<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 33-67490
File No. 811-7972
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 8 /X/
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 10
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DELAWARE GROUP ADVISER FUNDS, INC.
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(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 255-2923
--------------
George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
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(Name and Address of Agent for Service)
Approximate Date of Public Offering: February 28, 1998
-----------------
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b)
_____ on (date) pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
__X__ on February 28, 1998 pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on (date) pursuant to paragraph (a)(2) of Rule 485
Title of Securities Being Registered
------------------------------------
U.S. Growth Fund A Class, U.S. Growth Fund B Class, U.S. Growth Fund C Class,
U.S. Growth Fund Institutional Class, Overseas Equity Fund A Class,
Overseas Equity Fund B Class, Overseas Equity Fund C Class,
Overseas Equity Fund Institutional Class, New Pacific Fund A Class,
New Pacific Fund B Class, New Pacific Fund C Class and
New Pacific Fund Institutional Class
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 8 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>
CROSS-REFERENCE SHEET*
PART A
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
- -------- ----------- ------------
A Classes/
B Classes/ Institutional
C Classes Classes
<S> <C> <C> <C>
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;
Implementation of Implementation of
Investment Objectives Investment Objectives
and Policies and Policies
5 Management of the Fund................................... Management of Management of
the Funds the Funds
6 Capital Stock and Other Securities ...................... The Delaware Dividends and
Difference; Distributions;
Dividends and Taxes
Distributions;
Taxes
7 Purchase of Securities Being Offered.................... Cover; How Cover; How
to Buy Shares; to Buy Shares;
Calculation of Calculation of
Offering Price and Net Net Asset Value
Asset Value Per Share; Per Share; Management
Management of the Funds of the Funds
8 Redemption or Repurchase................................. How to Buy How to Buy
Shares; Redemption Shares; Redemption
and Exchange and Exchange
9 Legal Proceedings........................................ None None
</TABLE>
<PAGE>
* This filing relates to Class A Shares, Class B Shares and Class C
Shares of U.S. Growth Fund, Overseas Equity Fund and New Pacific 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 three Funds (and eight classes) have a common Part B
and Part C.
<PAGE>
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 Objectives and
Policies; Investment Restrictions
14 Management of the Registrant................................... Officers and Directors
15 Control Persons and Principal Holders of Securities ........... Officers and Directors
16 Investment Advisory and Other Services......................... Plans Under Rule 12b-1 for
the Fund Classes (under
Purchasing Shares); Investment
Management Agreements;
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>
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>
TABLE OF CONTENTS
Cover Page
Synopsis
Summary of Expenses
Financial Highlights
Investment Objectives and Strategies
U.S. Growth Fund
Overseas Equity Fund
New Pacific Fund
Classes of Shares
How to Buy Shares
Redemption and Exchange
Dividends and Distributions
Taxes
Calculation of Net Asset Value Per Share
Management of the Funds
Implementation of Investment Objectives and Policies
Appendix A - Description of Security Ratings
-1-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC. PROSPECTUS
INSTITUTIONAL CLASSES FEBRUARY 28, 1998
--------------------------------------------------------------
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 three 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 U.S. Growth
Fund, Overseas Equity Fund (formerly World Growth Fund) and New Pacific 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.
Each Fund offers an Institutional Class, which is referred to
individually as a "Class" and collectively as the "Classes."
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. The Funds' Statement of Additional Information ("Part B" of Adviser
Funds, Inc.'s registration statement), dated February 28, 1998, 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 (the "SEC"). 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. The SEC also
maintains a Web site (http://www.sec.gov) that contains Part B, material we
incorporated by reference, and other information regarding registrants that
electronically file with the SEC.
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.
-2-
<PAGE>
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 THE PRINCIPAL AMOUNT INVESTED.
SHARES OF THE FUNDS ARE NOT BANK OR CREDIT UNION DEPOSITS.
The investment objectives of each Fund are as follows:
U.S. Growth Fund seeks to maximize capital appreciation by investing
in companies of all sizes which have low dividend yields, strong
balance sheets and high expected earnings growth rates relative to
their industry.
Overseas Equity Fund seeks to maximize total return (capital
appreciation and income), principally through investments in an
internationally diversified portfolio of equity securities.
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.
-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 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.
Risk Factors
Prospective investors should consider a number of factors:
1. Overseas Equity Fund and New Pacific Fund may invest
substantially all of their assets in nonUnited States issuers. U.S. Growth
Fund may invest 20% of its 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
in connection with those investments 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 and
other developed 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 ("CFTC"). 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. 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 this Fund. See
Lower-Rated Securities under Risk Factors and Special Considerations.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") furnishes
investment management services to each Fund. See Restructuring of the Funds
under Management of the Funds. The Manager also provides investment management
services to certain 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,
accounting services and transfer agent for each Fund and for all of the other
mutual funds in the Delaware Group.
-4-
<PAGE>
The Manager has selected sub-advisers to provide the day-to-day
investment management of the Funds. The sub-advisers for the Funds are: Lynch &
Mayer, Inc. for U.S. Growth Fund; Delaware International Advisers Ltd. for
Overseas Equity Fund; and AIB Govett, Inc. for New Pacific Fund.
See Summary of Expenses and Management of the Funds for further
information regarding the Manager and the fees payable under each Fund's
Investment Management Agreement and Sub-Advisory Agreement.
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.
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.
-5-
<PAGE>
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
U.S. Growth Fund New Pacific Fund Overseas Equity Fund
Shareholder Transaction Expenses Institutional Class Institutional Class Institutional Class
- -------------------------------- --------------------- ------------------- -------------------
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price)........................ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as
a percentage of offering price)........... None None None
Exchange Fees............................. None* None* None*
<S> <C> <C> <C>
</TABLE>
- ------------------------
* Exchanges are subject to the requirements of each Fund and a front-end
sales charge may apply.
The purpose of the following tables is to assist the investor in
understanding the various costs and expenses they will bear directly or
indirectly in owning shares of each Fund.
<TABLE>
<CAPTION>
Annual Operating Expenses
(as a percentage of average
daily net assets after fee waivers U.S. Growth Fund Overseas Equity Fund New Pacific Fund
and expense reimbursements) Institutional Class Institutional Class Institutional Class
- --------------------------- --------------------- ------------------- -------------------
<S> <C> <C> <C>
Management Fees
(after voluntary waiver)+................. 0.00% 0.00%++ 0.00%+++
12b-1 Expenses............................ None None None
Other Operating Expenses
(after giving effect to voluntary
waiver reimbursements)+............ 0.00% 0.00% 0.00%
Total Operating Expenses
(after giving effect to voluntary
waiver reimbursements)+.......... 0.00% 0.00% 0.00%
</TABLE>
- ------------------------
For expense information about 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
-6-
<PAGE>
not exceed 1.50% through April 30, 1998. Absent such fee waivers
and expense reimbursements, "Total Operating Expenses" and
"Management Fees" would be as follows:
<TABLE>
<CAPTION>
Total Operating Expenses Management Fees
<S> <C> <C>
U.S. Growth Fund Institutional Class......................... 0.00% 0.00%
Overseas Equity Fund Institutional Class................... 0.00% 0.00%
New Pacific Fund Institutional Class......................... 0.00% 0.00%
</TABLE>
++ Effective September 15, 1997, the investment management fee payable
by Overseas Equity Fund changed from 1.10% of average daily net
assets to 1.00% of average daily net assets. The expense information
has been restated to reflect that change.
+++ Effective the close of business May 3, 1996, the investment
management fee payable by the 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.
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. [The
following example reflects the voluntary waivers and payments by the Manager
as discussed in this Prospectus.]
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
U.S. Growth Fund Institutional Class $00 $00 $00 $000
Overseas Equity Fund Institutional Class $00 $00 $00 $000
New Pacific Fund Institutional Class $00 $00 $00 $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.
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses they will bear directly or
indirectly in owning shares of each Fund.
-7-
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements
of Delaware Group Adviser Funds, Inc. - U.S. Growth Fund, Overseas Equity Fund
and New Pacific Fund and have been audited by Ernst & Young LLP, independent
auditors. The data should be read in conjunction with the financial
statements, related notes, and the report of Ernst & Young LLP, all of which
are incorporated by reference into Part B. Further information about each
Fund's performance is contained in its Annual Report to shareholders. A copy
of the Funds' Annual Report (including the report of Ernst & Young LLP) may
be obtained from Adviser Funds, Inc. upon request at no charge.
- --------------------------------------------------------------------------------
-8-
<PAGE>
<TABLE>
<CAPTION>
U.S. Growth Fund Overseas Equity Fund
Period
2/3/94(1)
Year Ended through Year Ended
10/31/97 10/31/96(2) 10/31/95 10/31/94 10/31/97(3) 10/31/96(2) 10/31/95
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $ 00.00 $12.50 $10.23 $10.52 $00.00 $11.44 $11.02
Income From Investment Operations:
Net Investment Income (Loss)...................... (0.00) (0.05) (0.05) (0.01) (0.00) (0.06) 0.04
Net Realized and Unrealized Gain (Loss)
From Security Transactions................... 0.00 1.49 2.32 (0.28) 0.00 0.96 0.41
Net Increase (Decrease) in Net Assets
From Investment Operations................... 0.00 1.44 2.27 (0.29) 0.00 0.90 0.45
Less Dividends and Distributions:
Dividends From Net Investment Income.............. 0.00 none none none none (0.02) (0.03)
Distributions From Net Realized Gain
on Security Transactions....................... none none none none none none none
Total Dividends and Distributions................. 0.00 none none none 0.00 (0.02) (0.03)
Net Asset Value, End of Period........................ $00.00 $13.94 $12.50 $10.23 $00.00 $12.32 $11.44
Total Return(4)....................................... 00.00% 11.52% 22.19% 2.78% 00.00% 7.91% 4.22%
- -----------------------------------------
Ratios and Supplemental Data:
Net Assets, End of Period (000's omitted)......... $00,000 $10,003 $4,819 $1,630 $00,000 $284 $161
Ratio of Expenses to Average Net Assets........... 0.00% 1.48% 1.50% 1.50% 0.00% 1.50% 1.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation.................. 0.00% 1.56% 1.83% 2.60% 0.00% 2.28% 2.61%
Ratio of Net Investment Loss to Average Net Assets (0.00%) (0.45%) (0.59%) (0.27%) (0.00%) (0.19%) 0.40%
Ratio of Net Investment Loss to Average Net Assets
Prior to Expense Limitation.................. (0.00%) (0.53%) (0.92%) (1.37%) (0.00%) (0.97%) (0.71%)
Portfolio Turnover Rate........................... 000% 131% 58% 66% 000% 21% 9%
Average Commission Rate Paid...................... $0.000 $0.519 N/A N/A $0.000 $0.0448 N/A
New Pacific Fund
Period Period
2/3/94(1) 2/3/94(1)
through Year Ended through
10/31/94 10/31/97 10/31/96(2) 10/31/95 10/31/94
Net Asset Value, Beginning of Period.................. $10.50 $00.00 $8.77 $10.48 $11.14
Income From Investment Operations:
Net Investment Income (Loss)...................... 0.04 (0.00) (0.05) (0.01) 0.01
Net Realized and Unrealized Gain (Loss)
From Security Transactions................... 0.52 0.00 0.82 (1.41) (0.67)
Net Increase (Decrease) in Net Assets
From Investment Operations................... 0.56 0.00 0.77 (1.42) (0.66)
Less Dividends and Distributions:
Dividends From Net Investment Income.............. (0.04) none (0.01) none none
Distributions From Net Realized Gain
on Security Transactions....................... none none none (0.29) none
Total Dividends and Distributions................. (0.04) 0.00 (0.01) (0.29) none
Net Asset Value, End of Period........................ $11.02 $00.00 $9.53 $8.77 $10.48
Total Return(4)....................................... 5.26% 00.00% 8.77% (13.65%) (5.98%)
- -----------------------------------------
Ratios and Supplemental Data:
Net Assets, End of Period (000's omitted)......... $63 $00,000 $119 $62 $47
Ratio of Expenses to Average Net Assets........... 1.50% 0.00% 1.50% 1.50% 1.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation.................. 3.21% 0.00% 2.45% 3.38% 3.31%
Ratio of Net Investment Loss to Average Net Assets 0.76% (0.00%) 1.49% (0.16%) 0.23%
Ratio of Net Investment Loss to Average Net Assets
Prior to Expense Limitation.................. (0.95%) (0.00%) 0.54% (2.04%) (1.58%)
Portfolio Turnover Rate........................... 6% 000% 163% 163% 104%
Average Commission Rate Paid...................... N/A $0.000 $0.0118 N/A N/A
</TABLE>
- --------------------
(1) Date of initial public offering; ratios have been annualized.
(2) Beginning May 6, 1996, Delaware Management Company, Inc. became the
investment manager of the Funds. See Restructuring of the Funds under
Management of the Funds.
(3) Beginning September 15, 1997, Delaware International Advisers Ltd. became
the sub-adviser to Overseas Equity Fund.
(4) Total return reflect the voluntary fee waivers described under Summary of
Expenses and Management of the Funds.
-9-
<PAGE>
INVESTMENT OBJECTIVES AND STRATEGIES
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, Inc. ("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 Appendix A for a description of Moody's
and S&P ratings.
The Fund may invest up to 20% of its assets in foreign securities.
Overseas Equity 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.
-10-
<PAGE>
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 Depositary Receipts
(ADRs), American Depositary 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 40% 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.
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
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,
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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.
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. U.S. Growth, Overseas Equity and 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 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 U.S. Growth 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. Overseas Equity Fund and New Pacific Fund may
invest substantially all of their assets in foreign investments. U.S. Growth
Fund may invest up to 20% of its assets in foreign securities. 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
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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 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.
Overseas Equity Fund and 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 Depositary
Receipts (ADRs) or American Depositary 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. U.S. Growth Fund may invest up to 10% of
its total assets in debt securities rated lower than Baa by Moody's or BBB by
S&P. Prices for securities rated below investment grade may be
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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 Appendix A.
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 leverage. None of the Funds, except for U.S. Growth Fund, 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. 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.
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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 of each Class are available for purchase only by: (a)
retirement plans introduced by persons not associated with brokers or dealers
that are primarily engaged in the retail securities business and rollover
individual retirement accounts from such plans; (b) tax-exempt employee
benefit plans of the Manager, or its affiliates and securities dealer firms
with a selling agreement with the Distributor; (c) institutional advisory
accounts of the Manager, or its affiliates and those having client
relationships with Delaware Investment Advisers, a division of the Manager, or
its affiliates and their corporate sponsors, as well as subsidiaries and
related employee benefit plans and rollover individual retirement accounts
from such institutional advisory accounts; (d) a bank, trust company and
similar financial institution investing for its own account or for the account
of its trust customers for whom such financial institution is exercising
investment discretion in purchasing shares of the Class, except where the
investment is part of a program that requires payment to the financial
institution of a Rule 12b-1 Plan fee; and (e) registered investment advisers
investing on behalf of clients that consist solely of institutions and high
net-worth individuals having at least $1,000,000 entrusted to the adviser for
investment purposes, but only if the adviser is not affiliated or associated
with a broker or dealer and derives compensation for its services exclusively
from its clients for such advisory services.
Class A Shares, Class B Shares and Class C Shares
In addition to offering 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
0.35%. 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 or by calling the
phone numbers listed on the back cover of this Prospectus.
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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, to Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by
mailing a check payable to the 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 1412893401
(include your name(s) and your account number for the Fund and Class in which
you are investing).
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, for the specific Fund and Class
selected, to Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You 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 a Class, you may write and
authorize an exchange of part or all of your investment into shares of the
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. See Redemption and Exchange for more
complete information concerning your exchange privileges.
Investing through Your Investment Dealer
You can make a purchase of shares of the Funds through most
investment dealers who, as part of the service they provide, must transmit
orders promptly 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 is the date the order is received
by the Fund in which the shares are being purchased, its agent or designee.
The effective date of a direct purchase is the day your wire, electronic
transfer or check is received, unless it is received after the time the share
price is determined, as noted above. Purchase orders received after such time
will be effective the next business day.
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The Conditions of Your Purchase
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 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.
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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 the Fund receives your request in good
order. For example, redemption and exchange requests received in good order
after the time the net asset value of shares is determined will be processed
on the next business day. See Purchase Price and Effective Date under How to
Buy Shares. Except as otherwise noted below, for a redemption request to be in
"good order," you must provide your Class account number, account
registration, and the total number of shares or dollar amount of the
transaction. With regard to exchanges, you must also provide the name of the
fund in which you want to invest the proceeds. Exchange instructions and
redemption requests must be signed by the record owner(s) exactly as the
shares are registered. You may also request a redemption or an exchange by
calling a Fund at 800-828-5052. Redemption proceeds will be distributed
promptly, as described below, but not later than seven days after receipt of a
redemption request.
All exchanges involve a purchase of shares of the fund into
which the exchange is made. As with any purchase, an investor should obtain
and carefully read that fund's prospectus before buying shares in an exchange.
The prospectus contains more complete information about the fund, including
charges and expenses.
Each Fund will process written and telephone redemption requests to
the extent that the purchase orders for the shares being redeemed have already
settled. Each Fund will honor written redemption requests as to shares for
which a check was tendered as payment, but neither Fund will mail or wire the
proceeds until it is reasonably satisfied that the check has cleared, which
may take up to 15 days from the purchase date. You can avoid this potential
delay if you purchase shares by wiring Federal Funds. 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 Classes, such exchange will be
exchanged at net asset value. Shares of the Classes may not be exchanged into
Class B Shares or Class C Shares of any of the funds in the Delaware Group. A
Fund may suspend, terminate, or amend the terms of the exchange privilege upon
60 days' written notice to shareholders.
Various redemption and exchange methods are outlined below. No fee is
charged by the Funds or the Distributor for redeeming or exchanging your
shares, although in the case of an exchange, a sales charge may apply. You may
also have your investment dealer arrange to have your shares redeemed or
exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any
of the features described below, shall continue in effect until such time as a
written revocation or modification has been received by a Fund or its agent.
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Written Redemption and Exchange
You can write to a Fund at 1818 Market Street, Philadelphia, PA 19103
to redeem some or all of your shares or to request an exchange of any or all
your shares into another mutual fund in the Delaware Group, subject to the
same conditions and limitations as other exchanges noted above. The request
must be signed by all owners of the account or your investment dealer of
record.
For redemptions of more than $50,000, or when the proceeds are not
sent to the shareholder(s) at the address of record, each Fund requires a
signature by all owners of the account and may require a signature guarantee.
Each signature guarantee must be supplied by an eligible guarantor
institution. Each Fund reserves the right to reject a signature guarantee
supplied by an eligible institution based on its creditworthiness. A Fund may
require further documentation from corporations, executors, retirement plans,
administrators, trustees or guardians.
Payment is normally mailed the next business day after receipt of
your redemption request. Certificates are issued for shares only if you submit
a specific request. If your shares are in certificate form, the certificate(s)
must accompany your request and also be in good order.
You also may submit your written request for redemption or exchange by
facsimile transmission at the following number: 215-255-8864.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge)
for you. If you choose to have your shares in certificate form, you may redeem
or exchange only by written request and you must return your certificates.
The Telephone Redemption - Check to Your Address of Record service
and the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in which you are investing
in writing that you do not wish to have such services 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 a Fund by telephone during periods when market or economic
conditions lead to an unusually large volume of telephone requests.
Neither the Funds nor their 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, a Fund will follow
reasonable procedures to confirm that instructions communicated by telephone
are genuine (including verification of a form of personal identification) as,
if it does not, the Fund or the Transfer Agent may be liable for any losses
due to unauthorized or fraudulent transactions. A written confirmation will be
provided for all purchase, exchange and redemption transactions initiated by
telephone. By exchanging shares by telephone, you are acknowledging prior
receipt of a prospectus for the fund into which your shares are being
exchanged.
Telephone Redemption-Check to Your Address of Record
You or your investment dealer of record can have redemption proceeds
of $50,000 or less mailed to you at your address of record. Checks will be
payable to the shareholder(s) of record. Payment is normally mailed the next
business day after receipt of the redemption request.
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Telephone Redemption-Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must submit a written authorization and you may need to have your
signature guaranteed. For your protection, your authorization must be on file.
If you request a wire, your funds will normally be sent the next business day.
If you ask for a check, it will normally be mailed the next business day after
receipt of your redemption request to your predesignated bank account. There
are no fees for this redemption method, but the mail time may delay getting
funds into your bank account. Simply call your Client Services Representative
prior to the time the net asset value is determined, as noted above.
Telephone Exchange
You or your investment dealer of record can exchange shares into any
fund in the Delaware Group under the same registration. As with the written
exchange service, telephone exchanges are subject to the same conditions and
limitations as other exchanges noted above. Telephone exchanges may be subject
to limitations as to amounts or frequency.
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DIVIDENDS AND DISTRIBUTIONS
Each Fund declares 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.
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TAXES
The tax discussion set forth below is included for general
information only. Investors should consult their own tax advisers concerning
the federal, state, local or foreign tax consequences of an investment in the
Fund.
On August 5, 1997, President Clinton signed into law the Taxpayer
Relief Act of 1997 (the "1997 Act"). This new law makes sweeping changes in
the Internal Revenue Code (the "Code"). Because many of these changes are
complex, and only indirectly affect a Fund and its distributions to you, they
are discussed in Part B. Changes in the treatment of capital gains, however,
are discussed in this section.
Each Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, a Fund
will not be subject to federal income tax, or to any excise tax, to the
extent its earnings are distributed as provided in the Code and it satisfies
certain other requirements relating to the sources of its income and
diversification of its assets.
Each Fund intends to distribute substantially all of its net
investment income and net capital gains, if any. Dividends from net
investment income or net short-term capital gains will be taxable to
those investors who are subject to income taxes as ordinary income, whether
received in cash or in additional shares. For corporate investors, dividends
from net investment income will generally qualify in part for the
corporate dividends-received deduction . The portion of dividends paid by a
Fund that so qualifies will be designated each year in a notice from
Adviser Funds, Inc. to the Fund's shareholders. For the fiscal year ended
October 31, 1997, 0%, 0% and 0% of U.S. Growth Fund's, Overseas Equity
Fund's and New Pacific Fund's dividends from net investment income qualified
for the dividends-received deduction to corporations.
Distributions paid by a Fund from long-term capital gains ,
whether received in cash or in additional shares, are taxable to those
investors who are subject to income taxes as long-term capital gains,
regardless of the length of time an investor has owned shares in the Fund.
A Fund does not seek to realize any particular amount of capital gains during
a year; rather, realized gains are a by-product of Fund management activities.
Consequently, capital gains distributions may be expected to vary considerably
from year to year. Also, for those investors subject to tax, if purchases of
shares in a Fund are made shortly before the record date for a dividend or
capital gains distribution, a portion of the investment will be returned as a
taxable distribution.
The Treatment of Capital Gain Distributions under the Taxpayer Relief Act of
1997
The 1997 Act creates a category of long-term capital gain for
individuals that will be taxed at new lower tax rates. For investors who are
in the 28% or higher federal income tax brackets, these gains will be taxed at
a minimum of 20%. For investors who are in the 15% federal income tax bracket,
these gains will be taxed at a maximum of 10%. Capital gain distributions will
qualify for these new maximum tax rates, depending on when a Fund's securities
were sold and how long they were held by a Fund before they were sold.
Investors who want more information on holding periods and other qualifying
rules relating to these new rates should review the expanded discussion in
Part B, or should contact their own tax advisers.
Adviser Funds, Inc. will advise you in its annual information reporting
at calendar year end of the amount of its capital gain distributions which will
qualify for these maximum federal tax rates.
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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.
The sale of shares of a Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
the Fund and any other funds in the Delaware Group. Any loss incurred on a sale
or exchange of Fund shares that had been held for six months or less will be
treated as a long-term capital loss to the extent of capital gain dividends
received with respect to such shares.
In addition to the federal taxes described above, shareholders may or
may not be subject to various state and local taxes . For example, distributions
of interest income and capital gains realized from certain types of U.S.
government securities may be exempt from state personal income taxes. Because
investors' state and local taxes may be different than the federal taxes
described above, investors should consult their own tax advisers.
Each year, Adviser Funds, Inc. will mail to you information on the tax
status of the Fund's dividends and distributions. Shareholders will also receive
each year information as to the portion of dividend income, if any, that is
derived from U.S. government securities that are exempt from state income tax.
Of course, shareholders who are not subject to tax on their income would not be
required to pay tax on amounts distributed to them by the Fund.
Adviser Funds, Inc. is required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to shareholders who have not
complied with IRS taxpayer identification regulations. You may avoid this
withholding requirement by certifying on your Investment Application your proper
Taxpayer Identification Number and by certifying that you are not subject to
backup withholding.
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 Overseas Equity Fund and New Pacific Fund
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.
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CALCULATION OF NET ASSET VALUE PER SHARE
The net asset value ("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 Determining
Offering Price and Net Asset Value in Part B.
The purchase and redemption price of a Class is the 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 12b-1 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 may vary.
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<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
Delaware Management Company, Inc. (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 October 31, 1997, the Manager and its
affiliates within the Delaware Group, including Delaware International
Advisers Ltd., were managing in the aggregate more than $00 billion in
assets in the various institutional or separately managed (approximately
$00,000,000,000) and investment company (approximately $00,000,000,000)
accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). In turn, DMH is a wholly owned subsidiary,
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 U.S. Growth Fund
and New Pacific Fund dated May 4, 1996 and under an Amended and Restated
Investment Management Agreement with Advisers Funds, Inc. on behalf of
Overseas Equity Fund dated September 15, 1997 (the "New Agreement").
Investment Management Agreements. The Investment Management
Agreements for U.S. Growth Fund and New Pacific Fund 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.
The New Agreement was approved by the Board of Directors of Adviser
Funds, Inc., including a majority of the Directors who are not interested
persons of Advisers Funds, Inc., on July 17, 1997. The New Agreement lowered
the Manager's annual fee from 1.10% of average daily net assets under the
previous Investment Management Agreement to 1.00%.
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:
U.S. Growth Fund 0.70%
Overseas Equity Fund 1.00%
New Pacific Fund 0.80%
The directors of Adviser Funds, Inc. annually review fees paid to the
Manager. The Manager elected voluntarily to waive that portion, if any, of its
investment advisory fees and to reimburse a Fund's expenses
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<PAGE>
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 Overseas Equity Fund and New Pacific Fund,
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, 1997, the following
investment management fees based on a percentage of a Fund's average daily net
assets were incurred and paid [and reflect the voluntary waiver described
above]:
Earned Paid
------ ----
U.S. Growth Fund 0.00% 0.00%
Overseas Equity Fund* 0.00% 0.00%
New Pacific Fund 0.00% 0.00%
* The Board of Directors approved a reduction from 1.10% to 1.00% in the
investment advisory fee for Overseas Equity Fund effective September
15, 1997.
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 of 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 stated policies and places orders on behalf of the
Fund to effect the investment decisions made. The Manager continues to have
ultimate 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.
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.
Lynch & Mayer, Inc., Sub-Adviser to the Manager with respect to
management of the assets of the 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, Inc. provides
investment advice to pension funds, foundations, endowments, trusts and high
net worth individuals and families and had assets under management, as of
October 31, 1997, in excess of $0.0 billion. Effective as of October 27,
1997, Edward J.
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<PAGE>
Petner assumed primary responsibility for making investment decisions for U.S.
Growth Fund. Mr. Petner currently serves as President and Co-Chief Executive
Officer of Lynch & Mayer, Inc. Before joining Lynch & Mayer, Inc. in 1983, Mr.
Petner received a BA from Duquesne University in 1981 and an MBA from the
Wharton School in 1983.
Delaware International Advisers Ltd., Sub-Adviser to the Manager with
respect to management of the assets of the Overseas Equity Fund, Third Floor, 80
Cheapside, London, England EC2V 6EE, is an affiliate of the Manager. Delaware
International Advisers Ltd. began serving as a Sub-Adviser on September 15,
1997. The Sub-Advisory Agreement between Delaware International Advisors Ltd.
and the Manager was approved by shareholders of Overseas Equity Fund at a
special meeting held on November 18, 1997. Delaware International Advisers Ltd.
provides investment advisory services to certain other funds in the Delaware
Group and to institutional accounts, primarily retirement plans and endowment
funds. As of October 31, 1997, Delaware International Advisers Ltd. had assets
in excess of $0.0 billion. Also effective September 15, 1997, Clive A. Gillmore
and Robert Akester assumed primary responsibility for making day-to-day
investment decisions for Overseas Equity Fund. A graduate of the University of
Warwick and having begun his career at Legal and General Investment Management,
Mr. Gillmore joined the Delaware Group in 1990 after eight years of investment
experience. His most recent position prior to joining the Delaware Group was as
a Pacific Basin equity analyst and senior portfolio manager for Hill Samuel
Investment Advisers Ltd. Mr. Gillmore completed the London Business School
Investment program. Prior to joining Delaware in 1996 as a Senior Portfolio
Manager, Mr. Akester, who began his investment career in 1969, was most recently
a Director of Hill Samuel Investment Advisers Ltd., which he joined in 1985. His
prior experience included working as a Senior Analyst and head of the South-East
Asian Research team at James Capel, and as a Fund Manager at Prudential
Assurance Co., Ltd. Mr. Akester holds a BS in Statistics and Economics from
University College, London and is an associate of the Institute of Actuaries,
with a certificate in Finance and Investment.
In making investment decisions for Overseas Equity Fund, Mr. Gillmore
and Mr. Akester regularly consult with an international equity team of nine
members, five of whom research the Pacific Basin and four of whom research the
European Markets. Mr. Gillmore and Mr. Akester also regularly consult with David
G. Tilles. Mr. Tilles, who is Chief Investment Officer for Delaware
International, is a graduate of the University of Warwick with a BS in
management sciences. Before joining the Delaware Group in 1990, he was Chief
Investment Officer of Hill Samuel Investment Advisers Ltd. He is a member of the
Institute of Investment Management & Research and the Operational Research
Society.
AIB Govett, Inc., Sub-Adviser to the Manager with respect to management
of the assets of New Pacific Fund, 250 Montgomery Street, Suite 1200, San
Francisco, California 94104, provides investment advice to investment trusts,
investment companies, mutual funds and pension funds and had assets under
management, as of October 31, 1997, of $0.0 billion. Effective as of November
12, 1997, Jane Pickard assumed primary responsibility for making investment
decisions for New Pacific Fund . Ms. Pickard graduated in law from Endinburgh
University. She joined BZW in 1991, where she initially worked as a specialist
in structured debt products moving into the Pacific Rim equity division in 1992.
She remained there until 1995 when she moved to IAI International where she had
responsibility for Pacific Region investment for U.S. institutional and retail
funds. Ms. Pickard joined AIB Govett Asset Management in 1996 and concentrates
on investments in the Pacific region.
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<PAGE>
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.
<TABLE>
<CAPTION>
Fund Sub-Adviser Annual Fee
---- ----------- ----------
<S> <C> <C>
U.S. Growth Fund Lynch & Mayer, Inc. 0.40% of average
daily net assets
Overseas Equity Fund Delaware International Advisers Ltd. 80% of the fee paid
to the Manager
New Pacific Fund AIB Govett , Inc. 0.50% of average
daily net assets
</TABLE>
Custodian
The Chase Manhattan Bank serves as Custodian for each of the Funds
and, in that capacity, has custody of the Funds' securities. Its mailing
address is 4 Chase Metrotech Center, Brooklyn, NY 11245. The Chase Manhattan
Bank 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.
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, or life-of-fund, as applicable. 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.
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<PAGE>
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. 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 directors of Adviser Funds, Inc. annually review fees paid to the
Distributor and 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, 1997, the ratios of expenses to average daily net
assets for each Class were as follows:
U.S. Growth Fund Institutional Class 0.00%
Overseas Equity Fund Institutional Class 0.00%
New Pacific Fund Institutional Class 0.00%
[The expense ratio of each Class reflects the fee waiver and
reimbursements.] See Summary of Expenses for current fee waivers and
reimbursements.
Restructuring of the Funds
Until April 26, 1996, Adviser Funds, Inc. consisted of nine series of
shares (U.S. Growth Fund, World Growth Fund (now named Overseas Equity Fund)
and New Pacific Fund, as well as six other funds) and was named Lincoln
Advisor Funds, Inc. ("LAF"). On February 23, 1996, LAF's Board of Directors
approved a
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<PAGE>
restructuring to integrate fully LAF into the Delaware Group of funds. The
restructuring provided, among other things, for the liquidation of three
funds; the appointment of Delaware Management Company, Inc. as the investment
manager of each of the Funds; the appointment of certain sub-advisers ;
changes in certain names, including: Lincoln U.S. Growth Portfolio to U.S.
Growth Fund; Lincoln World Growth Portfolio to World Growth Fund; and Lincoln
New Pacific Portfolio to New Pacific Fund; and the change of the LAF to
Delaware Group Adviser Funds, Inc. The liquidations were completed on April
26, 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.
On July 17, 1997, the Board of Directors approved the liquidations of
three additional funds. These liquidations were completed on September 19,
1997. Effective September 15, 1997, the name of World Growth Fund changed to
Overseas Equity Fund.
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 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 January 31, 1998, LIM held
23.84% of the outstanding shares of Overseas Equity Fund Institutional
Class, 10.40% of the outstanding shares of New Pacific Fund Institutional
Class and 99.99% of the outstanding shares of Federal Bond Fund Institutional
Class. In addition, as of January 31, 1997, ASI held 64.89% of the outstanding
shares of Enterprise Fund A Class and 75.91% of the outstanding shares of U.S.
Growth Fund A Class, LNLIC held 85.18% of the outstanding shares of Overseas
Equity Fund A Class, 82.75% of the outstanding shares of New Pacific Fund A
Class, 97.36% of the outstanding shares of Federal Bond Fund A Class and
89.78% of the outstanding shares of 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.]
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<PAGE>
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.
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<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
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.
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
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<PAGE>
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
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
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 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
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<PAGE>
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 premiums paid for options on futures contracts 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.
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<PAGE>
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 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 losses 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
-35-
<PAGE>
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 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.
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<PAGE>
APPENDIX A - DESCRIPTION OF SECURITIES RATINGS
U.S. Growth Fund has the ability to invest up to 10% of its net
assets in high yield, high risk fixed-income securities. The table set forth
below shows asset composition, based on rating categories, of such securities
held by the Fund. Certain securities may not be rated because the rating
agencies were either not asked to provide ratings (e.g., many issuers of
privately placed bonds do not seek ratings) or because the rating agencies
declined to provide a rating for some reason, such as insufficient data. The
table below shows the percentage of the Fund's high yield, high risk
securities which are not rated. The information contained in the table was
prepared based on a dollar weighted average of the Fund's portfolio
composition based on month end data for the fiscal year ended October 31,
1997. The paragraphs following the table contain excerpts from Moody's and
S&P's rating descriptions. These credit ratings evaluate only the safety of
principal and interest and do not consider the market value risk associated
with high yield securities.
Rating Moody's Average Weighted
and/or Percentage of
S&P Portfolio
-------------- ----------------
General Rating Information
MOODY'S INVESTORS SERVICE
BOND RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than Aaa bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
which make the long-term risks appear somewhat larger than in Aaa securities.
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<PAGE>
A: Bonds which are rated A possess many favorable investment
attributes and are considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds that are rated Baa are considered medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
SHORT-TERM DEBT RATINGS
Moody's short-term debt ratings are opinions of the ability of
issuers to repay punctually senior obligations which have an original maturity
not exceeding one year.
P-1: Issuers rated "PRIME-1" or "P-1" (or supporting institutions)
have superior ability for repayment of senior short-term debt obligations.
P-2: Issuers rated "PRIME-2" or "P-2" (or supporting institutions)
have a strong ability for repayment of senior short-term debt obligations.
P-3: Issuers rated "PRIME-3" or "P-3" (or supporting institutions)
have an acceptable ability for repayment of senior short-term debt
obligations.
-38-
<PAGE>
MUNICIPAL NOTE RATINGS
Issuers or the features associated with Moody's MIG or VMIG ratings
are identified by date of issue, date of maturity or maturities or rating
expiration date and description to distinguish each rating from other ratings.
Each rating designation is unique with no implication as to any other similar
issue of the same obligor. MIG ratings terminate at the retirement of the
obligation while VMIG rating expiration will be a function of each issue's
specific structural or credit features.
MIG 1/VMIG 1: This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity
support, or demonstrated broad-based access to the market for
refinancing.
MIG 2/VMIG 2: This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/VMIG 3: This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well established.
MIG 4/VMIG 4: This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
STANDARD & POOR'S RATINGS GROUP
BOND RATINGS
AAA: Debt rated AAA has the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in a small
degree.
A: Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest an repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC and CC: Debt rated BB, B, CCC or CC is regarded, on
balance, as predominately speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C: This rating is reserved for income bonds on which no interest is
being paid.
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<PAGE>
D: Debt rated D is in default, and payment of interest and/or repayment
of principal is in arrears.
COMMERCIAL PAPER RATINGS
S&P's commercial paper ratings are current assessments of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1: The A-1 designation indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. A plus (+)
designation is applied only to those issues rated A-1 which possess an
overwhelming degree of safety.
A-2: Capacity for timely payment on issues with the designation A-2
is strong. However, the relative degree of safely is not as high as for issues
designated A-1.
A-3: Issues carrying this designation have a satisfactory capacity
for timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
MUNICIPAL NOTE RATINGS
An S&P municipal note rating reflects the liquidity concerns and
market access risks unique to notes. Notes due in 3 years or less will likely
receive a note rating. Notes maturing beyond 3 years will most likely receive
a long-term debt rating. The following criteria will be used in making that
assessment:
Amortization schedule (the larger the final maturity relative to
other maturities, the more likely it will be treated as a note).
Sources of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
SP-1: Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
SP-3: Speculative capacity to pay principal and interest.
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<PAGE>
For more information contact -----------------------------------
Delaware Group at 800-828-5052.
DELAWARE GROUP ADVISER FUNDS, INC.
-----------------------------------
U.S. GROWTH FUND
OVERSEAS EQUITY FUND
NEW PACIFIC FUND
INSTITUTIONAL CLASSES
-----------------------------------
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103 P R O S P E C T U S
SHAREHOLDER SERVICING, -----------------------------------
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT FEBRUARY 28, 1998
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
DELAWARE
GROUP
--------
<PAGE>
TABLE OF CONTENTS
Cover Page
Synopsis
Summary of Expenses
Financial Highlights
Investment Objectives and Strategies
U.S. Growth Fund
Overseas Equity Fund
New Pacific Fund
The Delaware Difference
Plans and Services
Classes of Shares
How to Buy Shares
Redemption and Exchange
Dividends and Distributions
Taxes
Calculation of Offering Price and Net Asset Value Per Share
Management of the Funds
Implementation of Investment Objectives and Policies
Appendix A - Description of Security Ratings
-1-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC. PROSPECTUS
FEBRUARY 28, 1998
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- 2265
Delaware Group Adviser Funds, Inc. ("Adviser Funds, Inc.") is an
open-end management investment company. Adviser Funds, Inc. currently issues
three 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 U.S. Growth Fund, Overseas Equity Fund (formerly World
Growth Fund) and New Pacific 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.
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."
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. The Funds' Statement of Additional Information ("Part
B" of Adviser Funds, Inc.'s registration statement) dated February 28, 1998, 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 (the
"SEC"). 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. The SEC also maintains a Web site (http://www.sec.gov) that
contains Part B, material we incorporated by reference, and other information
regarding registrants that electronically file with the SEC.
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.
-2-
<PAGE>
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 THE PRINCIPAL AMOUNT INVESTED.
SHARES OF THE FUNDS ARE NOT BANK OR CREDIT UNION DEPOSITS.
The investment objectives of each Fund are as follows:
U.S. Growth Fund seeks to maximize capital appreciation by investing
in companies of all sizes which have low dividend yields, strong
balance sheets and high expected earnings growth rates relative to
their industry.
Overseas Equity Fund seeks to maximize total return (capital
appreciation and income), principally through investments in an
internationally diversified portfolio of equity securities.
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.
-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 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.
Risk Factors
Prospective investors should consider a number of factors:
1. Overseas Equity Fund and New Pacific Fund may invest substantially
all of their assets in nonUnited States issuers. U.S. Growth Fund may invest 20%
of its 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 in connection with
those investments 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 and other developed 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 ("CFTC"). 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. 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 this Fund. See Lower-Rated
Securities under Risk Factors and Special Considerations.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") furnishes investment
management services to each Fund. See Restructuring of the Funds under
Management of the Funds. The Manager also provides investment management
services to certain 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,
accounting services and transfer agent for each Fund and for all of the other
mutual funds in the Delaware Group.
-4-
<PAGE>
The Manager has selected sub-advisers to provide the day-to-day
investment management of the Funds. The sub-advisers for the Funds are: Lynch &
Mayer, Inc. for U.S. Growth Fund; Delaware International Advisers Ltd. for
Overseas Equity Fund; and AIB Govett, Inc. for New Pacific Fund.
See Summary of Expenses and Management of the Funds for further
information regarding the Manager and the fees payable under each Fund's
Investment Management Agreement and Sub-Advisory Agreement.
Sales Charges
Class A Shares
The price of each 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 Class A Shares as of the end of Adviser Funds, Inc.'s
most recent fiscal year, is equivalent to:
Fund Percentage of Amount Invested
---- -----------------------------
U.S. Growth Fund 0.00%
Overseas Equity Fund 0.00%
New Pacific Fund 0.00%
The front-end sales charge is reduced on certain transactions of at
least $100,000 but under $1,000,000. For purchases of $1,000,000 or more, the
front-end sales charge is eliminated (subject to a contingent deferred
sales charge ("CDSC") of 1% if shares are redeemed within 12 months of
purchase and if a dealer commission was paid in connection with such
purchase). Class A Shares are subject to annual 12b-1 Plan expenses for the
life of the investment.
Class B Shares
The price of each 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.
Class C Shares
The price of each 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 generally must 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 these 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
in Class A Shares, and that Class A Shares are subject to lower annual 12b-1
Plan expenses than Class B
-5-
<PAGE>
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 Classes of Shares.
Class B Shares and Class C Shares may be redeemed or exchanged at the
net asset value calculated after receipt of the redemption or exchange request
subject, in the case of redemptions, to any applicable CDSC. Neither the Funds
nor the Distributor assesses any charges other than the CDSC for redemptions
or exchanges of Class B Shares or Class C Shares. There are certain
limitations on an investor's ability to exchange shares between the various
classes of shares that are offered. See Redemption and Exchange.
Open-End Investment Company
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.
-6-
<PAGE>
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to each Fund's Class A Shares, Class B Shares and Class C Shares
follows:
<TABLE>
<CAPTION>
U.S. Growth Overseas Equity New Pacific
Class A Class B Class C Class A Class B Class C Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares Shares Shares Shares Shares Shares Shares
- -------------------------------- -------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <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 4.75% None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as
a percentage of offering price) None None None 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%* None* 4.00%* 1.00%*
Redemption Fees.............. None** None** None** None** None** None** None** None** None**
</TABLE>
- ------------------------
* Class A purchases of $1,000,000 or more may be made at net asset value.
However, if in connection with any such purchase a dealer's commission is
paid to the financial adviser through whom such purchase is effected, a
CDSC of 1% will be imposed on certain redemptions within 12 months of
purchase ("Limited CDSC"). Additional Class A purchase options involving
the imposition of a CDSC may be permitted as described in the Prospectus
from time to time. 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 , Level Sales Charge Alternative - Class C Shares and Contingent
Deferred Sales Charge - Class B Shares and Class C Shares under Classes of
Shares.
** CoreStates Bank, N.A. currently charges $7.50 per redemption for
redemptions payable by wire.
-7-
<PAGE>
<TABLE>
<CAPTION>
Annual Operating Expenses
(as a percentage of average daily U.S. Growth Overseas Equity New Pacific
net assets after fee waivers and Class A Class B Class C Class A Class B Class C Class A Class B Class C
expense reimbursements) Shares Shares Shares Shares Shares Shares Shares Shares Shares
- ----------------------- -------- ------ ------ ------ ------ ------ ------ ------ ------
Management Fees
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(after voluntary waiver)+.... 0.00% 0.00% 0.00% 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%* 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% 0.00% 0.00% 0.00%
Total Operating Expenses
(after giving effect to voluntary
waiver reimbursements)+ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
</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 do not exceed on an annualized basis 1.50%, as a
percentage of average net assets (exclusive of taxes, interest,
brokerage commissions, extraordinary expenses and 12b-1 Plan expenses)
through April 30, 1998. Absent such fee waivers and expense
reimbursements, "Total Operating Expenses" and "Management Fees" would be
as follows:
<TABLE>
<CAPTION>
Total Operating Expenses Management Fees
Class A Class B Class C Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C>
U.S. Growth Fund 0.00% 0.00% 0.00% 0.70% 0.70% 0.70%
Overseas Equity Fund 0.00% 0.00% 0.00% 1.10% 1.10% 1.10%
New Pacific Fund 0.00% 0.00% 0.00% 0.80% 0.80% 0.80%
</TABLE>
++ Effective September 15, 1997, the investment management fee payable by
Overseas Equity Fund changed from 1.10% of average daily net assets to
1.00% 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
-8-
<PAGE>
of the National Association of Securities Dealers, Inc. (the "NASD"). See
Distribution (12b-1) and Service under Management of the Funds.
** Prior to May 6, 1996, 12b-1 Plan expenses for Class A Shares were
0.35%. Beginning May 6, 1996, those expenses were reduced to 0.30%. The
expense information has been restated to reflect that change.
For expense information about the Funds' Institutional Classes of shares,
see the separate prospectus relating to those classes.
Investors utilizing the Delaware Group Asset Planner asset allocation
service also typically incur an annual maintenance fee of $35 per
Strategy. However, effective November 1, 1996, the annual maintenance fee is
waived until further notice. Investors who utilize the Asset Planner for an
Individual Retirement Account ("IRA") will pay an annual IRA fee of $15 per
Social Security number. See Delaware Group Asset Planner in Part B.
The following example illustrates the expenses that an investor would pay
on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return, (2) redemption and no redemption at the end of each time
period and (3) for Class B Shares and Class C Shares, payment of a CDSC at the
time of redemption, if applicable. The following example assumes the voluntary
waiver of the management fee by the Manager as discussed in this Prospectus.
<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>
U.S. Growth Fund
Class A $00(1) $000 $000 $000 $00 $000 $000 $000
Class B $00 $000 $000 $000(2) $00 $00 $000 $000(2)
Class C $00 $00 $000 $000 $00 $00 $000 $000
Overseas Equity Fund
Class A $00(1) $000 $000 $000 $00 $000 $000 $000
Class B $00 $000 $000 $000(2) $00 $00 $000 $000(2)
Class C $00 $00 $000 $000 $00 $00 $000 $000
New Pacific Fund
Class A $00(1) $000 $000 $000 $00 $000 $000 $000
Class B $00 $000 $000 $000(2) $00 $00 $000 $000(2)
Class C $00 $00 $000 $000 $00 $00 $000 $000
</TABLE>
(1) Generally, no redemption charge is assessed upon redemption of Class A
Shares. Under certain circumstances, however, a Limited CDSC or other CDSC,
which has not been reflected in this calculation, may be imposed on certain
redemptions . 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. The ten year expense numbers for
the Class B Shares reflects the expenses of Class B Shares for year
eight and the expenses of Class A Shares for years nine and ten. See
Automatic Conversion of Class B Shares under Classes of Shares for a
description of the automatic conversion feature.
-9-
<PAGE>
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.
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses they will bear directly or
indirectly in owning shares of each Fund.
-10-
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements
of Delaware Group Adviser Funds, Inc. - U.S. Growth Fund, Overseas Equity Fund
and New Pacific Fund and have been audited by Ernst & Young LLP, independent
auditors. The data should be read in conjunction with the financial
statements, related notes, and the report of Ernst & Young LLP, all of which
are incorporated by reference into Part B. Further information about each
Fund's performance is contained in its Annual Report to shareholders. A copy
of the Funds' Annual Report (including the report of Ernst & Young LLP) may
be obtained from Adviser Funds, Inc. upon request at no charge.
- --------------------------------------------------------------------------------
-11-
<PAGE>
<TABLE>
<CAPTION>
Advisor Funds, Inc.
Class A Shares Class B Shares
U.S. Growth Fund U.S. Growth Fund
Period Period
12/3/93(1) 3/29/94(1)
Year Ended through Year Ended through
10/31/97 10/31/96(2) 10/31/95 10/31/94 10/31/97 10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $00.00 $12.43 $10.21 $10.00 $00.00 $12.33 $10.19 $10.00
Income From Investment Operations:
Net Investment Income (Loss)............... (0.00) (0.09) (0.09) (0.04) (0.00) (0.17) (0.14) (0.03)
Net Realized and Unrealized Gain (Loss)
From Security Transactions............ 0.00 1.48 2.31 0.26 0.00 1.45 2.28 0.22
Net Increase (Decrease) in Net Asset
From Investment Operations............ 0.00 1.39 2.22 0.22 0.00 1.28 2.14 0.19
Less Dividends and Distributions:
Dividends From Net Investment Income....... 0.00 none none (0.01) 0.00 none none none
Distributions From Net Realized Gain
on Security Transactions.............. 0.00 none none none 0.00 none none none
Total Dividends and Distributions.......... 0.00 none none (0.01) 0.00 none none none
Net Asset Value, End of Period.................... $00.00 $13.82 $12.43 $10.21 00.00 $13.61 $12.33 $10.19
Total Return(3)................................... 00.00% 11.18% 21.74% 2.18% 00.00% 10.38% 21.00% 1.90%
- ----------------------------------
Ratios and /Supplemental Data:
Net Assets, End of Period (000's omitted).. $00,000 $16,118 $13,574 $10,669 $00,000 $809 $567 $204
Ratio of Expenses to Average Net Assets.... 0.00% 1.80% 1.85% 1.85% 0.00% 2.48% 2.50% 2.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation........... 0.00% 1.88% 2.18% 2.94% 0.00% 2.56% 2.83% 3.60%
Ratio of Investment Loss to Average Net
Assets ............................... (0.00%) (0.77%) (0.88%) (0.51%) (0.00%) (1.45%) (1.57%) (1.26%)
Ratio of Investment Loss to Average
Net Assets Prior to Expense Limitation (0.00%) (0.85%) (1.21%) (1.60%) (0.00%) (1.53%) (1.90%) (2.36%)
Portfolio Turnover Rate.................... 000% 131% 58% 66% 000% 131% 58% 66%
Average Commission Rate Paid............... $0.0000 $0.0519 N/A N/A $0.0000 $0.0519 N/A N/A
Advisor Funds, Inc.
Class C Shares
U.S. Growth Fund
Period
5/23/94(1)
Year Ended through
10/31/97 10/31/96(2) 10/31/95 10/31/94
Net Asset Value, Beginning of Period.............. $00.00 $12.85 $10.62 $10.00
Income From Investment Operations:
Net Investment Income (Loss)............... (0.00) (0.16) (0.10) (0.03)
Net Realized and Unrealized Gain (Loss)
From Security Transactions............ 0.00 1.49 2.33 0.65
Net Increase (Decrease) in Net Asset
From Investment Operations............ 0.00 1.33 2.23 0.62
Less Dividends and Distributions:
Dividends From Net Investment Income....... 0.00 none none none
Distributions From Net Realized Gain
on Security Transactions.............. 0.00 none none none
Total Dividends and Distributions.......... 0.00 none none none
Net Asset Value, End of Period.................... $00.00 $14.18 $12.85 $10.62
Total Return(3)................................... 00.00% 10.35% 21.00% 6.17%
- ----------------------------------
Ratios and /Supplemental Data:
Net Assets, End of Period (000's omitted).. $00,000 $55 $27 $5
Ratio of Expenses to Average Net Assets.... 0.00% 2.48% 2.50% 2.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation........... 0.00% 2.56% 2.82% 3.54%
Ratio of Investment Loss to Average Net
Assets ............................... (0.00%) (1.45%) (1.61%) (1.09%)
Ratio of Investment Loss to Average
Net Assets Prior to Expense Limitation (0.00%) (1.53%) (1.93%) (2.13%)
Portfolio Turnover Rate.................... 000% 131% 58% 66%
Average Commission Rate Paid............... $0.0000 $0.0519 N/A N/A
</TABLE>
<PAGE>
- --------------------
(1) Date of initial public offering; ratios have been annualized.
(2) Beginning May 6, 1996, Delaware Management Company, Inc. became the
investment manager of the Funds. See Restructuring of the Funds under
Management of the Funds.
(3) Total return for Class A Shares does not include maximum sales charge of
4.75% nor the 1% Limited CDSC that would apply in the event of certain
redemptions within 12 months of purchase. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Made At Net Asset Value.
Total return for Class B and Class C Shares does not include any applicable
CDSC, which varies from 1-4%, depending on the holding period for Class B
Shares and 1% for Class C Shares for 12 months from the date of purchase.
Total return reflects the voluntary waivers as discussed under Summary of
Expenses.
-12-
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
Class A Shares Class B Shares
Overseas Equity Fund Overseas Equity Fund
Period Period
12/3/93(1) 3/29/94(1)
Year Ended through Year Ended through
10/31/97 10/31/96(2) 10/31/95 10/31/94 10/31/97 10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............ $00.00 $11.40 $11.00 $10.00 $00.00 $10.71 $10.40 $10.00
Income From Investment Operations:
Net Investment Income (Loss).............. (0.00) (0.06) 0.01 0.02 (0.00) (0.06) (0.02) none
Net Realized and Unrealized Gain (Loss)
From Security Transactions........... 0.00 1.07 0.40 1.01 0.00 0.93 0.35 0.43
Total From Investment Operations.......... 0.00 1.01 0.41 1.03 0.00 0.87 0.33 0.43
Less Dividends and Distributions:
Dividends From Net Investment Income..... (0.00) (0.02) (0.01) (0.03) (0.00) (0.02) (0.02) (0.03)
Distributions From Net Realized Gain
on Security Transactions............. 0.00 none none none 0.00 none none none
Total Dividends and Distributions......... (0.00) (0.02) (0.01) (0.03) (0.00) (0.02) (0.02) (0.03)
Net Asset Value, End of Period.................. $00.00 $12.39 $11.40 $11.00 $00.00 $11.56 $10.71 $10.40
Total Return(3) ............................... 00.00% 8.90% 3.81% 10.25% 00.00% 8.16% 3.19% 4.28%
- ---------------------------------------
Ratios and Supplemental Data:
Net Assets, End of Period (000's omitted). $00,000 $14,886 $13,018 $11,721 $00,000 $1,208 $1,183 $523
Ratio of Expenses to Average Net Assets... 0.00% 1.82% 1.85% 1.85% 0.00% 2.50% 2.50% 2.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation.......... 0.00% 2.60% 2.96% 3.56% 0.00% 3.28% 3.61% 4.22%
Ratio of Net Investment Income (Loss) to
Average Net Assets................... (0.00%) (0.51%) 0.00% 0.25% (0.00%) (1.19%) (0.57%) (0.37%)
Ratio of Net Investment Income (Loss)
to Average Net Assets Prior to
Expense Limitation................... (0.00%) (1.29%) 1.11% 1.96% (0.00%) (1.97%) (1.68%) 2.09%
Portfolio Turnover Rate................... 000% 21% 9% 6% 000% 21% 9% 6%
Average Commission Rate Paid.............. $0.0000 $0.0448 N/A N/A $0.0000 $0.0448 N/A N/A
Adviser Funds, Inc.
Class C Shares
Overseas Equity Fund
Period
5/10/94(1)
Year Ended through
10/31/97 10/31/96(2) 10/31/95 10/31/94
Net Asset Value, Beginning of Period............ $00.00 $10.73 $10.43 $10.00
Income From Investment Operations:
Net Investment Income (Loss).............. (0.00) (0.06) (0.06) 0.01
Net Realized and Unrealized Gain (Loss)
From Security Transactions........... 0.00 0.93 0.39 0.44
Total From Investment Operations.......... 0.00 0.87 0.33 0.45
Less Dividends and Distributions:
Dividends From Net Investment Income..... (0.00) (0.02) (0.03) (0.02)
Distributions From Net Realized Gain
on Security Transactions............. 0.00 none none none
Total Dividends and Distributions......... (0.00) (0.02) (0.03) (0.02)
Net Asset Value, End of Period.................. $00.00 $11.58 $10.73 $10.43
Total Return(3) ............................... 0.00% 8.15% 3.16% 4.45%
- ---------------------------------------
Ratios and Supplemental Data:
Net Assets, End of Period (000's omitted). $00,000 $112 $43 $38
Ratio of Expenses to Average Net Assets... 0.00% 2.50% 2.50% 2.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation.......... 0.00% 3.28% 3.61% 4.23%
Ratio of Net Investment Income (Loss) to
Average Net Assets................... (0.00%) (1.19%) (0.62%) 0.16%
Ratio of Net Investment Income (Loss)
to Average Net Assets Prior to
Expense Limitation................... (0.00%) (1.97%) (1.73%) (1.57%)
Portfolio Turnover Rate................... 000% 21% 9% 6%
Average Commission Rate Paid.............. $0.0000 $0.0448 N/A N/A
</TABLE>
<PAGE>
- --------------------
(1) Date of initial public offering; ratios have been annualized.
(2) Beginning May 6, 1996, Delaware Management Company, Inc. became the
investment manager of the Funds. See Restructuring of the Funds under
Management of the Funds.
(3) Total return for Class A Shares does not include maximum sales charge of
4.75% nor the 1% Limited CDSC that would apply in the event of certain
redemptions within 12 months of purchase. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Made At Net Asset Value.
Total return for Class B and Class C Shares does not include any applicable
CDSC, which varies from 1-4%, depending on the holding period for Class B
Shares and 1% for Class C Shares for 12 months from the date of purchase.
Total return reflects the voluntary waivers as discussed under Summary of
Expenses.
-13-
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
Class A Shares Class B Shares
New Pacific Fund New Pacific Fund
Period Period
12/3/93(1) 3/29/94(1)
Year Ended through Year Ended through
10/31/97 10/31/96(2) 10/31/95 10/31/94 10/31/97 10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............ $00.00 $8.71 $10.44 $10.00 $00.00 $9.01 $10.86 $10.00
Income From Investment Operations:
Net Investment Income (Loss)............. (0.00) (0.05) (0.05) (0.02) (0.00) (0.05) (0.10) (0.03)
Net Realized and Unrealized Gain (Loss)
on Security Transactions............ 0.00 0.77 (1.39) 0.47 0.00 0.73 (1.46) 0.89
Total From Investment Operations......... 0.00 0.72 (1.44) 0.45 0.00 0.68 (1.56) 0.86
Less Dividends and Distributions:
Dividends From Net Investment Income..... (0.00) (0.01) none (0.01) (0.00) (0.01) none none
Distributions From Net Realized Gain
on Security Transactions............ (0.00) none (0.29) none (0.00) none (0.29) none
Returns of Capital....................... none none none none none none none none
Total Dividends and Distributions........ (0.00) (0.01) (0.29) (0.01) (0.00) (0.01) (0.29) none
Net Asset Value, End of Period.................. $00.00 $9.42 $8.71 $10.44 $00.00 $9.68 $9.01 $10.86
Total Return(3)................................. 00.00% 8.26% (13.99%) 4.53% 00.00% 7.54% (14.56%) 8.58%
- ---------------------------------
Ratios and Supplemental Data:
Net Assets, End of Period (000's omitted).$00,000 $11,752 $10,353 $11,333 $00,000 $562 $573 $431
Ratio of Expenses to Average Net Assets... 0.00% 1.82% 1.85% 1.85% 0.00% 2.50% 2.50% 2.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation.......... 0.00% 2.77% 3.73% 3.66% 0.00% 3.45% 4.38% 4.32%
Ratio of Net Investment Income (Loss) to
Average Net Assets................... (0.00%) 1.17% (0.60%) (0.21%) (0.00%) 0.49% (1.20%) (0.88%)
Ratio of Net Investment Income (Loss) to
Average Net Assets Prior to
Expense Limitation.................. (0.00%) 0.22% (2.48%) (2.02%) (0.00%) (0.46%) (3.08%) (2.70%)
Portfolio Turnover Rate................... 000% 163% 163% 104% 000% 163% 163% 104%
Average Commission Rate Paid.............. $0.0000 $0.0118 N/A N/A $0.0000 $0.0118 N/A N/A
Adviser Funds, Inc.
Class C Shares
New Pacific Fund
Period
7/7/94(1)
Year Ended through
10/31/97 10/31/96(2) 10/31/95 10/31/94
Net Asset Value, Beginning of Period............... $00.00 $8.83 $10.66 $10.00
Income From Investment Operations:
Net Investment Income (Loss)................ (0.00) (0.05) (0.08) (0.02)
Net Realized and Unrealized Gain (Loss)
on Security Transactions............... 0.00 0.72 (1.46) 0.68
Total From Investment Operations............ 0.00 0.67 (1.54) 0.66
Less Dividends and Distributions:
Dividends From Net Investment Income........ (0.00) (0.01) none none
Distributions From Net Realized Gain
on Security Transactions............... (0.00) none (0.29) none
Returns of Capital.......................... none none none none
Total Dividends and Distributions........... (0.00) (0.01) (0.29) none
Net Asset Value, End of Period..................... $00.00 $9.49 $8.83 $10.66
Total Return(3).................................... 00.00% 7.58% (14.57%) 6.55%
- ---------------------------------
Ratios and Supplemental Data:
Net Assets, End of Period (000's omitted).... $00,000 $44 $17 $12
Ratio of Expenses to Average Net Assets...... 0.00% 2.50% 2.50% 2.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation............. 0.00% 3.45% 4.38% 4.31%
Ratio of Net Investment Income (Loss) to
Average Net Assets...................... (0.00%) 0.49% (1.02%) (0.83%)
Ratio of Net Investment Income (Loss) to
Average Net Assets Prior to
Expense Limitation..................... (0.00%) (0.46%) (2.90%) (2.64%)
Portfolio Turnover Rate...................... 000% 163% 163% 104%
Average Commission Rate Paid................. $0.0000 $0.0118 N/A N/A
</TABLE>
<PAGE>
- --------------------
(1) Date of initial public offering; ratios have been annualized.
(2) Beginning May 6, 1996, Delaware Management Company, Inc. became the
investment manager of the Funds. See Restructuring of the Funds under
Management of the Funds.
(3) Total return for Class A Shares does not include maximum sales charge of
4.75% nor the 1% Limited CDSC that would apply in the event of certain
redemptions within 12 months of purchase. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Made At Net Asset Value.
Total return for Class B and Class C Shares does not include any applicable
CDSC, which varies from 1-4%, depending on the holding period for Class B
Shares and 1% for Class C Shares for 12 months from the date of purchase.
Total return reflects the voluntary waivers as discussed under Summary of
Expenses.
-14-
<PAGE>
INVESTMENT OBJECTIVES AND STRATEGIES
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, Inc. ("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 Appendix C for a
description of Moody's and S&P ratings.
The Fund may invest up to 20% of its assets in foreign securities.
Overseas Equity 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.
-15-
<PAGE>
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 Depositary Receipts
(ADRs), American Depositary 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 40% 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.
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
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,
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<PAGE>
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.
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. U.S. Growth Fund, Overseas Equity Fund and
New Pacific Fund 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
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
U.S. Growth 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. Overseas Equity Fund and the New Pacific Fund
may invest substantially all of their assets in foreign investments. U.S.
Growth Fund may invest up to 20% of its assets in foreign securities. 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
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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 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.
Overseas Equity Fund and the 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 Depositary
Receipts (ADRs) or American Depositary 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. U.S. Growth Fund may invest up to 10% of
its total assets in debt securities rated lower than Baa by Moody's or BBB by
S&P. Prices for securities rated below investment grade may be
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<PAGE>
affected by legislative and regulatory developments. Securities rated Ba\BB or
lower are commonly referred to as "junk bonds." See Appendix C - Description
of Security Ratings .
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 leverage. None of the Funds, except for U.S. Growth Fund, 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. 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.
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
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<PAGE>
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
and Telephone Exchanges
Delaphone
800-362-FUND
(800-362-3863)
Performance Information
You can call the Investor Information Center at any time for current
performance information. Current yield and total return information may also be
included in advertisements and information given to shareholders. Yields are
computed on an annualized basis over a 30-day period.
Shareholder Services
During business hours, you can call the Delaware Group's Shareholder
Service Center. Our representatives can answer any questions about your
account, the Funds, various service features and other funds in the Delaware
Group.
Delaphone Service
Delaphone is an account inquiry service for investors with
Touch-Tone(R) phone service. It enables you to get information on your account
faster than the mailed statements and confirmations. Delaphone also provides
current performance information on the 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, if any, 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.
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<PAGE>
For more information, see Additional Methods of Adding to Your
Investment - Dividend Reinvestment Plan under How to Buy Shares or call the
Shareholder Service Center.
MoneyLine(SM) Services
Delaware Group offers the following services for fast and convenient
transfer of funds between your personal bank account and your Delaware Group
fund account:
1. MoneyLine(SM) 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(SM) Direct Deposit Service and
have such payments transferred from your Fund account to your
predesignated bank account. See Dividends and Distributions. In
addition, you may elect to have your Systematic Withdrawal Plan
payments transferred from your Fund account to your predesignated
bank account through this service. See Systematic Withdrawal Plans
under Redemption and Exchange.
2. MoneyLine(SM) On Demand
You or your investment dealer may request purchases and
redemptions of Fund shares by using MoneyLine(SM) On Demand. When you
authorize the Fund to accept such requests from you or your
investment dealer, funds will be withdrawn from (for share purchases)
or deposited to (for share redemptions) your predesignated bank
account . Your request will be processed the same day if you call
prior to 4 p.m., Eastern time. There is a $25 minimum and a $50,000
maximum limit for MoneyLine(SM) On Demand transactions.
For each MoneyLine(SM) Service, it may take up to four business days
for the transactions to be completed. You can initiate either service by
completing an Account Services form. If your name and address are not
identical to the name and address on your Fund account, you must have your
signature guaranteed. The Fund does not charge a fee for any MoneyLine(SM)
Service; however, your bank may change a fee. Please call the Shareholder
Service Center for additional information about these services.
Retirement Planning
An investment in the Funds may be a suitable investment option for
tax-deferred retirement plans. Delaware Group offers a full spectrum of
qualified and non-qualified retirement plans, including the popular 401(k)
deferred compensation plan, IRA, and the new Roth IRA. Just call the Delaware
Group at 1-800- 523-1918 for more information.
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<PAGE>
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 a 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 Classes of Shares.
Letter of Intention
The Letter of Intention feature permits you to obtain a reduced
front-end sales charge on purchases of Class A Shares by aggregating certain
of your purchases of Delaware Group fund shares over a 13-month period. See
Classes of Shares and Part B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits you to reinvest proceeds
from a redemption of Class A Shares, within one year of the date of the
redemption, without paying a front-end sales charge. See Part B.
Exchange Privilege
The Exchange Privilege permits you to exchange all or part of your
shares into shares of other mutual funds in the Delaware Group, subject to
certain exceptions and limitations. For additional information on exchanges,
see Investing by Exchange under How to Buy Shares and Redemption and Exchange.
Wealth Builder Option
You may elect to invest in the Funds through regular liquidations of
shares in your accounts in other funds in the Delaware Group. Investments
under this feature are exchanges and are therefore subject to the same
conditions and limitations as other exchanges of Fund shares. See Additional
Methods of Adding to Your Investment - Wealth Builder Option and Investing by
Exchange under How to Buy Shares, and Redemption and Exchange.
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.
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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, which incur a sales charge when they are
purchased, but generally are not subject to any sales charge when they are
redeemed. Class A Shares are subject to annual 12b-1 Plan expenses of up to a
maximum of 0.35% (currently, no more than 0.30%) of average daily net assets
of such shares. Certain purchases of Class A Shares qualify for reduced
front-end sales charges. See Front-End Sales Charge Alternative - Class A
Shares, below. See also Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value under Redemption
and Exchange and Distribution (12b-1) and Service under Management of the
Funds.
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% (0.25% of which
are service fees to be paid to the Distributor, dealers or others for
providing personal service and/or maintaining shareholder accounts) of average
daily net assets of such shares for approximately eight years after purchase.
Class B Shares permit all of the investor's dollars to work from the time the
investment is made. The higher 12b-1 Plan expenses paid by Class B Shares will
cause such shares to have a higher expense ratio and to pay lower dividends
than Class A Shares. At the end of approximately eight years after purchase,
Class B Shares automatically will be converted into Class A Shares and,
thereafter, for the remainder of the life of the investment, the annual 12b-1
Plan fee of up to 0.35% (currently, no more than 0.30%) for Class A Shares
will apply. 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% (0.25% of which
are service fees to be paid to the Distributor, dealers or others for
providing personal service and/or maintaining shareholder accounts) of average
daily net assets of such shares for the life of the investment. The higher
12b-1 Plan expenses paid by Class C Shares will cause such shares to have a
higher expense ratio and to pay lower dividends than Class A Shares. Unlike
Class B Shares, Class C Shares do not convert to another class.
The alternative purchase arrangements described above permit
investors to choose the method of purchasing shares that is most suitable
given the amount of their purchase, the length of time they expect to hold
their shares and other relevant circumstances. Investors should determine
whether, given their particular circumstances, it is more advantageous to
purchase Class A Shares and incur a front-end sales charge, purchase Class B
Shares and have the entire initial purchase amount invested in 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. The higher 12b-1 Plan expenses on Class B Shares and Class C
Shares will be offset to the extent a
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return is realized on the additional money initially invested upon the
purchase of such shares. However, there can be no assurance as to the return,
if any, that will be realized on such additional money. In addition, the
effect of any return earned on such additional money will diminish over
time. In comparing Class B Shares to Class C Shares, investors should also
consider the duration of the annual 12b-1 Plan expenses to which each of these
classes is subject and the desirability of an automatic conversion feature,
which is available only for Class B Shares.
For the distribution and related services provided to, and the
expenses borne on behalf of, the Funds, the Distributor and others will be
paid, in the case of Class A Shares, from the proceeds of the front-end
sales charge and 12b-1 Plan fees and, in the case of Class B Shares and
Class C Shares, from the proceeds of the 12b-1 Plan fees and, if applicable,
the CDSC incurred upon redemption. Financial advisers may receive different
compensation for selling Class A Shares, Class B Shares and Class C Shares.
Investors should understand that the purpose and function of the respective
12b-1 Plans and the CDSCs applicable to Class B Shares and Class C Shares are
the same as those of the 12b-1 Plan and the front-end sales charge applicable
to Class A Shares in that such fees and charges are used to finance the
distribution of the respective Classes. See Distribution (12b-1) and Service
under Management of the Funds.
Dividends, if any, paid on Class A Shares, Class B Shares and Class C
Shares will be calculated in the same manner, at the same time, on the same
day and will be in the same amount, except that the additional amount of 12b-1
Plan expenses relating to Class B Shares and Class C Shares will be borne
exclusively by such shares. See Calculation of Offering Price and Net Asset
Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. Adviser Funds, Inc. and the Distributor intend to operate in compliance
with these rules.
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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
Offering Offering
Amount of Purchase Price Amount Invested** Price
- --------------------------------------------------------------------------------------------------------------------------
U.S. Overseas New
Growth Equity Pacific
Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Less than $100,000 4.75% 0.00% 0.00% 0.00% 4.00%
$100,000 but under $250,000 3.75 0.00 0.00 0.00 3.00
$250,000 but under $500,000 2.50 0.00 0.00 0.00 2.00
$500,000 but under $1,000,000* 2.00 0.00 0.00 0.00 1.60
</TABLE>
* There is no front-end sales charge on purchases of Class A Shares of
$1,000,000 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 respective 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.
- --------------------------------------------------------------------------------
A Fund must be notified when a sale takes place which would qualify for
the reduced front-end sales charge on the basis of previous or current
purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by 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 0.15% of the offering price.
Dealers who receive 90% or more of the sales charge may be deemed to be
underwriters under the Securities Act of 1933 (the "1933 Act").
- --------------------------------------------------------------------------------
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For initial purchases of Class A Shares of $1,000,000 or more, a dealer's
commission may be paid by the Distributor to financial advisers through whom
such purchases are made, in accordance with the following schedule:
Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
------------------ -------------------
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75
Next $2 million up to $5 million 0.50
Amount over $5 million 0.25
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other Delaware Group funds\
as to which a Limited CDSC applies 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.
Redemptions of Class A Shares purchased at net asset value may result in
the imposition of a Limited CDSC if the dealer's commission described above
was paid in connection with the purchase of those shares. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at
Net Asset Value under Redemption and Exchange.
Combined Purchases Privilege
By combining your holdings of Class A Shares with your holdings of Class
B Shares and/or Class C Shares of the Fund and shares of the other funds in
the Delaware Group, except as 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. In addition, assets held by investment advisory clients
of the Manager or its affiliates in a stable value account 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
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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.
Allied Plans
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made available
under a joint venture agreement between the Distributor and another
institution through which mutual funds are marketed and which allow
investments in Class A Shares of designated Delaware Group funds ("eligible
Delaware Group fund shares"), as well as shares of designated classes of
non-Delaware Group funds ("eligible non-Delaware Group fund shares"). Class B
Shares and Class C Shares are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Group and eligible non-Delaware Group fund shares
held by the Allied Plan may be combined with the dollar amount of new
purchases by that Allied Plan to obtain a reduced front-end sales charge on
additional purchases of eligible Delaware Group fund shares.
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.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described under Waiver of Limited Contingent
Deferred Sales Charge - Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Group and non-Delaware Group fund shares. When
eligible Delaware Group fund shares are exchanged into eligible non-Delaware
Group fund shares, the Limited CDSC will be imposed at the time of the
exchange, unless the joint venture agreement specifies that the amount of the
Limited CDSC will be paid by the financial adviser or selling dealer. See
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange.
Buying Class A Shares at Net Asset Value
Class A Shares of a Fund may be purchased at net asset value under the
Delaware Group Dividend Reinvestment Plan and, under certain circumstances,
the Exchange Privilege or 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
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employee benefit plans for such entities. Individual purchases, including
those in retirement accounts, must be for accounts in the name of the
individual or a qualifying family member.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within
12 months after the registered representative changes employment, if the
purchase is funded by proceeds from an investment where a front-end sales
charge, contingent deferred sales charge or other sales charge has been
assessed. Purchases of Class A Shares may also be made at net asset value by
bank employees who provide services in connection with agreements between the
bank and unaffiliated brokers or dealers concerning sales of shares of
Delaware Group funds. Officers, directors and key employees of institutional
clients of the Manager or any of its affiliates may purchase Class A Shares at
net asset value. Moreover, purchases may be effected at net asset value for
the benefit of the clients of brokers, dealers and registered investment
advisers affiliated with a broker or dealer, if such broker, dealer or
investment adviser has entered into an agreement with the Distributor
providing specifically for the purchase of Class A Shares in connection with
special investment products, such as wrap accounts or similar fee based
programs.
Purchases of Class A Shares at net asset value may also be made by the
following: institutions investing for the account of their trust customers if
they are not eligible to purchase shares of the Institutional Class of a Fund;
and any group retirement plan (excluding defined benefit pension plans), or
such plans of the same employer, for which plan participant records are
maintained on the Delaware Investment & Retirement Services, Inc. ("DIRSI")
proprietary record keeping system that (i) has in excess of $500,000 of plan
assets invested in Class A Shares of Delaware Group funds and any stable value
account available to investment advisory clients of the Manager or its
affiliates, or (ii) is sponsored by an employer that has at any point after
May 1, 1997 had more than 100 employees while such plan has held Class A
Shares of a Delaware Group fund and such employer has properly represented to
DIRSI in writing that it has the requisite number of employees and has
received written confirmation back from DIRSI. See Group Investment Plans for
information regarding the applicability of the Limited CDSC.
Investors in Delaware-Voyageur Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A
Shares of any of the funds in the Delaware Group at net asset value.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from
such accounts will be made at net asset value. Loan repayments made to 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.
A Fund must be notified in advance that an investment qualifies for
purchase at net asset value.
Group Investment Plans
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, SIMPLE IRA, SIMPLE
401(k), Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, and 403(b)(7) and 457 Deferred Compensation Plans) may
benefit from the reduced front-end sales charges available on Class A Shares
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 will
be aggregated to determine the applicable front-end 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
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non-retirement Delaware Group investment 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.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from Delaware Group funds. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at
Net Asset Value under Redemption and
Exchange.
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.
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. In addition, from time to time, upon written notice
to all of its dealers, the Distributor may hold special promotions for
specified periods during which the Distributor may pay additional compensation
to dealers or brokers for selling Class B Shares at the time of purchase. As
discussed below, however, Class B Shares are subject to annual 12b-1 Plan
expenses and, if redeemed within six years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class
B Shares. Payments to the Distributor and others under the Class B 12b-1 Plan
may be in an amount equal to no more than 1% annually. The combination of the
CDSC and the proceeds of the 12b-1 Plan fees makes it possible for a Fund to
sell Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class B Shares
described in this Prospectus, even after the exchange. Such CDSC schedule may
be higher than the CDSC schedule for Class B Shares acquired as a result of
the exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the last business
day of the second full week of March, June, September and December (each, a
"Conversion Date"). If the eighth anniversary after a purchase of Class B
Shares falls on a Conversion Date, an investor's Class B Shares will be
converted on that date. If the eighth anniversary occurs between Conversion
Dates, an investor's Class B Shares will be converted on the next Conversion
Date after such anniversary. Consequently, if a shareholder's eighth
anniversary falls on the day after a Conversion Date, that shareholder will
have to hold Class B Shares for as long as three additional months after the
eighth anniversary of purchase before the shares will automatically convert
into Class A Shares. 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.
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Class B Shares of a fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of that fund (or, in the case
of Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant
Class) pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute tax-free
exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class C Shares at the time of
purchase from its own assets in an amount equal to no more than 1% of the
dollar amount purchased. As discussed below, Class C Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within 12 months of purchase, a
CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class
C Shares. Payments to the Distributor and others under the Class C 12b-1 Plan
may be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class C Shares as
described in this Prospectus. See Redemption and Exchange.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage
of the dollar amount subject to the CDSC. The charge will be assessed on an
amount equal to the lesser of the net asset value at the time of purchase of
the shares being redeemed or the net asset value of those shares at the time
of redemption. No CDSC will be imposed on increases in net asset value above
the initial purchase price, nor will a CDSC be assessed on redemptions of
shares acquired through reinvestments of dividends or capital gains
distributions. For purposes of this formula, the "net asset value at the time
of purchase" will be the net asset value at purchase of the Class B Shares or
the Class C Shares of a Fund, even if those shares are later exchanged for
shares of another Delaware Group fund. In the event of an exchange of the
shares, the "net asset value of such shares at the time of redemption" will be
the net asset value of the shares that were acquired in the exchange.
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The following table sets forth the rates of the CDSC for 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, 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 Funds 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
Class B Shares will convert are subject to ongoing annual 12b-1 Plan
expenses of up to a maximum of 0.35% (currently, no more than 0.30%) of
average daily net assets of such shares.
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are
redeemed first, followed by shares acquired through the reinvestment of
dividends or distributions, and finally by shares held longest during the
six-year period. With respect to Class C Shares, it will be assumed that
shares held for more than 12 months are redeemed first followed by shares
acquired through the reinvestment of dividends or distributions, and finally
by shares held for 12 months or less.
All investments made during a calendar month, regardless of what day
of the month the investment occurred, will age one month on the last day of
that month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares and Class
C Shares. See Waiver of Contingent Deferred Sales Charge - Class B Shares and
Class C Shares under Redemption and Exchange.
Other Payments to Dealers -- Class A, Class B and Class C Shares
From time to time at the discretion of the Distributor, all
registered broker/dealers whose aggregate sales of the Classes exceed certain
limits, as set by the Distributor, may receive from the Distributor an
additional payment of up to 0.25% of the dollar amount of such sales. The
Distributor may also provide additional promotional incentives or payments to
dealers that sell shares of the Delaware Group of funds. In some instances,
these incentives or payments may be offered only to certain dealers who
maintain, have sold or may sell certain amounts of shares.
Subject to pending amendments to the NASD's Conduct Rules , in
connection with the promotion of Delaware Group fund shares, the Distributor
may, from time to time, pay to participate in dealer-sponsored seminars and
conferences, reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising and may, from time to time,
pay or allow additional promotional incentives to dealers, which shall include
non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation
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to dealers is currently under review by the NASD and the Securities and
Exchange Commission. It is likely that the NASD's Conduct Rules will be
amended such that the ability of the Distributor to pay non-cash compensation
as described above will be restricted in some fashion. The Distributor intends
to comply with the NASD's Conduct Rules as they may be amended.
Institutional Classes
In addition to offering the Class A Shares, Class B Shares 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.
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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. For purchases under a Uniform Gifts to Minors
Act or Uniform Transfers to Minors Act or through an Automatic Investing Plan,
there is a minimum initial purchase of $250 and a minimum subsequent purchase
of $25. 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, the Delaware Group 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 to Delaware Group at 1818 Market Street, Philadelphia, PA
19103.
2. Subsequent Purchases--Additional purchases may be made at any time by
mailing a check payable to the 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 1412893401
(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, to Delaware Group
at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You should advise the
Shareholder Service Center by telephone of each wire you send.
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If you want to wire investments to a retirement plan account, call
the Shareholder Service Center for special wiring instructions.
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. See Redemption and Exchange for more complete information
concerning your exchange privilege.
Holders of Class A Shares of a Fund may exchange all or part of their
shares for certain of the shares of other funds in the Delaware Group,
including other Class A Shares, but may not exchange their Class A Shares for
Class B Shares or Class C Shares of the Fund or of any other fund in the
Delaware Group. Holders of Class B Shares of 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 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.
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 Allied Plans under Classes of Shares 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, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457
Deferred Compensation Plans.
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.
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* * *
Should investments through an automatic investing plan or by direct
deposit be reclaimed or returned for some reason, Adviser Funds, Inc. has the
right to liquidate your shares to reimburse the government or transmitting
bank. If there are insufficient funds in your account, you are obligated to
reimburse the Fund.
3. MoneyLine(SM) On Demand
Through the MoneyLine(SM) On Demand service, you or your investment
dealer may call the Fund to request a transfer of funds from your
predesignated bank account to your Fund account. See MoneyLine(SM) Services
under The Delaware Difference for additional information about this service.
4. Wealth Builder Option
You can use our Wealth Builder Option to invest in a Fund through
regular liquidations of shares in your accounts in other funds in the Delaware
Group. You may also elect to invest in other mutual funds in the Delaware
Group through the Wealth Builder Option through regular liquidations of shares
in your Fund account.
Under this automatic exchange program, you can authorize regular
monthly amounts (minimum of $100 per fund) to be liquidated from your account
in one or more funds in the Delaware Group and invested automatically into any
other account in a Delaware Group mutual fund that you may specify. If in
connection with the election of the Wealth Builder Option, you wish to open a
new account to receive the automatic investment, such new account must meet
the minimum initial purchase requirements described in the prospectus of the
fund that you select. All investments under this option are exchanges and are
therefore subject to the same conditions and limitations as other exchanges
noted above. You can terminate your participation in Wealth Builder at any
time by giving written notice to the fund from which the exchanges are made.
See Redemption and Exchange.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457
Deferred Compensation Plans.
5. 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. 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. For more
information about reinvestments, call the Shareholder Service Center.
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Capital gains and/or dividend distributions for participants in
the following retirement plans are automatically reinvested into the same
Delaware Group fund in which their investments are held: SAR/SEP, SEP/IRA,
SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans,
401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation
Plans.
Purchase Price and Effective Date
The offering price and net asset value of the Class A Shares, Class B
Shares 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 is the date the order is received
by a Fund in which the shares are being purchased, its agent or designee. 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. A 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, as a
result of redemption, have remained below the minimum stated account balance
for a period of three or more consecutive months. Holders of such accounts may
be notified of their insufficient account balance and advised that they have
until the end of the current calendar quarter to raise their balance to the
stated minimum. If the account has not reached the minimum balance requirement
by that time, the Fund will charge a $9 fee for that quarter and each
subsequent calendar quarter until the account is brought up to the minimum
balance. The service fee will be deducted from the account during the first
week of each calendar quarter for the previous quarter, and will be used to
help defray the cost of maintaining low-balance accounts. No fees will be
charged without proper notice, and no CDSC will apply to such assessments.
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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.
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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 a Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
For example, redemption or exchange requests received in good order after the
time the offering price and net asset value of shares are determined will be
processed on the next business day. 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, a Fund will redeem the number of
shares necessary to deduct the applicable CDSC in the case of Class B Shares
and Class C Shares, and, if applicable, the Limited CDSC in the case of Class
A Shares and tender to the shareholder the requested amount, assuming the
shareholder holds enough shares in his or her account for the redemption to be
processed in this manner. Otherwise, the amount tendered to the shareholder
upon redemption will be reduced by the amount of the applicable CDSC or
Limited CDSC. Redemption proceeds will be distributed promptly, as described
below, but not later than seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in "good
order," you must provide your account number, account registration, and the
total number of shares or dollar amount of the transaction. For exchange
requests, you must also provide the name of the fund in which you want to
invest the proceeds. Exchange instructions and redemption requests must be
signed by the record owner(s) exactly as the shares are registered. You may
request a redemption or an exchange by calling the Shareholder Service Center
at 800-523-1918. Each Fund may suspend, terminate, or amend the terms of the
exchange privilege upon 60 days' written notice to shareholders.
Each Fund will process written and telephone redemption requests to
the extent that the purchase orders for the shares being redeemed have already
settled. Each Fund will honor redemption requests as to shares for which a
check was tendered as payment, but a Fund will not mail or wire the proceeds
until it is reasonably satisfied that the purchase check has cleared, which
may take up to 15 days from the purchase date. You can avoid this potential
delay if you purchase shares by wiring Federal Funds. 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.
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
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subject to a front-end sales charge, except for exchanges involving assets
that were previously invested in a fund with a front-end sales charge and/or
exchanges involving the reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange their
shares ("Original Shares") for shares of other funds in the Delaware Group (in
each case, "New Shares") in a permitted exchange, will not be subject to a
CDSC that might otherwise be due upon redemption of the Original Shares.
However, such shareholders will continue to be subject to the CDSC and, in the
case of Class B Shares, the automatic conversion schedule of the Original
Shares as described in this Prospectus and any CDSC assessed upon redemption
will be charged by the fund from which the Original Shares were exchanged. In
an exchange of Class B Shares from a Fund, the Fund's CDSC schedule may be
higher than the CDSC schedule relating to the New Shares acquired as a result
of the exchange. For purposes of computing the CDSC that may be payable upon a
disposition of the New Shares, the period of time that an investor held the
Original Shares is added to the period of time that an investor held the New
Shares. With respect to Class B Shares, the automatic conversion schedule of
the Original Shares may be longer than that of the New Shares. Consequently,
an investment in New Shares by exchange may subject an investor to the higher
12b-1 fees applicable to Class B Shares of a Fund for a longer period of time
than if the investment in 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 the Fund or
the Distributor for redeeming or exchanging your shares, but such fees could
be charged in the future. You may have your investment dealer arrange to have
your shares redeemed or exchanged. Your investment dealer may charge for this
service.
All authorizations given by shareholders, including selection of any
of the features described below, shall continue in effect until such time as a
written revocation or modification has been received by a Fund 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. Each Fund reserves 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 after receipt of
your redemption request. If your Class A Shares are in certificate form, the
certificate(s) must accompany your request and also be in good order.
Certificates are issued for Class A Shares only if a shareholder submits a
specific request. Certificates are not issued for Class B Shares or Class C
Shares.
Written Exchange
You may also write to 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
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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 services 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 their 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 after receipt of the redemption request. This service is only
available to individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day.
CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted from your
redemption proceeds. If you ask for a check, it will normally be mailed the
next business day after receipt of your redemption request to your
predesignated bank account. There are no separate fees for this redemption
method, but the mail time may delay getting funds into your bank account.
Simply call the Shareholder Service Center prior to the time the offering
price and net asset value are determined, as noted above.
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MoneyLine(SM) On Demand
Through the MoneyLine(SM) On Demand service, you or your investment
dealer may call the Fund to request a transfer of funds from your Fund account
to your predesignated bank account. See MoneyLine(SM) Services under The
Delaware Difference for additional information about this service.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in the Delaware Group under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
Systematic Withdrawal Plans
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(SM) Direct Deposit Service. Your funds will normally be credited
to your bank account up to four business days after the payment date. There
are no separate fees for this redemption method. See MoneyLine (SM) Services
under The Delaware Difference for more information about 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(SM) Direct Deposit Service
described above is not available for certain 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 was
paid on that purchase. See Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value, below.
The applicable CDSC for Class B Shares and Class C Shares redeemed
via a Systematic Withdrawal Plan will be waived if, on the date that the Plan
is established, the annual amount selected to be withdrawn is less than 12% of
the account balance. If the annual amount selected to be withdrawn exceeds 12%
of the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subject to the applicable
CDSC. Whether a waiver of the CDSC is available or not, the first shares to be
redeemed for each Systematic Withdrawal Plan payment will be those not subject
to a CDSC because they have either satisfied the required holding period or
were acquired through the reinvestment of distributions. The 12% annual limit
will be
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reset on the date that any Systematic Withdrawal Plan is modified (for example,
a change in the amount selected to be withdrawn or the frequency or date of
withdrawals), based on the balance in the account on that date. See Waiver of
Contingent Deferred Sales Charge - Class B Shares and Class C Shares, below.
For more information on Systematic Withdrawal Plans, call the
Shareholder Service Center.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value A Limited CDSC will be imposed on
certain redemptions of Class A Shares (or shares into which such
Class A Shares are exchanged) made within 12 months of purchase, if such
purchases were made at net asset value and triggered the payment by the
Distributor of the dealer's commission previously described. See Classes of
Shares.
The Limited CDSC will be paid to the Distributor and will be equal to
the lesser of 1% of: (1) the net asset value at the time of purchase of the
Class A Shares being redeemed; or (2) the net asset value of such Class A
Shares at the time of redemption. For purposes of this formula, the "net asset
value at the time of purchase" will be the net asset value at purchase of the
Class A Shares even if those shares are later exchanged for shares of another
Delaware Group fund and, in the event of an exchange of Class A Shares, the
"net asset value of such shares at the time of redemption" will be the net
asset value of the shares acquired in the exchange.
Redemptions of such Class A Shares held for more than 12 months will
not be subjected to the Limited CDSC and an exchange of such Class A Shares
into another Delaware Group fund will not trigger the imposition of the
Limited CDSC at the time of such exchange. The period a shareholder owns
shares into which Class A Shares are exchanged will count towards satisfying
the 12-month holding period. The Limited CDSC is assessed if such 12-month
period is not satisfied irrespective of whether the redemption triggering its
payment is of Class A Shares of 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 the Fund's right to liquidate a shareholder's account if the
aggregate net asset value of the shares held in the account is less than the
then-effective minimum account size; (ii) distributions to participants from a
retirement plan qualified under section 401(a) or 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code"), or due to death of a
participant in such a plan; (iii) redemptions pursuant to the direction of a
participant or beneficiary of a retirement plan qualified under section 401(a)
or 401(k) of the Code with respect to that retirement plan; (iv) periodic
distributions from an IRA, SIMPLE IRA, or 403(b)(7) or 457 Deferred
Compensation Plan due to death, disability, or attainment of age 59 1/2, and
IRA distributions qualifying under Section 72(t) of the Internal Revenue Code;
(v) returns of excess contributions to an IRA; (vi) distributions by other
employee benefit plans to pay benefits; (vii) distributions described in (ii),
(iv), and (vi) above pursuant to a systematic withdrawal plan; and (viii)
redemptions by the classes of shareholders who are permitted to purchase
shares at net asset value, regardless of the size of the purchase (see Buying
Class A Shares at Net Asset Value under Classes of Shares).
Waiver of Contingent Deferred Sales Charge - Class B Shares and Class C Shares
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The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from
the Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) returns of excess contributions to an IRA, SIMPLE
IRA, SEP/IRA, or 403(b)(7) or 457 Deferred Compensation Plan, (iii)
periodic distributions from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, or 403(b)(7)
or 457 Deferred Compensation Plan due to death, disability, or attainment of
age 59 1/2, and IRA distributions qualifying under Section 72(t) of the
Internal Revenue Code; and (iv) distributions from an account if the
redemption results from the death of all registered owners of the account (in
the case of accounts established under the Uniform Gifts to Minors or Uniform
Transfers to Minors Acts or trust accounts, the waiver applies upon the death
of all beneficial owners) or a total and permanent disability (as defined in
Section 72 of the Code) of all registered owners occurring after the purchase
of the shares being redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the 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, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution Plan; (iii) periodic distributions from a 403(b)(7)
or 457 Deferred Compensation Plan upon attainment of age 59 1/2, Profit
Sharing Plan, Money Purchase Pension Plan, or 401(k) Defined Contribution
Plans upon attainment of age 70 1/2, and IRA distributions qualifying under
Section 72(t) of the Internal Revenue Code; (iv) distributions from a
403(b)(7) or 457 Deferred Compensation Plan, Profit Sharing Plan, or 401(k)
Defined Contribution Plan, under hardship provisions of the plan; (v)
distributions from a 403(b)(7) or 457 Deferred Compensation Plan, Profit
Sharing Plan, Money Purchase Pension Plan or a 401(k) Defined Contribution
Plan upon attainment of normal retirement age under the plan or upon
separation from service; (vi) periodic distributions from an IRA or SIMPLE IRA
on or after attainment of age 59 1/2; and (vii) distributions from an account
if the redemption results from the death of all registered owners of the
account (in the case of accounts established under the Uniform Gifts to Minors
or Uniform Transfers to Minors Acts or trust accounts, the waiver applies upon
the death of all beneficial owners) or a total and permanent disability (as
defined in Section 72 of the Code) of all registered owners occurring after
the purchase of the shares being redeemed.
In addition, the CDSC will be waived on Class B Shares and Class C
Shares redeemed in accordance with a Systematic Withdrawal Plan if the annual
amount selected to be withdrawn under the Plan does not exceed 12% of the
value of the account on the date that the Systematic Withdrawal Plan was
established or modified.
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DIVIDENDS AND DISTRIBUTIONS
Each Fund 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(sm) Direct Deposit Service and have such payments
transferred from your Fund account to your predesignated bank account. This
service is not available for retirement plans. See MoneyLine (sm) Services
under The Delaware Difference for more information about this service.
Any payment by check of dividends or other distributions which
cannot be delivered by the United States Post Office or which remains uncashed
for a period of more than one year may be reinvested in your account at the
then-current net asset value and the dividend option may be changed from cash
to reinvest. If you elect to take your dividends and distributions in cash
and such dividends and distributions are in an amount of $25 or more, you
may choose the MoneyLine (SM) Direct Deposit Service and have such payments
transferred from your Fund account to your predesignated bank account. This
service is not available for certain retirement plans. See MoneyLine (SM)
Services under The Delaware Difference for more information about this
service.
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TAXES
The tax discussion set forth below is included for general
information only. Investors should consult their own tax advisers concerning
the federal, state, local or foreign tax consequences of an investment in the
Fund.
On August 5, 1997, President Clinton signed into law the Taxpayer
Relief Act of 1997 (the "1997 Act"). This new law makes sweeping changes in
the Internal Revenue Code (the "Code"). Because many of these changes are
complex, and only indirectly affect a Fund and its distributions to you, they
are discussed in Part B. Changes in the treatment of capital gains, however,
are discussed in this section.
Each Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, a Fund
will not be subject to federal income tax, or to any excise tax, to the extent
its earnings are distributed as provided in the Code and it satisfies certain
other requirements relating to the sources of its income and diversification
of its assets.
Each Fund intends to distribute substantially all of its net
investment income and net capital gains, if any. Dividends from net investment
income or net short-term capital gains will be taxable to those investors
who are subject to income taxes as ordinary income, whether received in cash
or in additional shares. For corporate investors, dividends from net
investment income will generally qualify in part for the corporate
dividends-received deduction . The portion of dividends paid by a Fund that
so qualifies will be designated each year in a notice from Adviser Funds,
Inc. to the Fund's shareholders. For the fiscal year ended October 31, 1997,
0%, 0% and 0% of U.S. Growth Fund's, Overseas Equity Fund's and New Pacific
Fund's dividends from net investment income qualified for the
dividends-received deduction to corporations.
Distributions paid by a Fund from long-term capital gains ,
whether received in cash or in additional shares, are taxable to those
investors who are subject to income taxes as long-term capital gains,
regardless of the length of time an investor has owned shares in the Fund.
A Fund does not seek to realize any particular amount of capital gains during
a year; rather, realized gains are a by-product of Fund management activities.
Consequently, capital gains distributions may be expected to vary considerably
from year to year. Also, for those investors subject to tax, if purchases of
shares in a Fund are made shortly before the record date for a dividend or
capital gains distribution, a portion of the investment will be returned as a
taxable distribution.
The Treatment of Capital Gain Distributions under the Taxpayer Relief Act of
1997
The 1997 Act creates a category of long-term capital gain for
individuals that will be taxed at new lower tax rates. For investors who are
in the 28% or higher federal income tax brackets, these gains will be taxed at
a maximum of 20%. For investors who are in the 15% federal income tax bracket,
these gains will be taxed at a maximum of 10%. Capital gain distributions will
qualify for these new maximum tax rates, depending on when a Fund's securities
were sold and how long they were held by a Fund before they were sold.
Investors who want more information on holding periods and other qualifying
rules relating to these new rates should review the expanded discussion in
Part B, or should contact their own tax advisers.
Adviser Funds, Inc. will advise you in its annual information reporting
at calendar year end of the amount of its capital gain distributions which will
qualify for these maximum federal tax rates.
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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 the Fund
and received by the shareholder on December 31 of the year declared.
The sale of shares of a Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may
be realized from an ordinary redemption of shares or an exchange of shares
between the Fund and any other funds in the Delaware Group. Any loss incurred
on a sale or exchange of Fund shares that had been held for six months or less
will be treated as a long-term capital loss to the extent of capital gain
dividends received with respect to such shares. All or a portion of the sales
charge incurred in acquiring Fund shares will be excluded from the federal tax
basis of any of such shares sold or exchanged within 90 days of their purchase
(for purposes of determining gain or loss upon sale of such shares) if the
sale proceeds are reinvested in a Fund or in another fund in the Delaware
Group of funds and a sales charge that would otherwise apply to the
reinvestment is reduced or eliminated. Any portion of such sales charge
excluded from the tax basis of the shares sold will be added to the tax basis
of the shares acquired in the reinvestment.
The automatic conversion of Class B Shares into Class A Shares at the
end of approximately eight years after purchase will be tax-free for federal
tax purposes. See Automatic Conversion of Class B Shares under Classes of
Shares.
In addition to the federal taxes described above, shareholders may or
may not be subject to various state and local taxes . For example,
distributions of interest income and capital gains realized from certain
types of U.S. government securities may be exempt from state personal income
taxes. Because investors' state and local taxes may be different than the
federal taxes described above, investors should consult their own tax
advisers.
Each year, Adviser Funds, Inc. will mail to you information on the
tax status of the Fund's dividends and distributions. Shareholders will also
receive each year information as to the portion of dividend income, if any,
that is derived from U.S. government securities that are exempt from state
income tax. Of course, shareholders who are not subject to tax on their income
would not be required to pay tax on amounts distributed to them by the Fund.
Adviser Funds, Inc. is required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to shareholders who have not
complied with IRS taxpayer identification regulations. You may avoid this
withholding requirement by certifying on your Investment Application your
proper Taxpayer Identification Number and by certifying that you are not
subject to backup withholding.
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 Overseas Equity Fund and New Pacific
Fund may be subject to foreign taxes. If more than 50% of the value of a
Fund's total assets at the close of any taxable year consists of securities of
foreign corporations, a 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
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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.
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CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
The net asset value ("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 Determining Offering Price and 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 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 Shares, Class B Shares 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
may vary.
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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
Delaware Management Company, Inc. (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 October 31, 1997, the Manager and its
affiliates within the Delaware Group, including Delaware International
Advisers Ltd., were managing in the aggregate more than $00 billion in
assets in the various institutional or separately managed (approximately
$00,000,000,000) and investment company (approximately $00,000,000,000)
accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). In turn, DMH is a wholly owned subsidiary,
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 U.S. Growth Fund
and New Pacific Fund dated May 4, 1996 and under an Amended and Restated
Investment Management Agreement with Advisers Funds, Inc. on behalf of
Overseas Equity Fund dated September 15,
1997 (the "New Agreement").
Investment Management Agreements. The Investment Management
Agreements for U.S. Growth Fund and New Pacific Fund 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.
The New Agreement was approved by the Board of Directors of Adviser
Funds, Inc., including a majority of the Directors who are not interested
persons of Advisers Funds, Inc., on July 17, 1997. The New Agreement lowered
the Manager's annual fee from 1.10% of average daily net assets under the
previous Investment Management Agreement to 1.00%.
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:
U.S. Growth Fund 0.70%
Overseas Equity Fund 1.00%
New Pacific Fund 0.80%
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<PAGE>
The directors of Adviser Funds, Inc. annually review fees paid to
the Manager. 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 Overseas Equity and 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, 1997, the following
investment management fees based on a percentage of a Fund's average daily net
assets were incurred and paid [and reflect the voluntary waiver described
above]:
Earned Paid
------ ----
U.S. Growth Fund 0.00% 0.00%
Overseas Equity Fund* 0.00% 0.00%
New Pacific Fund 0.00% 0.00%
* The Board of Directors approved a reduction from 1.10% to 1.00% in the
investment advisory fee for Overseas Equity Fund effective September
15, 1997.
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 of 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 stated policies and places orders on behalf of the
Fund to effect the investment decisions made. The Manager continues to have
ultimate 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.
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.
Lynch & Mayer, Inc., Sub-Adviser to the Manager with respect to
management of the assets of the 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, Inc. provides
investment advice to pension
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funds, foundations, endowments, trusts and high net worth individuals and
families and had assets under management, as of October 31, 1997, in excess of
$0.0 billion. Effective as of October 27, 1997, Edward J. Petner assumed
primary responsibility for making investment decisions for U.S. Growth Fund.
Mr. Petner currently serves as President and Co-Chief Executive Officer of Lynch
& Mayer, Inc. Before joining Lynch & Mayer, Inc. in 1983, Mr. Petner received a
BA from Duquesne University in 1981 and an MBA from the Wharton School in 1983.
Delaware International Advisers Ltd., Sub-Adviser to the Manager with
respect to management of the assets of the Overseas Equity Fund, Third Floor, 80
Cheapside, London, England EC2V 6EE, is an affiliate of the Manager. Delaware
International Advisers Ltd. began serving as a Sub-Adviser on September 15,
1997. The Sub-Advisory Agreement between Delaware International Advisors Ltd.
and the Manager was approved by shareholders of Overseas Equity Fund at a
special meeting held on November 18, 1997. Delaware International Advisers Ltd.
provides investment advisory services to certain other funds in the Delaware
Group and to institutional accounts, primarily retirement plans and endowment
funds. As of October 31, 1997, Delaware International Advisers Ltd. had assets
in excess of $0.0 billion. Also effective September 15, 1997, Clive A. Gillmore
and Robert Akester assumed primary responsibility for making day-to-day
investment decisions for Overseas Equity Fund. A graduate of the University of
Warwick and having begun his career at Legal and General Investment Management,
Mr. Gillmore joined the Delaware Group in 1990 after eight years of investment
experience. His most recent position prior to joining the Delaware Group was as
a Pacific Basin equity analyst and senior portfolio manager for Hill Samuel
Investment Advisers Ltd. Mr. Gillmore completed the London Business School
Investment program. Prior to joining Delaware in 1996 as a Senior Portfolio
Manager, Mr. Akester, who began his investment career in 1969, was most recently
a Director of Hill Samuel Investment Advisers Ltd., which he joined in 1985. His
prior experience included working as a Senior Analyst and head of the South-East
Asian Research team at James Capel, and as a Fund Manager at Prudential
Assurance Co., Ltd. Mr. Akester holds a BS in Statistics and Economics from
University College, London and is an associate of the Institute of Actuaries,
with a certificate in Finance and Investment.
In making investment decisions for Overseas Equity Fund, Mr. Gillmore
and Mr. Akester regularly consult with an international equity team of nine
members, five of whom research the Pacific Basin and four of whom research the
European Markets. Mr. Gillmore and Mr. Akester also regularly consult with David
G. Tilles. Mr. Tilles, who is Chief Investment Officer for Delaware
International, is a graduate of the University of Warwick with a BS in
management sciences. Before joining the Delaware Group in 1990, he was Chief
Investment Officer of Hill Samuel Investment Advisers Ltd. He is a member of the
Institute of Investment Management & Research and the Operational Research
Society.
AIB Govett, Inc., Sub-Adviser to the Manager with respect to
management of the assets of the New Pacific Fund, 250 Montgomery Street,
Suite 1200, San Francisco, California, 94104, provides investment advice to
investment trusts, investment companies, mutual funds and pension funds and
had assets under management, as of October 31, 1997, of $0.0 billion.
Effective as of November 12, 1997, Jane Pickard assumed primary responsibility
for making investment decisions for New Pacific Fund . Ms. Pickard graduated
in law from Endinburgh University. She joined BZW in 1991, where she initially
worked as a specialist in structured debt products moving into the Pacific
Rim equity division in 1992. She remained there until 1995 when she moved to
IAI International where she had responsibility for Pacific Region investment
for U.S. institutional and retail funds. Ms. Pickard joined AIB Govett Asset
Management in 1996 and concentrates on investments in the Pacific region.
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<PAGE>
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.
<TABLE>
<CAPTION>
Fund Sub-Adviser Annual Fee
---- ----------- ----------
<S> <C> <C>
U.S. Growth Fund Lynch & Mayer, Inc. 0.40% of average
daily net assets
Overseas Equity Fund Delaware International Advisers Ltd. 80% of the fee paid
to the Manager
New Pacific Fund AIB Govett , Inc. 0.50% of average
daily net assets
</TABLE>
Custodian
The Chase Manhattan Bank serves as Custodian for each of the Funds
and, in that capacity, has custody of the Funds' securities. Its mailing
address is 4 Chase Metrotech Center, Brooklyn, NY 11245. The Chase Manhattan
Bank 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.
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 and life-of-fund period, as
applicable. 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
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<PAGE>
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., 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, Class B Shares and Class C
Shares (the "Plans"). Each Plan permits the Fund to which the Plan relates to
pay the Distributor from the assets of the respective Classes a monthly fee
for the Distributor's services and expenses in distributing and promoting
sales of shares.
These expenses include, among other things, preparing and
distributing advertisements, sales literature, and prospectuses and reports
used for sales purposes, compensating sales and marketing personnel, holding
special promotions for specified periods of time and paying distribution and
maintenance fees to brokers, dealers and others. In connection with the
promotion of shares of the Classes, the Distributor may, from time to time,
pay to participate in dealer-sponsored seminars and conferences, and reimburse
dealers for expenses incurred in connection with preapproved seminars,
conferences and advertising. The Distributor may pay or allow additional
promotional incentives to dealers as part of preapproved sales contests and/or
to dealers who provide extra training and information concerning a Class and
increase sales of the Class. In addition, each Fund may make payments from the
12b-1 Plan fees of its respective Classes directly to others, such as banks,
who aid in the distribution of Class shares or provide services in respect of
a Class, pursuant to service agreements with Adviser Funds, Inc.
The 12b-1 Plan expenses relating to each of the Class B Shares and
Class C Shares of the Funds 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 0.35% of the Class A Shares' average daily net assets in any year, and
1% (0.25% 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. Class A Shares, Class B
Shares 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.
Although the maximum fee payable under the Plan relating to each of
the Class A Shares is 0.35% of average daily net assets, effective at the
close of business on May 3, 1996, the annual fee payable on a monthly basis is
equal to 0.30% of average daily net assets.
While payments pursuant to the Plans may not exceed 0.35% (and
currently do not exceed 0.30%) annually with respect to each Fund's Class A
Shares, and 1% annually with respect to each Fund's Class B Shares and Class C
Shares, the Plans do not limit fees to amounts actually expended by the
Distributor. It is therefore possible that the Distributor may realize a
profit in any particular year. However, the Distributor currently expects that
its distribution expenses will likely equal or exceed payments to it under the
Plans. The Distributor may, however,
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<PAGE>
incur such additional expenses and make additional payments to dealers from
its own resources to promote the distribution of shares of the Classes. The
monthly fees paid to the Distributor under the Plans 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.
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.
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 Transfer Agent also
provides accounting services to each Fund pursuant to the terms of a separate
Fund Accounting Agreement.
The directors of Adviser Funds, Inc. annually review fees paid to the
Distributor and 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, 1997, the ratios of expenses to average daily net
assets for each Class were as follows:
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
<S> <C> <C> <C>
U.S. Growth Fund 0.00% 0.00% 0.00%
Overseas Equity Fund 0.00% 0.00% 0.00%
New Pacific Fund 0.00% 0.00% 0.00%
</TABLE>
[The expense ratio of each Class reflects the impact of its 12b-1
Plan and the fee waiver and reimbursements.] See Summary of Expenses for
current fee waivers and reimbursements.
Restructuring of the Funds
Until April 26, 1996, Adviser Funds, Inc. consisted of nine series of
shares (U.S. Growth Fund, World Growth Fund (now named Overseas Equity Fund)
and New Pacific Fund, as well as six other funds) and was named Lincoln
Advisor Funds, Inc. ("LAF"). On February 23, 1996, LAF's Board of Directors
approved a restructuring to integrate fully LAF into the Delaware Group of
funds. The restructuring provided, among other things, for the liquidation of
three funds; the appointment of Delaware Management Company, Inc. as the
investment manager of each of the Funds; the appointment of certain
sub-advisers ; changes in certain names, including: Lincoln U.S. Growth
Portfolio to U.S. Growth Fund; Lincoln World Growth Portfolio to World Growth
Fund; and Lincoln New Pacific Portfolio to New Pacific Fund; and the change
of the LAF to Delaware Group Adviser Funds, Inc. The liquidations were
completed on April 26, 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.
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<PAGE>
In accordance with the restructuring, beginning May 6, 1996, the
former Class D shares have been redesignated as the Institutional Class
shares.
On July 17, 1997, the Board of Directors approved the liquidations of
three additional funds. These liquidations were completed on September 19,
1997. Effective September 15, 1997, the name of World Growth Fund changed to
Overseas Equity Fund.
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.
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, 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 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 January 31, 1998, [ASI held
64.89% of the outstanding shares of Enterprise Fund A Class and 75.91% of the
outstanding shares of U.S. Growth Fund A Class, LNLIC held 85.18% of the
outstanding shares of World Growth Fund A Class, 82.75% of the outstanding
shares of New Pacific Fund A Class, 97.36% of the outstanding shares of
Federal Bond Fund A Class and 89.78% of the outstanding shares of Corporate
Income Fund A Class. In addition, as of January 31, 1997, LIM held 23.84% of
the outstanding shares of World Growth Fund Institutional Class, 10.40% of the
outstanding shares of New Pacific Fund Institutional Class and 99.99% of the
outstanding shares of Federal Bond Fund Institutional 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.
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<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
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.
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
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<PAGE>
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
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
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 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
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<PAGE>
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 premiums paid for options on futures contracts 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.
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<PAGE>
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 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 losses 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
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<PAGE>
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 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.
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APPENDIX A - DESCRIPTION OF SECURITIES RATINGS
U.S. Growth Fund has the ability to invest up to 10% of its net
assets in high yield, high risk fixed-income securities. The table set forth
below shows asset composition, based on rating categories, of such securities
held by the Fund. Certain securities may not be rated because the rating
agencies were either not asked to provide ratings (e.g., many issuers of
privately placed bonds do not seek ratings) or because the rating agencies
declined to provide a rating for some reason, such as insufficient data. The
table below shows the percentage of the Fund's high yield, high risk
securities which are not rated. The information contained in the table was
prepared based on a dollar weighted average of the Fund's portfolio
composition based on month end data for the fiscal year ended October 31,
1997. The paragraphs following the table contain excerpts from Moody's and
S&P's rating descriptions. These credit ratings evaluate only the safety of
principal and interest and do not consider the market value risk associated
with high yield securities.
Rating Moody's Average Weighted
and/or Percentage of
S&P Portfolio
-------------- ----------------
General Rating Information
MOODY'S INVESTORS SERVICE
BOND RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than Aaa bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
which make the long-term risks appear somewhat larger than in Aaa securities.
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<PAGE>
A: Bonds which are rated A possess many favorable investment
attributes and are considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds that are rated Baa are considered medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
SHORT-TERM DEBT RATINGS
Moody's short-term debt ratings are opinions of the ability of
issuers to repay punctually senior obligations which have an original maturity
not exceeding one year.
P-1: Issuers rated "PRIME-1" or "P-1" (or supporting institutions)
have superior ability for repayment of senior short-term debt obligations.
P-2: Issuers rated "PRIME-2" or "P-2" (or supporting institutions)
have a strong ability for repayment of senior short-term debt obligations.
P-3: Issuers rated "PRIME-3" or "P-3" (or supporting institutions)
have an acceptable ability for repayment of senior short-term debt
obligations.
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<PAGE>
MUNICIPAL NOTE RATINGS
Issuers or the features associated with Moody's MIG or VMIG ratings
are identified by date of issue, date of maturity or maturities or rating
expiration date and description to distinguish each rating from other ratings.
Each rating designation is unique with no implication as to any other similar
issue of the same obligor. MIG ratings terminate at the retirement of the
obligation while VMIG rating expiration will be a function of each issue's
specific structural or credit features.
MIG 1/VMIG 1: This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support,
or demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/VMIG 3: This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less
well established.
MIG 4/VMIG 4: This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
STANDARD & POOR'S RATINGS GROUP
BOND RATINGS
AAA: Debt rated AAA has the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in a small
degree.
A: Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest an repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC and CC: Debt rated BB, B, CCC or CC is regarded, on
balance, as predominately speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C: This rating is reserved for income bonds on which no interest is
being paid.
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<PAGE>
D: Debt rated D is in default, and payment of interest and/or repayment
of principal is in arrears.
COMMERCIAL PAPER RATINGS
S&P's commercial paper ratings are current assessments of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1: The A-1 designation indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. A plus (+)
designation is applied only to those issues rated A-1 which possess an
overwhelming degree of safety.
A-2: Capacity for timely payment on issues with the designation A-2
is strong. However, the relative degree of safely is not as high as for issues
designated A-1.
A-3: Issues carrying this designation have a satisfactory capacity
for timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
MUNICIPAL NOTE RATINGS
An S&P municipal note rating reflects the liquidity concerns and
market access risks unique to notes. Notes due in 3 years or less will likely
receive a note rating. Notes maturing beyond 3 years will most likely receive
a long-term debt rating. The following criteria will be used in making that
assessment:
Amortization schedule (the larger the final maturity relative to
other maturities, the more likely it will be treated as a note).
Sources of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
SP-1: Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
SP-3: Speculative capacity to pay principal and interest.
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<PAGE>
The Delaware Group includes -------------------------------------
funds with a wide range of investment
objectives. Stock funds, income funds,
national and state-specific DELAWARE GROUP ADVISER FUNDS, INC.
tax-exempt funds, money market funds,
global and international funds and
closed-end funds give investors the -------------------------------------
ability to create a portfolio that
fits their personal financial goals.
For more information, contact your U.S. GROWTH FUND
financial adviser or call Delaware OVERSEAS EQUITY FUND
Group at 800-523-4640. NEW PACIFIC FUND
-------------------------------------
A CLASSES
B CLASSES
INVESTMENT MANAGER C CLASSES
Delaware Management Company, Inc. -------------------------------------
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103 P R O S P E C T U S
SHAREHOLDER SERVICING, -------------------------------------
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc. FEBRUARY 28, 1998
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
DELAWARE
GROUP
--------
<PAGE>
- --------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1998
- --------------------------------------------------------------------------------
DELAWARE GROUP ADVISER FUNDS, INC.
- --------------------------------------------------------------------------------
U.S. GROWTH FUND
OVERSEAS EQUITY FUND
NEW PACIFIC 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 Class A Shares, Class B
Shares and Class C Shares of each Fund: 800-523-4640
For Information on Existing Accounts of Class A Shares, Class B Shares and
Class C Shares of each Fund:
(SHAREHOLDERS ONLY) 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY) 800-362-7500
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Cover Page
- --------------------------------------------------------------------------------
Investment Objectives and Policies
- --------------------------------------------------------------------------------
Investment Restrictions
- --------------------------------------------------------------------------------
Performance Information
- --------------------------------------------------------------------------------
Trading Practices and Brokerage
- --------------------------------------------------------------------------------
Purchasing Shares
- --------------------------------------------------------------------------------
Investment Plans
- --------------------------------------------------------------------------------
Determining Offering Price and Net Asset Value
- --------------------------------------------------------------------------------
Redemption and Repurchase
- --------------------------------------------------------------------------------
Dividends, Distributions and Taxes
- --------------------------------------------------------------------------------
Investment Management Agreements
- --------------------------------------------------------------------------------
Officers and Directors
- --------------------------------------------------------------------------------
Exchange Privilege
- --------------------------------------------------------------------------------
General Information
- --------------------------------------------------------------------------------
Appendix A - IRA Information
- --------------------------------------------------------------------------------
Appendix B - The Equity Market
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
-1-
<PAGE>
Delaware Group Adviser Funds, Inc. ("Adviser Funds, Inc.") is a
professionally-managed mutual fund of the series type which currently offers
three series of shares: the U.S. Growth Fund series, the Overseas Equity Fund
series and the New Pacific Fund series (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.
Each Fund of Adviser Funds, Inc. offers three retail classes:
U.S. Growth Fund A Class, Overseas Equity Fund A Class and New Pacific Fund
A Class (the "Class A Shares"); U.S. Growth Fund B Class, Overseas Equity
Fund B Class and New Pacific Fund B Class (the "Class B Shares"); and U.S.
Growth Fund C Class, Overseas Equity Fund C Class and New Pacific Fund C
Class (the "Class C Shares"). Class A Shares, Class B Shares and Class C
Shares are collectively referred to as the "Fund Classes." Each Class also
offers an institutional class: U.S. Growth Fund Institutional Class, Overseas
Equity Fund Institutional Class and New Pacific Fund Institutional Class
(collectively, the "Institutional Classes"). Each class may be referred to
individually as a "Class" and collectively as the "Classes."
Class B Shares, Class C Shares and Institutional Class shares of each
Fund 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 0.35% (currently no more than
0.30%). 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.
This Part B supplements the information contained in the current
Prospectus for the Fund Classes and the current Prospectus for the
Institutional Classes of U.S. Growth Fund, Overseas Equity Fund and New
Pacific Fund, each dated February 28, 1998, as they may be amended from time
to time. Part B should be read in conjunction with the Classes'
Prospectuses. Part B is not itself a prospectus but is, in its entirety,
incorporated by reference into each Classes' Prospectuses. A Prospectus
relating to the Fund Classes and a Prospectus relating to the Institutional
Classes may be obtained by writing or calling your investment dealer or by
contacting Adviser Funds, Inc.'s national distributor, Delaware
Distributors, L.P. (the "Distributor"), 1818 Market Street, Philadelphia, PA
19103.
All references to "shares" in this Part B refer to all Classes of
shares of the Funds, except where noted.
-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
U.S. Growth 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 Description of Security Ratings in the Prospectuses.
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 the
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 sub-adviser's research and credit analysis is an integral
part of managing any securities of this type held by the Fund. In
considering investments for the Fund, the Manager and/or sub-adviser will
attempt to identify those issuers of high-yielding securities whose financial
condition is adequate to meet future obligations, has improved, or is expected
to improve in the future. The 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.
The 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.
Mortgage-Backed Securities
Each Fund may invest in mortgage-related securities including those
representing an undivided ownership interest in a pool of mortgages.
-3-
<PAGE>
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 nine 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.
Foreign Investments
Overseas Equity and New Pacific Funds may invest substantially all
of their assets in foreign investments, and U.S. Growth Fund may invest 20%
of its assets in foreign securities. 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.
-4-
<PAGE>
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 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 Depositary Receipts and European Depositary 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.
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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.
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
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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.
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
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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.
Over-the-Counter Options and Illiquid Securities. As indicated in the
Prospectuses, each Fund 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.
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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
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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 10% limitation on the Fund's net assets that may be
invested in illiquid securities. See Illiquid Securities, below.
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.
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
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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. U.S. Growth Fund, Overseas Equity
Fund and New Pacific 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.
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.
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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 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, U.S. Growth
Fund, Overseas Equity Fund and New Pacific 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.
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Foreign Currency Options
U.S. Growth Fund, Overseas Equity Fund and New Pacific 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 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 U.S. Growth Fund,
Overseas Equity Fund or New Pacific 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
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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
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 of 1940 (the "1940 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."
-13-
<PAGE>
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 100% 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) 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
-14-
<PAGE>
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
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
1940 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
-15-
<PAGE>
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.
"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 1940 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
While the Funds are permitted to do so, they normally do not invest
in repurchase agreements, except to invest cash balances.
The funds in the Delaware Group have obtained an exemption (the
"Order") 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
below.
A repurchase agreement is a short-term investment by which the
purchaser acquires ownership of a debt security and the seller agrees to
repurchase the obligation at a future time and set price, thereby determining
the yield during the purchaser's holding period. Should an issuer of a
repurchase agreement fail to repurchase the underlying security, the loss to the
Funds, if any, would be the difference between the repurchase price and the
market value of the security. A Fund will limit its investments in repurchase
agreements to those which the Manager and/or sub-adviser, under the guidelines
of the Board of Directors, determines to present minimal credit risks and which
are of high quality. In addition, a Fund must have collateral of at least 100%
of the repurchase price, including the portion representing the Fund's yield
under such agreements, which is monitored on a daily basis.
Illiquid Securities
Each Fund may invest no more than 10% of the value of its net assets
in illiquid securities.
Each Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933 (the "1933 Act"). Rule 144A
permits many privately placed and legally restricted securities to be freely
traded among certain institutional buyers such as the Funds.
-16-
<PAGE>
While maintaining oversight, the Board of Directors has delegated to
the Manager the day-to-day function of determining whether or not individual
Rule 144A Securities are liquid for purposes of a Fund's 10% limitation on
investments in illiquid assets. The Board has instructed the Manager to
consider the following factors in determining the liquidity of a Rule 144A
Security: (i) the frequency of trades and trading volume for the security;
(ii) whether at least three dealers are willing to purchase or sell the
security and the number of potential purchasers; (iii) whether at least two
dealers are making a market in the security; and (iv) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers, and the mechanics of
transfer).
If the Manager determines that a Rule 144A Security that was
previously determined to be liquid is no longer liquid and, as a result, a
Fund's holdings of illiquid securities exceed the Fund's 10% limit on
investment in such securities, the Manager will determine what action to take
to ensure that the Fund continues to adhere to such limitation.
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 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
-17-
<PAGE>
the Fund to demand payment of the 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 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 Prospectuses. 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 (the "1934
Act").
-18-
<PAGE>
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 1940 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:
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 1933 Act, 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
-19-
<PAGE>
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;
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 Adviser 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.
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.
-20-
<PAGE>
PERFORMANCE INFORMATION
From time to time, each Fund may state total return for its Classes
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 periods, as applicable.
Each Fund may also advertise aggregate and average compounded rate of return
information of each Class over additional periods of time. In addition, each
Fund may include illustrations showing the power of compounding in
advertisements and other types of literature.
In presenting performance information for 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 in this Performance Information
section will apply to Class B Shares or Class C Shares.
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.
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.
-21-
<PAGE>
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, each
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, 1997, computed as described above.
The average annual total return for Class A Shares at offer reflects
the maximum front-end sales charge of 4.75% 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 any front-end sales charge.
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, 1997. 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,
1997 and therefore does not reflect the deduction of a CDSC.
Pursuant to applicable regulation, total return shown for the
Institutional Classes for the periods prior to the commencement of operations
of such Classes is calculated by taking the performance of the respective
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.
-22-
<PAGE>
Average Annual Total Return(1)
<TABLE>
<CAPTION>
U.S. Growth Fund
Class B Class B Class C Class C
Class A Class A Shares Shares Shares Shares
Shares(2)(3) Shares(2) (including (excluding (including (excluding Institutional
(at offer) (at NAV) CDSC)(5) CDSC) CDSC) CDSC) Class
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
3 years 3 years 3 years 3 years
ended ended ended ended
10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
Period Period Period Period
12/3/93(4) 3/29/94(4) 5/23/94(4) 12/3/93(6)
through through through through
10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
</TABLE>
- ----------------------------
(1) The Manager has committed to waive a portion of its annual compensation
or reimburse expenses to limit the operating expenses of the Funds. See
Investment Management Agreements. In the absence of such waivers or
reimbursements, performance would have been affected negatively.
(2) The 12b-1 fees payable by each Fund for Class A Shares were at a rate
equal to 0.35% of the average daily net assets. Beginning May 6, 1996,
the payments were set at 0.30%. Performance calculations for periods
after May 6, 1996 will be made using the lower 12b-1 fee rate.
(3) The maximum front-end sales charge was reduced from 5.50% to 4.75%
effective May 6, 1996. The above performance figures are calculated
using 4.75% as the applicable sales charge for all time periods.
(4) Commencement of operations.
(5) Effective May 6, 1996, Class B Shares will be subject to a CDSC schedule
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. The above performance figures
are calculated using the new applicable CDSC schedule.
(6) Commencement of operations was February 3, 1994.
-23-
<PAGE>
Average Annual Total Return(1)
<TABLE>
<CAPTION>
Overseas Equity Fund
Class B Class B Class C Class C
Class A Class A Shares Shares Shares Shares
Shares(2)(3) Shares(2) (including (excluding (including (excluding Institutional
(at offer) (at NAV) CDSC)(5) CDSC) CDSC) CDSC) Class
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
3 years 3 years 3 years 3 years
ended ended ended ended
10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
Period Period Period Period
12/3/93(4) 3/29/94(4) 5/10/94(4) 12/3/93(6)
through through through through
10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
New Pacific Fund
Class B Class B Class C Class C
Class A Class A Shares Shares Shares Shares
Shares(2)(3) Shares(2) (including (excluding (including (excluding Institutional
(at offer) (at NAV) CDSC)(5) CDSC) CDSC) CDSC) Class
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
3 years 3 years 3 years 3 years
ended ended ended ended
10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
Period Period Period Period
12/3/93(4) 3/29/94(4) 7/7/94(4) 12/3/93(6)
through through through through
10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
</TABLE>
- ----------------------------
(1) The Manager has committed to waive a portion of its annual compensation
or reimburse expenses to limit the operating expenses of the Funds. See
Investment Management Agreements. In the absence of such waivers or
reimbursements, performance would have been affected negatively.
(2) The 12b-1 fees payable by each Fund for Class A Shares were at a rate
equal to 0.35% of the average daily net assets. Beginning May 6, 1996,
the payments were set at 0.30%. Performance calculations for periods
after May 6, 1996 will be made using the lower 12b-1 fee rate.
(3) The maximum front-end sales charge was reduced from 5.50% to 4.75%
effective May 6, 1996. The above performance figures are calculated
using 4.75% as the applicable sales charge for all time periods.
(4) Commencement of operations.
(5) Effective May 6, 1996, Class B Shares will be subject to a CDSC schedule
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. The above performance figures
are calculated using the new applicable CDSC schedule.
(6) Commencement of operations was February 3, 1994.
-24-
<PAGE>
Statistical and performance information and various indices compiled
and maintained by organizations such as those listed below 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, and a direct investment
in an index is not possible.
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.
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. In addition, the performance of multiple indices
compiled and maintained by these firms may be combined to create a
blended performance result for comparative performances. Generally,
the indices selected will be representative of the types of
securities in which the Funds may invest and the assumptions that
were used in calculating the blended performance will be described.
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.
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 an investment.
Current interest rate and yield information on government debt
obligations of various durations, as reported weekly by the Federal Reserve
(Bulletin H.15), may also be used. As well, current 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.
-25-
<PAGE>
The following tables present examples, for purposes of illustration
only, of cumulative total return performance for each Class through October
31, 1997. For these purposes, the calculations reflect maximum sales
charges, if any, and assume the reinvestment of any capital gains
distributions and income dividends paid during the indicated periods. The
performance does not reflect any income taxes payable by shareholders on the
reinvested distributions included in the calculations. The performance of
Class A Shares reflects the maximum front-end sales charge paid on the
purchase of shares but may also be shown without reflecting the impact of any
front-end sales charge. 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 an Institutional Class for the
periods prior to the commencement of operations of such Class is calculated by
taking the performance of the respective 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.
-26-
<PAGE>
Cumulative Total Return(1)
<TABLE>
<CAPTION>
U.S. Growth Fund
Class B Class B Class C Class C
Class A Shares Shares Shares Shares
Shares(2) (including (excluding (including (excluding Institutional
(at offer) CDSC)(4) CDSC) CDSC) CDSC) Class
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3 months 3 months 3 months 3 months
ended ended ended ended
10/31/97 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
6 months 6 months 6 months 6 months
ended ended ended ended
10/31/970.00%(5) 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00%
10/31/97 0.00%
9 months 9 months 9 months 9 months
ended ended ended ended
10/31/97 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/97 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
3 years 3 years 3 years 3 years
ended ended ended ended
10/31/97 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
Period Period Period Period
12/3/93(3) 3/29/94(3) 5/23/94(3) 12/3/93(6)
through through through through
10/31/97 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
</TABLE>
- ----------------------------
(1) The Manager has committed to waive a portion of its annual compensation or
reimburse expenses to limit the operating expenses of the Funds. See
Investment Management Agreements. In the absence of such waivers or
reimbursements, performance would have been affected negatively.
(2) The 12b-1 fees payable by each Fund for Class A Shares were at a rate equal
to 0.35% of the average daily net assets. Beginning May 6, 1996, the
payments were set at 0.30%. Performance calculations for periods after May
6, 1996 will be made using the lower 12b-1 fee rate. The maximum front-end
sales charge was reduced from 5.50% to 4.75% effective May 6, 1996. The
above performance figures are calculated using 4.75% as the applicable
sales charge for all time periods.
(3) Commencement of operations.
(4) Effective May 6, 1996, Class B Shares will be subject to a CDSC schedule 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. The above performance figures are calculated using
the new applicable CDSC schedule.
(5) For the six months ended October 31, 1997, cumulative total return for U.S.
Growth Fund A Class at net asset value was 0.00%.
(6) Commencement of operations was February 3, 1994.
-27-
<PAGE>
Cumulative Total Return(1)
<TABLE>
<CAPTION>
Overseas Equity Fund
Class B Class B Class C Class C
Class A Shares Shares Shares Shares
Shares(2) (including (excluding (including (excluding Institutional
(at offer) CDSC)(4) CDSC) CDSC) CDSC) Class
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3 months 3 months 3 months 3 months
ended ended ended ended
10/31/97 0.00% 10/31/97 0.00% 0.0% 10/31/97 0.00% 0.00% 10/31/97 0.00%
6 months 6 months 6 months 6 months
ended ended ended ended
10/31/970.00%(5) 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
0
9 months 9 months 9 months 9 months
ended ended ended ended
10/31/97 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/97 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
3 years 3 years 3 years 3 years
ended ended ended ended
10/31/97 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
Period Period Period Period
12/3/93(3) 3/29/94(3) 5/10/94(3) 12/3/93(6)
through through through through
10/31/97 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
</TABLE>
- ----------------------------
(1) The Manager has committed to waive a portion of its annual compensation or
reimburse expenses to limit the operating expenses of the Funds. See
Investment Management Agreements. In the absence of such waivers or
reimbursements, performance would have been affected negatively.
(2) The 12b-1 fees payable by each Fund for Class A Shares were at a rate
equal to 0.35% of the average daily net assets. Beginning May 6, 1996, the
payments were set at 0.30%. Performance calculations for periods after May
6, 1996 will be made using the lower 12b-1 fee rate. The maximum front-end
sales charge was reduced from 5.50% to 4.75% effective May 6, 1996. The
above performance figures are calculated using 4.75% as the applicable
sales charge for all time periods.
(3) Commencement of operations.
(4) Effective May 6, 1996, Class B Shares will be subject to a CDSC schedule 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. The above performance figures are calculated using
the new applicable CDSC schedule.
(5) For the six months ended October 31, 1997, cumulative total return for
Overseas Equity Fund A Class at net asset value was 0.00%.
(6) Commencement of operations was February 3, 1994.
-28-
<PAGE>
<TABLE>
<CAPTION>
New Pacific Fund
Class B Class B Class C Class C
Class A Shares Shares Shares Shares
Shares(2) (including (excluding (including (excluding Institutional
(at offer) CDSC)(4) CDSC) CDSC) CDSC) Class
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3 months 3 months 3 months 3 months
ended ended ended ended
10/31/97 0.00% 10/31/97 0.00%0 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
6 months 6 months 6 months 6 months
ended ended ended ended
10/31/97 0.00%(5) 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
9 months 9 months 9 months 9 months
ended ended ended ended
10/31/97 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/97 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
3 years 3 years 3 years 3 years
ended ended ended ended
10/31/97 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
Period Period Period Period
12/3/93(3) 3/29/94(3) 7/7/94(3) 12/3/93(6)
through through through through
10/31/97 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00% 0.00% 10/31/97 0.00%
</TABLE>
- ----------------------------
(1) The Manager has committed to waive a portion of its annual compensation or
reimburse expenses to limit the operating expenses of the Funds. See
Investment Management Agreements. In the absence of such waivers or
reimbursements, performance would have been affected negatively.
(2) The 12b-1 fees payable by each Fund for Class A Shares were at a rate
equal to 0.35% of the average daily net assets. Beginning May 6, 1996, the
payments were set at 0.30%. Performance calculations for periods after May
6, 1996 will be made using the lower 12b-1 fee rate. The maximum front-end
sales charge was reduced from 5.50% to 4.75% effective May 6, 1996. The
above performance figures are calculated using 4.75% as the applicable
sales charge for all time periods.
(3) Commencement of operations.
(4) Effective May 6, 1996, Class B Shares will be subject to a CDSC schedule 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. The above performance figures are calculated using
the new applicable CDSC schedule.
(5) For the six months ended October 31, 1997, cumulative total return for
New Pacific Fund A Class at net asset value was 0.00%.
(6) Commencement of operations was February 3, 1994.
-29-
<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 and 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 and
Sub-Adviser, 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. You also should consider your financial
ability to continue to purchase shares during periods of high fund share
prices. 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 Investment Plans for a
complete description of these services, including restrictions or limitations.
-30-
<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.
Investment Price Per Number of
Amount Share Shares Purchased
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
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 any stock or bond fund in the Delaware Group
of funds.
-31-
<PAGE>
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, banks and others are selected to execute
transactions for the purchase or sale of portfolio securities or other
instruments 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 securities 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 or
others. 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 Manager'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.
During the past three fiscal years, the aggregate dollar amounts of
brokerage commissions paid by U.S. Growth Fund, Overseas Equity Fund and
New Pacific Fund were as follows:
October 31,
1997 1996 1995
---- ---- ----
U.S. Growth Fund $00,000 $55,744 $27,955
Overseas Equity Fund $00,000 $31,960 $31,838
New Pacific Fund $000,000 $236,538 $142,441
The Manager may allocate out of all commission business generated
by all of the funds and accounts under their management, brokerage business to
brokers, dealers or members of an exchange who provide brokerage and research
services. These services include advice, either directly or through
publications or writings, as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities; furnishing of analyses and
reports concerning issuers, securities or industries; providing information on
economic factors and trends; assisting in determining portfolio strategy;
providing computer software and hardware used in security analyses; and
providing portfolio performance evaluation and technical market analyses. Such
services are used by the Manager in connection with its investment
decision-making process with respect to one or more funds and accounts managed
by it, and may not be used, or used exclusively, with respect to the fund or
account generating the brokerage.
During the fiscal year ended October 31, 1997, portfolio
transactions of U.S. Growth Fund, Overseas Equity Fund and New Pacific Fund in
the amounts of $0,000,000, $0,000,000 and $0,000,000, respectively,
resulting in brokerage commissions of $0,000, $0,000 and $0,000,
respectively, were directed to brokers for brokerage and research services
provided.
-32-
<PAGE>
As provided in the 1934 Act and the Investment Management and
Sub-Advisory Agreements, higher commissions are permitted to be paid to
brokers, dealers or members of an exchange who provide brokerage and research
services than to broker, dealers or members of an exchange 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 brokers, dealers or members of an exchange 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 Conduct Rules 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 expenses of the funds in the Delaware Group of funds such
as custodian fees, and may, at the request of the Distributor, give
consideration to sales of shares of such funds as a factor in the selection
of brokers and dealers to execute portfolio transactions.
Subject to the above considerations, an affiliate of the Manager
may act as a securities broker for the Funds. In order for an affiliate of the
Manager to effect any portfolio transactions for the Funds, the commissions,
fees or other remuneration received by the affiliate must be reasonable and
fair compared to the commissions, fees or other remuneration paid to other
brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period
of time. This standard would allow an affiliate of the Manager to receive no
more than the remuneration which would be expected to be received by an
unaffiliated broker in a commensurate arm's-length transaction. Furthermore,
the Directors of Adviser Funds, Inc., including a majority of the Directors
who are not "interested" persons, have adopted procedures which are reasonably
designed to provide that any commissions, fees or other remuneration paid to
an affiliate of the Manager are consistent with the foregoing standard. In
accordance with Section 11(a) under the 1934 Act, an affiliate of the
Manager may not retain compensation for effecting transactions on a
-34-
<PAGE>
national securities exchange for the Funds unless Adviser Funds, Inc. has
expressly authorized the retention of such compensation in a written contract
executed by Adviser Funds, Inc. and such affiliate. Section 11(a) provides
that an affiliate of the Manager must furnish to the Adviser Funds, Inc. at
least annually a statement setting forth the total amount of all compensation
retain by the affiliate from transactions effected for the Funds during the
applicable period. Brokerage and futures transactions with an affiliate of the
Manager are also subject to such fiduciary standards as may be imposed by
applicable law. No such trade have been made through affiliates to date.
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 sales of portfolio securities for the particular fiscal year by
the monthly average of the value of the portfolio securities owned by the
Fund, during the particular fiscal year, exclusive of securities whose
maturities at the time of acquisition are one year or less. 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.
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 , the portfolio turnover rates
of the Funds were as follows:
October 31,
1997 1996
U.S. Growth Fund 00% 131%
Overseas Equity Fund 00% 21%
New Pacific Fund 00% 163%
-35-
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for each Fund's
shares and has agreed to use its best efforts to sell shares of each Fund. See
the Prospectuses for information on how to invest. Shares of each Fund are
offered on a continuous basis and may be purchased through authorized
investment dealers or directly by contacting Adviser Funds, Inc. or the
Distributor.
The minimum initial investment generally is $1,000 for Class A
Shares, Class B Shares and Class C Shares. Subsequent purchases of such
classes generally must be at least $100. The initial and subsequent investment
minimums for Class A Shares will be waived for purchases by officers,
directors and employees of any Delaware Group fund, the Manager or any of the
Manager's affiliates if the purchases are made pursuant to a payroll deduction
program. Shares purchased pursuant to the Uniform Gifts to Minors Act or
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 Classes, 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 purchase
order for more than $250,000 of Class B Shares and $1,000,000 or more of Class
C Shares. An investor may exceed these limitations by making cumulative
purchases over a period of time. In doing so, an investor should keep in mind,
however, that reduced front-end sales charges apply to investments of $100,000
or more in Class A Shares, and that Class A Shares are subject to lower annual
12b-1 Plan expenses than Class B Shares and Class C Shares and generally are
not subject to a CDSC.
Selling dealers are responsible for transmitting orders promptly.
Adviser Funds, Inc. reserves the right to reject any order for the purchase of
its shares of any Fund if in the opinion of management such rejection is in such
Fund's best interest.
The NASD has adopted Conduct Rules , as amended, 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 following purchase; and
(iv) 1% if shares are redeemed during the sixth year following purchase. Class
B Shares are also subject to annual 12b-1 Plan expenses which are higher than
those to which Class A Shares are subject and are assessed against 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.
-36-
<PAGE>
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Class C
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment which are equal to those to which Class B Shares are subject.
Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales
charge or 12b-1 Plan expenses. See Plans Under Rule 12b-1 for the Fund
Classes under Purchasing Shares ,and Determining Offering Price and Net Asset
Value in this Part B.
Class A Shares, Class B Shares, Class C Shares and Institutional
Class shares represent a proportionate interest in a Fund's assets and will
receive a proportionate interest in that Fund's income, before application, as
to Class A, Class B and Class C Shares, of any expenses under that Fund's
12b-1 Plans.
Certificates representing shares purchased are not ordinarily issued
unless, in the case of Class A Shares or Institutional Class shares, a
shareholder submits a specific request. Certificates are not issued in the
case of Class B Shares or Class C Shares or in the case of any retirement
plans accounts including self-directed IRAs. However, purchases not involving
the issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained 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 full share denominations purchased by sending a letter signed
by each owner of the account to the Transfer Agent requesting the certificate.
No charge is assessed by Adviser Funds, Inc. for any certificate issued. A
shareholder may be subject to fees for replacement of a lost or stolen
certificate, under certain conditions, including the cost of obtaining a bond
covering the lost or stolen certificate. Please contact a Fund for further
information. Investors who hold certificates representing any of their shares
may only redeem those shares by written request. The investor's certificate(s)
must accompany such request.
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A Shares, Class B
Shares and Class C Shares permit investors to choose the method of purchasing
shares that is most suitable for their needs given the amount of their
purchase, the length of time they expect to hold their shares and other
relevant circumstances. Investors should determine whether, given their
particular circumstances, it is more advantageous to purchase Class A Shares
and incur a front-end sales charge and annual 12b-1 Plan expenses of up to a
maximum of 0.35% (currently, no more than 0.30%) of the average daily net
assets of Class A Shares or to purchase either Class B or Class C Shares and
have the entire initial purchase amount invested in the 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% (0.25% of which are
service fees to be paid to the Distributor, dealers or others for providing
personal service and/or maintaining shareholder accounts) of average daily net
assets of the respective Class. Class B Shares will automatically convert to
Class A Shares at the end of approximately eight years after purchase and,
thereafter, be subject to annual 12b-1 Plan expenses of up to a maximum of
0.35% (currently no more than 0.30%) of average daily net assets of such
shares. Unlike Class B Shares, Class C Shares do not convert to another class.
-37-
<PAGE>
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.
<TABLE>
<CAPTION>
Class A Shares
- -------------------------------------------------------------------------------------------------------------------
Dealer's
Commission***
as % of
Front-End Sales Charge as % of Offering
Amount of Purchase Offering Price Amount Invested** Price
- -------------------------------------------------------------------------------------------------------------------
U.S. Overseas New
Growth Equity Pacific
Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Less than $100,000 4.75% 0.00% 0.00% 0.00% 4.00%
$100,000 but under $250,000 3.75 0.00 0.00 0.00 3.00
$250,000 but under $500,000 2.50 0.00 0.00 0.00 2.00
$500,000 but under $1,000,000* 2.00 0.00 0.00 0.00 1.60
</TABLE>
* There is no front-end sales charge on purchases of $1,000,000 or more of
Class A Shares but, under certain limited circumstances, a 1% contingent
deferred sales charge may apply upon redemption of such shares. The
contingent deferred sales charge ("Limited CDSC") that may be applicable
arises only in the case of certain shares that were purchased at net asset
value and triggered the payment of a dealer's commission.
** Based on the net asset value per share of the respective 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.
- --------------------------------------------------------------------------------
A 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 charges shown above. In addition, certain
dealers who enter into an agreement to provide extra training and
information on Delaware Group products and services and who increase
sales of Delaware Group funds may receive an additional commission of
up to 0.15% of the offering price. Dealers who receive 90% or more of
the sales charge may be deemed to be underwriters under the 1933
Act.
- --------------------------------------------------------------------------------
-38-
<PAGE>
Certain dealers who enter into an agreement to provide extra training
and information on Delaware Group products and services and who increase sales
of Delaware Group funds may receive an additional commission of up to 0.15% of
the offering price 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
schedules:
Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
------------------ -----------------
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75%
Next $2 million up to $5 million 0.50%
Amount over $5 million 0.25%
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies (see Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value under Redemption
and Exchange in the Fund Classes Prospectus) 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 Shares and Class C Shares are purchased without a front-end
sales charge. Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth 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.
-39-
<PAGE>
The following table sets forth the rates of the CDSC for Class B
Shares of each Fund:
Contingent Deferred
Sales Charge (as a
Year After 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 same
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 of shares to which the Plan
applies. The Plans do not apply to the Institutional Classes 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 Classes. Shareholders of the Institutional Classes 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 0.35% of average
daily net assets of Class A Shares, and up to 1% (0.25% of which are service
fees to be paid to the Distributor, dealers and others for providing personal
service and/or maintaining shareholder accounts) of each of Class B Shares' and
Class C Shares' average daily net
-40-
<PAGE>
assets for the year. Adviser 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.
Effective at the close of business on May 3, 1996, the annual fee
payable on a monthly basis under Class A Shares' Plan is equal to 0.30% of
average daily net assets.
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 Agreement, 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 the
relevant shareholders of 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 also be
approved by a majority of the outstanding voting securities of Class B Shares
of the same Fund. Also, any other material amendment to the Plans must be
approved by a majority vote of the directors, including a majority of the
directors who are not "interested persons" 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.
-41-
<PAGE>
For the fiscal year ended October 31, 1997, payments from Class A
Shares, Class B Shares and Class C Shares of U.S. Growth Fund amounted to
$000,000, $000,000 and $000,000, respectively. Such amounts were used for the
following purposes:
<TABLE>
<CAPTION>
U.S. Growth Fund U.S. Growth Fund U.S. Growth Fund
A Class B Class C Class
---------------- ---------------- ----------------
<S> <C> <C> <C>
Advertising $000 $000 $000
Annual/Semi-Annual Reports $000 $000 $000
Broker Trails $000 $000 $000
Broker Sales Charges $000 $000 $000
Dealer Service Expenses $000 $000 $000
Interest on Broker Sales Charges $000 $000 $000
Commissions to Wholesalers $000 $000 $000
Promotional-Broker Meetings $000 $000 $000
Promotional-Other $000 $000 $000
Prospectus Printing $000 $000 $000
Telephone $000 $000 $000
Wholesaler Expenses $000 $000 $000
Other $000 $000 $000
Total $000 $000 $000
</TABLE>
For the fiscal year ended October 31, 1997, payments from Class A
Shares, Class B Shares and Class C Shares of Overseas Equity Fund amounted to
$000,000, $000,000 and $000,000, respectively. Such amounts were used for the
following purposes:
<TABLE>
<CAPTION>
Overseas Equity Fund Overseas Equity Fund Overseas Equity Fund
A Class B Class C Class
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Advertising $000 $000 $000
Annual/Semi-Annual Reports $000 $000 $000
Broker Trails $000 $000 $000
Broker Sales Charges $000 $000 $000
Dealer Service Expenses $000 $000 $000
Interest on Broker Sales Charges $000 $000 $000
Commissions to Wholesalers $000 $000 $000
Promotional-Broker Meetings $000 $000 $000
Promotional-Other $000 $000 $000
Prospectus Printing $000 $000 $000
Telephone $000 $000 $000
Wholesaler Expenses $000 $000 $000
Other $000 $000 $000
Total $000 $000 $000
</TABLE>
-42-
<PAGE>
For the fiscal year ended October 31, 1997, payments from Class A
Shares, Class B Shares and Class C Shares of New Pacific Fund amounted to
$000,000, $000,000 and $000,000, respectively. Such amounts were used for the
following purposes:
<TABLE>
<CAPTION>
New Pacific Fund New Pacific Fund New Pacific Fund
A Class B Class C Class
---------------- ---------------- ----------------
<S> <C> <C> <C>
Advertising $000 $000 $000
Annual/Semi-Annual Reports $000 $000 $000
Broker Trails $000 $000 $000
Broker Sales Charges $000 $000 $000
Dealer Service Expenses $000 $000 $000
Interest on Broker Sales Charges $000 $000 $000
Commissions to Wholesalers $000 $000 $000
Promotional-Broker Meetings $000 $000 $000
Promotional-Other $000 $000 $000
Prospectus Printing $000 $000 $000
Telephone $000 $000 $000
Wholesaler Expenses $000 $000 $000
Other $000 $000 $000
Total $000 $000 $000
</TABLE>
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 0.25% of the dollar amount of such sales. The
Distributor may also provide additional promotional incentives or payments to
dealers that sell shares of the Delaware Group of funds. In some instances,
these incentives or payments may be offered only to certain dealers who
maintain, have sold or may sell certain amounts of shares. 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, the Manager's
affiliates 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 and any such class of shares of any of
the other funds in the Delaware Group, including any fund that may be created,
at the net asset value per share. Family members (regardless of age) 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. Class A Shares may also be purchased net
asset value by current and former officers, directors and employees (and
members of their families) of the Dougherty Financial Group LLC. Purchases of
Class A Shares may also be made by clients of registered representatives of an
-43-
<PAGE>
authorized investment dealer at net asset value within 12 months of a change of
the registered representative's employment, if the purchase is funded by
proceeds from an investment where a front-end sales charge, contingent deferred
sales charge or other sales charge has been assessed. Purchases of Class A
Shares may also be made at net asset value by bank employees who provide
services in connection with agreements between the bank and unaffiliated brokers
or dealers concerning sales of shares of Delaware Group funds. In addition,
purchases of Class A Shares may be made by financial institutions investing for
the account of their trust customers when they are not eligible to purchase
shares of a Fund's Institutional Class. 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.
Investors in Delaware-Voyageur Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A
Shares of any of the Funds in the Delaware Group at net asset value.
Purchases of Class A Shares at net asset value may also be made by
the following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase shares of the Institutional
Class of a Fund; any group retirement plan (excluding defined benefit pension
plans), or such plans of the same employer, for which plan participant records
are maintained on the Delaware Investment & Retirement Services, Inc.
("DIRSI") proprietary record keeping system that (i) has in excess of $500,000
of plan assets invested in Class A Shares of Delaware Group funds and any
stable value product available through the Delaware Group, or (ii) is
sponsored by an employer that has at any point after May 1, 1997 had more than
100 employees while such plan has held Class A Shares of a Delaware Group fund
and such employer has properly represented to DIRSI in writing that it has the
requisite number of employees and has received written confirmation back from
DIRSI.
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.
The Funds must be notified in advance that the trade qualifies for
purchase at net asset value.
Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made
within a 13-month period pursuant to a written Letter of Intention provided by
the Distributor and signed by the purchaser, and not legally binding on the
signer or 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
-44-
<PAGE>
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,
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.
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 a Fund and other Delaware Group funds which offer corresponding classes of
shares may also be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine
the total amount of any combination of Class A Shares, Class B Shares and/or
Class C Shares of the 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). In addition, assets held by investment advisory clients
of the Manager or its affiliates in a stable value account may be combined
with other Delaware Group fund holdings.
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21;
or a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
-45-
<PAGE>
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 a Fund, as
well as shares of any other class of any of the other Delaware Group funds which
offer such classes (except shares of any Delaware Group fund which do not carry
a front-end sales charge, CDSC or Limited CDSC, other than shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange from
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 of a Fund (and of Institutional Classes
holding shares which were acquired through an exchange from 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 that 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
Shares or Class C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at
the net asset value next determined after receipt of remittance. A redemption
and reinvestment could have income tax consequences. It is recommended that a
tax adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is intended to be made before investing or sending money. The
prospectus contains more complete information about the fund, including
charges and expenses.
Investors should consult their financial advisers or the Transfer
Agent, which also serves as the 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 Classes may also benefit from the reduced front-end sales
charges for investments in Class A Shares set forth in the table on page ___,
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
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charge reduction upon each purchase, both initial and subsequent, upon
notification to the Fund in which the investment is being made at the time of
each such purchase. Employees participating in such Group Investment Plans may
also combine the investments made in their plan account when determining the
applicable front-end sales charge on purchases to non-retirement Delaware Group
investment accounts if they so notify the Fund in which they are investing in
connection with each purchase. See Retirement Plans for the Fund Classes under
Investment Plans for information about Retirement Plans.
The Institutional Classes
The Institutional Class of each Fund is available for purchase only by:
(a) retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans; (b) tax-exempt employee
benefit plans of the Manager or its affiliates and securities dealer firms with
a selling agreement with the Distributor; (c) institutional advisory accounts of
the Manager or its affiliates and those having client relationships with
Delaware Investment Advisers, a division of the Manager, or its affiliates and
their corporate sponsors, as well as subsidiaries and related employee benefit
plans and rollover individual retirement accounts from such institutional
advisory accounts; (d) a bank, trust company and similar financial institution
investing for its own account or for the account of its trust customers for whom
such financial institution is exercising investment discretion in purchasing
shares of the Class, except where the investment is part of a program that
requires payment to the financial institution of a Rule 12b-1 Plan fee; and (e)
registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least $1,000,000
entrusted to the adviser for investment purposes, but only if the adviser is not
affiliated or associated with a broker or dealer and derives compensation for
its services exclusively from its clients for such advisory services.
Shares of 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.
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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 accounts 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
specific Fund and Class in which shares are being purchased. Such purchases,
which must meet the minimum subsequent purchase requirements set forth in the
Prospectuses and this Part B, are made for Class A Shares at the public
offering price, and for Institutional Class shares, Class B Shares and
Class C Shares at the net asset value, at the end of the day of receipt. A
reinvestment plan may be terminated at any time. This plan does not assure a
profit nor protect against depreciation in a declining market.
Reinvestment of Dividends in Other Delaware Group Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A, Class B
and Class C Shares may automatically reinvest 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 at net asset
value at the close of business on the reinvestment date without any front-end
sales charge or service fee. The shareholder must notify the Transfer Agent in
writing and must have established an account in the fund into which the
dividends and/or distributions are to be invested. Any reinvestment directed
to a fund in which the investor does not then have an account will be treated
like all other initial purchases of a fund's shares. Consequently, an investor
should obtain and read carefully the prospectus for the fund in which the
investment is intended to be made before investing or sending money. The
prospectus contains more complete information about the fund, including
charges and expenses. See also Additional Methods of Adding to Your Investment
- - Dividend Reinvestment Plan under How to Buy Shares in the 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,
provided an account has been established. Dividends from Class A Shares may
not be directed to Class B Shares or Class C Shares. Dividends from Class B
Shares may only be directed to other Class B Shares and dividends from Class C
Shares may only be directed to other Class C Shares.
Capital gains and/or dividend distributions to participants in the
following retirement plans are automatically reinvested into the same
Delaware Group fund in which their investments are held: SAR/SEP, SEP/IRA,
SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans,
401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation
Plans.
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Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for any Fund to
accept for investment in Class A, Class B or Class C Shares, through an agent
bank, preauthorized government or private recurring payments. This method of
investment assures the timely credit to the shareholder's account of payments
such as social security, veterans' pension or compensation benefits, federal
salaries, Railroad Retirement benefits, private payroll checks, dividends, and
disability or pension fund benefits. It also eliminates lost, stolen and
delayed checks.
Automatic Investing Plan--Shareholders of Class A, Class B and Class
C Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into their Fund
account. This type of investment will be handled in either of the following
ways. (1) If the shareholder's bank is a member of the National Automated
Clearing House Association ("NACHA"), the amount of the investment will be
electronically deducted from his or her account by Electronic Fund Transfer
("EFT"). The shareholder's checking account will reflect a debit each month at
a specified date although no check is required to initiate the transaction.
(2) If the shareholder's bank is not a member of NACHA, deductions will be
made by preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457
Deferred Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such plans must be for $25 or more. An investor wishing to take
advantage of either service must complete an authorization form. Either
service can be discontinued by the shareholder at any time without penalty by
giving written notice.
Payments to a Fund from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account after
such payments should have been terminated by reason of death or otherwise. Any
such payments are subject to reclamation by the federal government or its
agencies. Similarly, under certain circumstances, investments from private
sources may be subject to reclamation by the transmitting bank. In the event
of a reclamation, a Fund 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 Fund.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer,
to make investments directly to their Fund accounts. Any Fund will accept
these investments, such as bank-by-phone, annuity payments and payroll
allotments, by mail directly from the third party. Investors should contact
their employers or financial institutions who in turn should contact Adviser
Funds, Inc. for proper instructions.
Wealth Builder Option
Shareholders can 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. Shareholders of the Fund
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Classes may elect to invest in one or more of the other mutual funds in the
Delaware Group through the Wealth Builder Option. See Wealth Builder Option and
Redemption and Exchange in the Prospectus for the Fund Classes.
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. The investment will be made on the 20th day of each
month (or, if the fund selected is not open that day, the next business day)
at the public offering price or net asset value, as applicable, of the fund
selected on the date of investment. No investment will be made for any month
if the value of the shareholder's account is less than the amount specified
for investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors
selecting this option should consider their financial ability to continue to
participate in the program through periods of low fund share prices. This
program involves automatic exchanges between two or more fund accounts and is
treated as a purchase of shares of the fund into which investments are made
through the program. See Exchange Privilege for a brief summary of the tax
consequences of exchanges. Shareholders can terminate their participation in
Wealth Builder at any time by giving written notice to the fund from which
exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457
Deferred Compensation Plans. This option also is not available to shareholders
of the Institutional Classes.
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. Effective September 1, 1997, the Delaware Group
Asset Planner Service is only available to financial advisers or investment
dealers who have previously used this service. 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. With the help of a financial adviser, you
may also design a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service
is determined by the individual sales charges of the underlying funds and
their percentage allocation in the selected Strategy. Exchanges from existing
Delaware Group accounts into the Asset Planner service may be made at net
asset value under the circumstances described under Investing by Exchange in
the Prospectus. Also see Buying Class A Shares at Net Asset Value under
Classes of Shares. The minimum initial investment per Strategy is $2,000;
subsequent investments must be at least $100. Individual fund minimums do not
apply to investments made using the Asset Planner service. Class A, Class B
and Class C Shares are available through the Asset Planner service. Generally,
only shares within the same class may be used within the same Strategy.
However, Class A Shares of a Fund and of other funds in the Delaware Group may
be used in the same Strategy with consultant class shares that are offered by
certain other Delaware Group funds.
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An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30 of each subsequent year. The
fee, payable to 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 30. However, effective November 1, 1996, the annual
maintenance fee is waived until further notice. Investors who utilize the
Asset Planner for an IRA will continue to pay an annual IRA fee of $15 per
Social Security number.
Investors will receive a customized quarterly Strategy Report
summarizing all 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.
Retirement Plans for the Fund Classes
An investment in each Fund may be suitable for tax-deferred
retirement plans. Delaware Group offers a full spectrum of qualified and
non-qualified retirement plans , including the 401(k) deferred compensation
plan, Individual Retirement Account ("IRA"), and the new Roth IRA. See
Appendix A for additional information on IRAs.
The CDSC may be waived on certain redemptions of Class B Shares and
Class C Shares. See Waiver of Contingent Deferred Sales Charge - Class B
Shares and Class C Shares under Redemption and Exchange in the Prospectuses
for the Fund Classes for a list of the instances in which the CDSC is waived.
Purchases of Class B Shares are subject to a maximum purchase
limitation of $250,000 for retirement plans. Purchases of Class C Shares must
be in an amount that is less than $1,000,000 for such plans. The maximum
purchase limitations apply only to the initial purchase of shares by the
retirement plan.
Minimum investment limitations generally applicable to other
investors do not apply to retirement plans, other than Individual Retirement
Accounts for which there is a minimum initial purchase of $250, and a minimum
subsequent purchase of $25, regardless of which class is selected.
Retirement plans may be subject to plan establishment fees, annual maintenance
fees and/or other administrative or trustee fees. Fees are based upon the
number of participants in the plan as well as the services selected.
Additional information about fees is included in retirement plan materials.
Fees are quoted upon request. Annual maintenance fees may be shared by
Delaware Management Trust Company, the Transfer Agent, other affiliates of the
Manager and others that provide services to such plans.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders.
Certain retirement plans may qualify to purchase shares of the Institutional
Classes. See The Institutional Classes, 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.
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Taxable distributions from the retirement plans may be subject to
withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the plans .
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships and corporations. These plans can be maintained as Section
401(k), profit sharing or money purchase pension plans. Contributions may be
invested only in Class A and Class C Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an
IRA and make contributions which may be tax-deductible, even if the individual
is already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below,
earnings will be tax-deferred. In addition, an individual may make
contributions on behalf of a spouse who has no compensation for the year or,
for years prior to 1997, elects to be treated as having no compensation for
the year. Investments in each of the Fund Classes are permissible.
An individual can contribute up to $2,000 to his or her IRA each
year. Contributions may or may not be deductible depending upon the
taxpayer's adjusted gross income and whether the taxpayer or his or her spouse
is an active participant in an employer-sponsored retirement plan. Even if a
taxpayer (or his or her spouse) is an active participant in an
employer-sponsored retirement plan, the full $2,000 deduction is still
available if the taxpayer's adjusted gross income is below $25,000 ($40,000
for taxpayers filing joint returns). A partial deduction is allowed for
married couples with incomes between $40,000 and $50,000, and for single
individuals with incomes between $25,000 and $35,000. No deductions are
available for contributions to IRAs by taxpayers whose adjusted gross income
before IRA deductions exceeds $50,000 ($35,000 for singles) and who are active
participants in an employer-sponsored retirement plan. Taxpayers who are not
allowed deductions on IRA contributions still can make nondeductible IRA
contributions of as much as $2,000 for each working spouse ($2,250 for
one-income couples for years prior to 1997), and defer taxes on interest or
other earnings from the IRAs. Special rules apply for determining the
deductibility of contributions made by married individuals filing separate
returns.
Effective for tax years beginning after 1996, one-income couples can
contribute up to $2,000 to each spouse's IRA provided the combined
compensation of both spouses is at least equal to the total contributions for
both spouses. If the working spouse is an active participant in an
employer-sponsored retirement plan and earns over $40,000, the maximum
deduction limit is reduced in the same way that the limit is reduced for
contributions to a non-spousal IRA.
A company or association may establish a Group IRA for employees or
members who want to purchase shares of a Fund. Purchases of $1 million or more
of Class A Shares qualify for purchase at net asset value but may, under
certain circumstances, be subject to a Limited CDSC. 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
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seven days after the receipt of the IRA Disclosure Statement or within seven
days after the establishment of the IRA, except, if the IRA is established more
than seven days after receipt of the IRA Disclosure Statement, the account may
not be revoked. Distributions from the account (except for the pro-rata portion
of any nondeductible contributions) are fully taxable as ordinary income in the
year received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. See Alternative Purchase Arrangements - Class B Shares and Class C
Shares under Classes of Shares, Contingent Deferred Sales Charge - Class B
Shares and Class C Shares under Classes of Shares, and Waiver of Contingent
Deferred Sales Charge - Class B Shares and Class C Shares under Redemption and
Exchange in the Fund Classes' Prospectuses concerning the applicability of a
CDSC upon redemption.
Effective January 1, 1997, the 10% premature distribution penalty
will not apply to distributions from an IRA that are used to pay medical
expenses in excess of 7.5% of adjusted gross income or to pay health insurance
premiums by an individual who has received unemployment compensation for 12
consecutive weeks.
See Appendix A-IRA Information for additional IRA information.
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")
Although new SAR/SEP plans may not be established after December
31, 1996, existing plans may be maintained by employers having 25 or fewer
employees . An employer may elect to make additional contributions to such
existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. 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 ___.
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 ___.
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
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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 ___.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that plan sponsors
are limited to 100 employees and, in exchange for mandatory plan sponsor
contributions, discrimination testing is no longer required.
Class B Shares are not available for purchase by such plans.
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DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering
price next calculated by the Fund in which shares are being purchased after
receipt of the order by the Fund or its agent. Orders for purchases of Class B
Shares, Class C Shares and Institutional Class shares are effected at the net
asset value per share next calculated by the Fund in which shares are being
purchased 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 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, Martin Luther King, Jr.'s
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas. When the New York Stock Exchange is closed,
the Funds 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 each Fund's 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. Foreign
currencies and the prices of foreign securities denominated in foreign
currencies are translated to U.S. dollars based on rates in effect as of 12
p.m., Eastern time. 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 a 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 Classes 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 and the net asset value of each
Class may vary. However, the net asset value per share of each Class is
expected to be equivalent.
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REDEMPTION AND REPURCHASE
Any shareholder may require a Fund to redeem shares by sending a
written request, signed by the record owner or owners exactly as the shares
are registered, to the Fund, at 1818 Market Street, 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. Each Fund reserves 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, 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
respective 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. See Restructuring of the Funds under Management of the Funds in
the Prospectus for the Fund Classes. Class C Shares are subject to a CDSC of
1% if shares are redeemed within 12 months following purchase. See Contingent
Deferred Sales Charge - Class B and Class C Shares 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, in the case of the Fund Classes, there is currently a $7.50 bank wiring
cost, neither the Funds nor the Distributor charges a fee for redemptions or
repurchases, but such fees could be charged at any time in the future.
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Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order; provided, however, that each commitment to mail or wire
redemption proceeds by a certain time, as described below, is modified by the
qualifications described in the next paragraph.
Each Fund will process written or telephone redemption requests to
the extent that the purchase orders for the shares being redeemed have already
been settled. A Fund will honor the redemption requests as to shares for which
a check was tendered as payment, but a Fund will not mail or wire the proceeds
until it is reasonably satisfied that the check has cleared. This potential
delay can be avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which
is subsequently returned unpaid for insufficient funds or for any other
reason, the Fund involved will automatically redeem from the shareholder's
account the shares purchased by the check plus any dividends earned thereon.
Shareholders may be responsible for any losses to a 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 a Fund of securities owned by it is not reasonably
practical, or it is not reasonably practical for a Fund fairly to value its
assets, or in the event that the SEC has provided for such suspension for
the protection of shareholders, a Fund may postpone payment or suspend the
right of redemption or repurchase. In such case, the shareholder may withdraw
the request for redemption or leave it standing as a request for redemption at
the net asset value next determined after the suspension has been terminated.
Payment for shares redeemed or repurchased may be made either in cash
or kind, or partly in cash and partly in kind. Any portfolio securities paid
or distributed in kind would be valued as described in Determining Offering
Price and Net Asset Value. Subsequent sale by an investor receiving a
distribution in kind could result in the payment of brokerage commissions.
However, Adviser Funds, Inc. has elected to be governed by Rule 18f-1 under
the 1940 Act pursuant to which each Fund is obligated to redeem shares solely
in cash up to the lesser of $250,000 or 1% of the net asset value of such Fund
during any 90-day period for any one shareholder.
The value of a Fund's investments is subject to changing market
prices. Thus, a shareholder reselling shares to a 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
established with a minimum investment may trigger mandatory redemption. No
CDSC or Limited CDSC will apply to the redemptions described in this
paragraph.
* * *
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Each Fund has 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 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 Classes,
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 address of record. Checks payable to the
shareholder(s) of record will normally be mailed the next business day, but no
later than seven days, after the receipt of the redemption request. This
option is only available to individual, joint and individual fiduciary-type
accounts.
In addition, redemption proceeds of $1,000 or more can be transferred
to your predesignated bank account by wire or by check by calling the phone
numbers listed above. An authorization form must have been completed by the
shareholder and filed with the relevant 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 from Class A Shares, Class B Shares and
Class C Shares. 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
relevant Fund 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.
To reduce the shareholder's risk of attempted fraudulent use of the
telephone redemption procedure, payment will be made only to the bank account
designated on the authorization form.
If expedited payment under these procedures could adversely affect a
Fund, such Fund may take up to seven days to pay the shareholder.
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
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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. 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 Funds do not recommend any
specific amount of withdrawal. This $5,000 minimum does not apply for a 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 may be disadvantageous to the shareholder. Purchases of
Class A Shares through a periodic investment program in a fund managed by the
Manager must be terminated before a Systematic Withdrawal Plan with respect to
such shares can take effect, except if the shareholder is a participant in one
of our retirement plans or is investing in Delaware Group funds which do not
carry a sales charge. Redemptions of Class A Shares pursuant to a Systematic
Withdrawal Plan may be subject to a Limited CDSC if the purchase was made at
net asset value and a dealer's commission has been paid on that purchase.
Redemptions of Class B Shares or Class C Shares pursuant to a Systematic
Withdrawal Plan may be subject to a CDSC, unless the annual amount selected to
be withdrawn is less than 12% of the account balance on the date that the
Systematic Withdrawal Plan was established. See Waiver of Contingent Deferred
Sales Charge - Class B Shares 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 with 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 Funds reserve the right to
reject a signature guarantee supplied by an eligible
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institution based on its creditworthiness. This plan may be terminated by the
shareholder or the Transfer Agent at any time by giving written notice.
The Systematic Withdrawal Plan is not available for Institutional
Classes.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
The following supplements the information in each Prospectus under
the heading Dividends, Distributions and Taxes.
Tax Information Concerning All Funds
Each Fund has qualified and intends to continue to qualify as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). By doing so, 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 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 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 one-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 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.
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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 a 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.
Each Fund intends to pay out substantially all of its net
investment income and net realized capital gains. Such payments, if any,
will be made once a year. Checks are normally mailed within three business
days of the payable 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 Class A Shares, Class B Shares
and Class C Shares alone will incur distribution fees under their respective
12b-1 Plans.
For each of the Fund classes, 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. All dividends and distributions are reinvested
for the Institutional Class. 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.
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
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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 Fund 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 Funds 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 Funds since these Funds may
make distributions on an annual basis.
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.
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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. 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 Overseas Equity and
New Pacific Funds are included in following sections of this Part B. 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
Overseas Equity Fund and New Pacific Fund are based on tax laws and
regulations which are in effect on the date of this Part B; such laws and
regulations may be changed by legislative or administrative action, and such
changes may be retroactive.
Additional Tax Information Concerning Overseas Equity Fund and New Pacific
Fund
Gain or loss on the sale or other disposition of foreign currency by
Overseas Equity Fund and New Pacific Fund on a spot (or cash) basis will
result in ordinary gain or loss for federal income tax purposes.
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.
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Foreign Tax Credit
Shareholders of Overseas Equity Fund and New Pacific Fund 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 advisers.
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.
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.
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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 30 days prior to or 30 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 advisers with specific reference to their own tax situations, including
their state and local tax liabilities.
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INVESTMENT MANAGEMENT AGREEMENTS
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. On October 31, 1997, the Manager and its
affiliates within the Delaware Group, including the Delaware International
Advisers Ltd., were managing in the aggregate more than $00 billion in
assets in the various institutional or separately managed (approximately
$00,000,000,000) and investment company (approximately $00,000,000,000)
accounts.
Separate Investment Management Agreements for U.S. Growth Fund and
New Pacific Fund are dated May 4, 1996 . An Amended and Restated Investment
Management Agreement for Overseas Equity Fund is dated September 15, 1997. 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. An Agreement
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
U.S. Growth Fund 0.70%
Overseas Equity Fund 1.00%
New Pacific Fund 0.80%
On October 31, 1997, each Fund's total net assets were as follows:
U.S. Growth Fund $00,000,000
Overseas Equity Fund $00,000,000
New Pacific Fund $00,000,000
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<PAGE>
The total investment management fees incurred by each Fund during the
fiscal years ended October 31, 1997, October 31, 1996 and October 31, 1995
were as follows below. Beginning May 6, 1996, the fees were paid to the
Manager, Delaware Management Company, Inc. Fees paid prior to May 6, 1996 were
paid to the previous investment manager, Lincoln Investment Management, Inc.
<TABLE>
<CAPTION>
Management Fees Incurred
Fund 1997 1996 1995
<S> <C> <C> <C>
U.S. Growth Fund $000,000 earned $154,309 earned $105,965 earned
$000,000 paid $137,359 paid $63,298 paid
$000,000 waived $16,950 waived $42,667 waived
Overseas Equity Fund $000,000 earned $167,584 earned $142,529 earned
$000,000 paid $47,994 paid $5,771 paid
$000,000 waived $119,590 waived $136,758 waived
New Pacific Fund $000,000 earned $116,131 earned $119,820 earned
$000,000 paid $203 paid -$0- paid
$000,000 waived $115,928 waived $119,820 waived
</TABLE>
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. The Manager has entered into separate Sub-Advisory
Agreements on behalf of U.S. Growth Fund and New Pacific Fund dated May 4,
1996 and on behalf of Overseas Equity Fund dated November 18, 1997. The terms
of the Sub-Advisory Agreements and requirements for Board approval and
termination are the same for these agreements as they are for the Investment
Management Agreements described above.
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 the fiscal
year ended October 31, 1997 for each Class of the Funds were as follows with
and without giving effect to any expense waivers or reimbursements, as more
fully described below:
Ratio (With Ratio (Without
Giving Effect Giving Effect
Fund To Waiver) To Waiver)
---- ---------- ----------
U.S. Growth Fund
Class A Shares 0.00% 0.00%
Class B Shares 0.00% 0.00%
Class C Shares 0.00% 0.00%
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<PAGE>
Institutional Class 0.00% 0.00%
Ratio (With Ratio (Without
Giving Effect Giving Effect
Fund To Waiver To Waiver
---- --------- -----------
Overseas Equity Fund
Class A Shares 0.00% 0.00%
Class B Shares 0.00% 0.00%
Class C Shares 0.00% 0.00%
Institutional Class 0.00% 0.00%
New Pacific Fund
Class A Shares 0.00% 0.00%
Class B Shares 0.00% 0.00%
Class C Shares 0.00% 0.00%
Institutional Class 0.00% 0.00%
The Manager has voluntarily committed to waive its fees or reimburse
expenses for the Funds beginning as of the close of business May 3, 1996
through April 30, 1998, as reflected below. The cap for each Fund has been
lowered from that maintained by the previous investment manager by 0.05%,
reflecting the reduction from 0.35% to 0.30% of the 12b-1 fees payable by the
Funds with respect to Class A Shares. The expense waivers and/or
reimbursements will be reevaluated by the Manager periodically. The expense
ratios presently being maintained are as follows:
<TABLE>
<CAPTION>
U.S. Growth Fund Overseas Equity Fund New Pacific
---------------- -------------------- -------------
Fund
- ----
<S> <C> <C> <C>
Class A Shares 1.80% 1.80% 1.80%
Class B Shares 2.50% 2.50% 2.50%
Class C Shares 2.50% 2.50% 2.50%
Institutional Class Shares 1.50% 1.50% 1.50%
</TABLE>
Sub-Advisers
The following registered investment advisers serve as sub-advisers to
the Funds indicated: Lynch & Mayer, Inc. serves as sub-adviser of U.S. Growth
Fund ; Delaware International Advisers Ltd. serves as sub-adviser of Overseas
Equity Fund; and AIB Govett , Inc. serves as sub-adviser of New Pacific Fund.
Lynch & Mayer, Inc. Dennis Lynch and Eldon Mayer established Lynch &
Mayer, Inc. in 1976. Lynch & Mayer, Inc. provides investment advice to 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, Inc.'s investment
expertise is in equities and convertible securities. As of October 31, 1997,
Lynch & Mayer, Inc. had total assets under management in excess of $0.0
billion.
Delaware International Adviser Ltd. was established in 1990 and began
serving as Sub-Adviser to Overseas Equity Fund on September 15, 1997. Delaware
International Advisers Ltd. provides investment
-69-
<PAGE>
advisory services to certain other funds in the Delaware Group and to
institutional clients. As of October 31, 1997, Delaware International Advisers
Ltd. had total assets under management in excess of $0 billion.
AIB Govett, Inc. [TO COME]
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 also provides accounting services to the Funds pursuant to
the terms of a separate Fund Accounting Agreement. The Transfer Agent is also
an indirect, wholly owned subsidiary of Delaware Management Holdings, Inc.
and, therefore, Lincoln National Corporation.
-70-
<PAGE>
OFFICERS AND DIRECTORS
The business and affairs of Adviser Funds, Inc. are managed under the
direction of its Board of Directors.
Certain officers and directors of Adviser Funds, Inc. hold identical
positions in each of the other funds in the Delaware Group. On January 31,
1998, Adviser Fund's officers and directors owned less than 1% of the
outstanding shares of each of the Class A Shares, Class B Shares, Class C
Shares and the Institutional Class, of each Fund, respectively.
As of January 31, 1998, management believes the following accounts
held 5% or more of the outstanding shares of a Fund's Class:
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<PAGE>
DMH Corp., Delvoy, Inc., Delaware Management Company, Inc., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company,
Inc., Delaware Management Trust Company, Delaware International Holdings Ltd.,
Founders Holdings, Inc., Delaware International Advisers Ltd., Delaware
Capital Management, Inc. and Delaware Investment & Retirement Services, Inc.
are direct or indirect, wholly owned subsidiaries of Delaware Management
Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a wholly
owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now indirect, wholly owned subsidiaries,
and subject to the ultimate control, of Lincoln National . Lincoln National,
with headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management. 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 Investment
Management and Sub-Advisory Agreements and other matters giving effect to the
restructuring of the Funds to integrate them into the Delaware Group. See
Restructuring of the Funds under Management of the Funds in the Prospectuses.
Directors and principal officers 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 (60)
Chairman and Director of Adviser Funds, Inc., 33 other investment
companies in the Delaware Group and Delaware Capital
Management, Inc.
Chairman, President, Chief Executive Officer and Director of DMH
Corp., Delaware Distributors, Inc. and Founders Holdings,
Inc.
Chairman, President, Chief Executive Officer, Chief Investment Officer
and Director of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware
International Advisers Ltd. and Delaware International
Holdings Ltd.
Chairman of Delaware Management Holdings, Inc. an Delaware
Distributors, L.P.
President and Chief Executive Officer of Delvoy, Inc.
Director of Delaware Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware
organization.
- ----------------------
*Director affiliated with Adviser Funds, Inc.'s investment manager and
considered an "interested person" as defined in the 1940 Act.
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<PAGE>
* Jeffrey J. Nick (44)
President, Chief Executive Officer and Director and/or Trustee of
Adviser Funds, Inc. and 33 other investment companies in the
Delaware Group.
President, Chief Executive Officer and Director of Lincoln National
Investment Companies, Inc. and Delaware Management Holdings,
Inc
President of Lincoln Funds Corporation.
From 1992 to 1996, Mr. Nick was Managing Director of Lincoln
National UK plc and from 1989 to 1992, he was Senior Vice
President responsible for corporate planning and development
for Lincoln National Corporation.
Richard G. Unruh, Jr. (58)
Executive Vice President of Adviser Funds, Inc., each of the other 33
investment companies in the Delaware Group, Delaware
Management Holdings, Inc. and Delaware Capital Management,
Inc.
Executive Vice President and Director of Delaware Management Company,
Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware
organization.
Paul E. Suckow (50)
Executive Vice President/Chief Investment Officer, Fixed Income of
Adviser Funds, Inc., each of the other 33 investment companies
in the Delaware Group, Delaware Management Company, Inc. and
Delaware Management Holdings, Inc.
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Capital Management, Inc.
Director of Founders CBO Corporation.
Director of HYPPCO Finance Company Ltd.
Before returning to the Delaware Group in 1993, Mr. Suckow was
Executive Vice President and Director of Fixed Income for
Oppenheimer Management Corporation, New York, NY from 1985
to 1992. Prior to that, Mr. Suckow was a fixed-income
portfolio manager for the Delaware Group.
Walter P. Babich (70)
Director and/or Trustee of Adviser Funds, Inc. and each of the other
33 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.
- ----------------------
*Director affiliated with Adviser Funds, Inc.'s investment manager and
considered an "interested person" as defined in the 1940 Act.
-73-
<PAGE>
Anthony D. Knerr (59)
Director and/or Trustee of Adviser Funds, Inc. and each of the other
33 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 (57)
Director and/or Trustee of Adviser Funds, Inc. and each of the other
33 investment companies in the Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal
Officer of the Smithsonian Institution, Washington, DC,
and from 1975 to 1992, she was Adjunct Professor of Columbia
Business School.
W. Thacher Longstreth (77)
Director and/or Trustee of Adviser Funds, Inc. and each of the other
33 investment companies in the Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
Thomas F. Madison (61)
Director and/or Trustee of Adviser Funds, Inc. and each of the other 33
investment companies in the Delaware Group.
President and Chief Executive Officer, MLM Partners, Inc.
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402.
Mr. Madison has also been Chairman of the Board of Communications
Holdings, Inc. since 1996. From February to September 1994,
Mr. Madison served as Vice Chairman--Office of the CEO of The
Minnesota Mutual Life Insurance Company and from 1988 to 1993,
he was President of U.S. WEST Communications--Markets.
Charles E. Peck (72)
Director and/or Trustee of Adviser Funds, Inc. and each of the other
33 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.
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<PAGE>
David K. Downes (58)
Executive Vice President, Chief Operating Officer , Chief Financial
Officer of Adviser Funds, Inc., each of the other 33
investment companies in the Delaware Group, Delaware
Management Holdings, Inc, Founders CBO Corporation, Delaware
Capital Management, Inc. and Delaware Distributors, L.P.
Executive Vice President, Chief Operating Officer, Chief Financial
Officer and Director of Delaware Management Company, Inc.,
DMH Corp., Delaware Distributors, Inc., Founders Holdings,
Inc. and Delvoy, Inc.
President, Chief Executive Officer, Chief Financial Officer and
Director of Delaware Service Company, Inc.
President, Chief Operating Officer, Chief Financial Officer and
Director of Delaware International Holdings Ltd.
Chairman, Chief Executive Officer and Director of Delaware
Management Trust Company and Delaware Investment & Retirement
Services, Inc.
Director of Delaware International Advisers Ltd. and Delaware Voyageur
Holding, Inc. Vice President of Lincoln Funds Corporation
Before joining the Delaware Group in 1992, Mr. Downes was Chief
Administrative Officer, Chief Financial Officer and Treasurer
of Equitable Capital Management Corporation, New York, from
December 1985 through August 1992, Executive Vice President
from December 1985 through March 1992, and Vice Chairman from
March 1992 through August 1992.
George M. Chamberlain, Jr. (51)
Senior Vice President , Secretary and General Counsel of Adviser
Funds, Inc., each of the other 33 investment companies
in the Delaware Group, Delaware Distributors, L.P. and
Delaware Management Holdings, Inc.
Senior Vice President, Secretary, General Counsel and Director of DMH
Corp., Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Service Company, Inc., Founders
Holdings, Inc., Delaware Investment & Retirement Services,
Inc., Delaware Capital Management, Inc. and Delvoy, Inc.
Executive Vice President, Secretary, General Counsel and Director of
Delaware Management Trust Company.
Senior Vice President and Director of Delaware International
Holdings Ltd.
Director of Delaware International Advisers Ltd. and Delaware Voyageur
Holding, Inc. Secretary of Lincoln Funds Corporation Attorney.
During the past five years, Mr. Chamberlain has served in various
capacities at different times within the Delaware
organization.
-75-
<PAGE>
Joseph H. Hastings (48)
Senior Vice President/Corporate Controller of Adviser Funds, Inc.,
each of the other 33 investment companies in the
Delaware Group and Founders Holdings, Inc.
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMC Corp., Delaware Management
Company, Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware
Capital Management, Inc. , Delaware International Holdings
Ltd. and Delvoy, Inc.
Chief Financial Officer/Treasurer of Delaware Investment &
Retirement Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company.
Senior Vice President/Assistant Treasurer of Founders CBO
Corporation.
Treasurer of Lincoln Funds Corporation
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings was Chief
Financial Officer for Prudential Residential Services,
L.P., New York, NY from 1989 to 1992. Prior to that, Mr.
Hastings served as Controller and Treasurer for Fine Homes
International, L.P., Stamford, CT from 1987 to 1989.
Michael P. Bishof (35)
Senior Vice President/Treasurer of Adviser Funds, Inc., each of the
other 33 investment companies in the Delaware Group and
Founders Holdings, Inc.
Senior Vice President/Investment Accounting of Delaware Management
Company, Inc. and Delaware Service Company, Inc.
Senior Vice President and Treasurer/Manager of Investment
Accounting of Delaware Distributors, L.P.
Senior Vice President and Manager of Investment Accounting of
Delaware International Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation.
Before joining the Delaware Group in 1995, Mr. Bishof was a Vice
President for Bankers Trust, New York, NY from 1994 to 1995,
a Vice President for CS First Boston Investment Management,
New York, NY from 1993 to 1994 and an Assistant Vice President
for Equitable Capital Management Corporation, New York, NY
from 1987 to 1993.
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<PAGE>
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from
Adviser Funds, Inc. and the total compensation received from all Delaware
Group funds for the fiscal year ended October 31, 1997 and an estimate of
annual benefits to be received upon retirement under the Delaware Group
Retirement Plan for Directors/Trustees as of October 31, 1997.
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Total
Accrued as Estimated Compensation
Aggregate Part of Annual from all 34
Compensation Adviser Benefits Delaware Group
from Adviser Funds, Inc. Upon Investment
Name Funds, Inc. Expenses Retirement* Companies
- ---- ----------- -------- ----------- ---------
<S> <C> <C> <C>
W. Thacher Longstreth $000 None $38,500 $00,000
Ann R. Leven $000 None $38,500 $00,000
Walter P. Babich $000 None $38,500 $00,000
Anthony D. Knerr $000 None $38,500 $00,000
Charles E. Peck $000 None $38,500 $00,000
Thomas F. Madison** $000 None $38,500 $00,000
</TABLE>
* Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director who, at the time of his or
her retirement from the Board, has attained the age of 70 and served on the
Board for at least five continuous years, is entitled to receive payments
from each fund in the Delaware Group for a period equal to the lesser of
the number of years that such person served as a director or the remainder
of such person's life. The amount of such payments will be equal, on an
annual basis, to the amount of the annual retainer that is paid to
directors of each fund at the time of such person's retirement. If an
eligible director retired as of December 31, 1997, he or she would be
entitled to annual payments totaling $38,500, 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.
*** Thomas F. Madison joined Adviser Funds, Inc.'s Board of Directors on April
30, 1997.
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<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. Each Fund 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 relevant 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 each Fund
reserves the right to record exchange instructions received by telephone and
to reject exchange requests at any time in the future.
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<PAGE>
As described in the Funds' 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 Funds 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) 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).
Each Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, a Fund would be unable to invest effectively in accordance with its
investment objective and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if a
Fund receives or anticipates simultaneous orders affecting significant
portions of the Fund's assets. In particular, a pattern of exchanges that
coincide with a "market timing" strategy may be disruptive to a 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.
Trend Fund seeks long-term growth by investing in common stocks
issued by emerging growth companies exhibiting strong capital appreciation
potential.
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<PAGE>
Small Cap Value Fund seeks capital appreciation by investing
primarily in common stocks whose market values appear low relative to their
underlying value or future potential.
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. Blue Chip Fund seeks to achieve long-term capital appreciation.
Current income is a secondary objective. It seeks to achieve these objectives
by investing primarily in equity securities and any securities that are
convertible into equity securities. Quantum Fund seeks to achieve long-term
capital appreciation. It seeks to achieve this objective by investing
primarily in equity securities of medium- to large-sized companies expected to
grow over time that meet the Fund's "Social Criteria" strategy.
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. Strategic Income Fund seeks
to provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of
the fixed-income securities markets: high yield, higher risk securities,
investment grade fixed-income securities and foreign government and other
foreign fixed-income securities.
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.
REIT Fund seeks to achieve maximum long-term total return with
capital appreciation as a secondary objective. it seeks to achieve its
objectives by investing in securities of companies primarily engaged in the
real estate industry.
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
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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.
Tax-Free New Jersey Fund seeks a high level of current interest
income exempt from federal income tax and New Jersey state and local taxes,
consistent with preservation of capital. Tax-Free Ohio Fund seeks a high level
of current interest income exempt from federal income tax and Ohio state and
local taxes, consistent with preservation of capital. Tax-Free Pennsylvania
Fund seeks a high level of current interest income exempt from federal income
tax and 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. Emerging Markets Fund
seeks long-term capital appreciation by investing primarily in equity
securities of issuers located or operating in emerging countries.
International Small Cap Fund seeks to achieve long-term capital appreciation
by investing primarily in equity securities of small non-U.S. companies, which
may include companies located or operating in established or emerging
countries.
Delaware Group Premium Fund, Inc. offers 15 funds available
exclusively as funding vehicles for certain insurance company separate accounts.
Decatur Total Return Series seeks the highest possible total rate of return by
selecting issues that exhibit the potential for capital appreciation while
providing higher than average dividend income. Delchester Series seeks as high
a current income as possible by investing in rated and unrated corporate bonds,
U.S. government securities and commercial paper. Capital Reserves Series seeks a
high stable level of current income while minimizing fluctuations in principal
by investing in a diversified portfolio of short-and intermediate-term
securities. Cash Reserve Series seeks the highest level of income consistent
with preservation of capital and liquidity through investments in short-term
money market instruments. DelCap Series seeks long-term capital appreciation
by investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. Delaware 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.
Trend Series seeks long-term capital appreciation by investing primarily in
small-cap common stocks and convertible securities of emerging and other
growth-oriented companies. These securities will have been judged to be
responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. Global Bond
Series seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. Strategic Income Series seeks
high current income and total return by
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using a multi-sector investment approach, investing primarily in three sectors
of the fixed-income securities markets: high-yield, higher risk securities;
investment grade fixed-income securities; and foreign government and other
foreign fixed-income securities. Devon Series seeks current income and capital
appreciation by investing primarily in income-producing common stocks, with a
focus on common stocks that the investment manager believes have the potential
for above-average dividend increases over time. Emerging Markets Series seeks to
achieve long-term capital appreciation by investing primarily in equity
securities of issuers located or operating in emerging countries. Convertible
Securities Series seeks a high level of total return on its assets through a
combination of capital appreciation and current income by investing primarily in
convertible securities. Quantum Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series' "Social
Criteria" strategy.
Delaware-Voyageur US Government Securities Fund seeks to provide a
high level of current income consistent with the prudent investment risk by
investing in U.S. Treasury bills, notes, bonds, and other obligations issued
or unconditionally guaranteed by the full faith and credit of the U.S.
Treasury, and repurchase agreements fully secured by such obligations.
Delaware-Voyageur Tax-Free Arizona Insured Fund seeks to provide a
high level of current income exempt from federal income tax and the Arizona
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Minnesota Insured Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal
income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Minnesota Intermediate Fund seeks to
provide a high level of current income exempt from federal income tax and the
Minnesota personal income tax, consistent with preservation of capital. The
Fund seeks to reduce market risk by maintaining an average weighted maturity
from five to
ten years.
Delaware-Voyageur Tax-Free California Insured Fund seeks to provide a
high level of current income exempt from federal income tax and the California
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Florida Insured Fund seeks to provide a high level of
current income exempt from federal income tax, consistent with the preservation
of capital. The Fund will seek to select investments that will enable its shares
to be exempt from the Florida intangible personal property tax.
Delaware-Voyageur Tax-Free Florida Fund seeks to provide a high level of current
income exempt from federal income tax, consistent with the preservation of
capital. The Fund will seek to select investments that will enable its shares to
be exempt from the Florida intangible personal property tax. Delaware-Voyageur
Tax-Free Kansas Fund seeks to provide a high level of current income exempt from
federal income tax, the Kansas personal income tax and the Kansas Intangible
personal property tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Missouri Insured Fund seeks to provide a high level
of current income exempt from federal income tax and the Missouri personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free New Mexico Fund seeks to provide a high level of current income exempt
from federal income tax and the New Mexico personal income tax, consistent with
the preservation of capital. Delaware-Voyageur Tax-Free Oregon Insured Fund
seeks to provide a high level of current income exempt from federal income tax
and the Oregon personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Utah Fund seeks to provide a high level of current
income exempt
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from federal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Washington Insured Fund seeks to provide a high level
of current income exempt from federal income tax, consistent with the
preservation of capital.
Delaware-Voyageur Tax-Free Florida Intermediate Fund seeks to provide
a high level of current income exempt from federal income tax, consistent with
the preservation of capital. The Fund will seek to select investments that
will enable its shares to be exempt from the Florida intangible personal
property tax. The Fund seeks to reduce market risk by maintaining an average
weighted maturity from five to ten years.
Delaware-Voyageur Tax-Free Arizona Fund seeks to provide a high level
of current income exempt from federal income tax and the Arizona personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free California Fund seeks to provide a high level of current income
exempt from federal income tax and the California personal income tax,
consistent with the preservation of capital. Delaware-Voyageur Tax-Free Iowa
Fund seeks to provide a high level of current income exempt from federal
income tax and the Iowa personal income tax, consistent with the preservation
of capital. Delaware-Voyageur Tax-Free Idaho Fund seeks to provide a high
level of current income exempt from federal income tax and the Idaho personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Minnesota High Yield Municipal Bond Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal
income tax primarily through investment in medium and lower grade municipal
obligations. National High Yield Municipal Fund seeks to provide a high level
of income exempt from federal income tax, primarily through investment in
medium and lower grade municipal obligations. Delaware-Voyageur Tax-Free New
York Fund seeks to provide a high level of current income exempt from federal
income tax and the personal income tax of the state of New York and the city
of New York, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free Wisconsin Fund seeks to provide a high level of current income exempt
from federal income tax and the Wisconsin personal income tax, consistent with
the preservation of capital.
Delaware-Voyageur Tax-Free Colorado Fund seeks to provide a high
level of current income exempt from federal income tax and the Colorado
personal income tax, consistent with the preservation of capital.
Aggressive Growth Fund seeks long-term capital appreciation, which
the Fund attempts to achieve by investing primarily in equity securities
believed to have the potential for high earnings growth. Although the Fund, in
seeking its objective, may receive current income from dividends and interest,
income is only an incidental consideration in the selection of the Fund's
investments. Growth Stock Fund has an objective of long-term capital
appreciation. The Fund seeks to achieve its objective from equity securities
diversified among individual companies and industries. Tax-Efficient Equity
Fund seeks to obtain for taxable investors a high total return on an after-tax
basis. The Fund will attempt to achieve this objective by seeking to provide a
high long-term after-tax total return through managing its portfolio in a
manner that will defer the realization of accrued capital gains and minimize
dividend income.
Delaware-Voyageur Tax-Free Minnesota Fund seeks to provide a high
level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free North Dakota Fund seeks to provide a high level of
current
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income exempt from federal income tax and the North Dakota personal
income tax, consistent with the preservation of capital.
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).
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GENERAL INFORMATION
The Manager is the investment manager of the Funds. The Manager also
provides investment management services to certain of 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.
The Manager, or its affiliate Delaware International Advisers Ltd.,
also manages the investment options for Delaware Medallion(SM) III Variable
Annuity. Medallion is issued by Allmerica Financial Life Insurance and Annuity
Company (First Allmerica Financial Life Insurance Company in New York and
Hawaii). Delaware Medallion offers 15 different investment series ranging
from domestic equity funds, international equity and bond funds and domestic
fixed income funds. Each investment series available through Medallion
utilizes an investment strategy and discipline the same as or similar to one
of the Delaware Group mutual funds available outside the annuity. See Delaware
Group Premium Fund, Inc., above.
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, the 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 each Fund 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. The Distributor received net commissions
from each Fund on behalf of Class A Shares, after reallowances to dealers, as
follows:
U.S. Growth Fund
Class A Shares
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers to DDLP
10/31/97 $0,000 $0,000 $000
10/31/96 $2,551 $2,141 $410
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Overseas Equity Fund
Class A Shares
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers to DDLP
10/31/97 $0,000 $0,000 $000
10/31/96 $4,626 $3,880 $746
New Pacific Fund
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers to DDLP
10/31/97 $0,000 $0,000 $000
10/31/96 $4,740 $3,912 $828
The Distributor received in the aggregate Limited CDSC payments with
respect to Class A Shares of each Fund as follows:
Limited CDSC Payments
Fiscal
Year U.S. Growth Overseas Equity New Pacific
Ended Fund A Class Fund A Class Fund A Class
10/31/97 $00 $00 $00
10/31/96 - $0- -$0- -$0-
The Distributor received in the aggregate CDSC payments with respect
to Class B Shares of each Fund as follows:
CDSC Payments
Fiscal
Year U.S. Growth Overseas Equity New Pacific
Ended Fund B Class Fund B Class Fund B Class
10/31/97 $000 $0,000 $000
10/31/96 $643 $3,542 $742
The Distributor received in the aggregate CDSC payments with respect
to Class C Shares of each Fund as follows:
CDSC Payments
Fiscal
Year U.S. Growth Overseas Equity New Pacific
Ended Fund C Class Fund C Class Fund C Class
10/31/97 $00 $00 $00
10/31/96 $36 $20 $4
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for each Fund and for the
other mutual funds in the Delaware Group. The Transfer Agent is paid a fee by
each Fund for providing these services consisting of an annual per account
charge of $5.50 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 Transfer
Agent also provides accounting services to each Fund. Those services include
performing all functions related to calculating each Fund's net asset value
and providing all financial reporting services, regulatory compliance testing
and the related accounting services. For its services, the Transfer Agent is
paid a fee based on total assets of all funds in the Delaware Group for which
it provides such accounting services. Such fee is equal to 0.25% multiplied by
the total amount of assets in the complex for which the Transfer Agent
furnishes accounting services, where such aggregate complex assets are $10
billion or less, and 0.20% of assets if such aggregate complex assets exceed
$10 billion. The fees are charged to each fund, including each Fund, on an
aggregate pro-rata basis. The asset-based fee payable to the Transfer Agent is
subject to a minimum fee calculated by determining the total number of
investment portfolios and associated classes.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of Adviser Funds, Inc.'s
advisory relationships with the Manager or its distribution relationships
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.
The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center,
Brooklyn, NY 11245 is custodian of Adviser Funds, Inc.'s securities and cash.
As custodian, Chase maintains a separate account for 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.
Capitalization
Adviser Funds, Inc. was incorporated under the laws of Maryland on
August 12, 1993 under the name Lincoln Renaissance Funds, Inc. On November 29,
1993, the name Lincoln Renaissance Funds, Inc. was changed to 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.
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 Adviser Funds, Inc. General
liabilities of the Fund include, without limitation,
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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
authorize 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 1940 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 1940 Act. Shareholders have certain rights,
including the right to call a meeting upon a vote of 10% of a 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.
All shares have no preemptive rights, are fully transferable and,
when issued, are fully paid and nonassessable and, except as described above,
have equal voting rights. All shares of the Advisers Funds, Inc.
participate equally in dividends, and upon liquidation would share equally.
Class A Shares, Class B Shares, Class C Shares and Institutional
Class (formerly, Class D Shares) represent a proportionate interest in the
assets of each Fund of Adviser Funds, Inc. and have the same voting and other
rights and preferences, except that shares of Institutional Classes 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. However, shareholders of Class
B Shares must be given a vote on any material increase in the 12b-1 fees
payable by Class A Shares under the Plans for the Funds. General expenses of
each 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 Shares, Class B
Shares and Class C Shares will be allocated solely to those classes.
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<PAGE>
As of the close of business on May 3, 1996, the changes of the names
of the Funds were as follows: Lincoln U.S. Growth Portfolio to U.S. Growth
Fund; Lincoln World Growth Portfolio to World Growth Fund; and Lincoln New
Pacific Portfolio to New Pacific Fund. In addition, as of the close of
business May 3, 1996, the name of Lincoln Advisor Funds, Inc. was changed to
Delaware Group Adviser Funds, Inc.
Effective September 15, 1997, the name of World Growth Fund was changed
to Overseas Equity Fund.
Noncumulative Voting
Adviser Funds, Inc.'s 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 SEC.
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APPENDIX A--IRA INFORMATION
An individual can contribute up to $2,000 to his or her IRA each
year. Contributions may or may not be deductible depending upon the taxpayers
adjusted gross income and whether the taxpayer or his or her spouse is an
active participant in an employer-sponsored retirement plan. Even if a
taxpayer (or his or her spouse) is an active participant in an
employer-sponsored retirement plan, the full $2,000 deduction is still
available if the taxpayer's adjusted gross income is below $25,000 ($40,000
for taxpayers filing joint returns). A partial deduction is allowed for
married couples with incomes between $40,000 and $50,000, and for single
individuals with incomes between $25,000 and $35,000. No deductions are
available for contributions to IRAs by taxpayers whose adjusted gross income
before IRA deductions exceeds $50,000 ($35,000 for singles) and who are active
participants in an employer-sponsored retirement plan. Taxpayers who 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 for years prior to 1997), and defer taxes on interest or
other earnings from the IRAs. Special rules apply for determining the
deductibility of contributions made by married individuals filing separate
returns.
Effective for tax years beginning after 1996, one-income couples can
contribute up to $2,000 to each spouse's IRA provided the combined
compensation of both spouses is at least equal to the total contributions for
both spouses. If the working spouse is an active participant in an
employer-sponsored retirement plan and earns over $40,000, the maximum
deduction limit is reduced in the same way that the limit is reduced for
contributions to a non-spousal IRA.
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 upfront 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.
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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. One table
reflects a constant 10% rate of return, and one table 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 your bottom line at retirement could be
lower or it could also be much higher.
$2,000 Invested Annually Assuming a 10% Annualized Return
<TABLE>
<CAPTION>
15% Tax Bracket Single - $0-$24,650
---------------
Joint - $0-$41,200
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 $ 1,844 $ 2,200
5 10,000 10,929 13,431
10 20,000 27,363 35,062
15 30,000 52,074 69,899
20 40,000 89,231 126,005
25 50,000 145,103 216,364
30 60,000 229,114 361,887
35 70,000 355,438 596,254
40 80,000 545,386 973,704
</TABLE>
[Without IRA--investment of $1,700 ($2,000 less 15%) earning 8.5% (10% less
15%)]
<TABLE>
<CAPTION>
28% Tax Bracket Single - $24,651-$59,750
---------------
Joint - $41,201-$99,600
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>
1 $ 2,000 $ 1,544 $ 1,584 $ 2,200
5 10,000 8,913 9,670 13,431
10 20,000 21,531 25,245 35,062
15 30,000 39,394 50,328 69,899
20 40,000 64,683 90,724 126,005
25 50,000 100,485 155,782 216,364
30 60,000 151,171 260,559 361,887
35 70,000 222,927 429,303 596,254
40 80,000 324,512 701,067 973,704
</TABLE>
[Without IRA--investment of $1,440 ($2,000 less 28%) earning 7.2% (10% less
28%)] [With IRA--No Deduction--investment of $1,440 ($2,000 less 28%) earning
10%]
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<TABLE>
<CAPTION>
31% Tax Bracket Single - $59,751-$124,650
---------------
Joint - $99,601-$151,750
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>
1 $ 2,000 $ 1,475 $ 1,518 $ 2,200
5 10,000 8,467 9,268 13,431
10 20,000 20,286 24,193 35,062
15 30,000 36,787 48,231 69,899
20 40,000 59,821 86,943 126,005
25 50,000 91,978 149,291 216,364
30 60,000 136,868 249,702 361,887
35 70,000 199,536 411,415 596,254
40 80,000 287,021 671,855 973,704
</TABLE>
[Without IRA--investment of $1,380 ($2,000 less 31%) earning 6.9% (10% less
31%)] [With IRA--No Deduction--investment of $1,380 ($2,000 less 31%) earning
10%]
<TABLE>
<CAPTION>
36% Tax Bracket* Single - $124,651-$271,050
---------------
Joint - $151,751-$271,050
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>
1 $ 2,000 $ 1,362 $ 1,408 $ 2,200
5 10,000 7,739 8,596 13,431
10 20,000 18,292 22,440 35,062
15 30,000 32,683 44,736 69,899
20 40,000 52,308 80,643 126,005
25 50,000 79,069 138,473 216,364
30 60,000 115,562 231,608 361,887
35 70,000 165,327 381,602 596,254
40 80,000 233,190 623,170 973,704
</TABLE>
[Without IRA--investment of $1,280 ($2,000 less 36%) earning 6.4% (10% less
36%)] [With IRA--No Deduction--investment of $1,280 ($2,000 less 36%) earning
10%]
-91-
<PAGE>
<TABLE>
<CAPTION>
39.6% Tax Bracket* Single - over $271,050
-----------------
Joint - over $271,050
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>
1 $ 2,000 $ 1,281 $ 1,329 $ 2,200
5 10,000 7,227 8,112 13,431
10 20,000 16,916 21,178 35,062
15 30,000 29,907 42,219 69,899
20 40,000 47,324 76,107 126,005
25 50,000 70,677 130,684 216,364
30 60,000 101,986 218,580 361,887
35 70,000 143,965 360,137 596,254
40 80,000 200,249 588,117 973,704
</TABLE>
[Without IRA--investment of $1,208 ($2,000 less 39.6%) earning 6.04% (10% less
39.6%)] [With IRA--No Deduction--investment of $1,208 ($2,000 less 39.6%)
earning 10%]
- -------------------------
* 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 $271,050. The
above tables do not reflect the personal exemption phaseout nor the
limitations of itemized deductions that may apply.
-92-
<PAGE>
$2,000 Invested Annually Assuming a 7% Annualized Return
<TABLE>
<CAPTION>
15% Tax Bracket Single - $0-$24,650
---------------
Joint - $0-$41,200
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>
[Without IRA--investment of $1,700 ($2,000 less 15%) earning 5.95% (7% less
15%)]
<TABLE>
<CAPTION>
28% Tax Bracket Single - $24,651-$59,750
---------------
Joint - $41,201-$99,600
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>
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%]
-93-
<PAGE>
<TABLE>
<CAPTION>
31% Tax Bracket Single - $59,751-$124,650
---------------
Joint - $99,601-$151,750
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>
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%]
<TABLE>
<CAPTION>
36% Tax Bracket* Single - $124,651-$271,050
---------------
Joint - $151,751-$271,050
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>
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%]
-94-
<PAGE>
<TABLE>
<CAPTION>
39.6% Tax Bracket* Single - over $271,050
-----------------
Joint - over $271,050
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>
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 $271,050. The above tables do not reflect
the personal exemption phaseout nor the limitations of itemized deductions
that may apply.
-95-
<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 opportunity, 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.
THE POWER OF TAX-DEFERRED COMPOUNDING
Over time, tax-deferred investing has the potential to double your
investment earnings. The following examples are based on a $2000 invested
on January 1 each year and assumes an 8% fixed rate of return, with no
fluctuation in the value of principal. The figures do not reflect the impact
of any fees or sales charges. These figures are for illustration only and are
not intended to represent any future investment results.
Accumulated Value
Over 10 years Tax Bracket
$26, 403 39.6%
$26,881 36%
$27,516 31%
$27,905 28%
$31,828 Tax-deferred
Over 20 years
$69,544 39.6%
$71,986 36%
$75,540 31%
$77,767 28%
$102,476 Tax-deferred
Over 40 years
$254,528 39.6%
$274,662 36%
$305,626 31%
$326,046 28%
$607,355 Tax-deferred
-96-
<PAGE>
APPENDIX B--THE EQUITY MARKET
The Company Life Cycle
Traditional business theory contends that a typical company
progresses through basically four stages of development, keyed closely to a
firm's sales. Often an equity mutual fund will focus on companies in a certain
development phase.
1. Emerging Growth--a period of experimentation in which the company
builds awareness of a new product or firm.
2. Accelerated Development--a period of rapid growth with potentially
high profitability and acceptance of the product.
3. Maturing Phase--a period of diminished real growth due to
dependence on replacement or sustained product demand.
4. Cyclical Stage--a period in which a company faces a potential
saturation of demand for its product. At this point, a firm either diversifies
or becomes obsolete.
Hypothetical Corporate Life Cycle
(Chart included here)
Hypothetical Corporate Life Cycle Chart shows in a line illustration,
the stages that a typical company would go through, beginning with the
emerging state where sales growth continues at a steep pace to the mature
phase where growth levels off to the cyclical stage where sales show more
definitive highs and lows.
The above chart illustrates the path traditionally followed by
companies that successfully survive the growth sequence.
-97-
<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Adviser
Funds, Inc. and, in its capacity as such, audits the annual financial statements
of each of the Funds. The Funds' Statements of Net Assets, Statements of Assets
and Liabilities, Statements of Operations, Statements of Changes in Net Assets,
Financial Highlights and Notes to Financial Statements, as well as the report of
Ernst & Young LLP, independent auditors, for the fiscal year ended October
31, 1997 are included in the Fund's Annual Report to shareholders. The financial
statements, the notes relating thereto and the report of Ernst & Young LLP
listed above are incorporated by reference from the Annual Report into this
Part B.
-98-
<PAGE>
Stock funds, income funds, ----------------------------------
national and state-specific tax-exempt
funds, money market funds, global and
international funds and closed-end DELAWARE GROUP ADVISER FUNDS, INC.
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 A CLASSES
adviser or call Delaware Group at B CLASSES
800-523-4640 and shareholders of the C CLASSES
Institutional Classes should contact ----------------------------------
Delaware Group at 800-828-5052.
INSTITUTIONAL CLASSES
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
Delaware International Advisers Ltd.
Third Floor, 80 Cheapside
London, England EC 2V 6EE
PART B
AIB Govett, Inc. STATEMENT OF
250 Montgomery Street, Suite 1200 ADDITIONAL INFORMATION
San Francisco, CA 94104 ----------------------------------
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street FEBRUARY 28, 1998
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
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245 DELAWARE
GROUP
--------
<PAGE>
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A - Financial Highlights
*Part B - Statements of Net Assets
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Financial Highlights
Report of Independent Accounts
* The financial statements and Accountant's Report
listed above relating to U.S. Growth Fund,
Overseas Fund and New Pacific Fund are
incorporated by reference into Part B from the
Registrant's Annual Report for the fiscal year
ended October 31, 1997.
(b) Exhibits:
(1) Articles of Incorporation. Articles of
Incorporation, as amended and supplemented
to date incorporated into this filing by
reference to Post-Effective Amendment No. 7
filed February 28, 1997.
(a) Executed Articles Supplementary
(December 18, 1997) attached as Exhibit.
(2) By-Laws. By-Laws, as amended to date,
incorporated into this filing by reference
to Post-Effective Amendment No. 7 filed
February 28, 1997.
(3) Voting Trust Agreement. Inapplicable.
(4) Copies of all Instruments Defining the Rights
of Holders.
(a) Articles of Incorporation. Article IV
of Articles of Incorporation (August
12, 1993) incorporated into this
filing by reference to Post-Effective
Amendment No. 7 filed February 28,
1997.
(i) Executed Articles Supplementary
(December 18, 1997) attached as
Exhibit 24(b)(1)(a).
(b) By-Laws. Article I and Article IV
incorporated into this filing by
reference to Post-Effective Amendment
No. 7 filed February 28, 1997.
<PAGE>
PART C - Other Information
(Continued)
(5) Investment Management and Sub-Advisory Agreements.
(a) Executed Investment Management Agreement
between Delaware Management Company, Inc.
and the Registrant on behalf of U.S. Growth
Fund (May 6, 1996) incorporated into this
filing by reference to Post-Effective
Amendment No. 7 filed February 28, 1997.
(b) Amended and Restated Investment Management
Agreement between Delaware Management Company,
Inc. and the Registrant on behalf of Overseas
Equity Fund (December 1997) attached as
Exhibit.
(c) Executed Investment Management Agreement
between Delaware Management Company, Inc.
and the Registrant on behalf of New Pacific
Fund (May 6, 1996) incorporated into this
filing by reference to Post-Effective
Amendment No. 7 filed February 28, 1997.
(d) Executed Sub-Advisory Agreement between
Delaware Management Company, Inc. and Lynch
& Mayer, Inc. on behalf of U.S. Growth Fund
(May 6, 1996) incorporated into this filing
by reference to Post-Effective Amendment No.
7 filed February 28, 1997.
(e) Form of Sub-Advisory Agreement between
Delaware Management Company, Inc. and Delaware
International Advisors Ltd. on behalf of
Overseas Equity Fund (1997) attached as
Exhibit.
(f) Form of Sub-Advisory Agreement between
Delaware Management Company, Inc. and AIB
Govett, Inc. on behalf of New Pacific Fund
(1997) attached as Exhibit.
(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 Post-Effective
Amendment No. 4 filed February 28, 1996.
(b) Administration and Service Agreement.
Administration and Service Agreement (as
amended November 1995) incorporated into
this filing by reference to Post-Effective
Amendment No. 5 filed March 12, 1996.
(c) Dealer's Agreement. Dealer's Agreement (as
amended November 1995) incorporated into
this filing by reference to Post-Effective
Amendment No. 5 filed March 12, 1996.
(d) Mutual Fund Agreement for the Delaware Group
of Funds (as amended November 1995)
incorporated into this filing by reference
to Post-Effective Amendment No. 5 filed
March 12, 1996.
<PAGE>
PART C - Other Information
(Continued)
(7) Bonus, Profit Sharing, Pension Contracts.
(a) Amended and Restated Profit Sharing Plan
(November 17, 1994) incorporated into this
filing by reference to Post-Effective
Amendment No. 5 filed March 12, 1996.
(b) Amendment to Profit Sharing Plan (December
21, 1995) incorporated into this filing by
reference to Post-Effective Amendment No. 5
filed March 12, 1996.
(8) Custodian Agreements.
(a) Form of Custodian Agreement (May 1996)
between The Chase Manhattan Bank and the
Registrant incorporated into this filing by
reference to Post-Effective Amendment No. 7
filed February 28, 1997.
(i) Form of Amendment (November 1997) to
Custodian Agreement between The
Chase Manhattan Bank and the Registrant
attached as Exhibit.
(b) Form of Securities Lending Agreement (May
1996) between The Chase Manhattan Bank and
the Registrant incorporated into this filing
by reference to Post-Effective Amendment No.
7 filed February 28, 1997.
(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 Post-Effective
Amendment No. 4 filed February 28, 1996.
(b) Executed Fund Accounting Agreement (August
19, 1996) between Delaware Service Company,
Inc. and the Registrant incorporated into
this filing by reference to Post-Effective
Amendment No. 7 filed February 28, 1997.
(i) Executed Amendment No. 4A (April 14, 1997)
to Schedule A to Delaware Group of Funds Fund
Accounting Agreement attached as Exhibit.
(ii) Executed Amendment No. 5 (May 1, 1997)
to Schedule A to Delaware Group of Funds
Fund Accounting Agreement attached as
Exhibit.
(iii) Executed Amendment No. 6 (July 21,
1997) to Schedule A to Delaware Group of
Funds Fund Accounting Agreement attached as
Exhibit.
(10) Opinion and Consent of Counsel. Inapplicable.
(11) Consent of Auditors. To be filed by Post-Effective
Amendment.
(12) Inapplicable.
(13) Inapplicable.
<PAGE>
PART C - Other Information
(Continued)
(14) Model Plans. To be filed by Post-Effective Amendment.
(15) Plans under Rule 12b-1.
(a) Plan under Rule 12b-1 for U.S. Growth Fund A
Class (September 25, 1995) incorporated into
this filing by reference to Post-Effective
Amendment No. 4 filed February 28, 1996.
(b) Plan under Rule 12b-1 for U.S. Growth Fund B
Class (September 25,1995) incorporated into
this filing by reference to Post-Effective
Amendment No. 4 filed February 28, 1996.
(c) Plan under Rule 12b-1 for U.S. Growth Fund C
Class (September 25,1995) incorporated into
this filing by reference to Post-Effective
Amendment No. 4 filed February 28, 1996.
(d) Plan under Rule 12b-1 for Overseas Equity
Fund A Class (September 25,1995)
incorporated into this filing by reference
to Post-Effective Amendment No. 4 filed
February 28, 1996.
(e) Plan under Rule 12b-1 for Overseas Equity
Fund B Class (September 25,1995)
incorporated into this filing by reference
to Post-Effective Amendment No. 4 filed
February 28, 1996.
(f) Plan under Rule 12b-1 for Overseas Equity
Fund C Class (September 25,1995)
incorporated into this filing by reference
to Post-Effective Amendment No. 4 filed
February 28, 1996.
(g) Plan under Rule 12b-1 for New Pacific Fund A
Class (September 25,1995) incorporated into
this filing by reference to Post-Effective
Amendment No. 4 filed February 28, 1996.
(h) Plan under Rule 12b-1 for New Pacific Fund B
Class (September 25,1995) incorporated into
this filing by reference to Post-Effective
Amendment No. 4 filed February 28, 1996.
(i) Plan under Rule 12b-1 for New Pacific Fund B
Class (September 25,1995) incorporated into
this filing by reference to Post-Effective
Amendment No. 4 filed February 28, 1996.
(16) Schedules of Computation for each Performance Quotation.
(a) Incorporated into this filing by reference to
Post-Effective Amendment No. 7 filed February
28, 1997.
<PAGE>
PART C - Other Information
(Continued)
(17) Financial Data Schedules.
(a) Incorporated into this filing by reference to
Post-Effective Amendment No. 7 filed February
28, 1997.
(18) Inapplicable
(19) Other: Directors' Power of Attorney.
(a) Incorporated into this filing by reference to
Post-Effective Amendment No. 7 filed February
28, 1997.
(b) Power of Attorney for Thomas F. Madison and
Jeffrey J. Nick attached as Exhibit.
Item 25. Persons Controlled by or under Common Control with
Registrant. None.
<PAGE>
PART C - Other Information
(Continued)
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
U.S. Growth Fund:
U.S. Growth Fund A Class
Common Stock Par Value 901 Accounts as of
$0.01 Per Share November 30, 1997
U.S. Growth Fund B Class
Common Stock Par Value 324 Accounts as of
$0.01 Per Share November 30,1997
U.S. Growth Fund C Class
Common Stock Par Value 86 Accounts as of
$0.01 Per Share November 30, 1997
U.S. Growth Fund Institutional Class
Common Stock Par Value 6 Accounts as of
$0.01 Per Share November 30, 1997
Delaware Group Adviser Funds, Inc.'s
Overseas Equity Fund:
Overseas Equity Fund A Class
Common Stock Par Value 834 Accounts as of
$0.01 Per Share November 30, 1997
Overseas Equity Fund B Class
Common Stock Par Value 247 Accounts as of
$0.01 Per Share November 30, 1997
Overseas Equity Fund C Class
Common Stock Par Value 46 Accounts as of
$0.01 Per Share November 30, 1997
Overseas Equity Fund Institutional Class
Common Stock Par Value 8 Accounts as of
$0.01 Per Share November 30, 1997
</TABLE>
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Delaware Group Adviser Funds, Inc.'s
New Pacific Fund:
New Pacific Fund A Class
Common Stock Par Value 968 Accounts as of
$0.01 Per Share November 30, 1997
New Pacific Fund B Class
Common Stock Par Value 381 Accounts as of
$0.01 Per Share November 30, 1997
New Pacific Fund C Class
Common Stock Par Value 64 Accounts as of
$0.01 Per Share November 30, 1997
New Pacific Fund Institutional Class
Common Stock par Value 7 Accounts as of
$0.01 Per Share November 30, 1997
</TABLE>
Item 27. Indemnification. Incorporated into this filing by reference
to Post-Effective Amendment No. 6 filed May 2, 1996.
<PAGE>
PART C - Other Information
(Continued)
Item 28 (a) Business and Other Connections of Investment Adviser.
Delaware Management Company, Inc. (the "Manager") serves as
investment manager to the Registrant and also serves as investment manager or
sub-adviser to certain of the other funds in the Delaware Group (Delaware
Group Equity Funds I, Inc., Delaware Group Equity Funds II, Inc., Delaware
Group Equity Funds III, Inc., Delaware Group Equity Funds IV, Inc., Delaware
Group Equity Funds V, Inc., Delaware Group Government Fund, Inc., Delaware
Group Income Funds, Inc., Delaware Group Limited-Term Government Funds, Inc.,
Delaware Group Cash Reserve, Inc., Delaware Group Tax-Free Fund, Inc.,
Delaware Group State Tax-Free Income Trust, Delaware Group Tax-Free Money
Fund, Inc., Delaware Group Premium Fund, Inc., Delaware Group Global &
International Funds, Inc., Delaware Pooled Trust, Inc., Delaware Group
Dividend and Income Fund, Inc., Delaware Group Global Dividend and Income
Fund, Inc., Delaware Group Foundation Funds, Inc., Voyageur Tax-Free Funds,
Inc., Voyageur Intermediate Tax-Free Funds, Inc., Voyageur Insured Funds,
Inc., Voyageur Funds, Inc., Voyageur Investment Trust, Voyageur Investment
Trust II, Voyageur Mutual Funds, Inc., Voyageur Mutual Funds II, Inc.,
Voyageur Mutual Funds III, Inc., Voyageur Arizona Municipal Income Fund, Inc.,
Voyageur Colorado Insured Municipal Income Fund, Inc., Voyageur Florida
Insured Municipal Income Fund, Voyageur Minnesota Municipal Fund, Inc.,
Voyageur Minnesota Municipal Fund II, Inc. and Voyageur Minnesota Municipal
Fund III, Inc.) 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 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 services, dividend disbursing,
accounting servicing and transfer agent for all of the mutual funds in the
Delaware Group.
<PAGE>
PART C - Other Information
(Continued)
The following persons serving as directors or officers of
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.; Chairman of the
Board, President, Chief Executive Officer and Director of DMH Corp., Delaware
Distributors, Inc. and Founders Holdings, Inc.; Chairman, Chief Executive Officer
and Director of Delaware Management Holdings, Inc., Delaware International
Holdings Ltd. and Delaware International Advisers Ltd.; Chairman of the Board
and Director of the Registrant, each of the other funds in the Delaware Group and
Delaware Capital Management, Inc.; Chairman of Delaware Distributors, L.P.;
President and Chief Executive Officer of Delvoy, Inc.; and Director of Delaware
Service Company, Inc. and Delaware Investment & Retirement Services, Inc.
Richard G. Unruh, Jr. Executive Vice President and Director of Delaware Management Company, Inc.;
Executive Vice President of the Registrant, each of the other funds in the Delaware
Group, Delaware Management Holdings, Inc. and Delaware Capital Management,
Inc; and Director of Delaware International Advisers Ltd.
Board of Directors, Chairman of Finance Committee, Keystone Insurance Company
since 1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Chairman of
Finance Committee, AAA Mid Atlantic, Inc. since 1989, 2040 Market Street,
Philadelphia, PA; Board of Directors, Metron, Inc. since 1995, 11911 Freedom
Drive, Reston, VA
Paul E. Suckow Executive Vice President/Chief Investment Officer, Fixed Income of Delaware
Management Company, Inc., the Registrant, each of the other funds in the Delaware
Group and Delaware Management Holdings, Inc.; Executive Vice President and
Director of Founders Holdings, Inc.; Executive Vice President of Delaware Capital
Management, Inc.; and Director of Founders CBO Corporation
Director, HYPPCO Finance Company Ltd.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
David K. Downes Executive Vice President, Chief Operating Officer, Chief Financial Officer and
Director of Delaware Management Company, Inc., DMH Corp, Delaware
Distributors, Inc., Founders Holdings, Inc. and Delvoy, Inc.; Executive Vice
President, Chief Operating Officer and Chief Financial Officer of the Registrant and
each of the other funds in the Delaware Group, Delaware Management Holdings,
Inc., Founders CBO Corporation, Delaware Capital Management, Inc. and
Delaware Distributors, L.P.; President, Chief Executive Officer, Chief Financial
Officer and Director of Delaware Service Company, Inc.; President, Chief
Operating Officer, Chief Financial Officer and Director of Delaware International
Holdings Ltd.; Chairman, Chief Executive Officer and Director of Delaware
Investment & Retirement Services, Inc.; Chairman and Director of Delaware
Management Trust Company; Director of Delaware International Advisers Ltd.;
and Vice President of Lincoln Funds Corporation
Chief Executive Officer and Director of Forewarn, Inc. since 1993, 8 Clayton
Place, Newtown Square, PA
George M. Senior Vice President, General Counsel, Secretary and Director of
Chamberlain, Jr. Delaware Management Company, Inc., DMH Corp., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Founders Holdings, Inc., Delaware Capital
Management, Inc., Delaware Investment & Retirement Services, Inc. and Delvoy,
Inc.; Senior Vice President, Secretary and General Counsel of the Registrant, each
of the other funds in the Delaware Group, Delaware Distributors, L.P. and Delaware
Management Holdings, Inc.; Senior Vice President and Director of Delaware
International Holdings Ltd.; Executive Vice President, Secretary, General Counsel
and Director of Delaware Management Trust Company; Director of Delaware
International Advisers Ltd.; Secretary of Lincoln Funds Corporation
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Richard J. Flannery Senior Vice President/Corporate and International Affairs of the Registrant, each
of the other funds in the Delaware Group, Delaware Management Holdings, Inc.,
DMH Corp., Delaware Management Company, Inc., Delaware Distributors, Inc.,
Delaware Distributors, L.P., Delaware Management Trust Company, Delaware
Capital Management, Inc., Delaware Service Company, Inc. and Delaware
Investment & Retirement Services, Inc.; Executive Vice President/Corporate &
International Affairs and Director of Delaware International Holdings Ltd.;
Senior Vice President/ Corporate and International Affairs and Director of
Founders Holdings, Inc. and Delvoy, Inc.; Senior Vice President of Founders
CBO Corporation; and Director of Delaware International Advisers Ltd.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd., Elverton, PA;
Director and Member of Executive Committee of Stonewall Links, Inc. since
1991, Bulltown Rd., Elverton, PA
Michael P. Bishof Senior Vice President and Treasurer of the Registrant, each of the other funds in
the Delaware Group and Founders Holdings, Inc.; Senior Vice
President/Investment Accounting of Delaware Management Company, Inc. and
Delaware Service Company, Inc.; Senior Vice President and Treasurer/ Manager,
Investment Accounting of Delaware Distributors, L.P.; Assistant Treasurer of
Founders CBO Corporation; and Senior Vice President and Manager of
Investment Accounting of Delaware International Holdings Ltd.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Joseph H. Hastings Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Capital Management, Inc., Delaware
Distributors, L.P., Delaware Service Company, Inc., Delaware International
Holdings Ltd. and Delvoy, Inc.; Senior Vice President/Corporate Controller of
the Registrant, each of the other funds in the Delaware Group and Founders
Holdings, Inc.; Executive Vice President, Chief Financial Officer and Treasurer
of Delaware Management Trust Company; Chief Financial Officer and Treasurer
of Delaware Investment & Retirement Services, Inc.; Senior Vice
President/Assistant Treasurer of Founders CBO Corporation; and Treasurer of
Lincoln Funds Corporation.
Michael T. Taggart Senior Vice President/Facilities Management and Administrative Services of
Delaware Management Company, Inc.
Douglas L. Anderson Senior Vice President/Operations of Delaware Management Company, Inc., Delaware
Investment and Retirement Services, Inc. and Delaware Service Company, Inc.;
Senior Vice President/ Operations and Director of Delaware Management Trust
Company
James L. Shields Senior Vice President/Chief Information Officer of Delaware Management
Company, Inc., Delaware Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.
Eric E. Miller Vice President, Assistant Secretary and Deputy General Counsel of the Registrant
and each of the other funds in the Delaware Group, Delaware Management Company,
Inc., Delaware Management Holdings, Inc., DMH Corp., Delaware Distributors,
L.P., Delaware Distributors Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Founders Holdings, Inc., Delaware Capital Management,
Inc. and Delaware Investment & Retirement Services, Inc.; and Vice President and
Assistant Secretary of Delvoy, Inc.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Richelle S. Maestro Vice President and Assistant Secretary of Delaware Management Company, Inc., the Registrant,
each of the other funds in the Delaware Group, Delaware Management Holdings, Inc., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., DMH Corp.,
Delaware Management Trust Company, Delaware Capital Management, Inc., Delaware Investment &
Retirement Services, Inc., Founders Holdings, Inc. and Delvoy, Inc.; Vice President and
Secretary of Delaware International Holdings Ltd.; and Secretary of Founders CBO Corporation;
Partner of Tri-R Associates since 1989, 10001 Sandmeyer Lane, Philadelphia, PA
Richard Salus(1) Vice President/Assistant Controller of Delaware Management Company, Inc. and Delaware
Management Trust Company
Bruce A. Ulmer Vice President/Director of LNC Internal Audit of Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware Group, Delaware Management Holdings, Inc.,
DMH Corp., Delaware Management Trust Company and Delaware Investment & Retirement Services,
Inc.; Vice President/Director of Internal Audit of Delvoy, Inc.
Steven T. Lampe Vice President/Taxation of Delaware Management Company, Inc., the Registrant, each of the
other funds in the Delaware Group, Delaware Management Holdings, Inc., DMH Corp.,
Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company, Inc.,
Delaware Management Trust Company, Founders Holdings, Inc., Founders CBO Corporation,
Delaware Capital Management, Inc., Delaware Investment & Retirement Services, Inc. and
Delvoy, Inc.
Christopher Adams Vice President/Strategic Planning of Delaware Management Company, Inc. and Delaware
Service Company, Inc.
Susan L. Hanson Vice President/Strategic Planning of Delaware Management Company, Inc. and Delaware
Service Company, Inc.
Dennis J. Mara(2) Vice President/Acquisitions of Delaware Management Company, Inc.
Scott Metzger Vice President/Business Development of Delaware Management Company, Inc. and Delaware
Service Company, Inc.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Lisa O. Brinkley Vice President/Compliance of Delaware Management Company, Inc., the Registrant, each of the
other funds in the Delaware Group, DMH Corp., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware Management Trust Company, Delaware
Capital Management, Inc. and Delaware Investment & Retirement Services, Inc.; Vice President of
Delvoy, Inc.
Rosemary E. Milner Vice President/Legal Registrations of Delaware Management Company, Inc., the Registrant,
each of the other funds in the Delaware Group, Delaware Distributors, L.P. and Delaware
Distributors, Inc.
Mary Ellen Carrozza Vice President/Client Services of Delaware Management Company, Inc. and the Registrant
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company, Inc. and each of the
tax-exempt funds, the fixed income funds and the closed-end funds in the Delaware Group
(excluding the Registrant); Vice President of Founders Holdings, Inc.; and Treasurer, Assistant
Secretary and Director of Founders CBO Corporation
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., each of the
tax-exempt funds, the fixed income funds and the closed-end funds in the Delaware Group
(excluding the Registrant); Vice President of Founders Holdings, Inc.; and President and
Director of Founders CBO Corporation.
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., each of the
tax-exempt funds and the fixed income funds in the Delaware Group (excluding the Registrant) and
Delaware Capital Management, Inc.
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the Registrant,
each of the tax-exempt funds and the fixed income funds in the Delaware Group and Delaware
Capital Management, Inc.
Roger A. Early Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., each of the
tax-exempt funds and the fixed income funds in the Delaware Group (excluding the Registrant)
Mitchell L. Conery(3) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., and each of the
tax-exempt and fixed income funds in the Delaware Group (excluding the Registrant)
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
George H. Burwell Vice President/Senior Portfolio Manager of Delaware Management Company, Inc. and each of the
equity funds in the Delaware Group (excluding the Registrant)
John B. Fields Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., each of the equity
funds in the Delaware Group (excluding the Registrant) and Delaware Capital Management, Inc.
Gerald S. Frey(4) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc. and each of the
equity funds in the Delaware Group (excluding the Registrant)
Christopher Beck(5) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc. and each of the
equity funds in the Delaware Group (excluding the Registrant)
Elizabeth H. Howell(6) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc. and the
Delaware-Voyageur Tax-Free Minnesota Intermediate, Delaware-Voyageur Minnesota Insured,
Delaware-Voyageur Tax-Free Minnesota, Delaware-Voyageur Tax- Free Idaho, Delaware-Voyageur
Tax-Free Kansas, Delaware-Voyageur Tax-Free Missouri, Delaware-Voyageur Tax-Free Oregon,
Delaware-Voyageur Tax-Free Washington, Delaware-Voyageur Tax-Free Iowa and Delaware-Voyageur
Tax-Free Wisconsin Funds.
Andrew M. McCullagh Jr.(7) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc. and the
Delaware-Voyageur Tax-Free Arizona Insured, Delaware-Voyageur Tax-Free Arizona,
Delaware-Voyageur Tax-Free California Insured, Delaware-Voyageur Tax-Free Colorado,
Delaware-Voyageur Tax-Free New Mexico, Delaware-Voyageur Tax-Free North Dakota and
Delaware-Voyageur Tax-Free Utah Funds.
Babak Zenouzi Vice President/Senior Portfolio Manager of Delaware Management Company, Inc. and each of the
equity funds and the closed-end funds in the Delaware Group (exclunding the Registrant)
Paul Grillo Vice President/Portfolio Manager of Delaware Management Company, Inc. and each of the tax-exempt
and fixed income funds in the Delaware Group
Marshall T. Bassett Vice President/Portfolio Manager of Delaware Management Company, Inc. and each of the equity
funds in the Delaware Group (excluding the Registrant)
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
John Heffern Vice President/Portfolio Manager of Delaware Management Company, Inc. and each of the equity
funds in the Delaware Group (excluding the Registrant)
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
1 SENIOR MANAGER, Ernst & Young LLP prior to December 1996.
2 CORPORATE CONTROLLER, IIS prior to July 1997 and DIRECTOR, FINANCIAL
PLANNING, Decision One prior to March 1996.
3 INVESTMENT OFFICER, Travelers Insurance prior to January 1997.
4 SENIOR DIRECTOR, Morgan Grenfell Capital Management prior to June 1996.
5 SENIOR PORTFOLIO MANAGER, Pitcairn Trust Company prior to May 1997.
6 SENIOR PORTFOLIO MANAGER, Voyageur Fund Managers, Inc. prior to May 1997.
7 SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, Voyageur Asset Management
LLC prior to May 1997.
<PAGE>
PART C - Other Information
(Continued)
Item 28 (b) Business and Other Connections of Sub-Investment
Advisers
Lynch & Mayer, Inc. serves as sub-investment adviser to
U.S. Growth Fund. 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 and Director
Eldon C. Mayer, Jr. Vice Chairman and Director
Edward J. Petner President and Co-Chief Executive Officer and Director
Dennis A. Blume Director
*H. Thomas McMeekin Director
*Laurence E. Ach Senior Vice President
Robert R. Coby Senior Vice President
Dallas L. Corser Senior Vice President
Kevin P. Ferguson Senior Vice President
Francis J. Houghton, Jr. Senior Vice President
Howard M. Kaufman Senior Vice President, Treasurer and Secretary
William A. Kissell Senior Vice President
John C. Levinson Senior Vice President
Bradley A. Roberts Senior Vice President
Michael F. Sassi Senior Vice President
Anthony A. Segalas Senior Vice President
W. Denman Zirkle Senior Vice President
Paul R. Ainslie Vice President
Philip C. Coburn Vice President
</TABLE>
* Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name Positions and Offices with Lynch & Mayer, Inc.
- ---- ----------------------------------------------
<S> <C>
Billie Cook Vice President
Katherine D. Elliott Vice President
Aiman N. Labib Vice President
Enrique Lopez-Balboa Vice President
Thomas E. McGowan Vice President
Ron M. Panzier Vice President
Kevin W. Putt Vice President
Charles Rose Vice President
Robert D. Schwartz Vice President
Rufus R. Winton Vice President
Armi D. Viti Vice President
Brian S. Becher Assistant Secretary
James N. Westafer Assistant Secretary
</TABLE>
Delaware International Advisers Ltd. ("Delaware International")
serves as sub-investment adviser to Overseas Equity Fund of the Registrant and
also serves as investment manager or sub-investment adviser to certain of the
other funds in the Delaware Group (Delaware Group Global Dividend and Income
Fund, Inc., Delaware Group Global & International Funds, Inc., Delaware Pooled
Trust, Inc. and Delaware Group Premium Fund, Inc.) and other institutional
accounts.
Information regarding the officers and directors of Delaware
International and the positions they have held with the Registrant during the
past two fiscal years is provided below.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Delaware International Advisers Ltd.
Business Address and its Affiliates and Other Positions and Offices Held
- ------------------ ---------------------------------------------------------------
<S> <C>
*Wayne A. Stork Chairman of the Board, President, Chief Executive Officer, Chief Investment Officer and
Director of Delaware Management Company, Inc.; Chairman of the Board, President,
Chief Executive Officer and Director of DMH Corp., Delaware Distributors, Inc. and
Founders Holdings, Inc.; Chairman, Chief Executive Officer and Director of Delaware
Management Holdings, Inc., Delaware International Holdings Ltd. and Delaware
International Advisers Ltd.; Chairman of the Board and Director of the Registrant, each
of the other funds in the Delaware Group and Delaware Capital Management, Inc.;
President and Chief Executive Officer of Delvoy, Inc.; Chairman of Delaware
Distributors, L.P.; and Director of Delaware Service Company, Inc. and Delaware
Investment & Retirement Services, Inc.
**G. Roger H. Kitson Vice Chairman and Director of Delaware International Advisers Ltd.
**Ian G. Sims Deputy Managing Director/ Chief Investment Officer/Global Fixed Income and Director
of Delaware International Advisers Ltd.
**David G. Tilles Managing Director, Chief Investment Officer and Director of Delaware International
Advisers Ltd. and Chief Investment Officer and Director of Delaware International
Holdings, Ltd.
**John Emberson Secretary, Compliance Officer, Finance Director and Director of Delaware International
Advisers Ltd.
**Nigel G. May Director/Head of Pacific Basin Group and Director of Delaware International Advisers
Ltd.
**Elizabeth A. Desmond Director/Head of European Group and Director of Delaware International Advisers Ltd.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London, England
EC2V 6EE.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name Positions and Offices with Lynch & Mayer, Inc.
- ---- ----------------------------------------------
<S> <C>
*David K. Downes Director of Delaware International Advisers Ltd. and Delaware Voyageur
Holding, Inc.; Executive Vice President, Chief Operating Officer, Chief
Financial Officer and Director of Delaware Management Company, Inc., DMH
Corp, Delaware Distributors, Inc., Founders Holdings, Inc. and Delvoy, Inc.;
Executive Vice President, Chief Operating Officer and Chief Financial Officer
of the Registrant and each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., Founders CBO Corporation, Delaware Capital
Management, Inc. and Delaware Distributors, L.P.; President, Chief Executive
Officer, Chief Financial Officer and Director of Delaware Service Company,
Inc.; President, Chief Operating Officer, Chief Financial Officer and Director
of Delaware International Holdings Ltd.; Chairman, Chief Executive Officer
and Director of Delaware Investment & Retirement Services, Inc.; Chairman
and Director of Delaware Management Trust Company; and Vice President of
Lincoln Funds Corporation
Chief Executive Officer and Director of Forewarn, Inc. since 1993, 8 Clayton
Place, Newtown Square, PA
*Richard G. Unruh, Jr. Director of Delaware International Advisers Ltd.; Executive Vice President
and Director of Delaware Management Company, Inc.; Executive Vice
President of the Registrant, each of the other funds in the Delaware Group,
Delaware Management Holdings, Inc and Delaware Capital Management, Inc
Board of Directors, Chairman of Finance Committee, Keystone Insurance
Company since 1989, 2040 Market Street, Philadelphia, PA; Board of
Directors, Chairman of Finance Committee, Mid Atlantic, Inc. since 1989,
2040 Market Street, Philadelphia, PA; Board of Directors, Metron, Inc. since
1995, 11911 Freedom Drive, Reston, VA
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London, England
EC2V 6EE.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name Positions and Offices with Lynch & Mayer, Inc.
- ---- ----------------------------------------------
<S> <C>
*Richard J. Flannery Director of Delaware International Advisers Ltd.; Executive Vice President and Director
of Delaware Management Company, Inc.; Executive Vice President of the Registrant,
each of the other funds in the Delaware Group, Delaware Management Holdings, Inc
and Delaware Capital Management, Inc
Board of Directors, Chairman of Finance Committee, Keystone Insurance Company since
1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Chairman of Finance
Committee, Mid Atlantic, Inc. since 1989, 2040 Market Street, Philadelphia, PA; Board
of Directors, Metron, Inc. since 1995, 11911 Freedom Drive, Reston, VA
*John C. E. Campbell Director of Delaware International Advisers Ltd.
*George M. Chamberlain, Jr. Director of Delaware International Advisers Ltd. and Delaware Voyageur Holding, Inc.;
Senior Vice President, General Counsel, Secretary and Director of Delaware
Management Company, Inc., DMH Corp., Delaware Distributors, Inc., Delaware
Service Company, Inc., Founders Holdings, Inc., Delaware Capital Management, Inc.,
Delaware Investment & Retirement Services, Inc. and Delvoy, Inc.; Senior Vice
President, Secretary and General Counsel of the Registrant, each of the other funds in
the Delaware Group, Delaware Distributors, L.P. and Delaware Management Holdings,
Inc.; Senior Vice President and Director of Delaware International Holdings Ltd.;
Executive Vice President, Secretary, General Counsel and Director of Delaware
Management Trust Company; and Secretary of Lincoln Funds Corporation
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London, England
EC2V 6EE.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name Positions and Offices with Lynch & Mayer, Inc.
- ---- ----------------------------------------------
<S> <C>
*George E. Deming Director of Delaware International Advisers Ltd.
**Timothy W. Sanderson Senior Portfolio Manager, Deputy Compliance Officer, Director Equity Research and
Director of Delaware International Advisers Ltd.
**Clive A. Gillmore Senior Portfolio Manager, Director U.S. Mutual Fund Liaison and Director of
Delaware International Advisers Ltd.
**Hamish O. Parker Senior Portfolio Manager, Director U.S. Marketing Liaison and Director of Delaware
International Advisers Ltd.
**Gavin A. Hall Senior Portfolio Manager of Delaware International Advisers Ltd.
**Robert Akester Senior Portfolio Manager of Delaware International Advisers Ltd.
**Hywel Morgan Senior Portfolio Manager of Delaware International Advisers Ltd.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London, England
EC2V 6EE.
AIB Govett, Inc. serves as sub-investment adviser to New
Pacific Fund. [The directors and officers of AIB Govett, Inc., 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 250
Montgomery Street, Suite 1200, San Francisco, CA 94104.]
<TABLE>
<CAPTION>
Name Positions and Offices with AIB Govett, Inc.
- ---- -------------------------------------------
<S> <C>
Andrew Barnett Director
Peter Cotgrove Director
Charles Fowler Joint Chairman
Peter Kysel Director
Caroline Lane Director
</TABLE>
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name Positions and Offices with AIB Govett, Inc.
- ---- -------------------------------------------
<S> <C>
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
Gareth Watts Director
Steve Wood Director
Andrew Yates Director
Colm Doherty Director
Patrick Cunneen Director
Michael Wilson Director
</TABLE>
<PAGE>
PART C - Other Information
(Continued)
Item 29. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal
underwriter for all the mutual funds in the Delaware
Group.
(b) Information with respect to each director, officer or
partner of principal underwriter:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
Delaware Management
Company, Inc. Limited Partner Investment Manager
Delaware Capital
Management, Inc. Limited Partner None
Wayne A. Stork Chairman Chairman
Bruce D. Barton President and Chief Executive None
Officer
David K. Downes Executive Vice President, Executive Vice
Chief Operating Officer President/Chief
and Chief Financial Officer Operating Officer/
Chief Financial Officer
George M. Chamberlain, Jr. Senior Vice President/Secretary/ Senior Vice President/
General Counsel Secretary/General Counsel
Richard J. Flannery Senior Vice President/Corporate Senior Vice President/
and International Affairs Corporate and
International Affairs
Joseph H. Hastings Senior Vice President/Corporate Senior Vice President/
Controller & Treasurer Corporate Controller
Terrence P. Cunningham Senior Vice President/ Financial None
Institutions
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Thomas E. Sawyer Senior Vice President/ None
National Sales Director
Dana B. Hall Senior Vice President/ None
Key Accounts
Mac McAuliffe Senior Vice President/Sales None
Manager, Western Division
William F. Hostler Senior Vice President/ None
Marketing Services
J. Chris Meyer Senior Vice President/ None
Director Product Management
Stephen H. Slack Senior Vice President/Wholesaler None
William M. Kimbrough Senior Vice President/Wholesaler None
Daniel J. Brooks Senior Vice President/Wholesaler None
Bradley L. Kolstoe Senior Vice President/Western None
Division Sales Manager
Henry W. Orvin Senior Vice President/Eastern None
Division Sales Manager
Michael P. Bishof Senior Vice President and Treasurer/ Senior Vice
Manager, Investment Accounting President/Treasurer
Eric E. Miller Vice President/Assistant Secretary/ Vice President/
Deputy General Counsel Assistant Secretary/
Deputy General Counsel
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Steven T. Lampe Vice President/Taxation Vice President/Taxation
Lisa O. Brinkley Vice President/Compliance Vice President/
Compliance
Rosemary E. Milner Vice President/Legal Registrations Vice President/Legal
Registrations
Daniel H. Carlson Vice President/Strategic Marketing None
Diane M. Anderson Vice President/Plan Record Keeping None
and Administration
Anthony J. Scalia Vice President/Defined Contribution None
Sales, SW Territory
Courtney S. West Vice President/Defined Contribution None
Sales, NE Territory
Denise F. Guerriere Vice President/Client Services None
Gordon E. Searles Vice President/Client Services None
Julia R. Vander Els Vice President/Participant Services None
Jerome J. Alrutz Vice President/Retail Sales None
Joanne A. Mettenheimer Vice President/New Business None
Development
Scott Metzger Vice President/Business Development Vice President/Business
Development
Stephen C. Hall Vice President/Institutional Sales None
Gregory J. McMillan Vice President/ National Accounts None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Christopher H. Price Vice President/Manager, None
Insurance
Stephen J. DeAngelis Vice President/Product None
Development
Andrew W. Whitaker Vice President/Financial Institutions None
Jesse Emery Vice President/ Marketing None
Communications
Darryl S. Grayson Vice President, Broker/Dealer None
Internal Sales
Susan T. Friestedt Vice President/Client Service None
Dinah J. Huntoon Vice President/Product None
Manager Equity
Soohee Lee Vice President/Fixed Income None
Product Management
Michael J. Woods Vice President/ UIT Product None
Management
Ellen M. Krott Vice President/Marketing None
Dale L. Kurtz Vice President/Marketing Support None
Holly W. Reimel Vice President/Manager, Key Accounts None
David P. Anderson Vice President/Wholesaler None
Lee D. Beck Vice President/Wholesaler None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Gabriella Bercze Vice President/Wholesaler None
Terrence L. Bussard Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William L. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Thomas C. Gallagher Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Ronald A. Haimowitz Vice President/Wholesaler None
Christopher L. Johnston Vice President/Wholesaler None
Michael P. Jordan Vice President/Wholesaler None
Jeffrey A. Keinert Vice President/Wholesaler None
Thomas P. Kennett Vice President/ Wholesaler None
Debbie A. Marler Vice President/Wholesaler None
Nathan W. Medin Vice President/Wholesaler None
Roger J. Miller Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
Stephen C. Nell Vice President/Wholesaler None
Julia A. Nye Vice President/Wholesaler None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Joseph T. Owczarek Vice President/Wholesaler None
Mary Ellen Pernice-Fadden Vice President/Wholesaler None
Mark A. Pletts Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
Laura E. Roman Vice President/Wholesaler None
Linda Schulz Vice President/Wholesaler None
Edward B. Sheridan Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Julia A. Stanton Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
Edward J. Wagner Vice President/Wholesaler None
Wayne W. Wagner Vice President/Wholesaler None
John A. Wells Vice President/Marketing Technology None
Scott Whitehouse Vice President/Wholesaler None
Frank C. Tonnemaker Vice President None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Not Applicable.
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)
<PAGE>
PART C - Other Information
(Continued)
(b) Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
(with respect to their services as investment adviser)
(c) The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, N.Y. 11245
(with respect to their services as custodian)
(d) Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
(with respect to their services as distributor)
(e) Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
(with respect to their services as shareholder
services agent)
(f) Lynch & Mayer, Inc.
520 Madison Avenue
New York, NY 10022
(with respect to their services as sub-adviser)
(g) Delaware International Advisers Ltd.
Third Floor
80 Cheapside
London, England EC2V 6EE
(with respect to their services as sub-adviser)
(h) AIB Govett, Inc.
250 Montgomery Street, Suite 1200
San Francisco, CA 94104
(with respect to their services as sub-adviser)
Item 31. Management Services. None.
<PAGE>
PART C - Other Information
(Continued)
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia and Commonwealth of Pennsylvania on
this 18th day of December, 1997.
DELAWARE GROUP ADVISER FUNDS, INC.
By /s/ Wayne A. Stork
--------------------
Wayne A. Stork
Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------------- ---------------------------------- -----------------
<S> <C> <C>
/s/ Wayne A. Stork Chariman of the Board and Director December 18, 1997
- ----------------------------------
Wayne A. Stork
Executive Vice President/Chief Operating
/s/ David K. Downes Officer/Chief Financial Officer
- ---------------------------------- (Principal Financial Officer and Principal
David K. Downes Accounting Officer) December 18, 1997
/s/Walter P. Babich Director December 18, 1997
- ----------------------------------
Walter P. Babich
/s/Anthony D. Knerr Director December 18, 1997
- ----------------------------------
Anthony D. Knerr
/s/Ann R. Leven Director December 18, 1997
- ----------------------------------
Ann R. Leven
/s/W. Thacher Longstreth Director December 18, 1997
- ----------------------------------
W. Thacher Longstreth
/s/Thomas F. Madison Director December 18, 1997
- ----------------------------------
Thomas F. Madison
/s/Jeffrey J. Nick Director December 18, 1997
- ----------------------------------
Jeffrey J. Nick
/s/Charles E. Peck Director December 18, 1997
- ----------------------------------
Charles E. Peck
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
EX-99.B1A Articles Supplementary (December 18, 1997)
EX-99.B5B Amended and Restated Investment Management Agreement between Delaware
Management Company, Inc. and the Registrant on behalf of Overseas Equity Fund
EX-99.B5E Form of Sub-Advisory Agreement between Delaware Management Company, Inc.
and Delaware International Advisers Ltd. on behalf of Overseas Equity Fund
EX-99.B5F Form of Sub-Advisory Agreement between Delaware Management Company, Inc.
and AIB Govett, Inc. on behalf of New Pacific Fund
EX-99.B8AI Form of Amendment (November 1997) to Custodian Agreement
EX-99.B9BI Executed Amendment No. 4A (April 14, 1997) to Schedule A to Delaware
Group of Funds Fund Accounting Agreement
EX-99.B9BII Executed Amendment No. 5 (May 1, 1997) to Schedule A to Delaware
Group of Funds Fund Accounting Agreement
EX-99.B9BIII Executed Amendment No. 6 (July 21, 1997) to Schedule A to Delaware
Group of Funds Fund Accounting Agreement
EX-99.B19B Power of Attorney for Thomas F. Madison and Jeffrey J. Nick
</TABLE>
<PAGE>
EX-99.B1A
EXHIBIT 24(b)(1)(a)
DELAWARE GROUP ADVISER FUNDS, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
DELAWARE GROUP ADVISER FUNDS, INC., a Maryland corporation
having its principal office in Baltimore, Maryland (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland,
that:
ONE: The Corporation is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended.
TWO: The Articles of Incorporation of the Corporation, as
amended and supplemented, are further amended by changing the name of the
World Growth Fund series of the Corporation to the Overseas Equity Fund series
of the Corporation, and by deleting the old name of such series from the
Articles of Incorporation, as amended and supplemented to date, and inserting
in lieu thereof, the new name of such series as changed hereby.
THREE: The amendment to the Articles of Incorporation of the
Corporation as set forth above has been duly approved by a majority of the
entire Board of Directors of the Corporation as required by law and is limited
to changes permitted by Section 2-605(a)(4) of the Maryland General
Corporation Law to be made without action by the stockholders of the
Corporation.
FOUR: The amendment to the Articles of Incorporation of the
Corporation as set forth above does not change the preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption of the shares that are
the subject of the name change.
FIVE: These Articles of Amendment shall become effective
upon filing and acceptance by the State Department of Assessments and Taxation.
1
<PAGE>
IN WITNESS WHEREOF, DELAWARE GROUP ADVISER FUNDS, INC.
has caused these Articles of Amendment to be signed in its name and on its
its behalf by its Chairman and attested by its Assistant Secretary
on this 18th day of December, 1997.
DELAWARE GROUP ADVISER FUNDS, INC.
By:/S/ Wayne A. Stork
------------------------------
Wayne A. Stork
ATTEST:
/s/ Michael D. Mabry
- --------------------
Michael D. Mabry
Assistant Secretary
2
<PAGE>
THE UNDERSIGNED, Wayne A. Stork of DELAWARE GROUP ADVISER
FUNDS, INC., who executed on behalf of said Corporation the foregoing Articles
of Amendment, of which this certificate is made a part, hereby acknowledges,
in the name and on behalf of said Corporation, the foregoing Articles of
Amendment to be the corporate act of said Corporation and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the approval thereof are true in all
material respects, under the penalties of perjury.
/s/Wayne A. Stork
-----------------------------
Wayne A. Stork
3
<PAGE>
EX-99.B5B
EXHIBIT 24(b)(5)(b)
DELAWARE GROUP ADVISER FUNDS, INC.
OVERSEAS EQUITY FUND
FIRST AMENDED AND RESTATED INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP ADVISER FUNDS, INC.,
a Maryland corporation ("Fund") on behalf of the OVERSEAS EQUITY FUND
("Portfolio"), and DELAWARE MANAGEMENT COMPANY, INC., a Delaware corporation
("Investment Manager").
W I T N E S S E T H:
WHEREAS, the Fund has been organized and operates as an investment
company registered under the Investment Company Act of 1940 and is currently
comprised of three portfolios, including the Portfolio; as a separate series
of the Fund, each portfolio engages in the business of investing and
reinvesting its assets in securities, and further
WHEREAS, the Investment Manager is a registered investment adviser
under the Investment Advisers Act of 1940 and engages in the business of
providing investment management services; and further
WHEREAS, the Board of Directors of the Fund approved a reduction in
the advisory fee paid under the original Investment Management Agreement; and
further
WHEREAS, the name of the Portfolio was changed from the World
Growth Fund to the Overseas Equity Fund; and further
<PAGE>
WHEREAS, in connection with the changes in investment manager, the
Fund on behalf of the Portfolio and the Investment Manager desire to enter
into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Fund hereby employs the Investment Manager to manage the
investment and reinvestment of the Portfolio's assets and to administer its
affairs, subject to the direction of the Fund's Board of Directors and
officers of the Fund for the period and on the terms hereinafter set forth.
The Investment Manager hereby accepts such employment and agrees during such
period to render the services and assume the obligations herein set forth for
the compensation herein provided. The Investment Manager shall for all
purposes herein be deemed to be an independent contractor, and shall, unless
otherwise expressly provided and authorized, have no authority to act for or
represent the Fund in any way, or in any way be deemed an agent of the Fund.
The Investment Manager shall regularly make decisions as to what securities
and other instruments to purchase and sell on behalf of the Portfolio and
shall effect the purchase and sale of such investments in furtherance of the
Portfolio's objectives and policies and shall furnish the Board of Directors
of the Fund with such information and reports regarding the Portfolio's
investments as the Investment Manager deems appropriate or as the Directors of
the Fund may reasonably request.
2. The Fund shall conduct its own business and affairs and shall
bear the expenses and salaries necessary and incidental thereto including, but
not in limitation of the foregoing, the costs incurred in: the maintenance of
its corporate existence; the maintenance of its own books, records and
procedures; dealing with its own shareholders; the payment of dividends;
transfer of stock, including issuance, redemption and repurchase of shares;
preparation of share certificates; reports
-2-
<PAGE>
and notices to shareholders; calling and holding of shareholders' meetings;
miscellaneous office expenses; brokerage commissions; custodian fees; legal
and accounting fees; taxes; and federal and state registration fees.
Directors, officers and employees of the Investment Manager may be directors,
officers and employees of any of the funds (including the Fund) of which
Delaware Management Company, Inc. is investment manager. Directors, officers
and employees of the Investment Manager who are directors, officers and/or
employees of these funds shall not receive any compensation from the funds for
acting in such dual capacity.
In the conduct of the respective businesses of the parties hereto
and in the performance of this Agreement, the Fund and Investment Manager may
share facilities common to each, with appropriate proration of expenses
between them.
3. (a) Subject to the primary objective of obtaining the best
available prices and execution, the Investment Manager will place orders for
the purchase and sale of portfolio securities and other instruments with such
broker/dealers selected who provide statistical, factual and financial
information and services to the Fund, to the Investment Manager, to any
Sub-Adviser, as defined in Paragraph 5 hereof, or to any other fund for which
the Investment Manager or any such Sub-Adviser provides investment advisory
services and/or with broker/dealers who sell shares of the Fund or who sell
shares of any other fund for which the Investment Manager or any such
Sub-Adviser provides investment advisory services. Broker/dealers who sell
shares of the funds of which Delaware Management Company, Inc. is investment
manager, shall only receive orders for the purchase or sale of portfolio
securities to the extent that the placing of such orders is in compliance with
the Rules of the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc.
-3-
<PAGE>
(b) Notwithstanding the provisions of subparagraph (a) above and
subject to such policies and procedures as may be adopted by the Board of
Directors and officers of the Fund, the Investment Manager may ask the Fund
and the Fund may agree to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would
have charged for effecting that transaction, in such instances where the Fund
and the Investment Manager have determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and
research services provided by such member, broker or dealer, viewed in terms
of either that particular transaction or the Investment Manager's overall
responsibilities with respect to the Fund and to other funds and other
advisory accounts for which the Investment Manager or any Sub-Adviser, as
defined in Paragraph 5 hereof, exercises investment discretion.
4. As compensation for the services to be rendered to the Fund by
the Investment Manager under the provisions of this Agreement, the Fund shall
pay to the Investment Manager monthly from the Portfolio's assets, a fee (at
an annual rate) equal to 1.00% of the average daily net assets of the
Portfolio during the month.
If this Agreement is terminated prior to the end of any calendar
month, the management fee shall be prorated for the portion of any month in
which this Agreement is in effect according to the proportion which the number
of calendar days, during which the Agreement is in effect, bears to the number
of calendar days in the month, and shall be payable within 10 days after the
date of termination.
5. The Investment Manager may, at its expense, select and contract
with one or more investment advisers registered under the Investment Advisers
Act of 1940 (the "Sub-Adviser") to
-4-
<PAGE>
perform some or all of the services for the Portfolio for which it is
responsible under this Agreement. The Investment Manager will compensate any
Sub-Adviser for its services to the Portfolio. The Investment Manager may
terminate the services of any Sub-Adviser at any time in its sole discretion,
and shall at such time assume the responsibilities of such Sub-Adviser unless
and until a successor Sub-Adviser is selected and the requisite approval of
the Portfolio's shareholders is obtained. The Investment Manager will continue
to have responsibility for all advisory services furnished by any Sub-Adviser.
6. The services to be rendered by the Investment Manager to the
Fund under the provisions of this Agreement are not to be deemed to be
exclusive, and the Investment Manager shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby.
7. The Investment Manager, its directors, officers, employees,
agents and shareholders may engage in other businesses, may render investment
advisory services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Fund or to any other investment company, corporation, association, firm or
individual.
8. In the absence of willful misfeasance, bad faith, gross
negligence, or a reckless disregard of the performance of its duties as the
Investment Manager to the Fund, the Investment Manager shall not be subject to
liability to the Fund or to any shareholder of the Fund for any action or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security, or otherwise.
9. This Agreement shall be executed and become effective as of the
date written below if approved by the vote of a majority of the outstanding
voting securities of the Portfolio. It shall
-5-
<PAGE>
continue in effect for a period of two years and may be renewed thereafter
only so long as such renewal and continuance is specifically approved at least
annually by the Board of Directors or by the vote of a majority of the
outstanding voting securities of the Portfolio and only if the terms and the
renewal hereof have been approved by the vote of a majority of the Directors
of the Fund who are not parties hereto or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. Notwithstanding the foregoing, this Agreement may be terminated by
the Fund at any time, without the payment of a penalty, on sixty days' written
notice to the Investment Manager of the Fund's intention to do so, pursuant to
action by the Board of Directors of the Fund or pursuant to the vote of a
majority of the outstanding voting securities of the Portfolio. The Investment
Manager may terminate this Agreement at any time, without the payment of a
penalty, on sixty days' written notice to the Fund of its intention to do so.
Upon termination of this Agreement, the obligations of all the parties
hereunder shall cease and terminate as of the date of such termination, except
for any obligation to respond for a breach of this Agreement committed prior
to such termination, and except for the obligation of the Fund to pay to the
Investment Manager the fee provided in Paragraph 4 hereof, prorated to the
date of termination. This Agreement shall automatically terminate in the event
of its assignment.
10. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
11. For the purposes of this Agreement, the terms "vote of a
majority of the outstanding voting securities"; "interested persons"; and
"assignment" shall have the meaning defined in the Investment Company Act of
1940.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their corporate
seals to be affixed and duly attested and their presents to be signed by their
duly authorized officers as of the 15th day of September, 1997.
Attest: DELAWARE ADVISER FUNDS, INC. for the
OVERSEAS EQUITY FUND
__________________________ By:____________________________________
Attest: DELAWARE MANAGEMENT COMPANY, INC.
__________________________ By:____________________________________
-7-
<PAGE>
EX-99.B5E
EXHIBIT 24(b)(5)(e)
DELAWARE GROUP ADVISER FUNDS, INC.
SUB-ADVISORY AGREEMENT
AGREEMENT, made by and between DELAWARE MANAGEMENT COMPANY, INC.,
a Delaware corporation ("Investment Manager"), and DELAWARE INTERNATIONAL
ADVISERS LTD., an entity organized under the laws of the U.K. ("Sub-Adviser").
W I T N E S S E T H:
WHEREAS, DELAWARE GROUP ADVISER FUNDS, INC., a Maryland corporation
("Fund"), on behalf of the Overseas Equity Fund ("Portfolio"), has been
organized and operates as an investment company registered under the
Investment Company Act of 1940 ("1940 Act") and engages in the business of
investing and reinvesting its assets in securities, and
WHEREAS, the Investment Manager and the Fund have entered into an
agreement dated as of September 15, 1997 ("First Amended and Restated
Investment Management Agreement") whereby the Investment Manager will provide
investment advisory services to the Fund on behalf of the Portfolio; and
WHEREAS, the First Amended and Restated Investment Management
Agreement permits the Investment Manager to hire one or more sub-advisers to
assist the Investment Manager in providing investment advisory services to the
Fund on behalf of the Portfolio; and
WHEREAS, the Investment Manager and the Sub-Adviser are registered
investment advisers under the Investment Advisers Act of 1940 and engage in
the business of providing investment management services; and
<PAGE>
WHEREAS, the Sub-Adviser is also regulated in the conduct of its
investment business by the Investment Management Regulatory Organization under
whose rules the Investment Manager is a "non-private customer".
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Investment Manager hereby employs the Sub-Adviser to manage
the investment and reinvestment of the Portfolio's assets, subject to the
direction of the Fund's Board of Directors and officers of the Fund for the
period and on the terms hereinafter set forth. The Sub-Adviser hereby accepts
such employment and agrees during such period to render the services and
assume the obligations herein set forth for the compensation herein provided.
The Sub-Adviser shall for all purposes herein be deemed to be an independent
contractor, and shall, unless otherwise expressly provided and authorized,
have no authority to act for or represent the Fund in any way, or in any way
be deemed an agent of the Fund. The Sub-Adviser shall regularly make decisions
as to what securities and other instruments to purchase and sell on behalf of
the Portfolio, shall effect the purchase and sale of such investments, as
agent for the Fund on behalf of the Portfolio, in furtherance of the
Portfolio's objectives and policies and shall furnish the Board of Directors
of the Fund with such information and reports regarding its activities as the
Investment Manager deems appropriate or as the Directors of the Fund may
reasonably request consistent with the provisions of Section 15(c) of the 1940
Act.
In the performance of its duties and obligations under this
Agreement, the Sub-Adviser shall act in conformity with the Articles of
Incorporation, By-Laws and Prospectus of the Fund and with the instructions
and directions of the Investment Manager and of the Board of Directors of the
Fund
-2-
<PAGE>
and will conform to and comply with the requirements of the 1940 Act, the
Internal Revenue Code of 1986 and all other applicable federal and state laws
and regulations.
2. Under the terms of the First Amended and Restated Investment
Management Agreement, the Fund shall conduct its own business and affairs and
shall bear the expenses and salaries necessary and incidental thereto
including, but not in limitation of the foregoing, the costs incurred in: the
maintenance of its corporate existence; the maintenance of its own books,
records and procedures; dealing with its own shareholders; the payment of
dividends; transfer of stock, including issuance and repurchase of shares;
preparation of share certificates; reports and notices to shareholders;
calling and holding of shareholders' meetings; miscellaneous office expenses;
brokerage commissions; custodian fees; legal and accounting fees; taxes; and
federal and state registration fees.
Directors, officers and employees of the Sub-Adviser may be
directors, officers and employees of other funds which have employed the
Sub-Adviser as sub-adviser or investment manager.
In the conduct of the respective business of the parties hereto and
in the performance of this Agreement, the Fund, the Investment Manager and the
Sub-Adviser may share facilities common to each, with appropriate proration of
expenses between and among them.
3. (a) Subject to the primary objective of obtaining the best
available prices and execution, the Sub-Adviser will place orders for the
purchase and sale of portfolio securities and other instruments with such
broker/dealers who provide statistical, factual and financial information and
services to the Fund, to the Investment Manager, to the Sub-Adviser or to any
other fund for which the Investment Manager or Sub-Adviser provides investment
advisory services and/or with
-3-
<PAGE>
broker/dealers who sell shares of the fund or who sell shares of any other
fund for which the Investment Manager or Sub-Adviser provides investment
advisory services. Broker/dealers who sell shares of the funds for which the
Investment Manager or Sub-Adviser provides advisory services shall only
receive orders for the purchase or sale of portfolio securities to the extent
that the placing of such orders is in compliance with the Rules of the
Securities and Exchange Commission and the National Association of Securities
Dealers, Inc.
(b) Notwithstanding the provisions of subparagraph (a) above
and subject to the policies and procedures as may be adopted by the Board of
Directors and officers of the Fund, the Sub-Adviser may ask the Fund and the
Fund may agree to pay a member of an exchange, broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission another member of an exchange, broker or dealer would have charged
for effecting that transaction, in such instances where it and the Sub-Adviser
have determined in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
member, broker or dealer, viewed in terms of either that particular
transaction or the Sub-Adviser's overall responsibilities with respect to the
Fund and to other funds and other advisory accounts for which the Investment
Manager or the Sub-Adviser exercises investment discretion.
4. As compensation for the services to be rendered to the Fund for
the benefit of the Portfolio by the Sub-Adviser under the provisions of this
Agreement, the Investment Manager shall pay to the Sub-Adviser a monthly fee
equal to 80% of the fee paid to the Investment Manager under the terms of the
First Amended and Restated Investment Management Agreement.
-4-
<PAGE>
If this Agreement is terminated prior to the end of any calendar
month, the Sub-Advisory fee shall be prorated for the portion of any month in
which this Agreement is in effect according to the proportion which the number
of calendar days, during which the Agreement is in effect, bears to the number
of calendar days in the month, and shall be payable within 10 days after the
date of termination.
5. The services to be rendered by the Sub-Adviser to the Fund for the
benefit of the Portfolio under the provisions of this Agreement are not to be
deemed to be exclusive, and the Sub-Adviser shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby.
6. The Sub-Adviser, its directors, officers, employees, agents and
shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Fund or to any other investment company, corporation, association, firm or
individual.
7. In the absence of willful misfeasance, bad faith, gross
negligence, or a reckless disregard of the performance of its duties as
Sub-Adviser to the Fund, the Sub-Adviser shall not be subject to liability to
the Fund, to the Investment Manager or to any shareholder of the Fund for any
action or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security, or otherwise.
8. This Agreement shall be executed and become effective as of the
date written below if approved by the Board of Directors; and shall continue
in effect beyond 120 days after its execution only if it is approved by the
vote of a majority of the outstanding voting securities of the Portfolio. It
shall continue in effect for a period of two years from the date of its
execution and may
-5-
<PAGE>
be renewed thereafter only so long as such renewal and continuance is
specifically approved at least annually by the Board of Directors or by the
vote of a majority of the outstanding voting securities of the Portfolio and
only if the terms and the renewal hereof have been approved by the vote of a
majority of the Directors of the Fund who are not parties hereto or interested
persons of any such party, cast in person at a meeting called for the purpose
of voting on such approval. Notwithstanding the foregoing, this Agreement may
be terminated by the Investment Manager or the Fund at any time, without the
payment of a penalty, on sixty days' written notice to the Sub-Adviser, of the
Investment Manager's or the Fund's intention to do so, in the case of the
Fund, pursuant to action by the Board of Directors of the Fund or pursuant to
the vote of a majority of the outstanding voting securities of the Portfolio.
The Sub-Adviser may terminate this Agreement at any time, without the payment
of a penalty on sixty days' written notice to the Investment Manager and the
Fund of its intention to do so. Upon termination of this Agreement, the
obligations of all the parties hereunder shall cease and terminate as of the
date of such termination, except for any obligation to respond for a breach of
this Agreement committed prior to such termination, and except for the
obligation of the Investment Manager to pay to the Sub-Adviser the fee
provided in Paragraph 4 hereof, prorated to the date of termination. This
Agreement shall automatically terminate in the event of its assignment or, if
the initial approval by a vote of a majority of the outstanding voting
securities of the Portfolio is not obtained within 120 days after its
execution. This Agreement shall automatically terminate upon the termination
of the First Amended and Restated Investment Management Agreement.
9. This Agreement shall extend to and bind the successors of the
parties hereto. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an
-6-
<PAGE>
original. This Agreement shall become effective when one or more counterparts
have been signed and delivered by each of the parties hereto.
10. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities", "interested person", and "assignment"
shall have the meaning defined in the 1940 Act.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their corporate
seals to be affixed and duly attested and their presents to be signed by their
duly authorized officers as of the 18th day of November, 1997.
DELAWARE MANAGEMENT COMPANY, INC.
By:_________________________________
Attest:_____________________________
DELAWARE INTERNATIONAL ADVISERS LTD.
By:_________________________________
Attest:_____________________________
Agreed to and accepted as of the
day and year first above written:
DELAWARE GROUP ADVISER FUNDS, INC.
on behalf of the Overseas Equity Fund
By:_______________________________
Attest:___________________________
-8-
<PAGE>
EX-99.B5F
EXHIBIT 24(b)(5)(f)
DELAWARE GROUP ADVISER FUNDS, INC.
SUB-ADVISORY AGREEMENT
AGREEMENT, made by and between DELAWARE MANAGEMENT COMPANY, INC., a
Delaware corporation ("Investment Manager"), and AIB GOVETT, INC., a Maryland
corporation ("Sub-Adviser").
W I T N E S S E T H:
WHEREAS, DELAWARE GROUP ADVISER FUNDS, INC., a Maryland corporation
("Fund"), on behalf of the New Pacific Fund ("Portfolio"), has been organized
and operates as an investment company registered under the Investment Company
Act of 1940 ("1940 Act") and engages in the business of investing and
reinvesting its assets in securities, and
WHEREAS, the Investment Manager and the Fund have entered into an
agreement of even date herewith ("Investment Management Agreement") whereby
the Investment Manager will provide investment advisory services to the Fund
on behalf of the Portfolio; and
WHEREAS, the Investment Management Agreement permits the Investment
Manager to hire one or more sub-advisers to assist the Investment Manager in
providing investment advisory services to the Fund on behalf of the Portfolio;
and
WHEREAS, the Investment Manager and the Sub-Adviser are registered
investment advisers under the Investment Advisers Act of 1940 and engage in
the business of providing investment management services; and
<PAGE>
WHEREAS, the Investment Manager previously entered into a
Sub-Advisory Agreement with John Govett & Co., Limited dated as of May 4,
1996; and
WHEREAS, as a result of an internal restructuring, the services and
personnel of John Govett & Co. Limited were transferred to the Sub-Adviser,
thus triggering the necessity to enter into the this Sub-Advisory Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Investment Manager hereby employs the Sub-Adviser to manage
the investment and reinvestment of the Portfolio's assets, subject to the
direction of the Fund's Board of Directors and officers of the Fund for the
period and on the terms hereinafter set forth. The Sub-Adviser hereby accepts
such employment and agrees during such period to render the services and
assume the obligations herein set forth for the compensation herein provided.
The Sub-Adviser shall for all purposes herein be deemed to be an independent
contractor, and shall, unless otherwise expressly provided and authorized,
have no authority to act for or represent the Fund in any way, or in any way
be deemed an agent of the Fund. The Sub-Adviser shall regularly make decisions
as to what securities and other instruments to purchase and sell on behalf of
the Portfolio, shall effect the purchase and sale of such investments, as
agent for the Fund on behalf of the Portfolio, in furtherance of the
Portfolio's objectives and policies and shall furnish the Board of Directors
of the Fund with such information and reports regarding its activities as the
Investment Manager deems
2
<PAGE>
appropriate or as the Directors of the Fund may reasonably request consistent
with the provisions of Section 15(c) of the 1940 Act.
In the performance of its duties and obligations under this
Agreement, the Sub-Adviser shall act in conformity with the Articles of
Incorporation, By-Laws and Prospectus of the Fund and with the instructions
and directions of the Investment Manager and of the Board of Directors of the
Fund and will conform to and comply with the requirements of the 1940 Act, the
Internal Revenue Code of 1986 and all other applicable federal and state laws
and regulations.
2. Under the terms of the Investment Management Agreement, the Fund
shall conduct its own business and affairs and shall bear the expenses and
salaries necessary and incidental thereto including, but not in limitation of
the foregoing, the costs incurred in: the maintenance of its corporate
existence; the maintenance of its own books, records and procedures; dealing
with its own shareholders; the payment of dividends; transfer of stock,
including issuance and repurchase of shares; preparation of share
certificates; reports and notices to shareholders; calling and holding of
shareholders' meetings; miscellaneous office expenses; brokerage commissions;
custodian fees; legal and accounting fees; taxes; and federal and state
registration fees.
Directors, officers and employees of the Sub-Adviser may be
directors, officers and employees of other funds which have employed the
Sub-Adviser as sub-adviser or investment manager.
In the conduct of the respective business of the parties hereto and
in the performance of this Agreement, the Fund, the Investment Manager and the
Sub-Adviser may share facilities common to each, with appropriate proration of
expenses between and among them.
3
<PAGE>
3. (a) Subject to the primary objective of obtaining the best
available prices and execution, the Sub-Adviser will place orders for the
purchase and sale of portfolio securities and other instruments with such
broker/dealers who provide statistical, factual and financial information and
services to the Fund, to the Investment Manager, to the Sub-Adviser or to any
other fund for which the Investment Manager or Sub-Adviser provides investment
advisory services and/or with broker/dealers who sell shares of the Fund or
who sell shares of any other fund for which the Investment Manager or
Sub-Adviser provides investment advisory services. Broker/dealers who sell
shares of the funds for which the Investment Manager or Sub-Adviser provides
advisory services shall only receive orders for the purchase or sale of
portfolio securities to the extent that the placing of such orders is in
compliance with the Rules of the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc.
(b) Notwithstanding the provisions of subparagraph (a) above
and subject to the policies and procedures as may be adopted by the Board of
Directors and officers of the Fund, the Sub-Adviser may ask the Fund and the
Fund may agree to pay a member of an exchange, broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission another member of an exchange, broker or dealer would have charged
for effecting that transaction, in such instances where it and the Sub-Adviser
have determined in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
member, broker or dealer, viewed in terms of either that particular
transaction or the Sub-Adviser's overall responsibilities with respect to the
Fund and to other funds and other advisory accounts for which the Investment
Manager or the Sub-Adviser exercises investment discretion.
4
<PAGE>
4. The Sub-Adviser shall maintain all books and records with respect
to the Portfolio's portfolio transactions required by subparagraphs (b) (5),
(6), (7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940
Act and shall render to the Fund's Board of Directors such periodic and
special reports as the Board may reasonably request.
The Sub-Adviser shall keep the Portfolio's books and records
required to be maintained by the Sub-Adviser pursuant to this Paragraph 4 and
shall timely furnish to the Investment Manager all information relating to the
Sub-Adviser's services hereunder needed by the Investment Manager to keep the
other books and records of the Portfolio required by Rule 31a-1 under the 1940
Act. The Sub-Adviser agrees that all records which it maintains for the
Portfolio are the property of the Fund and the Sub-Adviser will surrender
promptly to the Fund any of such records upon the Fund's request, provided
however that the Sub-Adviser may retain a copy of such records. The
Sub-Adviser further agrees to preserve for the periods prescribed by Rule
31a-2 of the Securities and Exchange Commission under the 1940 Act any such
records as are required to be maintained by it pursuant to this Paragraph 4.
5. As compensation for the services to be rendered to the Fund for
the benefit of the Portfolio by the Sub-Adviser under the provisions of this
Agreement, the Investment Manager shall pay to the Sub-Adviser a fee at an
annual rate of .50% of the average daily net assets of the Portfolio. The fee
shall be computed daily and will be paid to the Sub-Adviser, quarterly, in
arrears.
If this Agreement is terminated prior to the end of any calendar
month, the Sub-Advisory fee shall be prorated for the portion of any month in
which this Agreement is in effect according to the proportion which the number
of calendar days, during which the Agreement is in effect, bears to the
5
<PAGE>
number of calendar days in the month, and shall be payable within 10 days
after the date of termination.
6. The services to be rendered by the Sub-Adviser to the Fund for the
benefit of the Portfolio under the provisions of this Agreement are not to be
deemed to be exclusive, and the Sub-Adviser shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby; provided,
however, except for advisory arrangements implemented prior to the date of
this Agreement, during the term of this Agreement, the Sub-Adviser, will not,
without the written consent of the Investment Manager, which consent will not
be unreasonably withheld, render investment management (or similar services)
to another registered investment company (or portfolio thereof) which the
Investment Manager reasonably determines would be in competition with and
which has investment policies similar to those of the Portfolio.
7. The Investment Manager agrees that it shall not use the
Sub-Adviser's name or otherwise refer to the Sub-Adviser in any materials
distributed to third parties, including the Portfolio's shareholders, without
the prior written consent of the Sub-Adviser.
8. In the absence of willful misfeasance, bad faith, gross
negligence, or a reckless disregard of the performance of its duties as
Sub-Adviser to the Fund, the Sub-Adviser shall not be subject to liability to
the Fund, to the Investment Manager or to any shareholder of the Fund for any
action or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security, or otherwise.
9. This Agreement shall be executed and become effective as of the
date written below if approved by the vote of a majority of the outstanding
voting securities of the Portfolio. It shall
6
<PAGE>
continue in effect for a period of two years and may be renewed thereafter
only so long as such renewal and continuance is specifically approved at least
annually by the Board of Directors or by the vote of a majority of the
outstanding voting securities of the Portfolio and only if the terms and the
renewal hereof have been approved by the vote of a majority of the Directors
of the Fund who are not parties hereto or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. Notwithstanding the foregoing, this Agreement may be terminated by
the Investment Manager or the Fund at any time, without the payment of a
penalty, on sixty days' written notice to the Sub-Adviser, of the Investment
Manager's or the Fund's intention to do so, in the case of the Fund, pursuant
to action by the Board of Directors of the Fund or pursuant to the vote of a
majority of the outstanding voting securities of the Portfolio. The
Sub-Adviser may terminate this Agreement at any time, without the payment of a
penalty on sixty days' written notice to the Investment Manager and the Fund
of its intention to do so. Upon termination of this Agreement, the obligations
of all the parties hereunder shall cease and terminate as of the date of such
termination, except for any obligation to respond for a breach of this
Agreement committed prior to such termination, and except for the obligation
of the Investment Manager to pay to the Sub-Adviser the fee provided in
Paragraph 5 hereof, prorated to the date of termination. This Agreement shall
automatically terminate in the event of its assignment. This Agreement shall
automatically terminate upon the termination of the Investment Management
Agreement.
10. If the Investment Manager has any complaint about the way in
which the Sub-Adviser has carried out its obligations under this Agreement,
the matter should be raised in the first instance with the Sub-Adviser's
compliance officer, who will arrange to investigate the complaint and
7
<PAGE>
respond with his findings. The Investment Manager also has the right to
complain directly to the Investment Ombudsman at 6 Frederick's Place, London
EC2R 8BT.
11. This Agreement shall extend to and bind the successors of the
parties hereto. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original. This Agreement shall become
effective when one or more counterparts have been signed and delivered by each
of the parties hereto.
12. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities", "interested person", and "assignment"
shall have the meaning defined in the 1940 Act.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their corporate
seals to be affixed and duly attested and their presents to be signed by their
duly authorized officers as of the ___ day of December, 1997.
DELAWARE MANAGEMENT COMPANY, INC.
By:
------------------------------
Attest:
--------------------------
AIB GOVETT, INC.
By:
------------------------------
Attest:
--------------------------
Agreed to and accepted as of the
day and year first above written:
DELAWARE GROUP ADVISER FUNDS, INC.
on behalf of the New Pacific Fund
By:
------------------------------
Attest:
-------------------------
9
<PAGE>
EX-99.B8AI
EXHIBIT 24(b)(8)(a)(i)
AMENDMENT, dated November 20, 1997 to the May 1, 1996 custody agreement
("Agreement"), between those registered investment companies listed on Schedule
A to the Agreement (each a "Customer"), having a place of business at 1818
Market Street, Philadelphia, PA 19103 and The Chase Manhattan Bank ("Bank"),
having a place of business at 270 Park Ave., New York, N.Y. 10017-2070.
It is hereby agreed as follows:
Section 1. Except as modified hereby, the Agreement is confirmed in all
respects. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Agreement.
Section 2. The Agreement is amended by deleting the mutual fund rider
thereto and inserting, in lieu thereof, the following mutual fund rider:
1. Add a new Section 15 to the Agreement as follows:
15. Compliance with SEC rule 17f-5 ("Rule 17f-5").
(a) Customer's board of directors (or equivalent body) (hereinafter
"Board") hereby delegates to Bank, and Bank hereby accepts the delegation to it,
of the obligation to perform as Customer's "Foreign Custody Manager" (as that
term is defined in Rule 17f-5(a)(2)) adopted under the Investment Company Act of
1940 ("Act"), as amended ("1940 Act"), the following responsibilities in a
manner consistent with Rule 17f-5, to: (i) select Eligible Foreign Custodians
(as that term is defined in Rule 17f-5(a)(1), and as the same may be amended
from time to time, or that have otherwise been made exempt pursuant to an SEC
exemptive order); (ii) enter into written contracts with such Eligible Foreign
Custodians that are banks or trust companies and with Eligible Foreign
Custodians that are "Securities Depositories" (as defined in Rule 17f-5(a)(6))
and that are not Compulsory Depositories (as defined below) where the Depository
has such a contract; and (iii) to monitor the appropriateness of maintaining
Assets of the series of the Customer with such Eligible Foreign Custodians;
provided that, Bank shall not be responsible for these duties with respect to
any compulsory Securities Depository ("Compulsory Depository"). A Compulsory
Depository shall mean a Securities Depository or clearing agency the use of
which is compulsory because: (1) its use is required by law or regulation or (2)
maintaining securities outside the depository is not consistent with prevailing
<PAGE>
custodial practices in the country which the Depository serves. Compulsory
Depositories used by Chase as of the date hereof are set forth in Appendix 1-A
hereto. Appendix 1-A may be amended on notice to Customer from time to time. In
that connection, Bank shall notify Customer promptly of pending changes to
Appendix 1-A.
(b) In connection with the foregoing, Bank shall:
(i) provide written reports to Customer's Board upon the placement of
Assets with a particular Eligible Foreign Custodian and of any Material
Change (as defined below) in the arrangements with such Eligible
Foreign Custodians, with such reports to be provided to Customer's
Board at such times as the Board deems reasonable and appropriate based
on the circumstances of Customer's foreign custody arrangements (and
until further notice from Customer such reports shall be provided
within 30 days after Bank becomes aware of any such Material Change.
For purposes of the foregoing, a Material Change shall include, but
shall not be limited to, Bank's decision to remove Customer's Assets
from a particular Eligible Foreign Custodian, an event that has a
material adverse affect on an Eligible Foreign Custodian's financial or
operational strength, any non-compliance by an Eligible Foreign
Custodian with a "Material Term" of Bank's subcustodian agreement with
such Eligible Foreign Custodian (as defined below) or any failure by an
Eligible Foreign Custodian to meet the requirements for its status as
such under Rule 17f-5. A Material Term shall mean a term which provides
that (a) the Customer will be adequately indemnified or its Assets
adequately insured, or an adequate combination thereof, in the event of
loss; (b) the Assets of the Series will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of an
Eligible Foreign Custodian or such Eligible Foreign Custodian's
creditors, except a claim of payment for their safe custody or
administration, or in the case of cash deposits, liens or rights in
favor of creditors of the Eligible Foreign Custodian arising under
bankruptcy, insolvency or similar laws; (c) beneficial ownership for
the Assets of the Series will be freely transferable without the
payment of money or value other than for safe custody or administration
of the Assets of the Series; (d) adequate records will be maintained
identifying the Assets as belonging to the Customer or the Series or as
being held by a third party for the benefit of the Customer or the
Series; (e) the independent auditors for the Customer will be given
access to those records or confirmation of the contents of those
records; and (f) the Customer will receive periodic reports with
respect to the safekeeping of the Series' Assets, including, but not
necessarily limited to, notification of any transfer to or from the
Customer's account or a third party account containing Assets held for
the benefit of the Customer. In addition, in the event that a contract
with an Eligible Foreign Custodian does not include any or all of the
2
<PAGE>
terms described in (a) through (f) of this paragraph 15(b)(i), a
Material Term shall mean a term which, in the Bank's judgment, if not
complied with, would cause the contract not to provide the same or
greater level of care and protection for Customer's Assets than if the
contract contained the provisions described in (a) through (f) of this
paragraph 15(b)(i).
(ii) exercise such reasonable care, prudence and diligence in
performing as Customer's Foreign Custody Manager as a person having
responsibility for the safekeeping of Assets would exercise;
(iii) in selecting an Eligible Foreign Custodian, first have determined
that Assets placed and maintained in the safekeeping of such Eligible
Foreign Custodian shall be subject to reasonable care, based on the
standards applicable to custodians in the relevant market, after having
considered all factors relevant to the safekeeping of such Assets,
including, without limitation, those factors set forth in Rule
17f-5(c)(1)(i)-(iv);
(iv) determine that the written contract with the Eligible Foreign
Custodian (or, in the case of an Eligible Foreign Custodian that is a
Securities Depository or clearing agency, such contract, the rules or
established practices or procedures of the depository, or any
combination of the foregoing) requires that the Eligible Foreign
Custodian will provide reasonable care for Assets based on the
standards applicable to custodians in the relevant market.
(v) have established a system to monitor the continued appropriateness
of maintaining Assets with particular Eligible Foreign Custodians based
on the standards set forth herein and of the governing contractual
arrangements based on the standards set forth in Rule 17f-5(c)(2), as
it may be amended from time to time.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
Assets on behalf of Customer with Eligible Foreign Custodians pursuant to a
written contract which either contains the terms described in Rule
17f-5(c)(2)(i) or which, in lieu of any or all of the terms described in Rule
17f-5(c)(2)(i), contains such other provisions which the Bank determines will
provide in their entirety, the same or a greater level of care and protection
for the Customer's Assets as the provisions of Rule 17f-5(c)(2)(i) in their
entirety. The written contract shall be in such form as deemed appropriate by
Bank. In addition, with respect to Eligible Foreign Custodians that are
non-compulsory Securities Depositories, reliance may be had on such a contract,
the rules or established practices and procedures of such Depository or any
combination thereof.
3
<PAGE>
(c) Except as expressly provided herein, Customer shall be solely
responsible to assure that the maintenance of Assets hereunder complies with the
rules, regulations, interpretations and exemptive orders promulgated by or under
the authority of the SEC which are applicable to Fund's business or which have
been granted to Fund. Bank shall advise Customer of any exemptive orders which
it obtains which may have an impact on Bank's relationship with Customer.
(d) Bank represents to Customer that it is a U.S. Bank as defined in
Rule 17f-5(a)(7). Customer represents to Bank that: (1) the Assets being placed
and maintained in Bank's custody are subject to the 1940 Act, as the same may be
amended from time to time; (2) its Board has determined that it is reasonable to
rely on Bank to perform as Customer's Foreign Custody Manager. Nothing contained
herein shall require Bank, on Customer's behalf, to make any selection regarding
countries in which Customer invests or to engage in any monitoring of Customer's
decision to invest in any particular country in which Bank selects , contracts
and monitors Eligible Foreign Custodians, as Customer's Foreign Custody Manager
pursuant to the Agreement.
(e) Bank shall provide to Customer such information as is specified in
Appendix 1-B hereto. Customer hereby acknowledges that: (i) such information is
solely designed to inform Customer of market conditions and procedures, but is
not intended to influence Customer's investment decisions; and (ii) Bank has
gathered the information from sources it considers reliable, but that Bank shall
have no responsibility for inaccuracies or incomplete information except to the
extent that Bank was negligent in selecting the sources of such information.
2. Add the following after the first sentence of Section 3 of the
Agreement:
At the request of Customer, Bank may, but need not, add to Schedule A
an Eligible Foreign Custodian that is either a bank or a non-Compulsory
Depository where Bank has not acted as Foreign Custody Manager with
respect to the selection thereof. Bank shall notify Customer in the
event that it elects not to add any such entity.
3. Add the following language to the end of Section 3 of the Agreement:
4
<PAGE>
The term Subcustodian as used herein shall mean the following:
(a) a "U.S. Bank," which shall mean a U.S. bank as defined in
Rule 17f-5(a)(7); and
(b) with respect to Securities for which the primary market is outside
the U.S. an "Eligible Foreign Custodian," shall mean (i) a banking
institution or trust company, incorporated or organized under the laws
of a country other than the United States, that is regulated as such by
that country's government or an agency thereof, (ii) a majority-owned
direct or indirect subsidiary of a U.S. Bank or bank holding company
which subsidiary is incorporated or organized under the laws of a
country other than the United States; (iii) a Securities Depository or
clearing agency (other than a Compulsory Depository), incorporated or
organized under the laws of a country other than the United States,
that acts as a system for the central handling of securities or
equivalent book-entries in that country and that is regulated by a
foreign financial regulatory authority as defined under section
2(a)(50) of the 1940 Act, (iv) a Securities Depository or clearing
agency organized under the laws of a country other than the United
States that acts as a transnational system ("Transnational Depository")
for the central handling of securities or equivalent book-entries, and
(v) any other entity that shall have been so qualified by exemptive
order, rule or other appropriate action of the SEC.
The term Subcustodian as used in Section 12(a)(i) (except the last
sentence thereof) shall not include any Eligible Foreign Custodians as
to which Bank has not acted as Foreign Custody Manager, any Compulsory
Depository and any Transnational Depository.
4. Add the following after the word "administration" at the end of
Subsection 4(d)(i): "or, in the case of cash deposits, liens or rights in favor
of creditors of Subcustodian arising under bankruptcy, insolvency, or similar
laws".
5. Delete all of Subsection 4(e) after the word "located" in (ii)
thereof and add the word "and" between "Subcustodian" and "(ii)".
*********************
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
5
<PAGE>
Customer THE CHASE MANHATTAN BANK
By: /s/ Michael P. Bishof By: /s/ Rosemary M. Stidmon
Name: Michael P. Bishof Name: Rosemary M. Stidmon
Title: Senior Vice President/ Title: Vice President
Treasurer
Date: Nov. 20, 1997 Date: Nov. 20, 1997
6
<PAGE>
APPENDIX A
Delaware Group Adviser Funds, Inc.
U.S. Growth Fund
Overseas Equity Fund
New Pacific Fund
Delaware Group Equity Funds I, Inc.
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc.
Blue Chip Fund
Quantum Fund
Delaware Group Equity Funds IV, Inc.
DelCap Fund
Capital Appreciation Fund
Delaware Group Equity Funds V, Inc.
Retirement Income Fund
Small Cap Value Fund
Delaware Pooled Trust, Inc.
The International Equity Portfolio
The International Fixed Income Portfolio
The Global Equity Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Real Estate Investment Trust Portfolio II
The Emerging Markets Portfolio
Delaware Group Global & International Funds, Inc.
Emerging Markets Series
Global Assets Series
Global Bond Series
Global Equity Series
International Equity Series
International Small Cap Series
7
<PAGE>
APPENDIX A CON'T
Delaware Group Premium Fund, Inc.
Convertible Securities Series
Devon Series
Emerging Markets Series
Quantum Series
Strategic Income Series
Global Bond Series
DelCap Series
International Equity Series
Delaware Series
Value Series
Voyageur Mutual Funds III, Inc.
Tax-Efficient Equity Fund
Dated: November 20, 1997
8
<PAGE>
Appendix 1-A
COMPULSORY DEPOSITORIES
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Argentina Caja de Valores Equity, Corporate & Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Australia Austraclear Ltd. Corporate Debt, Money Market & Semi-Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
CHESS Equity
(Clearing House Electronic Sub-register System)
- --------------------------------------------------------------------------------------------------------------------------------
RITS Government Debt
(Reserve Bank Information and Transfer System)
- --------------------------------------------------------------------------------------------------------------------------------
Austria Oesterreichische Kontrolbank AG Equity, Corporate + Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Belgium CIK Equity + Corporate Debt
(Caisse Interprofessionnelle de Depots et de
Virements de Titres)
- --------------------------------------------------------------------------------------------------------------------------------
Banque Nationale de Belgique Treasury Bills + Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Brazil BOVESPA Equity
(Bolsa de Valores de Sao Paolo)
- --------------------------------------------------------------------------------------------------------------------------------
BVRJ Equity
(Bolsa de Valores de Rio de Janeiro)
-------------------------------------------------------------------------------------------------------------------------------
Canada CDS Equity, Corporate + Government Debt
(Canadian Depository for Securities)
- --------------------------------------------------------------------------------------------------------------------------------
China, Shanghai SSCCRC Equity
(Shanghai Securities Central Clearing and
Registration Corp.)
- --------------------------------------------------------------------------------------------------------------------------------
China, Shenzhen SSCC Equity
(Shenzhen Securities Registration Co., Ltd.)
- --------------------------------------------------------------------------------------------------------------------------------
Czech Republic SCP Equity + Long-Term Government Debt
(Securities Center)
- --------------------------------------------------------------------------------------------------------------------------------
TKD Treasury Bills + Money Market
(Trh Kratkododich Dlluhopisu or Short-Term
Bond Market)
- --------------------------------------------------------------------------------------------------------------------------------
Denmark VP Equity, Corporate + Government Debt
(Vaerdipapircentralen)
- --------------------------------------------------------------------------------------------------------------------------------
Egypt Misr Clearing & Sec. Dep. Equity
- --------------------------------------------------------------------------------------------------------------------------------
Estonia EVK Equity
(Estonian Central Depository for Securities
Ltd.)
- --------------------------------------------------------------------------------------------------------------------------------
Euromarket Cedel & Euroclear Euro-Debt
- --------------------------------------------------------------------------------------------------------------------------------
Finland CSR Equity + Government Debt
(Central Share Registry Finland)
- --------------------------------------------------------------------------------------------------------------------------------
Helsinki Money Market Center Ltd. Money Market
- --------------------------------------------------------------------------------------------------------------------------------
France SICOVAM Equity + Corporate Debt.
(Banque de France)
- --------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------------------------------------------
France SATURNE Government Debt.
(Banque de France)
- --------------------------------------------------------------------------------------------------------------------------------
Germany DKV Equity, Corporate + Government Debt
(Deutscher Kassenverein)
- --------------------------------------------------------------------------------------------------------------------------------
Greece Apothetirio Titlon A.E. Equity
- --------------------------------------------------------------------------------------------------------------------------------
Bank of Greece Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Hong Kong CCASS Equity
(Central Clearing and Settlement System)
-------------------------------------------------------------------------------------------------------------------------------
CMU Corporate + Government Debt
(Central Moneymarkets Unit)
- --------------------------------------------------------------------------------------------------------------------------------
Hungary Keler Ltd. Equity + Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Ireland CREST Equity
- --------------------------------------------------------------------------------------------------------------------------------
GSO Government Debt
(Gilt Settlement Office)
- --------------------------------------------------------------------------------------------------------------------------------
Israel TASE Clearing House Equity, Corporate + Government Debt
(Tel Aviv Stock Exchange Clearing House)
- --------------------------------------------------------------------------------------------------------------------------------
Italy Monte Titoli Equity + Corporate Debt
- --------------------------------------------------------------------------------------------------------------------------------
Bank of Italy Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Japan Bank of Japan Registered Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Latvia LCD Equity + Government Debt
(Latvian Central Depository)
- --------------------------------------------------------------------------------------------------------------------------------
Lebanon Midclear Equity
(Custodian and Clearing Center of Lebanon and
the Middle East)
- --------------------------------------------------------------------------------------------------------------------------------
Luxembourg Cedel Equity
- --------------------------------------------------------------------------------------------------------------------------------
Malaysia MCD Equity
(Malaysian Central Depository Snd Bhd)
- --------------------------------------------------------------------------------------------------------------------------------
Mauritius CDS Equity
(Central Depository System)
- --------------------------------------------------------------------------------------------------------------------------------
Mexico Indeval Equity, Corporate + Government Debt.
(Institucion para el Deposito de Valores)
- --------------------------------------------------------------------------------------------------------------------------------
Morocco Maroclear Equity + Corporate Debt
- --------------------------------------------------------------------------------------------------------------------------------
Bank Al'Maghrib Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Netherlands NECIGEF/KAS Associate NV Equity, Corp. + Govt. D
- --------------------------------------------------------------------------------------------------------------------------------
De Nederlandsche Bank N.V. Money Market
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Netherlands NIEC Premium Bonds
(Nederlands Interpforessioneel Effectencentrum
B.V.)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
New Zealand Austraclear New Zealand Equity, Corporate + Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Norway VPS Equity, Corporate + Government Debt
(Verdipapirsentralen)
- --------------------------------------------------------------------------------------------------------------------------------
Oman NONE
- --------------------------------------------------------------------------------------------------------------------------------
Pakistan CDC Equity
(Central Depository Company of Pakistan Ltd.)
- --------------------------------------------------------------------------------------------------------------------------------
Peru CAVALI Equity
(Caja de Valores)
- --------------------------------------------------------------------------------------------------------------------------------
Philippines PCD Equity
(Philippine Central Depository)
- --------------------------------------------------------------------------------------------------------------------------------
Poland NDS Equity, Long-Term Government Debt + Vouchers
(National Securities Depository)
- --------------------------------------------------------------------------------------------------------------------------------
CRT Treasury-Bills
(Central Registry of Treasury-Bills)
- --------------------------------------------------------------------------------------------------------------------------------
Portugal Interbolsa Equity, Corporate + Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Romania SNCDD - RASDAQ Equity
(National Company for Clearing, Settlement and
Depository for Securities)
- --------------------------------------------------------------------------------------------------------------------------------
Budapest Stock Exchange Registry Equity
- --------------------------------------------------------------------------------------------------------------------------------
National Bank of Romania Treasury-Bills
- --------------------------------------------------------------------------------------------------------------------------------
Russia MICEX GKO's
(Moscow Interbank Currency Exchange) (Gosudarstvennye Kratkosrochnye Obyazatelstva
[T-Bills])
OFZ's
(Obligatsyi Federalnogo Zaima [Federal Loan Bonds])s
- --------------------------------------------------------------------------------------------------------------------------------
Singapore CDP Equity + Corporate Debt and Malaysian equities
(Central Depository Pte. Ltd.) traded on CLOB
- --------------------------------------------------------------------------------------------------------------------------------
Monetary Authority of Singapore Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Slovak Republic SCP Equity + Government Debt
(Stredisko Cennych Papiru)
- --------------------------------------------------------------------------------------------------------------------------------
National Bank of Slovakia Treasury-Bills
- --------------------------------------------------------------------------------------------------------------------------------
So. Africa CD Corporate + Government Debt
(Central Depository)
- --------------------------------------------------------------------------------------------------------------------------------
So. Korea KSD Equity, Corporate + Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Spain SCLV Equity + Corporate Debt.
(Servicio de Compensacion y Liquidacion de
Valores)
- --------------------------------------------------------------------------------------------------------------------------------
CBEO Government Debt
(Central Book Entry Office)
- --------------------------------------------------------------------------------------------------------------------------------
Sri Lanka CDS Equity
(Central Depository System (Private) Ltd.)
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Sweden VPC Equity, Corporate + Government Debt
(Vardepapperscentralen AB)
- --------------------------------------------------------------------------------------------------------------------------------
Switzerland SEGA Equity, Corporate + Government Debt
(Schweizerische Effekten-Giro AG)
- --------------------------------------------------------------------------------------------------------------------------------
Taiwan TSCD Equity + Government Debt
(Taiwan Securities Central Depository Co.,
Ltd.)
- --------------------------------------------------------------------------------------------------------------------------------
Thailand TSDC Equity, Corporate + Government Debt
(Thailand Securities Depository Company Ltd.)
- --------------------------------------------------------------------------------------------------------------------------------
Tunisia STICODEVAM Equity
(Societe Tunisienne Interprofessionnelle pour
la Compensation et le Depot des Valeurs
Mobilieres)
- --------------------------------------------------------------------------------------------------------------------------------
Ministry of Finance Government Debt tradable on the stock exchange
(BTNBs)
- --------------------------------------------------------------------------------------------------------------------------------
Central Bank of Tunisia Government Debt not tradable on the stock exchange
(BTCs)
- --------------------------------------------------------------------------------------------------------------------------------
Turkey Takas Bank Equity + Corporate Debt
- --------------------------------------------------------------------------------------------------------------------------------
Central Bank of Turkey Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
United Kingdom CREST Equity + Corp. Debt
- --------------------------------------------------------------------------------------------------------------------------------
CMO Sterling CDs & CP
(Central Moneymarket Office)
- --------------------------------------------------------------------------------------------------------------------------------
CGO Gilts
(Central Gilts Office)
- --------------------------------------------------------------------------------------------------------------------------------
United States DTC Equity + Corporate Debt
(Depository Trust Company)
- --------------------------------------------------------------------------------------------------------------------------------
PTC Mortgage Back Debt
(Participants Trust Company)
- --------------------------------------------------------------------------------------------------------------------------------
Fed Book-Entry Government Debt.
- --------------------------------------------------------------------------------------------------------------------------------
Zambia LuSE Equity + Government Debt
(LuSE Central Shares Depository Ltd.)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
Appendix 1-B
Information Regarding Country Risk
1. To aid Customer's board in its determinations regarding Country
Risk, Bank shall furnish board annually and upon the initial placing of Assets
into a country the following information (check items applicable):
A Opinions of local counsel concerning:
___ i. Whether applicable foreign law would restrict the access
afforded Customer's independent public accountants to books
and records kept by an eligible foreign custodian located in
that country.
___ ii. Whether applicable foreign law would restrict the
Customer's ability to recover its assets in the event of the
bankruptcy of an Eligible Foreign Custodian located in that
country.
___ iii. Whether applicable foreign law would restrict the
Customer's ability to recover assets that are lost while under
the control of an Eligible Foreign Custodian located in the
country.
B. Written information concerning:
___ i. The likelihood of expropriation, nationalization, freezes, or
confiscation of Customer's assets.
___ ii. Whether difficulties in converting Customer's cash and cash
equivalents to U.S. dollars are reasonably foreseeable.]
C. A market report with respect to the following topics:
5
<PAGE>
(i) securities regulatory environment, (ii) foreign ownership
restrictions, (iii) foreign exchange, (iv) securities settlement and
registration, (v) taxation, and (vi) compulsory depositories (including
depository evaluation).
2. To aid Customer's board in monitoring Country Risk, Bank shall
furnish board the following additional information:
Market flashes, including with respect to changes in the information in
market reports.
6
<PAGE>
EX-99.B9BI
EXHIBIT 24(b)(9)(b)(i)
AMENDMENT NO. 4A
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)
- --------------------
*Except as otherwise noted, all Portfolios included on this Schedule
A are Existing Portfolios for purposes of the compensation described on
Schedule B to that Fund Accounting Agreement between Delaware Service Company,
Inc. and the Delaware Group of Funds dated as of August 19, 1996
("Agreement"). All portfolios added to this Schedule A by amendment executed
by a Company on behalf of such Portfolio hereof shall be a New Portfolio for
purposes of Schedule B to the Agreement.
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Decatur Total Return Series
Delaware Series
Delchester Series
DelCap Series
Global Bond Series (New)
International Equity Series
Trend Series
Value Series
2
<PAGE>
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Trend Fund, Inc.
DMC Tax-Free Income Trust - Pennsylvania (doing business as Tax-Free
Pennsylvania Fund)
Dated as of: April 14, 1997
3
<PAGE>
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
------------------------------
David K. Downes
President, Chief Executive
Officer and Chief
Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
By: /s/ Wayne A. Stork
-----------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
By: /s/ Wayne A. Stork
----------------------------
Wayne A. Stork
President and
Chief Executive Officer
4
<PAGE>
EX-99.B9BII
EXHIBIT 24(b)(9)(b)(ii)
AMENDMENT NO. 5
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule
A are Existing Portfolios for purposes of the compensation described on
Schedule B to that Fund Accounting Agreement between Delaware Service Company,
Inc. and the Delaware Group of Funds dated as of August 19, 1996
("Agreement"). All portfolios added to this Schedule A by amendment executed
by a Company on behalf of such Portfolio hereof shall be a New Portfolio for
purposes of Schedule B to the Agreement.
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series
2
<PAGE>
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Trend Fund, Inc.
DMC Tax-Free Income Trust-Pennsylvania (doing business as Tax-Free
Pennsylvania Fund)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
Dated as of May 1, 1997
4
<PAGE>
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
-----------------------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED -TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/ Wayne A. Stork
------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
5
<PAGE>
EX-99.B9BIII
EXHIBIT 24(b)(9)(b)(iii)
AMENDMENT NO. 6
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule
A are Existing Portfolios for purposes of the compensation described on
Schedule B to that Fund Accounting Agreement between Delaware Service Company,
Inc. and the Delaware Group of Funds dated as of August 19, 1996
("Agreement"). All portfolios added to this Schedule A by amendment executed
by a Company on behalf of such Portfolio hereof shall be a New Portfolio for
purposes of Schedule B to the Agreement.
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series
Delaware Group State Tax-Free Income Trust
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Tax-Free Pennsylvania Fund
Delaware Group Tax-Free Fund, Inc.
2
<PAGE>
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Trend Fund, Inc.
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
Dated as of July 21, 1997
4
<PAGE>
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
------------------------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED -TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/ Wayne A. Stork
-----------------------------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
5
<PAGE>
EX-99.B19B
EXHIBIT 24(b)(19)(b)
POWER OF ATTORNEY
The undersigned, a member of the Boards of Directors/Trustees of the
Delaware Group Funds listed on Exhibit A to this Power of Attorney, hereby
constitutes and appoints Wayne A. Stork, W. Thacher Longstreth and Walter P.
Babich and any one of them acting singly, his true and lawful
attorneys-in-fact, in his name, place, and stead, to execute and cause to be
filed with the Securities and Exchange Commission and other federal or state
government agency or body, such registration statements, and any and all
amendments thereto as either of such designees may deem to be appropriate
under the Securities Act of 1933, as amended, the Investment Company Act of
1940, as amended, and all other applicable federal and state securities laws.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
this 1st day of May, 1997.
/s/Thomas F. Madison
- -------------------------
Thomas F. Madison
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE GROUP FUNDS
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
VOYAGEUR TAX FREE FUNDS, INC.
VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC.
VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC.
VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC.
<PAGE>
POWER OF ATTORNEY
The undersigned, a member of the Boards of Directors/Trustees of the
Delaware Group Funds listed on Exhibit A to this Power of Attorney, hereby
constitutes and appoints Wayne A. Stork, W. Thacher Longstreth and Walter P.
Babich and any one of them acting singly, his true and lawful
attorneys-in-fact, in his name, place, and stead, to execute and cause to be
filed with the Securities and Exchange Commission and other federal or state
government agency or body, such registration statements, and any and all
amendments thereto as either of such designees may deem to be appropriate
under the Securities Act of 1933, as amended, the Investment Company Act of
1940, as amended, and all other applicable federal and state securities laws.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
this 1st day of May, 1997.
/s/Jeffrey J. Nick
- -----------------------
Jeffrey J. Nick
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE GROUP FUNDS
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
VOYAGEUR TAX FREE FUNDS, INC.
VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC.
VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC.
VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC.
