six Months
Ended
4/30/99(1) Year Ended Period 10/15/97(2)
(Unaudited) 10/31/98 through 10/31/97
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 8.720 $8.120 $8.500
Income from investment operations:
Net investment income(3) 0.069 0.184 0.009
Net realized and unrealized
gain (loss) on investments and
foreign currencies 1.021 0.486 (0.389)
------- ----- ------
Total from investment operations 1.090 0.670 (0.380)
------- ----- ------
Less dividends and distributions:
Dividends from net investment income (0.190) (0.070) none
Distributions from net realized
gain on investments (0.110) none none
------- ---- ------
Total dividends and distributions (0.300) (0.070) none
------- ------ ------
Net asset value, end of period $9.510 $8.720 $8.120
====== ====== ======
Total return(4) 12.81% 8.31% (4.47%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $3,491 $3,093 $2,855
Ratio of expenses to average net assets 0.95% 0.96% 0.96%
Ratio of expenses to average net assets
prior to expense limitation
and expenses paid indirectly 2.26% 2.31% 2.95%
Ratio of net investment income
to average net assets 1.51% 2.10% 2.54%
Ratio of net investment income
to average net assets
prior to expense limitation
and expenses paid indirectly 0.20% 0.75% 0.55%
Portfolio turnover 49% 47% 0%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(3) Per share information for the period ended April 30, 1999 and the year ended
October 31, 1998 was based on the average shares outstanding method.
(4) Total return reflects voluntary expense limitations.
-127-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
The Labor Select
International Equity Portfolio
Six Months
Ended Year Ended 10/31 Period
4/30/99(1) 12/19/95(2)
(Unaudited) 1998 1997 Through
10/31/96
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.320 $12.990 $11.690 $10.000
Income from investment operations:
Net investment income(3) 0.126 0.334 0.474 0.479
Net realized and unrealized
gain on investments
and foreign currencies 1.666 0.444 1.346 1.311
-------- -------- ------- -------
Total from investment operations 1.792 0.778 1.820 1.790
-------- -------- ------- -------
Less dividends and distributions:
Dividends from net investment income (0.252) (0.448) (0.520) (0.100)
Distributions from net realized
gain on investments (0.040) none none none
-------- -------- ------- -------
Total dividends and distributions (0.292) (0.448) (0.520) (0.100)
-------- -------- ------- -------
Net asset value, end of period $14.820 $ 13.320 12.990 11.690
======== ======== ======= =======
Total return(4) 13.64% 6.18% 16.01% 17.97%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $118,810 $103,350 $50,896 $23,154
Ratio of expenses to average net assets 0.69% 0.88% 0.89% 0.92%
Ratio of expenses to average net assets
prior to expense limitation
and expenses paid indirectly 0.70% 0.93% 1.06% 1.30%
Ratio of net investment income
to average net assets 1.82% 2.46% 2.37% 6.64%
Ratio of net investment income
to average net assets
prior to expense limitation
and expenses paid indirectly 1.81% 2.41% 2.20% 6.26%
Portfolio turnover 3% 2% 11% 7%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(3) Per share information for the period ended April 30, 1999 and the year ended
October 31, 1998 was based on the average shares outstanding method.
(4) Total return reflects voluntary expense limitations.
-128-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
The International Equity Portfolio
Six Months
Ended
4/30/99(1)
(Unaudited) Year Ended 10/31
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.870 $ 15.860 $ 14.780 $ 13.120 $ 13.110 $11.990
Income from investment operations:
Net investment income(2) 0.145 0.400 0.329 0.506 0.475 0.144
Net realized and unrealized
gain on investments
and foreign currencies 2.280 0.370 1.271 1.794 0.001 1.236
-------- -------- -------- -------- -------- -------
Total from investment operations 2.425 0.770 1.600 2.300 0.476 1.380
-------- -------- -------- -------- -------- -------
Less dividends and distributions:
Dividends from net investment income (0.325) (0.610) (0.520) (0.490) (0.170) (0.160)
Distributions from net realized
gain on investments none ( 0.150) none (0.150) (0.296) (0.100)
-------- -------- -------- -------- -------- -------
Total dividends and distributions (0.325) (0.760) (0.520) (0.640) (0.466) (0.260)
-------- -------- -------- -------- -------- -------
Net asset value, end of period $ 17.970 $ 15.870 $15.860 $ 14.780 $ 13.120 $13.110
======== ======== ======== ======== ======== =======
Total return(3) 15.53% 4.96% 11.01% 18.12% 3.91% 11.66%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $746,755 $616,229 $500,196 $299,950 $156,467 $70,820
Ratio of expenses to average net assets 0.89% 0.91% 0.93% 0.89% 0.90% 0.94%
Ratio of expenses to average net assets
prior to expense limitation
and expenses paid indirectly 0.90% 0.91% 0.93% 0.89% 0.90% 0.97%
Ratio of net investment income
to average net assets 1.76% 2.50% 2.21% 4.36% 4.81% 1.36%
Ratio of net investment income
to average net assets
prior to expense limitation
and expenses paid indirectly 1.75% 2.50% 2.21% 4.36% 4.81% 1.33%
Portfolio turnover 4% 5% 8% 8% 20% 22%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Per share information for the period ended April 30, 1999 and the year ended
October 31, 1998 was based on the average shares outstanding method.
(3) Total return reflects voluntary expense limitations.
-129-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
The Emerging
Markets Portfolio
Six Months Period
Ended 4/14/97(2)
4/30/99(1) Year Ended through
(Unaudited) 10/31 1998 10/31/97
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 5.840 $ 9.200 $10.000
Income from investment operations:
Net investment income(3) 0.061 0.153 0.028
Net realized and unrealized
gain (loss) on investments
and foreign currencies 1.019 (0.348) (0.828)
------- --------- -------
Total from investment operations 1.080 (3.195) (0.800)
------- --------- -------
Less dividends and distributions:
Dividends from net investment income (0.130) (0.025) none
Distributions from net realized
gain on investments none (0.140) none
------- --------- -------
Total dividends and distributions (0.130) (0.165) none
------- --------- -------
Net asset value, end of period $6.790 $5.840 $ 9.200
======= ========= =======
Total return(4) 19.04% (35.30%) (8.00%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $40,470 $ 34,030 $18,565
Ratio of expenses to average net assets 1.52% 1.55% 1.55%
Ratio of expenses to average net assets
prior to expense limitation
and expenses paid indirectly 1.61% 1.69% 2.02%
Ratio of net investment income
to average net assets 2.14% 1.98% 0.74%
Ratio of net investment income
to average net assets
prior to expense limitation
and expenses paid indirectly 2.05% 1.84% 0.27%
Portfolio turnover 23% 39% 46%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(3) Per share information for the period ended April 30, 1999 and the year ended
October 31, 1998 was based on the average shares outstanding method.
(4) Total return reflects voluntary expense limitations.
-130-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
The International Fixed Income Portfolio
Six Months Period
Ended 4/11/97(2)
4/30/99(1) Year Ended Through
(Unaudited) 10/31 1998 10/31/97
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.750 $10.660 $10.000
Income from investment operations:
Net investment income(3) 0.282 0.558 0.236
Net realized and unrealized
gain (loss) on investments
and foreign currencies (0.145) 0.045 0.474
-------- ------- -------
Total from investment operations 0.137 0.603 0.710
-------- ------- -------
Less dividends and distributions:
Dividends from net investment income (0.350) (0.492) (0.050)
Distributions from net realized
gain on investments (0.077) (0.021) none
-------- ------- -------
Total dividends and distributions (0.427) (0.513) (0.050)
-------- ------- -------
Net asset value, end of period $ 10.460 $10.750 $10.660
======== ======= =======
Total return(4) 1.40% 5.96% 7.11%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $102,438 $87,997 $33,734
Ratio of expenses to average net assets 0.60% 0.60% 0.60%
Ratio of expenses to average net assets
prior to expense limitation
and expenses paid indirectly 0.66% 0.67% 0.86%
Ratio of net investment income
to average net assets 5.44% 5.47% 6.05%
Ratio of net investment income
to average net assets
prior to expense limitation
and expenses paid indirectly 5.38% 5.40% 5.79%
Portfolio turnover 82% 104% 145%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(3) Per share information for the period ended April 30, 1999 and the year ended
October 31, 1998 was based on the average shares outstanding method.
(4) Total return reflects voluntary expense limitations.
-131-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
The Global Fixed Income Portfolio
Six Months
Ended
4/30/99(1)
(Unaudited) Year Ended 10/31
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.060 $ 11.220 $ 11.620 $ 11.040 $9.790 $11.090
Income from investment operations:
Net investment income(2) 0.297 0.610 0.721 0.777 0.736 0.419
Net realized and unrealized
gain (loss) on investments
and foreign currencies (0.092) 0.037 (0.116) 0.725 0.924 ( 0.139)
-------- -------- -------- -------- -------
Total from investment operations 0.205 0.647 0.605 1.502 1.660 0.226
-------- -------- -------- -------- -------
Less dividends and distributions:
Dividends from net investment income (0.253) (0.630) (0.835) (0.720) (0.410) (0.949)
Distributions from net realized
gain on investmentss (0.122) (0.177) (0.170) (0.202) none (0.577)
-------- ------- -------- -------- -------
Total dividends and distributions (0.375) (0.807) (1.005) (0.922) (0.410) (1.526)
-------- ------- -------- -------- -------
Net asset value, end of period $ 10.890 $11.060 $ 11.220 $ 11.620 $11.040 $ 9.790
======== ======= ======== ======== =======
Total return(3) 1.89% 6.28% 5.59% 16.40% 17.38% 2.07%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $649,862 $660,741 $431,076 $252,068 $99,161 $42,266
Ratio of expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60% 0.62%
Ratio of expenses to average net assets
prior to expense limitation
and expenses paid indirectly 0.63% 0.62% 0.65% 0.66% 0.68% 0.76%
Ratio of net investment income
to average net assets 5.51% 5.71% 6.28% 8.52% 6.73% 3.62%
Ratio of net investment income
to average net assets
prior to expense limitation
and expenses paid indirectly 5.48% 5.69% 6.23% 8.46% 6.65% 3.48%
Portfolio turnover 34% 131% 114% 63% 77% 205%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Per share information for the period ended April 30, 1999 and the year ended
October 31, 1998 was based on the average shares outstanding method.
(3) Total return reflects voluntary expense limitations.
-132-
<PAGE>
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.
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.
Excerpts from Fitch's description of its bond ratings: AAA--Bonds considered to
be investment grade and of the highest credit quality. The obligor has an
exceptionally strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events; AA--Bonds considered
to be investment grade and of very high credit quality. The obligor's ability to
pay interest and repay principal is very strong, although not quite as strong as
bonds rated AAA. Because bonds rated in the AAA and AA categories are not
significantly vulnerable to foreseeable future developments, short-term debt of
these issuers is generally rated F-1+; A--Bonds considered to be investment
grade and of high credit quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances that bonds with higher
ratings; BBB--Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings; BB--Bonds
are considered speculative. The obligor's ability to pay interest and repay
principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements; B--Bonds are considered
highly speculative. While bonds in this class are currently meeting debt service
requirements, the probability of continued timely payment of principal and
interest reflects the obligor's limited margin of safety and the need for
reasonable business and economic activity throughout the life of the issue;
CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment; CC--Bonds are minimally protected. Default in
payment of interest and/or principal seems probable over time; C--Bonds are in
imminent default in payment of interest or principal; and DDD, DD and D--Bonds
are in default on interest and/or principal payments. Such bonds are extremely
speculative and should be valued on the basis of their ultimate recovery value
in liquidation or reorganization of the obligor. "DDD" represents the highest
potential for recovery on these bonds, and "D" represents the lowest potential
for recovery.
Plus and minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category. Plus and minus signs, however,
are not used in the "AAA" category.
-133-
<PAGE>
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.
-134-
<PAGE>
APPENDIX B
===============================================================================
SUPPLEMENTAL INFORMATION REGARDING THE EMERGING MARKETS PORTFOLIO
COMPARATIVE PERFORMANCE
ABOUT THE EMERGING MARKETS PORTFOLIO
- -------------------------------------------------------------------------------
The Emerging Markets Portfolio of Delaware Pooled Trust, Inc. ("The Emerging
Markets Portfolio of DPT") commenced operations on April 14, 1997. Delaware
International Advisers Ltd. ("Delaware International"), the investment adviser
to The Emerging Markets Portfolio of DPT, also serves as investment manager to
the Delaware Emerging Markets Fund (the "G&I Emerging Markets Fund"), which is
an investment series of Delaware Group Global & International Funds, Inc. Shares
of the G&I Emerging Markets Fund were initially offered to the public on June
10, 1996. Except as set forth below, The Emerging Markets Portfolio of DPT and
the G&I Emerging Markets Fund are managed with substantially similar investment
objectives, policies and strategies.
The Emerging Markets Portfolio of DPT has achieved the performance set forth
below for the one-year period and two-year period ended September 30, 1999, and
for the period from the commencement of its operations on April 14, 1997 through
September 30, 1999. The Institutional Class of the G&I Emerging Markets Fund has
achieved the performance set forth below for the one-year period, two-year
period and three-year period ended September 30, 1999, for the period from April
14, 1997 through September 30, 1999, and for the period from the commencement of
its operations on June 10, 1996 through September 30, 1999. Performance
information for the Morgan Stanley Capital International Emerging Markets Free
Index, an unmanaged index, has also been provided.
The Emerging Markets G&I Emerging MSCI Emerging
Portfolio of DPT(1,2) Markets Fund(1,3) Markets Free Index(1,4)
- -------------------------------------------------------------------------------
One Year ..... 32.27% One Year ........ 32.65% One Year ........56.53%
Two Year ..... (16.73%) Two Year ........ (19.19%) Two Year ........(9.61%)
Lifetime ..... (11.12%) 4/14/97-9/30/99 . (12.28%) 4/30/97-9/30/99 .(8.54%)
Three Year ...... (6.50%) Three Year ......(4.51%)
Lifetime ........ (5.69%) 6/30/96-9/30/99 .(5.25%)
1. Return and share value fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Past performance is not a
guarantee of future results.
2. The performance presented is the average annual total return for the
one-year period and two-year period ended September 30, 1999, and for the
lifetime period from the commencement of operations on April 14, 1997
through September 30, 1999 for The Emerging Markets Portfolio of DPT.
During the period presented, Delaware International voluntarily waived its
investment management fee and/or paid fund expenses to the extent necessary
to limit total fund operating expenses to no more than 1.55%. In the
absence of such waivers, performance would have been reduced.
3. The performance presented is the average annual total return for the
one-year period, two-year period and three-year period ended September 30,
1999, for the period from April 14, 1997 through September 30, 1999, and
for the lifetime period from the commencement of operations on June 10,
1996 through September 30, 1999 for the G&I Emerging Markets Fund
Institutional Class, which is available only to certain eligible investors.
The G&I Emerging Markets Fund also offers an A Class, B Class and C Class.
The performance of the A Class, B Class, and C Class varies from the
performance of the Institutional Class due to varying expenses. During the
period presented, Delaware International voluntarily waived its investment
management fee and/or paid fund expenses to the extent necessary to limit
total fund operating expenses to no more than 1.70%. In the absence of such
waiver, performance would have been reduced.
4. The performance presented is the average annual total return for the
one-year period, two-year period and three-year period ended September 30,
1999, for the period from April 30, 1997 through September 30, 1999, and
for the period from June 30, 1996 through September 30, 1999 for the Morgan
Stanley Capital International Emerging Markets Free Index, an unmanaged
index of emerging market stocks. Performance of the index has not been
adjusted to reflect fees or expenses.
-135-
<PAGE>
APPENDIX B
===============================================================================
SUPPLEMENTAL INFORMATION REGARDING THE EMERGING MARKETS PORTFOLIO
The performance of the G&I Emerging Markets Fund has been presented to provide
investors with additional information on which to base their investment
decision. Emerging markets investment performance can be volatile and should be
evaluated over a multi-year period. The performance of the G&I Emerging Markets
Fund is not the performance of The Emerging Markets Portfolio of DPT and should
not be considered as a substitute for the performance of The Emerging Markets
Portfolio of DPT. The performance of the G&I Emerging Markets Fund should not be
considered indicative of the past or future performance of The Emerging Markets
Portfolio of DPT.
The charts on the following pages contain certain additional performance
information. For a description of the differences between The Emerging Markets
Portfolio of DPT and the G&I Emerging Markets Fund, see Differences Between
Funds.
DIFFERENCES BETWEEN FUNDS
- -------------------------------------------------------------------------------
The investment objective of The Emerging Markets Portfolio of DPT is identical
to the investment objective of the G&I Emerging Markets Fund and the two funds
invest in substantially similar securities. Investment strategies for the two
funds will be substantially similar; however, because of the nature of investors
in The Emerging Markets Portfolio of DPT, cash flows tend to be substantial and
irregular, while cash flows in the G&I Emerging Markets Fund tend to be more
regular and in smaller amounts. The differences in cash flows may affect the
timing of investment decisions, the relative speed with which such decisions may
be implemented, the investments held by each fund from time to time, and,
consequently, performance. In addition, investments may be made for each fund
during varying market conditions.
Shares of each of The Emerging Markets Portfolio of DPT and the G&I Emerging
Markets Fund Institutional Class may be purchased and sold without the
imposition of a sales charge; however, investors in The Emerging Markets
Portfolio of DPT are subject to a purchase reimbursement fee and a redemption
reimbursement fee equal in each case to 0.75% (as a percentage of the dollar
amount purchased or redeemed). The reimbursement fees, which are paid directly
to The Emerging Markets Portfolio of DPT, are designed to reflect an
approximation of the brokerage and related transaction costs associated with the
investment of an investor's purchase amount or the disposition of assets to meet
redemptions, and to limit the extent to which The Emerging Markets Portfolio of
DPT and its existing shareholders would have to bear such costs. The G&I
Emerging Markets Fund does not assess reimbursement fees; therefore, all
transaction costs associated with purchases and redemptions are borne by the G&I
Emerging Markets Fund.
After giving effect to voluntary expense limitations described in each fund's
prospectus, the total operating expenses of The Emerging Markets Portfolio of
DPT during the current fiscal year are not expected to exceed 1.55% of the
average net assets of the Portfolio, compared to 1.70% for the Institutional
Class of the G&I Emerging Markets Fund. A component of the total operating
expenses is the investment management fee payable to Delaware International,
which is 1.00% for The Emerging Markets Portfolio of DPT compared to a maximum
fee of 1.25% for the G&I Emerging Markets Fund.
-136-
<PAGE>
GROWTH OF $10,000 INVESTMENT
===============================================================================
DISTRIBUTIONS REINVESTED JUNE 10, 1996 - SEPTEMBER 30, 1999
G & I Emerging Markets Lipper Emerging Markets MSCI Emerging Markets
Fund(1) Fund Average(2) Free Index(3)
6/96 10,000 10,000 10,000
7/96 9,582 9,418 9,317
8/96 10,000 9,681 9,556
9/96 10,030 9,750 9,639
10/96 9,850 9,496 9,381
11/96 9,940 9,708 9,539
12/96 10,101 9,877 9,582
1/97 11,066 10,620 10,235
2/97 11,538 10,991 10,673
3/97 11,327 10,738 10,393
4/97 11,628 10,770 10,411
5/97 12,100 11,207 10,709
6/97 12,844 11,783 11,282
7/97 12,995 12,111 11,450
8/97 12,020 10,918 9,994
9/97 12,553 11,350 10,271
10/97 10,744 9,561 8,585
11/97 10,301 9,206 8,272
12/97 10,259 9,309 8,471
1/98 9,462 8,629 7,807
2/98 10,775 9,413 8,622
3/98 10,980 9,772 8,996
4/98 10,991 9,836 8,898
5/98 9,548 8,581 7,679
6/98 8,127 7,800 6,873
7/98 8,277 8,060 7,091
8/98 5,834 5,798 5,041
9/98 6,178 6,011 5,361
10/98 6,544 6,542 5,925
11/98 7,050 6,953 6,418
12/98 6,545 6,893 6,325
1/99 5,966 6,862 6,223
2/99 6,163 7,112 6,284
3/99 6,862 7,448 6,723
4/99 7,856 8,457 7,992
5/99 7,801 8,374 7,945
6/99 8,610 9,375 8,847
7/99 8,391 9,176 8,607
8/99 8,260 9,107 8,685
9/99 8,195 8,800 8,391
Chart assumes $10,000 invested on June 10, 1996 and includes the effect of the
reinvestment of all dividends and capital gains.
1. Performance of Delaware Group Global & International Funds, Inc. Delaware
Emerging Markets Fund (the "G & I Emerging Markets Fund") Institutional
Class, net of management fees and expenses. Past performance may not be
indicative of future results.
2. Performance of the Lipper Emerging Markets Equity Fund universe consisting
of between 55 and 87 funds during the measurement period. Multiple share
classes are combined and regional or country funds are excluded.
3. Morgan Stanley Capital International Emerging Markets Free Index, an
unmanaged index of emerging markets stocks. The performance of the Index
has not been adjusted to reflect management fees or other expenses.
-137-
<PAGE>
QUARTERLY RESULTS
===============================================================================
JUNE 30, 1996 - SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Delaware Pooled Trust, Inc. G & I Emerging MSCI Emerging Markets G & I Emerging Markets Fund
The Emerging Markets Portfolio Markets Fund Free Index Relative Return*
<S> <C> <C> <C> <C>
Q396 0.3% -3.6% 4.0%
Q496 0.7% -0.6% 1.3%
Q197 12.1% 8.5% 3.3%
Q297 11.9% 13.4% 8.6% 4.4%
Q397 -3.6% -2.3% -9.0% 7.4%
Q497 -16.7% -18.3% -17.5% -1.0%
Q198 7.0% 7.0% 6.2% 0.8%
Q298 -24.3% -26.0% -23.6% -3.1%
Q398 -22.4% -24.0% -22.0% -2.6%
Q498 3.5% 6.0% 18.0% -10.2%
Q199 5.4% 4.8% 12.4% -6.8%
Q299 26.6% 25.5% 24.4% 0.9%
Q399 -4.2% -4.8% -5.2% 0.4%
</TABLE>
* G & I Emerging Markets Fund Relative Return is the geometric difference
between the quarterly performance of the Delaware Group Global & International
Funds, Inc. Delaware Emerging Markets Fund (the "G & I Emerging Markets Fund")
Institutional Class, net of management fees and expenses, and the Morgan Stanley
Capital International Emerging Markets Free Index, an unmanaged index of
emerging markets stocks. For example, ({1 + 0.003} / {1 - 0.036}) - 1 = 4.0%.
Performance of the Index has not been adjusted to reflect management fees or
other expenses. Past performance may not be indicative of future results.
-152-
<PAGE>
<TABLE>
<CAPTION>
DEFENSIVE CHARACTERISTICS(1)
========================================================================================
JUNE 30, 1996 - SEPTEMBER 30, 1999
G & I Emerging Markets MSCI Emerging Markets US Consumer
Fund(2) Free Index(3) Price Index(4)
<S> <C> <C> <C>
Bull Market PERFORMANCE 89.7% 106.4%
Bear Market PERFORMANCE -56.8% -59.3%
Total PERFORMANCE (ANNUALIZED) -5.9% -5.3% 2.2%
Number of Quarters
- ----------------------------------------------------------------------------------------
6 7 13
</TABLE>
1. A Bull Market quarter is defined as one in which the MSCI EMF Index showed
a positive US dollar return, and a Bear Market quarter as one in which the
MSCI EMF Index showed a negative US dollar return. Bull Market Performance
and Bear Market Performance have not been annualized. Past performance may
not be indicative of future results.
2. Compound total return of Delaware Group Global & International Funds, Inc.
Delaware Emerging Markets Fund (the "G & I Emerging Markets Fund")
Institutional Class, net of management fees and expenses.
3. Morgan Stanley Capital International Emerging Markets Free Index is an
unmanaged index of emerging markets stocks. The compound total return of
the Index has not been adjusted to reflect management fees or other
expenses.
4. Source: United States Bureau of Labor Statistics. Data is for Consumer
Price Index - All Urban Consumers.
5. Total performance is calculated as the compound product of the Bull Market
period and the Bear Market period. For example, the G & I Emerging Markets
Fund performance is calculated as follows: (1 + 0.897) x (1 - 0.568) =
0.819 or (5.9%) annualized.
-138-
<PAGE>
COMPARATIVE ANNUALIZED PERFORMANCE
AGAINST COMPETITORS(1)
===============================================================================
JUNE 30, 1996 - SEPTEMBER 30, 1999
Minimum 75th Percentile Median 25th Percentile Maximum
-17.6% -6.6% -4.4% -2.3% 5.1%
G&I Emerging Markets Fund(2) MSCI Emerging Markets Free Index(3)
-5.9% -5.3%
1. Percentile, Maximum, Median and Minimum data are from Lipper Emerging
Markets Equity Fund universe, consisting of 57 funds during the measurement
period. Multiple share classes are combined and regional or country funds
are excluded.
2. Performance represents the compound total return of the Delaware Group
Global & International Funds, Inc. Delaware Emerging Markets Fund (the "G &
I Emerging Markets Fund") Institutional Class for the period June 30, 1996
to September 30, 1999 and is net of management fees and fund expenses. The
average annual total return for the lifetime period from the commencement
of operations on June 10, 1996 through September 30, 1999 is (5.69%), for
the one-year period ended September 30, 1999 is 32.65%, for the two-year
period ended September 30, 1999 is (19.19%) and for the three-year period
ended September 30, 1999 is (6.50%). Past performance may not be indicative
of future results.
3. Morgan Stanley Capital International Emerging Markets Free Index is an
unmanaged index of emerging markets stocks. Performance represents the
compound total return of the Index and has not been adjusted to reflect
management fees or other expenses.
-139-
<PAGE>
Delaware Pooled Trust
Additional information about the Portfolio's investments is available in the
Fund's Annual and Semi-Annual Reports to shareholders. In the Fund's shareholder
reports you will find a discussion of the market conditions and investment
strategies that significantly affected each Portfolio's performance during its
last fiscal period. You can find more detailed information about the Fund's in
the current Statement of Additional Information (SAI), which we have filed
electronically with the Securities and Exchange Commission (SEC) and which is
legally a part of this Prospectus. You may obtain a free copy of these documents
by writing to us at One Commerce Square, 2005 Market Street, Philadelphia, PA
19103, or call toll-free 800-231-8002.
You can find reports and other information about the Portfolios on the SEC web
site (http://www.sec.gov), or you can get copies of this information, after
payment of a duplicating fee, by writing to the Public Reference Section of the
SEC, Washington, D.C. 20549-6009. Information about the Portfolios, including
their Statement of Additional Information, can be reviewed and copied at the
SEC's Public Reference Room in Washington, D.C. You can get information on the
public reference room by calling the SEC at 1-800-SEC-0330.
E-mail
[email protected]
Shareholder Inquires
Call the Fund at 1-800-231-8002
o For Fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone
redemptions and telephone exchanges.
Investment Company Act File Number: 811-6322
-140-
<PAGE>
DELAWARE POOLED TRUST, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED NOVEMBER 15, 1999
-----------------------------------
Delaware Pooled Trust, Inc. ("Pooled Trust, Inc.") is an open-end
management investment company. Pooled Trust, Inc. consists of various series
("Portfolios") offering a broad range of investment choices. Pooled Trust, Inc.
is designed to provide clients with attractive alternatives for meeting their
investment needs. This Statement of Additional Information ("SAI") (Part B of
Pooled Trust, Inc.'s registration statement) addresses information of Pooled
Trust, Inc. applicable to each of the Portfolios. In addition, investors may
make investments in The Asset Allocation Portfolio. That Portfolio is a "fund of
funds" which primarily invests in several of the Portfolios of Pooled Trust,
Inc. The Asset Allocation Portfolio is a series of Delaware Group Foundation
Funds ("Foundation Funds") which is also an open-end management investment
company.
This SAI is not a prospectus but should be read in conjunction with the
related Prospectus for each Portfolio. Certain information from the Portfolio's
Annual Report has been incorporated by reference into this SAI. To obtain the
proper Prospectus or Annual Report for the Portfolios, please write to the
Delaware Pooled Trust, Inc. at One Commerce Square, 2005 Market Street,
Philadelphia, PA 19103, Attn: Client Services or call Pooled Trust, Inc. at
800-231-8002. Correspondence relating to The Asset Allocation Portfolio will be
forwarded to Foundation Funds. To obtain the Prospectuses or Annual Report for
the Class A, B and C Shares or the Institutional Class of The Real Estate
Investment Trust Portfolio, write to the Distributor at 1818 Market Street,
Philadelphia, PA 19103 or call 800-523-1918 for the Class A, B and C Shares or
800-510-4015 for the Institutional Class.
TABLE OF CONTENTS PAGE
Fund History 2
Investment Policies, Portfolio Techniques and Risk Considerations 2
Accounting and Tax Issues 34
Trading Practices and Brokerage 38
Portfolio Turnover 41
Purchasing Shares 43
Investment Plans 54
Determining Offering Price and Net Asset Value 62
Redemption and Exchange 64
Dividends and Capital Gain Distributions 74
Taxes 76
Investment Management Agreements and Sub-Advisory Agreements 78
Officers and Directors 85
General Information 111
Performance Information 114
Financial Statements 123
Appendix A - Ratings 124
Appendix B--Investment Objectives of the Funds in the Delaware
Investments Family 126
1
<PAGE>
FUND HISTORY
Pooled Trust, Inc. was organized as a Maryland corporation on May 30,
1991. The Articles of Incorporation permit Pooled Trust, Inc. to issue two
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. Shareholders of
Pooled Trust, Inc. approved the restructuring of Pooled Trust, Inc. from a
Maryland corporation to a Delaware business trust at a meeting of shareholders
held on March 17, 1999 or any adjournments thereof. The restructuring is
expected to take place in early 2000. Foundation Funds was organized as a
Delaware business trust on October 24, 1997.
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 s that the holders of more
than 50% of the shares voting for the election of directors/trustees can elect
100% of the directors/trustees 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 class of shares of a Portfolio when
otherwise expressly required by law. Neither Pooled Trust, Inc. nor Foundation
Funds issue certificates for shares unless a shareholder submits a specific
request. Under Maryland law, Pooled Trust, Inc. 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 Investment Company Act of 1940
(the "1940 Act"). Under Foundation Funds' Declaration of Trust and By-Laws, it
is also not required, and does not intend, to hold annual meetings unless
required to do so by the 1940 Act.
Delaware Pooled Trust, Inc. offers various Portfolios providing
eligible investors a broad range of investment choices coupled with the
advantage of a no-load mutual fund with the service companies of Delaware
Investments 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, The Emerging Markets
Portfolio, The Asset Allocation Portfolio and The Select Equity Portfolio, is a
diversified fund as defined by the 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, The Emerging Markets
Portfolio, The Asset Allocation Portfolio and The Select Equity Portfolio are
nondiversified funds as defined by the 1940 Act.
2
<PAGE>
INVESTMENT POLICIES, PORTFOLIO TECHNIQUES AND RISK CONSIDERATIONS
Investment Restrictions
The investment objectives of all the Portfolios, except The Labor
Select International Equity Portfolio, are non-fundamental, and may be changed
without shareholder approval. However, The Board of Directors or Trustees, as
appropriate for will notify shareholders prior to a material change in a
Portfolio's objective.
Fundamental Investment Restrictions -- Pooled Trust, Inc. and
Foundation Funds, as applicable, have adopted the following restrictions for
each of the Portfolios (except where otherwise noted) which cannot be changed
without approval by the holders of a "majority of the outstanding voting
securities" of the respective Portfolio, which is the vote of: (i) more than 50%
of the outstanding voting securities of the Portfolio; or (ii) 67% or more of
the voting securities of the Portfolio present at a meeting, if the holders of
more than 50% of the outstanding voting securities are present or represented by
proxy, whichever is less. The percentage limitations contained in the
restrictions and policies set forth herein apply at the time a Portfolio
purchases securities.
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Each Portfolio, other than The Labor Select International Equity
Portfolio, shall not:
1. With respect to each Portfolio, except the Real Estate Investment
Trust Portfolios, make investments that will result in the concentration (as
that term may be defined in the 1940 Act, any rule or order thereunder, or U.S.
Securities and Exchange Commission ("SEC") staff interpretation thereof) of its
investments in the securities of issuers primarily engaged in the same industry,
provided that this restriction does not limit the Portfolio from investing in
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities, or in tax-exempt securities or certificates of deposit. The
Real Estate Investment Trust Portfolios will concentrate their respective
investments in the real estate industry. Each of The Real Estate Investment
Trust Portfolios otherwise make investments that will result in the
concentration (as that term may be defined in the 1940 Act, any rule or order
thereunder, or SEC staff interpretation thereof) of its investments in the
securities of issuers primarily engaged in the same industry, provided that this
restriction does not limit the Portfolio from investing in obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities, or in
tax-exempt securities or certificates of deposit.
2. Borrow money or issue senior securities, except as the 1940 Act, any
rule or order thereunder, or SEC staff interpretation thereof, may permit.
3. Underwrite the securities of other issuers, except that the
Portfolio may engage in transactions involving the acquisition, disposition or
resale of its portfolio securities, under circumstances where it may be
considered to be an underwriter under the Securities Act of 1933.
4. With respect to each Portfolio, purchase or sell real estate, unless
acquired as a result of ownership of securities or other instruments and
provided that this restriction does not prevent the Portfolio from investing in
issuers which invest, deal or otherwise engage in transactions in real estate or
interests therein, or investing in securities that are secured by real estate or
interests therein.
5. Purchase or sell physical commodities, unless acquired as a result
of ownership of securities or other instruments and provided that this
restriction does not prevent the Portfolio from engaging in transactions
involving futures contracts and options thereon or investing in securities that
are secured by physical commodities.
6. Make loans, provided that this restriction does not prevent the
Portfolio from purchasing debt obligations, entering into repurchase agreements,
loaning its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The Labor Select International Equity Portfolio shall not:
1. Make loans, except to the extent that purchases of debt obligations
(including repurchase agreements), in accordance with the Portfolio's investment
objective and policies, are considered loans, and except that the 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.
3. Engage in the underwriting of securities of other issuers, except
that in connection with the disposition of a security, the Portfolio may be
deemed to be an "underwriter" as that term is defined in the Securities Act of
1933.
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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. 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.
6. Enter into futures contracts or options thereon.
7. Make short sales of securities, or purchase securities on margin.
8. Purchase or retain the securities of any issuer which has an
officer, director or security holder who is a director or officer of Pooled
Trust, Inc. or of either of the investment advisers if or so long as the
directors and officers of Pooled Trust, Inc. 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%, the Portfolio shall, within
three days thereafter (not including Sunday or holidays) or such longer period
as the SEC 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 the Portfolio
has an outstanding borrowing. The Portfolio will not pledge more than 10% of its
respective net assets. The Portfolio will not issue senior securities as defined
in the 1940 Act), except for notes to banks.
11. 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).
In addition to the restrictions set forth above, in connection with the
qualification of the Portfolio's shares for sale in certain states, the
Portfolio may not invest in warrants if such warrants, valued at the lower of
cost or market, would exceed 5% of the value of the Portfolio's net assets.
Included within such amount, but not to exceed 2% of the Portfolio's net assets
may be warrants which are not listed on the New York Stock Exchange or American
Stock Exchange. Warrants acquired by the Portfolio in units or attached to
securities may be deemed to be without value.
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Non-fundamental Investment Restrictions - In addition to the
fundamental policies and investment restrictions described above, and the
various general investment policies described in the Prospectuses, each
Portfolio, except as noted, will be subject to the following investment
restrictions, which are considered non-fundamental and may be changed by the
Board of Directors or Trustees, as appropriate, without shareholder approval.
Each Portfolio, other than The Labor Select International Equity
Portfolio,
1. is permitted to invest in other investment companies, including
open-end, closed-end or unregistered investment companies, either within the
percentage limits set forth in the 1940 Act, any rule or order thereunder, or
SEC staff interpretation thereof, or without regard to percentage limits in
connection with a merger, reorganization, consolidation or other similar
transaction. However, none of the Portfolios, except The Asset Allocation
Portfolio, may operate as a "fund of funds" which invests primarily in the
shares of other investment companies as permitted by Section 12(d)(1)(F) or (G)
of the 1940 Act, if its own shares are utilized as investments by such a "fund
of funds."
2. may not invest more than 15% of its net assets in securities which
it cannot sell or dispose of in the ordinary course of business within seven
days at approximately the value at which the Portfolio has valued the
investment.
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The Large-Cap Value Equity Portfolio, The Mid-Cap Growth Equity
Portfolio, The Small-Cap Growth Equity Portfolio, The Core Equity Portfolio, The
Real Estate Investment Trust Portfolios, The International Equity Portfolio, The
Labor Select International Equity Portfolio, The Intermediate Fixed Income
Portfolio, The High-Yield Bond Portfolio, The Global Fixed Income Portfolio and
The International Fixed Income 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
Mid-Cap Growth Equity 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.
6. Enter into futures contracts or options thereon, except that The
Mid-Cap Growth Equity 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 Mid-Cap Growth Equity 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 Pooled
Trust, Inc. or of either of the investment advisers if or so long as the
directors and officers of Pooled Trust, Inc. and of the investment advisers
together own beneficially more than 5% of any class of securities of such
issuer.
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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.
The Large-Cap Value Equity Portfolio, The Mid-Cap Growth Equity
Portfolio, The Small-Cap Growth Equity Portfolio, The Core Equity Portfolio, The
Global Equity Portfolio, The International Equity Portfolio, The Intermediate
Fixed Income Portfolio, The Global Fixed Income Portfolio and, only where noted,
The High-Yield Bond 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 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.
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4. Write, purchase or sell options, puts, calls or combinations thereof
with respect to securities, except that The Mid-Cap Growth Equity 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 Pooled Trust, Inc.'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.
The following additional non-fundamental investment restrictions apply
to The Labor Select International Equity Portfolio, The Real Estate Investment
Trust Portfolios, The International Fixed Income Portfolio and The High-Yield
Bond Portfolio.
Except as noted below, each of The Labor Select International Equity
Portfolio, The Real Estate Investment Trust Portfolios and The International
Fixed Income 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.
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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.
For purposes of investment restriction 6, it is Pooled Trust, Inc.'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 following additional non-fundamental investment restrictions apply
to The Mid-Cap Value Equity Portfolio, The Global Equity Portfolio, The Emerging
Markets Portfolio, The Aggregate Fixed Income Portfolio and The Diversified Core
Fixed Income Portfolio (except where otherwise noted). The percentage
limitations contained in these restrictions and policies apply at the time a
Portfolio purchases securities.
Except as noted below, each of The Mid-Cap Value Equity Portfolio, The
Global Equity Portfolio, The Emerging Markets Portfolio, The Aggregate Fixed
Income Portfolio and The Diversified Core Fixed Income 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). This
restriction shall not apply to The Emerging Markets Portfolio.
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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. 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.
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Investment Policies and Risks
Foreign Investment Information (The International Equity Portfolio, The
International Large-Cap 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 Diversified Core Fixed Income Portfolio, The Emerging Markets
Portfolio, The Global Equity Portfolio, The International Small-Cap Portfolio,
The Balanced Portfolio, The Equity Income Portfolio, The Asset Allocation
Portfolio, The Small-Cap Value Equity Portfolio, The Small-Cap Growth Equity
Portfolio and The Core Equity Portfolio)
Investors in The International Equity, The International Large-Cap
Equity, The Labor Select International Equity, The Global Fixed Income, The
International Fixed Income, The Emerging Markets, The Global Equity and The
International Small-Cap Portfolio (as well as in The Real Estate Investment
Trust, The Diversified Core Fixed Income, The High-Yield Bond, The Asset
Allocation, The Small-Cap Growth Equity, The Balanced, The Equity Income and The
Core Equity Portfolios, 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
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, The Diversified Core Fixed Income, The Emerging
Markets, The Global Equity, The Asset Allocation, The Small-Cap Growth Equity,
The International Large-Cap Equity and The Core Equity Portfolios 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 INTERNATIONAL
LARGE-CAP 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, THE GLOBAL
EQUITY PORTFOLIO, THE INTERNATIONAL SMALL-CAP PORTFOLIO, THE DIVERSIFIED CORE
FIXED INCOME PORTFOLIO, THE ASSET ALLOCATION PORTFOLIO, THE SMALL-CAP GROWTH
EQUITY PORTFOLIO AND THE CORE EQUITY PORTFOLIO)," below.
The International Equity, The International Large-Cap Equity , The
Labor Select International Equity, The Global Equity, The Emerging Markets, The
Global Fixed Income, The International Fixed Income and The International
Small-Cap Portfolios (and The Real Estate Investment Trust, The High-Yield Bond,
The Diversified Core Fixed Income, The Asset Allocation, The Small-Cap Growth
Equity, The Balanced , The Equity Income, The Small-Cap Value Equity and The
Core Equity Portfolios, up to 10%, 10%, 20%, 10%, 5%, 25%, 5%, 5% and 20%,
respectively, 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 instability or diplomatic
developments which could affect investments in securities of issuers in those
nations.
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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 International Large-Cap Equity, The Labor Select
International Equity, The Real Estate Investment Trust, The Diversified Core
Fixed Income, The Global Fixed Income, The International Fixed Income, The
High-Yield Bond, The Global Equity, The Emerging Markets, The Asset Allocation,
The Small-Cap Value Equity, The Small-Cap Growth Equity, The International
Small-Cap and The Core Equity 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
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 advisers 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.
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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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The issuers of the foreign government and government-related
high-yield securities, including Brady Bonds, in which The Emerging Markets, The
International Fixed Income, The Global Fixed Income, The Diversified Core Fixed
Income, The International Small-Cap and The Asset Allocation 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, The Global Fixed Income, The
Diversified Core Fixed Income and The Asset Allocation 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.
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.
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With reference to the Portfolios' investments in foreign government
securities, there is the risk that 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.
The issuers of foreign government and government-related debt
securities have in the past experienced substantial difficulties in servicing
their external debt obligations, which have led to defaults on certain
obligations and the restructuring of certain indebtedness. Restructuring
arrangements have included, among other things, reducing and rescheduling
interest and principal payments by negotiating new or amended credit agreements
or converting outstanding principal and unpaid interest to Brady Bonds, and
obtaining new credit to finance interest payments. Holders of certain foreign
government and government-related high-yield securities may be requested to
participate in the restructuring of such obligations and to extend further loans
to their issuers. There can be no assurance that Brady Bonds and other foreign
government and government-related securities will not be subject to similar
defaults or restructuring arrangements which may adversely affect the value of
such investments. Furthermore, certain participants in the secondary market for
such debt may be directly involved in negotiating the terms of these
arrangements and may therefore have access to information not available to other
market participants.
Investments and opportunities for investments by foreign investors in
emerging market countries are subject to a variety of national policies and
restrictions. These restrictions may take the form of prior governmental
approval, limits on the amount or type of securities held by foreigners, limits
on the types of companies in which foreigners may invest and prohibitions on
foreign investments in issuers or industries deemed sensitive to national
interests. Additional restrictions may be imposed at any time by these or other
countries in which the Portfolios' invest. Although these restrictions may in
the future make it undesirable to invest in emerging countries, a Portfolio's
adviser or sub-adviser, as relevant, does not believe that any current
registration restrictions would affect its decision to invest in such countries.
As disclosed in the Prospectuses for The International Equity
Portfolio, The International Large-Cap Equity Portfolio, The Labor Select
International Equity Portfolio, The International Fixed Income Portfolio and The
International Small-Cap Portfolio, the foreign short-term fixed-income
securities in which the Portfolio may invest may be U.S. dollar or foreign
currency denominated, including EURO. Such securities may include 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 Work Bank, European Investment
Bank, Asian Development Bank, European Economic Community and the Inter-American
Development Bank. Such fixed-income securities will be typically rated, at the
time of purchase, AA or higher by Standard & Poor's Ratings Group or Aa or
higher by Moody's Investor Service, Inc. or of comparable quality as determined
by the Portfolio's investment adviser.
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Foreign Currency Transactions (The International Equity Portfolio, The
International Large-Cap 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, The Global Equity Portfolio, The International Small-Cap, The
Diversified Core Fixed Income Portfolio, The Asset Allocation Portfolio, The
Small-Cap Growth Equity Portfolio, The Small-Cap Value Equity Portfolio, The
Balanced, The Equity Income and The Core Equity Portfolio)
The International Equity, The International Large-Cap Equity, The Labor
Select International Equity, The Global Fixed Income, The International Fixed
Income, The Emerging Markets, The Global Equity and The International Small-Cap
Portfolios (as well as The Real Estate Investment Trust, The Diversified Core
Fixed Income, The Asset Allocation, The Small-Cap Value Equity, The Small-Cap
Growth Equity, The Balanced, The Equity Income and The Core Equity 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.
The International Fixed Income, The Emerging Markets, The Global
Equity, The International Small-Cap, The Balanced, The Equity Income, The
Diversified Core Fixed Income, The International Large-Cap Equity and The Asset
Allocation Portfolios 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. 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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<PAGE>
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.
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 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.
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<PAGE>
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 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.
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Forward Foreign Currency Exchange Contracts
The foreign investments made by The International Equity, The
International Large-Cap Equity, The Labor Select International Equity, The Real
Estate Investment Trust, The Diversified Core Fixed Income, The Global Fixed
Income, The International Fixed Income, The Global Equity, The Emerging Markets,
The International Small-Cap, The Balanced, The Equity Income, The Asset
Allocation, The Small-Cap Value Equity, The Small-Cap Growth Equity and The Core
Equity Portfolios present currency considerations which pose special risks. The
investment advisers use 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 International Equity, The International Large-Cap Equity,
The Labor Select International Equity, The Real Estate Investment Trust, The
Diversified Core Fixed Income, The Global Fixed Income, The International Fixed
Income, The Global Equity, The Emerging Markets, The International Small-Cap,
The Balanced, The Equity Income, The Asset Allocation, The Small-Cap Growth
Equity, The Small-Cap Value Equity and The Core Equity 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.
20
<PAGE>
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.
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.
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Brady Bonds (The Global Fixed Income Portfolio, The International Fixed Income
Portfolio, The Diversified Core Fixed Income Portfolio, The Emerging Markets
Portfolio, The International Small-Cap and The Asset Allocation Portfolio)
The Global Fixed Income, The International Fixed Income, The
Diversified Core Fixed Income, The Emerging Markets, The International Small-Cap
and The Asset Allocation Portfolios 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 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
a viable opportunity for investment.
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.
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Options on Securities, Futures Contracts and Options on Futures Contracts (The
Mid-Cap Growth Equity Portfolio, The Mid-Cap Value Equity Portfolio, The Real
Estate Investment Trust Portfolios, The Diversified Core Fixed Income Portfolio,
The Emerging Markets Portfolio, The Global Equity Portfolio, The International
Small-Cap Portfolio, The Balanced Portfolio, The Equity Income Portfolio, The
Select Equity Portfolio, The Asset Allocation Portfolio, The Small-Cap Growth
Equity Portfolio, The Small-Cap Value Equity Portfolio, The International
Large-Cap Equity Portfolio and The Core Equity Portfolio)
In order to remain fully invested, and to reduce transaction costs, The
Mid-Cap Growth Equity, The Real Estate Investment Trust, The Diversified Core
Fixed Income, The Emerging Markets, The Global Equity, The International
Small-Cap, The Balanced, The Equity Income, The Select Equity, The Asset
Allocation, The Small-Cap Growth Equity, The Small-Cap Value Equity, The
International Large-Cap Equity and The Core Equity Portfolios 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.
Options
The Mid-Cap Growth Equity, The Mid-Cap Value Equity, The Real Estate
Investment Trust, The Emerging Markets, The Global Equity, The International
Small-Cap, The Balanced, The Equity Income, The Select Equity, The Asset
Allocation, The Small-Cap Growth Equity, The Small-Cap Value Equity, The
International Large-Cap Equity and The Core Equity Portfolios may purchase call
options, write call options on a covered basis, purchase put options and write
put options. Writing put options will require the Portfolio to segregate assets
sufficient to cover the put while the option is outstanding.
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
Mid-Cap Growth Equity and The International Large-Cap Equity Portfolios will not
invest more than 10% of their assets in illiquid securities, and The Real Estate
Investment Trust, The Diversified Core Fixed Income, The Emerging Markets, The
Global Equity, The Asset Allocation, The Small-Cap Value Equity, The Small-Cap
Growth Equity and The Core Equity Portfolios 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. The advantage is that the writer receives a premium income and
the purchaser may hedge against an increase in the price of the securities it
ultimately wishes to buy. 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.
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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 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.
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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 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 Mid-Cap Growth Equity, The Real Estate Investment Trust
and The Diversified Core Fixed Income 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 only if the
Portfolio will maintain in a segregated account with its Custodian Bank, cash,
U.S. government securities or other assets in an amount not less than the
exercise price of the option at all times during the option period. The amount
of cash, U.S. government securities or other assets 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, such 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 put option at an exercise
price which, reduced by the premium received on the option, reflects the lower
price it is willing to pay.
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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, The Global Equity, The Diversified Core Fixed
Income, The Asset Allocation, The Small-Cap Growth Equity, The International
Small-Cap, The Balanced, The Equity Income, The Select Equity, The International
Large-Cap Equity and The Core Equity Portfolios 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 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 a negative correlation between
the index or other securities which would result in a loss on both such
securities and the hedging instrument.
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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 Mid-Cap
Growth Equity, The Real Estate Investment Trust, The Diversified Core Fixed
Income, The Emerging Markets, The Global Equity, The International Small-Cap,
The Balanced, The Equity Income, The Select Equity, The Asset Allocation, The
Small-Cap Growth Equity, The International Large-Cap Equity and The Core Equity
Portfolios 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.
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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.
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.
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Futures Contracts And Options On Futures Contracts
In order to remain fully invested, to facilitate investments in
portfolio securities and to reduce transaction costs, The Mid-Cap Growth Equity,
The Mid-Cap Value Equity, The Real Estate Investment Trust, The Diversified Core
Fixed Income, The Global Equity, The Emerging Markets, The International
Small-Cap Portfolio, The Balanced Portfolio, The Equity Income Portfolio, The
Select Equity Portfolio, The Asset Allocation, The Small-Cap Growth Equity, The
Small-Cap Value Equity, The International Large-Cap Equity and The Core Equity
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. For the same purposes, The Balanced, The Equity Income, The Select
Equity, The International Large-Cap Equity and The Core Equity Portfolio may
also enter into futures contracts on stock indices and purchases or sell options
on stock index futures and stock indices and may enter into closing transactions
with respect to these 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, in the aggregate, exceed
25% of the Portfolios' assets.
Additionally, The International Fixed Income, The Global Equity, The
Emerging Markets, The Diversified Core Fixed Income, The International
Small-Cap, The International Large-Cap Equity and The Asset Allocation
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.
The Mid-Cap Growth Equity, The Mid-Cap Value Equity, The Real Estate
Investment Trust, The Diversified Core Fixed Income, The Global Equity, The
Emerging Markets, The International Small-Cap, The Asset Allocation, The
Small-Cap Growth Equity, The Small-Cap Value Equity, The Balanced, The Equity
Income, The Select Equity, The International Large-Cap Equity and The Core
Equity Portfolios may enter into contracts for the purchase or sale for future
delivery of securities. A futures contract is a bilateral agreement providing
for the purchase and sale of a specified type and amount of a financial
instrument, or for the making and acceptance of a cash settlement, at a stated
time in the future for a fixed price. By its terms, a futures contract provides
for a specified settlement date on which the securities underlying the contracts
are delivered, or in the case of securities index 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 the 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 transaction. In addition, futures contracts call for settlement only on the
expiration date, and cannot be "exercised" at any other time during their term.
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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. This
amount is generally maintained in a segregated account at the custodian bank.
Subsequent payments to and from the broker, referred to as "variation margin,"
are made on a daily basis as the value of the index or instrument underlying the
futures contract fluctuates, making positions in the futures contract more or
less valuable, a process known as "marking to the market."
Foreign currency futures contracts operate similarly to futures
contracts concerning securities. When The International Fixed Income, The Global
Equity, The Emerging Markets, The Diversified Core Fixed Income, The
International Large-Cap Equity or The Asset Allocation Portfolios 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 in which the Portfolio's may
invest and enter into related closing transactions. 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% limit.
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.
Asset-Backed Securities (The Intermediate Fixed Income Portfolio, The Aggregate
Fixed Income Portfolio, The Diversified Core Fixed Income Portfolio, The Asset
Allocation Portfolio, The Balanced Portfolio, The Equity Income Portfolio, The
Select Equity Portfolio and The Core Equity Portfolio)
The Intermediate Fixed Income, The Aggregate Fixed Income, The
Diversified Core Fixed Income, The Asset Allocation, The Balanced, The Equity
Income, The Select Equity and The Core Equity Portfolios may each invest a
portion of their assets in asset-backed securities. 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 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 Portfolio to pay
the debt service on the debt obligations issued.
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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. Due to the shorter maturity of the collateral backing such
securities, there tends to be less of a risk of substantial prepayment than with
mortgage-backed securities but the risk of such a prepayment does exist. Such
asset-backed securities doe however, involve certain risks not associated with
mortgage-backed securities, including the risk that security interest cannot be
adequately or in many case, ever, established and other risks which may be
peculiar 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.
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" (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.
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High-Yield, High Risk Securities
The International Fixed Income, The Global Fixed Income, The
Diversified Core Fixed Income, The Asset Allocation and Equity Income Portfolios
may invest up to 5%, 5%, 20%, 55% and 15%, respectively, of its assets in high
risk, high-yield fixed-income securities of foreign governments, including, with
specified limitations, 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. The International Small-Cap Portfolio may
invest up to 15% of its net assets in fixed-income securities some or all of
which may be corporate obligations, and some or all of which may be below
investment grade, or unrated. 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.
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. In its U.S. high yield sector, The
Diversified Core Fixed Income Portfolio, under normal circumstances, invests
between 5% and 30% in U.S. Bonds generally rated BB or lower by S&P or Fitch or
Ba or lower by Moody's or similarly rated by another nationally recognized
statistical rating organization. The Small-Cap Value Equity Portfolio may invest
up to 25% of its net assets in U.S. corporate bonds rated below B by Moody's or
S&P when the Portfolio investment adviser believes that capital appreciation is
likely from an investment in those securities. See "APPENDIX A--RATINGS" to this
SAI for more rating information.
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 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.
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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.
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.
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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 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.
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Convertible, Debt and Non-Traditional Equity Securities
A portion of The Mid-Cap Value Equity, The Small-Cap Value Equity, The
High-Yield Bond, The Asset Allocation, The Small-Cap Growth Equity, The
International Small-Cap, The Balanced, The Equity Income, The Select Equity, The
International Equity, The International Large-Cap Equity and The Core Equity
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. Investments in debt securities by The Small-Cap Growth Equity
Portfolio will be limited to those that are, at the time of investment, within
the four highest grades assigned by a nationally recognized statistical rating
agency (e.g., Baa or higher by Moody's or BBB or higher by Standard & Poor's) or
deemed to be of comparable quality by the investment adviser. Convertible and
debt securities acquired by The Mid-Cap Value Equity, The Real Estate Investment
Trust, The High-Yield Bond, The Asset Allocation, The Equity Income, The Select
Equity and, with respect to 5% of their assets, The Balanced and The Core Equity
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 "HIGH-YIELD, HIGH RISK
SECURITIES" for a further discussion of these types of investments.
The Mid-Cap Value Equity, The Small-Cap Value Equity, The Real Estate
Investment Trust, The High-Yield Bond, The Emerging Markets and The Asset
Allocation 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 one share of common stock. If, however, the
issuer's common stock is trading at a price above that set by the capital
appreciation limit, the holder of the PERCS would receive less than one full
share of common stock. The amount of that fractional share of common stock
received by the PERCS holder is determined by dividing the price set by the
capital appreciation limit of the PERCS by the market price of the issuer's
common stock. PERCS can be called at any time prior to maturity, and hence do
not provide call protection. However, if called early, the issuer may pay a call
premium over the market price to the investor. This call premium declines at a
preset rate daily, up to the maturity date of the PERCS.
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The Mid-Cap Value Equity, The Small-Cap Value Equity, The Real Estate
Investment Trust, The High-Yield Bond, The Emerging Markets, The International
Small-Cap and The Asset Allocation 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', The Asset Allocation
Portfolio's, The Small-Cap Value Equity Portfolio's and The Core Equity
Portfolio'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.
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Depositary Receipts
The Balanced, The Equity Income, The Select Equity, The Small-Cap
Growth Equity, The Core Equity, The Large-Cap Value Equity, The International
Equity, The International Large-Cap Equity, The Mid-Cap Value Equity, The
Small-Cap Value Equity, The Real Estate Investment Trust, The Diversified Core
Fixed Income, The Global Fixed Income, The International Fixed Income, The
Global Equity, The Emerging Markets, The International Small-Cap and The Asset
Allocation Portfolios may invest in sponsored and unsponsored ADRs. Such ADRs
that The Balanced, The Equity Income, The Select Equity, The Small-Cap Growth
Equity, The Core Equity, The Large-Cap Value Equity, The Mid-Cap Value Equity
Portfolio, The Small-Cap Value Equity, The Real Estate Investment Trust, The
Diversified Core Fixed Income, and The Asset Allocation Portfolios may invest in
will be those that are actively traded in the United States.
The Global Fixed Income, The International Fixed Income, The
International Equity, The International Large-Cap Equity, The Global Equity, The
Emerging Markets, The International Small-Cap and The Asset Allocation
Portfolios may also invest in sponsored and unsponsored European Depositary
Receipts ("EDRs") and Global Depositary Receipts ("GDRs"). The Small-Cap Growth
Equity Portfolio may also invest in sponsored and unsponsored GDRs. Subject to
its 10% limit on investments in foreign securities.
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.
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 Investments family, including Pooled Trust,
Inc. and Foundation Funds, have obtained an exemption from the joint-transaction
prohibitions of Section 17(d) of the 1940 Act to allow such 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. If bankruptcy proceedings are commences with
respect to the seller a Portfolio's realization upon the collateral may be
delayed or limited. Each Portfolio will limit its investments in repurchase
agreements to those which its respective investment adviser, under the
guidelines of the Board of Directors or Trustees, as applicable, determines to
present minimal credit risks and which are of high quality. In addition, a
Portfolio must have collateral of at least 102% of the repurchase price,
including the portion representing the Portfolio's yield under such agreements
which is monitored on a daily basis. 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.
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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 Pooled Trust, Inc. and Foundation Funds, as
applicable, 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 Pooled Trust, Inc. 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 or Trustees of Pooled Trust, Inc. or Foundation Funds, as applicable,
know that a material event will occur affecting an investment loan, they must
either terminate the loan in order to vote the proxy or enter into an
alternative arrangement with the borrower to enable the directors to vote the
proxy.
The major risk to which 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 or Trustees as
applicable, 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.
Restricted and 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 or Trustees, as applicable, 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 Boards have 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).
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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 or Trustees, as applicable, 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. 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.
The Diversified Core Fixed Income, The Asset Allocation, The Small-Cap
Growth Equity, The International Small-Cap, The Balanced, The Equity Income, The
Select Equity and The Core Equity Portfolios may purchase privately-placed
securities whose resale is restricted under applicable securities laws. Such
restricted securities generally offer a higher return potential than comparable
registered securities but involve some additional risk since they can be resold
only in privately-negotiated transactions or after registration under applicable
securities laws. The registration process may involve delays which would result
in the Portfolio obtaining a less favorable price on a resale. The Diversified
Core Fixed Income, The Asset Allocation, The Small-Cap Growth Equity and The
Core Equity Portfolios will not purchase illiquid assets if more than 15% of its
net assets would then consist of such illiquid securities.
U.S. Government Securities
The U.S. government securities in which the various Portfolios may
invest for temporary purposes and otherwise (see "INVESTMENT RESTRICTIONS" and
the Prospectus of the Portfolios for additional information), 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.
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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 Real Estate Investment Trust, The Aggregate Fixed Income, The
Diversified Core Fixed Income, The Intermediate Fixed Income, The Global Fixed
Income, The Asset Allocation, The Balanced and The Core Equity 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.
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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.
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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 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 Intermediate Fixed Income Portfolio and The Aggregate 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 (and, in the case of The Core
Equity Portfolio, the four) highest grades by a nationally-recognized
statistical rating agency.
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The Intermediate Fixed Income, The Aggregate Fixed Income, The
Diversified Core Fixed Income and The Asset Allocation Portfolios each may
invest up to 20% of its total assets in CMOs and REMICs issued by private
entities which are not collateralized by securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities, so-called non-agency
mortgage-backed securities. Investments in these securities may be made only if
the securities (i) are rated at the time of purchase in the four top rating
categories by a nationally-recognized statistical rating organization (e.g., BBB
or better by S&P or Baa or better by Moody's) and (ii) represent interests in
whole-loan mortgages, multi-family mortgages, commercial mortgages and other
mortgage collateral supported by a first mortgage lien on real estate.
Non-agency mortgage-backed securities are subject to the interest rate and
prepayment risks, described above, to which other CMOs and REMICs issued by
private issuers are subject. Non-agency mortgage-backed securities may also be
subject to a greater risk of loss of interest and principal because they are not
collateralized by securities issued or guaranteed by the U.S. government. In
addition, timely information concerning the loans underlying these securities
may not be as readily available and the market for these securities may be less
liquid than other CMOs and REMICs.
Short-Term Investments
The short-term investments in which The Large-Cap Value Equity, The
Mid-Cap Growth Equity, The International Equity, The International Large-Cap
Equity, The Mid-Cap Value Equity, The Diversified Core Fixed Income, 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,
The Emerging Markets, The International Small-Cap, The Asset Allocation, The
Small-Cap Growth Equity, The Balanced, The Equity Income, The Select Equity and
The Core Equity Portfolios may invest include:
(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 Large-Cap Value Equity, The Mid-Cap Growth Equity, The International
Equity, The International Large-Cap 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 Mid-Cap Value Equity, The Small-Cap Value Equity,
The Diversified Core Fixed Income, The Labor Select International Equity, The
Real Estate Investment Trust, The Global Equity, The Emerging Markets, The
International Small-Cap, The High-Yield Bond, The Asset Allocation, The
Small-Cap Growth Equity, The Balanced, The Equity Income, The Select Equity and
The Core Equity 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.
(6) And in the case of The Global Equity, The International Equity, The
International Large-Cap Equity, The Labor Select International Equity, The
Emerging Markets, The International Small-Cap, The Global Fixed Income and The
International Fixed Income Portfolios, bank deposits held by or at the
Portfolio's Custodian Bank or one of its sub-custodians.
Investment Company Securities
Any investments that the Portfolios 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, or
such other investment companies. Under the 1940 Act's current limitations, the
Portfolios may not (1) own more than 3% of the voting stock of another
investment company; and (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. The Asset Allocation Portfolio is not subject to these
percentage limitations because it operates as a "fund of funds." Each Portfolio
in which The Asset Allocation Portfolio invests may not operate as a "fund of
funds" by investing in other registered open-end investment companies or
registered unit investment trusts that are part of the Delaware Investments
family of funds.
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<PAGE>
Zero Coupon and Pay-In-Kind Bonds
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 pay value. PIK bonds pay
interest through the issuance to holders of additional securities. 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's authorized to invest in them. For example, with zero
coupon bonds, the Portfolio accrue, and is required to distribute to
shareholders, income on such 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.
When-Issued and Delayed Delivery Securities
Each Portfolio 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. A Portfolio will maintain with its custodian 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 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 Balanced Portfolio not to enter into
when-issued commitments exceeding in the aggregate 5% of the market value its
total assets less liabilities other than the obligations created by these
commitments.
Warrants
The Equity Income Portfolio, The Global Equity, The International
Equity, The International Large-Cap Equity, The Labor Select International
Equity, The Emerging Markets and The International Small-Cap Portfolios may
purchase warrants and similar rights, which are privileges issued by
corporations enabling the owners to subscribe to and purchase a specified number
of shares of the corporation at a specified price during a specified period of
time. The purchase of warrants involves the risk that the Portfolio could lose
the purchase value of a warrant if the right to subscribe to additional shares
is not exercised prior to the warrant's expiration. Also, the purchase of
warrants involves the risk that the effective price paid for the warrant added
to the subscription price of the related security may exceed the value of the
subscribed security's market price such as when there is no movement in the
level of the underlying security.
Concentration
In applying the Portfolio's policies on concentration: (i) utility
companies will be divided according to their services, for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry; (ii) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and (iii) asset
backed securities will be classified according to the underlying assets securing
such securities.
Risks Associated with the Asset Allocation Portfolio
The Asset Allocation Portfolio's assets may be primarily invested in a
combination of the Portfolios. As a result, the Asset Allocation Portfolio is
subject to the same risks as any of the Portfolios in the Fund in which its
invests. Moreover, The Asset Allocation Portfolio's investment performance may
be directly related to the investment performance of the Portfolios of the Fund
held by it. The ability of The Asset Allocation Portfolio to meet its investment
objective may thus be directly related to the ability of the Portfolios of the
Fund to meet their objectives as well as the allocation among those Portfolios
of the fund by Delaware. There can be no assurance that the investment objective
of The Asset Allocation Portfolio or any of the Portfolios of the Fund will be
achieved.
Because The Asset Allocation Portfolio and the other Portfolios of the
Fund are separately managed, it is possible that certain Portfolios of the Fund
in which The Asset Allocation Portfolio invests may be acquiring securities at
the same time that other Portfolios of the Fund in which that Portfolio invests
are selling the same security. Similarly, it is possible that The Asset
Allocation Portfolio may directly acquire a security at the same time that a
Portfolio of the Fund in which it invests is selling the same security, or vice
versa. This practice could result in higher indirect transactions costs for The
Asset Allocation Portfolio, and thus adversely affect The Asset Allocation
Portfolio's returns, than would be the case if it were only investing directly
in securities.
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<PAGE>
Delaware has adopted Asset Allocation Guidelines (the "Guidelines")
which govern The Asset Allocation Portfolio's purchases and redemptions of
shares of the Portfolios of the Fund. Pursuant to these Guidelines, if the
investment adviser anticipates that The Asset Allocation Portfolio's allocation
transaction will disrupt the investment activities of a Portfolio of the Fund,
the portfolio managers of the relevant Portfolios will confer on steps to
minimize adverse effects on both The Asset Allocation Portfolio and the
Portfolio of the Fund, such as staggering the timing and amounts of such
allocation transactions. In addition, Delaware will attempt to minimize the
number and size of allocation transactions taking place at any one time while
attempting to avoid losing investment opportunities for The Asset Allocation
Portfolio. As a result, The Asset Allocation Portfolio may, on occasion, be
unable to purchase or redeem shares of a Portfolio of the Fund as quickly or in
such amounts as they otherwise would in the absence of such Guidelines. Such
delays or changes in amounts may decrease the total return and/or increase the
volatility of The Asset Allocation Portfolio.
ACCOUNTING AND TAX ISSUES
When The Mid-Cap Growth Equity Portfolio, either of The Real Estate
Investment Trust Portfolios, The International Fixed Income Portfolio, The
Emerging Markets Portfolio, The Global Equity Portfolio, The International
Small-Cap Portfolio, The Balanced Portfolio, The Equity Income Portfolio, The
Select Equity Portfolio, The Diversified Core Fixed Income Portfolio, The Asset
Allocation Portfolio, The Small-Cap Value Equity Portfolio, The Small-Cap Growth
Equity Portfolio or The Core 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.
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<PAGE>
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 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. As such, a Portfolio will not be subject to
federal income tax, or to any excise tax, to the extent its earnings are
distributed as provided in the Code and it satisfies other requirements relating
to the sources of its income and diversification of its assets.
In order to qualify as a regulated investment company for federal
income tax purposes, each Portfolio must meet certain specific requirements,
including:
(i) Each Portfolio must maintain a diversified portfolio of securities,
wherein no security (other than U.S. government securities and securities of
other regulated investment companies) can exceed 25% of a Portfolio's total
assets, and, with respect to 50% of a Portfolio's total assets, no investment
(other than cash and cash items, U.S. government securities and securities of
other regulated investment companies) can exceed 5% of a Portfolio's total
assets. For purposes of the tax diversification test under Subchapter M of the
Internal Revenue Code, repurchase agreements constitute securities are not
considered to be cash or cash items;
47
<PAGE>
(ii) Each Portfolio must derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or disposition of stock and securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies;
(iii) Each Portfolio must distribute to its shareholders at least 90%
of its net investment income and net tax-exempt income for each of its fiscal
years, and
(iv) Each Portfolio must realize less than 30% of its gross income for
each fiscal year from gains from the sale of securities and certain other assets
that have been held by the Portfolio for less than three months ("short-short
income"). The Taxpayer Relief Act of 1997, as amended, (the "1997 Act") repealed
the 30% short-short income test for tax years of regulated investment companies
beginning after August 5, 1997; however, this rule may have continuing effect in
some states for purposes of classifying the Portfolio as a regulated investment
company.
The Code requires the Portfolios to distribute at least 98% of its
taxable ordinary income earned during the calendar year and 98% of its capital
gain net income earned during the 12 month period ending October 31 (in addition
to amounts from the prior year that were neither distributed nor taxed to a
Portfolio) to you by December 31 of each year in order to avoid federal excise
taxes. The Portfolios intend as a matter of policy to declare and pay sufficient
dividends in December or January (which are treated by you as received in
December) but does not guarantee and can give no assurances that its
distributions will be sufficient to eliminate all such taxes.
The straddle rules of Section 1092 may apply. Generally, the straddle
provisions require the deferral of losses to the extent of unrecognized gains
related to the offsetting positions in the straddle. Excess losses, if any, can
be recognized in the year of loss. Deferred losses will be carried forward and
recognized in the year that unrealized losses exceed unrealized gains or when
the offsetting position is sold.
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, the Portfolio must recognize gain (but not loss) on any
constructive sale of an appreciated financial position in stock, a partnership
interest or certain debt instruments. The Portfolio will generally be treated as
making a constructive sale when it: 1) enters into a short sale on the same or
substantially identical property; 2) enters into an offsetting notional
principal contract; or 3) enters into a futures or forward contract to deliver
the same or substantially identical property. Other transactions (including
certain financial instruments called collars) will be treated as constructive
sales as provided in Treasury regulations to be published. There are also
certain exceptions that apply for transactions that are closed before the end of
the 30th day after the close of the taxable year.
Investment in Foreign Currencies and Foreign Securities
Certain of the Portfolios are authorized to invest certain limited
amounts in foreign securities. Such investments, if made, will have the
following additional tax consequences to each Portfolio:
Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time a Portfolio accrues income
(including dividends), or accrues expenses which are denominated in a foreign
currency, and the time a Portfolio actually collects such income or pays such
expenses generally are treated as ordinary income or loss. Similarly, on the
disposition of debt securities denominated in a foreign currency and on the
disposition of certain options, futures, forward contracts, gain or loss
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of its disposition are
also treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "Section 988" gains or losses, may increase or decrease the amount
of a Portfolio's net investment company taxable income, which, in turn, will
affect the amount of income to be distributed to you by a Portfolio.
If a Portfolio's Section 988 losses exceed a Portfolio's other net
investment company taxable income during a taxable year, a Portfolio generally
will not be able to make ordinary dividend distributions to you for that year,
or distributions made before the losses were realized will be recharacterized as
return of capital distributions of federal income tax purposes, rather than as
an ordinary dividend or capital gain distribution. If a distribution is treated
as a return of capital, your tax basis in your Portfolio shares will be reduced
by a like amount (to the extent of such basis), and any excess of the
distribution over your tax basis in your Portfolio shares will be treated as
capital gain to you.
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<PAGE>
The 1997 Act generally requires that foreign income be translated into
U.S. dollars at the average exchange rate for the tax year in which the
transactions are conducted. Certain exceptions apply to taxes paid more than two
years after the taxable year to which they relate. This new law may require a
Portfolio to track and record adjustments to foreign taxes paid on foreign
securities in which it invests. Under a Portfolio's current reporting procedure,
foreign security transactions are recorded generally at the time of each
transaction using the foreign currency spot rate available for the date of each
transaction. Under the new law, a Portfolio will be required to record a fiscal
year end (and at calendar year end for excise tax purposes) an adjustment that
reflects the difference between the spot rates recorded for each transaction and
the year-end average exchange rate for all of a Portfolio's foreign securities
transactions. There is a possibility that the mutual fund industry will be given
relief from this new provision, in which case no year-end adjustments will be
required.
The Portfolios may be subject to foreign withholding taxes on income
from certain of its foreign securities. If more than 50% of the total assets of
a Portfolio at the end of its fiscal year are invested in securities of foreign
corporations, a Portfolio may elect to pass-through to you your pro rata share
of foreign taxes paid by a Portfolio. If this election is made, you will be: (i)
required to include in your gross income your pro rata share of foreign source
income (including any foreign taxes paid by a Portfolio); and (ii) entitled to
either deduct your share of such foreign taxes in computing your taxable income
or to claim a credit for such taxes against your U.S. income tax, subject to
certain limitations under the Code. You will be informed by a Portfolio at the
end of each calendar year regarding the availability of any such foreign tax
credits and the amount of foreign source income (including any foreign taxes
paid by a Portfolio). If a Portfolio elects to pass-through to you the foreign
income taxes that it has paid, you will be informed at the end of the calendar
year of the amount of foreign taxes paid and foreign source income that must be
included on your federal income tax return. If a Portfolio invests 50% or less
of its total assets in securities of foreign corporations, it will not be
entitled to pass-through to you your pro-rata shares of foreign taxes paid by a
Portfolio. In this case, these taxes will be taken as a deduction by a
Portfolio, and the income reported to you will be the net amount after these
deductions. The 1997 Act also simplifies the procedures by which investors in
funds that invest in foreign securities can claim tax credits on their
individual income tax returns for the foreign taxes paid by a Portfolio. These
provisions will allow investors who pay foreign taxes of $300 or less on a
single return or $600 or less on a joint return during any year (all of which
must be reported on IRS Form 1099-DIV from a Portfolio to the investor) to claim
a tax credit against their U.S. federal income tax for the amount of foreign
taxes paid by a Portfolio. This process will allow you, if you qualify, to
bypass the burdensome and detailed reporting requirements on the foreign tax
credit schedule (Form 1116) and report your foreign taxes paid directly on page
2 of Form 1040.
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<PAGE>
Investment in Passive Foreign Investment Company securities--The
Portfolios may invest in shares of foreign corporations which may be classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. If a Portfolio receives an "excess distribution" with
respect to PFIC stock, the Portfolio itself may be subject to U.S. federal
income tax on a portion of the distribution, whether or not the corresponding
income is distributed by a Portfolio to you. In general, under the PFIC rules,
an excess distribution is treated as having been realized ratably over the
period during which a Portfolio held the PFIC shares. A Portfolio itself will be
subject to tax on the portion, if any, of an excess distribution that is so
allocated to prior Portfolio taxable years, and an interest factor will be added
to the tax, as if the tax had been payable in such prior taxable years. In this
case, you would not be permitted to claim a credit on your own tax return for
the tax paid by a Portfolio. Certain distributions from a PFIC as well as gain
from the sale of PFIC shares are treated as excess distributions. Excess
distributions are characterized as ordinary income even though, absent
application of the PFIC rules, certain distribution might have been classified
as capital gain. This may have the effect of increasing Portfolio distributions
to you that are treated as ordinary dividends rather than long-term capital gain
dividends.
A Portfolio may be eligible to elect alternative tax treatment with
respect to PFIC shares. Under an election that currently is available in some
circumstances, a Portfolio generally would be required to include in its gross
income its share of the earnings of a PFIC on a current basis, regardless of
whether distributions are received from the PFIC during such period. If this
election were made, the special rules, discussed above, relating to the taxation
of excess distributions, would not apply. In addition, the 1997 Act provides for
another election that would involve marking-to-market the Portfolio's PFIC
shares at the end of each taxable year (and on certain other dates as prescribed
in the Code), with the result that unrealized gains would be treated as though
they were realized. The Portfolio would also be allowed an ordinary deduction
for the excess, if any, of the adjusted basis of its investment in the PFIC
stock over its fair market value at the end of the taxable year. This deduction
would be limited to the amount of any net mark-to-market gains previously
included with respect to that particular PFIC security. If a Portfolio were to
make this second PFIC election, tax at the Portfolio level under the PFIC rules
would generally be eliminated.
The application of the PFIC rules may affect, among other things, the
amount of tax payable by a Portfolio (if any), the amounts distributable to you
by a Portfolio, the time at which these distributions must be made, and whether
these distributions will be classified as ordinary income or capital gain
distributions to you.
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You should be aware that it is not always possible at the time shares
of a foreign corporation are acquired to ascertain that the foreign corporation
is a PFIC, and that there is always a possibility that a foreign corporation
will become a PFIC after a Portfolio acquires shares in that corporation. While
a Portfolio will generally seek to avoid investing in PFIC shares to avoid the
tax consequences detailed above, there are no guarantees that it will do so and
it reserves the right to make such investments as a matter of its fundamental
investment policy.
Most foreign exchange gains are classified as ordinary income which
will be taxable to you as such when distributed. Similarly, you should be aware
that any foreign exchange losses realized by a Portfolio, including any losses
realized on the sale of foreign debt securities, are generally treated as
ordinary losses for federal income tax purposes. This treatment could increase
or reduce a Portfolio's income available for distribution to you, and may cause
some or all of a Portfolio's previously distributed income to be classified as a
return of capital.
TRADING PRACTICES AND BROKERAGE
The investment adviser or sub-adviser of each Portfolio, as the case
may be, selects brokers or dealers to execute transactions on behalf of a
Portfolio 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
execution. Best execution refers to many factors, including the price paid or
received for a security, the commission charged, the promptness and reliability
of execution, the confidentiality and placement accorded the order and other
factors affecting the overall benefit obtained by the account on the
transaction. 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 investment adviser or sub-adviser
pays reasonably competitive brokerage commission rates based upon the
professional knowledge of its trading department as to rates paid and charged
for similar transactions throughout the securities industry. In some instances,
Pooled Trust, Inc. or Foundation Funds, as appropriate, pays a minimal share
transaction cost when the transaction presents no difficulty. A number of trades
are made on a net basis where the Portfolios either buy the securities directly
from the dealer or sell them to the dealer. In these instances, there is not
direct commission charged but there is a spread (the difference between the buy
and sell price) which is the equivalent of a commission.
Securities transactions for The International Equity, The International
Large-Cap Equity, The Labor Select International Equity, The Global Equity, The
Emerging Markets, The Global Fixed Income, The International Fixed Income, The
High Yield Bond, The Real Estate Investment Trust , The International Small-Cap
and The Diversified Core Fixed Income Portfolios may be effected in foreign
markets which may not allow negotiation of commissions or where it is customary
to pay fixed rates.
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During the fiscal years ended October 31, 1996, 1997 and 1998, the
aggregate dollar amounts of brokerage commissions paid by the Portfolios listed
below amounted to the following:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
The Large Cap Value Equity Portfolio $198,202 $137,685 $117,326
The Mid-Cap Growth Equity Portfolio $19,470 $66,754 $26,361
The International Equity Portfolio $390,649 $618,700 $398,781
The Global Fixed Income Portfolio N/A N/A N/A
The Labor Select International Equity Portfolio(2) $134,410 $72,413 $78,514
The Real Estate Investment Trust Portfolio (1) $185,742 $111,633 $122,865
The Emerging Markets Portfolio (6) $194,207 $92,535 N/A
The Global Equity Portfolio (7) $3,549 $5,176 N/A
The Core Equity Portfolio (10) $2,458 N/A N/A
The Mid-Cap Value Equity Portfolio(9) $15,643 N/A N/A
The Small-Cap Growth Equity Portfolio (10) $1,702 N/A N/A
The Real Estate Investment Trust Portfolio II (8) $16,638 N/A N/A
The Intermediate Fixed Income Portfolio (3) N/A N/A N/A
The Aggregate Fixed Income Portfolio (9) N/A N/A N/A
The High-Yield Bond Portfolio (4) N/A N/A N/A
The Diversified Core Fixed Income Portfolio(9) N/A N/A N/A
The International Fixed Income Portfolio(5) N/A N/A N/A
The Asset Allocation Portfolio (15) N/A N/A N/A
The Small-Cap Value Equity Portfolio (11) N/A N/A N/A
The Balanced Portfolio(13) N/A N/A N/A
The Equity Income Portfolio(13) N/A N/A N/A
The Select Equity Portfolio(12) N/A N/A N/A
The International Small-Cap Portfolio(14) N/A N/A N/A
The International Large-Cap Equity Portfolio (15) N/A N/A N/A
</TABLE>
(1) Commenced operations on December 6, 1995.
(2) Commenced operations on December 19, 1995.
(3) Commenced operations on March 12, 1996.
(4) Commenced operations on December 2, 1996.
(5) Commenced operations on April 11, 1997.
(6) Commenced operations on April 14, 1997.
(7) Commenced operations on October 15, 1997.
(8) Commenced operations on November 4, 1997.
(9) Commenced operations on December 29, 1997.
(10) Commenced operations on September 15, 1998.
(11) Commenced operations on March 29, 1999.
(12) Commenced operations on June 29, 1999.
(13) Commenced operations on June 30, 1999.
(14) Commenced operations on July 20, 1999.
(15) Has not commenced operations as of the date of this Part B.
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The investment advisers or sub-advisers may allocate out of all
commission business generated by all of the Portfolios 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 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, 1998, 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 Transactions Brokerage Commissions
Amounts Amounts
---------------------- ---------------------
<S> <C> <C>
The Large Cap Value Equity Portfolio $87,352,536 $92,557
The Mid-Cap Growth Equity Portfolio $7,338,957 $13,974
The International Equity Portfolio $19,488,896 $43,480
The Labor Select International Equity Portfolio $10,198,546 $22,822
The Real Estate Investment Trust Portfolio $38,144,721 $86,183
The Emerging Markets Portfolio none none
The Mid-Cap Value Equity Portfolio (2) $9,636,086 $14,985
The Core Equity Portfolio (3) $176,340 $276
The Small-Cap Growth Equity Portfolio (3) $673,401 $1,548
The Real Estate Investment Trust Portfolio II (1) $2,777,792 $6,341
The Intermediate Fixed Income Portfolio N/A N/A
The Aggregate Fixed Income Portfolio (2) N/A N/A
The High-Yield Bond Portfolio N/A N/A
The Diversified Core Fixed Income Portfolio (2) N/A N/A
The Global Equity Portfolio $752,875 $884
The Global Fixed Income Portfolio N/A N/A
The Asset Allocation Portfolio (8) N/A N/A
The International Fixed Income Portfolio N/A N/A
The Small-Cap Value Equity Portfolio (4) N/A N/A
The Balanced Portfolio(6) N/A N/A
The Equity Income Portfolio(6) N/A N/A
The Select Equity Portfolio(5) N/A N/A
The International Small-Cap Portfolio(7) N/A N/A
The International Large-Cap Equity Portfolio(8) N/A N/A
(1) Commenced operations on November 4, 1997.
(2) Commenced operations on December 29, 1997.
(3) Commenced operations on September 15, 1998.
(4) Commenced operations on March 29, 1999.
(5) Commenced operations on June 29, 1999.
(6) Commenced operations on June 30, 1999.
(7) Commenced operations on July 20, 1999.
(8) Has not commenced operations as of the date of this Part B.
</TABLE>
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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, Pooled Trust, Inc. and Foundation
Funds believe 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 Pooled Trust, Inc., Foundation Funds and to other funds in the
Delaware Investments family. Subject to best execution, commissions allocated to
brokers providing such pricing services may or may not be generated by the
Portfolios 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 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, the
Board of Directors of Pooled Trust, Inc. and the Board of Trustees of Foundation
Funds that the advantages of combined orders outweigh the possible disadvantages
of separate transactions.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking best execution, orders may be
placed with broker/dealers that have agreed to defray certain Portfolio
expenses, such as custodian fees.
Subject to best execution, Portfolio orders may be placed with
qualified broker/dealers who recommend the Portfolios or who acts as agents in
the purchase of shares of the Portfolios for their clients.
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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 Mid-Cap
Growth Equity Portfolio, either of The Real Estate Investment Trust Portfolios,
The International Large-Cap Equity Portfolio, The Emerging Markets Portfolio,
The Global Equity Portfolio, The International Small-Cap Portfolio, The Equity
Income Portfolio, The Select Equity Portfolio, The Diversified Core Fixed Income
Portfolio, The Asset Allocation Portfolio, The Small-Cap Growth Equity Portfolio
and The Core 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. High portfolio turnover involves
correspondingly greater brokerage costs and may affect taxes payable by
shareholders that are subject to federal income taxes.
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Under normal circumstances: (1) the annual portfolio turnover rate of
The International Equity Portfolio and The International Large-Cap Equity
Portfolio is not expected to exceed 75%; (2) the annual portfolio turnover rate
of The Global Fixed Income Portfolio and The International Fixed Income
Portfolio is not expected to exceed 200%; (3) the annual portfolio turnover rate
of The Large-Cap Value Equity Portfolio, The Mid-Cap Growth Equity Portfolio,
The Mid-Cap Value Equity Portfolio, The Small-Cap Value Equity Portfolio, The
Labor Select International Equity Portfolio, The Real Estate Investment Trust
Portfolios, The Emerging Markets Portfolio, The Global Equity Portfolio, The
International Small-Cap Portfolio, The High-Yield Bond Portfolio, The Balanced,
The Equity Income, The Core Equity Portfolio and The Asset Allocation Portfolio
is not expected to exceed 100%; (4) the annual portfolio turnover rate of The
Intermediate Fixed Income Portfolio, The Aggregate Fixed Income Portfolio and
The Diversified Core Fixed Income Portfolio is not expected to exceed 250%; (5)
the annual portfolio turnover rate of The Small-Cap Growth Equity Portfolio is
expected to be 100%; and (6) the annual portfolio turnover rate for The Select
Equity Portfolio is not expected to exceed 300%. The portfolio 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.
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The portfolio turnover rates of the following Portfolios for the past
two fiscal years were as follows:
<TABLE>
<CAPTION>
October 31, 1998 October 31, 1997
---------------- ----------------
<S> <C> <C>
The Large Cap Value Equity Portfolio 85% 73%
The Mid-Cap Growth Equity Portfolio 154% 117%
The International Equity Portfolio 5% 8%
The Global Fixed Income Portfolio 131% 114%
The Labor Select International Equity Portfolio 2% 11%
The Real Estate Investment Trust Portfolio 51% 58%
The Intermediate Fixed Income Portfolio 181% 205%
The High-Yield Bond Portfolio (1) 211% 281%*
The International Fixed Income Portfolio (2) 104% 145%*
The Emerging Markets Portfolio (3) 39% 46%*
The Global Equity Portfolio (4) 47% 0%*
The Core Equity Portfolio (7) 53%* N/A
The Mid-Cap Value Equity Portfolio (6) 155%* N/A
The Small-Cap Value Equity Portfolio (8) N/A N/A
The Small-Cap Growth Equity Portfolio (7) 98%* N/A
The Real Estate Investment Trust Portfolio II (5) 54%* N/A
The Aggregate Fixed Income Portfolio (6) 438%* N/A
The Diversified Core Fixed Income Portfolio (6) 312%* N/A
The Asset Allocation Portfolio (12) N/A N/A
The Balanced Portfolio(10) N/A N/A
The Equity Income Portfolio(10) N/A N/A
The Select Equity Portfolio(9) N/A N/A
The International Small-Cap Portfolio(11) N/A N/A
The International Large-Cap Equity Portfolio(12) N/A N/A
* Annualized
(1) Commenced operations on December 2, 1996.
(2) Commenced operations on April 11, 1997.
(3) Commenced operations on April 14, 1997.
(4) Commenced operations on October 15, 1997.
(5) Commenced operations on November 4, 1997.
(6) Commenced operations on December 29, 1997.
(7) Commenced operations on September 15, 1998.
(8) Commenced operations on March 29, 1999.
(9) Commenced operations on June 29, 1999.
(10) Commenced operations on June 30, 1999.
(11) Commenced operations on July 20, 1999.
(12) Has not commenced operations as of the date of this Part B.
</TABLE>
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<PAGE>
PURCHASING SHARES
The following supplements the disclosure provided in the Portfolios'
Prospectuses.
Delaware Distributors, L.P. (the "Distributor") serves as the national
distributor for each Portfolio's shares. See the related Prospectus for
information on how to invest. Pooled Trust, Inc. or Foundation Funds, as
applicable, 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
unless a shareholder submits a specific request. Certificates are not issued in
the case of Class B Shares or Class C Shares of The Real Estate Investment Trust
Portfolio or in the case of any retirement plan account including self-directed
IRAs. However, purchases not involving the issuance of certificates are
confirmed to the investor and credited to the shareholder's account on the books
maintained on behalf of Pooled Trust, Inc. and Foundation Funds. The investor
will have the same rights of ownership with respect to such shares as if
certificates had been issued. An investor that is permitted to obtain a
certificate may receive a certificate representing full share denominations
purchased by sending a letter signed by each owner of the account to the
Transfer Agent requesting the certificate. No charge is assessed by Pooled
Trust, Inc. or Foundation Funds for any certificate issued. A shareholder may be
subject to fees for replacement of a lost or stolen certificate, under certain
conditions, including the cost of obtaining a bond covering the lost or stolen
certificate. Please contact the Portfolios for further information. Investors
who hold certificates representing any of their shares may only redeem those
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 expenses of investing purchase proceeds. For The Global Equity
Portfolio, the purchase reimbursement fee is equal to 0.40% of the dollar amount
invested, for The International Small-Cap Portfolio, the purchase reimbursement
fee is equal to 0.55% of the dollar amount invested and for The International
Large-Cap Equity Portfolio, the purchase reimbursement fee is equal to 0.45% of
the dollar amount invested. In lieu of paying that fee, an investor in The
Emerging Markets Portfolio, The Global Equity Portfolio, The International
Small-Cap Portfolio or The International Large-Cap Equity Portfolio may elect,
subject to agreement by DIA Ltd., to invest by a contribution of in-kind
securities or may follow another procedure that has the same economic impact on
the Portfolio and its shareholders, in which case the purchase reimbursement fee
will not apply. 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 Emerging Markets Portfolio, The International Equity Portfolio,
The International Large-Cap Equity Portfolio, The Global Equity Portfolio and
The International Small-Cap Portfolio. At such time as Pooled Trust, Inc.
receives appropriate regulatory approvals to do so in the future, under certain
circumstances, Pooled Trust, Inc. may, at its sole discretion, allow eligible
investors who have an existing investment counseling relationship with Delaware
International or an affiliate of Delaware to make investments in the Portfolios
by a contribution of securities in-kind to such Portfolios.
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<PAGE>
Purchasing Shares (REIT Fund A, B, C and Institutional Classes of The Real
Estate Investment Trust Portfolio)
The minimum initial investment generally is $1,000 for REIT Fund A
Class, B Class and C Class. Subsequent purchases of such Classes generally must
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 Investments fund, the investment adviser or any of the investment
adviser's affiliates if the purchases are made pursuant to a payroll deduction
program. Shares purchased pursuant to the Uniform Gifts to Minors Act or 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 the Delaware Investments 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
Institutional Class, but certain eligibility requirements must be satisfied.
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. See "INVESTMENT PLANS" for purchase limitations
applicable to retirement plans. Pooled Trust, Inc. 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 $50,000 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.
Selling dealers are responsible for transmitting orders promptly.
Pooled Trust, Inc. reserves the right to reject any order for the purchase of
its shares if in the opinion of management such rejection is in the Portfolio's
best interest. If a purchase is canceled because your check is returned unpaid,
you are responsible for any loss incurred. The Portfolio 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 Investments family.
The Portfolio 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 Portfolio also reserves the right, following shareholder
notification, to charge a service fee on non-retirement accounts that, as a
result of 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 Portfolio 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.
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<PAGE>
The Portfolio 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 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.
The NASD has adopted amendments to its Conduct Rules, as amended,
relating to investment company sales charges. Pooled Trust, Inc. 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 5.75%; however, lower front-end sales charges
apply for larger purchases. See the table in the appropriate Prospectus. Class A
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 5% if shares are redeemed within one year of purchase; (ii) 4% if
shares are redeemed within two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if shares
are redeemed during the fifth year following purchase; and (v) 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 Class B Shares for approximately
eight years after purchase. See "AUTOMATIC CONVERSION OF CLASS B SHARES," below.
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 the net asset value per
share without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses. See "PLANS UNDER RULE 12B-1 FOR THE PORTFOLIO CLASSES"
under "PURCHASING SHARES," and "DETERMINING OFFERING PRICE AND NET ASSET VALUE"
in this Part B.
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 that Portfolio's income, before application,
as to Class A, Class B and Class C Shares, of any expenses under that
Portfolio's 12b-1 Plans.
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<PAGE>
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A Shares, Class B Shares
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
0.30% of the 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 0.30% of average daily net assets of such shares. Unlike Class B
Shares, Class C Shares do not convert to another 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. In addition, the effect of any return earned on such additional money
will diminish over time. In comparing Class B Shares to Class C Shares,
investors should also consider the duration of the annual 12b-1 Plan expenses to
which each of the classes is subject and the desirability of an automatic
conversion feature, which is available only for Class B Shares.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Portfolios, the Distributor and others will be paid, in
the case of Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of Class B Shares and 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 Shares, Class B Shares 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
such fees and charges are used to finance the distribution of the respective
Classes. See "PLANS under RULE 12B-1 FOR THE PORTFOLIO CLASSES."
Dividends, if any, paid on Class A Shares, Class B Shares and Class C
Shares will be calculated in the same manner, at the same time and 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 "DETERMINING OFFERING PRICE AND NET ASSET
VALUE."
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<PAGE>
Class A Shares
Purchases of $50,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the table in the appropriate
Prospectus, and may include a series of purchases 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.
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.
In addition, certain dealers who enter into an agreement to provide extra
training and information on Delaware Investments products and services and who
increase sales of Delaware Investments funds may receive an 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. Dealers who receive 90% or more of
the sales charge may be deemed to be underwriters under the 1933 Act.
Dealer's Commission
As described in the Prospectus, 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.
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other Delaware Investments
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") may be aggregated with those of the Class A Shares of
the Portfolio. 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 Investments 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.
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Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares 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 above, 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. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of Class B Shares or Class C
Shares of the Portfolio, even if those shares are later exchanged for shares of
another Delaware Investments 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. See "WAIVER OF
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES AND CLASS C SHARES under
REDEMPTION AND EXCHANGE" for the Portfolio Classes for a list of the instances
in which the CDSC is waived.
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
Portfolio. See "AUTOMATIC CONVERSION OF CLASS B SHARES" under "CLASSES OF
SHARES" in the appropriate Prospectus. Such conversion will constitute a
tax-free exchange for federal income tax purposes. See "TAXES." Investors are
reminded that the Class A Shares into which 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 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.
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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 Portfolio shares. The Distributor currently
compensates 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 5% of the dollar
amount 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 Portfolio 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 Class B Shares
described in this Part B, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for 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 18th day or next
business day 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 the Portfolio 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.
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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 Portfolio shares. The Distributor currently
compensates 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, Class C Shares are subject to annual 12b-1
Plan expenses and, if redeemed within 12 months 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 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 Class C Shares as
described in this Part B. See "REDEMPTION AND EXCHANGE."
Plans Under Rule 12b-1
Pursuant to Rule 12b-1 under the 1940 Act, Pooled Trust, Inc. has
adopted a separate plan for each of Class A Shares, the Class B Shares and the
Class C Shares of The Real Estate Investment Trust Portfolio (the "Plans"). Each
Plan permits the relevant Portfolio 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 Portfolio, 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 Shares 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 Portfolio may make payments out of the assets of Class
A Shares, Class B Shares 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 Portfolio under the Plans, and
the Portfolio's Distribution Agreement, is on an annual basis up to 0.30% of
Class A Shares' average daily net assets for the year of Class A Shares, and up
to 1% (0.25% of which are service fees to be paid to the Distributor, dealers
and others for 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. Pooled Trust, Inc.'s Board of Directors may reduce these
amounts at any time. Pursuant to Board action, the maximum aggregate fee payable
by Class A Shares is 0.25%.
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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 Shares, Class B Shares and Class C Shares would be borne by such persons
without any reimbursement from such 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 Pooled Trust, Inc., including a majority
of the directors who are not "interested persons" (as defined in the 1940 Act)
of Pooled Trust, Inc. 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 are 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 the Classes.
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 Pooled Trust, Inc. 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 Pooled Trust,
Inc. 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.
For the fiscal year ended October 31, 1998, payments from REIT Fund A
Class, B Class and C Class amounted to $18,831, $71,406 and $40,555,
respectively. Such amounts were used for the following purposes:
<TABLE>
<CAPTION>
REIT Fund REIT Fund REIT Fund
A Class B Class C Class
------- ------- -------
<S> <C> <C> <C>
Advertising --- --- ---
Annual/Semi-Annual Reports $55 --- ---
Broker Trails $18,636 $17,012 $7,681
Broker Sales Charges --- $27,030 $22,397
Dealer Service Expenses --- --- ---
Interest on Broker Sales Charges --- $22,954 $1,689
Commissions to Wholesalers --- $4,310 $8,788
Promotional-Broker Meetings --- $100 ---
Promotional-Other $10 --- ---
Prospectus Printing $130 --- ---
Telephone --- --- ---
Wholesaler Expenses --- --- ---
Other --- --- ---
</TABLE>
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<PAGE>
Other Payments to Dealers - Class A Shares, Class B Shares and Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of shares 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 Investments family 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. The Distributor may also pay a
portion of the expense of preapproved dealer advertisements promoting the sale
of Delaware Investments fund shares.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares of the Portfolio may be purchased at net asset value
under the Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment Privilege.
Purchases of Class A Shares may be made at net asset value by current
and former officers, directors and employees (and members of their families) of
the investment adviser, any affiliate, any of the funds in the Delaware
Investments family, 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. Class A Shares may also be purchased at net asset value by current and
former officers, directors and employees (and members of their families) of the
Dougherty Financial Group LLC.
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 funds in the
Delaware Investments family. Officers, directors and key employees of
institutional clients of the investment adviser 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. Investors may be charged a fee when effecting transactions
in Class A Shares through a broker or agent that offers these special investment
products.
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Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase shares of the Institutional Class
of the Portfolio; any group retirement plan (excluding defined benefit pension
plans), or such plans of the same employer, for which plan participant records
are maintained on the Retirement Financial Services, Inc. (formerly known as
Delaware Investment & Retirement Services, Inc.) proprietary record keeping
system that (i) has in excess of $500,000 of plan assets invested in Class A
Shares of funds in the Delaware Investments family and any stable value account
available to investment advisory clients of the investment adviser or its
affiliates; or (ii) is sponsored by an employer that has at any point after May
1, 1997 more than 100 employees while such plan has held Class A Shares of a
fund in the Delaware Investments family and such employer has properly
represented to Retirement Financial Services, Inc. in writing that it has the
requisite number of employees and received written confirmation back from
Retirement Financial Services, Inc. See "GROUP INVESTMENT PLANS" for information
regarding the applicability of the Limited CDSC.
Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase Institutional
Class Shares or purchase interests in a collective trust as a result of a change
in distribution arrangements.
Investors in Delaware Investments Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A Shares
of any of the funds in the Delaware Investments family at net asset value.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to the Portfolio
account in connection with loans originated from accounts previously maintained
by another investment firm will also be invested at net asset value.
Pooled Trust, Inc. must be notified in advance that the trade qualifies
for purchase at net asset value.
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 Investments funds ("eligible Delaware Investments
fund shares"), as well as shares of designated classes of non-Delaware
Investments funds ("eligible non-Delaware Investments 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 Investments and eligible non-Delaware Investments
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 Investments fund shares. See "COMBINED
PURCHASES PRIVILEGE," below.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments fund
shares or for eligible non-Delaware Investments fund shares at net asset value
without payment of a front-end sales charge. However, exchanges of eligible fund
shares, both Delaware Investments and non-Delaware Investments, which were not
subject to a front end sales charge, will be subject to the applicable sales
charge if exchanged for eligible Delaware Investments 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."
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A dealer's commission may be payable on purchases of eligible Delaware
Investments 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 Investments fund shares in connection with Allied Plans, all
participant holdings in the Allied Plan will be aggregated. See "CLASS A
SHARES," above.
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 " REDEMPTION AND EXCHANGE --
WAIVER OF LIMITED CONTINGENT DEFERRED SALES CHARGE - CLASS A SHARES" under,
apply to redemptions by participants in Allied Plans except in the case of
exchanges between eligible Delaware Investments and non-Delaware Investments
fund shares. When eligible Delaware Investments fund shares are exchanged into
eligible non-Delaware Investments 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."
Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made
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 Pooled Trust, Inc. which provides for the 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 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 Portfolio and of any class
of any of the other mutual funds in Delaware Investments (except shares of any
Delaware Investments 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 Investments 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.
Employers offering a Delaware Investments retirement plan may also
complete a Letter of Intention to obtain a reduced front-end sales charge on
investments of Class A Shares made by the plan. The aggregate investment level
of the Letter of Intention will be determined and accepted by the Transfer Agent
at the point of plan establishment. The level and any reduction in front-end
sales charge will be based on actual plan participation and the projected
investments in Delaware Investments funds that are offered with a front-end
sales charge, CDSC or Limited CDSC for a 13-month period. The Transfer Agent
reserves the right to adjust the signed Letter of Intention based on this
acceptance criteria. The 13-month period will begin on the date this Letter of
Intention is accepted by the Transfer Agent. If actual investments exceed the
anticipated level and equal an amount that would qualify the plan for further
discounts, any front-end sales charges will be automatically adjusted. In the
event this Letter of Intention is not fulfilled within the 13-month period, the
plan level will be adjusted (without completing another Letter of Intention) and
the employer will be billed for the difference in front-end sales charges due,
based on the plan's assets under management at that time. Employers may also
include the value (at offering price at the level designated in their Letter of
Intention) of all their shares intended for purchase that are offered with a
front-end sales charge, CDSC or Limited CDSC of any class. Class B Shares and
Class C Shares of the Portfolio and other Delaware Investments funds which offer
corresponding classes of shares may also be aggregated for this purpose.
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<PAGE>
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 Investments funds (except shares of any Delaware Investments 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 Investments fund which carried a front-end
sales charge, CDSC or Limited CDSC). In addition, assets held by investment
advisory clients of the investment adviser or its affiliates in a stable value
account may be combined with other Delaware Investments fund holdings.
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 the 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 Investments
funds which offer such classes (except shares of any Delaware Investments 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 Investments 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 $10,000 at offering price of additional shares of Class A
Shares, the charge applicable to the $10,000 purchase would currently be 4.75%.
For the purpose of this calculation, the shares presently held shall be valued
at the public offering price that 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 (and of Institutional Class
holding shares which were acquired through an exchange from one of the other
mutual funds in Delaware Investments offered with a front-end sales charge) 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 that Portfolio or in
Class A Shares of any of the other funds in the Delaware Investments family,
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 Investments family 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 Class B
or 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 the Portfolio in which the investor does not then have an account
will be treated like all other initial purchases of the Portfolio'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 Portfolio'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 connection with the features described above.
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Group Investment Plans
Group Investment Plans which are not eligible to purchase shares of the
Institutional Class may also benefit from the reduced front-end sales charges
for investments in Class A Shares described in the Prospectus, based on total
plan assets. If a company has more than one plan investing in the Delaware
Investments family of funds, then the total amount invested in all plans would
be used in determining the applicable front-end sales charge reduction upon each
purchase, both initial and subsequent, upon notification to the Portfolio in
which the investment is being made at the time of each such purchase. Employees
participating in such Group Investment Plans may also combine the investments
made in their plan account when determining the applicable front-end sales
charge on purchases to non-retirement Delaware Investments investment accounts
if they so notify the Portfolio in which they are investing in connection with
each purchase. See "RETIREMENT PLANS" under "INVESTMENTS PLANS" for information
about retirement plans.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from a fund in the Delaware Investments family.
See "CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN REDEMPTIONS OF CLASS A SHARES
PURCHASED AT NET ASSET VALUE" under "REDEMPTION AND EXCHANGE".
Institutional Class
The Institutional Class of the Portfolio is 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 investment adviser or its affiliates and securities dealer
firms with a selling agreement with the Distributor; (c) institutional advisory
accounts of the investment adviser or its affiliates and those having client
relationships with Delaware Investment Advisers, an affiliate of the investment
adviser, or its other 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 of 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.
Shares of the Institutional Class 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 A,
B or C Class in which an investor has an account (based on the net asset value
in effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of Institutional Class are
reinvested in the accounts of the holders of such shares (based on the net asset
value in effect on the reinvestment 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 specific
Class in which shares are being purchased. Such purchases, which must meet the
minimum subsequent purchase requirements set forth in the Prospectuses and this
Part B, are made for Class A Shares at the public offering price, and for Class
B Shares, Class C Shares and Institutional Class 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.
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Reinvestment of Dividends in Other Delaware Investments Family of Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A Shares,
Class B Shares and Class C Shares may automatically reinvest dividends and/or
distributions in any of the mutual funds in the Delaware Investments, including
the Portfolio, 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 the Portfolio in which the investor does not then have an account
will be treated like all other initial purchases of the Portfolio'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.
Subject to the following limitations, dividends and/or distributions
from other funds in Delaware Investments may be invested in shares of the
Portfolio, provided an account has been established. Dividends from Class A
Shares may not be directed to Class B Shares or Class C Shares. Dividends 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.
Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the same Delaware
Investments fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Investments family, you may write and authorize an exchange of part or all of
your investment into shares of the Portfolio. 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 the Portfolio's Prospectus. See "REDEMPTION AND EXCHANGE" for more
complete information concerning your exchange privileges.
Holders of Class A Shares of the Portfolio may exchange all or part of
their shares for certain of the shares of other funds in the Delaware
Investments family, including other Class A Shares, but may not exchange their
Class A Shares for Class B Shares or Class C Shares of the Portfolio or of any
other fund in the Delaware Investments family. Holders of Class B Shares of the
Portfolio are permitted to exchange all or part of their Class B Shares only
into Class B Shares of other Delaware Investments funds. Similarly, holders of
Class C Shares of the Portfolio are permitted to exchange all or part of their
Class C Shares only into Class C Shares of other Delaware Investments funds.
Class B Shares of the Portfolio and Class C Shares of the Portfolio acquired by
exchange will continue to carry the CDSC 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 Portfolio 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 Portfolio.
Permissible exchanges into Class A Shares of the Portfolio 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 Portfolio 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.
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Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for the Portfolio
to accept for investment in Class A Shares, Class B Shares 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 Shares, Class B
Shares and Class C Shares may make automatic investments by authorizing, in
advance, monthly payments directly from their checking account for deposit into
their Portfolio 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, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) 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 Portfolio 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 Portfolio may liquidate sufficient 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 Portfolio.
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Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer,
to make investments directly to their Portfolio accounts. Either Portfolio 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 Pooled
Trust, Inc. for proper instructions.
MoneyLine (SM) On Demand
You or your investment dealer may request purchases of Class A, B and C
Shares by phone using MoneyLine (SM) On Demand. When you authorize the Portfolio
to accept such requests from you or your investment dealer, funds will be
withdrawn from (for share purchases) your predesignated bank account. Your
request will be processed the same day if you call prior to 4 p.m., Eastern
time. There is a $25 minimum and $50,000 maximum limit for MoneyLine (SM) On
Demand transactions.
It may take up to four business days for the transactions to be
completed. You can initiate this service by completing an Account Services form.
If your name and address are not identical to the name and address on your
Portfolio account, you must have your signature guaranteed. The Portfolio does
not charge a fee for this service; however, your bank may charge a fee.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Class A
Shares, Class B Shares and C Shares through regular liquidations of shares in
their accounts in other mutual funds in the Delaware Investments family.
Shareholders of the Class A, B and C Shares may elect to invest in one or more
of the other mutual funds in Delaware Investments family through the Wealth
Builder Option. 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 limitations as
other exchanges noted above.
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
Investments family, subject to the conditions and limitations set forth in the
Class A, B and C Shares 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.
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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 "REDEMPTION AND EXCHANGE" for a brief summary of the tax
consequences of exchanges. Shareholders can terminate their participation in
Wealth Builder at any time by giving written notice to the fund from which
exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Class.
Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete an Asset Planner Account Registration
Form, which is available only from a financial adviser or investment dealer.
Effective September 1, 1997, the Asset Planner Service is only available to
financial advisers or investment dealers who have previously used this service.
The Asset Planner service offers a choice of four predesigned asset allocation
strategies (each with a different risk/reward profile) in predetermined
percentages in Delaware Investments funds. With the help of a financial adviser,
you may also 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
Investments accounts into the Asset Planner service may be made at net asset
value under the circumstances described under "INVESTING BY EXCHANGE." Also see
"BUYING CLASS A SHARES AT NET ASSET VALUE." 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.
Class A, Class B and Class C Shares are available through the Asset Planner
service. Generally, only shares within the same class may be used within the
same Strategy. However, Class A Shares of the Portfolio and of other funds in
the Delaware Investments family may be used in the same Strategy with consultant
class shares that are offered by certain other Delaware Investments funds.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30 of each subsequent year. The fee,
payable to the Transfer Agent 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 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an IRA will continue
to pay an annual IRA fee of $15 per Social Security number. Investors will
receive a customized quarterly Strategy Report summarizing all 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.
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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.
See "INSTITUTIONAL CLASS," above, for additional information on any of the plans
and Delaware's retirement services, call the Shareholder Service Center.
Retirement Plans
An investment in the REIT Fund may be suitable for tax-deferred
retirement plans. Delaware Investments offers a full spectrum of retirement
plans, including the 401(k) Defined Contribution Plan, Individual Retirement
Account ("IRA") and the new Roth IRA and Education IRA.
Among the retirement plans that Delaware Investments offers, Class B
Shares are available only by Individual Retirement Accounts, SIMPLE IRAs, Roth
IRAs, Education IRAs, Simplified Employee Pension Plans, Salary Reduction
Simplified Employee Pension Plans, and 403(b)(7) and 457 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 SHARES AND
CLASS C SHARES" under "REDEMPTION AND EXCHANGE" 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 investment adviser 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 shares of the Institutional Class
shares. See "INSTITUTIONAL CLASS," above. For additional information on any of
the plans and Delaware's retirement services, call the Shareholder Service
Center telephone number.
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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, corporations and other eligible forms of organizations. These
plans can be maintained as Section 401(k), profit sharing or money purchase
pension plans. Contributions may be invested only in Class A Shares 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 no compensation for the year; however, participation
may be restricted based on certain income limits.
IRA Disclosures
The Taxpayer Relief Act of 1997 provides new opportunities for
investors. Individuals have five types of tax-favored IRA accounts that can be
utilized depending on the individual's circumstances. A new Roth IRA and
Education IRA are available in addition to the existing deductible IRA and
non-deductible IRA.
Deductible and Non-deductible IRAs
An individual can contribute up to $2,000 in his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income ("AGI") and whether the taxpayer is an active participant
in an employer sponsored retirement plan. Even if a taxpayer is an active
participant in an employer sponsored retirement plan, the full $2,000 is still
available if the taxpayer's AGI is below $30,000 ($50,000 for taxpayers filing
joint returns) for years beginning after December 31, 1997. A partial deduction
is allowed for married couples with income between $50,000 and $60,000, and for
single individuals with incomes between $30,000 and $40,000. These income
phase-out limits reach $80,000-$100,000 in 2007 for joint filers and
$50,000-$60,000 in 2005 for single filers. No deductions are available for
contributions to IRAs by taxpayers whose AGI after IRA deductions exceeds the
maximum income limit established for each year and who are active participants
in an employer sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA contributions still can
make non-deductible IRA contributions of as much as $2,000 for each working
spouse and defer taxes on interest or other earnings from the IRAs.
Under the new law, a married individual is not considered an active
participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant if the couple's combined AGI is
below $150,000. The maximum deductible IRA contribution for a married individual
who is not an active participant, but whose spouse is, is phased out for
combined AGI between $150,000 and $160,000.
Conduit (Rollover) IRAs
Certain individuals who have received or are about to receive eligible
rollover distributions from an employer-sponsored retirement plan or another IRA
may rollover the distribution tax-free to a Conduit IRA. The rollover of the
eligible distribution must be completed by the 60th day after receipt of the
distribution; however, if the rollover is in the form of a direct
trustee-to-trustee transfer without going through the distributee's hand, the
60-day limit does not apply.
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A distribution qualifies as an "eligible rollover distribution" if it
is made from a qualified retirement plan, a 403(b) plan or another IRA and does
not constitute one of the following:
(1) Substantially equal periodic payments over the employee's life or
life expectancy or the joint lives or life expectancies of the employee and
his/her designated beneficiary;
(2) Substantially equal installment payments for a period certain of 10
or more years;
(3) A distribution, all of which represents a required minimum
distribution after attaining age 70 1/2;
(4) A distribution due to a Qualified Domestic Relations Order to an
alternate payee who is not the spouse (or former spouse) of the employee; and
(5) A distribution of after-tax contributions which is not includable
in income.
Roth IRAs
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $2,000 per year can be made to a new Roth IRA. As a
result of the Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Act"), the $2,000 annual limit will not be reduced by any contributions to
a deductible or nondeductible IRA for the same year before applying the AGI
limitation. The maximum contribution that can be made to a Roth IRA is phased
out for single filers with AGI between $95,000 and $110,000, and for couples
filing jointly with AGI between $150,000 and $160,000. Qualified distributions
from a Roth IRA would be exempt from federal taxes. Qualified distributions are
distributions (1) made after the five-taxable year period beginning with the
first taxable year for which a contribution was made to a Roth IRA and (2) that
are (a) made on or after the date on which the individual attains age 59 1/2,
(b) made to a beneficiary on or after the death of the individual, (c)
attributed to the individual being disabled, or (d) for a qualified special
purpose (e.g., first time homebuyer expenses).
Distributions that are not qualified distributions would always be
tax-free if the taxpayer is withdrawing contributions, not accumulated earnings.
Taxpayers with AGI of $100,000 or less are eligible to convert an
existing IRA (deductible, nondeductible and conduit) to a Roth IRA. Earnings and
contributions from a deductible IRA are subject to a tax upon conversion;
however, no 10% excise tax for early withdrawal would apply. If the conversion
is done prior to January 1, 1999, then the income from the conversion can be
included in income ratably over a four-year period beginning with the year of
conversion.
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Education IRAs
For taxable years beginning after December 31, 1997, an Education IRA
has been created exclusively for the purpose of paying qualified higher
education expenses. Taxpayers can make non-deductible contributions up to $500
per year per beneficiary. The $500 annual limit is in addition to the $2,000
annual contribution limit applicable to IRAs and Roth IRAs. Eligible
contributions must be in cash and made prior to the date the beneficiary reaches
age 18. Similar to the Roth IRA, earnings would accumulate tax-free. There is no
requirement that the contributor be related to the beneficiary, and there is no
limit on the number of beneficiaries for whom one contributor can establish
Education IRAs. In addition, multiple Education IRAs can be created for the same
beneficiaries, however, the contribution limit of all contributions for a single
beneficiary cannot exceed $500 annually.
This $500 annual contribution limit for Education IRAs is phased out
ratably for single contributors with modified AGI between $95,000 and $110,000,
and for couples filing jointly with modified AGI of between $150,000 and
$160,000. Individuals with modified AGI above the phase-out range are not
allowed to make contributions to an Education IRA established on behalf of any
other individual.
Distributions from an Education IRA are excludable from gross income to
the extent that the distribution does not exceed qualified higher education
expenses incurred by the beneficiary during the year the distribution is made
regardless of whether the beneficiary is enrolled at an eligible educational
institution on a full-time, half-time, or less than half-time basis.
Any balance remaining in an Education IRA at the time a beneficiary
becomes 30 years old must be distributed, and the earnings portion of such a
distribution will be includable in gross income of the beneficiary and subject
to an additional 10% penalty tax if the distribution is not for qualified higher
education expenses. Tax-free (and penalty-free) transfers and rollovers of
account balances from one Education IRA benefiting one beneficiary to another
Education IRA benefiting a different beneficiary (as well as redesignations of
the named beneficiary) is permitted, provided that the new beneficiary is a
member of the family of the old beneficiary and that the transfer or rollover is
made before the time the old beneficiary reaches age 30 and the new beneficiary
reaches age 18.
A company or association may establish a Group IRA or Group Roth IRA
for employees or members who want to purchase shares of the Portfolio.
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. For information concerning the applicability of a CDSC upon
redemption of Class B Shares and Class C Shares, see "CONTINGENT DEFERRED SALES
CHARGE - CLASS B SHARES AND CLASS C SHARES."
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. In addition, effective January 1, 1998, the new law allows for premature
distribution without a 10% penalty if (i) the amounts are used to pay qualified
higher education expenses (including graduate level courses) of the taxpayer,
the taxpayer's spouse or any child or grandchild of the taxpayer or the
taxpayer's spouse, or (ii) used to pay acquisition costs of a principle
residence for the purchase of a first-time home by the taxpayer, taxpayer's
spouse or any child or grandchild of the taxpayer or the taxpayer's spouse. A
qualified first-time homebuyer is someone who has had no ownership interest in a
residence during the past two years. The aggregate amount of distribution for
first-time home purchases cannot exceed a lifetime cap of $10,000.
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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")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may continue to be maintained by employers having 25 or
fewer employees. An employer may elect to make additional contributions to such
existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Effective January 1, 1997,
non-governmental tax-exempt organizations may establish 401(k) plans. 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 Investments family. Purchases under the Plan may be
combined for purposes of computing the reduced front-end sales charge applicable
to Class A Shares as set forth in the table the Prospectus.
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 shares
of any of the Classes in conjunction with such an arrangement. Purchases under
the Plan may be combined for purposes of computing the reduced front-end sales
charge applicable to Class A Shares as set forth in the table the Prospectus.
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 the Portfolio. Although investors may use
their own plan, there is available a Delaware Investments 457 Deferred
Compensation Plan. Interested investors should contact the Distributor or their
investment dealers to obtain further information. Purchases under the Plan may
be combined for purposes of computing the reduced front-end sales charge
applicable to Class A Shares as set forth in the table in the Prospectus.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis. A SIMPLE IRA is available only to plan sponsors with 100 or
fewer employees.
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SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available
only to plan sponsors 100 or fewer employees and, in exchange for mandatory plan
sponsor contributions, discrimination testing is no longer required. Class B
Shares are not available for purchase by such plans.
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
Pooled Trust, Inc. or, as applicable, Foundation Funds and Federal Funds wire by
the Portfolio's Custodian Bank, plus in the case of The Emerging Markets
Portfolio, The Global Equity Portfolio, The International Small-Cap Portfolio
and The International Large-Cap Equity Portfolio, any applicable purchase
reimbursement fee equal to 0.75%, 0.40%, 0.55% and 0.45%, respectively, 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 days when the following
holidays are observed: New Year's Day, Martin Luther King, Jr.'s Birthday,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. When the New York Stock Exchange is closed, Pooled
Trust, Inc. and Foundation Funds will generally be closed, pricing calculations
will not be made and purchase and redemption orders will not be processed.
Class A Shares, Class B Shares 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 by the Portfolio in which shares are being purchased after
receipt of the order by Pooled Trust, Inc., its agent or certain other
authorized persons. See "DISTRIBUTION AND SERVICE" under "INVESTMENT MANAGEMENT
AGREEMENTS AND SUB-ADVISORY AGREEMENTS." Orders for purchases of Class B Shares,
Class C Shares and the Institutional Class are effected at the net asset value
per share next calculated after receipt of the order by the Portfolio, its agent
or certain other authorized persons. Selling dealers are responsible for
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 days when the following holidays are observed: New
Year's Day, Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. When the
New York Stock Exchange is closed, Pooled Trust, Inc. will generally be closed,
pricing calculations will not be made and purchase and redemption orders will
not be processed.
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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 Real Estate Investment Trust Portfolio may
vary. However, the net asset value per share of each Class is expected to be
equivalent.
* * *
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 Board of
Directors or Trustees, as applicable.
The securities in which The International Equity Portfolio, The
International Large-Cap Equity Portfolio, The Labor Select International Equity
Portfolio, The Global Fixed Income Portfolio, The International Fixed Income
Portfolio, The Emerging Markets Portfolio, The International Small-Cap Portfolio
and The Global Equity Portfolio (as well as The Real Estate Investment Trust
Portfolios, The High-Yield Bond Portfolio, The Diversified Core Fixed Income
Portfolio The Asset Allocation Portfolio, The Small-Cap Growth Equity Portfolio
and The Core Equity 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 holidays or 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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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. Foreign securities and the prices of foreign
securities denominated in foreign currencies are translated into U.S. dollars at
the mean between the bid and offer quotations of such currencies based on rates
in effect as of the close of the London Stock Exchange.
An example showing how to calculate the net asset value per share and,
in the case of Class A Shares of The Real Estate Investment Trust Portfolio, the
offering price per share, is included in the financial statements for the
Portfolios which are incorporated by reference into this Part B.
REDEMPTION AND EXCHANGE
The following supplements the disclosure provided in the 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, The Global
Equity Portfolio, The International Small-Cap Portfolio and The International
Large-Cap Equity Portfolio are assessed by the relevant Portfolio a redemption
reimbursement fee of 0.75%, 0.30%, 0.45% and 0.35%, respectively. Payment for
shares redeemed or repurchased may be made either in cash or in-kind, or partly
in cash and partly in-kind. If a redemption of shares is made in-kind, the
redemption reimbursement fee that is otherwise applicable will not be assessed.
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 Emerging Markets Portfolio, The International
Equity Portfolio, The International Large-Cap Equity Portfolio, The Labor Select
International Equity Portfolio, The International Small-Cap Portfolio, The
Global Fixed Income Portfolio, The International Fixed Income Portfolio and The
Global Equity Portfolio. Under certain circumstances, eligible investors who
have an existing investment counseling relationship with Delaware Investment
Advisers or Delaware International will not be subject to Pooled Trust, Inc.'s
in-kind redemption requirements until such time as Pooled Trust, Inc. or
Foundation Funds, as applicable, receives appropriate regulatory approvals to
permit such redemptions for the account of such investors.
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Pooled Trust, Inc. and Foundation Funds has elected to be governed by
Rule 18f-1 under the 1940 Act pursuant to which Pooled Trust, Inc. 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 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, Pooled
Trust, Inc. and Foundation Funds 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 Pooled Trust, Inc. 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.
* * *
Pooled Trust, Inc. and Foundation Funds has available certain
redemption privileges, as described below. They are unavailable to shareholders
of The Emerging Markets Portfolio, The International Equity Portfolio, The
International Large-Cap Equity Portfolio, The Labor Select International Equity
Portfolio, The International Small-Cap Portfolio, The Global Fixed Income
Portfolio, The International Fixed Income Portfolio and The Global Equity
Portfolio whose redemptions trigger the special in-kind redemption procedures.
See the related Prospectus. The Portfolios reserve 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 Pooled Trust, Inc. at (800-231-8002) prior to 4 p.m.,
Eastern time, and have the proceeds mailed to them at the record address.
Redemptions involving The Asset Allocation Portfolio will be forwarded to
Foundation Funds. 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 Pooled Trust, Inc., as
described above. The Telephone Redemption Option on the Account Registration
Form must have been elected by the shareholder and filed with Pooled Trust, Inc.
before the request is received. Payment will be made by wire or check to the
bank account designated on the authorization form as follows:
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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 Portfolio 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 the check after the bank receives it. If expedited payment under
these procedures could adversely affect a Portfolio, Pooled Trust, Inc. or as
applicable, Foundation Funds 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 may be exchanged for shares of any other
Portfolio or for the institutional classes of the other funds in the Delaware
Investments family. Exchange requests should be sent to Delaware Pooled Trust,
Inc., One Commerce Square, 2005 Market Street, Philadelphia, PA 19103 Attn:
Client Services. Exchanges involving The Asset Allocation Portfolio will be
forwarded to Foundation Funds.
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 the special purchase and redemption reimbursement fees for
exchanges involving shares of The Emerging Markets Portfolio, The Global Equity
Portfolio, The International Small-Cap Portfolio and The International Large-Cap
Equity 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 authorized for sale 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.
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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 Pooled Trust, Inc. or, as applicable,
Foundation Funds 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 or
Trustees, as applicable, to assure that such exchanges do not disadvantage a
Portfolio and its shareholders. Exchanges into and out of The Emerging Markets
Portfolio, The International Equity Portfolio, The International Large-Cap
Equity Portfolio, The Labor Select International Equity Portfolio, The Global
Fixed Income Portfolio, The International Fixed Income Portfolio, The
International Small-Cap 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. Pooled Trust, Inc. and Foundation Funds reserves
the right to suspend or terminate or amend the terms of the exchange privilege
upon 60 days' written notice to client shareholders.
* * *
Neither Pooled Trust, Inc., Foundation Funds, the Portfolios nor the
Portfolios' 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, Pooled Trust, Inc. or, as
applicable, Foundation Funds 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, Pooled
Trust, Inc., Foundation Funds 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.
Class A Shares, Class B Shares and Class C Shares and Institutional Class
Shares of The Real Estate Investment Trust Portfolio
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 equity funds, tax-advantaged 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
the Portfolio and all exchanges of shares constitute taxable events. 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
Delaware Investments will best meet your changing objectives, and the
consequences of any exchange transaction. You may also call the Delaware
Investments directly for fund information.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after the Portfolio receives your request in good
order, subject, in the case of a redemption, to any applicable CDSC or Limited
CDSC. For example, redemption or exchange requests received in good order after
the time the offering price and net asset value of shares are determined will be
processed on the next business day. 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 Portfolio will redeem the
number of shares necessary to deduct the applicable CDSC in the case of Class B
Shares 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.
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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 in which you want to invest 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
Portfolio may suspend, terminate, or amend the terms of the exchange privilege
upon 60 days' written notice to shareholders.
In addition to redemption of Portfolio shares, the Distributor, acting
as agent of the Portfolio, 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 Portfolio, its agent, or certain authorized persons, subject to 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 Portfolio 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 Portfolio 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 the 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.
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 by the Portfolio or certain other authorized persons (see
"DISTRIBUTION AND SERVICE" under "INVESTMENT MANAGEMENT AGREEMENTS AND
SUB-ADVISORY AGREEMENTS"); 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 Portfolio will process written and telephone redemption requests to
the extent that the purchase orders for the shares being redeemed have already
settled. The Portfolio will honor redemption requests as to shares for which a
check was tendered as payment, but the Portfolio 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 Portfolio
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.
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
Portfolio 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 Portfolio or to the Distributor.
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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 Portfolio of securities owned by it is not reasonably
practical, or it is not reasonably practical for the Portfolio fairly to value
its assets, or in the event that the SEC has provided for such suspension for
the protection of shareholders, the Portfolio 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, Pooled
Trust, Inc. has elected to be governed by Rule 18f-1 under the 1940 Act pursuant
to which the Portfolio is obligated to redeem shares solely in cash up to the
lesser of $250,000 or 1% of the net asset value of the Portfolio during any
90-day period for any one shareholder.
The value of the Portfolio's investments is subject to changing market
prices. Thus, a shareholder reselling shares to the Portfolio may sustain either
a gain or loss, depending upon the price paid and the price received for such
shares.
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,"
below. 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; and (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 shares are redeemed within 12 months following purchase. See
"CONTINGENT DEFERRED SALES CHARGE - CLASS B SHARES AND CLASS C SHARES" under
"PURCHASING SHARES." Except for the applicable CDSC or Limited CDSC and, with
respect to the expedited payment by wire described below for which, in the case
of the Class A, B and C Shares, there is currently a $7.50 bank wiring cost,
neither the Portfolio nor the Distributor charges a fee for redemptions or
repurchases, but such fees could be charged at any time in the future.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Investments (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 Part B 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 Portfolio, the Portfolio'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 Portfolio for a longer period of time
than if the investment in New Shares were made directly.
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Written Redemption
You can write to the Portfolio 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 Portfolio require a signature by all owners of the
account and a signature guarantee for each owner. A signature guarantee can be
obtained from a commercial bank, a trust company or a member of a Securities
Transfer Association Medallion Program ("STAMP"). The Portfolio reserves the
right to reject a signature guarantee supplied by an eligible institution based
on its creditworthiness. The Portfolio 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. If your Class A Shares are in certificate form, the
certificate(s) 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 Portfolio (at 1818 Market Street,
Philadelphia, PA 19103) to request an exchange of any or all of your shares into
another mutual fund in Delaware Investments, 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 Portfolio in which you have your
account in writing that you do not wish to have such services available with
respect to your account. The Portfolio reserves the right to modify, terminate
or suspend these procedures upon 60 days' written notice to shareholders. It may
be difficult to reach the Portfolio by telephone during periods when market or
economic conditions lead to an unusually large volume of telephone requests.
Neither the Portfolio nor its Transfer Agent is responsible for any
shareholder loss 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 Portfolio 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, such Portfolio or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent transactions. Telephone instructions received by
the Class A, B and C Shares 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.
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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 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 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. First Union National Bank's fee
(currently $7.50) will be deducted from Class A, B and C Shares redemption
proceeds. 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 separate 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 Delaware Investments 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 the Portfolio, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds in the Delaware Investments family. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and the Portfolio
reserve the right to record exchange instructions received by telephone and to
reject exchange requests at any time in the future.
MoneyLine (SM) On Demand
You or your investment dealer may request redemptions of Class A, B and
C Shares by phone using MoneyLine (SM) On Demand. When you authorize the
Portfolio to accept such requests from you or your investment dealer, funds will
be deposited to (for share redemptions) your predesignated bank account. Your
request will be processed the same day if you call prior to 4 p.m., Eastern
time. There is a $25 minimum and $50,000 maximum limit for MoneyLine (SM) On
Demand transactions. See "MONEYLINE (SM) ON DEMAND" under "INVESTMENT PLANS."
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Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Portfolio will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Investments funds from Timing Firms. The Portfolio reserves the right to
temporarily or permanently terminate the exchange privilege or reject any
specific purchase order for any person whose transactions seem to follow a
timing pattern who: (i) makes an exchange request out of the Portfolio within
two weeks of an earlier exchange request out of the Portfolio, or (ii) makes
more than two exchanges out of the Portfolio per calendar quarter, or (iii)
exchanges shares equal in value to at least $5 million, or more than 1/4 of 1%
of the Portfolio's net assets. Accounts under common ownership or control,
including accounts administered so as to redeem or purchase shares based upon
certain predetermined market indicators, will be aggregated for purposes of the
exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Investments funds: (1)
Decatur Income Fund, (2) Decatur Total Return Fund, (3) Delaware Balanced Fund,
(4) Limited-Term Government Fund, (5) USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund and (8) Tax-Free Pennsylvania Fund. No other Delaware
Investments funds are available for timed exchanges. Assets redeemed or
exchanged out of Timing Accounts in Delaware Investments funds not listed above
may not be reinvested back into that Timing Account. The Portfolio reserves the
right to apply these same restrictions to the account(s) of any person whose
transactions seem to follow a time pattern (as described above).
The Portfolio also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the investment
adviser's judgment, the Portfolio would be unable to invest effectively in
accordance with its investment objectives and policies, or would otherwise
potentially be adversely affected. A shareholder's purchase exchanges may be
restricted or refused if the Portfolio receives or anticipates simultaneous
orders affecting significant portions of the Portfolio's assets. In particular,
a pattern of exchanges that coincide with a "market timing" strategy may be
disruptive to the Portfolio and therefore may be refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
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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 Portfolios do not recommend
any specific amount of withdrawal. This is particularly useful to shareholders
living on fixed incomes, since it can provide them with a stable supplemental
amount. This $5,000 minimum does not apply for the Portfolio'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.
Shareholders should not purchase additional shares while participating in a
Systematic Withdrawal Plan.
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. Premature withdrawals from
retirement plans may have adverse tax consequences.
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
investment adviser 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
Investments funds which do not carry a sales charge. 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. 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%
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.
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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 Portfolio 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.
Systematic Withdrawal Plan payments are normally made by check. In the
alternative, you may elect to have your payments transferred from your Portfolio
account to your predesignated bank account through the MoneyLine (SM) Direct
Deposit Service. Your funds will normally be credited to your bank account up to
four business days after the payment date. There are no separate fees for this
redemption method. It may take up to four business days for the transactions to
be completed. You can initiate this service by completing an Account Services
form. If your name and address are not identical to the name and address on your
Portfolio account, you must have your signature guaranteed. The Portfolio does
not charge a fee for any this service; however, your bank may charge a fee. This
service is not available for retirement plans.
The Systematic Withdrawal Plan is not available for the Institutional
Class. Shareholders should consult with their financial advisers to determine
whether a Systematic Withdrawal Plan would be suitable for them.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
For purchases of $1,000,000 or more made on or after July 1, 1998, a
Limited CDSC will be imposed on certain redemptions of Class A Shares (or shares
into which such Class A Shares are exchanged) according to the following
schedule: (1) 1.00% if shares are redeemed during the first year after the
purchase; and (2) 0.50% if such shares are redeemed during the second year after
the purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission described above.
The Limited CDSC will be paid to the Distributor and will be assessed
on an amount equal to the lesser 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 Investments 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.
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<PAGE>
Redemptions of such Class A Shares held for more than two years will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Investments 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 two-year
holding period. The Limited CDSC is assessed if such two year period is not
satisfied irrespective of whether the redemption triggering its payment is of
Class A Shares of the Portfolio 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 Portfolio'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; (ii) distributions to participants from a
retirement plan qualified under section 401(a) or 401(k) of the Internal Revenue
Code of 1986, as amended (the "Code"), or due to death of a participant in such
a plan; (iii) redemptions pursuant to the direction of a participant or
beneficiary of a retirement plan qualified under section 401(a) or 401(k) of the
Code with respect to that retirement plan; (iv) periodic distributions from an
IRA, SIMPLE IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to death,
disability, or attainment of age 59 1/2, and IRA distributions qualifying under
Section 72(t) of the Internal Revenue Code; (v) returns of excess contributions
to an IRA; (vi) distributions by other employee benefit plans to pay benefits;
(vii) distributions described in (ii), (iv), and (vi) above pursuant to a
systematic withdrawal plan; and (viii) 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 "PURCHASING SHARES").
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<PAGE>
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
Portfolio'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; (ii) returns of excess contributions to an IRA, SIMPLE
IRA, SEP/IRA, or 403(b)(7) or 457 Deferred Compensation Plan; (iii) periodic
distributions from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, or 403(b)(7) or 457
Deferred Compensation Plan due to death, disability or attainment of age 59 1/2,
and IRA distributions qualifying under Section 72(t) of the Internal Revenue
Code; and (iv) 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 on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the Portfolio'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; (ii) returns
of excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution plan; (iii) periodic distributions from a 403(b)(7) or 457
Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan,
Money Purchase Plan, 401(k) Defined Contribution Plan upon attainment of age 70
1/2, and IRA distributions qualifying under Section 72(t) of the Internal
Revenue Code; (iv) distributions from a 403(b)(7) or 457 Deferred Compensation
Plan, Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or a 401(k)
Defined Contribution Plan upon attainment of normal retirement age under the
plan or upon separation from service; (vi) periodic distributions from an IRA or
SIMPLE IRA on or after attainment of age 59 1/2; and (vii) 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 Shares 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.
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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, a Portfolio will not be subject to
federal income tax, or to any excise tax, to the extent its earnings are
distributed as provided in the Code and it satisfies other requirements relating
to the sources of its income and diversification of its assets.
The policy of Pooled Trust, Inc. and Foundation Funds, as applicable,
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. All dividends and capital gains
distributions of accounts in REIT Fund Institutional Class shall be
automatically reinvested in the Class. For all other Portfolios and Classes of
The Real Estate Investment Trust Portfolio, shareholders may elect to receive
dividends and capital gains distributions in cash, otherwise, all such dividends
and distributions will be automatically reinvested in the Portfolios. The
amounts of any dividend or capital gains distributions cannot be predicted.
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.
For the fiscal year ended October 31, 1998, the percentage of dividends
paid by the following Portfolios qualified for the dividends-received deduction:
The Large-Cap Value Equity Portfolio 74%
The Real Estate Investment Trust Portfolio 100%
The Core Equity Portfolio 100%
The Mid-Cap Growth Equity Portfolio 8%
The Mid-Cap Value Equity Portfolio 100%
The Small-Cap Value Equity Portfolio N/A
The Small-Cap Growth Equity Portfolio 1%
The Real Estate Investment Trust Portfolio II 100%
The Global Equity Portfolio 81%
The International Equity Portfolio none
The Labor Select International Equity Portfolio none
The Emerging Markets Portfolio none
The Intermediate Fixed Income Portfolio none
The Aggregate Fixed Income Portfolio none
The High-Yield Bond Portfolio 3 %
The Diversified Core Fixed Income Portfolio none
The Global Fixed Income Portfolio none
The International Fixed Income Portfolio none
The Asset Allocation Portfolio N/A
The International Small-Cap Portfolio N/A
The Balanced Portfolio N/A
The Equity Income Portfolio N/A
The Select Equity Portfolio N/A
The International Large-Cap Equity Portfolio N/A
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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 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, Pooled Trust, Inc. or, as applicable, Foundation Funds will
mail information to investors 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
Prospectuses.
Under the Taxpayer Relief Act of 1997, as revised by the Internal
Revenue Service Act of 1998 (the "1998 Act") and the Omnibus Consolidated and
Emergency Supplemental Appropriations Act, a Portfolio is required to track its
sales of portfolio securities and to report its capital gain distributions to
you according to the following categories of holding periods:
"Mid-term capital gains" or "28 percent rate gain": securities sold by a
Portfolio after July 28, 1997 that were held more than one year but not
more than 18 months. These gains will be taxable to individual investors
at a maximum rate of 28%. This category of gains applied only to gains and
distributions in 1997.
"1997 Act long-term capital gains" or "20 percent rate gain": securities
sold between May 7, 1997 and July 28, 1997 that were held for more than 12
months, and securities sold by a Portfolio after July 28, 1997 that were
held for more than 18 months. As revised by the 1998 Act, this rate
applies to securities held for more than 12 months and sold in tax years
beginning after December 1, 1997. These gains will be taxable to
individual investors at a maximum rate of 20% for investors in the 28% or
higher federal income tax brackets, and at a maximum rate of 10% for
investors in the 15% federal income tax bracket. The Omnibus Consolidated
and Emergency Supplemental Appropriations Act passed in October of 1998
included technical corrections to the 1998 Act. The effect of this
correction is that essentially all capital gain distributions paid to
shareholders during 1998 will be taxed at a maximum rate of 20%.
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<PAGE>
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
five-year gains are net gains on securities held for more than 5 years
which are sold after December 31, 2000. For individual who are subject to
tax at higher rate brackets, qualified five-year gains are net gains on
securities which are purchased after December 31, 2000 and are held for
more than five years. Taxpayers subject to tax at a higher rate brackets
may also make an election for shares held on January 1, 2001 to recognize
gain on their shares in order to qualify such shares as qualified
five-year property. These gains will be taxable to individual investors at
a maximum rate of 18% for investors in the 28% or higher federal income
tax brackets, and at a maximum rate of 8% for investors in the 15% federal
income tax bracket when sold after the five-year holding period.
A portion of each Portfolio's dividends may qualify for the
dividends-received deduction for corporations provided in the federal income tax
law. The portion of dividends paid by a Portfolio that so qualifies will be
designated each year in a notice mailed to a Portfolio's shareholders, and
cannot exceed the gross amount of dividends received by a Portfolio from
domestic (U.S.) corporations that would have qualified for the
dividends-received deduction in the hands of a Portfolio if the Portfolio was a
regular corporation. The availability of the dividends-received deduction is
subject to certain holding period and debt financing restrictions imposed under
the Code on the corporation claiming the deduction. Under the 1997 Act, the
amount that a Portfolio may designate as eligible for the dividends-received
deduction will be reduced or eliminated if the shares on which the dividends
earned by a Portfolio were debt-financed or held by a Portfolio for less than a
46-day period during a 90-day period beginning 45 days before the ex-dividend
date and ending 45 days after the ex-dividend date. Similarly, if your Portfolio
shares are debt-financed or held by you for less than a 46-day period during a
90-day period beginning 45 days before the ex-dividend date and ending 45 days
after the ex-dividend date, then the dividends-received deduction for Portfolio
dividends on your shares may also be reduced or eliminated. Even if designated
as dividends eligible for the dividends-received deduction, all dividends
(including any deducted portion) must be included in your alternative minimum
taxable income calculation.
Shareholders will be notified annually by Pooled Trust, Inc. or
Foundation Funds, as applicable, as to the federal income tax status of
dividends and distributions paid by their Portfolio.
In addition to the federal taxes described above, distributions and
gains by the Portfolios, from the sale or exchange of your shares, generally
will be subject to various state and local taxes. Because shareholders' state
and local taxes may be different than the federal taxes described above,
shareholders should consult their own tax advisers. Non-U.S. investors may be
subject to U.S. withholding and estate tax. Each year Pooled Trust, Inc. or
Foundation Funds, as applicable, will mail to you information on the amount and
tax status of each Portfolio's dividends and distribution.
See also "OTHER TAX REQUIREMENTS" under "ACCOUNTING AND TAX ISSUES" in
this Part B.
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Futures Contracts and Stock Options
(The Mid-Cap Growth Equity Portfolio, The Real Estate Investment Trust
Portfolios, The Emerging Markets Portfolio, The Global Equity Portfolio, The
International Large-Cap Equity Portfolio, The Balanced Portfolio, The Equity
Income Portfolio, The Select Equity Portfolio, The International Small-Cap
Portfolio, The Diversified Core Fixed Income Portfolio, The Asset Allocation
Portfolio, The Small-Cap Value Equity Portfolio, The Small-Cap Growth Equity
Portfolio and The Core Equity Portfolio)
The Mid-Cap Growth Equity Portfolio's, The Real Estate Investment Trust
Portfolios', The Emerging Markets Portfolio's, The Global Equity Portfolio's,
The International Large-Cap Equity Portfolio's, The Diversified Core Fixed
Income Portfolio's, The Asset Allocation Portfolio's, The Small-Cap Value Equity
Portfolio's, The Small-Cap Growth Equity Portfolio's, The Balanced Portfolio's,
The Equity Income Portfolio's, The Select Equity Portfolio's, The International
Small-Cap Portfolio's and The Core 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 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 International Large-Cap 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, The Global Equity
Portfolio, The Diversified Core Fixed Income Portfolio, The Asset Allocation
Portfolio, The Small-Cap Value Equity Portfolio, The Small-Cap Growth Equity
Portfolio, The Balanced Portfolio, The Equity Income Portfolio, The Select
Equity Portfolio, The International Small-Cap Portfolio and The Core Equity
Portfolio)
The International Equity Portfolio, The International Large-Cap 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, The Global
Equity Portfolio, The Diversified Core Fixed Income Portfolio, The Asset
Allocation Portfolio, The Small-Cap Value Equity Portfolio, The Small-Cap Growth
Equity Portfolio, The Balanced Portfolio, The Equity Income Portfolio, The
Select Equity Portfolio, The International Small-Cap Portfolio and The Core
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 Pooled Trust, Inc. are exempt from Pennsylvania county
personal property tax.
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INVESTMENT MANAGEMENT AGREEMENTS AND SUB-ADVISORY AGREEMENTS
Delaware Management Company ("Delaware"), One Commerce Square,
Philadelphia, PA 19103, furnishes investment management services to The
Large-Cap Value Equity, The Mid-Cap Growth Equity, The Intermediate Fixed
Income, The Aggregate Fixed Income, The Mid-Cap Value Equity, The Real Estate
Investment Trust, The High-Yield Bond, The Diversified Core Fixed Income and The
Asset Allocation, The Small-Cap Growth Equity, The Core Equity, The Balanced,
The Equity Income, The Select Equity and The Small-Cap Value Equity Portfolios,
subject to the supervision and direction of Board of Directors or Trustees of
Pooled Trust, Inc. or, as applicable, Foundation Funds. Delaware International
Advisers Ltd. ("Delaware International"), Third Floor, 80 Cheapside, London,
England EC2V 6EE, furnishes similar services to The International Equity, The
International Large-Cap Equity, The Labor Select International Equity, The
Global Fixed Income, The International Fixed Income, The Emerging Markets, The
Global Equity and The International Small-Cap Portfolios, and provides
sub-advisory services to The Diversified Core Fixed Income Portfolio subject to
the supervision and direction of Pooled Trust, Inc.'s Board of Directors.
Lincoln Investment Management, Inc. ("Lincoln") serves as sub-adviser to
Delaware with respect to The Real Estate Investment Trust Portfolios. Lincoln's
address is 200 E. Berry Street, Fort Wayne, Indiana 46802.
Delaware and its predecessors have been managing the funds in the
Delaware Investments family since 1938. On October 31, 1998, Delaware and its
affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $42 billion in assets in
the various institutional or separately managed (approximately $24,854,600,000)
and investment company ($17,780,970,000) accounts.
Lincoln (formerly Lincoln National Investment Management Company) was
incorporated in 1930. As of October 31, 1998, Lincoln had approximately $39.8
billion in assets under management.
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The following table contains the dates of the Investment Management
Agreements for the Portfolios as well as the dates that they were approved by
shareholders.
<TABLE>
<CAPTION>
Portfolio Date of Agreement Date Approved by
Shareholders
<S> <C> <C>
The Large-Cap Value Equity Portfolio April 15, 1999 April 13, 1999
The Mid-Cap Growth Equity Portfolio April 15, 1999 April 13, 1999
The International Fixed Income Portfolio April 15, 1999 April 13, 1999
The International Equity Portfolio April 15, 1999 April 13, 1999
The Global Fixed Income Portfolio April 15, 1999 April 13, 1999
The Intermediate Fixed Income Portfolio April 15, 1999 April 13, 1999
The Mid-Cap Value Equity Portfolio April 15, 1999 April 13, 1999
The Labor Select International Equity Portfolio April 15, 1999 April 13, 1999
The Real Estate Investment Trust Portfolio April 15, 1999 April 13, 1999
The High-Yield Bond Portfolio April 15, 1999 April 13, 1999
The Emerging Markets Portfolio April 15, 1999 April 13, 1999
The Global Equity Portfolio April 15, 1999 April 13, 1999
The Real Estate Investment Trust Portfolio II April 15, 1999 April 13, 1999
The Aggregate Fixed Income Portfolio April 15, 1999 April 13, 1999
The Diversified Core Fixed Income Portfolio April 15, 1999 April 13, 1999
The Core Equity Portfolio April 15, 1999 April 13, 1999
The Small-Cap Growth Equity Portfolio April 15, 1999 April 13, 1999
The Small-Cap Value Equity Portfolio March 1, 1999 March 1, 1999
The Balanced Portfolio June 29, 1999 June 29, 1999*
The Equity Income Portfolio June 29, 1999 June 29, 1999*
The Select Equity Portfolio June 29, 1999 June 29, 1999*
The International Small-Cap Portfolio June 30, 1999 July 19, 1999*
The Asset Allocation Portfolio August 31, 1998 **
The International Large-Cap Equity Portfolio November 15, 1999 **
</TABLE>
* Date approved by the initial shareholder
** Will be approved by the initial shareholder prior to commencement
of operations.
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The Sub-Advisory Agreements between Delaware and Lincoln for The Real
Estate Investment Trust Portfolios are each dated April 15, 1999 and were
approved by shareholders on April 13, 1999. The Sub-Advisory Agreement between
Delaware and Delaware International for The Diversified Core Fixed Income
Portfolio is dated April 15, 1999 and was approved by shareholders on April 13,
1999.
Each Portfolio's Investment Management 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 Trustees, as applicable, 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 or
trustees of Pooled Trust, Inc. or Foundation Funds 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 Pooled Trust, Inc., the trustees
of Foundation Funds or by the investment adviser. Each Agreement will terminate
automatically in the event of its assignment.
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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 Large-Cap Value Equity Portfolio 0.55%
The Mid-Cap Growth Equity Portfolio 0.75%
The International Equity Portfolio 0.75%
The Mid-Cap Value Equity Portfolio 0.75%
The Labor Select International Equity Portfolio 0.75%
The Real Estate Investment Trust Portfolio 0.75%(1)
The Real Estate Investment Trust Portfolio II 0.75%(1)
The Intermediate Fixed Income Portfolio 0.40%
The Aggregate Fixed Income Portfolio 0.40%
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 1.00%
The Global Equity Portfolio 0.75%(2)
The Diversified Core Fixed Income Portfolio 0.43%(2)
The Asset Allocation Portfolio 0.05%
The Small-Cap Growth Equity Portfolio 0.75%
The Core Equity Portfolio 0.55%
The Small-Cap Value Equity Portfolio 0.75%
The Balanced Portfolio 0.55%
The Equity Income Portfolio 0.55%
The Select Equity Portfolio 1.00%
The International Small-Cap Portfolio 1.00%
The International Large-Cap Equity Portfolio 0.75%
(1) 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 Pooled Trust, Inc.
on behalf of the Portfolio.
(2) Delaware has entered into sub-advisory agreements with Delaware
International with respect to The Global Equity Portfolio and The
Diversified Core Fixed Income Portfolio. As compensation for its services
as sub-adviser to Delaware, Delaware International is entitled to receive
sub-advisory fees equal to 50% of the investment management fees under
Delaware's Investment Management Agreement with Pooled Trust, Inc. on
behalf of The Global Equity Portfolio. With respect to The Diversified
Core Fixed Income Portfolio, as compensation for Delaware International's
services as sub-adviser to Delaware, Delaware International is entitled to
receive sub-advisory fees from Delaware an amount equal to the management
fee paid to Delaware times a ratio; the numerator of which is the average
daily net assets represented by foreign assets and the denominator of
which is the average daily net assets of The Diversified Core Fixed Income
Portfolio, such amount to be calculated at the same time and measured over
the same period as the management fee.
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Delaware, or as applicable Delaware International, has elected
voluntarily to waive that portion, if any of the annual investment
advisory fees payable by a particular Portfolio and (except with respect
to The International Mid-Cap Sub Portfolio) to pay 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, the
following percentages of average daily net assets from the commencement of
operations through October 31, 1999 (unless otherwise noted):
Portfolio
The Large-Cap Value Equity Portfolio 0.68%
The Mid-Cap Growth Equity Portfolio 0.93%
The International Equity Portfolio 0.96%
The Mid-Cap Value Equity Portfolio 0.89%
The Labor Select International Equity Portfolio 0.96%
The Real Estate Investment Trust Portfolio 0.95%(1)
The Real Estate Investment Trust Portfolio II 0.86%
The Intermediate Fixed Income Portfolio 0.53%
The Aggregate Fixed Income Portfolio 0.53%
The Global Fixed Income Portfolio 0.60%(2)
The International Fixed Income Portfolio 0.60%(3)
The High-Yield Bond Portfolio 0.59%
The Emerging Markets Portfolio 1.55%
The Global Equity Portfolio 0.96%
The Diversified Core Fixed Income Portfolio 0.57%
The Asset Allocation Portfolio 0.15%
The Small-Cap Growth Equity Portfolio 0.89%
The Core Equity Portfolio 0.68%
The Small-Cap Value Equity Portfolio 0.89%
The Balanced Portfolio 0.68%
The Equity Income Portfolio 0.68%
The Select Equity Portfolio 1.20%
The International Small-Cap Portfolio 1.20%
The International Large-Cap Equity Portfolio 0.96%
(1) With respect to REIT Fund A Class, REIT Fund B Class, REIT Fund C Class and
REIT Fund Institutional Class and the Real Estate Investment Trust
Portfolio 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 applicable 12b-1 plan expenses, taxes, interest, brokerage
commissions, extraordinary expenses) do not exceed, as a percentage of
average net assets, on an annualized basis, 0.95% during the period
November 11, 1998 through October 31, 1999. From commencement of operations
of the classes through November 11, 1998, expenses were capped at 0.86%.
(2) Delaware International voluntarily elected to waive that portion, if any,
of its annual investment advisory fees and to pay 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% as a percentage of average net assets for the period from the
commencement of the public offering for the Portfolio through October 31,
1994. Such waiver was modified effective November 1, 1994 to provide that
such expenses of the Portfolio do not exceed, on an annualized basis, 0.60%
through October 31, 1999.
(3) Delaware International voluntarily elected to waive that portion, if any,
of its annual investment advisory fees and to pay The International Fixed
Income Portfolio for its 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, 0.62% as a percentage of average net assets for the
period from the commencement of the public offering for the Portfolio
through April 30, 1994. Such waiver for The International Fixed Income
Portfolio was modified effective May 1, 1994 to provide that such expenses
of the Portfolio do not exceed, on an annual basis, 0.60% through October
31, 1999.
104
<PAGE>
Investment management fees incurred for the last three fiscal years with
respect to each Portfolio follows:
<TABLE>
<CAPTION>
Portfolio October 31, 1998 October 31, 1997 October 31, 1996
<S> <C> <C> <C>
The Large-Cap Value Equity Portfolio $522,423 earned $441,785 earned $343,114 earned
$484,387 paid $433,247 paid $328,126 paid
$38,036 waived $8,538 waived $14,988 waived
The Mid-Cap Growth Equity Portfolio $46,880 earned $156,524 earned $214,315 earned
$-0- paid $64,669 paid $185,753 paid
$46,880 waived $91,855 waived $28,562 waived
The International Equity Portfolio $4,214,740 earned $3,119,494 earned $1,632,036 earned
$4,214,740 paid $3,119,494 paid $1,632,036 paid
$-0- waived $-0- waived $-0- waived
The Global Fixed Income Portfolio $2,649,961 earned $1,591,678 earned $762,870 earned
$2,527,013 paid $1,425,392 paid $661,220 paid
$122,948 waived $166,286 waived $101,650 waived
The Labor Select International Equity Portfolio (2) $658,651 earned $291,778 earned $100,144 earned
$613,775 paid $222,760 paid $50,055 paid
$44,876 waived $69,018 waived $50,089 waived
The Real Estate Investment Trust Portfolio (1) $543,001 earned $354,157 earned $153,313 earned
$424,875 paid $273,770 paid $127,250 paid
$118,126 waived $80,387 waived $26,063 waived
The Intermediate Fixed Income Portfolio (3) $119,736 earned $84,846 earned $19,389 earned
$-0- paid $18,659 paid $-0- paid
$119,736 waived $66,187 waived $19,389 waived
The High-Yield Bond Portfolio (4) $80,874 earned $27,213 earned N/A
$51,914 paid $13,551 paid
$28,960 waived $13,662 waived
The International Fixed Income Portfolio (5) $292,924 earned $61,031 earned N/A
$251,150 paid $29,230 paid
$41,774 waived $31,801 waived
The Emerging Markets Portfolio (6) $431,051 earned $89,760 earned N/A
$380,298 paid $54,085 paid
$50,753 $35,675 waived
The Global Equity Portfolio (7) $23,131 earned $941 earned N/A
$-0- paid $-0- paid
$23,131 waived $941 waived
The Real Estate Investment Trust Portfolio II (8) $41,303 earned N/A N/A
$9,936 paid
$31,367 waived
The Mid-Cap Value Equity Portfolio (9) $18,902 earned N/A N/A
$6,388 paid
$12,514 waived
The Aggregate Fixed Income Portfolio (9) $6,901 earned N/A N/A
$-0- paid
$6,901 waived
The Diversified Core Fixed Income Portfolio (9) $11,289 earned N/A N/A
$-0- paid
$11,289 waived
The Core Equity Portfolio (10) $1,360 earned N/A N/A
$-0- paid
$1,360 waived
The Small-Cap Growth Equity Portfolio (10) $2,815 earned N/A N/A
$-0- paid
$2,815 waived
</TABLE>
105
<PAGE>
<TABLE>
<CAPTION>
Portfolio October 31, 1998 October 31, 1997 October 31, 1996
<S> <C> <C> <C>
The Small-Cap Value Equity Portfolio (11) N/A N/A N/A
The Asset Allocation Portfolio (15) N/A N/A N/A
The Balanced Portfolio (13) N/A N/A N/A
The Equity Income Portfolio (13) N/A N/A N/A
The Select Equity Portfolio (12) N/A N/A N/A
The International Small-Cap Portfolio (14) N/A N/A N/A
The International Large-Cap Equity Portfolio (15) N/A N/A N/A
(1) Commenced operations on December 6, 1995. (9) Commenced operations on December 29, 1997.
(2) Commenced operations on December 19, 1995. (10) Commenced operations on September 15, 1998.
(3) Commenced operations on March 12, 1996. (11) Commenced operations on March 29, 1999.
(4) Commenced operations on December 2, 1996. (12) Commenced operations on June 29, 1999.
(5) Commenced operations on April 11, 1997. (13) Commended operations on June 30, 1999.
(6) Commenced operations on April 14, 1997. (14) Commenced operations on July 20, 1999.
(7) Commenced operations on October 15,1997. (15) Has not commenced operations as of the date of this Part B.
(8) Commenced operations on November 4, 1997.
</TABLE>
On October 31, 1998, the total net assets of Pooled Trust, Inc. were
$1,769,284,150 broken down as follows:
The Large-Cap Value Equity Portfolio $117,858,330
The Mid-Cap Growth Equity Portfolio $4,879,498
The International Equity Portfolio $616,228,981
The Global Fixed Income Portfolio $660,740,708
The Labor Select International Equity Portfolio $103,350,327
The Real Estate Investment Trust Portfolio $70,888,256
The Real Estate Investment Trust Portfolio II $5,762,546
The Intermediate Fixed Income Portfolio $30,210,729
The High-Yield Bond Portfolio $20,705,567
The Emerging Markets Portfolio $34,030,343
The Global Equity Portfolio $3,092,554
The International Fixed Income Portfolio $87,996,539
The Diversified Core Fixed Income $3,215,869
The Limited-Term Maturity Portfolio $21,000
The Core Equity Portfolio $2,111,771
The Mid-Cap Value Equity Portfolio $2,724,084
The Small-Cap Growth Equity Portfolio $3,317,805
The Aggregate Fixed Income Portfolio $2,149,243
Delaware and Delaware International are indirect, wholly owned
subsidiaries 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 expenses 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.
106
<PAGE>
Distribution and Service
The Distributor is located at 1818 Market Street, Philadelphia, PA
19103 and serves as the national distributor for each Portfolio under separate
Distribution Agreements dated as follows:
The Large-Cap Value Equity Portfolio April 3, 1995
The Mid-Cap Growth Equity Portfolio April 3, 1995
The Intermediate Fixed Income Portfolio April 3, 1995
The International Equity Portfolio April 3, 1995
The Global Fixed Income Portfolio April 3, 1995
The International Fixed Income Portfolio April 3, 1995
The Real Estate Investment Trust Portfolio November 29, 1995
The Mid-Cap Value Equity Portfolio November 29, 1995
The Labor Select International Equity Portfolio November 29, 1995
The High-Yield Bond Portfolio November 29, 1995
The Emerging Markets Portfolio April 14, 1997
The Global Equity Portfolio October 14, 1997
The Real Estate Investment Trust Portfolio II October 14, 1997
The Aggregate Fixed Income Portfolio December 24, 1997
The Diversified Core Fixed Income Portfolio December 24, 1997
The Asset Allocation Portfolio August 31, 1998
The Small-Cap Growth Equity Portfolio August 31, 1998
The Core Equity Portfolio August 31, 1998
The Small-Cap Value Equity Portfolio March 1, 1999
The Balanced Portfolio June 29, 1999
The Equity Income Portfolio June 29, 1999
The Select Equity Portfolio June 29, 1999
The International Small-Cap Portfolio June 29, 1999
The International Large-Cap Equity Portfolio November 15, 1999
The Distributor is an affiliate of the investment advisers and bears
all of the costs of promotion and distribution.
Delaware Service Company, Inc., an affiliate of Delaware, is Pooled
Trust, Inc.'s shareholder servicing, dividend disbursing and transfer agent for
each Portfolio pursuant to an Amended and Restated Shareholders Services
Agreement dated November 15, 1999. Delaware Service Company, Inc. also provides
accounting services to the Portfolio 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.
The Portfolios have authorized one or more brokers to accept on its
behalf purchase and redemption orders in addition to the Transfer Agent. Such
brokers are authorized to designate other intermediaries to accept purchase and
redemption orders on the behalf of the Portfolios. For purposes of pricing, a
Portfolio will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Investors may be charged a fee when effecting transactions through a
broker or agent.
107
<PAGE>
OFFICERS AND DIRECTORS
The business and affairs of Pooled Trust, Inc. and Foundation Funds are
managed under the direction of its Board of Directors or Trustees, as
applicable.
As of October 31, 1999, no one account held 25% or more of the
outstanding shares of Pooled Trust, Inc. or Foundation Funds. As of October
31, 1999, the directors and officers of Pooled Trust, Inc., 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
October 31, 1999, the trustees and officers of Foundation Funds did not hold any
shares of the Portfolios.
As of October 31, 1999, management believes the following accounts held
of record 5% or more of the outstanding shares of a Portfolio. Management has no
knowledge of beneficial ownership.
108
<PAGE>
Delaware Pooled Trust, Inc.
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The Large-Cap Value Northern Trust Company 1,432,126.990 16.46%
Equity Portfolio PHH Group 22-30049
P.O. Box 92956
Chicago, IL 60675-2956
Mac & Co. 1,250,846.090 14.37%
A/C CLRF5051922
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
Mac & Co. 545,726.370 6.27%
A/C LNFF033902
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
State of Georgia Employees' 521,630.120 5.99%
Deferred Compensation Group Trust
200 Piedmont Avenue
Suite 1016 West
Atlanta, GA 30334-9032
AMSOUTH Bank 449,628.870 5.16%
Trustee FBO Lloyd Noland Foundation Retirement Plan
Attn: Trust Operations - Mutual Funds
P.O. Box 11426
Birmingham, AL 35202-1426
The Mid-Cap Growth Crestar Bank 265,017.830 33.34%
Equity Portfolio Cust the College of William and Mary
P.O. Box 105870-CTR3144
Atlanta, GA 30348-5870
NCSC Staff Pension Plan 174,560.830 21.96%
Defined Benefit
8403 Colesville Rd. Ste 1200
Silver Spring, MD 20910-6322
The City of Groton 160,598.230 20.20%
295 Meridian Street
Groton, CT 06340-4040
Philadelphia Association of Zeta Psi 114,717.540 14.43%
Fraternity U/T/A E W Weil
613 Kirsch Avenue
Wayne, PA 19087-2902
</TABLE>
109
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The International Equity Portfolio The Salvation Army 3,458,748.680 7.33%
A Georgia Corporation
Board Designated
Territorial Financial Secretary
1424 Northeast Expressway
Atlanta, GA 30329-2088
The Salvation Army 3,180,234.170 6.74%
Eastern Territory
440 West Nyack Rd
West Nyack, NY 10994-1715
Norwest Bank Minnesota NA Cust. 3,150,142.070 6.68%
BT International Equity
#25332800
P.O. Box 1533
Minneapolis, MN 55480-1533
CENCO 3,041,475.020 6.45%
C/O Compass Bank
Attn: AMG 7th Floor
P.O. Box 10056
Birmingham, AL 35296-0001
</TABLE>
110
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The Intermediate Byrd & Co 408,614.220 22.71%
Fixed Income Portfolio c/o First Union National Bank
Mutual Funds Div. Processing PA4905
530 Walnut Street
Philadelphia, PA 19106-3620
The City of Groton 399,272.870 22.19%
295 Meridian Street
Groton, CT 06340-4040
Crestar Bank 345,525.630 19.20%
Cust The College of William and Mary
Attn: AC 70061007013873
P.O. Box 105870
Atlanta, GA 30348-5870
Fleet National Bank Trustee 161,110.470 8.95%
FBO International Terminal
Operating Pension
Attn: 50502918
P.O. Box 92800
Rochester, NY 14692-8900
Philadelphia Association of Zeta Psi 153,596.970 8.53%
Fraternity U/T/A E W Weil
613 Kirsch Avenue
Wayne, PA 19087-2902
Iron Workers #28 Pension Fund 122,651.100 6.81%
501 E. Franklin Street, Suite 206
Richmond, VA 23219-2330
</TABLE>
111
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The Global Fixed Income Portfolio Public School Retirement System of the City 7,091,275.310 11.73%
of St. Louis
One Mercantile Center
Suite 2607
St. Louis, MO 63101-1643
Saxon and Company 4,625,716.970 7.65%
FBO Western Pennsylvania Teamsters
& Employers Pension Fund
A/C 10-01-002-1043205
P.O. Box 7780-1888
Philadelphia, PA 19183-0001
Banker's Trust Co. 4,565,394.280 7.55%
FBO SLU Delaware Fund
Attn: Julie Druhe
500 Washington Ave.
St Louis, MO 63101-1261
Bost and Co. 4,277,198.620 7.07%
A/C RTCF9526002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
WA Suburban Sanitary Commission 3,406,746.840 5.26%
Employees Retirement Plan
14501 Sweitzer Ln
Laurel, MD 20707-5902
The Hitchcock Alliance 3,178,741.810 5.26%
Master Investment Program of
Pooled Investment Accounts
Attn: S.G. Shaw - B3L5 PHY SERV
1 Medical Center Drive
Lebanon, NH 03756-0001
</TABLE>
112
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The International Montgomery County Public Schools 1,937,602.010 21.49%
Fixed Income Portfolio Employee's Pension & Retirement System
850 Hungerford Dr. Rm 154
Rockville, MD 20850-1718
Adventist Health System Sunbelt 1,935,077.330 21.46%
Healthcare Corp.- Core
111 N. Orlando Ave.
Winter Park, FL 32789-3675
Comerica Bank Trustee 1,384,656.000 15.35%
Oakwood Pension Plan
P.O. Box 75000 M/C #3446
Detroit, MI 48275-0001
El Paso Firemen & Policemen's 1,279,394.230 14.19%
Pension Fund Policemen's Division
8201 Lockheed Drive Ste. 229
El Paso, TX 79925-2558
City of Brockton 1,176,155.770 13.04%
Contributory Retirement System
50 School Street
Brockton, MA 02301-4031
El Paso Firemen & Policemen's 799,621.400 8.86%
Pension Fund Firemen's Division
8201 Lockheed Drive Ste. 229
El Paso, TX 79925-2558
The Mid-Cap Lincoln National Life Insurance Company 358,455.880 99.99%
Value Equity Portfolio 1300 S. Clinton Street
Fort Wayne, IN 46802-3506
</TABLE>
113
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The Labor Select Maritime Association ILA 2,129,846.030 26.94%
International Equity Pension Fund
Portfolio 11550 Fuqua St Ste 425
Houston, TX 77034-4597
Operating Engineers 1,065,088.160 13.47%
LCL 101 Pension Fund
301 E. Armour Blvd. Suite 203
Kansas City, MO 64111-1259
Carpenters' Pension Fund of 808,450.920 10.22%
Western Pennsylvania
495 Mansfield Avenue
Pittsburgh, PA 15205-4376
Twin City Floor Covering Industry 653,339.060 8.26%
Zenith Administrators
7645 Metro Blvd
Minneapolis, MN 55439-3060
Local 25 SEIU and Participating Employers 586,359.820 7.41%
Pension Trust
111 West Jackson Blvd Suite 2102
Chicago, IL 60604-3503
Inlandboatmen's Union of the 470,973.090 5.95%
Pacific National Pension Plan
1220 SW Morrison Street, Suite 300
Portland, OR 97205-2222
</TABLE>
114
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The High-Yield Chicago Trust Co. 284,740.580 25.87%
Bond Portfolio FBO Lincoln National Corp.
Employees Retirement Plan
c/o Marshall & Ilsley Trust Co.
P.O. Box 2977
Milwaukee, WI 53201
Schwartz 1996 Charitable Remainder Unitrust 269,921.890 24.52%
c/o TCS Group, L.L.C.
1200 Shermer Road Suite 212
Northbrook, IL 60062-4564
The Northern Trust Company TTEE for 121,685.960 11.05%
Jack Miller Family Trust #4B
FBO Sheri Ring
c/o Northern Trust Co.
P.O. Box 92956
Chicago, IL 60603-1006
Melhorn & Co. FBO Shopmen's 109,028.870 9.90%
Iron Workers' Union #502 Pension Fund
c/o PNC Bank
1600 Market Street
Lower Level 2
Philadelphia, PA 19103-7240
Trust Four Hundred Thirty 105,755.850 9.60%
U/A/D 4/2/94
c/o TCS Group, L.L.C.
1200 Shermer Road Suite 212
Northbrook, IL 60062-4564
Trust Seven Hundred Thirty 105,755.850 9.60%
U/A/D 4/2/94
c/o TCS Group, L.L.C.
1200 Shermer Road Suite 212
Northbrook, IL 60062-4564
Mac & Co LCWF 07802802 103,661.220 9.41%
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15320-3198
</TABLE>
115
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The Emerging Conagra Master Pension Trust 1,715,881.890 29.17%
Markets Portfolio One Conagra Drive
Omaha, NE 68102-5094
Burlington Northern Santa Fe 1,048,476.100 17.82%
Retirement Plan
Attn: Blaine A. Mineman
1700 E. Golf Rd.
Schaumburg, IL 60173-5084
Norwest Bank Minnesota NA 925,928.260 15.74%
FBO BT International Equity
#25332800
P.O. Box 1533
Minneapolis, MN 55480-1533
Mac & Co 602,240.900 10.23%
A/C COFF8583922
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
Chicago Trust Company 562,257.760 9.55%
FBO Lincoln National Corp.
Employees Retirement Trust
1000 N. Water St. TR 4
Milwaukee, WI 53202-6648
M.J. Murdock Charitable Trust 304,705.220 5.18%
703 Broadway, Suite 710
Vancouver, WA 98660-3308
</TABLE>
116
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The Small-Cap Growth Equity Portfolio Lincoln National Life Insurance Company 353,775.160 81.21%
1300 S. Clinton Street
Fort Wayne, IN 46802-3506
Our Sunday Visitor, Inc. 81,808.450 18.78%
200 Noll Plaza
Huntington, IN 46750-4304
The Core Equity Portfolio Lincoln National Life Insurance Company 235,909.430 82.55%
1300 S. Clinton Street
Fort Wayne, IN 46802-3506
TTEES of Medical Rehabilitation, Inc. 49,840.850 17.44%
Profit Sharing Plan
FBO Ronald Zimmerman M.D.
2811 Rollins Drive
Allison Park, PA 15101-4119
The Small-Cap Value Equity Portfolio Lincoln National Life Insurance Company 235,294.120 99.99%
1300 S. Clinton Street
Fort Wayne, IN 46802-3506
The Select Equity Portfolio Lincoln National Life Insurance Company 235,294.120 42.92%
1300 S Clinton Street
Fort Wayne, IN 46802-3518
Chase Manhattan Bank C/F 119,788.590 21.85%
Delaware Group Foundation Funds - Balanced Portfolio
Attn: Marisol Gordan, Global Investor Services
3 Metro Tech Center, 8th Floor
Brooklyn, NY 11201-3800
Chase Manhattan Bank C/F 108,991.050 19.88%
Delaware Group Foundation Funds - Income Portfolio
Attn: Marisol Gordan, Global Investor Services
3 Metro Tech Center, 8th Floor
Brooklyn, NY 11201-3800
Chase Manhattan Bank C/F 84,074.480 15.33%
Delaware Group Foundation Funds - Growth Portfolio
Attn: Marisol Gordan, Global Investor Services
3 Metro Tech Center, 8th Floor
Brooklyn, NY 11201-3800
</TABLE>
117
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The Balanced Portfolio The Savings Plan For Employees and Partners of 23,947,896.850 88.99%
PricewaterhouseCoopers LLP
1301 Avenue of the Americas
New York, NY 10019-6022
The Profit Sharing Plan for Partners of 1,524,491.890 5.66%
PricewaterhouseCoopers LLP
1301 Avenue of the Americas
New York, NY 10019-6022
Retirement Benefit Accumulation Plan for Employees 1,436,706.520 5.33%
of PricewaterhouseCoopers LLP
1301 Avenue of the Americas
New York, NY 10019-6022
The Equity Income Portfolio The Savings Plan For Employees and Partners of 10,887,085.600 59.54%
PricewaterhouseCoopers LLP
1301 Avenue of the Americas
New York, NY 10019-6022
Retirement Benefit Accumulation Plan for Employees 4,258,844.810 23.29%
of PricewaterhouseCoopers LLP
1301 Avenue of the Americas
New York, NY 10019-6022
The Profit Sharing Plan for Partners of 3,137,536.790 17.16%
PricewaterhouseCoopers LLP
1301 Avenue of the Americas
New York, NY 10019-6022
The International Small-Cap Portfolio Lincoln National Life Insurance Company 352,941.180 99.99%
1300 S. Clinton Street
Fort Wayne, IN 46802-3518
</TABLE>
118
<PAGE>
>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The Global Lincoln National Life Insurance Company 366,910.330 99.99%
Equity Portfolio 1300 S. Clinton Street
Fort Wayne, IN 46802-3518
REIT Fund A Class Charles Schwab & Co., Inc. 506,561.810 23.95%
Special Custody Account for the Excl.
Benefits of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
LEWCO Securities Corp 123,207.330 5.82%
FBO A/C # H30-627865-6-01 34 Exchange
Place, 4th Floor Jersey City, NJ
07302-3885
REIT Fund B Class MLPF&S For the Sole 233,748.690 19.47%
Benefit of its Customers
Attn: Fund Administration-SEC#97SR7
4800 Deer Lake Drive E 2nd Fl.
Jacksonville, FL 32246-6484
REIT Fund C Class MLPF&S For the Sole 18,219.590 5.65%
Benefit of its Customers
Attn: Fund Administration-SEC#97SR9
4800 Deer Lake Drive E 2nd Fl.
Jacksonville, FL 32246-6484
REIT Fund RS DMC Employee Profit Sharing Plan 89,630.490 75.49%
Institutional Class Delaware Management Company
Employee Profit Sharing Trust
c/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103
Chase Manhattan Bank C/F 29,099.540 24.50%
Delaware Group Foundation Funds-
Income Portfolio
Attn: Marisol Gordan-Global Inv. Serv.
3 Metrotech Center, 8th Floor
Brooklyn, NY 11201-3800
</TABLE>
119
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
REIT Lincoln National Life Insurance Company 1,282,200.280 67.20%
Portfolio Class 1300 S. Clinton Street
Fort Wayne, IN 46802-3518
American States Insurance Company 625,797.400 32.79%
500 N. Meridian Street
Indianapolis, IN 46802-1275
The Real Estate The Philadelphia Orchestra Association 131,435.140 38.94%
Investment 1420 Locust Street Ste 400
Trust Portfolio II Philadelphia, PA 19102-4297
Lincoln National Life Insurance Company 130,253.930 38.59%
1300 S. Clinton Street
Fort Wayne, IN 46802-3518
City of Groton 75,832.330 22.46%
295 Meridian Street
Groton, CT 06340-4040
The Aggregate Fixed NCSC Staff Pension Plan 482,667.610 56.98%
Income Portfolio Defined Benefit
8403 Colesville Road, Suite 1200
Silver Spring, MD 20910-6322
Lincoln National Life Insurance Company 241,287.210 28.48%
1300 S. Clinton Street
Fort Wayne, IN 46802-3506
NCSC Contract Employees Pension Plan 77,081.550 9.10%
Defined Contribution
8403 Colesville Road, Suite 1200
Silver Spring, MD 20910-6322
TTEES of Medical Rehabilitation, Inc. 45,909.560 5.42%
Profit Sharing Plan
FBO Ronald Zimmerman M.D.
2811 Rollins Drive
Allison Park, PA 15101-4119
</TABLE>
120
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The Diversified Core Lincoln National Life Insurance Company 394,786.900 99.99%
Fixed Income Portfolio 1300 S. Clinton Street
Fort Wayne, IN 46802-3506
Income Portfolio A Class DMTC RS 401(k) 1,900,301.820 94.49%
Hoag Memorial Hospital Savings Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
Income Portfolio B Class NFSC FEBO #OKS-998419 13,928.660 47.65%
NFSC/FMTC IRA Rollover
FBO Jonathan J. Williams
1122 Sinclair Way
Roseville, CA 95747-5814
Prudential Securities, Inc., FBO 4,579.180 15.66%
Mr. Arthur L. Harbin
IRA Rollover Dtd. 6/23/98
725 W. 104th Street
Los Angeles, CA 90044-4405
NFSC FEBO #BQ7-019119 2,508.360 8.58%
R James Benninghoff
5601 Coldwater Road
Fort Wayne, IN 46825-5450
NFSC FEBO #OKS-609277 1,734.040 5.93%
NFSC/FMTC IRA
FBO Teresa Linsteadt
12753 Manor Drive
Auburn, CA 95603-3621
</TABLE>
121
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
Income Portfolio C Class David L. Stoner & 3,425.130 14.90%
Janice F. Stoner JTWROS
3207 Bowman Rd.
Landisville, PA 17538-1830
H. Dale Zimmermann 2,319.480 10.09%
Norma J. Zimmermann JTWROS
775 Stone Hill Road
Shoemakersville, PA 19555-9046
DMTC Custodian for the IRA of 1,986.150 8.64%
Barbara J. Turner
485 Martic Heights Drive
Holtwood, PA 17532-9683
Ruby D. Miller 1,970.750 8.57%
6451 County Road 407
Millersburg, OH 44654
RS DMTC 401K Plan 1,957.690 8.51%
Shore Line Construction, Inc.
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
Donaldson Lufkin Jenrette 1,773.030 7.71%
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
DMTC Custodian for the IRA of 1,539.330 6.69%
Amos A. Bricker
2754 Mount Pleasant Road
Mount Joy, PA 17552-8728
Irvin B. Horst and Janis A. Horst JTWROS 1,162.730 5.06%
33 North Millbach Road
Newmanstown, PA 17073-9127
</TABLE>
122
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
Income Portfolio Delaware Management Business TR-DIA 6,205.180 91.84%
Institutional Class Attn: Joseph Hastings
1818 Market Street, 16th Floor
Philadelphia, PA 19103-3691
Balanced Portfolio A Class RS DMTC 401(k) 1,472,190.220 73.97%
Hoag Memorial Hospital Savings Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
Balanced Portfolio B Class Attn: Mutual Funds 9,236.570 7.76%
BHC Securities Inc.
FAO 45021199
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
Sara A. Anthony 8,494.420 7.14%
RR 3 Box 137
Kunkletown, PA 18058-9521
Paine Weber Incorporated 6,677.460 5.61%
FBO Janine Gimpleman So Kolov and Barbara J.
Brigham Co-Ex 137066333
1000 Harborside Blvd.
Weehawken, NJ 07087
Balanced Portfolio C Class Elaine J. Avery 11,185.170 11.38%
1789 E. 91 St.
Brooklyn, NY 11236-5405
DMTC C/F The Rollover IRA of 1,114.550 8.26%
Joan F. Sylvander
1757 E. 26th St.
Brooklyn, NY 11229-2405
DMTC C/F The Rollover IRA of 6,525.840 6.64%
Catherine A. Horch
133 Henry St., Apt. 8
Brooklyn, NY 11201-2250
Dain Rauscher Inc. 6,196.250 6.30%
FBO Anne S. Hershbell
732 Kenmore Road
Amherst, VA 24521-3222
DMTC C/F The Rollover IRA of 5,613.530 5.71%
Josephine Benfatti
2017 Kimball St.
Brooklyn, NY 11234-5021
Paul K. Graybill & Grace H. Graybill 5,038.850 5.13%
Ten Ent
4 Bomberger Road
Lititz, PA 17543-9510
</TABLE>
123
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
Balanced Portfolio Delaware Management Business TR-DIA 6,099.430 87.04%
Institutional Class Attn: Joseph Hastings
1818 Market Street, 16th Fl.
Philadelphia, PA 19103-3691
RS DMTC 401(k) Plan 530.500 7.57%
United Subcontractors 401(k) Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
RS Money Purchase Pension 376.970 5.37%
IATSE Atlanta Annuity Trust Fund
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
Growth Portfolio A Class RS DMTC 401(k) Plan 809,138.270 67.43%
Hoag Memorial Hospital Savings Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
RS DMTC 401(k) Plan 122,004.960 10.16%
Bottcher America Corp.
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
Growth Portfolio B Class DMTC C/F the Rollover IRA of 22,039.800 13.27%
Louis E. Meador
1301 Camden Place
Lawrenceville, GA 30043-5206
DMTC C/F the Beneficiary IRA of 12,279.350 7.39%
Jeanne Milner
300 Turner Road
Concord, GA 30206-2611
NSFC FEBO # BQ5-959685 9,061.320 5.45%
NFSC/FMTC IRA
FBO Joseph Morten Elkins
10602 Gray Fox Way
Savannah, GA 31406-4416
NSFC FEBO # BQ5-00540 8,636.340 5.20%
Carolyn W. Shay
9 North Marsh Rd.
Savannah, GA 31410-1036
</TABLE>
124
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
Growth Portfolio C Class Benuel A. Stoltzfus 8,209.260 14.55%
Regina Stoltzfus JTWROS
255 California Road
Morgantown, PA 19543-9444
RS DMTC 401(k) Plan 5,659.830 10.03%
Shore Line Construction Inc.
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
RS DMTC 401(k) Plan 5,405.920 9.58%
L.L. Baumunk & Son
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
RS DMTC 401(k) Plan 3,902.830 6.92%
Warren S. Kurnick, M.D., 401(k) Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
RS DMTC 401 (k) Plan 3,887.200 6.89%
American Independent Insurance Co.
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
Richard K. Morford 3,448.720 6.11%
1109 Tall Pines Court
Petoskey, MI 49770-3200
Growth Portfolio Institutional Delaware Management Business TR-DIA 5,962.100 84.53%
Attn: Joseph Hastings
1818 Market Street, 16th Fl.
Philadelphia, PA 19103-3638
RS Money Purchase Pension 1,024.210 14.52%
IATSE Atlanta Annuity Trust Fund
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
</TABLE>
125
<PAGE>
DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Management Company, Inc., Delaware Investment Advisers, (a series of Delaware
Management Business Trust), Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Management Trust Company,
Delaware International Holdings Ltd., Founders Holdings, Inc., Delaware
International Advisers Ltd., Delaware Capital Management, Inc. and Retirement
Financial Services, Inc. are direct or indirect, wholly owned subsidiaries of
Delaware Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between
DMH and a wholly owned subsidiary of Lincoln National Corporation ("Lincoln
National") was completed. 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 Pooled Trust, Inc. and Foundation
Funds hold identical positions in each of the other funds in the Delaware
Investments family. Directors or Trustees, as applicable, and principal officers
of Pooled Trust, Inc. and Foundation Funds 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/trustee is One Commerce Square,
Philadelphia, PA 19103.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
*Wayne A. Stork (62) Chairman, Director and/or Trustee of Pooled Trust, Inc. and Foundation Funds and the
other 31 investment companies In the Delaware Investments family
Chairman and Director of Delaware Management Holdings, Inc.
Prior to January 1, 1999, Mr. Stork was Director of Delaware Capital Management, Inc.;
Chairman, President and Chief Executive Officer and Director/Trustee of DMH Corp.,
Delaware Distributors, Inc. and Founders Holdings, Inc.; Chairman, President, Chief
Executive Officer, Chief Investment Officer and Director/Trustee of Delaware Management
Company, Inc. and Delaware Management Business Trust; Chairman, President, Chief
Executive Officer and Chief Investment Officer of Delaware Management Company (a series
of Delaware Management Business Trust); Chairman, Chief Executive Officer and Chief
Investment Officer of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Chairman and Chief Executive Officer of Delaware International Advisers
Ltd.; Chairman, Chief Executive Officer and Director of Delaware International Holdings
Ltd.; Chief Executive Officer of Delaware Management Holdings, Inc.; President and Chief
Executive Officer of Delvoy, Inc.; Chairman of Delaware Distributors, L.P.; Director of
Delaware Service Company, Inc. and Retirement Financial Services, Inc.
In addition, during the five years prior to January 1, 1999, Mr. Stork has served in
various executive capacities at different times within the Delaware organization.
</TABLE>
- ----------------------
* Director/Trustee affiliated with the Portfolio's investment manager and
considered an "interested person" as defined in the 1940 Act.
126
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
*David K. Downes (59) President, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and
Director and/or Trustee of Pooled Trust, Inc., Foundation Funds and the other 31
investment companies in the Delaware Investments family
President and Director of Delaware Management Company, Inc.
President of Delaware Management Company (a series of Delaware Management Business Trust)
President, Chief Executive Officer and Director of Delaware Capital Management, Inc.
Chairman, President, Chief Executive Officer and Director of Delaware Service Company,
Inc.
President, Chief Operating Officer, Chief Financial Officer and Director of Delaware
International Holdings Ltd.
Chairman and Director of Delaware Management Trust Company and Retirement Financial
Services, Inc.
Executive Vice President, Chief Operating Officer, Chief Financial Officer of Delaware
Management Holdings, Inc., Founders CBO Corporation, Delaware Investment Advisers (a
series of Delaware Management Business Trust) and Delaware Distributors, L.P.
Executive Vice President, Chief Operating Officer, Chief Financial Officer and Trustee of
Delaware Management Business Trust
Executive Vice President, Chief Operating Officer, Chief Financial Officer and Director
of DMH Corp., Delaware Distributors, Inc., Founders Holdings, Inc. and Delvoy, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Downes has served in various executive capacities at
different times within the Delaware organization.
</TABLE>
- ----------------------
* Director/Trustee affiliated with the Portfolio's investment manager and
considered an "interested person" as defined in the 1940 Act.
127
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Richard G. Unruh, Jr. (60) Executive Vice President and Chief Investment Officer, Equity of Pooled Trust, Inc.,
Foundation Funds and the other 31 investment companies in the Delaware Investments family
Chief Executive Officer/Chief Investment Officer of Delaware Investment Advisers (a
series of Delaware Management Business Trust)
Executive Vice President/Chief Investment Officer of Delaware Management Company (a
series of Delaware Management Business Trust)
Executive Vice President and Director/Trustee of Delaware Management Company, Inc. and
Delaware Management Business Trust
Executive 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.
</TABLE>
128
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Richard J. Flannery (42) Executive Vice President and General Counsel of Pooled Trust, Inc., Foundation Funds, the
other 31 investment companies in the Delaware Investments family, Delaware Management
Holdings, Inc., Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of Delaware Management Business Trust) and
Founders CBO Corporation.
Executive Vice President/General Counsel and Director of Delaware International Holdings
Ltd., Founders Holdings, Inc., Delvoy, Inc., DMH Corp., Delaware Management Company,
Inc., Delaware Service Company, Inc., Delaware Capital Management, Inc., Retirement
Financial Services, Inc., Delaware Distributors, Inc., Delaware Distributors, L.P. and
Delaware Management Trust Company.
Executive Vice President/General Counsel and Trustee of Delaware Management Business
Trust.
Director of Delaware International Advisers Ltd.
Director of HYPPCO Finance Company Ltd.
During the past five years, Mr. Flannery has served in various executive capacities at
different times within the Delaware organization.
</TABLE>
129
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Walter P. Babich (72) Director and/or Trustee of Pooled Trust, Inc., Foundation Funds and the other 31
investment companies in the Delaware Investments family
460 North Gulph Road, King of Prussia, PA 19406
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from 1988 to 1991, he
was a partner of I&L Investors.
John H. Durham (62) Director and/or Trustee of Pooled Trust, Inc., Foundation Funds and 17 other
investment companies in the Delaware Investments family
Partner, Complete Care Services
120 Gibraltar Road, Horsham, PA 19044
Mr. Durham served as Chairman of the Board of each fund in the Delaware Investments
family from 1986 to 1991; President of each fund from 1977 to 1990; and Chief Executive
Officer of each fund from 1984 to 1990. Prior to 1992, with respect to Delaware
Management Holdings, Inc., Delaware Management Company, Delaware Distributors, Inc. and
Delaware Service Company, Inc., Mr. Durham served as a director and in various executive
capacities at different times.
Anthony D. Knerr (60) Director and/or Trustee of Pooled Trust, Inc., Foundation Funds and the other
31 investment companies in the Delaware Investments family
500 Fifth Avenue, New York, NY 10110
Founder and Managing Director, Anthony Knerr & Associates
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and Treasurer of
Columbia University, New York. From 1987 to 1989, he was also a lecturer in English at
the University. In addition, Mr. Knerr was Chairman of The Publishing Group, Inc., New
York, from 1988 to 1990. Mr. Knerr founded The Publishing Group, Inc. in 1988.
Ann R. Leven (59) Director and/or Trustee of Pooled Trust, Inc., Foundation Funds and the other
31 investment companies in the Delaware Investments family
785 Park Avenue, New York, NY 10021
Treasurer, National Gallery of Art
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of the Smithsonian
Institution, Washington, DC, and from 1975 to 1992, she was Adjunct Professor of Columbia
Business School.
</TABLE>
130
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Thomas F. Madison (63) Director and/or Trustee of Pooled Trust, Inc., Foundation Funds and the other 31
investment companies in the Delaware Investments family
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402
President and Chief Executive Officer, MLM Partners, Inc.
Mr. Madison has also been Chairman of the Board of Communications Holdings, Inc. since
1996. From February to September 1994, Mr. Madison served as Vice Chairman--Office of the
CEO of The Minnesota Mutual Life Insurance Company and from 1988 to 1993, he was
President of U.S. WEST Communications--Markets.
Charles E. Peck (73) Director and/or Trustee of Pooled Trust, Inc., Foundation Funds and the other 31
investment companies in the Delaware Investments family
P.O. Box 1102, Columbia, MD 21044
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer of The Ryland Group,
Inc., Columbia, MD.
Jan L. Yeomans (51 ) Director and/or Trustee of Pooled Trust, Inc and Foundation Funds and the other 31
investment companies in the Delaware Investments family
Building 220-13W-37, St. Paul, MN 55144
Vice President and Treasurer, 3M Corporation.
From 1987-1994, Ms. Yeomans was Director of Benefit Funds and Financial Markets for the
3M Corporation; Manager of Benefit Fund Investments for the 3M Corporation, 1985-1987;
Manager of Pension Funds for the 3M Corporation, 1983-1985; Consultant -- Investment
Technology Group of Chase Econometrics, 1982-1983; Consultant for Data Resources,
1980-1982; Programmer for the Federal Reserve Bank of Chicago, 1970-1974.
Joseph H. Hastings (49) Senior Vice President/Corporate Controller of Pooled Trust, Inc., Foundation Funds, the
other 31 investment companies in the Delaware Investments family and Delaware Investment
Advisers (a series of Delaware Management Business Trust)
Senior Vice President/Corporate Controller and Treasurer of Delaware Management Holdings,
Inc., DMH Corp., Delaware Management Company, Inc., Delaware Management Company (a series
of Delaware Management Business Trust), Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware Capital Management, Inc.,
Delaware International Holdings Ltd., Delvoy, Inc., Founders Holdings, Inc. and Delaware
Management Business Trust
Executive Vice President/Chief Financial Officer/Treasurer of Delaware Management Trust
Company
Chief Financial Officer of Retirement Financial Services, Inc.
Senior Vice President/Assistant Treasurer of Founders CBO Corporation
During the past five years, Mr. Hastings has served in various executive capacities at
different times within the Delaware organization.
</TABLE>
131
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Michael P. Bishof (37) Senior Vice President and Treasurer of Pooled Trust, Inc., Foundation Funds and the other
31 investment companies in the Delaware Investments family
Senior Vice President/Investment Accounting of Delaware Service Company, Inc., Delaware
Capital Management, Inc., Delaware Distributors, L.P., Delaware Management Company (a
series of Delaware Management Business Trust) and Founders Holdings, Inc.
Senior Vice President and Treasurer/ Investment Accounting of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
Senior Vice President and Manager/Investment Accounting of Delaware International
Holdings, Inc.
Senior Vice President and Assistant Treasurer of Founders CBO Corporation
Before joining Delaware Investments in 1995, Mr. Bishof was a Vice President for Bankers
Trust, New York, NY from 1994 to 1995, a Vice President for CS First Boston Investment
Management, New York, NY from 1993 to 1994 and an Assistant Vice President for Equitable
Capital Management Corporation, New York, NY from 1987 to 1993.
George E. Deming (57) Vice President/Senior Portfolio Manager of Pooled Trust, Inc., Foundation Funds, the
other 31 investment companies in the Delaware Investments family, Delaware Management
Company (a series of Delaware Management Business Trust) and Delaware Investment Advisers
(a series of Delaware Management Business Trust)
Director of Delaware International Advisers Ltd.
Before joining Delaware Investments 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.
</TABLE>
132
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Gerald S. Frey (53) Senior Vice President/Senior Portfolio Manager of Pooled Trust, Inc., Foundation Funds,
the other 31 investment companies in the Delaware Investments family, Delaware Management
Company (a series of Delaware Management Business Trust), Delaware Investment Advisers (a
series of Delaware Management Business Trust) and Delaware Capital Management, Inc.
Before joining Delaware Investments in 1996, Mr. Frey was a Senior Director with Morgan
Grenfell Capital Management, New York, NY from 1986 to 1995.
Gary A. Reed (45) Vice President/Senior Portfolio Manager of Pooled Trust, Inc., Foundation Funds, the 31
other investment companies in the Delaware Investments family, Delaware Investment
Advisers (a series of Delaware Management Business Trust), Delaware Management Company (a
series of Delaware Management Business Trust) and Delaware Capital Management, Inc.
During the past five years, Mr. Reed has served in such capacities within the Delaware
organization.
Gerald T. Nichols (41) Vice President/Senior Portfolio Manager of Pooled Trust, Inc., Foundation Funds, the 31
other investment companies in the Delaware Investments family, Delaware Investment
Advisers (a series of Delaware Management Business Trust), Delaware Management Company (a
series of Delaware Management Business Trust) and Founders Holdings, Inc.
Treasurer/Assistant Secretary and Director of Founders CBO Corporation.
During the past five years, Mr. Nichols has served in various capacities at different
times within the Delaware organization.
Paul A. Matlack (40) Vice President/Senior Portfolio Manager of Pooled Trust, Inc., Foundation Funds, the 31
other investment companies in the Delaware Investments family, Delaware Investment
Advisers (a series of Delaware Management Business Trust), Delaware Management Company (a
series of Delaware Management Business Trust) and Founders Holdings, Inc.
President and Director of Founders CBO Corporation.
During the past five years, Mr. Matlack has served in various capacities at different
times within the Delaware organization.
</TABLE>
133
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Roger A. Early (45) Vice President/Senior Portfolio Manager of Pooled Trust, Inc., Foundation Funds, the 31
other investment companies in the Delaware Investments family, Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Delaware Management Company
(a series of Delaware Management Business Trust)
Before joining Delaware Investments, Mr. Early was a portfolio manager for Federated
Investment Counseling's fixed-income group, with over $1 billion in assets.
Frank X. Morris (38) Vice President/Senior Portfolio Manager of Pooled Trust, Inc., Foundation Funds, the
other 31 investment companies in the Delaware Investments family, Delaware Management
Company (a series of Delaware Management Business Trust) and Delaware Investment Advisers
(a series of Delaware Management Business Trust)
Before joining Delaware Investments in 1997, he served as vice president and director of
equity research at PNC Asset Management. Mr. Morris is president of the Financial
Analysis Society of Philadelphia and is a member of the Association of Investment
Management and Research and the National Association of Petroleum Investment Analysts.
J. Paul Dokas (40) Vice President/Senior Portfolio Manager of Pooled Trust, Inc., Foundation Funds, the
other 31 investment companies in the Delaware Investments family, Delaware Management
Company (a series of Delaware Management Business Trust) and Delaware Investment Advisers
(a series of Delaware Management Business Trust)
Before joining Delaware Investments in 1997, he was a Director of Trust Investments for
Bell Atlantic Corporation in Philadelphia.
John B. Fields (54) Senior Vice President/Senior Portfolio Manager of Pooled Trust, Inc., Foundation Funds,
the other 31 investment companies in the Delaware Investments family, Delaware Management
Company (a series of Delaware Management Business Trust), Delaware Investment Advisers (a
series of Delaware Management Business Trust) and Delaware Capital Management, Inc.
Trustee of Delaware Management Business Trust.
During the past five years, Mr. Fields has served in various capacities at different
times within the Delaware organization.
Robert L. Arnold (35) Vice President/Senior Portfolio Manager of Pooled Trust, Inc., Foundation Funds, the
other 31 investment companies in the Delaware Investments family, Delaware Management
Company (a series of Delaware Management Business Trust) , Delaware Investment Advisers
(a series of Delaware Management Business Trust) and Delaware Capital Management, Inc.
During the past five years, Mr. Arnold has served in various capacities at different
times within the Delaware organization.
Timothy J. Connors (46) Vice President/Senior Portfolio Manager of Pooled Trust, Inc., Foundation Funds, the
other 31 investment companies in the Delaware Investments family, Delaware Management
Company (a series of Delaware Management Business Trust) , Delaware Investment Advisers
(a series of Delaware Management Business Trust) and Delaware Capital Management, Inc.
Before joining Delaware Investments in 1997, Mr. Connors served as a Principal at Miller,
Anderson & Sherrerd, where he managed equity accounts, conducted sector analysis and
directed research. He previously held positions at CoreStates Investment Advisers and
Fauquier National Bank.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Thomas J. Trotman (48) Vice President/Portfolio Manager of Pooled Trust, Inc., Foundation Funds, the other 31
investment companies in the Delaware Investments family, Delaware Management Company (a
series of Delaware Management Business Trust) , Delaware Investment Advisers (a series of
Delaware Management Business Trust) and Delaware Capital Management, Inc.
Before joining Delaware Investments in 1995, Mr. Trotman was Vice President and Director
of Investment Research at Independence Capital Management. Before that, he held
credit-related positions at Marine Midland Bank, U.S. Steel Corporation, and Amerada
Hess.
Damon J. Andres (30) Vice President/Portfolio Manager of Pooled Trust, Inc., Foundation Funds, the other 31
investment companies in the Delaware Investments family, Delaware Management Company (a
series of Delaware Management Business Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and Delaware Capital Management, Inc.
Before joining Delaware Investments in 1994, Mr. Andres performed investment counseling
services as a Consulting Associate with Cambridge Associates, Inc. in Arlington Virginia.
Christopher S. Beck (41) Vice President/Senior Portfolio Manager of Pooled Trust, Inc., Foundation Funds, the
other 31 investment companies in the Delaware Investments family, Delaware Management
Company (a series of Delaware Management Business Trust) and Delaware Investment Advisers
(a series of Delaware Management Business Trust)
Before joining Delaware Investments in 1997, Mr. Beck managed the Small Cap Fund for two
years at Pitcairn Trust Company. Prior to 1995, he was Director of Research at Cypress
Capital Management in Wilmington and Chief Investment Officer of the University of
Delaware Endowment Fund.
</TABLE>
135
<PAGE>
With respect to Pooled Trust, Inc., the following is a compensation
table listing for each director entitled to receive compensation, the aggregate
compensation received from Pooled Trust, Inc. and the total compensation
received from all Delaware Investments funds for the fiscal year ended October
31, 1998 and an estimate of annual benefits to be received upon retirement under
the Delaware Investments Retirement Plan for Directors/Trustees as of October
31, 1998. Only the independent directors of Pooled Trust, Inc. receive
compensation from Pooled Trust, Inc.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Pension or Total
Retirement Estimated Compensation
Aggregate Benefits Annual from
Compensation Accrued Benefits Delaware
from Pooled as Part of Upon Investment
Name Trust, Inc. Portfolio Expenses Retirement(1) Companies(2)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
W. Thacher Longstreth(3) $3,729 None $38,000 $60,384
- ---------------------------------------------------------------------------------------------------------
Ann R. Leven $4,207 None $38,000 $66,499
- ---------------------------------------------------------------------------------------------------------
Walter P. Babich $4,127 None $38,000 $65,384
- ---------------------------------------------------------------------------------------------------------
Anthony D. Knerr $4,127 None $38,000 $65,384
- ---------------------------------------------------------------------------------------------------------
Charles E. Peck $3,729 None $38,000 $60,384
- ---------------------------------------------------------------------------------------------------------
Thomas F. Madison $3,898 None $38,000 $62,467
- ---------------------------------------------------------------------------------------------------------
John H. Durham(4) $2,221 None $31,180 $25,935
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director/trustee who, at the time of
his or her retirement from the Board, has attained the age of 70 and served
on the Board for at least five continuous years, is entitled to receive
payments from each investment company in the Delaware Investments family for
which he or she serves as a director or trustee for a period equal to the
lesser of the number of years that such person served as a director or
trustee or the remainder of such person's life. The amount of such payments
will be equal, on an annual basis, to the amount of the annual retainer that
is paid to directors/trustees of each investment company at the time of such
person's retirement. If an eligible director/trustee retired as of the
periods noted above for Pooled Trust, Inc. and Foundation Funds, he or she
would be entitled to annual payments totaling the amounts noted above, in
the aggregate, from all of the investment companies in the Delaware
Investments family for which he or she served as director or trustee, based
on the number of investment companies in the Delaware Investments family as
of that date.
136
<PAGE>
(2) Each independent director/trustee (other than John H. Durham) currently
receives a total annual retainer fee of $38,000 for serving as a director or
trustee for all 33 investment companies in Delaware Investments, plus $3,145
for each Board Meeting attended. John H. Durham currently receives a total
annual retainer fee of $31,180 for serving as a director or trustee for 19
investment companies in Delaware Investments, plus $1,810 for each Board
Meeting attended. Ann R. Leven, Thomas F. Madison, and Anthony D. Knerr
serve on the Fund's audit committee; Ms. Leven is the chairperson. Members
of the audit committee currently receive additional annual compensation of
$5,000 from all investment companies, in the aggregate, with the exception
of the chairperson, who receives $6,000.
3) W. Thacher Longstreth retired from the Board of Directors of Pooled Trust,
Inc. on April 13, 1999. Jan L. Yeomans joined the Board of Directors of
Pooled Trust, Inc. on April 13,1999.
(4) John H. Durham joined the Board of Directors/Trustees of 19 investment
companies in Delaware Investments on April 16, 1998.
137
<PAGE>
With respect to Foundation Funds, the following is a compensation table
listing for each trustee entitled to receive compensation, the aggregate
compensation expected to be received from Foundation Funds during its fiscal
year ended September 30, 1999 and the total compensation expected to be received
from all funds in the Delaware Investments family during the Trust's fiscal year
and an estimate of annual benefits to be received upon retirement under the
Delaware Group Retirement Plan for Directors/Trustees during the Trust's fiscal
year. Only the independent directors of Foundation Funds receive compensation
from the Trust.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Pension or Total
Retirement Estimated Compensation
Aggregate Benefits Annual from
Compensation Accrued Benefits Delaware
to be received from as Part of Upon Investment
Name the Trust the Trust Retirement(1) Companies(2)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
W. Thacher Longstreth(3) $132 None $38,000 $31,720
- -----------------------------------------------------------------------------------------------------------
Ann R. Leven $572 None $38,000 $66,126
- -----------------------------------------------------------------------------------------------------------
Walter P. Babich $466 None $38,000 $59,066
- -----------------------------------------------------------------------------------------------------------
Anthony D. Knerr $570 None $38,000 $65,126
- -----------------------------------------------------------------------------------------------------------
Charles E. Peck $568 None $38,000 $63,042
- -----------------------------------------------------------------------------------------------------------
Thomas F. Madison $570 None $38,000 $65,126
- -----------------------------------------------------------------------------------------------------------
John H. Durham(4) $464 None $31,180 $49,984
- -----------------------------------------------------------------------------------------------------------
Jan L. Yeomans(5) $532 None $38,000 $34,715
- -----------------------------------------------------------------------------------------------------------
</TABLE>
138
<PAGE>
(1) Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director/trustee who, at the time of
his or her retirement from the Board, has attained the age of 70 and served
on the Board for at least five continuous years, is entitled to receive
payments from each investment company in the Delaware Investments family for
which he or she serves as a director or trustee for a period equal to the
lesser of the number of years that such person served as a director or
trustee or the remainder of such person's life. The amount of such payments
will be equal, on an annual basis, to the amount of the annual retainer that
is paid to directors/trustees of each investment company at the time of such
person's retirement. If an eligible director/trustee retired as of the
periods noted above for Pooled Trust, Inc. and Foundation Funds, he or she
would be entitled to annual payments totaling the amounts noted above, in
the aggregate, from all of the investment companies in the Delaware
Investments family for which he or she served as director or trustee, based
on the number of investment companies in the Delaware Investments family as
of that date.
(2) Each independent director/trustee (other than John H. Durham) currently
receives a total annual retainer fee of $38,000 for serving as a director or
trustee for all 33 investment companies in Delaware Investments, plus $3,145
for each Board Meeting attended. John H. Durham currently receives a total
annual retainer fee of $31,180 for serving as a director or trustee for 19
investment companies in Delaware Investments, plus $1,810 for each Board
Meeting attended. Ann R. Leven, Thomas F. Madison, and Anthony D. Knerr
serve on the Fund's audit committee; Ms. Leven is the chairperson. Members
of the audit committee currently receive additional annual compensation of
$5,000 from all investment companies, in the aggregate, with the exception
of the chairperson, who receives $6,000.
(3) W. Thacher Longstreth retired from the Board of Trustees of Foundation Funds
on March 17, 1999. The compensation shown in the table is the amount Mr.
Longstreth received from October 1, 1998 through March 17,1999.
(4) John H. Durham joined the Board of Directors/Trustees of 19 investment
companies in Delaware Investments on April 16, 1998.
(5) Jan L. Yeomans joined the Board of Trustees of Foundation Funds on March 17,
1999. The compensation shown is the amount Ms. Yeomans is expected to
receive from March 17, 1999 through September 30, 1999.
139
<PAGE>
GENERAL INFORMATION
Delaware furnishes investment management services to The Large-Cap
Value Equity, The Mid-Cap Growth Equity, The Intermediate Fixed Income, The
Aggregate Fixed Income, The Mid-Cap Value Equity, The Small Cap Value Equity,
The Real Estate Investment Trust, The High-Yield Bond, The Diversified Core
Fixed Income, The Asset Allocation, The Small-Cap Growth Equity, The Balanced,
The Select Equity, The Equity Income and The Core Equity Portfolios. Delaware
International furnishes similar services to The International Equity, The
International Large-Cap Equity, The Labor Select International Equity, The
Global Fixed Income, The International Fixed Income, The Emerging Markets, The
International Small-Cap and The Global Equity Portfolios and also serves as
sub-adviser to The Diversified Core Fixed Income Portfolio. Delaware and
Delaware International also provide investment management services to certain of
the other funds in the Delaware Investments family. While investment decisions
of the Portfolios are made independently from those of the other funds and
accounts, investment decisions for such other funds and accounts may be made at
the same time as investment decisions for the Portfolios.
Delaware or Delaware International also manages the investment options
for Delaware-Lincoln Choice Plus and Delaware Medallion (SM) III Variable
Annuities. Choice Plus is issued and distributed by Lincoln National Life
Insurance Company. Choice Plus offers a variety of different investment styles
managed by leading money managers. Medallion is issued by Allmerica Financial
Life Insurance and Annuity Company (First Allmerica Financial Life Insurance
Company in New York and Hawaii). Delaware Medallion offers various investment
series ranging from domestic equity funds, international equity and bond funds
and domestic fixed income funds. Each investment series available through Choice
Plus and Medallion utilizes an investment strategy and discipline the same as or
similar to one of the Delaware Investments mutual funds available outside the
annuity. See "DELAWARE GROUP PREMIUM FUND, INC.", in "APPENDIX B."
Access persons and advisory persons of the Delaware Investments funds,
as those terms are defined in SEC Rule 17j-1 under the 1940 Act, who provide
services to Delaware, Delaware International or their affiliates, are permitted
to engage in personal securities transactions subject to the exceptions set
forth in Rule 17j-1 and the following general restrictions and procedures: (1)
certain blackout periods apply to personal securities transactions of those
persons; (2) transactions must receive advance clearance and must be completed
on the same day as the clearance is received; (3) certain persons are prohibited
from investing in initial public offerings of securities and other restrictions
apply to investments in private placements of securities; (4) opening positions
may only be closed-out at a profit after a 60-day holding period has elapsed;
and (5) the Compliance Officer must be informed periodically of all securities
transactions and duplicate copies of brokerage confirmations and account
statements must be supplied to the Compliance Officer.
The Distributor acts as national distributor for each Portfolio and for
the other mutual funds in the Delaware Investments family. The Distributor
received net commissions from REIT Fund on behalf of Class A Shares, after
reallowances to dealers, as follows:
REIT Fund
Class A Shares
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers to Distributor
-------- ------------ ---------- --------------
10/31/98 $254,157 $211,644 $42,513
10/31/97 N/A N/A N/A
10/31/96 N/A N/A N/A
140
<PAGE>
CDSC Payments
The Distributor received no aggregate Limited CDSC payments with
respect to Class A Shares of REIT Fund for fiscal year ended October 31, 1998.
The Distributor received aggregate CDSC payments in the amount of $7,643.30 with
respect to Class B Shares of REIT Fund for fiscal year ended October 31, 1998.
The Distributor received CDSC payments in the amount of $291.26 with respect to
Class C Shares of REIT Fund for fiscal year ended October 31, 1998.
The Transfer Agent, an affiliate of Delaware and Delaware
International, acts as shareholder servicing, dividend disbursing and transfer
agent for the Portfolios and for the other mutual funds in the Delaware
Investments family. The Transfer Agent's compensation for providing services to
the Portfolios of Pooled Trust, Inc. (other than The Real Estate Investment
Trust Portfolio effective October 14, 1997) is $25,000 annually. The Transfer
Agent will bill, and Pooled Trust, Inc. will pay, such compensation monthly
allocated among the current Portfolios (other than The Real Estate Investment
Trust Portfolio) 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. The Transfer
Agent is paid a fee by The Real Estate Investment Trust Portfolio for providing
these services consisting of an annual per account charge of $5.50 plus
transaction charges for particular services according to a schedule. The
Transfer Agent is paid a fee by The Asset Allocation Portfolio for providing
these services consisting of an annual per account charge of $11.00 plus
transaction charges for particular services according to a schedule.
Compensation is fixed each year and approved by the Board of Directors/Trustees,
including a majority of the disinterested directors. The Transfer Agent also
provides accounting services to the Portfolios. Those services include
performing all functions related to calculating each Portfolio's net asset value
and providing all financial reporting services, regulatory compliance testing
and other related accounting services. For its services, the Transfer Agent is
paid a fee based on total assets of all funds in the Delaware Investments family
for which it provides such accounting services. Such fee is equal to 0.25%
multiplied by the total amount of assets in the complex for which the Transfer
Agent furnishes accounting services, where such aggregate complex assets are $10
billion or less, and 0.20% of assets if such aggregate complex assets exceed $10
billion. The fees are charged to the Portfolio, including the Portfolios, on an
aggregate pro-rata basis. The asset-based fee payable to the Transfer Agent is
subject to a minimum fee calculated by determining the total number of
investment portfolios and associated classes.
The Asset Allocation, The Small-Cap Growth Equity Portfolio, The Core
Equity Portfolio, The Balanced Portfolio, The Equity Income Portfolio, The
Select Equity Portfolio and The International Small-Cap Portfolio reserves the
right to operate in a "master-feeder" structure, that is, to invest its assets
in another mutual fund with the same investment objective and substantially
similar investment policies as those of the respective Portfolio. Each Portfolio
has no present intention to operate in a master-feeder structure; however,
should the Board of Directors or Trustees approve the implementation of a
master-feeder structure for a Portfolio, shareholders will be notified prior to
the implementation of the new structure.
141
<PAGE>
Lincoln National Corporation Employees' Retirement Trust (the "Trust")
made an investment in The Emerging Markets Portfolio, which could result in the
Trust owning approximately 100% of the outstanding shares of The Emerging
Markets Portfolio. Subject to certain limited exceptions, there are no
limitations on the Trust's ability to redeem its shares of the Portfolio and it
may elect to do so at any time.
Lincoln National Life Insurance Company ("LNLIC") made an investment in
each of The Global Equity Portfolio, The Real Estate Investment Trust Portfolio,
The Real Estate Investment Trust Portfolio II, The Diversified Core Fixed Income
Portfolio, The Aggregate Fixed Income Portfolio, The Small-Cap Growth Equity
Portfolio, The Core Equity Portfolio, The Mid-Cap Value Equity Portfolio and The
Small-Cap Value Portfolio, and will make an investment in each of The Asset
Allocation Portfolio, The Select Equity Portfolio and The International
Small-Cap Portfolio, which could result in LNLIC owning approximately 100% of
the outstanding shares of the respective Portfolios. Subject to certain limited
exceptions, are no limitations on LNLIC's ability to redeem its shares of any
Portfolio and it may elect to do so at any time.
The investment adviser and its affiliates own the name "Delaware
Group." Under certain circumstances, including the termination of Pooled Trust,
Inc.'s or Foundation Funds' advisory relationship with the investment adviser or
its distribution relationship with the Distributor, the investment adviser and
its affiliates could cause Pooled Trust, Inc. or Foundation Funds to delete the
words "Delaware Group" from Pooled Trust, Inc.'s or Foundation Funds' names.
Custody Arrangements
The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn,
NY 11245 serves as custodian for each Portfolio. As custodian, Chase maintains a
separate account or accounts for a Portfolio; receives, holds and releases
portfolio securities on account of a Portfolio; receives and disburses money on
behalf of a Portfolio; and collects and receives income and other payments and
distributions on account of a Portfolio's portfolio securities.
With respect to foreign securities, Chase makes arrangements with
subcustodians who were approved by the directors/trustees of Pooled Trust, Inc.
or, as applicable, Foundation Funds 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 Portfolios, and the
reputation of the institutions in the particular country or region.
Capitalization
Pooled Trust, Inc. has a present authorized capitalization of two
billion shares of capital stock with a $.01 par value per share. The Board of
Directors has allocated fifty million shares to each Portfolio.
Foundation Funds currently consists four portfolios of shares.
Foundation Funds has an unlimited authorized number of shares of beneficial
interest with no par value allocated to each of its portfolios.
142
<PAGE>
While all shares have equal voting rights on matters affecting Pooled
Trust, Inc. or Foundation Funds, as applicable, 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.
Effective December 24, 1997, the name of The Defensive Equity
Small/Mid-Cap Portfolio was changed to The Mid-Cap Value Equity Portfolio, the
name of The Fixed Income Portfolio was changed to The Intermediate Fixed Income
Portfolio and the name of The Defensive Equity Portfolio was changed to The
Large-Cap Value Equity Portfolio. Effective October 7, 1998, the name of The
Aggressive Growth Portfolio was changed to The Mid-Cap Growth Equity Portfolio.
Effective March 1, 1999, the name of The Growth and Income Portfolio was changed
to The Core Equity Portfolio.
Noncumulative Voting
Portfolio shares of Pooled Trust have noncumulative voting rights which
means that the holders of more than 50% of the shares of Pooled Trust, Inc.
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.
Portfolio shares of Foundation Funds have noncumulative voting rights
which means that the holders of more than 50% of the shares of Foundation Funds
voting for the election of trustees can elect all the trustees if they choose to
do so, and, in such event, the holders of the remaining shares will not be able
to elect any trustees.
EURO
Several European countries are participating in the European Economic
and Monetary Union, which established a common European currency for
participating countries. This currency is commonly known as the "Euro." Each
participating country replaced its previous currency with the Euro on January 1,
1999. Additional European countries may elect to participate after that date. In
addition, full implementation of the Euro will extend over a period of several
years. Initial implementation of the Euro occurred on January 1, 1999 without
disruption of services provided to the Portfolios. The Portfolios' service
providers cooperated over the implementation weekend and following weeks to
reconcile their records and procedures. Going forward, if a Portfolio is
invested in securities of participating countries or countries that elect to
participate at a later date, it could be adversely affected if the computer
systems used by applicable service providers are not properly prepared to handle
the implementation of this single currency through completion of the process or
the adoption of the Euro by additional countries in the future.
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.
143
<PAGE>
PERFORMANCE INFORMATION
From time to time, Pooled Trust, Inc. 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 or life-of-portfolio, as relevant. Pooled Trust, Inc. 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 REIT
Fund A Class of The Real Estate Investment
Trust 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 REIT Fund B Class and
REIT Fund C Class of The Real Estate
Investment Trust 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.
144
<PAGE>
The performance, as shown below, is the average annual total return
quotations for the Portfolios operating for at least one year as of April 30,
1999. Securities prices fluctuated during the period covered and the past
results should not be considered as representative of future performance.
<TABLE>
<CAPTION>
Average Annual Total Return(1)
- ---------------------------------------------------------------------------------------------------------------
1 year 3 years 5 years
ended ended ended
4/30/99 4/30/99 4/30/99 Life of Fund
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Large-Cap Value Equity Portfolio 10.20% 21.62% 21.38% 19.33%
(Inception 2/3/92)
- ---------------------------------------------------------------------------------------------------------------
The International Equity Portfolio 8.91% 12.04% 11.27% 12.27%
(Inception 2/4/92)
- ---------------------------------------------------------------------------------------------------------------
The Mid-Cap Growth Equity Portfolio 14.69% 13.36% 15.87% 12.64%
(Inception 2/27/92)
- ---------------------------------------------------------------------------------------------------------------
The Global Fixed Income Portfolio 8.34% 7.90% 9.31% 10.26%
(Inception 11/30/92)
- ---------------------------------------------------------------------------------------------------------------
The Labor Select International Equity Portfolio 5.89% 14.29% N/A 16.07%
(Inception 12/19/95)
- ---------------------------------------------------------------------------------------------------------------
The Intermediate Fixed Income Portfolio 5.56% 6.72% N/A 6.27%
(Inception 3/12/96)
- ---------------------------------------------------------------------------------------------------------------
The High Yield Bond Portfolio (2.26)% N/A N/A 9.61%
(Inception 12/2/96)
- ---------------------------------------------------------------------------------------------------------------
The International Fixed Income Portfolio 8.78% N/A N/A 7.07%
(Inception 4/11/97)
- ---------------------------------------------------------------------------------------------------------------
The Emerging Markets Portfolio (26.59)% N/A N/A (15.53)%
(Inception 4/14/97)
- ---------------------------------------------------------------------------------------------------------------
The Global Equity Portfolio 7.15% N/A N/A 10.52%
(Inception 10/15/97)
- ---------------------------------------------------------------------------------------------------------------
The Real Estate Investment Trust Portfolio II (6.40)% N/A N/A (3.91)%
(Inception 11/4/97)
- ---------------------------------------------------------------------------------------------------------------
The Mid-Cap Value Equity Portfolio (11.70)% N/A N/A (2.21)%
(Inception 12/29/97)
- ---------------------------------------------------------------------------------------------------------------
The Aggregate Fixed Income Portfolio 5.15% N/A N/A 5.41%
(Inception 12/29/97)
- ---------------------------------------------------------------------------------------------------------------
The Diversified Core Fixed Income Portfolio 7.33% N/A N/A 9.03%
(Inception 12/29/97)
- ---------------------------------------------------------------------------------------------------------------
</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.
145
<PAGE>
The total return for REIT Fund A Class of The Real Estate Investment
Trust Portfolio at offer reflects the maximum front-end sales charge of 5.75%
paid on the purchase of shares. The total return for 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, is not
deducted from any computation of total return. The Portfolio 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 REIT Fund A Class. Securities prices fluctuated during the period
covered and the past results should not be considered as representative of
future performance.
Average Annual Total Return(1)
The Real Estate Investment Trust Portfolio
The Real Estate Investment Trust Portfolio Class (2)
1 year ended 4/30/99 (6.34)%
3 years ended 4/30/99 18.22%
Period 12/6/95(3) through 4/30/99 18.12%
(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) The Real Estate Investment Trust Portfolio class commenced operations
on November 4, 1997. Pursuant to applicable regulation, total return
shown for the class prior to commencement of operations 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
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 REIT Fund A Class).
146
<PAGE>
Average Annual Total Return(1)
The Real Estate Investment Trust Portfolio
<TABLE>
<CAPTION>
REIT Fund REIT Fund REIT Fund
A Class(2) A Class(2) Institutional Class (3)
(at Offer) (at NAV) -----------------------
---------- --------
<S> <C> <C> <C>
1 year ended 4/30/99 (11.99)% (6.59)% (6.34)%
3 years ended 4/30/99 15.77% 18.06% N/A
Period 11/11/97 (3) through 4/30/99 N/A N/A (2.66)%
Period 12/6/95(4) through 4/30/99 15.94% 17.98% N/A
</TABLE>
(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 REIT Fund A Class. Effective November 4, 1997, a front-end
sales charge of 5.75% was imposed on sales of those shares and effective
November 11, 1997, a 12b-1 distribution fee of up to 0.30% has been assessed
annually. All performance numbers for REIT Fund A Class (at Offer) are
calculated giving effect to the sales charge. For periods prior to November
11, 1997, no adjustment has been made to reflect the effect of 12b-1
payments. Performance on and after November 11, 1997 includes the effect of
such 12b-1 payments. REIT Fund A Class is subject to other expenses (at a
higher rate than applicable to the original class) which may affect
performance of the Class.
(3) REIT Fund Institutional Class commenced operations on November 11, 1997.
(4) Date of initial sale of the original class (now REIT Fund A Class).
147
<PAGE>
Average Annual Total Return(1)
The Real Estate Investment Trust Portfolio
<TABLE>
<CAPTION>
REIT Fund REIT Fund REIT Fund REIT Fund
B Class B Class C Class C Class
(including (excluding (including (excluding
CDSC) CDSC) CDSC) CDSC)
----- ----- ----- -----
<S> <C> <C> <C> <C>
1 year ended 4/30/99 (11.40)% (7.19)% (8.04)% (7.20)%
Period 11/11/97 (2) through 4/30/99 (6.09)% (3.93)% (3.93)% (3.93)%
</TABLE>
(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.
Pooled Trust, Inc. 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.
148
<PAGE>
The above formula will be used in calculating quotations of yield,
based on specific 30-day periods identified in advertising by a 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 30-day yields for
The Global Fixed Income Portfolio and The Intermediate Fixed Income Portfolio as
of April 30, 1999 were 3.92% and 6.06%, respectively. Each yield reflects the
waiver and reimbursement commitment by its investment adviser.
Investors should note that income earned and dividends paid by The
Intermediate Fixed Income Portfolio, The Global Fixed Income Portfolio, The
International Fixed Income Portfolio, The High-Yield Bond Portfolio, The
Aggregate Fixed Income Portfolio and The Diversified Core Fixed Income Portfolio
will also vary depending upon fluctuation in interest rates and performance of
each Portfolio.
The net asset value of these seven 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 charge, except for REIT Fund A Class, REIT Fund B Class
and 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.
Pooled Trust, Inc. may promote the total return performance of The Real
Estate Investment Trust Portfolio II by comparison to the original class (prior
to its redesignation as REIT Fund A Class) of The Real Estate Investment Trust
Portfolio.
From time to time, each Portfolio may also quote its actual total
return performance, dividend results and other performance information in
advertising and other types of literature. This information may be compared to
that of other mutual funds with similar investment objectives and to stock, bond
and other relevant indices or to rankings prepared by independent services or
other financial or industry publications that monitor the performance of mutual
funds. For example, the performance of a Portfolio may be compared to data
prepared by Lipper Analytical Services, Inc., Morningstar, Inc., or to the S&P
500 Index, the Dow Jones Industrial Average, the Morgan Stanley Capital
International (MSCI), Europe, Australia and Far East (EAFE) Index, the MSCI
Emerging Markets Free Index, or the Salomon Brothers World Government Bond
Index. Performance also may be compared to data prepared by Lipper Analytical
Services, Inc., Morningstar, Inc. or the performance of unmanaged indices
compiled or maintained by statistical research firms such as Lehman Brothers or
Salomon Brothers, Inc.
Salomon Brothers and Lehman Brothers are statistical research firms
that maintain databases of international market, bond market, corporate and
government-issued securities of various maturities. This information, as well as
unmanaged indices compiled and maintained by these firms, will be used in
preparing comparative illustrations. In addition, the performance of multiple
indices compiled and maintained by these firms may be combined to create a
blended performance result for comparative purposes. Generally, the indices
selected will be representative of the types of securities in which a Portfolio
may invest and the assumptions that were used in calculating the blended
performance will be described.
149
<PAGE>
Lipper Analytical Services, Inc. maintains statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds. Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare a Portfolio's
performance to another fund in appropriate categories over specific time periods
also may be quoted in advertising and other types of literature. The S&P 500 and
the Dow Jones Industrial Average are industry-accepted unmanaged indices of
generally-conservative securities used for measuring general market performance.
Similarly, the MSCI EAFE Index, the MSCI Emerging Markets Free Index, and the
Salomon Brothers World Government Bond Index are industry-accepted unmanaged
indices of equity securities in developed countries and global debt securities,
respectively, used for measuring general market performance. The total return
performance reported for these indices will reflect the reinvestment of all
distributions on a quarterly basis and market price fluctuations. The indices do
not take into account any sales charges or other fees. A direct investment in an
unmanaged index is not possible.
Comparative information on the Consumer Price Index may also be
included in advertisements or other literature. The Consumer Price Index, as
prepared by the U.S. Bureau of Labor Statistics, is the most commonly used
measure of inflation. It indicates the cost fluctuations of a representative
group of consumer goods. It does not represent a return from an investment.
Current interest rate and yield information on government debt
obligations of various durations, as reported weekly by the Federal Reserve
(Bulletin H.15), may also be used. As well, current industry rate and yield
information on all industry available fixed-income securities, as reported
weekly by The Bond Buyer, may also be used in preparing comparative
illustrations.
A Portfolio may also promote its yield and/or total return performance
and use comparative performance information computed by and available from
certain industry and general market research and publications, such as Lipper
Analytical Services, Inc. and Morningstar, Inc.
The performance of multiple indices compiled and maintained by
statistical research firms, such as Morgan Stanley, Salomon Brothers and Lehman
Brothers, may be combined to create a blended performance result for comparative
purposes. Generally, the indices selected will be representative of the types of
securities in which a Portfolio 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 Pooled Trust, Inc., peer group
comparison composites for each Portfolio. 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. Wellesley
Group will also be preparing performance analyses of actual Portfolio
performance, and benchmark index exhibits, for inclusion in client quarterly
review packages.
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Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides
historical returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the Consumer Price Index), and combinations
of various capital markets. The performance of these capital markets is based on
the returns of different indices. A Portfolio may use the performance of these
capital markets in order to demonstrate general risk-versus-reward investment
scenarios. Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to those
of the Portfolio. A Portfolio may also compare performance to that of other
compilations or indices that may be developed and made available in the future.
A Portfolio may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that describe
general principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting, questionnaires designed to help create a personal
financial profile, worksheets used to project savings needs based on assumed
rates of inflation and hypothetical rates of return and action plans offering
investment alternatives), investment management techniques, policies or
investment suitability of a Portfolio (such as value investing, market timing,
dollar cost averaging, asset allocation, constant ratio transfer, automatic
account rebalancing, the advantages and disadvantages of investing in
tax-deferred and taxable investments or global or international investments),
economic and political conditions, the relationship between sectors of the
economy and the economy as a whole, the effects of inflation and historical
performance of various asset classes, including but not limited to, stocks,
bonds and Treasury bills. From time to time advertisements, sales literature,
communications to shareholders or other materials may summarize the substance of
information contained in shareholder reports (including the investment
composition of a Portfolio), as well as the views as to current market,
economic, trade and interest rate trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to a Portfolio. In addition, selected indices may be used to
illustrate historic performance of selected asset classes. The Portfolio may
also include in advertisements, sales literature, communications to shareholders
or other materials, charts, graphs or drawings which illustrate the potential
risks and rewards of investment in various investment vehicles, including but
not limited to, domestic and international stocks, and/or bonds, treasury bills
and shares of a Portfolio. In addition, advertisements, sales literature,
communications to shareholders or other materials may include a discussion of
certain attributes or benefits to be derived by an investment in the Portfolio
and/or other mutual funds, shareholder profiles and hypothetical investor
scenarios, timely information on financial management, tax and retirement
planning (such as information on Roth IRAs and Education IRAs) and investment
alternative to certificates of deposit and other financial instruments. Such
sales literature, communications to shareholders or other materials may include
symbols, headlines or other material which highlight or summarize the
information discussed in more detail therein.
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Materials may refer to the CUSIP numbers of a Portfolio and may
illustrate how to find the listings of a Portfolio in newspapers and
periodicals. Materials may also include discussions of other Portfolios,
products, and services.
A Portfolio may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Portfolio may compare these
measures to those of other funds. Measures of volatility seek to compare the
historical share price fluctuations or total returns to those of a benchmark.
Measures of benchmark correlation indicate how valid a comparative benchmark may
be. Measures of volatility and correlation may be calculated using averages of
historical data. A Portfolio may advertise its current interest rate
sensitivity, duration, weighted average maturity or similar maturity
characteristics. Advertisements and sales materials relating to a Portfolio may
include information regarding the background and experience of its portfolio
managers.
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The following tables are an example, for purposes of illustration only,
of cumulative total return performance for the Portfolios operating as of April
30, 1999. For these purposes, the calculations assume the reinvestment of any
capital gains distributions and income dividends paid during the indicated
periods.
<TABLE>
<CAPTION>
Cumulative Total Return (1)
- ----------------------------------------------------------------------------------------------------------------------
3 months 6 months 9 months 1 year 3 years 5 years
ended ended ended ended ended ended Life of
4/30/99 4/30/99 4/30/99 4/30/99 4/30/99 4/30/99 Fund
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
The Large Cap Value Equity Portfolio 9.44% 15.12% 13.48% 10.20% 79.87% 163.50% 259.43%
(Inception 2/3/92)
- --------------------------------------------------------------------------------------------------- ------------------
The International Equity Portfolio 9.90% 15.53% 9.29% 8.91% 40.65% 70.60% 131.06%
(Inception 2/4/92)
- ----------------------------------------------------------------------------------------------------------------------
The Mid-Cap Growth Equity Portfolio 4.99% 28.98% 19.09% 14.69% 45.67% 108.86% 134.88%
(Inception 2/27/92)
- ----------------------------------------------------------------------------------------------------------------------
The Global Fixed Income Portfolio 0.10% 1.89% 8.44% 8.34% 25.61% 56.09% 87.09%
(Inception 11/30/92)
- ----------------------------------------------------------------------------------------------------------------------
The Labor Select International Equity Portfolio 7.77% 13.64% 5.52% 5.89% 49.29% N/A 65.14%
(Inception 12/19/95)
- ----------------------------------------------------------------------------------------------------------------------
The Intermediate Fixed Income Portfolio (0.28)% 1.43% 3.82% 5.56% 21.54% N/A 21.03%
(Inception 3/12/96)
- ----------------------------------------------------------------------------------------------------------------------
The High Yield Bond Portfolio 0.62% 5.47% (4.83)% (2.26)% N/A N/A 24.75%
(Inception 12/2/96)
- ----------------------------------------------------------------------------------------------------------------------
The International Fixed Income Portfolio 0.97% 1.40% 9.65% 8.78% N/A N/A 15.08%
(Inception 4/11/97)
- ----------------------------------------------------------------------------------------------------------------------
The Emerging Markets Portfolio 34.72% 19.04% (4.77)% (26.59)% N/A N/A (29.15)%
(Inception 4/14/97)
- ----------------------------------------------------------------------------------------------------------------------
The Global Equity Portfolio 7.22% 12.81% 8.34% 7.15% N/A N/A 16.72%
(Inception 10/15/97)
- ----------------------------------------------------------------------------------------------------------------------
The Real Estate Investment Trust Portfolio II 6.63% 7.42% 0.17% (6.40)% N/A N/A (5.76)%
(Inception 11/4/97)
- ----------------------------------------------------------------------------------------------------------------------
The Mid-Cap Value Equity Portfolio 6.28% 6.83% (0.76)% (11.70)% N/A N/A (2.98)%
(Inception 12/29/97)
- ----------------------------------------------------------------------------------------------------------------------
The Aggregate Fixed Income Portfolio (1.55)% (0.04)% 3.24% 5.15% N/A N/A 7.37%
(Inception 12/29/97)
- ----------------------------------------------------------------------------------------------------------------------
The Diversified Core Fixed Income Portfolio 0.71% 4.86% 4.40% 7.33% N/A N/A 12.38%
(Inception 12/29/97)
- ----------------------------------------------------------------------------------------------------------------------
The Core Equity Portfolio (0.20)% 9.76% N/A N/A N/A N/A 15.83%
(Inception 9/15/98)
- ----------------------------------------------------------------------------------------------------------------------
The Small-Cap Growth Equity Portfolio 0.61% 24.02% N/A N/A N/A N/A 37.15%
(Inception 9/15/98)
- ----------------------------------------------------------------------------------------------------------------------
</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.
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The cumulative total return for Class A Shares of The Real Estate
Investment Trust Portfolio at offer reflects the maximum front-end sales charge
of 5.75% paid on the purchase of shares. The cumulative total return for Class B
and C Shares of the Real Estate Investment Trust Portfolio including CDSC
reflects the deduction of the applicable CDSC that would be paid if the shares
were redeemed at April 30, 1999. The cumulative total return for Class B and C
Shares excluding CDSC assumes the shares were not redeemed at April 30, 1999 and
therefore does not reflect the deduction of a CDSC.
Securities prices fluctuated during the periods covered and past
results should not be considered as representative of future performance.
Cumulative Total Return (1)
The Real Estate Investment Trust Portfolio
The Real Estate Investment Trust Portfolio Class (2)
3 months ended 4/30/99 5.96%
6 months ended 4/30/99 6.82%
9 months ended 4/30/99 (0.01)%
1 year ended 4/30/99 (6.34)%
3 years ended 4/30/99 65.24%
Period 12/6/95(3) through 4/30/99 76.19%
(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) The Real Estate Investment Trust Portfolio class commenced operations
on November 4, 1997. Pursuant to applicable regulation, total return
shown for the class prior to commencement of operations 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
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 REIT Fund A Class).
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<PAGE>
Cumulative Total Return (1)
The Real Estate Investment Trust Portfolio
<TABLE>
<CAPTION>
REIT Fund A Class (at REIT Fund
Offer)(2) Institutional Class (3)
--------------------- -----------------------
<S> <C> <C>
3 months ended 4/30/99 (0.19)% 5.96%
6 months ended 4/30/99 0.57%(5) 6.82%
9 months ended 4/30/99 (5.93)% (0.01)%
1 year ended 4/30/99 (11.99)% (6.34)%
3 years ended 4/30/99 55.16% N/A
Period 11/11/97(3) through 4/30/99 N/A (3.87)%
Period 12/6/95(4) through 4/30/99 65.39% N/A
</TABLE>
(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) 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 REIT Fund A Class. Effective November 4, 1997, a front-end
sales charge of 5.75% was imposed on sales of those shares and effective
November 11, 1997, a 12b-1 distribution fee of up to 0.30% has been assessed
annually. All performance numbers for REIT Fund A Class (at Offer) are
calculated giving effect to the sales charge. For periods prior to November
11, 1997, no adjustment has been made to reflect the effect of 12b-1
payments. Performance on and after November 11, 1997 includes the effect of
such 12b-1 payments. REIT Fund A Class is subject to other expenses (at a
higher rate than applicable to the original class) which may affect
performance of the Class.
(3) REIT Fund Institutional Class commenced operations on November 11, 1997.
(4) Date of initial sale of the original class (now REIT Fund A Class).
(5) Cumulative total return at net asset value was 6.69% for the six months
ended April 30, 1999.
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<PAGE>
Cumulative Total Return (1)
The Real Estate Investment Trust Portfolio
<TABLE>
<CAPTION>
REIT Fund REIT Fund REIT Fund REIT Fund
B Class B Class C Class C Class
(including (excluding (including (excluding
CDSC) CDSC) CDSC) CDSC)
----- ----- ----- -----
<S> <C> <C> <C> <C>
3 months ended 4/30/99 0.73% 5.73% 4.73% 5.73%
6 months ended 4/30/99 1.46% 6.31% 5.34% 6.31%
9 months ended 4/30/99 (5.22)% (0.70)% (1.61)% (0.70)%
1 year ended 4/30/99 (11.40)% (7.19)% (8.04)% (7.20)%
Period 11/11/97 (2) through 4/30/99 (8.82)% (5.71)% (5.71)% (5.71)%
</TABLE>
(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.
In addition, information will be provided that discusses the overriding
investment philosophies of Delaware and Delaware International and how those
philosophies impact each Portfolio in the strategies Pooled Trust, Inc. and
Foundation Funds employs in seeking respective Portfolio objectives. Since the
investment disciplines being employed for each Portfolio are based on the
disciplines and strategies employed by an affiliate of Delaware and Delaware
International to manage institutional separate accounts, investment strategies
and disciplines of these entities may also be discussed.
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<PAGE>
The Large-Cap Value 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 Large-Cap
Value Equity Portfolio strategy.
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Delaware
Pooled Trust, Inc. ("Pooled Trust, Inc.") and, in its capacity as such, audits
the annual financial statements contained in the Pooled Trust, Inc.'s Annual
Reports. Each Portfolio's, other than The Small-Cap Value Equity, The Balanced,
The Equity Income, The Select Equity, The International Small-Cap and The
International Large-Cap Equity Portfolios', Statement of Net Assets, Statement
of Operations, Statement of Changes in Net Assets, Financial Highlights and
Notes to Financial Statements, as well as the reports of Ernst & Young LLP for
the fiscal year ended October 31, 1998 are included in Pooled Trust Inc.'s
Annual Reports to shareholders. The financial statements and financial
highlights, the notes relating thereto and the reports of Ernst & Young LLP
listed above are incorporated by reference from the Annual Reports into this
Part B. Each Portfolio's, other than The Balanced, The Equity Income, The Select
Equity, The International Small-Cap and The International Large-Cap Equity
Portfolios', unaudited financial statements, financial highlights and the notes
relating thereto for the six-month period ended April 30, 1999 are also
incorporated into this Part B by reference from Pooled Trust, Inc.'s Semi-Annual
Reports. The Small-Cap Value Equity, The Balanced, The Equity Income, The
Select Equity and The International Small-Cap Portfolios were not operating on
October 31, 1998. The International Large-Cap Equity Portfolio did not commence
operations prior to the date of this Part B.
Ernst & Young LLP serves as the independent auditors for Delaware Group
Foundation Funds and, in its capacity as such, will audit the annual financial
statements of The Asset Allocation Portfolio.
157
<PAGE>
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.
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.
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<PAGE>
Excerpts from Fitch's description of its bond ratings: AAA--Bonds
considered to be investment grade and of the highest credit quality. The obligor
has an exceptionally strong ability to pay interest and repay principal, which
is unlikely to be affected by reasonably foreseeable events; AA--Bonds
considered to be investment grade and of very high credit quality. The obligor's
ability to pay interest and repay principal is very strong, although not quite
as strong as bonds rated AAA. Because bonds rated in the AAA and AA categories
are not significantly vulnerable to foreseeable future developments, short-term
debt of these issuers is generally rated F-1+; A--Bonds considered to be
investment grade and of high credit quality. The obligor's ability to pay
interest and repay principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and circumstances that
bonds with higher ratings; BBB--Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings; BB--Bonds are considered speculative. The obligor's ability to
pay interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements; B--Bonds
are considered highly speculative. While bonds in this class are currently
meeting debt service requirements, the probability of continued timely payment
of principal and interest reflects the obligor's limited margin of safety and
the need for reasonable business and economic activity throughout the life of
the issue; CCC--Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment; CC--Bonds are minimally
protected. Default in payment of interest and/or principal seems probable over
time; C--Bonds are in imminent default in payment of interest or principal; and
DDD, DD and D--Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the "AAA" category.
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.
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<PAGE>
APPENDIX B--INVESTMENT OBJECTIVES OF THE FUNDS IN THE DELAWARE INVESTMENTS
FAMILY
Following is a summary of the investment objectives of the funds in the
Delaware Investments family:
Delaware Balanced Fund seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. Delaware Devon
Fund seeks current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks the investment
adviser believes have the potential for above average dividend increases over
time.
Delaware Trend Fund seeks long-term growth by investing in common
stocks issued by emerging growth companies exhibiting strong capital
appreciation potential.
Delaware Small Cap Value Fund seeks capital appreciation by investing
primarily in common stocks whose market values appear low relative to their
underlying value or future potential.
Delaware DelCap Fund seeks long-term capital growth by investing in
common stocks and securities convertible into common stocks of companies that
have a demonstrated history of growth and have the potential to support
continued growth.
Delaware Decatur Equity Income Fund seeks the highest possible current
income by investing primarily in common stocks that provide the potential for
income and capital appreciation without undue risk to principal. Delaware Growth
and Income Fund seeks long-term growth by investing primarily in securities that
provide the potential for income and capital appreciation without undue risk to
principal. Delaware Blue Chip Fund seeks to achieve long-term capital
appreciation. Current income is a secondary objective. It seeks to achieve these
objectives by investing primarily in equity securities and any securities that
are convertible into equity securities. Delaware Social Awareness Fund seeks to
achieve long-term capital appreciation. It seeks to achieve this objective by
investing primarily in equity securities of medium- to large-sized companies
expected to grow over time that meet the Fund's "Social Criteria" strategy.
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<PAGE>
Delaware Delchester Fund seeks as high a current income as possible by
investing principally in high yield, high risk corporate bonds, and also in U.S.
government securities and commercial paper. Delaware Strategic Income Fund seeks
to provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities. Delaware High-Yield Opportunities Fund seeks to provide
investors with total return and, as a secondary objective, high current income.
Delaware Corporate Bond Fund seeks to provide investors with total return by
investing primarily in corporate bonds. Delaware Extended Duration Bond Fund
seeks to provide investors with total return by investing primarily in corporate
bonds.
Delaware Limited-Term Government Fund seeks high, stable income by
investing primarily in a portfolio of short- and intermediate-term securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities
and instruments secured by such securities.
Delaware American Government Bond Fund seeks high current income by
investing primarily in long-term debt obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities.
Delaware Cash Reserve Fund seeks the highest level of income consistent
with the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
Delaware Tax-Free USA Fund seeks high current income exempt from
federal income tax by investing in municipal bonds of geographically-diverse
issuers. Delaware Tax-Free Insured Fund invests in these same types of
securities but with an emphasis on municipal bonds protected by insurance
guaranteeing principal and interest are paid when due. Delaware Tax-Free USA
Intermediate Fund seeks a high level of current interest income exempt from
federal income tax, consistent with the preservation of capital by investing
primarily in municipal bonds.
Delaware Tax-Free Money Fund seeks high current income, exempt from
federal income tax, by investing in short-term municipal obligations, while
maintaining a stable net asset value.
Delaware Tax-Free Pennsylvania Fund seeks a high level of current
interest income exempt from federal and, to the extent possible, certain
Pennsylvania state and local taxes, consistent with the preservation of capital.
Delaware Tax-Free New Jersey Fund seeks a high level of current interest income
exempt from federal income tax and New Jersey state and local taxes, consistent
with preservation of capital. Delaware Tax-Free Ohio Fund seeks a high level of
current interest income exempt from federal income tax and Ohio state and local
taxes, consistent with preservation of capital.
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Delaware Foundation Funds are "fund of funds" which invest in other
funds in the Delaware Investments family (referred to as "Underlying Funds").
Delaware Foundation Funds Income Portfolio seeks a combination of current income
and preservation of capital with capital appreciation by investing primarily in
a mix of fixed income and domestic equity securities, including fixed income and
domestic equity Underlying Funds. Delaware Foundation Funds Balanced Portfolio
seeks capital appreciation with current income as a secondary objective by
investing primarily in domestic equity and fixed income securities, including
domestic equity and fixed income Underlying Funds. Delaware Foundation Funds
Growth Portfolio seeks long-term capital growth by investing primarily in equity
securities, including equity Underlying Funds, and, to a lesser extent, in fixed
income securities, including fixed-income Underlying Funds.
Delaware International Equity Fund seeks to achieve long-term growth
without undue risk to principal by investing primarily in international
securities that provide the potential for capital appreciation and income.
Delaware Global Bond Fund seeks to achieve current income consistent with the
preservation of principal by investing primarily in global fixed-income
securities that may also provide the potential for capital appreciation.
Delaware Global Equity Fund seeks to achieve long-term total return by investing
in global securities that provide the potential for capital appreciation and
income. Delaware Emerging Markets Fund seeks long-term capital appreciation by
investing primarily in equity securities of issuers located or operating in
emerging countries.
Delaware U.S. Growth Fund seeks to maximize capital appreciation by
investing in companies of all sizes which have low dividend yields, strong
balance sheets and high expected earnings growth rates relative to their
industry. Overseas Equity Fund seeks to maximize total return (capital
appreciation and income), principally through investments in an internationally
diversified portfolio of equity securities. Delaware New Pacific Fund seeks
long-term capital appreciation by investing primarily in companies which are
domiciled in or have their principal business activities in the Pacific Basin.
Delaware Group Premium Fund, Inc. offers various funds available exclusively as
funding vehicles for certain insurance company separate accounts. Growth and
Income Series seeks the highest possible total rate of return by selecting
issues that exhibit the potential for capital appreciation while providing
higher than average dividend income. Delchester Series seeks as high a current
income as possible by investing in rated and unrated corporate bonds, U.S.
government securities and commercial paper. Capital Reserves Series seeks a high
stable level of current income while minimizing fluctuations in principal by
investing in a diversified portfolio of short- and intermediate-term securities.
Cash Reserve Series seeks the highest level of income consistent with
preservation of capital and liquidity through investments in short-term money
market instruments. DelCap Series seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. Delaware Balanced Series seeks a balance of
capital appreciation, income and preservation of capital. It uses a
dividend-oriented valuation strategy to select securities issued by established
companies that are believed to demonstrate potential for income and capital
growth. International Equity Series seeks long-term growth without undue risk to
principal by investing primarily in equity securities of foreign issuers that
provide the potential for capital appreciation and income. Small Cap Value
Series seeks capital appreciation by investing primarily in small-cap common
stocks whose market values appear low relative to their underlying value or
future earnings and growth potential. Emphasis will also be placed on securities
of companies that may be temporarily out of favor or whose value is not yet
recognized by the market. Trend Series seeks long-term capital appreciation by
investing primarily in small-cap common stocks and convertible securities of
emerging and other growth-oriented companies. These securities will have been
judged to be responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. Global Bond
Series seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. Strategic Income Series seeks
high current income and total return by using a multi-sector investment
approach, investing primarily in three sectors of the fixed-income securities
markets: high-yield, higher risk securities; investment grade fixed-income
securities; and foreign government and other foreign fixed-income securities.
Devon Series seeks current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on common stocks that
the investment manager believes have the potential for above-average dividend
increases over time. Emerging Markets Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of issuers located or
operating in emerging countries. Convertible Securities Series seeks a high
level of total return on its assets through a combination of capital
appreciation and current income by investing primarily in convertible
securities. Social Awareness Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series' "Social
Criteria" strategy. REIT Series seeks to achieve maximum long-term total return,
with capital appreciation as a secondary objective, by investing in securities
of companies primarily engaged in the real estate industry. Aggressive Growth
Series seeks long-term capital appreciation. The Series attempts to achieve its
investment objective by investing primarily in equity securities of companies
which the manager believes have the potential for high earnings growth. U.S.
Growth Series seeks to maximize capital appreciation by investing in companies
of all sizes which have low yields, strong balance sheets and high expected
earnings growth rates relative to their industry.
162
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Delaware U.S. Government Securities Fund seeks to provide a high level
of current income consistent with the prudent investment risk by investing in
U.S. Treasury bills, notes, bonds, and other obligations issued or
unconditionally guaranteed by the full faith and credit of the U.S. Treasury,
and repurchase agreements fully secured by such obligations.
Delaware Tax-Free Arizona Insured Fund seeks to provide a high level of
current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware Minnesota Insured
Fund seeks to provide a high level of current income exempt from federal income
tax and the Minnesota personal income tax, consistent with the preservation of
capital.
Delaware Tax-Free Minnesota Intermediate Fund seeks to provide a high
level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.
Delaware Tax-Free California Insured Fund seeks to provide a high level
of current income exempt from federal income tax and the California personal
income tax, consistent with the preservation of capital. Delaware Tax-Free
Florida Insured Fund seeks to provide a high level of current income exempt from
federal income tax, consistent with the preservation of capital. The Fund will
seek to select investments that will enable its shares to be exempt from the
Florida intangible personal property tax. Delaware Tax-Free Florida Fund seeks
to provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital. The Fund will seek to select
investments that will enable its shares to be exempt from the Florida intangible
personal property tax. Delaware Tax-Free Kansas Fund seeks to provide a high
level of current income exempt from federal income tax, the Kansas personal
income tax and the Kansas intangible personal property tax, consistent with the
preservation of capital. Delaware Tax-Free Missouri Insured Fund seeks to
provide a high level of current income exempt from federal income tax and the
Missouri personal income tax, consistent with the preservation of capital.
Delaware Tax-Free New Mexico Fund seeks to provide a high level of current
income exempt from federal income tax and the New Mexico personal income tax,
consistent with the preservation of capital. Delaware Tax-Free Oregon Insured
Fund seeks to provide a high level of current income exempt from federal income
tax and the Oregon personal income tax, consistent with the preservation of
capital.
Delaware Tax-Free Arizona Fund seeks to provide a high level of current
income exempt from federal income tax and the Arizona personal income tax,
consistent with the preservation of capital. Delaware Tax-Free California Fund
seeks to provide a high level of current income exempt from federal income tax
and the California personal income tax, consistent with the preservation of
capital. Delaware Tax-Free Iowa Fund seeks to provide a high level of current
income exempt from federal income tax and the Iowa personal income tax,
consistent with the preservation of capital. Delaware Tax-Free Idaho Fund seeks
to provide a high level of current income exempt from federal income tax and the
Idaho personal income tax, consistent with the preservation of capital. Delaware
Minnesota High Yield Municipal Bond Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax primarily through investment in medium and lower grade municipal
obligations. Delaware National High Yield Municipal Fund seeks to provide a high
level of income exempt from federal income tax, primarily through investment in
medium and lower grade municipal obligations. Delaware Tax-Free New York Fund
seeks to provide a high level of current income exempt from federal income tax
and the personal income tax of the state of New York and the city of New York,
consistent with the preservation of capital. Delaware Tax-Free Wisconsin Fund
seeks to provide a high level of current income exempt from federal income tax
and the Wisconsin personal income tax, consistent with the preservation of
capital. Delaware Montana Municipal Bond Fund seeks to provide a high level of
current income exempt from federal income tax and the Montana personal income
tax, consistent with the preservation of capital.
163
<PAGE>
Delaware Tax-Free Colorado Fund seeks to provide a high level of
current income exempt from federal income tax and the Colorado personal income
tax, consistent with the preservation of capital.
Delaware Tax-Free Minnesota Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax, consistent with the preservation of capital. Delaware Tax-Free North Dakota
Fund seeks to provide a high level of current income exempt from federal income
tax and the North Dakota personal income tax, consistent with the preservation
of capital.
Delaware Select Growth Fund seeks long-term capital appreciation, which
the Fund attempts to achieve by investing primarily in equity securities
believed to have the potential for high earnings growth. Although the Fund, in
seeking its objective, may receive current income from dividends and interest,
income is only an incidental consideration in the selection of the Fund's
investments. Delaware Growth Stock Fund has an objective of long-term capital
appreciation. The Fund seeks to achieve its objective from equity securities
diversified among individual companies and industries. Delaware Tax-Efficient
Equity Fund seeks to obtain for taxable investors a high total return on an
after-tax basis. The Fund will attempt to achieve this objective by seeking to
provide a high long-term after-tax total return through managing its portfolio
in a manner that will defer the realization of accrued capital gains and
minimize dividend income.
For more complete information about any of the funds in the Delaware
Investments family, including charges and expenses, you can obtain a prospectus
from the Distributor. Read it carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the
information contained in the Portfolio's prospectus(es).
164
<PAGE>
PART C
Other Information
Item 23. Exhibits
(a) Articles of Incorporation.
(1) 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.
(2) Articles Supplementary (January 14, 1997) incorporated into this
filing by reference to Post-Effective Amendment No. 14 filed
January 16, 1997.
(3) Articles Supplementary (April 14, 1997) incorporated into this
filing by reference to Post-Effective Amendment No. 16 filed May
23, 1997.
(4) Articles Supplementary (October 10, 1997) incorporated into this
filing by reference to Post-Effective Amendment No. 20 filed
October 24, 1997.
(5) Articles of Amendment (October 10, 1997) incorporated into this
filing by reference to Post-Effective Amendment No. 20 filed
October 24, 1997.
(6) Articles Supplementary (December 24, 1997) attached as Exhibit.
(7) Articles of Amendment (December 24, 1997) attached as Exhibit.
(8) Articles Supplementary (August 26, 1998) incorporated into this
filing by reference to Post-Effective Amendment No. 26 filed
March 1, 1999.
(9) Articles Supplementary (October 7, 1998) attached as Exhibit.
(10) Articles of Amendment (October 7, 1998) attached as Exhibit.
(11) Articles of Amendment (February 9, 1999) incorporated into this
filing by reference to Post-Effective Amendment No. 27 filed on
April 15, 1999.
(12) Articles Supplementary (February 24, 1999) incorporated into this
filing by reference to Post-Effective Amendment No. 27 filed on
April 15, 1999.
(13) Articles of Amendment (February 24, 1999) incorporated into this
filing by reference to Post-Effective Amendment No. 27 filed on
April 15, 1999.
(14) Form of Articles of Amendment (March 1999) to be filed by
Amendment.
(15) Form of Articles of Supplementary (March 1999) to be filed by
Amendment.
(16) Form of Articles of Amendment (June 1999) to be filed by
Amendment.
<PAGE>
(17) Articles Supplementary (June 21, 1999) incorporated into this
filing by reference to Post-Effective Amendment No. 28 filed on
September 1, 1999.
(18) Articles of Amendment (August 16, 1999) attached as Exhibit.
(19) Articles Supplementary (November 1999) attached as Exhibit.
(b) By-Laws. By-Laws, as amended to date, incorporated into this filing by
reference to Post-Effective Amendment No. 8 filed September 15, 1995.
(c) Instruments Defining the Rights of Security Holders.
(1) Articles of Incorporation and Articles Supplementary.
(i) 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.
(ii) Article Fourth of Articles Supplementary (November 28, 1995)
incorporated into this filing by reference to Post-Effective
Amendment No. 9 filed November 24, 1995.
(iii) Article Second of Articles Supplementary (April 14, 1997)
incorporated into this filing by reference to Post-Effective
Amendment No. 16 filed May 23, 1997.
(iv) Article Fourth of Articles Supplementary (October 9, 1997)
incorporated into this filing by reference to Post-Effective
Amendment No. 20 filed October 24, 1997.
(v) Article Fourth of Articles of Amendment (October 9, 1997)
incorporated into this filing by reference to Post-Effective
Amendment No. 20 filed October 24, 1997.
(vi) Article Third of Articles Supplementary (1997) incorporated
into this filing by reference to Post-Effective Amendment
No. 21 filed December 23, 1997.
(2) 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.
(d) Investment Management Agreements.
(1) Investment Management Agreement (dated March 1, 1999) between the
Registrant and Delaware Management Company on behalf of The Small-Cap
Value Equity Portfolio incorporated into this filing by reference to
Post-Effective Amendment No. 28 filed on September 1, 1999.
<PAGE>
(2) Investment Management Agreement (dated April 15, 1999) between the
Registrant and Delaware International Advisers Ltd. on behalf of The
Emerging Markets, The Global Equity, The Global Fixed Income, The
International Equity, The International Fixed Income and The Labor
Select International Equity Portfolios attached as Exhibit.
(3) Investment Sub-Advisory Agreement (dated April 15, 1999) between
Delaware Management Company and Delaware International Advisers Ltd.
on behalf of The Diversified Core Fixed Income Portfolio attached as
Exhibit.
(4) Investment Sub-Advisory Agreement (dated April 15, 1999) between
Delaware International Advisers Ltd. and Delaware Management Company
on behalf of The Global Equity Portfolio attached as Exhibit.
(5) Form of Investment Sub-Advisory Agreement (dated April 15, 1999)
between Delaware Management Company and Lincoln Investment Management,
Inc. on behalf of The Real Estate Investment Trust Portfolio attached
as Exhibit.
(6) Form of Investment Sub-Advisory Agreement (dated April 15, 1999)
between Delaware Management Company and Lincoln Investment Management,
Inc. on behalf of The Real Estate Investment Trust Portfolio II
attached as Exhibit.
(7) Amendment No. 1 (dated April 15, 1999) to Exhibit A of Investment
Management Agreement (dated March 1, 1999) between the Registrant and
Delaware Management Company (adding The Aggregate Fixed Income, The
Core Equity, The Diversified Core Fixed Income, The High-Yield Bond,
The Intermediate Fixed Income, The Large-Cap Value Equity, The Mid-Cap
Growth Equity, The Mid-Cap Value Equity, The Real Estate Investment
Trust Portfolio, The Real Estate Investment Trust Portfolio II, and
The Small-Cap Growth Equity Portfolios) incorporated into this filing
by reference to Post-Effective Amendment No. 28 filed on September 1,
1999.
(8) Amendment No. 2 (dated June 30, 1999) to Exhibit A of Investment
Management Agreement dated (March 1, 1999) between the Registrant and
Delaware Management Company (adding The Balanced, The Equity Income
and The Select Equity Portfolios) incorporated into this filing by
reference to Post-Effective Amendment No. 28 filed on September 1,
1999.
(9) Amendment No. 1 (dated June 30, 1999) to Exhibit A of Investment
Management Agreement dated (April 15, 1999) between the Registrant and
Delaware International Advisers Ltd. (adding The International
Small-Cap Portfolio) attached as Exhibit.
(10) Form of Amendment (November 1999) to Exhibit A of Investment
Management Agreement dated (April 15, 1999) between the Registrant and
Delaware International Advisers Ltd. (adding The International
Large-Cap Equity Portfolio) incorporated into this filing by reference
to Post-Effective Amendment No. 28 filed on September 1, 1999.
(e) (1) Distribution Agreements.
(i) Form of Distribution Agreements (April 1995) between Delaware
Distributors, L.P. and the Registrant on behalf of The Defensive
Equity (renamed The Large-Cap Value Equity), The Aggressive
Growth (renamed The Mid-Cap Growth Equity), The International
Equity, The Global Fixed Income, The Fixed Income (renamed
<PAGE>
The Intermediate Fixed Income) and The International Fixed Income
Portfolios incorporated into this filing by reference to
Post-Effective Amendment No. 9 filed October 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 (renamed The Mid-Cap Value Equity), 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
October 24, 1995.
(iii) Executed Distribution Agreement (April 14, 1997) between
Delaware Distributors, L.P. and the Registrant on behalf of The
Emerging Markets Portfolio incorporated into this filing by
reference to Post-Effective Amendment No. 17 filed August 1,
1997.
(iv) Executed Distribution Agreement (October 14, 1997) between
Delaware Distributors, L.P. and the Registrant on behalf of The
Global Equity Portfolio incorporated into this filing by
reference to Post-Effective Amendment No. 26 filed March 1, 1999.
(v) Executed Distribution Agreement (October 14, 1997) between
Delaware Distributors, L.P. and the Registrant on behalf of The
Real Estate Investment Trust Portfolio II incorporated into this
filing by reference to Post-Effective Amendment No. 26 filed
March 1, 1999.
(vi) Executed Amended and Restated Distribution Agreement (October 14,
1997) for The Real Estate Investment Trust Portfolio incorporated
into this filing by reference to Post-Effective Amendment No. 26
filed March 1, 1999.
(vii) Executed Distribution Agreement (December 24, 1997) between
Delaware Distributors, L.P. and the Registrant on behalf of The
Aggregate Fixed Income Portfolio incorporated into this filing by
reference to Post-Effective Amendment No. 26 filed March 1, 1999.
(viii) Executed Distribution Agreement (December 24, 1997) between
Delaware Distributors, L.P. and the Registrant on behalf of The
Diversified Core Fixed Income Portfolio incorporated into this
filing by reference to Post-Effective Amendment No. 26 filed
March 1, 1999.
(ix) Form of Distribution Agreement (1998) between Delaware
Distributors, L.P. and the Registrant on behalf of The Small-Cap
Growth Equity Portfolio incorporated into this filing by
reference to Post-Effective Amendment No. 22 filed June 17, 1998.
(x) Form of Distribution Agreement (1998) between Delaware
Distributors, L.P. and the Registrant on behalf of The Growth and
<PAGE>
Income Portfolio incorporated into this filing by reference to
Post-Effective Amendment No. 22 filed June 17, 1998.
(xi) Form of Distribution Agreement (1998) between Delaware
Distributors, L.P. and the Registrant on behalf of The Small-Cap
Value Equity Portfolio incorporated into this filing by reference
to Post-Effective Amendment No. 26 filed March 1, 1999.
(xii) Form of Distribution Agreement (1998) between Delaware
Distributors, L.P. and the Registrant on behalf of The Balanced
Portfolio, The Equity Income Portfolio, The Select Equity
Portfolio and The International Small-Cap Portfolio incorporated
into this filing by reference to Post-Effective Amendment No. 27
filed on April 15, 1999.
(xiii) Form of Distribution Agreement (1999) between Delaware
Distributors, L.P. and the Registrant on behalf of The
International Large-Cap Equity Portfolio incorporated into this
filing by reference to Post-Effective Amendment No. 28 filed on
September 1, 1999.
(2) Administration and Service Agreement. Form of Administration and
Service Agreement (as amended November 1995) (Module) incorporated
into this filing by reference to Post-Effective Amendment No. 17 filed
August 1, 1997.
(3) Dealer's Agreement. Dealer's Agreement (as amended November 1995)
(Module) incorporated into this filing by reference to Post-Effective
Amendment No. 17 filed August 1, 1997.
(4) Mutual Fund Agreement for the Delaware Group of Funds (as amended
November 1995) (Module) incorporated into this filing by reference to
Post-Effective Amendment No. 17 filed August 1, 1997.
(f) Bonus, Profit Sharing, Pension Contracts.
(1) Amended and Restated Profit Sharing Plan (November 17, 1994)
incorporated into this filing by reference to Post-Effective Amendment
No. 8 filed September 15, 1995.
(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.
(g) Custodian Agreements.
(1) Executed Custodian Agreement (1996) between the Registrant and The
Chase Manhattan Bank incorporated into this filing by reference to
Post-Effective Amendment No. 12 filed August 23, 1996.
<PAGE>
(2) Form of Securities Lending Agreement (1996) between the Registrant and
The Chase Manhattan Bank incorporated into this filing by reference to
Post-Effective Amendment No. 12 filed August 23, 1996.
(3) Amendment to Custodian Agreement (1997) between the Registrant and The
Chase Manhattan Bank incorporated into this filing by reference to
Post-Effective Amendment No. 21 filed December 23, 1997.
(4) Letter (April 14, 1997) to add The Emerging Markets Portfolio to the
Custodian Agreement between the Registrant and The Chase Manhattan
Bank incorporated into this filing by reference to Post-Effective
Amendment No. 22 filed June 17, 1998.
(5) Letter (October 14, 1997) to add The Global Equity Portfolio and The
Real Estate Investment Trust Portfolio II to the Custodian Agreement
between the Registrant and The Chase Manhattan Bank incorporated into
this filing by reference to Post-Effective Amendment No. 22 filed June
17, 1998.
(6) Letter (December 24, 1997) to add The Aggregate Fixed Income Portfolio
and The Diversified Core Fixed Income Portfolio to the Custodian
Agreement between the Registrant and The Chase Manhattan Bank
incorporated into this filing by reference to Post-Effective Amendment
No. 22 filed June 17, 1998.
(7) Form of letter to add The Small-Cap Growth Equity Portfolio and The
Growth and Income Portfolio to the Custodian Agreement between the
Registrant and The Chase Manhattan Bank incorporated into this filing
by reference to Post-Effective Amendment No. 22 filed June 17, 1998.
(8) Form of letter to add The Large-Cap Value Equity Portfolio, The
Aggressive Growth Portfolio (renamed The Mid-Cap Growth Equity
Portfolio), The Intermediate Fixed Income Portfolio and The
Small/Mid-Cap Value Equity Portfolio (renamed The Mid-Cap Value Equity
Portfolio) to the Custodian Agreement between the Registrant and The
Chase Manhattan Bank incorporated into this filing by reference to
Post-Effective Amendment No. 26 filed March 1, 1999.
(9) Executed letter to add The Balanced Portfolio, The Equity Income
Portfolio, The Select Equity Portfolio and The International Small-Cap
Portfolio to the Custodian Agreement between the Registrant and The
Chase Manhattan Bank attached as Exhibit.
(10) Form of letter to add The International Large-Cap Equity Portfolio to
the Custodian Agreement between the Registrant and The Chase Manhattan
Bank incorporated into this filing by reference to Post-Effective
Amendment No. 28 filed on September 1, 1999.
(h) Other Material Contracts.
(1) Executed Fourth Amended and Restated Shareholders Services Agreement
(April 1997) between Delaware Service Company, Inc. and the
<PAGE>
Registrant on behalf of each Portfolio incorporated into this
filing by reference to Post-Effective Amendment No. 17 filed
August 1, 1997.
(2) Form of Fifth Amended and Restated Shareholders Services
Agreement (October 1997) between Delaware Service Company, Inc.
and the Registrant on behalf of each Portfolio incorporated into
this filing by reference to Post-Effective Amendment No. 20 filed
October 24, 1997.
(3) Form of Sixth Amended and Restated Shareholders Services
Agreement (1997) between Delaware Service Company, Inc. and the
Registrant on behalf of each Portfolio incorporated into this
filing by reference to Post-Effective Amendment No. 21 filed
December 23, 1997.
(4) Form of Seventh Amended and Restated Shareholder Services
Agreement (1998) between Delaware Service Company, Inc. and the
Registrant on behalf of each Portfolio incorporated into this
filing by reference to Post-Effective Amendment No. 22 filed June
17, 1998.
(5) Form of Eighth Amended and Restated Shareholder Services
Agreement (1999) between Delaware Service Company, Inc. and the
Registrant on behalf of each Portfolio incorporated into this
filing by reference to Post-Effective Amendment No. 26 filed
March 1, 1999.
(6) Executed Ninth Amended and Restated Shareholder Services
Agreement (1999) between Delaware Service Company, Inc. and the
Registrant on behalf of each Portfolio attached as Exhibit.
(7) Form of Tenth Amended and Restated Shareholder Services Agreement
(November 1999) between Delaware Service Company, Inc. and the
Registrant on behalf of each Portfolio incorporated into this
filing by reference to Post-Effective Amendment No. 28 filed on
September 1, 1999.
(8) 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) Form of Amendment No. 14 (March 1999) to Delaware Group of
Funds Fund Accounting Agreement incorporated into this
filing by reference to Post-Effective Amendment No. 26 filed
March 1, 1999.
(ii) Form of Amendment No. 16 (June 1999) to Delaware Group of
Funds Fund Accounting Agreement incorporated into this
filing by reference to Post-Effective Amendment No. 27 filed
on April 15, 1999.
(iii) Form of Amendment (November 1999) to Delaware Group of
Funds Fund Accounting Agreement incorporated into this
filing by reference to Post-Effective Amendment No. 28 filed
on September 1, 1999.
<PAGE>
(i) Legal Opinion. Attached as Exhibit.
(j) Consent of Auditors. Attached as Exhibit.
(k) Inapplicable.
(l) Inapplicable.
(m) Plan Under Rule 12b-1.
(1) Executed 12b-1 Plan for REIT Fund Class A incorporated
into this filing by reference to Post-Effective
Amendment No. 27 filed on April 15, 1999.
(2) Executed 12b-1 Plan for REIT Fund Class B incorporated
into this filing by reference to Post-Effective
Amendment No. 27 filed on April 15, 1999.
(3) Executed 12b-1 Plan for REIT Fund Class C incorporated
into this filing by reference to Post-Effective
Amendment No. 27 filed on April 15, 1999.
(n) Plan under Rule 18f-3.
(1) Form of Rule 18f-3 Plan incorporated into this filing
by reference to Post-Effective Amendment No. 20 filed
October 24, 1997.
(2) Amended Appendix A to Rule 18f-3 Plan incorporated into
this filing by reference to Post-Effective Amendment
No. 20 filed October 24, 1997.
(o) Other: Directors' Power of Attorney.
(1) Incorporated into this filing by reference to
Post-Effective Amendment No. 21 filed December 23, 1997
and Post-Effective Amendment No. 22 filed June 17,
1998.
(2) Power of Attorney for Jan R. Yeomans incorporated into
this filing by reference to Post-Effective Amendment
No. 27 filed April 15, 1999.
Item 24. Persons Controlled by or under Common Control with Registrant. None.
Item 25. Indemnification. Article VII of By-Laws (as amended to date)
incorporated into this filing by reference to Post-Effective Amendment
No. 8 filed September 15, 1995.
<PAGE>
Item 26. Business and Other Connections of Investment Adviser.
(a) Delaware Management Company, a series of Delaware Management
Business Trust, (the "Manager") serves as investment manager to the Registrant
and also serves as investment manager or sub-adviser to certain of the other
funds in the Delaware Investments family (Delaware Group Equity Funds I, Inc.,
Delaware Group Equity Funds II, Inc., Delaware Group Equity Funds III, Delaware
Group Equity Funds IV, Inc., Delaware Group Equity Funds V, Inc., Delaware Group
Government Fund, Inc., Delaware Group Income Funds, Delaware Group Limited-Term
Government Funds, Inc., Delaware Group Cash Reserve, Inc., Delaware Group
Tax-Free Fund, Delaware Group State Tax-Free Income Trust, Delaware Group
Tax-Free Money Fund, 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., Delaware Group Foundation Funds, Voyageur Intermediate Tax-Free Funds,
Voyageur Tax-Free Funds, Voyageur Funds, Inc., Voyageur Insured Funds, Voyageur
Investment Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur
Mutual Funds III, Inc., Voyageur Arizona Municipal Income Fund, Inc., Voyageur
Colorado Insured Municipal Income Fund, Inc., Voyageur Florida Insured Municipal
Income Fund, Voyageur Minnesota Municipal Fund, Inc., Voyageur Minnesota
Municipal Fund II, Inc. and Voyageur Minnesota Municipal Fund III, Inc.). In
addition, certain officers of the Manager also serve as directors/trustees of
the other funds in the Delaware Investments family, and certain officers are
also officers of these other funds. A company indirectly owned by the Manager's
indirect parent company acts as principal underwriter to the mutual funds in the
Delaware Investments family (see Item 29 below) and another such company acts as
the shareholder services, dividend disbursing, accounting servicing and transfer
agent for all of the mutual funds in the Delaware Investments family.
The following persons serving as officers of the Manager have held
the following positions during the past two years. The business address of each
is 1818 Market Street, Philadelphia, PA 19103.
<TABLE>
<CAPTION>
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Name and Principal Positions and Offices with Delaware Management Company and its affiliates and other Positions
Business Address* and Offices Held
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<S> <C>
David K. Downes President of Delaware Management Company (a series of Delaware Management Business Trust);
Executive Vice President, Chief Operating Officer and Chief Financial Officer of Delaware
Management Holdings, Inc.; Executive Vice President, Chief Operating Officer, Chief Financial
Officer and Director of DMH Corp.; Executive Vice President, Chief Operating Officer, Chief
Financial Officer and Director of Delvoy, Inc.; President and Director of Delaware Management
Company, Inc.; Executive Vice President, Chief Operating Officer, Chief Financial Officer and
Trustee of Delaware Management Business Trust; Executive Vice President, Chief Operating
Officer and Chief Financial Officer of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Chairman, President, Chief Executive Officer and Director of
Delaware Service Company, Inc.; President, Chief Executive Officer and Director of Delaware
Capital Management, Inc.; Chairman and Director of Retirement Financial Services, Inc.;
Chairman and Director of Delaware Management Trust Company; Executive Vice President, Chief
Operating Officer, Chief Financial Officer and Director of Delaware Distributors, Inc.;
Executive Vice President, Chief Operating Officer and Chief Financial Officer of Delaware
Distributors, L.P.; President, Chief Operating Officer, Chief Financial Officer and Director
of Delaware International Holdings Ltd.; Director of Delaware International Advisers Ltd.;
Executive Vice President, Chief Operating Officer, Chief Financial Officer and Director of
Founders Holdings, Inc.; Executive Vice President, Chief Operating Officer and Chief
Financial Officer of Founders CBO Corporation; President, Chief Executive Officer, Chief
Operating Officer and Chief Financial Officer of each fund in the Delaware Investments family.
Chief Executive Officer and Director of Forewarn, Inc. since 1993, 8 Clayton Place, Newtown
Square, PA
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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Name and Principal Positions and Offices with Delaware Management Company and its affiliates and other Positions
Business Address* and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Richard J. Flannery Executive Vice President and General Counsel of Delaware Management Company (a series of
Delaware Management Business Trust); Executive Vice President and General Counsel of Delaware
Management Holdings, Inc.; Executive Vice President, General Counsel and Director of DMH
Corp.; Executive Vice President, General Counsel and Director of Delvoy, Inc.; Executive Vice
President, General Counsel and Director of Delaware Management Company, Inc.; Executive Vice
President, General Counsel and Trustee of Delaware Management Business Trust; Executive Vice
President and General Counsel of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Executive Vice President, General Counsel and Director of
Delaware Service Company, Inc.; Executive Vice President, General Counsel and Director of
Delaware Capital Management, Inc.; Executive Vice President, General Counsel and Director of
Retirement Financial Services, Inc.; Executive Vice President, General Counsel and Director
of Delaware Management Trust Company; Executive Vice President, General Counsel and Director
of Delaware Distributors, Inc.; Executive Vice President, General Counsel and Director of
Delaware Distributors, L.P.; Executive Vice President, General Counsel and Director of
Delaware International Holdings Ltd.; Director of Delaware International Advisers Ltd.;
Executive Vice President, General Counsel and Director of Founders Holdings, Inc.; Executive
Vice President and General Counsel of Founders CBO Corporation; Executive Vice President and
General Counsel of each fund in the Delaware Investments family.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd., Elverson, PA; Director and
Member of Executive Committee of Stonewall Links, Inc. since 1991, Bulltown Rd., Elverson, PA
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
H. Thomas McMeekin (1) Executive Vice President of Delaware Management Business Trust; Executive Vice
President/Chief Investment Officer DMC-Fixed Income of Delaware Management Company (a series
of Delaware Management Business Trust); Executive Vice President of Delaware Capital
Management, Inc.; Executive Vice President and Director of Delaware Management Holdings,
Inc.; Executive Vice President and Chief Investment Officer, Fixed Income of each Fund in the
Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Richard G. Unruh Executive Vice President, Chief Investment Officer of Delaware Management Company (a series
of Delaware Management Business Trust); Executive Vice President of Delaware Management
Holdings, Inc.; Executive Vice President and Trustee of Delaware Management Business Trust;
Chief Executive Officer, Chief Investment Officer of Delaware Investment Advisers (a series
of Delaware Management Business Trust; Executive Vice President of Delaware Capital
Management, Inc.; Director of Delaware International Advisers Ltd.; Executive Vice President,
Chief Investment Officer/Equity of each fund in the Delaware Investments family.
Board of Directors, Chairman of Finance Committee, Keystone Insurance Company since 1989, 2040 Market
Street, Philadelphia, PA; Board of Directors, Chairman of Finance Committee, AAA Mid Atlantic,
Inc. since 1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Metron, Inc. since 1995,
11911 Freedom Drive, Reston, VA
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Positions and Offices with Delaware Management Company and its affiliates and other Positions
Business Address* and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
William E. Dodge(2) Executive Vice President of Delaware Management Company (a series of Delaware Management
Business Trust); Executive Vice President of Delaware Management Business Trust; President of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Douglas L. Anderson Senior Vice President/Operations of Delaware Management Company (a series of Delaware
Management Business Trust; Senior Vice President/Operations of Delaware Service Company,
Inc.; Senior Vice President/Operations of Retirement Financial Services, Inc.; Senior Vice
President/Operations of Delaware Management Trust Company.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Michael P. Bishof Senior Vice President/Investment Accounting of Delaware Management Company (a series of
Delaware Management Business Trust); Senior Vice President, Treasurer/Investment Accounting
of Delaware Investment Advisers (a series of Delaware Management Business Trust); Senior Vice
President/Investment Accounting of Delaware Service Company, Inc.; Senior Vice
President/Investment Accounting of Delaware Capital Management, Inc.; Senior Vice
President/Investment Accounting of Delaware Distributors, L.P.; Senior Vice President,
Manager of Investment Accounting of Delaware International Holdings Ltd.; Senior Vice
President/Investment Accounting of Founders Holdings, Inc.; Senior Vice President and
Assistant Treasurer of Founders CBO Corporation; Senior Vice President and Treasurer of each
fund in the Delaware Investments family.
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- ------------------------------------------------------------------------------------------------------------------------------------
Robert J. DiBraccio Senior Vice President/Head of Equity Trading of Delaware Management Company (a series of
Delaware Management Business Trust); Senior Vice President/Head of Equity Trading of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Senior Vice President/Head of
Equity Trading of Delaware Capital Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
John B. Fields Senior Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Trustee of Delaware Management Business Trust; Senior
Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Senior Vice President/Senior Portfolio Manager of Delaware
Capital Management, Inc.; Senior Vice President/Senior Portfolio Manager of each fund in the
Delaware Investments family.
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- ------------------------------------------------------------------------------------------------------------------------------------
Susan L. Hanson Senior Vice President/Global Marketing and Client Services of Delaware Management Company (a
series of Delaware Management Business Trust); Senior Vice President/Global Marketing and
Client Services of Delaware Investment Advisers (a series of Delaware Management Business
Trust)
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- ------------------------------------------------------------------------------------------------------------------------------------
Joseph H. Hastings Senior Vice President/Treasurer/Corporate Controller of Delaware Management Company (a
series of Delaware Management Business Trust); Senior Vice President/Treasurer/Corporate
Controller of Delaware Management Holdings, Inc.; Senior Vice President/Treasurer/Corporate
Controller of DMH Corp; Senior Vice President/Treasurer/Corporate Controller of Delvoy, Inc.;
Senior Vice President/Treasurer/Corporate Controller of Delaware Management Company, Inc.;
Senior Vice President/Treasurer/Corporate Controller of Delaware Management Business Trust;
Senior Vice President/Treasurer/Corporate Controller of Delaware Service Company, Inc.;
Senior Vice President/Treasurer/Corporate Controller of Delaware Capital Management, Inc.;
Chief Financial Officer of Retirement Financial Services, Inc.; Executive Vice
President/Chief Financial Officer/Treasurer of Delaware Management Trust Company; Senior Vice
President/Treasurer/Corporate Controller of Delaware Distributors, L.P.; Senior Vice
President/Treasurer/Corporate Controller of Delaware International Holdings; Senior Vice
President/Treasurer/Corporate Controller of Founders Holdings, Inc.; Senior Vice President/
Assistant Treasurer Founders CBO Corporation; Senior Vice President/Corporate Controller of
each fund in the Delaware Investments family
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
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Name and Principal Positions and Offices with Delaware Management Company and its affiliates and other Positions
Business Address* and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Joanne O. Hutcheson Senior Vice President/Human Resources of Delaware Management Company (a series of Delaware
Management Business Trust); Senior Vice President/Human Resources of Delaware Management
Holdings, Inc.; Senior Vice President/Human Resources of DMH Corp.; Senior Vice
President/Human Resources of Delvoy, Inc.; Senior Vice President/Human Resources of
Delaware Management Company, Inc.; Senior Vice President/Human Resources of Delaware
Management Business Trust; Senior Vice President/Human Resources of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Senior Vice President/Human
Resources of Delaware Service Company, Inc.; Senior Vice President/Human Resources of
Delaware Capital Management, Inc.; Senior Vice President/Human Resources of Delaware
Retirement Financial Services, Inc.; Senior Vice President/Human Resources of Delaware
Management Trust Company; Senior Vice President/Human Resources of Delaware Distributors,
Inc.; Senior Vice President/Human Resources of Delaware Distributors, L.P.; Senior Vice
President/Human Resources of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Richelle S. Maestro Senior Vice President, Secretary and Deputy General Counsel of Delaware Management Company (a
series of Delaware Management Business Trust); Senior Vice President, Secretary and Deputy
General Counsel of Delaware Management Holdings, Inc.; Senior Vice President, Secretary and
Deputy General Counsel of DMH Corp.; Senior Vice President, Secretary and Deputy General
Counsel of Delvoy, Inc.; Senior Vice President, Secretary and Deputy General Counsel of
Delaware Management Company, Inc.; Senior Vice President, Secretary and Deputy General
Counsel of Delaware Management Business Trust; Senior Vice President, Secretary and Deputy
General Counsel of Delaware Investment Advisers (a series of Delaware Management Business
Trust); Senior Vice President, Secretary and Deputy General Counsel of Delaware Service
Company, Inc.; Senior Vice President, Secretary and Deputy General Counsel of Delaware
Capital Management, Inc.; Senior Vice President, Secretary and Deputy General Counsel of
Retirement Financial Services, Inc.; Senior Vice President, Secretary and Deputy General
Counsel of Delaware Distributors, Inc.; Senior Vice President, Secretary and Deputy General
Counsel of Delaware Distributors, L.P.; Vice President and Secretary of Delaware
International Holdings Ltd.; Senior Vice President, Secretary and Deputy General Counsel of
Founders Holdings, Inc.; Secretary of Founders CBO Corporation; Senior Vice President,
Assistant Secretary and Deputy General Counsel of each fund in the Delaware Investments
family.
General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Lane, Philadelphia, PA.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Eric E. Miller Senior Vice President, Assistant Secretary and Deputy General Counsel of Delaware Management
Company (a series of Delaware Management Business Trust); Senior Vice President, Assistant
Secretary and Deputy General Counsel of Delaware Management Holdings, Inc.; Senior Vice
President, Assistant Secretary and Deputy General Counsel of
DMH Corp.; Senior Vice President, Assistant Secretary and Deputy General Counsel of
Delvoy, Inc.; Senior Vice President, Assistant Secretary and Deputy General Counsel of
Delaware Management Company, Inc.; Senior Vice President, Assistant Secretary and Deputy
General Counsel of Delaware Management Business Trust; Senior Vice President, Assistant
Secretary and Deputy General Counsel of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Senior Vice President, Assistant Secretary and Deputy General
Counsel of Delaware Service Company, Inc.; Senior Vice President, Assistant Secretary and
Deputy General Counsel of Delaware Capital Management, Inc.; Senior Vice President, Assistant
Secretary and Deputy General Counsel of Retirement Financial Services, Inc.; Senior Vice
President, Assistant Secretary and Deputy General Counsel of Delaware Distributors, Inc.;
Senior Vice President, Assistant Secretary and Deputy General Counsel of Delaware
Distributors, L.P.; Senior Vice President, Assistant Secretary and Deputy General Counsel of
Founders Holdings, Inc.; Senior Vice President, Secretary and Deputy General Counsel of each
fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Positions and Offices with Delaware Management Company and its affiliates and other Positions
Business Address* and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
James L. Shields Senior Vice President, Chief Information Officer of Delaware Management Company (a series of
Delaware Management Business Trust); Senior Vice President, Chief Information Officer of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Senior Vice
President, Chief Information Officer of Delaware Service Company, Inc.; Senior Vice
President, Chief Information Officer of Delaware Capital Management Company, Inc.; Senior
Vice President, Chief Information Officer of Retirement Financial Services, Inc.; Senior Vice
President, Chief Information Officer of Delaware Distributors, L.P.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher S. Adams Vice President/Equity Analyst of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Equity Analyst of Delaware Investment Advisers (a series of
Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Robert L. Arnold Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Senior Portfolio
Manager of Delaware Capital Management, Inc., Vice President/Senior Portfolio Manager of each
fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Marshall T. Bassett Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Vice President/Portfolio Manager of each
fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher S. Beck Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in
the Delaware Investments family.
Trustee of New Castle County Pension Board since October 1992, Wilmington DE.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Richard E. Beister Vice President/Trading Operations of Delaware Management Company (a series of Delaware
Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Positions and Offices with Delaware Management Company and its affiliates and other Positions
Business Address* and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Lisa O. Brinkley Vice President/Compliance Director of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Compliance Director of Delaware Management
Holdings, Inc.; Vice President/Compliance Director of DMH Corp.; Vice President/Compliance
Director of Delvoy, Inc.; Vice President/Compliance Director of Delaware Management Company,
Inc.; Vice President/Compliance Director of Delaware Management Business Trust; Vice
President/Compliance Director of Delaware Investment Advisers (a series of Delaware
Management Business Trust);Vice President/Compliance Director of Delaware Service Company,
Inc.; Vice President/Compliance Director of Delaware Capital Management, Inc.; Vice
President/Compliance Director of Retirement Financial Services, Inc.; Vice
President/Compliance Director of Delaware Management Business Trust; Vice
President/Compliance Director of Delaware Distributors, Inc.; Vice President/Compliance
Director of Delaware Distributors, L.P.; Vice President/Compliance Director of each fund in the
Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
MaryEllen M. Carrozza Vice President/Client Services of Delaware Management Company (a series of Delaware
Management Business Trust);Vice President/Client Services of Delaware Investment Advisers (a
series of Delaware Management Business Trust);Vice President/Client Services of each fund in the
Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen R. Cianci Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Vice President/Portfolio Manager of each
fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Mitchell L. Conery Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in
the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Timothy J. Connors Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a
series of Delaware Management Business Trust).
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Senior Portfolio
Manager of Delaware Capital Management, Inc.; Vice President/Senior Portfolio Manager of each
fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
George E. Deming Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in
the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Positions and Offices with Delaware Management Company and its affiliates and other Positions
Business Address* and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
James P. Dokas Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in
the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Michael J. Dugan Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in
the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Roger A. Early Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in
the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Joel A. Ettinger Vice President/Taxation of Delaware Management Company (a series of Delaware Management
Business Trust);Vice President/Taxation of Delaware Management Holdings, Inc.; Vice
President/Taxation of DMH Corp.; Vice President/Taxation of Delvoy, Inc.; Vice
President/Taxation of Delaware Management Company, Inc.; Vice President/Taxation of Delaware
Management Business Trust; Vice President/Taxation of Delaware Investment Advisers (a series
of Delaware Management Business Trust);Vice President/Taxation of Delaware Service Company,
Inc.; Vice President/Taxation of Delaware Capital Management, Inc.; Vice President/Taxation
of Retirement Financial Services, Inc.; Vice President/Taxation of Delaware Distributors,
Inc.; Vice President/Taxation of Delaware Distributors, L.P.; Vice President/Taxation of
Founders Holdings, Inc.; Vice President/Taxation of Founders CBO Corporation; Vice
President/Taxation of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph Fiorilla Vice President/Performance Analyst of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Performance Analyst of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Gerald S. Frey Senior Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice President/Senior Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Positions and Offices with Delaware Management Company and its affiliates and other Positions
Business Address* and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
James A. Furgele Vice President/Investment Accounting of Delaware Management Company (a series of Delaware
Management Business Trust);Vice President/Investment Accounting of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Investment
Accounting of Delaware Service Company, Inc.; Vice President/Investment Accounting of each
fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Stuart M. George Vice President/Equity Trading of Delaware Management Company (a series of Delaware Management
Business Trust);Vice President/Equity Trading of Delaware Investment Advisers (a series of Delaware
Management Business Trust).
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Paul Grillo Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Vice President/Portfolio Manager of each
fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Brian T. Hannon Vice President/Equity Analyst of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Equity Analyst of Delaware Investment Advisers (a series of
Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
John A. Heffern Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Vice President/Portfolio Manager of each
fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Elizabeth H. Howell Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in
the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey Hynoski Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Vice President/Portfolio Manager of each
fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Positions and Offices with Delaware Management Company and its affiliates and other Positions
Business Address* and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Cynthia Isom Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Vice President/Portfolio Manager of each
fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Karina J. Ivstan Vice President/Strategic Planning of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Strategic Planning of Delaware Management
Holdings, Inc.; Vice President/Strategic Planning of Delaware Investment Advisers (a series
of Delaware Management Business Trust); Vice President/Strategic Planning of Delaware Service
Company, Inc.; Vice President/Strategic Planning of Delaware Capital Management, Inc.; Vice
President/Strategic Planning of Retirement Financial Services, Inc.; Vice President/Strategic
Planning of Delaware Management Trust Company; Vice President/Strategic Planning of Delaware
Distributors, L.P.; Vice President/Strategic Planning of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Audrey E. Kohart Vice President/Assistant Controller, Corporate Accounting of Delaware Management Company (a
series of Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Steven T. Lampe Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Vice President/Portfolio Manager of each
fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Philip Y. Lin Vice President, Assistant Secretary and Associate General Counsel of Delaware Management
Company (a series of Delaware Management Business Trust); Vice President, Assistant Secretary
and Associate General Counsel of Delaware Investment Advisers (a series of Delaware
Management Business Trust);Vice President, Assistant Secretary and Associate General Counsel
of Delaware Service Company, Inc.; Vice President, Assistant Secretary and Associate General
Counsel of Delaware Capital Management, Inc.; Vice President, Assistant Secretary and
Associate General Counsel of Retirement Financial Services, Inc.; Vice President, Assistant
Secretary and Associate General Counsel of Delaware Management Trust Company; Vice President,
Assistant Secretary and Associate General Counsel of Delaware Distributors, L.P.; Vice
President, Assistant Secretary and Associate General Counsel of each fund in the Delaware
Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Michael D. Mabry Vice President, Assistant Secretary and Associate General Counsel of Delaware Management
Company (a series of Delaware Management Business Trust); Vice President, Assistant Secretary
and Associate General Counsel of Delaware Investment Advisers (a series of Delaware
Management Business Trust);Vice President, Assistant Secretary and Associate General Counsel
of Delaware Service Company, Inc.; Vice President, Assistant Secretary and Associate General
Counsel of Delaware Capital Management, Inc.; Vice President, Assistant Secretary and
Associate General Counsel of Retirement Financial Services, Inc.; Vice President, Assistant
Secretary and Associate General Counsel of Delaware Distributors, L.P.; Vice President,
Assistant Secretary and Associate General Counsel of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Positions and Offices with Delaware Management Company and its affiliates and other Positions
Business Address* and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Founders
Holdings, Inc., President and Director of Founders CBO Corporation; Vice President/Senior Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Andrew M. McCullagh, Jr. Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice President/Senior Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Francis X Morris Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in
the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Senior Portfolio
Manager of Founders Holdings, Inc., Treasurer, Assistant Secretary and Director of Founders
CBO Corporation; Vice President/Senior Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Robert A. Norton, Jr. Vice President/Equity Analyst of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Equity Analyst of Delaware Investment Advisers (a series of
Delaware Management Business Trust).
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
David P. O'Connor Vice President, Assistant Secretary and Associate General Counsel of Delaware Management
Company (a series of Delaware Management Business Trust); Vice President, Assistant Secretary
and Associate General Counsel of Delaware Investment Advisers (a series of Delaware
Management Business Trust);Vice President, Assistant Secretary and Associate General Counsel
of Delaware Service Company, Inc.; Vice President, Assistant Secretary and Associate General
Counsel of Delaware Capital Management, Inc.; Vice President, Assistant Secretary and
Associate General Counsel of Retirement Financial Services, Inc.; Vice President, Assistant
Secretary and Associate General Counsel of Delaware Distributors, L.P.; Vice President,
Assistant Secretary and Associate General Counsel of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Positions and Offices with Delaware Management Company and its affiliates and other Positions
Business Address* and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in
the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Richard Salus Vice President/Assistant Controller of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Vice President/Assistant Controller of Delaware
Management Trust Company
- ------------------------------------------------------------------------------------------------------------------------------------
Richard D. Siedel Vice President/Assistant Controller/Manager Payroll of Delaware Management Company (a series
of Delaware Management Business Trust).
- --------------------------- --------------------------------------------------------------------------------------------------------
Michael T. Taggart Vice President/Facilities and Administration Services of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Facilities and Administration Services of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice President/Facilities and
Administration Services of Delaware Service Company, Inc.; Vice President/Facilities and Administration
Services of Delaware Distributors, L.P.
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas J. Trottman Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Vice President/Portfolio Manager of each
fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Lori P. Wachs Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust);Vice President/Portfolio Manager of Delaware Investment Advisers
(a series of Delaware Management Business Trust);Vice President/Portfolio Manager of each fund
in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) PRESIEDNT AND DIRECTOR, Lincoln Investment Management, Inc. 1987 to present.
EXECUTIVE VICE PRESIDENT/CHIEF INVESTMENT OFFICER of Lincoln National
Corporation 1992 to present.
(2) PRESIDENT, DIRECTOR OF MARKETING AND SENIOR PORTFOLIO MANAGER, Marvin &
Palmer Associates, Wilmington, DE 1996-1998.
(3) EQUITY TRADER, Mitchell Hutchins Asset Management prior to 1999.
<PAGE>
(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,
The Global Equity Portfolio, The International Small-Cap Portfolio and The
International Large-Cap Equity Portfolio. In addition, Delaware International
serves as investment manager or sub-adviser to certain of the other funds in
the Delaware Investments family (Delaware Group Adviser Funds, Inc., 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 other institutional accounts.
Information regarding the officers and directors of Delaware
International and the positions they have held with the Registrant during the
past two fiscal years is provided below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Positions and Offices with Delaware International and its affiliates and other Positions
Business Address* and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
*David K. Downes Director of Delaware International Advisers Ltd., President of Delaware Management Company (a
series of Delaware Management Business Trust); Executive Vice President, Chief Operating
Officer and Chief Financial Officer of Delaware Management Holdings, Inc.; Executive Vice
President, Chief Operating Officer, Chief Financial Officer and Director of DMH Corp.;
Executive Vice President, Chief Operating Officer, Chief Financial Officer and Director of
Delvoy, Inc.; President and Director of Delaware Management Company, Inc.; Executive Vice
President, Chief Operating Officer, Chief Financial Officer and Trustee of Delaware
Management Business Trust; Executive Vice President, Chief Operating Officer and Chief
Financial Officer of Delaware Investment Advisers (a series of Delaware Management Business
Trust); Chairman, President, Chief Executive Officer and Director of Delaware Service
Company, Inc.; President, Chief Executive Officer and Director of Delaware Capital
Management, Inc.; Chairman and Director of Retirement Financial Services, Inc.; Chairman and
Director of Delaware Management Trust Company; Executive Vice President, Chief Operating
Officer, Chief Financial Officer and Director of Delaware Distributors, Inc.; Executive Vice
President, Chief Operating Officer and Chief Financial Officer of Delaware Distributors,
L.P.; President, Chief Operating Officer, Chief Financial Officer and Director of Delaware
International Holdings Ltd.; Executive Vice President, Chief Operating Officer, Chief
Financial Officer and Director of Founders Holdings, Inc.; Executive Vice President, Chief
Operating Officer and Chief Financial Officer of Founders CBO Corporation; President, Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer and Director of each fund
in the Delaware Investments family.
Chief Executive Officer and Director of Forewarn, Inc. since 1993, 8 Clayton Place, Newtown
Square, PA
- ------------------------------------------------------------------------------------------------------------------------------------
**G Roger H. Kitson Vice Chairman and Director of Delaware International Advisers Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
**David G. Tilles Managing Director/Chief Investment Officer and Director of Delaware International Advisers
Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
**Elizabeth A. Desmond Senior Portfolio Manager and Director of Delaware International Advisers Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Positions and Offices with Delaware International and its affiliates and other Positions
Business Address* and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
**John Emberson Finance Director/Company Secretary/Compliance Officer and Director of Delaware International
Advisers Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
**Clive A. Gillmore Senior Portfolio Manager and Director of Delaware International Advisers Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
**Nigel G. May Senior Portfolio Manager and Director of Delaware International Advisers Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
**Hamish O. Parker Senior Portfolio Manager and Director of Delaware International Advisers Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
**Robert Akester Senior Portfolio Manager of Delaware International Advisers Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
**Fiona Barwick Senior Portfolio Manager of Delaware International Advisers Ltd.
- --------------------------- --------------------------------------------------------------------------------------------------------
**Joanna Bates Senior Portfolio Manager of Delaware International Advisers Ltd.
- --------------------------- --------------------------------------------------------------------------------------------------------
**Joshua Brooks Senior Portfolio Manager of Delaware International Advisers Ltd.
- --------------------------- --------------------------------------------------------------------------------------------------------
**Gavin A. Hall Senior Portfolio Manager of Delaware International Advisers Ltd.
- --------------------------- --------------------------------------------------------------------------------------------------------
**John Kirk Senior Portfolio Manager of Delaware International Advisers Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
**Hywel Morgan Senior Portfolio Manager of Delaware International Advisers Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
**Christopher A. Moth Senior Portfolio Manager of Delaware International Advisers Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
**Richard J. Ginty Portfolio Manager of Delaware International Advisers Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
**R. Emma Lewis Portfolio Manager of Delaware International Advisers Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
**Hugh A. Serjeant Portfolio Manager of Delaware International Advisers Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
*John C.E. Campbell Director of Delaware International Advisers Ltd.; Executive Vice President/Global Marketing
and Client Services of Delaware Investment Advisers (a series of Delaware Management Business
Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
*George E. Deming Director of Delaware International Advisers Ltd.; Vice President/Senior Portfolio Manager of
Delaware Management Company (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of each fund in the Delaware
Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
*Richard J. Flannery Director of Delaware International Advisers Ltd.; Executive Vice President and General
Counsel of Delaware Management Company (a series of Delaware Management Business Trust);
Executive Vice President and General Counsel of Delaware Management Holdings, Inc.; Executive
Vice President, General Counsel and Director of DMH Corp.; Executive Vice President, General
Counsel and Director of Delvoy, Inc.; Executive Vice President, General Counsel and Director
of Delaware Management Company, Inc.; Executive Vice President, General Counsel and Trustee
of Delaware Management Business Trust; Executive Vice President and General Counsel of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Executive Vice
President, General Counsel and Director of Delaware Service Company, Inc.; Executive Vice
President, General Counsel and Director of Delaware Capital Management, Inc.; Executive Vice
President, General Counsel and Director of Retirement Financial Services, Inc.; Executive
Vice President, General Counsel and Director of Delaware Management Trust Company; Executive
Vice President, General Counsel and Director of Delaware Distributors, Inc.; Executive Vice
President, General Counsel and Director of Delaware Distributors, L.P.; Executive Vice
President, General Counsel and Director of Delaware International Holdings Ltd.; Executive
Vice President, General Counsel and Director of Founders Holdings, Inc.; Executive Vice
President and General Counsel of Founders CBO Corporation; Executive Vice President and
General Counsel of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Positions and Offices with Delaware International and its affiliates and other Positions
Business Address* and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd., Elverson, PA; Director and
Member of Executive Committee of Stonewall Links, Inc. since 1991, Bulltown Rd., Elverson, PA
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
*Wayne A. Stork Director of Delaware International Advisers Ltd.; Chairman, Director/Trustee of each fund in
the Delaware Investments family; Chairman and Director of Delaware Management Holdings, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
*Richard G. Unruh Director of Delaware International Advisers Ltd.; Executive Vice President, Chief Investment
Officer of Delaware Management Company (a series of Delaware Management Business Trust);
Executive Vice President of Delaware Management Holdings, Inc.; Executive Vice President and
Trustee of Delaware Management Business Trust; Chief Executive Office, Chief Investment
Officer of Delaware Investment Advisers (a series of Delaware Management Business Trust;
Executive Vice President of Delaware Capital Management, Inc.; Executive Vice President,
Chief Investment Officer/Equity of each fund in the Delaware Investments family.
Board of Directors, Chairman of Finance Committee, Keystone Insurance Company since 1989, 2040 Market
Street, Philadelphia, PA; Board of Directors, Chairman of Finance Committee, AAA Mid Atlantic,
Inc. since 1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Metron, Inc. since 1995,
11911 Freedom Drive, Reston, VA
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London, England
EC2V 6EE.
(c) Lincoln Investment Management Company, Inc. serves as sub-adviser
to The Real Estate Investment Trust Portfolio and The Real Estate Investment
Trust Portfolio II. Lincoln Investment Management Company, Inc. also serves
as 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:
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Positions and Offices with Lincoln Investment Management, Inc. and its affiliates and other Positions
Business Address* and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
***H. Thomas McMeekin President & Director of Lincoln Investment Management, Inc.; Executive Vice
President (previously Senior Vice President) and Chief Investment Officer of
Lincoln National Corporation; and Director of The Lincoln National Life
Insurance Company, Lincoln National Investments, Inc., Delaware Management
Holdings, Inc., Lincoln Investment Companies, Inc. and Vantage Global
Advisors, Inc.
*Dennis A. Blume Vice President of Lincoln Investment Management, Inc. and Director of Vantage
Global Advisors, Inc.
*Steven R. Brody Vice President and Director of Lincoln Investment Management, Inc.; Vice
President of The Lincoln National Life Insurance Company.
*David A. Berry Vice President of Lincoln Investment Management, Inc.
*Kathy E. Bowman Vice President of Lincoln Investment Management, Inc.
*Philip C. Byrde Vice President of Lincoln Investment Management, Inc.
*Patrick R. Chasey Vice President of Lincoln Investment Management, Inc.
*Janet C. Chrzan Vice President and Treasurer of Lincoln Investment Management, Inc., Lincoln
National Corporation, LNC Equity Sales Corporation; Treasurer of Lincoln
National Investments, Inc.
*David C. Fischer Vice President of Lincoln Investment Management, Inc.
*Mark S. Forman Vice President of Lincoln Investment Management, Inc.
*Robert C. Franzino Vice President/Portfolio Manager of Lincoln Investment Management, Inc.
*Luc N. Girard Vice President and Actuary of Lincoln Investment Management, Inc.
*James M. Keefer Vice President, General Counsel and Director of Lincoln Investment Management,
Inc.
*Walter M. Korinke Vice President of Lincoln Investment Management, Inc.
*Howard R. Lodge Vice President of Lincoln Investment Management, Inc.
*David J. Miller Vice President of Lincoln Investment Management, Inc.
*David C. Patch Vice President of Lincoln Investment Management, Inc.
*Regina N. Rohrbacher Compliance Officer of Lincoln Investment Management, Inc.
*Cynthia A. Rose Corporate Secretary of Lincoln Investment Management, Inc. and Lincoln
National Life Insurance Company.
*Jay M. Yentis Portfolio Manager/Second Vice President of Lincoln Investment Management, Inc.
</TABLE>
* Business address is 200 East Berry Street, Fort Wayne, IN 46802.
**Business address is 1300 S. Clinton Street, Fort Wayne, IN 46802.
***Business address is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Item 27. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal underwriter for all
the mutual funds in the Delaware Investments family.
(b) Information with respect to each director, officer or partner of
principal underwriter:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Distributors, Inc. General Partner None
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Investment Advisers Limited Partner None
- ------------------------------------------ -----------------------------------------------------------------------------------------
Delaware Capital Management, Inc. Limited Partner None
- ------------------------------------------------------------------------------------------------------------------------------------
Bruce D. Barton President and Chief Executive Officer None
- ------------------------------------------ -----------------------------------------------------------------------------------------
David K. Downes Executive Vice President/Chief President/Chief Executive
Operating Officer/Chief Financial Officer/Chief Operating Officer/Chief
Officer Financial Officer
- ------------------------------------------------------------------------------------------------------------------------------------
Richard J. Flannery Executive Vice President/General Executive Vice President/General
Counsel Counsel
- ------------------------------------------------------------------------------------------------------------------------------------
Diane M. Anderson Senior Vice President/Retirement None
Operations
- ------------------------------------------------------------------------------------------------------------------------------------
Michael P. Bishof Senior Vice President/Investment Senior Vice President/Treasurer
Accounting
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel J. Brooks III Senior Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Terrence P. Cunningham Senior Vice President/National Sales None
Director, Financial Institutions
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph H. Hastings Senior Vice Senior Vice President/Corporate
President/Treasurer/Corporate Controller
Controller
- ------------------------------------------------------------------------------------------------------------------------------------
Joanne O. Hutcheson Senior Vice President/Human Resources Senior Vice President/Human Resources
- ------------------------------------------------------------------------------------------------------------------------------------
Bradley L. Kolstoe Senior Vice President/Western None
Division Sales, IPI Channel
- ------------------------------------------------------------------------------------------------------------------------------------
Richelle S. Maestro Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Mac Macaulliffe Senior Vice President/Divisional None
Sales Manager
- ------------------------------------------------------------------------------------------------------------------------------------
J. Chris Meyer Senior Vice President/Director, None
Product Management
- ------------------------------------------------------------------------------------------------------------------------------------
Eric E. Miller Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/Assistant Secretary Counsel/Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Stephen C. Nell Senior Vice President/National None
Retirement Sales
- ------------------------------------------------------------------------------------------------------------------------------------
Henry W. Orvin Senior Vice President/Eastern None
Division Sales
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher H. Price Senior Vice President/Channel Manager None
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas E. Sawyer Senior Vice President/Director, None
National Sales
- ------------------------------------------------------------------------------------------------------------------------------------
James L. Shields Senior Vice President/Chief None
Information Officer
- ------------------------------------------------------------------------------------------------------------------------------------
Steven Sorenson Senior Vice President/National None
Director, Independent Planner Channel
- ------------------------------------------------------------------------------------------------------------------------------------
Richard P. Allen Vice President/Wholesaler, Midwest None
- ------------------------------------------------------------------------------------------------------------------------------------
David P. Anderson, Jr. Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey H. Arcy Vice President/Wholesaler, South East None
Region
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick A. Bearss Vice President/Wholesaler - Midwest None
- ------------------------------------------------------------------------------------------------------------------------------------
Gabriella Bercze Vice President/Wholesaler, Financial None
Institution
- ------------------------------------------------------------------------------------------------------------------------------------
Denise D. Bradley Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Larry Bridwell Vice President/Financial Institutions None
Wholesaler
- ------------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley Vice President/Compliance Director Vice President/Compliance Director
- ------------------------------------------------------------------------------------------------------------------------------------
Terrance L. Bussard Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel H. Carlson Vice President/Marketing Services None
- ------------------------------------------------------------------------------------------------------------------------------------
Larry Carr Vice President/VA Sales Manager None
- ------------------------------------------------------------------------------------------------------------------------------------
William S. Carroll Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Matthew Coldren Vice President/National Accounts None
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick A Connelly Vice President/RIA Sales None
- ------------------------------------------------------------------------------------------------------------------------------------
Jessie V. Emery Vice President/Marketing None
Communications
- ------------------------------------------------------------------------------------------------------------------------------------
Joel A. Ettinger Vice President/Taxation Vice President/Taxation
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Edward A. Foley Vice President/Marketing None
Communications
- ------------------------------------------------------------------------------------------------------------------------------------
Susan T. Friestedt Vice President/Retirement Services None
- -----------------------------------------------------------------------------------------------------------------------------------
Douglas R. Glennon Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Darryl S. Grayson Vice President/Director, Internal None
Sales
- ------------------------------------------------------------------------------------------------------------------------------------
Rhonda J. Guido Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Haimowitz Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Edward J. Hecker Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
John R. Herron Vice President/VA Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Steven N. Horton Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Dinah J. Huntoon Vice President/Product Manager, None
Equities
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Karina J. Istvan Vice President/Strategic Planning Vice President/Strategic Planning
- ------------------------------------------------------------------------------------------------------------------------------------
Chirstopher L. Johnston Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Michael J. Jordan Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Carolyn Kelly Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Richard M. Koerner Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Ellen M. Krott Vice President/Marketing None
- ------------------------------------------------------------------------------------------------------------------------------------
John Leboeuf Vice President/IPI Sales - East None
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SooHee Lee Vice President/Fixed Income & None
International Product Manager
- ------------------------------------------------------------------------------------------------------------------------------------
Philip Y. Lin Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
John R. Logan Vice President/Wholesaler, Financial None
Institutions
- ------------------------------------------------------------------------------------------------------------------------------------
Michael D. Mabry Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Theodore T. Malone Vice President/IPI Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Debbie Marler Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
Raymond G. McCarthy Vice President/National Accounts, IPI None
Channel
- ------------------------------------------------------------------------------------------------------------------------------------
Joanne C. McCranie Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Gregory J. McMillan Vice President/National Accounts None
- ------------------------------------------------------------------------------------------------------------------------------------
Nathan W. Medin Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Scott L. Metzger Vice President/Business Development None
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Jamie L. Meyer Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Roger J. Miller Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher W. Moore Vice President/VA Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Andrew F. Morris Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick L. Murphy Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Scott E. Naughton Vice President/IPI Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Julie Nusbaum Vice President/Wholesaler, Financial None
Institutions
- ------------------------------------------------------------------------------------------------------------------------------------
Julie A. Nye Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel J. O'Brien Vice President/Insurance Products None
- ------------------------------------------------------------------------------------------------------------------------------------
David P. O'Connor Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph T. Owczarek Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Otis S. Page Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Mary Ellen Pernice-Fadden Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Eric Preus Vice President/Wrap Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Philip G. Rickards Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Laura E. Roman Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Robert A. Rosso Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Terri Lynn Sabby Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Richard Salus Vice President/Assistant Controller None
- ------------------------------------------------------------------------------------------------------------------------------------
Linda D. Shulz Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Gordon E. Searles Vice President/Client Services None
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Catherine A. Seklecki Vice President/Retirement Sales None
- ------------------------------------------------------------------------------------------------------------------------------------
John C. Shalloe Vice President/Wrap Fee Wholesaler, None
Western Region
- ------------------------------------------------------------------------------------------------------------------------------------
Edward B. Sheridan Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Kimberly M. Spangler Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Robert E. Stansbury Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Stephanie R. Szabo Vice President/Retirement Marketing None
- ------------------------------------------------------------------------------------------------------------------------------------
Michael T. Taggart Vice President/Facilities and None
Administration Services
- ------------------------------------------------------------------------------------------------------------------------------------
Bryon Townsend Vice President/Variable Annuity None
Wholesaler
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Julia R. Vander-Els Vice President/Retirement Plan None
Communications
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Wayne W. Wagner Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
John A. Wells Vice President/Marketing Technology None
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Courtney S. West Vice President/Institutional Sales None
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Andrew J. Whitaker Vice President/Wholesaler, Financial None
Institutions
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Scott Whitehouse Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Wesley Williams Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Theodore V. Wood Vice President/Technical Systems None
Officer
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Inapplicable.
Item 28. Location of Accounts and Records.
All accounts and records are maintained in the Philadelphia
office at 1818 Market Street, Philadelphia, PA 19103 or One
Commerce Square, Philadelphia, PA 19103.
Item 29. Management Services. None.
Item 30. Undertakings.
(a) Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia and Commonwealth of Pennsylvania on
this 11th day of November, 1999.
DELAWARE POOLED TRUST, INC.
By /s/David K. Downes
---------------------
David K. Downes
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
President/Chief Executive Officer/Chief
Operating Officer/Chief Financial
Officer (Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer) and Director November 11, 1999
/s/ David K. Downes
- --------------------
David K. Downes
/s/ Wayne A. Stork
- ---------------------
Wayne A. Stork Director November 11, 1999
/s/ Walter P. Babich * Director November 11, 1999
- ---------------------
Walter P. Babich
/s/ John H. Durham * Director November 11, 1999
- ---------------------
John H. Durham
/s/ Anthony D. Knerr * Director November 11, 1999
- ---------------------
Anthony D. Knerr
/s/ Ann R. Leven * Director November 11, 1999
- ---------------------
Ann R. Leven
/s/ Thomas F. Madison * Director November 11, 1999
- ---------------------
Thomas F. Madison
/s/ Charles E. Peck * Director November 11, 1999
- ---------------------
Charles E. Peck
/s/ Jan L. Yeomans * Director November 11, 1999
- ---------------------
Jan L. Yeomans
*By /s/David K. Downes
- ----------------------
David K. Downes
as Attorney-in-Fact for
each of the persons indicated
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Exhibit No. Exhibit
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
EX-99.(a)(6) Articles Supplementary (December 24, 1997)
- ------------------------------------------------------------------------------------------------------------------------------------
EX-99.(a)(7) Articles of Amendment (December 24, 1997)
- ------------------------------------------------------------------------------------------------------------------------------------
EX-99.(a)(9) Articles Supplementary (October 7, 1998)
- ------------------------------------------------------------------------------------------------------------------------------------
EX-99.(a)(10) Articles of Amendment (October 7, 1998)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
EX-99.(a)(18) Articles of Amendment (August 16, 1999)
- ------------------------------------------------------------------------------------------------------------------------------------
EX-99.(a)(19) Articles Supplementary (November 1999)
- ------------------------------------------------------------------------------------------------------------------------------------
EX-99.(d)(2) Investment Management Agreement (dated April 15, 1999) between the Registrant and Delaware International
Advisers Ltd. on behalf of The Emerging Markets, The Global Equity, The Global Fixed Income, The
International Equity, The International Fixed Income and The Labor Select International Equity Portfolios
- ------------------------------------------------------------------------------------------------------------------------------------
EX-99.(d)(3) Investment Sub-Advisory Agreement (dated April 15, 1999) between Delaware Management Company and Delaware
International Advisers Ltd. on behalf of The Diversified Core Fixed Income Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
EX-99.(d)(4) Investment Sub-Advisory Agreement (dated April 15, 1999) between Delaware International Advisers Ltd. and
Delaware Management Company on behalf of The Global Equity Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
EX-99.(d)(5) Form of Investment Sub-Advisory Agreement (dated April 15, 1999) between Delaware Management Company and
Lincoln Investment Management, Inc. on behalf of The Real Estate Investment Trust Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
EX-99.(d)(6) Form of Investment Sub-Advisory Agreement (dated April 15, 1999) between Delaware Management Company and
Lincoln Investment Management, Inc. on behalf of The Real Estate Investment Trust Portfolio II
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
EX-99.(d)(9) Amendment No. 1 (dated June 30, 1999) to Exhibit A of Investment Management Agreement dated
(April 15, 1999) between the Registrant and Delaware International Advisers Ltd. (adding The International
Small-Cap Portfolio)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
EX-99.(g)(9) Executed letter to add The Balanced Portfolio, The Equity Income Portfolio, The Select Equity Portfolio
and The International Small-Cap Portfolio to the Custodian Agreement between the Registrant and The Chase
Manhattan Bank
- ------------------------------------------------------------------------------------------------------------------------------------
EX-99.(h)(6) Executed Ninth Amended and Restated Shareholder Services Agreement (1999) between Delaware Service
Company, Inc. and the Registrant on behalf of each Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
EX-99.(i) Legal Opinion
- ------------------------------------------------------------------------------------------------------------------------------------
EX-99.(j) Consent of Auditors
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT (a)(6)
DELAWARE POOLED TRUST, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
Delaware Pooled Trust, Inc., a Maryland corporation having its
principal office in Baltimore, Maryland (the "Corporation"), hereby certifies,
in accordance with Section 2-208 of the Maryland General Corporation Law, to the
Maryland State Department of Assessments and Taxation, that:
FIRST: The Corporation has authority to issue Two Billion
(2,000,000,000) shares of common stock with a par value of One Cent ($0.01) per
share ("Common Stock"), having an aggregate par value of Twenty Million Dollars
($20,000,000). Of such Two Billion (2,000,000,000) shares of Common Stock, Nine
Hundred Million (900,000,000) shares of the Common Stock have been allocated to
the Corporation's existing series of Common Stock as follows: (i) Fifty Million
(50,000,000) shares have been allocated to each of The Large-Cap Value Equity
Portfolio, The Aggressive Growth Portfolio, The International Equity Portfolio,
The Intermediate Fixed Income Portfolio, The Limited-Term Maturity Portfolio,
The Global Fixed Income Portfolio, The International Fixed Income Portfolio, The
Small/Mid-Cap Value Equity Portfolio, The High-Yield Bond Portfolio, The Labor
Select International Equity Portfolio, The Global Equity Portfolio, The Emerging
Markets Portfolio and The Real Estate Investment Trust Portfolio II and (ii) Two
Hundred Fifty Million (250,000,000) shares have been allocated to The Real
Estate Investment Trust Portfolio.
SECOND: The Board of Directors of the Corporation, at a meeting held on
December 18th, 1997, adopted resolutions designating three additional series of
the Corporation's Common Stock as The Diversified Core Fixed Income Portfolio,
The Aggregate Fixed Income Portfolio and The International Mid-Cap Sub Portfolio
series, and classifying and allocating Fifty Million (50,000,000) shares of
authorized, unissued and unclassified Common Stock to each of The Diversified
Core Fixed Income Portfolio, The Aggregate Fixed Income Portfolio and The
International Mid-Cap Sub Portfolio series. Nine Hundred and Fifty Million
(950,000,000) shares of the Corporation's Common Stock remain authorized but
unissued and unallocated shares.
THIRD: Each holder of shares of The Diversified Core Fixed Income
Portfolio series, The Aggregate Fixed Income Portfolio series and The
International Mid-Cap Sub Portfolio series shall have the same preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms or conditions of redemption as set forth in
the Articles of Incorporation of the Corporation.
FOURTH: The shares of The Diversified Core Fixed Income Portfolio
series, The Aggregate Fixed Income Portfolio series and The International
Mid-Cap Sub Portfolio series have been classified by the Board of Directors
pursuant to authority contained in the Articles of Incorporation of the
Corporation.
1
<PAGE>
FIFTH: These Articles Supplementary shall become effective at 9:01 a.m.
(Eastern time) on December 24, 1997.
IN WITNESS WHEREOF, Delaware Pooled Trust, Inc. has caused these
Articles Supplementary to be signed in its name and on its behalf by its Senior
Vice President and attested by its Assistant Secretary on this 23rd day of
December, 1997.
DELAWARE POOLED TRUST, INC.
By: /s/George M. Chamberlain, Jr.
-----------------------------
George M. Chamberlain, Jr.
Senior Vice President & Secretary
ATTEST:
/s/Meghan M. Mahon
- --------------------
Meghan M. Mahon
Assistant Secretary
THE UNDERSIGNED, Senior Vice President of DELAWARE POOLED TRUST, INC.,
who executed on behalf of the said Corporation the foregoing Articles
Supplementary, of which this instrument is made a part, hereby acknowledges, in
the name of and on behalf of said Corporation, said Articles Supplementary to be
the corporate act of said Corporation and further certifies that, to the best of
his knowledge, information and belief, the matters and facts set forth therein
with respect to the authorization and approval thereof are true in all material
respects, under the penalties of perjury.
/s/George M. Chamberlain, Jr.
-----------------------------
George M. Chamberlain, Jr.
Senior Vice President and Secretary
2
<PAGE>
EXHIBIT (a)(7)
DELAWARE POOLED TRUST, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
DELAWARE POOLED TRUST, INC., a Maryland corporation having its
principal office in Baltimore, Maryland (hereinafter called the "Corporation"),
hereby certifies to the Maryland State Department of Assessments and Taxation
that:
FIRST: The Corporation is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended.
SECOND: The Articles of Incorporation of the Corporation, as amended
and supplemented, are further amended as follows: (i) by redesignating and
changing the name of the existing series of the Corporation's Common Stock
currently designated as "The Defensive Equity Small/Mid-Cap Portfolio" series to
"The Small/Mid-Cap Value Equity Portfolio" series; (ii) by redesignating and
changing the name of the existing series of the Corporation's Common Stock
currently designated as "The Fixed Income Portfolio" series to "The Intermediate
Fixed Income Portfolio" series; (iii) by redesignating and changing the name of
the existing series of the Corporation's Common Stock currently designated as
"The Defensive Equity Portfolio" series to "The Large-Cap Value Equity
Portfolio" series; and (iv) by deleting the old series name from the Articles of
Incorporation, and inserting in lieu thereof the new series name.
THIRD: The amendments to the Articles of Incorporation of the
Corporation as set forth above have been duly approved by a majority of the
entire Board of Directors of the Corporation as required by law and are limited
to a change permitted by Section 2-605(a)(4) of the Maryland General Corporation
Law to be made without action by the stockholders of the Corporation.
FOURTH: The amendments to the Articles of Incorporation of the
Corporation as set forth above do not change the preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption of the shares of the series
that are the subject of the amendments.
FIFTH: The Articles of Amendment shall become effective at 9:00 a.m.
(Eastern time) on December 24, 1997.
<PAGE>
IN WITNESS WHEREOF, DELAWARE POOLED TRUST, INC. has caused these
Articles of Amendment to be signed in its name and on its behalf by its Senior
Vice President and attested by its Assistant Secretary on this 23rd day of
December, 1997.
DELAWARE POOLED TRUST, INC.
By: /s/George M. Chamberlain, Jr.
-----------------------------------
George M. Chamberlain, Jr.
Senior Vice President and Secretary
ATTEST:
/s/Meghan M. Mahon
- -------------------
Meghan M. Mahon
Assistant Secretary
THE UNDERSIGNED, Senior Vice President of DELAWARE POOLED TRUST, INC.,
who executed on behalf of said Corporation the foregoing Articles of Amendment,
of which this certificate is made a part, hereby acknowledges, in the name and
on behalf of said Corporation, the foregoing Articles of Amendment to be the
corporate act of said Corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
/s/George M. Chamberlain, Jr.
-----------------------------------
George M. Chamberlain, Jr.
Senior Vice President and Secretary
<PAGE>
EXHIBIT (a)(9)
DELAWARE POOLED TRUST, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
Delaware Pooled Trust, Inc., a Maryland corporation having its
principal office in Baltimore, Maryland (the "Corporation"), hereby certifies,
in accordance with Section 2-208 of the Maryland General Corporation Law, to the
State Department of Assessments and Taxation of Maryland that:
FIRST: The Corporation has authority to issue Two Billion
(2,000,000,000) shares of Common Stock with a par value of One Cent ($0.01) per
share, having an aggregate par value of Twenty Million Dollars ($20,000,000). Of
such Two Billion (2,000,000,000) shares of Common Stock, One Billion One Hundred
Fifty Million (1,150,000,000) shares of the Common Stock have been classified
and allocated as follows: (i) Fifty Million (50,000,000) shares have been
classified and allocated to each of The Large-Cap Value Equity Portfolio, The
Mid-Cap Growth Equity Portfolio, The International Equity Portfolio, The
Intermediate Fixed Income Portfolio, The Limited-Term Maturity Portfolio, The
Global Fixed Income Portfolio, The International Fixed Income Portfolio, The
Small/Mid-Cap Value Equity Portfolio, The High-Yield Bond Portfolio, The Labor
Select International Equity Portfolio, The Global Equity Portfolio, The Emerging
Markets Portfolio, The Real Estate Investment Trust Portfolio II, The
Diversified Core Fixed Income Portfolio, The Aggregate Fixed Income Portfolio,
The International Mid-Cap Sub Portfolio, The Growth and Income Portfolio and The
Small-Cap Growth Equity Portfolio series; and (ii) Two Hundred Fifty Million
(250,000,000) shares have been classified and allocated to The Real Estate
Investment Trust Portfolio series. Additionally, The Real Estate Investment
Trust Portfolio series is further subdivided and classified into five separate
classes, with individual rights and preferences, all as described in the
Articles of Incorporation, as amended and supplemented.
SECOND: The Board of Directors of the Corporation, at a meeting held on
September, 17, 1998, adopted resolutions classifying and allocating One Hundred
Million (100,000,000) shares of the Common Stock that had previously been
authorized, but unclassified and unallocated, to increase the number of shares
classified and allocated to The Global Fixed Income Portfolio series by Fifty
Million (50,000,000) shares and The International Equity Portfolio series by
Fifty Million (50,000,000) shares. As a result of such classification and
allocation, Seven Hundred Fifty Million (750,000,000) shares of the
Corporation's Common Stock remain authorized but unclassified and unallocated
shares.
THIRD: After giving effect to the aforesaid classification and
allocation of the authorized Common Stock, the Corporation has authority to
issue Two Billion (2,000,000,000) shares of Common Stock with a par value of One
Cent ($0.01) per share ("Common Stock"), having an aggregate par value of Twenty
Million Dollars ($20,000,000). Of such Two Billion (2,000,000,000) shares of
Common Stock, One Billion Two Hundred Fifty Million
1
<PAGE>
(1,250,000,000) shares of the Common Stock have been classified and allocated as
follows: (i) Fifty Million (50,000,000) shares have been classified and
allocated to each of The Large-Cap Value Equity Portfolio, The Mid-Cap Growth
Equity Portfolio, The Intermediate Fixed Income Portfolio, The Limited-Term
Maturity Portfolio, The International Fixed Income Portfolio, The Small/Mid-Cap
Value Equity Portfolio, The High-Yield Bond Portfolio, The Labor Select
International Equity Portfolio, The Global Equity Portfolio, The Emerging
Markets Portfolio, The Real Estate Investment Trust Portfolio II, The
Diversified Core Fixed Income Portfolio, The Aggregate Fixed Income Portfolio,
The International Mid-Cap Sub Portfolio, The Growth and Income Portfolio and The
Small-Cap Growth Equity Portfolio series; (ii) One Hundred Million (100,000,000)
shares of Common Stock have been classified and allocated to each of The Global
Fixed Income Portfolio and The International Equity Portfolio series; and (iii)
Two Hundred Fifty Million (250,000,000) shares have been classified and
allocated to The Real Estate Investment Trust Portfolio series. Additionally,
The Real Estate Investment Trust Portfolio series is further subdivided and
classified into five separate classes, with individual rights and preferences,
all as described in the Articles of Incorporation, as amended and supplemented.
FOURTH: The Corporation is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended.
FIFTH: The shares of The Global Fixed Income Portfolio and The
International Equity Portfolio have been classified and allocated herein by the
Board of Directors pursuant to authority contained in Article Fifth of the
Articles of Incorporation of the Corporation.
SIXTH: These Articles Supplementary shall become effective immediately
upon filing.
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be signed in its name and on its behalf on this 6th day of
October, 1998 by its Vice President, who acknowledges that these Articles
Supplementary are the act of the Corporation and that to the best of his
knowledge, information and belief and under penalties of perjury, all matters
and facts contained herein are true in all material respects.
DELAWARE POOLED TRUST, INC.
By /s/Eric E. Miller
-----------------
Eric E. Miller
Vice President
ATTEST:
/s/Richelle S. Maestro
- ----------------------
Richelle S. Maestro
Assistant Secretary
<PAGE>
EXHIBIT (a)(10)
DELAWARE POOLED TRUST, INC.
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
DELAWARE POOLED TRUST, INC., a Maryland corporation, having its
principal office in Baltimore, Maryland (the "Corporation"), hereby certifies to
the State Department of Assessments and Taxation of the State of Maryland that:
FIRST: The Corporation is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended.
SECOND: The Articles of Incorporation of the Corporation, as amended
and supplemented (the "Articles"), are further amended as follows: (i) by
redesignating and changing the name of the existing series of the Corporation's
Common Stock currently designated as "The Aggressive Growth Portfolio" series to
"The Mid-Cap Growth Equity Portfolio" series; and (ii) by deleting the old
series name from the Articles, and inserting in lieu thereof the new series
name.
THIRD: The Articles of Incorporation of the Corporation, as amended
and supplemented (the "Articles"), are further amended as follows: (i) by
redesignating and changing the name of the existing series of the Corporation's
Common Stock currently designated as "The Small Cap Growth Equity Portfolio"
series to "The Small-Cap Growth Equity Portfolio" series; and (ii) by deleting
the old series name from the Articles, and inserting in lieu thereof the new
series name.
FOURTH: The foregoing amendments to the Articles of the Corporation as
set forth above have been duly approved by a majority of the entire Board of
Directors of the Corporation as required by law and is limited to a change
expressly permitted by Section 2-605(a)(4) of the Maryland General Corporation
Law to be made without action by the stockholders of the Corporation.
FIFTH: The amendments to the Articles of the Corporation as forth above
do not change the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of the shares of the series of Common Stock of the
Corporation that are subject of the amendments or the aggregate par value
thereof.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be signed in its name and on its behalf on this 6TH day of OCTOBER,
1998 by its Vice President, who acknowledges that the Articles of Amendment are
the act of the Corporation and that to the best of his knowledge, information
and belief and under penalties of perjury, all matters and facts contained
herein are true in all material respects.
DELAWARE POOLED TRUST, INC.
By: /s/Eric E. Miller
-----------------
Eric E. Miller
Vice President
ATTEST: /s/Richelle S. Maestro
----------------------
Richelle S. Maestro
Assistant Secretary
<PAGE>
EXHIBIT (a)(18)
DELAWARE POOLED TRUST, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
DELAWARE POOLED TRUST, INC., a Maryland corporation having its
principal office in Baltimore, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Corporation is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended.
SECOND: The Articles of Incorporation of the Corporation, as amended
and supplemented, are further amended by changing the names of each class of The
Real Estate Investment Trust Portfolio series of the Corporation's common stock
as follows: by changing the name of the REIT Fund A Class of shares to the
Delaware REIT Fund A Class of shares; by changing the name of the REIT Fund B
Class of shares to the Delaware REIT Fund B Class of shares; by changing the
name of the REIT Fund C Class of shares to the Delaware REIT Fund C Class of
shares; and by changing the name of the REIT Fund Institutional Class of shares
to the Delaware REIT Fund Institutional Class of shares; and by deleting the old
names of such classes from the Articles of Incorporation, as amended and
supplemented to date, and inserting in lieu thereof the new names of such
classes as changed hereby.
THIRD: The amendments to the Articles of Incorporation of the
Corporation as set forth above have been duly approved by a majority of the
entire Board of Directors of the Corporation as required by law and are limited
to changes expressly permitted by Section 2-605(a)(4) of the Maryland General
Corporation Law to be made without action by the stockholders of the
Corporation.
FOURTH: The amendments to the Articles of Incorporation of the
Corporation as set forth above do not change the preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption of the shares of the series
that are the subject of the amendments.
FIFTH: The Articles of Amendment shall become effective at 9:00 a.m.
(Eastern time) on August 16, 1999.
IN WITNESS WHEREOF, DELAWARE POOLED TRUST, INC. has caused these
Articles of Amendment to be signed in its name and on its behalf by its
Executive Vice President and attested by its Assistant Secretary on this 11th
day of August, 1999.
DELAWARE POOLED TRUST, INC.
By: /s/Richard J. Flannery
--------------------
Richard J. Flannery.
Executive Vice President
<PAGE>
ATTEST:
/s/David P. O'Connor
- --------------------
David P. O'Connor
Assistant Secretary
THE UNDERSIGNED, Executive Vice President of DELAWARE POOLED TRUST,
INC., who executed on behalf of said Corporation the foregoing Articles of
Amendment, of which this certificate is made a part, hereby acknowledges in the
name and on behalf of said Corporation, the foregoing Articles of Amendment to
be the corporate act of said Corporation and further certifies that, to the best
of his knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.
/s/Richard J. Flannery
----------------------
Richard J. Flannery
Executive Vice President
<PAGE>
EXHIBIT (a)(19)
DELAWARE POOLED TRUST, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
Delaware Pooled Trust, Inc., a Maryland corporation having its
principal office in Baltimore, Maryland (the "Corporation"), hereby certifies,
in accordance with Section 2-208 of the Maryland General Corporation Law, to the
State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at a meeting held on
September 16, 1999, adopted resolutions classifying and allocating unallocated
and unissued common stock of the Corporation as follows:
Fifty Million (50,000,000) shares of common stock with a par value of
One Cent ($.01) per share to a new series of shares designated as The
International Large-Cap Equity Portfolio.
SECOND: The shares of The International Large-Cap Equity Portfolio
shall have the rights and privileges, and shall be subject to the limitations
and priorities, set forth in the Charter of the Corporation.
THIRD: The shares of The International Large-Cap Equity Portfolio have
been classified by the Board of Directors pursuant to authority contained in the
Charter of the Corporation.
IN WITNESS WHEREOF, Delaware Pooled Trust, Inc. has caused these
Articles Supplementary to be signed in its name and on its behalf this 5th day
of November, 1999.
DELAWARE POOLED TRUST, INC.
By: /s/Richelle S. Maestro
-----------------------------
Richelle S. Maestro
Senior Vice President/
Deputy General Counsel/
Assistant Secretary
Attest:
/s/Michael T. Pellegrino
- -----------------------------
Name: Michael T. Pellegrino
Title: Assistant Secretary
<PAGE>
THE UNDERSIGNED, Senior Vice President, Deputy General Counsel
and Assistant Secretary of DELAWARE POOLED TRUST, INC., who executed on behalf
of said Corporation the foregoing Articles Supplementary, of which this
instrument is made a part, hereby acknowledges, in the name of and on behalf of
said Corporation, said Articles Supplementary to be the corporate act of said
Corporation and further certifies that, to the best of her knowledge,
information and belief, the matters and facts set forth therein with respect to
the authorization and approval thereof are true in all material respects, under
the penalties of perjury.
/s/Richelle S. Maestro
------------------------
Richelle S. Maestro
<PAGE>
EXHIBIT 99.(d)(2)
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE POOLED TRUST, INC., a Maryland
corporation (the "Company") severally on behalf of each series of shares of
common stock of the Company that is listed on Exhibit A to this Agreement, as
that Exhibit may be amended from time to time (each such series of shares is
hereinafter referred to as a "Portfolio" and, together with other series of
shares listed on such Exhibit, the "Portfolios"), and DELAWARE INTERNATIONAL
ADVISERS LTD., a U.K. company (the "Investment Manager").
W I T N E S S E T H:
WHEREAS, the Company has been organized and operates as an investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act") ;
WHEREAS, each Portfolio engages in the business of investing and
reinvesting its assets in securities; and
WHEREAS, the Investment Manager is registered under the Investment
Advisers Act of 1940 as an investment adviser and engages in the business of
providing investment management services; and
WHEREAS, the Company, severally on behalf of each Portfolio, and the
Investment Manager desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Company hereby employs the Investment Manager to manage the
investment and reinvestment of each Portfolio's assets and to administer the
Company's affairs, subject to the direction of the Company's Board of Directors
and officers for the period and on the terms hereinafter set forth. The
Investment Manager hereby accepts such employment and agrees during such period
to render the services and assume the obligations herein set forth for the
compensation herein provided. The Investment Manager shall for all purposes
herein be deemed to be an independent contractor, and shall, unless otherwise
expressly provided and authorized, have no authority to act for or represent the
Company in any way, or in any way be deemed an agent of the Company. The
Investment Manager shall regularly make decisions as to what securities and
other instruments to purchase and sell on behalf of each Portfolio and shall
effect the purchase and sale of such investments in furtherance of each
Portfolio's objectives and policies and shall furnish the Board of Directors of
the Company with such information and reports regarding each Portfolio's
investments as the Investment Manager deems appropriate or as the Directors of
the Company may reasonably request.
2. The Company 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 shares, including issuance, redemption and repurchase of shares;
preparation of share certificates; reports and notices to shareholders; calling
and holding of shareholders' and Directors' meetings; miscellaneous office
expenses; brokerage commissions; custodian fees; legal and accounting fees;
taxes; and federal and state registration fees. Directors, trustees, officers
and employees of the Investment Manager may be directors, trustees, officers and
employees of any of the investment companies within the Delaware Investments
<PAGE>
family (including the Company). Directors, trustees, officers and employees of
the Investment Manager who are directors, trustees, officers and/or employees of
these investment companies shall not receive any compensation from such
companies for acting in such dual capacity.
In the conduct of the respective businesses of the parties hereto and
in the performance of this Agreement, the Company and Investment Manager may
share facilities common to each, which may include legal and accounting
personnel, with appropriate proration of expenses between them.
3. (a) Subject to the primary objective of obtaining the best
execution, the Investment Manager will place orders for the purchase and sale of
portfolio securities and other instruments with such broker/dealers selected who
provide statistical, factual and financial information and services to the
Company, to the Investment Manager, to any sub-adviser (as defined in Paragraph
5 hereof, a "Sub-Adviser") or to any other fund for which the Investment Manager
or any Sub-Adviser provides investment advisory services and/or with
broker/dealers who sell shares of the Company or who sell shares of any other
investment company (or series thereof) for which the Investment Manager or any
Sub-Adviser provides investment advisory services. Broker/dealers who sell
shares of any investment companies or series thereof for which the Investment
Manager or Sub-Adviser provide investment advisory services shall only receive
orders for the purchase or sale of portfolio securities to the extent that the
placing of such orders is in compliance with the Rules of the Securities and
Exchange Commission and NASD Regulation, 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 Company, the Investment Manager may cause a
Portfolio to pay a member of an exchange, broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission another member of an exchange, broker or dealer would have charged
for effecting that transaction, in such instances where the Investment Manager
has 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 Company
on behalf of the Portfolios and to other investment companies (or series
thereof) and other advisory accounts for which the Investment Manager or any
Sub-Adviser exercises investment discretion.
4. As compensation for the services to be rendered to a particular
Portfolio by the Investment Manager under the provisions of this Agreement, that
Portfolio shall pay monthly to the Investment Manager exclusively from that
Portfolio's assets, a fee based on the average daily net assets of that
Portfolio during the month. Such fee shall be calculated in accordance with the
fee schedule applicable to that Portfolio as set forth in Exhibit A hereto,
which Exhibit may be amended from time to time as provided in Paragraphs 10(b)
and (c) of this Agreement.
If this Agreement is terminated prior to the end of any calendar month
with respect to a particular Portfolio, the management fee for such Portfolio
shall be prorated for the portion of any month in which this Agreement is in
effect with respect to such Portfolio 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 calendar
days after the date of termination.
5. The Investment Manager may, at its expense, select and contract with
one or more investment advisers registered under the Investment Advisers Act of
1940 ("Sub-Advisers") to perform some or all of the services for a Portfolio for
which it is responsible under this Agreement. The Investment Manager will
compensate any Sub-Adviser for its services to the Portfolio. The Investment
Manager may terminate the services of any Sub-Adviser at any time in its sole
discretion, and shall at
-2-
<PAGE>
such time assume the responsibilities of such Sub-Adviser unless and until a
successor Sub-Adviser is selected and the requisite approval of the Portfolio's
shareholders is obtained. The Investment Manager will continue to have
responsibility for all advisory services furnished by any Sub-Adviser.
6. The services to be rendered by the Investment Manager to the Company
on behalf of each Portfolio under the provisions of this Agreement are not to be
deemed to be exclusive, and the Investment Manager shall be free to render
similar or different services to others so long as its ability to render the
services provided for in this Agreement shall not be impaired thereby.
7. The Investment Manager, its directors, officers, employees, agents
and shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Company or to any other investment company, corporation, association, firm or
individual.
8. It is understood and agreed that so long as the Investment Manager
and/or its advisory affiliates shall continue to serve as the investment adviser
to any of the Company's Portfolios, other investment companies as may be
sponsored or advised by the Investment Manager or its affiliates shall have the
right permanently to adopt and to use the words "Delaware," "Delaware
Investments" or "Delaware Group" in their names and in the names of any series
or class of shares of such funds.
9. In the absence of willful misfeasance, bad faith, gross negligence,
or a reckless disregard of the performance of its duties as the Investment
Manager to the Company on behalf of any Portfolio, the Investment Manager shall
not be subject to liability to the Company or to any Portfolio or to any
shareholder of the Company for any action or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security, or otherwise.
10. (a) This Agreement shall be executed and become effective as of the
date written below, and shall become effective with respect to a particular
Portfolio as of the effective date set forth in Exhibit A for that Portfolio,
only if approved by the vote of a majority of the outstanding voting securities
of that Portfolio. It shall continue in effect for an initial period of two
years for each Portfolio and may be renewed thereafter only so long as such
renewal and continuance is specifically approved at least annually by the Board
of Directors or by the vote of a majority of the outstanding voting securities
of that Portfolio and only if the terms and the renewal hereof have been
approved by the vote of a majority of the Directors of the Company who are not
parties hereto or interested persons of any such party ("Independent
Directors"), cast in person at a meeting called for the purpose of voting on
such approval.
(b) Except as provided in Paragraph 10(c) below, no amendment to
this Agreement (or to Exhibit A hereto) shall be effective with respect to any
Portfolio unless approved by: (i) a majority of the Directors of the Company,
including a majority of Independent Directors; and (ii) a majority of the
outstanding voting securities of the particular Portfolio. Any such amendment
that pertains to a Portfolio will not change, or otherwise affect the
applicability of, this Agreement with respect to other Portfolios.
(c) The Agreement (and Exhibit A hereto) may be amended with respect
to a Portfolio without the approval of a majority of the outstanding voting
securities of that Portfolio if the amendment relates solely to a management fee
reduction or other change that is permitted or not prohibited under federal law,
rule, regulation or SEC staff interpretation thereof to be made without
shareholder approval. This Agreement may be amended from time to time to add or
remove one or more Portfolios, or to reflect changes in management fees, by an
amendment to Exhibit A hereto executed by the Company and the Investment
Manager. Any such amendment that pertains to a Portfolio will not change, or
otherwise affect the applicability of, this Agreement with respect to other
Portfolios.
-3-
<PAGE>
(d) This Agreement may be terminated as to any Portfolio by the
Company at any time, without the payment of a penalty, on sixty days' written
notice to the Investment Manager of the Company's intention to do so, pursuant
to action by the Board of Directors of the Company or pursuant to the vote of a
majority of the outstanding voting securities of the affected Portfolio. The
Investment Manager may terminate this Agreement at any time, without the payment
of a penalty, on sixty days' written notice to the Portfolio 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 Company on behalf of a
Portfolio to pay to the Investment Manager the fee provided in Paragraph 4
hereof, prorated to the date of termination. This Agreement shall automatically
terminate in the event of its assignment.
11. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
12. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities"; "interested persons"; and "assignment"
shall have the meaning defined in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers and duly attested as of the 15th day
of April, 1999.
DELAWARE INTERNATIONAL ADVISERS LTD. DELAWARE POOLED
TRUST, INC. on behalf of the
Portfolios listed on Exhibit A
By: /s/David G. Tilles By: /s/Wayne A. Stork
-------------------------- --------------------------
Name: David G. Tilles Name: Wayne A. Stork
Title: Managing Director & CIO Title: Chairman
Attest: /s/ John Emberson Attest: /s/ David P. O'Connor
----------------------- ---------------------
Name: John Emberson Name: David P. O'Connor
Title: Company Secretary Title: Assistant Secretary
-4-
<PAGE>
EXHIBIT A
THIS EXHIBIT to the Investment Management Agreement between DELAWARE
POOLED TRUST, INC. and DELAWARE INTERNATIONAL ADVISERS LTD. entered into as of
the 15th day of April, 1999 (the "Agreement") lists the Portfolios for which the
Investment Manager provides investment management services pursuant to this
Agreement, along with the management fee rate schedule for each Portfolio and
the date on which the Agreement became effective for each Portfolio.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Portfolio Name Effective Date Management Fee Schedule
-------------- -------------- (as a percentage of
average daily net assets)
Annual Rate
- ------------------------------------------------------------------------------ -----------------------------------
<S> <C> <C>
The Emerging Markets Portfolio April 15, 1999 1.00%
- ------------------------------------------------------------------------------------------------------------------
The Global Equity Portfolio April 15, 1999 0.75%
- ------------------------------------------------------------------------------------------------------------------
The Global Fixed Income Portfolio April 15, 1999 0.50%
- ------------------------------------------------------------------------------------------------------------------
The International Equity Portfolio April 15, 1999 0.75%
- ------------------------------------------------------------------------------------------------------------------
The International Fixed Income April 15, 1999 0.50%
Portfolio
- ------------------------------------------------------------------------------------------------------------------
The Labor Select International Equity April 15, 1999 0.75%
Portfolio
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 99.(d)(3)
SUB-ADVISORY AGREEMENT
AGREEMENT, made by and between DELAWARE MANAGEMENT COMPANY, a series of
Delaware Management Business Trust ("Investment Manager"), and DELAWARE
INTERNATIONAL ADVISERS LTD. ("Sub-Adviser").
WITNESSETH:
WHEREAS, DELAWARE POOLED TRUST, INC., a Maryland corporation ("Company"),
has been organized and operates as an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Investment Manager and the Company on behalf of THE
DIVERSIFIED CORE FIXED INCOME PORTFOLIO ("Portfolio") have entered into an
agreement ("Investment Management Agreement") whereby the Investment Manager
will provide investment advisory services to the Company on behalf of the
Portfolio; and
WHEREAS, the Investment Management Agreement permits the Investment Manager
to hire one or more sub-advisers to assist the Investment Manager in providing
investment advisory services to the Company on behalf of the Portfolio; and
WHEREAS, the Investment Manager and the Sub-Adviser are registered
investment advisers under the Investment Advisers Act of 1940, as amended, and
engage in the business of providing investment management services.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and each of the parties hereto intending to be legally bound, it is agreed as
follows:
1. The Investment Manager hereby employs the Sub-Adviser, subject always to
the Investment Manager's control and supervision, to manage the investment and
reinvestment of that portion of the Portfolio's assets as the Investment Manager
shall designate from time to time and to furnish the Investment Manager with
investment recommendations, asset allocation advice, research, economic analysis
and other investment services with respect to securities in which the Portfolio
may invest, subject to the direction of the Board and officers of the Company
for the period and on the terms hereinafter set forth. The Sub-Adviser hereby
accepts such employment and agrees during such period to render the services and
assume the obligations herein set forth for the compensation herein provided.
The Sub-Adviser shall for all purposes herein be deemed to be an independent
contractor, and shall, unless otherwise expressly provided and authorized, have
no authority to act for or represent the Company in any way, or in any way be
deemed an agent of the Company. The Sub-Adviser shall regularly make decisions
as to what securities to purchase and sell on behalf of the Portfolio with
respect to that portion of the Portfolio's assets designated by the Investment
Manager, shall effect the purchase and sale of such investments in furtherance
of the Portfolio's objectives and policies and shall furnish the Board of
Directors of the Company with such information and reports regarding its
activities as the Investment Manager deems appropriate or as the Directors of
the Company may reasonably request in the performance of its duties and
obligations under this Agreement. The Sub-Adviser shall act in conformity with
the Articles of Incorporation, By-Laws and Prospectus of the Company and with
the instructions and directions of the Investment Manager and of the Board of
Directors of the Company and will conform to and comply with the requirements of
the 1940 Act, the Internal Revenue Code of 1986 and all other applicable federal
and state laws and regulations consistent with the provisions of Section 15(c)
of the 1940 Act.
<PAGE>
2. Under the terms of the Investment Management Agreement, the Company
shall conduct its own business and affairs and shall bear the expenses and
salaries necessary and incidental thereto including, but not in limitation of
the foregoing, the costs incurred in: the maintenance of its corporate
existence; the maintenance of its own books, records and procedures; dealing
with its own shareholders; the payment of dividends; transfer of stock,
including issuance and repurchase of shares; preparation of share certificates;
reports and notices to shareholders; calling and holding of shareholders'
meetings; miscellaneous office expenses; brokerage commissions; custodian fees;
legal and accounting fees; taxes; and federal and state registration fees.
Without limiting the foregoing, except as the Investment Manager and the
Sub-Adviser may agree in writing from time to time, the Sub-Adviser shall have
no responsibility for record maintenance and preservation obligations under
Section 31 of the 1940 Act.
Directors, officers and employees of the Sub-Adviser may be directors,
officers and employees of other funds which have employed the Sub-Adviser as
sub-adviser or investment manager. Directors, officers and employees of the
Sub-Adviser who are Directors, officers and/or employees of the Company, shall
not receive any compensation from the Company for acting in such dual capacity.
In the conduct of the respective business of the parties hereto and in the
performance of this Agreement, the Company, the Investment Manager and the
Sub-Adviser may share facilities common to each, which may include legal and
accounting personnel, with appropriate proration of expenses between and among
them.
3. (a) Subject to the primary objective of obtaining the best execution,
the Sub-Adviser may place orders for the purchase and sale of portfolio
securities and other instruments with such broker/dealers who provide
statistical, factual and financial information and services to the Company, to
the Investment Manager, to the Sub-Adviser or to any other fund for which the
Investment Manager or Sub-Adviser provides investment advisory services and/or
with broker/dealers who sell shares of the Company or who sell shares of any
other fund for which the Investment Manager or Sub-Adviser provides investment
advisory services. Broker/dealers who sell shares of the funds for which the
Investment Manager or Sub-Adviser provides advisory services shall only receive
orders for the purchase or sale of portfolio securities to the extent that the
placing of such orders is in compliance with the rules of the Securities and
Exchange Commission and NASD Regulation, 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 Company, the Sub-Adviser may cause the Company to pay a member
of an exchange, broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of
an exchange, broker or dealer would have charged for effecting that transaction,
in such instances where the Sub-Adviser has 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 Sub-Adviser's overall
responsibilities with respect to the Company on behalf of the Portfolio and to
other funds and other advisory accounts for which the Investment Manager or the
Sub-Adviser exercises investment discretion.
4. As compensation for the services to be rendered to the Company for the
benefit of the Portfolio by the Sub-Adviser under the provisions of this
Agreement, the Investment Manager shall pay to the Sub-Adviser a fee equal to
that portion of the fees paid to the Investment Manager under the Investment
Management Agreement attributable to foreign investments.
-2-
<PAGE>
If this Agreement is terminated prior to the end of any calendar month, the
Sub-Advisory fee shall be prorated for the portion of any month in which this
Agreement is in effect according to the proportion which the number of calendar
days during which the Agreement is in effect bears to the number of calendar
days in the month, and shall be payable within 10 days after the date of
termination.
5. The services to be rendered by the Sub-Adviser to the Company for the
benefit of the Portfolio under the provisions of this Agreement are not to be
deemed to be exclusive, and the Sub-Adviser shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby; provided, however,
except for advisory arrangements implemented prior to the date of this
Agreement, during the term of this Agreement the Sub-Adviser will not, without
the written consent of the Investment Manager, which consent will not be
unreasonably withheld, render such services to an investment company (or
portfolio thereof) which the Investment Manager reasonably determines would be
in competition with and which has investment policies similar to those of the
Company.
6. Subject to the limitation set forth in Paragraph 5, the Sub-Adviser, its
directors, officers, employees, agents and shareholders may engage in other
businesses, may render investment advisory services to other investment
companies, or to any other corporation, association, firm or individual, and may
render underwriting services to the Company or to any other investment company,
corporation, association, firm or individual.
The Investment Manager agrees that it shall not use the Sub-Adviser's name
or otherwise refer to the Sub-Adviser in any materials distributed to third
parties, including the Portfolio's shareholders, without the prior written
consent of the Sub-Adviser.
7. In the absence of willful misfeasance, bad faith, gross negligence, or a
reckless disregard of the performance of its duties as Sub-Adviser to the
Company on behalf of the Portfolio, the Sub-Adviser shall not be subject to
liability to the Company or to the Portfolio, to the Investment Manager or to
any shareholder of the Company 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. (a) 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 the
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 Company who are not parties hereto or
interested persons of any such party ("Independent Directors"), cast in person
at a meeting called for the purpose of voting on such approval.
-3-
<PAGE>
(b) No amendment to this Agreement shall be effective unless approved
by: (i) a majority of the Directors of the Company, including a majority of
Independent Directors; and (ii) a majority of the outstanding voting securities
of the Portfolio. Notwithstanding the foregoing, the Agreement may be amended
without the approval of a majority of the outstanding voting securities of the
Portfolio if the amendment relates solely to a management fee reduction or other
change that is permitted or not prohibited under federal law, rule, regulation
or SEC staff interpretation thereof to be made without shareholder approval.
(c) This Agreement may be terminated by the Investment Manager or the
Company at any time, without the payment of a penalty, on sixty days' written
notice to the Sub-Adviser, of the Investment Manager's or the Company's
intention to do so, in the case of the Company pursuant to action by the Board
of Directors of the Company or pursuant to the vote of a majority of the
outstanding voting securities of the Portfolio. The Sub-Adviser may terminate
this Agreement at any time, without the payment of a penalty on sixty days'
written notice to the Investment Manager and the Company 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 Investment Manager to pay
to the Sub-Adviser the fee provided in Paragraph 4 hereof, prorated to the date
of termination. This Agreement shall automatically terminate in the event of its
assignment. This Agreement shall automatically terminate upon the termination of
the Investment Management Agreement.
9. This Agreement shall extend to and bind the successors of the parties
hereto.
10. For the purposes of this Agreement, the terms "vote of a majority of
the outstanding voting securities"; "interested person"; and "assignment" shall
have the meaning defined in the Investment Company Act of 1940.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers and duly attested as of the 15th day of
April, 1999.
DELAWARE INTERNATIONAL DELAWARE MANAGEMENT COMPANY,
ADVISERS LTD. a series of Delaware Management
Business Trust
By: /s/ David G. Tilles By: /s/ David K. Downes
------------------------------- -------------------------------
Name: David G. Tilles Name: David K. Downes
Title: Managing Director & C.I.O. Title: President
Attest: /s/ John Emberson Attest: /s/ David P. O'Connor
--------------------------- ---------------------------
Agreed to and accepted as of the day and year first above written:
DELAWARE POOLED TRUST, INC.
on behalf of the DIVERSIFIED CORE
FIXED INCOME PORTFOLIO
By: /s/ Wayne A. Stork
-------------------------------
Attest: /s/ David P. O'Connor
---------------------------
-4-
<PAGE>
EXHIBIT 99.(d)(4)
SUB-ADVISORY AGREEMENT
AGREEMENT, made by and between DELAWARE INTERNATIONAL ADVISERS LTD.
("Investment Manager"), and DELAWARE MANAGEMENT COMPANY, a series of Delaware
Management Business Trust ("Sub-Adviser").
WITNESSETH:
WHEREAS, DELAWARE POOLED TRUST, INC., a Maryland corporation ("Company"),
has been organized and operates as an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Investment Manager and the Company on behalf of THE GLOBAL
EQUITY PORTFOLIO ("Portfolio") have entered into an agreement ("Investment
Management Agreement") whereby the Investment Manager will provide investment
advisory services to the Company on behalf of the Portfolio; and
WHEREAS, the Investment Management Agreement permits the Investment Manager
to hire one or more sub-advisers to assist the Investment Manager in providing
investment advisory services to the Company on behalf of the Portfolio; and
WHEREAS, the Investment Manager and the Sub-Adviser are registered
investment advisers under the Investment Advisers Act of 1940, as amended, and
engage in the business of providing investment management services.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and each of the parties hereto intending to be legally bound, it is agreed as
follows:
1. The Investment Manager hereby employs the Sub-Adviser, subject always to
the Investment Manager's control and supervision, to manage the investment and
reinvestment of that portion of the Portfolio's assets as the Investment Manager
shall designate from time to time and to furnish the Investment Manager with
investment recommendations, asset allocation advice, research, economic analysis
and other investment services with respect to securities in which the Portfolio
may invest, subject to the direction of the Board and officers of the Company
for the period and on the terms hereinafter set forth. The Sub-Adviser hereby
accepts such employment and agrees during such period to render the services and
assume the obligations herein set forth for the compensation herein provided.
The Sub-Adviser shall for all purposes herein be deemed to be an independent
contractor, and shall, unless otherwise expressly provided and authorized, have
no authority to act for or represent the Company in any way, or in any way be
deemed an agent of the Company. The Sub-Adviser shall regularly make decisions
as to what securities to purchase and sell on behalf of the Portfolio with
respect to that portion of the Portfolio's assets designated by the Investment
Manager, shall effect the purchase and sale of such investments in furtherance
of the Portfolio's objectives and policies and shall furnish the Board of
Directors of the Company with such information and reports regarding its
activities as the Investment Manager deems appropriate or as the Directors of
the Company may reasonably request in the performance of its duties and
obligations under this Agreement. The Sub-Adviser shall act in conformity with
the Articles of Incorporation, By-Laws and Prospectus of the Company and with
the instructions and directions of the Investment Manager and of the Board of
Directors of the Company and will conform to and comply with the requirements of
the 1940 Act, the Internal Revenue Code of 1986 and all other applicable federal
and state laws and regulations consistent with the provisions of Section 15(c)
of the 1940 Act.
<PAGE>
2. Under the terms of the Investment Management Agreement, the Company
shall conduct its own business and affairs and shall bear the expenses and
salaries necessary and incidental thereto including, but not in limitation of
the foregoing, the costs incurred in: the maintenance of its corporate
existence; the maintenance of its own books, records and procedures; dealing
with its own shareholders; the payment of dividends; transfer of stock,
including issuance and repurchase of shares; preparation of share certificates;
reports and notices to shareholders; calling and holding of shareholders'
meetings; miscellaneous office expenses; brokerage commissions; custodian fees;
legal and accounting fees; taxes; and federal and state registration fees.
Without limiting the foregoing, except as the Investment Manager and the
Sub-Adviser may agree in writing from time to time, the Sub-Adviser shall have
no responsibility for record maintenance and preservation obligations under
Section 31 of the 1940 Act.
Directors, officers and employees of the Sub-Adviser may be directors,
officers and employees of other funds which have employed the Sub-Adviser as
sub-adviser or investment manager. Directors, officers and employees of the
Sub-Adviser who are Directors, officers and/or employees of the Company, shall
not receive any compensation from the Company for acting in such dual capacity.
In the conduct of the respective business of the parties hereto and in the
performance of this Agreement, the Company, the Investment Manager and the
Sub-Adviser may share facilities common to each, which may include legal and
accounting personnel, with appropriate proration of expenses between and among
them.
3. (a) Subject to the primary objective of obtaining the best execution,
the Sub-Adviser may place orders for the purchase and sale of portfolio
securities and other instruments with such broker/dealers who provide
statistical, factual and financial information and services to the Company, to
the Investment Manager, to the Sub-Adviser or to any other fund for which the
Investment Manager or Sub-Adviser provides investment advisory services and/or
with broker/dealers who sell shares of the Company or who sell shares of any
other fund for which the Investment Manager or Sub-Adviser provides investment
advisory services. Broker/dealers who sell shares of the funds for which the
Investment Manager or Sub-Adviser provides advisory services shall only receive
orders for the purchase or sale of portfolio securities to the extent that the
placing of such orders is in compliance with the rules of the Securities and
Exchange Commission and NASD Regulation, 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 Company, the Sub-Adviser may cause the Company to pay a member
of an exchange, broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of
an exchange, broker or dealer would have charged for effecting that transaction,
in such instances where the Sub-Adviser has 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 Sub-Adviser's overall
responsibilities with respect to the Company on behalf of the Portfolio and to
other funds and other advisory accounts for which the Investment Manager or the
Sub-Adviser exercises investment discretion.
4. As compensation for the services to be rendered to the Company for the
benefit of the Portfolio by the Sub-Adviser under the provisions of this
Agreement, the Investment Manager shall pay to the Sub-Adviser a fee equal to
50% of the fees paid to the Investment Manager under the Investment Management
Agreement.
-2-
<PAGE>
If this Agreement is terminated prior to the end of any calendar month, the
Sub-Advisory fee shall be prorated for the portion of any month in which this
Agreement is in effect according to the proportion which the number of calendar
days during which the Agreement is in effect bears to the number of calendar
days in the month, and shall be payable within 10 days after the date of
termination.
5. The services to be rendered by the Sub-Adviser to the Company for the
benefit of the Portfolio under the provisions of this Agreement are not to be
deemed to be exclusive, and the Sub-Adviser shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby; provided, however,
except for advisory arrangements implemented prior to the date of this
Agreement, during the term of this Agreement the Sub-Adviser will not, without
the written consent of the Investment Manager, which consent will not be
unreasonably withheld, render such services to an investment company (or
portfolio thereof) which the Investment Manager reasonably determines would be
in competition with and which has investment policies similar to those of the
Company.
6. Subject to the limitation set forth in Paragraph 5, the Sub-Adviser, its
directors, officers, employees, agents and shareholders may engage in other
businesses, may render investment advisory services to other investment
companies, or to any other corporation, association, firm or individual, and may
render underwriting services to the Company or to any other investment company,
corporation, association, firm or individual.
The Investment Manager agrees that it shall not use the Sub-Adviser's name
or otherwise refer to the Sub-Adviser in any materials distributed to third
parties, including the Portfolio's shareholders, without the prior written
consent of the Sub-Adviser.
7. In the absence of willful misfeasance, bad faith, gross negligence, or a
reckless disregard of the performance of its duties as Sub-Adviser to the
Company on behalf of the Portfolio, the Sub-Adviser shall not be subject to
liability to the Company or to the Portfolio, to the Investment Manager or to
any shareholder of the Company 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. (a) 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 the
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 Company who are not parties hereto or
interested persons of any such party ("Independent Directors"), cast in person
at a meeting called for the purpose of voting on such approval.
-3-
<PAGE>
(b) No amendment to this Agreement shall be effective unless approved
by: (i) a majority of the Directors of the Company, including a majority of
Independent Directors; and (ii) a majority of the outstanding voting securities
of the Portfolio. Notwithstanding the foregoing, the Agreement may be amended
without the approval of a majority of the outstanding voting securities of the
Portfolio if the amendment relates solely to a management fee reduction or other
change that is permitted or not prohibited under federal law, rule, regulation
or SEC staff interpretation thereof to be made without shareholder approval.
(c) This Agreement may be terminated by the Investment Manager or the
Company at any time, without the payment of a penalty, on sixty days' written
notice to the Sub-Adviser, of the Investment Manager's or the Company's
intention to do so, in the case of the Company pursuant to action by the Board
of Directors of the Company or pursuant to the vote of a majority of the
outstanding voting securities of the Portfolio. The Sub-Adviser may terminate
this Agreement at any time, without the payment of a penalty on sixty days'
written notice to the Investment Manager and the Company 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 Investment Manager to pay
to the Sub-Adviser the fee provided in Paragraph 4 hereof, prorated to the date
of termination. This Agreement shall automatically terminate in the event of its
assignment. This Agreement shall automatically terminate upon the termination of
the Investment Management Agreement.
9. This Agreement shall extend to and bind the successors of the parties
hereto.
10. For the purposes of this Agreement, the terms "vote of a majority of
the outstanding voting securities"; "interested person"; and "assignment" shall
have the meaning defined in the Investment Company Act of 1940.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers and duly attested as of the 15th day of
April, 1999.
DELAWARE MANAGEMENT COMPANY, DELAWARE INTERNATIONAL
a series of Delaware Management Business ADVISERS LTD.
Trust
By: /s/ David K. Downes By: /s/ David G. Tilles
------------------------------- -------------------------------
Name: David K. Downes Name: David G. Tilles
Title: President Title: Managing Director & C.I.O.
Attest: /s/ David P. O'Connor Attest: /s/ John Emberson
--------------------------- ---------------------------
Agreed to and accepted as of the day and year first above written:
DELAWARE POOLED TRUST, INC.
on behalf of the GLOBAL EQUITY
PORTFOLIO
By: /s/ Wayne A. Stork
-------------------------------
Attest: /s/ David P. O'Connor
---------------------------
-4-
<PAGE>
EXHIBIT 99.(d)(5)
FORM OF
SUB-ADVISORY AGREEMENT
AGREEMENT, made by and between DELAWARE MANAGEMENT COMPANY, a series of
Delaware Management Business Trust ("Investment Manager"), and LINCOLN
INVESTMENT MANAGEMENT, INC. ("Sub-Adviser").
WITNESSETH:
WHEREAS, DELAWARE POOLED TRUST, INC., a Maryland corporation
("Company"), has been organized and operates as an investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Investment Manager and the Company on behalf of THE REAL
ESTATE INVESTMENT TRUST PORTFOLIO ("Portfolio") have entered into an agreement
("Investment Management Agreement") whereby the Investment Manager will provide
investment advisory services to the Company on behalf of the Portfolio; and
WHEREAS, the Investment Management Agreement permits the Investment
Manager to hire one or more sub-advisers to assist the Investment Manager in
providing investment advisory services to the Company on behalf of the
Portfolio; and
WHEREAS, the Investment Manager and the Sub-Adviser are registered
investment advisers under the Investment Advisers Act of 1940, as amended, and
engage in the business of providing investment management services.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Investment Manager hereby employs the Sub-Adviser, subject
always to the Investment Manager's control and supervision, to manage the
investment and reinvestment of that portion of the Portfolio's assets as the
Investment Manager shall designate from time to time and to furnish the
Investment Manager with investment recommendations, asset allocation advice,
research, economic analysis and other investment services with respect to
securities in which the Portfolio may invest, subject to the direction of the
Board and officers of the Company for the period and on the terms hereinafter
set forth. The Sub-Adviser hereby accepts such employment and agrees during such
period to render the services and assume the obligations herein set forth for
the compensation herein provided. The Sub-Adviser shall for all purposes herein
be deemed to be an independent contractor, and shall, unless otherwise expressly
provided and authorized, have no authority to act for or represent the Company
in any way, or in any way be deemed an agent of the Company. The Sub-Adviser
shall regularly make decisions as to what securities to purchase and sell on
behalf of the Portfolio with respect to that portion of the Portfolio's assets
designated by the Investment Manager, shall effect the purchase and sale of such
investments in furtherance of the Portfolio's objectives and policies and shall
furnish the Board of Directors of the Company with such information and reports
regarding its activities as the Investment Manager deems appropriate or as the
Directors of the Company may reasonably request in the performance of its duties
and obligations under this Agreement. The Sub-Adviser shall act in conformity
with the Articles of Incorporation, By-Laws and Prospectus of the Company and
with the instructions and directions of the Investment Manager and of the Board
of Directors of the Company and will conform to and comply with the requirements
of the 1940 Act, the Internal Revenue Code of 1986 and all other applicable
federal and state laws and regulations consistent with the provisions of Section
15(c) of the 1940 Act.
<PAGE>
2. Under the terms of the Investment Management Agreement, the Company
shall conduct its own business and affairs and shall bear the expenses and
salaries necessary and incidental thereto including, but not in limitation of
the foregoing, the costs incurred in: the maintenance of its corporate
existence; the maintenance of its own books, records and procedures; dealing
with its own shareholders; the payment of dividends; transfer of stock,
including issuance and repurchase of shares; preparation of share certificates;
reports and notices to shareholders; calling and holding of shareholders'
meetings; miscellaneous office expenses; brokerage commissions; custodian fees;
legal and accounting fees; taxes; and federal and state registration fees.
Without limiting the foregoing, except as the Investment Manager and the
Sub-Adviser may agree in writing from time to time, the Sub-Adviser shall have
no responsibility for record maintenance and preservation obligations under
Section 31 of the 1940 Act.
Directors, officers and employees of the Sub-Adviser may be
directors, officers and employees of other funds which have employed the
Sub-Adviser as sub-adviser or investment manager. Directors, officers and
employees of the Sub-Adviser who are Directors, officers and/or employees of the
Company, shall not receive any compensation from the Company for acting in such
dual capacity.
In the conduct of the respective business of the parties
hereto and in the performance of this Agreement, the Company, the Investment
Manager and the Sub-Adviser may share facilities common to each, which may
include legal and accounting personnel, with appropriate proration of expenses
between and among them.
3. (a) Subject to the primary objective of obtaining the best
execution, the Sub-Adviser may place orders for the purchase and sale of
portfolio securities and other instruments with such broker/dealers who provide
statistical, factual and financial information and services to the Company, to
the Investment Manager, to the Sub-Adviser or to any other fund for which the
Investment Manager or Sub-Adviser provides investment advisory services and/or
with broker/dealers who sell shares of the Company or who sell shares of any
other fund for which the Investment Manager or Sub-Adviser provides investment
advisory services. Broker/dealers who sell shares of the funds for which the
Investment Manager or Sub-Adviser provides advisory services shall only receive
orders for the purchase or sale of portfolio securities to the extent that the
placing of such orders is in compliance with the rules of the Securities and
Exchange Commission and NASD Regulation, 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 Company, the Sub-Adviser may cause the Company to
pay a member of an exchange, broker or dealer an amount of commission for
effecting a securities transaction in excess of the amount of commission another
member of an exchange, broker or dealer would have charged for effecting that
transaction, in such instances where the Sub-Adviser has 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 Sub-Adviser's
overall responsibilities with respect to the Company on behalf of the Portfolio
and to other funds and other advisory accounts for which the Investment Manager
or the Sub-Adviser exercises investment discretion.
4. As compensation for the services to be rendered to the Company for
the benefit of the Portfolio by the Sub-Adviser under the provisions of this
Agreement, the Investment Manager shall pay to the Sub-Adviser a fee equal to
30% of the fees paid to the Investment Manager under the Investment Management
Agreement.
-2-
<PAGE>
If this Agreement is terminated prior to the end of any
calendar month, the Sub-Advisory fee shall be prorated for the portion of any
month in which this Agreement is in effect according to the proportion which the
number of calendar days during which the Agreement is in effect bears to the
number of calendar days in the month, and shall be payable within 10 days after
the date of termination.
5. The services to be rendered by the Sub-Adviser to the Company for
the benefit of the Portfolio under the provisions of this Agreement are not to
be deemed to be exclusive, and the Sub-Adviser shall be free to render similar
or different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby; provided, however,
except for advisory arrangements implemented prior to the date of this
Agreement, during the term of this Agreement the Sub-Adviser will not, without
the written consent of the Investment Manager, which consent will not be
unreasonably withheld, render such services to an investment company (or
portfolio thereof) which the Investment Manager reasonably determines would be
in competition with and which has investment policies similar to those of the
Company.
6. Subject to the limitation set forth in Paragraph 5, the Sub-Adviser,
its directors, officers, employees, agents and shareholders may engage in other
businesses, may render investment advisory services to other investment
companies, or to any other corporation, association, firm or individual, and may
render underwriting services to the Company or to any other investment company,
corporation, association, firm or individual.
The Investment Manager agrees that it shall not use the
Sub-Adviser's name or otherwise refer to the Sub-Adviser in any materials
distributed to third parties, including the Portfolio's shareholders, without
the prior written consent of the Sub-Adviser.
7. In the absence of willful misfeasance, bad faith, gross negligence,
or a reckless disregard of the performance of its duties as Sub-Adviser to the
Company on behalf of the Portfolio, the Sub-Adviser shall not be subject to
liability to the Company or to the Portfolio, to the Investment Manager or to
any shareholder of the Company 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. (a) 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 the 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 Company who are not parties hereto or
interested persons of any such party ("Independent Directors"), cast in person
at a meeting called for the purpose of voting on such approval.
-3-
<PAGE>
(b) No amendment to this Agreement shall be effective unless
approved by: (i) a majority of the Directors of the Company, including a
majority of Independent Directors; and (ii) a majority of the outstanding voting
securities of the Portfolio. Notwithstanding the foregoing, the Agreement may be
amended without the approval of a majority of the outstanding voting securities
of the Portfolio if the amendment relates solely to a management fee reduction
or other change that is permitted or not prohibited under federal law, rule,
regulation or SEC staff interpretation thereof to be made without shareholder
approval.
(c) This Agreement may be terminated by the Investment Manager
or the Company at any time, without the payment of a penalty, on sixty days'
written notice to the Sub-Adviser, of the Investment Manager's or the Company's
intention to do so, in the case of the Company pursuant to action by the Board
of Directors of the Company or pursuant to the vote of a majority of the
outstanding voting securities of the Portfolio. The Sub-Adviser may terminate
this Agreement at any time, without the payment of a penalty on sixty days'
written notice to the Investment Manager and the Company 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 Investment Manager to pay
to the Sub-Adviser the fee provided in Paragraph 4 hereof, prorated to the date
of termination. This Agreement shall automatically terminate in the event of its
assignment. This Agreement shall automatically terminate upon the termination of
the Investment Management Agreement.
9. This Agreement shall extend to and bind the successors of the
parties hereto.
10. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities"; "interested person"; and "assignment"
shall have the meaning defined in the Investment Company Act of 1940.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized officers and duly attested as of
the 15th day of April, 1999.
LINCOLN INVESTMENT MANAGEMENT, DELAWARE MANAGEMENT COMPANY,
INC. a series of Delaware Management
Business Trust
By:___________________________________ By:_________________________________
Name: Name:
Title: Title:
Attest:________________________________ Attest:_____________________________
Agreed to and accepted as of the day and year first above written:
DELAWARE POOLED TRUST, INC.
on behalf of THE REAL ESTATE
INVESTMENT TRUST PORTFOLIO
By:_________________________________
Attest:_____________________________
-4-
<PAGE>
EXHIBIT 99.(d)(6)
FORM OF
SUB-ADVISORY AGREEMENT
AGREEMENT, made by and between DELAWARE MANAGEMENT COMPANY, a series of
Delaware Management Business Trust ("Investment Manager"), and LINCOLN
INVESTMENT MANAGEMENT, INC. ("Sub-Adviser").
WITNESSETH:
WHEREAS, DELAWARE POOLED TRUST, INC., a Maryland corporation
("Company"), has been organized and operates as an investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Investment Manager and the Company on behalf of THE REAL
ESTATE INVESTMENT TRUST PORTFOLIO II ("Portfolio") have entered into an
agreement ("Investment Management Agreement") whereby the Investment Manager
will provide investment advisory services to the Company on behalf of the
Portfolio; and
WHEREAS, the Investment Management Agreement permits the Investment
Manager to hire one or more sub-advisers to assist the Investment Manager in
providing investment advisory services to the Company on behalf of the
Portfolio; and
WHEREAS, the Investment Manager and the Sub-Adviser are registered
investment advisers under the Investment Advisers Act of 1940, as amended, and
engage in the business of providing investment management services.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Investment Manager hereby employs the Sub-Adviser, subject
always to the Investment Manager's control and supervision, to manage the
investment and reinvestment of that portion of the Portfolio's assets as the
Investment Manager shall designate from time to time and to furnish the
Investment Manager with investment recommendations, asset allocation advice,
research, economic analysis and other investment services with respect to
securities in which the Portfolio may invest, subject to the direction of the
Board and officers of the Company for the period and on the terms hereinafter
set forth. The Sub-Adviser hereby accepts such employment and agrees during such
period to render the services and assume the obligations herein set forth for
the compensation herein provided. The Sub-Adviser shall for all purposes herein
be deemed to be an independent contractor, and shall, unless otherwise expressly
provided and authorized, have no authority to act for or represent the Company
in any way, or in any way be deemed an agent of the Company. The Sub-Adviser
shall regularly make decisions as to what securities to purchase and sell on
behalf of the Portfolio with respect to that portion of the Portfolio's assets
designated by the Investment Manager, shall effect the purchase and sale of such
investments in furtherance of the Portfolio's objectives and policies and shall
furnish the Board of Directors of the Company with such information and reports
regarding its activities as the Investment Manager deems appropriate or as the
Directors of the Company may reasonably request in the performance of its duties
and obligations under this Agreement. The Sub-Adviser shall act in conformity
with the Articles of Incorporation, By-Laws and Prospectus of the Company and
with the instructions and directions of the Investment Manager and of the Board
of Directors of the Company and will conform to and comply with the requirements
of the 1940 Act, the Internal Revenue Code of 1986 and all other applicable
federal and state laws and regulations consistent with the provisions of Section
15(c) of the 1940 Act.
<PAGE>
2. Under the terms of the Investment Management Agreement, the Company
shall conduct its own business and affairs and shall bear the expenses and
salaries necessary and incidental thereto including, but not in limitation of
the foregoing, the costs incurred in: the maintenance of its corporate
existence; the maintenance of its own books, records and procedures; dealing
with its own shareholders; the payment of dividends; transfer of stock,
including issuance and repurchase of shares; preparation of share certificates;
reports and notices to shareholders; calling and holding of shareholders'
meetings; miscellaneous office expenses; brokerage commissions; custodian fees;
legal and accounting fees; taxes; and federal and state registration fees.
Without limiting the foregoing, except as the Investment Manager and the
Sub-Adviser may agree in writing from time to time, the Sub-Adviser shall have
no responsibility for record maintenance and preservation obligations under
Section 31 of the 1940 Act.
Directors, officers and employees of the Sub-Adviser may be
directors, officers and employees of other funds which have employed the
Sub-Adviser as sub-adviser or investment manager. Directors, officers and
employees of the Sub-Adviser who are Directors, officers and/or employees of the
Company, shall not receive any compensation from the Company for acting in such
dual capacity.
In the conduct of the respective business of the parties hereto and
in the performance of this Agreement, the Company, the Investment Manager and
the Sub-Adviser may share facilities common to each, which may include legal and
accounting personnel, with appropriate proration of expenses between and among
them.
3. (a) Subject to the primary objective of obtaining the best
execution, the Sub-Adviser may place orders for the purchase and sale of
portfolio securities and other instruments with such broker/dealers who provide
statistical, factual and financial information and services to the Company, to
the Investment Manager, to the Sub-Adviser or to any other fund for which the
Investment Manager or Sub-Adviser provides investment advisory services and/or
with broker/dealers who sell shares of the Company or who sell shares of any
other fund for which the Investment Manager or Sub-Adviser provides investment
advisory services. Broker/dealers who sell shares of the funds for which the
Investment Manager or Sub-Adviser provides advisory services shall only receive
orders for the purchase or sale of portfolio securities to the extent that the
placing of such orders is in compliance with the rules of the Securities and
Exchange Commission and NASD Regulation, 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 Company, the Sub-Adviser may cause the Company to
pay a member of an exchange, broker or dealer an amount of commission for
effecting a securities transaction in excess of the amount of commission another
member of an exchange, broker or dealer would have charged for effecting that
transaction, in such instances where the Sub-Adviser has 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 Sub-Adviser's
overall responsibilities with respect to the Company on behalf of the Portfolio
and to other funds and other advisory accounts for which the Investment Manager
or the Sub-Adviser exercises investment discretion.
4. As compensation for the services to be rendered to the Company for
the benefit of the Portfolio by the Sub-Adviser under the provisions of this
Agreement, the Investment Manager shall pay to the Sub-Adviser a fee equal to
30% of the fees paid to the Investment Manager under the Investment Management
Agreement.
-2-
<PAGE>
If this Agreement is terminated prior to the end of any calendar
month, the Sub-Advisory fee shall be prorated for the portion of any month in
which this Agreement is in effect according to the proportion which the number
of calendar days during which the Agreement is in effect bears to the number of
calendar days in the month, and shall be payable within 10 days after the date
of termination.
5. The services to be rendered by the Sub-Adviser to the Company for
the benefit of the Portfolio under the provisions of this Agreement are not to
be deemed to be exclusive, and the Sub-Adviser shall be free to render similar
or different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby; provided, however,
except for advisory arrangements implemented prior to the date of this
Agreement, during the term of this Agreement the Sub-Adviser will not, without
the written consent of the Investment Manager, which consent will not be
unreasonably withheld, render such services to an investment company (or
portfolio thereof) which the Investment Manager reasonably determines would be
in competition with and which has investment policies similar to those of the
Company.
6. Subject to the limitation set forth in Paragraph 5, the Sub-Adviser,
its directors, officers, employees, agents and shareholders may engage in other
businesses, may render investment advisory services to other investment
companies, or to any other corporation, association, firm or individual, and may
render underwriting services to the Company or to any other investment company,
corporation, association, firm or individual.
The Investment Manager agrees that it shall not use the
Sub-Adviser's name or otherwise refer to the Sub-Adviser in any materials
distributed to third parties, including the Portfolio's shareholders, without
the prior written consent of the Sub-Adviser.
7. In the absence of willful misfeasance, bad faith, gross negligence,
or a reckless disregard of the performance of its duties as Sub-Adviser to the
Company on behalf of the Portfolio, the Sub-Adviser shall not be subject to
liability to the Company or to the Portfolio, to the Investment Manager or to
any shareholder of the Company 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. (a) 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 the 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 Company who are not parties hereto or
interested persons of any such party ("Independent Directors"), cast in person
at a meeting called for the purpose of voting on such approval.
-3-
<PAGE>
(b) No amendment to this Agreement shall be effective unless
approved by: (i) a majority of the Directors of the Company, including a
majority of Independent Directors; and (ii) a majority of the outstanding voting
securities of the Portfolio. Notwithstanding the foregoing, the Agreement may be
amended without the approval of a majority of the outstanding voting securities
of the Portfolio if the amendment relates solely to a management fee reduction
or other change that is permitted or not prohibited under federal law, rule,
regulation or SEC staff interpretation thereof to be made without shareholder
approval.
(c) This Agreement may be terminated by the Investment Manager or
the Company at any time, without the payment of a penalty, on sixty days'
written notice to the Sub-Adviser, of the Investment Manager's or the Company's
intention to do so, in the case of the Company pursuant to action by the Board
of Directors of the Company or pursuant to the vote of a majority of the
outstanding voting securities of the Portfolio. The Sub-Adviser may terminate
this Agreement at any time, without the payment of a penalty on sixty days'
written notice to the Investment Manager and the Company 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 Investment Manager to pay
to the Sub-Adviser the fee provided in Paragraph 4 hereof, prorated to the date
of termination. This Agreement shall automatically terminate in the event of its
assignment. This Agreement shall automatically terminate upon the termination of
the Investment Management Agreement.
9. This Agreement shall extend to and bind the successors of the
parties hereto.
10. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities"; "interested person"; and "assignment"
shall have the meaning defined in the Investment Company Act of 1940.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their duly authorized officers and duly attested as of the 15th day
of April, 1999.
LINCOLN INVESTMENT MANAGEMENT, DELAWARE MANAGEMENT COMPANY,
INC. a series of Delaware Management
Business Trust
By:___________________________________ By:_______________________________
Name: Name:
Title: Title:
Attest:________________________________ Attest:___________________________
Agreed to and accepted as of the day and year first above written:
DELAWARE POOLED TRUST, INC.
on behalf of THE REAL ESTATE
INVESTMENT TRUST PORTFOLIO II
By:_______________________________
Attest:___________________________
-4-
<PAGE>
EXHIBIT 99. (d)(9)
AMENDMENT NO. 1 TO
EXHIBIT A
OF THE INVESTMENT MANAGEMENT AGREEMENT
THIS EXHIBIT to the Investment Management Agreement dated April 15,
1999 (the "Agreement") between DELAWARE POOLED TRUST, INC. and DELAWARE
INTERNATIONAL ADVISERS LTD. amended as of the 30th day of June, 1999, to add The
International Small-Cap Portfolio, lists the Portfolios for which the Investment
Manager provides investment management services pursuant to this Agreement,
along with the management fee rate schedule for each Portfolio and the date on
which the Agreement became effective for each Portfolio.
<TABLE>
<CAPTION>
- ----------------------------------------------- ------------------------------- ----------------------------------
Management Fee Schedule
(as a percentage of
average daily net assets)
Portfolio Name Effective Date Annual Rate
- ----------------------------------------------- ------------------------------- ----------------------------------
<S> <C> <C> <C>
The Emerging Markets Portfolio April 15, 1999 1.00%
- ----------------------------------------------- ------------------------------- ----------------------------------
The Global Equity Portfolio April 15, 1999 0.75%
- ----------------------------------------------- ------------------------------- ----------------------------------
The Global Fixed Income Portfolio April 15, 1999 0.50%
- ----------------------------------------------- ------------------------------- ----------------------------------
The International Equity Portfolio April 15, 1999 0.75%
- ----------------------------------------------- ------------------------------- ----------------------------------
The International Fixed Income Portfolio April 15, 1999 0.50%
- ----------------------------------------------- ------------------------------- ----------------------------------
The International Small-Cap Portfolio June 30, 1999 1.00%
- ----------------------------------------------- ------------------------------- ----------------------------------
The Labor Select International Equity April 15, 1999 0.75%
Portfolio
- ----------------------------------------------- ------------------------------- ----------------------------------
DELAWARE INTERNATIONAL DELAWARE POOLED ADVISERS LTD.
ADVISERS LTD. TRUST, INC.
By: /s/David G. Tilles By: /s/Wayne A. Stork
Name: David G. Tilles Name: Wayne A. Stork
Title: Managing Director & CIO Title: Chairman
Attest: /s/ John Emberson Attest: /s/ David P. O'Connor
Name: John Emberson Name: David P. O'Connor
Title: Company Secretary Title: Assistant Secretary
</TABLE>
1
<PAGE>
EXHIBIT (g)(9)
As of June 29, 1999
VIA UPS OVERNIGHT
- ------------------------------
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, New York 11245
Attention: Global Custody Division
Re: Global Custody Agreement, Effective May 1, 1996, as amended November 20,
1997 between The Chase Manhattan Bank and those registered investment
companies (and on behalf of certain series thereof), listed on Schedule A
and Appendix A, respectively, attached thereto ("Agreement")
---------------------------------------------------------------------------
Ladies and Gentlemen:
Pursuant to the provisions of Section 1 of the Agreement, the undersigned, on
behalf of Delaware Pooled Trust, Inc. for the benefit of The Balanced Portfolio,
The Equity Income Portfolio, The Select Equity Portfolio and The International
Small-Cap Portfolio (the "Portfolios") hereby appoints The Chase Manhattan Bank
to provide custodial services for the four Portfolios under and in accordance
with the terms of the Agreement and accordingly, requests that the Portfolios be
added to Schedule A and Appendix A, respectively, to the Agreement effective
June 29, 1999. Kindly acknowledge your agreement to provide such services and to
add the Portfolios to Schedule A and Appendix A, respectively, to the Agreement
by signing in the space provided below.
DELAWARE POOLED TRUST, INC.
on behalf of The Balanced Portfolio
The Equity Income Portfolio
The Select Equity Portfolio and
The International Small-Cap Portfolio
By: /s/David K. Downes
David K. Downes
Its: President/Chief Executive Officer/
Chief Operating Officer/
Chief Financial Officer
AGREED:
THE CHASE MANHATTAN BANK
/s/Rosemary M. Stidmon
By: Rosemary M. Stidmon
Its: Vice President
<PAGE>
EXHIBIT (h)(6)
DELAWARE POOLED TRUST, INC.
NINTH AMENDED AND RESTATED SHAREHOLDERS SERVICES AGREEMENT
THIS AGREEMENT, made as of this 29th day of June, 1999 by and between
DELAWARE POOLED TRUST, INC. (the "Fund"), a Maryland Corporation, for THE
MID-CAP GROWTH EQUITY PORTFOLIO, THE LARGE-CAP VALUE EQUITY PORTFOLIO, THE
MID-CAP VALUE EQUITY PORTFOLIO, THE EMERGING MARKETS PORTFOLIO, THE INTERMEDIATE
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 REAL ESTATE
INVESTMENT TRUST PORTFOLIO, THE REAL ESTATE INVESTMENT TRUST PORTFOLIO II, THE
GLOBAL EQUITY PORTFOLIO, THE AGGREGATE FIXED INCOME PORTFOLIO, THE DIVERSIFIED
CORE FIXED INCOME PORTFOLIO, THE SMALL-CAP GROWTH EQUITY PORTFOLIO, THE CORE
EQUITY PORTFOLIO, THE SMALL-CAP VALUE EQUITY PORTFOLIO, THE BALANCED PORTFOLIO,
THE EQUITY INCOME PORTFOLIO, THE SELECT EQUITY PORTFOLIO and THE INTERNATIONAL
SMALL-CAP 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, a series of Delaware
Management Business Trust, 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 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
Large-Cap Value Equity Portfolio (formerly The Defensive Equity Portfolio), The
Mid-Cap Growth Equity Portfolio (formerly The Aggressive Growth Portfolio), The
International Equity Portfolio, The Intermediate Fixed Income Portfolio
(formerly 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 Fund and DCS amended the 1992 Agreement February 28, 1994
to include The International Fixed Income Portfolio ("Second Amended and
Restated Agreement"); and
<PAGE>
WHEREAS, the Fund and DSC amended the Second Amended and Restated
Agreement to include The Mid-Cap Value Equity Portfolio (formerly, The
Small/Mid-Cap Value Equity Portfolio, which was formerly The Defensive Equity
Small/Mid-Cap Portfolio), The Defensive Equity Utility Portfolio, The High-Yield
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 amended the Third Amended and Restated
Agreement on April 14, 1997 to include The Emerging Markets Portfolio ("Fourth
Amended and Restated Agreement");
WHEREAS, the Fund and DSC amended the Fourth Amended and Restated
Agreement on October 14, 1997 to modify the compensation schedule as it applies
to The Real Estate Investment Trust Portfolio, to reflect the restructuring of
that Portfolio to add retail classes of shares, to add The Real Estate
Investment Trust Portfolio II and The Global Equity Portfolio and to reflect the
deletion of The Defensive Equity Utility Portfolio, shares of which were
deregistered by action of the Fund's Board ("Fifth Amended and Restated
Agreement"); and
WHEREAS, the Fund and DSC amended the Fifth Amended and Restated
Agreement on December 24, 1997 to add The Diversified Core Fixed Income
Portfolio and The Aggregate Fixed Income Portfolio ("Sixth Amended and Restated
Agreement");
WHEREAS, the Fund and DSC amended the Sixth Amended and Restated
Agreement on August 31, 1998 to add The Small-Cap Growth Equity Portfolio and
The Core Equity Portfolio (formerly The Growth and Income Portfolio) ("Seventh
Amended and Restated Agreement");
WHEREAS, the Fund and DSC amended the Seventh Amended and Restated
Agreement on March 1, 1999 to add The Small-Cap Value Equity Portfolio and to
reflect the deletion of The Limited-Term Maturity Portfolio, shares of which
were deregistered by action of the Fund's Board ("Eighth Amended and Restated
Agreement").
WHEREAS, the Fund and DSC wish to amend the Eighth Amended and Restated
Agreement on June 29, 1999 to add The Balanced Portfolio, The Equity Income
Portfolio, The Select Equity Portfolio and The International Small-Cap Portfolio
("Ninth Amended and Restated Agreement").
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.
-2-
<PAGE>
II. DOCUMENTATION
2.1 The Fund represents that it has provided or made available to DSC
(or has given DSC an opportunity to examine) copies of, and DSC represents that
it has received from the Fund (or is otherwise familiar with), the following
documents:
(a) The Articles of Incorporation or other documents evidencing the
Fund's form of organization and any current amendments or supplements thereto.
(b) The By-Laws of the Fund;
(c) Any resolution or other action of the Fund or the Board of
Directors of the Fund establishing or affecting the rights, privileges or other
status of each class or series of shares of the Fund, including those relating
to the 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 of the Portfolios in the forms
approved by the Board of Directors of the Fund;
(f) A copy of the Fund's currently effective Prospectuses and
Statement of Additional Information under the Securities Act of 1933, if
effective;
(g) Copies of all account application forms and other documents
relating to stockholder accounts in the 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;
(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 Fund or the payment of dividends.
-3-
<PAGE>
2.4 In the case of any recapitalization or other capital adjustment
requiring a change in the form of stock certificates or the books recording the
same, the Fund shall deliver or make available to DSC:
(a) A certified copy of any document authorizing or effecting such
change;
(b) Written instructions from an authorized officer implementing
such change; and
(c) An opinion of counsel to the Fund as to the validity of such
action, if requested by DSC.
2.5 The Fund warrants the following:
(a) The Fund is, or will be, a properly registered investment
company under the Investment Company Act of 1940 and any and all Portfolio
shares which it issues will be properly registered and lawfully issued under
applicable federal and state laws.
(b) The provisions of this contract do not violate the terms of any
instrument by which the Fund is bound; nor do they violate any law or regulation
of any body having jurisdiction over the Fund or its property.
2.6 DSC warrants the following:
(a) DSC is and will be properly registered as a transfer agent
under the Securities and Exchange Act of 1934 and is duly authorized to serve,
and may lawfully serve as such.
(b) The provisions of this contract do not violate the terms of any
instrument by which DSC is bound; nor do they violate any law or regulation of
any body having jurisdiction over DSC or its property.
III. STOCK CERTIFICATES
3.1 The Fund shall furnish or authorize DSC to obtain, at the Fund's
expense, a sufficient supply of blank stock certificates for the 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.
-4-
<PAGE>
IV. TRANSFER AGENT
4.1 As Transfer Agent for the Fund, 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.
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 stockholders of each Portfolio's dividends, capital
gains distributions or any payments from other sources as directed by the Fund.
In connection therewith, but not in the limitation thereof, DSC shall:
(a) Calculate the total disbursement due and payable and the
disbursement to each stockholder as to shares owned, in accordance with the
Fund's authorization.
(b) Calculate the total disbursements for each stockholder, as
aforesaid, to be disbursed in cash; prepare and mail checks therefor.
(c) Calculate the total disbursement for each stockholder of each
Portfolio, 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.
(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-
<PAGE>
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.
(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 investors
and stockholders of each Portfolio, 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 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.
-6-
<PAGE>
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 in the Delaware
Investments family and to others, and may be used to perform other services for
the Fund, the other funds in the Delaware Investments family and others.
7.7 DSC shall provide its services as transfer agent hereunder in
accordance with Section 17 of the Securities Exchange Act of 1934, and the rules
and regulations thereunder. Further, the parties intend that the processes,
procedures, safeguards and controls employed should be those generally applied
and accepted for the type services provided hereunder by other institutions
providing the same or similar services, and, those which should provide
efficient, safe and economical services so as to promote promptness and accuracy
and to maintain the integrity of the Fund's records.
7.8 The Fund and DSC may, from time to time, set forth in writing
Guidelines For Selective Procedures to be applicable to the services hereunder.
VIII. COMPENSATION
8.1 The Fund and DSC acknowledge that because DSC has common ownership
and close management ties with the Fund's investment advisor and the Fund's
distributor and serves the other funds in the Delaware Investments family (DSC
having been originally established to provide the services hereunder for the
funds in the Delaware Investments family), 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.
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.
-7-
<PAGE>
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 investigation or defending any such claim or any administrative or
other proceeding, and acknowledges that any risk of loss or damage arising from
the conduct of the Fund's affairs in accordance herewith or in accordance with
Guidelines or instructions given hereunder, shall be borne by the Fund.
X. CONTRACTUAL STATUS
10.1 This Agreement shall be executed and become effective on the date
first written above if approved by a vote of the Board of Directors of the Fund,
including an affirmative vote of a majority of the non-interested members of the
Board, cast in person at a meeting called for the purpose of voting on such
approval. It shall continue in effect for an indeterminate period, and is
subject to termination on sixty (60) days' notice by either party unless earlier
terminated or amended by agreement among the parties. Compensation under this
Agreement shall require approval by a majority vote of the Board of Directors of
the Fund, including an affirmative vote of the majority of the non-interested
members of the Board cast in person at a meeting called for the purpose of
voting on such approval.
10.2 This Agreement may not be assigned without the approval of the
Fund.
-8-
<PAGE>
10.3 This Agreement shall be governed by the laws of the Commonwealth
of Pennsylvania.
DELAWARE SERVICE COMPANY, INC.
ATTEST:/s/David P. O'Connor By:/s/David K. Downes
Name: David P. O'Connor Name: David K. Downes
Title: Assistant Secretary Title: Chairman/President/Chief
Executive Officer
DELAWARE POOLED TRUST, INC. for
THE MID-CAP GROWTH EQUITY PORTFOLIO
THE LARGE-CAP VALUE EQUITY PORTFOLIO
THE MID-CAP VALUE EQUITY
PORTFOLIO
THE EMERGING MARKETS PORTFOLIO
THE INTERMEDIATE 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 REAL ESTATE INVESTMENT
TRUST PORTFOLIO
THE REAL ESTATE INVESTMENT
TRUST PORTFOLIO II
THE GLOBAL EQUITY PORTFOLIO
THE DIVERSIFIED CORE FIXED INCOME
PORTFOLIO
THE AGGREGATE FIXED INCOME PORTFOLIO
THE SMALL-CAP GROWTH EQUITY
PORTFOLIO
THE CORE EQUITY PORTFOLIO
THE SMALL-CAP VALUE EQUITY PORTFOLIO
THE BALANCED PORTFOLIO
THE EQUITY INCOME PORTFOLIO
THE SELECT EQUITY PORTFOLIO
THE INTERNATIONAL SMALL-CAP PORTFOLIO
ATTEST:/s/Michael T. Pellegrino By: /s/Wayne A. Stork
Name: Michael T. Pellegrino Name: Wayne A. Stork
Title: Assistant Secretary Title: Chairman
-9-
<PAGE>
SCHEDULE A
----------
SHAREHOLDERS SERVICES AGREEMENT
COMPENSATION SCHEDULE
DELAWARE INVESTMENTS FAMILY OF FUNDS
EFFECTIVE AS OF JUNE 17, 1999
1. Delaware Service Company, Inc. ("DSC") will determine and report to the Fund,
at least annually, the compensation for services to be provided to the Fund
for DSC's forthcoming fiscal year or period.
2. In determining such compensation, DSC will fix and report a fee to be
charged per account and/or transaction, as may be applicable, for services
provided. DSC will bill, and the Fund will pay, such compensation monthly.
3. The charge will consist of two charges for all the Funds in the Delaware
Investments family, except the Delaware Group Premium Fund, Inc. and the
Delaware Pooled Trust, Inc. (other than with respect to The Real Estate
Investment Trust Portfolio effective October 14, 1997), an annual charge and
a per transaction charge for each account on the transfer agent's records and
each account on an automated retirement processing system. These charges are
as follows:
A. ANNUAL CHARGE
Daily Dividend Funds $11.00 Per Annum
Other Funds $5.50 Per Annum
Merrill Lynch - Omnibus Accounts
Regular Accounts $16.00 Per Annum
Accounts with a Contingent
Deferred Sales Charge $19.00 Per Annum
Networked Accounts $3.00 - $6.00 Per Annum
-10-
<PAGE>
SCHEDULE A
----------
SHAREHOLDERS SERVICES AGREEMENT
COMPENSATION SCHEDULE
DELAWARE INVESTMENTS FAMILY OF FUNDS
CONTINUED
B. TRANSACTION CHARGE
Transaction Charge
----------- ------
1. Dividend Payment $ 0.25
2. New Account $ 6.00
3. Purchase:
a. Wire $ 8.00
b. Automated $ 1.50
c. Other $ 2.60
4. Transfer $ 8.00
5. Certificate Issuance $ 4.00
6. Liquidations
a. Wires $12.25
b. Drafts $ 0.75
c. Money Market Regular $ 4.50
d. Other Regular $ 4.50
7. Exchanges
a. Dividend Exchanges $ 3.00
b. Other $10.00
-11-
<PAGE>
4. DSC's compensation for providing services to the Delaware Group Premium Fund,
Inc. (the "Premium Fund") will be $50,000 annually. DSC will bill, and the
Premium Fund will pay, such compensation monthly, allocated among the current
Series of the Premium Fund based on the relative percentage of assets of each
Series at the time of billing and adjusted appropriately to reflect the
length of time a particular Series is in operation during any billing period.
5. DSC's compensation for providing services to the Portfolios (other than The
Real Estate Investment Trust Portfolio effective October 14, 1997) of
Delaware Pooled Trust, Inc. (the "Trust") will be $25,000 annually. DSC will
bill, and the Trust will pay, such compensation monthly allocated among the
current Portfolios (other than The Real Estate Investment Trust Portfolio) of
the Trust based on the relative percentage of assets of each Portfolio at the
time of billing and adjusted appropriately to reflect the length of time a
particular Portfolio is in operation during any billing period.
-12-
<PAGE>
EXHIBIT 99. (i)
Law Office
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000
Direct Dial: (215) 564-8115
November 11, 1999
Delaware Pooled Trust, Inc.
1818 Market Street
Philadelphia, PA 19103
Re: Legal Opinion-Securities Act of 1933
------------------------------------
Ladies and Gentlemen:
We have examined the Articles of Incorporation, as amended and
supplemented (the "Articles"), of Delaware Pooled Trust, Inc. (the "Fund"), a
series corporation organized under Maryland law, the By-Laws of the Fund, and
its proposed form of share certificates (if any), all as amended to date, and
the various pertinent corporate proceedings we deem material. We have also
examined the Notification of Registration and the Registration Statements filed
under the Investment Company Act of 1940, as amended (the "Investment Company
Act") and the Securities Act of 1933, as amended (the "Securities Act"), all as
amended to date, as well as other items we deem material to this opinion.
The Fund is authorized by the Articles to issue two billion
(2,000,000,000) shares of common stock at a par value of $0.01 and currently
issues shares of The Aggregate Fixed Income Portfolio, The Diversified Core
Fixed Income Portfolio, The Emerging Markets Portfolio, The Global Equity
Portfolio, The Global Fixed Income Portfolio, The High-Yield Bond Portfolio, The
Intermediate Fixed Income Portfolio, The International Equity Portfolio, The
International Fixed Income Portfolio, The International Mid-Cap Sub Portfolio,
The Labor Select International Equity Portfolio, The Large Cap Value Equity
Portfolio, The Limited Term Maturity Portfolio, The Mid-Cap Growth Equity
Portfolio, The Core Equity Portfolio, The Real Estate Investment Trust
Portfolio, The Real Estate Investment Trust Portfolio II, The Small-Cap Growth
Equity Portfolio, The Mid-Cap Value Equity Portfolio, The Small-Cap Value Equity
Portfolio, The Balanced Portfolio, The Equity Income Portfolio, The
International Small-Cap Portfolio, The Select Equity Portfolio and The
International Large-Cap Equity Portfolio series of shares. The Articles also
empower the Board to designate any additional series or classes and allocate
shares to such series or classes.
<PAGE>
Delaware Pooled Trust, Inc.
November 11, 1999
Page 2
The Fund has filed with the U.S. Securities and Exchange
Commission, a registration statement under the Securities Act, which
registration statement is deemed to register an indefinite number of shares of
the Fund pursuant to the provisions of Section 24(f) of the Investment Company
Act. You have further advised us that the Fund has filed, and each year
hereafter will timely file, a Notice pursuant to Rule 24f-2 under the Investment
Company Act perfecting the registration of the shares sold by the Fund during
each fiscal year during which such registration of an indefinite number of
shares remains in effect.
You have also informed us that the shares of the Fund have
been, and will continue to be, sold in accordance with the Fund's usual method
of distributing its registered shares, under which prospectuses are made
available for delivery to offerees and purchasers of such shares in accordance
with Section 5(b) of the Securities Act.
Based upon the foregoing information and examination, so long
as the Fund remains a valid and subsisting entity under the laws of its state of
organization, and the registration of an indefinite number of shares of the Fund
remains effective, the authorized shares of the Fund when issued for the
consideration set by the Board of Directors pursuant to the Articles, and
subject to compliance with Rule 24f-2, will be legally outstanding, fully-paid,
and non-assessable shares, and the holders of such shares will have all the
rights provided for with respect to such holding by the Articles and the laws of
the State of Maryland.
We hereby consent to the use of this opinion, in lieu of any
other, as an exhibit to the Registration Statement of the Fund, along with any
amendments thereto, covering the registration of the shares of the Fund under
the Securities Act and the applications, registration statements or notice
filings, and amendments thereto, filed in accordance with the securities laws of
the several states in which shares of the Fund are offered, and we further
consent to reference in the registration statement of the Fund to the fact that
this opinion concerning the legality of the issue has been rendered by us.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
BY: /s/ Bruce G. Leto
--------------------------------
Bruce G. Leto
<PAGE>
EXHIBIT 99.(j)
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 29 to the Registration Statement (Form N-1A) (No.
33-40991) of Delaware Pooled Trust, Inc. of our reports dated December 4, 1998,
included in the 1998 Annual Reports to shareholders.
/s/Ernst & Young LLP
Philadelphia, Pennsylvania
November 12, 1999
