<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File 33-67490
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. / /
------
Post-Effective Amendment No. 5 / X /
------
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 7
------
LINCOLN ADVISOR FUNDS, INC.
----------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
200 East Berry Street, Fort Wayne, Indiana 46802
-----------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (219) 455-2000
--------------
John L. Steinkamp, Esq., 200 East Berry Street, Fort Wayne, Indiana 46802
--------------------------------------------------------------------------
(Name and Address of Agent for Service)
Copies to: Arthur J. Simon, Esq., Gardner, Carton & Douglas,
321 North Clark Street, Suite 3400, Chicago, Illinois 60610
Approximate Date of Public Offering: 60 days after filing
--------------------
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
-------
on (date) pursuant to paragraph (b)
-------
X 60 days after filing pursuant to paragraph (a)(1)
-------
on (date) pursuant to paragraph (a)(1)
-------
75 days after filing pursuant to paragraph (a)(2)
-------
on (date) pursuant to paragraph (a)(2) of Rule 485.
-------
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
hereby declares that an indefinite number or amount of its shares have been
registered under the Securites Act of 1933. Form 24f-2 for the fiscal year
ended October 31, 1995 was filed on November 17, 1995. Amended and
Restated Form 24f-2 was filed on December 22, 1995.
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
--- C O N T E N T S ---
This Post-Effective Amendment No. 5 to Registration File No. 33-67490 includes
the following:
1. Facing Page
2. Contents Page
3. Cross-Reference Sheet
4. Part A - Prospectuses
5. Part B - Statement of Additional Information
6. Part C - Other Information
7. Signatures
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
CROSS-REFERENCE SHEET*
PART A
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
- -------- ----------- ------------
<S> <C> <C> <C>
A Classes/ Institutional
B Classes/ Classes
C Classes
1 Cover Page..................................................... Cover Cover
2 Synopsis....................................................... Synopsis, Synopsis,
Summary of Summary of
Expenses Expenses
3 Condensed Financial Information................................ Financial Financial
Highlights Highlights
4 General Description of Registrant ............................. Investment Investment
Objectives and Objectives and
Strategies, Strategies,
Other Other
Shareholder Shareholder
Matters Matters
5 Management of the Fund......................................... Management of Management of
the Funds the Funds
6 Capital Stock and Other Securities ............................ Delaware Dividends,
Difference, Distributions
Dividends, and Taxes,
Distributions Other
and Taxes, Shareholder
Other Matters
Shareholder
Matters
7 Purchase of Securities Being Offered........................... Cover, Cover,
How to Buy How to Buy
Shares, Shares,
Calculation of Calculation of
Offering Price Net Asset
and Net Asset Value Per
Value Per Share, Management
Share, Management of the Funds
of the Funds
8 Redemption or Repurchase....................................... How to Buy How to Buy
Shares, Shares,
Redemption and Redemption and
Exchange Exchange
9 Legal Proceedings.............................................. None None
</TABLE>
* This filing relates to the Class A Shares, Class B Shares and Class C
Shares of the Delaware Enterprise Fund, the Delaware U.S. Growth Fund, the
Delaware World Growth Fund, the Delaware New Pacific Fund, the Delaware
Federal Bond Fund and the Delaware Corporate Income Fund, which are
described in one prospectus. This filing also relates to the Institutional
Class of each Fund, which is described in another prospectus. The six
Funds (and twenty-four classes) have a common Part B and Part C.
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
CROSS-REFERENCE SHEET
PART B
<TABLE>
<CAPTION>
Location in Statement
Item No. Description of Additional Information
- -------- ----------- -------------------------
<S> <C> <C>
10 Cover Page..................................................... Cover
11 Table of Contents.............................................. Table of Contents
12 General Information and History................................ General Information
13 Investment Objectives and Policies............................. Investment Objective and
Policies, Investment Restrictions
14 Management of the Registrant................................... Management
15 Control Persons and Principal Holders of Securities ........... Management
16 Investment Advisory and Other Services......................... Plans Under Rule 12b-1 for
the Fund Classes (under
Purchasing Shares), Investment
Management Agreement, Management,
General Information,
Financial Statements
17 Brokerage Allocation........................................... Trading Practices and Brokerage
18 Capital Stock and Other Securities............................. Capitalization and
Noncumulative Voting
(under General Information)
19 Purchase, Redemption and Pricing of Securities
Being Offered................................................. Purchasing Shares,
Determining Offering Price
and Net Asset Value,
Redemption and Repurchase,
Exchange Privilege
20 Tax Status..................................................... Dividends, Distributions and Taxes
21 Underwriters .................................................. Purchasing Shares
22 Calculation of Performance Data................................ Performance Information
23 Financial Statements........................................... Financial Statements
</TABLE>
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
CROSS-REFERENCE SHEET
PART C
<TABLE>
<CAPTION>
Location in
Part C
---------------
<S> <C> <C>
24 Financial Statements and Exhibits...................................... Item 24
25 Persons Controlled by or under Common
Control with Registrant................................................ Item 25
26 Number of Holders of Securities........................................ Item 26
27 Indemnification........................................................ Item 27
28 Business and Other Connections of Investment Adviser................... Item 28
29 Principal Underwriters................................................. Item 29
30 Location of Accounts and Records....................................... Item 30
31 Management Services.................................................... Item 31
32 Undertakings........................................................... Item 32
</TABLE>
<PAGE>
------------------------------
DELAWARE GROUP ADVISER
FUNDS, INC.
DELAWARE ENTERPRISE FUND
DELAWARE U.S. GROWTH FUND
DELAWARE WORLD GROWTH FUND
DELAWARE NEW PACIFIC FUND
DELAWARE FEDERAL BOND FUND
DELAWARE CORPORATE INCOME FUND
A CLASSES
The Delaware Group includes funds B CLASSES
with a wide range of investment
objectives. Stock funds, income funds, C CLASSES
tax-free funds, money market funds, ------------------------------
global and international funds and
closed-end equity funds give investors
the ability to create a portfolio that
fits their personal financial goals.
For more information, contact your
financial adviser or call Delaware Group
at 800-523-4640. P R O S P E C T U S
------------------------------
INVESTMENT MANAGER MAY 6, 1996
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
CUSTODIAN
[Chemical Bank
450 West 33rd Street DELAWARE
New York, NY 10001] GROUP
-----------
<PAGE>
TABLE OF CONTENTS
Cover Page
Synopsis
Summary of Expenses
Financial Highlights
Investment Objectives and Strategies
Delaware Enterprise Fund
Delaware U.S. Growth Fund
Delaware World Growth Fund
Delaware New Pacific Fund
Delaware Federal Bond Fund
Delaware Corporate Income Fund
The Delaware Difference
Plans and Services
Retirement Planning
Classes of Shares
How to Buy Shares
Redemption and Exchange
Dividends, Distributions and Taxes
Calculation of Offering Price and Net Asset Value Per Share
Management of the Funds
Implementation of Investment Objectives and Policies
Appendix A - Investment Illustrations
-1-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC. PROSPECTUS
MAY 6, 1996
A CLASS SHARES
B CLASS SHARES
C CLASS SHARES
--------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance: Nationwide 800-523-4640
Information on Existing Accounts: (SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Representatives of Financial Institutions
Nationwide 800-659-2259
Delaware Group Adviser Funds, Inc. ("Adviser Funds, Inc.") (formerly
Lincoln Advisor Funds, Inc.) is an open-end management investment company.
Adviser Funds, Inc. currently issues six separate series of shares (each
referred to as a "Fund" or collectively as the "Funds") each representing a
separate, diversified portfolio of securities. The Funds are the Delaware
Enterprise Fund, Delaware U.S. Growth Fund, Delaware World Growth Fund, Delaware
New Pacific Fund, Delaware Federal Bond Fund and Delaware Corporate Income Fund.
See Restructuring of the Funds under Management of the Funds. Each Fund has a
fundamental investment objective and certain investment policies which are
described in this Prospectus.
The investment objectives of each Fund are as follows:
Equity Funds Delaware Enterprise Fund seeks to provide maximum
appreciation of capital by investing in medium-sized
companies which have a dominant position within their
industry, are undervalued, or have potential for growth
in earnings.
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.
Delaware World Growth 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.
-2-
<PAGE>
Fixed-Income Funds Delaware Federal Bond Fund seeks to maximize current
income consistent with preservation of capital. The Fund
attempts to achieve this objective by investing
primarily in securities issued by the U.S. Government,
its agencies and instrumentalities.
Delaware Corporate Income Fund seeks to provide high
current income consistent with preservation of capital.
The Fund attempts to achieve this objective primarily by
investing in a diversified portfolio of investment-grade
fixed income securities issued by U.S. corporations.
Investment-grade fixed income securities are those rated
at least Baa by Moody's Investors Service, Inc. or BBB by
Standard & Poor's Ratings Group or, if not rated, are of
comparable quality in the opinion of the manager or
sub-adviser.
Each Fund offers three retail classes of shares: "Class A Shares,"
"Class B Shares" and "Class C Shares." Each class is referred to individually as
a "Class" and collectively as the "Classes." These alternatives permit an
investor to choose the method of purchasing shares that is most suitable for his
or her needs.
Class A Shares of each Fund may be purchased at the public offering
price, which is equal to the next determined net asset value per share, plus a
front-end sales charge. Class A Shares are subject to a maximum front-end sales
charge of 4.75% and annual 12b-1 Plan expenses of up to .35% (currently, no more
than .30% pursuant to Board action).
Class B Shares of each Fund may be purchased at a price equal to the
next determined net asset value per share. Class B Shares are subject to a
contingent deferred sales charge ("CDSC") which may be imposed on redemptions
made within six years of purchase and annual 12b-1 Plan expenses of 1%, which
are assessed against the Class B Shares for approximately eight years after
purchase. See Automatic Conversion of Class B Shares under Classes of Shares.
Class C Shares of each Fund may be purchased at a price equal to the
next determined net asset value per share. Class C Shares are subject to a CDSC
which may be imposed on redemptions made within 12 months of purchase and annual
12b-1 Plan expenses of 1%, which are assessed against the Class C Shares for the
life of the investment.
In choosing the most suitable class, an investor should consider the
differences among the Classes, including the effects of sales charges and 12b-1
Plan expenses given the amount of the purchase, and the length of time the
investor expects to hold the shares, among other circumstances. See Summary of
Expenses and Classes of Shares.
-3-
<PAGE>
This Prospectus relates only to the Classes listed above and sets forth
information that you should read and consider before you invest. Please retain
it for future reference. Part B of Adviser Funds, Inc.'s registration statement,
dated May 6, 1996, as it may be amended from time to time, contains additional
information about the Funds and has been filed with the Securities and Exchange
Commission. Part B is incorporated by reference into this Prospectus and is
available, without charge, by writing to Delaware Distributors, L.P. at the
above address or by calling any of the above numbers. The Funds' financial
statements appear in their Annual Report, which will accompany any response to
requests for Part B.
This Prospectus contains useful information that can help the investor
decide whether a Fund's investment objective matches his/her own. Achievement of
a Fund's investment objective cannot, of course, be assured due to the risk of
capital loss from fluctuating prices inherent in any investment in securities.
Investments in the Funds are neither insured or guaranteed by any entity.
Each Fund also offers an Institutional Class, which is available for
purchase only by certain investors. A prospectus for the Funds' Institutional
Classes can be obtained by writing to Delaware Distributors, L.P. at the above
address or by calling the above number.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUNDS ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUNDS ARE NOT BANK
OR CREDIT UNION DEPOSITS.
-4-
<PAGE>
SYNOPSIS
The following synopsis is qualified in its entirety by the more
detailed information appearing in the body of the Prospectus.
Investment Objectives and Policies
Each Fund's investment objective is stated on the cover page of this
Prospectus. Each objective is "fundamental" and may be changed only with the
approval of the holders of a majority of the outstanding voting securities of
the Fund, as defined in the Investment Company Act of 1940 (the "1940 Act").
Certain investment policies also are fundamental and thus require approval of
shareholders if a Fund wishes to change them. See Investment Restrictions in
Part B. Still other investment policies reflect current practices of the Funds
and may be changed by the Funds without the approval of shareholders.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") is the investment
manager for each Fund. See Restructuring of the Funds under Management of the
Funds. The Manager or its affiliate, Delaware International Advisers Ltd., also
manages the other funds in the Delaware Group. Delaware Distributors, L.P. (the
"Distributor") is the national distributor for each Fund and for all of the
other mutual funds in the Delaware Group. Delaware Service Company, Inc. (the
"Transfer Agent") is the shareholder servicing, dividend disbursing and transfer
agent for each Fund and for all of the other mutual funds in the Delaware Group.
See Management of the Funds.
The Manager has selected sub-advisers to provide the day-to-day
investment management of the Funds. The sub-adviser for each Fund is: Lynch &
Mayer, Inc. for Delaware Enterprise Fund and Delaware U.S. Growth Fund, Walter
Scott & Partners Limited for Delaware World Growth Fund, John Govett & Company
Limited for Delaware New Pacific Fund and Lincoln Investment Management, Inc.
for Delaware Corporate Income Fund and Delaware Federal Bond Fund.
Open-End Investment Company
Adviser Funds, Inc., which was organized as a Maryland corporation on
August 10, 1993, is an open-end management investment company. Each Fund's
portfolio of assets is diversified as defined by the 1940 Act. See Other
Shareholder Matters under Management of the Funds.
Sales Charges
Class A
The price of the Class A Shares includes a maximum front-end sales
charge of 4.75% of the offering price, which, based on the net asset value per
share of the Class A Shares as of the end of Adviser Funds, Inc.'s most recent
fiscal year, is equivalent to:
Fund Percentage of Amount Invested
---- -----------------------------
Delaware Enterprise Fund 0.00%
Delaware U.S. Growth Fund 0.00%
Delaware World Growth Fund 0.00%
Delaware New Pacific Fund 0.00%
Delaware Federal Bond Fund 0.00%
Delaware Corporate Income Fund 0.00%
The sales charge is reduced on certain transactions of at least
$100,000 but under $1,000,000. There is no front-end sales charge on purchases
of $1,000,000 or more. Class A Shares are subject to annual 12b-1 Plan expenses.
-5-
<PAGE>
Class B
The price of the Class B Shares is equal to the net asset value per
share. 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. Class B Shares are subject to annual 12b-1 Plan
expenses for approximately eight years after purchase. See Automatic Conversion
of Class B Shares under Classes of Shares.
Class C
The price of the Class C Shares is equal to the net asset value per
share. Class C Shares are subject to a CDSC of 1% if shares are redeemed within
12 months of purchase. Class C Shares are subject to annual 12b-1 Plan expenses
for the life of the investment.
See Classes of Shares and Distribution (12b-1) and Service under
Management of the Funds.
Purchase Amounts
Generally, the minimum initial investment in any Class is $1,000.
Subsequent investments in any Class must generally be at least $100.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. An investor may exceed the maximum purchase
limitations for Class B Shares and Class C Shares by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of $100,000 or more of Class A
Shares, which are subject to lower annual 12b-1 Plan expenses than Class B
Shares and Class C Shares and generally are not subject to a CDSC. The minimum
and maximum purchase amounts for retirement plans may vary. See How to Buy
Shares.
Redemption and Exchange
Class A Shares of each Fund may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange request.
Neither the Funds nor the Distributor assesses a charge for redemptions or
exchanges of Class A Shares, except for certain redemptions of shares purchased
at net asset value, which may be subject to a CDSC if a dealer's commission was
paid in connection with such purchases. See Front-End Sales Charge Alternative -
Class A Shares under Buying Shares.
Class B Shares and Class C Shares may be redeemed or exchanged at the
net asset value calculated after receipt of the redemption or exchange request
subject, in the case of redemptions, to any applicable CDSC. Neither the Funds
nor the Distributor assesses any charges other than the CDSC for redemptions or
exchanges of Class B or Class C Shares. There are certain limitations on an
investor's ability to exchange shares between the various classes of shares that
are offered. See Redemption and Exchange.
-6-
<PAGE>
Risk Factors
Prospective investors should consider a number of factors:
1. Delaware World Growth Fund and Delaware New Pacific Fund may invest
substantially all of their assets in non-United States issuers. Delaware U.S.
Growth Fund, Delaware Enterprise Fund and Delaware Corporate Income Fund may
invest, respectively, 20%, 15% and 10% of their assets in such issuers.
Investing in securities of non-United States companies which are generally
denominated in foreign currencies and the utilization of forward foreign
currency exchange contracts involve certain risk and opportunity considerations
not typically associated with investing in United States companies. Some of
these investments may be in markets of emerging countries which may be subject
to a greater degree of economic, political and social instability than is the
case in the United States and Western European markets. See Foreign Investments
under Risk Factors and Special Considerations and Implementation of Investment
Objectives and Policies.
2. Each Fund has the right to engage in options and futures
transactions for certain hedging, return enhancement and risk management
purposes in accordance with regulations of the Commodity Futures Trading
Commission. While the Funds do not engage in options and futures for speculative
purposes, there are risks which result from the use of these instruments, and an
investor should carefully review the descriptions of these risks in this
Prospectus. Certain options and futures may be considered to be derivative
securities. See Implementation of Investment Objectives and Policies.
3. Each Fund may invest in interest rate, currency and other types of
swaps for hedging purposes which could subject the Fund to increased risks.
Interest rate swaps may be considered to be derivative securities. See
Implementation of Investment Objectives and Policies.
4. The Delaware Corporate Income Fund may invest up to 35% of its
assets and the Delaware U.S. Growth Fund may invest up to 10% of its assets in
non-investment grade fixed income securities ("junk bonds"). Consequently,
greater risks may be involved with an investment in these Funds. See Lower-Rated
Securities under Risk Factors and Special Considerations.
-7-
<PAGE>
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to each Fund's Class A, Class B and Class C Shares follows:
EQUITY FUNDS
<TABLE>
<CAPTION>
Delaware Enterprise Delaware U.S. Growth
Class A Class B Class C Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares Shares Shares Shares
- -------------------------------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price).................... 4.75% None None 4.75% None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as
a percentage of offering price) ...... None None None None None None
Maximum Contingent Deferred
Sales Charge (as a percentage
of original purchase price or
redemption proceeds, whichever
is lower)............................. None* 4.00%* 1.00%* None* 4.00%* 1.00%*
Redemption Fees....................... None** None** None** None** None** None**
</TABLE>
<TABLE>
<CAPTION>
Delaware World Growth Delaware New Pacific
Class A Class B Class C Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares Shares Shares Shares
- -------------------------------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price).................... 4.75% None None 4.75% None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as
a percentage of offering price) ...... None None None None None None
Maximum Contingent Deferred
Sales Charge (as a percentage
of original purchase price or
redemption proceeds, whichever
is lower)............................. None* 4.00%* 1.00%* None* 4.00%* 1.00%*
Redemption Fees....................... None** None** None** None** None** None**
</TABLE>
<PAGE>
FIXED-INCOME FUNDS
<TABLE>
<CAPTION>
Delaware Federal Bond Delaware Corporate Income
Class A Class B Class C Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares Shares Shares Shares
- -------------------------------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price).................... 4.75% None None 4.75% None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as
a percentage of offering price) ...... None None None None None None
Maximum Contingent Deferred
Sales Charge (as a percentage
of original purchase price or
redemption proceeds, whichever
is lower)............................. None* 4.00%* 1.00%* None* 4.00%* 1.00%*
Redemption Fees....................... None** None** None** None** None** None**
</TABLE>
- ------------------------
* Class A purchases of $1 million or more may be made at net asset value;
however, if in connection with any such purchase certain dealer
commissions are paid to the financial adviser through whom such purchase
is effected, a CDSC of 1% will be imposed on certain redemptions within
12 months of purchase ("Limited CDSC"). Class B Shares are subject to a
CDSC of: (i) 4% if shares are redeemed within two years of purchase;
(ii) 3% if shares are redeemed during the third or fourth year following
purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; (iv) 1% if shares are redeemed during the sixth year
following purchase; and (v) 0% thereafter. Class C Shares are subject to
a CDSC of 1% if the shares are redeemed within 12 months of purchase.
See Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange;
Deferred Sales Charge Alternative - Class B Shares and Level Sales
Charge Alternative - Class C Shares under Classes of Shares.
** CoreStates Bank, N.A. currently charges $7.50 per redemption for redemptions
payable by wire.
-8-
<PAGE>
Annual Operating Expenses (as percentage of daily net assets)
The purpose of the following table is to assist the investor in
understanding the various costs and expenses that will bear directly or
indirectly in owning shares of each Fund.
EQUITY FUNDS
<TABLE>
<CAPTION>
Annual Operating Expenses Delaware Enterprise Delaware U.S. Growth
(as a percentage of average Class A Class B Class C Class A Class B Class C
daily net assets) Shares Shares Shares Shares Shares Shares
- ----------------- ------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Management Fees
(after voluntary waiver)+............. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
12b-1 Expenses........................ 0.30%*/** 1.00%* 1.00%* 0.30%*/** 1.00%* 1.00%*
Other Operating Expenses
(after giving effect to
voluntary waiver
reimbursements)+................. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
----- ----- ----- ----- ----- -----
Total Operating Expenses
(after giving effect to
voluntary waiver
reimbursements)+............. 1.80% 2.50% 2.50% 1.80% 2.50% 2.50%
===== ===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Annual Operating Expenses Delaware World Growth Delaware New Pacific
(as a percentage of average Class A Class B Class C Class A Class B Class C
daily net assets) Shares Shares Shares Shares Shares Shares
- ----------------- ------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Management Fees
(after voluntary waiver)+............. 0.00% 0.00% 0.00% 0.00%++ 0.00%++ 0.00%++
12b-1 Expenses........................ 0.30%*/** 1.00%* 1.00%* 0.30%*/** 1.00%* 1.00%*
Other Operating Expenses
(after giving effect to
voluntary waiver
reimbursements)+................. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
----- ----- ----- ----- ----- -----
Total Operating Expenses
(after giving effect to
voluntary waiver
reimbursements)+............. 1.80% 2.50% 2.50% 1.80% 2.50% 2.50%
===== ===== ===== ===== ===== =====
</TABLE>
<PAGE>
FIXED-INCOME FUNDS
<TABLE>
<CAPTION>
Annual Operating Expenses Delaware Federal Bond Delaware Corporate Income
(as a percentage of average Class A Class B Class C Class A Class B Class C
daily net assets) Shares Shares Shares Shares Shares Shares
- ----------------- ------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Management Fees
(after voluntary waiver)+............. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
12b-1 Expenses........................ 0.30%*/** 1.00%* 1.00%* 0.30%*/** 1.00%* 1.00%*
Other Operating Expenses
(after giving effect to
voluntary waiver
reimbursements)+................. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
----- ----- ----- ----- ----- -----
Total Operating Expenses
(after giving effect to
voluntary waiver
reimbursements)+............. 1.20% 1.90% 1.85% 1.20% 1.90% 1.90%
===== ===== ===== ===== ===== =====
</TABLE>
- ------------------------
For expense information about the Institutional Classes, see the separate
Prospectus relating to those classes.
+ The Manager elected voluntarily to waive that portion, if any, of the
annual Management Fees payable by a particular Fund and to reimburse a Fund
for its expenses to the extent necessary to ensure that the expenses of
that Fund (exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, but inclusive of 12b-1 Plan expenses) do not
exceed, as a percentage of average net assets, on an annualized basis, the
amounts noted above corresponding to the caption "Total Operating Expenses"
through the six months from the date of this Prospectus. Absent such fee
waivers and expense reimbursements, "Total Operating Expenses" would be as
follows:
Class A Class B Class C
------- ------- -------
Delaware Enterprise Fund.................. 0.00% 0.00% 0.00%
Delaware U.S. Growth Fund................. 0.00% 0.00% 0.00%
Delaware World Growth Fund................ 0.00% 0.00% 0.00%
Delaware New Pacific Fund................. 0.00% 0.00% 0.00%
Delaware Federal Bond Fund................ 0.00% 0.00% 0.00%
Delaware Corporate Income Fund............ 0.00% 0.00% 0.00%
++ Effective May 6, 1996, the investment management fee payable by the
Delaware New Pacific Fund changed from 1.10% of average daily net assets
to 0.80% of average daily net assets. The expense information has been
restated to reflect that change.
* Class A Shares, Class B Shares and Class C Shares of each Fund are subject
to separate 12b-1 Plans. Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges permitted by
rules of the National Association of Securities Dealers, Inc. (the "NASD").
See Distribution (12b-1) and Service under Management of the Funds.
** As of October 31, 1995, 12b-1 Plan expenses for the Class A Shares were
.35%. Beginning May 6, 1996, those expenses were reduced by action of the
Board of Directors to .30%. The expense information has been restated to
reflect that change.
-9-
<PAGE>
The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return, (2) redemption at the end of each time period and (3) for Class
B Shares and Class C Shares, payment of a CDSC at the time of redemption, if
applicable.
<TABLE>
<CAPTION>
Assuming Redemption Assuming No Redemption
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Delaware Enterprise Fund
Class A $000(1) $000 $000 $000 $000 $000 $000 $000
Class B $000 $000 $000 $000(2) $000 $000 $000 $000(2)
Class C $000 $000 $000 $000 $000 $000 $000 $000
Delaware U.S. Growth Fund
Class A $000(1) $000 $000 $000 $000 $000 $000 $000
Class B $000 $000 $000 $000(2) $000 $000 $000 $000(2)
Class C $000 $000 $000 $000 $000 $000 $000 $000
Delaware World Growth Fund
Class A $000(1) $000 $000 $000 $000 $000 $000 $000
Class B $000 $000 $000 $000(2) $000 $000 $000 $000(2)
Class C $000 $000 $000 $000 $000 $000 $000 $000
Delaware New Pacific Fund
Class A $000(1) $000 $000 $000 $000 $000 $000 $000
Class B $000 $000 $000 $000(2) $000 $000 $000 $000(2)
Class C $000 $000 $000 $000 $000 $000 $000 $000
Delaware Federal Bond Fund
Class A $000(1) $000 $000 $000 $000 $000 $000 $000
Class B $000 $000 $000 $000(2) $000 $000 $000 $000(2)
Class C $000 $000 $000 $000 $000 $000 $000 $000
Delaware Corporate Income Fund
Class A $000(1) $000 $000 $000 $000 $000 $000 $000
Class B $000 $000 $000 $000(2) $000 $000 $000 $000(2)
Class C $000 $000 $000 $000 $000 $000 $000 $000
</TABLE>
(1) Generally, no redemption charge is assessed upon redemption of Class A
Shares. Under certain circumstances, however, a Limited CDSC, which has
not been reflected in this calculation, may be imposed on certain
redemptions within 12 months of purchase. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
(2) At the end of approximately eight years after purchase, Class B Shares
will be automatically converted into Class A Shares. The example above
assumes conversion of Class B Shares at the end of the eighth year.
However, the conversion may occur as late as three months after the
eighth anniversary of purchase, during which time the higher 12b-1 Plan
fees payable by Class B Shares will continue to be assessed.
Information for the ninth and tenth years reflects expenses of the
Class A Shares. See Automatic Conversion of Class B Shares under
Classes of Shares for a description of the automatic conversion
feature.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
-10-
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The table below provides financial highlights of income and capital changes for
one share of each Class outstanding for the fiscal year ended October 31, 1995
and the period ended October 31, 1994, and has been audited by Coopers &
Lybrand L.L.P., Adviser Funds, Inc.'s independent accountants, whose report
thereon is included in the Annual Report which accompanies the Statement of
Additional Information. This information is supplemented by the audited
financial statements and accompanying notes appearing in such Annual Report.
- -------------------------------------------------------------------------------
-11-
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
Class A Shares
--------------------------------------------------------
Delaware Delaware
Delaware Delaware U.S. U.S.
Enterprise Enterprise Growth Growth
Fund Fund Fund Fund
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................... $9.20 $10.00 $10.21 $10.00
Income From Investment Operations
- ---------------------------------
Net Investment Income (Loss)................................... (0.08) (0.08) (0.09) (0.04)
Net Realized and Unrealized Gain (Loss) on Investments......... 2.16 (0.71) 2.31 0.26
------ ------ ------ ------
Total From Investment Operations......................... 2.08 (0.79) 2.22 0.22
------ ------ ------ ------
Less Distributions to Shareholders
- ----------------------------------
From Net Investment Income..................................... -- (0.01) -- (0.01)
From Net Realized Gains........................................ -- -- -- --
------ ------ ------ ------
Total Distributions...................................... 0.00 (0.01) 0.00 (0.01)
------ ------ ------ ------
Net Asset Value, End of Period................................. $11.28 $9.20 $12.43 $10.21
====== ====== ====== ======
- --------------------------------------------
Total Return(2) ............................................... 22.72% (7.91%) 21.74% 2.18%
- ------------
- --------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)...................... $14,508 $10,579 $13,574 $10,669
Net Expenses to Average Daily Net Assets....................... 1.85% 1.85%(1) 1.85% 1.85%(1)
Net Investment Income (Loss) to Average Daily Net Assets....... (0.83%) (1.01%)(1) (0.88%) (0.51%)(1)
Portfolio Turnover Rate........................................ 106% 120% 58% 66%
Commencement of Operations..................................... 12/03/93 12/03/93
Without the Waiver of Fees and Reimbursement
of Expenses by the Advisor, the Ratio of
Net Expenses to Average Net Assets would have been:............ 2.42% 3.10%(1) 2.94% 2.94%(1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
Class A Shares
--------------------------------------------------------
Delaware Delaware Delaware Delaware
World World New New
Growth Growth Pacific Pacific
Fund Fund Fund Fund
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................... $11.00 $10.00 $10.44 $10.00
Income From Investment Operations
- ---------------------------------
Net Investment Income (Loss)................................... 0.01 0.02 (0.05) (0.02)
Net Realized and Unrealized Gain (Loss) on Investments......... 0.40 1.01 (1.39) 0.47
------ ------ ------ ------
Total From Investment Operations......................... 0.41 1.03 (1.44) 0.45
------ ------ ------ ------
Less Distributions to Shareholders
- ----------------------------------
From Net Investment Income..................................... (0.01) (0.03) -- (0.01)
From Net Realized Gains........................................ -- -- (0.29) --
------ ------ ------ ------
Total Distributions...................................... (0.01) (0.03) (0.29) (0.01)
------ ------ ------ ------
Net Asset Value, End of Period................................. $11.40 $11.00 $8.71 $10.44
======= ====== ====== ======
- --------------------------------------------
Total Return(2) ............................................... 3.81% 10.25% 13.99% 4.53%
- ------------
- --------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)...................... $13,018 $11,721 $10,353 $11,333
Net Expenses to Average Daily Net Assets....................... 1.85% 1.85%(1) 1.85% 1.85%(1)
Net Investment Income (Loss) to Average Daily Net Assets....... 0.00% 0.25%(1) (0.60%) (0.21%)(1)
Portfolio Turnover Rate........................................ 9% 6% 163% 104%
Commencement of Operations..................................... 12/03/93 12/03/93
Without the Waiver of Fees and Reimbursement
of Expenses by the Advisor, the Ratio of
Net Expenses to Average Net Assets would have been:............ 2.96% 3.56%(1) 3.73% 3.66%(1)
</TABLE>
- --------------------
(1) Annualized.
(2) Total return calculations exclude front-end sales load.
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
Class A Shares
--------------------------------------------------
Delaware Delaware Delaware Delaware
Federal Federal Corporate Corporate
Bond Bond Income Income
Fund Fund Fund Fund
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................... $9.15 $10.00 $8.80 $10.00
Income From Investment Operations
- ---------------------------------
Net Investment Income (Loss)................................... 0.57 0.38 0.61 0.51
Net Realized and Unrealized Gain (Loss) on Investments......... 0.65 (0.86) 0.91 (1.20)
------ ------ ------ ------
Total From Investment Operations......................... 1.22 (0.48) 1.52 (0.69)
------ ------ ------ ------
Less Distributions to Shareholders
- ----------------------------------
From Net Investment Income..................................... (0.57) (0.37) (0.56) (0.51)
From Net Realized Gains........................................ -- -- -- --
------ ------ ------ ------
Total Distributions...................................... (0.57) (0.37) (0.56) (0.51)
------ ------ ------ ------
Net Asset Value, End of Period................................. $9.80 $9.15 $9.76 $8.80
====== ====== ====== ======
- --------------------------------------------
Total Return(2) ............................................... 13.72% (4.93%) 17.71% (7.06%)
- ------------
- --------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)...................... $11,062 $9,658 $11,518 $9,620
Net Expenses to Average Daily Net Assets....................... 1.25% 1.25%(1) 1.25% 1.25%(1)
Net Investment Income (Loss) to Average Daily Net Assets....... 6.07% 4.38%(1) 6.64% 6.04%(1)
Portfolio Turnover Rate........................................ 227% 366% 119% 185%
Commencement of Operations..................................... 12/03/93 12/03/93
Without the Waiver of Fees and Reimbursement
of Expenses by the Advisor, the Ratio of
Net Expenses to Average Net Assets would have been:............ 2.06% 2.58%(1) 1.87% 2.55%(1)
</TABLE>
- --------------------
(1) Annualized.
(2) Total return calculations exclude front-end sales load.
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
Class B Shares
--------------------------------------------------
Delaware Delaware
Delaware Delaware U.S. U.S.
Enterprise Enterprise Growth Growth
Fund Fund Fund Fund
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................... $9.81 $10.00 $10.19 $10.00
Income From Investment Operations
- ---------------------------------
Net Investment Income (Loss)................................... (0.12) (0.04) (0.14) (0.03)
Net Realized and Unrealized Gain (Loss) on Investments......... 2.27 (0.15) 2.28 0.22
------ ------ ------ ------
Total From Investment Operations......................... 2.15 (0.19) 2.14 0.19
------ ------ ------ ------
Less Distributions to Shareholders
- ----------------------------------
From Net Investment Income..................................... -- -- -- --
From Net Realized Gains........................................ -- -- -- --
------ ------ ------ ------
Total Distributions...................................... 0.00 0.00 0.00 0.00
------ ------ ------ ------
Net Asset Value, End of Period................................. $11.96 $9.81 $12.33 $10.19
====== ====== ====== ======
- --------------------------------------------
Total Return ............................................... 21.92% (1.91%) 21.00% 1.90%
- ------------
- --------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)...................... $1,811 $761 $567 $204
Net Expenses to Average Daily Net Assets....................... 2.50% 2.50%(1) 2.50% 2.50%(1)
Net Investment Income (Loss) to Average Daily Net Assets....... (1.50%) (1.53%)(1) (1.57%) (1.26%)(1)
Portfolio Turnover Rate........................................ 106% 120% 58% 66%
Commencement of Operations..................................... 04/14/94 03/29/94
Without the Waiver of Fees and Reimbursement
of Expenses by the Advisor, the Ratio of
Net Expenses to Average Net Assets would have been:............ 3.07% 3.76%(1) 2.83% 3.60%(1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
Class B Shares
--------------------------------------------------
Delaware Delaware Delaware Delaware
World World New New
Growth Growth Pacific Pacific
Fund Fund Fund Fund
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................... $10.40 $10.00 $10.86 $10.00
Income From Investment Operations
- ---------------------------------
Net Investment Income (Loss)................................... (0.02) (0.00) (0.10) (0.03)
Net Realized and Unrealized Gain (Loss) on Investments......... 0.35 0.43 (1.46) 0.89
------ ------ ------ ------
Total From Investment Operations......................... 0.33 0.43 (1.56) 0.86
------ ------ ------ ------
Less Distributions to Shareholders
- ----------------------------------
From Net Investment Income..................................... (0.02) (0.03) -- --
From Net Realized Gains........................................ -- -- (0.29) --
------ ------ ------ ------
Total Distributions...................................... (0.02) (0.03) (0.29) 0.00
------ ------ ------ ------
Net Asset Value, End of Period................................. $10.71 $10.40 $9.01 $10.86
====== ====== ===== ======
- --------------------------------------------
Total Return ............................................... 3.19% 4.28% (14.56%) 8.58%
- ------------
- --------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)...................... $1,183 $523 $573 $431
Net Expenses to Average Daily Net Assets....................... 2.50% 2.50%(1) 2.50% 2.50%(1)
Net Investment Income (Loss) to Average Daily Net Assets....... (0.57%) 0.37%(1) (1.20%) (0.88%)(1)
Portfolio Turnover Rate........................................ 9% 6% 163% 104%
Commencement of Operations..................................... 03/29/94 03/29/94
Without the Waiver of Fees and Reimbursement
of Expenses by the Advisor, the Ratio of
Net Expenses to Average Net Assets would have been:............ 3.61% 4.22%(1) 4.38% 4.32%(1)
</TABLE>
- --------------------
(1) Annualized.
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
Class B Shares
---------------------------------------------------
Delaware Delaware Delaware Delaware
Federal Federal Corporate Corporate
Bond Bond Income Income
Fund Fund Fund Fund
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................... $9.78 $10.00 $9.73 $10.00
Income From Investment Operations
- ---------------------------------
Net Investment Income (Loss)................................... 0.57 0.12 0.66 0.29
Net Realized and Unrealized Gain (Loss) on Investments......... 0.65 (0.23) 0.91 (0.28)
---- ------ ---- ----
Total From Investment Operations......................... 1.22 (0.11) 1.57 0.01
---- ------ ---- ----
Less Distributions to Shareholders
- ----------------------------------
From Net Investment Income..................................... (0.75) (0.11) (0.85) (0.28)
From Net Realized Gains........................................ --- --- --- ---
----- ----- ----- ----
Total Distributions...................................... (0.75) (0.11) (0.85) (0.28)
------ ------ ------ ------
Net Asset Value, End of Period................................. $10.25 $9.78 $10.45 $9.73
====== ===== ====== =====
- --------------------------------------------
Total Return ............................................... 13.09% (1.11%) 17.05% 0.11%
- ------------
- --------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)...................... $299 $239 $362 $222
Net Expenses to Average Daily Net Assets....................... 1.90% 1.90%(1) 1.90% 1.90%(1)
Net Investment Income (Loss) to Average Daily Net Assets....... 5.43% 4.87%(1) 5.97% 5.94%(1)
Portfolio Turnover Rate........................................ 227% 366% 119% 185%
Commencement of Operations..................................... 07/27/94 05/11/94
Without the Waiver of Fees and Reimbursement
of Expenses by the Advisor, the Ratio of
Net Expenses to Average Net Assets would have been:............ 2.71% 3.22%(1) 2.52% 3.21%(1)
</TABLE>
- --------------------
(1) Annualized.
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
Class C Shares
-----------------------------------------------
Delaware Delaware
Delaware Delaware U.S. U.S.
Enterprise Enterprise Growth Growth
Fund Fund Fund Fund
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $10.02 $10.00 $10.62 $10.00
Income From Investment Operations
- ---------------------------------
Net Investment Income (Loss)............................. (0.15) (0.05) (0.10) (0.03)
Net Realized and Unrealized Gain (Loss) on Investments... 2.34 0.07 2.33 0.65
---- ---- ---- ----
Total From Investment Operations................... 2.19 0.02 2.23 0.62
---- ---- ---- ----
Less Distributions to Shareholders
- ----------------------------------
From Net Investment Income............................... --- --- --- ---
From Net Realized Gains.................................. --- --- --- ---
----- ----- ----- -----
Total Distributions................................ 0.00 0.00 0.00 0.00
---- ---- ---- ----
Net Asset Value, End of Period........................... $12.21 $10.02 $12.85 $10.62
====== ====== ====== ======
- --------------------------------------------
Total Return ........................................ 21.86% 0.23% 21.00% 6.17%
- ------------
- --------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)................ $58 $37 $27 $5
Net Expenses to Average Daily Net Assets................. 2.50% 2.50%(1) 2.50% 2.50%(1)
Net Investment Income (Loss) to Average Daily Net Assets. (1.49%) (1.53%)(1) (1.61%) (1.09%)(1)
Portfolio Turnover Rate.................................. 106% 120% 58% 66%
Commencement of Operations............................... 05/10/94 05/23/94
Without the Waiver of Fees and Reimbursement
of Expenses by the Advisor, the Ratio of
Net Expenses to Average Net Assets would have been:...... 3.07% 3.75%(1) 2.82% 3.54%(1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
Class C Shares
-----------------------------------------------
Delaware Delaware Delaware Delaware
World World New New
Growth Growth Pacific Pacific
Fund Fund Fund Fund
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $10.43 $10.00 $10.66 $10.00
Income From Investment Operations
- ---------------------------------
Net Investment Income (Loss)............................. (0.06) (0.01) (0.08) (0.02)
Net Realized and Unrealized Gain (Loss) on Investments... 0.39 0.44 (1.46) 0.68
---- ---- ------ ----
Total From Investment Operations................... 0.33 0.45 (1.54) 0.66
---- ---- ------ ----
Less Distributions to Shareholders
- ----------------------------------
From Net Investment Income............................... (0.03) (0.02) --- ---
From Net Realized Gains.................................. --- --- (0.29) ---
----- ----- ------ ----
Total Distributions................................ (0.03) (0.02) (0.29) 0.00
------ ------ ------ ----
Net Asset Value, End of Period........................... $10.73 $10.43 $8.83 $10.66
====== ====== ===== ======
- --------------------------------------------
Total Return ........................................ 3.16% 4.45% 14.57% 6.55%
- ------------
- --------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)................ $43 $38 $17 $12
Net Expenses to Average Daily Net Assets................. 2.50% 2.50%(1) 2.50% 2.50%(1)
Net Investment Income (Loss) to Average Daily Net Assets. (0.62%) (0.16%)(1) (1.02%) (0.83%)(1)
Portfolio Turnover Rate.................................. 9% 6% 163% 104%
Commencement of Operations............................... 05/10/94 07/07/94
Without the Waiver of Fees and Reimbursement
of Expenses by the Advisor, the Ratio of
Net Expenses to Average Net Assets would have been:...... 3.61% 4.23%(1) 4.38% 4.31%(1)
</TABLE>
- --------------------
(1) Annualized.
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
Class C Shares
--------------------------------------------------
Delaware Delaware Delaware Delaware
Federal Federal Corporate Corporate
Bond Bond Income Income
Fund Fund Fund Fund
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................... $9.79 $10.00 $9.80 $10.00
Income From Investment Operations
- ---------------------------------
Net Investment Income (Loss)................................... 0.63 0.15 0.18 0.08
Net Realized and Unrealized Gain (Loss) on Investments......... 0.47 (0.22) 1.33 (0.19)
---- ------ ---- -----
Total From Investment Operations......................... 1.10 (0.07) 1.51 (0.11)
---- ------ ---- -----
Less Distributions to Shareholders
- ----------------------------------
From Net Investment Income..................................... (0.51) (0.14) (0.87) (0.09)
From Net Realized Gains........................................ --- --- --- ---
----- ----- ----- -----
Total Distributions...................................... (0.51) (0.14) (0.87) (0.09)
------ ------ ------ -----
Net Asset Value, End of Period................................. $10.38 $9.79 $10.44 $9.80
====== ===== ====== =====
- --------------------------------------------
Total Return ............................................... 11.59% (0.72%) 16.23% (1.00%)
- ------------
- --------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)...................... $15 $49 $5 $9
Net Expenses to Average Daily Net Assets....................... 1.85% 1.90%(1) 1.90% 1.90%(1)
Net Investment Income (Loss) to Average Daily Net Assets....... 4.73% 4.71%(1) 5.75% 5.91%(1)
Portfolio Turnover Rate........................................ 227% 366% 119% 185%
Commencement of Operations..................................... 07/07/94 09/14/94
Without the Waiver of Fees and Reimbursement
of Expenses by the Advisor, the Ratio of
Net Expenses to Average Net Assets would have been:............ 2.70% 3.22%(1) 2.52% 3.17%(1)
</TABLE>
- --------------------
(1) Annualized.
<PAGE>
INVESTMENT OBJECTIVES AND
STRATEGIES
The Equity Funds
Delaware Enterprise Fund. This Fund's fundamental investment objective
is to seek to provide maximum appreciation of capital by investing in
medium-sized companies which have a dominant position within their industry, are
undervalued, or have potential for growth in earnings. Currently, medium-sized
companies are considered to have market capitalizations between $250 million and
$5 billion. The Fund is unlikely to participate in slow growth industries such
as utilities and is likely to invest frequently in high growth rate companies in
the retail, health care, computer, communication and entertainment industries.
Under normal circumstances, at least 65% of the value of the Fund's assets will
be invested in equity securities.
In selecting investments, the Fund's Manager or sub-adviser seeks small
or medium capitalization companies that it believes have earnings that may be
expected to grow faster than the U.S. economy in general. These companies will
typically possess one or more characteristics, including high quality
management, a leading or dominant position in a product and a relatively high
rate of return on invested capital. Income derived from securities of such
companies is only an incidental consideration of the Fund.
The Fund will primarily invest in common stocks although it may invest
up to 35% of the value of its assets in convertible bonds, convertible preferred
stock, warrants to purchase common stock, futures and options.
The Fund may invest up to 15% of its assets in securities of foreign
issuers.
Delaware U.S. Growth Fund. This Fund's fundamental investment objective
is to seek 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.
The Manager or sub-adviser will seek investments in companies of all
sizes that the Manager or sub-adviser believes have earnings that may be
expected to grow faster than the U.S. economy in general. Such companies may
offer the possibility of accelerated earnings growth because of management
changes, new products or structural changes in the economy. In addition, those
companies with relatively high rates of return on invested capital may be able
to finance future growth from internal sources. Income derived from securities
in such companies will be only an incidental consideration of the Fund.
The Fund intends to invest primarily in common stocks believed by the
Manager or sub-adviser to have appreciation potential. However, common stock is
not always the class of security that provides the greatest possibility for
appreciation. The Fund may invest up to 35% of its assets in debt securities,
bonds, convertible bonds, preferred stock and convertible preferred stock. The
Fund may also invest up to 10% of its assets in securities rated lower than Baa
by Moody's Investors Service ("Moody's") or BBB by Standard & Poor's Ratings
Group ("S&P") if, in the opinion of the Manager, doing so would further the
Fund's objective. Lower-rated or unrated securities, commonly referred to as
"junk bonds," are more likely to react to developments affecting market and
credit risk than are more highly rated securities, which react primarily to
movements in the general level of interest rates. See Risk Factors and Special
Considerations for a description of the risks inherent in such securities and
see Description of Security Ratings in Part B for a description of Moody's and
S&P ratings.
The Fund may invest up to 20% of its assets in foreign securities.
-12-
<PAGE>
Delaware World Growth Fund. This Fund's fundamental objective is to
seek to maximize total return (capital appreciation and income) by investing
primarily in equity securities of foreign issuers located in countries that the
Fund's Manager or sub-adviser deems to have attractive investment opportunities.
"Total return" refers to income plus realized and unrealized appreciation of the
securities. Under normal circumstances, the Fund will invest at least 65% of the
value of its total assets in securities of issuers located in at least three
countries other than the United States. However, more than 25% of the Fund's
total assets may be invested in the securities of issuers located in the same
country.
The Fund will emphasize established companies, although it may invest
in companies of varying sizes as measured by assets, sales and capitalization.
The Fund may invest in securities of issuers located in a variety of different
foreign regions and countries which includes, but is not limited to, the
following: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Greece, Hong Kong, Ireland, Italy, Japan, Luxembourg, Malaysia, Mexico,
The Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, Thailand and The United Kingdom. The relative strength or weakness
of a particular country's currency or economy may dictate whether securities of
issuers located in such country will be purchased or sold. Criteria for
determining the appropriate distribution of investments among various countries
and regions include prospects for relative economic growth among foreign
countries, expected levels of inflation, government policies influencing
business conditions, the outlook for currency relationships, and the range of
investment opportunities available to international investors.
The Fund invests in common stock and may invest in other securities
with equity characteristics, consisting of trust or limited partnership
interests, preferred stock, rights and warrants. The Fund may also invest in
convertible securities, consisting of debt securities or preferred stock that
may be converted into common stock or that carry the right to purchase common
stock. The Fund may invest in securities listed on foreign or domestic
securities exchanges and securities traded in foreign and domestic
over-the-counter markets and may invest in restricted or unlisted securities. In
addition, the Fund's investments may include American Depository Receipts
(ADRs), American Depository Shares (ADSs) and securities of foreign investment
funds or trusts to the extent permitted under the Fund's investment
restrictions. See Risk Factors and Special Considerations -- Foreign
Investments, below. For a complete list of the Fund's investment restrictions,
see Investment Restrictions in Part B.
The Fund may invest up to 20% of its assets in securities of companies
located in, or governments of, developing countries. For temporary defensive
purposes, the Fund may invest a major portion of its assets in securities of
U.S. issuers. In addition, the Fund may be invested in short-term debt
instruments to meet anticipated day-to-day operating expenses and liquidity
requirements.
Delaware New Pacific Fund. This Fund's fundamental investment objective
is to seek to maximize long-term capital appreciation by investing primarily in
equity securities of companies domiciled or having their principal business
activities in countries located in the Pacific Basin.
The Fund will invest in companies of varying size, measured by assets,
sales and capitalization. The Fund will invest in companies in one or more of
the following Pacific Basin countries:
Australia Pakistan
China Philippines
Hong Kong Singapore
India South Korea
Indonesia Sri Lanka
Japan Taiwan
Malaysia Thailand
New Zealand
-13-
<PAGE>
The Fund may invest in companies located in other countries or regions
in the Pacific Basin as those economies and markets become more accessible. The
Fund will invest in other countries or regions only after the decision to do so
is disclosed in an amendment to this Prospectus. Any amendment to this
Prospectus containing such a material change will be delivered to investors.
While the Fund will generally have investments in companies located in at least
three different countries or regions, the Fund may from time to time have
investments only in one or a few countries or regions.
The Fund invests in common stock and may invest in other securities
with equity characteristics, consisting of trust or limited partnership
interests, preferred stock, rights and warrants. The Fund may also invest in
convertible securities, consisting of debt securities or preferred stock that
may be converted into common stock or that carry the right to purchase common
stock. The Fund may invest in securities listed on foreign or domestic
securities exchanges and securities traded in foreign and domestic
over-the-counter markets and may invest in restricted or unlisted securities.
Under normal circumstances, at least 65% of the Fund's assets will be
invested in equity securities of foreign issuers located in the Pacific Basin.
The Fund may invest in securities of companies located in, or governments of,
developing countries within the Pacific Basin. The Fund may invest up to 35% of
its assets in securities of U.S. issuers. In addition, the Fund may be invested
in short-term debt instruments to meet anticipated day-to-day operating expenses
and liquidity requirements.
The Fixed-Income Funds
Delaware Federal Bond Fund. This Fund's fundamental investment
objective is to seek to maximize current income consistent with the preservation
of capital by investing primarily in securities issued by the U.S. Government,
its agencies and instrumentalities ("U.S. Government Securities"). Under normal
conditions, at least 65% of the value of the Fund's total assets will be
invested in U.S. Government Securities.
Depending upon prevailing market conditions, the Fund may invest in
U.S. Government Securities of varying maturities, ranging up to 40 years. U.S.
Government Securities include certain mortgage-backed securities, such as
Government National Mortgage Association Certificates. See Mortgage-Backed
Securities under Implementation of Investment Objectives and Policies. As the
Fund invests primarily in U.S. Government Securities, which are lower-risk
securities, it may not achieve as high a level of income under all market
conditions as would be the case if the Fund invested in higher yielding
securities. Up to 35% of the Fund's assets may be invested in corporate bonds of
U.S. companies, mortgage-backed securities and asset-backed securities that are
rated at least Aa by Moody's or AA by S&P or, if not rated, are of comparable
quality in the Manager's or sub-adviser's opinion. See Description of Security
Ratings in Part B.
Delaware Corporate Income Fund. This Fund's fundamental investment
objective is to seek to provide a high level of current income consistent with
preservation of capital by investing primarily in corporate bonds of U.S.
companies that are rated at least Baa by Moody's or BBB by S&P or, if not rated,
are of comparable quality in the opinion of the Manager or sub-adviser. See
Description of Security Ratings in Part B.
Maturities of the corporate bonds held by the Fund are expected to
range from seven to 40 years, unless the Fund's Manager or sub-adviser believes
that investing in corporate bonds with shorter or longer maturities would be
appropriate in light of prevailing market conditions.
-14-
<PAGE>
The Fund may also invest up to 35% of its assets in preferred stock,
corporate bonds and preferred stock convertible into or that carry the right to
acquire common stock, corporate bonds that are not of investment grade quality,
U.S. Government Securities, various mortgage-backed securities and asset-backed
securities, common stock consistent with the Fund's objective, and bonds issued
by foreign governments or foreign corporations, provided that no more than 10%
of the Fund's assets will be invested in bonds issued by foreign governments or
foreign corporations and no more than 10% of the Fund's assets will be
denominated in any one foreign currency. The Fund will not invest more than 35%
of its assets in bonds that are not of investment grade quality and will not
invest in bonds rated below Caa by Moody's or CCC by S&P. Lower-rated or unrated
securities, commonly referred to as "junk bonds," are more likely to react to
developments affecting market and credit risk than are more highly rated
securities, which primarily react to movements in the general level of interest
rates. See Risk Factors and Special Considerations for a description of the
risks inherent in such securities and see Description of Security Ratings in
Part B for a description of Moody's and S&P ratings.
Certain Investment Guidelines
Illiquid Securities. Up to 10% of the assets of each Fund may be
invested in securities that are not readily marketable, including, where
applicable: (1) repurchase agreements with maturities greater than seven
calendar days; (2) time deposits maturing in more than seven calendar days; (3)
certain instruments, futures contracts and options thereon for which there is no
liquid secondary market; (4) certain over-the-counter options, as described in
Part B; (5) certain variable rate demand notes having a demand period of more
than seven days; and (6) certain Rule 144A restricted securities (Rule 144A
securities for which a dealer or institutional market exists will not be
considered illiquid).
Restricted Securities. The Delaware Enterprise, Delaware U.S. Growth,
Delaware World Growth and Delaware New Pacific Funds may invest in restricted
securities. Restricted securities are securities with legal or contractual
restrictions on resale. Restricted securities eligible for resale pursuant to
Rule 144A that have a readily available market will not be considered illiquid
for purposes of the Funds' investment restriction concerning illiquid
securities.
Other Guidelines. In addition, each Fund may invest up to 5% of its
assets in the securities of issuers which have been in continuous operation for
less than three years. Each Fund may also borrow from banks for temporary or
other emergency purposes, but not for investment purposes, in an amount up to
one-third of its total assets, and may pledge its assets to the same extent in
connection with such borrowings. Whenever these borrowings, including reverse
repurchase agreements, exceed 5% of the value of a Fund's total assets, the Fund
will not purchase any securities. Except for the limitations on borrowing, the
investment guidelines set forth in this paragraph may be changed at any time
without shareholder consent by vote of the Board of Directors. A complete list
of investment restrictions that identifies additional restrictions that cannot
be changed without the approval of a majority of an affected Fund's outstanding
shares (as well as other non-fundamental restrictions) is contained in Part B.
Risk Factors and Special Considerations
Fixed-Income Securities. The market value of fixed-income obligations
held by the Funds and, consequently, the net asset value per share of the Funds
investing in fixed-income securities can be expected to vary inversely to
-15-
<PAGE>
changes in prevailing interest rates. When interest rates are falling, the
inflow of net new money to a Fixed-Income Fund will likely be invested in
instruments producing lower yields than the balance of assets in the Fund,
thereby reducing current yields. In periods of rising interest rates, the
opposite can be expected to occur. In addition, obligations purchased by the
Delaware Corporate Income Fund that are rated in the lowest of the top four
ratings (Baa by Moody's or BBB by S&P) are considered to have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade securities. See Lower-Rated
Securities, below.
Foreign Investments. The Delaware World Growth Fund and the Delaware
New Pacific Fund may invest substantially all of their assets in foreign
investments. Certain of the Funds may invest the following percentages of their
assets in foreign securities: the Delaware Enterprise Fund (15%), the Delaware
U.S. Growth Fund (20%) and the Delaware Corporate Income Fund (10%). There are
certain risks involved in investing in foreign securities, including those
resulting from fluctuations in currency exchange rates, devaluation of
currencies, future political or economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions, reduced availability of public information concerning issuers, and
the fact that foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic companies. Although the
Funds' Manager or sub-advisers do not intend to expose the Funds to such risks,
with respect to certain foreign countries, there is the possibility of
expropriation, nationalization, confiscatory taxation and limitations on the use
or removal of funds or other assets of the Funds, including the withholding of
dividends. When the Funds' Manager or sub-adviser believes that currency in
which a Fund security or securities is denominated may suffer a decline against
the United States dollar, it may hedge such risk by entering into a forward
contract to sell an amount of foreign currency approximating the value of some
or all of the Funds' portfolio securities denominated in such foreign currency.
Because foreign securities generally are denominated and pay dividends
or interest in foreign currencies, and the Funds hold various foreign currencies
from time to time, the value of the net assets of the Funds as measured in
United States dollars will be affected favorably or unfavorably by changes in
exchange rates. Generally, currency exchange transactions will be conducted on a
spot (i.e., cash) basis at the spot rate prevailing in the currency exchange
market. The cost of currency exchange transactions will generally be the
difference between the bid and offer spot rate of the currency being purchased
or sold. In order to protect against uncertainty in the level of future foreign
currency exchange rates, the Funds are authorized to enter into certain foreign
transactions. Investors should be aware that exchange rate movements can be
significant and can endure for long periods of time. The Manager and
sub-advisers of the Funds attempt to manage exchange rate risk through active
currency management.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of the New York Stock Exchange. Accordingly, the Funds' foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of United States companies. Moreover, the
-16-
<PAGE>
settlement periods for foreign securities, which are often longer than those for
securities of United States issuers, may affect portfolio liquidity. In buying
and selling securities on foreign exchanges, the Funds normally pay fixed
commissions that are generally higher than the negotiated commissions charged in
the United States. In addition, there is generally less governmental supervision
and regulation of securities exchanges, brokers and issuers in foreign countries
than in the United States.
The Delaware World Growth Fund and the Delaware New Pacific Fund may
purchase foreign equity and debt securities that are listed on a principal
foreign securities exchange or over-the-counter market, represented by American
Depository Receipts (ADRs) or American Depository Shares (ADSs). An ADR or ADS
facility may be either a "sponsored" or "unsponsored" arrangement. In a
sponsored arrangement, the foreign issuer establishes the facility, pays some or
all the depository's fees, and usually agrees to provide shareholder
communications. In an unsponsored arrangement, the foreign issuer is not
involved and the ADR or ADS holders pay the fees of the depository. Depository
banks arrange unsponsored ADR and ADS facilities, either upon their initiative
or at the urging of large shareholders of or dealers in the foreign securities.
Unsponsored ADRs or ADSs may involve more risk to the Fund than
sponsored ADRs or ADSs due to the additional costs involved to the Fund, the
relative illiquidity of the issue in U.S. markets, and the possibility of higher
trading costs in the over the counter market as opposed to exchange-based
trading. The Funds will take these and other risk considerations into account
before making an investment in an unsponsored ADR or ADS.
Investments in foreign securities offer potential benefits not
available from investments in securities of domestic issuers. Such benefits
include the opportunity to invest in securities that appear to offer greater
potential for long-term capital appreciation than investments in domestic
securities, and to reduce fluctuations in Fund value by taking advantage of
foreign stock markets that do not move in a manner parallel to U.S. markets.
Lower-Rated Securities. The following Funds may invest the following
percentages of their total assets in debt securities rated lower than Baa by
Moody's or BBB by S&P: Delaware U.S. Growth Fund (10%) and Delaware Corporate
Income Fund (35%). Prices for securities rated below investment grade may be
affected by legislative and regulatory developments. Securities rated Ba\BB or
lower are commonly referred to as "junk bonds". See Description of Security
Ratings in Part B. As of February 1, 1996, the Delaware Corporate Income Fund
held 9.35% of its total assets in securities rated BBB-, 1.89% of its total
assets in securities rated BB and 1.37% of its total assets in securities rated
BB-. All such ratings applied at the time of investment.
Securities rated below investment grade as well as unrated securities
usually entail greater risk (including the possibility of default or bankruptcy
of the issuers), and generally involve greater price volatility and risk of
principal and income, and may be less liquid, than securities in higher rated
categories. Both price volatility and illiquidity may make it difficult for the
Fund to value certain of these securities at certain times and these securities
may be difficult to sell under certain market conditions. Prices for securities
rated below investment grade may be affected by legislative and regulatory
developments.
Borrowing. Each of the Funds may borrow money for temporary or
emergency purposes in amounts not in excess of one-third of each Fund's total
assets. If a Fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is repaid. If a Fund makes additional
investments while borrowings are outstanding, this may be construed as a form of
-17-
<PAGE>
leverage. None of the Funds, except for the Delaware Enterprise and Delaware
U.S. Growth Funds, will purchase additional securities when money borrowed
exceeds 5% of the Fund's total assets.
Securities Lending. Each Fund may lend securities with a value of up to
one-third of its total assets to broker-dealers, institutions and other persons
as a means of earning additional income. Any such loan shall be continuously
secured by collateral at least equal to 100% of the value of the security being
loaned. If the collateral is cash, it may be invested in short-term securities,
U.S. Government obligations or certificates of deposit. Each Fund will retain
the evidence of ownership of any loaned securities and will continue to be
entitled to the interest or dividends payable on the loaned securities. In
addition, the Fund will receive interest on the loan. The loan will be
terminable by the Fund at any time and will not be made to affiliates of the
Fund, the Manager or the respective sub-adviser. The Fund may pay reasonable
finder's fees to persons unaffiliated with it in connection with the arrangement
of loans.
If the other party to a securities loan becomes bankrupt, a Fund could
experience delays in recovering its securities. To the extent that, in the
meantime, the value of securities loans has increased, the Fund could experience
a loss.
Temporary Defensive Position. For temporary defensive purposes when the
Manager or sub-adviser determines that market conditions warrant, each Fund may
invest up to 100% of its assets in money market instruments. To the extent a
Fund is engaged in a temporary defensive position, the Fund will not be pursuing
its investment objective. Each Fund may also hold a portion of its assets in
cash for liquidity purposes.
Portfolio Turnover. The portfolio turnover rates for the Funds were
as follows:
Period Year
Ended Ended
October October
Fund 31, 1994 31, 1995
- ---- -------- --------
Delaware
Enterprise
Fund 120% 106%
Delaware
U.S. Growth
Fund 66% 58%
Delaware
World Growth
Fund 6% 9%
Delaware
New Pacific
Fund 104% 163%
Delaware
Federal Bond
Fund 366% 227%
Delaware
Corporate Income
Fund 185% 119%
High turnover in any Fund could result in additional brokerage
commissions to be paid by the Fund. In addition, high portfolio turnover may
also mean that a proportionately greater amount of distributions to shareholders
will be taxed as ordinary income rather than long-term capital gains compared to
investment companies with lower portfolio turnover. See Dividends, Distributions
and Taxes.
-18-
<PAGE>
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Group of
funds.
SHAREHOLDER PHONE DIRECTORY
Investor Information Center
800-523-4640
Fund Information
Literature
Price, Yield and
Performance Figures
Shareholder Service Center
800-523-1918
Information on Existing
Regular Investment
Accounts and Retirement
Plan Accounts
Wire Investments
Wire Liquidations
Telephone Liquidations
Telephone Exchanges
Delaphone
800-362-FUND
(800-362-3863)
Shareholder Services
During business hours, you can call the Delaware Group's Shareholder
Service Center. Our representatives can answer any questions about your account,
the Funds, the various service features and other funds in the Delaware Group.
Performance Information
During business hours, you can call the
Investor Information Center for current performance information.
Delaphone Service
Delaphone is an account inquiry service for investors with
Touch-Tone(R) phone service. It enables you to get information on your account
faster than the mailed statements and confirmations. Delaphone also provides
current performance information on the Funds, as well as other funds in the
Delaware Group. Delaphone is available seven days a week, 24 hours a day.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling the Shareholder Service Center.
Duplicate Confirmations
If your financial adviser or investment dealer is noted on your
investment application, we will send a duplicate confirmation to him or her.
This makes it easier for your adviser to help you manage your investments.
Tax Information
Each year, Adviser Funds, Inc. will mail
to you information on the tax status of your
dividends and distributions.
Dividend Payments
Dividends, capital gains and other distributions are automatically
reinvested in your account, unless you elect to receive them in cash. You may
also elect to have the dividends earned in one fund automatically invested in
another Delaware Group fund with a different investment objective, subject to
certain exceptions and limitations.
-19-
<PAGE>
For more information, see Dividend Reinvestment Plan under How to Buy
Shares - Additional Methods of Adding to Your Investment or call the Shareholder
Service Center.
Exchange Privilege
The Exchange Privilege permits shareholders to exchange all or part of
their shares into shares of the other funds in the Delaware Group, subject to
certain exceptions and limitations. For additional information on exchanges, see
Investing by Exchange under How to Buy Shares and Redemption and Exchange.
Wealth Builder Option
You may elect to have amounts in your account automatically invested in
shares of other funds in the Delaware Group. Investments under this feature are
exchanges and are therefore subject to the same conditions and limitations as
other exchanges of Class A, Class B and Class C Shares. See Redemption and
Exchange.
Right of Accumulation
With respect to Class A Shares, the Right of Accumulation feature
allows you to combine the value of your current holdings of Class A Shares,
Class B Shares and Class C Shares of a Fund with the dollar amount of new
purchases of Class A Shares of that Fund to qualify for a reduced front-end
sales charge on such purchases of Class A Shares. Under the Combined Purchases
Privilege, you may also include certain shares that you own in other funds in
the Delaware Group. See Buying Shares.
Letter of Intention
The Letter of Intention feature permits you to obtain a reduced
front-end sales charge on purchases of Class A Shares by aggregating certain of
your purchases of Delaware Group fund shares over a 13-month period. See Classes
of Shares and Part B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits you to reinvest proceeds
from a redemption of Class A Shares within one year of the date of the
redemption, without paying a front-end sales charge. See Part B.
Delaware Group Asset Planner
Delaware Group Asset Planner is an asset allocation service that gives
investors, working with a professional financial adviser, the ability to more
easily design and maintain investments in a diversified selection of Delaware
Group mutual funds. The Asset Planner service offers a choice of four
predesigned allocation strategies (each with a different risk/reward profile)
made up of separate investments in predetermined percentages of Delaware Group
funds. With the guidance of a financial adviser, investors may also tailor an
allocation strategy that meets their personal needs and goals. See How to Buy
Shares under Classes of Shares.
MoneyLine Direct Deposit Service
If you elect to have your dividends and
distributions paid in cash and such dividends and distributions are in an amount
of $25 or more, you may choose the MoneyLine Direct Deposit Service and have
such payments transferred from your Fund account to your predesignated bank
account. See Dividends, Distributions and Taxes. In addition, you may elect to
have your Systematic Withdrawal Plan payments transferred from your Fund account
to your predesignated bank account through this service. See Systematic
Withdrawal Plans under Redemption and Exchange. Your funds will normally be
credited to your bank account two business days after the payment date. There
are no fees for this service. You can initiate the MoneyLine Direct Deposit
-20-
<PAGE>
Service by completing an Authorization Agreement. If your name and address are
not identical to the name and address on your Fund account, you must have your
signature guaranteed. This service is not available for retirement plans.
Financial Information about the Funds
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
each Fund's investments and performance. Adviser Funds, Inc.'s fiscal year ends
on October 31.
-21-
<PAGE>
RETIREMENT PLANNING
An investment in the Funds may be suitable for tax-deferred retirement
plans. Among the retirement plans noted below, Class B Shares are available for
investment only by Individual Retirement Accounts, Simplified Employee Pension
Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred Compensation
Plans.
Retirement plans may be subject to plan establishment fees, annual
maintenance fees and/or other administrative or trustee fees. Fees are based
upon the number of participants in the plan as well as the services selected.
Additional information about fees is included in retirement plan materials. Fees
are quoted upon request. Certain shareholder investment services available to
non-retirement plan shareholders may not be available to retirement plan
shareholders. Certain retirement plans may qualify to purchase the Institutional
Class of each Fund. For additional information on any of the plans and
Delaware's retirement services, call the Shareholder Service Center or see Part
B.
Individual Retirement Account ("IRA")
Individuals, even if they participate in an employer-sponsored
retirement plan, may establish their own retirement program for investments in
each of the Classes. Contributions to an IRA may be tax-deductible and earnings
are tax-deferred. Under the Tax Reform Act of 1986, the tax deductibility of IRA
contributions is restricted, and in some cases eliminated, for individuals who
participate in certain employer-sponsored retirement plans and whose annual
income exceeds certain limits. Existing IRAs and future contributions up to the
IRA maximums, whether deductible or not, still earn on a tax-deferred basis.
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")
Offers employers with 25 or fewer eligible employees the ability to
establish a SEP/IRA that permits salary deferral contributions. An employer may
also elect to make additional contributions to this plan. Class B Shares are not
available for purchase by such plans.
403(b)(7) Deferred Compensation Plan
Permits employees of public school systems or of certain types of
non-profit organizations to enter into a deferred compensation arrangement for
the purchase of shares of each of the Classes.
457 Deferred Compensation Plan
Permits employees of state and local governments and certain other
entities to enter into a deferred compensation arrangement for the purchase of
shares of each of the Classes.
Prototype Profit Sharing or Money Purchase Pension Plan
Offers self-employed individuals, partnerships and corporations a
tax-qualified plan which provides for the investment of contributions in Class A
Shares or Class C Shares. Class B Shares are not available for purchase by such
plans.
Prototype 401(k) Defined Contribution Plan
Permits employers to establish a tax-qualified plan based on salary
-22-
<PAGE>
deferral contributions in Class A Shares or Class C Shares. Class B Shares are
not available for purchase by such plans.
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made available
under a joint venture agreement between the Distributor and another institution
through which mutual funds are marketed and which allow investments in Class A
Shares of designated Delaware Group funds ("eligible Delaware Group fund
shares"), as well as shares of designated classes of non-Delaware Group funds
("eligible non-Delaware Group fund shares"). Class B Shares and Class C Shares
are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Group and eligible non- Delaware Group fund shares
held by the Allied Plan may be combined with the dollar amount of new purchases
by that Allied Plan to obtain a reduced front-end sales charge on additional
purchases of eligible Delaware Group fund shares. See Front-End Sales Charge
Alternative - Class A Shares under Classes of Shares.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Group fund shares for other eligible Delaware Group fund shares or for
eligible non-Delaware Group fund shares at net asset value without payment of a
front-end sales charge. However, exchanges of eligible fund shares, both
Delaware Group and non-Delaware Group, which were not subject to a front-end
sales charge, will be subject to the applicable sales charge if exchanged for
eligible Delaware Group fund shares to which a sales charge applies. No sales
charge will apply if the eligible fund shares were previously acquired through
the exchange of eligible shares on which a sales charge was already paid or
through the reinvestment of dividends. See Investing by Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Group fund shares under an Allied Plan. In determining a financial adviser's
eligibility for a dealer's commission on net asset value purchases of eligible
Delaware Group fund shares in connection with Allied Plans, all participant
holdings in the Allied Plan will be aggregated. See Front-End Sales Charge
Alternative - Class A Shares under Classes of Shares.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described below under Waiver of Limited
Contingent Deferred Sales Charge - Class A Shares, apply to redemptions by
participants in Allied Plans, except in the case of exchanges between eligible
Delaware Group and non- Delaware Group fund shares. When eligible Delaware Group
fund shares are exchanged into eligible non-Delaware Group fund shares, the
Limited CDSC will be imposed at the time of the exchange, unless the joint
venture agreement specifies that the amount of the 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.
-23-
<PAGE>
CLASSES OF SHARES
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net
asset value per share, subject to a sales charge which may be imposed, at the
election of the purchaser, at the time of the purchase for Class A Shares
("front-end sales charge alternative"), or on a contingent deferred basis for
Class B Shares ("deferred sales charge alternative") or Class C Shares ("level
sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares. Class A Shares incur a sales charge when
they are purchased but generally are not subject to any sales charge when they
are redeemed. Class A Shares are subject to annual 12b-1 Plan expenses of up to
a maximum of .35% (currently, no more than .30% pursuant to Board action) of
average daily net assets of such shares. Certain purchases of Class A Shares
qualify for reduced front-end sales charges. See Front-End Sales Charge
Alternative - Class A Shares, below. See also Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value and
Distribution (12b-1) and Service.
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares, which do not incur a front-end sales charge
when they are purchased, but are subject to a contingent deferred sales charge
if they are redeemed within six years of purchase. Class B Shares are subject to
annual 12b-1 Plan expenses of up to a maximum of 1% (.25% of which are service
fees to be paid to the Distributor, dealers or others for providing personal
service and/or maintaining shareholder accounts) of average daily net assets of
such shares for approximately eight years after purchase. Class B Shares permit
all of the investor's dollars to work from the time the investment is made. The
higher 12b-1 Plan expenses paid by Class B Shares will cause such shares to have
a higher expense ratio and to pay lower dividends than Class A Shares. At the
end of approximately eight years after purchase, the Class B Shares will
automatically be converted into Class A Shares. See Automatic Conversion of
Class B Shares, below. See Restructuring of the Funds under Management of the
Funds for information concerning the CDSC schedule and conversion feature
applicable to Class B Shares purchased on or before May 3, 1996.
Class C Shares. An investor who elects the level sales charge
alternative acquires Class C Shares, which do not incur a front-end sales charge
when they are purchased, but are subject to a contingent deferred sales charge
if they are redeemed within 12 months of purchase. Class C Shares are subject to
annual 12b-1 Plan expenses of up to a maximum of 1% (.25% of which are service
fees to be paid to the Distributor, dealers or others for providing personal
service and/or maintaining shareholder accounts) of average daily net assets of
such shares for the life of the investment. The higher 12b-1 Plan expenses paid
by Class C Shares will cause such shares to have a higher expense ratio and to
pay lower dividends than Class A Shares. Unlike Class B Shares, Class C Shares
do not convert to another class.
The alternative purchase arrangements described above permit investors
to choose the method of purchasing shares that is most suitable given the amount
of their purchase, the length of time they expect to hold their shares and other
relevant circumstances. Investors should determine whether, given their
particular circumstances, it is more advantageous to purchase Class A Shares and
incur a front-end sales charge, purchase Class B Shares and have the entire
initial purchase amount invested in a Fund with their investment being subject
to a CDSC if they redeem shares within six years of purchase, or purchase Class
C Shares and have the entire initial purchase amount invested in a Fund with
their investment being subject to a CDSC if they redeem shares within 12 months
of purchase. In addition, investors should consider the level of annual 12b-1
Plan expenses applicable to each Class. In comparing Class B Shares to Class C
Shares, investors should also consider the desirability of an automatic
conversion feature, which is available only for Class B Shares.
-24-
<PAGE>
As an illustration, investors who qualify for significantly reduced
front-end sales charges on purchases of Class A Shares, as described below,
might choose the front-end sales charge alternative because similar sales charge
reductions are not available under either the deferred sales charge alternative
or the level sales charge alternative. Moreover, shares acquired under the
front-end sales charge alternative are subject to annual 12b-1 Plan expenses of
up to .35% (currently, no more than .30% pursuant to Board action), whereas
Class B Shares acquired under the deferred sales charge alternative are subject
to annual 12b-1 Plan expenses of up to 1% for approximately eight years after
purchase (see Automatic Conversion of Class B Shares) and Class C Shares
acquired under the level sales charge alternative are subject to annual 12b-1
Plan expenses of up to 1% for the life of the investment. However, because
front-end sales charges are deducted from the purchase amount at the time of
purchase, investors who buy Class A Shares will not have their full purchase
amount invested in the Fund.
Other investors might determine it to be more advantageous to purchase
Class B Shares and have all their money invested initially, even though they
would be subject to a CDSC for up to six years after purchase and annual 12b-1
Plan expenses of up to 1% until the shares are automatically converted into
Class A Shares. Still other investors might determine it to be more advantageous
to purchase Class C Shares and have all of their funds invested initially,
recognizing that they would be subject to a CDSC for just 12 months after
purchase but that Class C Shares do not offer a conversion feature, so their
shares would be subject to annual 12b-1 Plan expenses of up to 1% for the life
of the investment. 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.
Prospective investors should refer to Appendix A to this Prospectus for
an illustration of the potential effect that each of the purchase options may
have on a long-term shareholder's investment.
For the distribution and related services provided to, and the expenses
borne on behalf of, a Fund, the Distributor and others will be paid, in the case
of the Class A Shares, from the proceeds of the front-end sales charge and 12b-1
Plan fees and, in the case of the Class B Shares and the Class C Shares, from
the proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Financial advisers may receive different compensation for selling
Class A, Class B and Class C Shares. Investors should understand that the
purpose and function of the respective 12b-1 Plans and the CDSCs applicable to
Class B 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
12b-1 Distribution Plans - Class A, Class B and Class C Shares.
Dividends paid on Class A, Class B and Class C Shares, to the extent
any dividends are paid, will be calculated in the same manner, at the same time,
on the same day and will be in the same amount, except that the additional
amount of 12b-1 Plan expenses relating to Class B and Class C Shares will be
borne exclusively by such shares. See Calculation of Offering Price and Net
Asset Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. Adviser Funds, Inc. and the Distributor intend to operate in compliance
with these rules.
-25-
<PAGE>
Front-End Sales Charge Alternative - Class A Shares
Class A Shares of each Fund may be purchased at the offering price,
which reflects a maximum front-end sales charge of 4.75%. See Calculation of
Offering Price and Net Asset Value Per Share.
Purchases of $100,000 or more carry a reduced front-end sales charge as
shown in the following table.
<TABLE>
<CAPTION>
Class A Shares
- --------------------------------------------------------------------------------------------------------------------------
Dealer's
Commission***
Front-End Sales Charge as % of as % of
Amount of Purchase Offering Offering
Price Amount Invested** Price
- --------------------------------------------------------------------------------------------------------------------------
Delaware
Delaware Delaware Delaware Delaware Delaware Corpo-
Enter- U.S. World New Federal rate
prise Growth Growth Pacific Bond Income
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Less than $100,000 4.75% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 4.00%
$100,000 but under $250,000 3.75 0.00 0.00 0.00 0.00 0.00 0.00 3.00
$250,000 but under $500,000 2.50 0.00 0.00 0.00 0.00 0.00 0.00 2.00
$500,000 but under $1,000,000* 2.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00
</TABLE>
* There is no front-end sales charge on purchases of Class A Shares of $1
million or more but, under certain limited circumstances, a 1% Limited CDSC
may apply upon redemption of such shares.
** Based on the net asset value per share of the Class A Shares as of the end
of Adviser Funds, Inc.'s most recent fiscal year.
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- --------------------------------------------------------------------------------
Each Fund, as appropriate, must be notified when a sale takes place which
would qualify for the reduced front-end sales charge on the basis of
previous or current purchases. The reduced front-end sales charge will be
granted upon confirmation of the shareholder's holdings by such Fund. Such
reduced front-end sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which
the Distributor may reallow to dealers up to the full amount of the
front-end sales charge shown above. In addition, certain dealers who enter
into an agreement to provide extra training and information on Delaware
Group products and services and who increase sales of Delaware Group funds
may receive an additional commission of up to .15% of the offering price.
Dealers who receive 90% or more of the sales charge may be deemed to be
underwriters under the Securities Act of 1933.
- --------------------------------------------------------------------------------
-26-
<PAGE>
For initial purchases of Class A Shares of $1,000,000 or more, a dealer's
commission may be paid by the Distributor to financial advisers through whom
such purchases are made, in accordance with the following schedule:
Dealer's
Commission
(as a percent-
age of amount
Amount of Purchase purchased)
- ------------------
Up to $2 million 1.00%
Next $1 million up to $3 million .75
Next $2 million up to $5 million .50
Amount over $5 million .25
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies may be aggregated with those of the Class A Shares
of a Fund. Financial advisers also may be eligible for a dealer's commission in
connection with certain purchases made under a Letter of Intention or pursuant
to an investor's Right of Accumulation. Financial advisers should contact the
Distributor concerning the applicability and calculation of the dealer's
commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for payment
of the dealer's commission, unless a dealer's commission or similar payment has
not been previously paid on the assets being exchanged. The schedule and program
for payment of the dealer's commission are subject to change or termination at
any time by the Distributor at its discretion.
Redemptions of Class A Shares purchased at net asset value may result in
the imposition of a Limited CDSC if the dealer's commission described above was
paid in connection with the purchase of those shares. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
Combined Purchases Privilege
By combining your holdings of Class A
Shares with your holdings of Class B Shares and/or Class C Shares of a Fund and
shares of the other funds in the Delaware Group, except those noted below, you
can reduce the front-end sales charges on any additional purchases of Class A
Shares. Shares of Delaware Group Premium Fund, Inc. beneficially owned in
connection with ownership of variable insurance products may be combined with
other Delaware Group fund holdings. Shares of other funds that do not carry a
front-end sales charge or CDSC may not be included unless they were acquired
through an exchange from a Delaware Group fund that does carry a front-end sales
charge or CDSC.
This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under 21 and any trust, fiduciary or
retirement account for the benefit of such family members.
It also permits you to use these combinations under a Letter of Intention.
A Letter of Intention allows you to make purchases over a 13-month period and
qualify the entire purchase for a reduction in front-end sales charges on Class
A Shares.
Combined purchases of $1,000,000 or more, including certain purchases made
at net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may result in the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative - Class A Shares, above.
Buying Class A Shares at Net Asset Value
Class A Shares may be purchased at net asset value under the Delaware
Group Dividend Reinvestment Plan and, under certain circumstances, the Exchange
-27-
<PAGE>
Privilege and the 12-Month Reinvestment Privilege. (See The Delaware Difference
and Redemption and Exchange for additional information.)
[Purchases of Class A Shares may be made at net asset value by current and
former officers, directors and employees (and members of their families) of the
Manager, any affiliate, any of the funds in the Delaware Group, certain of their
agents and registered representatives and employees of authorized investment
dealers and by employee benefit plans for such entities. Individual purchases,
including those in retirement accounts, must be for accounts in the name of the
individual or a qualifying family member.
Purchases of Class A Shares may be made by clients of registered
representatives of an authorized investment dealer at net asset value within six
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge has been
assessed and the redemption of the investment did not result in the imposition
of a contingent deferred sales charge or other redemption charge. Purchases of
Class A Shares may also be made at net asset value by bank employees who provide
services in connection with agreements between the bank and unaffiliated brokers
or dealers concerning sales of shares of Delaware Group funds. Officers,
directors and key employees of institutional clients of the Manager or any of
its affiliates may purchase Class A Shares at net asset value. Moreover,
purchases may be effected at net asset value for the benefit of the clients of
brokers, dealers and registered investment advisers affiliated with a broker or
dealer, if such broker, dealer or investment adviser has entered into an
agreement with the Distributor providing specifically for the purchase of Class
A Shares in connection with special investment products, such as wrap accounts
or similar fee based programs.
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 a Delaware
Group account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset value.
Each Fund, as appropriate, must be notified in advance that an investment
qualifies for purchase of Class A Shares at net asset value.]
Group Investment Plans
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, Prototype Profit Sharing,
Pension and 401(k) Defined Contribution Plans) may benefit from the reduced
front-end sales charges available on Class A Shares set forth in the table on
page , based on total plan assets. In addition, 403(b)(7) and 457 Retirement
Plan Accounts may benefit from a reduced front-end sales charge on Class A
Shares based on the total amount invested by all participants in the plan by
satisfying the following criteria: (i) the employer for which the plan was
established has 250 or more eligible employees and the plan lists only one
broker of record, or (ii) the plan includes employer contributions and the plan
lists only one broker of record. If a company has more than one plan investing
in the Delaware Group of funds, then the total amount invested in all plans will
be aggregated to determine the applicable sales charge reduction on each
purchase, both initial and subsequent, if, at the time of each such purchase,
the company notifies the Fund in which it is investing that it qualifies for the
reduction. Employees participating in such Group Investment Plans may also
combine the investments held in their plan account to determine the front-end
sales charge applicable to purchases in non-retirement Delaware Group investment
-28-
<PAGE>
accounts if, at the time of each such purchase, they notify the Fund in which
they are investing that they are eligible to combine purchase amounts held in
their plan account.
For additional information on retirement plans, including plan forms,
applications, minimum investments and any applicable account maintenance fees,
contact your investment dealer or the Distributor.
For other retirement plans and special services, see Retirement Planning.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than 4% of the dollar
amount purchased. 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 Funds to sell
Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class B Shares
described in this Prospectus, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for the Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the last business day
of the second full week of March, June, September and December (each, a
"Conversion Date"). If the eighth anniversary after a purchase of Class B Shares
falls on a Conversion Date, an investor's Class B Shares will be converted on
that date. If the eighth anniversary occurs between Conversion Dates, an
investor's Class B Shares will be converted on the next Conversion Date after
such anniversary. Consequently, if a shareholder's eighth anniversary falls on
the day after a Conversion Date, that shareholder will have to hold Class B
Shares for as long as three additional months after the eighth anniversary after
purchase before the shares will automatically convert into Class A Shares. See
Restructuring of the Fund under Management of the Funds concerning the
conversion feature applicable to Class B Shares purchased on or before May 3,
1996.
Class B Shares of a fund acquired through reinvestment of dividends will
convert to the corresponding Class A Shares of that fund (or, in the case of
Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant Class)
pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.
-29-
<PAGE>
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 Fund will invest the full amount of the
investor's purchase payment. The Distributor currently anticipates compensating
dealers or brokers for selling Class C Shares at the time of purchase from its
own assets in an amount equal to no more than 1% of the dollar amount purchased.
As discussed below, however, Class C Shares are subject to annual 12b-1 Plan
expenses and, if redeemed within 12 months of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class C Shares
described in this Prospectus. See Redemption and Exchange.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below, and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestments of dividends or capital gains distributions. For purposes
of this formula, the "net asset value at the time of purchase" will be the net
asset value at purchase of either the Class B Shares or the Class C Shares of a
Fund, as the case may be, even if those shares are later exchanged for shares of
another Delaware Group fund. In the event of an exchange of the shares, the "net
asset value of such shares at the time of redemption" will be the net asset
value of the shares that were acquired in the exchange.
The following table sets forth the rates of the CDSC for the Class B
Shares of the Funds:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
- ------------------------ ------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, the Class B Shares will still be subject to
the annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. See Automatic Conversion of Class B Shares, above. See also
Restructuring of the Fund under Management of the Funds for information
concerning the CDSC schedule applicable to Class B Shares purchased on or before
May 3, 1996. Investors are reminded that the Class A Shares into which the Class
B Shares will convert are subject to ongoing annual 12b-1 Plan expenses of up to
a maximum of .35% (currently, no more than .30% pursuant to Board action) of
average daily net assets of such shares.
-30-
<PAGE>
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.
The CDSC is waived on certain redemptions of Class B Shares and Class C
Shares. See Waiver of Contingent Deferred Sales Charge - Class B and Class C
Shares under Redemption and Exchange.
12b-1 Distribution Plans -- Class A, Class B and Class C Shares
Under the distribution plans adopted by Adviser Funds, Inc. in accordance
with Rule 12b-1 under the 1940 Act, Adviser Funds, Inc. is permitted to pay the
Distributor annual distribution fees of up to .35% (currently, no more than .30%
pursuant to Board action) of the average daily net assets of the Class A Shares
and 1% of the average daily net assets of each of the Class B Shares and the
Class C Shares. These fees, which are payable monthly, compensate the
Distributor for providing distribution and related services and bearing certain
expenses of each Class. The 12b-1 Plans applicable to the Class B Shares and the
Class C Shares are designed to permit an investor to purchase these shares
through dealers or brokers without paying a front-end sales charge while
enabling the Distributor to compensate dealers and brokers for the sale of such
shares. For a more detailed discussion of the 12b-1 Plans relating to the Class
A, Class B, and Class C Shares, see Distribution (12b-1) and Service under
Management of the Funds.
Other Payments to Dealers -- Class A, Class B and Class C Shares
From time to time at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Classes exceed certain limits, as
set by the Distributor, may receive from the Distributor an additional payment
of up to .25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
Subject to pending amendments to the NASD's Rules of Fair Practice, in
connection with the promotion of Delaware Group fund shares, the Distributor
may, from time to time, pay to participate in dealer-sponsored seminars and
conferences, reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising and may, from time to time,
pay or allow additional promotional incentives to dealers, which shall include
non-cash commissions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and Exchange Commission.
It is likely that the NASD's Rules of Fair Practice will be amended such that
the ability of the Distributor to pay non-cash compensation as described above
will be restricted in some fashion. The Distributor intends to comply with the
NASD's Rules of Fair Practice as they may be amended.
-31-
<PAGE>
Classes Offered
The following funds currently offer Class A, Class B and Class C Shares:
Delaware Group Delchester High-Yield Bond Fund, Inc., Delaware Group Government
Fund, Inc., Limited-Term Government Fund of Delaware Group Limited-Term
Government Funds, Inc., Delaware Group Cash Reserve, Inc., Tax-Free USA Fund,
Tax-Free Insured Fund and Tax-Free USA Intermediate Fund of Delaware Group Tax-
Free Fund, Inc., Delaware Group DelCap Fund, Inc., Delaware Fund and Devon Fund
of Delaware Group Delaware Fund, Inc., Delaware Group Value Fund, Inc., Delaware
Group Trend Fund, Inc., Decatur Income Fund and Decatur Total Return Fund of
Delaware Group Decatur Fund, Inc., International Equity Fund, Global Bond Fund
and Global Assets Fund of Delaware Group Global & International Funds, Inc., DMC
Tax-Free Income Trust - Pennsylvania and each Fund. In addition, Delaware Group
Cash Reserve, Inc. offers Consultant Class shares.
U.S. Government Money Series of Delaware Group Limited-Term Government
Funds, Inc. and Delaware Group Tax-Free Money Fund, Inc. offer only Class A and
Consultant Class shares.
Institutional Classes
In addition to offering the Class A, Class B and Class C Shares of each
Fund, Adviser Funds, Inc. also offers an Institutional Class for each Fund
(formerly referred to as Class D Shares), which is described in a separate
prospectus and is available for purchase only by certain investors.
Institutional Class shares generally are distributed directly by the Distributor
and do not have a front-end sales charge, a CDSC or a Limited CDSC, and are not
subject to 12b-1 plan distribution expenses. To obtain the prospectus that
describes the Institutional Classes, contact the Distributor by writing to the
address or by calling the telephone number listed on the back cover of this
Prospectus.
-32-
<PAGE>
HOW TO BUY SHARES
Purchase Amounts
Generally, the minimum initial purchase is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of shares of any Class
generally must be $100 or more. Shares purchased under the Uniform Gifts to
Minors Act or Uniform Transfers to Minors Act are subject to a minimum initial
purchase of $250 and a minimum subsequent purchase of $25. Minimum purchase
requirements do not apply to retirement plans other than IRAs for which there is
a minimum initial purchase of $250, and a minimum subsequent purchase of $25,
regardless of which class is selected.
There is a maximum purchase limitation of $250,000 on each purchase of
Class B Shares. For Class C Shares, each purchase must be in an amount that is
less than $1,000,000. An investor may exceed these maximum purchase limitations
by making cumulative purchases over a period of time. In doing so, an investor
should keep in mind that reduced front-end sales charges are available on
investments of $100,000 or more in Class A Shares, and that Class A Shares (i)
are subject to lower annual 12b-1 Plan expenses than Class B Shares and Class C
Shares and (ii) generally are not subject to a CDSC. For retirement plans, the
maximum purchase limitations apply only to the initial purchase of Class B
Shares or Class C Shares by the plan.
Investing through Your Investment Dealer
You can make a purchase of shares of the Funds through most investment
dealers who, as part of the service they provide, must transmit orders promptly.
They may charge for this service. If you want a dealer but do not have one, we
can refer you to one.
Investing by Mail
1. Initial Purchases--An Investment Application or, in the case of a retirement
account, an appropriate retirement plan application, must be completed, signed
and sent with a check payable to the specific Fund and Class selected at 1818
Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to the specific Fund and Class selected. Your check should be
identified with your name(s) and account number. An investment slip (similar to
a deposit slip) is provided at the bottom of transaction confirmations and
dividend statements that you will receive from Adviser Funds, Inc. Use of this
investment slip can help expedite processing of your check when making
additional purchases. Your investment may be delayed if you send additional
purchases by certified mail.
Investing by Wire
You may purchase shares by requesting your bank to transmit funds by wire
to CoreStates Bank, N.A., ABA #031000011, account number 0114-2596 (include your
name(s) and your account number for the Class in which you are investing).
1. Initial Purchases--Before you invest, telephone the Shareholder Service
Center to get an account number. If you do not call first, processing of your
investment may be delayed. In addition, you must promptly send your Investment
Application or, in the case of a retirement account, an appropriate retirement
plan application, to the specific Fund and Class selected, at 1818 Market
Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You should advise the
Shareholder Service Center by telephone of each wire you send.
-33-
<PAGE>
If you want to wire investments to a retirement plan account, call the
Shareholder Service Center for special wiring instructions.
Delaware Group Asset Planner
To invest in Delaware Group funds using the Delaware Group Asset Planner
asset allocation service, you should complete a Delaware Group Asset Planner
Account Registration Form, which is available only from a financial adviser or
investment dealer. As previously described, the Delaware Group Asset Planner
service offers a choice of four predesigned asset allocation strategies (each
with a different risk/reward profile) in predetermined percentages in Delaware
Group funds or, with the help of a financial adviser, you may design a
customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. 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; however, only shares within the same class may be used within the same
Strategy.
An annual maintenance fee, currently $35 per Strategy, is due at the time
of initial investment and by September 30th of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30th.
See Part B.
Investors will receive a customized quarterly Strategy Report summarizing
all Delaware Group Asset Planner investment performance and account activity
during the prior period. Confirmation statements will be sent following all
transactions other than those involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group,
you may write and authorize an exchange of part or all of your investment into
shares of a Fund. If you wish to open an account by exchange, call the
Shareholder Service Center for more information. All exchanges are subject to
the eligibility and minimum purchase requirements set forth in each fund's
prospectus.
Holders of Class A Shares may exchange all or part of their shares for
certain of the shares of other funds in the Delaware Group, including other
Class A Shares, but may not exchange their Class A Shares for Class B Shares or
Class C Shares of a Fund or of any other fund in the Delaware Group. Holders of
Class B Shares of a Fund are permitted to exchange all or part of their Class B
Shares only into Class B Shares of other Delaware Group funds. Similarly,
holders of Class C Shares of a Fund are permitted to exchange all or part of
their Class C Shares only into Class C Shares of other Delaware Group funds.
Class B Shares of a Fund and Class C Shares of a Fund 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 the Class B Shares of a Fund acquired by exchange will be added to
that of the shares that were exchanged for purposes of determining the time of
the automatic conversion into Class A Shares of that Fund.
-34-
<PAGE>
Permissible exchanges into Class A Shares of a Fund will be made without a
front-end sales charge except for exchanges of shares that were not previously
subject to a front-end sales charge (unless such shares were acquired through
the reinvestment of dividends). Permissible exchanges into Class B Shares or
Class C Shares of a Fund will be made without the imposition of a CDSC by the
fund from which the exchange is being made at the time of the exchange.
See Retirement Planning for information on exchanges by participants in an
Allied Plan.
Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if you wish to
use the following services:
1. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly
investments without writing or mailing checks. You may authorize Adviser Funds,
Inc. to transfer a designated amount monthly from your checking account to your
Fund account. Many shareholders use this as an automatic savings plan.
Shareholders should allow a reasonable amount of time for initial purchases and
changes to these plans to become effective.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
2. Direct Deposit
You may have your employer or bank make regular investments directly to
your account for you (for example: payroll deduction, pay by phone, annuity
payments). Each Fund also accepts preauthorized recurring government and private
payments by Electronic Fund Transfer, which avoids mail time and check clearing
holds on payments such as social security, federal salaries, Railroad Retirement
benefits, etc.
* * *
Should investments by direct deposit or through an Automatic Investing
Plan be reclaimed or returned for some reason, Adviser Funds, Inc. has the right
to liquidate your Fund shares to reimburse the government or transmitting bank.
If there are insufficient funds in your account, you are obligated to reimburse
the Fund.
3. Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in a Fund through
regular liquidations of shares in their accounts in other funds in the Delaware
Group, subject to the same conditions and limitations as other exchanges noted
above.
Shareholders may elect to invest in other mutual funds in the Delaware
Group through our Wealth Builder Option. Under this automatic exchange program,
shareholders can authorize regular monthly amounts (minimum of $100 per fund) to
be liquidated from their Fund account and invested automatically into an account
in one or more funds in the Delaware Group. If, in connection with the Wealth
Builder Option, a shareholder wishes to open a new account in such other fund or
funds to receive the automatic investment, such new account must meet such other
fund's minimum initial purchase requirements. Investments under this option are
exchanges and are therefore subject to the same conditions and limitations as
other exchanges noted above.
Shareholders can terminate their participation at any time by written
notice to their Fund. See Redemption and Exchange.
-35-
<PAGE>
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
4. Dividend Reinvestment Plan
You can elect to have your distributions
(capital gains and/or dividend income) paid to you by check or reinvested in
your account. Or, you may invest your distributions in certain other funds in
the Delaware Group, subject to the exceptions noted below as well as the
eligibility and minimum purchase requirements set forth in each fund's
prospectus.
Reinvestments of distributions into Class A Shares of a Fund or of other
Delaware Group funds are made without a front-end sales charge. Reinvestments of
distributions into Class B Shares of a Fund or of other Delaware Group funds or
into Class C Shares of a Fund or of other Delaware Group funds are also made
without any sales charge and will not be subject to a CDSC if later redeemed.
See Automatic Conversion of Class B Shares under Classes of Shares for
information concerning the automatic conversion of Class B Shares acquired by
reinvesting dividends.
Holders of Class A Shares of a Fund may not reinvest their distributions
into Class B Shares or Class C Shares of any fund in the Delaware Group,
including the Funds. Holders of Class B Shares of a Fund may reinvest their
distributions only into Class B Shares of the funds in the Delaware Group which
offer that class of shares (the "Class B Funds"). Similarly, holders of Class C
Shares of a Fund may reinvest their distributions only into Class C Shares of
the funds in the Delaware Group which offer that class of shares (the"Class C
Funds"). See Classes Offered under Classes of Shares for a list of the funds
offering those classes of shares. For more information about reinvestments, call
the Shareholder Service Center.
Purchase Price and Effective Date
The offering price and net asset value of the Class A, Class B and
Class C Shares are determined as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open.
The effective date of a purchase made through an investment dealer is the
date the order is received by the Fund in which the shares are being purchased.
The effective date of a direct purchase is the day your wire, electronic
transfer or check is received, unless it is received after the time the offering
price or net asset value of shares is determined, as noted above. Purchase
orders received after such time will be effective the next business day.
The Conditions of Your Purchase
Each Fund reserves the right to reject any purchase order. If a
purchase is canceled because your check is returned unpaid, you are responsible
for any loss incurred. Each Fund can redeem shares from your account(s) to
reimburse itself for any loss, and you may be restricted from making future
purchases in any of the funds in the Delaware Group. Each Fund reserves the
right to reject purchase orders paid by third-party checks or checks that are
not drawn on a domestic branch of a United States financial institution. If a
check drawn on a foreign financial institution is accepted, you may be subject
to additional bank charges for clearance and currency conversion.
Each Fund also reserves the right, following shareholder notification, to
charge a service fee on non-retirement accounts that have remained below the
minimum stated account balance for a period of three or more consecutive months.
-36-
<PAGE>
Holders of such accounts may be notified of their insufficient account balance
and advised that they have until the end of the current calendar quarter to
raise their balance to the stated minimum. If the account has not reached the
minimum balance requirement by that time, the Fund in which the account is held
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.
Each Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An 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.
-37-
<PAGE>
REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways. The
exchange service is useful if your investment requirements change and you want
an easy way to invest in other 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 each fund
and all exchanges of shares constitute taxable events. See Taxes. Further, in
order for an exchange to be processed, shares of the fund being acquired must be
registered in the state where the acquiring shareholder resides. You may want to
consult your financial adviser or investment dealer to discuss which funds in
the Delaware Group will best meet your changing objectives and the consequences
of any exchange transaction. You may also call the Delaware Group directly for
fund information.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after the Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
Redemption or exchange requests received in good order after the time the
offering price and net asset value of shares are determined, as noted above,
will be processed on the next business day. See Purchase Price and Effective
Date under How to Buy Shares. A shareholder submitting a redemption request may
indicate that he or she wishes to receive redemption proceeds of a specific
dollar amount. In the case of such a request, and in the case of certain
redemptions from retirement plan accounts, the Fund will redeem the number of
shares necessary to deduct the applicable CDSC in the case of Class B or Class C
Shares, or, 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.
Except as noted below, for a redemption request to be in "good order," you
must provide your account number, account registration, and the total number of
shares or dollar amount of the transaction. For exchange requests, you must also
provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Shareholder Service Center at 800-523-1918. Each Fund
may suspend, terminate, or amend the terms of the exchange privilege upon 60
days' written notice to shareholders.
Each Fund will honor written redemption requests of shareholders who
recently purchased shares by check, but will not mail the proceeds until it is
reasonably satisfied that the purchase check has cleared, which may take up to
15 days from the purchase date. Telephone redemptions for shares recently
purchased by check will not be honored unless the Fund involved is reasonably
satisfied that the purchase check has cleared. You can avoid this potential
delay if you purchase shares by wiring Federal Funds. Each Fund reserves the
right to reject a written or telephone redemption request or delay payment of
redemption proceeds if there has been a recent change to the shareholder's
address of record.
-38-
<PAGE>
There is no front-end sales charge or fee for exchanges made between
shares of funds which both carry a front-end sales charge. Any applicable
front-end sales charge will apply to exchanges from shares of funds not subject
to a front-end sales charge, except for transfers involving assets that were
previously invested in a fund with a front-end sales charge and/or transfers
involving the reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for Class B Shares of other Class B Funds or Class C Shares
of other Class C Funds, as applicable (in each case, "New Shares"), will not be
subject to a CDSC that might otherwise be due upon redemption of the Original
Shares. However, such shareholders will continue to be subject to the CDSC and,
in the case of Class B Shares, the automatic conversion schedule of the Original
Shares as described in this Prospectus and any CDSC assessed upon redemption
will be charged by the Fund from which the Original Shares were exchanged. In an
exchange of Class B Shares from a Fund, such Fund's CDSC schedule may be higher
than the CDSC schedule relating to the New Shares acquired as a result of the
exchange. For purposes of computing the CDSC that may be payable upon a
disposition of the New Shares, the period of time that an investor held the
Original Shares is added to the period of time that an investor held the New
Shares. With respect to Class B Shares, the automatic conversion schedule of the
Original Shares may be longer than that of the New Shares. Consequently, an
investment in the New Shares by exchange may subject an investor to the higher
12b-1 fees applicable to Class B Shares for a longer period of time than if the
investment in the New Shares were made directly. See Restructuring of the Funds
under Management of the Funds for the CDSC schedule and the conversion feature
applicable to Class B Shares purchased on or before May 3, 1996.
Various redemption and exchange methods are outlined below. Except for the
CDSC applicable to certain redemptions of Class B Shares and Class C Shares and
the Limited CDSC applicable to certain redemptions of Class A Shares purchased
at net asset value, there is no fee charged by either Fund or the Distributor
for redeeming or exchanging your shares, but such fees could be charged in the
future. You may have your investment dealer arrange to have your shares redeemed
or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund to which the
authorization relates or its agent.
Written Redemption
You can write to each Fund at 1818 Market Street, Philadelphia, PA 19103
to redeem some or all of your shares. The request must be signed by all owners
of the account or your investment dealer of record. For redemptions of more than
$50,000, or when the proceeds are not sent to the shareholder(s) at the address
of record, the Funds require a signature by all owners of the account and a
signature guarantee for each owner. Each signature guarantee must be supplied by
an eligible guarantor institution. The Funds reserve the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. The Funds may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
Payment is normally mailed the next business day, but no later than seven
days, after receipt of your redemption request. If your Class A Shares are in
certificate form, the certificate must accompany your request and also be in
good order. Certificates are issued for Class A Shares only if a shareholder
submits a specific request. Certificates are not issued for Class B or Class C
Shares.
-39-
<PAGE>
Written Exchange
You may also write to each Fund (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your shares into another mutual
fund in the Delaware Group, subject to the same conditions and limitations as
other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
certificates.
The Telephone Redemption-Check to Your Address of Record service and the
Telephone Exchange service, both of which are described below, are automatically
provided unless you notify the Fund in which you have your account in writing
that you do not wish to have such service available with respect to your
account. Each Fund reserves the right to modify, terminate or suspend these
procedures upon 60 days' written notice to shareholders. It may be difficult to
reach the Funds by telephone during periods when market or economic conditions
lead to an unusually large volume of telephone requests.
Neither the Funds nor the Funds' Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, each Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day, but no later than seven days, after receipt of the 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.
CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted from your
redemption. If you ask for a check, it will normally be mailed the next business
day, but no later than seven days, after receipt of your request to your
predesignated bank account. Except for any CDSC which may be applicable to Class
B and Class C Shares and the Limited CDSC which may be applicable to certain
Class A Shares, there are no fees for this redemption method, but the mail time
-40-
<PAGE>
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.
If expedited payment by check or wire could adversely affect a Fund, such
Fund may take up to seven days to pay.
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 any fund in the Delaware Group under the same registration, subject
to the same conditions and limitations as other exchanges noted above. As with
the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
Systematic Withdrawal Plans
1. Regular Plans
This plan provides shareholders with a consistent monthly (or quarterly)
payment. This is particularly useful to shareholders living on fixed incomes,
since it can provide them with a stable supplemental amount. With accounts of at
least $5,000, you may elect monthly withdrawals of $25 (quarterly $75) or more.
The Funds do not recommend any particular monthly amount, as each shareholder's
situation and needs vary. Payments are normally made by check. In the
alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine Direct Deposit
Service. Except for the Limited CDSC which may be applicable to Class A Shares
and the CDSC which may be applicable to Class B and Class C Shares as noted
below, there are no fees for this redemption method. See MoneyLine Direct
Deposit Service under The Delaware Difference for more information above this
service.
2. Retirement Plans
For shareholders eligible under the applicable retirement plan to
receive benefits in periodic payments, the Systematic Withdrawal Plan provides
you with maximum flexibility. A number of formulas are available for calculating
your withdrawals, depending upon whether the distributions are required or
optional. Withdrawals must be for $25 or more; however, no minimum account
balance is required. The MoneyLine service described above is not available for
retirement plans.
* * *
Shareholders should not purchase additional shares while participating in
a Systematic Withdrawal Plan.
Redemptions of Class A Shares via a Systematic Withdrawal Plan may be
subject to a Limited CDSC if the original purchase was made at net asset value
within the 12 months prior to the withdrawal and a dealer's commission has been
paid on that purchase. See Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value, below.
With respect to Class B Shares and Class C Shares redeemed via a
Systematic Withdrawal Plan, any applicable CDSC 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
-41-
<PAGE>
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 and Class C
Shares, below.
For more information on Systematic Withdrawal Plans, call the
Shareholder Service Center.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
A Limited CDSC will be imposed on certain redemptions of Class A Shares
(or shares into which such Class A Shares are exchanged) made within 12 months
of purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission previously described. See
Buying Shares.
The Limited CDSC will be paid to the Distributor and will be equal to the
lesser of 1% of: (1) the net asset value at the time of purchase of the Class A
Shares being redeemed; or (2) the net asset value of such Class A Shares at the
time of redemption. For purposes of this formula, the "net asset value at the
time of purchase" will be the net asset value at purchase of the Class A Shares
even if those shares are later exchanged for shares of another Delaware Group
fund and, in the event of an exchange of Class A Shares, the "net asset value of
such shares at the time of redemption" will be the net asset value of the shares
acquired in the exchange.
Redemptions of such Class A Shares held for more than 12 months will not
be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Group fund will not trigger the imposition of the Limited CDSC
at the time of such exchange. The period a shareholder owns shares into which
Class A Shares are exchanged will count towards satisfying the 12-month holding
period. The Limited CDSC is assessed if such 12-month period is not satisfied
irrespective of whether the redemption triggering its payment is of Class A
Shares of a Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed that
shares not subject to the Limited CDSC are the first redeemed followed by other
shares held for the longest period of time. The Limited CDSC will not be imposed
upon shares representing reinvested dividends or capital gains distributions, or
upon amounts representing share appreciation. All investments made during a
calendar month, regardless of what day of the month the investment occurred,
will age one month on the last day of that month and each subsequent month.
Waiver of Limited Contingent Deferred Sales Charge--Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from a Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (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
-42-
<PAGE>
respect to that retirement plan; (iv) distributions from a section 403(b)(7)
Plan or an IRA due to death, disability, or attainment of age 59 1/2; (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 Classes of Shares).
Waiver of Contingent Deferred Sales Charge--Class B and Class C Shares
[The CDSC is waived on redemptions of Class B Shares in connection with
the following redemptions: (i) redemptions that result from a Fund's right to
liquidate a shareholder's account if the aggregate net asset value of the shares
held in the account is less than the then-effective minimum account size; (ii)
returns of excess contributions to an IRA or 403(b)(7) Deferred Compensation
Plan; (iii) required minimum distributions from an IRA, 403(b)(7) Deferred
Compensation Plan, or 457 Deferred Compensation Plan; 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 a Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, 403(b)(7) Deferred Compensation Plan, Profit
Sharing Plan, Money Purchase Pension Plan or 401(k) Defined Contribution Plan;
(iii) required minimum distributions from an IRA, 403(b)(7) Deferred
Compensation Plan, 457 Deferred Compensation Plan, Profit Sharing Plan, Money
Purchase Pension Plan, or 401(k) Defined Contribution Plan; (iv) distributions
from a 403(b)(7) Deferred Compensation Plan, 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) Deferred Compensation
Plan, 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)
distributions from an 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 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.]
-43-
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in a Fund.
The Fixed-Income Funds accrue dividends from net investment income and
usually distribute such accrued dividends to shareholders monthly. The Equity
Funds declare dividends from net investment income and usually distribute such
accrued dividends to shareholders at least annually. All capital gains, if any,
are distributed annually, usually in December. When a capital gain dividend is
declared, the net asset value per share is reduced by the amount of the
dividend. Investors considering buying shares of one of the Funds just prior to
a record date for a taxable dividend or capital gain distribution should be
aware that, regardless of whether the price of the Fund shares to be purchased
reflects the amount of the forthcoming dividend or distribution payment, any
such payment will be a taxable dividend or distribution payment.
Both dividends and distributions, if any, are automatically reinvested in
your account at net asset value unless you elect otherwise. Any check in payment
of dividends or other distributions which cannot be delivered by the United
States Post Office or which remains uncashed for a period of more than one year
may be reinvested in the shareholder's account at the then-current net asset
value, and the dividend option may be changed from cash to reinvest. If you
elect to take your dividends and distributions in cash and such dividends and
distributions are in an amount of $25 or more, you may choose the MoneyLine
Direct Deposit Service and have such payments transferred from your Fund account
to your predesignated bank account. See MoneyLine Direct Deposit Service under
The Delaware Difference for more information about this service.
Each Fund has qualified and intends to continue to qualify as a "regulated
investment company" under the Code. In any fiscal year in which each Fund so
qualifies and distributes to shareholders its net investment income and net
realized capital gains, each Fund will be relieved of federal income tax. It is
each Fund's policy to distribute to the shareholders all of its net investment
income and capital gains realized during each fiscal year.
Under current law for each of the Funds, dividends paid from net
investment income and distributions of net realized short-term capital gains are
taxable to shareholders as ordinary income, regardless of how long shareholders
have held their Fund shares or whether such dividends and distributions are
received in cash or reinvested in additional Fund shares. Distributions of net
realized long-term capital gains will be taxable to shareholders as long-term
capital gains, regardless of how long shareholders have held Fund shares and
whether such distributions are received in cash or are reinvested in additional
Fund shares. The per share dividends and distributions on Class A Shares will be
higher than the per share dividends and distributions on Class B and Class C
Shares as a result of lower distribution fees applicable to Class A Shares.
Furthermore, as a general rule, a shareholder's gain or loss on a sale or
redemption of Fund shares will be a long-term capital gain or loss if the
shareholder has held the shares for more than one year and will be a short-term
capital gain or loss if the shareholder has held the shares for one year or
less. Some of the Funds' dividends declared from net investment income may
qualify for the federal dividends-received deduction for corporations. The
investor will be notified each year as to the amount and federal tax status of
all dividends and capital gains paid during the prior year. Such dividends and
capital gains may also be subject to state or local taxes.
-44-
<PAGE>
A portion of each Fund's income, including income from repurchase
agreements and gains from options and futures transactions may be taxable to
shareholders as ordinary income. Long-term capital gains from options and
futures transactions may be taxable to shareholders as ordinary income.
Long-term capital gains distributions, if any, are taxable as long term capital
gains, regardless of the length of time a shareholder has owned shares.
Short-term capital gains and other taxable income distributions are taxable as
ordinary income.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November or December to shareholders of
record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by a Fund and received by the shareholder on
December 31 of the year declared.
If an investor has not furnished a certified correct taxpayer
identification number (generally a Social Security number) and has not certified
that withholding does not apply, or if the Internal Revenue Service has notified
a Fund that the taxpayer identification number listed on the investor's account
is incorrect according to their records or that the investor is subject to
backup withholding, federal law generally requires the Fund to withhold 31% from
any dividends and/or redemptions (including exchange redemptions). Amounts
withheld are applied to the investor's federal tax liability; a refund may be
obtained from the Internal Revenue Service if withholding results in overpayment
of taxes. Federal law also requires the Funds to withhold 30% or the applicable
tax treaty rate from dividends paid to certain nonresident alien, non-U.S.
partnership and non-U.S. corporation shareholder accounts.
The automatic conversion of Class B Shares into Class A Shares at the end
of approximately eight years after purchase will be tax-free for federal tax
purposes. See Automatic Conversion of Class B Shares under Classes of Shares.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. Government securities may be exempt from
state personal income taxes. Shares of each Fund are exempt from Pennsylvania
county personal property taxes.
Certain Funds may be required to pay withholding and other taxes imposed
by foreign countries in connection with their investments outside the U.S.
generally at rates from 10% to 40%, which would reduce these Funds' investment
income.
Certain income received by the Delaware World Growth and Delaware New
Pacific Funds may be subject to foreign taxes. If more than 50% of the value of
the Fund's total assets at the close of any taxable year consists of securities
of foreign corporations, the Fund may elect to treat any foreign taxes paid by
it as paid by its shareholders. If a Fund makes this election, its shareholders
will generally be required to include in income their respective pro rata
positions in computing their taxable income or, alternatively, to claim foreign
tax credits (subject, in either case, to certain limitations). Each year that a
Fund makes such an election, it will report to its shareholders the amount per
share of foreign taxes it has elected to have treated as paid by its
shareholders.
See Dividends, Distributions and Taxes in Part B for additional
information on tax matters relating to each Fund and its shareholders.
-45-
<PAGE>
CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
The NAV per share is computed by adding the value of all securities and
other assets in the portfolio, deducting any liabilities (expenses and fees are
accrued daily) and dividing by the number of shares outstanding. Portfolio
securities for which market quotations are available are priced at market value.
Short-term investments having a maturity of less than 60 days are valued at
amortized cost, which approximates market value. All other securities are valued
at their fair value as determined in good faith and in a method approved by
Adviser Funds, Inc.'s Board of Directors. See Net Asset Value in Part B.
Class A Shares are purchased at the offering price per share, while Class
B Shares and Class C Shares are purchased at the net asset value ("NAV") per
share. The offering price per share of Class A Shares consists of the NAV per
share next computed after the order is received, plus any applicable front-end
sales charges.
The offering price and NAV are computed as of the close of regular trading
on the New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when
the Exchange is open.
The net asset values of all outstanding shares of each class of a Fund
will be computed on a pro-rata basis for each outstanding share based on the
proportionate participation in that Fund represented by the value of shares of
that class. All income earned and expenses incurred by a Fund will be borne on a
pro-rata basis by each outstanding share of a class, based on each class'
percentage in that Fund represented by the value of shares of such classes,
except that the Institutional Classes will not incur any distribution fees under
the 12b-1 Plans and the Class A, Class B and Class C Shares alone will bear the
12b-1 Plan expenses payable under their respective 12b-1 Plans. Due to the
specific distribution expenses and other costs that will be allocable to each
class, the net asset value of each class of a Fund will vary.
-46-
<PAGE>
MANAGEMENT OF THE FUNDS
Directors
The business and affairs of Adviser Funds, Inc. are managed under the
direction of its Board of Directors. Part B contains additional information
regarding the directors and officers.
Investment Manager
The Manager furnishes investment management services to each Fund.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On _______________, 199_, the Manager and its
affiliate, Delaware International Advisers Ltd., were supervising in the
aggregate more than $00 billion in assets in the various institutional
(approximately $00,000,000,000) and investment company (approximately
$00,000,000,000) accounts.
The Manager is an indirect, wholly-owned subsidiary of Delaware Management
Holdings, Inc. ("DMH"). In turn, DMH is a wholly-owned subsidiary of and subject
to the ultimate control of Lincoln National Corporation ("Lincoln National").
Lincoln National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management.
The Manager administers the affairs of and is ultimately responsible for
the investment management of each of the Funds under separate Investment
Management Agreements with Adviser Funds, Inc. on behalf of each Fund dated
May [3], 1996.
Investment Management Agreements. The Investment Management Agreements
were approved by the Board of Directors of Adviser Funds, Inc., including a
majority of the Directors who are not "interested persons" of Adviser Funds,
Inc., on February 23, 1996 and approved by the respective shareholders of the
Funds at a shareholder meeting held on May 3, 1996. See Restructuring of the
Funds, below.
Under the Investment Management Agreements, the Manager receives advisory
fees monthly based upon each Fund's average daily net assets at the following
annual rates:
Delaware Enterprise Fund .80%
Delaware U.S. Growth Fund .70%
Delaware World Growth Fund 1.10%
Delaware New Pacific Fund .80%
Delaware Federal Bond Fund .30%
Delaware Corporate Income Fund .30%
The Manager elected voluntarily to waive that portion, if any, of its
investment advisory fees and to reimburse a Fund's expenses to the extent
necessary to ensure that a Fund's expenses do not exceed the amounts noted under
Summary of Expenses.
The advisory fees for the Delaware Enterprise, Delaware World Growth and
Delaware New Pacific Funds, while higher than the advisory fees paid by other
mutual funds in general, are comparable to fees paid by other mutual funds with
similar objectives and policies.
For the fiscal year ended October 31, 1995, the following investment
management fees based on a percentage of a Fund's average daily net assets
(before reimbursement) were paid to Lincoln Investment Management, Inc. ("LIM"),
the investment manager to the Funds prior to the close of business on May 3,
1996:
Delaware Enterprise Fund .80%
Delaware U.S. Growth Fund .70%
Delaware World Growth Fund 1.10%
Delaware New Pacific Fund 1.10%
Delaware Federal Bond Fund .30%
Delaware Corporate Income Fund .30%
Securities regulations of various states in which the Funds intend to have
shareholders may provide that, if expenses borne by a Fund in any fiscal year
exceed certain limitations, the Manager must reimburse the Fund for any such
excess at least annually and prior to publication of the Fund's annual report.
-47-
<PAGE>
The percentage limitation includes the advisory fee but excludes interest,
taxes, a portion of a Fund's service and distribution fee, a portion of a Fund's
custody fee attributable to investments in foreign securities, brokerage fees
and, where permitted, extraordinary expenses. These expense limitations may be
raised or lowered from time to time. Under present state regulations, the most
restrictive limitation of state securities commissions is: 2 1/2% of the first
$30,000,000 of average net assets of a Fund, 2% of the next $70,000,000 of
average net assets and 1 1/2% of average net assets in excess of $100,000,000
during the applicable year. During any year the Manager will be bound by the
most stringent applicable requirements of any state in which a Fund has
registered its shares for sale.
The Investment Management Agreements will continue in effect for a period
of two years from the date of their execution, and will continue annually
thereafter if approved by a vote of a majority of the Directors who are not
interested persons of Adviser Funds, Inc. or the Manager, at a meeting called
for the purpose of voting on such approval. The Investment Management Agreements
may be terminated without penalty at any time (1) on 60 days' written notice, by
vote of a majority of the Board of Directors of Adviser Funds, Inc., (2) on 60
days' written notice, by vote a majority of the outstanding voting securities of
the Funds, or (3) on 60 days' written notice by the Manager. The Investment
Management Agreements terminate automatically in the event of "assignment". The
terms "assignment," "majority of outstanding voting securities" and "interested
person" are as defined in the 1940 Act.
Investment Sub-Advisers
Pursuant to a sub-advisory agreement with the Manager (the "Sub-Advisory
Agreement" or, collectively, the "Sub-Advisory Agreements"), each Fund's
sub-adviser participates in the management of its respective Fund's assets, is
responsible for the day-to-day investment management of the Fund, makes
investment decisions for the Fund in accordance with the Fund's investment
objective and places orders on behalf of the Fund to effect the investment
decisions made. The Manager continues to have responsibility for all investment
advisory services in connection with the management of the Funds pursuant to the
Investment Management Agreement and supervises the sub-advisers' performance of
such services. Each of the sub-advisers uses a team of Fund managers to provide
the advisory services pursuant to the Sub-Advisory Agreements.
The sub-advisers receive subadvisory fees from the Manager for their
services calculated in accordance with the schedule set forth below. The Funds
do not pay any fees to the sub-advisers.
Fund Sub-Adviser Annual Fee
- ---- ----------- ----------
Delaware
U.S.
Growth Fund Lynch Mayer, Inc. .40%
Delaware
World Walter Scott &
Growth Fund Partners Limited .80%
Delaware
New Pacific John Govett &
Fund Company Limited .80%
Delaware
Corporate
Income Lincoln Investment
Fund Management, Inc. .30%
Delaware
Federal
Bond Lincoln Investment
Fund Management, Inc. .30%
Delaware
Enterprise
Fund Lynch & Mayer, Inc. .50% on the
first $150
million and
.35% on
assets over
$150
million
-48-
<PAGE>
The following registered investment advisers act as sub-advisers (the
"Sub-Advisers" or individually the "Sub-Adviser") to the Manager with respect to
the management of the assets of the Funds as indicated below.
LIM, Sub-Adviser to the Manager with respect to management of the assets
of the Delaware Corporate Income Fund and the Delaware Federal Bond Fund, 200
East Berry Street, Fort Wayne, Indiana 46802, is an indirect, wholly-owned
subsidiary of Lincoln National and an affiliate of the Manager. LIM acts as
investment adviser to several registered investment companies in addition to
those Funds. LIM also provides investment services to Lincoln National and its
principal subsidiaries and acts as investment adviser to the other clients. As
of December 31, 1995, LIM had total assets under management in excess of $37
billion.
Lynch & Mayer, Inc., Sub-Adviser to the Manager with respect to management
of the assets of the Delaware Enterprise Fund and the Delaware U.S. Growth Fund,
520 Madison Avenue, New York, New York 10022, is an indirect, wholly-owned
subsidiary of Lincoln National and an affiliate of the Manager. Lynch & Mayer
provides investment advice to pension funds, foundations, endowments, trusts and
high net worth individuals and families and had assets under management, as of
December 31, 1995, in excess of $6.6 billion.
Walter Scott & Partners Limited, Sub-Adviser to the Manager with respect
to management of the assets of the Delaware World Growth Fund, Millburn Tower,
Gogar, Edinburgh, Scotland EH12 9BS, provides investment advice to pension funds
and foundations and had assets under management, as of December 31, 1995, in
excess of $2.0 billion.
John Govett & Company Limited, Sub-Adviser to the Manager with respect to
management of the assets of the Delaware New Pacific Fund, Shackleton House, 4
Battlebridge Lane, London, England SE1 2HR, provides investment advice to
investment trusts, investment companies, mutual funds and pension funds and had
assets under management, as of December 31, 1995, of $5.1 billion.
Custodian
- ----------------------------------------
- ----------------------------------------
serves as Custodian for each of the Funds and, in
that capacity, has custody of the Funds'
securities. Its mailing address is
- ----------------------------------------.
- ----------------------------------------
is not involved in the investment decisions made
with respect to the Funds.
Execution of Fund Transactions
Each Fund uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
its advisory clients. These services may be used by the Manager in servicing any
of its accounts. Subject to best price and execution, each Fund may consider a
broker/dealer's sales of Fund shares in placing portfolio orders and may place
orders with broker/dealers that have agreed to defray certain Fund expenses such
as custodian fees.
[Affiliates of the Manager, such as Lynch & Mayer, Inc., may act as a
broker or futures commission merchant for Adviser Funds, Inc., provided that the
commissions, fees or other remuneration it receives are fair and reasonable. See
Execution of Fund Transactions in Part B.]
-49-
<PAGE>
Performance Information
From time to time, each Fund may quote total return performance or yield
(if applicable) of its Classes in advertising and other types of literature.
Total return will be based on a hypothetical $1,000 investment, reflecting
the reinvestment of all distributions at net asset value and: (i) in the case of
Class A Shares, the impact of the maximum front-end sales charge at the
beginning of each specified period; and (ii) in the case of Class B Shares and
Class C Shares, the deduction of any applicable CDSC at the end of the relevant
period. Each presentation will include the average annual total return for one-,
five- and ten-year periods, as relevant. Each Fund may also advertise aggregate
and average total return information concerning a Class over additional periods
of time. In addition, each Fund may present total return information that does
not reflect the deduction of the maximum front-end sales charge or any
applicable CDSC. In this case, such total return information would be more
favorable than total return information which includes deductions of the maximum
front-end sales charge or any applicable CDSC.
The current yield for a Class will be calculated by dividing the
annualized net investment income earned by that Class during a recent 30-day
period by the net asset value per share on the last day of the period. The yield
formula provides for semi-annual compounding which assumes that net investment
income is earned and reinvested at a constant rate and annualized at the end of
a six-month period.
Because securities prices fluctuate, investment results of the Classes
will fluctuate over time and past performance should not be considered as a
representation of future results.
Distribution (12b-1) and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), serves as the national distributor for
each Fund under separate Distribution Agreements dated September 25, 1995.
Adviser Funds, Inc. has adopted a separate distribution plan under Rule
12b-1 for each of the Class A Shares, the Class B Shares and the Class C Shares
(the "Plans"). Each Plan permits the Fund to which it relates to pay the
Distributor from the assets of its respective Classes a monthly fee for the
Distributor's services and expenses in distributing and promoting sales of
shares. These expenses include, among other things, preparing and distributing
advertisements, sales literature, and prospectuses and reports used for sales
purposes, compensating sales and marketing personnel, holding special promotions
for specified periods of time, and paying distribution and maintenance fees to
brokers, dealers and others.
The 12b-1 Plan expenses relating to each of the 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.
Under the Plans, the aggregate fees paid a Fund from the assets of its
respective Classes to the Distributor and others under the Plans may not exceed
.35% of the Class A Shares' average daily net assets in any year, and 1% (.25%
of which are service fees to be paid by such Fund to the Distributor, dealers
and others, for providing personal service and/or maintaining shareholder
accounts) of each of the Class B Shares' and the Class C Shares' average daily
net assets in any year. The Class A, Class B and Class C Shares will not incur
any distribution expenses beyond these limits, which may not be increased
without shareholder approval. The Distributor may, however, incur additional
expenses and make additional payments to dealers from its own resources to
promote the distribution of shares of the Classes.
-50-
<PAGE>
Although the maximum fee payable under the Plan relating to each of the
Class A Shares is .35% of average daily net assets, the Board of Directors has
determined that the annual fee payable on a monthly basis, under such Plan, will
be equal to .30% of average daily net assets.
Adviser Funds, Inc.'s Plans do not apply to the Institutional Classes of
shares. Those shares are not included in calculating the Plans' fees, and the
Plans are not used to assist in the distribution and marketing of the
Institutional Classes.
While payments pursuant to the Plans may not exceed .35% annually with
respect to the Class A Shares and 1% annually with respect to each of the Class
B Shares and the Class C Shares, the Plans do not limit fees to amounts actually
expended by the Distributor. It is therefore possible that the Distributor may
realize a profit in any particular year. However, the Distributor currently
expects that its distribution expenses will likely equal or exceed payments to
it under the Plans. The monthly fees paid to the Distributor are subject to the
review and approval of Adviser Funds, Inc.'s unaffiliated directors who may
reduce the fees or terminate the Plans at any time.
In connection with the promotion of Class A, Class B and Class C Shares,
the Distributor may, from time to time, pay to participate in dealer-sponsored
seminars and conferences, and reimburse dealers for expenses incurred in
connection with preapproved seminars, conferences and advertising. The
Distributor may pay or allow additional promotional incentives to dealers as
part of preapproved sales contests and/or to dealers who provide extra training
and information concerning a Class and increase sales of the Class. In addition,
each Fund may make payments from the assets of its respective Classes directly
to others, such as banks, who aid in the distribution of Class shares or provide
services in respect of such Classes, pursuant to service agreements with Adviser
Funds, Inc. See Other Payments to Dealers -- Class A, Class B and Class C Shares
under Classes of Shares.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for each Fund
under separate Agreements dated September 25, 1995. The directors annually
review service fees paid to the Transfer Agent.
The Distributor and the Transfer Agent are also indirect, wholly-owned
subsidiaries of DMH and Lincoln National.
Expenses
Each Fund is responsible for all of its own expenses other than those
borne by the Manager under its Investment Management Agreements and those borne
by the Distributor under its Distribution Agreements. For the fiscal year ended
October 31, 1995, the ratios of expenses to average daily net assets for each
Class were as follows:
Class Class Class
A B C
Shares Shares Shares
------ ------ ------
Delaware Enterprise Fund 1.85% 2.50% 2.50%
Delaware U.S. Growth Fund 1.85% 2.50% 2.50%
Delaware World Growth Fund 1.85% 2.50% 2.50%
Delaware New Pacific Fund 1.85% 2.50% 2.50%
Delaware Federal Bond Fund 1.25% 1.90% 1.85%
Delaware Corporate Income Fund 1.25% 1.90% 1.90%
The expense ratio of each Class reflects the impact of its 12b-1 Plan and the
fee waiver and reimbursements in effect on October 31, 1995. See Summary of
Expenses for current fee waivers and reimbursements.
Restructuring of the Funds
Until May 3, 1996, Adviser Funds, Inc. consisted of nine series of
shares (the six current Funds as well as three other funds) and was named the
Lincoln Advisor Funds, Inc. ("LAF"). On February 23, 1996, the LAF's Board of
-51-
<PAGE>
Directors approved a restructuring to integrate fully the LAF into the Delaware
Group of funds. The restructuring provided, among other things, for the
liquidation of three funds, other than the Funds; the appointment of Delaware
Management Company, Inc. as the investment manager of each of the Funds; the
appointment of the sub-advisers described in this Prospectus; the changes in the
names as follows: Lincoln Enterprise Portfolio to Delaware Enterprise Fund;
Lincoln U.S. Growth Portfolio to Delaware U.S. Growth Fund; Lincoln World Growth
Portfolio to Delaware World Growth Fund; Lincoln New Pacific Portfolio to
Delaware New Pacific Fund; Lincoln Government Income Portfolio to Delaware
Federal Bond Fund; and Lincoln Corporate Income Portfolio to Delaware Corporate
Income Fund; and the change of the LAF to Delaware Group Adviser Funds, Inc. The
liquidations were completed on _____________, 1996 and following required
shareholder approval of the investment management and sub-advisory arrangements
at a meeting of shareholders held on May 3, 1996, the restructuring was
consummated.
In accordance with the restructuring, the front-end sales charges for and
12b-1 Plan distribution fees assessable against Class A Shares and the
contingent deferred sales charge schedule for Class B Shares, as well as its
feature for conversion to Class A Shares, have been modified to be made
consistent with the charges, fees and features that generally apply to all other
Delaware Group funds. The charges and fees previously applicable to the Class C
Shares have not been changed.
Beginning May 6, 1996, the charges, fees and features described in this
Prospectus will apply to the respective shares, except for Class B Shares
purchased before that date. Class B Shares purchased prior to May 6, 1996 will
continue to be subject to the following contingent deferred sales charge
schedule if redemptions are made during the time periods described: within the
first year after purchase (5.0%); within the second year after purchase (4.0%);
within the third year after purchase (4.0%) within the fourth year after
purchase (3.0%); within the fifth year after purchase (2.0%) within the sixth
year after purchase (1.0%); and, thereafter, none. In addition, Class B Shares
purchased prior to May 6, 1996 still will convert to Class A Shares after the
expiration of approximately six years after purchase. Class B Shares purchased
with reinvested dividends whether effected before or after May 6, 1996, will be
aggregated and converted pro rata with other Class B Shares.
Other Shareholder Matters
All shares of Adviser Funds, Inc. have equal voting rights and are
entitled to one vote per share with proportional voting for fractional shares.
As permitted by Maryland law, there will normally be no meetings of shareholders
for the purpose of electing Directors unless and until such time as fewer than a
majority of the Directors holding office have been elected by shareholders. At
that time, the Directors in office will call a shareholders meeting for election
of Directors. Shareholders have certain rights, including the right to call a
meeting upon a vote of 10% of Adviser Funds, Inc.'s outstanding shares for the
purpose of voting on the removal of one or more Directors or to transact any
other business. The shares do not have cumulative voting rights. Accordingly,
the holders of a majority of the shares voting for the election of directors can
elect all the Directors. Shares of Adviser Funds, Inc., when issued, will be
fully paid and non-assessable.
In matters which only affect a particular Fund, the matter shall have been
effectively acted upon by a majority vote of that Fund even though: (1) the
matter has not been approved by a majority vote of any other Fund; or (2) the
matter has not been approved by a majority vote of Adviser Funds, Inc.
-52-
<PAGE>
In addition to Class A Shares, Class B Shares and Class C Shares, each
Fund also offers an Institutional Class of shares. Shares of each class
represent proportionate interests in the assets of the respective Fund and have
the same voting and other rights and preferences as the other classes of that
Fund, except that shares of the Institutional Classes are not subject to, and
may not vote on matters affecting, the 12b-1 Plans relating to the Classes.
Similarly, as a general matter, shareholders of Class A Shares, Class B Shares
and Class C Shares may vote only on matters affecting the 12b-1 Plan that
relates to the class of shares that they hold. However, the Class B Shares may
vote on any proposal to increase materially the fees to be paid by a Fund under
the 12b-1 Plan relating to the Class A Shares.
Initial investments into Adviser Funds, Inc. were made by American States
Insurance Company ("ASI") and Lincoln National Life Insurance Company ("LNLIC"),
both affiliates of the Manager. As of February 1, 1996, ASI held 73% of the
outstanding shares of Delaware Enterprise Fund A Class and 90% of the
outstanding shares of Delaware U.S. Growth Fund A Class, LNLIC held 84% of the
outstanding shares of Delaware World Growth Fund A Class, 84% of the outstanding
shares of Delaware New Pacific Fund A Class, 98% of the outstanding shares of
Delaware Federal Bond Fund A Class and 95% of the outstanding shares of Delaware
Corporate Income Fund A Class. Subject to certain limited exceptions, there are
no limitations on the Lincoln National Corporation affiliates' ability to redeem
the shares of the Adviser Funds, Inc. and they may do so at any time.
General Information
Shareholder Services
Shareholder servicing, reporting and general shareholder services
functions for each Fund are performed by Delaware Service Company, Inc., which
maintains its offices at 1818 Market Street, Philadelphia, PA 19103.
Independent Accountants
Adviser Funds, Inc.'s independent accountants are Coopers & Lybrand
L.L.P., [One Post Office Square, Boston, Massachusetts 02109]. Coopers & Lybrand
L.L.P. conducts an annual audit of each Fund and consults with the Fund and each
Fund as to matters of accounting, regulatory filings and federal and state
income taxation.
-53-
<PAGE>
IMPLEMENTATION OF INVESTMENT OBJECTIVES AND POLICIES
In attempting to achieve their investment objectives and policies, the
Funds may employ, among others, one or more of the strategies set forth below.
Convertible Securities
The Funds may invest in securities that either have warrants or rights
attached or are otherwise convertible into other or additional securities. A
convertible security is typically a fixed-income security (a bond or preferred
stock) that may be converted at a stated price within a specified period of time
into a specified number of shares of common stock of the same or a different
issuer. Convertible securities are generally senior to common stocks in a
corporation's capital structure but are usually subordinated to similar
non-convertible securities. While providing a fixed income stream (generally
higher in yield than the income derivable from a common stock but lower than
that afforded by a similar non-convertible security), a convertible security
also affords an investor the opportunity, through its conversion feature, to
participate in capital appreciation attendant upon a market price advance in the
common stock underlying the convertible security. In general, the market value
of a convertible security is at least the higher of its "investment value"
(i.e., its value as a fixed-income security) or its "conversion value" (i.e.,
its value upon conversion into its underlying common stock). While no securities
investment is without some risk, investments in convertible securities generally
entail less risk than investments in the common stock of the same issuer.
U.S. Government Securities
All of the Funds may invest in securities of the U.S. Government.
Securities guaranteed by the U.S. Government include: (1) direct obligations of
the U.S. Treasury (such as Treasury bills, notes and bonds) and (2) federal
agency obligations guaranteed as to principal and interest by the U.S. Treasury
(such as GNMA certificates and Federal Housing Administration debentures). For
these securities, the payment of principal and interest is unconditionally
guaranteed by the U.S. Government, and thus they are of the highest possible
credit quality. Such securities are subject to variations in market value due to
fluctuations in interest rates, but if held to maturity are deemed to be free of
credit risk for the life of the investment.
Securities issued by U.S. Government instrumentalities and certain federal
agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they generally involve federal sponsorship in one way or
another: some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the U.S. Treasury; some are supported by the
discretionary authority of the U.S. Treasury to purchase certain obligations of
the issuer; and others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and instrumentalities
include, but are not limited to, Federal Land Banks, Farmers Home
Administration, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, and Federal Home Loan Banks.
Mortgage-Backed Securities
The Delaware Corporate Income and Delaware Federal Bond Funds may invest
in various types of mortgage-backed securities. Mortgage-backed securities may
be issued by governmental agencies (such as the Government National Mortgage
Association ("GNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC")),
by the Federal National Mortgage Association ("FNMA"), which is a federally
-54-
<PAGE>
chartered and privately-owned corporation, or by private financial institutions
such as commercial banks, savings and loan associations, mortgage bankers and
securities broker-dealers (or separate trusts or affiliates of such institutions
established to issue these securities).
Most mortgage-backed securities, including the securities issued by GNMA,
FHLMC and FNMA, are so-called "pass-through" securities representing interests
in a pool of underlying mortgage loans, on which the regular interest and
principal payments (including any prepayments) are passed through to the holder
of the securities. Although the mortgage loans in a pool will have stated
maturities of up to 30 years, due to both normal principal repayment and
prepayments, the average effective maturities of these securities will vary and
will tend to be shorter than those of the underlying mortgages. Due to the
prepayment feature and the need to reinvest prepayments of principal at current
market rates, these securities can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of declining interest
rates. Like other fixed-income investments, the value of mortgage-related
securities will tend to rise when interest rates fall and to fall when interest
rates rise. Their value may also change due to changes in the market's
perception of the creditworthiness of the entity that issues or guarantees them.
For additional information regarding mortgage-backed securities, see Part B.
U.S. Government securities may be acquired by the Funds in the form of
separately traded principal and interest components of securities issued or
guaranteed by the U.S. Treasury. The principal and interest components of
selected securities are traded independently under the Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. Under the
STRIPS program, the principal and interest components are individually numbered
and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Obligations of Resolution Funding Corporation are similarly divided into
principal and interest components and maintained as such on the book-entry
records of the Federal Reserve Banks.
In addition, the Funds may invest in custodial receipts that evidence
ownership of future interest payments, principal payments or both on certain
U.S. Treasury notes or bonds in connection with programs sponsored by banks and
brokerage firms. Such notes and bonds are held in custody by a bank on behalf of
the owners of the receipts. These custodial receipts are known by various names,
including "Treasury Receipts" ("Trs"), ("TIGRs") and "Certificates of Accrual on
Treasury Securities" ("CATS"), and may not be deemed U.S. Government securities.
The Funds may also invest from time to time in collective investment
vehicles, the assets of which consist principally of U.S. Government securities
or other assets substantially collateralized or supported by such securities,
such as government trust certificates.
The U.S. Government securities in which the Funds invest do not, in
general, have as high a yield as more speculative securities or securities not
supported by the U.S. Government or its agencies or instrumentalities. When
interest rates increase, the value of debt securities and shares of the Funds
can be expected to decline.
Asset-Backed Securities
The Delaware Federal Bond and Delaware Corporate Income Funds may purchase
asset-backed securities, which represent a participation in, or are secured by
and payable from, a stream of payments generated by particular assets, most
often a pool of assets similar to one another. Assets generating such payments
will consist of motor vehicle installment purchase obligations, credit card
receivables, other financial receivables and home equity loans. See Part B.
-55-
<PAGE>
Repurchase Agreements
The Funds may enter into repurchase
agreements, under which a Fund buys a security (typically a U.S. Government
security or other money market security) and obtains a simultaneous commitment
from the seller to repurchase the security at a specified time and price. The
seller must maintain with the Adviser Funds, Inc.'s Custodian collateral equal
to at least 100% of the repurchase price including accrued interest, as
monitored daily by the Manager and/or sub-adviser. A Fund only will enter into
repurchase agreements involving securities in which it could otherwise invest
and with banks, brokers or dealers deemed by the Board of Directors to be
creditworthy. If the seller under the repurchase agreement defaults, the Fund
may incur a loss if the value of the collateral securing the repurchase
agreement has declined and may incur disposition costs in connection with
liquidating the collateral. If bankruptcy proceedings are commenced with respect
to the seller, realization upon the collateral by the Fund may be delayed or
limited.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow the
Delaware Group funds jointly to invest cash balances. The Funds may invest cash
balances in a joint repurchase agreement in accordance with the terms of the
Order and subject generally to the conditions described above.
When-Issued Securities and Firm Commitment Agreements
All of the Funds may purchase securities on a delayed delivery or
"when-issued" basis and enter into firm commitment agreements (transactions
whereby the payment obligation and interest rate are fixed at the time of the
transaction but the settlement is delayed). The transactions may involve either
corporate, municipal or government securities. A Fund as a purchaser assumes the
risk of any decline in value of the security beginning on the date of the
agreement or purchase. The Funds may invest in when-issued securities in order
to take advantage of securities that may be especially under or over valued when
trading on a when-issued basis.
Each Fund will segregate liquid assets such as cash, U.S. Government
securities or other appropriate high grade debt obligations in an amount
sufficient to meet its payment obligations in these transactions. Although these
transactions will not be entered into for leveraging purposes, to the extent a
Fund's aggregate commitments under these transactions exceed its holdings of
cash and securities that do not fluctuate in value (such as money market
instruments), the Fund temporarily will be in a leveraged position (i.e., it
will have an amount greater than its net assets subject to market risk). Should
market values of a Fund's portfolio securities decline while Adviser Funds, Inc.
is in a leveraged position, greater depreciation of its net assets would likely
occur than were it not in such a position. The Funds will not borrow money to
settle these transactions and, therefore, will liquidate other Fund securities
in advance of settlement if necessary to generate additional cash to meet their
obligations thereunder.
Money Market Instruments
All of the Funds may invest in money market instruments without limit
for temporary or defensive purposes. These are shorter- term debt securities
generally maturing in one year or less which include (1) commercial paper
(short-term notes up to 9 months issued by corporations or governmental bodies),
(2) commercial bank obligations (certificates of deposit (interest-bearing time
deposits), bankers' acceptances (time drafts on a commercial bank where the bank
accepts an irrevocable obligation to pay at maturity), and documented discount
-56-
<PAGE>
notes (corporate promissory discount notes accompanied by a commercial bank
guarantee to pay at maturity)), (3) corporate bonds and notes (corporate
obligations that mature, or that may be redeemed, in one year or less), (4)
variable rate demand notes, short-term tax-exempt obligations and (5) savings
association obligations (certificates of deposit issued by mutual savings banks
or savings and loan associations). Although certain floating or variable rate
obligations (securities which have a coupon rate that changes at least annually
and generally more frequently) have maturities in excess of one year, they are
also considered to be short-term debt securities.
Strategic Transactions
General. The Funds may, but are not required to, utilize various other
investment strategies as described below to hedge various market risks (such as
interest rates, currency exchange rates, and broad or specific equity or
fixed-income market movements), to manage the effective maturity or duration of
fixed income securities in the Fund's portfolio or to enhance potential gain.
Such strategies are generally accepted as modern Fund management and are
regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur. In the course of pursuing
these investment strategies, the Fund may purchase and sell derivative
securities. In particular, the Funds may purchase and sell exchange-listed and
over-the-counter put and call options on securities, equity and fixed-income
indices and other financial instruments, purchase and sell financial futures
contracts and options thereon, enter into various interest rate transactions
such as swaps, caps, floors or collars, and enter into various currency
transactions such as currency forward contracts, currency futures contracts,
currency swaps or options on currencies or currency futures (collectively, all
the above are called "Strategic Transactions"). Strategic Transactions may be
used to attempt to protect against possible changes in the market value of
securities held in or to be purchased for the Fund resulting from securities
markets or currency exchange rate fluctuations, to protect the Fund's unrealized
gains in the value of its Fund securities, to facilitate the sale of such
securities for investment purposes, to manage the effective maturity or duration
of fixed income securities in a Fund, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Any or all of these investment techniques may be used at
any time and there is no particular strategy that dictates the use of one
technique rather than another, as use of any Strategic Transaction is a function
of numerous variables including market conditions. The ability of a Fund to
utilize these Strategic Transactions successfully will depend on the Manager's
or sub-adviser's ability to predict pertinent market movements, which cannot be
assured. The Funds will comply with applicable regulatory requirements when
implementing these strategies, techniques and instruments. Strategic
Transactions involving financial futures and options thereon will be purchased,
sold or entered into only for bona fide hedging, risk management or Fund
management purposes and not for speculative purposes. Additional information
relating to certain financial instruments or strategies is set forth below. In
addition, see Special Risks of Strategic Transactions below for a discussion of
certain risks.
Limitations on Futures and Options Transactions. A Fund will not enter
into any futures contract or option on a futures contract if, as a result, the
sum of initial margin deposits on futures contracts and related options and
-57-
<PAGE>
premiums paid for options on futures contract the Funds have purchased, after
taking into account unrealized profits and losses on such contracts, would
exceed 5% of the Fund's net asset value without reference to the definition of
"bona fide hedging transactions and positions" under the Commodity Exchange Act,
as amended, or unless the futures contract is covered by cash equivalent
set-asides equal to the total contract value.
In addition to the above limitations, each Fund will not (a) sell futures
contracts, purchase put options or write call options if, as a result, more than
25% of a Fund's total assets would be hedged with futures and options under
normal conditions; (b) purchase futures contracts or write put options if, as a
result, a Fund's total obligations upon settlement or exercise of purchased
futures contracts and written put options would exceed 25% of its total assets;
or (c) purchase call options if, as a result, the current value of option
premiums for call options purchased by a Fund would exceed 5% of the Fund's
total assets. These limitations do not apply to options attached to or acquired
or traded together with their underlying securities, and do not apply to
securities that incorporate features similar to options.
The limitations on the Funds' investments in futures contracts and
options, and the Funds' policies regarding futures contracts and options
discussed elsewhere are not fundamental policies and may be changed as
regulatory agencies permit.
Options Transactions. The Funds may purchase and write (i.e., sell) put
and call options on securities and currencies that are traded on national
securities exchanges or in the over-the-counter market to enhance income or to
hedge their Funds. A call option gives the purchaser, in exchange for a premium
paid, the right for a specified period of time to purchase securities or
currencies subject to the option at a specified price (the exercise price or
strike price). When a Fund writes a call option, the Fund gives up the potential
for gain on the underlying securities in excess of the exercise price of the
option.
A put option gives the purchaser, in return for a premium, the right for a
specified period of time to sell the securities or currencies subject to the
option to the writer of the put at the specified exercise price. The writer of
the put option, in return for the premium, has the obligation, upon exercise of
the option, to acquire the securities underlying the option at the exercise
price. A Fund might, therefore, be obligated to purchase the underlying
securities for more than their current market price.
The Funds will write only "covered" options. An option is covered if a
Fund owns an offsetting position in the underlying security or maintains cash,
U.S. Government securities or other high-grade debt obligations with a value
sufficient at all times to cover its obligations.
See Part B.
Forward Foreign Currency Exchange Contracts. The Funds may enter into
forward foreign currency exchange contracts to protect the value of their Funds
against future changes in the level of currency exchange rates. The Funds may
enter into such contracts on a spot (i.e., cash) basis at the rate then
prevailing in the currency exchange market or on a forward basis, by entering
into a forward contract to purchase or sell currency at a future date. A Fund's
dealings in forward contracts will be limited to hedging involving either
specific transactions or Fund positions. Transaction hedging generally arises in
connection with the purchase or sale of its Fund securities and accruals of
interest or dividends receivable and Fund expenses. Position hedging generally
arises with respect of existing Fund security or currency positions.
-58-
<PAGE>
Futures Contracts and Options Thereon. The Funds may purchase and sell
financial futures contracts and options thereon which are exchange-listed or
over-the-counter for certain hedging, return enhancement and risk management
purposes in accordance with regulations of the CFTC. These futures contracts and
related options will be on interest-bearing securities, financial indices and
interest rate indices. A financial futures contract is an agreement to purchase
or sell an agreed amount of securities at a set price for delivery in the
future.
A Fund may not purchase or sell futures contracts and related options if
immediately thereafter the sum of the amount of initial margin deposits on the
Fund's existing futures and options on futures and premiums paid on such related
options would exceed 5% of the market value of the Fund's total assets. In
addition, the value of all futures contracts sold will not exceed the total
market value of the Fund.
Swap Agreements. The Funds may enter into interest rate swaps, currency
swaps, and other types of swap agreements such as caps, collars and floors. In
an interest rate swap, one party agrees to make regular payments of a floating
rate times a "notional" principal amount in return for payments of a fixed rate
times the same amount. Swaps may also depend on other prices or rates such as
the value of an index or mortgage prepayment rates.
Swap agreements usually involve a small investment of cash relative to the
magnitude of risk assumed. As a result, swaps can be very volatile and may
substantially impact a Fund's performance. Swap agreements are also subject to
the risk of a counterpart's ability to perform (i.e., creditworthiness). A Fund
may also suffer loses if it is unable to terminate swap agreements or reduce
exposure through offsetting transactions in a timely manner.
Special Risks of Strategic Transactions. Participation in the options or
futures markets and in currency exchange transactions involves investment risks
and transaction costs to which a Fund would not be subject absent the use of
these Strategic Transactions. If the Manager's and/or sub-adviser's prediction
of movements in the direction of the securities, foreign currency and interest
rate markets are inaccurate, the adverse consequences to a Fund may leave the
Fund in a worse position than if such Strategic Transactions were not used.
Risks inherent in the use of options, foreign current and futures contracts and
options on futures contracts include (1) dependence on the Manager's and/or
sub-adviser's ability to predict current movements in the direction of interest
rates, securities prices and currency markets; (2) imperfect correlation between
the price of options and futures contracts and options thereon and movements in
the prices of securities being hedged; (3) the fact that skills need to use
these strategies are different from those needed to select Fund securities; (4)
the possible absence of a liquid secondary market for any particular instrument
at any time; (5) the possible need to defer closing out certain hedged positions
to avoid adverse tax consequences; and (6) the possible inability of a Fund to
purchase or sell a Fund security at a time that otherwise would be favorable for
it to do so, or the possible need for a Fund to sell a Fund security at a
disadvantageous time, due to the need for a Fund to maintain "cover" or to
segregate securities in connection with Strategic Transactions. Although the use
of futures contracts and options transactions for hedging should tend to
minimize the risk of loss due to a decline in the value of the hedged position,
at the same time they tend to limit any potential gain which might result from
an increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
-59-
<PAGE>
financial risk than would purchase of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized. The
Strategic Transactions that the Funds may use and some of their risks are
described more fully in Part B.
Each Fund's ability to engage in Strategic Transactions is limited by the
requirements of the Internal Revenue Code of 1986, as amended, for qualification
as a regulated investment company.
See Part B.
-60-
<PAGE>
<TABLE>
<CAPTION>
APPENDIX A - INVESTMENT ILLUSTRATIONS
Illustrations of the Potential Impact on Investment Based on Purchase Option
$10,000 Purchase
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
--------------------------------------- --------------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,478 10,930 10,930 10,478 10,530 10,830+
2 11,525 11,946 11,946
3 12,678 13,058 13,058
4 13,946 14,272 14,272
5 15,340 15,599 15,599
6 16,874 17,050 17,050
7 18,562 18,636 18,636
8 20,418+ 20,369 20,369
9 22,459 22,405* 22,263
10 24,705 24,646* 24,333
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
------------------------------ ----------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,478 10,930 10,930 10,478 10,930 10,930
2 11,525 11,946 11,946 11,525 11,946 11,946
3 12,678 12,758 13,058+ 12,678 13,058 13,058
4 13,946 14,272 14,272
5 15,340 15,399 15,599+
6
7
8
9
10
*This assumes that Class B Shares were converted to Class A Shares at the end of the eighth year.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$250,000 Purchase
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
---------------------------------------- ----------------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
0 243,750 250,000 250,000 243,750 250,000 250,000
1 268,125 273,250 273,250 268,125 263,250 270,750+
2 294,938 298,662 298,662
3 324,431 326,438 326,438
4 356,874+ 356,797 356,797
5 392,562 389,979 389,979
6 431,818 426,247 426,247
7 475,000 465,888 465,888
8 522,500 509,215 509,215
9 574,750 560,137* 556,572
10 632,225 616,150* 608,333
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
--------------------------------------- ---------------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
0 243,750 250,000 250,000 243,750 250,000 250,000
1 268,125 273,250 273,250 268,125 273,250 273,250
2 294,938 298,662 298,662 294,938 298,662 298,662
3 324,431 318,938 326,438+ 324,431 326,438 326,438
4 356,874+ 356,797 356,797
5 392,562 384,979 389,979
6
7
8
9
10
*This assumes that Class B Shares were converted to Class A Shares at the end of the eighth year.
Assumes a hypothetical return for Class A of 10% per year, a hypothetical return for Class B of 9.3% for years 1-8 and 10% for
years 9-10, and a hypothetical return for Class C of 9.3% per year. Hypothetical returns vary due to the different expense
structures for each Class and do not represent actual performance.
Class A purchase subject to appropriate sales charge breakpoint (4.75% @ $10,000; 3.75% @ $100,000; 2.50% @ $250,000).
Class B purchase assessed appropriate CDSC upon redemption (4%-4%-3%-3%-2%-1% in years 1-2-3-4-5-6).
Class C purchase assessed 1% CDSC upon redemption in year 1.
Figures marked "+" identify which Class offers the greater return potential based on the investment amount, the holding
period and the expense structure for each Class.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APPENDIX A
Illustrations of the Potential Impact on Investment Based on Purchase Option
$10,000 Purchase
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
--------------------------------------- ---------------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,192 10,630 10,630 10,192 10,230 10,530+
2 10,905 11,300 11,300
3 11,669 12,012 12,012
4 12,485 12,768 12,768
5 13,359 13,573 13,573
6 14,294 14,428 14,428
7 15,295 15,337 15,337
8 16,366+ 16,303 16,303
9 17,511 17,444* 17,330
10 18,737 18,665* 18,422
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
--------------------------------------- ---------------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,192 10,630 10,630 10,192 10,630 10,630
2 10,905 11,300 11,300 10,905 11,300 11,300
3 11,669 11,712 12,012+ 11,669 12,012 12,012
4 12,485 12,768 12,768
5 13,359 13,373 13,573+
6
7
8
9
10
*This assumes that Class B Shares were converted to Class A Shares at the end of the eighth year.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$250,000 Purchase
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
----------------------------------------- ----------------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
0 243,750 250,000 250,000 243,750 250,000 250,000
1 260,813 265,750 265,750 260,813 255,750 263,250+
2 279,069 282,492 282,492
3 298,604 300,289 300,289
4 319,507+ 319,207 319,207
5 341,872 339,318 339,318
6 365,803 360,695 360,695
7 391,409 383,418 383,418
8 418,808 407,574 407,574
9 448,124 436,104* 433,251
10 479,493 466,631* 460,546
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
--------------------------------------- ---------------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
0 243,750 250,000 250,000 243,750 250,000 250,000
1 260,813 265,750 265,750 260,813 265,750 265,750
2 279,069 282,492 282,492 279,069 282,492 282,492
3 298,604 292,789 300,289+ 298,604 300,289 300,289
4 319,507+ 319,207 319,207
5 341,872 334,318 339,318
6
7
8
9
10
*This assumes that Class B Shares were converted to Class A Shares at the end of the eighth year.
Assumes a hypothetical return for Class A of 7% per year, a hypothetical return for Class B of 6.3% for years 1-8 and 7% for years
9-10, and a hypothetical return for Class C of 6.3% per year. Hypothetical returns vary due to the different expense structure
for each Class and do not represent actual performance.
Class A purchase subject to appropriate sales charge breakpoint (4.75% @ $10,000; 3.75% @ $100,000; 2.50% @ $250,000).
Class B purchase assessed appropriate CDSC upon redemption (4%-4%-3%-3%-2%-1% in years 1-2-3-4-5-6).
Class C purchase assessed 1% CDSC upon redemption in year 1.
Figures marked "+" identify which Class offers the greater return potential based on the investment amount, the holding period
and the expense structure for each Class.
</TABLE>
<PAGE>
---------------------------------
DELAWARE GROUP ADVISER FUNDS,
INC.
DELAWARE ENTERPRISE FUND
DELAWARE U.S. GROWTH FUND
DELAWARE WORLD GROWTH FUND
DELAWARE NEW PACIFIC FUND
DELAWARE FEDERAL BOND FUND
DELAWARE CORPORATE INCOME FUND
For more information contact the
Delaware Group at 800-828-5052. INSTITUTIONAL CLASSES
---------------------------------
INVESTMENT MANAGER P R O S P E C T U S
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103 MAY 6, 1996
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
CUSTODIAN
[Chemical Bank DELAWARE
450 West 33rd Street GROUP
New York, NY 10001] -----
<PAGE>
TABLE OF CONTENTS
Cover Page
Synopsis
Summary of Expenses
Financial Highlights
Investment Objectives and Strategies
Delaware Enterprise Fund
Delaware U.S. Growth Fund
Delaware World Growth Fund
Delaware New Pacific Fund
Delaware Federal Bond Fund
Delaware Corporate Income Fund
Classes of Shares
How to Buy Shares
Redemption and Exchange
Dividends, Distributions and Taxes
Calculation of Net Asset Value Per Share
Management of the Funds
Implementation of Investment Objectives and Policies
-1-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC. PROSPECTUS
INSTITUTIONAL CLASSES MAY 6, 1996
-------------------------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For more information about the Institutional Classes
call Delaware Group at 800-828-5052.
Delaware Group Adviser Funds, Inc. ("Adviser Funds, Inc.") (formerly
Lincoln Advisor Funds, Inc.) is an open-end management investment company.
Adviser Funds, Inc. currently issues six separate series of shares (each
referred to as a "Fund" or collectively as the "Funds"), each representing a
separate, diversified portfolio of securities. The Funds are the Delaware
Enterprise Fund, Delaware U.S. Growth Fund, Delaware World Growth Fund, Delaware
New Pacific Fund, Delaware Federal Bond Fund and Delaware Corporate Income Fund.
See Restructuring of the Funds under Management of the Funds. Each Fund has a
fundamental investment objective and certain investment policies which are
described in this Prospectus.
The investment objectives of each Fund are as follows:
Equity Funds Delaware Enterprise Fund seeks to provide maximum
appreciation of capital by investing in medium-sized
companies which have a dominant position within their
industry, are undervalued, or have potential for growth in
earnings.
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.
Delaware World Growth 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.
-2-
<PAGE>
Fixed-Income Funds Delaware Federal Bond Fund seeks to maximize current
income consistent with preservation of capital. The Fund
attempts to achieve this objective by investing primarily
in securities issued by the U.S. Government, its agencies
and instrumentalities.
Delaware Corporate Income Fund seeks to provide high
current income consistent with preservation of capital.
The Fund attempts to achieve this objective primarily by
investing in a diversified portfolio of investment-grade
fixed income securities issued by U.S. corporations.
Investment-grade fixed income securities are those rated
at least Baa by Moody's Investors Service, Inc. or BBB by
Standard & Poor's Ratings Group or, if not rated, are of
comparable quality in the opinion of the Manager or
sub-adviser.
Each Fund offers an Institutional Class, which is referred to
individually as a "Class" and collectively as the "Classes." Shares of each
Class are available for purchase only by certain eligible investors and are
offered at net asset value without the imposition of a front-end or contingent
deferred sales charge and without a 12b-1 charge. See Classes of Shares.
This Prospectus relates only to the Classes and sets forth information
that you should read and consider before you invest. Please retain it for future
reference. Part B of Adviser Funds, Inc.'s registration statement, dated May 6,
1996, as it may be amended from time to time, contains additional information
about the Funds and has been filed with the Securities and Exchange Commission.
Part B is incorporated by reference into this Prospectus and is available,
without charge, by writing to Delaware Distributors, L.P. at the above address
or by calling the above number. The Funds' financial statements appear in their
Annual Report, which will accompany any response to requests for Part B.
This Prospectus contains useful information that can help the investor
decide whether a Fund's investment objective matches his/her own. Achievement of
a Fund's investment objective cannot, of course, be assured due to the risk of
capital loss from fluctuating prices inherent in any investment in securities.
Investments in the Funds are neither insured or guaranteed by any entity.
Each Fund also offers Class A Shares, Class B Shares and Class C
Shares. Shares of these classes are subject to sales charges and other expenses,
which may affect their performance. A prospectus for these classes can be
obtained by writing to Delaware Distributors, L.P. at the above address or by
calling the above number.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUNDS ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUNDS ARE NOT BANK
OR CREDIT UNION DEPOSITS.
-3-
<PAGE>
SYNOPSIS
The following synopsis is qualified in its entirety by the more
detailed information appearing in the body of the Prospectus.
Investment Objectives and Policies
Each Fund's investment objective is stated on the cover page of this
Prospectus. Each objective is "fundamental" and may be changed only with the
approval of the holders of a majority of the outstanding voting securities of
the Fund, as defined in the Investment Company Act of 1940 (the "1940 Act").
Certain investment policies also are fundamental and thus require approval of
shareholders if a Fund wishes to change them. See Investment Restrictions in
Part B. Still other investment policies reflect current practices of the Funds
and may be changed by the Funds without the approval of shareholders.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") is the investment
manager for each Fund. See Restructuring of the Funds under Management of the
Funds. The Manager or its affiliate, Delaware International Advisers Ltd., also
manages the other funds in the Delaware Group. Delaware Distributors, L.P. (the
"Distributor") is the national distributor for each Fund and for all of the
other mutual funds in the Delaware Group. Delaware Service Company, Inc. (the
"Transfer Agent") is the shareholder servicing, dividend disbursing and transfer
agent for each Fund and for all of the other mutual funds in the Delaware Group.
See Management of the Funds.
The Manager has selected sub-advisers to provide the day-to-day
investment management of the Funds. The sub-adviser for each Fund is: Lynch &
Mayer, Inc. for Delaware Enterprise Fund and Delaware U.S. Growth Fund, Walter
Scott & Partners Limited for Delaware World Growth Fund, John Govett & Company
Limited for Delaware New Pacific Fund and Lincoln Investment Management, Inc.
for Delaware Corporate Income Fund and Delaware Federal Bond Fund.
Open-End Investment Company
Adviser Funds, Inc., which was organized as a Maryland corporation on
August 10, 1993, is an open-end management investment company. Each Fund's
portfolio of assets is diversified as defined by the 1940 Act. See Other
Shareholder Matters under Management of the Funds.
Purchase Price
Shares of each Class offered by this Prospectus are available at net
asset value, without a front-end or contingent deferred sales charge and are not
subject to distribution fees under a Rule 12b-1 distribution plan. See Classes
of Shares.
Redemption and Exchange
Shares of each Class are redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request. See Redemption
and Exchange.
-4-
<PAGE>
Risk Factors
Prospective investors should consider a number of factors:
1. Delaware World Growth Fund and Delaware New Pacific Fund may invest
substantially all of their assets in non-United States issuers. Delaware U.S.
Growth Fund, Delaware Enterprise Fund and Delaware Corporate Income Fund may
invest, respectively, 20%, 15% and 10% of their assets in such issuers.
Investing in securities of non-United States companies which are generally
denominated in foreign currencies and the utilization of forward foreign
currency exchange contracts involve certain risk and opportunity considerations
not typically associated with investing in United States companies. Some of
these investments may be in markets of emerging countries which may be subject
to a greater degree of economic, political and social instability than is the
case in the United States and Western European markets. See Foreign Investments
under Risk Factors and Special Considerations and Implementation of Investment
Objectives and Policies.
2. Each Fund has the right to engage in options and futures
transactions for certain hedging, return enhancement and risk management
purposes in accordance with regulations of the Commodity Futures Trading
Commission. While the Funds do not engage in options and futures for speculative
purposes, there are risks which result from the use of these instruments, and an
investor should carefully review the descriptions of these risks in this
Prospectus. Certain options and futures may be considered to be derivative
securities. See Implementation of Investment Objectives and Policies.
3. Each Fund may invest in interest rate, currency and other types of
swaps for hedging purposes which could subject the Fund to increased risks.
Interest rate swaps may be considered to be derivative securities. See
Implementation of Investment Objectives and Policies.
4. The Delaware Corporate Income Fund may invest up to 35% of its
assets and the Delaware U.S. Growth Fund may invest up to 10% of its assets in
non-investment grade fixed income securities ("junk bonds"). Consequently,
greater risks may be involved with an investment in these Funds. See Lower-Rated
Securities under Risk Factors and Special Considerations.
-5-
<PAGE>
SUMMARY OF EXPENSES
EQUITY FUNDS
<TABLE>
<CAPTION>
Delaware Delaware U.S. Delaware Delaware
Enterprise Growth World Growth New Pacific
Shareholder Fund Fund Fund Fund
Transaction Expenses Institutional Class Institutional Class Institutional Class Institutional Class
-------------------- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price)........... None None None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as
a percentage of offering price) None None None None
Redemption Fees.............. None* None* None* None*
Exchange Fees................ None** None** None** None**
</TABLE>
FIXED-INCOME FUNDS
Delaware Federal Delaware Corporate
Bond Fund Income Fund
Shareholder Transaction Expenses Institutional Class Institutional Class
- -------------------------------- ------------------- -------------------
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price)........... None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as
a percentage of offering price) None None
Redemption Fees.............. None* None*
Exchange Fees................ None** None**
- ------------------------
* CoreStates Bank, N.A. currently charges $7.50 per redemption for
redemptions payable by wire.
** Exchanges are subject to the requirements of each Fund and a front-end
sales charge may apply.
-6-
<PAGE>
Annual Operating Expenses (as percentage of daily net assets)
The purpose of the following table is to assist the investor in
understanding the various costs and expenses that will bear directly or
indirectly in owning shares of each Fund.
EQUITY FUNDS
<TABLE>
<CAPTION>
Annual Operating Expenses
(as a percentage of Delaware Enterprise Delaware U.S. Growth Delaware World Growth Delaware New Pacific
average daily net assets) Fund Institutional Class Fund Institutional Class Fund Institutional Class Fund Institutional Class
- ------------------------- ------------------------ ------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C>
Management Fees (after
voluntary waiver)+...... 0.00% 0.00% 0.00% 0.00%++
12b-1 Expenses............... None None None None
Other Operating Expenses
(after giving effect to
voluntary waiver
reimbursements)+........ 0.00% 0.00% 0.00% 0.00%
----- ----- ----- -----
Total Operating Expenses
(after giving effect to
voluntary waiver
reimbursements)+..... 1.53% 1.50% 1.50% 1.50%
===== ===== ===== =====
</TABLE>
FIXED-INCOME FUNDS
Annual Operating Expenses Delaware Federal Delaware Corporate
(as a percentage of Bond Fund Income Fund
average daily net assets) Institutional Class Institutional Class
- ------------------------- ------------------- -------------------
Management Fees (after
voluntary waiver)+...... 0.00% 0.00%
12b-1 Expenses............... None None
Other Operating Expenses
(after giving effect to
voluntary waiver
reimbursements)+........ 0.00% 0.00%
----- -----
Total Operating Expenses
(after giving effect to
voluntary waiver
reimbursements)+..... 0.90% 0.90%
===== =====
- ------------------------
For expense information about the Class A Shares, Class B Shares and Class C
Shares of each Fund, see the separate Prospectus relating to those classes.
+ The Manager elected voluntarily to waive that portion, if any, of the
annual Management Fees payable by a particular Fund and to reimburse a Fund
for its expenses to the extent necessary to ensure that the expenses of
that Fund (exclusive of taxes, interest, brokerage commissions and
extraordinary expenses) do not exceed, as a percentage of average net
assets, on an annualized basis, the amounts noted above corresponding to
the caption "Total Operating Expenses" through the six months from the date
of this Prospectus. Absent such fee waivers and expense reimbursements,
"Total Operating Expenses" would be as follows:
Delaware Enterprise Fund Institutional Class................. 0.00%
Delaware U.S. Growth Fund Institutional Class................ 0.00%
Delaware World Growth Fund Institutional Class............... 0.00%
Delaware New Pacific Fund Institutional Class................ 0.00%
Delaware Federal Bond Fund Institutional Class............... 0.00%
Delaware Corporate Income Fund Institutional Class........... 0.00%
++ Effective May 6, 1996, the investment management fee payable by the
Delaware New Pacific Fund changed from 1.10% of average daily net assets to
0.80% of average daily net assets. The expense information has been
restated to reflect that change.
-7-
<PAGE>
(DAF-IC)
The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return and (2) redemption at the end of each time period
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Delaware Enterprise Fund Institutional Class $000 $000 $000 $000
Delaware U.S. Growth Fund Institutional Class $000 $000 $000 $000
Delaware World Growth Fund Institutional Class $000 $000 $000 $000
Delaware New Pacific Fund Institutional Class $000 $000 $000 $000
Delaware Federal Bond Fund Institutional Class $000 $000 $000 $000
Delaware Corporate Income Fund Institutional Class $000 $000 $000 $000
</TABLE>
This example should not be considered a representation of past or
future expenses or performance. Actual expenses may be greater or less than
those shown.
-8-
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The table below provides financial highlights of income and capital changes for
one share of each Class outstanding for the fiscal year ended October 31, 1995
and the period ended October 31, 1994, and has been audited by Coopers & Lybrand
L.L.P., Adviser Funds, Inc.'s independent accountants, whose report thereon is
included in the Annual Report which accompanies the Statement of Additional
Information. This information is supplemented by the audited financial
statements and accompanying notes appearing in such Annual Report.
- -------------------------------------------------------------------------------
-9-
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
Institutional Class
-----------------------------------------------------
Delaware Delaware
Delaware Delaware U.S. U.S.
Enterprise Enterprise Growth Growth
Fund Fund Fund Fund
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .......................... $9.23 $10.44 $10.23 $10.52
Income From Investment Operations
- ---------------------------------
Net Investment Income (Loss)................................... (0.02) (0.02) (0.05) (0.01)
Net Realized and Unrealized Gain (Loss) on Investments ........ 2.09 (1.19) 2.32 (0.28)
---- ---- ---- ----
Total From Investment Operations......................... 2.07 (1.21) 2.27 (0.29)
---- ------ ---- -----
Less Distributions to Shareholders
- ----------------------------------
From Net Investment Income..................................... --- --- --- ---
From Net Realized Gains........................................ --- --- --- ---
---- ----- ----- ----
Total Distributions...................................... 0.00 0.00 0.00 0.00
---- ---- ---- ----
Net Asset Value, End of Period................................. $11.30 $9.23 $12.50 $10.23
====== ===== ====== ======
- ---------------------------------
Total Return................................................... 22.43% (11.61%) 22.19% (2.78%)
- ------------
- ---------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)...................... $3,666 $234 $4,819 $1,630
Net Expenses to Average Daily Net Assets....................... 1.53% 1.50%(1) 1.50% 1.50%(1)
Net Investment Income (Loss) to Average Daily Net Assets ...... (0.60%) (0.63%)(1) (0.59%) (0.27%)(1)
Portfolio Turnover Rate........................................ 106% 120% 58% 66%
Commencement of Operations..................................... 02/03/94 02/03/94
Without the Waiver of Fees and Reimbursement
of Expenses by the Advisor, the Ratio of
Net Expenses to Average Net Assets would have been: ........... 2.07% 2.75%(1) 1.83% 2.60%(1)
- --------------------
(1) Annualized.
<PAGE>
Adviser Funds, Inc.
Institutional Class
--------------------------------------------------
Delaware Delaware Delaware Delaware
World World New New
Growth Growth Pacific Pacific
Fund Fund Fund Fund
1995 1994 1995 1994
Net Asset Value, Beginning of Period .......................... $11.02 $10.50 $10.48 $11.14
Income From Investment Operations
- ---------------------------------
Net Investment Income (Loss)................................... 0.04 0.04 (0.01) 0.01
Net Realized and Unrealized Gain (Loss) on Investments 0.41 0.52 (1.41) (0.67)
---- ---- ------ ----
Total From Investment Operations......................... 0.45 0.56 (1.42) (0.66)
---- ---- ------ ----
Less Distributions to Shareholders
- ----------------------------------
From Net Investment Income..................................... (0.03) (0.04) --- ---
From Net Realized Gains........................................ --- --- (0.29) ---
---- ----- ----- ----
Total Distributions...................................... (0.03) (0.04) (0.29) 0.00
---- ------ ----- ----
Net Asset Value, End of Period................................. $11.44 $11.02 $8.77 $10.48
====== ====== ===== ======
- ---------------------------------
Total Return................................................... 4.22% 5.26% (13.65%) (5.98%)
- ------------
- ---------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)...................... $161 $63 $62 $47
Net Expenses to Average Daily Net Assets....................... 1.50% 1.50%(1) 1.50% 1.50%(1)
Net Investment Income (Loss) to Average Daily Net Assets ...... 0.40% 0.76%(1) (0.16%) (0.23%)(1)
Portfolio Turnover Rate........................................ 9% 6% 163% 104%
Commencement of Operations..................................... 02/03/94 02/03/94
Without the Waiver of Fees and Reimbursement
of Expenses by the Advisor, the Ratio of
Net Expenses to Average Net Assets would have been: ........... 2.61% 3.21%(1) 3.38% 3.31%(1)
- --------------------
(1) Annualized.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
Institutional Class
--------------------------------------------------
Delaware Delaware Delaware Delaware
Federal Federal Corporate Corporate
Bond Bond Income Income
Fund Fund Fund Fund
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .......................... $9.15 $10.00 $8.84 $9.98
Income From Investment Operations
- ---------------------------------
Net Investment Income (Loss)................................... 0.69 0.33 0.73 0.41
Net Realized and Unrealized Gain (Loss) on Investments......... 0.54 (0.85) 0.78 (1.12)
---- ------ ---- -----
Total From Investment Operations......................... 1.23 (0.52) 1.51 (0.71)
---- ------ ---- -----
Less Distributions to Shareholders
- ----------------------------------
From Net Investment Income..................................... (0.78) (0.33) (0.86) (0.43)
From Net Realized Gains........................................ --- --- --- ---
----- ----- ----- ----
Total Distributions...................................... (0.78) (0.33) (0.86) (0.43)
------ ----- ----- -----
Net Asset Value, End of Period................................. $9.60 $9.15 $9.49 $8.84
===== ===== ===== =====
- ---------------------------------
Total Return.................................................. 14.15% (5.17%) 18.27% (7.21%)
- ------------
- ---------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)...................... $979 $353 $3,704 $1,302
Net Expenses to Average Daily Net Assets....................... 0.90% 0.90%(1) 0.90% 0.90%(1)
Net Investment Income (Loss) to Average Daily Net Assets ...... 6.39% 5.57%(1) 6.95% 6.88%(1)
Portfolio Turnover Rate........................................ 227% 366% 119% 185%
Commencement of Operations..................................... 02/03/94 02/03/94
Without the Waiver of Fees and Reimbursement
of Expenses by the Advisor, the Ratio of
Net Expenses to Average Net Assets would have been: ........... 1.71% 2.23%(1) 1.52% 2.20%(1)
- --------------------
(1) Annualized.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND
STRATEGIES
The Equity Funds
Delaware Enterprise Fund. This Fund's fundamental investment objective
is to seek to provide maximum appreciation of capital by investing in
medium-sized companies which have a dominant position within their industry, are
undervalued, or have potential for growth in earnings. Currently, medium-sized
companies are considered to have market capitalizations between $250 million and
$5 billion. The Fund is unlikely to participate in slow growth industries such
as utilities and is likely to invest frequently in high growth rate companies in
the retail, health care, computer, communication and entertainment industries.
Under normal circumstances, at least 65% of the value of the Fund's assets will
be invested in equity securities.
In selecting investments, the Fund's Manager or sub-adviser seeks small
or medium capitalization companies that it believes have earnings that may be
expected to grow faster than the U.S. economy in general. These companies will
typically possess one or more characteristics, including high quality
management, a leading or dominant position in a product and a relatively high
rate of return on invested capital. Income derived from securities of such
companies is only an incidental consideration of the Fund.
The Fund will primarily invest in common stocks although it may invest
up to 35% of the value of its assets in convertible bonds, convertible preferred
stock, warrants to purchase common stock, futures and options.
The Fund may invest up to 15% of its assets in securities of foreign
issuers.
Delaware U.S. Growth Fund. This Fund's fundamental investment objective
is to seek 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.
The Manager or sub-adviser will seek investments in companies of all
sizes that the Manager or sub-adviser believes have earnings that may be
expected to grow faster than the U.S. economy in general. Such companies may
offer the possibility of accelerated earnings growth because of management
changes, new products or structural changes in the economy. In addition, those
companies with relatively high rates of return on invested capital may be able
to finance future growth from internal sources. Income derived from securities
in such companies will be only an incidental consideration of the Fund.
The Fund intends to invest primarily in common stocks believed by the
Manager or sub-adviser to have appreciation potential. However, common stock is
not always the class of security that provides the greatest possibility for
appreciation. The Fund may invest up to 35% of its assets in debt securities,
bonds, convertible bonds, preferred stock and convertible preferred stock. The
Fund may also invest up to 10% of its assets in securities rated lower than Baa
by Moody's Investors Service ("Moody's") or BBB by Standard & Poor's Ratings
Group ("S&P") if, in the opinion of the Manager, doing so would further the
Fund's objective. Lower-rated or unrated securities, commonly referred to as
"junk bonds," are more likely to react to developments affecting market and
credit risk than are more highly rated securities, which react primarily to
movements in the general level of interest rates. See Risk Factors and Special
Considerations for a description of the risks inherent in such securities and
see Description of Security Ratings in Part B for a description of Moody's and
S&P ratings.
The Fund may invest up to 20% of its assets in foreign securities.
-10-
<PAGE>
Delaware World Growth Fund. This Fund's fundamental objective is to
seek to maximize total return (capital appreciation and income) by investing
primarily in equity securities of foreign issuers located in countries that the
Fund's Manager or sub-adviser deems to have attractive investment opportunities.
"Total return" refers to income plus realized and unrealized appreciation of the
securities. Under normal circumstances, the Fund will invest at least 65% of the
value of its total assets in securities of issuers located in at least three
countries other than the United States. However, more than 25% of the Fund's
total assets may be invested in the securities of issuers located in the same
country.
The Fund will emphasize established companies, although it may invest
in companies of varying sizes as measured by assets, sales and capitalization.
The Fund may invest in securities of issuers located in a variety of different
foreign regions and countries which includes, but is not limited to, the
following: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Greece, Hong Kong, Ireland, Italy, Japan, Luxembourg, Malaysia, Mexico,
The Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, Thailand and The United Kingdom. The relative strength or weakness
of a particular country's currency or economy may dictate whether securities of
issuers located in such country will be purchased or sold. Criteria for
determining the appropriate distribution of investments among various countries
and regions include prospects for relative economic growth among foreign
countries, expected levels of inflation, government policies influencing
business conditions, the outlook for currency relationships, and the range of
investment opportunities available to international investors.
The Fund invests in common stock and may invest in other securities
with equity characteristics, consisting of trust or limited partnership
interests, preferred stock, rights and warrants. The Fund may also invest in
convertible securities, consisting of debt securities or preferred stock that
may be converted into common stock or that carry the right to purchase common
stock. The Fund may invest in securities listed on foreign or domestic
securities exchanges and securities traded in foreign and domestic
over-the-counter markets and may invest in restricted or unlisted securities. In
addition, the Fund's investments may include American Depository Receipts
(ADRs), American Depository Shares (ADSs) and securities of foreign investment
funds or trusts to the extent permitted under the Fund's investment
restrictions. See Risk Factors and Special Considerations -- Foreign
Investments, below. For a complete list of the Fund's investment restrictions,
see Investment Restrictions in Part B.
The Fund may invest up to 20% of its assets in securities of companies
located in, or governments of, developing countries. For temporary defensive
purposes, the Fund may invest a major portion of its assets in securities of
U.S. issuers. In addition, the Fund may be invested in short-term debt
instruments to meet anticipated day-to-day operating expenses and liquidity
requirements.
Delaware New Pacific Fund. This Fund's fundamental investment objective
is to seek to maximize long-term capital appreciation by investing primarily in
equity securities of companies domiciled or having their principal business
activities in countries located in the Pacific Basin.
The Fund will invest in companies of varying size, measured by assets,
sales and capitalization. The Fund will invest in companies in one or more of
the following Pacific Basin countries:
Australia Pakistan
China Philippines
Hong Kong Singapore
India South Korea
Indonesia Sri Lanka
Japan Taiwan
Malaysia Thailand
New Zealand
-11-
<PAGE>
The Fund may invest in companies located in other countries or regions
in the Pacific Basin as those economies and markets become more accessible. The
Fund will invest in other countries or regions only after the decision to do so
is disclosed in an amendment to this Prospectus. Any amendment to this
Prospectus containing such a material change will be delivered to investors.
While the Fund will generally have investments in companies located in at least
three different countries or regions, the Fund may from time to time have
investments only in one or a few countries or regions.
The Fund invests in common stock and may invest in other securities
with equity characteristics, consisting of trust or limited partnership
interests, preferred stock, rights and warrants. The Fund may also invest in
convertible securities, consisting of debt securities or preferred stock that
may be converted into common stock or that carry the right to purchase common
stock. The Fund may invest in securities listed on foreign or domestic
securities exchanges and securities traded in foreign and domestic
over-the-counter markets and may invest in restricted or unlisted securities.
Under normal circumstances, at least 65% of the Fund's assets will be
invested in equity securities of foreign issuers located in the Pacific Basin.
The Fund may invest in securities of companies located in, or governments of,
developing countries within the Pacific Basin. The Fund may invest up to 35% of
its assets in securities of U.S. issuers. In addition, the Fund may be invested
in short-term debt instruments to meet anticipated day-to-day operating expenses
and liquidity requirements.
The Fixed-Income Funds
Delaware Federal Bond Fund. This Fund's fundamental investment
objective is to seek to maximize current income consistent with the preservation
of capital by investing primarily in securities issued by the U.S. Government,
its agencies and instrumentalities ("U.S. Government Securities"). Under normal
conditions, at least 65% of the value of the Fund's total assets will be
invested in U.S. Government Securities.
Depending upon prevailing market conditions, the Fund may invest in
U.S. Government Securities of varying maturities, ranging up to 40 years. U.S.
Government Securities include certain mortgage-backed securities, such as
Government National Mortgage Association Certificates. See Mortgage-Backed
Securities under Implementation of Investment Objectives and Policies. As the
Fund invests primarily in U.S. Government Securities, which are lower-risk
securities, it may not achieve as high a level of income under all market
conditions as would be the case if the Fund invested in higher yielding
securities. Up to 35% of the Fund's assets may be invested in corporate bonds of
U.S. companies, mortgage-backed securities and asset-backed securities that are
rated at least Aa by Moody's or AA by S&P or, if not rated, are of comparable
quality in the Manager's or sub-adviser's opinion. See Description of Security
Ratings in Part B.
Delaware Corporate Income Fund. This Fund's fundamental investment
objective is to seek to provide a high level of current income consistent with
preservation of capital by investing primarily in corporate bonds of U.S.
companies that are rated at least Baa by Moody's or BBB by S&P or, if not rated,
are of comparable quality in the opinion of the Manager or sub-adviser. See
Description of Security Ratings in Part B.
Maturities of the corporate bonds held by the Fund are expected to
range from seven to 40 years, unless the Fund's Manager or sub-adviser believes
that investing in corporate bonds with shorter or longer maturities would be
appropriate in light of prevailing market conditions.
-12-
<PAGE>
The Fund may also invest up to 35% of its assets in preferred stock,
corporate bonds and preferred stock convertible into or that carry the right to
acquire common stock, corporate bonds that are not of investment grade quality,
U.S. Government Securities, various mortgage-backed securities and asset-backed
securities, common stock consistent with the Fund's objective, and bonds issued
by foreign governments or foreign corporations, provided that no more than 10%
of the Fund's assets will be invested in bonds issued by foreign governments or
foreign corporations and no more than 10% of the Fund's assets will be
denominated in any one foreign currency. The Fund will not invest more than 35%
of its assets in bonds that are not of investment grade quality and will not
invest in bonds rated below Caa by Moody's or CCC by S&P. Lower-rated or unrated
securities, commonly referred to as "junk bonds," are more likely to react to
developments affecting market and credit risk than are more highly rated
securities, which primarily react to movements in the general level of interest
rates. See Risk Factors and Special Considerations for a description of the
risks inherent in such securities and see Description of Security Ratings in
Part B for a description of Moody's and S&P ratings.
Certain Investment Guidelines
Illiquid Securities. Up to 10% of the assets of each Fund may be
invested in securities that are not readily marketable, including, where
applicable: (1) repurchase agreements with maturities greater than seven
calendar days; (2) time deposits maturing in more than seven calendar days; (3)
certain instruments, futures contracts and options thereon for which there is no
liquid secondary market; (4) certain over-the-counter options, as described in
Part B; (5) certain variable rate demand notes having a demand period of more
than seven days; and (6) certain Rule 144A restricted securities (Rule 144A
securities for which a dealer or institutional market exists will not be
considered illiquid).
Restricted Securities. The Delaware Enterprise, Delaware U.S. Growth,
Delaware World Growth and Delaware New Pacific Funds may invest in restricted
securities. Restricted securities are securities with legal or contractual
restrictions on resale. Restricted securities eligible for resale pursuant to
Rule 144A that have a readily available market will not be considered illiquid
for purposes of the Funds' investment restriction concerning illiquid
securities.
Other Guidelines. In addition, each Fund may invest up to 5% of its
assets in the securities of issuers which have been in continuous operation for
less than three years. Each Fund may also borrow from banks for temporary or
other emergency purposes, but not for investment purposes, in an amount up to
one-third of its total assets, and may pledge its assets to the same extent in
connection with such borrowings. Whenever these borrowings, including reverse
repurchase agreements, exceed 5% of the value of a Fund's total assets, the Fund
will not purchase any securities. Except for the limitations on borrowing, the
investment guidelines set forth in this paragraph may be changed at any time
without shareholder consent by vote of the Board of Directors. A complete list
of investment restrictions that identifies additional restrictions that cannot
be changed without the approval of a majority of an affected Fund's outstanding
shares (as well as other non-fundamental restrictions) is contained in Part B.
Risk Factors and Special Considerations
Fixed-Income Securities. The market value of fixed-income obligations
held by the Funds and, consequently, the net asset value per share of the Funds
investing in fixed-income securities can be expected to vary inversely to
-13-
<PAGE>
changes in prevailing interest rates. When interest rates are falling, the
inflow of net new money to a Fixed-Income Fund will likely be invested in
instruments producing lower yields than the balance of assets in the Fund,
thereby reducing current yields. In periods of rising interest rates, the
opposite can be expected to occur. In addition, obligations purchased by the
Delaware Corporate Income Fund that are rated in the lowest of the top four
ratings (Baa by Moody's or BBB by S&P) are considered to have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade securities. See Lower-Rated
Securities, below.
Foreign Investments. The Delaware World Growth Fund and the Delaware
New Pacific Fund may invest substantially all of their assets in foreign
investments. Certain of the Funds may invest the following percentages of their
assets in foreign securities: the Delaware Enterprise Fund (15%), the Delaware
U.S. Growth Fund (20%) and the Delaware Corporate Income Fund (10%). There are
certain risks involved in investing in foreign securities, including those
resulting from fluctuations in currency exchange rates, devaluation of
currencies, future political or economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions, reduced availability of public information concerning issuers, and
the fact that foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic companies. Although the
Funds' Manager or sub-advisers do not intend to expose the Funds to such risks,
with respect to certain foreign countries, there is the possibility of
expropriation, nationalization, confiscatory taxation and limitations on the use
or removal of funds or other assets of the Funds, including the withholding of
dividends. When the Funds' Manager or sub-adviser believes that currency in
which a Fund security or securities is denominated may suffer a decline against
the United States dollar, it may hedge such risk by entering into a forward
contract to sell an amount of foreign currency approximating the value of some
or all of the Funds' portfolio securities denominated in such foreign currency.
Because foreign securities generally are denominated and pay dividends
or interest in foreign currencies, and the Funds hold various foreign currencies
from time to time, the value of the net assets of the Funds as measured in
United States dollars will be affected favorably or unfavorably by changes in
exchange rates. Generally, currency exchange transactions will be conducted on a
spot (i.e., cash) basis at the spot rate prevailing in the currency exchange
market. The cost of currency exchange transactions will generally be the
difference between the bid and offer spot rate of the currency being purchased
or sold. In order to protect against uncertainty in the level of future foreign
currency exchange rates, the Funds are authorized to enter into certain foreign
transactions. Investors should be aware that exchange rate movements can be
significant and can endure for long periods of time. The Manager and
sub-advisers of the Funds attempt to manage exchange rate risk through active
currency management.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of the New York Stock Exchange. Accordingly, the Funds' foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of United States companies. Moreover, the
settlement periods for foreign securities, which are often longer than those for
securities of United States issuers, may affect portfolio liquidity. In buying
-14-
<PAGE>
and selling securities on foreign exchanges, the Funds normally pay fixed
commissions that are generally higher than the negotiated commissions charged in
the United States. In addition, there is generally less governmental supervision
and regulation of securities exchanges, brokers and issuers in foreign countries
than in the United States.
The Delaware World Growth Fund and the Delaware New Pacific Fund may
purchase foreign equity and debt securities that are listed on a principal
foreign securities exchange or over-the-counter market, represented by American
Depository Receipts (ADRs) or American Depository Shares (ADSs). An ADR or ADS
facility may be either a "sponsored" or "unsponsored" arrangement. In a
sponsored arrangement, the foreign issuer establishes the facility, pays some or
all the depository's fees, and usually agrees to provide shareholder
communications. In an unsponsored arrangement, the foreign issuer is not
involved and the ADR or ADS holders pay the fees of the depository. Depository
banks arrange unsponsored ADR and ADS facilities, either upon their initiative
or at the urging of large shareholders of or dealers in the foreign securities.
Unsponsored ADRs or ADSs may involve more risk to the Fund than
sponsored ADRs or ADSs due to the additional costs involved to the Fund, the
relative illiquidity of the issue in U.S. markets, and the possibility of higher
trading costs in the over the counter market as opposed to exchange-based
trading. The Funds will take these and other risk considerations into account
before making an investment in an unsponsored ADR or ADS.
Investments in foreign securities offer potential benefits not
available from investments in securities of domestic issuers. Such benefits
include the opportunity to invest in securities that appear to offer greater
potential for long-term capital appreciation than investments in domestic
securities, and to reduce fluctuations in Fund value by taking advantage of
foreign stock markets that do not move in a manner parallel to U.S. markets.
Lower-Rated Securities. The following Funds may invest the following
percentages of their total assets in debt securities rated lower than Baa by
Moody's or BBB by S&P: Delaware U.S. Growth Fund (10%) and Delaware Corporate
Income Fund (35%). Prices for securities rated below investment grade may be
affected by legislative and regulatory developments. Securities rated Ba\BB or
lower are commonly referred to as "junk bonds". See Description of Security
Ratings in Part B. As of February 1, 1996, the Delaware Corporate Income Fund
held 9.35% of its total assets in securities rated BBB-, 1.89% of its total
assets in securities rated BB and 1.37% of its total assets in securities rated
BB-. All such ratings applied at the time of investment.
Securities rated below investment grade as well as unrated securities
usually entail greater risk (including the possibility of default or bankruptcy
of the issuers), and generally involve greater price volatility and risk of
principal and income, and may be less liquid, than securities in higher rated
categories. Both price volatility and illiquidity may make it difficult for the
Fund to value certain of these securities at certain times and these securities
may be difficult to sell under certain market conditions. Prices for securities
rated below investment grade may be affected by legislative and regulatory
developments.
Borrowing. Each of the Funds may borrow money for temporary or
emergency purposes in amounts not in excess of one-third of each Fund's total
assets. If a Fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is repaid. If a Fund makes additional
-15-
<PAGE>
investments while borrowings are outstanding, this may be construed as a form of
leverage. None of the Funds, except for the Delaware Enterprise and Delaware
U.S. Growth Funds, will purchase additional securities when money borrowed
exceeds 5% of the Fund's total assets.
Securities Lending. Each Fund may lend securities with a value of up to
one-third of its total assets to broker-dealers, institutions and other persons
as a means of earning additional income. Any such loan shall be continuously
secured by collateral at least equal to 100% of the value of the security being
loaned. If the collateral is cash, it may be invested in short-term securities,
U.S. Government obligations or certificates of deposit. Each Fund will retain
the evidence of ownership of any loaned securities and will continue to be
entitled to the interest or dividends payable on the loaned securities. In
addition, the Fund will receive interest on the loan. The loan will be
terminable by the Fund at any time and will not be made to affiliates of the
Fund, the Manager or the respective sub-adviser. The Fund may pay reasonable
finder's fees to persons unaffiliated with it in connection with the arrangement
of loans.
If the other party to a securities loan becomes bankrupt, a Fund could
experience delays in recovering its securities. To the extent that, in the
meantime, the value of securities loans has increased, the Fund could experience
a loss.
Temporary Defensive Position. For temporary defensive purposes when the
Manager or sub-adviser determines that market conditions warrant, each Fund may
invest up to 100% of its assets in money market instruments. To the extent a
Fund is engaged in a temporary defensive position, the Fund will not be pursuing
its investment objective. Each Fund may also hold a portion of its assets in
cash for liquidity purposes.
Portfolio Turnover. The portfolio turnover rates for the Funds were
as follows:
Period Ended Year Ended
Fund October 31, 1994 October 31, 1995
- ---- ---------------- ----------------
Delaware
Enterprise
Fund 120% 106%
Delaware
U.S. Growth
Fund 66% 58%
Delaware
World Growth
Fund 6% 9%
Delaware
New Pacific
Fund 104% 163%
Delaware
Federal Bond
Fund 366% 227%
Delaware
Corporate
Income Fund 185% 119%
High turnover in any Fund could result in additional brokerage
commissions to be paid by the Fund. In addition, high portfolio turnover may
also mean that a proportionately greater amount of distributions to shareholders
will be taxed as ordinary income rather than long-term capital gains compared to
investment companies with lower portfolio turnover. See Dividends, Distributions
and Taxes.
-16-
<PAGE>
CLASSES OF SHARES
The Distributor serves as the national distributor for each Fund.
Shares may be purchased directly by contacting a Fund or its agent or through
authorized investment dealers. All purchases of shares are at net asset value.
There is no front-end or contingent deferred sales charge.
Investment instructions given on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees considering purchasing shares as part of
their retirement program should contact their employer for details.
Shares are available for purchase only by: (a) retirement plans
introduced by persons not associated with brokers or dealers that are primarily
engaged in the retail securities business and rollover individual retirement
accounts from such plans; (b) tax-exempt employee benefit plans of the Manager
or its affiliates and securities dealer firms with a selling agreement with the
Distributor; (c) institutional advisory accounts of the Manager or its
affiliates and those having client relationships with Delaware Investment
Advisers, a division of the Manager, or its affiliates and their corporate
sponsors, as well as subsidiaries and related employee benefit plans and
rollover individual retirement accounts from such institutional advisory
accounts; (d) banks, trust companies and similar financial institutions
investing for their own account or for the account of their trust customers for
whom such financial institution is exercising investment discretion in
purchasing shares of the class; and (e) registered investment advisers investing
on behalf of clients that consist solely of institutions and high net- worth
individuals having at least $1,000,000 entrusted to the adviser for investment
purposes, but only if the adviser is not affiliated or associated with a broker
or dealer and derives compensation for its services exclusively from its clients
for such advisory services.
Class A Shares, Class B Shares and Class C Shares
In addition to offering Institutional Class shares, each Fund also
offers Class A Shares, Class B Shares and Class C Shares, which are described in
a separate prospectus relating only to those classes. Class A Shares carry a
front-end sales charge and have annual 12b-1 expenses equal to a maximum of
.35%. The maximum front-end sales charge as a percentage of the offering price
is 4.75% and is reduced on certain transactions of $100,000 or more. Class B
Shares and Class C Shares have no front-end sales charge but are subject to
annual 12b-1 expenses equal to a maximum of 1%. Class B Shares and Class C
Shares and certain Class A Shares may be subject to a contingent deferred sales
charge upon redemption. To obtain a prospectus relating to such classes, contact
the Distributor by writing to the address on the back cover of this Prospectus
or by calling 800-523-4640.
-17-
<PAGE>
HOW TO BUY SHARES
Each Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer. In all instances, investors must
qualify to purchase shares of the Classes.
Investing Directly by Mail
1. Initial Purchases--An Investment Application or, in the case of a retirement
account, an appropriate retirement plan application, must be completed, signed
and sent with a check payable to the specific Fund and Class selected, at 1818
Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to the specific Fund and Class selected. Your check should be
identified with your name(s) and account number.
Investing Directly by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 0114-2596 (include
your name(s) and your account number for the Class).
1. Initial Purchases--Before you invest, telephone the Client Services
Department at 800-828-5052 to get an account number. If you do not call first,
it may delay processing your investment. In addition, you must promptly send
your Investment Application or, in the case of a retirement account, an
appropriate retirement plan application, to the specific Fund and Class
selected, to 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You must advise your Client
Services Representative by telephone at 800-828-5052 prior to sending your wire.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group
and you qualify to purchase shares of the Class, you may write and authorize an
exchange of part or all of your investment into shares of either Fund. However,
Class B Shares and Class C Shares of each Fund and the Class B Shares and Class
C Shares of the other funds in the Delaware Group offering such a class of
shares may not be exchanged into the Classes. If you wish to open an account by
exchange, call your Client Services Representative at 800-828-5052 for more
information.
Investing through Your Investment Dealer
You can make a purchase of shares of the Funds through most investment
dealers who, as part of the service they provide, must promptly transmit orders
to a Fund. They may charge for this service.
Purchase Price and Effective Date
The purchase price (net asset value) is determined as of the close of
regular trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open.
The effective date of a purchase made through an investment dealer is
the date the order is received by the Fund in which the shares are being
purchased. The effective date of a direct purchase is the day your wire,
electronic transfer or check is received, unless it is received after the time
-18-
<PAGE>
the share price is determined, as noted above. Purchase orders received after
such time will be effective the next business day.
The Conditions of Your Purchase
Each Fund reserves the right to reject any purchase order. If a
purchase is cancelled because your check is returned unpaid, you are responsible
for any loss incurred. Each Fund can redeem shares from your account(s) to
reimburse itself for any loss, and you may be restricted from making future
purchases in any of the funds in the Delaware Group. Each Fund reserves the
right to reject purchases by third-party checks or checks that are not drawn on
a domestic branch of a United States financial institution. If a check drawn on
a foreign financial institution is accepted, you may be subject to additional
bank charges for clearance and currency conversion.
Each Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under $250 as a result of redemptions.
-19-
<PAGE>
REDEMPTION AND EXCHANGE
Redemption and exchange requests made on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees should therefore contact their employer for
details.
Your shares will be redeemed or exchanged at a price equal to the net
asset value next determined after we receive your request in good order.
Redemption and exchange requests received in good order after the time the net
asset value of shares is determined, as noted above, will be processed on the
next business day. See Purchase Price and Effective Date under Buying Shares.
Except as otherwise noted below, for a redemption request to be in "good order,"
you must provide your Class account number, account registration, and the total
number of shares or dollar amount of the transaction. For exchange requests, you
must also provide the name of the fund you want to receive the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may also request a redemption
or an exchange by calling 800-828- 5052.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
Each Fund will honor written redemption requests of shareholders who
recently purchased shares by check, but will not mail the proceeds until it is
reasonably satisfied that the purchase check has cleared, which may take up to
15 days from the purchase date. Telephone redemptions for shares recently
purchased by check will not be honored unless the Fund involved is reasonably
satisfied that the purchase check has cleared. You can avoid this potential
delay if you purchase shares by wiring Federal Funds. Each Fund reserves the
right to reject a written or telephone redemption request or delay payment of
redemption proceeds if there has been a recent change to the shareholder's
address of record.
Shares of a Class may be exchanged into any other Delaware Group mutual
fund provided: (1) the investment satisfies the eligibility and other
requirements set forth in the prospectus of the fund being acquired, including
the payment of any applicable front-end sales charge; and (2) the shares of the
fund being acquired are in a state where that fund is registered. If exchanges
are made into other shares that are eligible for purchase only by those
permitted to purchase shares of the Class, such exchange will be exchanged at
net asset value. Shares of a Class may not be exchanged into the Class B Shares
or Class C Shares of any of the funds in the Delaware Group. Each Fund may
suspend or terminate, or amend the terms of, the exchange privilege upon 60
days' written notice to shareholders.
Various redemption and exchange methods are outlined below. No fee is
charged by any Fund or the Distributor for redeeming or exchanging your shares.
You may also have your investment dealer arrange to have your shares redeemed or
exchanged. Your investment dealer may charge for this service.
All authorizations, including selection of any of the features
described below, shall continue in effect until such time as a written
revocation or modification has been received by the Fund to which the
authorization relates or its agent.
Written Redemption and Exchange
You can write to each Fund at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares or to request an exchange of any or
-20-
<PAGE>
all your shares into another mutual fund in the Delaware Group, subject to the
same conditions and limitations as other exchanges noted above. The request must
be signed by all owners of the account or your investment dealer of record.
For redemptions of more than $50,000, or when the proceeds are not sent
to the shareholder(s) at the address of record, the Funds require a signature by
all owners of the account and may require a signature guarantee. Each signature
guarantee must be supplied by an eligible guarantor institution. The Funds
reserve the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Funds may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.
The redemption request is effective at the net asset value next
determined after it is received in good order. Payment is normally mailed the
next business day, but no later than seven days, after receipt of your
redemption request. Certificates for shares are issued only if you submit a
specific request. If your shares are in certificate form, the certificate must
accompany your request and also be in good order.
Shareholders also may submit their written request for redemption or
exchange by facsimile transmission at the following number: 215-255-8864.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your shares in certificate form, you may redeem or
exchange only by written request and you must return your certificates.
The Telephone Redemption - Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in which you have your account
in writing that you do not wish to have such service available with respect to
your account. Each Fund reserves the right to modify, terminate or suspend these
procedures upon 60 days' written notice to shareholders. It may be difficult to
reach the Funds by telephone during periods when market or economic conditions
lead to an unusually large volume of telephone requests.
Neither the Funds nor the Funds' Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of shares which are reasonably believed to be genuine.
With respect to such telephone transactions, each Fund will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be provided
for all purchase, exchange and redemption transactions initiated by telephone.
By exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption-Check to Your Address of Record
You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day, but no more than seven days, after receipt of the request.
-21-
<PAGE>
Telephone Redemption-Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must submit a written authorization and you may need to have your
signature guaranteed. For your protection, your authorization must be on file.
If you request a wire, your funds will normally be sent the next business day.
CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted from your
redemption. If you ask for a check, it will normally be mailed the next business
day, but no later than seven days, after receipt of your request to your
predesignated bank account. There are no fees for this redemption method, but
the mail time may delay getting funds into your bank account. Simply call your
Client Services Representative prior to the time the net asset value is
determined, as noted above.
Telephone Exchange
You or your investment dealer of record can exchange shares into any
fund in the Delaware Group under the same registration. As with the written
exchange service, telephone exchanges are subject to the same conditions and
limitations as other exchanges noted above. Telephone exchanges may be subject
to limitations as to amounts or frequency.
-22-
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in a Fund.
The Fixed-Income Funds accrue dividends from net investment income and
usually distribute such accrued dividends to shareholders monthly. The Equity
Funds declare dividends from net investment income and usually distribute such
accrued dividends to shareholders at least annually. All capital gains, if any,
are distributed annually, usually in December. When a capital gain dividend is
declared, the net asset value per share is reduced by the amount of the
dividend. Investors considering buying shares of one of the Funds just prior to
a record date for a taxable dividend or capital gain distribution should be
aware that, regardless of whether the price of the Fund shares to be purchased
reflects the amount of the forthcoming dividend or distribution payment, any
such payment will be a taxable dividend or distribution payment.
Both dividends and distributions, if any, are automatically reinvested
in your account at net asset value unless.
Each Fund has qualified and intends to continue to qualify as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended. In any fiscal year in which a Fund so qualifies and distributes to
shareholders its net investment income and net realized capital gains, the Fund
will be relieved of federal income tax. It is each Fund's policy to distribute
to the shareholders all of its net investment income and capital gains realized
during each fiscal year.
Under current law for each of the Funds, dividends paid from net
investment income and distributions of net realized short-term capital gains are
taxable to shareholders as ordinary income, regardless of how long shareholders
have held their Fund shares. Distributions of net realized long-term capital
gains will be taxable to shareholders as long-term capital gains, regardless of
how long shareholders have held Fund shares. Furthermore, as a general rule, a
shareholder's gain or loss on a sale or redemption of Fund shares will be a
long-term capital gain or loss if the shareholder has held the shares for more
than one year and will be a short-term capital gain or loss if the shareholder
has held the shares for one year or less. Some of the Funds' dividends declared
from net investment income may qualify for the federal dividends-received
deduction for corporations. The investor will be notified each year as to the
amount and federal tax status of all dividends and capital gains paid during the
prior year. Such dividends and capital gains may also be subject to state or
local taxes.
A portion of each Fund's income, including income from repurchase
agreements and gains from options and futures transactions may be taxable to
shareholders as ordinary income. Long-term capital gains from options and
futures transactions may be taxable to shareholders as ordinary income.
Long-term capital gains distributions, if any, are taxable as long term capital
gains, regardless of the length of time a shareholder has owned shares.
Short-term capital gains and other taxable income distributions are taxable as
ordinary income.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November or December to shareholders of
record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by a Fund and received by the shareholder on
December 31 of the year declared.
-23-
<PAGE>
If an investor has not furnished a certified correct taxpayer
identification number (generally a Social Security number) and has not certified
that withholding does not apply, or if the Internal Revenue Service has notified
a Fund that the taxpayer identification number listed on the investor's account
is incorrect according to their records or that the investor is subject to
backup withholding, federal law generally requires the Fund to withhold 31% from
any dividends and/or redemptions (including exchange redemptions). Amounts
withheld are applied to the investor's federal tax liability; a refund may be
obtained from the Internal Revenue Service if withholding results in overpayment
of taxes. Federal law also requires the Funds to withhold 30% or the applicable
tax treaty rate from dividends paid to certain nonresident alien, non-U.S.
partnership and non-U.S. corporation shareholder accounts.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. Government securities may be exempt from
state personal income taxes. Shares of each Fund are exempt from Pennsylvania
county personal property taxes.
Certain Funds may be required to pay withholding and other taxes
imposed by foreign countries in connection with their investments outside the
U.S. generally at rates from 10% to 40%, which would reduce these Funds'
investment income.
Certain income received by the Delaware World Growth and Delaware New
Pacific Funds may be subject to foreign taxes. If more than 50% of the value of
the Fund's total assets at the close of any taxable year consists of securities
of foreign corporations, the Fund may elect to treat any foreign taxes paid by
it as paid by its shareholders. If a Fund makes this election, its shareholders
will generally be required to include in income their respective pro rata
positions in computing their taxable income or, alternatively, to claim foreign
tax credits (subject, in either case, to certain limitations). Each year that a
Fund makes such an election, it will report to its shareholders the amount per
share of foreign taxes it has elected to have treated as paid by its
shareholders.
See Dividends, Distributions and Taxes in Part B for additional
information on tax matters relating to each Fund and its shareholders.
-24-
<PAGE>
CALCULATION OF NET ASSET VALUE PER SHARE
The NAV per share is computed by adding the value of all securities and
other assets in the portfolio, deducting any liabilities (expenses and fees are
accrued daily) and dividing by the number of shares outstanding. Portfolio
securities for which market quotations are available are priced at market value.
Short-term investments having a maturity of less than 60 days are valued at
amortized cost, which approximates market value. All other securities are valued
at their fair value as determined in good faith and in a method approved by
Adviser Funds, Inc.'s Board of Directors. See Net Asset Value in Part B.
The purchase and redemption price of a Class is the net asset value
("NAV") per share of the Class next computed after the order is received. The
NAV is 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 net asset values of all outstanding shares of each class of a Fund
will be computed on a pro-rata basis for each outstanding share based on the
proportionate participation in the Fund represented by the value of shares of
that class. All income earned and expenses incurred by a Fund will be borne on a
pro-rata basis by each outstanding share of a class, based on each class'
percentage in the Fund represented by the value of shares of such classes,
except that the Classes will not incur any of the expenses under Adviser Funds,
Inc.'s 12b-1 Plans and each Fund's Class A Shares, Class B Shares and Class C
Shares alone will bear the 12b-1 Plan fees payable under their respective Plans.
Due to the specific distribution expenses and other costs that will be allocable
to each class, the net asset value of and dividends paid to each class of a Fund
will vary.
-25-
<PAGE>
MANAGEMENT OF THE FUNDS
Directors
The business and affairs of Adviser Funds, Inc. are managed under the
direction of its Board of Directors. Part B contains additional information
regarding the directors and officers.
Investment Manager
The Manager furnishes investment management services to each Fund.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On _______________, 199_, the Manager and its
affiliate, Delaware International Advisers Ltd., were supervising in the
aggregate more than $00 billion in assets in the various institutional
(approximately $00,000,000,000) and investment company (approximately
$00,000,000,000) accounts.
The Manager is an indirect, wholly-owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). In turn, DMH is a wholly-owned subsidiary of
and subject to the ultimate control of Lincoln National Corporation ("Lincoln
National"). Lincoln National, with headquarters in Fort Wayne, Indiana, is a
diversified organization with operations in many aspects of the financial
services industry, including insurance and investment management.
The Manager administers the affairs of and is ultimately responsible
for the investment management of each of the Funds under separate Investment
Management Agreements with Adviser Funds, Inc. on behalf of each Fund dated May
[3], 1996.
Investment Management Agreements. The Investment Management Agreements
were approved by the Board of Directors of Adviser Funds, Inc., including a
majority of the Directors who are not "interested persons" of Adviser Funds,
Inc., on February 23, 1996 and approved by the respective shareholders of the
Funds at a shareholder meeting held on May 3, 1996. See Restructuring of the
Funds, below.
Under the Investment Management Agreements, the Manager receives
advisory fees monthly based upon each Fund's average daily net assets at the
following annual rates:
Delaware Enterprise Fund .80%
Delaware U.S. Growth Fund .70%
Delaware World Growth Fund 1.10%
Delaware New Pacific Fund .80%
Delaware Federal Bond Fund .30%
Delaware Corporate Income Fund .30%
The Manager elected voluntarily to waive that portion, if any, of its
investment advisory fees and to reimburse a Fund's expenses to the extent
necessary to ensure that a Fund's expenses do not exceed the amounts noted under
Summary of Expenses.
The advisory fees for the Delaware Enterprise, Delaware World Growth and
Delaware New Pacific Funds, while higher than the advisory fees paid by other
mutual funds in general, are comparable to fees paid by other mutual funds with
similar objectives and policies.
For the fiscal year ended October 31, 1995, the following investment
management fees based on a percentage of a Fund's average daily net assets
(before reimbursement) were paid to Lincoln Investment Management, Inc. ("LIM"),
the investment manager to the Funds prior to the close of business on May 3,
1996:
Delaware Enterprise Fund .80%
Delaware U.S. Growth Fund .70%
Delaware World Growth Fund 1.10%
Delaware New Pacific Fund 1.10%
Delaware Federal Bond Fund .30%
Delaware Corporate Income Fund .30%
Securities regulations of various states in which the Funds intend to
have shareholders may provide that, if expenses borne by a Fund in any fiscal
year exceed certain limitations, the Manager must reimburse the Fund for any
such excess at least annually and prior to publication of the Fund's annual
report.
-26-
<PAGE>
The percentage limitation includes the advisory fee but excludes
interest, taxes, a portion of a Fund's service and distribution fee, a portion
of a Fund's custody fee attributable to investments in foreign securities,
brokerage fees and, where permitted, extraordinary expenses. These expense
limitations may be raised or lowered from time to time. Under present state
regulations, the most restrictive limitation of state securities commissions is:
2 1/2% of the first $30,000,000 of average net assets of a Fund, 2% of the next
$70,000,000 of average net assets and 1 1/2% of average net assets in excess of
$100,000,000 during the applicable year. During any year the Manager will be
bound by the most stringent applicable requirements of any state in which a Fund
has registered its shares for sale.
The Investment Management Agreements will continue in effect for a
period of two years from the date of their execution, and will continue annually
thereafter if approved by a vote of a majority of the Directors who are not
interested persons of Adviser Funds, Inc. or the Manager, at a meeting called
for the purpose of voting on such approval. The Investment Management Agreements
may be terminated without penalty at any time (1) on 60 days' written notice, by
vote of a majority of the Board of Directors of Adviser Funds, Inc., (2) on 60
days' written notice, by vote a majority of the outstanding voting securities of
the Funds, or (3) on 60 days' written notice by the Manager. The Investment
Management Agreements terminate automatically in the event of "assignment". The
terms "assignment," "majority of outstanding voting securities" and "interested
person" are as defined in the 1940 Act.
Investment Sub-Advisers
Pursuant to a sub-advisory agreement with the Manager (the
"Sub-Advisory Agreement" or, collectively, the "Sub-Advisory Agreements"), each
Fund's sub-adviser participates in the management of its respective Fund's
assets, is responsible for the day-to-day investment management of the Fund,
makes investment decisions for the Fund in accordance with the Fund's investment
objective and places orders on behalf of the Fund to effect the investment
decisions made. The Manager continues to have responsibility for all investment
advisory services in connection with the management of the Funds pursuant to the
Investment Management Agreement and supervises the sub-advisers' performance of
such services. Each of the sub-advisers uses a team of Fund managers to provide
the advisory services pursuant to the Sub-Advisory Agreements.
The sub-advisers receive subadvisory fees from the Manager for their
services calculated in accordance with the schedule set forth below. The Funds
do not pay any fees to the sub-advisers.
Fund Sub-Adviser Annual Fee
- ---- ----------- ----------
Delaware
U.S.
Growth Fund Lynch Mayer, Inc. .40%
Delaware
World Walter Scott &
Growth Fund Partners Limited .80%
Delaware
New Pacific John Govett &
Fund Company Limited .80%
Delaware
Corporate
Income Lincoln Investment
Fund Management, Inc. .30%
Delaware
Federal
Bond Lincoln Investment
Fund Management, Inc. .30%
Delaware
Enterprise
Fund Lynch & Mayer, Inc. .50% on the
first $150
million and
.35% on
assets over
$150
million
-27-
<PAGE>
The following registered investment advisers act as sub-advisers (the
"Sub-Advisers" or individually the "Sub-Adviser") to the Manager with respect to
the management of the assets of the Funds as indicated below.
LIM, Sub-Adviser to the Manager with respect to management of the
assets of the Delaware Corporate Income Fund and the Delaware Federal Bond Fund,
200 East Berry Street, Fort Wayne, Indiana 46802, is an indirect, wholly-owned
subsidiary of Lincoln National and an affiliate of the Manager. LIM acts as
investment adviser to several registered investment companies in addition to
those Funds. LIM also provides investment services to Lincoln National and its
principal subsidiaries and acts as investment adviser to the other clients. As
of December 31, 1995, LIM had total assets under management in excess of $37
billion.
Lynch & Mayer, Inc., Sub-Adviser to the Manager with respect to
management of the assets of the Delaware Enterprise Fund and the Delaware U.S.
Growth Fund, 520 Madison Avenue, New York, New York 10022, is an indirect,
wholly-owned subsidiary of Lincoln National and an affiliate of the Manager.
Lynch & Mayer provides investment advice to pension funds, foundations,
endowments, trusts and high net worth individuals and families and had assets
under management, as of December 31, 1995, in excess of $6.6 billion.
Walter Scott & Partners Limited, Sub-Adviser to the Manager with
respect to management of the assets of the Delaware World Growth Fund, Millburn
Tower, Gogar, Edinburgh, Scotland EH12 9BS, provides investment advice to
pension funds and foundations and had assets under management, as of December
31, 1995, in excess of $2.0 billion.
John Govett & Company Limited, Sub-Adviser to the Manager with respect
to management of the assets of the Delaware New Pacific Fund, Shackleton House,
4 Battlebridge Lane, London, England SE1 2HR, provides investment advice to
investment trusts, investment companies, mutual funds and pension funds and had
assets under management, as of December 31, 1995, of $5.1 billion.
Custodian
- ----------------------------------------
- ----------------------------------------
serves as Custodian for each of the Funds and, in
that capacity, has custody of the Funds' securities.
Its mailing address is
- ----------------------------------------.
- ----------------------------------------
is not involved in the investment decisions made
with respect to the Funds.
Execution of Fund Transactions
Each Fund uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
its advisory clients. These services may be used by the Manager in servicing any
of its accounts. Subject to best price and execution, each Fund may consider a
broker/dealer's sales of Fund shares in placing portfolio orders and may place
orders with broker/dealers that have agreed to defray certain Fund expenses such
as custodian fees.
[Affiliates of the Manager, such as Lynch & Mayer, Inc., may act as a
broker or futures commission merchant for Adviser Funds, Inc., provided that the
commissions, fees or other remuneration it receives are fair and reasonable. See
Execution of Fund Transactions in Part B.]
-28-
<PAGE>
Performance Information
From time to time, the each Fund may quote total return performance or
yield (if applicable) of its Class in advertising and other types of literature.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value. Each
presentation will include the average annual total return for one-, five- and
ten year periods, as relevant. Each Fund may also advertise aggregate and
average total return information concerning a Class over additional periods of
time.
The current yield will be calculated by dividing the annualized net
investment income earned by the Class during a recent 30-day period by the net
asset value per share on the last day of the period. The yield formula provides
for semi-annual compounding which assumes that net investment income is earned
and reinvested at a constant rate and annualized at the end of a six-month
period.
Because securities prices fluctuate, investment results will fluctuate
over time and past performance should not be considered as a representation of
future results.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling your Client Services Representative.
Financial Information about the Funds
Each fiscal year, you will receive an audited annual report and an
unaudited semi- annual report. These reports provide detailed information about
each Fund's investments and performance. Adviser Funds, Inc.'s fiscal year ends
on October 31.
Distribution and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), serves as the national distributor for
each Fund under separate Distribution Agreements dated September 25, 1995. The
Distributor bears all of the costs of promotion and distribution.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for each Fund
under separate Agreements dated September 25, 1995. The directors annually
review service fees paid to the Transfer Agent. Certain recordkeeping and other
shareholder services that otherwise would be performed by the Transfer Agent may
be performed by certain other entities and the Transfer Agent may elect to enter
into an agreement to pay such other entities for those services. In addition,
participant account maintenance fees may be assessed for certain recordkeeping
provided as part of retirement plan and administration service packages. These
fees are based on the number of participants in the plan and the various
services selected. Fees will be quoted upon request and are subject to change.
The Distributor and the Transfer Agent are also indirect, wholly-owned
subsidiaries of DMH and Lincoln National.
Expenses
Each Fund is responsible for all of its own expenses other than those
borne by the Manager under its Investment Management Agreements and those borne
by the Distributor under its Distribution Agreements. The ratio of expenses to
average daily net assets for each Class was as follows for the fiscal year ended
October 31, 1995:
Delaware Enterprise Fund Institutional Class 1.53%
Delaware U.S. Growth Fund Institutional Class 1.50%
Delaware World Growth Fund Institutional Class 1.50%
Delaware New Pacific Fund Institutional Class 1.50%
Delaware Federal Bond Fund Institutional Class 0.90%
Delaware Corporate Income Fund Institutional Class 0.90%
-29-
<PAGE>
The expense ratio of each Class reflects the fee waiver and reimbursements in
effect on October 31, 1995. See Summary of Expenses for current
fee waivers and reimbursements.
Restructuring of the Funds
Until May 3, 1996, Adviser Funds, Inc. consisted of nine series of
shares (the six current Funds as well as three other funds) and was named the
Lincoln Advisor Funds, Inc. ("LAF"). On February 23, 1996, the LAF's Board of
Directors approved a restructuring to integrate fully the LAF into the Delaware
Group of funds. The restructuring provided, among other things, for the
liquidation of three funds, other than the Funds; the appointment of Delaware
Management Company, Inc. as the investment manager of each of the Funds; the
appointment of the sub-advisers described in this Prospectus; the changes in the
names as follows: Lincoln Enterprise Portfolio to Delaware Enterprise Fund;
Lincoln U.S. Growth Portfolio to Delaware U.S. Growth Fund; Lincoln World Growth
Portfolio to Delaware World Growth Fund; Lincoln New Pacific Portfolio to
Delaware New Pacific Fund; Lincoln Government Income Portfolio to Delaware
Federal Bond Fund; and Lincoln Corporate Income Portfolio to Delaware Corporate
Income Fund; and the change of the LAF to Delaware Group Adviser Funds, Inc. The
liquidations were completed on _____________, 1996 and following required
shareholder approval of the investment management and sub-advisory arrangements
at a meeting of shareholders held on May 3, 1996, the restructuring was
consummated.
In accordance with the restructuring, beginning May 6, 1996, the former
Class D shares have been redesignated as the Institutional Class shares.
Other Shareholder Matters
All shares of Adviser Funds, Inc. have equal voting rights and are
entitled to one vote per share with proportional voting for fractional shares.
As permitted by Maryland law, there will normally be no meetings of shareholders
for the purpose of electing Directors unless and until such time as fewer than a
majority of the Directors holding office have been elected by shareholders. At
that time, the Directors in office will call a shareholders meeting for election
of Directors. Shareholders have certain rights, including the right to call a
meeting upon a vote of 10% of Adviser Funds, Inc.'s outstanding shares for the
purpose of voting on the removal of one or more Directors or to transact any
other business. The shares do not have cumulative voting rights. Accordingly,
the holders of a majority of the shares voting for the election of directors can
elect all the Directors. Shares of Adviser Funds, Inc., when issued, will be
fully paid and non-assessable.
In matters which only affect a particular Fund, the matter shall have
been effectively acted upon by a majority vote of that Fund even though: (1) the
matter has not been approved by a majority vote of any other Fund; or (2) the
matter has not been approved by a majority vote of Adviser Funds, Inc.
Each Fund also offers Class A Shares, Class B Shares and Class C
Shares. Shares of those classes represent proportionate interests in the assets
of the respective Fund and have the same voting and other rights and preferences
as the Classes, except that shares of the Classes are not subject to, and may
not vote on matters affecting, the Distribution Plans under Rule 12b-1 relating
to the Class A Shares, Class B Shares and Class C Shares of the Funds.
Initial investments into Adviser Funds, Inc. were made by American
States Insurance Company ("ASI") and Lincoln National Life Insurance Company
("LNLIC"), both affiliates of the Manager. As of February 1, 1996, LIM held 100%
of the outstanding shares of Delaware World Growth Fund Institutional Class,
100% of the outstanding shares of Delaware New Pacific Fund Institutional Class
-30-
<PAGE>
and 100% of the outstanding shares of Delaware Federal Bond Fund. Subject to
certain limited exceptions, there are no limitations on the Lincoln National
Corporation affiliates' ability to redeem the shares of the Adviser Funds, Inc.
and they may do so at any time.
General Information
Shareholder Services
Shareholder servicing, reporting and general shareholder services
functions for each Fund are performed by Delaware Service Company, Inc., which
maintains its offices at 1818 Market Street, Philadelphia, PA 19103.
Independent Accountants
Adviser Funds, Inc.'s independent accountants are Coopers & Lybrand
L.L.P., [One Post Office Square, Boston, Massachusetts 02109]. Coopers & Lybrand
L.L.P. conducts an annual audit of each Fund and consults with the Fund and each
Fund as to matters of accounting, regulatory filings and federal and state
income taxation.
-31-
<PAGE>
IMPLEMENTATION OF INVESTMENT OBJECTIVES AND POLICIES
In attempting to achieve their investment objectives and policies, the
Funds may employ, among others, one or more of the strategies set forth below.
Convertible Securities
The Funds may invest in securities that either have warrants or rights
attached or are otherwise convertible into other or additional securities. A
convertible security is typically a fixed-income security (a bond or preferred
stock) that may be converted at a stated price within a specified period of time
into a specified number of shares of common stock of the same or a different
issuer. Convertible securities are generally senior to common stocks in a
corporation's capital structure but are usually subordinated to similar
non-convertible securities. While providing a fixed income stream (generally
higher in yield than the income derivable from a common stock but lower than
that afforded by a similar non-convertible security), a convertible security
also affords an investor the opportunity, through its conversion feature, to
participate in capital appreciation attendant upon a market price advance in the
common stock underlying the convertible security. In general, the market value
of a convertible security is at least the higher of its "investment value"
(i.e., its value as a fixed-income security) or its "conversion value" (i.e.,
its value upon conversion into its underlying common stock). While no securities
investment is without some risk, investments in convertible securities generally
entail less risk than investments in the common stock of the same issuer.
U.S. Government Securities
All of the Funds may invest in securities of the U.S. Government.
Securities guaranteed by the U.S. Government include: (1) direct obligations of
the U.S. Treasury (such as Treasury bills, notes and bonds) and (2) federal
agency obligations guaranteed as to principal and interest by the U.S. Treasury
(such as GNMA certificates and Federal Housing Administration debentures). For
these securities, the payment of principal and interest is unconditionally
guaranteed by the U.S. Government, and thus they are of the highest possible
credit quality. Such securities are subject to variations in market value due to
fluctuations in interest rates, but if held to maturity are deemed to be free of
credit risk for the life of the investment.
Securities issued by U.S. Government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they generally involve federal sponsorship in one way or
another: some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the U.S. Treasury; some are supported by the
discretionary authority of the U.S. Treasury to purchase certain obligations of
the issuer; and others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and instrumentalities
include, but are not limited to, Federal Land Banks, Farmers Home
Administration, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, and Federal Home Loan Banks.
Mortgage-Backed Securities
The Delaware Corporate Income and Delaware Federal Bond Funds may
invest in various types of mortgage-backed securities. Mortgage-backed
securities may be issued by governmental agencies (such as the Government
National Mortgage Association ("GNMA") or the Federal Home Loan Mortgage
Corporation ("FHLMC")), by the Federal National Mortgage Association ("FNMA"),
-32-
<PAGE>
which is a federally chartered and privately-owned corporation, or by private
financial institutions such as commercial banks, savings and loan associations,
mortgage bankers and securities broker-dealers (or separate trusts or affiliates
of such institutions established to issue these securities).
Most mortgage-backed securities, including the securities issued by
GNMA, FHLMC and FNMA, are so-called "pass-through" securities representing
interests in a pool of underlying mortgage loans, on which the regular interest
and principal payments (including any prepayments) are passed through to the
holder of the securities. Although the mortgage loans in a pool will have stated
maturities of up to 30 years, due to both normal principal repayment and
prepayments, the average effective maturities of these securities will vary and
will tend to be shorter than those of the underlying mortgages. Due to the
prepayment feature and the need to reinvest prepayments of principal at current
market rates, these securities can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of declining interest
rates. Like other fixed-income investments, the value of mortgage-related
securities will tend to rise when interest rates fall and to fall when interest
rates rise. Their value may also change due to changes in the market's
perception of the creditworthiness of the entity that issues or guarantees them.
For additional information regarding mortgage-backed securities, see Part B.
U.S. Government securities may be acquired by the Funds in the form of
separately traded principal and interest components of securities issued or
guaranteed by the U.S. Treasury. The principal and interest components of
selected securities are traded independently under the Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. Under the
STRIPS program, the principal and interest components are individually numbered
and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Obligations of Resolution Funding Corporation are similarly divided into
principal and interest components and maintained as such on the book-entry
records of the Federal Reserve Banks.
In addition, the Funds may invest in custodial receipts that evidence
ownership of future interest payments, principal payments or both on certain
U.S. Treasury notes or bonds in connection with programs sponsored by banks and
brokerage firms. Such notes and bonds are held in custody by a bank on behalf of
the owners of the receipts. These custodial receipts are known by various names,
including "Treasury Receipts" ("Trs"), ("TIGRs") and "Certificates of Accrual on
Treasury Securities" ("CATS"), and may not be deemed U.S. Government securities.
The Funds may also invest from time to time in collective investment
vehicles, the assets of which consist principally of U.S. Government securities
or other assets substantially collateralized or supported by such securities,
such as government trust certificates.
The U.S. Government securities in which the Funds invest do not, in
general, have as high a yield as more speculative securities or securities not
supported by the U.S. Government or its agencies or instrumentalities. When
interest rates increase, the value of debt securities and shares of the Funds
can be expected to decline.
Asset-Backed Securities
The Delaware Federal Bond and Delaware Corporate Income Funds may
purchase asset-backed securities, which represent a participation in, or are
secured by and payable from, a stream of payments generated by particular
assets, most often a pool of assets similar to one another. Assets generating
such payments will consist of motor vehicle installment purchase obligations,
credit card receivables, other financial receivables and home equity loans. See
Part B.
-33-
<PAGE>
Repurchase Agreements
The Funds may enter into repurchase agreements, under which a Fund buys
a security (typically a U.S. Government security or other money market security)
and obtains a simultaneous commitment from the seller to repurchase the security
at a specified time and price. The seller must maintain with the Adviser Funds,
Inc.'s Custodian collateral equal to at least 100% of the repurchase price
including accrued interest, as monitored daily by the Manager and/or
sub-adviser. A Fund only will enter into repurchase agreements involving
securities in which it could otherwise invest and with banks, brokers or dealers
deemed by the Board of Directors to be creditworthy. If the seller under the
repurchase agreement defaults, the Fund may incur a loss if the value of the
collateral securing the repurchase agreement has declined and may incur
disposition costs in connection with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller, realization upon the
collateral by the Fund may be delayed or limited.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow the
Delaware Group funds jointly to invest cash balances. The Funds may invest cash
balances in a joint repurchase agreement in accordance with the terms of the
Order and subject generally to the conditions described above.
When-Issued Securities and Firm Commitment Agreements
All of the Funds may purchase securities on a delayed delivery or
"when-issued" basis and enter into firm commitment agreements (transactions
whereby the payment obligation and interest rate are fixed at the time of the
transaction but the settlement is delayed). The transactions may involve either
corporate, municipal or government securities. A Fund as a purchaser assumes the
risk of any decline in value of the security beginning on the date of the
agreement or purchase. The Funds may invest in when-issued securities in order
to take advantage of securities that may be especially under or over valued when
trading on a when-issued basis.
Each Fund will segregate liquid assets such as cash, U.S. Government
securities or other appropriate high grade debt obligations in an amount
sufficient to meet its payment obligations in these transactions. Although these
transactions will not be entered into for leveraging purposes, to the extent a
Fund's aggregate commitments under these transactions exceed its holdings of
cash and securities that do not fluctuate in value (such as money market
instruments), the Fund temporarily will be in a leveraged position (i.e., it
will have an amount greater than its net assets subject to market risk). Should
market values of a Fund's portfolio securities decline while Adviser Funds, Inc.
is in a leveraged position, greater depreciation of its net assets would likely
occur than were it not in such a position. The Funds will not borrow money to
settle these transactions and, therefore, will liquidate other Fund securities
in advance of settlement if necessary to generate additional cash to meet their
obligations thereunder.
Money Market Instruments
All of the Funds may invest in money market instruments without limit
for temporary or defensive purposes. These are shorter-term debt securities
generally maturing in one year or less which include (1) commercial paper
(short-term notes up to 9 months issued by corporations or governmental bodies),
(2) commercial bank obligations (certificates of deposit (interest-bearing time
deposits), bankers' acceptances (time drafts on a commercial bank where the bank
accepts an irrevocable obligation to pay at maturity), and documented discount
-34-
<PAGE>
notes (corporate promissory discount notes accompanied by a commercial bank
guarantee to pay at maturity)), (3) corporate bonds and notes (corporate
obligations that mature, or that may be redeemed, in one year or less), (4)
variable rate demand notes, short-term tax-exempt obligations and (5) savings
association obligations (certificates of deposit issued by mutual savings banks
or savings and loan associations). Although certain floating or variable rate
obligations (securities which have a coupon rate that changes at least annually
and generally more frequently) have maturities in excess of one year, they are
also considered to be short-term debt securities.
Strategic Transactions
General. The Funds may, but are not required to, utilize various other
investment strategies as described below to hedge various market risks (such as
interest rates, currency exchange rates, and broad or specific equity or
fixed-income market movements), to manage the effective maturity or duration of
fixed income securities in the Fund's portfolio or to enhance potential gain.
Such strategies are generally accepted as modern Fund management and are
regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur. In the course of pursuing
these investment strategies, the Fund may purchase and sell derivative
securities. In particular, the Funds may purchase and sell exchange-listed and
over-the-counter put and call options on securities, equity and fixed-income
indices and other financial instruments, purchase and sell financial futures
contracts and options thereon, enter into various interest rate transactions
such as swaps, caps, floors or collars, and enter into various currency
transactions such as currency forward contracts, currency futures contracts,
currency swaps or options on currencies or currency futures (collectively, all
the above are called "Strategic Transactions"). Strategic Transactions may be
used to attempt to protect against possible changes in the market value of
securities held in or to be purchased for the Fund resulting from securities
markets or currency exchange rate fluctuations, to protect the Fund's unrealized
gains in the value of its Fund securities, to facilitate the sale of such
securities for investment purposes, to manage the effective maturity or duration
of fixed income securities in a Fund, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Any or all of these investment techniques may be used at
any time and there is no particular strategy that dictates the use of one
technique rather than another, as use of any Strategic Transaction is a function
of numerous variables including market conditions. The ability of a Fund to
utilize these Strategic Transactions successfully will depend on the Manager's
or sub-adviser's ability to predict pertinent market movements, which cannot be
assured. The Funds will comply with applicable regulatory requirements when
implementing these strategies, techniques and instruments. Strategic
Transactions involving financial futures and options thereon will be purchased,
sold or entered into only for bona fide hedging, risk management or Fund
management purposes and not for speculative purposes. Additional information
relating to certain financial instruments or strategies is set forth below. In
addition, see Special Risks of Strategic Transactions below for a discussion of
certain risks.
Limitations on Futures and Options Transactions. A Fund will not enter
into any futures contract or option on a futures contract if, as a result, the
sum of initial margin deposits on futures contracts and related options and
-35-
<PAGE>
premiums paid for options on futures contract the Funds have purchased, after
taking into account unrealized profits and losses on such contracts, would
exceed 5% of the Fund's net asset value without reference to the definition of
"bona fide hedging transactions and positions" under the Commodity Exchange Act,
as amended, or unless the futures contract is covered by cash equivalent
set-asides equal to the total contract value.
In addition to the above limitations, each Fund will not (a) sell
futures contracts, purchase put options or write call options if, as a result,
more than 25% of a Fund's total assets would be hedged with futures and options
under normal conditions; (b) purchase futures contracts or write put options if,
as a result, a Fund's total obligations upon settlement or exercise of purchased
futures contracts and written put options would exceed 25% of its total assets;
or (c) purchase call options if, as a result, the current value of option
premiums for call options purchased by a Fund would exceed 5% of the Fund's
total assets. These limitations do not apply to options attached to or acquired
or traded together with their underlying securities, and do not apply to
securities that incorporate features similar to options.
The limitations on the Funds' investments in futures contracts and
options, and the Funds' policies regarding futures contracts and options
discussed elsewhere are not fundamental policies and may be changed as
regulatory agencies permit.
Options Transactions. The Funds may purchase and write (i.e., sell) put
and call options on securities and currencies that are traded on national
securities exchanges or in the over-the-counter market to enhance income or to
hedge their Funds. A call option gives the purchaser, in exchange for a premium
paid, the right for a specified period of time to purchase securities or
currencies subject to the option at a specified price (the exercise price or
strike price). When a Fund writes a call option, the Fund gives up the potential
for gain on the underlying securities in excess of the exercise price of the
option.
A put option gives the purchaser, in return for a premium, the right
for a specified period of time to sell the securities or currencies subject to
the option to the writer of the put at the specified exercise price. The writer
of the put option, in return for the premium, has the obligation, upon exercise
of the option, to acquire the securities underlying the option at the exercise
price. A Fund might, therefore, be obligated to purchase the underlying
securities for more than their current market price.
The Funds will write only "covered" options. An option is covered if a
Fund owns an offsetting position in the underlying security or maintains cash,
U.S. Government securities or other high-grade debt obligations with a value
sufficient at all times to cover its obligations. See Part B.
Forward Foreign Currency Exchange Contracts. The Funds may enter into
forward foreign currency exchange contracts to protect the value of their Funds
against future changes in the level of currency exchange rates. The Funds may
enter into such contracts on a spot (i.e., cash) basis at the rate then
prevailing in the currency exchange market or on a forward basis, by entering
into a forward contract to purchase or sell currency at a future date. A Fund's
dealings in forward contracts will be limited to hedging involving either
specific transactions or Fund positions. Transaction hedging generally arises in
connection with the purchase or sale of its Fund securities and accruals of
interest or dividends receivable and Fund expenses. Position hedging generally
arises with respect of existing Fund security or currency positions.
Futures Contracts and Options Thereon. The Funds may purchase and sell
financial futures contracts and options thereon which are exchange-listed or
-36-
<PAGE>
over-the-counter for certain hedging, return enhancement and risk management
purposes in accordance with regulations of the CFTC. These futures contracts and
related options will be on interest-bearing securities, financial indices and
interest rate indices. A financial futures contract is an agreement to purchase
or sell an agreed amount of securities at a set price for delivery in the
future.
A Fund may not purchase or sell futures contracts and related options
if immediately thereafter the sum of the amount of initial margin deposits on
the Fund's existing futures and options on futures and premiums paid on such
related options would exceed 5% of the market value of the Fund's total assets.
In addition, the value of all futures contracts sold will not exceed the total
market value of the Fund.
Swap Agreements. The Funds may enter into interest rate swaps, currency
swaps, and other types of swap agreements such as caps, collars and floors. In
an interest rate swap, one party agrees to make regular payments of a floating
rate times a "notional" principal amount in return for payments of a fixed rate
times the same amount. Swaps may also depend on other prices or rates such as
the value of an index or mortgage prepayment rates.
Swap agreements usually involve a small investment of cash relative to
the magnitude of risk assumed. As a result, swaps can be very volatile and may
substantially impact a Fund's performance. Swap agreements are also subject to
the risk of a counterpart's ability to perform (i.e., creditworthiness). A Fund
may also suffer loses if it is unable to terminate swap agreements or reduce
exposure through offsetting transactions in a timely manner.
Special Risks of Strategic Transactions. Participation in the options
or futures markets and in currency exchange transactions involves investment
risks and transaction costs to which a Fund would not be subject absent the use
of these Strategic Transactions. If the Manager's and/or sub-adviser's
prediction of movements in the direction of the securities, foreign currency and
interest rate markets are inaccurate, the adverse consequences to a Fund may
leave the Fund in a worse position than if such Strategic Transactions were not
used. Risks inherent in the use of options, foreign current and futures
contracts and options on futures contracts include (1) dependence on the
Manager's and/or sub-adviser's ability to predict current movements in the
direction of interest rates, securities prices and currency markets; (2)
imperfect correlation between the price of options and futures contracts and
options thereon and movements in the prices of securities being hedged; (3) the
fact that skills need to use these strategies are different from those needed to
select Fund securities; (4) the possible absence of a liquid secondary market
for any particular instrument at any time; (5) the possible need to defer
closing out certain hedged positions to avoid adverse tax consequences; and (6)
the possible inability of a Fund to purchase or sell a Fund security at a time
that otherwise would be favorable for it to do so, or the possible need for a
Fund to sell a Fund security at a disadvantageous time, due to the need for a
Fund to maintain "cover" or to segregate securities in connection with Strategic
Transactions. Although the use of futures contracts and options transactions for
hedging should tend to minimize the risk of loss due to a decline in the value
of the hedged position, at the same time they tend to limit any potential gain
which might result from an increase in value of such position. Finally, the
daily variation margin requirements for futures contracts would create a greater
ongoing potential financial risk than would purchase of options, where the
exposure is limited to the cost of the initial premium. Losses resulting from
the use of Strategic Transactions would reduce net asset value, and possibly
-37-
<PAGE>
income, and such losses can be greater than if the Strategic Transactions had
not been utilized. The Strategic Transactions that the Funds may use and some of
their risks are described more fully in Part B.
Each Fund's ability to engage in Strategic Transactions is limited by
the requirements of the Internal Revenue Code of 1986, as amended, for
qualification as a regulated investment company.
See Part B.
-38-
<PAGE>
-------------------------------------
DELAWARE GROUP ADVISER FUNDS, INC.
(FORMERLY LINCOLN ADVISOR FUNDS, INC.)
--------------------------------------
A CLASS
--------------------------------------
B CLASS
--------------------------------------
C CLASS
--------------------------------------
INSTITUTIONAL CLASS
--------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
-----------------------
MAY 6, 1996
DELAWARE
GROUP
--------
<PAGE>
- -------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
MAY 6, 1996
- -------------------------------------------------------------------------------
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE ENTERPRISE FUND
DELAWARE U.S. GROWTH FUND
DELAWARE WORLD GROWTH FUND
DELAWARE NEW PACIFIC FUND
DELAWARE CORPORATE INCOME FUND
DELAWARE FEDERAL BOND FUND
- -------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
- -------------------------------------------------------------------------------
For more information about the Institutional Class shares of each Fund:
800-828-5052
For a Prospectus and Performance information for the A Class, B Class and the
C Class of each Fund: 800-523-4640
For Information on Existing Accounts of the A Class, B Class and the C Class of
each Fund:
(SHAREHOLDERS ONLY) 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY) 800-362-7500
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Cover Page
- -------------------------------------------------------------------------------
Investment Objective and Policies
- -------------------------------------------------------------------------------
Investment Restrictions
- -------------------------------------------------------------------------------
Dividends, Distributions and Taxes
- -------------------------------------------------------------------------------
Performance Information
- -------------------------------------------------------------------------------
Trading Practices and Brokerage
- -------------------------------------------------------------------------------
Purchasing Shares
- -------------------------------------------------------------------------------
Investment Plans
- -------------------------------------------------------------------------------
Determining Offering Price and Net Asset Value
- -------------------------------------------------------------------------------
Redemption and Repurchase
- -------------------------------------------------------------------------------
Investment Management Agreement
- -------------------------------------------------------------------------------
Management
- -------------------------------------------------------------------------------
Exchange Privilege
- -------------------------------------------------------------------------------
General Information
- -------------------------------------------------------------------------------
Financial Statements
- -------------------------------------------------------------------------------
-1-
<PAGE>
Delaware Group Adviser Funds, Inc. (formerly Lincoln Advisor Funds,
Inc.) (hereinafter referred to as "Adviser Funds, Inc.") is a
professionally-managed mutual fund currently offering six separate series of
shares: the Delaware Enterprise Fund, Delaware U.S. Growth Fund, Delaware World
Growth Fund, Delaware New Pacific Fund, Delaware Corporate Income Fund, and
Delaware Federal Bond Fund (each a "Fund" and collectively, the "Funds"). This
Statement of Additional Information ("Part B" of Adviser Funds, Inc.'s
registration statement) describes each of the Funds, except where noted. Until
May 3, 1996, Adviser Funds, Inc. was called Lincoln Advisor Funds, Inc., and the
Delaware Enterprise Fund, Delaware U.S. Growth Fund, Delaware World Growth Fund,
Delaware New Pacific Fund, Delaware Corporate Income Fund, and the Delaware
Federal Bond Fund were called the Lincoln Enterprise Portfolio, Lincoln U.S.
Growth Portfolio, Lincoln World Growth Portfolio, Lincoln New Pacific Portfolio,
Lincoln Corporate Income Portfolio and Lincoln Government Income Portfolio,
respectively.
Each Fund offers four classes of shares consisting of an A Class of
shares ("Class A Shares"), a B Class of shares ("Class B Shares"), a C Class of
shares ("Class C Shares") and an Institutional Class of shares (the
"Institutional Class"). Each class may be referred to individually as a "Class"
and collectively the "Classes." These alternatives permit an investor to choose
the method of purchasing shares that is most suitable for his or her needs.
Class A Shares, Class B Shares and Class C Shares (together, the "Fund Classes")
are offered through a Prospectus dated May 6, 1996, and the Institutional Class
is offered through a separate Prospectus also dated May 6, 1996.
Class B Shares, Class C Shares and Institutional Class shares may be
purchased at a price equal to the next determined net asset value per share.
Class A Shares may be purchased at the public offering price, which is equal to
the next determined net asset value per share, plus a front-end sales charge.
Class A Shares are subject to a maximum front-end sales charge of 4.75% and
annual 12b-1 Plan expenses of up to .35% (currently, .30% pursuant to Board
action). Class B Shares are subject to a contingent deferred sales charge
("CDSC") which may be imposed on redemptions made within six years of purchase
and annual 12b-1 Plan expenses of up to 1%, which are assessed against Class B
Shares for approximately eight years after purchase. See Automatic Conversion of
Class B Shares under Classes of Shares in the Fund Classes' Prospectus. Class C
Shares are subject to a CDSC which may be imposed on redemptions made within 12
months of purchase and annual 12b-1 Plan expenses of up to 1%, which are
assessed against Class C Shares for the life of the investment. All references
to "shares" in this Part B refer to all Classes of shares of the Fund, except
where noted.
This Part B supplements the information contained in the current
Prospectus for the Fund Classes and the current Prospectus for the Institutional
Classes as they may be amended from time to time. It should be read in
conjunction with the respective Class' Prospectus. Part B is not itself a
prospectus but is, in its entirety, incorporated by reference into each Class'
Prospectus. A Prospectus relating to the Fund Classes and a Prospectus relating
to the Institutional Class may be obtained by writing or calling your investment
dealer or by contacting the Fund's national distributor, Delaware Distributors,
L.P. (the "Distributor"), 1818 Market Street, Philadelphia, PA 19103.
-2-
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Prospectuses discuss the Funds' investment objectives and the
policies followed to achieve those objectives. The following discussion
supplements the description of the Funds' investment objectives and policies in
the Prospectuses. Capitalized terms that are not defined herein are defined in
the Funds' Prospectuses.
Lower-Rated Debt Securities
The Delaware U.S. Growth Fund and the Delaware Corporate Income Fund
may purchase securities that are rated lower than Baa by Moody's Investors
Service, Inc. ("Moody's") or lower than BBB by Standard & Poor's Ratings Group
("S&P"). These securities are often considered to be speculative and involve
significantly higher risk of default on the payment of principal and interest or
are more likely to experience significant price fluctuation due to changes in
the issuer's creditworthiness. Market prices of these securities may fluctuate
more than higher-rated debt securities and may decline significantly in periods
of general economic difficulty which may follow periods of rising interest
rates. While the market for high yield corporate debt securities has been in
existence for many years and has weathered previous economic downturns, the
market in recent years has experienced a dramatic increase in the large-scale
use of such securities to fund highly leveraged corporate acquisitions and
restructurings. Accordingly, past experience may not provide an accurate
indication of future performance of the high yield bond market, especially
during periods of economic recession. [See Appendix A -"Description of Security
Ratings" herein.]
The market for lower-rated securities may be less active than that for
higher-rated securities, which can adversely affect the prices at which these
securities can be sold. If market quotations are not available, these securities
will be valued in accordance with procedures established by the Board of
Directors, including the use of outside pricing services. Judgment plays a
greater role in valuing high yield corporate debt securities than is the case
for securities for which more external sources for quotations and last-sale
information are available. Adverse publicity and changing investor perceptions
may affect the ability of outside pricing services used by a Fund to value its
portfolio securities and the Fund's ability to dispose of these lower-rated debt
securities.
Since the risk of default is higher for lower-quality securities, the
Manager's and/or applicable sub-adviser's research and credit analysis is an
integral part of managing any securities of this type held by a Fund. In
considering investments for a Fund, the Manager and/or sub-adviser, if any, will
attempt to identify those issuers of high-yielding securities whose financial
condition is adequate to meet future obligations, has improved, or is expected
to improve in the future. The Manager's and/or sub-adviser's analysis focuses on
relative values based on such factors as interest or dividend coverage, asset
coverage, earnings prospects, and the experience and managerial strength of the
issuer. There can be no assurance that such analysis will prove accurate.
A Fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as security holder to seek to
protect the interests of security holders if it determines this to be in the
best interest of shareholders.
-3-
<PAGE>
Mortgage-Backed Securities
Each Fund may invest in mortgage-related securities including those
representing an undivided ownership interest in a pool of mortgages.
Government National Mortgage Association Certificates. Certificates
issued by the Government National Mortgage Association ("GNMA") are
mortgage-backed securities representing part ownership of a pool of mortgage
loans, which are issued by lenders such as mortgage bankers, commercial banks
and savings and loan associations, and are either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration. A pool of these
mortgages is assembled and, after being approved by GNMA, is offered to
investors through securities dealers. The timely payment of interest and
principal on each mortgage is guaranteed by GNMA and backed by the full faith
and credit of the U.S. Government.
Principal is paid back monthly by the borrower over the term of the
loan. Investment of prepayments may occur at higher or lower rates than the
anticipated yield on the certificates. Due to the prepayment feature and the
need to reinvest prepayments of principal at current market rates, GNMA
certificates can be less effective than typical bonds of similar maturities at
"locking in" yields during periods of declining interest rates. GNMA
certificates typically appreciate or decline in market value during periods of
declining or rising interest rates, respectively. Due to the regular repayment
of principal and the prepayment feature, the effective maturities of mortgage
pass-through securities are shorter than stated maturities, will vary based on
market conditions and cannot be predicted in advance. The effective maturities
of newly-issued GNMA certificates backed by relatively new loans at or near the
prevailing interest rates are generally assumed to range between approximately 9
and 12 years.
FNMA and FHLMC Mortgage-Backed Obligations. The Federal National
Mortgage Association ("FNMA"), a federally chartered and privately-owned
corporation, issues pass-through securities representing interests in a pool of
conventional mortgage loans. FNMA guarantees the timely payment of principal and
interest but this guarantee is not backed by the full faith and credit of the
U.S. Government. The Federal Home Loan Mortgage Corporation ("FHLMC"), a
corporate instrumentality of the U.S. Government, issues participation
certificates which represent an interest in a pool of conventional mortgage
loans. FHLMC guarantees the timely payment of interest and the ultimate
collection of principal, and maintains reserves to protect holders against
losses due to default, but the certificates are not backed by the full faith and
credit of the U.S. Government.
As is the case with GNMA certificates, the actual maturity of and
realized yield on particular FNMA and FHLMC pass-through securities will vary
based on the prepayments of the underlying pool of mortgages and cannot be
predicted.
Other Mortgage-Backed Securities. The Delaware Federal Bond and
Delaware Corporate Income Funds may invest in mortgage-backed securities issued
by financial institutions such as commercial banks, savings and loan
associations, mortgage bankers and securities broker-dealers (or separate trusts
or affiliates of such institutions established to issue these securities). These
securities include mortgage pass-through certificates, collateralized mortgage
obligations ("CMOs") (which include real estate mortgage investment conduits as
authorized under the Internal Revenue Code of 1986) or mortgage-backed bonds.
Each class of bonds in a CMO series may have a different maturity than the other
classes of bonds in the series and may bear a different coupon. The different
maturities occur because payments of principal, both regular principal payments
as well as any prepayments are passed through first to the holders of the class
-4-
<PAGE>
with the shortest maturity until it is completely retired. Thereafter, principal
payments are passed through to the next class of bonds in the series, until all
the classes have been paid off. As a result, an acceleration in the rate of
prepayments may also be associated with declining interest rates, shortening the
expected life of each class, with the greatest cash flow impact on those classes
with the shortest maturities. Should the rate of prepayments slow down, as may
happen in times of rising interest rates, the expected life of each class
lengthens, again with the greatest cash flow impact on those classes with the
shortest maturities. In the case of some CMO series, each class may receive a
different proportion of the monthly interest and principal repayments on the
underlying collateral. In these series the classes have proportionally greater
interests in principal repayments generally and would be more affected by a
change in the rate of prepayments although the percentage impact on those
classes consisting mostly of interest payments could be greater.
Asset-Backed Securities. The Delaware Federal Bond and Delaware
Corporate Income Funds may invest in bonds or notes backed by loan paper or
accounts receivable originated by banks, credit card companies, or other
providers of credit. These securities are often "enhanced" by a bank letter of
credit or by insurance coverage provided by an institution other than the
issuer; such an enhancement typically covers only a portion of the par value
until exhausted. Generally, the originator of the loan or accounts receivable
paper sells it to a specially created trust, which repackages it as securities
with a term of five years or less. Examples of these types of securities include
"certificates for automobile receivables" (commonly referred to as "CARs") and
bonds backed by credit card loan receivables (commonly referred to as "plastic
bonds"). The loans underlying these securities are subject to prepayments which
can decrease maturities and returns. The values of these securities are
ultimately dependent upon payment of the underlying loans by individuals, and
the holders generally have no recourse against the originator of the loans.
Holders of these securities may experience losses or delays in payment if the
original payments of principal and interest are not made to the trust with
respect to the underlying loans. The values of these securities also may
fluctuate due to changes in the market perception of the creditworthiness of the
servicing agent for the loan pool, the originator of the loan, or the financial
institution providing the credit enhancement.
Foreign Investments
The Delaware World Growth and Delaware New Pacific Funds may invest
substantially all of their assets in foreign investments. Certain of the Funds
may invest the following percentages of their assets in foreign securities: the
Delaware Enterprise Fund (15%), and the Delaware U.S. Growth Fund (20%) and the
Delaware Corporate Income Fund (10%). Foreign investments can involve
significant risks in addition to the risks inherent in U.S. investments. The
value of securities denominated in or indexed to foreign currencies, and of
dividends and interest from such securities, can change significantly when
foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign
securities markets generally have less trading volume and less liquidity than
U.S. markets, and prices on some foreign markets can be highly volatile. Many
foreign countries lack uniform accounting and disclosure standards comparable to
those applicable to U.S. companies, and it may be more difficult to obtain
reliable information regarding an issuer's financial condition and operations.
In addition, the costs of foreign investing, including withholding taxes,
brokerage commissions, and custodial costs, are generally higher than for U.S.
investments.
Foreign markets may offer less protection to investors than U.S.
markets. Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve
-5-
<PAGE>
increased risks in the event of a failed trade or the insolvency of a
broker-dealer, and may involve substantial delays. It may also be difficult to
enforce legal rights in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments adverse to
the interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic, or social instability, military action or unrest, or adverse
diplomatic developments. There is no assurance that the Manager or sub-adviser
will be able to anticipate or counter these potential events.
The considerations noted above generally are intensified for
investments in developing countries. Developing countries may have relatively
unstable governments, economies based on only a few industries, and securities
markets that trade a small number of securities.
The Funds may invest in foreign securities that impose restrictions on
transfer within the United States or to U.S. persons. Although securities
subject to transfer restrictions may be marketable abroad, they may be less
liquid than foreign securities of the same class that are not subject to such
restrictions.
American Depository Receipts and European Depository Receipts ("ADRs"
and "EDRs") are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed for
use in U.S. and European securities markets, respectively, ADRs and EDRs are
alternatives to the purchase of the underlying securities in their national
markets and currencies.
Mortgage Dollar Rolls
Each Fund may enter into mortgage "dollar rolls" in which the Fund
sells mortgage-backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type, coupon
and maturity) securities on a specified future date. Dollar roll transactions
consist of the sale by a Fund of mortgage-backed securities, together with a
commitment to purchase similar, but not necessarily identical, securities at a
future date. Any difference between the sale price and the purchase price is
netted against the interest income foregone on the securities to arrive at an
implied borrowing (reverse repurchase) rate. Alternatively, the sale and
purchase transactions which constitute the dollar roll can be executed at the
same price, with the Fund being paid a fee as consideration for entering into
the commitment to purchase. Dollar rolls may be renewed prior to cash settlement
and initially may involve only a firm commitment agreement by the Fund to buy a
security. If the broker-dealer to whom the Fund sells the security becomes
insolvent, the Fund's right to purchase or repurchase the security may be
restricted; the value of the security may change adversely over the term of the
dollar roll; the security that the Fund is required to repurchase may be worth
less than the security that the Fund originally held, and the return earned by
the Fund with the proceeds of a dollar roll may not exceed transaction costs.
The Fund will place U.S. Government or other liquid, high quality assets in a
segregated account in an amount sufficient to cover its repurchase obligation.
-6-
<PAGE>
Options on Foreign and U.S. Currencies and Securities
The Funds, may purchase and sell (write) put and call options on
securities, although the present intent is to write only covered call options.
These covered call options must remain covered so long as a Fund is obligated as
a writer. A call option written by a Fund is "covered" if the Fund owns the
security underlying the option or has an absolute and immediate right to acquire
that security without additional cash consideration (or for additional cash
consideration held in a segregated account by the Fund's Custodian) upon
conversion or exchange of other securities held in its fund. A call option is
also covered if a Fund holds on a share-for-share basis a call on the same
security as the call written where the exercise price of the call held is equal
to or less than the exercise price of the call written or greater than the
exercise price of the call written if the difference is maintained by the Fund
in cash, treasury bills or other high grade, short-term debt obligations in a
segregated account with the Custodian. The premium paid by the purchaser of an
option will reflect, among other things, the relationship of the exercise price
to the market price and volatility of the underlying security, the remaining
term of the option, supply and demand and interest rates.
If the writer of an option wishes to terminate the obligation, he or
she may effect a "closing purchase transaction." This is accomplished by buying
an option of the same series as the option previously written. The effect of the
purchase is that the writer's position will be canceled by the clearing
corporation. However, a writer may not effect a closing purchase transaction
after he or she has been notified of the exercise of an option. Similarly, an
investor who is the holder of an option may liquidate his or her position by
effecting a "closing sale transaction." This is accomplished by selling an
option of the same series as the option previously purchased. There is no
guarantee that either a closing purchase or a closing sale transaction can be
effected. To secure the obligation to deliver the underlying security in the
case of a call option, the writer of the option (whether an exchange-traded
option or a NASDAQ option) is required to pledge for the benefit of the broker
the underlying security or other assets in accordance with the rules of The
Options Clearing Corporation (OCC), the Chicago Board of Trade and the Chicago
Mercantile Exchange, institutions which interpose themselves between buyers and
sellers of options. Technically, each of these institutions assumes the other
side of every purchase and sale transaction on an exchange and, by doing so,
guarantees the transaction.
An option position may be closed out only on an exchange, board of
trade or other trading facility which provides a secondary market for an option
of the same series. Although a Fund will generally purchase or write only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange or other trading
facility will exist for any particular option, or at any particular time, and
for some options no secondary market on an exchange or otherwise may exist. In
such event it might not be possible to effect closing transactions in particular
options, with the result that the Fund would have to exercise its options in
order to realize any profit and would incur brokerage commissions upon the
exercise of call options and upon the subsequent disposition of underlying
securities acquired through the exercise of call options or upon the purchase of
underlying securities for the exercise of put options. If a Fund as a covered
call option writer is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise.
-7-
<PAGE>
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
a clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at times, render certain of the facilities of any of the clearing
corporations inadequate, and thereby result in the institution by an exchange of
special procedures which may interfere with the timely execution of customers'
orders. However, the OCC, based on forecasts provided by the U.S. exchanges,
believes that its facilities are adequate to handle the volume of reasonably
anticipated options transactions, and such exchanges have advised such clearing
corporation that they believe their facilities will also be adequate to handle
reasonably anticipated volume.
Options on Stock Indices
Options on stock indices are similar to options on stock except that,
rather than the right to take or make delivery of stock at a specified price, an
option on a stock index gives the holder the right to receive, upon exercise of
the option, an amount of cash if the closing level of the stock index upon which
the option is based is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option. This amount of cash is equal to
such difference between the closing price of the index and the exercise price of
the option expressed in dollars times a specified multiple (the "multiplier").
The writer of the option is obligated, in return for the premium received, to
make delivery of this amount. Unlike stock options, all settlements are in cash.
The multiplier for an index option performs a function similar to the
unit of trading for a stock option. It determines the total dollar value per
contract of each point in the difference between the exercise price of an option
and the current level of the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on different indices may have
different multipliers.
Except as described below, a Fund will write call options on indices
only if on such date it holds a portfolio of securities at least equal to the
value of the index times the multiplier times the number of contracts. When a
Fund writes a call option on a broadly-based stock market index, the Fund will
segregate or put into escrow with the Custodian, or pledge to a broker as
collateral for the option, cash, cash equivalents or at least one "qualified
security" with a market value at the time the option is written of not less than
100% of the current index value times the multiplier times the number of
contracts. A Fund will write call options on broadly-based stock market indices
only if at the time of writing it holds a diversified portfolio of stocks.
If a Fund has written an option on an industry or market segment index,
it will so segregate or put into escrow with the Custodian, or pledge to a
broker as collateral for the option, at least ten "qualified securities," which
are stocks of an issuer in such industry or market segment, with a market value
at the time the option is written of not less than 100% of the current index
value times the multiplier times the number of contracts. Such stocks will
include stocks which represent at least 50% of the Fund's holdings in that
industry or market segment. No individual security will represent more than 15%
of the amount so segregated, pledged or escrowed in the case of broadly-based
stock market index options or 25% of such amount in the case of industry or
market segment index options.
-8-
<PAGE>
If at the close of business, the market value of such qualified
securities so segregated, escrowed or pledged falls below 100% of the current
index value times the multiplier times the number of contracts, a Fund will
segregate, escrow or pledge an amount in cash, Treasury bills or other high
grade short-term debt obligations equal in value to the difference. In addition,
when a Fund writes a call on an index which is in-the-money at the time the call
is written, the Fund will segregate with the Custodian or pledge to the broker
as collateral, cash, U.S. Government or other high grade short-term debt
obligations equal in value to the amount by which the call is in-the-money times
the multiplier times the number of contracts. Any amount segregated pursuant to
the foregoing sentence may be applied to the Fund's obligation to segregate
additional amounts in the event that the market value of the qualified
securities falls below 100% of the current index value times the multiplier
times the number of contracts. However, if a Fund holds a call on the same index
as the call written where the exercise price of the call held is equal to or
less than the exercise price of the call written or greater than the exercise
price of the call written if the difference is maintained by the Fund in cash,
Treasury bills or other high grade short-term debt obligations in a segregated
account with the Custodian, it will not be subject to the requirements described
in this paragraph.
Risks of Options on Stock Indices. Index prices may be distorted if
trading of certain securities included in the index is interrupted. Trading in
the index options also may be interrupted in certain circumstances, such as if
trading were halted in a substantial number of securities included in the index.
If this occurred, a Fund would not be able to close out options which it had
purchased or written and, if restrictions on exercise were imposed, may be
unable to exercise an option it holds, which could result in substantial losses
to the Fund. It is the Funds' policy to purchase or write options only on
indices which include a number of securities sufficient to minimize the
likelihood of a trading halt in the index.
Special Risks of Writing Calls on Stock Indices. Unless a Fund has
other liquid assets which are sufficient to satisfy the exercise of a call, the
Fund would be required to liquidate portfolio securities in order to satisfy the
exercise. Because an exercise must be settled within hours after receiving the
notice of exercise, if a Fund fails to anticipate an exercise it may have to
borrow from a bank (in amounts not exceeding 20% of the value of the Fund's
total assets) pending settlement of the sale of securities in its portfolio and
would incur interest charges thereon.
When a Fund has written a call, there is also a risk that the market
may decline between the time the Fund has a call exercised against it, at a
price which is fixed as of the closing level of the index on the date of
exercise, and the time the Fund is able to sell securities in its portfolio. As
with stock options, a Fund will not learn that an index option has been
exercised until the day following the exercise date. Unlike a call on stock
where the Fund would be able to deliver the underlying securities in settlement,
the Fund may have to sell part of its portfolio in order to make settlement in
cash, and the price of such securities might decline before they can be sold.
This timing risk makes certain strategies involving more than one option
substantially more risky with index options than with stock options. For
example, even if an index call which a Fund has written is "covered" by an index
call held by the Fund with the same strike price, the Fund will bear the risk
that the level of the index may decline between the close of trading on the date
the exercise notice is filed with the clearing corporation and the close of
trading on the date the Fund exercises the call it holds or the time the Fund
sells the call, which in either case would occur no earlier than the day
following the day the exercise notice was filed.
-9-
<PAGE>
Over-the-Counter Options and Illiquid Securities. As indicated in the
Prospectuses, all Funds may deal in over-the-counter ("OTC") options. The Funds
understand the position of the staff of the [Securities and Exchange Commission
("SEC")] to be that purchased OTC options and the assets used as "cover" for
written OTC options are illiquid securities. The Funds, the Manager, and the
sub-advisers disagree with this position and have found the dealers with which
they engage in OTC options transactions generally agreeable to and capable of
entering into closing transactions. As also indicated in the Prospectuses, the
Funds have adopted procedures for engaging in OTC options for the purpose of
reducing any potential adverse impact of such transactions upon the liquidity of
each Fund's portfolio.
As part of these procedures the Funds will engage in OTC options
transactions only with primary dealers that have been specifically approved by
the Board of Directors of Adviser Funds, Inc. and the Manager and/or
sub-advisers believe that the approved dealers should be agreeable and able to
enter into closing transactions if necessary and, therefore, present minimal
credit risks to the Funds. The Funds anticipate entering into written agreements
with those dealers to whom the Funds may sell OTC options, pursuant to which the
Funds would have the absolute right to repurchase the OTC options from such
dealers at any time at a price determined pursuant to a formula set forth in
certain no action letters published by the SEC staff. A Fund will not engage in
OTC options transactions if the amount invested by the Fund in OTC options plus,
with respect to OTC options written by the Fund, the amounts required to be
treated as illiquid pursuant to the terms of such letters (and the value of the
assets used as cover with respect to OTC option sales which are not within the
scope of such letters), plus the amount invested by the Fund in illiquid
securities, would exceed 15% of the Fund's total assets. OTC options on
securities other than U.S. Government securities may not be within the scope of
such letters and, accordingly, the amount invested by a Fund in OTC options on
such other securities and the value of the assets used as cover with respect to
OTC option sales regarding such non-U.S. Government securities will be treated
as illiquid and subject to the 15% limitation on the Fund's assets that may be
invested in illiquid securities. See "Illiquid Investments" herein.
Futures Contracts and Options Thereon
A futures contract is an agreement in which the writer (or seller) of
the contract agrees to deliver to the buyer an amount of cash or securities
equal to a specific dollar amount times the difference between the value of a
specific fixed-income security or index at the close of the last trading day of
the contract and the price at which the agreement is made. No physical delivery
of the underlying securities is made. When the futures contract is entered into,
each party deposits with a broker or in a segregated custodial account
approximately 5% of the contract amount, called the "initial margin." Subsequent
payments to and from the broker, called "variation margin," will be made on a
daily basis as the price of the underlying security or index fluctuates, making
the long and short positions in the futures contracts more or less valuable, a
process known as "marking to market." In the case of options on futures
contracts, the holder of the option pays a premium and receives the right, upon
exercise of the option at a specified price during the option period, to assume
a position in the futures contract (a long position if the option is a call and
a short position if the option is a put). If the option is exercised by the
holder before the last trading day during the option period, the option writer
delivers the futures position, as well as any balance in the writer's futures
margin account. If it is exercised on the last trading day, the option writer
delivers to the option holder cash in an amount equal to the difference between
the option exercise price and the closing level of the relevant security or
index on the date the option expires.
-10-
<PAGE>
Each Fund intends to engage in futures contracts and options thereon as
a hedge against changes, resulting from market conditions, in the value of
securities which are held by the Fund or which the Fund intends to purchase, in
accordance with the rules and regulations of the Commodity Futures Trading
Commission ("CFTC"). Additionally, the Funds may write options on futures
contracts to realize through the receipt of premium income a greater return than
would be realized in a Fund's portfolio securities alone.
Risks of Transactions in Futures Contracts. There are several risks in
connection with the use of futures contracts as a hedging device. Successful use
of futures contracts by a Fund is subject to the ability of the Fund's Manager
or sub-adviser to correctly predict movements in the direction of interest rates
or changes in market conditions. These predictions involve skills and techniques
that may be different from those involved in the management of the portfolio
being hedged. In addition, there can be no assurance that there will be a
correlation between movements in the price of the underlying index or securities
and movements in the price of the securities which are the subject of the hedge.
A decision of whether, when and how to hedge involves the exercise of skill and
judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of market behavior or unexpected trends in interest rates.
Although certain Funds will purchase or sell futures contracts only on
exchanges where there appears to be an adequate secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular contract or at any particular time. Accordingly, there can be no
assurance that it will be possible, at any particular time, to close a futures
position. In the event a Fund could not close a futures position and the value
of such position declined, the Fund would be required to continue to make daily
cash payments of variation margin. However, in the event futures contracts have
been used to hedge portfolio securities, such securities will not be sold until
the futures contract can be terminated. In such circumstances, an increase in
the price of the securities, if any, may partially or completely offset losses
on the futures contract. However, there is no guarantee that the price movements
of the securities will, in fact, correlate with the price movements in the
futures contract and thus provide an offset to losses on a futures contract.
The hours of trading of futures contracts may not conform to the hours
during which a Fund may trade the underlying securities. To the extent that the
futures markets close before the securities markets, significant price and rate
movements can take place in the securities markets that cannot be reflected in
the futures market.
Foreign Currency Transactions. The Delaware Enterprise Fund, the
Delaware U.S. Growth Fund, the Delaware World Growth Fund, the Delaware New
Pacific Fund and the Delaware Corporate Income Fund may hold foreign currency
deposits from time to time and may convert dollars and foreign currencies in the
foreign exchange markets. Currency conversion involves dealer spreads and other
costs, although commissions usually are not charged. Currencies may be exchanged
on a spot (i.e., cash) basis, or by entering into forward contracts to purchase
or sell foreign currencies at a future date and price. Forward contracts
generally are traded in an interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. The parties to a
forward contract may agree to offset or terminate the contract before its
maturity, or may hold the contract to maturity and complete the contemplated
currency exchange.
-11-
<PAGE>
Forward Foreign Currency Exchange Contracts
The Funds' dealings in forward contracts will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward contracts with respect to specific
receivables or payables of a Fund generally arising in connection with the
purchase or sale of its portfolio securities and accruals of interest or
dividends receivable and Fund expenses. Position hedging is the sale of a
foreign currency with respect to portfolio security positions denominated or
quoted in that currency. A Fund may not position hedge with respect to a
particular currency for an amount greater than the aggregate market value
(determined at the time of making any sale of a forward contract) of securities
held in its portfolio denominated or quoted in, or currently convertible into,
such currency.
When a Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when a Fund anticipates the
receipt in a foreign currency of dividends or interest payments on a security
which it holds, the Fund may desire to "lock in" the U.S. dollar price of the
security or the U.S. dollar equivalent of such dividend or interest payment as
the case may be. By entering into a forward contract for a fixed amount of
dollars for the purchase or sale of the amount of foreign currency involved in
the underlying transactions, a Fund will be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period between the date
on which the security is purchased or sold, or on which the dividend or interest
payment is declared, and the date on which such payments are made or received.
Additionally, when the Manager and/or applicable sub-adviser believes
that the currency of a particular foreign country may suffer a substantial
decline against the U.S. dollar, a Fund may enter into a forward contract for a
fixed amount of dollars, to sell the amount of foreign currency approximating
the value of some or all of the securities of the Fund denominated in such
foreign currency.
The Funds may use currency forward contracts to manage currency risks
and to facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by these Funds.
In connection with purchases and sales of securities denominated in
foreign currencies, a Fund may enter into currency forward contracts to fix a
definite price for the purchase or sale in advance of the trade's settlement
date. This technique is sometimes referred to as a "settlement hedge" or
"transaction hedge". The Manager and/or sub-advisers expect to enter into
settlement hedges in the normal course of managing the Funds' foreign
investments. The Funds could also enter into forward contracts to purchase or
sell a foreign currency in anticipation of future purchases or sales of
securities denominated in foreign currency, even if the specific investments
have not yet been selected by the Manager and/or sub-adviser.
The Funds may also use forward contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. For example,
if a Fund owned securities denominated in pounds sterling, it could enter into a
forward contract to sell pounds sterling in return for U.S. dollars to hedge
against possible declines in the pound's value. Such a hedge (sometimes referred
to as a "position hedge") would tend to offset both positive and negative
currency fluctuations, but would not offset changes in security values caused by
-12-
<PAGE>
other factors. The Fund could also hedge the position by selling another
currency expected to perform similarly to the pound sterling -- for example, by
entering into a forward contract to sell Deutschemarks or European Currency
Units in return for U.S. dollars. This type of hedge, sometimes referred to as a
"proxy hedge", could offer advantages in terms of cost, yield, or efficiency,
but generally will not hedge currency exposure as effectively as a simple hedge
into U.S. dollars. Proxy hedges may result in losses if the currency used to
hedge does not perform similarly to the currency in which the hedged securities
are denominated.
Under certain conditions, SEC guidelines require mutual funds to set
aside cash and appropriate liquid assets in a segregated custodian account to
cover currency forward contracts. As required by SEC guidelines, the Delaware
Enterprise Fund, the Delaware U.S. Growth Fund, the Delaware World Growth Fund,
the Delaware New Pacific Fund and the Delaware Corporate Income Fund will
segregate assets to cover currency forward contracts, if any, whose purpose is
essentially speculative. The Funds will not segregate assets to cover forward
contracts, including settlement hedges, position hedges, and proxy hedges.
Successful use of forward currency contracts will depend on the Manager's and/or
sub-advisers' skill in analyzing and predicting currency values. Forward
contracts may substantially change the Funds' investment exposure to changes in
currency exchange rates, and could result in losses to the Funds if currencies
do not perform as the Manager and/or sub-advisers anticipate. For example, if a
currency's value rose at a time when the Manager and/or applicable sub-adviser
had hedged a Fund by selling that currency in exchange for dollars, the Fund
would be unable to participate in the currency's appreciation. If the Manager
and/or applicable sub-adviser hedges currency exposure through proxy hedges, a
Fund could realize currency losses from the hedge and the security position at
the same time if the two currencies do not move in tandem. Similarly, if the
Manager and/or sub-adviser increases a Fund's exposure to a foreign currency,
and that currency's value declines, the Fund will realize a loss. There is no
assurance that the Manager's and/or sub-advisers' use of forward currency
contracts will be advantageous to the Funds or that it will hedge at an
appropriate time.
Foreign Currency Options
The Delaware Enterprise Fund, the Delaware U.S. Growth Fund, the
Delaware World Growth Fund, the Delaware New Pacific Fund and the Delaware
Corporate Income Fund may purchase U.S. exchange-listed call and put options on
foreign currencies. Such options on foreign currencies operate similarly to
options on securities. Options on foreign currencies are affected by all of
those factors which influence foreign exchange rates and investments generally.
The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealer or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets for
-13-
<PAGE>
the underlying currencies remain open, significant price and rate movements may
take place in the underlying markets that cannot be reflected in the options
market.
Foreign Currency Conversion
Although foreign exchange dealers do not charge a fee for currency
conversion, they do realize a profit based on the difference (the "spread")
between prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the Delaware Enterprise Fund, the
Delaware U.S. Growth Fund, the Delaware World Growth Fund, the Delaware New
Pacific Fund or the Delaware Corporate Income Fund at one rate, while offering
a lesser rate of exchange should those Funds desire to resell that currency to
the dealer.
Combined Transactions
Each Fund may enter into multiple transactions, including multiple
options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single transaction, as
part of a single or combined strategy when, in the opinion of the Manager and/or
sub-adviser, it is in the best interests of the Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Manager's and/or sub-adviser's judgment that the combined
strategies will reduce risk or otherwise more effectively achieve the desired
portfolio management goal, it is possible that the combination will instead
increase such risks or hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars
Each Fund may enter into interest rate, currency and index swaps and
the purchase or sale of related caps, floors and collars. The Funds expect to
enter into these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Funds intend to use these transactions as hedges and not speculative
investments and will not sell interest rate caps or floors where it does not own
securities or other instruments providing the income stream the Fund may be
obligated to pay. Interest rate swaps involve the exchange by the Fund with
another party of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
nominal amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
A Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
-14-
<PAGE>
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the
Investment Manager and the Fund believe such obligations do not constitute
senior securities under the Investment Company Act and, accordingly, will not
treat them as being subject to its borrowing restrictions. A Fund will not enter
into any swap, cap, floor or collar transaction unless, at the time of entering
into such transaction, the unsecured long-term debt of the counterparty,
combined with any credit enhancements, is rated at least A by S&P or Moody's or
is determined to be of equivalent credit quality by the Manager and/or
sub-adviser. If there is a default by the counterparty, the Fund may have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agent utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
Eurodollar Instruments
The Funds may make investments in Eurodollar instruments. Eurodollar
instruments are U.S. dollar-denominated futures contracts or options thereon
which are linked to the London Interbank Offered Rate ("LIBOR"), although
foreign currency-denominated instruments are available from time to time.
Eurodollar futures contracts enable purchasers to obtain a fixed rate for the
lending of funds and sellers to obtain a fixed rate for borrowings. A Fund might
use Eurodollar futures contracts and options thereon to hedge against changes in
LIBOR, to which many interest rate swaps and fixed income instruments are
linked.
Lending of Portfolio Securities
As discussed in the Prospectuses, each Fund has the ability to lend
securities from its portfolio to brokers, dealers and other financial
organizations. Such loans, if and when made, may not exceed one-third of a
Fund's total assets. A Fund may not lend its portfolio securities to Lincoln
National Corporation or its affiliates unless it has applied for and received
specific authority from the SEC. Loans of securities by the Funds will be
collateralized by cash, letters of credit or U.S. Government securities, which
will be maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. From time to time, a Fund may
return a part of the interest earned from the investment of collateral received
for securities loaned to the borrower and/or a third party, which is
unaffiliated with the Fund or with Lincoln National Corporation, and which is
acting as a "finder".
In lending its portfolio securities, a Fund can increase its income by
continuing to receive interest on the loaned securities as well as by either
investing the cash collateral in short-term instruments or obtaining yield in
the form of interest paid by the borrower when government securities are used as
collateral. Requirements of the SEC, which may be subject to future
modifications, currently provide that the following conditions must be met
whenever portfolio securities are loaned: (a) the Fund must receive at least
102% cash collateral or equivalent securities from the borrower; (b) the
borrower must increase such collateral whenever the market value of the loaned
securities rises above the level of such collateral; (c) the Fund must be able
to terminate the loan at any time; (d) the Fund must receive reasonable interest
on the loan, as well as an amount equal to any dividends, interest or other
distributions on the loaned securities, and any increase in market value; (e)
-15-
<PAGE>
the Fund may pay only reasonable custodian fees in connection with the loan; and
(f) voting rights on the loaned securities may pass to the borrower; however, if
a material event adversely affecting the investment occurs, the Fund's Board of
Directors must terminate the loan and regain the right to vote the securities.
The risks in lending portfolio securities, as with other extensions of secured
credit, consist of possible delay in receiving additional collateral or in the
recovery of the securities or possible loss of rights in the collateral should
the borrower fail financially.
When-Issued Securities
As discussed in the Prospectuses, the Funds may purchase securities on
a "when-issued" basis. When a Fund agrees to purchase securities, the Custodian
will set aside cash or liquid portfolio securities equal to the amount of the
commitment in a separate account. Normally, the Custodian will set aside
portfolio securities to satisfy a purchase commitment. In such a case, a Fund
may be required subsequently to place additional assets in the separate account
in order to assure that the value of the account remains equal to the amount of
the Fund's commitment. It may be expected that a Fund's net assets will
fluctuate to a greater degree when it sets aside portfolio securities to cover
such purchase commitments than when it sets aside cash. No Fund intends to
purchase "when-issued" securities for speculative purposes but only in
furtherance of its investment objective. Because a Fund will set aside cash or
liquid portfolio securities to satisfy its purchase commitments in the manner
described, the Fund's liquidity and the ability of the Manager or sub-adviser to
manage the Fund might be affected in the event its commitments to purchase
when-issued securities ever exceeded 25% of the value of its assets.
When a Fund engages in "when-issued" transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in the
Fund's incurring a loss or missing the opportunity to obtain a price considered
to be advantageous.
Money Market Instruments
Each Fund may invest for defensive purposes in corporate government
bonds and notes and money market instruments. Money market instruments in which
the Funds may invest include U.S. Government securities; certificates of
deposit, time deposits and bankers' acceptances issued by domestic banks
(including their branches located outside the U.S. and subsidiaries located in
Canada), domestic branches of foreign banks, savings and loan associations and
similar institutions; high grade commercial paper; and repurchase agreements
with respect to the foregoing types of instruments. The following is a more
detailed description of such money market instruments.
Bank Obligations
Certificates of deposit ("CDs") are short-term negotiable obligations
of commercial banks; time deposits ("TDs") are non-negotiable deposits
maintained in banking institutions for specified periods of time at stated
interest rates; and bankers' acceptances are time drafts drawn on commercial
banks by borrowers usually in connection with international transactions.
Obligations of foreign branches of domestic banks, such as CDs and TDs,
may be general obligations of the parent bank in addition to the issuing branch,
or may be limited by the terms of a specific obligation and government
regulation. Such obligations are subject to different risks than are those of
domestic banks or domestic branches of foreign banks. These risks include
-16-
<PAGE>
foreign economic and political developments, foreign governmental restrictions
that may adversely affect payment of principal and interest on the obligations,
foreign exchange controls and foreign withholding and other taxes on interest
income. Foreign branches of domestic banks are not necessarily subject to the
same or similar regulatory requirements that apply to domestic banks, such as
mandatory reserve requirements, loan limitations, and accounting, auditing and
financial recordkeeping requirements. In addition, less information may be
publicly available about a foreign branch of a domestic bank than about a
domestic bank. CDs issued by wholly owned Canadian subsidiaries of domestic
banks are guaranteed as to repayment of principal and interest (but not as to
sovereign risk) by the domestic parent bank.
Obligations of domestic branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by governmental regulation as
well as governmental action in the country in which the foreign bank has its
head office. A domestic branch of a foreign bank with assets in excess of $1
billion may or may not be subject to reserve requirements imposed by the Federal
Reserve System or by the state in which the branch is located if the branch is
licensed in that state. In addition, branches licensed by the Comptroller of the
Currency and branches licensed by certain states ("State Branches") may or may
not be required to: (a) pledge to the regulator by depositing assets with a
designated bank within the state, an amount of its assets equal to 5% of its
total liabilities; and (b) maintain assets within the state in an amount equal
to a specified percentage of the aggregate amount of liabilities of the foreign
bank payable at or through all of its agencies or branches within the state. The
deposits of state branches may not necessarily be insured by the FDIC. In
addition, there may be less publicly available information about a domestic
branch of a foreign bank than about a domestic bank.
In view of the foregoing factors associated with the purchase of CDs
and TDs issued by foreign branches of domestic banks or by domestic branches of
foreign banks, the Manager and/or sub-advisers will carefully evaluate such
investments on a case-by-case basis.
Savings and loan associations whose CDs may be purchased by the Funds
are supervised by the Office of Thrift Supervision and are insured by the
Savings Association Insurance Fund, which is administered by the FDIC and is
backed by the full faith and credit of the U.S. Government. As a result, such
savings and loan associations are subject to regulation and examination.
Reverse Repurchase Agreements
All Funds are authorized to enter into reverse repurchase agreements. A
reverse repurchase agreement is the sale of a security by a Fund and its
agreement to repurchase the security at a specified time and price. A Fund will
maintain in a segregated account with the Custodian cash, cash equivalents or
U.S. Government securities in an amount sufficient to cover its obligations
under reverse repurchase agreements with broker-dealers (but no collateral is
required on reverse repurchase agreements with banks). Under the Investment
Company Act, reverse repurchase agreements may be considered borrowings by a
Fund; accordingly, each Fund will limit its investments in reverse repurchase
agreements, together with any other borrowings, to no more than one-third of its
total assets. The use of reverse repurchase agreements by a Fund creates
leverage which increases the Fund's investment risk. If the income and gains on
securities purchased with the proceeds of reverse repurchase agreements exceed
the costs of the agreements, a Fund's earnings or net asset value will increase
faster than otherwise would be the case; conversely, if the income and gains
fail to exceed the costs, earnings or net asset value would decline faster than
otherwise would be the case.
-17-
<PAGE>
"Roll" Transactions
Each Fund may engage in "roll" transactions. A "roll" transaction is
the sale of securities together with a commitment (for which a Fund may receive
a fee) to purchase similar, but not identical, securities at a future date.
Under the Investment Company Act, these transactions may be considered
borrowings by the Funds; accordingly, each Fund will limit its use of these
transactions, together with any other borrowings, to no more than one-third of
its total assets. The Funds will segregate liquid assets such as cash, U.S.
Government securities or other high grade debt obligations in an amount
sufficient to meet their payment obligations in these transactions. Although
these transactions will not be entered into for leveraging purposes, to the
extent a Fund's aggregate commitments under these transactions exceed its
holdings of cash and securities that do not fluctuate in value (such as
short-term money market instruments), the Fund temporarily will be in a
leveraged position (i.e., it will have an amount greater than its net assets
subject to market risk). Should the market value of a Fund's portfolio
securities decline while the Fund is in a leveraged position, greater
depreciation of its net assets would likely occur than were it not in such a
position. As a Fund's aggregate commitments under these transactions increase,
the opportunity for leverage similarly increases.
Repurchase Agreements
The Funds may additionally engage in repurchase agreement transactions.
Under the terms of a typical repurchase agreement, a Fund would acquire an
underlying debt obligation for a relatively short period (usually not more than
one week) subject to an obligation of the seller to repurchase, and the Fund to
resell, the obligation at an agreed-upon price and time, thereby determining the
yield during the Fund's holding period. This arrangement results in a fixed rate
of return that is not subject to market fluctuations during the Fund's holding
period. The Funds will enter into repurchase agreements with respect to their
portfolio securities with member banks of the Federal Reserve System or primary
government securities dealers recognized by the Federal Reserve Bank of New
York. Under each repurchase agreement, the selling institution will be required
to maintain the value of the securities subject to the repurchase agreement at
not less than their repurchase price, including accrued interest earned on the
underlying securities.
Repurchase agreements could involve certain risks in the event of
default or insolvency of the other party, including possible delays or
restrictions upon a Fund's ability to dispose of the underlying securities. The
Manager and/or sub-advisers, acting under the supervision of the Board of
Directors, review the creditworthiness of those banks and dealers with which the
Funds enter into repurchase agreements to evaluate these risks, and monitors on
an ongoing basis the value of the securities subject to repurchase agreements to
ensure that the collateral is maintained at the required level.
Illiquid Securities
Illiquid securities are securities that cannot be sold or disposed of
in the ordinary course of business at approximately the prices at which they are
valued. Under the supervision of the Board of Directors, the Manager and/or
sub-advisers determine the liquidity of the Funds' securities and monitors
trading activity in illiquid securities. In determining the liquidity of a
Fund's securities, the Manager and/or sub-advisers may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of dealers
and prospective purchasers in the marketplace, (3) dealer undertakings to make a
market, (4) the nature of the security (including any demand or tender
-18-
<PAGE>
features), and (5) the nature of the marketplace for trades (including the
ability to assign or offset the Fund's rights and obligations relating to the
investment). Securities currently considered by the Fund to be illiquid include
repurchase agreements not entitling the holder to payments of principal and
interest within seven days, loans and other direct debt instruments,
over-the-counter options, non-government stripped fixed-rate mortgage-backed
securities, and certain restricted securities and government-stripped fixed-rate
mortgage backed securities determined by the Manager and/or sub-advisers to be
illiquid. Rule 144A securities for which a market exists will not be considered
illiquid securities. In the absence of market quotations, illiquid securities
are priced at fair value as determined in good faith by the Investment\Pricing
Committee of the Board of Directors.
Variable and Floating Rate Notes
Variable rate master demand notes, in which the Funds may invest, are
unsecured demand notes that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate according to the terms of
the instrument. A Fund will not invest over 5% of its assets in variable rate
master demand notes. Because master demand notes are direct lending arrangements
between a Fund and the issuer, they are not normally traded. Although there is
no secondary market in the notes, a Fund may demand payment of principal and
accrued interest at any time. While the notes are not typically rated by credit
rating agencies, issuers of variable amount master demand notes (which are
normally manufacturing, retail, financial, and other business concerns) must
satisfy the same criteria as set forth above for commercial paper. In
determining average weighted portfolio maturity, a variable amount master demand
note will be deemed to have a maturity equal to the period of time remaining
until the principal amount can be recovered from the issuer through demand.
A variable rate note is one whose terms provide for the adjustment of
its interest rate on set dates and which, upon such adjustment, can reasonably
be expected to have a market value that approximates its par value. A floating
rate note is one whose terms provide for the adjustment of its interest rate
whenever a specified interest rate changes and which, at any time, can
reasonably be expected to have a market value that approximates its par value.
Such notes are frequently not rated by credit rating agencies; however, unrated
variable and floating rate notes purchased by a Fund will be determined by the
Fund's Manager and/or sub-adviser, if any, under guidelines established by the
Fund's Board of Directors to be of comparable quality at the time of purchase to
rated instruments eligible for purchase under the Fund's investment policies. In
making such determinations, the Manager and/or sub-adviser, if any, will
consider the earning power, cash flow and other liquidity ratios of the issuers
of such notes (such issuers include financial, merchandising, bank holding and
other companies) and will continuously monitor their financial condition.
Although there may be no active secondary market with respect to a particular
variable or floating rate note purchased by a Fund, the Fund may re-sell the
note at any time to a third party. The absence of such an active secondary
market, however, could make it difficult for the Fund to dispose of the variable
or floating rate note involved in the event the issuer of the note defaulted on
its payment obligations, and the Fund could, for this or other reasons, suffer a
loss to the extent of the default. Variable or floating rate notes may be
secured by bank letters of credit.
Variable and floating rate notes for which no readily available market
exists will be purchased in an amount which, together with securities with legal
or contractual restrictions on resale or for which no readily available market
exists (including repurchase agreements providing for settlement more than seven
days after notice), exceed 10% of the Fund's total assets only if such notes are
subject to a demand feature that will permit the Fund to demand payment of the
-19-
<PAGE>
Principal within seven days after demand by the Fund. If not rated, such
instruments must be found by the Fund's Manager and/or sub-adviser, if any,
under guidelines established by the Fund's Board of Directors, to be of
comparable quality to instruments that are rated high quality. A rating may be
relied upon only if it is provided by a nationally recognized statistical rating
organization that is not affiliated with the issuer or guarantor of the
instruments. [For a description of the rating symbols of S&P and Moody's used in
this paragraph, see the Appendix.] The Fund may also invest in Canadian
Commercial Paper which is commercial paper issued by a Canadian corporation or a
Canadian counterpart of a U.S. corporation and in Europaper which is U.S. dollar
denominated commercial paper of a foreign issuer.
Municipal Securities
Municipal Securities are issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as bridges, highways, roads, schools, water and sewer works, and other
utilities. Other public purposes for which Municipal Securities may be issued
include refunding outstanding obligations, obtaining funds for general operating
expenses and obtaining funds to lend to other public institutions and
facilities. In addition, certain debt obligations known as "private activity
bonds" may be issued by or on behalf of municipalities and public authorities to
obtain funds to provide certain water, sewage and solid waste facilities,
qualified residential rental projects, certain local electric, gas and other
heating or cooling facilities, qualified hazardous waste facilities, high-speed
intercity rail facilities, governmentally-owned airports, docks and wharves and
mass commuting facilities, certain qualified mortgages, student loan and
redevelopment bonds and bonds used for certain organizations exempt from federal
income taxation. Certain debt obligations known as "industrial development
bonds" under prior federal tax law may have been issued by or on behalf of
public authorities to obtain funds to provide certain privately-operated housing
facilities, sports facilities, industrial parks, convention or trade show
facilities, airport, mass transit, port or parking facilities, air or water
pollution control facilities, sewage or solid waste disposal facilities, and
certain facilities for water supply. Other private activity bonds and industrial
development bonds issued to finance the construction, improvement, equipment or
repair of privately-operated industrial, distribution, research, or commercial
facilities may also be Municipal Securities, but the size of such issues is
limited under current and prior federal tax law.
Information about the financial condition of issuers of Municipal
Securities may be less available than about corporations with a class of
securities registered under the Securities Exchange Act of 1934.
INVESTMENT RESTRICTIONS
Each Fund has adopted policies and investment restrictions. The
investment restrictions numbered 1 through 9 may not be changed without a
majority vote of its outstanding shares, and are considered fundamental. Such
majority is defined in the Investment Company Act as the vote of the lesser of:
(i) 67% or more of the outstanding voting securities present at a meeting, if
the holders of more than 50% of the outstanding voting securities are present in
person or by proxy, or (ii) more than 50% of the outstanding voting securities.
All percentage limitations expressed in the following investment restrictions
are measured immediately after and giving effect to the relevant transaction.
Investment restrictions numbered 10 through 12 may be changed by the vote of a
majority of the Board of Directors.
Each Fund normally may not:
-20-
<PAGE>
1. Purchase any security (other than obligations of
the U.S. Government, its agencies or instrumentalities) if as
a result, with respect to 75% of the Fund's total assets, more
than 5% of the Fund's assets (determined at the time of
investment) would then be invested in securities of a single
issuer;
2. Purchase any securities (other than obligations of
the U.S. Government, its agencies and instrumentalities) if as
a result 25% or more of the value of the Fund's total assets
(determined at the time of investment) would be invested in
the securities of one or more issuers conducting their
principal business activities in the same industry, provided
that there is no limitation with respect to money market
instruments of domestic banks, U.S. branches of foreign banks
that are subject to the same regulations as U.S. banks and
foreign branches of domestic banks (provided that the domestic
bank is unconditionally liable in the event of the failure of
the foreign branch to make payment on its instruments for any
reason). Foreign governments, including agencies and
instrumentalities thereof, and each of the electric utility,
natural gas distribution, natural gas pipeline, combined
electric and natural gas utility, and telephone industries
shall be considered as a separate industry for this purpose;
3. Buy or sell real estate, interests in real estate
or commodities or commodity contracts; however, each Fund may
invest in debt securities secured by real estate or interests
therein, or issued by companies which invest in real estate or
interests therein, including real estate investment trusts,
and may purchase or sell currencies (including forward
currency contracts) and financial futures contracts and
options thereon;
4. Engage in the business of underwriting securities
of other issuers, except to the extent that the disposal of an
investment position may technically cause the Adviser Funds,
Inc. to be considered an underwriter as that term is defined
under the Securities Act of 1933, as amended;
5. Make loans in an aggregate amount in excess of
one-third of a Fund's total assets, taken at the time any loan
is made, provided that entering into certain repurchase
agreements and purchasing debt securities shall not be deemed
loans for the purposes of this restriction;
6. Make short sales of securities or maintain a short
position if, when added together, more than 25% of the value
of the Fund's net assets would be (i) deposited as collateral
for the obligation to replace securities borrowed to effect
short sales and (ii) allocated to segregated accounts in
connection with short sales;
7. Borrow money, except from banks for temporary or
emergency purposes not in excess of one-third of the value of
a Fund's assets, and except that Funds may enter into reverse
repurchase agreements and engage in "roll" transactions,
provided that reverse repurchase agreements, "roll"
transactions and any other transactions constituting borrowing
by a Fund may not exceed one-third of the Fund's total assets.
-21-
<PAGE>
8. Invest in securities of other investment companies
except as may be acquired as part of a merger, consolidation,
reorganization or acquisition of assets and except that each
of the Funds may invest up to 5% of its total assets in the
securities of any one investment company, but may not own more
than 3% of the securities of any investment company or invest
more than 10% of its total assets in the securities of other
investment companies;
9. Make investments for the purpose of exercising
control or management;
10. Invest in securities of any issuer if, to the
knowledge of Adviser Funds, Inc., any officer or director of
the Advisor Funds, Inc. or the Manager or any sub-adviser owns
more than 1/2 of 1% of the outstanding securities of such
issuer, and such officers and directors who own more than 1/2
of 1% own in the aggregate more than 5% of the outstanding
securities of such issuer;
11. Purchase any security if as a result a Fund would
then have more than 5% of its total assets (determined at the
time of investment) invested in securities of companies
(including predecessors) less than three years old; or
12. Purchase illiquid securities or other securities
that are not readily marketable if more than 10% of the total
assets of the Fund would be invested in such securities, which
include: (1) repurchase agreements with maturities greater
than seven calendar days; (2) to the extent a liquid secondary
market does not exist for the instruments, futures contracts
and options thereon; (3) over-the-counter options; (4)
variable rate demand notes with a demand period of more than
seven days; (5) time deposits maturing in more than seven
calendar days; (6) certain Rule 144A restricted securities;
and (7) foreign securities not traded on a recognized domestic
or foreign exchange, to the extent a liquid secondary market
does not exist for such instruments.
In order to comply with certain state "blue sky" restrictions, each Fund will
not as a matter of operating policy:
1. Invest in oil, gas and mineral leases or programs;
2. Purchase warrants if as a result the Fund would
then have more than 5% of its net assets (determined at the
time of investment) invested in warrants. Warrants will be
valued at the lower of cost or market and investment in
warrants which are not listed on the New York Stock Exchange
or American Stock Exchange will be limited to 2% of the net
assets of the Adviser Funds, Inc. (determined at the time of
investment). For the purpose of this limitation, warrants
acquired in units or attached to securities are deemed to be
without value;
3. In connection with investment restriction number
eight above, invest in securities issued by other investment
companies without waiving the advisory fee on that portion of
its assets invested in such securities; or
4. Purchase puts, calls, straddles, spreads, and any
combination thereof if by reason thereof the value of its
aggregate investment in such classes of securities will exceed
5% of its total assets.
-22-
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following supplements the information in each Prospectus under the
heading Dividends, Distributions and Taxes.
Tax Information Concerning All Funds
It is the policy of each Fund to meet the requirements necessary to
qualify as a "regulated investment company" under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). By following such policy, each
Fund expects to eliminate or reduce to a nominal amount the federal income taxes
to which it may be subject.
In order to qualify as a regulated investment company, each Fund must,
among other things, (1) derive at least 90% of its gross income from dividends,
interest, payment with respect to securities loans, and gains from the sale or
other disposition of stock or securities, foreign currencies or other income
(including gains from options, futures or forward contracts) derived with
respect to its business of investing in stock, securities or currencies, (2)
derive less than 30% of its gross income from the sale or other disposition of
stock, securities, options, futures, forward contracts, and certain foreign
currencies (or options, futures, or forward contracts on foreign currencies)
held for less than three months, and (3) diversify its holdings so that at the
end of each quarter of its taxable year (i) at least 50% of the market value of
the Fund's assets is represented by cash or cash items (including receivables),
United States Government securities, securities of other regulated investment
companies, and other securities limited, in respect of any one issuer, to an
amount not greater than 5% of the value of the Fund's assets at the date of
purchase and 10% of the outstanding voting securities of such issuer, and (ii)
not more than 25% of the value of its assets is invested in the securities of
any one issuer (other than United States Government securities or the securities
of other regulated investment companies) or of two or more issuers that the
Adviser Funds, Inc. controls and that are engaged in the same, similar or
related trades or businesses. These requirements may restrict the degree to
which the Adviser Funds, Inc. may engage in short-term trading and limit the
range of the Adviser Funds, Inc.'s investments. If a Fund qualifies as a
regulated investment company, it will not be subject to federal income tax on
the part of its income distributed to shareholders, provided the Fund
distributes at least 90% of its net investment income (including short-term
capital gains) other than long-term capital gains in each year. Each Fund
intends to make sufficient distributions to shareholders to meet this
requirement.
Consequently, in order to avoid realizing a gain within the three-month
period, each Fund may be required to defer the closing out of a contract beyond
the time when it might otherwise be advantageous to do so. Each Fund may also be
restricted in the sale of purchased put options and the purchase of put options
for the purpose of hedging underlying securities because of the application of
the short sale holding period rules with respect to such underlying securities.
The Code imposes a non-deductible excise tax on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar taxable year) an amount equal to 98% of their
"ordinary income" (as defined) for the calendar year plus 98% of their "capital
gain net income" (as defined) for the 1-year period ending on October 31 of such
calendar year plus 100% of the prior calendar year's undistributed income (if
any). The balance, if any, of such income must be distributed during the next
calendar year. For the foregoing purposes, a Fund is treated as having
distributed any amount on which it is subject to income tax for any taxable year
-23-
<PAGE>
ending in such calendar year. If distributions during a calendar year are less
than the required amount, that particular Fund will be subject to a
non-deductible excise tax equal to 4% of the deficiency.
Shareholders of the Funds will generally pay federal income tax on
distributions received from the Fund. Dividends that are attributable to a
Fund's taxable net investment income will be taxed as ordinary income.
Distributions of net capital gain that are designated by a Fund as capital gain
dividends will generally be taxable as long-term capital gain. Distributions in
excess of a Fund's current and accumulated earnings and profits will be treated
by shareholders receiving such distributions as a return of capital; a return of
capital is taxable to shareholder as capital gain to the extent that it exceeds
such shareholder's basis in its shares in the Fund. Shareholders not subject to
tax on their income generally will not be required to pay tax on amounts
distributed to them. Such shareholders will include qualified retirement plans.
It is the present policy of Adviser Funds, Inc. to declare dividends
from net investment income of each fixed-income Fund on a daily basis. Dividends
are declared at the time the offering price and net asset value are determined
(see Determining Offering Price and Net Asset Value) each day the Fund is open
and are paid monthly on the last business day of each month. Checks are normally
mailed within three business days of that date. Any check in payment of
dividends or other distributions which cannot be delivered by the United States
Post Office or which remains uncashed for a period of more than one year may be
reinvested in the shareholder's account at the then-current net asset value and
the dividend option may be changed from cash to reinvest. A Fund may deduct from
a shareholder's account the costs of the Fund's effort to locate a shareholder
if a shareholder's mail is returned by the United States Post Office or the Fund
is otherwise unable to locate the shareholder or verify the shareholder's
mailing address. These costs may include a percentage of the account when a
search company charges a percentage fee in exchange for their location services.
Net investment income earned on days when a Fund is not open will be declared as
a dividend on the next business day. Purchases of Fund shares by wire begin
earning dividends when converted into Federal Funds and available for
investment, normally the next business day after receipt. Purchases by check
earn dividends upon conversion to Federal Funds, normally one business day after
receipt.
Each class of a Fund will share proportionately in the investment
income and expenses of the Fund, except that the Class A Shares, Class B Shares
and the Class C Shares alone will incur distribution fees under their respective
12b-1 Plans.
Dividends and realized securities profits distributions are
automatically reinvested in additional shares of a Fund at net asset value in
effect on the payable date, and credited to the shareholder's account, unless an
election to receive distributions in cash has been made by the shareholder.
Dividend payments of $1.00 or less will be automatically reinvested,
notwithstanding a shareholder's election to receive dividends in cash. If such a
shareholder's dividends increase to greater than $1.00, the shareholder would
have to file a new election in order to begin receiving dividends in cash again.
Adviser Funds, Inc. anticipates distributing to its shareholders
substantially all of a Fund's net investment income. Any net short-term capital
gains after deducting any net long-term capital losses (including carryforwards)
would be distributed quarterly but, in the discretion of Adviser Funds, Inc.'s
Board of Directors, might be distributed less frequently. Distributions of net
long-term gains, if any, realized on sales of investments will be distributed
annually during the quarter following the close of the fiscal year.]
-24-
<PAGE>
Taxation of Shareholders
Gain or loss on the sale of a security generally will be long-term
capital gain or loss if a Fund has held the securities for more than one year.
Gain or loss on the sale of securities held for not more than one year will be
short-term. If one of the Funds acquires a debt security at a substantial
discount, a portion of any gain upon the sale or redemption will be taxed as
ordinary income, rather than capital gain to the extent it reflects accrued
market discount. Alternatively, this discount may be accredited as ordinary
income on a daily basis rather than recognized at disposition.
Dividends of net investment income and distributions of net realized
short-term capital gains will be taxable to shareholders as ordinary income for
federal income tax purposes, whether received in cash or reinvested in
additional shares. Dividends received by corporate shareholders will qualify for
the dividends-received deduction only to the extent that each of the [Equity
Portfolios] designates the amount distributed as a dividend and the amount so
designated does not exceed the aggregate amount of dividends received by the
Funds from domestic corporations for the taxable year. The federal
dividends-received deduction for corporate shareholders may be further reduced
or disallowed if the shares with respect to which dividends are received are
treated as debt-financed or are deemed to have been held for less than 46 days.
Foreign countries may impose withholding and other taxes on dividends
and interest paid to the Portfolios with respect to investments in foreign
securities. However, certain foreign countries have entered into tax conventions
with the U.S. to reduce or eliminate such taxes.
Distributions of long-term capital gains will be taxable to
shareholders as such, whether paid in cash or reinvested in additional shares
and regardless of the length of time that the shareholder has held his or her
interest in one of the Funds. If a shareholder receives a distribution taxable
as long-term capital gain with respect to his or her investment in a Fund and
redeems or exchanges the shares before he or she has held them for more than six
months, any loss on the redemption or exchange that is less than or equal to the
amount of the distribution will be treated as a long-term capital loss.
If a shareholder: (a) incurs a sales charge or in acquiring or
redeeming shares of one of the Funds; (b) disposes of those shares and acquires
within 90 days after the original acquisition; or (c) acquires within 90 days of
the redemption those shares in a mutual fund for which the otherwise applicable
sales charge is reduced by reason of reinvestment right (i.e., an exchange
privilege), the original sales charge increases the shareholder's tax basis in
the original shares only to the extent the other applicable sales charge for the
second acquisition is not reduced. The portion of the original sales charge that
does not increase the shareholder's tax basis in the original shares would be
treated as incurred with respect to the second acquisition and, as a general
rule, would increase the shareholder's tax basis in the newly acquired shares.
Furthermore, the same rule also applies to a disposition of the newly acquired
or redeemed shares made within 90 days of the second acquisition. This provision
prevents a shareholder from immediately deducting the sales charge by shifting
his or her investment in a family of mutual funds.
Investors considering buying shares of one of the Funds just prior to a
record date for a taxable dividend or capital gain distribution should be aware
that, regardless of whether the price of the Fund shares to be purchased
reflects the amount of the forthcoming dividend or distribution payment, any
such payment will be a taxable dividend or distribution payment. This is of
particular concern for investors in the [Equity Portfolios] since these Funds
may make distributions on an annual basis.
-25-
<PAGE>
Each Fund will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable dividends or of gross proceeds from
redemptions paid to any shareholder who has provided either an incorrect tax
identification number or no number at all, or who is subject to withholding by
the Internal Revenue Service for failure to properly include on his tax return
payments of interest or dividends. This withholding, known as backup
withholding, is not an additional tax, and any amounts withheld may be credited
against the shareholder's ultimate U.S. tax liability.
Certain investments and hedging activities of the Funds, including
transactions in options, futures contracts, hedging transactions, forward
contracts, straddles, foreign currencies, and foreign securities will be subject
to special tax rules. See "Option Transactions," "Straddles" and "Wash Sales"
herein. In a given case, these rules may accelerate income to a Fund, defer
losses to a Fund, cause adjustments in the holding periods of a Fund's
securities, convert short-term capital losses into long-term capital losses, or
otherwise affect the character of a Fund's income. These rules could therefore
affect the amount, timing and character of distributions to shareholders. Each
Fund will endeavor to make any available elections pertaining to such
transactions in a manner believed to be in the best interest of a Fund.
Certain securities purchased by the Funds (such as STRIPS, CUBES, TRs,
TIGRs and CATS), are sold at original issue discount and do not make periodic
cash interest payments. A Fund will be required to include as part of its
current income the imputed interest on such obligations even though a Fund has
not received any interest payments on such obligations during that period.
Because a Fund distributes all of its net investment income to its shareholders
(including such imputed interest), a Fund may have to sell securities in order
to generate the cash necessary for the required distributions. Such sales may
occur at a time when the Manager or sub-adviser would not have chosen to sell
such securities and which may result in a taxable gain or loss.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting purchasers of shares of each Fund of Adviser
Funds, Inc. Further tax information regarding the Delaware World Growth and
Delaware New Pacific Funds are included in following sections of this Statement
of Additional Information. No attempt is made to present a detailed explanation
of the federal income tax treatment of each Fund or its shareholders, and this
discussion is not intended as a substitute for careful tax planning.
Accordingly, prospective purchasers of shares of a Fund are urged to consult
their tax advisors with specific reference to their own tax situation, including
the potential application of state and local taxes.
The foregoing discussion and the discussion below regarding the
Delaware World Growth and Delaware New Pacific Funds are based on tax laws and
regulations which are in effect on the date of this Statement of Additional
Information; such laws and regulations may be changed by legislative or
administrative action, and such changes may be retroactive.
Additional Tax Information Concerning the Delaware World Growth and Delaware
New Pacific Funds
Gain or loss on the sale or other disposition of foreign currency by
the Delaware World Growth and Delaware New Pacific Funds on a spot (or cash)
basis will result in ordinary gain or loss for federal income tax purposes.
-26-
<PAGE>
Gains from foreign currencies (including foreign currency options,
foreign currency futures and foreign currency forward contracts) will constitute
qualifying income for purposes of the 90% test. However, future Treasury
regulations may exclude from qualifying income foreign currency gains not
directly related to a Fund's business of investing in stock or securities (and
may further define those foreign currency transactions that are not directly
related).
Investment by a Fund in certain "passive foreign investment companies"
could subject a Fund to U.S. federal income tax or other charge on distributions
received from, or the sale of its investment in, such a company, which tax
cannot be eliminated by making distributions to shareholders. If the Funds elect
to treat a passive foreign investment company as a "qualified electing fund,"
different rules would apply, although the Funds do not expect to be in the
position to make such elections.
Foreign Tax Credit
Shareholders of the Delaware World Growth and Delaware New Pacific
Funds who are U.S. citizens may be able to claim a foreign tax credit or
deduction on their U.S. income tax returns with respect to foreign taxes paid by
the Funds. Generally, a credit for foreign taxes is subject to the limitation
that it may not exceed the shareholder's U.S. tax attributable to his or her
total foreign source taxable income. For this purpose, the source of a Fund's
income flows through to its shareholders. A Fund's gains from the sale of
securities generally will be treated as derived from U.S. sources and certain
currency fluctuation gains, including fluctuation gains from foreign currency
denominated debt securities, receivables and payables, will be treated as
ordinary income derived from U.S. sources. With limited exceptions, the foreign
tax credit is allowed to offset only 90% of the alternative minimum tax imposed
on corporations and individuals. Because of these limitations, shareholders may
be unable to claim a credit for the full amount of their proportionate share of
the foreign taxes paid by a Fund.
The foregoing is only a general description of the treatment of foreign
withholding or other foreign taxes under the U.S. federal income tax laws.
Because the availability of a credit or deduction depends on the particular
circumstances of each shareholder, shareholders are advised to consult their own
tax advisors.
Options Transactions
When a Fund writes a call option, an amount equal to the premium
received by it is included in the Fund's assets and liabilities as an asset and
as an equivalent liability. The amount of the liability is subsequently "marked
to market" to reflect the current market value of the option written. The
current market value of a written option is the last sale price on the principal
Exchange on which such option is traded or, in the absence of a sale, the mean
between the last bid and asked prices. If an option which a Fund has written
expires on its stipulated expiration date, or if a Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss if the cost of the
closing transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. Any such gain or loss is a
short-term capital gain or loss for federal income tax purposes. If a call
option which a Fund has written is exercised, the Fund 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 are increased by the premium originally received.
-27-
<PAGE>
The premium paid by a Fund for the purchase of a put option is recorded
in the section of the Fund'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. If a put
option which a Fund has purchased expires on the stipulated expiration date,
that Fund realizes a long- or short-term capital loss for federal income tax
purposes in the amount of the cost of the option. If the Fund sells the put
option, it realizes a long- or short-term capital gain or loss, depending on
whether the proceeds from the sale are greater or less than the cost of the
option. If the Fund 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. However, since the
purchase of a put option is treated as a short sale for federal income tax
purposes, the holding period of the underlying security will be affected by such
a purchase.
Futures Contracts
The initial margin deposits made when entering into futures contracts
are recognized as assets due from the broker. During the period the futures
contract is open, changes in the value of the contract will be reflected at the
end of each day.
Regulated futures contracts held by the Fund at the end of each fiscal
year will be required to be "marked to market" for federal income tax purposes.
Any unrealized gain or loss on futures contracts will therefore be recognized
and deemed to consist of 60% long-term capital gain or loss and 40% short-term
capital gain or loss. Therefore, adjustments are made to the tax basis in the
futures contract to reflect the gain or loss recognized at year end.
Straddles
The Code contains rules applicable to "straddles," that is, "offsetting
positions in actively traded personal property." Such personal property includes
offsetting puts of the same class, section 1256 contracts or other investment
contracts. Where applicable, the straddle rules generally override the other
provisions of the Code. In general, investment positions will be offsetting if
there is a substantial diminution in the risk of loss from holding one position
by reason of holding one or more other positions (although certain covered call
options would not be treated as part of a straddle). The Funds are authorized to
enter into covered call and covered put positions. Depending on what other
investments are held by a Fund, at the time it enters into one of the above
transactions, the Fund may create a straddle for purposes of the Code.
Wash Sales
"Wash sale" rules will apply to prevent the recognition of loss with
respect to a position where an identical or substantially identical position has
been acquired thirty days prior to or thirty days after the date of the loss.
The foregoing is only a summary of certain federal tax considerations
generally affecting the Funds and their shareholders and is not intended as a
substitute for careful tax planning. Shareholders are urged to consult their tax
advisors with specific reference to their own tax situations, including their
state and local tax liabilities.
-28-
<PAGE>
PERFORMANCE INFORMATION
From time to time, each Fund may state total return for each Class in
advertisements and other types of literature. Any statements of total return
performance data for a Class will be accompanied by information on the average
annual compounded rate of return for that Class over, as relevant, the most
recent one-, five- and ten-year (or life of fund, if applicable) periods. Each
Fund may also advertise aggregate and average compounded return information of
each Class over additional periods of time.
The average annual total rate of return for each 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 from which,
in the case of only Class A Shares, the maximum front-end
sales charge is deducted;
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 the deduction of the applicable
CDSC, if any, with respect to Class B Shares and Class C
Shares.
In the case of Class A Shares, the Limited CDSC, applicable only to
certain redemptions of those shares, will not be deducted from any computations
of total return. See the Prospectus for the Fund Classes for a description of
the Limited CDSC and the limited instances in which it applies. All references
to a CDSC will apply to Class B Shares or Class C Shares.
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made with respect to Class A Shares and that all distributions
are reinvested at net asset value, and, with respect to Class B Shares and Class
C Shares, reflects the deduction of the CDSC that would be applicable upon
complete redemption of such shares. In addition, the Fund may present total
return information that does not reflect the deduction of the maximum front-end
sales charge or any applicable CDSC.
The performance of Class A Shares, Class B Shares Class C Shares and
the Institutional Class, as shown below, is the average annual total return
quotations through October 31, 1995, computed as described above.
The average annual total return for Class A Shares at offer reflects
the maximum front-end sales charges paid on the purchase of shares. The average
annual total return for Class A Shares at net asset value (NAV) does not reflect
the payment of the maximum front-end sales charge of 4.75%.
-29-
<PAGE>
The average annual total return for Class B Shares and Class C Shares
including deferred sales charge reflects the deduction of the applicable CDSC
that would be paid if the shares were redeemed on October 31, 1995. The average
annual total return for Class B Shares and Class C Shares excluding deferred
sales charge assumes the shares were not redeemed on October 31, 1995 and
therefore does not reflect the deduction of a CDSC.
Pursuant to applicable regulation, total return shown for Classes for
the periods prior to the commencement of operations of such Class is calculated
by taking the performance of Class A Shares and adjusting it to reflect the
elimination of all front-end sales charges. However, for those periods, no
adjustment has been made to eliminate the impact of 12b-1 payments, and
performance may have been affected had such an adjustment been made.
Securities prices fluctuated during the periods covered and past
results should not be considered as representative of future performance.
-30-
<PAGE>
AVERAGE ANNUAL TOTAL RETURN(1)
<TABLE>
<CAPTION>
ONE THREE
YEAR YEARS
ENDED ENDED SINCE
FUND AND CLASSES 10/31/95 10/31/95 INCEPTION
---------------- -------- -------- ---------
<S> <C> <C> <C>
Delaware Enterprise Fund
Class A Shares
(at offer) _____% _____% _____%
(at NAV) _____% _____% _____%
Class B Shares
(including CDSC) _____% _____% _____%
(excluding CDSC) _____% _____% _____%
Class C Shares
(including CDSC) _____% _____% _____%
(excluding CDSC) _____% _____% _____%
Institutional Class _____% _____% _____%
Delaware U.S. Growth Fund
Class A Shares
(at offer) _____% _____% _____%
(at NAV) _____% _____% _____%
Class B Shares
(including CDSC) _____% _____% _____%
(excluding CDSC) _____% _____% _____%
Class C Shares
(including CDSC) _____% _____% _____%
(excluding CDSC) _____% _____% _____%
Institutional Class _____% _____% _____%
Delaware World Growth Fund
Class A Shares
(at offer) _____% _____% _____%
(at NAV) _____% _____% _____%
Class B Shares
(including CDSC) _____% _____% _____%
(excluding CDSC) _____% _____% _____%
Class C Shares
(including CDSC) _____% _____% _____%
(excluding CDSC) _____% _____% _____%
Institutional Class _____% _____% _____%
</TABLE>
-31-
<PAGE>
<TABLE>
<CAPTION>
ONE THREE
YEAR YEARS
ENDED ENDED SINCE
FUND AND CLASSES 10/31/95 10/31/95 INCEPTION
---------------- -------- -------- ---------
<S> <C> <C> <C>
Delaware New Pacific Fund
Class A Shares
(at offer) _____% _____% _____%
(at NAV) _____% _____% _____%
Class B Shares
(including CDSC) _____% _____% _____%
(excluding CDSC) _____% _____% _____%
Class C Shares
(including CDSC) _____% _____% _____%
(excluding CDSC) _____% _____% _____%
Institutional Class _____% _____% _____%
Delaware Corporate Income Fund
Class A Shares
(at offer) _____% _____% _____%
(at NAV) _____% _____% _____%
Class B Shares
(including CDSC) _____% _____% _____%
(excluding CDSC) _____% _____% _____%
Class C Shares
(including CDSC) _____% _____% _____%
(excluding CDSC) _____% _____% _____%
Institutional Class _____% _____% _____%
</TABLE>
-32-
<PAGE>
<TABLE>
<CAPTION>
ONE THREE
YEAR YEARS
ENDED ENDED SINCE
FUND AND CLASSES 10/31/95 10/31/95 INCEPTION
---------------- -------- -------- ---------
<S> <C> <C> <C>
Delaware Federal Bond Fund
Class A Shares
(at offer) _____% _____% _____%
(at NAV) _____% _____% _____%
Class B Shares
(including CDSC) _____% _____% _____%
(excluding CDSC) _____% _____% _____%
Class C Shares
(including CDSC) _____% _____% _____%
(excluding CDSC) _____% _____% _____%
Institutional Class _____% _____% _____%
</TABLE>
- -------------------------------
1 The previous Investment Manager, Lincoln Investment Management, Inc., waived
a portion of its annual compensation or reimbursed expenses to limit the
operating expenses of the Funds. See Investment Management Agreement. In the
absence of such waivers or reimbursements, performance would have been
affected negatively.
As stated in the Prospectuses, the Delaware Federal Bond Fund and the
Delaware Corporate Income Fund may also quote the current yield for each of its
Classes 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[( cd + 1) -- 1]
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.
-33-
<PAGE>
The above formula will be used in calculating quotations of yield of
each Class, based on specified 30-day periods identified in advertising by the
Fund. The yields as of October 31, 1995 using this formula were 0.00%, 0.00%,
0.00% and 0.00% for the Class A Shares, Class B Shares, Class C Shares and the
Institutional Class, respectively of the Delaware Federal Bond Fund, and 0.00%,
0.00%, 0.00% and 0.00% of the Delaware Corporate Income Fund, respectively.
Yield assumes the maximum front-end sales charge, if any, and does not reflect
the deduction of any CDSC or Limited CDSC. Actual yield may be affected by
variations in front-end sales charges on investments. Past performance, such as
is reflected in quoted yields, should not be considered as a representation of
the results which may be realized from an investment in any class of the Fund in
the future.
From time to time, the Funds may also quote actual total return for
each Class in advertising and other types of literature compared to indices or
averages of alternative financial products available to prospective investors.
For example, the performance comparisons may include the average return of
various bank instruments, some of which may carry certain return guarantees
offered by leading banks and thrifts as monitored by Bank Rate Monitor, and
those of corporate bond and government security price indices of various
durations prepared by Lehman Brothers and Salomon Brothers, Inc. These indices
are not managed for any investment goal.
Comparative information on the Consumer Price Index may also be
included. 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 investment.
Total return performance of each Class will reflect the appreciation or
depreciation of principal, reinvestment of income and any capital gains
distributions paid during any indicated period, and the impact of the maximum
front-end sales charge or CDSC, if any, paid on the illustrated investment
amount, annualized. The results will not reflect any income taxes, if
applicable, payable by shareholders on the reinvested distributions included in
the calculations. As securities prices fluctuate, an illustration of past
performance should not be considered as representative of future results.
Statistical and performance information and various indices compiled
and maintained by organizations such as the following may also be used in
preparing exhibits comparing certain industry trends and competitive mutual fund
performance to comparable Fund activity and performance and in illustrating
general financial planning principles. From time to time, certain mutual fund
performance ranking information, calculated and provided by these organizations
may also be used in the promotion of sales in the Fund. Any indices used are not
managed for any investment goal.
CDA Investment Technologies, Inc., Lipper Analytical Services, Inc. and
Morningstar, Inc. are performance evaluation services that maintain
statistical performance databases, as reported by a diverse universe of
independently-managed mutual funds.
Ibbotson Associates, Inc. is a consulting firm that provides a variety
of historical data including total return, capital appreciation and
income on the stock market as well as other investment asset classes,
and inflation. With their permission, this information will be used
primarily for comparative purposes and to illustrate general financial
planning principles.
-34-
<PAGE>
Interactive Data Corporation is a statistical access service that
maintains a database of various international industry indicators, such
as historical and current price/earning information, individual equity
and fixed income price and return information.
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.
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 rate information on
municipal debt obligations of various durations, as reported daily by The Bond
Buyer, may also be used. The Bond Buyer is published daily and is an
industry-accepted source for current municipal bond market information.
The following table is an example, for purposes of illustration only,
of cumulative total return performance for Class A Shares, Class B Shares, Class
C Shares and the Institutional Class through October 31, 1995. For these
purposes, the calculations assume the reinvestment of any realized securities
profits distributions and income dividends paid during the indicated periods. In
addition, these calculations, as shown below, reflect maximum sales charges, if
any, paid on the purchase or redemption of shares, as applicable, but not any
income taxes payable by shareholders on the reinvested distributions included in
the calculations. The performance of Class B Shares and Class C Shares is
calculated both with the applicable CDSC included and excluded. Pursuant to
applicable regulation, total return shown for the Institutional Class for the
periods prior to the commencement of operations of such Class is calculated by
taking the performance of Class A Shares and adjusting it to reflect the
elimination of all sales charges. However, for those periods, no adjustment has
been made to eliminate the impact of 12b-1 payments, and performance may have
been affected had such an adjustment been made.
The net asset value of a Class fluctuates so shares, when redeemed, may
be worth more or less than the original investment, and a Class' results should
not be considered as representative of future performance.
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
THREE SIX NINE ONE THREE
MONTHS MONTHS MONTHS YEAR YEARS
ENDED ENDED ENDED ENDED ENDED SINCE
FUND AND CLASSES 10/31/95 10/31/95 10/31/95 10/31/95 10/31/95 INCEPTION
---------------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Delaware Enterprise Fund
Class A Shares
(at offer) _____% _____% _____% _____% _____% _____%
(at NAV) _____% _____% _____% _____% _____% _____%
Class B Shares
(including CDSC) _____% _____% _____% _____% _____% _____%
(excluding CDSC) _____% _____% _____% _____% _____% _____%
Class C Shares
(including CDSC) _____% _____% _____% _____% _____% _____%
(excluding CDSC) _____% _____% _____% _____% _____% _____%
Institutional Class _____% _____% _____% _____% _____% _____%
</TABLE>
-35-
<PAGE>
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
THREE SIX NINE ONE THREE
MONTHS MONTHS MONTHS YEAR YEARS
ENDED ENDED ENDED ENDED ENDED SINCE
FUND AND CLASSES 10/31/95 10/31/95 10/31/95 10/31/95 10/31/95 INCEPTION
---------------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Delaware U.S. Growth
Fund
Class A Shares
(at offer) _____% _____% _____% _____% _____% _____%
(at NAV) _____% _____% _____% _____% _____% _____%
Class B Shares
(including CDSC) _____% _____% _____% _____% _____% _____%
(excluding CDSC) _____% _____% _____% _____% _____% _____%
Class C Shares
(including CDSC) _____% _____% _____% _____% _____% _____%
(excluding CDSC) _____% _____% _____% _____% _____% _____%
Institutional Class _____% _____% _____% _____% _____% _____%
Delaware World Growth
Fund
Class A Shares
(at offer) _____% _____% _____% _____% _____% _____%
(at NAV) _____% _____% _____% _____% _____% _____%
Class B Shares
(including CDSC) _____% _____% _____% _____% _____% _____%
(excluding CDSC) _____% _____% _____% _____% _____% _____%
Class C Shares
(including CDSC) _____% _____% _____% _____% _____% _____%
(excluding CDSC) _____% _____% _____% _____% _____% _____%
Institutional Class _____% _____% _____% _____% _____% _____%
Delaware New Pacific
Fund
Class A Shares
(at offer) _____% _____% _____% _____% _____% _____%
(at NAV) _____% _____% _____% _____% _____% _____%
Class B Shares
(including CDSC) _____% _____% _____% _____% _____% _____%
(excluding CDSC) _____% _____% _____% _____% _____% _____%
Class C Shares
(including CDSC) _____% _____% _____% _____% _____% _____%
(excluding CDSC) _____% _____% _____% _____% _____% _____%
Institutional Class _____% _____% _____% _____% _____% _____%
Delaware Corporate
Income Fund
Class A Shares
(at offer) _____% _____% _____% _____% _____% _____%
(at NAV) _____% _____% _____% _____% _____% _____%
Class B Shares
(including CDSC) _____% _____% _____% _____% _____% _____%
(excluding CDSC) _____% _____% _____% _____% _____% _____%
Class C Shares
(including CDSC) _____% _____% _____% _____% _____% _____%
(excluding CDSC) _____% _____% _____% _____% _____% _____%
Institutional Class _____% _____% _____% _____% _____% _____%
Delaware Federal Bond
Fund
Class A Shares
(at offer) _____% _____% _____% _____% _____% _____%
(at NAV) _____% _____% _____% _____% _____% _____%
Class B Shares
(including CDSC) _____% _____% _____% _____% _____% _____%
(excluding CDSC) _____% _____% _____% _____% _____% _____%
Class C Shares
(including CDSC) _____% _____% _____% _____% _____% _____%
(excluding CDSC) _____% _____% _____% _____% _____% _____%
Institutional Class _____% _____% _____% _____% _____% _____%
</TABLE>
-36-
<PAGE>
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Funds and other mutual funds in the Delaware
Group, will provide general information about investment alternatives and
scenarios that will allow investors to assess their personal goals. This
information will include general material about investing as well as materials
reinforcing various industry-accepted principles of prudent and responsible
personal financial planning. One typical way of addressing these issues is to
compare an individual's goals and the length of time the individual has to
attain these goals to his or her risk threshold. In addition, the Distributor
will provide information that discusses the Manager's or sub-adviser's
overriding investment philosophy and how that philosophy impacts the Funds', and
other Delaware Group funds', investment disciplines employed in seeking their
objectives. The Distributor may also from time to time cite general or specific
information about the institutional clients of the Manager or sub-adviser's,
including the number of such clients serviced by such persons.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly--as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember. Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. Delaware Group offers three services -- Automatic
Investing Program, Direct Deposit Program and the Wealth Builder Option -- that
can help to keep your regular investment program on track. See Investing by
Electronic Fund Transfer - Direct Deposit Purchase Plan and Automatic Investing
Plan under Investment Plans and Wealth Builder Option under Redemption and
Exchange in the Fund Classes' Prospectus for a complete description of these
services including restrictions or limitations.
-37-
<PAGE>
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.
<TABLE>
<CAPTION>
Number of
Investment Amount Price Per Share Shares Purchased
<S> <C> <C> <C>
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $ 5.00 12
Month 4 $100 $10.00 10
-------------------------------------------------------------------------------------------------
$400 $37.50 48
</TABLE>
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to represent
the actual performance of the Funds.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional shares of
the Funds, your investment is given yet another opportunity to grow. It's called
of the Funds the Power of Compounding and the following chart illustrates just
how powerful it can be.
COMPOUNDED RETURNS
Results at various assumed fixed rates of return on a $10,000
investment compounded monthly for 10 years:
-38-
<PAGE>
7% 8% 9%
Rate of Rate of Rate of
Return Return Return
12-'85 $10,723 $10,830 $10,938
12-'86 $11,498 $11,729 $11,964
12-'87 $12,330 $12,702 $13,086
12-'88 $13,221 $13,757 $14,314
12-'89 $14,177 $14,898 $15,657
12-'90 $15,201 $16,135 $17,126
12-'91 $16,300 $17,474 $18,732
12-'92 $17,479 $18,924 $20,489
12-'93 $18,743 $20,495 $22,411
12-'94 $20,098 $22,196 $24,514
12-'95 $ $ $
------- ------- ------
These figures are calculated assuming a fixed constant investment
return and assume no fluctuation in the value of principal. These figures, which
do not reflect payment of applicable taxes or sales charges, are not intended to
be a projection of investment results and do not reflect the actual performance
results of any of the Classes.
TRADING PRACTICES AND BROKERAGE
Fund transactions are executed by the Manager or any sub-adviser
(collectively referred to in this section as the "Manager") on behalf of the
Fund in accordance with the standards described below.
Brokers, dealers and banks are selected to execute transactions for
the purchase or sale of portfolio securities on the basis of the Manager's
judgment of their professional capability to provide the service. The primary
consideration is to have brokers, dealers or banks execute transactions at best
price and execution. Best price and execution refers to many factors, including
the price paid or received for a security, the commission charged, the
promptness and reliability of execution, the confidentiality and placement
accorded the order and other factors affecting the overall benefit obtained by
the account on the transaction. Trades are generally made on a net basis where
securities are either bought or sold directly from or to a broker, dealer or
bank. 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 Funds pay reasonably competitive
brokerage commission rates based upon the professional knowledge of the Delaware
Group's trading department as to rates paid and charged for similar transactions
throughout the securities industry. In some instances, the Funds pay a minimal
share transaction cost when the transaction presents no difficulty.
The Manager may allocate out of all commission business generated by
all of the funds and accounts under their management, brokerage business to
brokers or dealers who provide brokerage and research services. These services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends; assisting in
determining portfolio strategy; providing computer software and hardware used in
security analyses; and providing portfolio performance evaluation and technical
-39-
<PAGE>
market analyses. Such services are used by the Manager in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used, or used exclusively, with respect
to the fund or account generating the brokerage.
As provided in the Securities Exchange Act of 1934 and the Investment
Management Agreement, higher commissions are permitted to be paid to
broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services, if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, the Fund believes that the
commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In some instances, services may be provided to
the Manager which constitute in some part brokerage and research services used
by the Manager in connection with its investment decision-making process and
constitute in some part services used by the Manager in connection with
administrative or other functions not related to its investment decision-making
process. In such cases, the Manager will make a good faith allocation of
brokerage and research services and will pay out of its own resources for
services used by the Manager in connection with administrative or other
functions not related to its investment decision-making process. In addition, so
long as no fund is disadvantaged, portfolio transactions which generate
commissions or their equivalent are allocated to broker/dealers who provide
daily portfolio pricing services to the Funds and to other funds in the Delaware
Group. Subject to best price and execution, commissions allocated to brokers
providing such pricing services may or may not be generated by the funds
receiving the pricing service.
The Manager may place a combined order for two or more accounts or
funds engaged in the purchase or sale of the same security if, in its judgment,
joint execution is in the best interest of each participant and will result in
best price and execution. Transactions involving commingled orders are allocated
in a manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager and the Board of
Directors that the advantages of combined orders outweigh the possible
disadvantages of separate transactions.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Manager may place orders with broker/dealers that have agreed to
defray certain Fund expenses such as custodian fees, and may, at the request of
the Distributor, give consideration to sales of shares of the Funds as a factor
in the selection of brokers and dealers to execute portfolio transactions.
Portfolio Turnover
While the Funds do not intend to trade in securities for short-term
profits, securities may be sold without regard to the amount of time they have
been held by a Fund when warranted by the circumstances. A Fund's portfolio
turnover rate is calculated by dividing the lesser of purchases or
-40-
<PAGE>
sales of portfolio securities for a year by the monthly average value of
portfolio securities for that year. Securities with remaining maturities of one
year or less at the date of acquisition are excluded from the calculation. A
portfolio turnover rate of 100% would occur, for example, if all the securities
in the Fund's portfolio were replaced once during a period of one year. A high
rate of portfolio turnover in any year may increase brokerage commissions paid
and could result in high amounts of realized investment gain subject to the
payment of taxes by shareholders. The turnover rate may also be affected by cash
requirements from redemptions and repurchases of fund shares.
For the Delaware Corporate Income Fund and Delaware Federal Bond Fund,
which are fixed-income funds, portfolio trading will be undertaken principally
to accomplish the Funds' objectives in relation to anticipated movements in the
general level of interest rates, and not for the purpose of realizing capital
gains, although capital gains may be realized on certain portfolio transactions.
For example, capital gains may be realized when a security is sold (i) so that,
provided capital is preserved or enhanced, another security can be purchased to
obtain a higher yield, (ii) to take advantage of what the Manager believes to be
a temporary disparity in the normal yield relationship between the two
securities to increase income or improve the quality of the portfolio, (iii) to
purchase a security which the Manager believes is of higher quality than its
rating or current market value would indicate, or (iv) when the Manager
anticipates a decline in value due to market risk or credit risk. The Fund is
free to dispose of portfolio securities at any time, subject to complying with
the Internal Revenue Code and the 1940 Act, when changes in circumstances or
conditions make such a move desirable in light of the investment objective. The
Fund will not attempt to achieve or be limited to a predetermined rate of
portfolio turnover, such a turnover always being incidental to transactions
undertaken with a view to achieving the Fund's investment objective.
Although the fixed-income Funds trade principally to seek a high level
of income and stability of principal and not for profits, the portfolio turnover
may be high, particularly if interest rates are volatile. The portfolio turnover
rate of the Funds is calculated by dividing the lesser of purchases or sales of
portfolio securities for the particular fiscal year by the monthly average of
the value of the portfolio securities owned by the Funds during the particular
fiscal year, exclusive of securities whose maturities at the time of acquisition
are one year or less.
During the past two fiscal years ended October 31, 1994 and 1995, the
Fund's portfolio turnover rates were as follows:
FUND 1994 1995
---- ---- ----
Delaware Enterprise Fund ___% ___%
Delaware U.S. Growth Fund ___% ___%
Delaware World Growth Fund ___% ___%
Delaware New Pacific Fund ___% ___%
Delaware Corporate Income Fund ___% ___%
Delaware Federal Bond Fund ___% ___%
PURCHASING SHARES
The Distributor serves as the national distributor for each Funds'
four classes of shares - Class A Shares, Class B Shares, Class C Shares and the
Institutional Class, and has agreed to use its best efforts to sell shares of
the Classes. See the Prospectuses for additional information on how to invest.
-41-
<PAGE>
Shares of the Funds are offered on a continuous basis, and may be purchased
through authorized investment dealers or directly by contacting Adviser Funds,
Inc. or its agent.
The minimum initial investment for each of the Fund Classes generally
is $1,000. Subsequent purchases generally must be at least $100. The initial and
subsequent minimum investment with respect to Class A Shares will be waived for
purchases by officers, directors and employees of any Delaware Group fund, the
Manager or any sub-adviser to a Fund, or any affiliates of the Manager or any
such sub-adviser 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 Group Asset
Planner service are subject to a minimum initial investment of $2,000 per Asset
Planner Strategy selected. There are no minimum purchase requirements for the
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. Adviser Funds, Inc. will reject any order for
purchase of more than $250,000 of Class B Shares and $1,000,000 or more of Class
C Shares. An investor may exceed these limitations by making cumulative
purchases over a period of time. In doing so, an investor should keep in mind,
however, that reduced front-end sales charges apply to investments of $100,000
or more in Class A Shares, which are subject to lower annual 12b-1 Plan expenses
than Class B Shares and Class C Shares and generally are not subject to a CDSC.
Selling dealers have the responsibility of transmitting orders
promptly. Adviser Funds, Inc. reserves the right to reject any order for the
purchase of a Fund's shares if in the opinion of management such rejection is in
the Fund's best interest. The NASD has adopted Rules of Fair Practice relating
to investment company sales charges. Adviser Funds, 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 4.75%; however, lower front-end sales charges
apply for larger purchases. See the table below. Class A Shares are also subject
to annual 12b-1 Plan expenses.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase; (iii) 2%
if shares are redeemed during the fifth year of purchase; (iv) 1% if shares are
redeemed during the sixth year following purchase; (v) and 0% thereafter. 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.
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.
-42-
<PAGE>
Institutional Class shares, Class A Shares, Class B Shares and Class C
Shares of each Fund represent a proportionate interest in the particular Fund's
assets and will receive a proportionate interest in the particular Fund's
income, before application, as to Class A, Class B and Class C Shares, of any
expenses under the Fund's 12b-1 Plans.
See Automatic Conversion of Class B Shares in the Fund Classes'
Prospectus, and Determining Offering Price and Net Asset Value and Plans Under
Rule 12b-1 for the Fund Classes in this Part B.
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. However, purchases not involving
the issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). 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 shares
purchased by sending a letter to the Transfer Agent requesting the certificate.
No charge is made for any certificate issued. 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.
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A Shares, Class B
Shares and the Class C Shares permit investors to choose the method of
purchasing shares that is most suitable for his or her 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 .35% (currently, no more than .30% pursuant to Board action) 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 Fund 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% (.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 .35% (currently
no more than .30% pursuant to Board action) of average daily net assets of such
shares. Unlike Class B Shares, Class C Shares do not convert to another class.
Class A Shares
Purchases of $100,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the accompanying table, and
may include a series of purchases 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.
-43-
<PAGE>
<TABLE>
<CAPTION>
Class A Shares
- -----------------------------------------------------------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge Commission***
Amount of Offering as % of as % of
Purchase Price Amount Invested** Offering Price
- -----------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
Enterprise U.S. World New Federal Corporate
Fund Growth Growth Pacific Bond Income
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Less than 4.75% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 4.00%
$100,000
$100,000 but 3.75 0.00 0.00 0.00 0.00 0.00 0.00 3.00
under
$250,000
$250,000 but 2.50 0.00 0.00 0.00 0.00 0.00 0.00 2.00
under
$500,000
$500,000 but 2.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00
under
$1,000,000*
</TABLE>
* There is no front-end sales charge on purchases of Class A Shares of $1
million or more but, under certain limited circumstances, a 1% Limited CDSC
may apply upon redemption of such shares.
** Based on the net asset value per share of the Class A Shares as of the end
of Adviser Funds, Inc.'s most recent fiscal year.
*** Financial institutions or their affiliated brokers may receive any agency
transaction fee in the percentages set forth above.
- -------------------------------------------------------------------------------
Each Fund, as appropriate, must be notified when a sale takes place which would
qualify for the reduced front-end sales charge on the basis of previous or
current purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by such Fund. Such reduced front-end
sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the Distributor
may hold special promotions for specified periods during which the Distributor
may reallow to dealers up to the full amount of the front-end sales charge shown
above. In addition, certain dealers who enter into an agreement to provide extra
training and information on Delaware Group products and services and who
increase sales of Delaware Group funds may receive an additional commission of
up to .15% of the offering price. Dealers who receive 90% or more of the sales
charge may be deemed to be underwriters under the Securities Act of 1933.
- --------------------------------------------------------------------------------
Certain dealers who enter into an agreement to provide extra training
and information on Delaware Group products and services and who increase sales
of Delaware Group funds may receive an additional commission of up to .15% of
the offering price in connection with sales of Class A Shares. Such dealers must
meet certain requirements in terms of organization and distribution capabilities
and their ability to increase sales. The Distributor should be contacted for
further information on these requirements as well as the basis and circumstances
upon which the additional commission will be paid. Participating dealers may be
deemed to have additional responsibilities under the securities laws.
Dealer's Commission
For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers through
whom such purchases are effected in accordance with the following schedule:
-44-
<PAGE>
Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
- ------------------ -------------------
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75%
Next $2 million up to $5 million 0.50%
Amount over $5 million 0.25%
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies (see Redemption and Repurchase) may be aggregated
with those of Class A Shares of a Fund. Financial advisers also may be eligible
for a dealer's commission in connection with certain purchases made under a
Letter of Intention or pursuant to an investor's Right of Accumulation.
Financial advisers should contact the Distributor concerning the applicability
and calculation of the dealer's commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B and Class C Shares are purchased without a front-end sales
charge. Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price. Nor will a CDSC be assessed on redemption of shares acquired
through reinvestment of dividends or capital gains distributions. See Waiver of
Contingent Deferred Sales Charge - Class B and Class C Shares under Redemption
and Exchange in the Prospectus for the Fund Classes for a list of the instances
in which the CDSC is waived.
-45-
<PAGE>
The following table sets forth the rates of the CDSC for the Class B
Shares of each Fund:
Contingent Deferred Sales
Year After Charge (as a Percentage of Dollar
Purchase Made Amount Subject to Charge)
------------- ---------------------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. At the end of approximately eight years after purchase, the investor's
Class B Shares will be automatically converted into Class A Shares of the
relevant Fund. See Automatic Conversion of Class B Shares under Classes of
Shares in the Fund Classes' Prospectus. Such conversion will constitute a
tax-free exchange for federal income tax purposes. See Dividends, Distributions
and Taxes in the Prospectus for the Fund Classes.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Adviser Funds, Inc. has
adopted a separate plan for each of the Class A Shares, Class B Shares and Class
C Shares of each Fund (the "Plans"). Each Plan permits the particular Fund to
pay for certain distribution, promotional and related expenses involved in the
marketing of only the Class to which the Plan applies. The Plans do not apply to
the Institutional Class of shares. Such shares are not included in calculating
the Plans' fees, and the Plans are not used to assist in the distribution and
marketing of shares of the Institutional Class. Shareholders of the
Institutional Class may not vote on matters affecting the Plans.
The Plans permit the Funds, pursuant to the Distribution Agreements,
to pay out of the assets of Class A Shares, Class B Shares and Class C Shares
monthly fees to the Distributor for its services and expenses in distributing
and promoting sales of shares of such classes. These expenses include, among
other things, preparing and distributing advertisements, sales literature and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, and paying distribution and maintenance fees to securities
brokers and dealers who enter into agreements with the Distributor. The Plan
expenses relating to Class B and Class C Shares are also used to pay the
Distributor for advancing the commission costs to dealers with respect to the
initial sale of such shares.
In addition, the Funds may make payments out of the assets of Class A,
Class B and Class C Shares directly to other unaffiliated parties, such as
banks, who either aid in the distribution of shares of, or provide services to,
such classes.
The maximum aggregate fee payable by the Funds under the Plans, and
the Funds' Distribution Agreements, is on an annual basis up to .35% of Class A
Shares' average daily net assets for the year, and up to 1% (.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. Adviser
-46-
<PAGE>
Funds, Inc.'s Board of Directors may reduce these amounts at any time. The
Distributor has agreed to waive these distribution fees to the extent such fees
for any day exceeds the net investment income realized by the Fund Classes for
such day.
[On May 3, 1996, the Board of Directors set the fee for Class A
Shares, pursuant to its Plan, at .30% of average daily net assets. While this
describes the current formula for calculating the fees which will be payable
under the Class A Shares' Plan beginning June 1, 1992, the Plan permits a full
.35% on all assets of Class A Shares to be paid at any time following
appropriate Board approval.]
All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf of Class
A, Class B and Class C Shares would be borne by such persons without any
reimbursement from such classes. Subject to seeking best price and execution,
the Fund 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 Agreements, as amended, have been
approved by the Board of Directors of Adviser Funds, Inc., including a majority
of the directors who are not "interested persons" (as defined in the 1940 Act)
of Adviser Funds, 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 Distribution Agreement. Continuation of the Plans
and the Distribution Agreement, as amended, must be approved annually by the
Board of Directors in the same manner as specified above.
Each year, the directors must determine whether continuation of the
Plans is in the best interest of shareholders of, respectively, Class A Shares,
Class B Shares and Class C Shares and that there is a reasonable likelihood of
the Plan relating to a Fund Class providing a benefit to that Class. The Plans
and the Distribution Agreement, as amended, may be terminated at any time
without penalty by a majority of those directors who are not "interested
persons" or by a majority vote of the outstanding voting securities of the
relevant Fund Class. Any amendment materially increasing the percentage payable
under the Plans must likewise be approved by a majority vote of the outstanding
voting securities of the relevant Fund Class, as well as by a majority vote of
those directors who are not "interested persons." With respect to the Class A
Shares' Plan, any material increase in the maximum percentage payable thereunder
must be approved by a majority of the outstanding voting 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 Adviser
Funds, 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 Adviser Funds, 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, 1995, payments to the
Distributor and, in its capacity as national distributor, LNC Equity under the
Plans for the Class A Shares, Class B Shares and Class C Shares were as follows:
-47-
<PAGE>
12b-1 Fees Paid
In Year Ended
Fund and Class 10/31/95
-------------- ----------------
Delaware Enterprise Fund
Class A Shares $______
Class B Shares $______
Class C Shares $______
Delaware U.S. Growth Fund
Class A Shares $______
Class B Shares $______
Class C Shares $______
Delaware World Growth Fund
Class A Shares $______
Class B Shares $______
Class C Shares $______
Delaware New Pacific Fund
Class A Shares $______
Class B Shares $______
Class C Shares $______
Delaware Corporate Income Fund
Class A Shares $______
Class B Shares $______
Class C Shares $______
Delaware Federal Bond Fund
Class A Shares $______
Class B Shares $______
Class C Shares $______
The payments under the Plans shown above were used for the following purposes:
The staff of the Securities and Exchange Commission ("SEC") has
proposed amendments to Rule 12b-1 and other related regulations that could
impact Rule 12b-1 Distribution Plans. Adviser Funds, Inc. intends to amend the
Plans, if necessary, to comply with any new rules or regulations the SEC may
adopt with respect to Rule 12b-1.
-48-
<PAGE>
Other Payments to Dealers - Class A, Class B and Class C Shares
From time to time at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Fund Classes exceed certain limits
as set by the Distributor, may receive from the Distributor an additional
payment of up to .25% of the dollar amount of such sales. The Distributor may
also provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
Payment to dealers made in connection with seminars, conferences or
contests relating to the promotion of fund shares may be in an amount up to 100%
of the expenses incurred or awards made. The Distributor may also pay a portion
of the expense of preapproved dealer advertisements promoting the sale of
Delaware Group fund shares.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares may be purchased without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the Exchange
Privilege and the 12-Month Reinvestment Privilege.
[Current and former officers, directors and employees of Adviser
Funds, Inc., any other fund in the Delaware Group, the Manager, any of the
Funds' sub-advisers, or any of the Manager's affiliates that may in the future
be created, legal counsel to the funds and registered representatives and
employees of broker/dealers who have entered into Dealer's Agreements with the
Distributor may purchase Class A Shares of the Funds and any of the funds in the
Delaware Group, including any fund that may be created, at the net asset value
per share. Family members of such persons at their direction, and any employee
benefit plan established by any of the foregoing funds, corporations, counsel or
broker/dealers may also purchase shares at net asset value. Purchases of Class A
Shares may also be made by clients of registered representatives of an
authorized investment dealer at net asset value within six months after the
registered representative changes employment, if the purchase is funded by
proceeds from an investment where a front-end sales charge has been assessed and
the redemption of the investment did not result in the imposition of a
contingent deferred sales charge or other redemption charges. Purchases of Class
A Shares may also be made at net asset value by bank employees that provide
services in connection with agreements between the bank and unaffiliated brokers
or dealers concerning sales of Delaware Group funds. Officers, directors and key
employees of institutional clients of the Manager, or any of its affiliates, may
purchase Class A Shares at net asset value. Moreover, purchases may be effected
at net asset value for the benefit of the clients of brokers, dealers and
registered investment advisers affiliated with a broker or dealer, if such
broker, dealer or investment adviser has entered into an agreement with the
Distributor providing specifically for the purchase of Class A Shares in
connection with special investment products, such as wrap accounts or similar
fee based programs. Such purchasers are required to sign a letter stating that
the purchase is for investment only and that the securities may not be resold
except to the issuer. Such purchasers may also be required to sign or deliver
such other documents as Adviser Funds, Inc. may reasonably require to establish
eligibility for purchase at net asset value. Adviser Funds, Inc. must be
notified in advance that the trade qualifies for purchase at net asset value.
-49-
<PAGE>
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 a Delaware
Group account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset value.]
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 by
any such purchaser previously enumerated within a 13-month period pursuant to a
written Letter of Intention provided by the Distributor and signed by the
purchaser, and not legally binding on the signer or Adviser Funds, 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 Funds and of any class of any of the other mutual
funds in the Delaware Group (except shares of any Delaware Group fund which do
not carry a front-end sales charge or CDSC or Limited CDSC, other than shares of
Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Group fund which carried a front-end sales charge, CDSC
or Limited CDSC) previously purchased and still held as of the date of their
Letter of Intention toward the completion of such Letter. For purposes of
satisfying an investor's obligation under a Letter of Intention, Class B Shares
and Class C Shares of the Funds and the corresponding classes of shares of other
Delaware Group funds which offer such shares may be aggregated with Class A
Shares of the Funds and the corresponding class of shares of the other Delaware
Group funds.
Employers offering a Delaware Group 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 Group 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 Fund and
other Delaware Group funds which offer corresponding classes of shares may also
be aggregated for this purpose.
-50-
<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 B Shares and/or Class C Shares of the
Funds, as well as shares of any other class of any of the other Delaware Group
funds (except shares of any Delaware Group fund which do not carry a front-end
sales charge, CDSC or Limited CDSC, other than shares of Delaware Group Premium
Fund, Inc. beneficially owned in connection with the ownership of variable
insurance products, unless they were acquired through an exchange from a
Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC).
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of the Funds, as
well as shares of any other class of any of the other Delaware Group funds which
offer such classes (except shares of any Delaware Group fund which do not carry
a front-end sales charge, CDSC or Limited CDSC, other than shares of Delaware
Group Premium Funds, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange from
shares from a Delaware Group fund which carried a front-end sales charge, CDSC
or Limited CDSC). If, for example, any such purchaser has previously purchased
and still holds Class A Shares and/or shares of any other of the classes
described in the previous sentence with a value of $40,000 and subsequently
purchases $60,000 at offering price of additional shares of Class A Shares, the
charge applicable to the $60,000 purchase would currently be 3.75%. 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 (and of Institutional Class shares which
were acquired through an exchange of one of the other mutual funds in the
Delaware Group 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 a Fund or in Class A Shares of any of
the other funds in the Delaware Group, subject to applicable eligibility and
minimum purchase requirements, in states where shares of such other funds may be
sold, at net asset value without the payment of a front-end sales charge. This
privilege does not extend to Class A Shares where the redemption of the shares
triggered the payment of a Limited CDSC. Persons investing redemption proceeds
from direct investments in mutual funds in the Delaware Group offered without a
front-end sales charge will be required to pay the applicable sales charge when
purchasing Class A Shares. The reinvestment privilege does not extend to a
redemption of either Class B or Class C Shares.
-51-
<PAGE>
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is proposed 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 Funds' shareholder servicing agent, about the
applicability of the Limited CDSC (see Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Fund Classes' Prospectus) in connection with the
features described above.
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 set forth in the table on page [00],
based on total plan assets. If a company has more than one plan investing in the
Delaware Group 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 Funds 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 Group investment accounts if they so notify the Funds in connection
with each purchase.
For other retirement plans and special services, see Retirement Plans
for the Fund Classes under Investment Plans.
-52-
<PAGE>
Adviser Funds Institutional Classes
The Institutional Classes are available for purchase only by: (a)
retirement plans introduced by persons not associated with brokers or dealers
that are primarily engaged in the retail securities business and rollover
individual retirement accounts from such plans; (b) tax-exempt employee benefit
plans of the Manager or its affiliates and securities dealer firms with a
selling agreement with the Distributor; (c) institutional advisory accounts of
the Manager or its affiliates and those having client relationships with
Delaware Investment Advisers, a division of the Manager, or its affiliates and
their corporate sponsors, as well as subsidiaries and related employee benefit
plans and rollover individual retirement account from such institutional
advisory accounts; (d) banks, trust companies and similar financial institutions
investing for their own account or for the account of their trust customers for
whom such financial institution is exercising investment discretion in
purchasing shares of the class; 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 Classes 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.
-53-
<PAGE>
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
Fund 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 the Institutional Class
are reinvested in the account of the holders of such shares (based on the net
asset value in effect on the reinvestment date). Confirmations of any
distributions from realized securities profits will be mailed to shareholders in
the first quarter of each fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase
and add full and fractional shares to their plan accounts at any time either
through their investment dealers or by sending a check or money order to the
Fund. Such purchases, which must meet the minimum subsequent purchase
requirements set forth in the Prospectuses and this Part B, are made for Class A
Shares at the public offering price, and for the Institutional Class, Class B
and Class C Shares at the net asset value, at the end of the day of receipt. A
reinvestment plan may be terminated at any time. This plan does not assure a
profit nor protect against depreciation in a declining market.
Reinvestment of Dividends in Other Delaware Group Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A, Class B
and Class C Shares may automatically reinvest their dividends and/or
distributions in any of the mutual funds in the Delaware Group, including the
Funds, in states where their shares may be sold. Such investments will be made
at the net asset value per share at the close of business on the reinvestment
date without any front-end sales charge or service fee. The shareholder must
notify the Transfer Agent in writing and must have established an account in the
fund into which the dividends and/or distributions are to be invested. Any
reinvestment directed to a fund in which the investor does not then have an
account, will be treated like all other initial purchases of a fund's shares.
Consequently, an investor should obtain and read carefully the prospectus for
the fund in which the investment is proposed to be made before investing or
sending money. The prospectus contains more complete information about the fund,
including charges and expenses. See also Dividend Reinvestment Plan in the
Prospectus for the Fund Classes.
Subject to the following limitations, dividends and/or distributions
from other funds in the Delaware Group may be invested in shares of the Funds at
net asset value, provided an account has been established. Dividends from Class
A Shares may not be directed to Class B or Class C Shares. Likewise, 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. See Classes
Offered under Classes of Shares in the Fund Classes' Prospectus for the funds in
the Delaware Group that are eligible for investment by holders of Fund shares.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
-54-
<PAGE>
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for the Funds to
accept for investment in Class A, Class B or Class C Shares, through an agent
bank, preauthorized government or private recurring payments by Electronic Fund
Transfer. This method of investment assures the timely credit to the
shareholder's account of payments such as social security, veterans' pension or
compensation benefits, federal salaries, Railroad Retirement benefits, private
payroll checks, dividends, and disability or pension fund benefits. It also
eliminates lost, stolen and delayed checks.
Automatic Investing Plan--Shareholders of Class A, Class B and Class C
Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into their Fund
accounts. This type of investment will be handled in either of the two ways
noted below. (1) If the shareholder's bank is a member of the National Automated
Clearing House Association ("NACHA"), the amount of the investment will be
electronically deducted from his or her account by Electronic Fund Transfer
("EFT"). The shareholder's checking account will reflect a debit each month at a
specified date although no check is required to initiate the transaction. (2) If
the shareholder's bank is not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such Plans must be for $25 or more. An investor wishing to take advantage
of either option should contact the Shareholder Service Center at 800-523-1918
for the necessary authorization forms and information. These services can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to the Funds 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 Funds 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 Funds.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer,
to make investments directly to their Fund accounts. The Funds will accept these
investments, such as bank-by-phone, annuity payments and payroll allotments, by
mail directly from the third party. Investors should contact their employers or
financial institutions who in turn should contact the Funds for proper
instructions.
-55-
<PAGE>
Retirement Plans for the Fund Classes
An investment in the Funds may be suitable for tax-deferred retirement
plans. Among the retirement plans noted below, Class B Shares are available for
investment only by Individual Retirement Accounts, Simplified Employee Pension
Plans, 403(b)(7) Deferred Compensation Plans 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 and Class C
Shares under Redemption and Exchange in the Prospectus for the Fund Classes for
a list of the instances in which the CDSC is waived.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000 for retirement plans. Each purchase 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
("IRAs"), for which there is a minimum initial purchase of $250 and a minimum
subsequent purchase of $25 regardless of which class is selected. Retirement
plans may be subject to plan establishment fees, annual maintenance fees and/or
other administrative or trustee fees. Fees are based upon the number of
participants in the plan as well as the services selected. Additional
information about fees is included in retirement plan materials. Fees are quoted
upon request. Annual maintenance fees may be shared by Delaware Management Trust
Company, the Transfer Agent, other affiliates of the Manager and others that
provide services to such plans.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Class. See
Adviser Funds Institutional Class, above. For additional information on any of
the Plans and Delaware's retirement services, call the Shareholder Service
Center telephone number.
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding. Please contact your investment dealer or the Distributor
for the special application forms required for the plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype plans are available for self-employed individuals,
partnerships and corporations which replace the former Keogh and corporate
retirement plans. These plans contain profit sharing or money purchase pension
plan provisions. Contributions may be invested only in Class A and Class C
Shares.
-56-
<PAGE>
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an
IRA by making 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 or elects to be treated
as having no compensation for the year. Investments in each of the Fund Classes
are permissible.
The Tax Reform Act of 1986 (the "Act") restructured, and in some cases
eliminated, the tax deductibility of IRA contributions. Under the Act, the full
deduction for IRAs ($2,000 for each working spouse and $2,250 for one-income
couples) was retained for all taxpayers who are not covered by an
employer-sponsored retirement plan. Even if a taxpayer (or his or her spouse) is
covered by an employer-sponsored retirement plan, the full deduction is still
available if the taxpayer's adjusted gross income is below $25,000 ($40,000 for
taxpayers filing joint returns). A partial deduction is allowed for married
couples with incomes between $40,000 and $50,000, and for single individuals
with incomes between $25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross income before IRA
deductions exceeds $50,000 ($35,000 for singles) and who are active participants
in an employer-sponsored retirement plan. Taxpayers who are not allowed
deductions on IRA contributions still can make nondeductible IRA contributions
of as much as $2,000 for each working spouse ($2,250 for one-income couples),
and defer taxes on interest or other earnings from the IRAs. Special rules apply
for determining the deductibility of contributions made by married individuals
filing separate returns.
A company or association may establish a Group IRA for employees or
members who want to purchase shares of the Funds. Purchases of $1 million or
more of the Class A Shares qualify for purchase at net asset value but may,
under certain circumstances, be subject to a Limited CDSC. See Purchasing Shares
for information on reduced front-end sales charges applicable to Class A Shares.
Investments generally must be held in the IRA until age 59 1/2 in
order to avoid premature distribution penalties, but distributions generally
must commence no later than April 1 of the calendar year following the year in
which the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. See Class B Shares and Class C Shares under Alternative Purchase
Arrangements in the Fund Classes' Prospectus concerning the applicability of a
CDSC upon redemption.
See Appendix A for additional IRA information.
-57-
<PAGE>
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Fund Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Employers with 25 or fewer eligible employees can establish this plan
which permits employer contributions and salary deferral contributions in Class
A Shares and Class C Shares only.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Plan documents are available to
enable employers to establish a plan. An employer may also elect to make profit
sharing contributions and/or matching contributions with investments in only
Class A Shares and Class C Shares or certain other funds in the Delaware Group.
Purchases under the Plan may be combined for purposes of computing the reduced
front-end sales charge applicable to Class A Shares as set forth in the table on
page 00.
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and
certain non-profit organizations to use mutual fund shares held in a custodial
account to fund deferred compensation arrangements for their employees. A
custodial account agreement is available for those employers who wish to
purchase any of the Fund Classes in conjunction with such an arrangement.
Applicable front-end sales charges with respect to Class A Shares for such
purchases are set forth in the table on page 00.
Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of any of the Fund Classes. Although investors
may use their own plan, there is available a Delaware Group 457 Deferred
Compensation Plan. Interested investors should contact the Distributor or their
investment dealers to obtain further information. Applicable front-end sales
charges for such purchases of Class A Shares are set forth in the table on page
00.
-58-
<PAGE>
DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering
price next calculated by the Funds after receipt of the order by the Funds or
their agent. Orders for purchases of Class B Shares, Class C Shares and the
Institutional Class of a Fund are effected at the net asset value per share next
calculated by the Funds after receipt of the order by the Fund or its agent.
Selling dealers have the responsibility of transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable front-end sales charges. Offering price and net
asset value are computed as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open. The New York Stock Exchange is scheduled to be open Monday through Friday
throughout the year except for New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. When the
New York Stock Exchange is closed, the Fund will generally be closed, pricing
calculations will not be made and purchase and redemption orders will not be
processed.
An example showing how to calculate the net asset value per share and,
in the case of Class A Shares, the offering price per share, is included in the
Funds' financial statements which are incorporated by reference into this Part
B.
The Funds' net asset value per share is computed by adding the value
of all securities and other assets in the portfolio of the Funds, deducting any
liabilities and dividing by the number of shares outstanding. Expenses and
income are accrued daily. U.S. Government and other debt securities are valued
at the mean between the last reported bid and asked prices. Options are valued
at the last reported sales price or, if no sales are reported, at the mean
between the last reported bid and asked prices. Short-term investments having
remaining maturities of 60 days or less are valued at amortized cost. All other
securities and assets, including non-Exchange-traded options, are valued at fair
value as determined in good faith by the Board of Directors of Adviser Funds,
Inc.
Each Class of the Funds will bear, pro-rata, all of the common
expenses of the particular Fund. The net asset values of all outstanding shares
of each Class of the Fund will be computed on a pro-rata basis for each
outstanding share based on the proportionate participation in the Funds
represented by the value of shares of that Class. All income earned and expenses
incurred by the Funds will be borne on a pro-rata basis by each outstanding
share of a Class, based on each Class' percentage in the Funds represented by
the value of shares of such Classes, except that the Institutional Class will
not incur any of the expenses under the Funds' 12b-1 Plans and 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 a Fund may
vary. However, the net asset value per share of each Class is expected to be
equivalent.
-59-
<PAGE>
REDEMPTION AND REPURCHASE
Any shareholder may require the Funds to redeem shares by sending a
written request, signed by the record owner or owners exactly as the shares are
registered, to the Funds at 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. Certificates are issued for Class
A Shares and Institutional Class shares only if a shareholder specifically
requests them. Certificates are not issued for Class B Shares or Class C Shares.
If stock certificates have been issued for shares being redeemed, they must
accompany the written request. For redemptions of $50,000 or less paid to the
shareholder at the address of record, the request must be signed by all owners
of the shares or the investment dealer of record, but a signature guarantee is
not required. When the redemption is for more than $50,000, or if payment is
made to someone else or to another address, signatures of all record owners are
required and a signature guarantee may be required. Each signature guarantee
must be supplied by an eligible guarantor institution. The Funds reserve the
right to reject a signature guarantee supplied by an eligible institution based
on its creditworthiness. The Funds may request further documentation from
corporations, retirement plans, executors, administrators, trustees or
guardians.
In addition to redemption of Fund shares by the Funds, the
Distributor, acting as agent of the Funds, offers to repurchase Fund shares from
broker/dealers acting on behalf of shareholders. The redemption or repurchase
price, which may be more or less than the shareholder's cost, is the net asset
value per share next determined after receipt of the request in good order by
the Fund or its agent, subject to any applicable CDSC or Limited CDSC. This is
computed and effective at the time the offering price and net asset value are
determined. See Determining Offering Price and Net Asset Value. The Funds and
the Distributor end their business days at 5 p.m., Eastern time. This offer is
discretionary and may be completely withdrawn without further notice by the
Distributor.
Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to 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.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Prospectus for the Fund Classes. Redemptions of
Class B Shares made within three years of purchase are subject to a CDSC of: (i)
4% if shares are redeemed within two years of purchase; (ii) 3% if shares are
redeemed during the third or fourth year following purchase; (iii) 2% if shares
are redeemed during the fifth year following purchase; (iv) 1% if shares are
redeemed during the sixth year following purchase; and (v) 0% thereafter. Class
C Shares are subject to a CDSC of 1% if shares are redeemed within 12 months
following purchase. See Contingent Deferred Sales Charge under Classes of Shares
in the Prospectus for the Fund Classes. Except for the applicable CDSC or
Limited CDSC and, with respect to the expedited payment by wire described below,
for which there is currently a $7.50 bank wiring cost, neither the Funds nor
their Distributor charges a fee for redemptions or repurchases, but such fees
could be charged at any time in the future.
-60-
<PAGE>
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. If a shareholder redeems an entire account,
all dividends accrued to the time of withdrawal will be paid by a separate check
at the end of that particular monthly dividend period.
If a shareholder who recently purchased shares by check seeks to
redeem all or a portion of those shares in a written request, the redemption
request will be honored but the proceeds will not be mailed until the Fund is
reasonably satisfied of the collection of the investment check. Redemption
requests by wire or the Checkwriting Feature in this case will not be honored.
This hold period against a recent purchase may be up to but not in excess of 15
days, depending upon the origin of the investment check. This potential delay
can be avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
appropriate Fund will automatically redeem from the shareholder's account the
Fund's shares purchased by the check plus any dividends earned thereon.
Shareholders may be responsible for any losses to the Fund or to the
Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by the Funds of securities owned by it is not reasonably
practical, or it is not reasonably practical for the Fund fairly to value its
assets, or in the event that the Commission has provided for such suspension for
the protection of shareholders, the Funds 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 in kind, or partly in cash and partly in kind. Any portfolio securities paid
or distributed in kind would be valued as described in Determining Offering
Price and Net Asset Value. Subsequent sale by an investor receiving a
distribution in kind could result in the payment of brokerage commissions.
However, Adviser Funds, Inc. has elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which the Funds are obligated to redeem shares solely in
cash up to the lesser of $250,000 or 1% of the net asset value of the Funds
during any 90-day period for any one shareholder.
The value of the Funds' investments are subject to changing market
prices. Thus, a shareholder reselling shares to the Fund may sustain either a
gain or loss, depending upon the price paid and the price received for such
shares.
Small Accounts
Before the Funds involuntarily redeem shares from an account that,
under the circumstances listed in the relevant Prospectus, has remained below
the minimum amounts required by the Funds' Prospectuses and sends the proceeds
to the shareholder, the shareholder will be notified in writing that the value
of the Fund shares in the account is less than the minimum required and will be
allowed 60 days from the date of notice to make an additional investment to meet
the required minimum. See The Conditions of Your Purchase under How to Buy
Shares in the Funds' Prospectuses. Any redemption in an inactive account
-61-
<PAGE>
established with a minimum investment may trigger mandatory redemption. No CDSC
or Limited CDSC will apply to the redemptions described in this paragraph.
Checkwriting Feature
Shareholders of the Class A Shares and the Institutional Class holding
shares for which certificates have not been issued may request on the investment
application that they be provided with special forms of checks which may be
issued to redeem their shares by drawing on the Adviser Funds, Inc.'s account
with CoreStates Bank, N.A. for the particular Fund. If normally, it takes two
weeks from the date the shareholder's initial purchase check clears to receive
the ten-check book. The use of any form of check other than the Fund's check
will not be permitted unless approved by the Fund. The Checkwriting Feature is
not available with respect to the Class B Shares, Class C Shares or for
retirement plans.
(1) Redemption checks must be made payable in an amount of $500 or
more.
(2) Checks must be signed by the shareholder(s) of record or, in the
case of an organization, by the authorized person(s). If registration is in more
than one name, unless otherwise indicated on the investment application or your
checkwriting authorization form, these checks must be signed by all owners
before Adviser Funds, Inc. will honor them. Through this procedure the
shareholder will continue to be entitled to distributions paid on these shares
up to the time the check is presented for payment.
(3) If a shareholder who recently purchased shares by check seeks to
redeem all or a portion of those shares through the Checkwriting Feature, the
Funds will not honor the redemption request unless it is reasonably satisfied of
the collection of the investment check. A hold period against a recent purchase
may be up to but not in excess of 15 days, depending upon the origin of the
investment check.
(4) If the amount of the check is greater than the value of the shares
held in the shareholder's account, the check will be returned and the
shareholder may be subject to extra charges.
(5) Checks may not be used to close accounts.
The Funds reserve the right to revoke the Checkwriting Feature of
shareholders who overdraw their accounts or if, in the opinion of management,
such revocation is in the Funds' best interests.
Shareholders will be subject to CoreStates Bank, N.A.'s rules and
regulations governing similar accounts. This service may be terminated or
suspended at any time by CoreStates Bank, N.A., the Funds or the Transfer Agent.
The Funds and the Transfer Agent will not be responsible for the inadvertent
processing of post-dated checks or checks more than six months old.
Stop-Payment Requests--Investors may request a stop payment on checks
by providing the Funds with a written authorization to do so. Oral requests will
be accepted provided that the Fund promptly receives a written authorization.
Such requests will remain in effect for six months unless renewed or canceled.
The Fund will use its best efforts to effect stop-payment instructions, but does
not promise or guarantee that such instructions will be effective. Shareholders
-62-
<PAGE>
requesting stop payment will be charged a $5 service fee per check for each
six-month period which will be deducted from their accounts.
* * *
The Funds have made available certain special redemption privileges,
as described below. The Funds reserve the right to suspend or terminate these
expedited payment procedures upon 60 days' written notice to shareholders.
Expedited Telephone Redemptions
Shareholders of the Fund Classes or their investment dealers of record
wishing to redeem any amount of Fund shares of $50,000 or less for which
certificates have not been issued may call the Shareholder Service Center at
800-523-1918 or, in the case of shareholders of the Institutional Class, their
Client Services Representative at 800-828-5052 prior to the time the offering
price and net asset value are determined, as noted above, and have the proceeds
mailed to them at the record address. Checks payable to the shareholder(s) of
record will normally be mailed the next business day, but no later than seven
days, after the receipt of the redemption request. This option is only available
to individual, joint and individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can be transferred
to your predesignated bank account by wire or by check by calling the phone
numbers listed above. An authorization form must have been completed by the
shareholder and filed with the particular Fund before the request is received.
Payment will be made by wire or check to the bank account designated on the
authorization form as follows:
1. Payment by Wire: Request that Federal Funds be wired to the bank
account designated on the authorization form. Redemption proceeds will normally
be wired on the next business day following receipt of the redemption request.
There is a $7.50 wiring fee (subject to change) charged by CoreStates Bank, N.A.
which will be deducted from the withdrawal proceeds each time the shareholder
requests a redemption. If the proceeds are wired to the shareholder's account at
a bank which is not a member of the Federal Reserve System, there could be a
delay in the crediting of the funds to the shareholder's bank account.
2. Payment by Check: Request a check be mailed to the bank account
designated on the authorization form. Redemption proceeds will normally be
mailed the next business day, but no later than seven days, from the date of the
telephone request. This procedure will take longer than the Payment by Wire
option (1 above) because of the extra time necessary for the mailing and
clearing of the check after the bank receives it.
Redemption Requirements: In order to change the name of the bank and
the account number it will be necessary to send a written request to the Fund
and a signature guarantee may be required. Each signature guarantee must be
supplied by an eligible guarantor institution. The Fund reserves the right to
reject a signature guarantee supplied by an eligible institution based on its
creditworthiness.
To reduce the shareholder's risk of attempted fraudulent use of the
telephone redemption procedure, payment will be made only to the bank account
designated on the authorization form. Telephone redemptions for Fund shares
-63-
<PAGE>
recently purchased by check will not be honored unless the Fund is reasonably
satisfied that the purchase check has cleared.
If expedited payment under these procedures could adversely affect the
Funds, the Funds may take up to seven days to pay the shareholder.
Neither the Funds nor the Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the Funds will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, the Funds or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by
shareholders of the Fund Classes are generally tape recorded. A written
confirmation will be provided for all purchase, exchange and redemption
transactions initiated by telephone.
Systematic Withdrawal Plans
Shareholders of Class A Shares, Class B Shares and Class C Shares who
own or purchase $5,000 or more of shares at the offering price, or net asset
value, as applicable, for which certificates have not been issued may establish
a Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or
quarterly withdrawals of $75 or more, although the Fund does not recommend any
specific amount of withdrawal. This $5,000 minimum does not apply for the Fund's
prototype retirement plans. Shares purchased with the initial investment and
through reinvestment of cash dividends and realized securities profits
distributions will be credited to the shareholder's account and sufficient full
and fractional shares will be redeemed at the net asset value calculated on the
third business day preceding the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend) and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the Class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital and the share balance
may in time be depleted, particularly in a declining market.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of
additional shares of the Fund may be disadvantageous to the shareholder.
Purchases of Class A Shares through a periodic investment program in a fund
managed by the Manager must be terminated before a Systematic Withdrawal Plan
with respect to such shares can take effect, except if the shareholder is a
participant in one of our retirement plans or is investing in funds of the
Delaware Group which do not carry a sales charge. Redemptions of Class A Shares
-64-
<PAGE>
pursuant to a Systematic Withdrawal Plan may be subject to a Limited CDSC if the
purchase was made at net asset value and a dealer's commission has been paid on
that purchase. Redemptions of Class B Shares or Class C Shares pursuant to a
Systematic Withdrawal Plan may be subject to a CDSC, unless the annual amount
selected to be withdrawn is less than 12% of the account balance on the date
that the Systematic Withdrawal Plan was established. See Waiver of Contingent
Deferred Sales Charge - Class B and Class C Shares and Waiver of Limited
Contingent Deferred Sales Charge - Class A Shares under Redemption and Exchange
in the Prospectus for the Fund Classes. Shareholders should consult their
financial advisers to determine whether a Systematic Withdrawal Plan would be
suitable for them.
An investor wishing to start a Systematic Withdrawal Plan must
complete an authorization form. If the recipient of Systematic Withdrawal Plan
payments is other than the registered shareholder, the shareholder's signature
on this authorization must be guaranteed. Each signature guarantee must be
supplied by an eligible guarantor institution. The Fund reserves the right to
reject a signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
The Systematic Withdrawal Plan is not available with respect to the
Institutional Class.
Wealth Builder Option
Shareholders of the Fund Classes may elect to invest in one or more of
the other mutual funds in the Delaware Group through our Wealth Builder Option.
Under this automatic exchange program, shareholders can authorize regular
monthly investments (minimum of $100 per fund) to be liquidated from their
account and invested automatically into other mutual funds in the Delaware
Group, subject to the conditions and limitations set forth in the Fund Classes'
Prospectus. See Wealth Builder Option and Redemption and Exchange in the
Prospectus for the Fund Classes.
The investment will be made on the 20th day of each month (or, if the
fund selected is not open that day, the next business day) at the public
offering price or net asset value, as applicable, of the fund selected on the
date of investment. No investment will be made for any month if the value of the
shareholder's account is less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges.
-65-
<PAGE>
Shareholders can also use the Wealth Builder Option to invest in the
Fund Classes through regular liquidations of shares in their accounts in other
mutual funds in the Delaware Group, subject to the conditions and limitations
described in the Fund Classes' Prospectus. Shareholders can terminate their
participation at any time by written notice to the particular Fund.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans. This option also is not available to shareholders
of the Institutional Class.
-66-
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to each Fund, subject to the
supervision and direction of the Board of Directors of Adviser Funds, Inc.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. The aggregate assets of these funds on December 31,
1995 were approximately $10,522,726,000. Investment advisory services are also
provided to institutional accounts with assets on December 31, 1995 of
approximately $17,606,321,000.
Separate Investment Management Agreements for each Fund are dated May
3, 1996 and were approved by shareholders on the same date. The Agreements have
an initial term of two years and may be further renewed only so long as such
renewals and continuance are specifically approved at least annually by the
Board of Directors or by vote of a majority of the outstanding voting securities
of the relevant Fund, and only if the terms and renewal thereof have been
approved by the vote of a majority of the directors of Adviser Funds, Inc. who
are not parties thereto or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval. The Agreements
are terminable without penalty on 60 days' notice by the directors of Adviser
Funds, Inc. or by the Manager. The Agreements will terminate automatically in
the event of its assignment.
The Investment Management Agreements provide that each Fund shall pay
the Manager an annual management fee payable monthly and computed on the average
daily net assets of each Fund at the following annual rates:
Management
Fund Fee Rate
---- ----------
Delaware Enterprise Fund 0.80%
Delaware U.S. Growth Fund 0.70%
Delaware World Growth Fund 1.10%
Delaware New Pacific Fund 0.80%
Delaware Corporate Income Fund 0.30%
Delaware Federal Bond Fund 0.30%
On October 31, 1995, each Fund's total net assets were as follows:
Delaware Enterprise Fund ($__________); Delaware U.S. Growth Fund ($__________);
Delaware World Growth Fund ($__________); Delaware New Pacific Fund
($__________); Delaware Corporate Income Fund ($__________); Delaware Federal
Bond Fund ($__________).
The total investment management fees paid by each Fund during the
three fiscal years ended October 31, 1993, 1994 and 1995 were paid to the
previous investment manager, Lincoln Investment Management, Inc., and were as
follows:
Management Fees Paid
Fund 1995 1994 1993
---- ---- ---- ----
Delaware Enterprise Fund $_____ $_____ $_____
Delaware U.S. Growth Fund $_____ $_____ $_____
Delaware World Growth Fund $_____ $_____ $_____
Delaware New Pacific Fund $_____ $_____ $_____
Delaware Corporate Income Fund $_____ $_____ $_____
Delaware Federal Bond Fund $_____ $_____ $_____
-67-
<PAGE>
As authorized by the Investment Management Agreements relating to each
Fund, the Investment Manager, under the general supervision of the Board of
Directors, has selected and contracted with various sub-advisers to assist with
the management of the Fund's portfolios in accordance with each Fund's stated
objectives and policies. The Manager is responsible for compensating such
sub-advisers, as well as paying the salaries of all directors, officers and
employees of Adviser Funds, Inc. who are affiliated with the Manager.
Each Fund pays all of its other expenses, including its proportionate
share of rent and certain other administrative expenses. The ratios of expenses
to average daily net assets for Class A Shares, Class B Shares, Class C Shares
and the Institutional Class for each Fund for the fiscal year ended October 31,
1995 were as follows with and without giving effect to any expense waivers or
reimbursements, as more fully described below:
Ratio (Without
Giving Effect
Fund Ratio To Waiver)
---- ----- --------------
Delaware Enterprise Fund
Class A Shares _____% _____%
Class B Shares _____% _____%
Class C Shares _____% _____%
Institutional Class _____% _____%
Delaware U.S. Growth Fund
Class A Shares _____% _____%
Class B Shares _____% _____%
Class C Shares _____% _____%
Institutional Class _____% _____%
Delaware World Growth Fund
Class A Shares _____% _____%
Class B Shares _____% _____%
Class C Shares _____% _____%
Institutional Class _____% _____%
Delaware New Pacific Fund
Class A Shares _____% _____%
Class B Shares _____% _____%
Class C Shares _____% _____%
Institutional Class _____% _____%
Delaware Corporate Income Fund
Class A Shares _____% _____%
Class B Shares _____% _____%
Class C Shares _____% _____%
Institutional Class _____% _____%
Delaware Federal Bond Fund
Class A Shares _____% _____%
Class B Shares _____% _____%
Class C Shares _____% _____%
Institutional Class _____% _____%
-68-
<PAGE>
By California regulation, the Manager is required to waive certain
fees and reimburse the Funds for certain expenses to the extent that a Fund's
annual operating expenses, exclusive of taxes, interest, brokerage commissions
and extraordinary expenses, exceed 2 1/2% of its first $30 million of average
daily net assets, 2% of the next $70 million of average daily net assets and 1
1/2% of any additional average daily net assets. The Manager has voluntarily
committed to waive its fees or reimburse expenses for the Funds for the first
six months after May 3, 1996, when it became the investment manager for the
Funds, in amounts sufficient to maintain the expense ratios of the Funds that
had been maintained through similar reimbursements or waivers by the Funds'
previous investment manager. The expense waivers and/or reimbursements will be
reevaluated by the Manager periodically. The expense ratios presently being
maintained are as follows: Delaware Enterprise Fund ____%; Delaware U.S. Growth
Fund ____%; Delaware World Growth Fund _____%; Delaware New Pacific Fund ____%;
Delaware Corporate Income Fund _____%; Delaware Federal Bond Fund ____%.
Sub-Advisers
The following registered investment advisers serve as sub-advisers to
the Funds indicated: Lincoln Investment Management, Inc. serves as sub-adviser
of the Delaware Corporate Income Fund and the Delaware Federal Bond Fund, Lynch
& Mayer, Inc. serves as sub-adviser of the Delaware U.S. Growth Fund and
Delaware Enterprise Fund; Walter Scott & Partners Limited serves as sub-adviser
of the Delaware World Growth Fund and John Govett & Company Limited serves as
sub-adviser of the Delaware New Pacific Fund.
Lincoln Investment Management, Inc. Lincoln Investment Management,
Inc. provides investment services to Lincoln National Corporation and its
principal subsidiaries and acts as investment adviser to other clients in
addition to the funds. As of December 31, 1995, Lincoln Investment Management,
Inc. had total assets under management in excess of $37 billion.
Lynch & Mayer, Inc. Dennis Lynch and Eldon Mayer established Lynch &
Mayer, Inc. in 1976. Currently the firm manages $6.6 billion in assets for
pension funds, foundations, endowments, trusts and high net worth individuals
and families. The firm also manages a closed-end convertible security fund which
is traded on the New York Stock Exchange. Lynch & Mayer's investment expertise
is in equities and convertible securities. As of December 31, 1995, Lynch &
Mayer, Inc. had total assets under management in excess of $6.6 billion.
-69-
<PAGE>
Walter Scott & Partners Limited. Walter Scott & Partners Limited was
founded in 1983. The firm is an investment advisor registered with the
Securities and Exchange Commission. The firm's area of expertise is in providing
both international and global management of equity securities. The firm manages
money for pension funds and foundations of over $2.0 billion for investors in
the United Kingdom and United States. As of December 31, 1995, Walter Scott &
Partners Limited had assets under management in excess of $2.0 billion.
John Govett & Company Limited. The London-based investment management
firm of John Govett & Company Limited was established in 1920. In December,
1995, John Govett & Company Limited was acquired by John Govett Holdings
Limited, a majority owned subsidiary of the AIB Group of Companies. John Govett
& Company Limited manages assets of over $5.1 billion for investment trusts,
investment companies, mutual funds and pension funds. The firm has other
investment offices in Singapore and San Francisco. As of December 31, 1995, John
Govett & Company Limited had assets under management in excess of $5.1 billion.
Distribution and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor of the Funds' shares
under separate Distribution Agreements dated September 25, 1995. The Distributor
is an affiliate of the Manager and bears all of the costs of promotion and
distribution, except for payments by Class A Shares, Class B Shares and Class C
Shares of the Funds under their respective 12b-1 Plans. Prior to September 25,
1995, LNC Equity Sales, Inc. served as the national distributor of the Fund's
shares. Delaware Distributors Inc. ("DDI") is the corporate general partner of
Delaware Distributors, L.P. and both DDI and Delaware Distributors, L.P. are
indirect, wholly-owned subsidiaries of Delaware Management Holdings, Inc. which,
in turn, is a wholly-owned subsidiary of Lincoln National Corporation.
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
the shareholder servicing, dividend disbursing and transfer agent for each Fund
pursuant to a Shareholders Services Agreement dated September 25, 1995. The
Transfer Agent is also an indirect, wholly-owned subsidiary of Delaware
Management Holdings, Inc. and, therefore, Lincoln National Corporation.
-70-
<PAGE>
MANAGEMENT
DMH Corp., Delaware Management Company, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware International Holdings Ltd., Founders
Holdings, Inc., Delaware International Advisers Ltd., Delaware Investment
Counselors, Inc. and Delaware Investment & Retirement Services, Inc. are direct
or indirect, wholly-owned subsidiaries of Delaware Management Holdings, Inc.
("DMH"). On April 3, 1995, a merger between DMH and a wholly-owned subsidiary of
Lincoln National Corporation was completed. Lincoln National Corporation, 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. DMH and the Manager are now wholly-owned
subsidiaries, and subject to the ultimate control, of Lincoln National
Corporation. After Lincoln National's acquisition of DMH and the Manager,
Lincoln National was operating two mutual fund complexes, the Delaware Group and
Lincoln Advisor Funds, Inc. (the "Lincoln Funds"). The directors and management
of both mutual fund complexes concluded that the extensive mutual fund
experience and resources of the Delaware Group of funds warranted the
consolidation of Lincoln Funds into the Delaware Group of funds. On May 3, 1996,
the shareholders of the Lincoln Funds approved the elimination of three of the
nine series of the Lincoln Funds and the restructuring of the funds into Adviser
Funds, Inc.
DIRECTORS
The business and affairs of Adviser Funds, Inc. are managed under the
direction of its Board of Directors.
Directors of Adviser Funds, Inc. are noted below along with their ages
and their business experience for the past five years. Unless otherwise noted,
the address of each officer and director is One Commerce Square, Philadelphia,
PA 19103.
*Wayne A. Stork (58) Director
Chairman, President, Chief Executive Officer, Director and/or Trustee
of 15 other investment companies in the Delaware Group (which
excludes Delaware Pooled Trust, Inc.), Delaware Management
Holdings, Inc., DMH Corp., Delaware International Holdings
Ltd. and Founders Holdings, Inc.
Chairman and Director of Delaware Pooled Trust, Inc., Delaware
Investment Counselors, Inc. and Delaware Investment &
Retirement Services, Inc.
Chairman, President, Chief Executive Officer, Chief Investment Officer
and Director of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware
International Advisers Ltd.
Director of Delaware Distributors, Inc. and Delaware Service Company,
Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.
- --------
* Director affiliated with the Fund's investment manager and considered
an "interested person" as defined in the Investment Company Act of
1940.
-71-
<PAGE>
Walter P. Babich (68) Director
Director and/or Trustee of each of the other 16 investment companies
in the Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc. From 1986 to 1988, Mr.
Babich was a partner of Irwin & Leighton and from 1988 to
1991, he was a partner of I&L Investors.
Anthony D. Knerr (57) Director
Director and/or Trustee of each of the other 16 investment companies
in the Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Founder and Managing Director, Anthony Knerr & Associates. From 1982
to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to 1989,
he was also a lecturer in English at the University. In
addition, Mr. Knerr was Chairman of The Publishing Group,
Inc., New York, from 1988 to 1990. Mr. Knerr founded The
Publishing Group, Inc. in 1988.
Ann R. Leven (55) Director
Director and/or Trustee of each of the other 16 investment companies
in the Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art. From 1984 to 1990, Ms. Leven was
Treasurer and Chief Fiscal Officer of the Smithsonian
Institution, Washington, DC, and from 1975 to 1994, she was
Adjunct Professor of Columbia Business School.
W. Thacher Longstreth (75) Director
Director and/or Trustee of each of the other 16 investment companies
in the Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
Charles E. Peck (70) Director
Director and/or Trustee of each of the other 16 investment companies
in the Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Secretary/Treasurer, Enterprise Homes, Inc. From 1981 to 1990,
Mr. Peck was Chairman and Chief Executive Officer of
The Ryland Group, Inc., Columbia, MD.
The following is a compensation table listing for each director
entitled to receive compensation. The present directors were elected on May 3,
1996 and, therefore, did not previously receive compensation from the Funds.
However, the previous directors entitled to receive compensation each received
annual fees of $13,000 for their services to Adviser Funds, Inc., while it
operated as Lincoln Advisor Funds, Inc. The following table shows the total
compensation received from all Delaware Group funds for the year ended December
31, 1995 and an estimate of annual benefits to be received upon retirement under
the Delaware Group Retirement Plan.
-72-
<PAGE>
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits
Aggregate Accrued as Estimated Total
Compensation Part of Annual Compensation
from Adviser Benefits from all 17
Adviser Funds, Inc. Upon Delaware
Name Funds, Inc. Expenses Retirement* Group Funds
- ---- ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C>
W. Thacher Longstreth N/A None $18,100 $61,324
Ann R. Leven N/A None $18,100 $66,324
Walter P. Babich N/A None $18,100 $64,188
Anthony D. Knerr N/A None $18,100 $65,324
Charles E. Peck N/A None $18,100 $58,188
</TABLE>
* Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director who, at the time of his or
her retirement from the Board, has attained the age of 70 and served on the
Board for at least five continuous years, is entitled to receive payments
from each fund in the Delaware Group for a period equal to the lesser of the
number of years that such person served as a director or the remainder of
such person's life. The amount of such payments will be equal, on an annual
basis, to the amount of the annual retainer that is paid to directors of
each fund at the time of such person's retirement. If an eligible director
retired as of December 31, 1995, he or she would be entitled to annual
payments totaling $18,100, in the aggregate, from all of the funds in the
Delaware Group, based on the number of funds in the Delaware Group as of
that date.
The day to day business operations of Adviser Funds, Inc. are managed
under the direction of the officers of Adviser Funds, Inc., who are listed
below:
Officers
Principal Holders of Securities
As of February 1, 1996, the officers and directors of Adviser Funds,
Inc., as a group, owned less than 1% of the outstanding shares of each the Class
A Shares, Class B Shares, Class C Shares and the Institutional Class, of each
Fund, respectively.
Listed below are the shareholders of record who held 25% or more of the
outstanding shares of each Class as of February 1, 1996.
-73-
<PAGE>
<TABLE>
<CAPTION>
Fund Name and Address of Shareholder Percent Held
- ---- ------------------------------- ------------
<S> <C> <C>
Delaware Enterprise Fund American States Insurance Co. 73.41
(Class A) Attn: Corporate Accounting P/C
David Rogers
500 North Meridian St.
Indianapolis, IN 46207
Delaware Enterprise Fund None
(Class B)
Delaware Enterprise Fund John Robertson Plumbing Inc. 14.54
(Class C) PO Box 118
Burlington, KY 41005
Delaware Enterprise Fund NBD Bank 100.00
(Class D) Trst Motor Wheel Corp.
Box 771072
Detroit, MI 48277-1072
Delaware U.S. Growth Fund American States Insurance Co. 89.62
(Class A) Attn: Corporate Accounting P/C
David Rogers
500 North Meridian St.
Indianapolis, IN 46207
Delaware U.S. Growth Fund None
(Class B)
Delaware U.S. Growth Fund None
(Class C)
Delaware U.S. Growth Fund Federated Life insurance Co. 100.00
(Class D) Attn: Tom Koch
121 E. Park Sq.
Owatonna, MN 55060
Delaware World Growth Fund Lincoln National Life Insurance Co. 85.63
(Class A) 1300 South Clinton St.
Fort Wayne, IN 46801
Delaware World Growth Fund None
(Class B)
Delaware World Growth Fund None
(Class C)
Delaware World Growth Fund Lincoln Investment Management, Inc. 100.00
(Class D) 1300 South Clinton St.
Fort Wayne, IN 46801
Delaware New Pacific Fund Lincoln National Life Insurance Co. 84.26
(Class A) 1300 South Clinton St.
Fort Wayne, IN 46801
Delaware New Pacific Fund None
(Class B)
Delaware New Pacific Fund NFSC FBO 27.73
(Class C) Chester M. Boltwood
Karen A. Boltwood
828 Cobblestone Circle
Modesto, CA 95355
Delaware New Pacific Fund Lincoln Investment Management, Inc. 100.00
(Class D) 1300 South Clinton St.
Fort Wayne, IN 46801
</TABLE>
-74-
<PAGE>
<TABLE>
<CAPTION>
Fund Name and Address of Shareholder Percent Held
- ---- ------------------------------- ------------
<S> <C> <C>
Delaware Government Income Lincoln National Life Insurance Co. 98.28
Fund (Class A) 1300 South Clinton St.
Fort Wayne, IN 46801
Delaware Government Income NFSC/FMTC IRA Rollover 72.81
Fund (Class B) FBO Lawrence B. Silver, MD
1800 Linglestown Road, Suite 404
Harrisburg, PA 17110
Delaware Government Income Willard Shivley 68.26
Fund (Class C) Carolyn Shively
6649 E. 150 North St.
Columbia City, IN 46725
Delaware Government Income Lincoln Investment Management, Inc. 100.00
Fund (Class D) 1300 South Clinton St.
Fort Wayne, IN 46801
Delaware Corporate Income Lincoln National Life Insurance Co. 94.88
Fund (Class A) 1300 South Clinton St.
Fort Wayne, IN 46801
Delaware Corporate Income NFSC/FMTC IRA Rollover 61.50
Fund (Class B) FBO Lawrence B. Silver, MD
1800 Linglestown Road, Suite 404
Harrisburg, PA 171109
Delaware Corporate Income Willard Shivley 94.99
Fund (Class C) Carolyn Shivley
6649 E. 150 North St.
Columbia City, IN 46725
Delaware Corporate Income Federated Life Insurance Co. 100.00
Fund (Class D) Attn: Tom Koch
121 E. Park Square
Owatonna, MN 55060
</TABLE>
<PAGE>
Listed below are the shareholders who held at least 5% but less than
25% of the outstanding shares of each Class as of February 1, 1996.
<TABLE>
<CAPTION>
Fund Name and Address of Shareholder Percent Held
- ---- ------------------------------- ------------
<S> <C> <C>
Delaware Enterprise Fund None
(Class A)
Delaware Enterprise Fund Marlin and Jeanne Drake 17.36
(Class B) 11595 N. Meridian St. Suite 250
Carmel, IN 46032
NFSC FBO, NFSC/FMTC IRA 7.41
FBO Lawrence B. Silver, MD
1800 Linglestown Road, Suite 404
Harrisburg, PA 17110
Delaware Enterprise Fund Marlin and Jeanne Drake 14.70
(Class C) 11595 N. Meridian St. Suite 250
Carmel, IN 46032
NFSC 10.46
FBO Garold A. Nest
105-B Westwall Street
Harrisonville, MO 64701
Paul E. Moberg 6.28
62 Hall Rd.
Hampton, VA 23664
Delaware Enterprise Fund None
(Class D)
</TABLE>
-75-
<PAGE>
<TABLE>
<CAPTION>
Fund Name and Address of Shareholder Percent Held
- ---- ------------------------------- ------------
<S> <C> <C>
Delaware U.S. Growth Fund None
(Class A)
Delaware U.S. Growth Fund NFSC/FMTC IRA Rollover 19.71
(Class B) FBO Lawrence B. Silver, MD
1800 Linglestown Road, Suite 404
Harrisburg, PA 171109
Marlin and Jeanne Drake 17.40
11595 N. Meridian St. Suite 250
Carmel, IN 46032
Marlene M. Clark 8.50
1536 Kensington L
Lancaster, OH 43130
LR Brown 5.83
1201 Winner Ave.
Huntsville, AL 35805
Delaware U.S. Growth Fund NFSC 14.12
(Class C) FBO Garold A. Nest
105-B Westwall Street
Harrisonville, MO 64701
NFSC FBO 12.60
Lionel R. & Anne L. Felteau
1578 Greyson Ridge
Marietta, GA 30062
Senan S. Santos 11.13
Cust. Imelda May Cardona
2109 Charlemagne Ave.
Long Beach, CA 90615
Paul E. Moberg 10.79
62 Hall Rd.
Hampton, VA 23664
Susan W. Horne 8.64
2412 Catherine Drive
Burlington, NC 27215
Marlin and Jeanne Drake 6.43
11595 N. Meridian St. Suite 250
Carmel, IN 46032
Delaware U.S. Growth Fund None
(Class D)
Delaware World Growth Fund None
(Class A)
Delaware World Growth Fund NFSC FBO, NFSC/FMTC IRA 12.27
(Class B) FBO Lawrence B. Silver, MD
1800 Linglestown Road, Suite 404
Harrisburg, PA 17110
Carl W. Niederwimmer 6.92
201 NW 73rd Terrace
Gladstone, MD 64118
NFSC FBO 5.08
Joan Miller
4917 Waterfowl Way
Rockville, MD 20853
</TABLE>
-76-
<PAGE>
<TABLE>
<CAPTION>
Fund Name and Address of Shareholder Percent Held
- ---- ------------------------------- ------------
<S> <C> <C>
Delaware World Growth Fund NFSC FBO 24.72
(Class C) John Robertston
Trst John Robertson Plumbing Inc.
P.O. Box 118
Burlington, KY 41005
NFSC FBO 23.47
Chester M. Boltwood
Karen A. Boltwood
828 Cobblestone Circle
Modesto, CA 95355
NFSC 10.33
FBO Garold A. Nest
105-B Westwall Street
Harrisonville, MO 64701
Paul E. Moberg 7.90
62 Hall Rd.
Hampton, VA 23664
Susan W. Horne 6.73
2412 Catherine Drive
Burlington, NC 27215
Eileen Shiman 6.00
3625 Yale Drive
Santa Rosa, CA 95405
Delaware World Growth Fund None
(Class D)
Delaware Government Income None
Fund (Class A)
Delaware Government Income Irene E. Hall 8.26
Fund (Class B) 5503 Monticello Ave.
Dallas, TX 75206
NFSC FBO 5.14
Geraldine W. Nixon
1577 Galor Circle
Smyrna, GA 30080
Delaware Government Income William H. Lambert 16.63
Fund (Class C) 7775 Chaple Ridge
Memphis, TN 38018
Eileen Shiman 14.99
3625 Yale Drive
Santa Rosa, CA 95405
Delaware Government Income None
Fund (Class D)
Delaware New Pacific Fund None
(Class A)
Delaware New Pacific Fund NFSC 22.88
(Class B) FBO Lawrence B. Silver, MD
1800 Linglestown Road, Suite 404
Harrisburg, PA 171109
Kenneth D. Willis, MD 8.78
1506 Olive Drive
Huntsville, AL 35801
</TABLE>
-77-
<PAGE>
<TABLE>
<CAPTION>
Fund Name and Address of Shareholder Percent Held
- ---- ------------------------------- ------------
<S> <C> <C>
Delaware New Pacific Fund NFSC 20.66
(Class C) FBO Garold A. Nest
105-B Westwall Street
Harrisonville, MO 64701
Paul E. Moberg 20.60
62 Hall Rd.
Hampton, VA 23664
Charles H. Stevens 6.73
2413 Jenan Road
Virginia Beach, VA 23454
Edward K. Robinson 5.34
Dianne McKenzie
11999 W. Florida
Boise, ID 83709
Delaware New Pacific Fund None
(Class D)
Delaware Corporate Income None
Fund (Class A)
Delaware Corporate Income None
Fund (Class B)
Delaware Corporate Income None
Fund (Class C)
Delaware Corporate Income None
Fund (Class D)
</TABLE>
-78-
<PAGE>
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the Classes and
for shareholders of classes of other funds in the Delaware Group are set forth
in the relevant prospectuses for such classes. The following supplements that
information. The Funds may modify, terminate or suspend the exchange privilege
upon 60 days' notice to shareholders.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses. A shareholder requesting an exchange will be sent a current prospectus
and an authorization form for any of the other mutual funds in the Delaware
Group. Exchange instructions must be signed by the record owner(s) exactly as
the shares are registered.
An exchange constitutes, for tax purposes, the sale of one fund and the
purchase of another. The sale may involve either a capital gain or loss to the
shareholder for federal income tax purposes.
In addition, investment advisers and dealers may make exchanges between
funds in the Delaware Group on behalf of their clients by telephone or other
expedited means. This service may be discontinued or revised at any time by the
Transfer Agent. Such exchange requests may be rejected if it is determined that
a particular request or the total requests at any time could have an adverse
effect on any of the funds. Requests for expedited exchanges may be submitted
with a properly completed exchange authorization form, as described above.
Telephone Exchange Privilege
Shareholders owning shares for which certificates have not been issued
or their investment dealers of record may exchange shares by telephone for
shares in other mutual funds in the Delaware Group. This service is
automatically provided unless the Fund receives written notice from the
shareholder to the contrary.
Shareholders or their investment dealers of record may contact the
Shareholder Service Center at 800-523-1918 or, in the case of shareholders of
the Institutional Class, their Client Services Representative at 800-828-5052 to
effect an exchange. The shareholder's current Fund account number must be
identified, as well as the registration of the account, the share or dollar
amount to be exchanged and the fund into which the exchange is to be made.
Requests received on any day after the time the offering price and net asset
value are determined will be processed the following day. See Determining
Offering Price and Net Asset Value. Any new account established through the
exchange will automatically carry the same registration, shareholder information
and dividend option as the account from which the shares were exchanged. The
exchange requirements of the fund into which the exchange is being made, such as
sales charges, eligibility and investment minimums, must be met. (See the
prospectus of the fund desired or inquire by calling the Transfer Agent or, as
relevant, your Client Services Representative.) Certain funds are not available
for retirement plans.
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 Group. Telephone exchanges may be subject to limitations
as to amounts or frequency. The Transfer Agent and the Funds reserve the right
to record exchange instructions received by telephone and to reject exchange
requests at any time in the future.
-79-
<PAGE>
As described in the Fund's Prospectuses, neither the Funds nor the
Transfer Agent is responsible for any shareholder loss incurred in acting upon
written or telephone instructions for redemption or exchange of Fund shares
which are reasonably believed to be genuine.
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 Fund will refuse any new Timing
Arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Group funds from Timing Firms. The Funds reserve 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 a Fund within two weeks of an earlier exchange
request out of such Fund, or (ii) makes more than two exchanges out of a Fund
per calendar quarter, or (iii) exchanges shares equal in value to at least $5
million, or more than 1/4 of 1% of a Fund'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 Group funds: (1) Decatur
Income Fund, (2) Decatur Total Return Fund, (3) Delaware Fund, (4) Limited-Term
Government Fund, (5) Tax-Free USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund and (8) Tax-Free Pennsylvania Fund. No other Delaware Group
funds are available for Timed Exchanges. Assets redeemed or exchanged out of
Timing Accounts in Delaware Group funds not listed above may not be reinvested
back into that Timing Account. The Funds reserve 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 Funds also reserve the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Funds 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
Funds receive or anticipate simultaneous orders affecting significant portions
of the Funds' assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to the Fund 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.
* * *
Following is a summary of the investment objectives of the other
Delaware Group funds:
Delaware 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. Devon Fund
seeks current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks the Manager
believes have the potential for above average dividend increases over time.
-80-
<PAGE>
Trend Fund seeks long-term growth by investing in common stocks issued
by emerging growth companies exhibiting strong capital appreciation potential.
Value Fund seeks capital appreciation by investing primarily in common
stocks whose market values appear low relative to their underlying value or
future potential.
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.
Decatur 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. Decatur Total Return Fund
seeks long-term growth by investing primarily in securities that provide the
potential for income and capital appreciation without undue risk to principal.
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.
U.S. Government 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.
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. U.S. Government Money Fund seeks maximum
current income with preservation of principal and maintenance of liquidity by
investing only in short-term securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or instrumentalities, and
repurchase agreements collateralized by such securities, while maintaining a
stable net asset value.
Delaware Cash Reserve 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.
Tax-Free USA Fund seeks high current income exempt from federal income
tax by investing in municipal bonds of geographically-diverse issuers. 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. 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.
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.
-81-
<PAGE>
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.
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. 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. Global Assets Fund seeks to achieve
long-term total return by investing in global securities which will provide
higher current income than a portfolio comprised exclusively of equity
securities, along with the potential for capital growth.
Delaware Group Premium Fund offers nine funds available exclusively as
funding vehicles for certain insurance company separate accounts. Equity/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. High Yield 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. Money
Market Series seeks the highest level of income consistent with preservation of
capital and liquidity through investments in short-term money market
instruments. Growth Series seeks long-term capital appreciation by investing its
assets in a diversified portfolio of securities exhibiting the potential for
significant growth. Multiple Strategy 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. Value Series seeks capital
appreciation by investing in small- to mid-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.
Emerging Growth 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.
For more complete information about any of the Delaware Group funds,
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 each fund's prospectus(es).
-82-
<PAGE>
GENERAL INFORMATION
The Manager is the investment manager of Adviser Funds, Inc. The
Manager or its affiliate, Delaware International Advisers Ltd., also manages the
other funds in the Delaware Group. The Manager, through a separate division,
also manages private investment accounts. While investment decisions of the
Funds 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 Funds.
Access persons and advisory persons of the Delaware Group of funds, as
those terms are defined in SEC Rule 17j-1 under the 1940 Act, who provide
services to the Manager, Delaware International Advisers Ltd. 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 was 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 the Funds and for the
other mutual funds in the Delaware Group. As previously described, prior to
September 25, 1995, LNC Equity Sales, Inc. ("LNC Equity") served as the national
distributor for the Funds.
For the fiscal years ended October 31, 1993, 1994 and 1995, in its
capacity as the Funds' national distributor, LNC Equity or as relevant, the
Distributor, received net commissions from Adviser Funds, Inc., after
reallowances to dealers, as follows:
<TABLE>
<CAPTION>
Total Amount Amounts Net
Fiscal Year of Underwriting Reallowed to Commission to
Ending Commissions Dealers Distributors
----------- --------------- ------------ -------------
<S> <C> <C> <C>
October 31, 1995 $_________ $_________ $_________
October 31, 1994 $_________ $_________ $_________
October 31, 1993 $_________ $_________ $_________
</TABLE>
* For its role as Distributor for the period from September 25, 1995 through
the fiscal year end of October 31, 1995, Delaware Distributors, L.P.
received $________ in underwriting commissions, $________ of which was
reallowed to dealers.
For the three most recently completed fiscal years, the Distributor, or
in its capacity as Adviser Fund, Inc.'s national distributor, LNC Equity
received the following contingent deferred sales charge payments with respect to
the Class A Shares, Class B Shares and Class C Shares of the Funds.
-83-
<PAGE>
<TABLE>
<CAPTION>
For Fiscal Year For Fiscal Year For Fiscal Year
Fund and Class Ended 10/31/95 Ended 10/31/94 Ended 10/31/93
CDSC Payments CDSC Payments CDSC Payments
-------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Delaware Enterprise Fund
Class A Shares $________ $________ $________
Class B Shares $________ $________ $________
Class C Shares $________ $________ $________
Delaware U.S. Growth Fund
Class A Shares $________ $________ $________
Class B Shares $________ $________ $________
Class C Shares $________ $________ $________
Delaware World Growth Fund
Class A Shares $________ $________ $________
Class B Shares $________ $________ $________
Class C Shares $________ $________ $________
Delaware New Pacific Fund
Class A Shares $________ $________ $________
Class B Shares $________ $________ $________
Class C Shares $________ $________ $________
Delaware Corporate Income Fund
Class A Shares $________ $________ $________
Class B Shares $________ $________ $________
Class C Shares $________ $________ $________
Delaware Federal Bond Fund
Class A Shares $________ $________ $________
Class B Shares $________ $________ $________
Class C Shares $________ $________ $________
</TABLE>
Of the amounts listed above, a total of $________ was received by the
Distributor for the period from September 25, 1995, when it became the Funds'
national distributor, through the fiscal year end of October 31, 1995.
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for the Fund and for the other
mutual funds in the Delaware Group. The Transfer Agent is paid a fee by the
Funds 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,
including a majority of the disinterested directors.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of Adviser Funds, Inc.'s
advisory relationship with the Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause Adviser Funds, Inc. to
delete the words "Delaware Group" from Adviser Funds, Inc.'s name.
Chemical Bank (the "Custodian"), 450 West 33rd Street, New York, New
York 10001 is custodian of Adviser Funds, Inc.'s securities and cash. As
custodian, Chemical Bank maintains a separate account each Fund; receives, holds
and releases portfolio securities on account of the Funds; receives and
disburses money on behalf of each Fund; and collects and receives income and
other payments and distributions on account of each Fund's portfolio securities.
The legality of the issuance of the shares offered hereby, registered
pursuant to Rule 24f-2 under the 1940 Act, has been passed upon for Adviser
Funds, Inc.'s Funds by Stradley, Ronon, Stevens & Young, LLP, Philadelphia,
Pennsylvania.
Capitalization
Adviser Funds, Inc. was incorporated under the laws of Maryland on
August 12, 1993 under the name Lincoln Advisor Funds, Inc. Adviser Funds, Inc.
and all of its series (the Funds) shall continue perpetually subject to the
provisions in the Articles of Incorporation concerning termination by action of
the shareholders or by the Directors by written notice to the shareholders.
-84-
<PAGE>
The authorized capital of Adviser Funds, Inc. consists of 810,000,000
shares of Common Stock, $.01 par value, issued in separate series. Each Fund,
for federal income tax purposes, will constitute a separate entity which will be
governed by the provisions of the Articles of Incorporation. All shares of any
Fund issued and outstanding will be fully paid and non-assessable by Adviser
Funds, Inc. The assets of Adviser Funds, Inc. received for the issue or sale of
the shares of each Fund and all income, earnings, profits and proceeds thereof,
subject only to the rights of creditors of such Fund, are specially allocated to
such Fund and constitute the underlying assets of such Fund. The underlying
assets of each Fund are segregated on the books of account, and are to be
charged with the liabilities in respect to such Fund and with a share of the
general liabilities incurred by each Fund of the Fund. General liabilities of
the Fund include, without limitation, director's fees, professional expenses and
printing expenses. Under no circumstances would the assets of a Fund be used to
meet liabilities which are not otherwise properly chargeable to it. Expenses
with respect to any two or more Funds are to be allocated in proportion to the
net asset value of the respective Fund except where allocations of direct
expenses can otherwise be fairly made. The officers of Adviser Funds, Inc.,
subject to the general supervision of the Board of Directors, have the power to
determine which liabilities are allocable to a given Fund or which are general
or allocable to two or more Funds. Upon redemption of shares of a Fund, the
shareholder will receive proceeds solely of the assets of such Fund. In the
event of the dissolution or liquidation of Adviser Funds, Inc., the holders of
the shares of any Fund are entitled to receive as a class the underlying assets
of such Fund available for distribution to shareholders.
Pursuant to the Articles of Incorporation, the Directors may authorized
the creation of additional series of shares (the proceeds of which would be
invested in separate, independently managed portfolios with distinct investment
objectives and policies and share purchase, redemption and net asset valuation
procedures) and additional classes of shares within any Fund (which would be
used to distinguish among the rights of different categories of shareholders as
might be required by future regulations or other unforeseen circumstances) with
such preferences, privileges, limitations and voting and dividend rights as the
Directors may determine. All consideration received by Adviser Funds, Inc. for
shares of any additional series or class, and all assets in which such
consideration is invested, would belong to that series or class (subject only to
the rights of creditors of such series or class) and would be subject to the
liabilities related thereto. Pursuant to the Investment Company Act,
shareholders of any additional series or class of shares would normally have to
approve the adoption of any advisory contract relating to such series or class
and of any changes in the investment policies related thereto.
Adviser Funds, Inc. does not intend to hold shareholders' meetings
unless otherwise required by law. Adviser Funds, Inc. will not be required to
hold meetings of shareholders unless the election of directors is required to be
acted on by shareholders under the Investment Company Act. Shareholders have
certain rights, including the right to call a meeting upon a vote of 10% of the
Fund's outstanding shares for the purpose of voting on the removal of one or
more directors or to transact any other business.
Identifiable expenses to each Fund will be paid by that Fund. General
expenses of all Funds will be allocated on a pro-rata basis according to asset
size. Where matters must be submitted to a vote of shareholders, the holders of
a majority of shares of each Fund affected must vote affirmatively for that
class to be affected.
<PAGE>
The Class A Shares, Class B Shares, Class C Shares and Institutional
Class represent a proportionate interest in the assets of each series of Adviser
Funds, Inc. and have the same voting and other rights and preferences as the
Institutional Class of shares, except that shares of the Institutional Class may
not vote on matters affecting the Funds' Distribution Plans under Rule 12b-1.
Similarly, as a general matter, shareholders of Class A Shares, Class B Shares
and Class C Shares may vote only on matters affecting the 12b-1 Plan that
relates to the class of shares that they hold. General expenses of the Fund will
be allocated on a pro-rata basis to the classes according to asset size, except
that expenses of the 12b-1 Plans of Class A, Class B Shares and Class C Shares
will be allocated solely to those classes.
All shares have equal voting rights, no preemptive rights, are fully
transferable and, when issued, are fully paid. All shares of the Advisers Funds,
Inc. participate equally in dividends, and upon liquidation would share equally.
As of the close of business on May 3, 1996, the changes of the names of
the Funds were as follows: Lincoln Enterprise Portfolio to Delaware Enterprise
Fund; Lincoln U.S. Growth Portfolio to Delaware U.S. Growth Fund; Lincoln World
Growth Portfolio to Delaware World Growth Fund; Lincoln New Pacific Portfolio to
Delaware New Pacific Fund; Lincoln Government Income Portfolio to Delaware
Federal Bond Fund; and Lincoln Corporate Income Portfolio to Delaware Corporate
Income Fund.
Noncumulative Voting
Fund shares have noncumulative voting rights which means that the
holders of more than 50% of the shares of Adviser Funds, 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.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the Securities and Exchange
Commission.
-85-
<PAGE>
APPENDIX A - IRA INFORMATION
The Tax Reform Act of 1986 restructured, and in some cases eliminated,
the tax deductibility of IRA contributions. Under the Act, the full deduction
for IRAs ($2,000 for each working spouse and $2,250 for one-income couples) was
retained for all taxpayers who are not covered by an employer-sponsored
retirement plan. Even if a taxpayer (or his or her spouse) is covered by an
employer-sponsored retirement plan, the full deduction is still available if the
taxpayer's adjusted gross income is below $25,000 ($40,000 for taxpayers filing
joint returns). A partial deduction is allowed for married couples with incomes
between $40,000 and $50,000, and for single individuals with incomes between
$25,000 and $35,000. The Act does not permit deductions for contributions to
IRAs by taxpayers whose adjusted gross income before IRA deductions exceeds
$50,000 ($35,000 for singles) and who are active participants in an
employer-sponsored retirement plan. Taxpayers who were not allowed deductions on
IRA contributions still can make nondeductible IRA contributions of as much as
$2,000 for each working spouse ($2,250 for one-income couples), and defer taxes
on interest or other earnings from the IRAs. Special rules apply for determining
the deductibility of contributions made by married individuals filing separate
returns.
As illustrated in the following tables, maintaining an Individual
Retirement Account remains a valuable opportunity.
For many, an IRA will continue to offer both an up-front tax break with
its tax deduction each year and the real benefit that comes with tax-deferred
compounding. For others, losing the tax deduction will impact their taxable
income status each year. Over the long term, however, being able to defer taxes
on earnings still provides an impressive investment opportunity--a way to have
money grow faster due to tax-deferred compounding.
Even if your IRA contribution is no longer deductible, the benefits of
saving on a tax-deferred basis can be substantial. The following tables
illustrate the benefits of tax-deferred versus taxable compounding. Each
reflects a constant 7% rate of return, compounded annually, with the
reinvestment of all proceeds. The tables do not take into account any fees. Of
course, earnings accumulated in your IRA will be subject to tax upon withdrawal.
If you choose a mutual fund with a fluctuating net asset value, like the Fund,
your bottom line at retirement could be lower--it could also be much higher.
$2,000 Invested Annually Assuming a 7% Annualized Return
15% Tax Bracket Single - $0-$24,000
---------------
Joint - $0-$40,100
<TABLE>
<CAPTION>
How Much You
End of Cumulative How Much You Have With Full
Year Investment Amount Have Without IRA IRA Deduction
------ ------------------ ---------------- --------------
<S> <C> <C> <C>
1 $ 2,000 $ 1,801 $ 2,140
5 10,000 10,143 12,307
10 20,000 23,685 29,567
15 30,000 41,764 53,776
20 40,000 65,901 87,730
25 50,000 98,126 135,353
30 60,000 141,149 202,146
35 70,000 198,587 295,827
40 80,000 275,271 427,219
</TABLE>
<PAGE>
[Without IRA--investment of $1,700 ($2,000 less 15%) earning 5.95%
(7% less 15%)]
28% Tax Bracket Single - $24,001-$58,150
---------------
Joint - $40,101-$96,900
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full
Year Investment Amount Have Without IRA No Deduction IRA Deduction
------ ----------------- ---------------- ------------ -------------
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,513 $ 1,541 $ 2,140
5 10,000 8,365 8,861 12,307
10 20,000 19,061 21,288 29,567
15 30,000 32,738 38,719 53,776
20 40,000 50,227 63,166 87,730
25 50,000 72,590 97,454 135,353
30 60,000 101,187 145,545 202,146
35 70,000 137,754 212,995 295,827
40 80,000 184,512 307,598 427,219
</TABLE>
[Without IRA--investment of $1,440 ($2,000 less 28%) earning 5.04% (7% less
28%)] [With IRA--No Deduction--investment of $1,440 ($2,000 less 28%) earning
7%]
-86-
<PAGE>
31% Tax Bracket Single - $58,151-$121,300
---------------
Joint - $96,901-$147,700
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
------ ----------------- ---------------- ------------ ---------
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,447 $ 1,477 $ 2,140
5 10,000 7,967 8,492 12,307
10 20,000 18,052 20,401 29,567
15 30,000 30,820 37,106 53,776
20 40,000 46,985 60,534 87,730
25 50,000 67,448 93,394 135,353
30 60,000 93,355 139,481 202,146
35 70,000 126,152 204,121 295,827
40 80,000 167,673 294,781 427,219
</TABLE>
[Without IRA--investment of $1,380 ($2,000 less 31%) earning 4.83% (7% less
31%)] [With IRA--No Deduction--investment of $1,380 ($2,000 less 31%) earning
7%]
36% Tax Bracket* Single - $121,301-$263,750
---------------
Joint - $147,701-$263,750
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
------ ----------------- ---------------- ------------ ---------
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,337 $ 1,370 $ 2,140
5 10,000 7,313 7,876 12,307
10 20,000 16,418 18,923 29,567
15 30,000 27,754 34,417 53,776
20 40,000 41,867 56,147 87,730
25 50,000 59,437 86,626 135,353
30 60,000 81,312 129,373 202,146
35 70,000 108,545 189,329 295,827
40 80,000 142,451 273,420 427,219
</TABLE>
[Without IRA--investment of $1,280 ($2,000 less 36%) earning 4.48% (7% less
36%)] [With IRA--No Deduction--investment of $1,280 ($2,000 less 36%) earning
7%]
-87-
<PAGE>
39.6% Tax Bracket* Single - over $263,750
-----------------
Joint - over $263,750
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
------ ----------------- ---------------- ------------ ---------
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,259 $ 1,293 $ 2,140
5 10,000 6,851 7,433 12,307
10 20,000 15,277 17,859 29,567
15 30,000 25,643 32,481 53,776
20 40,000 38,392 52,989 87,730
25 50,000 54,075 81,753 135,353
30 60,000 73,366 122,096 202,146
35 70,000 97,094 178,679 295,827
40 80,000 126,281 258,040 427,219
</TABLE>
[Without IRA--investment of $1,208 ($2,000 less 39.6%) earning 4.23% (7% less
39.6%)] [With IRA--No Deduction--investment of $1,208 ($2,000 less 39.6%)
earning 7%]
* For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate.
In addition, a 10% surtax (not applicable to capital gains) applies to
certain high-income taxpayers. It is computed by applying a 39.6% rate to
taxable income in excess of $250,000. The above tables do not reflect the
personal exemption phaseout nor the limitations of itemized deductions that
may apply.
-88-
<PAGE>
$2,000 SINGLE INVESTMENT AT A RETURN OF 7% COMPOUNDED MONTHLY
<TABLE>
<CAPTION>
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 $ 3,050 $ 3,128 $ 3,239 $ 3,307 $ 3,621 $ 4,019
15 3,767 3,911 4,121 4,253 4,872 5,698
20 4,652 4,891 5,245 5,469 6,555 8,077
30 7,094 7,650 8,493 9,043 11,867 16,233
40 10,820 11,963 13,753 14,953 21,483 32,623
</TABLE>
$2,000 INVESTED ANNUALLY AT A RETURN OF 7% COMPOUNDED MONTHLY
<TABLE>
<CAPTION>
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 $ 25,411 $ 25,788 $ 26,322 $ 26,649 $ 28,125 $ 29,953
15 42,752 43,708 45,079 45,927 49,833 54,851
20 64,166 66,117 68,947 70,716 79,042 90,148
30 123,271 129,187 137,973 143,581 171,220 211,120
40 213,412 227,820 249,750 264,078 338,096 454,233
</TABLE>
* For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate.
In addition, a 10% surtax (not applicable to capital gains) applies to
certain high-income taxpayers. It is computed by applying a 39.6% rate to
taxable income in excess of $250,000. The above tables do not reflect the
personal exemption phaseout nor the limitations of itemized deductions that
may apply.
-89-
<PAGE>
THE VALUE OF STARTING YOUR IRA EARLY
The following illustrates how much more you would have contributing
$2,000 each January--the earliest opportunity--compared to contributing on April
15th of the following year--the latest, for each tax year.
After 5 years $3,528 more
10 years $6,113
20 years $17,228
30 years $47,295
Compounded returns for the longest period of time is the key. The above
illustration assumes a 10% rate of return and the reinvestment of all proceeds.
And it pays to shop around. If you get just 2% more per year, it can
make a big difference when you retire. A constant 8% versus 10% return,
compounded monthly, illustrates the point. This chart is based on a yearly
investment of $2,000 on January 1. After 30 years the difference can mean as
much as 50% more!
8% Return 10% Return
--------- ----------
10 years $31,291 $35,602
30 years $244,692 $361,887
The statistical exhibits above are for illustration purposes only and
do not reflect the actual performance for any Fund either in the past or in the
future.
-90-
<PAGE>
FINANCIAL STATEMENTS
Coopers & Lybrand, L.L.P. serves as the independent auditors for
Adviser Funds, Inc. and, in its capacity as such, audits the financial
statements contained in the Annual Report. The Portfolio of Investments,
Statements of Net Assets, Statements of Operations, Statements of Changes in Net
Assets and Notes to Financial Statements, as well as the report of Coopers &
Lybrand, L.L.P., independent auditors, for the fiscal year ended October 31,
1995 are included in the Annual Report to shareholders. The financial
statements, the notes relating thereto and the report of Coopers & Lybrand,
L.L.P. listed above are incorporated by reference from the Annual Report into
this Part B.
-91-
<PAGE>
The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, tax-free funds, money market funds,
global and international funds and closed-end equity funds give investors the
ability to create a portfolio that fits their personal financial goals. For more
information, shareholders of the Fund Classes should contact their financial
adviser or call Delaware Group at 800-523-4640 and shareholders of the
Institutional Class should contact Delaware Group at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
INVESTMENT SUB-ADVISERS
Lynch & Mayer, Inc.
520 Madison Avenue
New York, NY 10022
Walter Scott & Partners Limited
Millburn Tower, Gogar
Edinburgh, Scotland EH12 9BS
John Govett & Company Limited
Shackleton House
4 Battlebridge Lane
London, England SE1 2HR
Lincoln Investment Management, Inc.
200 East Berry Street
Fort Wayne, IN 46802
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Coopers & Lybrand, L.L.P.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Chemical Bank of New York
450 West 33rd Street
New York, NY 10001
-92-
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A - Financial Highlights
*Part B - Portfolios of Investments
Statements of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Independent Accounts
* The financial statements and Accountant's Report listed above
relating to the Delaware Enterprise Fund, the Delaware U.S.
Growth Fund, the Delaware World Growth Fund, the Delaware New
Pacific Fund, the Delaware Federal Bond Fund and the Delaware
Corporate Income Fund are incorporated by reference into Part
B from the Registrant's Annual Report for the fiscal year
ended October 31, 1995.
(b) Exhibits:
(1) Articles of Incorporation.
(a) Incorporated by reference to Exhibit No. 1 to
Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (File No. 33-67490) filed
on September 27, 1993.
(b) Articles of Amendment, as filed with the
Department of Assessments and Taxation of Maryland
on November 29, 1993. Incorporated by reference to
Exhibit No. 1(b) to Pre-Effective Amendment No. 2
to the Registration Statement on Form N-1A (File
No. 33-67490) filed on November 29, 1993.
(c) Articles of Amendment ( , 1996) to be
filed by Post-Effective Amendment.
i
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
(2) By-Laws.
(a) Incorporated by reference to Exhibit No. 2(a) to
Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (File No. 33-67490) filed
on September 27, 1993.
(b) Amended By-Laws. Incorporated by reference to
Exhibit No. 1(b) to Pre-Effective Amendment No. 2
to the Registration Statement on Form N-1A (File
No. 33-67490) filed on November 29, 1993.
(3) Inapplicable.
(4) Inapplicable.
(5) Investment Management Agreements.
(a) Forms of Investment Management Agreements between
Delaware Management Company, Inc. and the
Registrant on behalf of each Fund ( , 1996) to be
filed by Post-Effective Amendment.
(b) Forms of Sub-Advisory Agreements between Delaware
Management Company, Inc. and Sub-Adviser on behalf
of the Registrant and each Fund ( , 1996) to be
filed by Post-Effective Amendment.
(6) (a) Distribution Agreements. Executed Distribution
Agreements between Delaware Distributors, L.P.
and the Registrant on behalf of each Class
(September 25, 1995) incorporated into this
filing by reference to Exhibit No. 6 to Post-
Effective Amendment No. 4 to the Registration
Statement on Form N-1A (File No. 33-67490) filed
on February 28, 1996.
(b) Administration and Service Agreement. Form of
Administration and Service Agreement (as amended
November 1995) included as Module.
(c) Dealer's Agreement. Dealer's Agreement (as amended
November 1995) included as Module.
(d) Mutual Fund Agreement for the Delaware Group of
Funds (as amended November 1995) included as
Module.
ii
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
(7) Bonus, Profit Sharing, Pension Contracts.
(a) Amended and Restated Profit Sharing Plan (November
17, 1994) included as Module.
(b) Amendment to Profit Sharing Plan (December 21,
1995) included as Module.
(8) Custodian Agreements.
(a) Forms of Custodian Agreements ( , 1996) to be
filed by Post- Effective Amendment.
(9) Other Material Contracts.
(a) Shareholders Services Agreement (September 25,
1995) between Delaware Service Company, Inc. and
the Registrant incorporated into this filing by
reference to Exhibit No. 9 to Post-Effective
Amendment No. 4 to the Registration Statement on
Form N-1A (File No. 33-67490) filed on February
28, 1996.
(10) Opinion of Counsel. Filed with letter relating to Rule
24f-2 Notice on November 17, 1995 and Amended and
Restated Rule 24f-2 Notice on December 22, 1995.
(11) (a) Consent of Auditors to be filed by Post-Effective
Amendment.
(b) Powers of Attorney for Jon A. Boscia, Priscilla S.
Brown, Richard M. Burridge, Jorge Castro, Adela
Cepeda, Roger J. Deshaies, Charles G. Freund, Gary
R. McPhail and Barbara Peck. Incorporated by
reference to Exhibit No. 11(b) to Pre-Effective
Amendment No. 1 to the Registration Statement on
Form N-1A (File No. 33-67490) filed on September
27, 1993.
(c) Power of Attorney for Philip L. Holstein.
Incorporated by reference to Exhibit No. 11(c) to
Post-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (File No. 33-67490) filed
on June 30, 1994.
iii
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
(d) Power of Attorney for H. Thomas McMeekin.
Incorporated by reference to Exhibit No. 11(d) to
Post-Effective Amendment No. 2 to the Registration
Statement on Form N-1A (File 33-67490) filed on
November 25, 1994.
(e) Powers of Attorney for David G. Humes and Steven
R. Brody. Incorporated by reference to Exhibit No.
11(e) to Post-Effective Amendment No. 4 to
Registration Statement on Form N-1A (File
33-67490) filed on February 28, 1996.
(12) Inapplicable.
(13) Inapplicable.
(14) Model Plans. To be filed by Post-Effective Amendment.
(15) Plans under Rule 12b-1. Plans under Rule 12b-1 for each
Class of each Fund (September 25, 1995) incorporated by
reference to Exhibit No. 15 to Post-Effective
Amendment No. 4 to the Registration Statement on Form
N-1A (File No. 33-67490) filed February 28, 1996.
(16) Schedules of Computation for each Performance
Quotation. To be filed by Post-Effective Amendment.
(17) Financial Data Schedules. Incorporated by reference to
Exhibit No. 27 to Post-Effective Amendment No. 4 to the
Registration Statement on Form N- 1A (File 33-67490)
filed on Feberuary 28, 1996.
Item 25. Persons Controlled by or under Common Control with Registrant. None.
iv
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
Item 26. Number of Holders of Securities.
<TABLE>
<CAPTION>
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Delaware Group Adviser Funds, Inc.'s
Delaware Enterprise Fund:
Delaware Enterprise Fund 1,260 Accounts as of
(Class A Shares) February 29, 1996
Delaware Enterprise Fund 356 Accounts as of
(Class B Shares) February 29, 1996
Delaware Enterprise Fund 28 Accounts as of
(Class C Shares) February 29, 1996
Delaware Enterprise Fund 1 Account as of
(Institutional Class) February 29, 1996
Delaware Group Adviser Funds, Inc.'s
Delaware U.S. Growth Fund:
Delaware U.S. Growth Fund 534 Accounts as of
(Class A Shares) February 29, 1996
Delaware U.S. Growth Fund 159 Accounts as of
(Class B Shares) February 29, 1996
Delaware U.S. Growth Fund 19 Accounts as of
(Class C Shares) February 29, 1996
Delaware U.S. Growth Fund 1 Account as of
(Institutional Class) February 29, 1996
</TABLE>
v
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Delaware Group Adviser Funds, Inc.'s
Delaware World Growth Fund:
Delaware World Growth Fund 922 Accounts as of
(Class A Shares) February 29, 1996
Delaware World Growth Fund 220 Accounts as of
(Class B Shares) February 29, 1996
Delaware World Growth Fund 21 Accounts as of
(Class C Shares) February 29, 1996
Delaware World Growth Fund 1 Account as of
(Institutional Class) February 29, 1996
Delaware Group Adviser Funds, Inc.'s
Delaware New Pacific Fund:
Delaware New Pacific Fund 699 Accounts as of
(Class A Shares) February 29, 1996
Delaware New Pacific Fund 154 Accounts as of
(Class B Shares) February 29, 1996
Delaware New Pacific Fund 13 Accounts as of
(Class C Shares) February 29, 1996
Delaware New Pacific Fund 1 Account as of
(Institutional Class) February 29, 1996
Delaware Group Adviser Funds, Inc.'s
Delaware Federal Bond Fund:
Delaware Federal Bond Fund 80 Accounts as of
(Class A Shares) February 29, 1996
Delaware Federal Bond Fund 25 Accounts as of
(Class B Shares) February 29, 1996
</TABLE>
vi
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Delaware Federal Bond Fund 4 Accounts as of
(Class C Shares) February 29, 1996
Delaware Federal Bond Fund 1 Account as of
(Institutional Class) February 29, 1996
Delaware Group Adviser Funds, Inc.'s
Delaware Corporate Income Fund:
Delaware Corporate Income Fund 304 Accounts as of
(Class A Shares) February 29, 1996
Delaware Corporate Income Fund 55 Accounts as of
(Class B Shares) February 29, 1996
Delaware Corporate Income Fund 5 Accounts as of
(Class C Shares) February 29, 1996
Delaware Corporate Income Fund 1 Account as of
(Institutional Class) February 29, 1996
</TABLE>
Item 27. Indemnification.
As permitted by Section 17(h) and (i) of the Investment Company Act of
1940 (the "1940 Act") and pursuant to Article VII of the Registrant's By-Laws
(Exhibit 2 to the Registration Statement), officers, directors, employees and
agents of the Registrant will not be liable to the Registrant, any stockholder,
officer, director, employee, agent or other person for any action or failure to
act, except for bad faith, willful misfeasance, gross negligence or reckless
disregard of duties, and those individuals may be indemnified against
liabilities in connection with the Registrant, subject to the same exceptions.
Section 2- 418 of Maryland General Corporation Law permits indemnification of
directors who acted in good faith and reasonably believed that the conduct was
in the best interests of the Registrant. As permitted by Section 17(i) of the
1940 Act and pursuant to Section 10 of each Distribution Agreement (Exhibit 6(a)
herein), the Distributor of the Registrant is indemnified against liabilities
which it may incur, except liabilities arising from bad faith, gross negligence,
willful misfeasance or reckless disregard of duties.
vii
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
Insofar as indemnification for liabilities arising under Securities Act
of 1933 (the "1933 Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Investment Company Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such director,
officer or controlling person in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1940 Act and will be governed by the final adjudication of such
issue.
The Registrant purchased an insurance policy insuring its officers and
directors against liabilities, and certain costs of defending claims against
such officers and directors, to the extent such officers and directors are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties.
The insurance policy also insures the Registrant against the cost of
indemnification payments to officers and directors under certain circumstances.
Section 8 of the Investment Management Agreements (to be filed by
Post-Effective Amendment) and Section 8 of the Sub-Advisory Agreements (to be
filed by Post-Effective Amendment) limit the liability, respectively, of
Delaware Management Company, Inc., Lincoln Investment Management, Inc., Lynch &
Mayer, Inc., Walter Scott & Partners Limited and John Govett & Co. Limited, to
liabilities arising from willful misfeasance, bad faith or gross negligence in
the performance of their respective duties or from reckless disregard by them of
their respective obligations and duties under the agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws and its Distribution Agreements in a manner consistent
with Release No. 11330 of the Securities and Exchange Commission under the 1940
Act so long as the interpretations of Section 17(h) and 17(i) of such Act remain
in effect and are consistently applied.
viii
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
Item 28(a). Business and Other Connections of Investment Adviser.
Delaware Management Company, Inc. (the "Manager") or its affiliate,
Delaware International Advisers Ltd., also serves as investment manager to the
other funds in the Delaware Group (Delaware Group Delaware Fund, Inc., Delaware
Group Trend Fund, Inc., Delaware Group Value Fund, Inc., Delaware Group DelCap
Fund, Inc., Delaware Group Decatur Fund, Inc., Delaware Group Delchester
High-Yield Bond Fund, Inc., Delaware Group Government Fund, Inc., Delaware Group
Limited-Term Government Funds, Inc., Delaware Group Cash Reserve, Inc., Delaware
Group Tax-Free Fund, Inc., DMC Tax-Free Income Trust-Pennsylvania, Delaware
Group Tax-Free Money Fund, Inc., Delaware Group Premium Fund, Inc., Delaware
Group Global & International Funds, Inc., Delaware Pooled Trust, Inc., Delaware
Group Dividend and Income Fund, Inc. and Delaware Group Global Dividend and
Income Fund, Inc.) and provides investment advisory services to institutional
accounts, primarily retirement plans and endowment funds. In addition, certain
directors of the Manager also serve as directors/trustees of the other Delaware
Group funds, and certain officers are also officers of these other funds. A
company indirectly owned by the Manager's parent company acts as principal
underwriter to the mutual funds in the Delaware Group (see Item 29 below) and
another such company acts as the shareholder servicing, dividend disbursing and
transfer agent for all of the mutual funds in the Delaware Group.
The following persons serving as directors or officers of the Manager
have held the following positions during the past two years:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Wayne A. Stork Chairman of the Board, President, Chief Executive Officer, Chief Investment
Officer and Director of Delaware Management Company, Inc.; President,
Chief Executive Officer, Chairman of the Board and Director of the
Registrant and, with the exception of Delaware Pooled Trust, Inc., each of the
other funds in the Delaware Group, Delaware Management Holdings, Inc.,
DMH Corp., Delaware International Holdings Ltd. and Founders Holdings,
Inc.; Chairman of the Board and Director of Delaware Pooled Trust, Inc.,
Delaware Investment Counselors, Inc. and Delaware Investment & Retirement
Services, Inc.; Chairman, Chief Executive Officer and Director of Delaware
International Advisers Ltd.; and Director of Delaware Distributors, Inc. and
Delaware Service Company, Inc.
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
ix
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Winthrop S. Jessup Executive Vice President and Director of Delaware Management Company,
Inc., DMH Corp., Delaware International Holdings Ltd. and Founders
Holdings, Inc.; Executive Vice President of the Registrant and, with the
exception of Delaware Pooled Trust, Inc., each of the other funds in the
Delaware Group and Delaware Management Holdings, Inc.; President and
Chief Executive Officer of Delaware Pooled Trust, Inc.; Vice Chairman of
Delaware Distributors, L.P.; Vice Chairman and Director of Delaware
Distributors, Inc.; Director of Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware International Advisers Ltd. and
Delaware Investment & Retirement Services, Inc.; and President and Director
of Delaware Investment Counselors, Inc.
Richard G. Unruh, Jr. Executive Vice President and Director of Delaware Management Company, Inc.;
Executive Vice President of the Registrant and each of the other funds in the
Delaware Group; Senior Vice President of Delaware Management Holdings, Inc.;
and Director of Delaware International Advisers Ltd.
Board of Directors, Chairman of Finance Committee, Keystone Insurance Company
since 1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Chairman
of Finance Committee, Mid Atlantic, Inc. since 1989, 2040 Market Street,
Philadelphia, PA
Paul E. Suckow Executive Vice President/Chief Investment Officer, Fixed Income of Delaware
Management Company, Inc., the Registrant and each of the other funds in the
Delaware Group; Senior Vice President/Chief Investment Officer, Fixed Income of
Delaware Management Holdings, Inc.; Senior Vice President and Director of
Founders Holdings, Inc.; and Director of Founders CBO Corporation
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
x
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
David K. Downes Senior Vice President, Chief Administrative Officer and Chief Financial Officer
of Delaware Management Company, Inc., the Registrant and each of the other
funds in the Delaware Group; Chairman and Director of Delaware Management Trust
Company; Senior Vice President, Chief Administrative Officer, Chief Financial
Officer and Treasurer of Delaware Management Holdings, Inc.; Senior Vice
President, Chief Financial Officer, Treasurer and Director of DMH Corp.; Senior
Vice President and Chief Administrative Officer of Delaware Distributors, L.P.;
Senior Vice President, Chief Administrative Officer and Director of Delaware
Distributors, Inc.; Senior Vice President, Chief Administrative Officer, Chief
Financial Officer and Director of Delaware Service Company, Inc.; Chief
Financial Officer and Director of Delaware International Holdings Ltd.; Senior
Vice President, Chief Financial Officer and Treasurer of Delaware Investment
Counselors, Inc.; Senior Vice President, Chief Financial Officer and Director
of Founders Holdings, Inc.; Chief Executive Officer and Director of Delaware
Investment & Retirement Services, Inc.; and Director of Delaware International
Advisers Ltd.
Chief Executive Officer, Chief Financial Officer and Treasurer of Forewarn,
Inc. since 1992, 8 Clayton Place, Newtown Square, PA
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xi
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
George M. Chamberlain, Jr. Senior Vice President, Secretary and Director of Delaware
Management Company, Inc., DMH Corp., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Founders Holdings, Inc. and Delaware Investment
& Retirement Services, Inc.; Senior Vice President and Secretary of the
Registrant, each of the other funds in the Delaware Group, Delaware
Distributors, L.P., Delaware Investment Counselors, Inc. and Delaware
Management Holdings, Inc.; Executive Vice President, Secretary and Director of
Delaware Management Trust Company; Secretary and Director of Delaware
International Holdings Ltd.; and Director of Delaware International Advisers
Ltd.
Director of ICI Mutual Insurance Co. since 1992, P.O. Box 730, Burlington, VT
Richard J. Flannery Managing Director/Corporate Tax & Affairs of Delaware Management Company, Inc.,
Delaware Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware Investment Counselors, Inc., Founders CBO
Corporation and Delaware Investment & Retirement Services, Inc.; Vice President
of the Registrant and each of the other funds in the Delaware Group; Managing
Director/Corporate Tax & Affairs and Director of Founders Holdings, Inc.;
Managing Director and Director of Delaware International Holdings Ltd.; and
Director of Delaware International Advisers Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd., Elverton,
PA; Director and Member of Executive Committee of Stonewall Links, Inc. since
1991, Bulltown Rd., Elverton, PA
Michael P. Bishof(1) Vice President and Treasurer of Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware Group, Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company, Inc.
and Founders Holdings, Inc.; Assistant Treasurer of Founders CBO Corporation;
and Vice President and Manager of Investment Accounting of Delaware
International Holdings Ltd.
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xii
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Eric E. Miller Vice President and Assistant Secretary of Delaware Management Company,
Inc., the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Founders Holdings, Inc., Delaware Investment
Counselors, Inc. and Delaware Investment & Retirement Services, Inc.
Richelle S. Maestro Vice President and Assistant Secretary of Delaware Management Company,
Inc., the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., DMH Corp., Delaware
Management Trust Company, Delaware Investment Counselors, Inc.,
Founders Holdings, Inc. and Delaware Investment & Retirement Services,
Inc.; and Assistant Secretary of Founders CBO Corporation and Delaware
International Holdings Ltd.
General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Ln.,
Philadelphia, PA
John M. Zerr(2) Vice President and Assistant Secretary of Delaware Management Company,
Inc., the Registrant, each of the other funds in the Delaware Group, DMH
Corp., Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware
Service Company, Inc., Delaware Management Trust Company, Delaware
Investment Counselors, Inc. and Delaware Investment & Retirement Services,
Inc.
Secretary and Counsel of Renovisions, Inc. since 1990, 4284 South Dixi Road,
Resaca, GA
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xiii
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Joseph H. Hastings Vice President/Corporate Controller of Delaware Management Company, Inc.,
the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Investment Counselors, Inc., Founders Holdings, Inc. and Delaware
International Holdings Ltd.; Executive Vice President, Chief Financial Officer
and Treasurer of Delaware Management Trust Company; Chief Financial
Officer and Treasurer of Delaware Investment & Retirement Services, Inc.;
and Assistant Treasurer of Founders CBO Corporation
Bruce A. Ulmer Vice President/Director of Internal Audit of Delaware Management Company,
Inc., the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp. and Delaware Management Trust
Company; and Vice President/Internal Audit of Delaware Investment &
Retirement Services, Inc.
Steven T. Lampe(3) Vice President/Taxation of Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Founders Holdings, Inc., Founders CBO
Corporation and Delaware Investment Counselors, Inc.
Lisa O. Brinkley(4) Vice President/Compliance of Delaware Management Company, Inc., the Registrant,
each of the other funds in the Delaware Group, DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company,
Inc., Delaware Management Trust Company, Delaware Investment Counselors, Inc.
and Delaware Investment & Retirement Services, Inc.
Rosemary E. Milner Vice President/Legal of Delaware Management Company, Inc., the Registrant, each
of the other funds in the Delaware Group, Delaware Distributors, L.P. and
Delaware Distributors, Inc.
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xiv
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Douglas L. Anderson Vice President/Operations of Delaware Management Company, Inc., Delaware
Service Company, Inc. and Delaware Investment & Retirement Services, Inc.; and
Vice President/Operations and Director of Delaware Management Trust Company
Michael T. Taggart Vice President/Facilities Management and Administrative Services of Delaware
Management Company, Inc.
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
the Registrant, each of the tax-exempt funds, the fixed income funds and the
closed-end funds in the Delaware Group; Vice President of Founders Holdings,
Inc.; and Treasurer and Director of Founders CBO Corporation
J. Michael Pokorny Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., the Registrant, each of the tax-exempt funds and the fixed income funds
in the Delaware Group
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
the Registrant, each of the tax-exempt funds and the fixed income funds in the
Delaware Group and Delaware Investment Counselors, Inc.
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
the Registrant, each of the tax-exempt funds, the fixed income funds and the
closed-end funds in the Delaware Group; Vice President of Founders Holdings,
Inc.; and Secretary and Director of Founders CBO Corporation
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
the Registrant, each of the tax-exempt funds and the fixed income funds in the
Delaware Group
Roger A. Early(5) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
the Registrant, each of the tax-exempt funds and the fixed income funds in the
Delaware Group
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xv
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Edward N. Antoian Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc. and each of the equity funds in the Delaware Group
General Partner of Zeke Investment Partners since 1991, 569 Canterbury Lane,
Berwyn, PA
George H. Burwell Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc. and each of the equity funds in the Delaware Group
John B. Fields Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., each of the equity funds in the Delaware Group and Delaware
Investment Counselors, Inc.
David C. Dalrymple Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc. and each of the equity funds in the Delaware Group
Faye P. Staples(6) Vice President/Human Resources of Delaware Management Company, Inc.,
Delaware Distributors, L.P. and Delaware Distributors, Inc.; and Vice
President/Director of Human Resources of Delaware Service Company, Inc.
Daniel H. Carlson(7) Vice President/Marketing Manager of Delaware Management Company, Inc.
</TABLE>
1 VICE PRESIDENT/GLOBAL INVESTMENT MANAGEMENT OPERATIONS, Bankers Trust and
VICE PRESIDENT, CS First Boston Investment Management prior to June 1995.
2 ATTORNEY, Ballard, Spahr, Andrews and Ingersoll prior to July 1995.
3 TAX MANAGER, Price Waterhouse prior to October 1995.
4 VICE PRESIDENT AND COMPLIANCE OFFICER, Banc One Securities Corporation prior
to June 1994 and ASSISTANT VICE PRESIDENT AND COMPLIANCE OFFICER, Aetna Life
and Casualty prior to March 1993.
5 SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER, Federated Investors prior to
July 1994.
6 VICE PRESIDENT/HUMAN RESOURCES, Nova Care prior to September 1995.
7 PRINCIPAL AND CONSULTANT, Buck Consultants prior to October 1995.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xvi
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
Item 28(b). Business and Other Connections of Investment Sub-Advisers
Lincoln Investment Management, Inc. ("LIM") serves as sub-investment
adviser to Delaware Corporate Income Fund, Inc. and Delaware Federal Bond Fund,
Inc. LIM serves as investment adviser 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. and Lincoln National Special Opportunities Fund, Inc. and
to other clients. LIM 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.
The directors and officers of LIM are listed below. Unless otherwise
indicated, the address of each person is 200 East Berry Street, Fort Wayne, IN
46802.
Name Positions and Offices with LIM
- ---- ------------------------------
H. Thomas McMeekin President and Director
Dennis A. Blume Senior Vice President, Treasurer and
Director, Real Estate
Steven R. Brody Senior Vice President, Assistant Treasurer
and Director; Vice President, The Lincoln
National Life Insurance Company
Ann L. Warner Senior Vice President
Janet S. Whitney Vice President and Treasurer, Lincoln
National Corporation
Lawrence T. Kissko Vice President
Joann E. Becker Vice President
David A. Berry Vice President
Anne E. Bookwalter Vice President
Phillip C. Byrde Vice President
xvii
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
Name Positions and Offices with LIM
- ---- ------------------------------
Patrick R. Chasey Vice President
Garrett W. Cooper Vice President
David C. Fischer Vice President
Luc N. Girard Vice President
Donald P. Groover Vice President
William N. Holm, Jr. Vice President
John A. Kellogg Vice President
Jennifer C. Hom Vice President
Timothy H. Kilfoil Vice President
Walter M. Korinke Vice President
Lawrence M. Lee Vice President
Thomas A. McAvity, Jr. Vice President
Harold F. McElraft Vice President
Mary Beth Montgomery Vice President
John David Moore Vice President
Oliver H. G. Nichols Vice President
David C. Patch Vice President
Joseph T. Pusateri Vice President
Gregory E. Reed Vice President
xviii
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
Name Positions and Offices with LIM
- ---- ------------------------------
Bill L. Sanders Vice President
Milton W. Shuey Vice President
Gerald M. Weiss Vice President
O. Douglas Worthington Vice President, Controller and Assistant
Treasurer, The Lincoln National Life
Insurance Company
C. Suzanne Womack Assistant Vice President and Corporate
Secretary; Vice President, Secretary
and Director, Lincoln National Foundation,
Inc.
Joseph J. Voors Regional Vice President
Harold L. Hughes Sales Vice President
The directors and officers of Lynch & Mayer, Inc. are listed below.
Unless otherwise indicated, the address of each person is 520 Madison Avenue,
New York, New York 10022.
<TABLE>
<CAPTION>
Name Positions and Offices with Lynch & Mayer, Inc.
- ---- ---------------------------------------------
<S> <C>
Dennis P. Lynch Chairman and Co-Chief Executive Officer
Eldon C. Mayer, Jr. Vice Chairman
Edward J. Petner President and Co-Chief Executive Officer
</TABLE>
The directors and officers of Walter Scott & Partners Limited are
listed below. Unless otherwise indicated, the address of each person is Milburn
Tower, Gogar, Edinburgh, Scotland EH12 9BS.
<TABLE>
<CAPTION>
Name Positions and Offices with Walter Scott and Partners Limited
- ---- ------------------------------------------------------------
<S> <C>
Dr. Walter G. Scott Chairman and Managing Director
Dr. Kenneth J. Lyall Director and Pension Fund Manager
</TABLE>
xix
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
The directors and officers of John Govett & Co. Limited, a majority
owned indirect subsidiary of the AIB Group of Companies as of December 29, 1995,
are listed below. Unless otherwise indicated, the address of each person is
Shackleton House, 4 Battlebridge Lane, London, England SE1 2HR.
<TABLE>
<CAPTION>
Name Positions and Offices with John Govett & Co. Limited
- ---- ----------------------------------------------------
<S> <C>
Andrew Barnett Director
Peter Cotgrove Director
Charles Fowler Joint Chairman
Peter Kysel Director
Caroline Lane Director
Brian Lee Managing Director Operations
Rachael Maunder Director
Peter Moffatt Director
Rosemary Morgan Director
Ian Morley Director
John Murray Director
Kevin Pakenham Joint Chairman and Chief Executive Officer
Peter Pejacsevich Director and Chief Investment Officer
Peter Robson Director
Gareth Watts Director
Steve Wood Director
Andrew Yates Director
</TABLE>
xx
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
Item 29. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal
underwriter for all the mutual funds in the Delaware
Group.
(b) Information with respect to each director, officer or
partner of principal underwriter:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
Delaware Management
Company, Inc. Limited Partner Investment Manager
Delaware Investment
Counselors, Inc. Limited Partner None
Winthrop S. Jessup Vice Chairman Executive Vice President
Keith E. Mitchell President and Chief None
Executive Officer
David K. Downes Senior Vice President and Senior Vice President/Chief
Chief Administrative Officer Administrative Officer/Chief
Financial Officer
George M. Chamberlain, Jr. Senior Vice President/ Senior Vice President/
Secretary Secretary
J. Lee Cook Senior Vice President/ None
National Sales Manager
Stephen H. Slack Senior Vice President/ None
Wholesaler
William F. Hostler Senior Vice President/ None
Marketing Services
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xxi
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
Minette van Noppen Senior Vice President/ None
Retirement Services
J. Chris Meyer Senior Vice President None
Richard J. Flannery Managing Director/Corporate Vice President
& Tax Affairs
Eric E. Miller Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
John M. Zerr Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Michael P. Bishof Vice President/Treasurer Vice President/Treasurer
Joseph H. Hastings Vice President/ Vice President/
Corporate Controller Corporate Controller
Steven T. Lampe Vice President/Taxation Vice President/Taxation
Lisa O. Brinkley Vice President/ Vice President/
Compliance Compliance
Rosemary E. Milner Vice President/Legal Vice President/Legal
Diane M. Anderson Vice President/ None
Retirement Services
Denise F. Guerriere Vice President/Client Services None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xxii
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Julia R. Vander Els Vice President/ None
Retirement Services
Jerome J. Alrutz Vice President/ None
Retirement Services
Joanne A. Mettenheimer Vice President/ None
National Accounts
Christopher H. Price Vice President/Annuity None
Marketing & Administration
Thomas S. Butler Vice President/ None
DDI Administration
Steven J. DeAngelis Vice President/Product None
Development
Susan T. Friestedt Vice President/Customer None
Service
Dinah J. Huntoon Vice President/Product None
Management
Jodie L. Johnson Vice President/National None
Accounts
Ellen M. Krott Vice President/ None
Communications
Holly W. Riemel Vice President/ None
Telemarketing
Frank Albanese Vice President/Wholesaler None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xxiii
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
William S. Carroll Vice President/Wholesaler None
William S. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Alan D. Kessler Vice President/Wholesaler None
William M. Kimbrough Vice President/Wholesaler None
Mac McAuliffe Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
Henry W. Orvin Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
Michael W. Rose Vice President/Wholesaler None
Thomas E. Sawyer Senior Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
Faye P. Staples Vice President/Human Resources None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Not Applicable.
xxiv
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
Item 30. Location of Accounts and Records.
(a) Delaware Group Adviser Funds, Inc.
One Commerce Square
Philadelphia, PA 19103
(Articles of Incorporation and By-Laws)
(b) Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
(with respect to their services as investment adviser)
(c) Lincoln Investment Management, Inc.
200 East Berry Street
Fort Wayne, IN 46802
(with respect to their services as sub-adviser)
(d)
------------------------------------------------
------------------------------------------------
------------------------------------------------
(with respect to their services as administrator
and custodian)
(e) Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
(with respect to their services as distributor)
(f) Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
(with respect to their services as shareholder
services agent)
(g) Lynch & Mayer, Inc.
520 Madison Avenue
New York, NY 10022
(with respect to their services as sub-adviser)
(h) Walter & Scott & Partners Limited
Milburn Tower
Gogar
Edinburgh, Scotland EH12 9BS
(with respect to their services as sub-adviser)
xxv
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser
Funds, Inc.
(i) John Govett & Company Limited
Shackleton House
4 Battlebridge Lane
London, England SE1 2HR
(with respect to their services as sub-adviser)
(j) Gardner, Carton & Douglas
321 North Clark Street
Suite 3400
Chicago, IL 60610
(with respect to their services as counsel to Registrant)
Item 31. Management Services. None.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
(d) The Registrant hereby undertakes to promptly call a
meeting of shareholders for the purpose of voting upon the
question of removal of any director when requested in
writing to do so by the record holders of not less than
10% of the outstanding shares.
xxvi
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this post-effective amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in the City
of Fort Wayne, and State of Indiana on the 12th day of March, 1996.
LINCOLN ADVISOR
FUNDS, INC.
By /s/ C. Suzanne Womack
---------------------
C. Suzanne Womack
Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 12th day of March, 1996.
Signature Titles Date
- ------------------------- --------------------------- -------------
* President and Director
- --------------------------
Priscilla S. Brown
*
- -------------------------- Director
Richard M. Burridge
*
- -------------------------- Director
Jorge G. Castro
*
- -------------------------- Director
Adela Cepeda
*
- -------------------------- Director
Roger J. Deshaies
*
- -------------------------- Director
Charles G. Freund
*
- -------------------------- Director
Philip L. Holstein
*
- -------------------------- Director
H. Thomas McMeekin
*
- -------------------------- Director
Barbara Peck
* Vice President, Treasurer and
- -------------------------- Chief Financial Officer
Steven R. Brody
* Assistant Vice President and
- -------------------------- Chief Accounting Officer
David G. Humes
/s/ John Steinkamp
- ------------------------------------
*John Steinkamp, as Attorney-in-fact
pursuant to Powers of Attorney granted on
October 1, 1993, May 23, 1994, November 22, 1994
and February 14, 1996.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
EX-99.B6B Form of Administration and Service Agreement (as amended November 1995)
(Module Name
ADMIN_SER_AGREE)
EX-99.B6C Dealer's Agreement (as amended November 1995)
(Module Name
(DEALERS_AGREE)
EX-99.B6D Mutual Fund Agreement for the Delaware Group of Funds (as amended
(Module Name November 1995)
MFAGMT95)
EX-99.B7A Amended and Restated Profit Sharing Plan (November 17, 1994)
(Module Name
PROF_SHARE_PLAN)
EX-99.B7B Amendment to Profit Sharing Plan (December 21, 1995)
(Module Name
AMEND_PROF_SHAR)
</TABLE>
<PAGE>
DELAWARE GROUP
Administration and Service Agreement
Gentlemen:
We are the national distributor of the shares of all of the classes
(now existing or hereafter added) of all of the Funds in the Delaware Group of
Funds. The term "Fund" as used in this Agreement refers to each fund in the
Delaware Group which retains the Distributor to promote and sell its shares, and
any fund which may hereafter be added to the Delaware Group and retain us as
national distributor. You have indicated that you wish to provide certain
services to your customers relating to their ownership of Fund shares, in
accordance with the terms of this Agreement.
TERMS
1. With respect to any Fund that offers shares of classes for which
Distribution Plans have been adopted under Rule 12b-1 (individually a "12b-1
Plan") of the Investment Company Act of 1940 (the "1940 Act"), which 12b-1 Plans
provide for the payment of service fees, we expect you to provide administrative
and other services, including, but not limited to, furnishing personal and other
services and assistance to your customers who own Fund shares, answering routine
inquiries regarding a Fund, assisting in changing dividend options, account
designations and addresses, maintaining such accounts, or such other services as
a Fund may require, to the extent permitted by applicable statutes, rules, or
regulations. For such services, we shall pay you a fee, as established by us
from time to time, based on the value of the shares of each class of each Fund
which are attributable to customers of your firm. We are permitted to make this
payment under the terms of the 12b-1 Plans adopted by certain of the Funds, as
such Plans may be in effect from time to time.
2. You shall furnish us and each Fund with such information as shall
reasonably be requested by the Board of Directors or Trustees with respect to
the fees paid to you pursuant to this Agreement.
3. We shall furnish to the Board of Directors or Trustees, for their
review, on a quarterly basis, a written report of the amounts expended under
<PAGE>
the Plan by us with respect to the relevant Fund and the purposes for which
such expenditures were made.
4. This Agreement may be terminated by either party at any time by
written notice to that effect and will terminate without notice upon any act of
insolvency by you. Notwithstanding the termination of this Agreement, you shall
remain liable for any amounts otherwise owing to the Distributor or the Funds
and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Distributor or the Fund, or upon any one or
more of the Distributor's dealers, based upon a claim that you and such dealers
or any of them constitute a partnership, an unincorporated business or other
separate entity.
5. Any obligation assumed by a Fund pursuant to this Agreement shall be
limited in all cases to the assets of such Fund and no person shall seek
satisfaction thereof from shareholders of a Fund.
6. The 12b-1 Plans in effect on the date of this Agreement are
described in the Funds' Prospectuses. Each Fund reserves the right to terminate
or suspend its 12b-1 Plan(s) at any time as specified in such Plan(s) and we
reserve the right, at any time, without notice, to modify, suspend or terminate
payments hereunder in connection with such 12b-1 Plan(s).
7. This Agreement shall take effect on the date set forth below.
8. The terms and provisions of the current Prospectus and Statement of
Additional Information for each relevant Fund are hereby accepted and agreed to
by the parties hereto as evidenced by our execution hereof.
GENERAL
9. Governing Law. This Agreement will be governed by and construed in
accordance with the law of the State of Pennsylvania, without reference to that
state's choice of law doctrine.
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one Agreement.
11. Severability. In the event that any provision of this Agreement,
or the application of any such provision to any person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
<PAGE>
to persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
12. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto and supersedes all prior agreements and
understandings between the parties hereto relating to the subject matter hereof.
13. Headings. The underlined headings contained herein are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the interpretation
hereof.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
General Partner
By:
--------------------------------
Agreed and Accepted:
- ------------------------------
(Name)
By:
---------------------------
(Authorized Officer)
Date:
-------------------------
<PAGE>
DEALER'S AGREEMENT
We invite you, as a selected dealer, to participate as principal in the
distribution of the shares of all of the classes (now existing or hereafter
added) of all of the Funds in the Delaware Group of Investment Companies which
retain us, Delaware Distributors, L.P., to act as exclusive national
distributor. The term "Fund" as used in this Agreement, refers to each Fund in
the Delaware Group which retains us to promote and sell its shares, and any Fund
which may hereafter be added to the Delaware Group and retain us as national
distributor. Such additional Funds will be included in this Agreement upon our
providing you with written notice of such inclusion.
OFFERING PRICE TO PUBLIC: Orders for shares received from you and accepted by a
Fund or its agent, Delaware Service Company, Inc., will be at the public
offering price applicable to each order as set forth in that Fund's Prospectus.
The manner of computing the net asset value of shares, the public offering price
and the effective time of orders received from you are described in the
Prospectus for each Fund. We reserve the right, at any time and without notice,
to suspend the sale of Fund shares.
CONCESSIONS TO YOU: You will be entitled to deduct the applicable concession as
set forth in the then current Prospectus of a Fund from the purchase price of
certain purchase orders placed by you for shares of a Fund having a sales
charge. We reserve the right from time to time, without prior notice, to modify,
suspend or eliminate such concessions by amendment, sticker or supplement to the
Prospectus for the Fund. If any shares confirmed to you under the terms of this
Agreement are redeemed or repurchased by the Fund or by us as agent for the
Fund, or are tendered for redemption or repurchase, within seven business days
after the date of our confirmation of the original purchase order, you shall
promptly refund to us the concession allowed to you on such shares.
PURCHASE PLANS: The purchase price on all orders placed by you and any
concessions or other fees otherwise due to you under this Agreement will be
subject to the then current terms and provisions of any applicable special plans
and accounts (e.g., volume purchases, letters of intent, rights of accumulation,
combined purchases privilege, exchange and reinvestment privileges and
<PAGE>
retirement plan accounts) as set forth from time to time in the Prospectus. We
must be notified when an order is placed if it qualifies for a reduced sales
charge under any of these plans. We reserve the right, at any time, without
prior notice, to modify, suspend or eliminate any such plans or accounts by
amendment, sticker or supplement to the Prospectus for the Fund.
SALES, ORDERS AND CONFIRMATIONS: In offering Fund shares to the public or
otherwise, you shall act as dealer for your own account, and in no transaction
shall you have any authority to act as agent for the Fund, for any other
selected dealer or for us. No person is authorized to make any representations
concerning the shares to the Fund except those contained in the Prospectus and
in written information issued by the Fund or by us as a supplement to such
Prospectus. In purchasing Fund shares, you shall rely only on such
representations.
All sales must be made subject to confirmation and orders are subject
to acceptance or rejection by the Fund in its sole discretion. Your orders must
be wired, telephoned or written to the Fund or its agent. You agree to place
orders for the same number of shares sold by you at the price at which such
shares are sold. You agree that you will not purchase Fund shares except for
investment or for the purpose of covering purchase orders already received and
that you will not, as principal, sell Fund shares unless purchased by you from
the Fund under the terms hereof. You also agree that you will not withhold
placing with us orders received from your customers so as to profit yourself
from such withholding. Each of your orders shall be confirmed by you in writing
on the same day.
PAYMENT AND ISSUANCE OF CERTIFICATES: The shares purchased by you hereunder
shall be paid for in full at the public offering price, less any concession to
you as set forth above, by check payable to the Fund, at its office, within
three business days after our acceptance of your order. If not so paid, we
reserve the right to cancel the sale and to hold you responsible for any loss
sustained by us or the Fund (including lost profit) in consequence. Certificates
representing the Fund's shares will not be issued unless (i) the Fund's
Prospectus indicates that certificates may be issued for the class of shares
being purchased, and (ii) a specific request is received from the purchaser.
Certificates, if requested, will be issued in the names indicated by
registration instructions accompanying your payment.
-2-
<PAGE>
REDEMPTION: The Prospectus describes the provisions whereby the Fund, under all
ordinary circumstances, will redeem shares held by shareholders on demand. You
agree that you will not make any representations to shareholders relating to the
redemption of their shares other than the statements contained in the Prospectus
and the underlying organizational documents of the Fund, to which it refers, and
that you will quote as the redemption price only the price determined by the
Fund. You shall not repurchase any shares from your customers at a price below
that next quoted by the Fund for redemption. You may charge a reasonable fee for
services in connection with the repurchase by you from your customers of shares.
You may hold such repurchased shares only for investment purposes or submit such
shares to the Fund for redemption.
12b-1 PLAN: With respect to any Fund that offers shares of classes for which
Distribution Plans have been adopted under Rule 12b-1 (individually a "12b-1
Plan") of the Investment Company Act of 1940 (the "1940 Act"), we expect you to
provide distribution and marketing services in the promotion of the Fund's
shares. In connection with the receipt of distribution fees and/or the receipt
of service fees as set forth under the 12b-1 Plan(s) applicable to the class or
classes of Fund shares purchased by your customers, we expect you to provide
administrative and other services to your customers who own Fund shares,
including, but not limited to, furnishing personal and other services and
assistance, answering routine inquiries regarding a Fund, assisting in changing
dividend options, account designations and addresses, maintaining such accounts,
or such other services as the Fund may require, to the extent permitted by
applicable statutes, rules, or regulations. For such services we will pay you a
fee, as established by us from time to time, based on a portion of the net asset
value of the accounts of your clients in the Fund. We are permitted to make this
payment under the terms of the 12b-1 Plans adopted by certain of the Funds, as
such Plans may be in effect from time to time. The 12b-1 Plans in effect on the
date of this Agreement are described in the Funds' Prospectuses. Each Fund
reserves the right to terminate or suspend its 12b-1 Plan at any time as
specified in the Plan and we reserve the right, at any time, without notice, to
modify, suspend or terminate payments hereunder in connection with such 12b-1
Plan. You will furnish the Fund and us with such information as may be
-3-
<PAGE>
reasonably requested by the Fund or its directors or trustees or by us with
respect to such fees paid to you pursuant to this Agreement.
LEGAL COMPLIANCE: This Agreement and any transaction with, or payment to, you
pursuant to the terms hereof is conditioned on your representation to us that,
as of the date of this Agreement you are, and at all times during its
effectiveness you will be: (a) a registered broker/dealer under the Securities
Exchange Act of 1934 and qualified under applicable state securities laws in
each jurisdiction in which you are required to be qualified to act as a
broker/dealer in securities, and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); or (b) a foreign
broker/dealer not eligible for membership in the NASD and otherwise in
compliance with applicable U.S. federal and state securities laws. You agree to
notify us promptly in writing and immediately suspend sales of Fund shares if
this representation ceases to be true. You also agree that, whether you are a
member of the NASD or a foreign broker/dealer not eligible for such membership,
you will comply with the rules of the NASD including, in particular, Sections 2
and 26 of Article III thereof, and that you will maintain adequate records with
respect to your transactions with the Funds.
BLUE SKY MATTERS: We shall have no obligation or responsibility with respect to
your right to sell Fund shares in any state or jurisdiction. From time to time
we may furnish you with information identifying the states and jurisdictions
under the securities laws of which it is believed a Fund's shares may be sold.
You will not transact orders for Fund shares in states or jurisdictions in which
we indicate Fund shares may not be sold. You agree to offer and sell Fund shares
outside the United States only in compliance with all applicable laws, rules and
regulations of any foreign government having jurisdiction over such transactions
in addition to any applicable laws, rules and regulations of the United States.
LITERATURE: We will furnish you with copies of each Fund's Prospectus, sales
literature and other information made publicity available by the Fund, in
reasonable quantities upon your request. You agree to deliver a copy of the
current Prospectus in accordance with the provisions of the Securities Act of
1933 to each purchaser of Fund shares for whom you act as broker. We shall file
Fund sales literature and promotional material with the NASD and SEC as
required.
-4-
<PAGE>
You may not publish or use any sales literature or promotional materials with
respect to the Funds without our prior review and written approval.
NOTICES AND COMMUNICATIONS: All communications from you should be addressed to
us at One Commerce Square, 2005 Market Street, Philadelphia, PA 19103. Any
notice from us to you shall be deemed to have been duly given if mailed or
telegraphed to you at the address set forth below. Each of us may change the
address to which notices shall be sent by notice to the other in accordance with
the terms hereof.
TERMINATION: This Agreement may be terminated by either party at any time by
written notice to that effect and will terminate without notice upon the
appointment of a trustee for you under the Securities Investor Protection Act,
or any other act of insolvency by you. Notwithstanding the termination of this
Agreement, you shall remain liable for any amounts otherwise owing to us or the
Funds and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Fund, or us, or upon any one or more of the
selected dealers based upon the claim that the selected dealers or any of them
constitute a partnership, an unincorporated business or other separate entity.
AMENDMENT: This Agreement may be amended or revised at any time by us upon
notice to you and, unless you notify us in writing to the contrary, you will be
deemed to have accepted such modifications.
GENERAL: Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event you breach any of the
terms and conditions of this Agreement, you will indemnify us, the Funds, and
our affiliates for any damages, losses, costs and expenses (including reasonable
attorneys' fees) arising out of or relating to such breach and we may offset any
such damages, losses, costs and expenses against any amounts due to you
hereunder. Nothing contained herein shall constitute you, us and any dealers an
association or partnership. All references in this Agreement to the "Prospectus"
refer to the then current version of the Prospectus and include the Statement of
Additional Information incorporated by reference therein and any stickers or
supplements thereto. This Agreement supercedes and replaces any prior agreement
-5-
<PAGE>
between us and you with respect to your purchase and sale of Fund shares and is
to be construed in accordance with the laws of the State of Delaware.
Please confirm this Agreement by executing one copy of this Agreement
below and returning it to us. Keep the enclosed duplicate copy for your records.
DELAWARE DISTRIBUTORS, L.P.
By: Delaware Distributors, Inc.,
General Partner
By:/s/Keith E. Mitchell
----------------------
Name: Keith E. Mitchell
Title: President/Chief Executive Officer
-6-
<PAGE>
DEALER'S AGREEMENT ACCEPTANCE
DELAWARE DISTRIBUTORS, L.P.
The undersigned hereby confirms the Dealer's Agreement and acknowledges
that any purchase of Fund shares made during the effectiveness of this Agreement
is subject to all the applicable terms and conditions set forth in this
Agreement, and agrees to pay for the shares at the price and upon the terms and
conditions stated in the Agreement. The undersigned hereby acknowledges receipt
of Prospectuses relating to the Fund shares and confirms that, in executing the
Dealer's Agreement, it has relied on such Prospectuses and not on any other
statement whatsoever, written or oral.
INVESTMENT DEALER PLEASE SIGN HERE AND COMPLETE BELOW
By: DATE
------------------------------- ----------------------------
Name:
-----------------------------
Title:
----------------------------
- ----------------------------------
FIRM
- ----------------------------------
FIRM'S TAX IDENTIFICATION NUMBER
- ----------------------------------
STREET ADDRESS
- ----------------------------------
CITY/STATE/ZIP
<PAGE>
MUTUAL FUND AGREEMENT
FOR THE DELAWARE GROUP OF FUNDS
Gentlemen:
We are the national distributor for the Delaware Group of Funds with exclusive
right to sell and distribute Fund shares. (The term "Funds" in this Agreement
refers to each or any of the Funds that from time to time comprise the Delaware
Group and for whom we act as distributor.) You have indicated that you wish to
act as agent for your customers in connection with the purchase, sale and
redemption of Fund shares and desire to provide certain services to your
customers relating to their ownership of Fund shares, all in accordance with the
terms of this Agreement.
AGENT FOR CUSTOMERS: In placing orders for the purchase and sale of Fund shares,
you will be acting as agent for your customers and will not have any authority
to act as agent for us, any of the Funds or any of our affiliates or
representatives. Neither you nor any of your employees or agents are authorized
to make any representations concerning the Funds or Fund shares except those
contained in the then current "Prospectus" and in written information issued by
the Fund or by us as a supplement to the Prospectus. In purchasing Fund shares
your customers may rely on such authorized information.
OFFERING PRICE TO PUBLIC: Orders for shares received from you and accepted by
the Fund or its agent, Delaware Service Co., Inc., will be at the public
offering price applicable to each order as set forth in the Prospectus. The
manner of computing the net asset value, the public offering price and the
effective time of orders received from you are described in the Prospectus for
each Fund. We reserve the right at any time, without notice, to suspend the sale
of Fund shares or withdraw the public offering.
SALES, ORDERS AND CONFIRMATIONS: All orders must be made subject to
confirmation. Your orders must be wired, telephoned or written to the Fund or
its agent. You agree to place orders on behalf of your customers for the number
of shares, and at the price, as in bona fide orders from your customers. We will
not accept any conditional orders. We will send a written confirmation of each
trade indicating that the trade was on a fully disclosed basis to your customer.
It is agreed and understood that, whether shares are registered in the
purchaser's name, in your name or in the name of your nominee, your customer
will have full beneficial ownership of the Fund shares.
AGENCY FEES: On each order accepted by us for a Fund with a sales charge, we
understand that you will charge your customer an agency commission or agency
transaction fee ("agency fee") as set forth in the schedule of sales concessions
and agency fees set forth in that Fund's Prospectus, as it may be amended from
time to time. This fee shall be subject to the provisions of all terms set forth
in the Prospectus for volume purchases and special plans and accounts (e.g.
retirement plans, letters of intent, etc.) You will not receive from us a
<PAGE>
dealer's concession or similar allowance out of the sales charge. In accordance
with interpretations by the Staff of the Securities and Exchange Commission (the
"Commission"), the agency fee will be your sole charge to your customers for
placing such orders. You may elect to make payments in either of two ways: (a)
you may send us the public offering price for the Fund shares purchased less the
amount of the agency fee due you or (b) you or your customer may send us the
entire public offering price for the Fund shares and we will, on a periodic
basis, remit to you the agency fee due. You will notify us in writing of which
method of payment you elect. If any shares sold to your customer under the terms
of this Agreement are repurchased by the Fund or by us, or are tendered to a
Fund for redemption or repurchase, within seven (7) business days after the date
of the confirmation of the original purchase order, you will promptly refund to
us full agency fee paid or allowed to you on such shares.
PAYMENT AND ISSUANCE OF CERTIFICATES: Regardless of the payment method elected,
Fund shares purchased by you for your customers hereunder shall be paid for in
full by check payable to the Fund at its office within three business days after
our acceptance of your order. If not so paid, the Fund reserves the right,
without notice, to cancel the sale and to hold you responsible for any loss,
including lost profit, sustained by us or the Fund in consequence. Certificates
representing Fund shares will not be issued unless a specific request is
received from you or your customer. Certificates, if requested, will be issued
in the names indicated by registration instructions accompanying payment.
REDEMPTION: The Prospectus describes the provisions whereby the Fund, under all
ordinary circumstances, will repurchase its shares from shareholders on demand.
You agree that you will not make any representations to shareholders relating to
the purchase of their Fund shares other than the statements contained in the
Prospectus and the underlying organizational documents of the Fund, to which it
refers, and that you will quote to your customers as the redemption price only
the price determined by the Fund.
12b-1 PLAN: With respect to any Fund that has a Distribution Plan under Rule
12b-1 (a "12b-1Plan") of the Investment Company Act of 1940 (the "1940 Act"), we
expect you will provide shareholder and administrative services to your
customers who own Fund shares, such as: answering inquiries regarding the Fund;
assisting in changing dividend options, account designations and addresses;
establishing and maintaining shareholder accounts and records; arranging for
bank wires; or such other services as the Fund may require to the extent
permitted by applicable statutes, rules or regulations. You will promptly answer
all written complaints received by you relating to Fund accounts or promptly
forward such complaints to us and assist us in answering such complaints. For
such services we will pay you a fee as set by us from time to time, based on a
portion of the net asset value of the accounts of your clients in the Fund. We
are permitted to make this payment under the terms of the 12b-1 Plan adopted by
2
<PAGE>
certain of the Funds, as such 12b-1 Plans may be in effect from time to time.
Each Fund reserves the right, at any time, to suspend payments under its 12b-1
Plan. You will furnish the Fund and us with such information as may be
reasonably requested by the Fund or its directors or trustees or by us with
respect to fees paid to you pursuant to this Agreement. In accordance with
interpretations and rulings to the Staff of the Commission, you will not charge
your customers any fees for services for which you are being compensated under a
12b-1 Plan of a Fund.
SALES OF NO-LOAD - NON 12b-1 PLAN FUNDS: In connection with any orders placed by
you on behalf of your customers for shares of Funds that do not charge a sales
load and do not have a 12b-1 Plan, we understand that you may charge your
customers a limited service or transaction fee, in accordance with
interpretations and rulings of the Staff of the Commission.
LEGAL COMPLIANCE: This Agreement and any transaction with or payment to you
pursuant to the terms hereof is conditioned on your representation to us that,
as of the date of this Agreement you are and at all times during its
effectiveness you will be (a) a registered broker-dealer under the Securities
Exchange Act of 1934 and qualified under applicable state securities laws, if
any, to act as a broker or dealer in securities, and a member in good standing
of the National Association of Securities Dealers, Inc. (the "NASD"); or (b) a
"bank" as defined in Section 3(a)(6) of the Securities and Exchange Act of 1934
(or other financial institution) and not otherwise required to register as a
broker or dealer under such Act. You agree to notify us promptly in writing if
this representation ceases to be true. You also agree that you will comply with
the rules of the NASD including, in particular, Sections 2 and 26 of Article III
thereof, to the extent applicable, that you will maintain adequate records with
respect to your customers and their transactions, and that such transactions
will be without recourse against you by your customers. We recognize that, in
addition to applicable provisions of state and federal securities laws, you may
be subject to the provisions of the Glass-Steagall Act and other laws governing,
among other things, the conduct of activities by federal and state chartered and
supervised financial institutions and their affiliated organizations. Because
you will be the only one having a direct relationship with the customer, you
will be responsible in that relationship for insuring compliance with all laws
and regulations, including those of all applicable federal and state regulatory
authorities and bodies having jurisdiction over you or your customers to the
extent applicable to securities purchases hereunder.
BLUE SKY MATTERS: We shall have no obligation or responsibility with respect to
your right to sell Fund shares in any state or jurisdiction. From time to time
we shall furnish you with information identifying the states under the
securities laws of which it is believed a Fund's shares may be sold. You will
not transact orders for Fund shares in states which we indicate Fund shares may
not be sold.
LITERATURE: We will furnish you with copies of each Fund's Prospectus, sales
literature and other information made publicly available by the Fund, in
3
<PAGE>
reasonable quantities upon your request. We shall file Fund sales literature and
promotional material with the NASD and SEC as required. You may not publish or
use any sales literature or promotional material with respect to the Funds
without our prior review and written approval.
CUSTOMERS: The name of your customers will remain your sole property and will
not be used by us except for servicing or informational mailings and other
correspondence in the normal course of business.
NOTICES AND COMMUNICATIONS: All communications from you should be addressed to
us at 1818 Market Street, Philadelphia, PA 19103. Any notice from us to you
shall be deemed to have been duly given if mailed or telegraphed to you at the
address set forth above. Each of us may change the address to which notices
shall be sent by notice to the other in accordance with the terms hereof.
TERMINATION: This Agreement may be terminated by either party at any time by
written notice to that effect. Notwithstanding the termination of this
Agreement, you shall remain liable for any amounts otherwise owing to us or the
Fund and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Fund, us or any one or more of our dealers,
based upon the claim that you and such dealers or any of them constitute a
partnership, an unincorporated business or other separate entity.
AMENDMENT: This Agreement may be amended or revised at any time by us upon
notice to you and, unless you promptly notify us in writing to the contrary, you
will be deemed to have accepted such modifications.
GENERAL: Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event you breach any of the
terms and conditions of this Agreement, you will indemnify us, the Funds, and
our affiliates for any damages, losses, costs and expenses (including reasonable
attorneys' fees) arising out of or relating to such breach. Nothing contained
herein shall constitute you, us and any dealers an association or partnership.
All references in this Agreement to the "Prospectus" include the Statement of
Additional Information incorporated by reference therein and any stickers or
supplements thereto, provided that any requirement in this Agreement to deliver
a copy of the Prospectus shall not include the Statement of Additional
Information unless requested by the customer. This Agreement is to be construed
in accordance with the laws of the State of Delaware.
4
<PAGE>
Please confirm this Agreement by executing one copy of this Agreement below and
returning it to us. Keep the enclosed duplicate copy for your records.
Date: DELAWARE DISTRIBUTORS, L.P.
----------------------------
BY: DELAWARE DISTRIBUTORS, INC.
General Partner
BY:
--------------------------------
Accepted and Agreed to:
- ---------------------------------
(Name of Firm)
BY:
------------------------------
Name:
Title:
5
<PAGE>
PROFIT SHARING PLAN
OF
DELAWARE GROUP DELAWARE FUND, INC.
SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989
<PAGE>
PROFIT SHARING PLAN
OF
DELAWARE GROUP DELAWARE FUND, INC.
SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I
PURPOSE CLAUSE . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III
ELIGIBILITY OF EMPLOYEES
TO PARTICIPATE IN THE PLAN . . . . . . . . . . . . . . 6
ARTICLE IV
CONTRIBUTIONS TO PLAN . . . . . . . . . . . . . . . . . 7
ARTICLE V
ALLOCATION OF CONTRIBUTIONS . . . . . . . . . . . . . . 12
ARTICLE VI
RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . . 14
ARTICLE VII
DISABILITY BENEFITS . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII
DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IX
OTHER SEPARATION FROM SERVICE . . . . . . . . . . . . . 16
ARTICLE X
METHOD OF PAYMENT . . . . . . . . . . . . . . . . . . . 18
ARTICLE XI
ADMINISTRATION OF PLAN . . . . . . . . . . . . . . . . 26
ARTICLE XII
AMENDMENT, CONSOLIDATION, MERGER
OR TERMINATION . . . . . . . . . . . . . . . . . . . . 29
(i)
<PAGE>
ARTICLE XIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XIV
LOANS . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XV
LIMITATIONS ON ALLOCATIONS . . . . . . . . . . . . . . 32
ARTICLE XVI
TOP HEAVY DEFINITIONS AND RULES . . . . . . . . . . . . 36
(ii)
<PAGE>
PROFIT SHARING PLAN
OF
DELAWARE GROUP DELAWARE FUND, INC.
SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989
ARTICLE I
PURPOSE CLAUSE
--------------
This Profit Sharing Plan and the Trust Agreement forming a part hereof are
established for the benefit of the employees of Delaware Group Delaware Fund,
Inc. and the other investment companies of the Delaware Group of Funds to
promote in them a strong interest in the successful operation of the business
and to provide for them an opportunity for accumulation of funds for their
retirement benefit.
ARTICLE II
DEFINITIONS
-----------
When used herein, the following words shall have the following meanings
unless the context clearly indicates otherwise:
2.1 "Administrative Committee" or "Committee" shall mean the Administrative
Committee with authority and responsibility to manage and direct the operation
and administration of this Plan. "Administrative Committee" shall be deemed to
also mean "Administrator" and "Plan Administrator" as defined in ERISA.
2.2 "Anniversary Date" shall mean the first day of each Plan Year.
2.3 "Beneficiary" shall mean the person or persons designated by a
Participant to receive benefits upon the death of said Participant pursuant to
Article VIII.
2.4 "Board of Directors" shall mean the Board of Directors of the Employer.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.6 "Effective Date" of the Plan shall mean October 1, 1983. The Effective
Date of this amended and restated Plan shall mean April 1, 1989, except where
indicated otherwise.
2.7 "Eligibility Computation Period" shall mean the period of twelve (12)
-4-
<PAGE>
consecutive months beginning on the date an Employee first performs an Hour of
Service upon hire or rehire after a One Year Break in Service, and any Plan Year
following such date of hire or date of rehire following a One Year Break in
Service.
2.8 "Eligibility Year of Service" shall mean the Eligibility Computation
Period during which the Employee performs one thousand (1,000) or more Hours of
Service. Eligibility Years of Service shall include an Employee's prior service
with Delaware Management Company, Inc. or any Entity required to be aggregated
with Delaware Management Company, Inc. under Sections 414(b) or(c) of the Code.
2.9 "Employee" shall mean any person employed by the Employer or by any
affiliated Entity which adopts this Plan; provided, however, no person covered
by a collective bargaining agreement under which the Employer has participated
in good faith bargaining concerning retirement benefits shall be considered an
Employee for the purposes of this Plan. Any Leased Employee shall not be
considered an Employee for purposes of the Plan.
2.10 "Employer" shall mean Delaware Group Delaware Fund, Inc. and any other
affiliated investment company which adopts this Plan. Effective October 1, 1987,
and solely for purposes of determining periods of service for eligibility for
participation and vesting, the term "Employer" shall include any corporation
which is a member of a controlled group of corporations (as defined in Section
414(b) of the Code) which includes the Employer; any trade or business (whether
or not incorporated) which is under common control (as defined in Section 414(c)
of the Code) with the Employer; any organization (whether or not incorporated)
which is a member of an affiliated service group (as defined in Section 414(m)
of the Code) which includes the Employer; and any other Entity required to be
aggregated with the Employer pursuant to regulations under Section 414(o) of the
Code.
2.11 "Employer Contribution Account" shall mean a Participant's account
derived from Employer contributions and the earnings thereon.
2.12 "Entity" shall mean an individual, partnership, corporation or
unincorporated organization.
2.13 "ERISA" shall mean the Employee Retirement Income Security Act of 1974
and the Regulations promulgated thereunder by either the Department of Labor or
Treasury.
2.14 "Hour of Service" shall mean:
-5-
<PAGE>
(a) Each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for the Employer. These hours will be credited to the
Employee for the computation period in which the duties are performed; and
(b) Each hour for which an Employee is paid, or entitled to payment, by the
Employer on account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability), layoff, jury
duty, military service or leave of absence. No more than 501 Hours of Service
will be credited under this paragraph for any single continuous period (whether
or not such period occurs in a single computation period); and
(c) Each hour for which back pay, regardless of mitigation of damages, is
either awarded or agreed to by the Employer. The same Hours of Service will not
be credited both under paragraph (a) or paragraph (b), as the case may be, and
under this paragraph (c). These hours will be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or payment is made.
(d) Hours of Service will be calculated on the basis described in
Department of Labor Regulations Section 2530.200b-2(b) and (c).
(e) Solely for purposes of determining whether a Break in Service has
occurred, for participation and vesting purposes, an individual who is absent
from work for maternity or paternity reasons will receive credit for the Hours
of Service which would otherwise have been credited to such individual. In the
event these hours cannot be determined, eight (8) Hours of Service per day will
be used. For purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence (i) by reason of the pregnancy of the
individual, (ii) by reason of the birth of a child of the individual, (iii) by
reason of the placement of a child with the individual in connection with the
adoption of the child by such individual, or (iv) for purposes of caring for the
child for a period beginning immediately following such birth or placement.
However, in no event will the hours treated as Hours of Service under this
paragraph (e), by reason of any pregnancy or placement, exceed 501 hours. The
Hours of Service credited under this paragraph will be credited (i) in the Plan
Year in which the absence begins if the crediting is necessary to prevent a
Break in Service in that period, or (ii) in all other cases, in the following
Plan Year.
(f) Effective for Plan Years beginning on or after April 1, 1994, an
Employee shall be credited with 45 Hours of Service for each week for which he
would be required to be credited with at least one Hour of Service under
paragraphs (a)-(e) above.
-6-
<PAGE>
2.15 "Leased Employee" shall mean any person described in Section 414(n) of
the Code who is not an employee of the Employer who, pursuant to an agreement
between the Employer and any other person, has performed service for the
Employer (or for any related persons determined in accordance with Section
414(n)(6) of the Code) on a substantially full-time basis for a period of at
least one year and such services are of a type historically performed by
employees in the Employer's business field.
2.16 "Named Fiduciary" shall be the Administrative Committee and the
Trustee or Trustees serving from time to time and any other person who is
specifically so designated by the Board of Directors.
2.17 "Normal Retirement Date" shall mean the date on which a Participant
shall reach age 65.
2.18 "One Year Break in Service" or "Break in Service" shall mean a Plan
Year during which an Employee has or was separated from employment with Employer
and has completed 500 or less Hours of Service.
2.19 "Participant" shall mean any Employee who meets the eligibility
requirements under Article III or any Employee who is or may become eligible to
receive a benefit under the Plan or whose Beneficiaries may be eligible to
receive any such benefit.
2.20 "Participant Contribution Account" shall mean a Participant's account
derived from his voluntary contributions and the earnings thereon.
2.21 "Plan" shall mean the Employer's Profit Sharing Plan set forth in this
document and all subsequent amendments thereto.
2.22 "Plan Compensation" shall mean as of each Anniversary Date, the basic
compensation received by an Employee from the Employer during the preceding Plan
Year, including salary, draw, overtime and bonuses, but excluding contributions
to this or any other deferred compensation plan. Plan Compensation includes
salary reduction contributions paid by the Employer on the Employee's behalf to
a cafeteria plan, within the meaning of Section 125 of the Code, maintained by
the Employer. Effective for Plan Years beginning on or after April 1, 1994, Plan
Compensation shall mean the sum of (a) the total earnings which are received by
the Employee from the Employer for the preceding Plan Year and which are
required to be reported as wages on the Employee's Form W-2 (in the wages, tips
and other compensation box) and (b) the total amount contributed by the
-7-
<PAGE>
Employer on behalf of the Employee pursuant to a salary reduction agreement
which is not includable in the gross income of the Employee under Sections 125
or 402 (e)(3) of the Code, but excluding all of the following items (even if
includable in gross income): reimbursements or other expense allowances, fringe
benefits (cash and non-cash), moving expenses, deferred compensation and welfare
benefits.
For Plan Years beginning on or after April 1, 1989, the Plan Compensation
of each Participant taken into account under the Plan shall not exceed $200,000,
as adjusted by the Secretary of the Treasury. In determining the Plan
Compensation of a Participant for purposes of the limitations set forth in the
preceding sentence, the rules of Section 414(q)(6) of the Code shall apply,
except in applying such rules, the term "family" shall include only the spouse
of the Participant and any lineal descendants of the Participant who have not
attained age 19 before the close of the Plan Year. If, as a result of the
application of such rules, the adjusted $200,000 limitation is exceeded, then
the limitation shall be prorated among the affected individuals in proportion to
each such individual's Plan Compensation as determined under this Section 2.22
prior to the application of this limitation. Effective for Plan Years beginning
on or after January 1, 1994, the Plan Compensation of a Participant shall not
exceed $150,000, as adjusted at the time and manner prescribed by Section 401
(a)(17)(B) of the Code.
2.23 "Plan Year" shall mean a twelve-month period beginning on April 1st
and ending on March 31st. For the Plan Years beginning before April 1, 1989 and
after December 31, 1986, the term Plan Year means a twelve month period
beginning October 1st and ending September 30th, except that the Plan Year
beginning October 1, 1988 is a short year which ends March 31, 1989.
2.24 "Total and Permanent Disability" shall mean incapacity, resulting from
injury or disease, of a Participant to perform any work for Employer and shall
be presumed permanent after the same has continued uninterrupted for six months
as certified by a qualified physician selected by the Administrative Committee.
2.25 "Trustee" or "Trustees" shall mean the trustee or trustees named in
the Trust Agreement attached hereto and forming a part hereof, or any successor
thereto.
2.26 "Trust Fund" or "Fund" shall mean all property held pursuant to the
Trust Agreement.
2.27 "Valuation Date" means the last day of each Plan Year and such other
quarterly, monthly or daily dates as determined by the Administrative Committee.
-8-
<PAGE>
2.28 "Year of Service" shall mean a Plan Year during which an Employee
completes at least 1,000 Hours of Service; provided, however, that for the
period from October 1, 1988 through March 31, 1990, an Employee shall be given
credit for a Year of Service if he completes 1,000 Hours of Service during the
period October 1, 1988 to September 30, 1989 and shall be given credit for an
additional Year of Service if he completes 1,000 Hours of Service during the
period April 1, 1989 to March 31, 1990. For purposes of determining a
Participant's nonforfeitable right to his Employer Contribution Account, Years
of Service shall include an Employee's prior service with Delaware Management
Company, Inc. or any other Entity required to be aggregated with Delaware
Management Company, Inc. under Sections 414(b) or (c) of the Code. An Employee
shall also receive credit for a Year of Service if he completes 1000 or more
Hours of Service during his initial Eligibility Computation Period.
2.29 Whenever used herein, the masculine provision includes the feminine
and the singular includes the plural.
ARTICLE III
ELIGIBILITY OF EMPLOYEES
TO PARTICIPATE IN THE PLAN
--------------------------
3.1 Each Employee who was a Participant on March 31, 1989 shall continue as
a Participant. Each other Employee shall be eligible to participate in this Plan
on the first day of the Plan Year within which he completes one Eligibility Year
of Service.
3.2 Any Participant who returns to service after a Break in Service shall
be admitted to the Plan as a Participant on his date of re-employment.
3.3 Within 60 days of each Anniversary Date of this Plan, the Employer
shall furnish the Administrator a list showing all eligible Employees, the date
of employment, the Years of Service, the Plan Compensation of each eligible
Employee and the date of termination of any terminated Employees.
3.4 Notwithstanding the provisions of Section 3.1 to the contrary, if an
Employee is employed by the Employer on March 31, 1989 and has completed by such
date 1,000 or more Hours of Service during an Eligibility Computation Period
which began on or before October 1, 1988, such Employee shall be eligible to
participate in the Plan on October 1, 1988.
-9-
<PAGE>
ARTICLE IV
CONTRIBUTIONS TO PLAN
---------------------
4.1 Each participating Employer may contribute to the Plan's Trust Fund for
each taxable year an amount, if any, determined in accordance with a resolution
of the Board of Directors adopted before the date prescribed by law for filing
its Federal income tax return for such taxable year (including extensions
thereof); provided, however, that no contributions shall be made for any year in
excess of the amount deductible for such year under provisions of the Code and
regulations thereunder as then in effect. For Plan Years beginning on or after
April 1, 1989, the Employer may make contributions regardless of whether or not
it has Net Profits and Earnings for its tax year.
4.2 For Plan Years beginning before April 1, 1989, Net Profits and Earnings
in any one year of operations means the net income before provisions for Federal
and State income taxes as determined by the certified public accountants
employed by the Employer in accordance with generally accepted accounting
principles of open-end management investment companies.
4.3 For each taxable year, the contributions shall accrue on the
Anniversary Date thereof, but shall not be considered as accruing during the
said taxable year prior to the Anniversary Date thereof.
4.4 The Trust Fund shall not be diverted to any use other than the
exclusive benefit of eligible Employees and their Beneficiaries.
4.5 Effective August 1, 1991, a Participant may not make voluntary
contributions to his Participant Contribution Account. Prior to August 1, 1991,
a Participant may make voluntary contributions to his Participant Contribution
Account. Such contributions may be made by payroll deductions or in such other
manner and subject to such procedures as the Administrator may prescribe. No
Participant may contribute more than ten percent of his aggregate Plan
Compensation for all Plan Years during which he participated in the Plan.
4.6 Notwithstanding the provisions of Article IX, a Participant shall have
a nonforfeitable interest in all voluntary contributions made by him and in any
increase in his account attributable to such contributions.
4.7 A Participant shall have the right to withdraw the total amount of his
voluntary contributions at any time; provided, however, that such withdrawal
-10-
<PAGE>
shall be permissible only with respect to the amount of such Participant's
voluntary contributions and not to any increase in his account attributable to
such contributions. No Participant shall be permitted to make withdrawals of
his voluntary contributions more than four times in any one calendar year.
Effective as of the date of adoption of this amended and restated Plan, a
Participant shall be permitted to make withdrawals as frequently as monthly of
all or a portion of his voluntary contributions, including the earnings
thereon.
4.8 The Fund may accept rollover contributions on behalf of an Employee
(including an Employee who has not satisfied the requirements to be eligible to
participate) from any other plan maintained for his benefit which satisfies the
requirements of a tax-qualified plan, or a rollover individual retirement
account; provided, however, that such rollovers are permitted by and effected in
accordance with the requirements of the Code. The Administrative Committee may
as a condition of acceptance of such rollovers demand such information, opinions
and statements as it deems necessary to assure that such rollovers conform to
the requirements of the federal tax laws.
4.9 An Employee for whom a rollover has been made shall be deemed a
Participant with respect to the amount contributed and shall have a
nonforfeitable interest in such amount and any increases attributable to it. Any
such rollovers shall be held in a special account for the Participant segregated
from other assets held by the fund. Such contributions will be administered and
distributed pursuant to the provisions of this Plan.
4.10 The following special non-discrimination rules pertaining to voluntary
contributions shall be applicable for Plan Years beginning on or after October
1, 1987 and before April 1, 1990.
(a) For any Plan Year, the Contribution Percentage for all Highly
Compensated Employees will not exceed the greater of (i) or (ii) as follows:
(i) The Contribution Percentage for all Non-Highly Compensated Employees,
times 1.25; or
(ii) The lesser of the Contribution Percentage for all Non-Highly
Compensated Employees, times 2.0, provided that the Contribution Percentage for
all Highly Compensated Employees may not exceed the Contribution Percentage for
all Non-Highly Compensated Employees by more than two (2) percentage points or
such lesser amount as the Secretary of Treasury will prescribe to prevent the
multiple use of this alternative limitation with respect to any Highly
Compensated Employee.
-11-
<PAGE>
(b) Distribution of Excess Aggregate Contributions.
(i) Excess Aggregate Contributions, plus any income and minus any loss
allocable thereto, will be distributed no later than the last day of each Plan
Year to Participants to whose accounts Excess Aggregate Contributions were
allocated for the preceding Plan Year.
(ii) For the Plan Year beginning on October 1, 1987, the income or loss
allocable to Excess Aggregate Contributions shall be determined under any
reasonable method, which method shall be applied on a consistent basis for all
Participants. For Plan Years beginning after 1987, the income or loss allocable
to Excess Aggregate Contributions shall be the sum of (A) and (B) below:
(A) The income or loss for the Plan Year allocable to the Participant's
voluntary contribution Account multiplied by a fraction, the numerator of which
is the Participant's Excess Aggregate Contributions for the year, and the
denominator of which is the balance of the Participant's voluntary contribution
account as of the end of the Plan Year, minus income (or plus losses) allocable
to such account.
(B) The income or loss for the period between the end of the Plan Year and
the date of the distribution allocable to the Participant's voluntary
contribution account multiplied by the fraction described in (A), above.
In lieu of using the formula described in (B), the income or loss for the
period between the end of the Plan Year and the date of the distribution
allocable to Excess Aggregate Contributions for the year may be calculated under
the following alternative method, provided such method is applied on a
consistent basis for all Participants: ten percent (10%) of the amount
determined under (A), above, multiplied by the number of whole calendar months
that have elapsed since the end of the Plan Year. For this purpose, if a
distribution of Excess Aggregate Contributions is made after the 15th day of a
month, that month will be counted as a whole month.
(c) The following definitions apply for purposes of this Section 4.10.:
(i) "Contribution Percentage" means, for a group of Participants, the
average of the following ratios (calculated separately) for each Participant in
the group:
(A) The sum of voluntary contributions made on behalf of each Participant
for the Plan Year; over
-12-
<PAGE>
(B) The Participant's Compensation for that Plan Year, whether or not the
Participant was a Participant for the entire Plan Year.
The Contribution Percentage for any Participant who is a Highly Compensated
Employee for the Plan Year and who is eligible to have voluntary employee
contributions or employer matching contributions allocated to his account under
two or more plans described in Section 401(a) of the Code or arrangements
described in Section 401(k) of the Code that are maintained by the employer or
an entity that is required to be aggregated with the employer pursuant to
Sections 414(b), (c), (m), or (o) of the Code will be determined as if all such
contributions were made under a single plan. If a Highly Compensated Employee
participates in two or more arrangements described in Section 401(k) of the Code
that have different plan years, all such arrangements ending with or within the
same calendar year shall be treated as a single arrangement.
For purposes of determining the Contribution Percentage of a Participant
who is a five-percent owner or one of the ten most Highly Compensated Employees,
the Contribution Percentage and compensation of such Participant will include
the Contribution Percentage and Compensation of Family Members, and such Family
Members will be disregarded in determining the Contribution Percentage for
Participants who are Non-Highly Compensated Employees.
Voluntary contributions will be considered made for a Plan Year if made by
the date specified in the applicable regulations and allocated to a
Participant's account for the Plan Year.
The determination and treatment of the Contribution Percentage of any
Participant will satisfy such other requirements as may be prescribed by
Secretary of the Treasury.
In the event that this Plan satisfies the requirements of Sections 401(m),
401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans,
or if one or more other plans satisfy the requirements of such Sections only if
aggregated with this Plan, then this Section 4.10 will be applied by determining
the Contribution Percentages of eligible Participants as if all such plans were
a single plan. For plan years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Section 401(m) of the Code only if they have the
same plan year.
(ii) "Excess Aggregate Contributions" means, with respect to any Plan Year,
the excess of:
-13-
<PAGE>
(A) The aggregate Contribution Percentage amounts taken into account in
computing the numerator of the Contribution Percentage actually made on behalf
of Highly Compensated Employees for such Plan Year; over
(B) The maximum Contribution Percentage amounts permitted by the
Contribution Percentage limits set forth in this Section 4.10 (determined by
reducing contributions made on behalf of Highly Compensated Employees in order
of their Contribution Percentages beginning with the highest of such
percentages).
(iii) "Family Member" means an individual described in Section 414(q)(6)(B)
of the Code.
(iv) "Highly Compensated Employee" means a highly compensated active
employee or a highly compensated former employee, as described below.
A highly compensated active employee includes any employee who performs
service for the employer during the determination year and who, during the
look-back year: (i)received compensation from the employer in excess of $75,000
(as adjusted pursuant to Section 415(d) of the Code); (ii) received compensation
from the employer in excess of $50,000 (as adjusted pursuant to Section 415(d)
of the Code) and was a member of the top-paid group for such year; or (iii) was
an officer of the employer and received compensation during such year that is
greater than 50 percent of the dollar limitation in effect under Section
415(b)(1)(A) of the Code. The term Highly Compensated Employee also includes:
(i) employees who are both described in the preceding sentence if the term
"determination year" is substituted for the term "look-back year" and the
employee is one of the 100 employees who received the most compensation from the
Employer during the determination year; and (ii) employees who are five percent
owners at any time during the look-back year or determination year.
If no officer has satisfied the compensation requirement of (iii) above
during either a determination year or a look-back year, the highest paid officer
for such year shall be treated as a Highly Compensated Employee.
For this purpose, the determination year shall be the Plan Year. The
look-back shall be the twelve (12)-month period immediately preceding the
determination year.
A highly compensated former employee includes any employee who separated
from service (or was deemed to have separated) prior to the determination year,
performs no service for the employer during the determination year, and was a
highly compensated active employee for either the separation year or any
determination year ending on or after the employee's fifty-fifth (55th)
birthday.
-14-
<PAGE>
If an employee is, during a determination year or look-back year, a Family
Member of either a five percent owner who is an active or former employee or a
Highly Compensated Employee who is one of the ten (10) most Highly Compensated
Employees ranked on the basis of compensation paid by the Employer during such
year, then the Family Member and the five percent owner or top-ten (10) Highly
Compensated Employee shall be aggregated. In such case, the Family Member and
five percent owner or top-ten Highly Compensated Employee shall be treated as a
single employee receiving compensation and Plan contributions or benefits equal
to the sum of such compensation and contributions or benefits of the Family
Member and five percent owner or ten (10) most Highly Compensated Employee.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of employees in the top-paid group,
the top one hundred (100) employees, a five percent owner, the number of
employees treated as officers and the compensation that is considered, will be
made in accordance with Section 414(q) of the Code and the regulations
thereunder.
(v) "Compensation" means all of an Employee's compensation, as that term is
defined in Article XV, Limitations on Allocations, and shall include elective
contributions that are made by the Employer on behalf of the Employee and which
are not includable in income under Section 125 of the Code. Compensation shall
be subject to the limitation of Section 401(a)(17) of the Code.
ARTICLE V
ALLOCATION OF CONTRIBUTIONS
---------------------------
5.1 A separate and complete accounting shall be maintained for each
Participant which shall set forth the amount credited to or forfeited from his
Employer Contribution Account and his Participant Contribution Account. Employer
contributions and Participant contributions shall be allocated among investment
companies managed by Delaware Management Company, Inc. Each Participant shall
file a written notice with the Committee thereby making an election as to what
proportion of his contributions, including both contributions made by the
Employer and voluntary contributions, shall be allocated to the eligible
investment company funds, as announced from time to time by the Committee. Each
Participant shall have the right to change the investment allocation of his
contributions and his accumulated account balance, in accordance with rules and
procedures as announced from time to time by the Committee, provided changes are
subject to any limitations imposed on the right of exchange by the investment
media.
-15-
<PAGE>
5.2 The Employer's contributions and any forfeitures for each Plan Year
shall be credited to the Employer Contribution Accounts of Participants who are
employed by the Employer on the Anniversary Date and allocated in the proportion
that the Plan Compensation of each Participant bears to the total Plan
Compensation of all Participants for such Plan Year. A Participant who
terminates employment on the Anniversary Date shall be treated as employed by
the Employer on the Anniversary Date. All voluntary contributions made by a
Participant prior to August 1, 1991 shall be credited to his Participant
Contribution Account.
5.3 As of the Anniversary Date, each Participant's Employer Contribution
Account and his Participant Contribution Account shall be valued at its fair
market value. For the purposes of paying benefits to a Participant, his accounts
shall be valued on the most recent Valuation Date as determined by the
Administrative Committee.
5.4 Income when earned less expenses, if any, when charged, shall be
credited to or charged against each Participant's account, in accordance with
the self-directed investments selected by the Participant.
5.5 The Committee shall, as of each Anniversary Date, determine the total
amount of forfeitures which accrued during the Plan Year and shall add the
forfeited amount to the Employer's annual contribution for the purposes of
reallocation to the remaining Participants as provided in Section 5.2.
5.6 Any allocation made and credited to the account of a Participant under
this Article shall not cause such Participant to have any right, title or
interest in or to any assets of the Trust Fund except at the time or times, and
under the terms and conditions, expressly provided for in this Plan.
5.7 (a) In the case of a contribution to the Plan which is made by the
Employer because of a mistake of fact, the Employer may, within one year after
the payment of such contribution, withdraw such contribution from the Trust
Fund.
(b) Employer contributions to the Plan are expressly conditioned on the
deductibility of such contributions under Section 404 of the Code. To the extent
such contributions are disallowed, the Employer may, within one year of the
disallowance of the deduction, withdraw such contribution from the Trust Fund.
-16-
<PAGE>
ARTICLE VI
RETIREMENT BENEFITS
-------------------
6.1 Upon attaining Normal Retirement Date, a Participant shall have a fully
vested and nonforfeitable right to his entire Employer Contribution Account and
shall be entitled to retire and upon so retiring shall be entitled to the
commencement of the payment of his benefits, consisting of the balance of his
accounts, in accordance with the method of payment elected pursuant to Article
X.
6.2 A Participant who retires after his Normal Retirement Date shall
continue to be a Participant in the Plan until his actual retirement and shall
be eligible to share in the allocation of Employer contributions as provided in
Section 5.2.
ARTICLE VII
DISABILITY BENEFITS
-------------------
7.1 If the employment of a Participant has been terminated prior to his
retirement date because of Total and Permanent Disability, such Participant
shall be entitled to receive his entire Participant Contribution Account and his
entire Employer Contribution Account in accordance with the manner elected under
Article X.
7.2 Upon a Participant's cessation of Total and Permanent Disability and
upon his return to work for Employer before all of his account has been
distributed, no further payments shall be made therefrom by reason of the
disability. A Participant shall have no right or obligation to repay any amount
distributed to him pursuant to Section 7.1.
ARTICLE VIII
DEATH BENEFITS
--------------
8.1 Notwithstanding anything stated in the Plan to the contrary, if a
Participant dies prior to receiving the entire nonforfeitable amount credited to
his accounts, all such undistributed nonforfeitable amounts shall be paid to the
Participant's surviving spouse, unless there is no surviving spouse or the
surviving spouse consents in writing to the payment of death benefits to another
Beneficiary. A spouse's consent must satisfy the following requirements:
-17-
<PAGE>
(a) the consent must be in writing;
(b) the consent must be witnessed by a member of the Administrative
Committee or a notary public;
(c) the consent must approve a designation of a specific Beneficiary,
including any class of Beneficiaries or any contingent Beneficiaries, which may
not be changed without spousal consent, or the spouse expressly permits
designations by the Participant without any further spousal consent; and
(d) the consent acknowledges the effect of the Participant's designation of
Beneficiary. If a consent permits designations by the Participant without any
requirement of further consent by such spouse, it must acknowledge that the
spouse has the right to limit consent to a specific Beneficiary and that the
spouse voluntarily elects to relinquish such right.
Written consent of a spouse need not be obtained if the Participant
establishes to the satisfaction of the Committee that there is no spouse or that
the spouse cannot be located. Any such designation may be changed from time to
time by the Participant by filing a new designation with the Committee, provided
the spousal consent requirements above are satisfied.
8.2 Each Participant may file with the Committee a designation of
Beneficiary to receive amounts payable under this Plan upon his death. The
designation may be changed from time to time by the Participant, except that a
married Participant may not name a Beneficiary other than his spouse without a
written consent which satisfies the requirements of Section 8.1. If no
designation has been filed, or all designated Beneficiaries have predeceased the
Participant, then any amounts payable shall be paid to his surviving spouse. If
there is no surviving spouse, any amounts payable shall be paid to his estate.
8.3 If at, after or during the time when a benefit is payable to any
Beneficiary, the Administrative Committee, upon request of the Trustee or at its
own instance, mails by registered or certified mail to the Beneficiary at the
Beneficiary's last known address a written demand for his then address, or for
satisfactory evidence of his continued life or both, and, if the Beneficiary
shall fail to furnish the information to the Committee within 3 years from the
mailing of the demand, then the Committee shall distribute the remaining
benefits to the Beneficiary next entitled thereto under Section 8.3 above as if
the Beneficiary designated by the Participant or Section 8.3 were then deceased.
-18-
<PAGE>
ARTICLE IX
OTHER SEPARATION FROM SERVICE
-----------------------------
9.1 (a) If a Participant separates from service other than under Articles
VI, VII or VIII, he shall be entitled to receive a lump sum distribution of his
entire Participant Contribution Account and his entire nonforfeitable Employer
Contribution Account. Such distribution shall be made upon the written request
of the Participant and shall be made as soon as practicable following the
Participant's separation from service, but not later than the close of the
second Plan which such separation occurs.
(b) If the non-forfeitable portion of the Participant's Employer
Contribution Account and his Participant Contribution Account exceeds $3500 (or
ever exceeded $3500 at the time of an earlier distribution), and the Participant
does not consent in writing to receive a lump sum distribution of his accounts
by the close of the second Plan Year following his separation from service, no
distribution shall be made to the Participant until he attains his Normal
Retirement Date. Regardless of whether the Participant consents in writing, if
the non-forfeitable portion of the Participant's Employer Contribution Account
and Participant Contribution Account does not exceed $3500 (or did not exceed
$3500 at the time of a prior distribution), a lump sum distribution shall be
made to the Participant of the entire value of the non-forfeitable portion of
his accounts not later than the end of the second Plan Year following his
separation from service.
(c) If a distribution is made to the Participant of the nonforfeitable
portion of his Employer Contribution Account upon his separation from service,
the non-vested portion of his Account, if any, will be treated as a forfeiture
and reallocated to remaining Participants as provided in Section 5.2. If the
Participant does not receive a distribution of his Employer Contribution Account
upon his separation from service, such Account shall be held for the Participant
until he attains Normal Retirement Date and the non-vested portion of the
Account shall be treated as a forfeiture when the Participant sustains five
consecutive One Year Breaks in Service.
(d) In the event a Participant who is less than fully vested in his
Employer Contribution Account receives a distribution of his vested interest in
such Account upon his separation from service, and such Participant subsequently
returns to employment of the Employer, the Participant's Employer Contribution
Account will be restored to the value of the Account on the date of the
distribution if the Participant repays to the Trustees the full amount of such
-19-
<PAGE>
distribution before the earlier of five consecutive One-Year Breaks in Service
or five years after the Participant's date of reemployment. Restoration of the
forfeited amount of a Participant's Account shall be made from forfeitures or
Employer contributions.
9.2 (a) In the event a Participant separates from service with the Employer
for reasons other than retirement, disability, death or a layoff by the
Employer, he shall have a nonforfeitable right to the amount credited to his
Employer Contribution Account in accordance with the following schedule:
Completed Years of Service Percentage
-------------------------- ----------
At least But less than
0 1 0%
1 2 20%
2 3 40%
3 4 60%
4 5 80%
5 or more 100%
(b) A Participant shall have a wholly vested and nonforfeitable right to
his Employer Contribution Account upon separation from service on account of
retirement on or after the Normal Retirement Date, Total and Permanent
Disability, death while in the employ of the Employer or layoff by the Employer.
For purposes of this Section 9.2, the term "layoff" shall mean any involuntary
separation from service other than separation due to cause. If a Participant
separates from service with the Employer, the non-vested portion of his Employer
Contribution Account, if any, shall be forfeited upon the death of the
Participant.
(c) If the Employer amends the Plan in a manner which directly or
indirectly affects the computation of a Participant's nonforfeitable percentage,
each Participant who completes an Hour of Service in any Plan Year beginning
after December 31, 1988 and who has at least three Years of Service may elect
after the adoption of such amendment to have his nonforfeitable interest
computed under the Plan without regard to such amendment. The period during
which the election may be made shall commence the day the amendment is adopted
and shall end on later of:
(i) sixty (60) days after the amendment is adopted;
(ii) sixty (60) days after the amendment becomes effective; or
(iii) sixty (60) days after the Participant is issued written notice of the
amendment by the Employer or the Committee.
-20-
<PAGE>
9.3 (a) In the case of a Participant who has a Break in Service, Years of
Service completed before such Break shall not be counted until the Participant
has completed a Year of Service for the purpose of determining his
nonforfeitable percentage of the amount credited to his Employer Contribution
Account after such Break in Service.
(b) Years of Service completed on reemployment and after separation from
service with the Employer in connection with which he has five consecutive One
Year Breaks in Service shall not be counted for purposes of determining such
Participant's nonforfeitable percentage right to amounts credited to his
Employer Contribution Account before such Break in Service.
ARTICLE X
METHOD OF PAYMENT
-----------------
10.1 At the request of a Participant, the form of benefit payments may be
one of the following in cash:
(a) in a lump sum payment; or
(b) in periodic, monthly, quarterly, semi-annual or annual installments
over a period certain not exceeding the Participant's life expectancy or the
joint life expectancy of the Participant and his designated Beneficiary. If
periodic installments are to be paid, a Participant's account shall be invested
in the investment company funds available under the Plan as designated by the
Participant.
If periodic installments are paid over the life expectancy of the
Participant or joint life expectancy of the Participant and a designated
Beneficiary, a Participant may elect, prior to the time distributions begin,
whether or not to have his life expectancy and his Beneficiary's life expectancy
(if the Beneficiary is his spouse) annually recalculated. In the absence of such
election, life expectancies will not be recalculated.
10.2 In no event shall payments of benefits under this Plan commence later
than sixty (60) days after the close of the Plan Year in which the latest of the
following events occur:
(a) the Participant attains age sixty-five (65); or
(b) the Participant completes ten years of participation in the Plan; or
-21-
<PAGE>
(c) the termination of the Participant's service with the Employer.
10.3 (a) Notwithstanding the other requirements of this Plan, distributions
on behalf of any Participant, including a five percent (5%) owner, may be made
in accordance with all of the following requirements (regardless of when such
distribution commences):
(i) The distribution by the Trust Fund is one which would not have
disqualified such Trust under Section 401(a)(9) of the Code as in effect prior
to amendment by the Deficit Reduction Act of 1984.
(ii) The distribution is in accordance with a method of distribution
designated by the Participant whose interest is being distributed or, if the
Participant is deceased, by a Beneficiary of such Participant.
(iii) Such designation was in writing, was signed by the Participant or the
Beneficiary, and was made before January 1, 1984.
(iv) The Participant had accrued a benefit under the Plan as of December
31, 1983.
(v) The method of distribution designated by the Participant or the
Beneficiary specifies the time at which distribution will commence, the period
over which distributions will be made, and in the case of any distribution upon
the Participant's death, the Beneficiaries of the Participant listed in order of
priority.
(b) A distribution upon death will not be covered by this Section unless
the information in the designation contains the required information described
above with the respect to the distributions to be made upon the death of the
Participant.
(c) For any distribution which commenced before January 1, 1984, but
continues after December 31, 1983, the Participant, or the Beneficiary, to whom
such distribution is being made, will be presumed to have designated the method
of distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirements in subsections (a)(i) and (v) above.
(d) If a designation is revoked, any subsequent distribution must satisfy
the requirements of Section 401(a)(9) of the Code. Any changes in the
designation will be considered to be revocation of the designation. However, the
mere substitution or addition of another Beneficiary (one not named in the
-22-
<PAGE>
designation) under the designation will not be considered to be revocation
of the designation, so long as such substitution or addition does not alter the
period over which distributions are to be made under the designation, either
directly or indirectly (for example, by altering the relevant measuring life).
10.4 Required Distributions. All distributions required under this Section
10.4 shall be determined and made in accordance with the proposed regulations
under Section 401(a)(9) of the Code, including the minimum distribution
incidental benefit requirement of Section 1.401(a)(9)-2 of the proposed
regulations.
(a) Required beginning date. The entire interest of a Participant must be
distributed or begin to be distributed no later than the Participant's required
beginning date.
(b) Limits on Distribution Periods. As of the first distribution calendar
year, distributions, if not made in a single-sum, may only be made over one of
the following periods (or a combination thereof):
(1) a period certain not extending beyond the life expectancy of the
Participant, or
(2) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated beneficiary.
(c) Determination of amount to be distributed each year. If the
Participant's interest is to be distributed in other than a single sum, the
following minimum distribution rules shall apply on or after the required
beginning date:
(1) If a Participant's benefit is to be distributed over (i) a period not
extending beyond the life expectancy of the Participant or the joint life and
last survivor expectancy of the Participant and the Participant's designated
beneficiary or (ii) a period not extending beyond the life expectancy of the
designated beneficiary, the amount required to be distributed for each calendar
year, beginning with distributions for the first distribution calendar year,
must at least equal the quotient obtained by dividing the Participant's benefit
by the applicable life expectancy.
(2) For calendar years beginning before January 1, 1989, if the
Participant's spouse is not the designated beneficiary, the method of
distribution selected must assure that at least fifty percent (50%) of the
present value of the amount available for distribution is paid within the life
expectancy of the Participant.
-23-
<PAGE>
(3) For calendar years beginning after December 31, 1988, the amount to be
distributed each year, beginning with distributions for the first distribution
calendar year, shall not be less than the quotient obtained by dividing the
Participant's benefit by the lesser of (1) the applicable life expectancy or (2)
if the Participant's spouse is not the designated beneficiary, the applicable
divisor determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of
the proposed regulations. Distributions after the death of the Participant shall
be distributed using the applicable life expectancy in (c)(i)(A) above as the
relevant divisor without regard to proposed regulations Section 1.401(a)(9)-2.
(4) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the Participant's required
beginning date. The minimum distribution for other calendar years, including the
minimum distribution for the distribution calendar year in which the
Participant's required beginning date occurs, must be made on or before December
31 of that distribution calendar year.
(d) Death Distribution Provisions.
(1) Distribution beginning before death. If the Participant dies after
distribution of his or her interest has begun, the remaining portion of such
interest will continue to be distributed at least as rapidly as under the method
of distribution being used prior to the Participant's death.
(2) Distribution beginning after death. If the Participant dies before
distribution of his or her interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of the calendar year
containing the fifth (5th) anniversary of the Participant's death except to the
extent that the Participant or his designated beneficiary elects to receive
distributions in accordance with (i) or (ii) below:
(i) if any portion of the Participant's interest is payable to a designated
beneficiary, distributions may be made over a period certain not greater than
the life expectancy of the designated beneficiary commencing on or before
December 31 of the calendar year immediately following the calendar year in
which the Participant died;
(ii) if the designated beneficiary is the Participant's surviving spouse,
the date distributions are required to begin in accordance with (i) above shall
not be earlier than the later of (1) December 31 of the calendar year
immediately following the calendar year in which the Participant died and (2)
December 31 of the calendar year in which the Participant would have attained
age 70 1/2.
-24-
<PAGE>
If the Participant has not made an election pursuant to Section 10.4(d)(2)
by the time of his or her death, the Participant's designated beneficiary must
elect the method of distribution no later than the earlier of (1) December 31 of
the calendar year in which distributions would be required to begin under this
Section 10.4(d), or (2) December 31 of the calendar year which contains the
fifth (5th) anniversary of the date of death of the Participant. If the
Participant has no designated beneficiary, or if the designated beneficiary does
not elect a method of distribution, distribution of the Participant's entire
interest must be completed by December 31 of the calendar year containing the
fifth (5th) anniversary of the Participant's death.
(3) For purposes of Section 10.4(d)(2) above, if the surviving spouse dies
after the Participant, but before payments to such spouse begin, the provisions
of Section 10.4(d)(2), with the exception of subparagraph (ii) therein, shall be
applied as if the surviving spouse were the Participant.
(4) For purposes of Section 10.4(d), distribution of a Participant's
interest is considered to begin on the Participant's required beginning date
(or, if Section 10.4(d)(3) above is applicable, the date distribution is
required to begin to the surviving spouse pursuant to Section 10.4(d)(3) above).
(e) Definitions.
(1) Applicable life expectancy. The life expectancy (or joint and last
survivor expectancy) calculated using the attained age of the Participant (or
designated beneficiary) as of the Participant's (or designated beneficiary's)
birthday in the applicable calendar year reduced by one for each calendar year
which has elapsed since the date life expectancy was first calculated. If life
expectancy is being recalculated, the applicable life expectancy will be the
life expectancy as so recalculated. The applicable calendar year shall be the
first distribution calendar year and if life expectancy is being recalculated,
such succeeding calendar year.
(2) Designated beneficiary. The individual who is designated as the
beneficiary under the Plan in accordance with Section 401(a)(9) and the proposed
regulations thereunder.
(3) Distribution calendar year. A calendar year for which a minimum
distribution is required. For distributions beginning before the Participant's
death, the first distribution calendar year is the calendar year immediately
preceding the calendar year which contains the Participant's required beginning
date. For distributions beginning after the Participant's death, the first
distribution calendar year is the calendar year in which distributions are
required to begin pursuant to Section 10.4(d) above.
-25-
<PAGE>
(4) Life expectancy. Life expectancy and joint and last survivor expectancy
are computed by use of the expected return multiples in Tables V and VI of
Section 1.72-9 of the income tax regulations. Unless otherwise elected by the
Participant by the time distributions are required to begin, life expectancies
shall not be recalculated annually. Such election shall be irrevocable as to the
Participant (or spouse) and shall apply to all subsequent years. The life
expectancy of a nonspouse designated beneficiary may not be recalculated. A
spousal designated beneficiary may not elect to have his or her life expectancy
recalculated with respect to any distribution paid pursuant to Section
10.4(d)(2).
(5) Participant's benefit.
(i) The Participant's account balance as of the last valuation date in the
calendar year immediately preceding the distribution calendar year (valuation
calendar year) increased by the amount of any contributions or forfeitures
allocated to the account balance as of dates in the valuation calendar year
after the valuation date and decreased by distributions made in the valuation
calendar year after the valuation date.
(ii) For purposes of paragraph (i) above, if any portion of the minimum
distribution for the first distribution calendar year is made in the second
distribution calendar year on or before the required beginning date, the amount
of the minimum distribution made in the second distribution calendar year shall
be treated as if it had been made in the immediately preceding distribution
calendar year.
(6) Required beginning date.
(i) General rule. The required beginning date of a Participant is the first
day of April of the calendar year following the calendar year in which the
Participant attains age 70 1/2.
(ii) Transitional rules. The required beginning date of a Participant who
attains age 70 1/2 before January 1, 1988, shall be determined in accordance
with (A) or (B) below:
(A) Non-five (5)-percent owners. The required beginning date of a
Participant who is not a five (5)-percent owner is the first day of April of the
calendar year following the calendar year in which the later of retirement or
attainment of age 70 1/2 occurs.
-26-
<PAGE>
(B) Five (5)-percent owners. The required beginning date of a Participant
who is a five (5)-percent owner during any year beginning after December 31,
1979, is the first day of April following the later of:
(I) the calendar year in which the Participant attains age 70 1/2, or
(II) the earlier of the calendar year with or within which ends the Plan
Year in which the Participant becomes a five (5)-percent owner, or the calendar
year in which the Participant retires.
The required beginning date of a Participant who is not a five (5)-percent
owner who attains age 70 1/2 during 1988 and who has not retired as of January
1, 1989, is April 1, 1990.
(iii) Five (5)-percent owner. A Participant is treated as a five
(5)-percent owner for purposes of this section if such Participant is a five
(5)-percent owner as defined in Section 416(i) of the Code (determined in
accordance with Section 416 but without regard to whether the Plan is top-heavy)
at any time during the Plan Year ending with or within the calendar year in
which such owner attains age 66 1/2 or any subsequent Plan Year.
(iv) Once distributions have begun to a five (5)-percent owner under this
section, they must continue to be distributed, even if the Participant ceases to
be a five (5)-percent owner in a subsequent year.
10.5 Restrictions on Distributions Prior to Normal Retirement Date. If the
value of a Participant's vested account balance exceeds (or at the time of any
prior distribution exceeded) $3,500, the Participant must consent to any
distribution made to him before he attains the Normal Retirement Date. The
consent of the Participant shall be obtained in writing within the 90-day period
ending on the date benefits are paid. The Committee shall notify the Participant
of his right to defer any distribution until the Participant attains the Normal
Retirement Date (or would have attained the Normal Retirement Date if not
deceased). Such notification shall include a general description of the material
features, and an explanation of the relative values of, the optional forms of
benefit available under the Plan in a manner that would satisfy the notice
requirements of Section 417(a)(3) of the Code below, and shall be provided no
less than 30 days and no more than 90 days prior to the date benefits are paid.
The consent of the Participant shall not be required to the extent that a
distribution is required to satisfy Sections 401(a)(9) or 415 of the Code. A
distribution may be paid to the Participant less than 30 days after the notice
described in this Section 10.5 is given to him, provided that the Administrative
Committee clearly informs the Participant that he has the right to a period of
-27-
<PAGE>
at least 30 days after receiving the notice to consider the decision of
whether or not to elect the distribution and the Participant, after receiving
the notice, affirmatively elects to receive a distribution. In addition, subject
to Section 10.7, upon termination of this Plan, the Participant's entire account
balance may be distributed without the Participant's consent to the Participant
or transferred to another defined contribution plan (other than an employee
stock ownership plan, as defined in Section 4975(e)(7) of the Code) within the
same controlled group as the Employer.
10.6 Withdrawals upon Attainment of Age 59-1/2. Upon the attainment of age
59-1/2, a Participant who is fully vested in his Employer Contribution Account
will be entitled to withdraw once a Plan Year all or any portion of his account
balance in a single sum. Any withdrawal by a Participant under this Section 10.6
will be made only after the Participant files a written request with the
Administrative Committee pursuant to such terms and conditions as the Committee
may prescribe.
10.7 Direct Rollovers
(a) This Section applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Section, a distributee may elect, at
the time and in the manner prescribed by the Administrative Committee to have
any portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
(b) Definitions.
(i) Eligible rollover distribution: An eligible rollover distribution is
any distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under section 401(a)(9) of the Code; and the portion of any
distribution that is not includable in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
securities).
(ii) Eligible retirement plan: An eligible retirement plan is an individual
retirement account described in section 408(a) of the Code, an individual
-28-
<PAGE>
retirement annuity described in section 408(b) of the Code, an annuity plan
described in section 403(a) of the Code, or a qualified trust described in
section 401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
(iii) Distributee: A distributee includes an Employee or former Employee.
In addition, the Employee's or former Employee's surviving spouse or former
spouse who is the alternate payee under a qualified domestic relations order, as
defined in section 414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
(iv) Direct rollover: A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the distributee.
ARTICLE XI
ADMINISTRATION OF PLAN
----------------------
11.1 (a) This Plan shall be administered by a Committee which shall consist
of not less than two nor more than five members.
(b) The Committee shall serve without compensation from the Plan. Vacancies
may be filled by the Chief Executive Officer of Delaware Group Delaware Fund,
Inc. on an interim basis, until action to fill the vacancy is taken by the Board
of Directors of Delaware Group Delaware Fund, Inc.
(c) The Committee:
(1) shall act by affirmative vote of a majority of its members at a meeting
called with five days notice or in writing without a meeting;
(2) shall appoint a Secretary who may be but need not be one of its own
members. He shall keep complete records of the administration of the Plan;
(3) may authorize each and any one of its members to perform routine acts
and to sign documents on its behalf.
11.2 The Committee may appoint such persons or committees, employ such
attorneys, agents, accountants, investment managers, consultants, actuaries, and
other specialists as it deems necessary or desirable to advise or assist
-29-
<PAGE>
it in the performance of its duties hereunder and the Committee may rely upon
their respective written opinions or certificates. To the extent such persons
are empowered by written notification from the Committee to perform duties
defined in ERISA as fiduciary duties, such empowerment shall constitute a
delegation of fiduciary responsibility for purposes of determining the
co-fiduciary liability under ERISA. The Committee shall review the performance
of any such persons periodically.
11.3 Administration of the Plan shall consist of interpreting and carrying
out the provisions of this Plan. The Committee shall determine the eligibility
of Employees to participate in this Plan, their rights while Participants in
this Plan and the nature and amount of benefits to be received therefrom. The
Committee shall decide any disputes which may arise under this Plan and the
Trust Agreement. The Committee may provide rules and regulations for the
administration of the Plan consistent with its terms and provisions. Any
construction or interpretation of the Plan and any determination of fact in
administering the Plan made in good faith by the Committee shall be final and
conclusive for all Plan purposes. The Committee shall have the discretionary
authority to determine eligibility for benefits and to construe the terms of the
Plan.
11.4 (a) The Committee shall prescribe a form for the presentation of
claims under the terms of this Plan and/or Trust Agreement.
(b) Upon presentation to the Committee of a claim on the prescribed form,
the Committee shall make a determination of the validity thereof. If the
determination is adverse to the claimant, the Committee shall furnish to the
claimant within 90 days after the receipt of the claim a written notice setting
forth the following:
(1) The specific reason or reasons for the denial;
(2) Specific reference to pertinent provisions of the Plan on which the
denial is based;
(3) A description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such material or
information is necessary; and
(4) Appropriate information as to the steps to be taken if the claimant
wishes to submit his or her claim for review.
-30-
<PAGE>
(c) In the event of a denial of a claim, the claimant or his duly
authorized representative may appeal such denial to the Committee for a full and
fair review of the adverse determination. Claimant's request for review must be
in writing and made to the Committee within 60 days after receipt by claimant of
the written notification required under Section 11.4(b); provided, however, such
60 day period shall be extended if circumstances so warrant. Claimant or his
duly authorized representative may submit issues and comments in writing which
shall be given full consideration by the Committee in his review.
(d) The Committee may, in its sole discretion, conduct a hearing. A request
for a hearing made by claimant will be given full consideration. At such
hearing, the claimant shall be entitled to appear and present evidence and be
represented by counsel.
(e) A decision on a request for review shall be made by the Committee not
later than 60 days after receipt of the request; provided, however, in the event
of a hearing or other special circumstances, such decision shall be made not
later than 120 days after receipt of such request. If it is necessary to extend
the period of time for making a decision beyond 60 days after the receipt of the
request, the claimant shall be notified in writing of the extension of time
prior to the beginning of such extension.
(f) The Committee's decision on review shall state in writing the specific
reasons and references to the Plan provisions on which it is based. Such
decision shall be promptly provided to the claimant. If the decision on review
is not furnished in accordance with the foregoing, the claim shall be deemed
denied on review.
11.5 The Committee shall have the power to allocate its responsibilities
among its several members, except that all matters involving the hearing of and
decision on the claims and the review of the determination of benefits shall be
made by the full Committee; provided, however, that no member of the Committee
shall participate in any matter relating solely to himself.
11.6 To the extent required by law, the Committee shall give notice in
writing to all interested parties of any amendment of this Plan and/or Trust
Agreement and of any application to any government agency for any determination
of the effect of any such amendment on the Plan within the jurisdiction of that
agency.
11.7 (a) The Committee shall administer the Plan and the Trust Agreement
forming a part thereof under uniform rules of general application.
(b) The Committee or any member thereof:
-31-
<PAGE>
(1) May serve under the Plan and/or the Trust Agreement in one or more
fiduciary capacities, as that term is defined in ERISA; and
(2) May resign by giving written notice thereof to the Chief Executive
Officer of Delaware Group Delaware Fund, Inc. not less than fifteen (15) days
before the effective date of such resignation; and
(3) May be removed at any time, without cause, by the Board of Directors of
Delaware Group Delaware Fund, Inc.
ARTICLE XII
AMENDMENT, CONSOLIDATION, MERGER OR TERMINATION
-----------------------------------------------
12.1 Delaware Group Delaware Fund, Inc. may amend the Plan and the Trust
Agreement in any manner and at any time by action of its Board of Directors;
provided, however, that no amendment shall deprive any Participant or his
Beneficiary of any vested interest he may have hereunder unless the amendment is
for the purpose of conforming the Plan to the requirements of the Code or any
other applicable law. No amendment which affects the rights, responsibilities or
duties of the Trustee may be made without the Trustee's written consent. No
amendment shall be made to the Plan which has the effect of eliminating or
reducing an early retirement benefit or a retirement-type subsidy, eliminating
an optional form of benefit or decreasing a Participant's account balance with
respect to benefits attributable to service before the amendment. Further, if
the vesting schedule of the Plan is amended, in the case of an Employee who is a
Participant as of the later of the date such amendment is adopted or the date it
becomes effective, the nonforfeitable percentage (determined as of such date) of
such Employee's right to his Employer derived account balance will not be less
than his percentage computed under the Plan without regard to such amendment.
12.2 Any Participant on the effective date of an amendment who is not
actively participating in the Plan on such effective date shall not benefit from
an amendment unless otherwise required by law or unless such amendment is
specifically made applicable to such Participant.
12.3 In the event of any merger or consolidation with, or transfer of
assets or liabilities to, any other plan, each Participant shall be entitled to
a benefit after the merger, consolidation or transfer (if the Plan then
terminated) which is not less than the benefits he would have been entitled to
receive immediately before the merger, consolidation or transfer (if the Plan
had then terminated).
-32-
<PAGE>
12.4 The Employer intends to continue the Plan indefinitely but reserves
the right to discontinue contributions, terminate or partially terminate the
Plan at any time. In the event of a complete discontinuance of contributions,
termination or partial termination of the Plan, the interests of all
Participants affected shall become nonforfeitable. Upon termination of the Plan,
the Employer shall in its complete discretion notify the Trustee to either hold
all assets of the Trust Fund and make payments in accordance with the terms of
the Plan or distribute to each Participant his net account balance in a lump sum
payment in cash or kind. The Employer's contribution to the Trust Fund or the
income thereof shall not be paid to, or shall not revert to Employer and shall
not be used for any purpose other than the exclusive benefit of the Participants
or their Beneficiaries.
ARTICLE XIII
MISCELLANEOUS
-------------
13.1 To the extent permitted by law, it is a condition of the Plan that the
benefits provided hereunder shall not be subject to assignment, anticipation,
alienation, attachment, levy or transfer, and any attempt to do so shall not be
recognized. The preceding sentence shall also apply to the creation, assignment
or recognition of a right to any benefit payable with respect to a Participant
pursuant to a domestic relations order, unless such order is determined to be a
qualified domestic relations order as defined in Section 414(p) of the Code. If
provided by the terms of a qualified domestic relations order, a distribution of
benefits may be made from the Plan to the alternate payee under such order in a
single lump sum as soon as practicable following the determination by the
Administrative Committee that the order constitutes a qualified domestic
relations order. Payment of benefits may be made to the alternate payee even
though the Participant identified in the order has not attained the earliest
retirement age under the Plan. For purposes of this Section 13.1, the "earliest
retirement age" means the earlier of (i) the date in which the Participant is
entitled to a distribution under the Plan or (ii) the later of the date the
Participant attains age 50 or the earliest date on which the Participant would
begin receiving benefits if the Participant separated from service.
13.2 Nothing herein contained shall be deemed to give any Employee the
right to be retained in the employ of Employer or to interfere with the right of
the Employer to discharge any Employee at any time, nor shall it be deemed to
give the Employer the right to require any Employee to remain in its employ, nor
shall it interfere with the Employee's right to terminate his employment at any
time.
-33-
<PAGE>
13.3 All expenses incurred by the Trustees in the administration of the
Fund, including but not limited to the compensation of counsel, accountants,
Trustees, other agents or fiduciaries, shall be charged against the Employer,
unless otherwise paid by the Fund.
13.4 This Plan shall be interpreted in accordance with the laws of the
Commonwealth of Pennsylvania, except to the extent superseded by ERISA as in
effect from time to time.
ARTICLE XIV
LOANS
-----
14.1 The Committee, in its sole discretion, may direct the Trustees to make
a loan to a Participant, who is a party-in-interest, as defined in Section 3(14)
of ERISA, from the Participant's account balance upon receipt of a written
request from the Participant. The total amount of any such loan (when added to
the outstanding balance of all other loans to the Participant under the Plan or
any other qualified plan of the Employer) shall not exceed the lesser of $50,000
or 50% of the Participant's vested account balance. The $50,000 limitation shall
be reduced by the excess, if any, of the highest outstanding balance of loans to
the Participant from the Plan during the one-year period ending on the day
before the date on which such loan was made over the outstanding balance of
loans from the Plan to the Participant on the date that such loan was made.
14.2 A request by a Participant for a loan shall be made in writing to the
Committee and shall specify the amount of the loan. The terms and conditions on
which the Committee shall approve loans under the Plan shall be applied on a
reasonably equivalent basis with respect to all Participants. If a Participant's
request for a loan is approved by the Committee, the Committee shall furnish the
Trustees with written instructions directing the Trustees to make the loan in a
lump sum payment of cash to the Participant. In making any loan payment under
this Article XIV, the Trustees shall be fully entitled to rely on the
instructions furnished by the Committee, and shall be under no duty to make any
inquiry or investigation with respect thereto.
14.3 Loans shall be made on such terms and subject to such limitations as
the Committee may prescribe from time to time, provided that any such loan shall
be evidenced by a written note, shall bear a reasonable rate of interest on the
unpaid principal thereof, shall be adequately secured, and shall be repaid by
the Participant over a period not to exceed five years.
-34-
<PAGE>
14.4 Any loan to a Participant under the Plan shall be secured by the
pledge of not more than 50% percent of the Participant's right, title and
interest in his vested account balance. Such pledge shall be evidenced by the
execution of a promissory note by the Participant.
14.5 The Committee shall have the sole responsibility for insuring that a
Participant timely makes all loan repayments, and for notifying the Trustees in
the event of any default by the Participant on the loan. Each loan repayment
shall be paid to the Trustees, and shall be accompanied by written instructions
from the Committee that identifies the Participant on whose behalf the loan
repayment is being made. Repayment of loans shall be made solely by means of
payroll deductions, or such other manner approved by the Committee.
14.6 In the event of a default by a Participant on a loan repayment, all
remaining principal payments on the loan shall be immediately due and payable.
The Committee shall be authorized (to the extent permitted by law) to take any
and all actions necessary and appropriate to enforce collection of an unpaid
loan. However, in the event of a default, foreclosure on the note and attachment
of security will not occur until a distributable event occurs under the Plan.
14.7 Upon the occurrence of a Participant's retirement or death, or earlier
distribution of benefits, the unpaid balance of any loan, including any unpaid
interest, shall be deducted from any payment or distribution from the Trust Fund
to which such Participant or his Beneficiary may be entitled and his vested
interest in his account shall be reduced.
14.8 A loan to a Participant shall be considered an investment of the
separate account(s) of the Participant from which the loan is made. All loan
repayments shall be credited to such separate account(s) and reinvested in the
investment company fund designated by the Participant.
14.9 A loan may not be made to a Participant who owns (or is considered as
owning within the meaning of Section 318(a)(1) of the Internal Revenue Code)
more than 5% of the outstanding stock of the Employer.
14.10 For loans granted or renewed on or after the last day of first Plan
Year beginning on or after January 1, 1989, the Committee shall issue written
loan guidelines, which shall form part of the Plan, describing the procedures
and conditions for making loans, and may revise those guidelines at any time,
and for any reason.
-35-
<PAGE>
ARTICLE XV
LIMITATIONS ON ALLOCATIONS
--------------------------
15.1 The provisions of this Article XV shall be effective for limitation
years beginning after December 31, 1986.
(a) Notwithstanding any provisions of this Plan to the contrary, the annual
additions which may be credited to a Participant's account for any limitation
year will not exceed the lesser of the maximum permissible amount or any other
limitation contained in this Plan.
(b) As soon as is administratively feasible after the end of the limitation
year, the maximum permissible amount for the limitation year will be determined
on the basis of the Participant's actual compensation for the limitation year.
(c) In the event that it is determined that because of the allocation of
forfeitures, a reasonable error in estimating a Participant's annual
compensation or under other limited facts and circumstances permitted by the
Commissioner of the Internal Revenue Service, if there is an excess amount the
excess will be disposed of as follows:
(1) If the Participant is covered by the Plan at the end of the limitation
year, the excess amount shall be used to reduce employer contributions
(including any allocation of forfeitures) for such Participant in the next
limitation year, and each succeeding limitation year if necessary;
(2) If the Participant is not covered by the Plan at the end of the
limitation year, the excess amount will be held unallocated in a suspense
account. The suspense account will be applied to reduce future employer
contributions (including allocation of any forfeitures) for all remaining
Participants in the next limitation year, and each succeeding limitation year if
necessary;
(3) If a suspense account is in existence at any time during the limitation
year pursuant to this Section, it will not participate in the allocation of
investment gains and losses. The entire amount allocated to Participants from a
suspense account, including any such gains or other income or less any losses is
considered an annual addition.
(d) For the purpose of applying the limitations under this Article, all
defined contribution plans maintained by the employer are to be considered as a
single plan.
15.2 Definitions. For purposes of this Article only, the following
definitions and rules of interpretation will apply:
-36-
<PAGE>
(a) "annual additions" -- The sum of the following amounts credited to a
Participant's account for the limitation year:
(1) employer contributions;
(2) forfeitures;
(3) voluntary Employee contributions;
(4) amounts allocated after March 31, 1984, to an individual medical
account, as defined in Section 415(1)(1) of the Code, which is part of a pension
or annuity maintained by the employer;
(5) amounts derived from contributions paid or accrued after December 31,
1985, in taxable years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate account of a key
employee, as defined in Section 419A(d)(3) of the Code, under a welfare benefit
fund as defined in Section 419(e) of the Code, maintained by the employer; and
(6) excess amounts applied under this Article in the limitation year to
reduce employer contributions.
(b) "compensation" -- a Participant's earned income, wages, salaries, and
fees for professional services and other amounts received (without regard to
whether an amount is paid in cash) for personal services actually rendered in
the course of employment with the employer to the extent that the amounts are
includable in gross income (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits,
reimbursements and expense allowances), and excluding the following:
(1) Employer contributions to a plan of deferred compensation which are not
includable in the Employee's gross income for the taxable year in which
contributed, or Employer contributions under a simplified employee pension to
the extent such contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation;
(2) Amounts realized from the exercise of a nonqualified stock option, or
when restricted stock (or property) held by the Employee either becomes freely
transferable or is no longer subject to a substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option; and
-37-
<PAGE>
(4) Other amounts which received special tax benefits, or contributions
made by the employer (whether or not under a salary reduction agreement) towards
the purchase of an annuity described in Section 403(b) of the Code (whether or
not the amounts are actually excludable from the gross income of the Employee);
and
(5) Any contribution for medical benefits (within the meaning of Section
419A(f)(2) of the Code) after separation from service which is otherwise treated
as an annual addition; and
(6) Any amount otherwise treated as an annual addition under Section
415(i)(1) of the Code.
For purposes of applying the limitations of this Article, compensation for
a limitation year is the compensation actually paid or includable in gross
income during such year.
Notwithstanding the preceding sentence, compensation for a Participant who
is permanently and totally disabled (as defined in Section 37(e)(3) of the Code)
is the compensation such Participant would have received for the limitation year
if the Participant had been paid at the rate of compensation paid immediately
before becoming permanently and totally disabled; such imputed compensation for
the disabled Participant may be taken into account only if the Participant is
not an officer, an owner, or highly compensated, and contributions made on
behalf of such Participant are nonforfeitable when made.
(c) "employer" -- The Employer that adopts this Plan, and all members of a
controlled group of corporations (as defined in Section 414(b) of the Code as
modified by Section 415(h) of the Code), all commonly controlled trades or
businesses (as defined in Section 414(c) of the Code as modified by Section
415(h) of the Code), or affiliated service groups (as defined in Section 414(m)
of the Code) of which the adopting Employer is a part.
(d) "excess amount" -- The excess of the Participant's annual additions for
the limitation year over the maximum permissible amount.
(e) "limitation year" -- Effective April 2, 1989, the twelve-month period
beginning April 2 and ending April 1. Prior to April 2, 1989, the limitation
year is the twelve-month period from November 1 through the following October
31, except the limitation year beginning November 1, 1988 shall end April 1,
1989.
-38-
<PAGE>
(f) "maximum permissible amount" -- The lesser of $30,000 (or, if greater,
1/4 of the dollar limitation in effect under Section 415(b)(1)(A) of the Code)
or twenty-five percent (25%) of the Participant's compensation for the
limitation year.
ARTICLE XVI
TOP HEAVY DEFINITIONS AND RULES
-------------------------------
16.1 Key employee. An Employee or former Employee, (or the Beneficiary of
such an Employee or former Employee) who at any time during the determination
period was:
(a) An officer of the Employer having an annual compensation greater than
fifty percent (50%) of the amount in effect under Section 415(b)(1)(A) of the
Code for any such Plan Year;
(b) One of the ten Employees having annual compensation from the Employer
of more than the limitation in effect under Section 415(c)(1)(A) of the Code and
owning (or considered as owning within the meaning of Section 318 of the Code)
the largest interests in the Employer;
(c) A person owning (or considered as owning within the meaning of Section
318 of the Code) more than five percent (5%) of the outstanding stock of the
Employer or stock possessing more then five percent (5%) of the total combined
voting power of ail stock of the Employer, or
(d) A person who has annual compensation from the Employer of more than
$150,000 and who would be described in (c) hereof if one percent (1%) were
substituted for five percent (5%).
For purposes of (a) above, no more than fifty (50) Employees (or, if lesser, the
greater of three or ten percent of the Employees will be treated as officers.)
For purposes of (b), if two Employees have the same interest in the Employer,
the Employee having greater annual compensation from the Employer will be
treated as having a larger interest. For purposes of this Article the term
"compensation" shall have the same meaning as provided for in Article XV.
The determination period is the Plan Year containing the determination date
as defined in Section 16.8, and the four (4) preceding Plan Years. The
determination of who is a key employee will be made in accordance with the rules
and regulations under Section 416(i)(1) of the Code.
16.2 Non-key employee. Any Employee who is not a key employee. In addition,
any Beneficiary of a non-key employee will be treated as a non-key employee.
-39-
<PAGE>
16.3 Permissive aggregation group. The required aggregation group of plans
plus any other plan or plans of the Employer, which considered as a group with
the required aggregation group, would continue to satisfy the requirements of
Sections 401(a)(4) and 410 of the Code.
16.4 Required aggregation group.
(a) Each qualified plan of the Employer in which at least one key employee
participates or participated at any time during the determination period
(regardless of whether the plan has terminated), and
(b) Any other qualified plan of the Employer which enables a plan described
in (a) to meet the requirements of Sections 401 (a)(4) and 410 of the Code.
16.5 Top-heavy plan. This Plan is top-heavy for any Plan Year if any of the
following conditions exist;
(a) If the top-heavy ratio for this Plan exceeds sixty percent (60%) and
this Plan is not part of any required aggregation group or permissive
aggregation group of plans.
(b) If this Plan is part of a required aggregation group of plans but not
part of a permissive aggregation group and the top-heavy ratio for the required
aggregation group of plans exceeds sixty percent (60%).
(c) If this Plan is a part of a permissive aggregation group of plans and
the top-heavy ratio for the required aggregation group exceeds sixty percent
(60%) and the top-heavy ratio for the permissive aggregation group exceeds sixty
percent (60%).
16.6 Super top-heavy plan. For any Plan Year in which this Plan would be a
Top-Heavy Plan pursuant to Section 16.5 above if "ninety percent (90%)" were
substituted for "sixty percent (60%)" at each place where "sixty percent (60%)"
appears therein.
16.7 Top-heavy ratio.
(a) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and has not maintained any
defined benefit plan which during the five (5) year period ending on the
determination date has or has had accrued benefits, the top-heavy ratio for this
Plan alone or for the required or permissive aggregation group as appropriate is
a fraction, the numerator of which is the sum of the account balances of all key
employees as of the determination date (including any part of any account
balance distributed in the five (5) year period ending on the determination
-40-
<PAGE>
date), and the denominator of which is the sum of all account balances
(including any part of any account balance distributed in the five (5) Year
period ending on the determination date), both computed in accordance with
Section 416 of the Code and the regulations thereunder. Both the numerator and
denominator of the top-heavy ratio are increased to reflect any contribution not
actually made as of the determination date, but which is required to be taken
into account on that date under Section 416 of the Code and the regulations
thereunder.
(b) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and maintains or has maintained
one or more defined benefit plans which during the five (5) year period ending
on the Determination Date has or has had any accrued benefits, the top-heavy
ratio for any required or permissive aggregation group as appropriate is a
fraction, the numerator of which is the sum of account balances under the
aggregated defined contribution plan or plans for all key employees determined
in accordance with (2) above, and the present value of accrued benefits under
the aggregated defined benefit plan or plans for all key employees as of the
determination date, and the denominator of which is the sum of the account
balances under the aggregated defined contribution plan or plans for all
Participants, determined in accordance with (a) above, and the present value of
accrued benefits under the aggregated defined benefit plan or plans for all
Participants as of the determination dates, all determined in accordance with
Section 416 of the Code and the regulations thereunder. The accrued benefits
under a defined benefit plan in both the numerator and denominator of the
top-heavy ratio are increased for any distribution of an accrued benefit made in
the five year period ending on the determination date.
(c) For the purposes of (a) and (b) above, the value of account balances
and the present value of accrued benefits will be determined as of the most
recent valuation date that falls within or ends with the twelve (12) month
period ending on the determination date, except as provided in Section 416 of
the Code and the regulations thereunder for the first and second plan years of a
defined benefit plan. The account balances and accrued benefits of a Participant
(1) who is a non-key employee but who was a key employee in a prior year, or (2)
who has not been credited with at least one Hour of Service with any Employer
maintaining the Plan at any time during the five (5) year period ending on the
determination date will be disregarded. The calculation of the top-heavy ratio,
and the extent to which distributions, rollovers, and transfers are taken into
account will be made in accordance with Section 416 of the Code and the
regulations thereunder. When aggregating plans the value of account balances and
accrued benefits will be calculated with reference to the determination dates
that fall within the same calendar year. If any individual has not received
-41-
<PAGE>
any compensation from any employer maintaining the plan (other than benefits
under the Plan) at any time during the five (5) year period ending on the
determination date, any accrued benefit for such individual (and the account
of such individual) will not be taken into account.
Effective for Plan Years beginning after December 31, 1986, the accrued
benefit of a Participant other than a key employee shall be determined under (i)
the method, if any, that uniformly applies for accrual purposes under all
defined benefit plans maintained by the Employer or (ii) if there is no such
method, as if such benefit accrued not more rapidly than the slowest accrual
rate permitted under the fractional rule of Section 411(b)(1)(C) of the Code.
16.8 Determination date. With respect to any Plan Year subsequent to the
first Plan Year, the last day of the preceding Plan Year. For the first Plan
Year of the Plan, the last day of that Plan Year.
16.9 Valuation date. The last day of the Plan Year.
16.10 Present value. Present value will be based upon the interest and
mortality rates specified in the Employer's defined benefit plan.
16.11 Minimum Allocation.
(a) If in any Plan Year the Plan is a Top Heavy Plan and the Employer does
not maintain any qualified defined benefit plan in addition to this Plan, except
as provided in (b) and (c) below, the Employer contributions and forfeitures
allocated on behalf of any Participant who is a non-key employee will not be
less than the lesser of three percent (3%) of such Participant's compensation or
the largest percentage of Employer contributions and forfeitures, as a
percentage of the first $200,000 of the key employee's compensation (as defined
in Section 15.2(b)), and as limited by Section 401(a)(17) of the Code, allocated
on behalf of any key employee for that year. The minimum allocation is
determined without regard to any Social Security contributions. This minimum
allocation will be made even though, under other Plan provisions, the
Participant would not otherwise be entitled to receive an allocation, or would
have received a lesser allocation for the year because of the Participant's
failure to complete 1,000 Hours of Service. The minimum allocation (if any)
required under this paragraph (a) shall be made to this Plan only to the extent
such allocation is not made for the Participant under any other defined
contribution plan(s) maintained by the Employer.
-42-
<PAGE>
(b) In the event the Employer maintains a qualified defined benefit plan(s)
in addition to this Plan, the Employer will provide a minimum allocation at
least equal to five percent (5%) of compensation (as defined in Section 15.2(b))
to each non-key employee, entitled under (a) above to receive a minimum
allocation, who is covered under this Plan and the qualified defined benefit
plan(s). If this Plan enables a defined benefit plan to meet the requirements of
Section 401(a) or 410 of the Code, the minimum allocation described in (a) above
must be at least three percent (3%) of a Participant's compensation, regardless
of the largest percentage of Employer contributions and forfeitures of a key
employee's compensation.
(c) The provisions in (a) and (b) above will not apply to any Participant
who was not employed by the Employer on the last day of the Plan Year.
(d) The minimum allocation required under this Section 16.11 (to the extent
required to be nonforfeitable under Section 416(b) of the Code) may not be
forfeited under Sections 411(a)(3)(B) or 411(a)(3)(D) of the Code.
IN WITNESS WHEREOF, Delaware Group Delaware Fund, Inc. has caused this
amended and restated Plan, effective April 1, 1989, to be executed by its duly
authorized officers and its corporate seal to be impressed hereon this 17th day
of November, 1994.
Attest: DELAWARE GROUP DELAWARE FUND, INC.
/s/ George M. Chamberlain, Jr. By: /s/Brian F. Wruble
- ------------------------------ -------------------------
George M. Chamberlain, Jr. Brian F. Wruble
Senior Vice President/Secretary President and Chief
Executive Officer
-43-
AMENDMENT NO. 1
TO THE
SECOND AMENDMENT AND RESTATEMENT OF THE
PROFIT SHARING PLAN OF
DELAWARE GROUP DELAWARE FUND, INC.
EFFECTIVE APRIL 1, 1989
This Amendment is made this 21st day of December, 1995, by Delaware
Group Delaware fund, Inc. (the "Employer").
WITNESSETH:
-----------
WHEREAS, the Employer adopted the second amendment and restatement of
the Profit Sharing Plan of Delaware Management Company, Inc. (the "Plan"),
effective April 1, 1989; and
WHEREAS, the Employer desires to clarify the provisions of the Plan
pertaining to the crediting of service for vesting purposes.
NOW THEREFORE, Section 2.28 of the Plan is hereby amended as follows:
"2.28 "Year of Service" shall mean the completion by an Employee of
1,000 or more Hours of Service during his initial Eligibility
Computation Period and during any Plan Year, beginning with the Plan
Year which commences after the Employee first performs an Hour of
Service. However, for the period from October 1, 1988 through March 31,
1990, an Employee shall be given credit for a Year of Service if he
completes 1,000 Hours of Service during the period October 1, 1988 to
September 30, 1989 and shall be given credit for an additional Year of
Service if he completes 1,000 Hours of Service during the period April
1, 1989 to March 31, 1990. For purposes of determining a Participant's
nonforfeitable right to his Employer Contribution Account, Years of
Service shall include an Employee's prior service with Delaware
Management Company, Inc. or any other Entity required to be aggregated
with Delaware Management Company, Inc. under Sections 414(b) or (c) of
the Code."
IN WITNESS WHEREOF, the Employer has caused this Amendment to be
executed by its duly authorized officers and its corporate seal to be impressed
hereon the date first written above.
ATTEST: DELAWARE GROUP DELAWARE FUND, INC.
/s/ George M. Chamberlain, Jr. By: /s/ Wayne A. Stork
- ------------------------------- -------------------------
Senior Vice President/Secretary Chairman
