<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. 7 /X/
-----
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 9
-----
DELAWARE GROUP ADVISER FUNDS, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 255-2923
--------------
George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Public Offering: February 28, 1997
-----------------
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b)
__X__ on February 28, 1997 pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ on (date) pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on (date) pursuant to paragraph (a)(2) of Rule 485
Registrant has registered an indefinite amount of securities
under the Securities Act of 1933 pursuant to Section 24(f)
of the Investment Company Act of 1940. Registrant's 24f-2 Notice
for its most recent fiscal year was filed on December 30, 1996.
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser Funds, Inc.
--- C O N T E N T S ---
This Post-Effective Amendment No. 7 to Registration File No. 33-67490 includes
the following:
1. Facing Page
2. Contents Page
3. Cross-Reference Sheet
4. Part A - Prospectuses
5. Part B - Statement of Additional Information
6. Part C - Other Information
7. Signatures
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser Funds, Inc.
CROSS-REFERENCE SHEET*
PART A
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
- -------- ----------- ------------
A Classes/ Institutional
B Classes/ Classes
C 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;
Other Other
Shareholder Shareholder
Matters; Implementation Matters;
of Investment Objective Implemen-
and Policies tation of
Investment
Objective and
Policies
5 Management of the Fund......................................... Management of Management of
the Funds the Funds
6 Capital Stock and Other Securities ............................ Delaware Dividends,
Difference; Distributions
Dividends, and Taxes;
Distributions Other
and Taxes; Shareholder
Other Matters
Shareholder
Matters
7 Purchase of Securities Being Offered........................... Cover; Cover;
How to Buy How to Buy
Shares; Shares;
Calculation of Calculation of
Offering Price Net Asset
and Net Asset Value Per
Value Per Share; Management
Share; Management of the Funds
of the Funds
8 Redemption or Repurchase....................................... How to Buy How to Buy
Shares; Shares;
Redemption and Redemption and
Exchange Exchange
9 Legal Proceedings.............................................. None None
</TABLE>
* This filing relates to the Class A Shares, Class B Shares and Class C
Shares of the Enterprise Fund, the U.S. Growth Fund, the World Growth
Fund, the New Pacific Fund, the Federal Bond Fund and the Corporate Income
Fund, which are described in one prospectus. This filing also relates to
the Institutional Class of each Fund, which is described in another
prospectus. The six Funds (and 24 classes) have a common Part B and Part
C.
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser Funds, Inc.
CROSS-REFERENCE SHEET
PART B
<TABLE>
<CAPTION>
Location in Statement
Item No. Description of Additional Information
- -------- ----------- -------------------------
<S> <C> <C>
10 Cover Page..................................................... Cover
11 Table of Contents.............................................. Table of Contents
12 General Information and History................................ General Information
13 Investment Objectives and Policies............................. Investment Objective and
Policies; Investment Restrictions
14 Management of the Registrant................................... 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; Management;
General Information;
Financial Statements
17 Brokerage Allocation........................................... Trading Practices and Brokerage
18 Capital Stock and Other Securities............................. Capitalization and
Noncumulative Voting
(under General Information)
19 Purchase, Redemption and Pricing of Securities
Being Offered................................................. Purchasing Shares;
Determining Offering Price
and Net Asset Value;
Redemption and Repurchase,
Exchange Privilege
20 Tax Status..................................................... Dividends, Distributions and Taxes
21 Underwriters .................................................. Purchasing Shares
22 Calculation of Performance Data................................ Performance Information
23 Financial Statements........................................... Financial Statements
</TABLE>
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser Funds, Inc.
CROSS-REFERENCE SHEET
PART C
<TABLE>
<CAPTION>
Location in
Part C
------
<S> <C> <C>
24 Financial Statements and Exhibits..................... Item 24
25 Persons Controlled by or under Common
Control with Registrant............................... Item 25
26 Number of Holders of Securities....................... Item 26
27 Indemnification....................................... Item 27
28 Business and Other Connections of Investment Adviser.. Item 28
29 Principal Underwriters................................ Item 29
30 Location of Accounts and Records...................... Item 30
31 Management Services................................... Item 31
32 Undertakings.......................................... Item 32
</TABLE>
<PAGE>
The Delaware Group includes funds with a
wide range of investment objectives. Stock funds,
income funds, tax-free funds, money market funds,
global and international funds and closed-end
equity funds give investors the ability to create a
portfolio that fits their personal financial goals. For
more information, contact your financial adviser or
call Delaware Group at 800-523-4640.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P.
Eleven Penn Center Plaza
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
- ---------------------------------------------------------
DELAWARE GROUP ADVISER
FUNDS, INC.
ENTERPRISE FUND
U.S. GROWTH FUND
WORLD GROWTH FUND
NEW PACIFIC FUND
FEDERAL BOND FUND
CORPORATE INCOME FUND
- ---------------------------------------------------------
A CLASSES
- ---------------------------------------------------------
B CLASSES
- ---------------------------------------------------------
C CLASSES
- ---------------------------------------------------------
P R O S P E C T U S
- ---------------------------------------------------------
FEBRUARY 28, 1997
DELAWARE
GROUP
-------
<PAGE>
TABLE OF CONTENTS
Cover Page
Synopsis
Summary of Expenses
Financial Highlights
Investment Objectives and Strategies
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
The Delaware Difference
Plans and Services
Retirement Planning
Classes of Shares
How to Buy Shares
Redemption and Exchange
Dividends, Distributions and Taxes
Calculation of Offering Price and Net Asset Value Per Share
Management of the Funds
Implementation of Investment Objectives and Policies
Appendix A - Investment Illustrations
Appendix B - Classes Offered
Appendix C - Description of Security Ratings
-1-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC. PROSPECTUS
FEBRUARY 28, 1997
A CLASS SHARES
B CLASS SHARES
C CLASS SHARES
--------------------------------------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance: Nationwide 800-523-4640
Information on Existing Accounts: (SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Representatives of Financial Institutions
Nationwide 800-659-2259
Delaware Group Adviser Funds, Inc. ("Adviser Funds, Inc.") (formerly,
Lincoln Advisor Funds, Inc.) is an open-end management investment company.
Adviser Funds, Inc. currently issues six separate series of shares (each
referred to as a "Fund" or collectively as the "Funds") each representing a
separate, diversified portfolio of securities. The Funds are the Enterprise
Fund, U.S. Growth Fund, World Growth Fund, New Pacific Fund, Federal Bond Fund
and Corporate Income Fund. See Restructuring of the Funds under Management of
the Funds. Each Fund has a fundamental investment objective and certain
investment policies which are described in this Prospectus.
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, 1997, as
it may be amended from time to time, contains additional information about the
Funds and has been filed with the Securities and Exchange Commission. Part B is
incorporated by reference into this Prospectus and is available, without charge,
by writing to Delaware Distributors, L.P. at the above address or by calling any
of the above numbers. The Funds' financial statements appear in their Annual
Report, which will accompany any response to requests for Part B.
This Prospectus contains useful information that can help the investor
decide whether a Fund's investment objective matches his/her own. Achievement of
a Fund's investment objective cannot, of course, be assured due to the risk of
capital loss from fluctuating prices inherent in any investment in securities.
Investments in the Funds are neither insured or guaranteed by any entity.
-2-
<PAGE>
Each Fund also offers an Institutional Class, which is available for
purchase only by certain investors. A prospectus for the Funds' Institutional
Classes can be obtained by writing to Delaware Distributors, L.P. at the above
address or by calling the above number.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUNDS ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUNDS ARE NOT BANK
OR CREDIT UNION DEPOSITS.
-3-
<PAGE>
The investment objectives of each Fund are as follows:
Equity Funds Enterprise Fund seeks to provide maximum appreciation
of capital by investing in medium-sized companies which have
a dominant position within their industry, are undervalued,
or have potential for growth in earnings.
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.
World Growth 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.
Fixed-Income Funds Federal Bond Fund seeks to maximize current income
consistent with preservation of capital. The Fund attempts to
achieve this objective by investing primarily in securities
issued by the U.S. government, its agencies and
instrumentalities.
Corporate Income Fund seeks to provide high current income
consistent with preservation of capital. The Fund attempts to
achieve this objective primarily by investing in a
diversified portfolio of investment grade fixed-income
securities issued by U.S. corporations. Investment grade
fixed-income securities are those rated at least Baa by
Moody's Investors Service, Inc. or BBB by Standard & Poor's
Ratings Group or, if not rated, are of comparable quality in
the opinion of the manager or sub-adviser.
-4-
<PAGE>
SYNOPSIS
The following synopsis is qualified in its entirety by the more
detailed information appearing in the body of the Prospectus.
Investment Objectives and Policies
Each Fund's investment objective is stated on the page 1 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. World Growth Fund and New Pacific Fund may invest substantially all
of their assets in non-United States issuers. U.S. Growth Fund, Enterprise Fund
and Corporate Income Fund may invest, respectively, 20%, 15% and 10% of their
assets in such issuers. Investing in securities of non-United States companies
which are generally denominated in foreign currencies and the utilization of
forward foreign currency exchange contracts 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 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. The Corporate Income Fund may invest up to 35% of its assets and the
U.S. Growth Fund may invest up to 10% of its assets in non-investment grade
fixed-income securities ("junk bonds"). Consequently, greater risks may be
involved with an investment in these Funds. See Lower-Rated Securities under
Risk Factors and Special Considerations.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") is the investment
manager for each Fund. See Restructuring of the Funds under Management of the
Funds. The Manager 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
-5-
<PAGE>
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.
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 Enterprise Fund and U.S. Growth Fund; Walter Scott & Partners
Limited for World Growth Fund; John Govett & Company Limited for New Pacific
Fund; and Lincoln Investment Management, Inc. for Corporate Income Fund and
Federal Bond 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 the Class A Shares as of the end of Adviser Funds, Inc.'s most
recent fiscal year, is equivalent to:
Fund Percentage of Amount Invested
----- -------------------------------
Enterprise Fund 5.00%
U.S. Growth Fund 4.99%
World Growth Fund 5.00%
New Pacific Fund 4.99%
Federal Bond Fund 5.00%
Corporate Income Fund 4.99%
The sales charge is reduced on certain transactions of at least
$100,000 but under $1,000,000. For purchases of $1,000,000 or more, the
front-end sales charge is eliminated. Class A Shares are subject to annual 12b-1
Plan expenses 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 contingent deferred sales charge
("CDSC") of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3%
if shares are redeemed during the third or fourth year following purchase; (iii)
2% if shares are redeemed during the fifth year following purchase; and (iv) 1%
if shares are redeemed during the sixth year following purchase. Class B Shares
are subject to annual 12b-1 Plan expenses for approximately eight years after
purchase. See Deferred Sales Charge Alternative - Class B Shares and Automatic
Conversion of Class B Shares under Classes of Shares.
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.
-6-
<PAGE>
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 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 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.
-7-
<PAGE>
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to each Fund's Class A, Class B and Class C Shares follows:
EQUITY FUNDS
<TABLE>
<CAPTION>
Enterprise U.S. Growth
Class A Class B Class C Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares Shares Shares Shares
- --------------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price).......................... 4.75% None None 4.75% None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as
a percentage of offering price)............. None None None None None None
Maximum Contingent Deferred
Sales Charge (as a percentage
of original purchase price or
redemption proceeds, whichever
is lower)................................... None* 4.00%* 1.00%* None* 4.00%* 1.00%*
Redemption Fees............................. None** None** None** None** None** None**
World Growth New Pacific
Class A Class B Class C Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares Shares Shares Shares
- --------------------------------- -------- -------- -------- -------- -------- --------
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price).......................... 4.75% None None 4.75% None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as
a percentage of offering price)............. None None None None None None
Maximum Contingent Deferred
Sales Charge (as a percentage
of original purchase price or
redemption proceeds, whichever
is lower)................................... None* 4.00%* 1.00%* None* 4.00%* 1.00%*
Redemption Fees............................. None** None** None** None** None** None**
</TABLE>
<PAGE>
FIXED-INCOME FUNDS
<TABLE>
<CAPTION>
Federal Bond Corporate Income
Class A Class B Class C Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares Shares Shares Shares
- -------------------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price)................. 4.75% None None 4.75% None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as
a percentage of offering price).... None None None None None None
Maximum Contingent Deferred
Sales Charge (as a percentage
of original purchase price or
redemption proceeds, whichever
is lower).......................... None* 4.00%* 1.00%* None* 4.00%* 1.00%*
Redemption Fees.................... None** None** None** None** None** None**
</TABLE>
- ------------------------
* Class A purchases of $1 million or more may be made at net asset value.
However, if in connection with any such purchase 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"). Class B Shares are subject to a CDSC of: (i) 4%
if shares are redeemed within two years of purchase; (ii) 3% if shares are
redeemed during the third or fourth year following purchase; (iii) 2% if
shares are redeemed during the fifth year following purchase; (iv) 1% if
shares are redeemed during the sixth year following purchase; and (v) 0%
thereafter. Class C Shares are subject to a CDSC of 1% if the shares are
redeemed within 12 months of purchase. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value
under Redemption and Exchange; Deferred Sales Charge Alternative - Class B
Shares and Level Sales Charge Alternative - Class C Shares under Classes of
Shares.
** CoreStates Bank, N.A. currently charges $7.50 per redemption for
redemptions payable by wire.
-8-
<PAGE>
Annual Operating Expenses (as percentage of daily net assets)
The purpose of the following 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.
EQUITY FUNDS
<TABLE>
<CAPTION>
Annual Operating Expenses
(as a percentage of average daily Enterprise U.S. Growth
net assets after fee waivers and Class A Class B Class C Class A Class B Class C
expense reimbursements) Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Management Fees
(after voluntary waiver)+.............. 0.72% 0.72% 0.72% 0.62% 0.62% 0.62%
12b-1 Expenses......................... 0.30%*/** 1.00%* 1.00%* 0.30%*/** 1.00%* 1.00%*
Other Operating Expenses
(after giving effect to voluntary
waiver reimbursements)+.............. 0.78% 0.78% 0.78% 0.86% 0.86% 0.86%
----- ----- ----- ----- ----- -----
Total Operating Expenses
(after giving effect to voluntary
waiver reimbursements)............ 1.80% 2.50% 2.50% 1.78% 2.48% 2.48%
===== ===== ===== ===== ===== =====
Annual Operating Expenses
(as a percentage of average daily World Growth New Pacific
net assets after fee waivers and Class A Class B Class C Class A Class B Class C
expense reimbursements) Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------
Management Fees
(after voluntary waiver)+.............. 0.34% 0.34% 0.34% 0.00%++ 0.00%++ 0.00%++
12b-1 Expenses......................... 0.30%*/** 1.00%* 1.00%* 0.30%*/** 1.00%* 1.00%*
Other Operating Expenses
(after giving effect to voluntary
waiver reimbursements)+.............. 1.16% 1.16% 1.16% 1.50% 1.50% 1.50%
----- ----- ----- ----- ----- -----
Total Operating Expenses
(after giving effect to voluntary
waiver reimbursements)............ 1.80% 2.50% 2.50% 1.80% 2.50% 2.50%
===== ===== ===== ===== ===== =====
<PAGE>
</TABLE>
FIXED-INCOME FUNDS
<TABLE>
<CAPTION>
Annual Operating Expenses
(as a percentage of average daily Federal Bond Corporate Income
net assets after fee waivers and Class A Class B Class C Class A Class B Class C
expense reimbursement Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Management Fees
(after voluntary waiver)+.............. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
12b-1 Expenses......................... 0.30%*/** 1.00%* 1.00%* 0.30%*/** 1.00%* 1.00%*
Other Operating Expenses
(after giving effect to voluntary
waiver reimbursements)+.............. 0.90% 0.90% 0.90% 0.90% 0.90% 0.90%
----- ----- ----- ----- ----- -----
Total Operating Expenses
(after giving effect to voluntary
waiver reimbursements)............ 1.20% 1.90% 1.90% 1.20% 1.90% 1.90%
===== ===== ===== ===== ===== =====
</TABLE>
- ------------------------
For expense information about the Institutional Classes, see the separate
Prospectus relating to those classes.
+ With the exception of U.S. Growth Fund, the Manager elected voluntarily to
waive that portion, if any, of the annual Management Fees payable by a
particular Fund and to reimburse a Fund for its expenses to the extent
necessary to ensure that the expenses of that Fund (exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, but inclusive
of 12b-1 Plan expenses) do not exceed, as a percentage of average net
assets, on an annualized basis, the amounts noted above corresponding to
the caption "Total Operating Expenses" through April 30, 1997. For U.S.
Growth Fund, the Manger elected to waive such expenses to the extent that
"Total Operating Expenses" do not exceed 1.50% (exclusive of taxes,
interest, brokerage commissions, extraordinary expenses and 12b-1 Plan
expenses) through April 30, 1997. 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>
Enterprise Fund 1.88% 2.58% 2.58% 0.80% 0.80% 0.80%
U.S. Growth Fund 1.88% 2.56% 2.56% 0.70% 0.70% 0.70%
World Growth Fund 2.58% 3.28% 3.28% 1.10% 1.10% 1.10%
New Pacific Fund 2.75% 3.45% 3.45% 0.80% 0.80% 0.80%
Federal Bond Fund 1.88% 2.58% 2.58% 0.30% 0.30% 0.30%
Corporate Income Fund 1.62% 2.32% 2.32% 0.30% 0.30% 0.30%
</TABLE>
++ 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.
* Class A Shares, Class B Shares and Class C Shares of each Fund are subject
to separate 12b-1 Plans. Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges permitted by
rules of the National Association of Securities Dealers, Inc. (the "NASD").
See Distribution (12b-1) and Service under Management of the Funds.
** Prior to May 6, 1996, 12b-1 Plan expenses for the 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.
-9-
<PAGE>
Unless waived, investors utilizing the Delaware Group Asset Planner
asset allocation service will incur an annual maintenance fee of $35 per
strategy. Investors who utilize the Asset Planner for an Individual Retirement
Account ("IRA") will pay an annual maintenance fee of $15 per Social Security
number. See Delaware Group Asset Planner under How to Buy Shares.
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>
Enterprise Fund
Class A $65(1) $101 $140 $249 $65 $101 $140 $249
Class B $65 $108 $153 $266(2) $25 $78 $133 $266(2)
Class C $35 $78 $133 $284 $25 $78 $133 $284
U.S. Growth Fund
Class A $65(1) $101 $140 $249 $65 $101 $140 $249
Class B $65 $108 $153 $266(2) $25 $78 $133 $266(2)
Class C $35 $78 $133 $284 $25 $78 $133 $284
World Growth Fund
Class A $65(1) $101 $140 $249 $65 $101 $140 $249
Class B $65 $108 $153 $266(2) $25 $78 $133 $266(2)
Class C $35 $78 $133 $284 $25 $78 $133 $284
New Pacific Fund
Class A $65(1) $101 $140 $249 $65 $101 $140 $249
Class B $65 $108 $153 $266(2) $25 $78 $133 $266(2)
Class C $35 $78 $133 $284 $25 $78 $133 $284
Federal Bond Fund
Class A $59(1) $84 $110 $186 $59 $84 $110 $186
Class B $59 $90 $123 $204(2) $19 $60 $103 $204(2)
Class C $29 $60 $103 $222 $19 $60 $103 $222
Corporate Income Fund
Class A $59(1) $84 $110 $186 $59 $84 $110 $186
Class B $59 $90 $123 $204(2) $19 $60 $103 $204(2)
Class C $29 $60 $103 $222 $19 $60 $103 $222
</TABLE>
(1) Generally, no redemption charge is assessed upon redemption of Class A
Shares. Under certain circumstances, however, a Limited CDSC, which has
not been reflected in this calculation, may be imposed on certain
redemptions within 12 months of purchase. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
(2) At the end of approximately eight years after purchase, Class B Shares
will be automatically converted into Class A Shares. The example above
assumes conversion of Class B Shares at the end of the eighth year.
However, the conversion may occur as late as three months after the
eighth anniversary of purchase, during which time the higher 12b-1 Plan
fees payable by Class B Shares will continue to be assessed.
Information for the ninth and tenth years reflects expenses of the
Class A Shares. See Automatic Conversion of Class B Shares under
Classes of Shares for a description of the automatic conversion
feature.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
-10-
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Group Adviser Funds, Inc. and have been audited by Coopers & Lybrand
L.L.P., independent auditors. The data should be read in conjunction with the
financial statements, related notes, and the reports of Coopers & Lybrand L.L.P.
covering such financial information and highlights, all of which are
incorporated by reference into Part B. Further information about the Funds'
performance is contained in their Annual Report to shareholders. A copy of the
Funds' Annual Report (including the report of Coopers & Lybrand L.L.P. ) may be
obtained from Adviser Funds, Inc. upon request at no charge.
- --------------------------------------------------------------------------------
-11-
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
----------------------------------------------------------------------------
Class A Shares Class B Shares
Enterprise Fund Enterprise Fund
Period Period
12/3/93(1) 4/14/94(1)
Year Ended through Year Ended through
10/31/96(2) 0/31/95 10/31/94 10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............... $11.28 $ 9.20 $10.00 $11.96 $ 9.81 $10.00
Income From Investment Operations:
Net Investment Income (Loss).................. (0.16) (0.08) (0.08) (0.26) (0.12) (0.04)
Net Realized and Unrealized Gain (Loss)
From Security Transactions.............. 2.47 2.16 (0.71) 2.64 2.27 (0.15)
------- ------- ------- -------- ------ --------
Net Increase (Decrease) in Net Assets
From Investment Operations.............. 2.31 2.08 (0.79) 2.38 2.15 (0.19)
------- ------- ------- -------- ------ --------
Less Dividends and Distributions:
Dividends From Net Investment Income......... none none (0.01) none none none
Distributions From Net Realized Gain
on Security Transactions................ none none none none none none
Returns of Capital........................... none none none none none none
------- ------- ------- -------- ------- ---------
Total Dividends and Distributions............ none none (0.01) none none none
------- ------- ------- -------- ------- ---------
Net Asset Value, End of Period..................... $13.59 $11.28 $ 9.20 $14.34 $11.96 $ 9.81
======= ======= ======= ======== ======= =========
Total Return(3).................................... 20.37% 22.72% (7.91%) 19.90% 21.92% (1.91%)
- --------------------------------
Ratios and Supplemental Data:
Net Assets, End of Period (000's omitted)..... $18,826 $14,508 $10,579 2,365 $1,811 $ 761
Ratio of Expenses to Average Net Assets...... 1.82% 1.85% 1.85% 2.50% 2.50% 2.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation............. 1.90% 2.42% 3.10% 2.58% 3.07% 3.76%
Ratio of Net Investment Loss to Average
Net Assets.............................. (1.26%) (0.83%) (1.01%) (1.94%) (1.50%) (1.53%)
Ratio of Net Investment Loss to Average
Net Assets Prior to Expense Limitation.. (1.34%) (1.40%) (2.26%) (2.02%) (2.07%) (2.79%)
Portfolio Turnover Rate...................... 92% 106% 120% 92% 106% 120%
Average Commission Rate Paid................. $0.0505 N/A N/A $0.0505 N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
----------------------------------------------------------------------------
Class C Shares
Enterprise Fund
Period
5/10/94(1)
Year Ended through
10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C>
Net Asset Value, Beginning of Period............... $12.21 $10.02 $10.00
Income From Investment Operations:
Net Investment Income (Loss).................. (0.25) (0.15) (0.05)
Net Realized and Unrealized Gain (Loss)
From Security Transactions.............. 2.65 2.34 0.07
----- ----- -----
Net Increase (Decrease) in Net Assets
From Investment Operations.............. 2.40 2.19 0.02
----- ----- -----
Less Dividends and Distributions:
Dividends From Net Investment Income......... none none none
Distributions From Net Realized Gain
on Security Transactions................ none none none
Returns of Capital........................... none none none
----- ----- -----
Total Dividends and Distributions............ none none none
----- ----- -----
Net Asset Value, End of Period..................... $14.61 $12.21 $10.02
===== ===== =====
- ----------------------------
Total Return(3).................................... 19.57% 21.86% 0.23%
- ------------
- ---------------------------------------------------------------
Ratios and Supplemental Data:
Net Assets, End of Period (000's omitted)..... $ 70 $ 58 $ 37
Ratio of Expenses to Average Net Assets...... 2.50% 2.50% 2.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation............. 2.58% 3.07% 3.75%
Ratio of Net Investment Loss to
Average Net Assets...................... (1.94%) (1.49%) (1.53%)
Ratio of Net Investment Loss to Average
Net Assets Prior to Expense Limitation.. (2.02%) (2.06%) (2.78%)
Portfolio Turnover Rate...................... 92% 106% 120%
Average Commission Rate Paid................. $0.0505 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) 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
U.S. Growth Fund U.S. Growth Fund
Period Period
12/3/93(1) 3/29/94(1)
Year Ended through Year Ended through
10/31/96(2) 0/31/95 10/31/94 10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $12.43 $10.21 $10.00 $12.33 $10.19 $10.00
Income From Investment Operations:
Net Investment Income (Loss)................. (0.09) (0.09) (0.04) (0.17) (0.14) (0.03)
Net Realized and Unrealized Gain (Loss)
From Security Transactions............. 1.48 2.31 0.26 1.45 2.28 0.22
------- ------- ------- -------- ------ --------
Net Increase (Decrease) in Net Asset
From Investment Operations............. 1.39 2.22 0.22 1.28 2.14 0.19
------- ------- ------- -------- ------- -------
Less Dividends and Distributions:
Dividends From Net Investment Income......... none none (0.01) none none none
Distributions From Net Realized Gain
on Security Transactions............... none none none none none none
Returns of Capital........................... none none none none none none
------- ------- ------- ------- ------- -------
Total Dividends and Distributions............ none none (0.01) none none none
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period.................... $13.82 $12.43 $10.21 $13.61 $12.33 $10.19
======= ======= ======= ======== ======= =========
Total Return(3)................................... 11.18% 21.74% 2.18% 10.38% 21.00% 1.90%
- ---------------------------------------------------------------
Ratios and /Supplemental Data:
Net Assets, End of Period (000's omitted).... $16,118 $13,574 $10,669 $ 809 $ 567 $ 204
Ratio of Expenses to Average Net Assets...... 1.80% 1.85% 1.85% 2.48% 2.50% 2.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation............ 1.88% 2.18% 2.94% 2.56% 2.83% 3.60%
Ratio of Investment Loss to Average Net Assets (0.77%) (0.88%) (0.51%) (1.45%) (1.57%) (1.26%)
Ratio of Investment Loss to Average
Net Assets Prior to Expense Limitation. (0.85%) (1.21%) (1.60%) (1.53%) (1.90%) (2.36%)
Portfolio Turnover Rate...................... 131% 58% 66% 131% 58% 66%
Average Commission Rate Paid................. $0.0519 N/A N/A $0.0519 N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
----------------------------------------------------------------------------
Class C Shares
U.S. Growth Fund
Period
7/7/94(1)
Year Ended through
10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $12.85 $10.62 $10.00
Income From Investment Operations:
Net Investment Income (Loss)................. (0.16) (0.10) (0.03)
Net Realized and Unrealized Gain (Loss)
From Security Transactions............. 1.49 2.33 0.65
---- ---- ----
Net Increase (Decrease) in Net Asset
From Investment Operations............. 1.33 2.23 0.62
---- ---- ----
Less Dividends and Distributions:
Dividends From Net Investment Income......... none none none
Distributions From Net Realized Gain
on Security Transactions............... none none none
Returns of Capital........................... none none none
---- ---- ----
Total Dividends and Distributions............ none none none
---- ---- ----
Net Asset Value, End of Period.................... $14.18 $12.85 $10.62
====== ====== ======
Total Return(3)................................... 10.35% 21.00% 6.17%
- ------------
- ---------------------------------------------------------------
Ratios and /Supplemental Data:
Net Assets, End of Period (000's omitted).... $55 $27 $5
Ratio of Expenses to Average Net Assets...... 2.48% 2.50% 2.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation............ 2.56% 2.82% 3.54%
Ratio of Investment Loss to Average Net Assets (1.45%) (1.61%) (1.09%)
Ratio of Investment Loss to Average
Net Assets Prior to Expense Limitation. (1.53%) (1.93%) (2.13%)
Portfolio Turnover Rate...................... 131% 58% 66%
Average Commission Rate Paid................. $0.0519 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) 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 Summery of
Expenses.
-13-
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
----------------------------------------------------------------------------
Class A Shares Class B Shares
World Growth Fund World Growth Fund
Period Period
12/3/93(1) 3/29/94(1)
Year Ended through Year Ended through
10/31/96(2) 0/31/95 10/31/94 10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $11.40 $11.00 $10.00 $10.71 $10.40 $10.00
Income From Investment Operations:
Net Investment Income (Loss).................. (0.06) 0.01 0.02 (0.06) (0.02) none
Net Realized and Unrealized Gain (Loss)
From Security Transactions.............. 1.07 0.40 1.01 0.93 0.35 0.43
------- ------- ------- -------- ------ --------
Total From Investment Operations.............. 1.01 0.41 1.03 0.87 0.33 0.43
------- ------- ------- -------- ------ --------
Less Dividends and Distributions:
Dividends From Net Investment Income.......... (0.02) (0.01) (0.03) (0.02) (0.02) (0.03)
Distributions From Net Realized Gain
on Security Transactions................ none none none none none none
Returns of Capital............................ none none none none none none
------- ------- ------- -------- ------ --------
Total Dividends and Distributions............. (0.02) (0.01) (0.03) (0.02) (0.02) (0.03)
------- ------- ------- -------- ------ --------
Net Asset Value, End of Period.................... $12.39 $11.40 $11.00 $11.56 $10.71 $10.40
======= ======= ======= ======== ======= =========
Total Return(3)................................... 8.90% 3.81% 10.25% 8.16% 3.19% 4.28%
- ---------------------------------------------------------------
Ratios and Supplemental Data:
Net Assets, End of Period (000's omitted)..... $14,886 $13,018 $11,721 $1,208 $1,183 $523
Ratio of Expenses to Average Net Assets....... 1.82% 1.85% 1.85% 2.50% 2.50% 2.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation.............. 2.60% 2.96% 3.56% 3.28% 3.61% 4.22%
Ratio of Net Investment Income (Loss) to
Average Net Assets....................... (0.51%) 0.00% 0.25% (1.19%) (0.57%) (0.37%)
Ratio of Net Investment Income (Loss) to Average
Net Assets Prior to Expense Limitation... (1.29%) 1.11% 1.96% (1.97%) (1.68%) 2.09%
Portfolio Turnover Rate....................... 21% 9% 6% 21% 9% 6%
Average Commission Rate Paid.................. $0.0448 N/A N/A $0.0448 N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
----------------------------------------------------------------------------
Class C Shares
World Growth Fund
Period
5/10/94(1)
Year Ended through
10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $10.73 $10.43 $10.00
Income From Investment Operations:
Net Investment Income (Loss).................. (0.06) (0.06) 0.01
Net Realized and Unrealized Gain (Loss)
From Security Transactions.............. 0.93 0.39 0.44
---- ---- ----
Total From Investment Operations.............. 0.87 0.33 0.45
---- ---- ----
Less Dividends and Distributions:
Dividends From Net Investment Income.......... (0.02) (0.03) (0.02)
Distributions From Net Realized Gain
on Security Transactions................ none none none
Returns of Capital............................ none none none
---- ---- ----
Total Dividends and Distributions............. (0.02) (0.03) (0.02)
---- ---- ----
Net Asset Value, End of Period.................... $11.58 $10.73 $10.43
====== ====== ======
Total Return(3)................................... 8.15% 3.16% 4.45%
- ------------
- ---------------------------------------------------------------
Ratios and Supplemental Data:
Net Assets, End of Period (000's omitted)..... $112 $43 $38
Ratio of Expenses to Average Net Assets....... 2.50% 2.50% 2.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation.............. 3.28% 3.61% 4.23%
Ratio of Net Investment Income (Loss) to
Average Net Assets....................... (1.19%) (0.62%) 0.16%
Ratio of Net Investment Income (Loss) to Average
Net Assets Prior to Expense Limitation... (1.97%) (1.73%) (1.57%)
Portfolio Turnover Rate....................... 21% 9% 6%
Average Commission Rate Paid.................. $0.0448 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) 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>
<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
10/31/96(2) 0/31/95 10/31/94 10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $8.71 $10.44 $10.00 $9.01 $10.86 $10.00
Income From Investment Operations:
Net Investment Income (Loss)................. (0.05) (0.05) (0.02) (0.05) (0.10) (0.03)
Net Realized and Unrealized Gain (Loss)
on Security Transactions............... 0.77 (1.39) 0.47 0.73 (1.46) 0.89
------- ------- ------- -------- ------ --------
Total From Investment Operations............. 0.72 (1.44) 0.45 0.68 (1.56) 0.86
------- ------- ------- -------- ------ --------
Less Dividends and Distributions:
Dividends From Net Investment Income......... (0.01) none (0.01) (0.01) none none
Distributions From Net Realized Gain
on Security Transactions............... none (0.29) none none (0.29) none
Returns of Capital........................... none none none none none none
------- ------- ------- -------- ------ --------
Total Dividends and Distributions............ (0.01) (0.29) (0.01) (0.01) (0.29) none
------- ------- ------- -------- ------ --------
Net Asset Value, End of Period.................... $9.42 $8.71 $10.44 $9.68 $9.01 $10.86
======= ======= ======= ======== ======= =========
- -------------------------------
Total Return(3)................................... 8.26% (13.99%) 4.53% 7.54% (14.56%) 8.58%
- -----------------------------------------------------
Ratios and Supplemental Data:
Net Assets, End of Period (000's omitted)..... $11,752 $10,353 $11,333 $562 $573 $431
Ratio of Expenses to Average Net Assets....... 1.82% 1.85% 1.85% 2.50% 2.50% 2.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation............. 2.77% 3.73% 3.66% 3.45% 4.38% 4.32%
Ratio of Net Investment Income (Loss) to
Average Net Assets...................... 1.17% (0.60%) (0.21%) 0.49% (1.20%) (0.88%)
Ratio of Net Investment Income (Loss) to Average
Net Assets Prior to Expense Limitation.. 0.22% (2.48%) (2.02%) (0.46%) (3.08%) (2.70%)
Portfolio Turnover Rate....................... 163% 163% 104% 163% 163% 104%
Average Commission Rate Paid.................. $0.0118 N/A N/A $0.0118 N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
----------------------------------------------------------------------------
Class C Shares
New Pacific Fund
Period
7/7/94(1)
Year Ended through
10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $8.83 $10.66 $10.00
Income From Investment Operations:
Net Investment Income (Loss)................. (0.05) (0.08) (0.02)
Net Realized and Unrealized Gain (Loss)
on Security Transactions............... 0.72 (1.46) 0.68
---- ---- ----
Total From Investment Operations............. 0.67 (1.54) 0.66
---- ---- ----
Less Dividends and Distributions:
Dividends From Net Investment Income......... (0.01) none none
Distributions From Net Realized Gain
on Security Transactions............... none (0.29) none
Returns of Capital........................... none none none
---- ---- ----
Total Dividends and Distributions............ (0.01) (0.29) none
---- ---- ----
Net Asset Value, End of Period.................... $9.49 $8.83 $10.66
==== ==== ====
- ----------------------------
Total Return(3)................................... 7.58% (14.57%) 6.55%
- ---------------------------------------------------------------
Ratios and Supplemental Data:
Net Assets, End of Period (000's omitted)..... $44 $17 $12
Ratio of Expenses to Average Net Assets....... 2.50% 2.50% 2.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation............. 3.45% 4.38% 4.31%
Ratio of Net Investment Income (Loss) to
Average Net Assets...................... 0.49% (1.02%) (0.83%)
Ratio of Net Investment Income (Loss) to Average
Net Assets Prior to Expense Limitation.. 0.46% (2.90%) (2.64%)
Portfolio Turnover Rate....................... 163% 163% 104%
Average Commission Rate Paid.................. $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) 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.
-15-
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
----------------------------------------------------------------------------
Class A Shares Class B Shares
Corporate Income Fund Corporate Income Fund
Period Period
12/3/93(1) 5/11/94(1)
Year Ended through Year Ended through
10/31/96(2) 0/31/95 10/31/94 10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $9.76 $8.80 $10.00 $10.45 $9.73 $10.00
Income From Investment Operations:
Net Investment Income (Loss)................. 0.59 0.61 0.51 0.52 0.66 0.29
Net Realized and Unrealized Gain (Loss)
on Security Transactions............... (0.14) 0.91 (1.20) (0.10) 0.91 (0.28)
------- ------- ------- -------- ------ --------
Total From Investment Operations............. 0.45 1.52 (0.69) 0.42 1.57 0.01
------- ------- ------- -------- ------ --------
Less Dividends and Distributions:
Dividends From Net Investment Income......... (0.59) (0.56) (0.51) (0.52) (0.85) (0.28)
Distributions From Net Realized Gain
on Security Transactions............... none none none none none none
Returns of Capital........................... none none none none none none
------- ------- ------- -------- ------ --------
Total Dividends and Distributions............ (0.59) (0.56) (0.51) (0.52) (0.85) (0.28)
------- ------- ------- -------- ------ --------
Net Asset Value, End of Period.................... $9.62 $9.76 $8.80 $10.35 $10.45 $9.73
======= ======= ======= ======== ======= =========
Total Return(3)................................... 4.81% 17.71% (7.06%) 4.16% 17.05% 0.11%
- ---------------------------------------------------------------
Ratios and Supplemental Data:
Net Assets, End of Period (000's omitted).... $12,270 $11,518 $9,620 $196 $362 $222
Ratio of Expenses to Average Net Assets...... 1.23% 1.25% 1.25% 1.90% 1.90% 1.90%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation............ 1.65% 1.87% 2.55% 2.32% 2.52% 3.21%
Ratio of Net Investment Income to
Average Net Assets..................... 6.20% 6.64% 6.04% 5.53% 5.97% 5.94%
Ratio of Net Investment Income to Average
Net Assets Prior to Expense Limitation. 5.78% 6.02% 4.74% 5.11% 5.35% 4.63%
Portfolio Turnover Rate...................... 68% 119% 185% 68% 119% 185%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
----------------------------------------------------------------------------
Class C Shares
Corporate Income Fund
Period
9/14/94(1)
Year Ended through
10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $10.44 $9.80 $10.00
Income From Investment Operations:
Net Investment Income (Loss)................. 0.52 0.18 0.08
Net Realized and Unrealized Gain (Loss)
on Security Transactions............... (0.11) 1.33 (0.19)
---- ---- ----
Total From Investment Operations............. 0.41 1.51 (0.11)
---- ---- ----
Less Dividends and Distributions:
Dividends From Net Investment Income......... (0.52) (0.87) (0.09)
Distributions From Net Realized Gain
on Security Transactions............... none none none
Returns of Capital........................... none none none
---- ---- ----
Total Dividends and Distributions............ (0.52) (0.87) (0.09)
---- ---- ----
Net Asset Value, End of Period.................... $10.33 $10.44 $9.80
==== ==== ====
- ---------------------------
Total Return(3)................................... 4.06% 16.23% (1.00%)
- ---------------------------------------------------------------
Ratios and Supplemental Data:
Net Assets, End of Period (000's omitted).... $71 $5 $9
Ratio of Expenses to Average Net Assets...... 1.90% 1.90% 1.85%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation............ 2.32% 2.52% 3.17%
Ratio of Net Investment Income to
Average Net Assets..................... 5.53% 5.75% 5.91%
Ratio of Net Investment Income to Average
Net Assets Prior to Expense Limitation. 5.11% 5.13% 4.59%
Portfolio Turnover Rate...................... 68% 119% 185%
</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) 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.
-16-
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
----------------------------------------------------------------------------
Class A Shares Class B Shares
Federal Bond Fund Federal Bond Fund
Period Period
12/3/93(1) 7/27/94(1)
Year Ended through Year Ended through
10/31/96(2) 0/31/95 10/31/94 10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $9.80 $9.15 $10.00 $10.25 $9.78 $10.00
Income From Investment Operations:
Net Investment Income (Loss)................. 0.52 0.57 0.38 0.45 0.57 0.12
Net Realized and Unrealized Gain (Loss)
on Security Transactions............... (0.20) 0.65 (0.86) (0.18) 0.65 (0.23)
------- ------- ------- -------- ------ --------
Total From Investment Operations............. 0.32 1.22 (0.48) 0.27 1.22 (0.11)
------- ------- ------- -------- ------ --------
Less Dividends and Distributions:
Dividends From Net Investment Income......... (0.52) (0.57) (0.37) (0.45) (0.75) (0.11)
Distributions From Net Realized Gain
on Security Transactions............... none none none none none none
Returns of Capital........................... none none none none none none
------- ------- ------- -------- ------ --------
Total Dividends and Distributions............ (0.52) (0.57) (0.37) (0.45) (0.75) (0.11)
------- ------- ------- -------- ------ --------
Net Asset Value, End of Period.................... $9.60 $9.80 $9.15 $10.07 $10.25 $9.78
======= ======= ======= ======= ====== ========
Total Return(3)................................... 3.43% 13.72% (4.93%) $ 2.76% 13.09% (1.11%)
- ---------------------------------------------------------------
Ratios and Supplemental Data:
Net Assets, End of Period (000's omitted).... $11,419 $11,062 $9,658 $568 $299 $239
Ratio of Expenses to Average Net Assets...... 1.23% 1.25% 1.25% 1.90% 1.90% 1.90%
Ratio of Expenses to Average Net Assets
Prior to Expenses Limitation........... 1.91% 2.06% 2.58% 2.58% 2.71% 3.22%
Ratio of Net Investment Income to
Average Net Assets..................... 5.33% 6.07% 4.38% 4.66% 5.43% 4.87%
Ratio of Net Investment Income to Average
Net Assets Prior to Expense Limitation. 4.65% 5.26% 3.05% 3.98% 4.62% 3.55%
Portfolio Turnover Rate...................... 196% 227% 366% 196% 227% 366%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adviser Funds, Inc.
----------------------------------------------------------------------------
Class C Shares
Federal Bond Fund
Period
7/7/94(1)
Year Ended through
10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $10.38 $9.79 $10.00
Income From Investment Operations:
Net Investment Income (Loss)................. 0.45 0.63 0.15
Net Realized and Unrealized Gain (Loss)
on Security Transactions............... (0.18) 0.47 (0.22)
------- ------- -------
Total From Investment Operations............. 0.27 1.10 (0.07)
------- ------- -------
Less Dividends and Distributions:
Dividends From Net Investment Income......... (0.45) (0.51) (0.14)
Distributions From Net Realized Gain
on Security Transactions............... none none none
Returns of Capital........................... none none none
------- ------- -------
Total Dividends and Distributions............ (0.45) (0.51) (0.14)
------- ------- -------
Net Asset Value, End of Period.................... $10.20 $10.38 $9.79
======= ======= =======
- -----------------------------------
Total Return(3)................................... 2.74% 11.59% (0.72%)
- ---------------------------------------------------------------
Ratios and Supplemental Data:
Net Assets, End of Period (000's omitted).... $12 $15 $49
Ratio of Expenses to Average Net Assets...... 1.90% 1.85% 1.90%
Ratio of Expenses to Average Net Assets
Prior to Expenses Limitation........... 2.58% 2.70% 3.22%
Ratio of Net Investment Income to
Average Net Assets..................... 4.66% 4.73% 4.71%
Ratio of Net Investment Income to Average
Net Assets Prior to Expense Limitation. 3.98% 3.88% 3.39%
Portfolio Turnover Rate...................... 196% 227% 366%
</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) 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.
-17-
<PAGE>
INVESTMENT OBJECTIVES AND STRATEGIES
The Equity Funds
Enterprise Fund. This Fund's fundamental investment objective is to
seek to provide maximum appreciation of capital by investing in medium-sized
companies which have a dominant position within their industry, are undervalued,
or have potential for growth in earnings. Currently, medium-sized companies are
considered to have market capitalizations between $250 million and $9 billion.
The Fund is unlikely to participate in slow growth industries such as utilities
and is likely to invest frequently in high growth rate companies in the retail,
health care, computer, communication and entertainment industries. Under normal
circumstances, at least 65% of the value of the Fund's assets will be invested
in equity securities.
In selecting investments, the Fund's Manager or sub-adviser seeks small
or medium capitalization companies that it believes have earnings that may be
expected to grow faster than the U.S. economy in general. These companies will
typically possess one or more characteristics, including high quality
management, a leading or dominant position in a product and a relatively high
rate of return on invested capital. Income derived from securities of such
companies is only an incidental consideration of the Fund.
The Fund will primarily invest in common stocks although it may invest
up to 35% of the value of its assets in convertible bonds, convertible preferred
stock, warrants to purchase common stock, futures and options.
The Fund may invest up to 15% of its assets in securities of foreign
issuers.
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.
-18-
<PAGE>
World Growth Fund. This Fund's fundamental objective is to seek to
maximize total return (capital appreciation and income) by investing primarily
in equity securities of foreign issuers located in countries that the Fund's
Manager or sub-adviser deems to have attractive investment opportunities. "Total
return" refers to income plus realized and unrealized appreciation of the
securities. Under normal circumstances, the Fund will invest at least 65% of the
value of its total assets in securities of issuers located in at least three
countries other than the United States. However, more than 25% of the Fund's
total assets may be invested in the securities of issuers located in the same
country.
The Fund will emphasize established companies, although it may invest
in companies of varying sizes as measured by assets, sales and capitalization.
The Fund may invest in securities of issuers located in a variety of different
foreign regions and countries which includes, but is not limited to, the
following: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Greece, Hong Kong, Ireland, Italy, Japan, Luxembourg, Malaysia, Mexico,
The Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, Thailand and The United Kingdom. The relative strength or weakness
of a particular country's currency or economy may dictate whether securities of
issuers located in such country will be purchased or sold. Criteria for
determining the appropriate distribution of investments among various countries
and regions include prospects for relative economic growth among foreign
countries, expected levels of inflation, government policies influencing
business conditions, the outlook for currency relationships, and the range of
investment opportunities available to international investors.
The Fund invests in common stock and may invest in other securities
with equity characteristics, consisting of trust or limited partnership
interests, preferred stock, rights and warrants. The Fund may also invest in
convertible securities, consisting of debt securities or preferred stock that
may be converted into common stock or that carry the right to purchase common
stock. The Fund may invest in securities listed on foreign or domestic
securities exchanges and securities traded in foreign and domestic
over-the-counter markets and may invest in restricted or unlisted securities. In
addition, the Fund's investments may include American 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 20% of its assets in securities of companies
located in, or governments of, developing countries. For temporary defensive
purposes, the Fund may invest a major portion of its assets in securities of
U.S. issuers. In addition, the Fund may be invested in short-term debt
instruments to meet anticipated day-to-day operating expenses and liquidity
requirements.
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.
-19-
<PAGE>
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,
developing countries within the Pacific Basin. The Fund may invest up to 35% of
its assets in securities of U.S. issuers. In addition, the Fund may be invested
in short-term debt instruments to meet anticipated day-to-day operating expenses
and liquidity requirements.
The Fixed-Income Funds
Federal Bond Fund. This Fund's fundamental investment objective is to
seek to maximize current income consistent with the preservation of capital by
investing primarily in securities issued by the U.S. government, its agencies
and instrumentalities ("U.S. government securities"). Under normal conditions,
at least 65% of the value of the Fund's total assets will be invested in U.S.
government securities.
Depending upon prevailing market conditions, the Fund may invest in
U.S. government securities of varying maturities, ranging up to 40 years. U.S.
government securities include certain mortgage-backed securities, such as
Government National Mortgage Association Certificates. See Mortgage-Backed
Securities under Implementation of Investment Objectives and Policies. As the
Fund invests primarily in U.S. government securities, which are lower-risk
securities, it may not achieve as high a level of income under all market
conditions as would be the case if the Fund invested in higher yielding
securities. Up to 35% of the Fund's assets may be invested in corporate bonds of
U.S. companies, mortgage-backed securities and asset-backed securities that are
rated at least Aa by Moody's or AA by S&P or, if not rated, are of comparable
quality in the Manager's or sub-adviser's opinion. See Description of Security
Ratings in Appendix C.
-20-
<PAGE>
Corporate Income Fund. This Fund's fundamental investment objective is
to seek to provide a high level of current income consistent with preservation
of capital by investing primarily in corporate bonds of U.S. companies that are
rated at least Baa by Moody's or BBB by S&P or, if not rated, are of comparable
quality in the opinion of the Manager or sub-adviser. See Description of
Security Ratings in Appendix C.
Maturities of the corporate bonds held by the Fund are expected to
range from seven to 40 years, unless the Fund's Manager or sub-adviser believes
that investing in corporate bonds with shorter or longer maturities would be
appropriate in light of prevailing market conditions.
The Fund may also invest up to 35% of its assets in preferred stock,
corporate bonds and preferred stock convertible into or that carry the right to
acquire common stock, corporate bonds that are not of investment grade quality,
U.S. government securities, various mortgage-backed securities and asset-backed
securities, common stock consistent with the Fund's objective, and bonds issued
by foreign governments or foreign corporations, provided that no more than 10%
of the Fund's assets will be invested in bonds issued by foreign governments or
foreign corporations and no more than 10% of the Fund's assets will be
denominated in any one foreign currency. The Fund will not invest more than 35%
of its assets in bonds that are not of investment grade quality and will not
invest in bonds rated below Caa by Moody's or CCC by S&P. Lower-rated or unrated
securities, commonly referred to as "junk bonds," are more likely to react to
developments affecting market and credit risk than are more highly rated
securities, which primarily react to movements in the general level of interest
rates. See Risk Factors and Special Considerations for a description of the
risks inherent in such securities and see Description of Security Ratings in
Appendix C for a description of Moody's and S&P ratings.
Certain Investment Guidelines
Illiquid Securities. Up to 10% of the assets of each Fund may be
invested in securities that are not readily marketable, including, where
applicable: (1) repurchase agreements with maturities greater than seven
calendar days; (2) time deposits maturing in more than seven calendar days; (3)
certain instruments, futures contracts and options thereon for which there is no
liquid secondary market; (4) certain over-the-counter options, as described in
Part B; (5) certain variable rate demand notes having a demand period of more
than seven days; and (6) certain Rule 144A restricted securities (Rule 144A
securities for which a dealer or institutional market exists will not be
considered illiquid).
Restricted Securities. The Enterprise, U.S. Growth, World Growth 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.
-21-
<PAGE>
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
Corporate Income Fund that are rated in the lowest of the top four ratings (Baa
by Moody's or BBB by S&P) are considered to have speculative characteristics and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is the case
with higher grade securities. See Lower-Rated Securities, below.
Foreign Investments. The World Growth Fund and the New Pacific Fund may
invest substantially all of their assets in foreign investments. Certain of the
Funds may invest the following percentages of their assets in foreign
securities: the Enterprise Fund (15%), the U.S. Growth Fund (20%) and the
Corporate Income Fund (10%). There are certain risks involved in investing in
foreign securities, including those resulting from fluctuations in currency
exchange rates, devaluation of currencies, future political or economic
developments and the possible imposition of currency exchange blockages or other
foreign governmental laws or restrictions, reduced availability of public
information concerning issuers, and the fact that foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards or to other regulatory practices and requirements comparable to those
applicable to domestic companies. Although the Funds' Manager or sub-advisers do
not intend to expose the Funds to such risks, with respect to certain foreign
countries, there is the possibility of expropriation, nationalization,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Funds, including the withholding of dividends. When the Funds'
Manager or sub-adviser believes that currency in which a Fund security or
securities is denominated may suffer a decline against the United States dollar,
it may hedge such risk by entering into a forward contract to sell an amount of
foreign currency approximating the value of some or all of the Funds' portfolio
securities denominated in such foreign currency.
Because foreign securities generally are denominated and pay dividends
or interest in foreign currencies, and the Funds hold various foreign currencies
from time to time, the value of the net assets of the Funds as measured in
United States dollars will be affected favorably or unfavorably by changes in
exchange rates. Generally, currency exchange transactions will be conducted on a
spot (i.e., cash) basis at the spot rate prevailing in the currency exchange
market. The cost of currency exchange transactions will generally be the
difference between the bid and offer spot rate of the currency being purchased
or sold. In order to protect against uncertainty in the level of future foreign
currency exchange rates, the Funds are authorized to enter into certain foreign
transactions. Investors should be aware that exchange rate movements can be
significant and can endure for long periods of time. The Manager and
sub-advisers of the Funds attempt to manage exchange rate risk through active
currency management.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of the New York Stock Exchange. Accordingly, the Funds' foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of United States companies. Moreover, the
settlement periods for foreign securities, which are often longer than those for
securities of United States issuers, may affect portfolio liquidity. In buying
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
-22-
<PAGE>
less governmental supervision and regulation of securities exchanges, brokers
and issuers in foreign countries than in the United States.
The World Growth 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. The following Funds may invest the following
percentages of their total assets in debt securities rated lower than Baa by
Moody's or BBB by S&P: U.S. Growth Fund (10%) and Corporate Income Fund (35%).
Prices for securities rated below investment grade may be affected by
legislative and regulatory developments. Securities rated Ba\BB or lower are
commonly referred to as "junk bonds." See Description of Security Ratings in
Appendix C.
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 the Enterprise and U.S. Growth Funds,
will purchase additional securities when money borrowed exceeds 5% of the Fund's
total assets.
Securities Lending. Each Fund may lend securities with a value of up to
one-third of its total assets to broker/dealers, institutions and other persons
as a means of earning additional income. Any such loan shall be continuously
secured by collateral at least equal to 100% of the value of the security being
loaned. If the collateral is cash, it may be invested in short-term securities,
U.S. government obligations or certificates of
-23-
<PAGE>
deposit. Each Fund will retain the evidence of ownership of any loaned
securities and will continue to be entitled to the interest or dividends payable
on the loaned securities. In addition, the Fund will receive interest on the
loan. The loan will be terminable by the Fund at any time and will not be made
to affiliates of the Fund, the Manager or the respective sub-adviser. The Fund
may pay reasonable finder's fees to persons unaffiliated with it in connection
with the arrangement of loans.
If the other party to a securities loan becomes bankrupt, a Fund could
experience delays in recovering its securities. To the extent that, in the
meantime, the value of securities loans has increased, the Fund could experience
a loss.
Temporary Defensive Position. For temporary defensive purposes when the
Manager or sub-adviser determines that market conditions warrant, each Fund may
invest up to 100% of its assets in money market instruments. To the extent a
Fund is engaged in a temporary defensive position, the Fund will not be pursuing
its investment objective. Each Fund may also hold a portion of its assets in
cash for liquidity purposes.
Portfolio Turnover. The portfolio turnover rates for the past two
fiscal years for the Funds were as follows:
Period Ended Year Ended
Fund October 31, 1996 October 31, 1995
---- ---------------- ----------------
Enterprise Fund 92% 106%
U.S. Growth Fund 131% 58%
World Growth Fund 21% 9%
New Pacific Fund 163% 163%
Federal Bond Fund 196% 227%
Corporate Income Fund 68% 119%
High turnover in any Fund could result in additional brokerage
commissions to be paid by the Fund. In addition, high portfolio turnover may
also mean that a proportionately greater amount of distributions to shareholders
will be taxed as ordinary income rather than long-term capital gains compared to
investment companies with lower portfolio turnover. See Dividends, Distributions
and Taxes.
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<PAGE>
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Group of
funds.
SHAREHOLDER PHONE DIRECTORY
Investor Information Center
800-523-4640
Fund Information; Literature; Price; Yield and Performance
Figures
Shareholder Service Center
800-523-1918
Information on Existing Regular Investment Accounts and
Retirement Plan Accounts; Wire Investments; Wire Liquidations;
Telephone Liquidations 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.
-25-
<PAGE>
Duplicate Confirmations
If your financial adviser or investment dealer is noted on your
investment application, we will send a duplicate confirmation to him or her.
This makes it easier for your adviser to help you manage your investments.
Tax Information
Each year, Adviser Funds, Inc. will mail to you information on the tax
status of your dividends and distributions.
Dividend Payments
Dividends, capital gains and other distributions are automatically
reinvested in your account, unless you elect to receive them in cash. You may
also elect to have the dividends earned in one fund automatically invested in
another Delaware Group fund with a different investment objective, subject to
certain exceptions and limitations.
For more information, see Additional Methods of Adding to Your
Investment - Dividend Reinvestment Plan under How to Buy Shares or call the
Shareholder Service Center.
MoneyLine Direct Deposit Service
If you elect to have your dividends and distributions paid in cash and
such dividends and distributions are in an amount of $25 or more, you may choose
the MoneyLine Direct Deposit Service and have such payments transferred from
your Fund account to your predesignated bank account. See Dividends and
Distributions. In addition, you may elect to have your Systematic Withdrawal
Plan payments transferred from your Fund account to your predesignated bank
account through this service. See Systematic Withdrawal Plans under Redemption
and Exchange. Your funds will normally be credited to your bank account two
business days after the payment date. There are no fees for this service. You
can initiate the MoneyLine Direct Deposit Service by completing an Authorization
Agreement. If the name and address on your designated bank account are not
identical to the name and address on your Fund account, you must have your
signature guaranteed. The MoneyLine Direct Deposit Service is not available for
certain retirement plans.
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.
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<PAGE>
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.
Delaware Group Asset Planner
Delaware Group Asset Planner is an asset allocation service that gives
you, when working with a professional financial adviser, the ability to more
easily design and maintain investments in a diversified selection of Delaware
Group mutual funds. The Asset Planner service offers a choice of four
predesigned allocation strategies (each with a different risk/reward profile)
made up of separate investments in predetermined percentages of Delaware Group
funds. With the guidance of a financial adviser, you may also tailor an
allocation strategy that meets your personal needs and goals. See How to Buy
Shares.
Financial Information about the 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.
-27-
<PAGE>
RETIREMENT PLANNING
An investment in a Fund may be suitable for tax-deferred retirement
plans. Among the retirement plans noted below, Class B Shares are available for
investment only by Individual Retirement Accounts, Simplified Employee Pension
Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred Compensation
Plans.
Retirement plans may be subject to plan establishment fees, annual
maintenance fees and/or other administrative or trustee fees. Fees are based
upon the number of participants in the plan as well as the services selected.
Additional information about fees is included in retirement plan materials. Fees
are quoted upon request.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Classes.
For additional information on any of the plans and Delaware's retirement
services, call the Shareholder Service Center or see Part B.
Individual Retirement Account ("IRA")
Individuals, even if they participate in an employer-sponsored
retirement plan, may establish their own retirement program for investments in
each of the Classes. Contributions to an IRA may be tax-deductible and earnings
are tax-deferred. The tax deductibility of IRA contributions is restricted, and
in some cases eliminated, for individuals who participate in certain
employer-sponsored retirement plans and whose annual income exceeds certain
limits. Existing IRAs and future contributions up to the IRA maximums, whether
deductible or not, still earn on a tax-deferred basis.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
New SAR/SEP plans may not be established after December 31, 1996.
Employers must have no more than 25 employees to maintain an existing SEP/IRA
that permits salary deferral contributions. An employer may also elect to make
additional contributions to this plan. Class B Shares are not available for
purchase by such plans.
403(b)(7) Deferred Compensation Plan
Permits employees of public school systems or of certain types of
non-profit organizations to enter into a deferred compensation arrangement for
the purchase of shares of each of the Classes.
457 Deferred Compensation Plan
Permits employees of state and local governments and certain other
entities to enter into a deferred compensation arrangement for the purchase of
shares of each of the Classes.
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<PAGE>
Prototype Profit Sharing or Money Purchase Pension Plan
Offers self-employed individuals, partnerships and corporations a
tax-qualified plan which provides for the investment of contributions in Class A
Shares or Class C Shares. Class B Shares are not available for purchase by such
plans.
Prototype 401(k) Defined Contribution Plan
Permits employers to establish a tax-qualified plan based on salary
deferral contributions for investment in Class A Shares or Class C Shares. Class
B Shares are not available for purchase by such plans.
Allied Plans
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made available
under a joint venture agreement between the Distributor and another institution
through which mutual funds are marketed and which allow investments in Class A
Shares of designated Delaware Group funds ("eligible Delaware Group fund
shares"), as well as shares of designated classes of non-Delaware Group funds
("eligible non-Delaware Group fund shares"). Class B Shares and Class C Shares
are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Group and eligible non-Delaware Group fund shares
held by the Allied Plan may be combined with the dollar amount of new purchases
by that Allied Plan to obtain a reduced front-end sales charge on additional
purchases of eligible Delaware Group fund shares. See Front-End Sales Charge
Alternative - Class A Shares under Classes of Shares.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Group fund shares for other eligible Delaware Group fund shares or for
eligible non-Delaware Group fund shares at net asset value without payment of a
front-end sales charge. However, exchanges of eligible fund shares, both
Delaware Group and non-Delaware Group, which were not subject to a front-end
sales charge, will be subject to the applicable sales charge if exchanged for
eligible Delaware Group fund shares to which a sales charge applies. No sales
charge will apply if the eligible fund shares were previously acquired through
the exchange of eligible shares on which a sales charge was already paid or
through the reinvestment of dividends. See Investing by Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Group fund shares under an Allied Plan. In determining a financial adviser's
eligibility for a dealer's commission on net asset value purchases of eligible
Delaware Group fund shares in connection with Allied Plans, all participant
holdings in the Allied Plan will be aggregated. See Front-End Sales Charge
Alternative - Class A Shares under Classes of Shares.
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<PAGE>
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.
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<PAGE>
CLASSES OF SHARES
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net
asset value per share, subject to a sales charge which may be imposed, at the
election of the purchaser, at the time of the purchase for Class A Shares
("front-end sales charge alternative"), or on a contingent deferred basis for
Class B Shares ("deferred sales charge alternative") or Class C Shares ("level
sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares, 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, the Class B Shares will
automatically 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 the 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
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<PAGE>
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
return is realized on the additional money initially invested upon the purchase
of such shares. However, there can be no assurance as to the return, if any,
that will be realized on such additional money, and the effect of earning a
return on such additional money will diminish over time. In comparing Class B
Shares to Class C Shares, investors should also consider the desirability of an
automatic conversion feature, which is available only for Class B Shares.
Prospective investors should refer to Appendix A--Investment
Illustrations in this Prospectus for an illustration of the potential effect
that each of the purchase options may have on a long-term shareholder's
investment.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Funds, the Distributor and others will be paid, in the
case of the Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of the Class B Shares and the Class C Shares,
from the proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred
upon redemption. Financial advisers may receive different compensation for
selling Class A, Class B and Class C Shares. Investors should understand that
the purpose and function of the respective 12b-1 Plans and the CDSCs applicable
to Class B Shares and Class C Shares are the same as those of the 12b-1 Plan and
the front-end sales charge applicable to Class A Shares in that 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 paid on Class A, Class B and Class C Shares, to the extent
any dividends are paid, will be calculated in the same manner, at the same time,
on the same day and will be in the same amount, except that the additional
amount of 12b-1 Plan expenses relating to Class B Shares and Class C Shares will
be borne exclusively by such shares. See Calculation of Offering Price and Net
Asset Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. Adviser Funds, Inc. and the Distributor intend to operate in compliance
with these rules.
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<PAGE>
Front-End Sales Charge Alternative - Class A Shares
Class A Shares of each Fund may be purchased at the offering price,
which reflects a maximum front-end sales charge of 4.75%. See Calculation of
Offering Price and Net Asset Value Per Share.
Purchases of $100,000 or more carry a reduced front-end sales charge as
shown in the following table.
<TABLE>
<CAPTION>
Class A Shares
- --------------------------------------------------------------------------------------------------------------------------
Dealer's
Commission***
Front-End Sales Charge as % of as of
Amount of Purchase Offering Offering
Price Amount Invested** Price
- --------------------------------------------------------------------------------------------------------------------------
Corpo-
Enter- U.S. World New Federal rate
prise Growth Growth Pacific Bond Income
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Less than $100,000 4.75% 5.00% 4.99% 5.00% 4.99% 5.00% 4.99% 4.00%
$100,000 but under $250,000 3.75 3.90 3.91 3.87 3.82 3.85 3.85 3.00
$250,000 but under $500,000 2.50 2.58 2.53 2.52 2.55 2.60 2.60 2.00
$500,000 but under $1,000,000* 2.00 2.06 2.03 2.02 2.02 2.08 2.08 1.60
</TABLE>
* There is no front-end sales charge on purchases of Class A Shares of $1
million or more but, under certain limited circumstances, a 1% Limited
CDSC may apply upon redemption of such shares.
** Based on the net asset value per share of the 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.
- --------------------------------------------------------------------------------
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<PAGE>
For initial purchases of Class A Shares of $1,000,000 or more, a dealer's
commission may be paid by the Distributor to financial advisers through whom
such purchases are made, in accordance with the following schedule:
Dealer's
Commission
------------
(as a percentage
Amount of Purchase of amount purchased)
--------------------
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75
Next $2 million up to $5 million 0.50
Amount over $5 million 0.25
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies may be aggregated with those of the Class A Shares
of a Fund. Financial advisers also may be eligible for a dealer's commission in
connection with certain purchases made under a Letter of Intention or pursuant
to an investor's Right of Accumulation. Financial advisers should contact the
Distributor concerning the applicability and calculation of the dealer's
commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for payment
of the dealer's commission, unless a dealer's commission or similar payment has
not been previously paid on the assets being exchanged. The schedule and program
for payment of the dealer's commission are subject to change or termination at
any time by the Distributor at its discretion.
Redemptions of Class A Shares purchased at net asset value may result in
the imposition of a Limited CDSC if the dealer's commission described above was
paid in connection with the purchase of those shares. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
Combined Purchases Privilege
By combining your holdings of Class A Shares with your holdings of Class
B Shares and/or Class C Shares of a Fund and shares of other funds in the
Delaware Group, except those noted below, you can reduce the front-end sales
charges on any additional purchases of Class A Shares. Shares of Delaware Group
Premium Fund, Inc. beneficially owned in connection with ownership of variable
insurance products may be combined with other Delaware Group fund holdings.
Shares of other funds that do not carry a front-end sales charge or CDSC may not
be included unless they were acquired through an exchange from a Delaware Group
fund that does carry a front-end sales charge or CDSC.
This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under 21 and any trust, fiduciary or
retirement account for the benefit of such family members.
It also permits you to use these combinations under a Letter of
Intention. A Letter of Intention allows you to make purchases over a 13-month
period and qualify the entire purchase for a reduction in front-end sales
charges on Class A Shares.
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<PAGE>
Combined purchases of $1,000,000 or more, including certain purchases
made at net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may result in the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative - Class A Shares, above.
Buying Class A Shares at Net Asset Value
Class A Shares of a Fund may be purchased at net asset value under the
Delaware Group Dividend Reinvestment Plan and, under certain circumstances, the
Exchange Privilege and the 12-Month Reinvestment Privilege. See The Delaware
Difference and Redemption and Exchange for additional information.
Purchases of Class A Shares may be made at net asset value by current
and former officers, directors and employees (and members of their families) of
the Manager, any affiliate, any of the funds in the Delaware Group, certain of
their agents and registered representatives and employees of authorized
investment dealers and by employee benefit plans for such entities. Individual
purchases, including those in retirement accounts, must be for accounts in the
name of the individual or a qualifying family member.
Purchases of Class A Shares may 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. 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.
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, Prototype Profit
Sharing, Pension and 401(k) Defined Contribution Plans) may benefit from the
reduced front-end sales charges available on Class A Shares set forth in the
table on page , based on total plan assets. In addition, 403(b)(7) and 457
Retirement Plan Accounts may benefit from a reduced front-end sales charge on
Class A Shares based on the total amount invested by all participants in the
plan by satisfying the following criteria: (i) the employer for which the plan
was established has 250 or more eligible employees and the plan lists only one
broker of record, or (ii) the plan includes
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<PAGE>
employer contributions and the plan lists only one broker of record. If a
company has more than one plan investing in the Delaware Group of funds, then
the total amount invested in all plans will be aggregated to determine the
applicable 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 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.
For additional information on retirement plans, including plan forms,
applications, minimum investments and any applicable account maintenance fees,
contact your investment dealer or the Distributor.
For other retirement plans and special services, see Retirement
Planning.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than 4% of the dollar
amount purchased. 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 the Class B Shares
described in this Prospectus, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for the Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the last business day
of the second full week of March, June, September and December (each, a
"Conversion Date"). If the eighth anniversary after a purchase of Class B Shares
falls on a Conversion Date, an investor's Class B Shares will be converted on
that date. If the eighth anniversary occurs between Conversion Dates, an
investor's Class B Shares will be converted on the next Conversion Date after
such anniversary. Consequently, if a shareholder's eighth anniversary falls on
the day after a Conversion Date, that shareholder will have to hold Class B
Shares for as long as three additional months after the eighth anniversary of
purchase before the shares will automatically convert into Class A Shares. See
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Restructuring of the Fund under Management of the Funds concerning the
conversion feature applicable to Class B Shares purchased on or before May 3,
1996.
Class B Shares of a fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of that fund (or, in the case
of Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant
Class) pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class C Shares at the time of
purchase from its own assets in an amount equal to no more than 1% of the dollar
amount purchased. As discussed below, however, Class C Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within 12 months of purchase, a
CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class C Shares as
described in this Prospectus. See Redemption and Exchange.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestments of dividends or capital gains distributions. For purposes
of this formula, the "net asset value at the time of purchase" will be the net
asset value at purchase of the Class B Shares or the Class C Shares of 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 the Class B
Shares of the Funds:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
-------------------------- ---------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, 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 the 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 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.
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Subject to pending amendments to the NASD's Rules of Fair Practice, in
connection with the promotion of Delaware Group fund shares, the Distributor
may, from time to time, pay to participate in dealer-sponsored seminars and
conferences, reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising and may, from time to time,
pay or allow additional promotional incentives to dealers, which shall include
non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and Exchange Commission.
It is likely that the NASD's Rules of Fair Practice will be amended such that
the ability of the Distributor to pay non-cash compensation as described above
will be restricted in some fashion. The Distributor intends to comply with the
NASD's Rules of Fair Practice as they may be amended.
Institutional Classes
In addition to offering the Class A, Class B and Class C Shares of each
Fund, Adviser Funds, Inc. also offers an Institutional Class for each Fund
(formerly referred to as Class D Shares), which is described in a separate
prospectus and is available for purchase only by certain investors.
Institutional Class shares generally are distributed directly by the Distributor
and do not have a front-end sales charge, a CDSC or a Limited CDSC, and are not
subject to 12b-1 plan distribution expenses. To obtain the prospectus that
describes the Institutional Classes, contact the Distributor by writing to the
address or by calling the telephone number listed on the back cover of this
Prospectus.
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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.
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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.
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. See Appendix B--Classes Offered for a list of Delaware Group funds and
the classes they offer. 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 Retirement Planning for information on exchanges
by participants in an Allied Plan.
Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if you wish to
use the following services:
1. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly
investments without writing or mailing checks. You may authorize Adviser Funds,
Inc. to transfer a designated amount monthly from your checking account to your
Fund account. Many shareholders use this as an automatic savings plan.
Shareholders should allow a reasonable amount of time for initial purchases and
changes to these plans to become effective.
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This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
2. Direct Deposit
You may have your employer or bank make regular investments directly to
your account for you (for example: payroll deduction, pay by phone, annuity
payments). Each Fund also accepts preauthorized recurring government and private
payments by Electronic Fund Transfer, which avoids mail time and check clearing
holds on payments such as social security, federal salaries, Railroad Retirement
benefits, etc.
* * *
Should investments 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. 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, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
4. Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your account. Or, you may invest
your distributions in certain other funds in the Delaware Group, subject to the
exceptions noted below as well as the eligibility and minimum purchase
requirements set forth in each fund's prospectus.
Reinvestments of distributions into Class A Shares of a Fund or of
other Delaware Group funds are made without a front-end sales charge.
Reinvestments of distributions into Class B Shares of a Fund or of other
Delaware Group funds or into Class C Shares of a Fund or of other Delaware Group
funds are also made without any sales charge and will not be subject to a CDSC
if later redeemed. See Automatic Conversion of Class B Shares under Classes of
Shares for information concerning the automatic conversion of Class B Shares
acquired by reinvesting dividends.
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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. See Appendix B--Classes Offered
for a list of the funds offering those classes of shares. For more information
about reinvestments, call the Shareholder Service Center.
Distributions for capital gains and/or dividends for participants in
the following retirement plans are automatically reinvested into the same
Delaware Group fund: SAR/SEP, SEP/IRA, Profit Sharing, Money Purchase Pension,
401(k), 403(b)(7), or 457 Plans.
Delaware Group Asset Planner
To invest in Delaware Group funds using the Delaware Group Asset
Planner asset allocation service, you should complete a Delaware Group Asset
Planner Account Registration Form, which is available only from a financial
adviser or investment dealer. As previously described under The Delaware
Difference, the Delaware Group Asset Planner service offers a choice of four
predesigned asset allocation strategies (each with a different risk/reward
profile) in predetermined percentages in Delaware Group funds. Or, with the help
of a financial adviser, you may design a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Group accounts into the Asset Planner service may be made at net asset value
under the circumstances described under Investing by Exchange, above. The
minimum initial investment per Strategy is $2,000; subsequent investments must
be at least $100. Individual fund minimums do not apply to investments made
using the Asset Planner service. 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. See Appendix B--Classes Offered for the funds in the Delaware Group that
offer consultant class shares.
An annual maintenance fee, currently $35 per Strategy, is typically due
at the time of initial investment and by September 30th of each subsequent year.
The fee, payable to Delaware Service Company, Inc. to defray extra costs
associated with administering the Asset Planner service, will be deducted
automatically from one of the funds within your Asset Planner account if not
paid by September 30th. However, effective November 1, 1996, the annual 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. See
Part B.
Investors will receive a customized quarterly Strategy Report
summarizing all Delaware Group Asset Planner investment performance and account
activity during the prior period. Confirmation statements will be sent following
all transactions other than those involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
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Purchase Price and Effective Date
The offering price and net asset value of the Class A, Class B and
Class C Shares are determined as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open.
The effective date of a purchase made through an investment dealer is
the date the order is received by a Fund. The effective date of a direct
purchase is the day your wire, electronic transfer or check is received, unless
it is received after the time the offering price 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 a
redemption, have remained below the minimum stated account balance for a period
of three or more consecutive months. Holders of such accounts may be notified of
their insufficient account balance and advised that they have until the end of
the current calendar quarter to raise their balance to the stated minimum. If
the account has not reached the minimum balance requirement by that time, the
Fund will charge a $9 fee for that quarter and each subsequent calendar quarter
until the account is brought up to the minimum balance. The service fee will be
deducted from the account during the first week of each calendar quarter for the
previous quarter, and will be used to help defray the cost of maintaining
low-balance accounts. No fees will be charged without proper notice, and no CDSC
will apply to such assessments.
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 and Class C Shares, and, if
applicable, the Limited CDSC in the case of Class A Shares and tender to the
shareholder the requested amount, assuming the shareholder holds enough shares
in his or her account for the redemption to be processed in this manner.
Otherwise, the amount tendered to the shareholder upon redemption will be
reduced by the amount of the applicable CDSC or Limited CDSC. Redemption
proceeds will be distributed promptly, as described below, but not later than
seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Shareholder Service Center at 800-523-1918. 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.
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There is no front-end sales charge or fee for exchanges made between
shares of funds which both carry a front-end sales charge. Any applicable
front-end sales charge will apply to exchanges from shares of funds not subject
to a front-end sales charge, except for exchanges involving assets that were
previously invested in a fund with a front-end sales charge and/or exchanges
involving the reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Group (in each
case, "New Shares") in a permitted exchange, will not be subject to a CDSC that
might otherwise be due upon redemption of the Original Shares. However, such
shareholders will continue to be subject to the CDSC and, in the case of Class B
Shares, the automatic conversion schedule of the Original Shares as described in
this Prospectus and any CDSC assessed upon redemption will be charged by the
fund from which the Original Shares were exchanged. In an exchange of Class B
Shares from 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 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.
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Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificate must accompany your request and also be in good order. Certificates
are issued for Class A Shares only if a shareholder submits a specific request.
Certificates are not issued for Class B Shares or Class C Shares.
Written Exchange
You may also write to each Fund (at 1818 Market Street, Philadelphia,
PA 19103) to request an exchange of any or all of your shares into another
mutual fund in the Delaware Group, subject to the same conditions and
limitations as other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
certificates.
The Telephone Redemption - Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in which you have your account
in writing that you do not wish to have such 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
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<PAGE>
business day. CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted
from your redemption. If you ask for a check, it will normally be mailed the
next business day after receipt of your redemption request to your predesignated
bank account. There are no separate fees for this redemption method, but the
mail time may delay getting funds into your bank account. Simply call the
Shareholder Service Center prior to the time the offering price and net asset
value are determined, as noted above.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in the Delaware Group under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
Systematic Withdrawal Plans
1. Regular Plans
This plan provides shareholders with a consistent monthly (or
quarterly) payment. This is particularly useful to shareholders living on fixed
incomes, since it can provide them with a stable supplemental amount. With
accounts of at least $5,000, you may elect monthly withdrawals of $25 (quarterly
$75) or more. The Funds do not recommend any particular monthly amount, as each
shareholder's situation and needs vary. Payments are normally made by check. In
the alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine Direct Deposit
Service. Your funds will normally be credited to your bank account two business
days after the payment date. There are no separate fees for this redemption
method. See MoneyLine Direct Deposit Service under The Delaware Difference for
more information about this service.
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 Direct Deposit Service 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.
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<PAGE>
The applicable CDSC for Class B Shares and Class C Shares redeemed via
a Systematic Withdrawal Plan will be waived if, on the date that the Plan is
established, the annual amount selected to be withdrawn is less than 12% of the
account balance. If the annual amount selected to be withdrawn exceeds 12% of
the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subject to the applicable
CDSC. Whether a waiver of the CDSC is available or not, the first shares to be
redeemed for each Systematic Withdrawal Plan payment will be those not subject
to a CDSC because they have either satisfied the required holding period or were
acquired through the reinvestment of distributions. The 12% annual limit will be
reset on the date that any Systematic Withdrawal Plan is modified (for example,
a change in the amount selected to be withdrawn or the frequency or date of
withdrawals), based on the balance in the account on that date. See Waiver of
Contingent Deferred Sales Charge - Class B 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 the Class A
Shares of a Fund or the 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.
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<PAGE>
Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from a Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"), or due to death of a participant in such a plan; (iii)
redemptions pursuant to the direction of a participant or beneficiary of a
retirement plan qualified under section 401(a) or 401(k) of the Code with
respect to that retirement plan; (iv) distributions from a section 403(b)(7)
Plan or an IRA due to death, disability, or attainment of age 59 1/2; (v)
returns of excess contributions to an IRA; (vi) distributions by other employee
benefit plans to pay benefits; (vii) distributions described in (ii), (iv), and
(vi) above pursuant to a Systematic Withdrawal Plan; and (viii) redemptions by
the classes of shareholders who are permitted to purchase shares at net asset
value, regardless of the size of the purchase (see Buying Class A Shares at Net
Asset Value under Classes of Shares).
Waiver of Contingent Deferred Sales Charge - Class B and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from a
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective minimum
account size; (ii) returns of excess contributions to an IRA or 403(b)(7)
Deferred Compensation Plan; (iii) required minimum distributions from an IRA,
403(b)(7) Deferred Compensation Plan or 457 Deferred Compensation Plan; and (iv)
distributions from an account if the redemption results from the death of all
registered owners of the account (in the case of accounts established under the
Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts,
the waiver applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Code) of all registered
owners occurring after the purchase of the shares being redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from a Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, 403(b)(7) Deferred Compensation Plan, Profit
Sharing Plan, Money Purchase Pension Plan or 401(k) Defined Contribution Plan;
(iii) required minimum distributions from an IRA, 403(b)(7) Deferred
Compensation Plan, 457 Deferred Compensation Plan, Profit Sharing Plan, Money
Purchase Pension Plan or 401(k) Defined Contribution Plan; (iv) distributions
from a 403(b)(7) Deferred Compensation Plan, 457 Deferred Compensation Plan,
Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) Deferred Compensation
Plan, 457 Deferred Compensation Plan, Profit Sharing Plan, Money Purchase
Pension Plan or a 401(k) Defined Contribution Plan upon attainment of normal
retirement age under the plan or upon separation from service; (vi)
distributions from an IRA on or after attainment of age 59 1/2; and (vii)
distributions from an account if the redemption results from the death of all
registered owners of the account (in the case of accounts established under the
Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts,
the waiver applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Code) of all registered
owners occurring after the purchase of the shares being redeemed.
In addition, the CDSC will be waived on Class B and Class C Shares
redeemed in accordance with a Systematic Withdrawal Plan if the annual amount
selected to be withdrawn under the Plan does not exceed 12% of the value of the
account on the date that the Systematic Withdrawal Plan was established or
modified.
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<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in a Fund.
The Fixed-Income Funds accrue dividends from net investment income and
usually distribute such accrued dividends to shareholders monthly. The Equity
Funds declare dividends from net investment income and usually distribute such
accrued dividends to shareholders at least annually. All capital gains, if any,
are distributed annually, usually in December. When a capital gain dividend is
declared, the net asset value per share is reduced by the amount of the
dividend. Investors considering buying shares of one of the Funds just prior to
a record date for a taxable dividend or capital gain distribution should be
aware that, regardless of whether the price of the Fund shares to be purchased
reflects the amount of the forthcoming dividend or distribution payment, any
such payment will be a taxable dividend or distribution payment.
Both dividends and distributions, if any, are automatically reinvested
in your account at net asset value unless you elect otherwise. Any check in
payment of dividends or other distributions which cannot be delivered by the
United States Post Office or which remains uncashed for a period of more than
one year may be reinvested in the shareholder's account at the then-current net
asset value, and the dividend option may be changed from cash to reinvest. If
you elect to take your dividends and distributions in cash and such dividends
and distributions are in an amount of $25 or more, you may choose the MoneyLine
Direct Deposit Service and have such payments transferred from your Fund account
to your predesignated bank account. The MoneyLine Direct Deposit Service is not
available to certain retirement plans. See MoneyLine Direct Deposit Service
under The Delaware Difference for more information about this service.
Each Fund has qualified and intends to continue to qualify as a
"regulated investment company" under the Code. In any fiscal year in which each
Fund so qualifies and distributes to shareholders its net investment income and
net realized capital gains, each Fund will be relieved of federal income tax. It
is each Fund's policy to distribute to the shareholders all of its net
investment income and capital gains realized during each fiscal year.
Under current law for each of the Funds, dividends paid from net
investment income and distributions of net realized short-term capital gains are
taxable to shareholders who are subject to income taxes as ordinary income,
regardless of how long shareholders have held their Fund shares or whether such
dividends and distributions are received in cash or reinvested in additional
Fund shares. Distributions of net realized long-term capital gains will be
taxable to shareholders as long-term capital gains, regardless of how long
shareholders have held Fund shares and whether such distributions are received
in cash or are reinvested in additional Fund shares. The per share dividends and
distributions on Class A Shares will be higher than the per share dividends and
distributions on Class B and Class C Shares as a result of lower distribution
fees applicable to Class A Shares. Furthermore, as a general rule, a
shareholder's gain or loss on a sale or redemption of Fund shares will be a
long-term capital gain or loss if the shareholder has held the shares for more
than one year and will be a short-term capital gain or loss if the shareholder
has held the shares for one year or less. Some of the Funds' dividends declared
from net investment income may qualify for the federal dividends-received
deduction for corporations. The investor will be notified each year as to the
amount and federal tax status of all dividends and capital gains paid during the
prior year. Such dividends and capital gains may also be subject to state or
local taxes. For the fiscal year ended October 31, 1996, 23% and 13% of the
dividends from net investment
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<PAGE>
income of, respectively, World Growth Fund and New Pacific Fund were eligible
for the dividends-received deduction to corporations.
A portion of each Fund's income, including income from repurchase
agreements and gains from options and futures transactions may be taxable to
shareholders as ordinary income. Long-term capital gains from options and
futures transactions may be taxable to shareholders as ordinary income.
Long-term capital gains distributions, if any, are taxable as long term capital
gains, regardless of the length of time a shareholder has owned shares.
Short-term capital gains and other taxable income distributions are taxable as
ordinary income.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November or December to shareholders of
record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by a Fund and received by the shareholder on
December 31 of the year declared.
If an investor has not furnished a certified correct taxpayer
identification number (generally a Social Security number) and has not certified
that withholding does not apply, or if the Internal Revenue Service has notified
a Fund that the taxpayer identification number listed on the investor's account
is incorrect according to their records or that the investor is subject to
backup withholding, federal law generally requires the Fund to withhold 31% from
any dividends and/or redemptions (including exchange redemptions). Amounts
withheld are applied to the investor's federal tax liability; a refund may be
obtained from the Internal Revenue Service if withholding results in overpayment
of taxes. Federal law also requires the Funds to withhold 30% or the applicable
tax treaty rate from dividends paid to certain nonresident alien, non-U.S.
partnership and non-U.S. corporation shareholder accounts.
The automatic conversion of Class B Shares into Class A Shares at the
end of approximately eight years after purchase will be tax-free for federal tax
purposes. See Automatic Conversion of Class B Shares under Classes of Shares.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. government securities may be exempt from
state personal income taxes. Shares of each Fund are exempt from Pennsylvania
county personal property taxes.
Certain Funds may be required to pay withholding and other taxes
imposed by foreign countries in connection with their investments outside the
U.S. generally at rates from 10% to 40%, which would reduce these Funds'
investment income.
Certain income received by the World Growth and New Pacific Funds may
be subject to foreign taxes. If more than 50% of the value of the Fund's total
assets at the close of any taxable year consists of securities of foreign
corporations, the Fund may elect to treat any foreign taxes paid by it as paid
by its shareholders. If a Fund makes this election, its shareholders will
generally be required to include in income their respective pro-rata positions
in computing their taxable income or, alternatively, to claim foreign tax
credits (subject, in either case, to certain limitations). Each year that a Fund
makes such an election, it will report to its shareholders the amount per share
of foreign taxes it has elected to have treated as paid by its shareholders.
See Dividends, Distributions and Taxes in Part B for additional
information on tax matters relating to each Fund and its shareholders.
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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, Class B and Class C Shares alone will bear the
12b-1 Plan expenses payable under their respective 12b-1 Plans. Due to the
specific distribution expenses and other costs that will be allocable to each
class, the net asset value of each class of a Fund 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, 1996, the Manager and its affiliates
within the Delaware Group, including Delaware International Advisers Ltd., were
managing in the aggregate more than $30 billion in assets in the various
institutional or separately managed (approximately $19,214,690,000) and
investment company (approximately $11,539,873,000) 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 each Fund dated May
4, 1996.
Investment Management Agreements. The Investment Management Agreements
were approved by the Board of Directors of Adviser Funds, Inc., including a
majority of the Directors who are not "interested persons" of Adviser Funds,
Inc., on February 23, 1996 and approved by the respective shareholders of the
Funds at a shareholder meeting held on May 3, 1996. See Restructuring of the
Funds, below.
Under the Investment Management Agreements, the Manager receives
advisory fees monthly based upon each Fund's average daily net assets at the
following annual rates:
Enterprise Fund 0.80%
U.S. Growth Fund 0.70%
World Growth Fund 1.10%
New Pacific Fund 0.80%
Federal Bond Fund 0.30%
Corporate Income Fund 0.30%
The Manager elected voluntarily to waive that portion, if any, of its
investment advisory fees and to reimburse a Fund's expenses to the extent
necessary to ensure that a Fund's expenses do not exceed the amounts noted under
Summary of Expenses.
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<PAGE>
The advisory fees for the Enterprise, World Growth 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, 1996, the following investment
management fees based on a percentage of a Fund's average daily net assets were
incurred and reflect the voluntary waiver described above:
Earned Paid
Enterprise Fund 0.80% 0.72%
U.S. Growth Fund 0.70% 0.62%
World Growth Fund 1.10% 0.34%
New Pacific Fund 0.95%* none
Federal Bond Fund 0.30% none
Corporate Income Fund 0.30% none
* The Board of Directors approved a reduction from 1.10% to 0.80% in the
investment advisory fee for New Pacific Fund effective the close of business
May 3, 1996.
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.
LIM, Sub-Adviser to the Manager with respect to management of the
assets of the Corporate Income Fund and the Federal Bond Fund, 200 East Berry
Street, Fort Wayne, Indiana 46802, is an indirect, wholly owned subsidiary of
Lincoln National and an affiliate of the Manager. LIM acts as investment adviser
to several registered investment companies in addition to those Funds. LIM also
provides investment services to Lincoln National and its principal subsidiaries
and acts as investment adviser to the other clients. As of
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<PAGE>
October 31, 1996, LIM had total assets under management in excess of $39
billion. Timothy J. Policinski has had primary responsibility for making
investment decisions for Federal Bond Fund and Corporate Income Fund since
January 1995. Mr. Policinski currently serves as a Second Vice President and a
Portfolio Manager for LIM. Mr. Policinski joined Lincoln in 1978 and has held
several investment-related positions including management of annuity and pension
assets in excess of $3 billion. He also has experience in short-term investments
and cash management. He holds a BS in economics and an MBA from Indiana
University. He is also a candidate for CFA designation.
Lynch & Mayer, Inc., Sub-Adviser to the Manager with respect to
management of the assets of the Enterprise Fund and 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, 1996, in excess of $6.1 billion. Edward J. Petner
and Kevin P. Ferguson have had primary responsibility for making investment
decisions for Enterprise Fund since the Fund's inception. Philip C. Coburn
joined Mr. Petner and Mr. Ferguson in making investment decisions for the Fund
on October 31, 1996. 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. Mr. Ferguson serves as Senior Vice President for
Lynch & Mayer, Inc. Before joining Lynch & Mayer, Inc. in 1992, he was a Senior
Financial Analyst for American Express. Mr. Ferguson received a BS from Boston
College in 1986 and an MBA from New York University in 1992. Mr. Coburn serves
as Vice President for Lynch & Mayer, Inc. Before joining Lynch & Mayer in 1994,
he was an Institutional Equity Trader for C. J. Lawrence. Mr. Coburn received a
BA from Brown University in 1987 and an MBA from The Wharton School in 1994.
Anthony A. Segalas has had primary responsibility for making investment
decisions for U.S. Growth Fund since Lynch & Mayer, Inc. assumed sub-advisory of
the Fund in 1996. Mr. Segalas serves as Senior Vice President for Lynch & Mayer,
Inc. Before joining Lynch & Mayer, Inc. in 1984, Mr. Segalas was Assistant
Treasurer/Pension Trust for Chase Manhattan Bank, N.A. He received a BS from
Boston University in 1980 and an MBA from Fordham University in 1985.
Walter Scott & Partners Limited, Sub-Adviser to the Manager with
respect to management of the assets of the World Growth Fund, Millburn Tower,
Gogar, Edinburgh, Scotland EH12 9BS, provides investment advice to pension funds
and foundations and had assets under management, as of October 31, 1996, in
excess of $3.5 billion. Walter Scott & Partners Limited uses a team of Fund
managers to provide the advisory services to World Growth Fund pursuant to the
Sub-Advisory Agreement.
John Govett & Company Limited, Sub-Adviser to the Manager with respect
to management of the assets of the New Pacific Fund, Shackleton House, 4
Battlebridge Lane, London, England SE1 2HR, provides investment advice to
investment trusts, investment companies, mutual funds and pension funds and had
assets under management, as of October 31, 1996, of $5.4 billion. Peter Robson
has had primary responsibility for making investment decisions for New Pacific
Fund since the Fund's inception. Mr. Robson currently serves as a Senior
Portfolio Manager and Director for John Govett & Company Limited and specializes
in the management of Far Eastern investments. Before joining John Govett &
Company Limited in 1990, Mr. Robson was with BZW Investment Management where he
managed UK unit trusts before moving to specialize in Far Eastern Markets. Mr.
Robson is a graduate of Oxford University, and was commissioned into the 1st
Queen's Dragoon Guards in 1985.
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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%
World Growth Fund Walter Scott & Partners Limited 0.80%
New Pacific Fund John Govett & Company Limited 0.50%
Corporate Income Fund Lincoln Investment Management, Inc. 0.30%
Federal Bond Fund Lincoln Investment Management, Inc. 0.30%
Enterprise Fund Lynch & Mayer, Inc. 0.50% on the first
$150 million and
0.35% on assets over
$150 million
</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 relevant. Each
Fund may also advertise aggregate and average total return information
concerning a Class over additional periods of time. In
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addition, each Fund may present total return information that does not reflect
the deduction of the maximum front-end sales charge or any applicable CDSC. In
this case, such total return information would be more favorable than total
return information which includes deductions of the maximum front-end sales
charge or any applicable CDSC.
The current yield for a Class will be calculated by dividing the
annualized net investment income earned by that Class during a recent 30-day
period by the net asset value per share on the last day of the period. The yield
formula provides for semi-annual compounding which assumes that net investment
income is earned and reinvested at a constant rate and annualized at the end of
a six-month period.
Because securities prices fluctuate, investment results of the Classes
will fluctuate over time and past performance should not be considered as a
representation of future results.
Distribution (12b-1) and Service
The Distributor, Delaware Distributors, L.P., serves as the national
distributor for each Fund under separate Distribution Agreements dated September
25, 1995.
Adviser Funds, Inc. has adopted a separate distribution plan under Rule
12b-1 for each of the Class A Shares, the Class B Shares and the Class C Shares
(the "Plans"). Each Plan permits the Fund to which 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. The Class A, Class B and Class C Shares will not incur
any distribution expenses beyond these limits, which may not be increased
without shareholder approval. The Distributor may, however, incur additional
expenses and make additional payments to dealers from its own resources to
promote the distribution of shares of the Classes.
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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, 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 annually review service fees paid to
the Transfer Agent.
The Distributor and the Transfer Agent are also indirect, wholly owned
subsidiaries of DMH and Lincoln National.
Expenses
Each Fund is responsible for all of its own expenses other than those
borne by the Manager under its Investment Management Agreements and those borne
by the Distributor under its Distribution Agreements. For the fiscal year ended
October 31, 1996, 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>
Enterprise Fund 1.82% 2.50% 2.50%
U.S. Growth Fund 1.80% 2.48% 2.48%
World Growth Fund 1.82% 2.50% 2.50%
New Pacific Fund 1.82% 2.50% 2.50%
Federal Bond Fund 1.23% 1.90% 1.90%
Corporate Income Fund 1.23% 1.90% 1.90%
</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.
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Restructuring of the Funds
Until April 26, 1996, Adviser Funds, Inc. consisted of nine series of
shares (the six current Funds as well as three other funds) and was named the
Lincoln Advisor Funds, Inc. ("LAF"). On February 23, 1996, the LAF's Board of
Directors approved a restructuring to integrate fully the LAF into the Delaware
Group of funds. The restructuring provided, among other things, for the
liquidation of three funds, other than the Funds; the appointment of Delaware
Management Company, Inc. as the investment manager of each of the Funds; the
appointment of the sub-advisers described in this Prospectus; the changes in the
names as follows: Lincoln Enterprise Portfolio to Enterprise Fund; Lincoln U.S.
Growth Portfolio to U.S. Growth Fund; Lincoln World Growth Portfolio to World
Growth Fund; Lincoln New Pacific Portfolio to New Pacific Fund; Lincoln
Government Income Portfolio to Federal Bond Fund; and Lincoln Corporate Income
Portfolio to Corporate Income 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, the front-end sales charges for
and 12b-1 Plan distribution fees assessable against Class A Shares and the
contingent deferred sales charge schedule for Class B Shares, as well as its
feature for conversion to Class A Shares, have been modified to be made
consistent with the charges, fees and features that generally apply to all other
Delaware Group funds. The charges and fees previously applicable to the Class C
Shares have not been changed.
Beginning May 6, 1996, the charges, fees and features described in this
Prospectus have been applied to the respective shares, except for Class B Shares
purchased before that date. Class B Shares purchased prior to May 6, 1996
continue to be subject to the following contingent deferred sales charge
schedule if redemptions are made during the time periods described: within the
first year after purchase (5.0%); within the second year after purchase (4.0%);
within the third year after purchase (4.0%) within the fourth year after
purchase (3.0%); within the fifth year after purchase (2.0%) within the sixth
year after purchase (1.0%); and, thereafter, none. In addition, Class B Shares
purchased prior to May 6, 1996 still will convert to Class A Shares after the
expiration of approximately six years after purchase. Class B Shares purchased
with reinvested dividends, whether effected before or after May 6, 1996, will be
aggregated and converted pro-rata with other Class B Shares.
Other Shareholder Matters
All shares of Adviser Funds, Inc. have equal voting rights and are
entitled to one vote per share with proportional voting for fractional shares.
As permitted by Maryland law, there will normally be no meetings of shareholders
for the purpose of electing directors unless and until such time as fewer than a
majority of the directors holding office have been elected by shareholders. At
that time, the directors in office will call a shareholders meeting for election
of directors. Shareholders have certain rights, including the right to call a
meeting upon a vote of 10% of Adviser Funds, Inc.'s outstanding shares for the
purpose of voting on the removal of one or more directors or to transact any
other business. The shares do not have cumulative voting rights. Accordingly,
the holders of a majority of the shares voting for the election of directors can
elect all the directors. Shares of Adviser Funds, Inc., when issued, will be
fully paid and non-assessable.
In matters which only affect a particular Fund, the matter shall have
been effectively acted upon by a majority vote of that Fund even though: (1) the
matter has not been approved by a majority vote of any other Fund; or (2) the
matter has not been approved by a majority vote of Adviser Funds, Inc.
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In addition to Class A Shares, Class B Shares and Class C Shares, each
Fund also offers an Institutional Class of shares. Shares of each class
represent proportionate interests in the assets of the respective Fund and have
the same voting and other rights and preferences as the other classes of that
Fund, except that shares of the Institutional Classes are not subject to, and
may not vote on matters affecting, the 12b-1 Plans relating to the Classes.
Similarly, as a general matter, shareholders of Class A Shares, Class B Shares
and Class C Shares may vote only on matters affecting the 12b-1 Plan that
relates to the class of shares that they hold. However, the Class B Shares may
vote on any proposal to increase materially the fees to be paid by a Fund under
the 12b-1 Plan relating to the Class A Shares.
Initial investments into Adviser Funds, Inc. were made by American
States Insurance Company ("ASI") and Lincoln National Life Insurance Company
("LNLIC"), both affiliates of the Manager. As of 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 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.
Independent Accountants
Adviser Funds, Inc.'s independent accountants are Coopers & Lybrand
L.L.P., Eleven Penn Center Plaza, Philadelphia, PA 19103. Coopers & Lybrand
L.L.P. conducts an annual audit of each Fund and consults with the Fund and each
Fund as to matters of accounting, regulatory filings and federal and state
income taxation.
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IMPLEMENTATION OF INVESTMENT OBJECTIVES AND POLICIES
In attempting to achieve their investment objectives and policies, the
Funds may employ, among others, one or more of the strategies set forth below.
Convertible Securities
The Funds may invest in securities that either have warrants or rights
attached or are otherwise convertible into other or additional securities. A
convertible security is typically a fixed-income security (a bond or preferred
stock) that may be converted at a stated price within a specified period of time
into a specified number of shares of common stock of the same or a different
issuer. Convertible securities are generally senior to common stocks in a
corporation's capital structure but are usually subordinated to similar
non-convertible securities. While providing a fixed-income stream (generally
higher in yield than the income derivable from a common stock but lower than
that afforded by a similar non-convertible security), a convertible security
also affords an investor the opportunity, through its conversion feature, to
participate in capital appreciation attendant upon a market price advance in the
common stock underlying the convertible security. In general, the market value
of a convertible security is at least the higher of its "investment value"
(i.e., its value as a fixed-income security) or its "conversion value" (i.e.,
its value upon conversion into its underlying common stock). While no securities
investment is without some risk, investments in convertible securities generally
entail less risk than investments in the common stock of the same issuer.
U.S. Government Securities
All of the Funds may invest in securities of the U.S. government.
Securities guaranteed by the U.S. government include: (1) direct obligations of
the U.S. Treasury (such as Treasury bills, notes and bonds) and (2) federal
agency obligations guaranteed as to principal and interest by the U.S. Treasury
(such as GNMA certificates and Federal Housing Administration debentures). For
these securities, the payment of principal and interest is unconditionally
guaranteed by the U.S. government, and thus they are of the highest possible
credit quality. Such securities are subject to variations in market value due to
fluctuations in interest rates, but if held to maturity are deemed to be free of
credit risk for the life of the investment.
Securities issued by U.S. government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they generally involve federal sponsorship in one way or
another: some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the U.S. Treasury; some are supported by the
discretionary authority of the U.S. Treasury to purchase certain obligations of
the issuer; and others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and instrumentalities
include, but are not limited to, Federal Land Banks, Farmers Home
Administration, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, and Federal Home Loan Banks.
Mortgage-Backed Securities
The Corporate Income and Federal Bond Funds may invest in various types
of mortgage-backed securities. Mortgage-backed securities may be issued by
governmental agencies (such as the Government National Mortgage Association
("GNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC")), by the
Federal National Mortgage Association ("FNMA"), which is a federally chartered
and privately-owned corporation, or by private financial institutions such as
commercial banks, savings and loan associations, mortgage bankers and securities
broker/dealers (or separate trusts or affiliates of such institutions
established to issue these securities).
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Most mortgage-backed securities, including the securities issued by
GNMA, FHLMC and FNMA, are so-called "pass-through" securities representing
interests in a pool of underlying mortgage loans, on which the regular interest
and principal payments (including any prepayments) are passed through to the
holder of the securities. Although the mortgage loans in a pool will have stated
maturities of up to 30 years, due to both normal principal repayment and
prepayments, the average effective maturities of these securities will vary and
will tend to be shorter than those of the underlying mortgages. Due to the
prepayment feature and the need to reinvest prepayments of principal at current
market rates, these securities can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of declining interest
rates. Like other fixed-income investments, the value of mortgage-related
securities will tend to rise when interest rates fall and to fall when interest
rates rise. Their value may also change due to changes in the market's
perception of the creditworthiness of the entity that issues or guarantees them.
For additional information regarding mortgage-backed securities, see Part B.
U.S. government securities may be acquired by the Funds in the form of
separately traded principal and interest components of securities issued or
guaranteed by the U.S. Treasury. The principal and interest components of
selected securities are traded independently under the Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. Under the
STRIPS program, the principal and interest components are individually numbered
and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Obligations of Resolution Funding Corporation are similarly divided into
principal and interest components and maintained as such on the book-entry
records of the Federal Reserve Banks.
In addition, the Funds may invest in custodial receipts that evidence
ownership of future interest payments, principal payments or both on certain
U.S. Treasury notes or bonds in connection with programs sponsored by banks and
brokerage firms. Such notes and bonds are held in custody by a bank on behalf of
the owners of the receipts. These custodial receipts are known by various names,
including "Treasury Receipts" ("Trs"), ("TIGRs") and "Certificates of Accrual on
Treasury Securities" ("CATS"), and may not be deemed U.S.
government securities.
The Funds may also invest from time to time in collective investment
vehicles, the assets of which consist principally of U.S. government securities
or other assets substantially collateralized or supported by such securities,
such as government trust certificates.
The U.S. government securities in which the Funds invest do not, in
general, have as high a yield as more speculative securities or securities not
supported by the U.S. government or its agencies or instrumentalities. When
interest rates increase, the value of debt securities and shares of the Funds
can be expected to decline.
Asset-Backed Securities
The Federal Bond and Corporate Income Funds may purchase asset-backed
securities, which represent a participation in, or are secured by and payable
from, a stream of payments generated by particular assets, most often a pool of
assets similar to one another. Assets generating such payments will consist of
motor vehicle installment purchase obligations, credit card receivables, other
financial receivables and home equity loans. See Part B.
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Repurchase Agreements
The Funds may enter into repurchase agreements, under which a Fund buys
a security (typically a U.S. government security or other money market security)
and obtains a simultaneous commitment from the seller to repurchase the security
at a specified time and price. The seller must maintain with the Adviser Funds,
Inc.'s Custodian collateral equal to at least 100% of the repurchase price
including accrued interest, as monitored daily by the Manager and/or
sub-adviser. A Fund only will enter into repurchase agreements involving
securities in which it could otherwise invest and with banks, brokers or dealers
deemed by the Board of Directors to be creditworthy. If the seller under the
repurchase agreement defaults, the Fund may incur a loss if the value of the
collateral securing the repurchase agreement has declined and may incur
disposition costs in connection with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller, realization upon the
collateral by the Fund may be delayed or limited.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow the
Delaware Group funds jointly to invest cash balances. The Funds may invest cash
balances in a joint repurchase agreement in accordance with the terms of the
Order and subject generally to the conditions described above.
When-Issued Securities and Firm Commitment Agreements
All of the Funds may purchase securities on a delayed delivery or
"when-issued" basis and enter into firm commitment agreements (transactions
whereby the payment obligation and interest rate are fixed at the time of the
transaction but the settlement is delayed). The transactions may involve either
corporate, municipal or government securities. A Fund as a purchaser assumes the
risk of any decline in value of the security beginning on the date of the
agreement or purchase. The Funds may invest in when-issued securities in order
to take advantage of securities that may be especially under or over valued when
trading on a when-issued basis.
Each Fund will segregate liquid assets such as cash, U.S. government
securities or other appropriate high grade debt obligations in an amount
sufficient to meet its payment obligations in these transactions. Although these
transactions will not be entered into for leveraging purposes, to the extent a
Fund's aggregate commitments under these transactions exceed its holdings of
cash and securities that do not fluctuate in value (such as money market
instruments), the Fund temporarily will be in a leveraged position (i.e., it
will have an amount greater than its net assets subject to market risk). Should
market values of a Fund's portfolio securities decline while Adviser Funds, Inc.
is in a leveraged position, greater depreciation of its net assets would likely
occur than were it not in such a position. The Funds will not borrow money to
settle these transactions and, therefore, will liquidate other Fund securities
in advance of settlement if necessary to generate additional cash to meet their
obligations thereunder.
Money Market Instruments
All of the Funds may invest in money market instruments without limit
for temporary or defensive purposes. These are shorter-term debt securities
generally maturing in one year or less which include (1) commercial paper
(short-term notes up to 9 months issued by corporations or governmental bodies),
(2) commercial bank obligations (certificates of deposit (interest-bearing time
deposits), bankers' acceptances (time drafts on a commercial bank where the bank
accepts an irrevocable obligation to pay at maturity), and documented discount
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
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annually and generally more frequently) have maturities in excess of one year,
they are also considered to be short-term debt securities.
Strategic Transactions
General. The Funds may, but are not required to, utilize various other
investment strategies as described below to hedge various market risks (such as
interest rates, currency exchange rates, and broad or specific equity or
fixed-income market movements), to manage the effective maturity or duration of
fixed-income securities in the Fund's portfolio or to enhance potential gain.
Such strategies are generally accepted as modern Fund management and are
regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur. In the course of pursuing
these investment strategies, the Fund may purchase and sell derivative
securities. In particular, the Funds may purchase and sell exchange-listed and
over-the-counter put and call options on securities, equity and fixed-income
indices and other financial instruments, purchase and sell financial futures
contracts and options thereon, enter into various interest rate transactions
such as swaps, caps, floors or collars, and enter into various currency
transactions such as currency forward contracts, currency futures contracts,
currency swaps or options on currencies or currency futures (collectively, all
the above are called "Strategic Transactions"). Strategic Transactions may be
used to attempt to protect against possible changes in the market value of
securities held in or to be purchased for the Fund resulting from securities
markets or currency exchange rate fluctuations, to protect the Fund's unrealized
gains in the value of its Fund securities, to facilitate the sale of such
securities for investment purposes, to manage the effective maturity or duration
of fixed-income securities in a Fund, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Any or all of these investment techniques may be used at
any time and there is no particular strategy that dictates the use of one
technique rather than another, as use of any Strategic Transaction is a function
of numerous variables including market conditions. The ability of a Fund to
utilize these Strategic Transactions successfully will depend on the Manager's
or sub-adviser's ability to predict pertinent market movements, which cannot be
assured. The Funds will comply with applicable regulatory requirements when
implementing these strategies, techniques and instruments. Strategic
Transactions involving financial futures and options thereon will be purchased,
sold or entered into only for bona fide hedging, risk management or Fund
management purposes and not for speculative purposes. Additional information
relating to certain financial instruments or strategies is set forth below. In
addition, see Special Risks of Strategic Transactions, below, for a discussion
of certain risks.
Limitations on Futures and Options Transactions. A Fund will not enter
into any futures contract or option on a futures contract if, as a result, the
sum of initial margin deposits on futures contracts and related options and
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.
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The limitations on the Funds' investments in futures contracts and
options, and the Funds' policies regarding futures contracts and options
discussed elsewhere are not fundamental policies and may be changed as
regulatory agencies permit.
Options Transactions. The Funds may purchase and write (i.e., sell) put
and call options on securities and currencies that are traded on national
securities exchanges or in the over-the-counter market to enhance income or to
hedge their Funds. A call option gives the purchaser, in exchange for a premium
paid, the right for a specified period of time to purchase securities or
currencies subject to the option at a specified price (the exercise price or
strike price). When a Fund writes a call option, the Fund gives up the potential
for gain on the underlying securities in excess of the exercise price of the
option.
A put option gives the purchaser, in return for a premium, the right
for a specified period of time to sell the securities or currencies subject to
the option to the writer of the put at the specified exercise price. The writer
of the put option, in return for the premium, has the obligation, upon exercise
of the option, to acquire the securities underlying the option at the exercise
price. A Fund might, therefore, be obligated to purchase the underlying
securities for more than their current market price.
The Funds will write only "covered" options. An option is covered if a
Fund owns an offsetting position in the underlying security or maintains cash,
U.S. government securities or other high-grade debt obligations with a value
sufficient at all times to cover its obligations. See Part B.
Forward Foreign Currency Exchange Contracts. The Funds may enter into
forward foreign currency exchange contracts to protect the value of their Funds
against future changes in the level of currency exchange rates. The Funds may
enter into such contracts on a spot (i.e., cash) basis at the rate then
prevailing in the currency exchange market or on a forward basis, by entering
into a forward contract to purchase or sell currency at a future date. A Fund's
dealings in forward contracts will be limited to hedging involving either
specific transactions or Fund positions. Transaction hedging generally arises in
connection with the purchase or sale of its Fund securities and accruals of
interest or dividends receivable and Fund expenses. Position hedging generally
arises with respect of existing Fund security or currency positions.
Futures Contracts and Options Thereon. The Funds may purchase and sell
financial futures contracts and options thereon which are exchange-listed or
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.
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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 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.
-67-
<PAGE>
<TABLE>
<CAPTION>
APPENDIX A - INVESTMENT ILLUSTRATIONS
Illustrations of Hypothetical Returns on Investments Based on Purchase Option
$10,000 Purchase
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
--------------------------------------------------- -------------------------------------------------------------------------
Year Class A Class B Class C Class A Class B Class C
---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,478 10,930 10,930 10,478 10,530 10,830+
2 11,525 11,946 11,946
3 12,678 13,058 13,058
4 13,946 14,272 14,272
5 15,340 15,599 15,599
6 16,874 17,050 17,050
7 18,562 18,636 18,636
8 20,418+ 20,369 20,369
9 22,459 22,405* 22,263
10 24,705 24,646* 24,333
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
--------------------------------------------------- -------------------------------------------------------------------------
Year Class A Class B Class C Class A Class B Class C
---- ------- ------- ------- ------- ------- -------
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,478 10,930 10,930 10,478 10,930 10,930
2 11,525 11,946 11,946 11,525 11,946 11,946
3 12,678 12,758 13,058+ 12,678 13,058 13,058
4
5
6
7
8
9
10
</TABLE>
*This assumes that Class B Shares
were converted to Class A Shares at the end of the eighth year.
<PAGE>
<TABLE>
<CAPTION>
$250,000 Purchase
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
-------------------------------------------------- ---------------------------------------------------------------------------
Year Class A Class B Class C Class A Class B Class C
---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
0 243,750 250,000 250,000 243,750 250,000 250,000
1 268,125 273,250 273,250 268,125 263,250 270,750+
2 294,938 298,662 298,662
3 324,431 326,438 326,438
4 356,874+ 356,797 356,797
5 392,562 389,979 389,979
6 431,818 426,247 426,247
7 475,000 465,888 465,888
8 522,500 509,215 509,215
9 574,750 560,137* 556,572
10 632,225 616,150* 608,333
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
-------------------------------------------------- ---------------------------------------------------------------------------
Year Class A Class B Class C Class A Class B Class C
---- -------
0 243,750 250,000 250,000 243,750 250,000 250,000
1 268,125 273,250 273,250 268,125 273,250 273,250
2 294,938 298,662 298,662 294,938 298,662 298,662
3 324,431 318,938 326,438+ 324,431 326,438 326,438
4 356,874+ 356,797 356,797
5 392,562 384,979 389,979
6
7
8
9
10
</TABLE>
*This assumes that Class B Shares
were converted to Class A Shares at the end of the eighth year.
Assumes a hypothetical return for Class A of 10% per year, a hypothetical return
for Class B of 9.3% for years 1-8 and 10% for years 9-10, and a hypothetical
return for Class C of 9.3% per year.
Hypothetical returns vary due to the different expense structure for each Class
and do not represent actual performance.
Class A purchase subject to appropriate sales charge breakpoint (4.75% @
$10,000; 3.75% @ $100,000; 2.50% @ $250,000).
Class B purchase assessed appropriate CDSC upon redemption (4%-4%-3%-3%-2%-1% in
years 1-2-3-4-5-6).
Class C purchase assessed 1% CDSC upon redemption in year 1.
Figures marked "+" identify which Class offers the greater return potential
based on the investment amount, the holding period and the expense structure for
each Class.
-68-
<PAGE>
<TABLE>
<CAPTION>
Illustrations of Hypothetical Returns on Investments Based on Purchase Option
$10,000 Purchase
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
----------------------------------------------------- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Class A Class B Class C Class A Class B Class C
---- --------- --------- --------- --------- --------- ---------
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,192 10,630 10,630 10,192 10,230 10,530+
2 10,905 11,300 11,300
3 11,669 12,012 12,012
4 12,485 12,768 12,768
5 13,359 13,573 13,573
6 14,294 14,428 14,428
7 15,295 15,337 15,337
8 16,366+ 16,303 16,303
9 17,511 17,444* 17,330
10 18,737 18,665* 18,422
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
----------------------------------------------------- -------------------------------------------------------------------------
Year Class A Class B Class C Class A Class B Class C
---- --------- --------- --------- --------- --------- ---------
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,192 10,630 10,630 10,192 10,630 10,630
2 10,905 11,300 11,300 10,905 11,300 11,300
3 11,669 11,712 12,012+ 11,669 12,012 12,012
4 12,485 12,768 12,768
5 13,359 13,373 13,573+
6
7
8
9
10
</TABLE>
*This assumes that Class B Shares were converted to Class A Shares at the end of
the eighth year.
<PAGE>
<TABLE>
<CAPTION>
$250,000 Purchase
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
---------------------------------------------------- ---------------------------------------------------------------------------
Year Class A Class B Class C Class A Class B Class C
---- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
0 243,750 250,000 250,000 243,750 250,000 250,000
1 260,813 265,750 265,750 260,813 255,750 263,250+
2 279,069 282,492 282,492
3 298,604 300,289 300,289
4 319,507+ 319,207 319,207
5 341,872 339,318 339,318
6 365,803 360,695 360,695
7 391,409 383,418 383,418
8 418,808 407,574 407,574
9 448,124 436,104* 433,251
10 479,493 466,631* 460,546
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
---------------------------------------------------- ---------------------------------------------------------------------------
Year Class A Class B Class C Class A Class B Class C
---- --------- --------- --------- --------- --------- ---------
0 243,750 250,000 250,000 243,750 250,000 250,000
1 260,813 265,750 265,750 260,813 265,750 265,750
2 279,069 282,492 282,492 279,069 282,492 282,492
3 298,604 292,789 300,289+ 298,604 300,289 300,289
4 319,507+ 319,207 319,207
5 341,872 334,318 339,318
6
7
8
9
10
</TABLE>
*This assumes that Class B Shares were converted to Class A Shares at the end of
the eighth year.
Assumes a hypothetical return for Class A of 7% per year, a hypothetical return
for Class B of 6.3% for years 1-8 and 7% for years 9-10, and a hypothetical
return for Class C of 6.3% per year. Hypothetical returns vary due to the
different expense structure for each Class and do not represent actual
performance.
Class A purchase subject to appropriate sales charge breakpoint (4.75% @
$10,000; 3.75% @ $100,000; 2.50% @ $250,000).
Class B purchase assessed appropriate CDSC upon redemption (4%-4%-3%-3%-2%-1% in
years 1-2-3-4-5-6).
Class C purchase assessed 1% CDSC upon redemption in year 1.
Figures marked "+" identify which Class offers the greater return potential
based on the investment amount, the holding period and the expense structure for
each Class.
-69-
<PAGE>
APPENDIX B--CLASSES OFFERED
Growth of Capital A Class B Class C Class Consultant Class
- ------------------ -------- -------- -------- -----------------
Trend Fund x x x -
Enterprise Fund x x x -
DelCap Fund x x x -
Value Fund x x x -
U.S. Growth Fund x x x -
Quantum Fund x x x -
Total Return
Devon Fund x x x -
Decatur Total Return Fund x x x -
Decatur Income Fund x x x -
Delaware Fund x x x -
Blue Chip Fund x x x -
International Diversification
Emerging Markets Fund x x x -
New Pacific Fund x x x -
International Equity Fund x x x -
World Growth Fund x x x -
Global Assets Fund x x x -
Global Bond Fund x x x -
Current Income
Delchester Fund x x x -
Strategic Income Fund x x x -
Corporate Income Fund x x x -
Federal Bond Fund x x x -
U.S. Government Fund x x x -
Limited-Term Government Fund x x x -
Tax-Free Current Income
Tax-Free Pennsylvania Fund x x x -
Tax-Free USA Fund x x x -
Tax-Free Insured Fund x x x -
Tax-Free USA Intermediate Fund x x x -
Money Market Funds
Delaware Cash Reserve x x x x
U.S. Government Money Fund x - - x
Tax-Free Money Fund x - - x
-70-
<PAGE>
APPENDIX C - DESCRIPTION OF SECURITIES RATINGS
Corporate Income Fund has the ability to invest up to 35% 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, 1996. 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.
Corporate Income Fund
Rating Moody's Average Weighted
and/or Percentage of
S&P Portfolio
---------------- ------------------------
Ba/BB 5.00%
B/B 0.00%
Not Rated/Other 0.00%
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.
-71-
<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.
-72-
<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.
-73-
<PAGE>
C: This rating is reserved for income bonds on which no interest is
being paid.
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.
-74-
<PAGE>
For more information contact Delaware Group at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P.
Eleven Penn Center Plaza
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
- ---------------------------------------------------------
DELAWARE GROUP ADVISER FUNDS, INC.
ENTERPRISE FUND
U.S. GROWTH FUND
WORLD GROWTH FUND
NEW PACIFIC FUND
FEDERAL BOND FUND
CORPORATE INCOME FUND
INSTITUTIONAL CLASSES
- ---------------------------------------------------------
P R O S P E C T U S
- ---------------------------------------------------------
FEBRUARY 28, 1997
DELAWARE
GROUP
- --------
<PAGE>
TABLE OF CONTENTS
Cover Page
Synopsis
Summary of Expenses
Financial Highlights
Investment Objectives and Strategies
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
Classes of Shares
How to Buy Shares
Redemption and Exchange
Dividends, Distributions and Taxes
Calculation of Net Asset Value Per Share
Management of the Funds
Implementation of Investment Objectives and Policies
Appendix A - Description of Security Ratings
-1-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC. PROSPECTUS
INSTITUTIONAL CLASSES FEBRUARY 28, 1997
---------------------------------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For more information about the Institutional Classes
call Delaware Group at 800-828-5052.
Delaware Group Adviser Funds, Inc. ("Adviser Funds, Inc.") (formerly,
Lincoln Advisor Funds, Inc.) is an open-end management investment company.
Adviser Funds, Inc. currently issues six separate series of shares (each
referred to as a "Fund" or collectively as the "Funds"), each representing a
separate, diversified portfolio of securities. The Funds are the Enterprise
Fund, U.S. Growth Fund, World Growth Fund, New Pacific Fund, Federal Bond Fund
and Corporate Income Fund. See Restructuring of the Funds under Management of
the Funds. Each Fund has a fundamental investment objective and certain
investment policies which are described in this Prospectus.
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, 1997, as it may be
amended from time to time, contains additional information about the Funds and
has been filed with the Securities and Exchange Commission. Part B is
incorporated by reference into this Prospectus and is available, without charge,
by writing to Delaware Distributors, L.P. at the above address or by calling the
above number. The Funds' financial statements appear in their Annual Report,
which will accompany any response to requests for Part B.
This Prospectus contains useful information that can help the investor
decide whether a Fund's investment objective matches his/her own. Achievement of
a Fund's investment objective cannot, of course, be assured due to the risk of
capital loss from fluctuating prices inherent in any investment in securities.
Investments in the Funds are neither insured or guaranteed by any entity.
-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 PRINCIPAL. SHARES OF THE FUNDS ARE NOT BANK
OR CREDIT UNION DEPOSITS.
-3-
<PAGE>
The investment objectives of each Fund are as follows:
Equity Funds Enterprise Fund seeks to provide maximum appreciation
of capital by investing in medium-sized companies
which have a dominant position within their industry,
are undervalued, or have potential for growth in
earnings.
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.
World Growth 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.
Fixed-Income Funds Federal Bond Fund seeks to maximize current income
consistent with preservation of capital. The Fund
attempts to achieve this objective by investing
primarily in securities issued by the U.S.
government, its agencies and instrumentalities.
Corporate Income Fund seeks to provide high current
income consistent with preservation of capital. The
Fund attempts to achieve this objective primarily by
investing in a diversified portfolio of investment
grade fixed-income securities issued by U.S.
corporations. Investment grade fixed-income
securities are those rated at least Baa by Moody's
Investors Service, Inc. or BBB by Standard & Poor's
Ratings Group or, if not rated, are of comparable
quality in the opinion of the Manager or sub-adviser.
-4-
<PAGE>
SYNOPSIS
The following synopsis is qualified in its entirety by the more
detailed information appearing in the body of the Prospectus.
Investment Objectives and Policies
Each Fund's investment objective is stated on the cover page of this
Prospectus. Each objective is "fundamental" and may be changed only with the
approval of the holders of a majority of the outstanding voting securities of
the Fund, as defined in the Investment Company Act of 1940 (the "1940 Act").
Certain investment policies also are fundamental and thus require approval of
shareholders if a Fund wishes to change them. See Investment Restrictions in
Part B. Still other investment policies reflect current practices of the Funds
and may be changed by the Funds without the approval of shareholders.
Risk Factors
Prospective investors should consider a number of factors:
1. World Growth Fund and New Pacific Fund may invest substantially all
of their assets in non-United States issuers. U.S. Growth Fund, Enterprise Fund
and Corporate Income Fund may invest, respectively, 20%, 15% and 10% of their
assets in such issuers. Investing in securities of non-United States companies
which are generally denominated in foreign currencies and the utilization of
forward foreign currency exchange contracts 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 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. The Corporate Income Fund may invest up to 35% of its assets and the
U.S. Growth Fund may invest up to 10% of its assets in non-investment grade
fixed-income securities ("junk bonds"). Consequently, greater risks may be
involved with an investment in these Funds. See Lower-Rated Securities under
Risk Factors and Special Considerations.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") is the investment
manager for each Fund. See Restructuring of the Funds under Management of the
Funds. The Manager 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
-5-
<PAGE>
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.
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 Enterprise Fund and U.S. Growth Fund; Walter Scott & Partners
Limited for World Growth Fund; John Govett & Company Limited for New Pacific
Fund; and Lincoln Investment Management, Inc. for Corporate Income Fund and
Federal Bond 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.
-6-
<PAGE>
SUMMARY OF EXPENSES
EQUITY FUNDS
<TABLE>
<CAPTION>
Enterprise Fund U.S. Growth Fund World Growth Fund New Pacific Fund
Shareholder Transaction Expenses Institutional Class Institutional Class Institutional Class Institutional Class
- -------------------------------- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price)................. None None None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as
a percentage of offering price).... None None None None
Exchange Fees...................... None* None* None* None*
</TABLE>
FIXED-INCOME FUNDS
<TABLE>
<CAPTION>
Federal Bond Fund Corporate Income Fund
Shareholder Transaction Expenses Institutional Class Institutional Class
- -------------------------------- ------------------- ---------------------
<S> <C> <C>
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price)........... None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as
a percentage of offering price) None None
Exchange Fees................ None* None*
</TABLE>
- ------------------------
* Exchanges are subject to the requirements of each Fund and a front-end sales
charge may apply.
-7-
<PAGE>
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.
EQUITY FUNDS
<TABLE>
<CAPTION>
Annual Operating Expenses
(as a percentage of average
daily net assets after fee waivers Enterprise Fund U.S. Growth Fund World Growth Fund New Pacific Fund
and expense reimbursements) Institutional Class Institutional Class Institutional Class Institutional Class
- ---------------------------------- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Management Fees
(after voluntary waiver)+............. 0.72% 0.62% 0.34% 0.00%++
12b-1 Expenses........................ None None None None
Other Operating Expenses
(after giving effect to voluntary
waiver reimbursements)+ ....... 0.78% 0.86% 1.16% 1.50%
----- ----- ----- -----
Total Operating Expenses
(after giving effect to voluntary
waiver reimbursements)+ ..... 1.50% 1.48% 1.50% 1.50%
===== ===== ===== =====
</TABLE>
FIXED-INCOME FUNDS
<TABLE>
<CAPTION>
Annual Operating Expenses
(as a percentage of average
daily net assets after fee waivers Federal Bond Fund Corporate Income Fund
and expense reimbursements) Institutional Class Institutional Class
- ---------------------------------- ------------------- ---------------------
<S> <C> <C>
Management Fees
(after voluntary waiver)+ ...... 0.00% 0.00%
12b-1 Expenses...................... None None
Other Operating Expenses
(after giving effect to voluntary
waiver reimbursements)+ ...... 0.90% 0.90%
----- -----
Total Operating Expenses
(after giving effect to voluntary
waiver reimbursements)+.... 0.90% 0.90%
===== =====
</TABLE>
- ------------------------
For expense information about the Class A Shares, Class B Shares and Class C
Shares of each Fund, see the separate Prospectus relating to those classes.
+ With the exception of U.S. Growth Fund, the Manager elected voluntarily to
waive that portion, if any, of the annual Management Fees payable by a
particular Fund and to reimburse a Fund for its expenses to the extent
necessary to ensure that the expenses of that Fund (exclusive of taxes,
interest, brokerage commissions and extraordinary expenses) do not exceed, as
a percentage of average net assets, on an annualized basis, the amounts noted
above corresponding to the caption "Total Operating Expenses" through April
30, 1997. For U.S. Growth
-8-
<PAGE>
Fund, the Manger elected to waive such expenses to the extent that "Total
Operating Expenses" do not exceed 1.50% through April 30, 1997. 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>
Enterprise Fund Institutional Class.......................... 1.58% 0.80%
U.S. Growth Fund Institutional Class......................... 1.56% 0.70%
World Growth Fund Institutional Class........................ 2.28% 1.10%
New Pacific Fund Institutional Class......................... 2.45% 0.80%
Federal Bond Fund Institutional Class........................ 1.58% 0.30%
Corporate Income Fund Institutional Class 1.32% 0.30%
</TABLE>
++ 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.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Enterprise Fund Institutional Class $15 $47 $82 $179
U.S. Growth Fund Institutional Class $15 $47 $82 $179
World Growth Fund Institutional Class $15 $47 $82 $179
New Pacific Fund Institutional Class $15 $47 $82 $179
Federal Bond Fund Institutional Class $9 $29 $50 $111
Corporate Income Fund Institutional Class $9 $29 $50 $111
</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.
-9-
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Group Adviser Funds, Inc. and have been audited by Coopers & Lybrand
L.L.P., independent auditors. The data should be read in conjunction with the
financial statements, related notes, and the reports of Coopers & Lybrand L.L.P.
covering such financial information and highlights, all of which are
incorporated by reference into Part B. Further information about the Funds'
performance is contained in their Annual Report to shareholders. A copy of the
Funds' Annual Report (including the report of Coopers & Lybrand L.L.P. ) may be
obtained from Adviser Funds, Inc. upon request at no charge.
- -------------------------------------------------------------------------------
-10-
<PAGE>
<TABLE>
<CAPTION>
ADVISER FUNDS, INC. - INSTITUTIONAL CLASSES
Enterprise Fund U.S. Growth Fund
--------------- ----------------
Period Period
2/3/94(1) 2/3/94(1)
Year Ended through Year Ended through
10/31/96(2) 10/31/95 10/31/94 10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $11.30 $9.23 $10.44 $12.50 $10.23 $10.52
Income From Investment Operations:
- ----------------------------------
Net Investment Income (Loss)...................... (0.12) (0.02) (0.02) (0.05) (0.05) (0.01)
Net Realized and Unrealized Gain (Loss)
From Security Transactions................... 2.48 2.09 (1.19) 1.49 2.32 (0.28)
---- ---- ------ ---- ------- -------
Net Increase (Decrease) in Net Assets
From Investment Operations................... 2.36 2.07 (1.21) 1.44 2.27 (0.29)
---- ---- ------ ---- ------- -------
Less Dividends and Distributions:
- ---------------------------------
Dividends From Net Investment Income.............. none none none none none none
Distributions From Net Realized Gain
on Security Transactions....................... none none none none none none
Returns of Capital................................ none none none none none none
---- ---- ---- ---- ---- ----
Total Dividends and Distributions................. none none none none none none
---- ---- ---- ---- ---- ----
Net Asset Value, End of Period........................ $13.66 $11.30 $9.23 $13.94 $12.50 $10.23
====== ====== ===== ====== ====== ======
- ---------------------------------------
Total Return(3)....................................... 20.80% 22.43% (11.61%) 11.52% 22.19% 2.78%
- ------------
- --------------------------------------------
Ratios and Supplemental Data:
- -----------------------------
Net Assets, End of Period (000's omitted)......... $7,225 $3,666 $234 $10,003 $4,819 $1,630
Ratio of Expenses to Average Net Assets........... 1.50% 1.53% 1.50% 1.48% 1.50% 1.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation.................. 1.58% 2.07% 2.75% 1.56% 1.83% 2.60%
Ratio of Net Investment Loss to Average Net Assets (0.94%) (0.60%) (0.63%) (0.45%) (0.59%) (0.27%)
Ratio of Net Investment Loss to Average Net Assets
Prior to Expense Limitation.................. (1.02%) (1.14%) (1.88%) (0.53%) (0.92%) (1.37%)
Portfolio Turnover Rate........................... 92% 106% 120% 131% 58% 66%
Average Commission Rate Paid...................... $0.0505 N/A N/A $0.519 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) Total return reflect the voluntary fee waivers described under Summary of
Expenses and Management of the Funds.
<PAGE>
<TABLE>
<CAPTION>
ADVISER FUNDS, INC. - INSTITUTIONAL CLASSES
World Growth Fund New Pacific Fund
----------------- ----------------
Period Period
2/3/94(1) 2/3/94(1)
Year Ended through Year Ended through
10/31/96(2) 10/31/95 10/31/94 10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $11.44 $11.02 $10.50 $8.77 $10.48 $11.14
Income From Investment Operations:
- ----------------------------------
Net Investment Income (Loss)...................... (0.06) 0.04 0.04 (0.05) (0.01) 0.01
Net Realized and Unrealized Gain (Loss)
From Security Transactions................... 0.96 0.41 0.52 0.82 (1.41) (0.67)
---- ---- ---- ---- ------ ------
Total From Investment Operations.................. 0.90 0.45 0.56 0.77 (1.42) (0.66)
---- ---- ---- ---- ------ ------
Less Dividends and Distributions:
- ---------------------------------
Dividends From Net Investment Income........... (0.02) (0.03) (0.04) (0.01) none none
Distributions From Net Realized Gain
on Security Transactions..................... none none none none (0.29) none
Returns of Capital................................ none none none none none none
---- ---- ---- ---- ---- ----
Total Dividends and Distributions................. (0.02) (0.03) (0.04) (0.01) (0.29) none
------ ------ ------ ------ ------ ----
Net Asset Value, End of Period........................ $12.32 $11.44 $11.02 $9.53 $8.77 $10.48
====== ====== ====== ===== ===== ======
- ---------------------------------------
Total Return(3)....................................... 7.91% 4.22% 5.26% 8.77% (13.65%) (5.98%)
- ------------
- ---------------------------------------------
Ratios and Supplemental Data:
- -----------------------------
Net Assets, End of Period (000's omitted)......... $284 $161 $63 $119 $62 $47
Ratio of Expenses to Average Net Assets........... 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of Expenses to Average Net Assets
Prior to Expense Limitation.................. 2.28% 2.61% 3.21% 2.45% 3.38% 3.31%
Ratio of Net Investment (Loss) to Average Net Assets (0.19%) 0.40% 0.76% 1.49% (0.16%) 0.23%
Ratio of Net Investment (Loss) to Average Net Assets
Prior to Expense Limitation.................. (0.97%) (0.71%) (0.95%) 0.54% (2.04%) (1.58%)
Portfolio Turnover Rate........................... 21% 9% 6% 163% 163% 104%
Average Commission Rate Paid...................... $0.0448 N/A N/A $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) Total return reflect the voluntary fee waivers described under Summary of
Expenses and Management of the Funds.
<PAGE>
<TABLE>
<CAPTION>
ADVISER FUNDS, INC. - INSTITUTIONAL CLASSES
Corporate Income Fund Federal Bond Fund
--------------------- -----------------
Period Period
2/3/94(1) 2/3/94(1)
Year Ended through Year Ended through
10/31/96(2) 10/31/95 10/31/94 10/31/96(2) 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $9.49 $8.84 $9.98 $9.60 $9.15 $10.00
Income From Investment Operations:
- ----------------------------------
Net Investment Income (Loss)...................... 0.62 0.73 0.41 0.55 0.69 0.33
Net Realized and Unrealized Gain (Loss)
on Security Transactions..................... (0.15) 0.78 (1.12) (0.51) 0.54 (0.85)
------ ---- ------ ------ ---- ------
Total From Investment Operations.................. 0.47 1.51 (0.71) 0.04 1.23 (0.52)
---- ---- ------ ---- ---- ------
Less Dividends and Distributions:
- ---------------------------------
Dividend From Net Investment Income............... (0.62) (0.86) (0.43) (0.55) (0.78) (0.33)
Distributions From Net Realized Gain on
Security Transactions........................ none none none none none none
Returns of Capital................................ none none none none none none
---- ---- ---- ---- ---- ----
Total Dividends and Distributions................. (0.62) (0.86) (0.43) (0.55) (0.78) (0.33)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period........................ $9.34 $9.49 $8.84 $9.09 $9.60 $9.15
===== ===== ===== ===== ===== =====
- ----------------------------------------
Total Return(3)....................................... 5.19% 18.27% (7.21%) 0.60% 14.15% (5.17%)
- ------------
- --------------------------------------------------
Ratios and Supplemental Data:
- -----------------------------
Net Assets, End of Period (000's omitted)......... $5,852 $3,704 $1,302 $106 $979 $353
Ratio of Expenses to Average Net Assets........... 0.90% 0.90% 0.90% 0.90% 0.90% 0.90%
Ratio of Expenses to Average Net Assets ..........
Prior to Expense Limitation.................. 1.32% 1.52% 2.20% 1.58% 1.71% 2.23%
Ratio of Net Investment (Loss) to Average Net Assets 6.53% 6.95% 6.88% 5.66% 6.39% 5.57%
Ratio of Net Investment (Loss) to Average Net Assets
Prior to Expense Limitation.................. 6.11% 6.33% 5.58% 4.98% 5.58% 4.24%
Portfolio Turnover Rate........................... 68% 119% 185% 196% 227% 366%
</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) Total return reflect the voluntary fee waivers described under Summary of
Expenses and Management of the Funds.
<PAGE>
INVESTMENT OBJECTIVES AND STRATEGIES
The Equity Funds
Enterprise Fund. This Fund's fundamental investment objective is to
seek to provide maximum appreciation of capital by investing in medium-sized
companies which have a dominant position within their industry, are undervalued,
or have potential for growth in earnings. Currently, medium-sized companies are
considered to have market capitalizations between $250 million and $9 billion.
The Fund is unlikely to participate in slow growth industries such as utilities
and is likely to invest frequently in high growth rate companies in the retail,
health care, computer, communication and entertainment industries. Under normal
circumstances, at least 65% of the value of the Fund's assets will be invested
in equity securities.
In selecting investments, the Fund's Manager or sub-adviser seeks small
or medium capitalization companies that it believes have earnings that may be
expected to grow faster than the U.S. economy in general. These companies will
typically possess one or more characteristics, including high quality
management, a leading or dominant position in a product and a relatively high
rate of return on invested capital. Income derived from securities of such
companies is only an incidental consideration of the Fund.
The Fund will primarily invest in common stocks although it may invest
up to 35% of the value of its assets in convertible bonds, convertible preferred
stock, warrants to purchase common stock, futures and options.
The Fund may invest up to 15% of its assets in securities of foreign
issuers.
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.
-11-
<PAGE>
World Growth Fund. This Fund's fundamental objective is to seek to
maximize total return (capital appreciation and income) by investing primarily
in equity securities of foreign issuers located in countries that the Fund's
Manager or sub-adviser deems to have attractive investment opportunities. "Total
return" refers to income plus realized and unrealized appreciation of the
securities. Under normal circumstances, the Fund will invest at least 65% of the
value of its total assets in securities of issuers located in at least three
countries other than the United States. However, more than 25% of the Fund's
total assets may be invested in the securities of issuers located in the same
country.
The Fund will emphasize established companies, although it may invest
in companies of varying sizes as measured by assets, sales and capitalization.
The Fund may invest in securities of issuers located in a variety of different
foreign regions and countries which includes, but is not limited to, the
following: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Greece, Hong Kong, Ireland, Italy, Japan, Luxembourg, Malaysia, Mexico,
The Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, Thailand and The United Kingdom. The relative strength or weakness
of a particular country's currency or economy may dictate whether securities of
issuers located in such country will be purchased or sold. Criteria for
determining the appropriate distribution of investments among various countries
and regions include prospects for relative economic growth among foreign
countries, expected levels of inflation, government policies influencing
business conditions, the outlook for currency relationships, and the range of
investment opportunities available to international investors.
The Fund invests in common stock and may invest in other securities
with equity characteristics, consisting of trust or limited partnership
interests, preferred stock, rights and warrants. The Fund may also invest in
convertible securities, consisting of debt securities or preferred stock that
may be converted into common stock or that carry the right to purchase common
stock. The Fund may invest in securities listed on foreign or domestic
securities exchanges and securities traded in foreign and domestic
over-the-counter markets and may invest in restricted or unlisted securities. In
addition, the Fund's investments may include American 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 20% of its assets in securities of companies
located in, or governments of, developing countries. For temporary defensive
purposes, the Fund may invest a major portion of its assets in securities of
U.S. issuers. In addition, the Fund may be invested in short-term debt
instruments to meet anticipated day-to-day operating expenses and liquidity
requirements.
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.
-12-
<PAGE>
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,
developing countries within the Pacific Basin. The Fund may invest up to 35% of
its assets in securities of U.S. issuers. In addition, the Fund may be invested
in short-term debt instruments to meet anticipated day-to-day operating expenses
and liquidity requirements.
The Fixed-Income Funds
Federal Bond Fund. This Fund's fundamental investment objective is to
seek to maximize current income consistent with the preservation of capital by
investing primarily in securities issued by the U.S. government, its agencies
and instrumentalities ("U.S. government securities"). Under normal conditions,
at least 65% of the value of the Fund's total assets will be invested in U.S.
government securities.
Depending upon prevailing market conditions, the Fund may invest in
U.S. government securities of varying maturities, ranging up to 40 years. U.S.
government securities include certain mortgage-backed securities, such as
Government National Mortgage Association Certificates. See Mortgage-Backed
Securities under Implementation of Investment Objectives and Policies. As the
Fund invests primarily in U.S. government securities, which are lower-risk
securities, it may not achieve as high a level of income under all market
conditions as would be the case if the Fund invested in higher yielding
securities. Up to 35% of the Fund's assets may be invested in corporate bonds of
U.S. companies, mortgage-backed securities and asset-backed securities that are
rated at least Aa by Moody's or AA by S&P or, if not rated, are of comparable
quality in the Manager's or sub-adviser's opinion. See Description of Security
Ratings in Appendix A.
-13-
<PAGE>
Corporate Income Fund. This Fund's fundamental investment objective is
to seek to provide a high level of current income consistent with preservation
of capital by investing primarily in corporate bonds of U.S. companies that are
rated at least Baa by Moody's or BBB by S&P or, if not rated, are of comparable
quality in the opinion of the Manager or sub-adviser. See Description of
Security Ratings in Appendix A.
Maturities of the corporate bonds held by the Fund are expected to
range from seven to 40 years, unless the Fund's Manager or sub-adviser believes
that investing in corporate bonds with shorter or longer maturities would be
appropriate in light of prevailing market conditions.
The Fund may also invest up to 35% of its assets in preferred stock,
corporate bonds and preferred stock convertible into or that carry the right to
acquire common stock, corporate bonds that are not of investment grade quality,
U.S. government securities, various mortgage-backed securities and asset-backed
securities, common stock consistent with the Fund's objective, and bonds issued
by foreign governments or foreign corporations, provided that no more than 10%
of the Fund's assets will be invested in bonds issued by foreign governments or
foreign corporations and no more than 10% of the Fund's assets will be
denominated in any one foreign currency. The Fund will not invest more than 35%
of its assets in bonds that are not of investment grade quality and will not
invest in bonds rated below Caa by Moody's or CCC by S&P. Lower-rated or unrated
securities, commonly referred to as "junk bonds," are more likely to react to
developments affecting market and credit risk than are more highly rated
securities, which primarily react to movements in the general level of interest
rates. See Risk Factors and Special Considerations for a description of the
risks inherent in such securities and see Description of Security Ratings in
Appendix A for a description of Moody's and S&P ratings.
Certain Investment Guidelines
Illiquid Securities. Up to 10% of the assets of each Fund may be
invested in securities that are not readily marketable, including, where
applicable: (1) repurchase agreements with maturities greater than seven
calendar days; (2) time deposits maturing in more than seven calendar days; (3)
certain instruments, futures contracts and options thereon for which there is no
liquid secondary market; (4) certain over-the-counter options, as described in
Part B; (5) certain variable rate demand notes having a demand period of more
than seven days; and (6) certain Rule 144A restricted securities (Rule 144A
securities for which a dealer or institutional market exists will not be
considered illiquid).
Restricted Securities. The Enterprise, U.S. Growth, World Growth 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.
-14-
<PAGE>
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
Corporate Income Fund that are rated in the lowest of the top four ratings (Baa
by Moody's or BBB by S&P) are considered to have speculative characteristics and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is the case
with higher grade securities. See Lower-Rated Securities, below.
Foreign Investments. The World Growth Fund and the New Pacific Fund may
invest substantially all of their assets in foreign investments. Certain of the
Funds may invest the following percentages of their assets in foreign
securities: the Enterprise Fund (15%), the U.S. Growth Fund (20%) and the
Corporate Income Fund (10%). There are certain risks involved in investing in
foreign securities, including those resulting from fluctuations in currency
exchange rates, devaluation of currencies, future political or economic
developments and the possible imposition of currency exchange blockages or other
foreign governmental laws or restrictions, reduced availability of public
information concerning issuers, and the fact that foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards or to other regulatory practices and requirements comparable to those
applicable to domestic companies. Although the Funds' Manager or sub-advisers do
not intend to expose the Funds to such risks, with respect to certain foreign
countries, there is the possibility of expropriation, nationalization,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Funds, including the withholding of dividends. When the Funds'
Manager or sub-adviser believes that currency in which a Fund security or
securities is denominated may suffer a decline against the United States dollar,
it may hedge such risk by entering into a forward contract to sell an amount of
foreign currency approximating the value of some or all of the Funds' portfolio
securities denominated in such foreign currency.
Because foreign securities generally are denominated and pay dividends
or interest in foreign currencies, and the Funds hold various foreign currencies
from time to time, the value of the net assets of the Funds as measured in
United States dollars will be affected favorably or unfavorably by changes in
exchange rates. Generally, currency exchange transactions will be conducted on a
spot (i.e., cash) basis at the spot rate prevailing in the currency exchange
market. The cost of currency exchange transactions will generally be the
difference between the bid and offer spot rate of the currency being purchased
or sold. In order to protect against uncertainty in the level of future foreign
currency exchange rates, the Funds are authorized to enter into certain foreign
transactions. Investors should be aware that exchange rate movements can be
significant and can endure for long periods of time. The Manager and
sub-advisers of the Funds attempt to manage exchange rate risk through active
currency management.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of the New York Stock Exchange. Accordingly, the Funds' foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of United States companies. Moreover, the
settlement periods for foreign securities, which are often longer than those for
securities of United States issuers, may
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affect portfolio liquidity. In buying and selling securities on foreign
exchanges, the Funds normally pay fixed commissions that are generally higher
than the negotiated commissions charged in the United States. In addition, there
is generally less governmental supervision and regulation of securities
exchanges, brokers and issuers in foreign countries than in the United States.
The World Growth 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. The following Funds may invest the following
percentages of their total assets in debt securities rated lower than Baa by
Moody's or BBB by S&P: U.S. Growth Fund (10%) and Corporate Income Fund (35%).
Prices for securities rated below investment grade may be affected by
legislative and regulatory developments. Securities rated Ba\BB or lower are
commonly referred to as "junk bonds." See Description of Security Ratings in
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 the Enterprise and U.S. Growth Funds,
will purchase additional securities when money borrowed exceeds 5% of the Fund's
total assets.
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Securities Lending. Each Fund may lend securities with a value of up to
one-third of its total assets to broker/dealers, institutions and other persons
as a means of earning additional income. Any such loan shall be continuously
secured by collateral at least equal to 100% of the value of the security being
loaned. If the collateral is cash, it may be invested in short-term securities,
U.S. government obligations or certificates of deposit. Each Fund will retain
the evidence of ownership of any loaned securities and will continue to be
entitled to the interest or dividends payable on the loaned securities. In
addition, the Fund will receive interest on the loan. The loan will be
terminable by the Fund at any time and will not be made to affiliates of the
Fund, the Manager or the respective sub-adviser. The Fund may pay reasonable
finder's fees to persons unaffiliated with it in connection with the arrangement
of loans.
If the other party to a securities loan becomes bankrupt, a Fund could
experience delays in recovering its securities. To the extent that, in the
meantime, the value of securities loans has increased, the Fund could experience
a loss.
Temporary Defensive Position. For temporary defensive purposes when the
Manager or sub-adviser determines that market conditions warrant, each Fund may
invest up to 100% of its assets in money market instruments. To the extent a
Fund is engaged in a temporary defensive position, the Fund will not be pursuing
its investment objective. Each Fund may also hold a portion of its assets in
cash for liquidity purposes.
Portfolio Turnover. The portfolio turnover rates for the past two
fiscal years for the Funds were as follows:
Period Ended Year Ended
Fund October 31, 1996 October 31, 1995
---- ---------------- ----------------
Enterprise Fund 92% 106%
U.S. Growth Fund 131% 58%
World Growth Fund 21% 9%
New Pacific Fund 163% 163%
Federal Bond Fund 196% 227%
Corporate Income Fund 68% 119%
High turnover in any Fund could result in additional brokerage
commissions to be paid by the Fund. In addition, high portfolio turnover may
also mean that a proportionately greater amount of distributions to shareholders
will be taxed as ordinary income rather than long-term capital gains compared to
investment companies with lower portfolio turnover. See Dividends, Distributions
and Taxes.
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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, 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 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.
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.
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<PAGE>
The effective date of a purchase made through an investment dealer is
the date the order is received by the Fund in which the shares are being
purchased. The effective date of a direct purchase is the day your wire,
electronic transfer or check is received, unless it is received after the time
the share price is determined, as noted above. Purchase orders received after
such time will be effective the next business day.
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 you want to receive the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may also request a redemption
or an exchange by calling 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 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, DISTRIBUTIONS AND TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in a Fund.
The Fixed-Income Funds accrue dividends from net investment income and
usually distribute such accrued dividends to shareholders monthly. The Equity
Funds declare dividends from net investment income and usually distribute such
accrued dividends to shareholders at least annually. All capital gains, if any,
are distributed annually, usually in December. When a capital gain dividend is
declared, the net asset value per share is reduced by the amount of the
dividend. Investors considering buying shares of one of the Funds just prior to
a record date for a taxable dividend or capital gain distribution should be
aware that, regardless of whether the price of the Fund shares to be purchased
reflects the amount of the forthcoming dividend or distribution payment, any
such payment will be a taxable dividend or distribution payment.
Both dividends and distributions, if any, are automatically reinvested
in your account at net asset value.
Each Fund has qualified and intends to continue to qualify as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended. In any fiscal year in which a Fund so qualifies and distributes to
shareholders its net investment income and net realized capital gains, the Fund
will be relieved of federal income tax. It is each Fund's policy to distribute
to the shareholders all of its net investment income and capital gains realized
during each fiscal year.
Under current law for each of the Funds, dividends paid from net
investment income and distributions of net realized short-term capital gains are
taxable to shareholders who are subject to income taxes as ordinary income,
regardless of how long shareholders have held their Fund shares. Distributions
of net realized long-term capital gains will be taxable to shareholders as
long-term capital gains, regardless of how long shareholders have held Fund
shares. Furthermore, as a general rule, a shareholder's gain or loss on a sale
or redemption of Fund shares will be a long-term capital gain or loss if the
shareholder has held the shares for more than one year and will be a short-term
capital gain or loss if the shareholder has held the shares for one year or
less. Some of the Funds' dividends declared from net investment income may
qualify for the federal dividends-received deduction for corporations. The
investor will be notified each year as to the amount and federal tax status of
all dividends and capital gains paid during the prior year. Such dividends and
capital gains may also be subject to state or local taxes. For the fiscal year
ended October 31, 1996, 23% and 13% of the dividends from net investment income
of, respectively, World Growth Fund and New Pacific Fund were eligible for the
dividends-received deduction to corporations.
A portion of each Fund's income, including income from repurchase
agreements and gains from options and futures transactions may be taxable to
shareholders as ordinary income. Long-term capital gains from options and
futures transactions may be taxable to shareholders as ordinary income.
Long-term capital gains distributions, if any, are taxable as long term capital
gains, regardless of the length of time a shareholder has owned shares.
Short-term capital gains and other taxable income distributions are taxable as
ordinary income.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November or December to shareholders of
record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by a Fund and received by the shareholder on
December 31 of the year declared.
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<PAGE>
If an investor has not furnished a certified correct taxpayer
identification number (generally a Social Security number) and has not certified
that withholding does not apply, or if the Internal Revenue Service has notified
a Fund that the taxpayer identification number listed on the investor's account
is incorrect according to their records or that the investor is subject to
backup withholding, federal law generally requires the Fund to withhold 31% from
any dividends and/or redemptions (including exchange redemptions). Amounts
withheld are applied to the investor's federal tax liability; a refund may be
obtained from the Internal Revenue Service if withholding results in overpayment
of taxes. Federal law also requires the Funds to withhold 30% or the applicable
tax treaty rate from dividends paid to certain nonresident alien, non-U.S.
partnership and non-U.S. corporation shareholder accounts.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. government securities may be exempt from
state personal income taxes. Shares of each Fund are exempt from Pennsylvania
county personal property taxes.
Certain Funds may be required to pay withholding and other taxes
imposed by foreign countries in connection with their investments outside the
U.S. generally at rates from 10% to 40%, which would reduce these Funds'
investment income.
Certain income received by the World Growth and New Pacific Funds may
be subject to foreign taxes. If more than 50% of the value of the Fund's total
assets at the close of any taxable year consists of securities of foreign
corporations, the Fund may elect to treat any foreign taxes paid by it as paid
by its shareholders. If a Fund makes this election, its shareholders will
generally be required to include in income their respective pro-rata positions
in computing their taxable income or, alternatively, to claim foreign tax
credits (subject, in either case, to certain limitations). Each year that a Fund
makes such an election, it will report to its shareholders the amount per share
of foreign taxes it has elected to have treated as paid by its shareholders.
See Dividends, Distributions and Taxes in Part B for additional
information on tax matters relating to each Fund and its shareholders.
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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 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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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, 1996, the Manager and its
affiliates within the Delaware Group, including Delaware International Advisers
Ltd., were managing in the aggregate more than $30 billion in assets in the
various institutional or separately managed (approximately $19,214,690,000) and
investment company (approximately $11,539,873,000) 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 each Fund dated May
4, 1996.
Investment Management Agreements. The Investment Management Agreements
were approved by the Board of Directors of Adviser Funds, Inc., including a
majority of the directors who are not "interested persons" of Adviser Funds,
Inc., on February 23, 1996 and approved by the respective shareholders of the
Funds at a shareholder meeting held on May 3, 1996. See Restructuring of the
Funds, below.
Under the Investment Management Agreements, the Manager receives
advisory fees monthly based upon each Fund's average daily net assets at the
following annual rates:
Enterprise Fund 0.80%
U.S. Growth Fund 0.70%
World Growth Fund 1.10%
New Pacific Fund 0.80%
Federal Bond Fund 0.30%
Corporate Income Fund 0.30%
The Manager elected voluntarily to waive that portion, if any, of its
investment advisory fees and to reimburse a Fund's expenses to the extent
necessary to ensure that a Fund's expenses do not exceed the amounts noted under
Summary of Expenses.
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<PAGE>
The advisory fees for the Enterprise, World Growth 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, 1996, the following investment
management fees based on a percentage of a Fund's average daily net assets were
incurred and reflect the voluntary waiver described above:
Earned Paid
Enterprise Fund 0.80% 0.72%
U.S. Growth Fund 0.70% 0.62%
World Growth Fund 1.10% 0.34%
New Pacific Fund 0.95%* none
Federal Bond Fund 0.30% none
Corporate Income Fund 0.30% none
* The Board of Directors approved a reduction from 1.10% to 0.80% in the
investment advisory fee for New Pacific Fund effective the close of
business May 3, 1996.
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.
LIM, Sub-Adviser to the Manager with respect to management of the
assets of the Corporate Income Fund and the Federal Bond Fund, 200 East Berry
Street, Fort Wayne, Indiana 46802, is an indirect, wholly owned subsidiary of
Lincoln National and an affiliate of the Manager. LIM acts as investment adviser
to
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<PAGE>
several registered investment companies in addition to those Funds. LIM also
provides investment services to Lincoln National and its principal subsidiaries
and acts as investment adviser to the other clients. As of October 31, 1996, LIM
had total assets under management in excess of $39 billion. Timothy J.
Policinski has had primary responsibility for making investment decisions for
Federal Bond Fund and Corporate Income Fund since January 1995. Mr. Policinski
currently serves as a Second Vice President and a Portfolio Manager for LIM. Mr.
Policinski joined Lincoln in 1978 and has held several investment-related
positions including management of annuity and pension assets in excess of $3
billion. He also has experience in short-term investments and cash management.
He holds a BS in economics and an MBA from Indiana University. He is also a
candidate for CFA designation.
Lynch & Mayer, Inc., Sub-Adviser to the Manager with respect to
management of the assets of the Enterprise Fund and 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, 1996, in excess of $6.1 billion. Edward J. Petner
and Kevin P. Ferguson have had primary responsibility for making investment
decisions for Enterprise Fund since the Fund's inception. Philip C. Coburn
joined Mr. Petner and Mr. Ferguson in making investment decisions for the Funds
on October 31, 1996. 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. Mr. Ferguson serves as Senior Vice President for
Lynch & Mayer, Inc. Before joining Lynch & Mayer, Inc. in 1992, he was a Senior
Financial Analyst for American Express. Mr. Ferguson received a BS from Boston
College in 1986 and an MBA from New York University in 1992. Mr. Coburn serves
as Vice President for Lynch & Mayer, Inc. Before joining Lynch & Mayer in 1994,
he was an Institutional Equity Trader for C. J. Lawrence. Mr. Coburn received a
BA from Brown University in 1987 and an MBA from The Wharton School in 1994.
Anthony A. Segalas has had primary responsibility for making investment
decisions for U.S. Growth Fund since Lynch & Mayer, Inc. assumed sub-advisory of
the Fund in 1996. Mr. Segalas serves as Senior Vice President for Lynch & Mayer,
Inc. Before joining Lynch & Mayer, Inc. in 1984, Mr. Segalas was Assistant
Treasurer/Pension Trust for Chase Manhattan Bank, N.A. He received a BS from
Boston University in 1980 and an MBA from Fordham University in 1985.
Walter Scott & Partners Limited, Sub-Adviser to the Manager with
respect to management of the assets of the World Growth Fund, Millburn Tower,
Gogar, Edinburgh, Scotland EH12 9BS, provides investment advice to pension funds
and foundations and had assets under management, as of October 31, 1996, in
excess of $3.5 billion. Walter Scott & Partners Limited uses a team of Fund
managers to provide the advisory services to World Growth Fund pursuant to the
Sub-Advisory Agreement.
John Govett & Company Limited, Sub-Adviser to the Manager with respect
to management of the assets of the New Pacific Fund, Shackleton House, 4
Battlebridge Lane, London, England SE1 2HR, provides investment advice to
investment trusts, investment companies, mutual funds and pension funds and had
assets under management, as of October 31, 1996, of $5.4 billion. Peter Robson
has had primary responsibility for making investment decisions for New Pacific
Fund since the Fund's inception. Mr. Robson currently serves as a Senior
Portfolio Manager and Director for John Govett & Company Limited and specializes
in the management of Far Eastern investments. Before joining John Govett &
Company Limited in 1990, Mr. Robson was with BZW Investment Management where he
managed UK unit trusts before moving to specialize in Far Eastern Markets. Mr.
Robson is a graduate of Oxford University, and was commissioned into the 1st
Queen's Dragoon Guards in 1985.
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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%
World Growth Fund Walter Scott & Partners Limited 0.80%
New Pacific Fund John Govett & Company Limited 0.50%
Corporate Income Fund Lincoln Investment Management, Inc. 0.30%
Federal Bond Fund Lincoln Investment Management, Inc. 0.30%
Enterprise Fund Lynch & Mayer, Inc. 0.50% on the first
$150 million and 0.35% on
assets over $150 million
</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, as relevant. Each Fund may also advertise aggregate and
average total return information concerning a Class over additional periods of
time.
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<PAGE>
The current yield will be calculated by dividing the annualized net
investment income earned by the Class during a recent 30-day period by the net
asset value per share on the last day of the period. The yield formula provides
for semi-annual compounding which assumes that net investment income is earned
and reinvested at a constant rate and annualized at the end of a six-month
period.
Because securities prices fluctuate, investment results will fluctuate
over time and past performance should not be considered as a representation of
future results.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling your Client Services Representative.
Financial Information about the Funds
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
each Fund's investments and performance. Adviser Funds, Inc.'s fiscal year ends
on October 31.
Distribution and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), serves as the national distributor for
each Fund under separate Distribution Agreements dated September 25, 1995. The
Distributor bears all of the costs of promotion and distribution.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for each Fund
under separate Agreements dated September 25, 1995. The directors annually
review service fees paid to the Transfer Agent. Certain recordkeeping and other
shareholder services that otherwise would be performed by the Transfer Agent may
be performed by certain other entities and the Transfer Agent may elect to enter
into an agreement to pay such other entities for those services. In addition,
participant account maintenance fees may be assessed for certain recordkeeping
provided as part of retirement plan and administration service packages. These
fees are based on the number of participants in the plan and the various
services selected. Fees will be quoted upon request and are subject to change.
The Distributor and the Transfer Agent are also indirect, wholly owned
subsidiaries of DMH and Lincoln National.
-31-
<PAGE>
Expenses
Each Fund is responsible for all of its own expenses other than those
borne by the Manager under its Investment Management Agreements and those borne
by the Distributor under its Distribution Agreements. The ratio of expenses to
average daily net assets for each Class was as follows for the fiscal year ended
October 31, 1996:
Enterprise Fund Institutional Class 1.50%
U.S. Growth Fund Institutional Class 1.48%
World Growth Fund Institutional Class 1.50%
New Pacific Fund Institutional Class 1.50%
Federal Bond Fund Institutional Class 0.90%
Corporate Income Fund Institutional Class 0.90%
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 (the six current Funds as well as three other funds) and was named the
Lincoln Advisor Funds, Inc. ("LAF"). On February 23, 1996, the LAF's Board of
Directors approved a restructuring to integrate fully the LAF into the Delaware
Group of funds. The restructuring provided, among other things, for the
liquidation of three funds, other than the Funds; the appointment of Delaware
Management Company, Inc. as the investment manager of each of the Funds; the
appointment of the sub-advisers described in this Prospectus; the changes in the
names as follows: Lincoln Enterprise Portfolio to Enterprise Fund; Lincoln U.S.
Growth Portfolio to U.S. Growth Fund; Lincoln World Growth Portfolio to World
Growth Fund; Lincoln New Pacific Portfolio to New Pacific Fund; Lincoln
Government Income Portfolio to Federal Bond Fund; and Lincoln Corporate Income
Portfolio to Corporate Income 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.
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.
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<PAGE>
In matters which only affect a particular Fund, the matter shall have
been effectively acted upon by a majority vote of that Fund even though: (1) the
matter has not been approved by a majority vote of any other Fund; or (2) the
matter has not been approved by a majority vote of Adviser Funds, Inc.
Each Fund also offers Class A Shares, Class B Shares and Class C
Shares. Shares of those classes represent proportionate interests in the assets
of the respective Fund and have the same voting and other rights and preferences
as the Classes, except that shares of the Classes are not subject to, and may
not vote on matters affecting, the Distribution Plans under Rule 12b-1 relating
to the Class A Shares, Class B Shares and Class C Shares of the Funds.
Initial investments into Adviser Funds, Inc. were made by American
States Insurance Company ("ASI") and Lincoln National Life Insurance Company
("LNLIC"), both affiliates of the Manager. As of 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. 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 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. Subject to certain limited
exceptions, there are no limitations on the Lincoln National Corporation
affiliates' ability to redeem the shares of the Adviser Funds, Inc.
and they may do so at any time.
General Information
Shareholder Services
Shareholder servicing, reporting and general shareholder services
functions for each Fund are performed by Delaware Service Company, Inc., which
maintains its offices at 1818 Market Street, Philadelphia, PA 19103.
Independent Accountants
Adviser Funds, Inc.'s independent accountants are Coopers & Lybrand
L.L.P., Eleven Penn Center Plaza, Philadelphia, PA 19103. Coopers & Lybrand
L.L.P. conducts an annual audit of each Fund and consults with the Fund and each
Fund as to matters of accounting, regulatory filings and federal and state
income taxation.
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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
All of the Funds may invest in securities of the U.S. government.
Securities guaranteed by the U.S. government include: (1) direct obligations of
the U.S. Treasury (such as Treasury bills, notes and bonds) and (2) federal
agency obligations guaranteed as to principal and interest by the U.S. Treasury
(such as GNMA certificates and Federal Housing Administration debentures). For
these securities, the payment of principal and interest is unconditionally
guaranteed by the U.S. government, and thus they are of the highest possible
credit quality. Such securities are subject to variations in market value due to
fluctuations in interest rates, but if held to maturity are deemed to be free of
credit risk for the life of the investment.
Securities issued by U.S. government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they generally involve federal sponsorship in one way or
another: some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the U.S. Treasury; some are supported by the
discretionary authority of the U.S. Treasury to purchase certain obligations of
the issuer; and others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and instrumentalities
include, but are not limited to, Federal Land Banks, Farmers Home
Administration, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, and Federal Home Loan Banks.
Mortgage-Backed Securities
The Corporate Income and Federal Bond Funds may invest in various types
of mortgage-backed securities. Mortgage-backed securities may be issued by
governmental agencies (such as the Government National Mortgage Association
("GNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC")), by the
Federal National Mortgage Association ("FNMA"), which is a federally chartered
and privately-owned corporation, or by private financial institutions such as
commercial banks, savings and loan associations, mortgage bankers and securities
broker/dealers (or separate trusts or affiliates of such institutions
established to issue these securities).
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<PAGE>
Most mortgage-backed securities, including the securities issued by
GNMA, FHLMC and FNMA, are so-called "pass-through" securities representing
interests in a pool of underlying mortgage loans, on which the regular interest
and principal payments (including any prepayments) are passed through to the
holder of the securities. Although the mortgage loans in a pool will have stated
maturities of up to 30 years, due to both normal principal repayment and
prepayments, the average effective maturities of these securities will vary and
will tend to be shorter than those of the underlying mortgages. Due to the
prepayment feature and the need to reinvest prepayments of principal at current
market rates, these securities can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of declining interest
rates. Like other fixed-income investments, the value of mortgage-related
securities will tend to rise when interest rates fall and to fall when interest
rates rise. Their value may also change due to changes in the market's
perception of the creditworthiness of the entity that issues or guarantees them.
For additional information regarding mortgage-backed securities, see Part B.
U.S. government securities may be acquired by the Funds in the form of
separately traded principal and interest components of securities issued or
guaranteed by the U.S. Treasury. The principal and interest components of
selected securities are traded independently under the Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. Under the
STRIPS program, the principal and interest components are individually numbered
and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Obligations of Resolution Funding Corporation are similarly divided into
principal and interest components and maintained as such on the book-entry
records of the Federal Reserve Banks.
In addition, the Funds may invest in custodial receipts that evidence
ownership of future interest payments, principal payments or both on certain
U.S. Treasury notes or bonds in connection with programs sponsored by banks and
brokerage firms. Such notes and bonds are held in custody by a bank on behalf of
the owners of the receipts. These custodial receipts are known by various names,
including "Treasury Receipts" ("Trs"), ("TIGRs") and "Certificates of Accrual on
Treasury Securities" ("CATS"), and may not be deemed U.S.
government securities.
The Funds may also invest from time to time in collective investment
vehicles, the assets of which consist principally of U.S. government securities
or other assets substantially collateralized or supported by such securities,
such as government trust certificates.
The U.S. government securities in which the Funds invest do not, in
general, have as high a yield as more speculative securities or securities not
supported by the U.S. government or its agencies or instrumentalities. When
interest rates increase, the value of debt securities and shares of the Funds
can be expected to decline.
Asset-Backed Securities
The Federal Bond and Corporate Income Funds may purchase asset-backed
securities, which represent a participation in, or are secured by and payable
from, a stream of payments generated by particular assets, most often a pool of
assets similar to one another. Assets generating such payments will consist of
motor vehicle installment purchase obligations, credit card receivables, other
financial receivables and home equity loans. See Part B.
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<PAGE>
Repurchase Agreements
The Funds may enter into repurchase agreements, under which a Fund buys
a security (typically a U.S. government security or other money market security)
and obtains a simultaneous commitment from the seller to repurchase the security
at a specified time and price. The seller must maintain with the Adviser Funds,
Inc.'s Custodian collateral equal to at least 100% of the repurchase price
including accrued interest, as monitored daily by the Manager and/or
sub-adviser. A Fund only will enter into repurchase agreements involving
securities in which it could otherwise invest and with banks, brokers or dealers
deemed by the Board of Directors to be creditworthy. If the seller under the
repurchase agreement defaults, the Fund may incur a loss if the value of the
collateral securing the repurchase agreement has declined and may incur
disposition costs in connection with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller, realization upon the
collateral by the Fund may be delayed or limited.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow the
Delaware Group funds jointly to invest cash balances. The Funds may invest cash
balances in a joint repurchase agreement in accordance with the terms of the
Order and subject generally to the conditions described above.
When-Issued Securities and Firm Commitment Agreements
All of the Funds may purchase securities on a delayed delivery or
"when-issued" basis and enter into firm commitment agreements (transactions
whereby the payment obligation and interest rate are fixed at the time of the
transaction but the settlement is delayed). The transactions may involve either
corporate, municipal or government securities. A Fund as a purchaser assumes the
risk of any decline in value of the security beginning on the date of the
agreement or purchase. The Funds may invest in when-issued securities in order
to take advantage of securities that may be especially under or over valued when
trading on a when-issued basis.
Each Fund will segregate liquid assets such as cash, U.S. government
securities or other appropriate high grade debt obligations in an amount
sufficient to meet its payment obligations in these transactions. Although these
transactions will not be entered into for leveraging purposes, to the extent a
Fund's aggregate commitments under these transactions exceed its holdings of
cash and securities that do not fluctuate in value (such as money market
instruments), the Fund temporarily will be in a leveraged position (i.e., it
will have an amount greater than its net assets subject to market risk). Should
market values of a Fund's portfolio securities decline while Adviser Funds, Inc.
is in a leveraged position, greater depreciation of its net assets would likely
occur than were it not in such a position. The Funds will not borrow money to
settle these transactions and, therefore, will liquidate other Fund securities
in advance of settlement if necessary to generate additional cash to meet their
obligations thereunder.
Money Market Instruments
All of the Funds may invest in money market instruments without limit
for temporary or defensive purposes. These are shorter-term debt securities
generally maturing in one year or less which include (1) commercial paper
(short-term notes up to 9 months issued by corporations or governmental bodies),
(2) commercial bank obligations (certificates of deposit (interest-bearing time
deposits), bankers' acceptances (time drafts on a commercial bank where the bank
accepts an irrevocable obligation to pay at maturity), and documented discount
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
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annually and generally more frequently) have maturities in excess of one year,
they are also considered to be short-term debt securities.
Strategic Transactions
General. The Funds may, but are not required to, utilize various other
investment strategies as described below to hedge various market risks (such as
interest rates, currency exchange rates, and broad or specific equity or
fixed-income market movements), to manage the effective maturity or duration of
fixed-income securities in the Fund's portfolio or to enhance potential gain.
Such strategies are generally accepted as modern Fund management and are
regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur. In the course of pursuing
these investment strategies, the Fund may purchase and sell derivative
securities. In particular, the Funds may purchase and sell exchange-listed and
over-the-counter put and call options on securities, equity and fixed-income
indices and other financial instruments, purchase and sell financial futures
contracts and options thereon, enter into various interest rate transactions
such as swaps, caps, floors or collars, and enter into various currency
transactions such as currency forward contracts, currency futures contracts,
currency swaps or options on currencies or currency futures (collectively, all
the above are called "Strategic Transactions"). Strategic Transactions may be
used to attempt to protect against possible changes in the market value of
securities held in or to be purchased for the Fund resulting from securities
markets or currency exchange rate fluctuations, to protect the Fund's unrealized
gains in the value of its Fund securities, to facilitate the sale of such
securities for investment purposes, to manage the effective maturity or duration
of fixed-income securities in a Fund, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Any or all of these investment techniques may be used at
any time and there is no particular strategy that dictates the use of one
technique rather than another, as use of any Strategic Transaction is a function
of numerous variables including market conditions. The ability of a Fund to
utilize these Strategic Transactions successfully will depend on the Manager's
or sub-adviser's ability to predict pertinent market movements, which cannot be
assured. The Funds will comply with applicable regulatory requirements when
implementing these strategies, techniques and instruments. Strategic
Transactions involving financial futures and options thereon will be purchased,
sold or entered into only for bona fide hedging, risk management or Fund
management purposes and not for speculative purposes. Additional information
relating to certain financial instruments or strategies is set forth below. In
addition, see Special Risks of Strategic Transactions, below, for a discussion
of certain risks.
Limitations on Futures and Options Transactions. A Fund will not enter
into any futures contract or option on a futures contract if, as a result, the
sum of initial margin deposits on futures contracts and related options and
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
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<PAGE>
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features similar to
options.
The limitations on the Funds' investments in futures contracts and
options, and the Funds' policies regarding futures contracts and options
discussed elsewhere are not fundamental policies and may be changed as
regulatory agencies permit.
Options Transactions. The Funds may purchase and write (i.e., sell) put
and call options on securities and currencies that are traded on national
securities exchanges or in the over-the-counter market to enhance income or to
hedge their Funds. A call option gives the purchaser, in exchange for a premium
paid, the right for a specified period of time to purchase securities or
currencies subject to the option at a specified price (the exercise price or
strike price). When a Fund writes a call option, the Fund gives up the potential
for gain on the underlying securities in excess of the exercise price of the
option.
A put option gives the purchaser, in return for a premium, the right
for a specified period of time to sell the securities or currencies subject to
the option to the writer of the put at the specified exercise price. The writer
of the put option, in return for the premium, has the obligation, upon exercise
of the option, to acquire the securities underlying the option at the exercise
price. A Fund might, therefore, be obligated to purchase the underlying
securities for more than their current market price.
The Funds will write only "covered" options. An option is covered if a
Fund owns an offsetting position in the underlying security or maintains cash,
U.S. government securities or other high-grade debt obligations with a value
sufficient at all times to cover its obligations. See Part B.
Forward Foreign Currency Exchange Contracts. The Funds may enter into
forward foreign currency exchange contracts to protect the value of their Funds
against future changes in the level of currency exchange rates. The Funds may
enter into such contracts on a spot (i.e., cash) basis at the rate then
prevailing in the currency exchange market or on a forward basis, by entering
into a forward contract to purchase or sell currency at a future date. A Fund's
dealings in forward contracts will be limited to hedging involving either
specific transactions or Fund positions. Transaction hedging generally arises in
connection with the purchase or sale of its Fund securities and accruals of
interest or dividends receivable and Fund expenses. Position hedging generally
arises with respect of existing Fund security or currency positions.
Futures Contracts and Options Thereon. The Funds may purchase and sell
financial futures contracts and options thereon which are exchange-listed or
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
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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 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
Corporate Income Fund has the ability to invest up to 35% 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, 1996. 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.
Corporate Income Fund
Rating Moody's Average Weighted
and/or Percentage of
S&P Portfolio
Ba/BB 5.00%
B/B 0.00%
Not Rated/Other 0.00%
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.
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<PAGE>
C: This rating is reserved for income bonds on which no interest is
being paid.
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>
Stock funds, income funds, --------------------------------------
tax-free funds, money market funds, DELAWARE GROUP ADVISER FUNDS, INC.
global and international funds and (FORMERLY LINCOLN ADVISOR FUNDS, INC.)
closed-end equity funds give
investors the ability to create a --------------------------------------
portfolio that fits their personal
financial goals. For more A CLASSES
information, shareholders of the --------------------------------------
Fund Classes should contact their
financial adviser or call Delaware B CLASSES
Group at 800-523-4640 and --------------------------------------
shareholders of the Institutional
Class should contact Delaware Group C CLASSES
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
Walter Scott & Partners Limited
Millburn Tower, Gogar PART B
Edinburgh, Scotland EH12 9BS
STATEMENT OF
John Govett & Company Limited ADDITIONAL INFORMATION
Shackleton House --------------------------------------
4 Battlebridge Lane
London, England SE1 2HR
Lincoln Investment Management, Inc.
200 East Berry Street FEBRUARY 28, 1997
Fort Wayne, IN 46802
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Coopers & Lybrand, L.L.P.
Eleven Penn Center Plaza
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center DELAWARE
Brooklyn, NY 11245 GROUP
----------
<PAGE>
- --------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
DELAWARE GROUP ADVISER FUNDS, INC.
ENTERPRISE FUND
U.S. GROWTH FUND
WORLD GROWTH FUND
NEW PACIFIC FUND
FEDERAL BOND FUND
CORPORATE INCOME FUND
- --------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
- --------------------------------------------------------------------------------
For more information about the Institutional Class shares of each Fund:
800-828-5052
For a Prospectus and Performance information for the A Class, B Class and C
Class of each Fund: 800-523-4640
For Information on Existing Accounts of the A Class, B Class and C Class 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
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
Appendix A--IRA Information
- --------------------------------------------------------------------------------
Appendix B--The Equity Market
- --------------------------------------------------------------------------------
<PAGE>
Delaware Group Adviser Funds, Inc. ("Adviser Funds, Inc.") is a
professionally-managed mutual fund currently offering six separate series of
shares: Enterprise Fund, U.S. Growth Fund, World Growth Fund, New Pacific Fund,
Federal Bond Fund and Corporate Income Fund (each a "Fund" and collectively, the
"Funds"). This Statement of Additional Information ("Part B" of Adviser Funds,
Inc.'s registration statement) describes each of the Funds, except where noted.
Until the close of business on May 3, 1996, Delaware Group Adviser Funds, Inc.
was called Lincoln Advisor Funds, Inc., and Enterprise Fund, U.S. Growth Fund,
World Growth Fund, New Pacific Fund, Federal Bond Fund and Corporate Income Fund
were called the Lincoln Enterprise Portfolio, Lincoln U.S. Growth Portfolio,
Lincoln World Growth Portfolio, Lincoln New Pacific Portfolio, Lincoln
Government Income Portfolio and Lincoln Corporate Income Portfolio,
respectively.
Each Fund offers four classes of shares consisting of an A Class of
shares ("Class A Shares"), a B Class of shares ("Class B Shares"), a C Class of
shares ("Class C Shares") (together the "Fund Classes") and an Institutional
Class of shares (individually, an "Institutional Class" and collectively, the
"Institutional Classes"). Each class may be referred to individually as a
"Class" and collectively as the "Classes." The Fund Classes are offered through
a Prospectus dated February 28, 1997, and the Institutional Classes are offered
through a separate Prospectus also dated February 28, 1997.
Class B Shares, Class C Shares and Institutional Class shares may be
purchased at a price equal to the next determined net asset value per share.
Class A Shares may be purchased at the public offering price, which is equal to
the next determined net asset value per share, plus a front-end sales charge.
Class A Shares are subject to a maximum front-end sales charge of 4.75% and
annual 12b-1 Plan expenses of up to 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. All references to
"shares" in this Part B refer to all Classes of shares of the Funds, except
where noted.
This Part B supplements the information contained in the current
Prospectus for the Fund Classes, and the current Prospectus for the
Institutional Classes, as they may be amended from time to time. It should be
read in conjunction with the respective Class' Prospectus. Part B is not itself
a prospectus but is, in its entirety, incorporated by reference into each Class'
Prospectus. A Prospectus relating to the Fund Classes and a Prospectus relating
to the Institutional Classes may be obtained by writing or calling your
investment dealer or by contacting the Funds' national distributor, Delaware
Distributors, L.P. (the "Distributor"), 1818 Market Street, Philadelphia, PA
19103.
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<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 and Corporate Income Fund may purchase securities that
are rated lower than Baa by Moody's Investors Service, Inc. ("Moody's") or lower
than BBB by Standard & Poor's Ratings Group ("S&P"). These securities are often
considered to be speculative and involve significantly higher risk of default on
the payment of principal and interest or are more likely to experience
significant price fluctuation due to changes in the issuer's creditworthiness.
Market prices of these securities may fluctuate more than higher-rated debt
securities and may decline significantly in periods of general economic
difficulty which may follow periods of rising interest rates. While the market
for high yield corporate debt securities has been in existence for many years
and has weathered previous economic downturns, the market in recent years has
experienced a dramatic increase in the large-scale use of such securities to
fund highly leveraged corporate acquisitions and restructurings. Accordingly,
past experience may not provide an accurate indication of future performance of
the high yield bond market, especially during periods of economic recession. See
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 a Fund to value its
portfolio securities and the Fund's ability to dispose of these lower-rated debt
securities.
Since the risk of default is higher for lower-quality securities, the
Manager's and/or sub-adviser's research and credit analysis is an integral part
of managing any securities of this type held by a Fund. In considering
investments for a Fund, the Manager and/or sub-adviser will attempt to identify
those issuers of high-yielding securities whose financial condition is adequate
to meet future obligations, has improved, or is expected to improve in the
future. The Manager's and/or sub-adviser's analysis focuses on relative values
based on such factors as interest or dividend coverage, asset coverage, earnings
prospects, and the experience and managerial strength of the issuer. There can
be no assurance that such analysis will prove accurate.
A Fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as security holder to seek to
protect the interests of security holders if it determines this to be in the
best interest of shareholders.
Mortgage-Backed Securities
Each Fund may invest in mortgage-related securities including those
representing an undivided ownership interest in a pool of mortgages.
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<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.
Other Mortgage-Backed Securities. The Federal Bond and Corporate Income
Funds may invest in mortgage-backed securities issued by financial institutions
such as commercial banks, savings and loan associations, mortgage bankers and
securities broker/dealers (or separate trusts or affiliates of such institutions
established to issue these securities). These securities include mortgage
pass-through certificates, collateralized mortgage obligations ("CMOs") (which
include real estate mortgage investment conduits as authorized under the
Internal Revenue Code of 1986) or mortgage-backed bonds. Each class of bonds in
a CMO series may have a different maturity than the other classes of bonds in
the series and may bear a different coupon. The different maturities occur
because payments of principal, both regular principal payments as well as any
prepayments are passed through first to the holders of the class with the
shortest maturity until it is completely retired. Thereafter, principal payments
are passed through to the next class of bonds in the series, until all the
classes have been paid off. As a result, an acceleration in the rate of
prepayments may also be associated with declining interest rates, shortening the
expected life of each class, with the greatest cash flow impact on those classes
with the shortest maturities. Should the rate of prepayments slow down, as may
happen in times of rising interest rates, the expected life of each class
lengthens, again with the greatest cash flow impact on those classes with the
shortest maturities. In the case of some CMO series, each class may receive a
different proportion of the monthly interest and principal repayments on the
underlying collateral. In these series the classes have proportionally greater
interests in
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<PAGE>
principal repayments generally and would be more affected by a change in the
rate of prepayments although the percentage impact on those classes consisting
mostly of interest payments could be greater.
Asset-Backed Securities. Federal Bond and Corporate Income Funds may
invest in bonds or notes backed by loan paper or accounts receivable originated
by banks, credit card companies, or other providers of credit. These securities
are often "enhanced" by a bank letter of credit or by insurance coverage
provided by an institution other than the issuer; such an enhancement typically
covers only a portion of the par value until exhausted. Generally, the
originator of the loan or accounts receivable paper sells it to a specially
created trust, which repackages it as securities with a term of five years or
less. Examples of these types of securities include "certificates for automobile
receivables" (commonly referred to as "CARs") and bonds backed by credit card
loan receivables (commonly referred to as "plastic bonds"). The loans underlying
these securities are subject to prepayments which can decrease maturities and
returns. The values of these securities are ultimately dependent upon payment of
the underlying loans by individuals, and the holders generally have no recourse
against the originator of the loans. Holders of these securities may experience
losses or delays in payment if the original payments of principal and interest
are not made to the trust with respect to the underlying loans. The values of
these securities also may fluctuate due to changes in the market perception of
the creditworthiness of the servicing agent for the loan pool, the originator of
the loan, or the financial institution providing the credit enhancement.
Foreign Investments
The World Growth and New Pacific Funds may invest substantially all of
their assets in foreign investments. Certain of the Funds may invest the
following percentages of their assets in foreign securities: Enterprise Fund
(15%), U.S. Growth Fund (20%) and Corporate Income Fund (10%). Foreign
investments can involve significant risks in addition to the risks inherent in
U.S. investments. The value of securities denominated in or indexed to foreign
currencies, and of dividends and interest from such securities, can change
significantly when foreign currencies strengthen or weaken relative to the U.S.
dollar. Foreign securities markets generally have less trading volume and less
liquidity than U.S. markets, and prices on some foreign markets can be highly
volatile. Many foreign countries lack uniform accounting and disclosure
standards comparable to those applicable to U.S. companies, and it may be more
difficult to obtain reliable information regarding an issuer's financial
condition and operations. In addition, the costs of foreign investing, including
withholding taxes, brokerage commissions, and custodial costs, are generally
higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S.
markets. Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve 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.
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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.
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
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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 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.
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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 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
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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, all Funds may deal in over-the-counter ("OTC") options. The Funds
understand the position of the staff of the Securities and Exchange Commission
("SEC") to be that purchased OTC options and the assets used as "cover" for
written OTC options are illiquid securities. The Funds, the Manager, and the
sub-advisers disagree with this position and have found the dealers with which
they engage in OTC options transactions generally agreeable to and capable of
entering into closing transactions. As also indicated in the Prospectuses, the
Funds have adopted procedures for engaging in OTC options for the purpose of
reducing any potential adverse impact of such transactions upon the liquidity of
each Fund's portfolio.
As part of these procedures the Funds will engage in OTC options
transactions only with primary dealers that have been specifically approved by
the Board of Directors of Adviser Funds, Inc. and the Manager and/or
sub-advisers believe that the approved dealers should be agreeable and able to
enter into closing transactions if necessary and, therefore, present minimal
credit risks to the Funds. The Funds anticipate entering into written agreements
with those dealers to whom the Funds may sell OTC options, pursuant to which the
Funds would have the absolute right to repurchase the OTC options from such
dealers at any time at a price determined pursuant to a formula set forth in
certain no action letters published by the SEC staff. A Fund will not engage in
OTC options transactions if the amount invested by the Fund in OTC options plus,
with respect to OTC options written by the Fund, the amounts required to be
treated as illiquid pursuant to the terms of such letters (and the value of the
assets used as cover with respect to OTC option sales which are not within the
scope of such letters), plus the amount invested by the Fund in illiquid
securities, would exceed 15% of the Fund's total assets. OTC options on
securities other than U.S. government securities may not be within the scope of
such letters and, accordingly, the amount invested by a Fund in OTC options on
such other securities and the value of the assets used as cover with respect to
OTC option sales regarding such non-U.S. government securities will be treated
as illiquid and subject to the 10% limitation on the Fund's net assets that may
be invested in illiquid securities. See "Illiquid Securities" herein.
Futures Contracts and Options Thereon
A futures contract is an agreement in which the writer (or seller) of
the contract agrees to deliver to the buyer an amount of cash or securities
equal to a specific dollar amount times the difference between the value of a
specific fixed-income security or index at the close of the last trading day of
the contract and the price at which the agreement is made. No physical delivery
of the underlying securities is made. When the futures contract is entered into,
each party deposits with a broker or in a segregated custodial account
approximately 5% of the contract amount, called the "initial margin." Subsequent
payments to and from the broker, called "variation margin," will be made on a
daily basis as the price of the underlying security or index fluctuates, making
the long and short positions in the futures contracts more or less valuable, a
process known as "marking to market." In the case of options on futures
contracts, the holder of the option pays a premium and receives the right, upon
exercise of the option at a specified price during the option period, to assume
a position in the futures contract (a long position if the option is a call and
a short position if the option is a put). If the option is exercised by the
holder before the last trading day during the option period, the option writer
delivers the futures position, as well as any balance in the writer's futures
margin account. If it is exercised on the last trading day, the option writer
delivers to the option
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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 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. Enterprise Fund, U.S. Growth Fund, World
Growth Fund, New Pacific Fund and Corporate Income Fund may hold foreign
currency deposits from time to time and may convert dollars and foreign
currencies in the foreign exchange markets. Currency conversion involves dealer
spreads and other costs, although commissions usually are not charged.
Currencies may be exchanged on a spot (i.e., cash) basis, or by entering into
forward contracts to purchase or sell foreign currencies at a future date and
price. Forward contracts generally are traded in an interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. The parties to a forward contract may agree to offset or terminate
the contract before its maturity, or may hold the contract to maturity and
complete the contemplated currency exchange.
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
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currency with respect to portfolio security positions denominated or quoted in
that currency. A Fund may not position hedge with respect to a particular
currency for an amount greater than the aggregate market value (determined at
the time of making any sale of a forward contract) of securities held in its
portfolio denominated or quoted in, or currently convertible into, such
currency.
When a Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when a Fund anticipates the
receipt in a foreign currency of dividends or interest payments on a security
which it holds, the Fund may desire to "lock in" the U.S. dollar price of the
security or the U.S. dollar equivalent of such dividend or interest payment as
the case may be. By entering into a forward contract for a fixed amount of
dollars for the purchase or sale of the amount of foreign currency involved in
the underlying transactions, a Fund will be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period between the date
on which the security is purchased or sold, or on which the dividend or interest
payment is declared, and the date on which such payments are made or received.
Additionally, when the Manager and/or applicable sub-adviser believes
that the currency of a particular foreign country may suffer a substantial
decline against the U.S. dollar, a Fund may enter into a forward contract for a
fixed amount of dollars, to sell the amount of foreign currency approximating
the value of some or all of the securities of the Fund denominated in such
foreign currency.
The Funds may use currency forward contracts to manage currency risks
and to facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by these Funds.
In connection with purchases and sales of securities denominated in
foreign currencies, a Fund may enter into currency forward contracts to fix a
definite price for the purchase or sale in advance of the trade's settlement
date. This technique is sometimes referred to as a "settlement hedge" or
"transaction hedge." The Manager and/or sub-advisers expect to enter into
settlement hedges in the normal course of managing the Funds' foreign
investments. The Funds could also enter into forward contracts to purchase or
sell a foreign currency in anticipation of future purchases or sales of
securities denominated in foreign currency, even if the specific investments
have not yet been selected by the Manager and/or sub-adviser.
The Funds may also use forward contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. For example,
if a Fund owned securities denominated in pounds sterling, it could enter into a
forward contract to sell pounds sterling in return for U.S. dollars to hedge
against possible declines in the pound's value. Such a hedge (sometimes referred
to as a "position hedge") would tend to offset both positive and negative
currency fluctuations, but would not offset changes in security values caused by
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, Enterprise
Fund, U.S. Growth Fund, World Growth Fund, New Pacific Fund and Corporate Income
Fund will segregate assets to cover currency forward contracts, if any, whose
purpose is essentially speculative. The Funds will not segregate assets to cover
forward contracts, including settlement hedges, position hedges, and proxy
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hedges. Successful use of forward currency contracts will depend on the
Manager's and/or sub-advisers' skill in analyzing and predicting currency
values. Forward contracts may substantially change the Funds' investment
exposure to changes in currency exchange rates, and could result in losses to
the Funds if currencies do not perform as the Manager and/or sub-advisers
anticipate. For example, if a currency's value rose at a time when the Manager
and/or applicable sub-adviser had hedged a Fund by selling that currency in
exchange for dollars, the Fund would be unable to participate in the currency's
appreciation. If the Manager and/or applicable sub-adviser hedges currency
exposure through proxy hedges, a Fund could realize currency losses from the
hedge and the security position at the same time if the two currencies do not
move in tandem. Similarly, if the Manager and/or sub-adviser increases a Fund's
exposure to a foreign currency, and that currency's value declines, the Fund
will realize a loss. There is no assurance that the Manager's and/or
sub-advisers' use of forward currency contracts will be advantageous to the
Funds or that it will hedge at an appropriate time.
Foreign Currency Options
Enterprise Fund, U.S. Growth Fund, World Growth Fund, New Pacific Fund
and Corporate Income Fund may purchase U.S. exchange-listed call and put options
on foreign currencies. Such options on foreign currencies operate similarly to
options on securities. Options on foreign currencies are affected by all of
those factors which influence foreign exchange rates and investments generally.
The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealer or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets for 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 Enterprise Fund, U.S. Growth
Fund, World Growth Fund, New Pacific Fund or Corporate Income Fund at one rate,
while offering a lesser rate of exchange should those Funds desire to resell
that currency to the dealer.
Combined Transactions
Each Fund may enter into multiple transactions, including multiple
options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single transaction, as
part of a single or combined strategy when, in the opinion of the Manager and/or
sub-adviser, it is in the best interests of the Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Manager's and/or sub-adviser's judgment that the combined
strategies
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will reduce risk or otherwise more effectively achieve the desired portfolio
management goal, it is possible that the combination will instead increase such
risks or hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars
Each Fund may enter into interest rate, currency and index swaps and
the purchase or sale of related caps, floors and collars. The Funds expect to
enter into these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Funds intend to use these transactions as hedges and not speculative
investments and will not sell interest rate caps or floors where it does not own
securities or other instruments providing the income stream the Fund may be
obligated to pay. Interest rate swaps involve the exchange by the Fund with
another party of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
nominal amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
A Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
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 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
-13-
<PAGE>
cash, letters of credit or U.S. government securities, which will be maintained
at all times in an amount equal to at least 100% of the current market value of
the loaned securities. From time to time, a Fund may return a part of the
interest earned from the investment of collateral received for securities loaned
to the borrower and/or a third party, which is unaffiliated with the Fund or
with Lincoln National Corporation, and which is acting as a "finder."
In lending its portfolio securities, a Fund can increase its income by
continuing to receive interest on the loaned securities as well as by either
investing the cash collateral in short-term instruments or obtaining yield in
the form of interest paid by the borrower when government securities are used as
collateral. Requirements of the SEC, which may be subject to future
modifications, currently provide that the following conditions must be met
whenever portfolio securities are loaned: (a) the Fund must receive at least
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.
-14-
<PAGE>
Bank Obligations
Certificates of deposit ("CDs") are short-term negotiable obligations
of commercial banks; time deposits ("TDs") are non-negotiable deposits
maintained in banking institutions for specified periods of time at stated
interest rates; and bankers' acceptances are time drafts drawn on commercial
banks by borrowers usually in connection with international transactions.
Obligations of foreign branches of domestic banks, such as CDs and TDs,
may be general obligations of the parent bank in addition to the issuing branch,
or may be limited by the terms of a specific obligation and government
regulation. Such obligations are subject to different risks than are those of
domestic banks or domestic branches of foreign banks. These risks include
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
-15-
<PAGE>
income and gains on securities purchased with the proceeds of reverse repurchase
agreements exceed the costs of the agreements, a Fund's earnings or net asset
value will increase faster than otherwise would be the case; conversely, if the
income and gains fail to exceed the costs, earnings or net asset value would
decline faster than otherwise would be the case.
"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. 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 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
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<PAGE>
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.
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<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 Securities Act of 1933, as amended;
5. Make loans in an aggregate amount in excess of one-third of a Fund's
total assets, taken at the time any loan is made, provided that entering into
certain repurchase agreements and purchasing debt securities shall not be deemed
loans for the purposes of this restriction;
6. Make short sales of securities or maintain a short position if, when
added together, more than 25% of the value of the Fund's net assets would be (i)
deposited as collateral for the obligation to replace securities borrowed to
effect short sales and (ii) allocated to segregated accounts in connection with
short sales;
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<PAGE>
7. Borrow money, except from banks for temporary or emergency purposes
not in excess of one-third of the value of a Fund's assets, and except that
Funds may enter into reverse repurchase agreements and engage in "roll"
transactions, provided that reverse repurchase agreements, "roll" transactions
and any other transactions constituting borrowing by a Fund may not exceed
one-third of the Fund's total assets;
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.
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<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, if applicable) periods. Each
Fund may also advertise aggregate and average compounded rate of return
information of each Class over additional periods of time.
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.
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, 1996, 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.
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<PAGE>
The average annual total return for Class B Shares and Class C Shares
including deferred sales charge reflects the deduction of the applicable CDSC
that would be paid if the shares were redeemed on October 31, 1996. 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, 1996 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.
<TABLE>
<CAPTION>
Average Annual Total Return(1)
Enterprise 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
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/96 14.68% 20.37% 10/31/96 15.90% 19.90% 10/31/96 18.57% 19.57% 10/31/96 20.80%
Period Period Period Period
12/3/93(4) 4/14/94(4) 5/10/94(4) 2/3/94(4)
through through through through
10/31/96 9.28% 11.13% 10/31/96 14.23% 15.18% 10/31/96 16.49% 16.49% 10/31/96 10.27%
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
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/96 5.90% 11.18% 10/31/96 6.38% 10.38% 10/31/96 9.35% 10.35% 10/31/96 11.52%
Period Period Period Period
12/3/93(4) 3/29/94(4) 5/23/94(4) 2/3/94(4)
through through through through
10/31/96 9.93% 11.79% 10/31/96 11.65% 12.61% 10/31/96 15.36% 15.36% 10/31/96 10.81%
</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 the 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 5.5% 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.
-22-
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return(1)
World 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
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/96 3.71% 8.90% 10/31/96 4.16% 8.16% 10/31/96 7.15% 8.15% 10/31/96 7.91%
Period Period Period Period
12/3/93(4) 3/29/94(4) 5/10/94(4) 2/3/94(4)
through through through through
10/31/96 6.05% 7.84% 10/31/96 4.95% 6.01% 10/31/96 6.37% 6.37% 10/31/96 6.33%
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
10/31/96 3.17% 8.26% 10/31/96 3.54% 7.54% 10/31/96 6.58% 7.58% 10/31/96 8.77%
Period Period Period Period
12/3/93(4) 3/29/94(4) 7/7/94(4) 2/3/94(4)
through through through through
10/31/96 (2.58%) (0.94%) 10/31/96 (1.22%) (0.09%) 10/31/96 (0.92%) (0.92%) 10/31/96 (4.45%)
</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 the 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 5.5% 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.
-23-
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return(1)
Federal Bond 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
<C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/96 (1.49%) 3.43% 10/31/96 (1.17%) 2.76% 10/31/96 1.75% 2.74% 10/31/96 0.60%
Period Period Period Period
12/3/93(4) 7/27/94(4) 7/7/94(4) 2/3/94(4)
through through through through
10/31/96 2.20% 3.93% 10/31/96 5.09% 6.32% 10/31/96 5.74% 5.74% 10/31/96 3.15%
Corporate Income 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
10/31/96 (0.20%) 4.81% 10/31/96 0.20% 4.16% 10/31/96 3.07% 4.06% 10/31/96 5.19%
Period Period Period Period
12/3/93(4) 5/11/94(4) 9/14/94(4) 2/3/94(4)
through through through through
10/31/96 3.08% 4.82% 10/31/96 7.28% 8.37% 10/31/96 8.83% 8.83% 10/31/96 5.36%
</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 the 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 increased from 4.5% 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.
-24-
<PAGE>
As stated in the Prospectuses, Federal Bond Fund and Corporate Income
Fund may also quote the current yield for each of its Classes in advertisements
and investor communications. The yield computation is determined by dividing the
net investment income per share earned during the period by the maximum offering
price per share on the last day of the period and annualizing the resulting
figure, according to the following formula:
a--b 6
YIELD = 2[(-------- + 1) -- 1]
cd
Where: a = dividends and interest earned during the
period;
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends;
d = the maximum offering price per share on the
last day of the period.
The above formula will be used in calculating quotations of yield of
each Class, based on specified 30-day periods identified in advertising by a
Fund. Yield assumes the maximum front-end sales charge, if any, and does not
reflect the deduction of any CDSC or Limited CDSC. Actual yield may be affected
by variations in front-end sales charges on investments. Past performance, such
as is reflected in quoted yields, should not be considered as a representation
of the results which may be realized from an investment in any class of Adviser
Funds, Inc. in the future. For the fiscal year ended October 31, 1996, the yield
of each Class of Federal Bond Fund and Corporate Income Fund was as follows:
Federal Bond Fund Corporate Income Fund
Class A Shares 5.31% 5.81%
Class B Shares 4.58% 4.92%
Class C Shares 4.50% 4.93%
Institutional Class 6.22% 6.61%
From time to time, the Funds may also quote actual total return for
each Class in advertising and other types of literature compared to indices or
averages of alternative financial products available to prospective investors.
For example, the performance comparisons may include the average return of
various bank instruments, some of which may carry certain return guarantees
offered by leading banks and thrifts as monitored by Bank Rate Monitor, and
those of corporate bond and government security price indices of various
durations prepared by Lehman Brothers and Salomon Brothers, Inc. These indices
are not managed for any investment goal.
-25-
<PAGE>
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.
Statistical and performance information and various indices compiled
and maintained by organizations such as the following may also be used in
preparing exhibits comparing certain industry trends and competitive mutual fund
performance to comparable Fund activity and performance and in illustrating
general financial planning principles. From time to time, certain mutual fund
performance ranking information, calculated and provided by these organizations
may also be used in the promotion of sales in the Fund. Any indices used are not
managed for any investment goal.
CDA Investment Technologies, Inc., Lipper Analytical Services, Inc. and
Morningstar, Inc. are performance evaluation services that maintain
statistical performance databases, as reported by a diverse universe of
independently-managed mutual funds.
Ibbotson Associates, Inc. is a consulting firm that provides a variety
of historical data including total return, capital appreciation and
income on the stock market as well as other investment asset classes,
and inflation. With their permission, this information will be used
primarily for comparative purposes and to illustrate general financial
planning principles.
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.
-26-
<PAGE>
Current interest rate and yield information on government debt
obligations of various durations, as reported weekly by the Federal Reserve
(Bulletin H.15), may also be used. As well, current rate information on
municipal debt obligations of various durations, as reported daily by The Bond
Buyer, may also be used. The Bond Buyer is published daily and is an
industry-accepted source for current municipal bond market information.
The following table is an example, for purposes of illustration only,
of cumulative total return performance for Class A Shares, Class B Shares, Class
C Shares and the Institutional Classes through October 31, 1996. For these
purposes, the calculations assume the reinvestment of any realized securities
profits distributions and income dividends paid during the indicated periods. In
addition, these calculations, as shown below, reflect maximum sales charges, if
any, paid on the purchase or redemption of shares, as applicable, but not any
income taxes payable by shareholders on the reinvested distributions included in
the calculations. In addition, the performance of Class A Shares may 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.
-27-
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return(1)
Enterprise 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
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3 months 3 months 3 months 3 months
ended ended ended ended
10/31/96 6.51% 10/31/96 7.68% 11.68% 10/31/96 10.62% 11.62% 10/31/96 11.89%
6 months 6 months 6 months 6 months
ended ended ended ended
10/31/96 (3.96%)(5) 10/31/96 (3.51%) 0.49% 10/31/96 (0.59%) 0.41% 10/31/96 0.89%
9 months 9 months 9 months 9 months
ended ended ended ended
10/31/96 5.43% 10/31/96 6.31% 10.31% 10/31/96 9.02% 10.02% 10/31/96 10.89%
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/96 14.68% 10/31/96 15.90% 19.90% 10/31/96 18.57% 19.57% 10/31/96 20.80%
Period Period Period Period
12/3/93(3) 4/14/94(3) 5/10/94(3) 2/3/94(3)
through through through through
10/31/96 29.49% 10/31/96 40.40% 43.40% 10/31/96 46.00% 46.00% 10/31/96 30.75%
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
3 months 3 months 3 months 3 months
ended ended ended ended
10/31/96 4.86% 10/31/96 5.94% 9.94% 10/31/96 8.92% 9.92% 10/31/96 10.20%
6 months 6 months 6 months 6 months
ended ended ended ended
10/31/96 1.32%(5) 10/31/96 2.00% 6.00% 10/31/96 4.98% 5.98% 10/31/96 6.58%
9 months 9 months 9 months 9 months
ended ended ended ended
10/31/96 6.80% 10/31/96 7.47% 11.47% 10/31/96 10.48% 11.48% 10/31/96 12.33%
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/96 5.90% 10/31/96 6.38% 10.38% 10/31/96 9.35% 10.35% 10/31/96 11.52%
Period Period Period Period
12/3/93(3) 3/29/94(3) 5/23/94(3) 2/3/94(3)
through through through through
10/31/96 31.75% 10/31/96 33.10% 36.10% 10/31/96 41.80% 41.80% 10/31/96 32.51%
</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 the 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 5.5% 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, 1996, cumulative total return for
Enterprise Fund A Class at net asset value was 0.82% and for U.S. Growth
Fund A Class at net asset value was 6.39%.
-28-
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return(1)
World 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
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3 months 3 months 3 months 3 months
ended ended ended ended
10/31/96 (3.88%) 10/31/96 (3.30%) 0.70% 10/31/96 (0.22%) 0.78% 10/31/96 0.98%
6 months 6 months 6 months 6 months
ended ended ended ended
10/31/96 (4.99%)(5) 10/31/96 (4.58%) (0.60%) 10/31/96 (1.60%) (0.60%) 10/31/96 (0.08%)
9 months 9 months 9 months 9 months
ended ended ended ended
10/31/96 1.23% 10/31/96 1.67% 5.67% 10/31/96 4.75% 5.75% 10/31/96 6.48%
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/96 3.71% 10/31/96 4.16% 8.16% 10/31/96 7.15% 8.15% 10/31/96 7.91%
Period Period Period Period
12/3/93(3) 3/29/94(3) 5/10/94(3) 2/3/94(3)
through through through through
10/31/96 18.66% 13/31/96 13.36% 16.36% 10/31/96 16.53% 16.53% 10/31/96 18.32%
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
3 months 3 months 3 months 3 months
ended ended ended ended
10/31/96 (4.66%) 10/31/96 (4.10%) (0.10%) 10/31/96 (1.10%) (0.11%) 10/31/96 0.21%
6 months 6 months 6 months 6 months
ended ended ended ended
10/31/96 (10.96%)(5) 10/31/96 (10.56%) (6.83%) 10/31/96 (7.71%) (6.78%) 10/31/96 (6.29%)
9 months 9 months 9 months 9 months
ended ended ended ended
10/31/96 (7.10%) 10/31/96 (6.89%) (3.01%) 10/31/96 (3.94%) (2.97%) 10/31/96 (2.26%)
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/96 3.17% 10/31/96 3.54% 7.54% 10/31/96 6.58% 7.58% 10/31/96 8.77%
Period Period Period Period
12/3/93(3) 3/29/94(3) 7/7/94(3) 2/3/94(3)
through through through through
10/31/96 (7.34%) 10/31/96 (3.13%) (0.22%) 10/31/96 (2.13%) (2.13%) 10/31/96 (11.73%)
</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 the 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 5.5% 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, 1996, cumulative total return for
World Growth Fund A Class at net asset value was (0.24%) and for New
Pacific Fund A Class at net asset value was (6.55%).
-29-
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return(1)
Federal Bond 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
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3 months 3 months 3 months 3 months
ended ended ended ended
10/31/96 (1.53%) 10/31/96 (0.77%) 3.23% 10/31/96 2.19% 3.19% 10/31/96 3.41%
6 months 6 months 6 months 6 months
ended ended ended ended
10/31/96 (0.63%)(5) 10/31/96 0.04% 4.04% 10/31/96 2.98% 3.98% 10/31/96 4.48%
9 months 9 months 9 months 9 months
ended ended ended ended
10/31/96 (4.79%) 10/31/96 (4.32%) (0.47%) 10/31/96 (1.52%) (0.56%) 10/31/96 0.21%
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/96 (1.49%) 10/31/96 (1.17%) 2.76% 10/31/96 1.75% 2.74% 10/31/96 0.60%
Period Period Period Period
12/3/93(3) 7/27/94(3) 7/7/94(3) 2/3/94(3)
through through through through
10/31/96 6.54% 10/31/96 11.90% 14.90% 10/31/96 13.84% 13.84% 10/31/96 8.88%
Corporate Income 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
3 months 3 months 3 months 3 months
ended ended ended ended
10/31/96 (0.72%) 10/31/96 0.07% 4.07% 10/31/96 3.08% 4.08% 10/31/96 4.35%
6 months 6 months 6 months 6 months
ended ended ended ended
10/31/96 0.61%(5) 10/31/96 1.28% 5.28% 10/31/96 4.18% 5.18% 10/31/96 5.74%
9 months 9 months 9 months 9 months
ended ended ended ended
10/31/96 (4.09%) 10/31/96 (3.55%) 0.32% 10/31/96 (0.74%) 0.22% 10/31/96 1.06%
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/96 (0.20%) 10/31/96 0.20% 4.16% 10/31/96 3.07% 4.06% 10/31/96 5.19%
Period Period Period Period
12/3/93(3) 5/11/94(3) 9/14/94(3) 2/3/94(3)
through through through through
10/31/96 9.25% 10/31/96 19.02% 22.02% 10/31/96 19.76% 19.76% 10/31/96 15.38%
</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 the 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 increased from 4.5% 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, 1996, cumulative total return for
Federal Bond Fund A Class at net asset value was 4.30% and for Corporate
Income Fund A Class at net asset value was 5.64%.
-30-
<PAGE>
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Funds and other mutual funds in the Delaware
Group, will provide general information about investment alternatives and
scenarios that will allow investors to assess their personal goals. This
information will include general material about investing as well as materials
reinforcing various industry-accepted principles of prudent and responsible
personal financial planning. One typical way of addressing these issues is to
compare an individual's goals and the length of time the individual has to
attain these goals to his or her risk threshold. In addition, the Distributor
will provide information that discusses the Manager's or sub-adviser's
overriding investment philosophy and how that philosophy impacts the Funds', and
other Delaware Group funds', investment disciplines employed in seeking their
objectives. The Distributor may also from time to time cite general or specific
information about the institutional clients of the Manager or sub-adviser's,
including the number of such clients serviced by such persons.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly--as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember.
Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. You also should consider your financial ability to
continue to purchase shares during periods of low 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.
-31-
<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 Fund.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional shares of a
Fund, your investment is given yet another opportunity to grow. It's called the
Power of Compounding and the following chart illustrates just how powerful it
can be.
Compounded Returns
Results for various assumed fixed rates of return on a $10,000
investment compounded monthly for 10 years:
6% 8% 10% 12%
Rate of Rate of Rate of Rate of
Return Return Return Return
1 Year $10,617 $10,830 $11,047 $11,268
2 Years $11,272 $11,729 $12,204 $12,697
3 Years $11,967 $12,702 $13,482 $14,308
4 Years $12,705 $13,757 $14,894 $16,122
5 Years $13,488 $14,898 $16,453 $18,167
6 Years $14,320 $16,135 $18,176 $20,471
7 Years $15,203 $17,474 $20,079 $23,067
8 Years $16,141 $18,924 $22,182 $25,993
9 Years $17,137 $20,495 $24,504 $29,290
10 Years $18,194 $22,196 $27,070 $33,004
-32-
<PAGE>
Results for various assumed fixed rates of return on a $10,000
investment compounded quarterly for 10 years:
6% 8% 10% 12%
Rate of Rate of Rate of Rate of
Return Return Return Return
1 Year $10,614 $10,824 $11,038 $11,255
2 Years $11,265 $11,717 $12,184 $12,668
3 Years $11,956 $12,682 $13,449 $14,258
4 Years $12,690 $13,728 $14,845 $16,047
5 Years $13,468 $14,859 $16,386 $18,061
6 Years $14,295 $16,084 $18,087 $20,328
7 Years $15,172 $17,410 $19,965 $22,879
8 Years $16,103 $18,845 $22,038 $25,751
9 Years $17,091 $20,399 $24,326 $28,983
10 Years $18,140 $22,080 $26,851 $32,620
The figures are calculated assuming a fixed constant investment return
and assume no fluctuation in the value of principal. These figures, which do not
reflect payment of applicable taxes or sales charges, are not intended to be a
projection of investment results and do not reflect the actual performance
results of any of the Classes.
-33-
<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 Enterprise Fund, U.S. Growth Fund, World Growth
Fund and New Pacific Fund were as follows:
October 31,
1996 1995 1994
Enterprise Fund(1) $50,621 $35,533 $42,482
U.S. Growth Fund(1) $55,744 $27,955 $23,709
World Growth Fund(1) $31,960 $31,838 $12,019
New Pacific Fund(1) $236,538 $142,441 $187,987
(1) Date of initial public offering was December 3, 1993.
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.
-34-
<PAGE>
During the fiscal year ended October 31, 1996, portfolio
transactions of the following Funds in the amounts listed below, resulting in
brokerage commissions in the amounts listed below were directed to brokers for
brokerage and research services provided.
During the fiscal year ended October 31, 1996, portfolio
transactions of New Pacific Fund in the amount of $1,297,396 resulting in
brokerage commissions of $7,896 were directed to brokers for brokerage and
research services provided.
As provided in the Securities Exchange Act of 1934 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 Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the "NASD"), and subject to seeking
best price and execution, the Manager may place orders with broker/dealers that
have agreed to defray certain Fund expenses such as custodian fees, and may, at
the request of the Distributor, give consideration to sales of shares of the
Funds as a factor in the selection of brokers and dealers to execute portfolio
transactions.
-35-
<PAGE>
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 the
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 Securities Exchange Act of 1934, an affiliate of the
Manager may not retain compensation for effecting transactions on a national
securities exchange for the Funds unless the Adviser Funds, Inc. has expressly
authorized the retention of such compensation in a written contract executed by
the 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 a year by the monthly average value of portfolio
securities for that year. Securities with remaining maturities of one year or
less at the date of acquisition are excluded from the calculation. A portfolio
turnover rate of 100% would occur, for example, if all the securities in the
Fund's portfolio were replaced once during a period of one year. A high rate of
portfolio turnover in any year may increase brokerage commissions paid and could
result in high amounts of realized investment gain subject to the payment of
taxes by shareholders. The turnover rate may also be affected by cash
requirements from redemptions and repurchases of fund shares.
For Federal Bond Fund and Corporate Income Fund, which are
fixed-income funds, portfolio trading will be undertaken principally to
accomplish the Funds' objectives in relation to anticipated movements in the
general level of interest rates, and not for the purpose of realizing capital
gains, although capital gains may be realized on certain portfolio transactions.
For example, capital gains may be realized when a security is sold (i) so that,
provided capital is preserved or enhanced, another security can be purchased to
obtain a higher yield, (ii) to take advantage of what the Manager believes to be
a temporary disparity in the normal yield relationship between the two
securities to increase income or improve the quality of the portfolio, (iii) to
purchase a security which the Manager believes is of higher quality than its
rating or current market value would indicate, or (iv) when the Manager
anticipates a decline in value due to market risk or credit risk. The Fund is
free to dispose of portfolio securities at any time, subject to complying with
the Internal Revenue Code and the 1940 Act, when changes in circumstances or
conditions make such a move desirable in light of the investment objective. The
Fund will not attempt to achieve or be limited to a predetermined rate of
portfolio turnover, such a turnover always being incidental to transactions
undertaken with a view to achieving the Fund's investment objective.
-36-
<PAGE>
Although the Fixed-Income Funds trade principally to seek a high
level of income and stability of principal and not for profits, the portfolio
turnover may be high, particularly if interest rates are volatile. The portfolio
turnover rate of the Funds is calculated by dividing the lesser of purchases or
sales of portfolio securities for the particular fiscal year by the monthly
average of the value of the portfolio securities owned by the Funds during the
particular fiscal year, exclusive of securities whose maturities at the time of
acquisition are one year or less.
During the fiscal years ended October 31, 1996 and October 31, 1995,
the Funds' portfolio turnover rates were as follows:
FUND 1996 1995
Enterprise Fund 92% 106%
U.S. Growth Fund 131% 58%
World Growth Fund 21% 9%
New Pacific Fund 163% 163%
Federal Bond Fund 196% 227%
Corporate Income Fund 68% 119%
-37-
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for each Fund's four
classes of shares - Class A Shares, Class B Shares, Class C Shares and the
Institutional Class, and has agreed to use its best efforts to sell shares of
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 Rules of Fair Practice, 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 the 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.
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<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 Determining Offering Price and Net Asset Value and
Plans Under Rule 12b-1 for the Fund Classes 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 the
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. However, purchases not involving the
issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing shares
purchased by sending a letter to the Transfer Agent requesting the certificate.
No charge is assessed by Adviser Funds, Inc. for any certificate issued.
Investors who hold certificates representing any of their shares may only redeem
those shares by written request. The investor's certificate(s) must accompany
such request.
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A Shares, Class B Shares
and 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.
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.
-39-
<PAGE>
<TABLE>
<CAPTION>
Class A Shares
- -------------------------------------------------------------------------------------------------------------------------
Dealer's
Commission***
Front-End Sales Charge as % of as % of
Amount of Purchase Offering Offering
Price Amount Invested** Price
- -------------------------------------------------------------------------------------------------------------------------
Corpo-
Enter- U.S. World New Federal rate
prise Growth Growth Pacific Bond Income
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Less than $100,000 4.75% 5.00% 4.99% 5.00% 4.99% 5.00% 4.99% 4.00%
$100,000 but under $250,000 3.75 3.90 3.91 3.87 3.82 3.85 3.85 3.00
$250,000 but under $500,000 2.50 2.58 2.53 2.52 2.55 2.60 2.60 2.00
$500,000 but under $1,000,000* 2.00 2.06 2.03 2.02 2.02 2.08 2.08 1.60
</TABLE>
* There is no front-end sales charge on purchases of $1 million or more
of Class A Shares but, under certain limited circumstances, a 1%
contingent deferred sales charge may apply upon redemption of such
shares. The contingent deferred sales charge ("Limited CDSC") that may
be applicable arises only in the case of certain shares that were
purchased at net asset value and triggered the payment of a dealer's
commission.
** Based on the net asset value per share of the Class A Shares as of the
end of Adviser Funds, Inc.'s most recent fiscal year.
*** Financial institutions or their affiliated brokers may receive an
agency transaction fee in the percentages set forth above.
- --------------------------------------------------------------------------------
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 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.
- --------------------------------------------------------------------------------
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.
-40-
<PAGE>
Dealer's Commission
For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers through
whom such purchases are effected in accordance with the following schedule:
Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
------------------ -----------------
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75%
Next $2 million up to $5 million 0.50%
Amount over $5 million 0.25%
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies (see Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value under Redemption and
Exchange in the 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 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.
-41-
<PAGE>
The following table sets forth the rates of the CDSC for the 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 Class A
Shares' average daily net assets for the year, and up to 1% (0.25% of which are
service fees to be paid to the Distributor, dealers and others for providing
personal service and/or maintaining shareholder accounts) of each of Class B
Shares' and Class C Shares' average daily net assets for the year. Adviser
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.
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<PAGE>
Effective at the close of business on May 3, 1996, the annual fee
payable on a monthly basis under the 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 Class B Shares. Also, any other material
amendment to the Plans must be approved by a majority vote of the directors,
including a majority of the 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.
-43-
<PAGE>
For the fiscal year ended October 31, 1996, payments under the Plans
for the Class A Shares, Class B Shares and Class C Shares were as follows:
<TABLE>
<CAPTION>
Enterprise Fund Enterprise Fund Enterprise Fund
A Class B Class C Class
<S> <C> <C> <C>
Advertising --- --- ---
Annual/Semi-Annual Reports --- --- ---
Broker Trails $54,361 $6,703 $413
Broker Sales Charges --- $10,513 $198
Dealer Service Expenses $318 $216 ---
Interest on Broker Sales Charges --- $3,505 $22
Commissions to Wholesalers $59 $453 ---
Promotional-Broker Meetings $435 $107 ---
Promotional-Other $1,233 --- ---
Prospectus Printing --- --- ---
Telephone $43 $17 ---
Wholesaler Expenses $227 $317 ---
Other --- --- ---
Total $56,676 $21,831 $633
U.S. Growth Fund U.S. Growth Fund U.S. Growth Fund
A Class B Class C Class
Advertising --- --- ---
Annual/Semi-Annual Reports --- --- ---
Broker Trails $45,454 $2,730 $276
Broker Sales Charges --- $3,264 $146
Dealer Service Expenses $62 $46 $1
Interest on Broker Sales Charges --- $1,089 $13
Commissions to Wholesalers $76 $78 $5
Promotional-Broker Meetings $302 $37 ---
Promotional-Other $1,179 --- ---
Prospectus Printing --- --- ---
Telephone $79 $10 ---
Wholesaler Expenses $261 $86 $2
Other --- --- ---
Total $47,413 $7,340 $443
</TABLE>
-44-
<PAGE>
<TABLE>
<CAPTION>
World Growth Fund World Growth Fund World Growth Fund
A Class B Class C Class
<S> <C> <C> <C>
Advertising --- --- ---
Annual/Semi-Annual Reports $609 --- ---
Broker Trails $44,078 $3,650 $281
Broker Sales Charges --- $5,141 $193
Dealer Service Expenses --- $105 $2
Interest on Broker Sales Charges --- $1,956 $18
Commissions to Wholesalers --- $169 $2
Promotional-Broker Meetings --- $56 ---
Promotional-Other $1,227 --- ---
Prospectus Printing --- --- ---
Telephone --- $12 ---
Wholesaler Expenses --- $180 $3
Other --- --- ---
Total $45,914 $11,269 $499
New Pacific Fund New Pacific Fund New Pacific Fund
A Class B Class C Class
Advertising --- --- ---
Annual/Semi-Annual Reports $497 --- ---
Broker Trails $36,706 $1,058 $136
Broker Sales Charges --- $1,281 $113
Dealer Service Expenses --- --- $2
Interest on Broker Sales Charges --- $1,101 $6
Commissions to Wholesalers --- --- ---
Promotional-Broker Meetings --- --- ---
Promotional-Other $993 --- ---
Prospectus Printing --- --- ---
Telephone --- --- ---
Wholesaler Expenses --- --- $2
Other --- --- ---
Total $38,196 $3,440 $259
</TABLE>
-45-
<PAGE>
<TABLE>
<CAPTION>
Federal Bond Fund Federal Bond Fund Federal Bond Fund
A Class B Class C Class
<S> <C> <C> <C>
Advertising --- --- ---
Annual/Semi-Annual Reports $442 --- ---
Broker Trails $27,843 $851 $118
Broker Sales Charges --- $1,855 $45
Dealer Service Expenses $15 $1 ---
Interest on Broker Sales Charges --- $526 $5
Commissions to Wholesalers $12 $1 ---
Promotional-Broker Meetings $556 $21
Promotional-Other $7,414 --- ---
Prospectus Printing --- --- ---
Telephone $191 $6 ---
Wholesaler Expenses $48 $141 ---
Other --- --- ---
Total $36,521 $3,402 $168
Corporate Income Fund Corporate Income Fund Corporate Income Fund
A Class B Class C Class
Advertising --- --- ---
Annual/Semi-Annual Reports $1,330 --- ---
Broker Trails $28,492 $942 $110
Broker Sales Charges --- $1,868 $171
Dealer Service Expenses $260 $67 ---
Interest on Broker Sales Charges --- $670 $15
Commissions to Wholesalers $289 $84 ---
Promotional-Broker Meetings $588 $16 ---
Promotional-Other $6,635 --- ---
Prospectus Printing --- --- ---
Telephone $202 $5 ---
Wholesaler Expenses $599 $113 ---
Other --- --- ---
Total $38,395 $3,765 $296
</TABLE>
The staff of the Securities and Exchange Commission ("SEC") has
proposed amendments to Rule 12b-1 and other related regulations that could
impact Rule 12b-1 Distribution Plans. Adviser Funds, Inc. intends to amend the
Plans, if necessary, to comply with any new rules or regulations the SEC may
adopt with respect to Rule 12b-1.
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.
-46-
<PAGE>
Payment to dealers made in connection with seminars, conferences or
contests relating to the promotion of fund shares may be in an amount up to 100%
of the expenses incurred or awards made. The Distributor may also pay a portion
of the expense of preapproved dealer advertisements promoting the sale of
Delaware Group fund shares.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares may be purchased without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the Exchange
Privilege and the 12-Month Reinvestment Privilege.
Current and former officers, directors and employees of Adviser Funds,
Inc., any other fund in the Delaware Group, the Manager, 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 of such persons at their direction, and
any employee benefit plan established by any of the foregoing funds,
corporations, counsel or broker/dealers may also purchase shares at net asset
value.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 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.
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.
-47-
<PAGE>
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 the Class A Shares intended to be
purchased until such purchase is completed within the 13-month period. A Letter
of Intention may be dated to include shares purchased up to 90 days prior to the
date the Letter is signed. The 13- month period begins on the date of the
earliest purchase. If the intended investment is not completed, except as noted
below, the purchaser will be asked to pay an amount equal to the difference
between the front-end sales charge on the Class A Shares purchased at the
reduced rate and the front-end sales charge otherwise applicable to the total
shares purchased. If such payment is not made within 20 days following the
expiration of the 13-month period, the Transfer Agent will surrender an
appropriate number of the escrowed shares for redemption in order to realize the
difference. Such purchasers may include the value (at offering price at the
level designated in their Letter of Intention) of all their shares of the 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 the 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).
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).
-48-
<PAGE>
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to the Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of 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 the 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.
-49-
<PAGE>
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 00, based on
total plan assets. If a company has more than one plan investing in the Delaware
Group of funds, then the total amount invested in all plans would be used in
determining the applicable front-end sales charge reduction upon each purchase,
both initial and subsequent, upon notification to the 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.
For other retirement plans and special services, see Retirement Plans for the
Fund Classes under Investment 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 the Institutional Classes are available for purchase at net
asset value, without the imposition of a front-end or contingent deferred sales
charge and are not subject to Rule 12b-1 expenses.
-50-
<PAGE>
INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares of the respective
Fund Class in which an investor has an account (based on the net asset value in
effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of the Institutional Class
are reinvested in the 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 the Institutional Classes, 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. See Appendix B--Classes Offered in
the Fund Classes' Prospectus for the funds in the Delaware Group that are
eligible for investment by holders of Fund shares.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
-51-
<PAGE>
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, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to 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 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.
-52-
<PAGE>
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 at any time by giving
written notice to their Fund.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans. This option also is not available to shareholders
of the Institutional Classes.
Retirement Plans for the Fund Classes
An investment in any Fund may be suitable for tax-deferred retirement
plans. Among the retirement plans noted below, Class B Shares are available for
investment only by Individual Retirement Accounts, Simplified Employee Pension
Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares and Class
C Shares. See Waiver of Contingent Deferred Sales Charge - Class B and Class C
Shares under Redemption and Exchange in the Prospectus for the Fund Classes for
a list of the instances in which the CDSC is waived.
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.
-53-
<PAGE>
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships and corporations. These plans can be maintained as Section 401(k),
profit sharing or money purchase pension plans. Contributions may be invested
only in Class A and Class C Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
and make contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has 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 taxpayers adjusted
gross income and whether the taxpayer or his or her spouse is an active
participant in an employer-sponsored retirement plan. Even if a taxpayer (or his
or her spouse) is an active participant in an employer-sponsored retirement
plan, the full $2,000 deduction is still available if the taxpayer's adjusted
gross income is below $25,000 ($40,000 for taxpayers filing joint returns). A
partial deduction is allowed for married couples with incomes between $40,000
and $50,000, and for single individuals with incomes between $25,000 and
$35,000. No deductions are available for contributions to IRAs by taxpayers
whose adjusted gross income before IRA deductions exceeds $50,000 ($35,000 for
singles) and who are active participants in an employer-sponsored retirement
plan. Taxpayers who are not allowed deductions on IRA contributions still can
make nondeductible IRA contributions of as much as $2,000 for each working
spouse ($2,250 for one-income couples for years prior to 1997), and defer taxes
on interest or other earnings from the IRAs. Special rules apply for determining
the deductibility of contributions made by married individuals filing separate
returns.
Effective for tax years beginning after 1996, one-income couples can
contribute up to $2,000 to each spouse's IRA provided the combined compensation
of both spouses is at least equal to the total contributions for both spouses.
If the working spouse is an active participant in an employer-sponsored
retirement plan and earns over $40,000, the maximum deduction limit is reduced
in the same way that the limit is reduced for contributions to a non-spousal
IRA.
A company or association may establish a Group IRA for employees or
members who want to purchase shares of a Fund. Purchases of $1 million or more
of Class A Shares qualify for purchase at net asset value but may, under certain
circumstances, be subject to a Limited CDSC. 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
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without penalty, by mailing written notice of revocation to Delaware Management
Trust Company within seven days after the receipt of the IRA Disclosure
Statement or within seven days after the establishment of the IRA, except, if
the IRA is established more than seven days after receipt of the IRA Disclosure
Statement, the account may not be revoked. Distributions from the account
(except for the pro-rata portion of any nondeductible contributions) are fully
taxable as ordinary income in the year received. Excess contributions removed
after the tax filing deadline, plus extensions, for the year in which the excess
contributions were made are subject to a 6% excise tax on the amount of excess.
Premature distributions (distributions made before age 59 1/2, except for death,
disability and certain other limited circumstances) will be subject to a 10%
excise tax on the amount prematurely distributed, in addition to the income tax
resulting from the distribution. See Alternative Purchase Arrangements Class B
Shares and Class C Shares under Classes of Shares, Contingent Deferred Sales
Charge - Class B Shares and Class C Shares under Classes of Shares, and Waiver
of Contingent Deferred Sales Charge - Class B 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 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")
New SAR/SEP plans may not be established after December 31, 1996. In
addition, employers must have 25 or fewer eligible employees to maintain an
existing SEP/IRA that permits salary deferral contributions.
SAR/SEP plans may only invest in Class A Shares and Class C Shares.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Plan documents are available to
enable employers to establish a plan. An employer may also elect to make profit
sharing contributions and/or matching contributions with investments in only
Class A Shares and Class C Shares or certain other funds in the Delaware Group.
Purchases under the plan may be combined for purposes of computing the reduced
front-end sales charge applicable to Class A Shares as set forth in the table on
page 00.
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase any of
the Fund Classes in conjunction with such an arrangement. Applicable front-end
sales charges with respect to Class A Shares for such purchases are set forth in
the table on page 00.
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Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of any of the Fund Classes. Although investors
may use their own plan, there is available a Delaware Group 457 Deferred
Compensation Plan. Interested investors should contact the Distributor or their
investment dealers to obtain further information. Applicable front-end sales
charges for such purchases of Class A Shares are set forth in the table on page
00.
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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, 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. 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 Securities and Exchange Commission 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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The Funds have made available certain special redemption privileges, as
described below. The Funds reserve the right to suspend or terminate these
expedited payment procedures upon 60 days' written notice to shareholders.
Expedited Telephone Redemptions
Shareholders of the Fund Classes or their investment dealers of record
wishing to redeem any amount of 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.
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Neither the Funds nor the Funds' Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, each Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. 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, Class B 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 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.
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An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The Funds reserve the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
The Systematic Withdrawal Plan is not available for the Institutional
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 the
Adviser Funds, Inc. controls and that are engaged in the same, similar or
related trades or businesses. These requirements may restrict the degree to
which the Adviser Funds, Inc. may engage in short-term trading and limit the
range of the Adviser Funds, Inc.'s investments. If a Fund qualifies as a
regulated investment company, it will not be subject to federal income tax on
the part of its income distributed to shareholders, provided the Fund
distributes at least 90% of its net investment income (including short-term
capital gains) other than long-term capital gains in each year. Each Fund
intends to make sufficient distributions to shareholders to meet this
requirement.
Consequently, in order to avoid realizing a gain within the three-month
period, each Fund may be required to defer the closing out of a contract beyond
the time when it might otherwise be advantageous to do so. Each Fund may also be
restricted in the sale of purchased put options and the purchase of put options
for the purpose of hedging underlying securities because of the application of
the short sale holding period rules with respect to such underlying securities.
The Code imposes a non-deductible excise tax on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar taxable year) an amount equal to 98% of their
"ordinary income" (as defined) for the calendar year plus 98% of their "capital
gain net income" (as defined) for the 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.
It is the present policy of Adviser Funds, Inc. to declare and pay
dividends from net investment income of each fixed-income Fund monthly.
Dividends are declared at the time the offering price and net asset value are
determined (see Determining Offering Price and Net Asset Value) on the second to
last business day of each month and are payable on the last business day of each
month. For the Equity Funds, the current policy is to declare dividends of net
investment income, if any, on the second to last business day of each quarter
which are payable on the last business day of the quarter. 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 the Class A Shares, Class B Shares
and the 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.
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Taxation of Shareholders
Gain or loss on the sale of a security generally will be long-term
capital gain or loss if a Fund has held the securities for more than one year.
Gain or loss on the sale of securities held for not more than one year will be
short-term. If one of the Funds acquires a debt security at a substantial
discount, a portion of any gain upon the sale or redemption will be taxed as
ordinary income, rather than capital gain to the extent it reflects accrued
market discount. Alternatively, this discount may be accredited as ordinary
income on a daily basis rather than recognized at disposition.
Dividends of net investment income and distributions of net realized
short-term capital gains will be taxable to shareholders as ordinary income for
federal income tax purposes, whether received in cash or reinvested in
additional shares. Dividends received by corporate shareholders will qualify for
the dividends-received deduction only to the extent that each of the Equity
Funds 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.
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<PAGE>
Each Fund will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable dividends or of gross proceeds from
redemptions paid to any shareholder who has provided either an incorrect tax
identification number or no number at all, or who is subject to withholding by
the Internal Revenue Service for failure to properly include on his tax return
payments of interest or dividends. This withholding, known as backup
withholding, is not an additional tax, and any amounts withheld may be credited
against the shareholder's ultimate U.S. tax liability.
Certain investments and hedging activities of the Funds, including
transactions in options, futures contracts, hedging transactions, forward
contracts, straddles, foreign currencies, and foreign securities will be subject
to special tax rules. See Option Transactions, Straddles and Wash Sales. In a
given case, these rules may accelerate income to a Fund, defer losses to a Fund,
cause adjustments in the holding periods of a Fund's securities, convert
short-term capital losses into long-term capital losses, or otherwise affect the
character of a Fund's income. These rules could therefore affect the amount,
timing and character of distributions to shareholders. Each Fund will endeavor
to make any available elections pertaining to such transactions in a manner
believed to be in the best interest of a Fund.
Certain securities purchased by the Funds (such as STRIPS, CUBES, TRs,
TIGRs and CATS), are sold at original issue discount and do not make periodic
cash interest payments. A Fund will be required to include as part of its
current income the imputed interest on such obligations even though a Fund has
not received any interest payments on such obligations during that period.
Because a Fund distributes all of its net investment income to its shareholders
(including such imputed interest), a Fund may have to sell securities in order
to generate the cash necessary for the required distributions. Such sales may
occur at a time when the Manager or sub-adviser would not have chosen to sell
such securities and which may result in a taxable gain or loss.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting purchasers of shares of each Fund of Adviser
Funds, Inc. Further tax information regarding the World Growth 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 the World
Growth and New Pacific Funds 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 the World Growth and New Pacific Funds
Gain or loss on the sale or other disposition of foreign currency by
the World Growth and New Pacific Funds 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).
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<PAGE>
Investment by a Fund in certain "passive foreign investment companies"
could subject a Fund to U.S. federal income tax or other charge on distributions
received from, or the sale of its investment in, such a company, which tax
cannot be eliminated by making distributions to shareholders. If the Funds elect
to treat a passive foreign investment company as a "qualified electing fund,"
different rules would apply, although the Funds do not expect to be in the
position to make such elections.
Foreign Tax Credit
Shareholders of the World Growth and New Pacific Funds who are U.S.
citizens may be able to claim a foreign tax credit or deduction on their U.S.
income tax returns with respect to foreign taxes paid by the Funds. Generally, a
credit for foreign taxes is subject to the limitation that it may not exceed the
shareholder's U.S. tax attributable to his or her total foreign source taxable
income. For this purpose, the source of a Fund's income flows through to its
shareholders. A Fund's gains from the sale of securities generally will be
treated as derived from U.S. sources and certain currency fluctuation gains,
including fluctuation gains from foreign currency denominated debt securities,
receivables and payables, will be treated as ordinary income derived from U.S.
sources. With limited exceptions, the foreign tax credit is allowed to offset
only 90% of the alternative minimum tax imposed on corporations and individuals.
Because of these limitations, shareholders may be unable to claim a credit for
the full amount of their proportionate share of the foreign taxes paid by a
Fund.
The foregoing is only a general description of the treatment of foreign
withholding or other foreign taxes under the U.S. federal income tax laws.
Because the availability of a credit or deduction depends on the particular
circumstances of each shareholder, shareholders are advised to consult their own
tax 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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<PAGE>
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, 1996, the Manager and its affiliates
within the Delaware Group, including Delaware International Advisers Ltd., were
managing in the aggregate more than $30 billion in assets in the various
institutional or separately managed (approximately $19,214,690,000) and
investment company (approximately $11,539,873,000) accounts.
Separate Investment Management Agreements for each Fund are dated May
4, 1996 and were approved by shareholders on May 3, 1996. 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
Enterprise Fund 0.80%
U.S. Growth Fund 0.70%
World Growth Fund 1.10%
New Pacific Fund 0.80%
Federal Bond Fund 0.30%
Corporate Income Fund 0.30%
On October 31, 1996, each Fund's total net assets were as follows:
Enterprise Fund $28,486,265
U.S. Growth Fund $26,985,244
World Growth Fund $16,489,873
New Pacific Fund $12,477,878
Federal Bond Fund $12,105,271
Corporate Income Fund $18,389,288
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<PAGE>
The total investment management fees incurred by each Fund during the
fiscal years ended October 31, 1996 and October 31, 1995 and the period ended
October 31, 1994 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 1996 1995 1994
<S> <C> <C> <C>
Enterprise Fund $210,155 earned $116,353 earned $75,244 earned
$188,060 paid $40,625 paid -$0- paid
$22,095 waived $75,728 waived $75,244 waived
U.S. Growth Fund $154,309 earned $105,965 earned $68,168 earned
$137,359 paid $63,298 paid -$0- paid
$16,950 waived $42,667 waived $68,168 waived
World Growth Fund $167,584 earned $142,529 earned $111,392 earned
$47,994 paid $5,771 paid -$0- paid
$119,590 waived $136,758 waived $111,392 waived
New Pacific Fund $116,131 earned $119,820 earned $108,975 earned
$203 paid -$0- paid -$0- paid
$115,928 waived $119,820 waived $108,975 waived
Federal Bond Fund $34,787 earned $33,749 earned $27,383 earned
-$0- paid -$0- paid -$0- paid
$34,787 waived $33,749 waived $27,383 waived
Corporate Income Fund $48,958 earned $40,247 earned $28,095 earned
-$0- paid -$0- paid -$0- paid
$48,958 waived $40,427 waived $28,095 waived
</TABLE>
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<PAGE>
As authorized by the Investment Management Agreements relating to each
Fund, the Investment Manager, under the general supervision of the Board of
Directors, has selected and contracted with various sub-advisers to assist with
the management of the Fund's portfolios in accordance with each Fund's stated
objectives and policies. The Manager is responsible for compensating such
sub-advisers. The Manager has entered into separate Sub-Advisory Agreements in
respect of each of the Funds dated May 4, 1996. 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 Class A Shares, Class B Shares, Class C Shares
and the Institutional Class for each Fund for the fiscal year ended October 31,
1995 were as follows with and without giving effect to any expense waivers or
reimbursements, as more fully described below:
Ratio (With Ratio (Without
Giving Effect Giving Effect
Fund To Waiver) To Waiver)
---- ---------- ----------
Enterprise Fund
Class A Shares 1.82% 1.90%
Class B Shares 2.50% 2.58%
Class C Shares 2.50% 2.58%
Institutional Class 1.50% 1.58%
U.S. Growth Fund
Class A Shares 1.80% 1.88%
Class B Shares 2.48% 2.56%
Class C Shares 2.48% 2.56%
Institutional Class 1.48% 1.56%
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<PAGE>
Ratio (With Ratio (Without
Giving Effect Giving Effect
Fund To Waiver) To Waiver)
---- ---------- ----------
World Growth Fund
Class A Shares 1.82% 2.60%
Class B Shares 2.50% 3.28%
Class C Shares 2.50% 3.28%
Institutional Class 1.50% 2.28%
New Pacific Fund
Class A Shares 1.82% 2.77%
Class B Shares 2.50% 3.45%
Class C Shares 2.50% 3.45%
Institutional Class 1.50% 2.45%
Federal Bond Fund
Class A Shares 1.23% 1.91%
Class B Shares 1.90% 2.58%
Class C Shares 1.90% 2.58%
Institutional Class 0.90% 1.58%
Corporate Income Fund
Class A Shares 1.23% 1.65%
Class B Shares 1.90% 2.32%
Class C Shares 1.90% 2.32%
Institutional Class 0.90% 1.32%
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, 1997, 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. World New Federal Corporate
Enterprise Growth Growth Pacific Bond Income
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
Class A Shares 1.80% 1.80% 1.80% 1.80% 1.20% 1.20%
Class B Shares 2.50% 2.50% 2.50% 2.50% 1.90% 1.90%
Class C Shares 2.50% 2.50% 2.50% 2.50% 1.90% 1.90%
Institutional Class Shares 1.50% 1.50% 1.50% 1.50% 0.90% 0.90%
</TABLE>
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<PAGE>
Sub-Advisers
The following registered investment advisers serve as sub-advisers to
the Funds indicated: Lincoln Investment Management, Inc. serves as sub-adviser
of Federal Bond Fund and Corporate Income Fund; Lynch & Mayer, Inc. serves as
sub-adviser of U.S. Growth Fund and Enterprise Fund; Walter Scott & Partners
Limited serves as sub-adviser of World Growth Fund; and John Govett & Company
Limited serves as sub-adviser of New Pacific Fund.
Lincoln Investment Management, Inc. Lincoln Investment Management, Inc.
provides investment services to Lincoln National Corporation and its principal
subsidiaries and acts as investment adviser to other clients in addition to the
funds. As of October 31, 1996, Lincoln Investment Management, Inc. had total
assets under management in excess of $39 billion.
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, 1996,
Lynch & Mayer, Inc. had total assets under management in excess of $6.1 billion.
Walter Scott & Partners Limited. Walter Scott & Partners Limited was
founded in 1983. The firm is an investment adviser registered with the
Securities and Exchange Commission. The firm's area of expertise is in providing
both international and global management of equity securities. The firm manages
money for pension funds and foundations for investors in the United Kingdom and
United States. As of October 31, 1996, Walter Scott & Partners Limited had
assets under management in excess of $3.5 billion.
John Govett & Company Limited. The London-based investment management
firm of John Govett & Company Limited was established in 1920. In December 1995,
John Govett & Company Limited was acquired by John Govett Holdings Limited, a
majority-owned subsidiary of the AIB Group of Companies. On January 2, 1997,
John Govett Holdings Limited was renamed AIB Assets Management Holdings Limited.
John Govett & Company Limited provides investment advice to investment trusts,
investment companies, mutual funds and pension funds. The firm has other
investment offices in Singapore and San Francisco. As of October 31, 1996, John
Govett & Company Limited had assets under management in excess of $5.4 billion.
Distribution and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor of the Funds' shares
under separate Distribution Agreements dated September 25, 1995. The Distributor
is an affiliate of the Manager and bears all of the costs of promotion and
distribution, except for payments by Class A Shares, Class B Shares and Class C
Shares of the Funds under their respective 12b-1 Plans. Prior to September 25,
1995, LNC Equity Sales, Inc. served as the national distributor of the Fund's
shares. Delaware Distributors Inc. ("DDI") is the corporate general partner of
Delaware Distributors, L.P. and both DDI and Delaware Distributors, L.P. are
indirect, wholly owned subsidiaries of Delaware Management Holdings, Inc. which,
in turn, is a wholly owned subsidiary of Lincoln National Corporation.
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
the shareholder servicing, dividend disbursing and transfer agent for each Fund
pursuant to a Shareholders Services Agreement dated September 25, 1995. The
Transfer Agent 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.
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OFFICERS AND DIRECTORS
DMH Corp., Delaware Management Company, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware International Holdings Ltd., Founders
Holdings, Inc., Delaware International Advisers Ltd., Delaware 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 was completed. Lincoln National Corporation, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management. DMH and the Manager are now indirect,
wholly owned subsidiaries, and subject to the ultimate control, of Lincoln
National Corporation. After Lincoln National's acquisition of DMH and the
Manager, Lincoln National was operating two mutual fund complexes, the Delaware
Group and Lincoln Advisor Funds, Inc. (the "Lincoln Funds"). The directors and
management of both mutual fund complexes concluded that the extensive mutual
fund experience and resources of the Delaware Group of funds warranted the
consolidation of Lincoln Funds into the Delaware Group of funds. On May 3, 1996,
the shareholders of the Lincoln Funds approved the 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
The business and affairs of Adviser Funds, Inc. are managed under the
direction of its Board of Directors.
Directors of Adviser Funds, Inc. are noted below along with their ages
and their business experience for the past five years. Unless otherwise noted,
the address of each officer and director is One Commerce Square, Philadelphia,
PA 19103.
*Wayne A. Stork (59)
Chairman,President, Chief Executive Officer, Director and/or Trustee
of Adviser Funds, Inc., 16 other investment companies in the
Delaware Group (which excludes Delaware Pooled Trust, Inc.),
Delaware Management Holdings, Inc., DMH Corp., Delaware
International Holdings Ltd. and Founders Holdings, Inc.
Chairman and Director of Delaware Pooled Trust, Inc., Delaware
Distributors, Inc. and Delaware Capital Management, Inc.
Chairman,President, Chief Executive Officer, Chief Investment Officer
and Director of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware
International Advisers Ltd.
Director of Delaware Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware
organization.
- ----------
*Director affiliated with Adviser Funds, Inc.'s investment manager and
considered an "interested person" as defined in the 1940 Act.
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Walter P. Babich (69)
Director and/or Trustee of Adviser Funds, Inc. and each of the other 17
investment companies in the Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and
from 1988 to 1991, he was a partner of I&L Investors.
Anthony D. Knerr (58)
Director and/or Trustee of Adviser Funds, Inc. and each of the other 17
investment companies in the Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Founder and Managing Director, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance
and Treasurer of Columbia University, New York. From 1987 to
1989, he was also a lecturer in English at the University. In
addition, Mr. Knerr was Chairman of The Publishing Group,
Inc., New York, from 1988 to 1990. Mr. Knerr founded The
Publishing Group, Inc. in 1988.
Ann R. Leven (56)
Director and/or Trustee of Adviser Funds, Inc. and each of the other 17
investment companies in the Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer
of the Smithsonian Institution, Washington, DC, and from 1975
to 1992, she was Adjunct Professor of Columbia Business
School.
W. Thacher Longstreth (76)
Director and/or Trustee of Adviser Funds, Inc. and each of the other 17
investment companies in the Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
Charles E. Peck (71)
Director and/or Trustee of Adviser Funds, Inc. and each of the other 17
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>
The following is a compensation table listing for each director
entitled to receive compensation. The present directors were elected on May 3,
1996 and, therefore, did not previously receive compensation from the Funds
prior to that date. However, the previous directors entitled to receive
compensation each received annual fees of $13,000 for their services to Adviser
Funds, Inc., while it operated as Lincoln Advisor Funds, Inc. The following
table shows the total compensation received from all Delaware Group funds for
the fiscal year ended October 31, 1996 and an estimate of annual benefits to be
received upon retirement under the Delaware Group Retirement Plan.
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits
Aggregate Accrued as Estimated Total
Compensation Part of Annual Compensation
from Adviser Benefits from all 18
Adviser Funds, Inc. Upon Delaware
Name Funds, Inc.* Expenses Retirement** Group Funds
<S> <C> <C> <C>
W. Thacher Longstreth $647 None $30,000 $44,102
Ann R. Leven $668 None $30,000 $52,238
Walter P. Babich $664 None $30,000 $48,102
Anthony D. Knerr $664 None $30,000 $51,238
Charles E. Peck $647 None $30,000 $47,238
</TABLE>
* Each director of Adviser Funds, Inc. entitled to receive compensation
currently receives $174 for each meeting attended as well as an annual
retainer fee of $310.
** Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director who, at the time of his or
her retirement from the Board, has attained the age of 70 and served on the
Board for at least five continuous years, is entitled to receive payments
from each fund in the Delaware Group for a period equal to the lesser of
the number of years that such person served as a director or the remainder
of such person's life. The amount of such payments will be equal, on an
annual basis, to the amount of the annual retainer that is paid to
directors of each fund at the time of such person's retirement. If an
eligible director retired as of October 31, 1996, he or she would be
entitled to annual payments totaling $30,000, in the aggregate, from all of
the funds in the Delaware Group, based on the number of funds in the
Delaware Group as of that date.
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<PAGE>
OFFICERS
The day to day business operations of Adviser Funds, Inc. are managed
under the direction of the officers of Adviser Funds, Inc., who are listed
below:
Winthrop S. Jessup (51)
Executive Vice President of Adviser Funds, Inc., 16 other investment
companies in the Delaware Group (which excludes Delaware
Pooled Trust, Inc.) and Delaware Management Holdings, Inc.
President and Chief Executive Officer of Delaware Pooled Trust, Inc.
President and Director of Delaware Capital Management, Inc.
Executive Vice President and Director of DMH Corp., Delaware Management
Company, Inc., Delaware International Holdings Ltd. and
Founders Holdings, Inc.
Vice Chairman and Director of Delaware Distributors, Inc.
Vice Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc., Delaware International
Advisers Ltd., Delaware Management Trust Company and Delaware
Investment & Retirement Services, Inc.
During the past five years, Mr. Jessup has served in various
executive capacities at different times within the Delaware
organization.
Richard G. Unruh, Jr. (57)
Executive Vice President of Adviser Funds, Inc. and each of the other
17 investment companies in the Delaware Group.
Executive Vice President and Director of Delaware Management Company,
Inc.
Senior Vice President of Delaware Management Holdings, Inc. and
Delaware Capital Management, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware
organization.
Paul E. Suckow (49)
Executive Vice President/Chief Investment Officer, Fixed Income of
Adviser Funds, Inc., each of the other 17 investment companies
in the Delaware Group and Delaware Management Company, Inc.
Executive Vice President/Chief Investment Officer/Fixed Income and
Director of Founders Holdings, Inc.
Senior Vice President/Chief Investment Officer, Fixed Income of
Delaware Management Holdings, Inc.
Director of Founders CBO Corporation.
Senior Vice President of Delaware Capital Management, Inc.
Director, 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.
-77-
<PAGE>
David K. Downes (57)
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer of Adviser Funds, Inc., each of the other 17
investment companies in the Delaware Group
ExecutiveVice President, Chief Operating Officer and Chief Financial
Officer of Delaware Management Company, Inc.
Chairman and Director of Delaware Management Trust Company.
Chief Executive Officer and Director of Delaware Investment &
Retirement Services, Inc.
Executive Vice President/Chief Operating Officer/Chief Financial
Officer of Delaware Management Holdings, Inc.
Executive Vice President/Chief Operating Officer/Chief Financial
Officer and Director of DMH Corp, Delaware Distributors, Inc.
and Founders Holdings, Inc.
Senior Vice President/Chief Administrative Officer/ Chief Financial
Officer of Delaware Distributors, L.P.
Vice President/Chief Executive Officer/Chief Financial Officer and
Director of Delaware Service Company, Inc.
Executive Vice President/Chief Operating Officer/Chief Financial
Officer and Director of Delaware International Holdings Ltd.
Executive Vice President/Chief Financial Officer/Chief Operating
Officer of Delaware Capital Management, Inc.
Director of Delaware International Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes was Chief
Administrative Officer, Chief Financial Officer and Treasurer
of Equitable Capital Management Corporation, New York, from
December 1985 through August 1992, Executive Vice President
from December 1985 through March 1992, and Vice Chairman from
March 1992 through August 1992.
George M. Chamberlain, Jr. (50)
Senior Vice President and Secretary of Adviser Funds, Inc., each of
the other 17 investment companies in the Delaware Group,
Delaware Management Holdings, Inc. and Delaware Distributors,
L.P.
Executive Vice President, Secretary and Director of Delaware Management
Trust Company.
Senior Vice President, Secretary and Director of DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Founders Holdings, Inc.,
Delaware Investment & Retirement Services, Inc. and Delaware
Capital Management, Inc.
Secretary and Director of Delaware International Holdings Ltd.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served in various
capacities at different times within the Delaware
organization.
-78-
<PAGE>
Joseph H. Hastings (47)
Vice President/Corporate Controller of Adviser Funds, Inc., each of
the other 17 investment companies in the Delaware Group,
Delaware Distributors, L.P., Delaware Service Company, Inc.,
Delaware Capital Management, Inc. and Delaware International
Holdings Ltd.
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Company, Inc., Delaware Management Holdings, Inc.,
DMH Corp., Delaware Distributors, Inc. and Founders Holdings,
Inc.
Chief Financial Officer/Treasurer of Delaware Investment &
Retirement Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company.
Vice President/Treasurer of Delaware Capital Management, Inc.
Assistant Treasurer of Founders CBO Corporation.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings was Chief
Financial Officer for Prudential Residential Services, L.P.,
New York, NY from 1989 to 1992. Prior to that, Mr. Hastings
served as Controller and Treasurer for Fine Homes
International, L.P., Stamford, CT from 1987 to 1989.
Michael P. Bishof (34)
Vice President/Treasurer of Adviser Funds, Inc., each of the other
17 investment companies in the Delaware Group, Delaware
Distributors, L.P. and Delaware Service Company, Inc.
Senior Vice President/Treasurer of Delaware Distributors, Inc. and
Founders Holdings, Inc.
Senior Vice President of Delaware Management Company, Inc.
Vice President/Manager of Investment Accounting of Delaware
International Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation.
Before joining the Delaware Group in 1995, Mr. Bishof was a Vice
President for Bankers Trust, New York, NY from 1994 to 1995, a
Vice President for CS First Boston Investment Management, New
York, NY from 1993 to 1994 and an Assistant Vice President for
Equitable Capital Management Corporation, New York, NY from
1987 to 1993.
-79-
<PAGE>
As of January 31, 1997, the officers and directors of Adviser Funds,
Inc., as a group, 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.
Listed below are the shareholders of record who management believes
held 25% or more of the outstanding shares of each Class as of January 31, 1997.
Except in the case of the Delaware Management Company Employee Profit Sharing
Trust, management has no knowledge whether such shares were also held
beneficially. Shares held of record by Delaware Management Company Employee
Profit Sharing Trust are beneficially owned by the participants in the plan.
<TABLE>
<CAPTION>
Fund Name and Address of Shareholder Share Amount Percentage Held
- ---- ------------------------------- ------------ ---------------
<S> <C> <C> <C>
Enterprise Fund American States Insurance Co. 1,071,687 64.89%
(Class A) Attn: Corporate Accounting P/C
David Rogers
500 North Meridian St.
Indianapolis, IN 46204
Enterprise Fund None
(Class B)
Enterprise Fund NFSC/FMTC IRA Rollover 3,732 41.54%
(Class C) FBO Lester C. Gilman, Jr.
1485 Kathleen Place
Englewood, FL 34223
Enterprise Fund NBD Bank 565,433 99.30%
(Institutional Trst Motor Wheel Corp.
Class) 415819602
P.O. Box 771072
Detroit, MI 48277
U.S. Growth Fund American States Insurance Co. 1,106,529 75.91%
(Class A) Attn: Corporate Accounting P/C
David Rogers
500 North Meridian St.
Indianapolis, IN 46204
U.S. Growth Fund None
(Class B)
U.S. Growth Fund None
(Class C)
U.S. Growth Fund Federated Life Insurance Co. 861,401 99.06%
(Institutional Separate Account A
Class) Attn: Tom Koch
121 E. Park Sq.
Owatonna, MN 55060
</TABLE>
-80-
<PAGE>
<TABLE>
<CAPTION>
Fund Name and Address of Shareholder Share Amount Percentage Held
- ---- ------------------------------- ------------ ---------------
<S> <C> <C> <C>
World Growth Fund Lincoln National Life Insurance Co. 1,072,145 85.18%
(Class A) 1300 S. Clinton St.
Fort Wayne, IN 46801
World Growth Fund None
(Class B)
World Growth Fund None
(Class C)
World Growth Fund Delaware Management Company 1,501 76.17%
(Institutional Employee Profit Sharing Trust
Class) c/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103
New Pacific Fund Lincoln National Life Insurance Co. 1,039,049 82.75%
(Class A) 1300 S. Clinton St.
Fort Wayne, IN 46801
New Pacific Fund None
(Class B)
New Pacific Fund NFSC/FEBO BRB-946966 1,549 32.02%
(Class C) NFSC/FMTC IRA
FBO Sandra Courtney Hayes
368 Sandefur Street
Shreveport, LA 71105
New Pacific Fund Delaware Management Company 4,896 89.60%
(Institutional Employee Profit Sharing Trust
Class) c/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103
Federal Bond Fund Lincoln National Life Insurance Co. 1,175,756 97.36%
(Class A) 1300 S. Clinton St.
Fort Wayne, IN 46801
Federal Bond Fund NFSC FBO Lawrence B Silver 46,569 80.11%
(Class B) NFSC/FMTC IRA R/O BRD-983756
1800 Linglestown Rd. Suite 404
Harrisburg, PA 17110
</TABLE>
-81-
<PAGE>
<TABLE>
<CAPTION>
Fund Name and Address of Shareholder Share Amount Percentage Held
- ---- ------------------------------- ------------ ---------------
<S> <C> <C> <C>
Federal Bond Fund Willard L. Shively and 1,246 100.00%
(Class C) Carolyn R. Shively JTWROS
6649 E. 150 N
Columbia City, IN 46725
Federal Bond Fund Lincoln National Investment Management 549 99.99%
(Institutional 1300 Clinton St.
Class) P.O. Box 1110
Fort Wayne, IN 46801
Corporate Income Fund Lincoln National Life Insurance Co. 1,204,696 89.78%
(Class A) 1300 S. Clinton St.
Fort Wayne, IN 46801
Corporate Income Fund None
(Class B)
Corporate Income Fund Dain Bosworth Inc. 6,469 93.30%
(Class C) FBO SMACNA Northern IL Inc.
Attn: Deb Sullivan
4010 E. State Street, Room. 204
Rockford, IL 61108
Corporate Income Fund Federated Life Insurance Co. 666,322 100.00%
(Institutional Separate Account A
Class) Attn: Tom Koch
121 E. Park Sq.
Owatonna, MN 55060
</TABLE>
Listed below are the shareholders of record who management believes
held at least 5% but less than 25% of the outstanding shares of each Class as of
January 31, 1996.
<TABLE>
<CAPTION>
Fund Name and Address of Shareholder Share Amount Percentage Held
- ---- ------------------------------- ------------ ---------------
<S> <C> <C> <C>
Enterprise Fund Dain Bosworth, Inc. 7,121 5.28%
(Class A) FBO Linda M. Taffey, TTE
Elsie A. Luedtke Marital Trust
220 Monastery Hill Drive
Oconomowoc, WI 53066
Enterprise Fund NFSC FBO Lawrence B. Silver 12,803 7.08%
(Class B) NFSC/FMTC IRA R/0 BRD-983756
1800 Linglestown Rd. Suite 404
Harrisburg, PA 17110
</TABLE>
-82-
<PAGE>
<TABLE>
<CAPTION>
Fund Name and Address of Shareholder Share Amount Percentage Held
- ---- ------------------------------- ------------ ---------------
<S> <C> <C> <C>
Enterprise Fund John Robertson 2,132 23.73%
(Class C) FBO John Robertson Plumbing, Inc.
P.O. Box 118
Burlington, KY 41005
DMTC 401(k) Plan 953 10.60%
Sunlawn Energy Corp. 401(k)
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
NFSC FBO Garold A. Nest 537 5.97%
6225 Shilo Road
Alpharetta, GA 30202
Enterprise Fund None
(Institutional
Class)
U.S. Growth Fund None
(Class A)
U.S. Growth Fund NFSC FBO Lawrence B. Silver 12,728 17.18%
(Class B) NFSC/FMTC IRA R/O BRD-983756
1800 Linglestown Rd. Suite 404
Harrisburg, PA 17110
NFSC FBO Marlene M. Clark 5,487 7.41%
BT9-312363
1536 Kensington Ln.
Lancaster, OH 43130
DMTC C/F The Rollover IRA of 3,763 5.08%
L. R. Brown
1201 Wimmer Ave.
Huntsville, AL 35805
</TABLE>
-83-
<PAGE>
<TABLE>
<CAPTION>
Fund Name and Address of Shareholder Share Amount Percentage Held
- ---- ------------------------------- ------------ ---------------
<S> <C> <C> <C>
U.S. Growth Fund Raymond James & Assoc., Inc. 1,474 23.98%
(Class C) CSDN Roland P. Roberts IRA
RR 5 Box 377
Beaumont, TX 77713
NFSC/FEBO BNM-052949 662 10.78%
John A. Storey and
Cheryl F. Storey
4699 Sandpiper Lane
Hoover, AL 35244
DMTC Custodian For the IRA of 631 10.27%
Raymond L. Lance
3370 Appel Road
Bethel Park, PA 15102
NFSC/FEBO BQ5-136204 536 8.73%
Garold A. Nest
6225 Shilo Road
Alpharetta, GA 30202
Fred Farah and Teresa Farah 420 6.83%
452 Meadowcrest Circle
Memphis, TN 38117
NFSC FBO Leonel R. Felteau 375 6.10%
and Anne L. Felteau
1578 Greyson Ridge
Marietta, GA 30062
Senen S. Santos 331 5.38%
Cust. Imelda May Cardona
UTMA/CA
2109 Charlemagne Ave.
Long Beach, CA 90815
DMTC C/F The Rollover IRA of 321 5.22%
Paul E. Moberg
62 Hall Rd.
Hampton, VA 23664
U.S. Growth Fund None
(Institutional
Class)
</TABLE>
-84-
<PAGE>
<TABLE>
<CAPTION>
Fund Name and Address of Shareholder Share Amount Percentage Held
- ---- ------------------------------- ------------ ---------------
<S> <C> <C> <C>
World Growth Fund None
(Class A)
World Growth Fund NFSC FBO Lawrence B. Silver 12,918 11.43%
(Class B) NFSC/FMTC IRA R/O BRD-983756
1800 Linglestown Rd. Suite 404
Harrisburg, PA 17110
DMTC C/F The Rollover IRA of 7,286 6.44%
Carl W. Niederwimmer
301 N.W. 73rd Terrace
Gladstone, MO 64118
World Growth Fund Merrill Lynch, Fenner, Pierce & Smith 2,356 22.74%
(Class C) For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246
Harris B. Kram 1,703 16.44%
8565 West Dartmouth Place
Denver, CO 80227
John Robertson 1,078 10.41%
FBO John Robertson Plumbing, Inc.
P.O. Box 118
Burlington, KY 41005
NFSC FBO Chester M. Boltwood 1,023 9.88%
and Karen A. Boltwood
BNW-302864
828 Cobblestone Circle
Modesto, CA 95355
World Growth Fund Lincoln National Investment Management 470 23.84%
(Institutional 1300 S. Clinton Street
Class) P.O. Box 1110
Fort Wayne, IN 46801
New Pacific Fund None
(Class A)
</TABLE>
-85-
<PAGE>
<TABLE>
<CAPTION>
Fund Name and Address of Shareholder Share Amount Percentage Held
- ---- ------------------------------- ------------ ---------------
<S> <C> <C> <C>
New Pacific Fund NFSC FBO Lawrence B. Silver 12,800 20.84%
(Class B) NFSC/FMTC IRA R/O BRD-983756
1800 Linglestown Rd. Suite 404
Harrisburg, PA 17110
NFSC/FEBO BT9-343854 4,999 8.14%
Marlene M. Clark, Trustee
Marlene M. Clark Trust
1536 Kensington Lane
Lancaster, OH 43130
New Pacific Fund Sunlawn Energy Corp. 401(k) 546 11.30%
(Class C) Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
NFSC/FEBO BQD-081280 525 10.86%
Scott Werthmann and
Mary Anne Werthmann
22 Barton Lane
Cos Cob, CT 06807
NFSC/FEBO BRB-249378 495 10.24%
David F. Lewis
2109 Chase Wells
Shreveport, LA 71118
NFSC FBO Chester M. Boltwood 480 9.93%
and Karen A. Boltwood
BNW-302864
828 Cobblestone Circle
Modesto, CA 95355
NFSC FBO Garold A. Nest 358 7.40%
BQ5-136204
6225 Shilo Road
Alpharetta, GA 30202
DMTC C/F The Rollover IRA of 357 7.38%
Paul E. Moberg
62 Hall Rd.
Hampton, VA 23664
</TABLE>
-86-
<PAGE>
<TABLE>
<CAPTION>
Fund Name and Address of Shareholder Share Amount Percentage Held
- ---- ------------------------------- ------------ ---------------
<S> <C> <C> <C>
New Pacific Fund Lincoln National Investment Management 568 10.40%
(Institutional 1300 S. Clinton Street
Class) P.O. Box 1110
Fort Wayne, IN 46801
Federal Bond Fund None
(Class A)
Federal Bond Fund None
(Class B)
Federal Bond Fund None
(Class C)
Federal Bond Fund None
(Institutional
Class)
Corporate Income Fund None
(Class A)
Corporate Income Fund NFSC/FEBO BNW-253278 2,160 12.18%
(Class B) Cornerstone Fellowship
135-D Lindbergh Avenue
Livermore, CA 94550
NFSC FBO Bobbe Ann Griswold 1,245 7.07%
NFSC/FMTC IRA
BNX-992-739
1401 E. Interstate 30
Rockwall, TX 75087
NFSC/FEBO BT9-252670 1,201 6.77%
Diane T. Carroll
5056 Crown Hill Road
Mechanicsville, VA 23111
NFSC FBO Doris T. Stell 1,063 5.99%
BNM-341436
4859 Balmoral Drive
Pensacola, FL 32504
NFSC FBO Loren T. Griswold 1,043 5.88%
NFSC/FMTC IRA BNX-933929
1401 E. Interstate 30
Rockwall, TX 75087
</TABLE>
-87-
<PAGE>
<TABLE>
<CAPTION>
Fund Name and Address of Shareholder Share Amount Percentage Held
- ---- ------------------------------- ------------ ---------------
<S> <C> <C> <C>
Paula S. Wing 1,042 5.87%
9131 Yellow Tree Court
Fort Wayne, IN 46804
Corporate Income Fund Willard L. Shively and 418 6.03%
(Class C) Carolyn R. Shively JTWROS
6649 E. 150 N
Columbia City, IN 46725
Corporate Income Fund None
(Institutional
Class)
</TABLE>
-88-
<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.
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.
-89-
<PAGE>
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) Tax-Free USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund and (8) Tax-Free Pennsylvania Fund. No other Delaware Group
funds are available for timed exchanges. Assets redeemed or exchanged out of
Timing Accounts in Delaware Group funds not listed above may not be reinvested
back into that Timing Account. The Funds reserve the right to apply these same
restrictions to the account(s) of any person whose transactions seem to follow a
time pattern (as described above).
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.
Value Fund seeks capital appreciation by investing primarily in common
stocks whose market values appear low relative to their underlying value or
future potential.
-90-
<PAGE>
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 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.
Tax-Free USA Fund seeks high current income exempt from federal income
tax by investing in municipal bonds of geographically-diverse issuers. Tax-Free
Insured Fund invests in these same types of securities but with an emphasis on
municipal bonds protected by insurance guaranteeing principal and interest are
paid when due. Tax-Free USA Intermediate Fund seeks a high level of current
interest income exempt from federal income tax, consistent with the preservation
of capital by investing primarily in municipal bonds.
Tax-Free Money Fund seeks high current income, exempt from federal
income tax, by investing in short-term municipal obligations, while maintaining
a stable net asset value.
Tax-Free Pennsylvania Fund seeks a high level of current interest
income exempt from federal and, to the extent possible, certain Pennsylvania
state and local taxes, consistent with the preservation of capital.
-91-
<PAGE>
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.
Delaware Group Premium Fund, Inc. offers ten funds available
exclusively as funding vehicles for certain insurance company separate accounts.
Equity/Income Series seeks the highest possible total rate of return by
selecting issues that exhibit the potential for capital appreciation while
providing higher than average dividend income. High Yield Series seeks as high a
current income as possible by investing in rated and unrated corporate bonds,
U.S. government securities and commercial paper. Capital Reserves Series seeks a
high stable level of current income while minimizing fluctuations in principal
by investing in a diversified portfolio of short- and intermediate-term
securities. Money Market Series seeks the highest level of income consistent
with preservation of capital and liquidity through investments in short-term
money market instruments. Growth Series seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. Multiple Strategy Series seeks a balance of
capital appreciation, income and preservation of capital. It uses a
dividend-oriented valuation strategy to select securities issued by established
companies that are believed to demonstrate potential for income and capital
growth. International Equity Series seeks long-term growth without undue risk to
principal by investing primarily in equity securities of foreign issuers that
provide the potential for capital appreciation and income. Value Series seeks
capital appreciation by investing in small- to mid-cap common stocks whose
market values appear low relative to their underlying value or future earnings
and growth potential. Emphasis will also be placed on securities of companies
that may be temporarily out of favor or whose value is not yet recognized by the
market. Emerging Growth Series seeks long-term capital appreciation by investing
primarily in small-cap common stocks and convertible securities of emerging and
other growth-oriented companies. These securities will have been judged to be
responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. 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.
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).
-92-
<PAGE>
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 ten 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, Delaware International Advisers Ltd. or their
affiliates, are permitted to engage in personal securities transactions subject
to the exceptions set forth in Rule 17j-1 and the following general restrictions
and procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance was received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions may only be closed-out at a profit after a 60-day holding
period has elapsed; and (5) the Compliance Officer must be informed periodically
of all securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.
The Distributor acts as national distributor for the Funds and for the
other mutual funds in the Delaware Group. As previously described, prior to
September 25, 1995, LNC Equity Sales, Inc. ("LNC Equity") served as the national
distributor for the Funds. The Distributor received net commissions from each
Fund on behalf of Class A Shares, after reallowances to dealers, as follows:
Enterprise Fund
Class A Shares
Total
Amount of
Fiscal Under- Amounts Net
Year writing Reallowed Commission
Ended Commissions to Dealers to DDLP
10/31/96 $9,973 $8,402 $1,571
-93-
<PAGE>
U.S. Growth Fund
Class A Shares
Total
Amount of
Fiscal Under- Amounts Net
Year writing Reallowed Commission
Ended Commissions to Dealers to DDLP
10/31/96 $2,551 $2,141 $410
World Growth Fund
Class A Shares
Total
Amount of
Fiscal Under- Amounts Net
Year writing Reallowed Commission
Ended Commissions to Dealers to DDLP
10/31/96 $4,626 $3,880 $746
New Pacific Fund
Total
Amount of
Fiscal Under- Amounts Net
Year writing Reallowed Commission
Ended Commissions to Dealers to DDLP
10/31/96 $4,740 $3,912 $828
Federal Bond Fund
Total
Amount of
Fiscal Under- Amounts Net
Year writing Reallowed Commission
Ended Commissions to Dealers to DDLP
10/31/96 $295 $249 $46
-94-
<PAGE>
Corporate Income Fund
Total
Amount of
Fiscal Under- Amounts Net
Year writing Reallowed Commission
Ended Commissions to Dealers to DDLP
10/31/96 $3,948 $3,224 $724
The Distributor received in the aggregate Limited CDSC payments with
respect to Class A Shares of each Fund as follows:
<TABLE>
<CAPTION>
Limited CDSC Payments
Fiscal Corporate
Year Enterprise U.S. Growth World Growth New Pacific Federal Bond Income
Ended Fund A Class Fund A Class Fund A Class Fund A Class Fund A Class Fund A
Class
<C> <C> <C> <C> <C> <C> <C>
10/31/96 -$0- -$0- -$0- -$0- -$0- -$0-
</TABLE>
The Distributor received in the aggregate CDSC payments with respect to
Class B Shares of each Fund as follows:
<TABLE>
<CAPTION>
CDSC Payments
Fiscal Corporate
Year Enterprise U.S. Growth World Growth New Pacific Federal Bond Income
Ended Fund B Class Fund B Class Fund B Class Fund B Class Fund B Class Fund B
Class
<C> <C> <C> <C> <C> <C> <C>
10/31/96 $3,850 $643 $3,542 $742 $45 $88
</TABLE>
The Distributor received in the aggregate CDSC payments with respect to
Class C Shares of each Fund as follows:
<TABLE>
<CAPTION>
CDSC Payments
Fiscal Corporate
Year Enterprise U.S. Growth World Growth New Pacific Federal Bond Income
Ended Fund C Class Fund C Class Fund C Class Fund C Class Fund C Class Fund C
Class
<C> <C> <C> <C> <C> <C> <C>
10/31/96 $135 $36 $20 $4 -$0- -$0-
</TABLE>
-95-
<PAGE>
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 relationship with the Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause Adviser Funds, Inc. to
delete the words "Delaware Group" from Adviser Funds, Inc.'s name.
The Chase Manhattan Bank, 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.
The legality of the issuance of the shares offered hereby, registered
pursuant to Rule 24f-2 under the 1940 Act, has been passed upon for Adviser
Funds, Inc. by Stradley, Ronon, Stevens & Young, LLP, Philadelphia,
Pennsylvania.
Capitalization
Adviser Funds, Inc. was incorporated under the laws of Maryland on
August 12, 1993 under the name Lincoln 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, 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
-96-
<PAGE>
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 equal voting rights, except as noted, no preemptive
rights, are fully transferable and, when issued, are fully paid. All shares of
the Advisers Funds, Inc. participate equally in dividends, and upon liquidation
would share equally.
The 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 the 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, Class B and Class C Shares
will be allocated solely to those classes.
As of the close of business on May 3, 1996, the changes of the names of
the Funds were as follows: Lincoln Enterprise Portfolio to Enterprise Fund;
Lincoln U.S. Growth Portfolio to U.S. Growth Fund; Lincoln World Growth
Portfolio to World Growth Fund; Lincoln New Pacific Portfolio to New Pacific
Fund; Lincoln Government Income Portfolio to Federal Bond Fund; and Lincoln
Corporate Income Portfolio to Corporate Income 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.
-97-
<PAGE>
Noncumulative Voting
Fund shares have noncumulative voting rights which means that the
holders of more than 50% of the shares of Adviser Funds, Inc. voting for the
election of directors can elect all the directors if they choose to do so, and,
in such event, the holders of the remaining shares will not be able to elect any
directors.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the Securities and Exchange
Commission.
-98-
<PAGE>
FINANCIAL STATEMENTS
Coopers & Lybrand, L.L.P. serves as the independent auditors for
Adviser Funds, Inc. and, in its capacity as such, audits the financial
statements contained in the Annual Report. The Portfolio of Investments,
Statements of Net Assets, Statements of Operations, Statements of Changes in Net
Assets and Notes to Financial Statements, as well as the report of Coopers &
Lybrand, L.L.P., independent auditors, for the fiscal year ended October 31,
1996 are included in the Annual Report to shareholders. The financial
statements, the notes relating thereto and the report of Coopers & Lybrand,
L.L.P. listed above are incorporated by reference from the Annual Report into
this Part B.
-99-
<PAGE>
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.
-100-
<PAGE>
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, like any Fund, your bottom line at
retirement could be lower--it could also be much higher.
$2,000 Invested Annually Assuming a 10% Annualized Return
15% Tax Bracket Single - $0-$24,650
---------------
Joint - $0-$41,200
<TABLE>
<CAPTION>
How Much You
End of Cumulative How Much You Have With Full
Year Investment Amount Have Without IRA IRA Deduction
<S> <C> <C> <C>
1 $ 2,000 $ 1,844 $ 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%)]
28% Tax Bracket Single - $24,651-$59,750
---------------
Joint - $41,201-$99,600
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C>
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%]
-101-
<PAGE>
31% Tax Bracket Single - $59,751-$124,650
---------------
Joint - $99,601-$151,750
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,475 $ 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%]
36% Tax Bracket* Single - $124,651-$271,050
---------------
Joint - $151,751-$271,050
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,362 $ 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%]
-102-
<PAGE>
39.6% Tax Bracket* Single - over $271,050
-----------------
Joint - over $271,050
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,281 $ 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.
-103-
<PAGE>
$2,000 Invested Annually Assuming a 7% Annualized Return
15% Tax Bracket Single - $0-$24,650
---------------
Joint - $0-$41,200
<TABLE>
<CAPTION>
How Much You
End of Cumulative How Much You Have With Full
Year Investment Amount Have Without IRA IRA Deduction
<S> <C> <C> <C>
1 $ 2,000 $ 1,801 $ 2,140
5 10,000 10,143 12,307
10 20,000 23,685 29,567
15 30,000 41,764 53,776
20 40,000 65,901 87,730
25 50,000 98,126 135,353
30 60,000 141,149 202,146
35 70,000 198,587 295,827
40 80,000 275,271 427,219
</TABLE>
[Without IRA--investment of $1,700 ($2,000 less 15%) earning 5.95% (7% less
15%)]
28% Tax Bracket Single - $24,651-$59,750
---------------
Joint - $41,201-$99,600
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full
Year Investment Amount Have Without IRA No Deduction IRA Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,513 $ 1,541 $ 2,140
5 10,000 8,365 8,861 12,307
10 20,000 19,061 21,288 29,567
15 30,000 32,738 38,719 53,776
20 40,000 50,227 63,166 87,730
25 50,000 72,590 97,454 135,353
30 60,000 101,187 145,545 202,146
35 70,000 137,754 212,995 295,827
40 80,000 184,512 307,598 427,219
</TABLE>
[Without IRA--investment of $1,440 ($2,000 less 28%) earning 5.04% (7% less
28%)]
[With IRA--No Deduction--investment of $1,440 ($2,000 less 28%) earning
7%]
-104-
<PAGE>
31% Tax Bracket Single - $59,751-$124,650
---------------
Joint - $99,601-$151,750
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,447 $ 1,477 $ 2,140
5 10,000 7,967 8,492 12,307
10 20,000 18,052 20,401 29,567
15 30,000 30,820 37,106 53,776
20 40,000 46,985 60,534 87,730
25 50,000 67,448 93,394 135,353
30 60,000 93,355 139,481 202,146
35 70,000 126,152 204,121 295,827
40 80,000 167,673 294,781 427,219
</TABLE>
[Without IRA--investment of $1,380 ($2,000 less 31%) earning 4.83% (7% less
31%)]
[With IRA--No Deduction--investment of $1,380 ($2,000 less 31%) earning
7%]
36% Tax Bracket* Single - $124,651-$271,050
---------------
Joint - $151,751-$271,050
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,337 $ 1,370 $ 2,140
5 10,000 7,313 7,876 12,307
10 20,000 16,418 18,923 29,567
15 30,000 27,754 34,417 53,776
20 40,000 41,867 56,147 87,730
25 50,000 59,437 86,626 135,353
30 60,000 81,312 129,373 202,146
35 70,000 108,545 189,329 295,827
40 80,000 142,451 273,420 427,219
</TABLE>
[Without IRA--investment of $1,280 ($2,000 less 36%) earning 4.48% (7% less
36%)]
[With IRA--No Deduction--investment of $1,280 ($2,000 less 36%) earning
7%]
-105-
<PAGE>
39.6% Tax Bracket* Single - over $271,050
-----------------
Joint - over $271,050
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,259 $ 1,293 $ 2,140
5 10,000 6,851 7,433 12,307
10 20,000 15,277 17,859 29,567
15 30,000 25,643 32,481 53,776
20 40,000 38,392 52,989 87,730
25 50,000 54,075 81,753 135,353
30 60,000 73,366 122,096 202,146
35 70,000 97,094 178,679 295,827
40 80,000 126,281 258,040 427,219
</TABLE>
[Without IRA--investment of $1,208 ($2,000 less 39.6%) earning 4.23% (7% less
39.6%)]
[With IRA--No Deduction--investment of $1,208 ($2,000 less 39.6%)
earning 7%]
* For tax years beginning after 1992, a 36% tax rate applies to all
taxable income in excess of the maximum dollar amounts subject to
the 31% tax rate. In addition, a 10% surtax (not applicable to
capital gains) applies to certain high-income taxpayers. It is
computed by applying a 39.6% rate to taxable income in excess of
$271,050. The above tables do not reflect the personal exemption
phaseout nor the limitations of itemized deductions that may apply.
-106-
<PAGE>
<TABLE>
<CAPTION>
$2,000 SINGLE INVESTMENT AT A RETURN OF 10% COMPOUNDED ANNUALLY
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 $ 3,595 $ 3,719 $ 3,898 $ 4,008 $ 4,522 $ 5,187
15 4,820 5,072 5,441 5,675 6,799 8,354
20 6,463 6,916 7,596 8,034 10,224 13,455
30 11,618 12,861 14,803 16,102 23,117 34,899
40 20,884 23,916 28,849 32,272 52,266 90,519
$2,000 INVESTED ANNUALLY AT A RETURN OF 10% COMPOUNDED ANNUALLY
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- ------------------------------------------------------------------------------------------------------------------------------------
10 $ 28,006 $ 28,581 $ 29,400 $ 29,904 $ 32,192 $ 35,062
15 49,514 51,067 53,314 54,714 61,264 69,899
20 78,351 81,731 86,697 89,838 104,978 126,005
30 168,852 180,566 198,360 209,960 269,546 361,887
40 331,537 364,360 415,973 450,711 641,631 973,704
</TABLE>
* For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate.
In addition, a 10% surtax (not applicable to capital gains) applies to
certain high-income taxpayers. It is computed by applying a 39.6% rate to
taxable income in excess of $271,050. The above tables do not reflect the
personal exemption phaseout nor the limitations of itemized deductions that
may apply.
-107-
<PAGE>
<TABLE>
<CAPTION>
$2,000 SINGLE INVESTMENT AT A RETURN OF 7% COMPOUNDED MONTHLY
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 $ 3,050 $ 3,128 $ 3,239 $ 3,307 $ 3,621 $ 4,019
15 3,767 3,911 4,121 4,253 4,872 5,698
20 4,652 4,891 5,245 5,469 6,555 8,077
30 7,094 7,650 8,493 9,043 11,867 16,233
40 10,820 11,963 13,753 14,953 21,483 32,623
$2,000 INVESTED ANNUALLY AT A RETURN OF 7% COMPOUNDED MONTHLY
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- ------------------------------------------------------------------------------------------------------------------------------------
10 $ 25,411 $ 25,788 $ 26,322 $ 26,649 $ 28,125 $ 29,953
15 42,752 43,708 45,079 45,927 49,833 54,851
20 64,166 66,117 68,947 70,716 79,042 90,148
30 123,271 129,187 137,973 143,581 171,220 211,120
40 213,412 227,820 249,750 264,078 338,096 454,233
</TABLE>
* For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate.
In addition, a 10% surtax (not applicable to capital gains) applies to
certain high-income taxpayers. It is computed by applying a 39.6% rate to
taxable income in excess of $271,050. The above tables do not reflect the
personal exemption phaseout nor the limitations of itemized deductions that
may apply.
-108-
<PAGE>
THE VALUE OF STARTING YOUR IRA EARLY
The following illustrates how much more you would have contributing
$2,000 each January--the earliest opportunity--compared to contributing on April
15th of the following year--the latest, for each tax year.
After 5 years $3,528 more
10 years $6,113
20 years $17,228
30 years $47,295
Compounded returns for the longest period of time is the key. The above
illustration assumes a 10% rate of return and the reinvestment of all proceeds.
And it pays to shop around. If you get just 2% more per year, it can
make a big difference when you retire. A constant 8% versus 10% return,
compounded monthly, illustrates the point. This chart is based on a yearly
investment of $2,000 on January 1. After 30 years the difference can mean as
much as 50% more!
8% Return 10% Return
--------- ----------
10 years $31,291 $35,602
30 years $244,692 $361,887
The statistical exhibits above are for illustration purposes only and
do not reflect the actual performance for any Fund either in the past or in the
future.
-109-
<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.
-110-
<PAGE>
Form N-1A
File No. 33-67490
Delaware Group Adviser Funds, Inc.
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A - Financial Highlights
*Part B - 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 the Enterprise Fund, the U.S. Growth Fund, the
World Growth Fund, the New Pacific Fund, the Federal Bond Fund
and the Corporate Income Fund are incorporated by reference
into Part B from the Registrant's Annual Report for the fiscal
year ended October 31, 1995.
(b) Exhibits:
(1) Articles of Incorporation. Articles of Incorporation,
as amended and supplemented to date attached as Exhibit.
(2) By-Laws. By-Laws, as amended to date, attached as Exhibit.
(3) Voting Trust Agreement. Inapplicable.
<PAGE>
PART C - Other Information
(Continued)
Form N-1A
File No. 33-67490
Delaware Group Adviser Funds, Inc.
(4) Copies of all Instruments Defining the Rights of Holders.
(a) Articles of Incorporation. Article IV of Articles of
Incorporation (August 12, 1993) attached in
Exhibit 24(b)(1).
(b) By-Laws. Article I and Article IV attached in
Exhibit 24(b)(2).
(5) Investment Management and Sub-Advisory Agreements.
(a) Executed Investment Management Agreement between
Delaware Management Company, Inc. and Delaware Group
Adviser Funds, Inc. on behalf of Enterprise Fund (May
6, 1996) attached as Exhibit.
(b) Executed Investment Management Agreement between
Delaware Management Company, Inc. and Delaware Group
Adviser Funds, Inc. on behalf of U.S. Growth Fund
(May 6, 1996) attached as Exhibit.
(c) Executed Investment Management Agreement between
Delaware Management Company, Inc. and Delaware Group
Adviser Funds, Inc. on behalf of World Growth Fund
(May 6, 1996) attached as Exhibit.
(d) Executed Investment Management Agreement between
Delaware Management Company, Inc. and Delaware Group
Adviser Funds, Inc. on behalf of New Pacific Fund
(May 6, 1996) attached as Exhibit.
(e) Executed Investment Management Agreement between
Delaware Management Company, Inc. and Delaware Group
Adviser Funds, Inc. on behalf of Federal Bond Fund
(May 6, 1996) attached as Exhibit.
(f) Executed Investment Management Agreement between
Delaware Management Company, Inc. and Delaware Group
Adviser Funds, Inc. on behalf of Corporate Income
Fund (May 6, 1996) attached as Exhibit.
(g) Executed Sub-Advisory Agreement between Delaware
Management Company, Inc. and Lynch & Mayer, Inc. on
behalf of Enterprise Fund (May 6, 1996) attached as
Exhibit.
(h) Executed Sub-Advisory Agreement between Delaware
Management Company, Inc. and Lynch & Mayer, Inc. on
behalf of U.S. Growth Fund (May 6, 1996) attached as
Exhibit.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
(i) Executed Sub-Advisory Agreement between Delaware
Management Company, Inc. and Walter Scott & Partners
Limited on behalf of World Growth Fund (May 6, 1996)
attached as Exhibit.
(j) Executed Sub-Advisory Agreement between Delaware
Management Company, Inc. and John Govett & Company
Limited on behalf of New Pacific Fund (May 6, 1996)
attached as Exhibit.
(k) Executed Sub-Advisory Agreement between Delaware
Management Company, Inc. and Lincoln Investment
Management, Inc. on behalf of Federal Bond Fund (May
6, 1996) attached as Exhibit.
(l) Executed Sub-Advisory Agreement between Delaware
Management Company, Inc. and Lincoln Investment
Management, Inc. on behalf of Corporate Income Fund
(May 6, 1996) 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.
(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.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
(8) Custodian Agreements.
(a) Executed Custodian Agreement (Module) (May 1996)
between The Chase Manhattan Bank and the Registrant
included as Module.
(b) Form of Securities Lending Agreement (May 1996)
between The Chase Manhattan Bank and the Registrant
attached as Exhibit.
(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 attached as Exhibit.
(i) Executed Amendment No. 1 (September 30, 1996)
to Schedule A to Delaware Group of Funds Fund
Accounting Agreement attached as Exhibit.
(ii) Executed Amendment No. 2 (November 29, 1996)
to Schedule A to Delaware Group of Funds Fund
Accounting Agreement attached as Exhibit.
(iii) Executed Amendment No. 3 (December 27, 1996)
to Schedule A to Delaware Group of Funds Fund
Accounting Agreement attached as Exhibit.
(iv) Executed Amendment No. 4 (February 24, 1997)
to Schedule A to Delaware Group of Funds Fund
Accounting Agreement attached as Exhibit.
<PAGE>
(10) Opinion of Counsel. Filed with letter relating to
Rule 24f-2 Notice on December 30, 1996.
(11) Consent of Auditors. Attached as Exhibit.
(12) Inapplicable.
(13) Inapplicable.
(14) Model Plans. To be filed by Post-Effective Amendment.
(15) Plans under Rule 12b-1. Plans under Rule 12b-1 for
each Class of each Fund (September 25, 1995)
incorporated into this filing by reference to
Post-Effective Amendment No. 4 filed February 28,
1996.
(16) Schedules of Computation for each Performance
Quotation. Attached as Exhibit.
(17) Financial Data Schedules. Attached as Exhibit.
(18) Inapplicable.
(19) Other: Directors' Power of Attorney. Attached as
Exhibit.
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
Item 26. Number of Holders of Securities.
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
Delaware Group Adviser Funds, Inc.'s
Enterprise Fund:
Enterprise Fund 1,277 Accounts as of
(Class A Shares) January 31, 1997
Enterprise Fund 417 Accounts as of
(Class B Shares) January 31, 1997
Enterprise Fund 26 Accounts as of
(Class C Shares) January 31, 1997
Enterprise Fund 5 Accounts as of
(Institutional Class) January 31, 1997
Delaware Group Adviser Funds, Inc.'s
U.S. Growth Fund:
U.S. Growth Fund 690 Accounts as of
(Class A Shares) January 31, 1997
U.S. Growth Fund 179 Accounts as of
(Class B Shares) January 31, 1997
U.S. Growth Fund 26 Accounts as of
(Class C Shares) January 31, 1997
U.S. Growth Fund 4 Accounts as of
(Institutional Class) January 31, 1997
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
Number of
Title of Class Record Holders
-------------- --------------
Delaware Group Adviser Funds, Inc.'s
World Growth Fund:
World Growth Fund 829 Accounts as of
(Class A Shares) January 31, 1997
World Growth Fund 230 Accounts as of
(Class B Shares) January 31, 1997
World Growth Fund 31 Accounts as of
(Class C Shares) January 31, 1997
World Growth Fund 6 Accounts as of
(Institutional Class) January 31, 1997
Delaware Group Adviser Funds, Inc.'s
New Pacific Fund:
New Pacific Fund 688 Accounts as of
(Class A Shares) January 31, 1997
New Pacific Fund 151 Accounts as of
(Class B Shares) January 31, 1997
New Pacific Fund 20 Accounts as of
(Class C Shares) January 31, 1997
New Pacific Fund 6 Accounts as of
(Institutional Class) January 31, 1997
Delaware Group Adviser Funds, Inc.'s
Federal Bond Fund:
Federal Bond Fund 76 Accounts as of
(Class A Shares) January 31, 1997
Federal Bond Fund 26 Accounts as of
(Class B Shares) January 31, 1997
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
Number of
Title of Class Record Holders
-------------- --------------
Federal Bond Fund 4 Accounts as of
(Class C Shares) January 31, 1997
Federal Bond Fund 6 Accounts as of
(Institutional Class) January 31, 1997
Delaware Group Adviser Funds, Inc.'s
Corporate Income Fund:
Corporate Income Fund 279 Accounts as of
(Class A Shares) January 31, 1997
Corporate Income Fund 61 Accounts as of
(Class B Shares) January 31, 1997
Corporate Income Fund 11 Accounts as of
(Class C Shares) January 31, 1997
Corporate Income Fund 5 Accounts as of
(Institutional Class) January 31, 1997
Item 27. Indemnification. Incorporated into this filing by reference to
Post-Effective Amendment No. 6 filed May 2, 1996.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
Item 28(a). Business and Other Connections of Investment Adviser.
Delaware Management Company, Inc. (the "Manager") 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
Trend Fund, 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 Income Funds, Inc., Delaware Group Government Fund, Inc.,
Delaware Group Limited-Term Government Funds, Inc., Delaware Group Cash Reserve,
Inc., Delaware Group Tax-Free Fund, Inc., DMC Tax-Free Income
Trust-Pennsylvania, Delaware Group Tax-Free Money Fund, Inc., Delaware Group
Premium Fund, Inc., Delaware Group Global & International Funds, Inc., Delaware
Pooled Trust, Inc., Delaware Group Dividend and Income Fund, Inc. and Delaware
Group Global Dividend and Income Fund, Inc.) and provides investment advisory
services to institutional accounts, primarily retirement plans and endowment
funds. In addition, certain directors of the Manager also serve as
directors/trustees of the other Delaware Group funds, and certain officers are
also officers of these other funds. A company indirectly owned by the Manager's
parent company acts as principal underwriter to the mutual funds in the Delaware
Group (see Item 29 below) and another such company acts as the shareholder
servicing, dividend disbursing, accounting services and transfer agent for all
of the mutual funds in the Delaware Group.
The following persons serving as directors or officers of the
Manager have held the following positions during the past two years:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
<S> <C>
Wayne A. Stork Chairman of the Board, President, Chief Executive Officer, Chief Investment
Officer and Director of Delaware Management Company, Inc.; President, Chief
Executive Officer, Chairman of the Board and Director of the Registrant and,
with the exception of Delaware Pooled Trust, Inc., each of the other funds in the
Delaware Group, Delaware Management Holdings, Inc., DMH Corp., Delaware
International Holdings Ltd. and Founders Holdings, Inc.; Chairman of the Board
and Director of Delaware Pooled Trust, Inc., Delaware Distributors, Inc. and
Delaware Capital Management, Inc.; Chairman, Chief Executive Officer and
Director of Delaware International Advisers Ltd.; and Director of Delaware
Service Company, Inc. and Delaware Investment & Retirement Services, Inc.
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
<S> <C>
Winthrop S. Jessup Executive Vice President and Director of Delaware Management Company,
Inc., DMH Corp., Delaware International Holdings Ltd. and Founders Holdings,
Inc.; Executive Vice President of the Registrant and, with the exception of
Delaware Pooled Trust, Inc., each of the other funds in the Delaware Group and
Delaware Management Holdings, Inc.; President and Chief Executive Officer of
Delaware Pooled Trust, Inc.; Vice Chairman of Delaware Distributors, L.P.;
Vice Chairman and Director of Delaware Distributors, Inc.; Director of
Delaware Service Company, Inc., Delaware Management Trust Company,
Delaware International Advisers Ltd. and Delaware Investment & Retirement
Services, Inc.; and President and Director of Delaware Capital Management,
Inc.
Board Member of Glen Lincoln Inc. since 1985, Frazer, PA.
Richard G. Unruh, Jr. Executive Vice President and Director of Delaware Management Company,
Inc.; Executive Vice President of the Registrant and each of the other funds in
the Delaware Group; Senior Vice President of Delaware Management Holdings,
Inc. and Delaware Capital Management, Inc.; and Director of Delaware
International Advisers Ltd.
Board of Directors, Chairman of Finance Committee, Keystone Insurance Company
since 1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Chairman
of Finance Committee, AAA Mid Atlantic, Inc. since 1989, 2040 Market Street,
Philadelphia, PA; Board of Directors, Metron, Inc. since 1995, 11911 Freedom
Drive, Reston, VA.
Paul E. Suckow Executive Vice President/Chief Investment Officer, Fixed Income of Delaware
Management Company, Inc., the Registrant and each of the other funds in the
Delaware Group; Executive Vice President and Director of Founders Holdings,
Inc.; Senior Vice President/Chief Investment Officer, Fixed Income of Delaware
Management Holdings, Inc.; Senior Vice President of Delaware Capital
Management, Inc.; and Director of Founders CBO Corporation
Director, HYPPCO Finance Company Ltd.
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
<S> <C>
David K. Downes Executive Vice President, Chief Operating Officer and Chief
Financial Officer of Delaware Management Company, Inc.; Senior
Vice President, Chief Administrative Officer and Chief Financial
Officer of the Registrant and each of the other funds in the
Delaware Group; Chairman and Director of Delaware Management
Trust Company; Executive Vice President, Chief Operating Officer
and Chief Financial Officer of Delaware Management Holdings,
Inc.; Executive Vice President, Chief Operating Officer, Chief
Financial Officer and Director of DMH Corp., Delaware
Distributors, Inc. and Founders Holdings, Inc.; President, Chief
Executive Officer, Chief Financial Officer and Director of
Delaware Service Company, Inc.; Executive Vice President, Chief
Operating Officer, Chief Financial Officer and Director of
Delaware International Holdings Ltd.; Executive Vice President,
Chief Financial Officer and Chief Operating Officer of Delaware
Capital Management, Inc.; Chairman and Director of Delaware
Investment & Retirement Services, Inc.; Director of Delaware
International Advisers Ltd.; and Senior Vice President, Chief
Administrative Officer and Chief Financial Officer of Delaware
Distributors, L.P.
Chief Executive Officer, and Director of Forewarn, Inc. since
1993, 8 Clayton Place, Newtown Square, PA
George M. Chamberlain, Jr. Senior Vice President, Secretary and Director of Delaware
Management Company, Inc., DMH Corp., Delaware Distributors,
Inc., Delaware Service Company, Inc., Founders Holdings, Inc.,
Delaware Capital Management, Inc. and Delaware Investment &
Retirement Services, Inc.; Senior Vice President and Secretary of
the Registrant, each of the other funds in the Delaware Group,
Delaware Distributors, L.P. and Delaware Management Holdings,
Inc.; Executive Vice President, Secretary and Director of Delaware
Management Trust Company; Secretary and Director of Delaware
International Holdings Ltd.; and Director of Delaware International
Advisers Ltd.
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
<S> <C>
Richard J. Flannery Senior Vice President/Corporate & International Affairs of
Delaware Management Company, Inc., Delaware Management
Holdings, Inc., DMH Corp., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Management Trust Company,
Founders CBO Corporation and Delaware Capital Management,
Inc.; Vice President of the Registrant and each of the other funds in
the Delaware Group; Senior Vice President/Corporate &
International Affairs and Director of Founders Holdings, Inc. and
Delaware International Holdings Ltd.; Managing
Director/Corporate & Tax Affairs of Delaware Service Company,
Inc. and Delaware Investment & Retirement Services, Inc.; and
Director of Delaware International Advisers Ltd.
Director of HYPPCO Finance Company, Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd.,
Elverton, PA; Director and Member of Executive Committee of
Stonewall Links, Inc. since 1991, Bulltown Rd., Elverton, PA
Michael P. Bishof(1) Senior Vice President of Delaware Management Company, Inc.;
Vice President and Treasurer of the Registrant, each of the other
funds in the Delaware Group, Delaware Distributors, L.P. and
Delaware Service Company, Inc.; Senior Vice President/Treasurer
of Delaware Distributors, Inc. and Founders Holdings, Inc.;
Assistant Treasurer of Founders CBO Corporation; and Vice
President and Manager of Investment Accounting of Delaware
International Holdings Ltd.
Joseph H. Hastings Senior Vice President/Corporate Controller and Treasurer of
Delaware Management Company, Inc., Delaware Management
Holdings, Inc. and DMH Corp.; Senior Vice President/Corporate
Controller of Founders Holdings, Inc.; Senior Vice
President/Treasurer of Delaware Distributors, Inc.; Vice
President/Corporate Controller of the Registrant, each of the other
funds in the Delaware Group, Delaware Distributors, L.P.,
Delaware Service Company, Inc. and Delaware International
Holdings Ltd.; Vice President/Treasurer of Delaware Capital
Management, 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.; and Assistant Treasurer of Founders
CBO Corporation
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
<S> <C>
Douglas L. Anderson Senior Vice President/Operations of Delaware Management
Company, Inc.; Vice President/Operations of Delaware Investment
& Retirement Services, Inc. and Delaware Service Company, Inc.;
and Vice President/Operations and Director of Delaware
Management Trust Company
Michael T. Taggart Senior Vice President/Facilities Management and Administrative
Services of Delaware Management Company, Inc.
Eric E. Miller Vice President and Assistant Secretary of Delaware Management
Company, Inc., the Registrant, each of the other funds in the
Delaware Group, Delaware Management Holdings, Inc., DMH
Corp., Delaware Distributors, L.P., Delaware Distributors Inc.,
Delaware Service Company, Inc., Delaware Management Trust
Company, Founders Holdings, Inc., Delaware Capital
Management, Inc. and Delaware Investment & Retirement
Services, Inc.
Richelle S. Maestro Vice President and Assistant Secretary of Delaware Management
Company, Inc., the Registrant, each of the other funds in the
Delaware Group, Delaware Management Holdings, Inc., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc., DMH Corp., Delaware Management Trust
Company, Delaware Capital Management, Inc., Delaware
Investment & Retirement Services, Inc. and Founders Holdings,
Inc.; Secretary of Founders CBO Corporation; and Assistant
Secretary of Delaware International Holdings Ltd.
Partner of Tri-R Associates since 1989, 10001 Sandmeyer Ln.,
Philadelphia, PA
Richard Salus(2) Vice President/Assistant Controller of Delaware Management
Company, Inc.; and Vice President of Delaware Management Trust
Company.
Bruce A. Ulmer Vice President/Director of Internal Audit of Delaware Management
Company, Inc., the Registrant, each of the other funds in the
Delaware Group, Delaware Management Holdings, Inc., DMH
Corp. and Delaware Management Trust Company; and Vice
President/Internal Audit of Delaware Investment & Retirement
Services, Inc.
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
<S> <C>
Steven T. Lampe(3) Vice President/Taxation of Delaware Management Company, Inc.,
the Registrant, each of the other funds in the Delaware Group,
Delaware Management Holdings, Inc., DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc., Delaware Management Trust Company, Founders
Holdings, Inc., Founders CBO Corporation, Delaware Capital
Management, Inc. and Delaware Investment & Retirement
Services, Inc.
Lisa O. Brinkley Vice President/Compliance of Delaware Management Company,
Inc., the Registrant, each of the other funds in the Delaware Group,
DMH Corp., Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Management
Trust Company, Delaware Capital Management, Inc. and Delaware
Investment & Retirement Services, Inc.
Rosemary E. Milner Vice President/Legal of Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware Group,
Delaware Distributors, L.P. and Delaware Distributors, Inc.
Gerald T. Nichols 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
Treasurer, Assistant Secretary 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 Counselors, Inc.
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
<S> <C>
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 Secretary and Director of Founders CBO Corporation
Patrick P. Coyne 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.
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(4) 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)
Edward N. Antoian 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.
Director of HR Easy since 1996, 6407 Idlewild Road, Suite 100, Charlotte, NC
28212
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.
David C. Dalrymple Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.
and each of the equity funds in the Delaware Group (excluding the Registrant)
Gerald S. Frey(5) Vice President/Senior 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 Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
<S> <C>
Faye P. Staples(6) Vice President/Human Resources of Delaware Management Company, Inc. and
Delaware Distributors, Inc.; Senior Vice President/Human Resources of Delaware
Distributors, L.P.; and Vice President/Director of Human Resources of Delaware
Service Company, Inc.
</TABLE>
1 VICE PRESIDENT/GLOBAL INVESTMENT MANAGEMENT OPERATIONS, Bankers Trust and
VICE PRESIDENT, CS First Boston Investment Management prior to June 1995.
2 SENIOR MANAGER, Ernst & Young LLP prior to December 1996.
3 TAX MANAGER, Price Waterhouse prior to October 1995.
4 INVESTMENT OFFICER, Travelers Insurance prior to January 1997 and RESEARCH
ANALYST, CS First Boston Investment Management prior to March 1995.
5 SENIOR DIRECTOR, Morgan Grenfell Capital Management prior to June 1996.
6 VICE PRESIDENT/HUMAN RESOURCES, Nova Care prior to September 1995.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
Item 28(b). Business and Other Connections of Sub-Investment Advisers
Lincoln Investment Management, Inc. ("LIM") serves as
sub-investment adviser to Corporate Income Fund, Inc. and Federal Bond Fund,
Inc. LIM serves as investment adviser to Lincoln National Convertible Securities
Fund, Inc., Lincoln National Income Fund, Inc., Lincoln National Aggressive
Growth Fund, Inc., Lincoln National Bond Fund, Inc., Lincoln National Capital
Appreciation Fund, Inc., Lincoln National Equity-Income Fund, Inc., Lincoln
National Global Asset Allocation Fund, Inc., Lincoln National Growth and Income
Fund, Inc., Lincoln National International Fund, Inc., Lincoln National Managed
Fund, Inc., Lincoln National Money Market Fund, Inc., Lincoln National Social
Awareness Fund, Inc. and Lincoln National Special Opportunities Fund, Inc. and
to other clients. LIM is registered with the Securities and Exchange Commission
(the Commission) as an investment adviser and has acted as an investment adviser
to investment companies for over 40 years.
The directors and officers of LIM are listed below.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Lincoln Investment Management Company,
Business Address Inc. and its Affiliates and Other Positions and Offices Held
- ---------------- ------------------------------------------------------------
<S> <C>
*H. Thomas McMeekin President and Director of Lincoln Investment Management, Inc.,
Lincoln National Convertible Securities Fund, Inc. and Lincoln National
Income Fund, Inc.; President, Chief Executive Officer and Director of Lincoln
National Mezzanine Corporation; Executive Vice President (previously
Senior Vice President) and Chief Investment Officer of Lincoln National
Corporation; and Director of The Lincoln National Life Insurance Company,
Lynch & Mayer, Inc. and Vantage Global Advisors, Inc.
*Dennis A. Blume Senior Vice President and Director of Lincoln Investment Management, Inc.
and Lincoln National Realty Corporation; and Director of Lynch & Mayer,
Inc. and Vantage Global Advisors, Inc.
</TABLE>
* Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Lincoln Investment Management Company,
Business Address Inc. and its Affiliates and Other Positions and Offices Held
- ---------------- ------------------------------------------------------------
<S> <C>
*Steven R. Brody Director, Senior Vice President of Lincoln Investment Management, Inc.;
Director and Vice President of Lincoln National Mezzanine Corporation;
Vice President of The Lincoln National Life Insurance Company; Director of
Lincoln National Realty Corporation; Treasurer of Lincoln National
Convertible Securities Fund, Inc. and Lincoln National Income Fund, Inc.;
and Assistant Treasurer of Lincoln Financial Group, Inc., Lincoln National
Aggressive Growth Fund, Inc., Lincoln National Bond Fund, Inc., Lincoln
National Capital Appreciation Fund, Inc., Lincoln National Equity-Income
Fund, Inc., Lincoln National Global Asset Allocation Fund, Inc., Lincoln
National Growth and Income Fund, Inc., Lincoln National Health & Casualty
Insurance Company, Lincoln National International Fund, Inc., Lincoln
National Life Reinsurance Company, Lincoln National Managed Fund, Inc.,
Lincoln National Money Market Fund, Inc., Lincoln National Reassurance
Company, Lincoln National Social Awareness Fund, Inc. and Lincoln
National Special Opportunities Fund, Inc.
*Ann L. Warner Senior Vice President (previously Vice President) of Lincoln Investment
Management, Inc.; Second Vice President of Lincoln Life & Annuity Company of
New York; Director of Lincoln National Convertible Securities Fund, Inc.; and
Director and Vice President of Lincoln National Income Fund, Inc.
*JoAnn E. Becker Vice President of Lincoln Investment Management, Inc. and The Lincoln
National Life Insurance Company; and Director of LNC Equity Sales
Corporation, The Richard Leahy Corporation and Professional Financial
Planning, Inc.
*David A. Berry Vice President of Lincoln Investment Management, Inc., Lincoln National
Convertible Securities Fund, Inc. and Lincoln National Income Fund, Inc.;
and Second Vice President of Lincoln Life & Annuity Company of New York
*Anne E. Bookwalter Vice President (previously Second Vice President) of Lincoln
Investment Management, Inc.; and Director of Professional Financial
Planning, Inc.
</TABLE>
*Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Lincoln Investment Management Company,
Business Address Inc. and its Affiliates and Other Positions and Offices Held
- ---------------- ------------------------------------------------------------
<S> <C>
*Philip C. Byrde Vice President of Lincoln Investment Management, Inc.
*Patrick R. Chasey Vice President of Lincoln Investment Management, Inc.
*Garrett W. Cooper Vice President of Lincoln Investment Management, Inc.
*David C. Fischer Vice President of Lincoln Investment Management, Inc. and
Lincoln National Income Fund, Inc.
*Luc N. Girard Vice President of Lincoln Investment Management, Inc. and The Lincoln
National Life Insurance Company
*Donald P. Groover Vice President of Lincoln Investment Management, Inc.
Previously Senior Economist/Senior Consultant, Chalke, Inc., Chantilly, VA
*William N. Holm, Jr. Vice President of Lincoln Investment Management, Inc.; and Vice President
and Director of Lincoln National Mezzanine Corporation
*Jennifer C. Hom Vice President (previously Portfolio Manager) of Lincoln Investment
Management, Inc.
*John A. Kellogg Vice President of Lincoln Investment Management, Inc. and Lincoln National
Realty Corporation
*Timothy H. Kilfoil Vice President of Lincoln Investment Management, Inc.
*Lawrence T. Kissko Vice President of Lincoln Investment Management, Inc.; Vice President and
Director Lincoln National Realty Corporation; and Vice President of The
Lincoln National Life Insurance Company
*Walter M. Korinke Vice President of Lincoln Investment Management, Inc.
*Lawrence M. Lee Vice President of Lincoln Investment Management, Inc. and Lincoln National
Realty Corporation
</TABLE>
*Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Lincoln Investment Management Company,
Business Address Inc. and its Affiliates and Other Positions and Offices Held
- ---------------- ------------------------------------------------------------
<S> <C>
*John David Moore Vice President of Lincoln Investment Management, Inc.
*Oliver H. G. Nichols Vice President of Lincoln Investment Management, Inc., The Lincoln
National Life Insurance Company and Lincoln National Realty Corporation
*David C. Patch Vice President of Lincoln Investment Management, Inc.
*Joseph T. Pusateri Vice President of Lincoln Investment Management, Inc. and Lincoln National
Realty Corporation
*Gregory E. Reed Vice President of Lincoln Investment Management, Inc.
*Bill L. Sanders Vice President of Lincoln Investment Management, Inc.; and Sales Vice
President of The Lincoln National Life Insurance Company
*Milton W. Shuey Vice President of Lincoln Investment Management, Inc.
*Gerald M. Weiss Vice President of Lincoln Investment Management, Inc.
**Jon A. Boscia Director (previously President) of Lincoln Investment Management, Inc.;
Director of Lincoln National Foundation, Inc., Lincoln Life & Annuity Company
of New York and First Penn-Pacific Life Insurance Company; President, Chief
Executive Officer and Director of The Lincoln National Life Insurance
Company; and President of Lincoln Financial Group, Inc.
</TABLE>
*Business address is 200 East Berry Street, Fort Wayne, IN 46802.
**Business address is 1300 S. Clinton Street, Fort Wayne, IN 46802.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Lincoln Investment Management Company,
Business Address Inc. and its Affiliates and Other Positions and Offices Held
- ---------------- ------------------------------------------------------------
<S> <C>
*Janet C. Whitney Vice President and Treasurer of Lincoln Investment Management, Inc., The
Financial Alternative, Inc., Financial Alternative Resources, Inc., Financial
Choices, Inc., Financial Investments, Inc., Financial Investment Services,
Inc., The Financial Resources Department, Inc., Investment Alternatives, Inc.,
The Investment Center, Inc., The Investment Group, Inc., LNC
Administrative Services Corporation, LNC Equity Sales Corporation, The
Richard Leahy Corporation, Lincoln National Aggressive Growth Fund, Inc.,
Lincoln National Bond Fund, Inc., Lincoln National Capital Appreciation
Fund, Inc., Lincoln National Equity-Income Fund, Inc., Lincoln National
Global Assets Allocation Fund, Inc., Lincoln National Growth and Income
Fund, Inc., Lincoln National Health & Casualty Insurance Company, Lincoln
National Intermediaries, Inc., Lincoln National International Fund, Inc.,
Lincoln National Managed Fund, Inc., Lincoln National Management
Services, Inc., Lincoln National Mezzanine Corporation, Lincoln National
Money Market Fund, Inc. Lincoln National Realty Corporation, Lincoln
National Risk Management, Inc., Lincoln National Social Awareness Fund,
Inc., Lincoln National Special Opportunities Fund, Inc., Lincoln National
Structured Settlement, Inc., Personal Financial Resources, Inc., Personal
Investment Services, Inc., Special Pooled Risk Administrators, Inc.,
Underwriters & Management Services, Inc.; Vice President and Treasurer
(previously Vice President and General Auditor) of Lincoln National
Corporation; and Assistant Treasurer of First Penn-Pacific Life Insurance
Company
</TABLE>
*Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Lincoln Investment Management Company,
Business Address Inc. and its Affiliates and Other Positions and Offices Held
- ---------------- ------------------------------------------------------------
<S> <C>
*C. Suzanne Womack Secretary of Lincoln Investment Management, Inc., Corporate Benefit
Systems Services Corporation, The Financial Alternative, Inc., Financial
Alternative Resources, Inc., Financial Choices, Inc., The Financial Resources
Department, Inc., Financial Investment Services, Inc., Financial Investments,
Inc., Insurance Services, Inc., Investment Alternatives, Inc., The Investment
Center, Inc. (TN), The Investment Group, Inc., LNC Administrative Services
Corporation, LNC Equity Sales Corporation, The Richard Leahy Corporation,
Lincoln Life Improved Housing, Inc., Lincoln National (China) Inc., Lincoln
National Convertible Securities Fund, Inc., Lincoln National Health &
Casualty Insurance Company, Lincoln National Income Fund, Inc., Lincoln
National Intermediaries, Inc., Lincoln National Life Reinsurance Company,
Lincoln National Management Services, Inc., Lincoln National Mezzanine
Corporation, Lincoln National Realty Corporation, Lincoln National
Reassurance Company, Lincoln National Reinsurance Company (Barbados)
Limited, Lincoln National Reinsurance Company Limited, Lincoln National
Risk Management, Inc., Lincoln National Structured Settlement, Inc., Old
Fort Insurance Company, Ltd., Personal Financial Resources, Inc., Personal
Investment Services, Inc., Professional Financial Planning, Inc., Reliance Life
Insurance Company of Pittsburgh, Special Pooled Risk Administrators, Inc.
and Underwriters & Management Services, Inc.; Vice President, Secretary
and Director of Lincoln National Foundation, Inc.; Secretary and Assistant
Vice President of Lincoln National Corporation and The National Life
Insurance Company; and Assistant Secretary of Lincoln National Aggressive
Growth Fund, Inc., Lincoln National Bond Fund, Inc., Lincoln National
Capital Appreciation Fund, Inc., Lincoln National Equity-Income Fund, Inc.,
Lincoln National Global Asset Allocation Fund, Inc., Lincoln National
Growth and Income Fund, Inc., Lincoln National International Fund, Inc.,
Lincoln National Managed Fund, Inc., Lincoln National Money Market Fund,
Inc., Lincoln National Social Awareness Fund, Inc., Lincoln National Special
Opportunities Fund, Inc., Lincoln National Variable Annuity Funds A & B
and Lincoln Life & Annuity Company of New York
</TABLE>
*Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
Lynch & Mayer, Inc. serves as sub-investment adviser to U.S. Growth Fund
and Enterprise 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.
Name Positions and Offices with Lynch & Mayer, Inc.
- ---- ----------------------------------------------
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
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
* Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
Walter Scott & Partners Limited serves as sub-investment adviser to World
Growth Fund. The directors and officers of Walter Scott & Partners Limited are
listed below. Unless otherwise indicated, the address of each person is Millburn
Tower, Gogar, Edinburgh, Scotland EH12 9BS.
<TABLE>
<CAPTION>
Name Positions and Offices with Walter Scott & Partners Limited
- ---- ----------------------------------------------------------
<S> <C>
Dr. Walter G. Scott Chairman and Managing Director
Dr. Kenneth J. Lyall Director - Investments
John Clark Director - Investments
William D. Stroud Murray Director - Investments
James D. Smith Director - Investments & Centralized Dealing
Marilyn R. Harrison Director - Finance & Company Secretary
</TABLE>
John Govett & Co. Limited serves as sub-investment adviser to New Pacific
Fund. The directors and officers of John Govett & Co. Limited, a majority owned
indirect subsidiary of the AIB Group of Companies as of December 29, 1995, are
listed below. Unless otherwise indicated, the address of each person is
Shackleton House, 4 Battlebridge Lane, London, England SE1 2HR.
<TABLE>
<CAPTION>
Name Positions and Offices with John Govett & Co. Limited
- ---- ----------------------------------------------------
<S> <C>
Andrew Barnett Director
Peter Cotgrove Director
Charles Fowler Joint Chairman
Peter Kysel Director
</TABLE>
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
<TABLE>
<CAPTION>
Name Positions and Offices with John Govett & Co. Limited
- ---- ----------------------------------------------------
<S> <C>
Caroline Lane Director
Brian Lee Managing Director Operations
Rachael Maunder Director
Peter Moffatt Director
Rosemary Morgan Director
Ian Morley Director
John Murray Director
Kevin Pakenham Joint Chairman and Chief Executive Officer
Peter Pejacsevich Director and Chief Investment Officer
Peter Robson Director
Gareth Watts Director
Steve Wood Director
Andrew Yates Director
Colm Doherty Director
Patrick Cunneen Director
Michael Wilson Director
</TABLE>
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:
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
Delaware Distributors, Inc. General Partner None
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>
Delaware Management
Company, Inc. Limited Partner Investment Manager
Delaware Capital
Management, Inc. Limited Partner None
Winthrop S. Jessup Vice Chairman Executive Vice President
Bruce Barton President and Chief None
Executive Officer
David K. Downes Senior Vice President and Senior Vice
Chief Administrative President/Chief
Officer/Chief Financial Administrative
Officer Officer/Chief
Financial Officer
George M. Chamberlain, Jr. Senior Vice President/ Senior Vice President/
Secretary Secretary
William F. Hostler Senior Vice President/ None
Marketing Services
Dana B. Hall Senior Vice President/ None
Key Accounts
J. Chris Meyer Senior Vice President/ None
Product Development
Richard J. Flannery Senior Vice President/
Corporate & International Vice President
Affairs
Eric E. Miller 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 Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Michael P. Bishof Vice President/Treasurer Vice President/Treasurer
Steven T. Lampe Vice President/Taxation Vice President/Taxation
Joseph H. Hastings Vice President/ Vice President/
Corporate Controller Corporate Controller
Lisa O. Brinkley Vice President/ Vice President/
Compliance Compliance
Rosemary E. Milner Vice President/Legal Vice President/Legal
Susan J. Black Vice President/ None
Manager Key Accounts
Thomas P. Kennett Vice President/Wholesaler None
Daniel H. Carlson Vice President/ None
Marketing Manager
Diane M. Anderson Vice President/ None
Retirement Services
Denise F. Guerriere Vice President/Client Services None
Julia R. Vander Els Vice President/ None
Client Services
Jerome J. Alrutz Vice President/ None
Client Services
Joseph M. Barrett Vice President/
Media Relations None
Joanne A. Mettenheimer Vice President/ None
National Accounts
Christopher H. Price Vice President/Annuity None
Marketing & Administration
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>
Steven J. DeAngelis Vice President/ None
Product Development
Susan T. Friestedt Vice President/ None
Customer Service
Dinah J. Huntoon Vice President/ None
Product Management
Soohee Lee Vice President/Fixed Income None
Product Management
Ellen M. Krott Vice President/ None
Communications
Holly W. Riemel Vice President/ None
Telemarketing
Frank Albanese Vice President/Wholesaler None
Terrence L. Bussard Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William S. 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
William M. Kimbrough Vice President/Wholesaler None
Mac McAuliffe Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
Henry W. Orvin Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>
Laura A. Roman Vice President/Wholesaler None
Michael W. Rose Vice President/Wholesaler None
Thomas E. Sawyer Vice President/Wholesaler None
Stephen H. Slack Vice President/Wholesaler None
Linda Schulz Vice President/Wholesaler None
Edward B. Sheridan Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
Faye P. Staples Vice President/Human Resources None
John A. Wells Vice President/Marketing None
Technology
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Not Applicable.
Item 30. Location of Accounts and Records.
(a) Delaware Group Adviser Funds, Inc.
One Commerce Square
Philadelphia, PA 19103
(Articles of Incorporation and By-Laws)
(b) Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
(with respect to their services as investment adviser)
(c) The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, N.Y. 11245
(with respect to their services as custodian)
<PAGE>
PART C - Other Information Form N-1A
(Continued) File No. 33-67490
Delaware Group Adviser Funds, Inc.
(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) Lincoln Investment Management, Inc.
200 East Berry Street
Fort Wayne, IN 46802
(with respect to their services as sub-adviser)
(g) Lynch & Mayer, Inc.
520 Madison Avenue
New York, NY 10022
(with respect to their services as sub-adviser)
(h) Walter & Scott & Partners Limited
Millburn Tower
Gogar
Edinburgh, Scotland EH12 9BS
(with respect to their services as sub-adviser)
(i) John Govett & Company Limited
Shackleton House
4 Battlebridge Lane
London, England SE1 2HR
(with respect to their services as sub-adviser)
Item 31. Management Services. None.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
(d) The Registrant hereby undertakes to promptly call a
meeting of shareholders for the purpose of voting upon the
question of removal of any director when requested in
writing to do so by the record holders of not less than
10% of the outstanding shares.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia and Commonwealth of Pennsylvania on
this 27th day of February 1997.
DELAWARE GROUP ADVISER FUNDS, INC.
By /s/ Wayne A. Stork
-------------------------------------
Wayne A. Stork
President, Chairman of the Board,
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/Wayne A. Stork President, Chairman of the Board,
- --------------------------- Chief Executive Officer and Director February 27, 1997
Wayne A. Stork
Senior Vice President/Chief Administrative
Officer/Chief Financial Officer (Principal
/s/David K. Downes Financial Officer and Principal Accounting
- --------------------------- Officer February 27, 1997
David K. Downes
/s/Ann R. Leven * Director February 27, 1997
- ---------------------------
Ann R. Leven
/s/Anthony D. Knerr * Director February 27, 1997
- ---------------------------
Anthony D. Knerr
/s/Walter P. Babich * Director February 27, 1997
- ---------------------------
Walter P. Babich
/s/Charles E. Peck * Director February 27, 1997
- ---------------------------
Charles E. Peck
/s/W. Thacher Longstreth * Director February 27, 1997
- ---------------------------
W. Thacher Longstreth
*By /s/Wayne A. Stork
---------------------------------
Wayne A. Stork
as Attorney-in-Fact for
each of the persons indicated
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
EX-99.B1 Articles of Incorporation as amended and supplemented to date
EX-99.B2 By-Laws as amended and restated to date
EX-99.B5A Executed Investment Management Agreement (May 1996) on behalf of Enterprise
Fund
EX-99.B5B Executed Investment Management Agreement (May 1996) on behalf of U.S.
Growth Fund
EX-99.B5C Executed Investment Management Agreement (May 1996) on behalf of World
Growth Fund
EX-99.B5D Executed Investment Management Agreement (May 1996) on behalf of New
Pacific Fund
EX-99.B5E Executed Investment Management Agreement (May 1996) on behalf of Federal
Bond Fund
EX-99.B5F Executed Investment Management Agreement (May 1996) on behalf of Corporate
Income Fund
EX-99.B5G Executed Sub-Advisory Agreement (May 1996) on behalf of Enterprise Fund
EX-99.B5H Executed Sub-Advisory Agreement (May 1996) on behalf of U.S. Growth Fund
EX-99.B5I Executed Sub-Advisory Agreement (May 1996) on behalf of World Growth Fund
EX-99.B5J Executed Sub-Advisory Agreement (May 1996) on behalf of New Pacific Fund
EX-99.B5K Executed Sub-Advisory Agreement (May 1996) on behalf of Federal Bond Fund
EX-99.B5L Executed Sub-Advisory Agreement (May 1996) on behalf of Corporate Income
Fund
EX-99.B8A Executed Custodian Agreement (May 1996) on behalf of each Fund
(Module Name
CHASE CUST AGR)
EX-99.B8B Form of Securities Lending Agreement (May 1996)
EX-99.B9B Executed Fund Accounting Agreement (August 19, 1996)
EX-99.B9B(I) Executed Amendment No. 1 (September 30, 1996) to Schedule A to
Delaware Group of Funds Fund Accounting Agreement
EX-99.B9B(II) Executed Amendment No. 2 (November 29, 1996) to Schedule A to
Delaware Group of Funds Fund Accounting Agreement
EX-99.B9B(III) Executed Amendment No. 3 (December 27, 1996) to Schedule A to
Delaware Group of Funds Fund Accounting Agreement
EX-99.B9B(IV) Executed Amendment No. 4 (February 24, 1997) to Schedule A to
Delaware Group of Funds Fund Accounting Agreement
EX-99.B11 Consent of Auditors
EX-99.B16 Schedules of Computation
EX-27 Financial Data Schedules
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
(Continued)
Exhibit No. Exhibit
- ----------- -------
<S> <C>
EX-99.B19 Directors' Power of Attorney
</TABLE>
<PAGE>
Exhibit 99.B1
ARTICLES OF INCORPORATION
OF
LINCOLN RENAISSANCE FUNDS, INC.
I, the incorporator, HELEN J. MCSWEENEY, whose post office address is
321 North Clark Street, Suite 3300, Chicago, Illinois 60610, being at least
eighteen years of age, am, under and by virtue of the General Laws of the State
of Maryland authorizing the formation of corporations, forming a corporation.
ARTICLE I
The name of the corporation (hereinafter called the "Corporation") is
Lincoln Renaissance Funds, Inc.
ARTICLE II
Purposes
The purpose for which the Corporation is formed is to act as an
open-end investment company of the management type registered as such with the
Securities and Exchange Commission pursuant to the Investment Company Act of
1940 and to exercise and generally to enjoy all of the powers, rights and
privileges granted to, or conferred upon, corporations by the General Laws of
the State of Maryland now or hereinafter in force.
ARTICLE III
Address in Maryland
The post office address of the place at which the principal office of
the Corporation in the State of Maryland is located is
<PAGE>
c/o CT Corporation System, 32 South Street, Baltimore, Maryland 21202.
The name of the Corporation's resident agent is the CT Corporation
System and its post office address is 32 South Street, Baltimore, Maryland
21202. Said resident agent is a corporation of the State of Maryland.
ARTICLE IV
Common Stock
Section 1. The total number of shares of capital stock which the
Corporation shall have authority to issue is One Million (1,000,000) shares of
the par value of $.01 per share and of the aggregate par value of $10,000 to be
divided initially into four classes, consisting of 250,000 shares of Class A
Common Stock, 250,000 shares of Class B Common Stock, 250,000 shares of Class C
Common Stock and 250,000 shares of Class D Common Stock.
Section 2. The Board of Directors may, in its discretion, classify and
reclassify any unissued shares of the capital stock of the Corporation into one
or more additional or other classes or series by setting or changing in any one
or more respect the designations, conversion or other rights, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption of such shares and pursuant to such classification or
reclassification to increase or decrease the number of authorized shares of any
existing class or series. If designated by the Board of Directors, particular
classes or
-2-
<PAGE>
series of capital stock may relate to separate portfolios of investments.
Section 3. Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or series
of capital stock, the holders of each class and series of capital stock of the
Corporation shall be entitled to dividends and distributions in such amounts and
at such times as may be determined by the Board of Directors, and the dividends
and distributions paid with respect to the various classes or series of capital
stock may vary among such classes or series. Expenses related to the
distribution of, and other identified expenses that should properly be allocated
to the shares of a particular class or series of capital stock may be charged to
and borne solely by such class or series and the bearing of expenses solely by a
class or series may be appropriately reflected (in a manner determined by the
Board of Directors) and cause differences in the net asset value attributable
to, and the dividend, redemption and liquidation rights of, the shares of each
such class or series of capital stock.
Section 4. Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or series
of capital stock, on each matter submitted to a vote of stockholders, each
holder of a share of capital stock of the Corporation shall be entitled to one
vote for each share standing in such holder's name on the books of the
-3-
<PAGE>
Corporation, irrespective of the class or series thereof, and all shares of all
classes and series shall vote together as a single class; provided, however,
that (a) as to any matter with respect to which a separate vote of any class or
series is required by the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and in effect from time to time, or any rules,
regulations or orders issued thereunder, or by the Maryland General Corporation
Law, such requirement as to a separate vote by that class or series shall apply
in lieu of a general vote of all classes and series as described above; (b) in
the event that the separate vote requirements referred to in (a) above apply
with respect to one or more classes or series, then, subject to paragraph (c)
below, the shares of all other classes and series not entitled to a separate
vote shall vote together as a single class; and (c) as to any matter which in
the judgment of the Board of Directors (which shall be conclusive) does not
affect the interest of a particular class or series, such class or series shall
not be entitled to any vote and only the holders of shares of the one or more
affected classes and series shall be entitled to vote. The presence in person or
by proxy of the holders of record of one-third of the shares of all classes or
series issued and outstanding and entitled to vote thereat shall constitute a
quorum for the transaction of any business at all meetings of the stockholders
except as otherwise provided by law or in these Articles of Incorporation and
except that where the holders of shares of any class or series are entitled to a
-4-
<PAGE>
separate vote as a class or series (a "Separate Class") or where the holders of
shares of two or more (but not all) classes are required to vote as a single
class or series ("Combined Class"), the presence in person or by proxy of the
holders of record of one-third of the shares of that Separate Class or Combined
Class, as the case may be, issued and outstanding and entitled to vote thereat
shall constitute a quorum for such vote.
Section 5. Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or series
of capital stock, in the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, holders of shares of capital
stock of the Corporation shall be entitled, after payment or provision for
payment of the debts and other liabilities of the Corporation (as such
liabilities may affect one or more of the classes of shares of capital stock of
the Corporation), to share ratably in the remaining net assets of the
Corporation; provided, however, that in the event the capital stock of the
Corporation shall be classified or reclassified into series, holders of any
shares of capital stock within such series shall be entitled to share ratably
out of assets belonging to such series pursuant to the provisions of Section
7(c) of this Article V.
Section 6. Each share of any class of the capital stock of the
Corporation, and in the event the capital stock of the Corporation shall be
classified or reclassified into series, each
-5-
<PAGE>
share of any class of capital stock of the Corporation within such series shall
be subject to the following provisions.
(a) The net asset value of each outstanding share of
capital stock of the Corporation (or of a class or
series, in the event the capital stock of the
Corporation shall be so classified or
reclassified) subject to subsection (b) of this
Section 6, shall be the quotient obtained by
dividing the value of the net assets of the
Corporation (or the net assets of the Corporation
attributable or belonging to the class or series
as designated by the Board of Directors pursuant
to Articles Supplementary) by the total number of
outstanding shares of capital stock of the
Corporation (or of such class or series, in the
vent the capital stock of the Corporation shall be
classified or reclassified into series). Subject
to subsection (b) of this Section 6, the value of
the net assets of the Corporation (or of such
class or series in the event the capital stock of
the Corporation shall be classified or
reclassified into series) shall be determined
pursuant to the procedures or methods (which
procedures or methods, in the event the capital
stock of the Corporation shall be classified or
reclassified into series, may differ from class to
-6-
<PAGE>
class or from series to series) prescribed or
approved by the Board of Directors in its discretion,
and shall be determined at the time or times (which
time or times may, in the event the capital stock of
the Corporation shall be classified into classes or
series differ from series to series) prescribed or
approved by the Board of Directors in its discretion.
In addition, subject to subsection (b) of this
Section 6, the Board of Directors, in its discretion,
may suspend the daily determination of net asset
value of any share of any series or class of capital
stock of the Corporation.
(b) The net asset value of each share of the capital
stock of the Corporation or any class or series
thereof shall be determined in accordance with any
applicable provision of the Investment Company
Act, any applicable rule, regulation or order of
the Securities and Exchange Commission thereunder,
and any applicable rule or regulation made or
adopted by any securities association registered
under the Securities Exchange Act of 1934.
(c) All shares now or hereafter authorized shall be
subject to redemption and redeemable at the option of
the stockholder pursuant to the applicable provisions
of the Investment Company Act and laws
-7-
<PAGE>
of the State of Maryland, including any applicable
rules and regulations thereunder. Each holder of a
share of any class or series upon request to the
corporation (if such holder's shares are
certificated, such request being accompanied by
surrender of the appropriate stock certificate or
certificates in proper form for transfer), shall be
entitled to require the Corporation to redeem all or
any part of such shares standing in the name of such
holder on the books of the Corporation (or as
represented by share, certificates surrendered to the
Corporation by such redeeming holder) at a redemption
price per share determined in accordance with
subsection (a) of this Section 6.
(d) Notwithstanding subsection (c) of this Section 6, the
Board of Directors of the Corporation may suspend the
right of the holders of shares of any or all classes
or series of capital stock to require the Corporation
to redeem such shares or may suspend any purchase of
such shares.
(i) for any period (A) during which the
New York Stock Exchange is closed,
other than customary weekend and
holiday closings, or (B) during
which trading of
-8-
<PAGE>
the New York Stock Exchange is
restricted;
(ii) for any period during which an
emergency, as defined by the rules
of the Securities and Exchange
Commission or any successor thereto,
exists as a result of which (A)
disposal by the Corporation of
securities owned by it and belonging
to the affected series of capital
stock (or the Corporation, if the
shares of capital stock of the
Corporation have not been classified
or reclassified into series) is not
reasonably practicable, or (B) it is
not reasonably practicable for the
Corporation fairly to determine the
value of the net assets of the
affected series of capital stock; or
(iii) for such other periods as the
Securities and Exchange Commission
or any successor thereto may by
order permit for the protection of
the holders of shares of capital
stock of the Corporation.
(e) All shares of the capital stock of the Corporation
now or hereafter authorized shall be subject to
-9-
<PAGE>
redemption and redeemable at the option of the
Corporation. The Board of Directors may by resolution
from time to time authorize the Corporation to
require the redemption of all or any part of the
outstanding shares of any class or series upon the
sending of written notice thereof to each holder
whose shares are to be redeemed and upon such terms
and conditions as the Board of Directors, in its
discretion, shall deem advisable, out of funds
legally available therefor, at the net asset value
per share of that class or series determined in
accordance with subsections (a) and (b) of this
Section 6 and take all other steps deemed necessary
or advisable in connection therewith.
(f) The Board of Directors may by resolution from time
to time authorize the purchase by the Corporation,
either directly or through an agent, of shares of
any class or series of the capital stock of the
Corporation upon such terms and conditions and for
such consideration as the Board of Directors, in
its discretion, shall deem advisable out of funds
legally available therefor at prices per share not
in excess of the net asset value per share of that
class or series determined in accordance with
subsections (a) and (b) of this Section 6 and to
-10-
<PAGE>
take all other steps deemed necessary or advisable
in connection therewith.
(g) Except as otherwise permitted by the Investment
Company Act, payment of the redemption price of
shares of any class or series of the capital stock
of the Corporation surrendered to the Corporation
for redemption pursuant to the provisions of
subsection (c) of this Section 6 or for purchase
by the Corporation pursuant to the provisions of
subsections (e) or (f) of this Section 6 shall be
made by the Corporation within seven days after
surrender of such shares to the Corporation for
such purpose. Any such payment may be made in
whole or in part in portfolio securities or in
cash, as the Board of Directors, in its
discretion, shall deem advisable, and no
stockholder shall have the right, other than as
determined by the Board of Directors, to have his
or her shares redeemed in portfolio securities.
(h) In the absence of any specification as to the
purposes for which shares are redeemed or repurchased
by the Corporation, all shares so redeemed or
repurchased shall be deemed to be acquired for
retirement in the sense contemplated by the laws of
the State of Maryland. Shares of any class or series
retired by repurchase or
-11-
<PAGE>
redemption shall thereafter have the status of
authorized but unissued shares of such class or
series.
Section 7. In the event the Directors shall authorize the
classification or reclassification of shares into classes or series, the Board
of Directors may (but shall not be obligated to) provide that each class or
series shall have the following powers, preferences and voting or other special
rights, and the qualifications, restrictions and limitations thereof shall be as
follows:
(a) All consideration received by the Corporation for
the issue or sale of shares of capital stock of
each series, together with all income, earnings,
profits, and proceeds received thereon, including
any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments
derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably
belong to the series with respect to which such
assets, payments or funds were received by the
Corporation for all purposes, subject only to the
rights of creditors, and shall be so handled upon
the books of account of the Corporation. Such
assets, payments and funds, including any proceeds
derived from the sale, exchange or liquidation
thereof and any assets derived from any
-12-
<PAGE>
reinvestment of such proceeds in whatever form the
same may be, are herein referred to as "assets
belonging to" such series.
(b) The Board of Directors may from time to time declare
and pay dividends or distributions, in additional
shares of capital stock of such series or in cash, on
any, or all series of capital stock, the amount of
such dividends and the means of payment being wholly
in the discretion of the Board of Directors.
(i) Dividends or distributions on shares
of any series shall be paid only out
of earned surplus or other lawfully
available assets belonging to such
series.
(ii) Inasmuch as one goal of the
Corporation is to qualify as a
"regulated investment company" under
the Internal Revenue Code of 1986,
as amended, or any successor or
comparable statute thereto, and
Regulations promulgated thereunder,
and inasmuch as the computation of
net income and gains for federal
income tax purposes may vary from
the computation thereof on the books
of the Corporation the Board of
Directors shall have the
-13-
<PAGE>
power, in its discretion, to
distribute in any fiscal year as
dividends, including dividends
designated in whole or in part as
capital gains distributions amounts
sufficient, in the opinion of the
Board of Directors, to enable the
Corporation to qualify as a
regulated investment company and to
avoid liability for the Corporation
for federal income tax in respect of
that year. In furtherance, and not
in limitation of the foregoing, in
the event that a series has a net
capital loss for a fiscal year, and
to the extent that the net capital
loss offsets net capital gains from
such series the amount to be deemed
available for distribution to that
series with the net capital gain may
be reduced by the amount offset.
(c) In the event of the liquidation or dissolution of the
Corporation, holders of shares of capital stock of
each series shall be entitled to receive, as a
series, out of the assets of the Corporation
available for distribution to such holders, but other
than general assets not belonging to any
-14-
<PAGE>
particular series, the assets belonging to such
series; and the assets so distributed to the holders
of shares of capital stock of any series shall be
distributed, subject to the provisions of subsection
(d) of this Section 7, among such stockholders in
proportion to the number of shares of such series
held by them and recorded on the books of the
Corporation. In the event that there are any general
assets not belonging to any particular series and
available for distribution shall be made to the
holders of all series in proportion to the net asset
value of the respective series determined in
accordance with the charter of the Corporation.
(d) The assets belonging to any series shall be
charged with the liabilities in respect to such
series and shall also be charged with their share
of the general liabilities of the Corporation, in
proportion to the asset value of the respective
series determined in accordance with the charter
of the Corporation. The determination of the
Board of Directors shall be conclusive as to the
amount of liabilities, including accrued expenses
and reserves as to the allocation of the same as
to a given series, and as to whether the same or
-15-
<PAGE>
general assets of the Corporation are allocable to
one or more classes.
Section 8. Any fractional shares shall carry proportionately all the
rights of a whole share, excepting any right to receive a certificate evidencing
such fractional share, but including without limitation the right to vote and
the right to receive dividends.
Section 9. No holder of shares of Common Stock of the Corporation
shall, as such holder, have any preemptive right to purchase or subscribe for
any shares of the Common Stock of the Corporation of any class or series which
it may issue or sell (whether out of the number of shares authorized by the
Articles of Incorporation, or out of any shares of the Common Stock of the
Corporation acquired by it after the issue thereof, or otherwise).
Section 10. All persons who shall acquire any shares of capital stock
of the Corporation shall acquire the same subject to the provisions of the
charter and By-Laws of the Corporation. All shares of Common Stock of the
Corporation issued on or before the date of the filing of this amendment to the
Articles of Incorporation shall without further act of the Board of Directors or
the holders of such shares be deemed to be shares of Class Common Stock.
ARTICLE V
Directors
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<PAGE>
The initial number of directors of the Corporation shall be three, and
the names of those who shall act as such until the first meeting of stockholders
and until their successors are duly elected and qualified are as follows:
Jon A. Boscia
Priscilla S. Brown
David A. Berry
However, the By-Laws of the Corporation may fix the number of directors at no
less than three and may authorize the Board of Directors, by the vote of a
majority of the entire Board of Directors, to increase or decrease the number of
directors within a limit specified in the By-Laws (provided that, if there are
no Shares outstanding, the number of directors may be less than three but not
less than one), and to fill the vacancies created by any such increase in the
number of directors. Unless otherwise provided by the By-Laws of the
Corporation, the directors of the Corporation need not be stockholders.
The By-Laws of the Corporation may divide the directors of the
Corporation into classes and prescribed the tenure of office of the several
classes; but no class shall be elected for a period shorter than one year or for
a period longer than five years and the term of office of at least one class
shall expire each year.
ARTICLE VI
Miscellaneous
-17-
<PAGE>
The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for
creating, defining, limiting, and regulating the powers of the Corporation, the
directors and the stockholders.
Section 1. The Board of Directors shall have the management and control
of the property, business and affairs of the Corporation and is hereby vested
with all the powers possessed by the Corporation itself so far as is not
inconsistent with law or these Article of Incorporation. In furtherance and
without limitation of the foregoing provisions, it is expressly declared that
subject to these Articles of Incorporation, the Board of Directors shall have
power:
(a) To make, alter, amend or repeal from time to time the
By-Laws of the Corporation except as such power may
otherwise be limited in the By-Laws.
(b) To issue shares of any class or series of the
capital stock of the Corporation.
(c) To authorize the purchase of shares of any class
or series in the open market or otherwise, at
prices not in excess of their net asset value for
shares of that class, series or class within such
series determined in accordance with subsections
(a) and (b) of Section 6 of Article V hereof,
provided that the Corporation has assets legally
available for such purpose and to pay for such
-18-
<PAGE>
shares in cash, securities or other assets then
held or owned by the Corporation.
(d) To declare and pay dividends and distributions
from funds legally available therefor on shares of
such class or series, in such amounts, if any, in
such manner (including declaration by means of a
formula or other similar method of determination
whether or not the amount of the dividend or
distribution so declared can be calculated at the
time of such declaration) and to the holders of
record as of such date, as the Board of Directors
may determine.
(e) To take any and all action necessary or appropriate
to maintain a constant net asset value per share for
shares of any class, series or class within such
series.
Section 2. Any determination made in good faith and, so far as
accounting matters are involved, in accordance with generally accepted
accounting principles applied by or pursuant to the direction of the Board of
Directors or as otherwise required or permitted by the Securities and Exchange
Commission, shall be final and conclusive, and shall be binding upon the
Corporation and all holders of shares, past, present and future, of each class
or series, and shares are issued and sold on the condition and undertaking,
evidenced by acceptance of certificates for such shares by, or confirmation of
such shares
-19-
<PAGE>
being held for the account of any stockholder, that any and all such
determinations shall be binding as aforesaid.
Nothing in this Section 2 shall be construed to protect any director or
officer of this Corporation against liability to the Corporation or its
stockholders to which such director or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office.
Section 3. The directors of the Corporation may receive compensation
for their services, subject, however, to such limitations with respect thereto
as may be determined from time to time by the holders of shares of capital stock
of the Corporation.
Section 4. Except as required by law, the holders of shares of capital
stock of the Corporation shall have only such right to inspect the records,
documents, accounts and books of the Corporation as may be granted by the Board
of Directors of the Corporation.
Section 5. Any vote of the holders of shares of capital stock of the
Corporation authorizing liquidation of the Corporation or proceedings for its
dissolution may authorize the Board of Directors to determine, as provided
herein, or if provision is not made herein in accordance with generally accepted
accounting principles, which assets are the assets belonging to the Corporation
or any series thereof available for distribution to the holders of the
Corporation or any series
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<PAGE>
thereof (pursuant to the provisions of Section 7 of Article V hereof) and may
divide or authorize the Board of Directors to divide such assets among the
stockholders of the shares of capital stock of the Corporation or any series
thereof in such manner as to ensure that each such holder receives an amount
from the proceeds of such liquidation or dissolution that such holder is
entitled to, as determined pursuant to the provisions of Sections 3 and 7 of
Article V hereof.
ARTICLE VII
Amendments
The Corporation reserves the right from time to time to amend, alter or
repeal any of the provisions of these Articles of Incorporation (including any
amendment that changes the terms of any of the outstanding Shares by
classification, reclassification or otherwise), and to add or insert any other
provisions that may under the statutes of the State of Maryland at the time in
force, be lawfully contained in articles of incorporation, and all rights at any
time conferred upon the stockholders of the Corporation by these Articles of
Incorporation are subject to the provisions of this Article VII.
-----------------------------
The term "Articles of Incorporation" as used herein and in the By-Laws
of the Corporation shall be deemed to mean these
-21-
<PAGE>
Articles of Incorporation as from time to time amended and restated.
I acknowledge this document to be my act and state under the penalties
of perjury that with respect to all matters and facts herein, to the best of my
knowledge, information and belief such
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<PAGE>
matters and fact are true in all material respects and that this statement is
made under the penalties of perjury.
/s/ Helen J. McSweeney
--------------------------
Helen J. McSweeney
February 14, 1997
Approved and received for record by the State Department of Assessments and
Taxation of Maryland August 12, 1993 at 10:10 o'clock A.M. as in conformity with
law and ordered recorded.
-23-
<PAGE>
LINCOLN RENAISSANCE FUNDS, INC.
ARTICLES OF AMENDMENT
Lincoln Renaissance Funds, Inc., a Maryland corporation having its
principal office in Baltimore, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Articles of Incorporation of the Corporation is hereby
amended by striking out the first sentence of Article FIFTH of the Articles of
Incorporation and inserting in lieu thereof the following:
ARTICLE FIFTH
Directors
The initial number of directors of the Corporation shall be 9, and the
names of those who shall act as such until the first meeting of stockholders and
until their successors are duly elected and qualified are as follows:
Jon Boscia Jorge Castro Charles Freund
Priscilla Brown Adela Cepeda Gary McPhail
Richard Burridge Roger Deshaies Barbara Peck
SECOND: The Board of Directors of the Corporation by a unanimous
written consent dated September 20, 1993 duly adopted a resolution in which was
set forth the foregoing amendment to the Articles of Incorporation.
THIRD: The remainder of the Articles of Incorporation shall remain in
full force and effect.
FOURTH: The amendment of the Articles of Incorporation of the
Corporation as hereinabove set forth has been duly advised, approved and adopted
by the Board of Directors of the Corporation there being no stock outstanding or
subscribed for at the time of approval.
FIFTH: The authorized capital stock of the Corporation has not been
increased by these Articles of Amendment.
IN WITNESS WHEREOF, the officers of the Corporation who executed on
behalf of said corporation these Articles of Amendment hereby acknowledge, in
the name and on behalf of said corporation these Articles of Amendment to be the
corporate act of said corporation and further certify, under the penalties of
perjury, that, to the best of their knowledge, information and belief, the
matters and facts set forth therein with respect to
<PAGE>
the approval thereof are true in all material respects, all of this 30th day of
September, 1993.
Attest: Lincoln Renaissance Funds, Inc.
C. Suzanne Womack Jon A. Boscia
C. Suzanne Womack, Secretary Jon A. Boscia, President
Approved and received for record by the State Department of Assessments and
Taxation of Maryland October 1, 1993 at 10:20 o'clock A.M. as in conformity with
law and ordered recorded.
<PAGE>
LINCOLN RENAISSANCE FUNDS, INC.
ARTICLES OF AMENDMENT
Lincoln Renaissance Funds, Inc., a Maryland corporation having it
principal office in Baltimore, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of
Maryland, that:
FIRST: The Articles of Incorporation of the Corporation is hereby
amended by striking out Article I of the Articles of Incorporation and inserting
in lieu thereof the following:
ARTICLE I
The name of the corporation (hereinafter called the
"Corporation") is Lincoln Advisor Funds, Inc.
SECOND: Article IV, Section I of the Articles of Incorporation
currently reads as follows:
Section 1. The total number of shares of capital
stock which the Corporation shall have authority to
issue is One Million (1,000,000) shares of the par
value of $.01 per share and of the aggregate par
value of $10,000 to be divided initially into four
classes, consisting of 250,000 shares of Class A
Common Stock, 250,000 shares of Class B Common Stock,
250,000 shares of Class C Common Stock and 250,000
shares of Class D Common Stock.
THIRD: The Articles of Incorporation of the Corporation is hereby
amended by striking out Article IV, Section 1 of the Articles of Incorporation
and inserting in lieu thereof the following:
"Section 1. The total number of shares of capital
stock which the Corporation has authority to issue is
Eight Hundred Ten Million (810,000,000) shares of
common stock (the "Shares") of the par value of $.01
per share and of the aggregate par value of
$8,100,000 divided into four classes, consisting of
360,000,000 shares of Class A Common Stock,
210,000,000 shares of Class B Common Stock,
120,000,000 shares of Class C Common Stock and
120,000,000 shares of Class D Common Stock (any
class(es) or series of Shares from time to time
created by the Board of Directors being herein
referred to individually as a "Class" and
collectively as "Classes"). The Board of Directors of
the Corporation shall have the power and authority to
classify or reclassify any
<PAGE>
unissued Shares from time to time by setting or
changing the preferences, conversion or other rights,
voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of
redemption of such unissued Shares. The Board of
Directors of the Corporation shall have the power and
authority to increase or decrease the aggregate
number of Shares of any Class that the Corporation
has authority to issue. The Board of Directors has
classified 70,000,000 Shares as shares of the Lincoln
Growth and Income Portfolios; 70,000,000 Shares as
shares of the Lincoln Enterprise Portfolio;
70,000,000 Shares as shares of the Lincoln U.S.
Growth Portfolio; 70,000,000 Shares as shares of the
Lincoln World Growth Portfolio; 70,000,000 Shares as
shares of the Lincoln New Pacific Portfolio;
70,000,000 Shares as shares of the Lincoln Government
Income Portfolio; 70,000,000 Shares as shares of the
Lincoln Corporate Income Portfolio; 70,000,000 Shares
as shares of the Lincoln Tax-Free Income Portfolio;
and 250,000,000 Shares as shares of the Lincoln
Cashfund Portfolio. Each of these portfolios, with
the exception of the Lincoln Cashfund Portfolio, will
be divided into four Classes, consisting of
10,000,000 shares of Class A common stock, 20,000,000
shares of Class B common stock, 15,000,000 shares of
Class C common stock and 15,000,000 shares of Class D
common stock. The Lincoln Cashfund Portfolio will be
divided into two Classes, consisting of 200,000,000
shares of Class A common stock and 50,000,000 shares
of Class B common stock.
FOURTH: The information required by subsection (b)(a)(i) ss.2-607 of
the Maryland General Corporation Law is not changed by these Articles of
Amendment.
FIFTH: The Board of Directors of the Corporation by a unanimous written
consent dated November 23, 1993 duly adopted a resolution in which was set forth
the foregoing amendments to the Articles of Incorporation.
SIXTH: The sole stockholder of the Corporation by a unanimous written
consent dated November 23, 1993 duly approved the foregoing amendments to the
Articles of Incorporation.
SEVENTH: The remainder of the Articles of Incorporation shall remain in
full force and effect.
EIGHTH: The amendments of the Articles of Incorporation of the
Corporation as hereinafter set forth have been duly advised,
-2-
<PAGE>
approved, and adopted by the Board of Directors of the Corporation.
IN WITNESS WHEREOF, the officers of the Corporation who executed on
behalf of said corporation these Articles of Amendment hereby acknowledge, in
the name and on behalf of said corporation, these Articles of Amendment to be
the corporate act of said corporation and further certify, under the penalties
of perjury, that, to the best of their knowledge, information and belief, the
matters and facts set forth therein with respect to the approval thereof are
true in all material respects all on this 23rd day of November, 1993.
Lincoln Renaissance Funds, Inc.
Jon A. Boscia
Jon A. Boscia, President
Attest:
C. Suzanne Womack
C. Suzanne Womack, Secretary
Approved and received for record by the State Department of Assessments and
Taxation of Maryland November 29, 1993 at 10:24 A.M. as in conformity with law
and ordered recorded.
-3-
<PAGE>
LINCOLN ADVISOR FUNDS, INC.
ARTICLES OF AMENDMENT
CHANGING NAME OF CORPORATION AND
NAMES OF CLASSES OF SHARES
PURSUANT TO MGCL SECTION 2-605(B)
LINCOLN ADVISOR FUNDS, INC., a Maryland corporation having its
principal office in Baltimore, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Trustees of Maryland
that:
FIRST: The Charter of the Corporation is hereby amended to provide that
the name of the Corporation is changed to "Delaware Group Adviser Funds, Inc."
SECOND: The Charter of the Corporation is hereby amended by changing
the designation of Classes of Shares referred to in Article IV, Section 1 as
follows:
From: To:
---- --
Lincoln Enterprise Portfolio Enterprise Fund
Lincoln U.S. Growth Portfolio U.S. Growth Fund
Lincoln World Growth Portfolio World Growth Fund
Lincoln New Pacific Portfolio New Pacific Fund
Lincoln Government Income Portfolio Federal Bond Fund
Lincoln Corporate Income Portfolio Corporate Income
Fund
SECOND: The amendment does not change the outstanding capital stock of
the Corporation or the aggregate par value thereof.
THIRD: The foregoing amendment to the Charter of the Corporation has
been approved by the Board of Directors and is limited to changes expressly
permitted by Section 2-605 of the Maryland General Corporation Law.
<PAGE>
FOURTH: The Corporation is registered as an open-end company under the
Investment Company act of 1940.
FIFTH: The foregoing amendment to the Charter of the Corporation shall
become effective at 8:59 a.m. on May 6, 1996.
IN WITNESS WHEREOF, LINCOLN ADVISOR FUNDS, INC., has caused these
presents to be signed in its name and on its behalf by its Vice President and
attested by its Secretary on May 3, 1996.
LINCOLN ADVISOR FUNDS, INC.
/s/ Ann L. Warner
-----------------------------
Ann L. Warner
Vice President
Attest:
/s/ C. Suzanne Womack
- -----------------------------
C. Suzanne Womack, Secretary
The undersigned, Vice President of LINCOLN ADVISOR FUNDS, INC., who
executed on behalf of said corporation the foregoing Articles of Amendment to
the Charter of which this certificate is made a part, hereby acknowledges in the
name and on behalf of said corporation, the foregoing amendments to the Charter
to be the corporate act of said corporation and further certifies that, to the
best of her knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof
-2-
<PAGE>
are true in all material respects, under the penalties of perjury.
/s/ Ann L. Warner
---------------------
Ann L. Warner
Vice President
Approved and received for record by the State Department of Assessments and
Taxation of Maryland May 3, 1996 at 3:23 o'clock P.M. as in conformity with law
and ordered recorded. (Effective date: 05/06/96) at 8:59 A.M.
-3-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
Delaware Group Adviser Funds, Inc. (formerly Lincoln Advisor Funds,
Inc.), a Maryland corporation having its principal office in Maryland in
Baltimore City, Maryland (the "Corporation"), hereby certifies, in accordance
with Section 2-208.1 of the Maryland General Corporation Law, to the State
Department of Assessments and Taxation of Maryland, that:
FIRST: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
SECOND: The total number of shares of all classes of capital stock
which the Corporation has authority to issue is Eight Hundred Ten Million
(810,000,000) shares of common stock, par value of $0.01 each, having an
aggregate par value of $8,100,000, and the total number of shares of common
stock that the Corporation has authority to issue is not being increased or
decreased.
THIRD: Heretofore, the number of authorized shares of which the
Corporation has authority to issue was divided into four classes of shares,
consisting of 360,000,000 Class A Common Stock shares, 210,000,000 Class B
Common Stock shares, 120,000,000 Class C Common Stock shares and 120,000,000
Class D Common Stock shares.
FOURTH: In accordance with Section 2-105(c) of the Maryland General
Corporation Law, and pursuant to a resolution duly adopted by the Board of
Directors of the Corporation at a meeting held on February 23, 1996, the number
of authorized shares allocated to the Corporation's four classes of shares is
hereby reduced such that the four classes of shares of common stock of the
Corporation shall consist of 120,000,000 Class A Common Stock shares,
120,000,000 Class B Common Stock shares, 90,000,000 Class C Common Stock shares
and 90,000,000 Class D Common Stock shares, such Class D Common Stock shares
hereafter to be known as the Institutional Class of shares.
FIFTH: In accordance with Section 2-105(c) of the Maryland General
Corporation Law and pursuant to a resolution duly adopted by the Board of
Directors of the Corporation at a meeting held on February 23, 1996, the
70,000,000 shares that are currently classified and allocated to the Lincoln
Growth and Income Portfolio, the 70,000,000 shares that are
<PAGE>
currently classified and allocated to the Lincoln Tax-Free Income Portfolio, and
the 250,000,000 shares that are currently classified and allocated to the
Lincoln Cashfund Portfolio, are hereby declassified, and such shares are
restored to the status of authorized but unissued and unclassified shares of the
Corporation at the time that there are no shares of such portfolios issued and
outstanding.
SIXTH: After giving effect to the decrease in the number of shares of
common stock allocated to each class of common stock of the Corporation, as well
as the declassification of the shares previously classified and allocated to
three of the portfolios of the Corporation, the total number of shares of
capital stock which the Corporation currently has authority to issue remains at
Eight Hundred Ten Million (810,000,000) shares of common stock, par value $0.01
per share, with an aggregate par value of Eight Million One Hundred Thousand
Dollars ($8,100,000). Three Hundred Ninety Million (390,000,000) of the total
authorized shares of common stock are unissued and unclassified, and the
remaining Four Hundred Twenty Million (420,000,000) of the total authorized
shares of common stock have been classified into six separate portfolios of
investments (or funds) (each a "Series"), each of which is further subdivided
and classified into classes as follows:
Names of Series Number of
and Classes Thereof Shares
------------------- ---------
1. Enterprise Fund
(a) Class A common stock 20,000,000
(b) Class B common stock 20,000,000
(c) Class C common stock 15,000,000
(d) Class D common stock 15,000,000
----------
70,000,000
2. U.S. Growth Fund
(a) Class A common stock 20,000,000
(b) Class B common stock 20,000,000
(c) Class C common stock 15,000,000
(d) Class D common stock 15,000,000
----------
70,000,000
3. World Growth Fund
(a) Class A common stock 20,000,000
(b) Class B common stock 20,000,000
(c) Class C common stock 15,000,000
(d) Class D common stock 15,000,000
----------
70,000,000
4. New Pacific Fund
(a) Class A common stock 20,000,000
(b) Class B common stock 20,000,000
(c) Class C common stock 15,000,000
(d) Class D common stock 15,000,000
----------
70,000,000
<PAGE>
Names of Series Number of
and Classes Thereof Shares
------------------- ---------
5. Federal Bond Fund
(a) Class A common stock 20,000,000
(b) Class B common stock 20,000,000
(c) Class C common stock 15,000,000
(d) Class D common stock 15,000,000
----------
70,000,000
6. Corporate Income Fund
(a) Class A common stock 20,000,000
(b) Class B common stock 20,000,000
(c) Class C common stock 15,000,000
(d) Class D common stock 15,000,000
----------
70,000,000
Total of Classified Shares 420,000,000
Authorized, Unissued, Unclassified Shares 390,000,000
===========
Total Authorized Shares 810,000,000
SEVENTH: The shares of common stock declassified, reallocated and
reclassified as described above have been duly reclassified by the Board of
Directors pursuant to authority and power contained in the Corporation's
Articles of Incorporation, as amended.
EIGHTH: These Articles Supplementary shall become effective at 9:00
a.m. on May 6, 1996.
IN WITNESS WHEREOF, DELAWARE GROUP ADVISER FUNDS, INC., has caused
these presents to be signed in its name and on its behalf by its Senior Vice
President and attested by its Assistant Secretary on May 3, 1996.
DELAWARE GROUP ADVISER FUNDS, INC.
By: /s/ George M. Chamberlain, Jr.
--------------------------------
George M. Chamberlain, Jr.
Senior Vice President
Attest: /s/ Eric E. Miller
--------------------------
Assistant Secretary
THE UNDERSIGNED, Senior Vice President of Delaware Group Adviser Funds,
Inc., who executed on behalf of the Corporation the foregoing Articles
Supplementary of which
<PAGE>
this certificate is made a part, hereby acknowledges in the name and on behalf
of said Corporation the foregoing Articles Supplementary to be the corporate act
of said Corporation and hereby certifies that to the best of his knowledge,
information and belief the matters and facts set forth therein with respect to
the authorization and approval thereof are true in all material respects under
the penalties of perjury.
/s/ George M. Chamberlain, Jr.
------------------------------------
George M Chamberlain, Jr.
Senior Vice President
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
Delaware Group Adviser Funds, Inc. (formerly Lincoln Advisor Funds,
Inc.), a Maryland corporation having its principal office in Maryland in
Baltimore City, Maryland (hereinafter called the "Corporation"), hereby
certifies, in accordance with Section 2-208 of the Maryland General Corporation
Law, to the State Department of Assessments and Taxation of Maryland, that:
FIRST: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
SECOND: The Corporation currently has authority to issue a total of
Eight Hundred Ten Million (810,000,000) shares of common stock, par value $.01
per share, with an aggregate par value of Eight Million One Hundred Thousand
Dollars ($8,100,000). Three Hundred Ninety Million (390,000,000) of the total
authorized shares of common stock are unissued and unclassified, and the
remaining Four Hundred Twenty Million (420,000,000) shares of common stock have
been classified into six separate portfolios of investments (or funds) (each a
"Series"), each of which is further subdivided into classes as follows:
Names of Series Number of
and Classes Thereof Shares
------------------- ---------
1. Enterprise Fund
(a) Class A common stock 20,000,000
(b) Class B common stock 20,000,000
(c) Class C common stock 15,000,000
(d) Class D common stock 15,000,000
----------
70,000,000
2. U.S. Growth Fund
(a) Class A common stock 20,000,000
(b) Class B common stock 20,000,000
(c) Class C common stock 15,000,000
(d) Class D common stock 15,000,000
----------
70,000,000
3. World Growth Fund
(a) Class A common stock 20,000,000
(b) Class B common stock 20,000,000
(c) Class C common stock 15,000,000
(d) Class D common stock 15,000,000
----------
70,000,000
<PAGE>
Names of Series Number of
and Classes Thereof Shares
------------------- ---------
4. New Pacific Fund
(a) Class A common stock 20,000,000
(b) Class B common stock 20,000,000
(c) Class C common stock 15,000,000
(d) Class D common stock 15,000,000
----------
70,000,000
5. Federal Bond Fund
(a) Class A common stock 20,000,000
(b) Class B common stock 20,000,000
(c) Class C common stock 15,000,000
(d) Class D common stock 15,000,000
----------
70,000,000
6. Corporate Income Fund
(a) Class A common stock 20,000,000
(b) Class B common stock 20,000,000
(c) Class C common stock 15,000,000
(d) Class D common stock 15,000,000
----------
70,000,000
Total of Classified Shares 420,000,000
Authorized, Unissued, Unclassified Shares 390,000,000
===========
Total Authorized Shares 810,000,000
THIRD: These Articles Supplementary do not increase the total
authorized capital stock of the Corporation or the aggregate par value thereof.
FOURTH: The Board of Directors hereby reclassifies the unissued Class B
shares of common stock within each Series in such manner that they shall have
the same preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption that the Class B shares of common stock within each Series currently
have under the Charter of the Corporation subject, however, while remaining as
part of the same class of shares as any already outstanding Class B shares of
common stock of the same Series, to the following: At such times (which may vary
among the holders of the Class B shares of common stock of each Series), as may
be determined by the Board of Directors (or with the authorization of the Board
of Directors, by the officers of the Corporation) in accordance with the
Investment Company Act of 1940, as amended, applicable rules and regulations
thereunder, and applicable rules of the National Association of Securities
Dealers, Inc., and reflected in the pertinent registration statement of the
Corporation, the Class B shares of common stock of each Series may be
automatically converted into Class A shares of common stock of the same Series
based on the relative net asset values of such Class B shares of common stock
and Class A shares of common stock of the particular Series at the time of
conversion, subject, however, to any conditions of conversion that may be
imposed by the Board of Directors (or with
-2-
<PAGE>
authorization of the Board of Directors, by the officers of the Corporation) and
reflected in the pertinent registration statement of the Corporation as
aforesaid.
FIFTH: The shares of common stock reclassified as described above have
been duly reclassified by the Board of Directors pursuant to authority and power
contained in the Corporation's Articles of Incorporation, as amended.
SIXTH: These Articles Supplementary shall become effective at 9:01 a.m.
on May 6, 1996.
IN WITNESS WHEREOF, Delaware Group Adviser Funds, Inc. has caused these
presents to be signed as of the 3rd day of May, 1996, in its name and on its
behalf by its duly authorized officers who acknowledge that these Articles
Supplementary are the act of the Corporation, that to the best of their
knowledge, information and belief, all matters and facts set forth herein
relating to the authorization and approval of these Articles are true in all
materials respects, and that this statement is made under the penalties of
perjury.
DELAWARE GROUP ADVISER FUNDS, INC.
By: /s/ George M. Chamberlain, Jr.
------------------------------------
George M. Chamberlain, Jr.
Senior Vice President
ATTEST:
/s/ Eric E. Miller
- -----------------------
Assistant Secretary
-3-
<PAGE>
THE UNDERSIGNED, Senior Vice President of Delaware Group Adviser Funds,
Inc., who executed on behalf of the Corporation the foregoing Articles
Supplementary of which this certificate is made a part, hereby acknowledges in
the name and on behalf of said Corporation the foregoing Articles Supplementary
to be the corporate act of said Corporation and hereby certifies that to the
best of his knowledge, information and belief the matters and facts set forth
therein with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
/s/ George M. Chamberlain, Jr.
---------------------------------
George M Chamberlain, Jr.
Senior Vice President
-4-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
By-Laws
ARTICLE I
Stockholders
Section 1. Place of Meeting. All meetings of the stockholders shall be
held at the principal office of the Corporation in the State of Maryland or at
such other place within the United States as may from time to time be designated
by the Board of Directors and stated in the notice of such meeting.
Section 2. Annual Meetings. The annual meeting of the stockholders of
the Corporation shall be held on such date and at such hour as may from time to
time be designated by the Board of Directors and stated in the notice of such
meetings, for the purpose of electing directors for the ensuing year and for the
transaction of such business as may properly be brought before the meeting;
provided however, that an annual meeting of stockholders is not required to be
held in any year in which the election of directors is not required to be acted
upon by stockholders pursuant to the Investment Company of 1940.
Section 3. Meetings. Meetings of the stockholders for any purpose or
purposes may be called by the Chairman of the Board, the President or a majority
of the Board of Directors, and shall be called by the Secretary upon receipt of
the request in writing signed by stockholders holding not less than 10% of the
common stock issued and outstanding and entitled to vote thereat. Such request
shall state the purpose or purposes of the proposed meeting. The Secretary shall
inform such stockholders of the reasonably estimated costs of preparing the
mailing such notice of meeting and upon payment of the Corporation of such
costs, the Secretary shall give notice stating the purpose or purposes of the
meeting as required in this Article and by-law to all stockholders entitled to
notice of such meeting. No meeting need be called upon the request of the
holders of shares entitled to cast less than a majority of all votes entitled to
be cast at such meeting to consider any matter which is substantially the same
as a matter voted upon at any meeting of stockholders held during the preceding
twelve months.
Section 4. Notice of Meeting of Stockholders. Not less than ten days'
and not more than ninety days' written or printed notice of every meeting of
stockholders, stating the time and place thereof and the general nature of the
business proposed to be transacted thereat, shall be given to each stockholder
<PAGE>
entitled to vote thereat by leaving the same with such stockholder or at such
stockholder's residence or unusual place of business or by mailing it, postage
prepaid, and addressed to such stockholder at such stockholder's address as it
appears upon the books of the Corporation. If mailed, notice shall be deemed to
be given when deposited in the United States mail addressed to the stockholder
as aforesaid.
No notice of the time, place or purpose of any meeting of stockholders
need be given to any stockholder who attends in person or by proxy or to any
stockholder who, in writing executed and filed with the records of the meeting,
either before or after the holding thereof, waives such notice.
Section 5. Record Dates. The Board of Directors may fix, in advance, a
date not exceeding sixty days preceding the date of any meeting of stockholders,
and dividend payment date or any date for the allotment of rights, as a record
date for the determination of the stockholders entitled to notice of and to vote
at such meeting or entitled to receive such dividends or rights, as the case may
be; and only stockholders of record on such date shall be entitled to notice of
and to vote at such meeting or to receive such dividends or rights, as the case
may be. In the case of a meeting of stockholders, such date shall not be less
than ten days prior to the date fixed for such meeting.
Section 6. Quorum, Adjournment of Meetings. The presence in person or
by proxy of the holders of record of one-third of the shares of the common
stock of the Corporation issued and outstanding and entitled to vote thereat
shall constitute a quorum at all meetings of the stockholders except as
otherwise provided in the Articles of Incorporation. If, however, such quorum
shall not be present or represented at any meeting of the stockholders, the
holders of a majority of the stock present in person or by proxy shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until stockholders owning the requisite amount of
stock entitled to vote at such meeting shall be present. At such adjourned
meeting at which stockholders owning the requisite amount of stock entitled to
vote thereat shall be represented, any business may be transacted which might
have been transacted at the meeting as originally notified.
Section 7. Voting and Inspectors. At all meetings, stockholders of
record entitled to vote thereat shall have one vote for each share of common
stock standing in his or her name on the books of the Corporation (and such
stockholders of record
-2-
<PAGE>
holding factional shares, if any, shall have proportionate voting rights) on the
date for the determination of stockholders entitled to vote at such meeting,
either in person or by proxy appointed by instrument in writing subscribed by
such stockholder or his or her duly authorized attorney.
All elections shall be had and all questions decided by a majority of
the votes cast at a duly constituted meeting, except as otherwise provided by
statute or by the Articles of Incorporation or by these By-Laws.
At any election of directors, the Chairman of the meeting may, and upon
the request of the holders of ten percent (10%) of the stock entitled to vote at
such election shall, appoint two inspectors of election who shall first
subscribe an oath or affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after the election make a certificate of the result of the
vote taken. No candidate for the office of director shall be appointed such
inspector.
Section 8. Conduct of Stockholders' Meetings. The meetings of the
stockholders shall be presiding over by the Chairman of the Board, or if he or
she is not present, by the President, or if he or she is not present, by a Vice
President, or if none of them is present, by a Chairman to be elected at the
meeting. The Secretary of the Corporation, if present, shall act as a Secretary
of such meetings, or if he or she is not present, an Assistant Secretary shall
so act; if neither the Secretary nor the Assistant Secretary is present, then
the meeting shall elect its Secretary.
Section 9. Concerning Validity of Proxies, Ballots, etc. At every
meeting of the stockholders, all proxies shall be received and taken in charge
of and all ballots shall be received and canvassed by the Secretary of the
meeting, who shall decide all questions concerning the qualification of voters,
the validity of the proxies and the acceptance or rejection of votes, unless
inspectors of election shall have been appointed by the Chairman of the meeting,
in which event such inspectors of election shall decide all such questions.
ARTICLE II
Board of Directors
Section 1. Number and Tenure of Office. The business and affairs of the
Corporation shall be conducted and managed by a Board of Directors of not less
than three nor more than twelve
-3-
<PAGE>
directors, as may be determined from time to time by voting of a majority of the
directors then in office, provided that if there is not stock outstanding the
number of directors may be less than three but not less than one. Directors need
not be stockholders.
Section 2. Vacancies. In case of any vacancy in the Board of Directors
through death, resignation or other cause, other than an increase in the number
of directors, a majority of the remaining directors, although a majority is less
than a quorum, by an affirmative vote, may elect a successor to hold office
until the next meeting of stockholders or until his or her successor is chosen
and qualifies.
Section 3. Increase or Decrease in Number of Directors. The Board of
Directors, by the vote of a majority of the entire Board, may increase the
number of directors and may elect directors to fill the vacancies created by any
such increase in the member of directors until the next meeting of stockholders
or until their successors are duly chosen and qualified. The Board of Directors,
by the vote of a majority of the entire Board, may likewise decrease the number
of directors to a number not less than three.
Section 4. Place of Meeting. The directors may hold their meetings,
have one or more offices, and keep the books of the Corporation, outside the
State of Maryland, at any office or offices of the Corporation or at any other
place as they may from time to time by resolution determine, or in the case of
meetings, as they may from time to time by resolution determine or as shall be
specified or fixed in the respective notices or waivers of notice thereof.
Section 5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such time and on such notice as the directors may from time to
time determine.
Section 6. Special Meetings. Special meetings of the Board of Directors
may be held from time to time upon call for the Chairman of the Board, the
President, the Secretary or two or more of the directors, by oral or telegraphic
or written notice duly served on or sent or mailed to each director not less
than one day before such meeting. No notice need be given to any director who
attends in person or to any director who, in writing executed and filed with the
records of the meeting either before or after the holding thereof, waives such
notice. Such notice or waiver of notice need not state the purpose or purposes
of such meeting.
-4-
<PAGE>
Section 7. Quorum. One-third of the directors then in office shall
constitute a quorum for the transaction of business, provided that a quorum
shall in no case be less than two directors. If at any meeting of the Board
there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum shall have been obtained.
The act of the majority of the directors present at any meeting at which there
is a quorum shall be the act of the directors, except as may be otherwise
specifically provided by statute or by the Article of Incorporation or by these
By-Laws.
Section 8. Executive Committee. The Board of Directors may, by the
affirmative vote of a majority of the whole Board, appoint from the directors
and Executive Committee to consist for such number of directors (not less than
three) as the Board may from time to time determine. The Chairman of the
Committee shall be elected by the Board of Directors. The Board of Directors by
such affirmative vote shall have power at any time to change the members of such
Committee and may fill vacancies in the Committee by election from the
directors. When the Board of Directors is not in session, to the extent
permitted by law, the Executive Committee shall have and may exercise any or all
of the powers of the Board of Directors in the management of the business and
affairs of the Corporation. The Executive Committee may fix its own rules of
procedure, and may meet when and as provided by such rules or by resolution of
the Board of Directors, but in every case the presence of a majority shall be
necessary to constitute a quorum. During the absence of a member of the
Executive Committee, the remaining members may appoint a member of the Board of
Directors to act in his or her place.
Section 9. Other Committees. The Board of Directors, by the affirmative
vote of a majority of the whole Board, may appoint from the directors other
committees which shall in each case consist of such number of directors (not
less than two) and shall have and may exercise such powers as the Board may
determine in the resolution appointing them. A majority of all the members of
any such committee may determine its action and fix the time and place of its
meetings, unless the Board of Directors shall other wise provide. The Board of
Directors shall have power at any time to change the members and powers of any
such committee, to fill vacancies and to discharge any such committee.
-5-
<PAGE>
Section 10. Telephone Meetings. Members of the Board of Directors or a
committee of the Board of Directors may participate in a meeting by means of a
conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time. Participation
in a meeting by these means constitutes presence in person at the meeting.
Section 11. Action Without a Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting, if a written consent to such action is signed by
all members of the board or of such committee, as the case may be, and such
written consent is filed with the minutes of the proceedings of the Board or
such committee.
Section 12. Compensation of Directors. No director shall receive any
stated salary or fees from the Corporation for his services as such if such
director is, other than by reason of being such director, an interested person
(as such term is defined by the Investment Company Act f 1940) of the
Corporation or of its investment adviser, administrator or principal
underwriter. Except as provided in the preceding sentence, directors shall be
entitled to receive such compensation from the Corporation for their services as
may from time to time be voted by the Board of Directors.
Section 13. Removal of Directors. No director shall continue to hold
office after the holders of record of not less than two-thirds of the
Corporation's outstanding common stock of all series have declared that the
director be removed from office either by declaration in writing filed with the
Corporation's secretary or by votes cast in person or by proxy at a meeting
called for the purpose. The directors shall promptly call a meeting of
stockholders for the purposes of voting upon the question of removal of any
director or directors when requested in writing to do so by the record holders
of not less than 10 percent of the Corporation's outstanding common stock of all
series.
ARTICLE III
Officers
Section 1. Executive Officers. The executive officers of the
Corporation shall be chosen by the Board of Directors. These may include a
Chairman of the Board of Directors (who shall be a
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<PAGE>
director) and shall include a President (who shall be a director), one or more
Vice Presidents (the number thereof to be determined by the Board of Directors),
a Secretary and a Treasurer. The Board of Directors or the Executive Committee
may also in its discretion appoint Assistant Secretaries, Assistant Treasures
and other officers, agents and employees, who shall have such authority and
perform such duties as the Board or the Executive Committee may determine. The
Board of Directors may fill any vacancy which may occur in any office. Any two
offices, except those of President and Vice-President, may be held by the same
person, but no officer shall execute, acknowledge or verify any instrument in
more than one capacity, if such instrument is require by law or these By-Law to
be executed, acknowledged or verify by two or more officers.
Section 2. Term of Office. The term of office of all officers shall be
one year and until their respective successors are chosen and qualified. Any
officer may be removed from office at any time with or without cause by the vote
of a majority of the whole Board of Directors.
Section 3. Powers and Duties. The officers of the Corporation shall
have such powers and duties as generally pertain to their respective offices, as
well as such powers and duties a may from time to time be conferred by the Board
of Directors or the Executive Committee.
ARTICLE IV
Capital Stock
Section 1. Certificates for Shares. The Board from time to time may
authorize the issuance of some or all of the shares of any or all of classes or
series without certificates.
Section 2. Transfer of Shares. Shares of the Corporation shall be
transferable on the books of the Corporation by the holder thereof in person or
by his or her duly authorized attorney or legal representative, upon surrender
and cancellation of certificates, if any, for the same number of shares, duly
endorsed or accompanies by proper instruments of assignment and transfer, with
such proof of the authenticity of the signature as the Corporation or its agents
may reasonably require; in the case of shares not represented by certificates,
the same or similar requirements may be imposed by the Board of Directors.
Section 3. Stock Ledgers. The stock ledgers of the Corporation,
containing the names and addresses of the stockholders and the number of shares
held by them respectively,
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<PAGE>
shall be kept at the principal office of the Corporation or, if the Corporation
employs a Transfer Agent, at the office of the Transfer Agent of the
Corporation.
Section 4. Lost, Stolen or Destroyed Certificates. If stock
certificates are issued, the Board of Directors or the Executive Committee may
determine the conditions upon which a new certificate of stock of the
Corporation of any class may be issued in place of a certificate which is
alleged to have been lost, stolen or destroyed; and may, in its discretion,
require the owner of such certificates or such owner's legal representative to
give bond, with sufficient surety, to the Corporation and each Transfer Agent,
if any, to indemnify it and each such Transfer Agent against any and all loss or
claims which may arise by reasons of the issue of a new certificate in the place
of the one so lost, stolen or destroyed.
ARTICLE V
Corporate Seal
The Board of Directors may provide for a suitable corporate seal, in
such form and bearing such inscriptions as it may determine.
ARTICLE VI
Fiscal Year
The fiscal year of the Corporation shall begin on the first
of Nov. and shall end on the last day of Oct. in each year.
ARTICLE VII
Indemnification
The Corporation shall indemnify directors, officers, employees and
agents of the Corporation against judgments, fines, settlements and expenses to
the fullest extent authorized and in the manner permitted, by applicable federal
and state law.
ARTICLE VIII
Custodian
Section 1. The Corporation shall have as custodian or custodians one or
more trust companies or banks of good standing, each having a capital, surplus
and undivided profits aggregating
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<PAGE>
not less than fifty million dollars ($50,000,000), and, to the extent required
by the Investment Company Act of 1940, the funds and securities held by the
Corporation shall be kept in the custody of one or more such custodians,
provided such custodian or custodians can be found ready and willing to act, and
further provided that the Corporation may use as subcustodians, for the purposes
of holding any foreign securities and related funds of the Corporation, such
foreign banks as the Board of Directors may approve and as shall be permitted by
law.
Section 2. The Corporation shall upon the resignation or inability to
serve of its custodian or upon change of the custodian:
(i) in case of such resignation or inability to serve, use its best
efforts to obtain a successor custodian;
(ii) require that the cash and securities owned by the Corporation be
delivered directly to the successor custodian; and
(iii) in the event that no successor custodian can be found, submit to
the stockholders before permitting delivery of the cash and securities owned by
the Corporation otherwise than to a successor custodian, the question whether or
not this Corporation shall be liquidated or shall function without a custodian.
ARTICLE IX
Amendment of By-Laws
The By-Laws of the Corporation may be altered, amended, added to or
repeals by the stockholders or by majority vote of the entire Board of
Directors; but any such alteration, amendment, addition or repeal of the By-Laws
by action of the Board of Directors may be altered or repealed by stockholders.
-9-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
ENTERPRISE FUND
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP ADVISER FUNDS, INC.,
Maryland corporation ("Fund") on behalf of the ENTERPRISE 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 six 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 restructuring
("Restructuring") of the Fund and each of its portfolios for the purpose of
integrating the Fund into the Delaware Group of Funds; and further
WHEREAS, as part of the Restructuring, the names of the Fund and the
Portfolio were changed from the Lincoln Advisor Funds, Inc. and Lincoln
Enterprise Portfolio to, respectively,
<PAGE>
Delaware Group Adviser Funds, Inc. and Enterprise Fund; and the Investment
Manager was selected to replace Lincoln Investment Management, Inc. (formerly
Lincoln National Investment Management Company), which served as investment
manager for the Portfolio under an Investment Advisory Agreement dated as of the
25th of October, 1993; and further
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-
<PAGE>
2. The Fund shall conduct its own business and affairs and shall bear
the expenses and salaries necessary and incidental thereto including, but not in
limitation of the foregoing, the costs incurred in: the maintenance of its
corporate existence; the maintenance of its own books, records and procedures;
dealing with its own shareholders; the payment of dividends; transfer of stock,
including issuance, redemption and repurchase of shares; preparation of share
certificates; reports and notices to shareholders; calling and holding of
shareholders' meetings; miscellaneous office expenses; brokerage commissions;
custodian fees; legal and accounting fees; taxes; and federal and state
registration fees. 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
-3-
<PAGE>
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.
(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 .80% 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
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<PAGE>
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 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
-5-
<PAGE>
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 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.
-6-
<PAGE>
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.
-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 4th day of May, 1996.
Attest: DELAWARE ADVISER FUNDS, INC. for the
ENTERPRISE FUND
/s/John M. Zerr By: /s/David K. Downes
- -------------------------- ---------------------------------------------
John M. Zerr David K. Downes
Vice President Senior Vice President/Chief Administrative
Assistant Secretary Officer/Chief Financial Officer
Attest: DELAWARE MANAGEMENT COMPANY, INC.
/s/Eric E. Miller By: /s/Wayne A. Stork
- --------------------------- ---------------------------------------------
Eric E. Miller Wayne A. Stork
Vice President Chairman, President, Chief Executive Officer,
Assistant Secretary Chief Investment Officer
-8-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
U.S. GROWTH FUND
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP ADVISER FUNDS, INC.,
Maryland corporation ("Fund") on behalf of the U.S. GROWTH 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 six 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 restructuring
("Restructuring") of the Fund and each of its portfolios for the purpose of
integrating the Fund into the Delaware Group of Funds; and further
WHEREAS, as part of the Restructuring, the names of the Fund and the
Portfolio were changed from the Lincoln Advisor Funds, Inc. and Lincoln U.S.
Growth Portfolio to, respectively,
-1-
<PAGE>
Delaware Group Adviser Funds, Inc. and U.S. Growth Fund; and the Investment
Manager was selected to replace Lincoln Investment Management, Inc. (formerly
Lincoln National Investment Management Company), which served as investment
manager for the Portfolio under an Investment Advisory Agreement dated as of the
25th of October, 1993; and further
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-
<PAGE>
2. The Fund shall conduct its own business and affairs and shall bear
the expenses and salaries necessary and incidental thereto including, but not in
limitation of the foregoing, the costs incurred in: the maintenance of its
corporate existence; the maintenance of its own books, records and procedures;
dealing with its own shareholders; the payment of dividends; transfer of stock,
including issuance, redemption and repurchase of shares; preparation of share
certificates; reports and notices to shareholders; calling and holding of
shareholders' meetings; miscellaneous office expenses; brokerage commissions;
custodian fees; legal and accounting fees; taxes; and federal and state
registration fees. 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
-3-
<PAGE>
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.
(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 .70% 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
-4-
<PAGE>
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 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
-5-
<PAGE>
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 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.
-6-
<PAGE>
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.
-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 4th day of May, 1996.
Attest: DELAWARE ADVISER FUNDS, INC. for the
U.S. GROWTH FUND
/s/John M. Zerr By: /s/David K. Downes
- --------------- ------------------------------------------
John M. Zerr David K. Downes
Vice President Senior Vice President/Chief Administrative
Assistant Secretary Officer/Chief Financial Officer
Attest: DELAWARE MANAGEMENT COMPANY, INC.
/s/Eric E. Miller By: /s/Wayne A. Stork
- --------------- ------------------------------------------
Eric E. Miller Wayne A. Stork
Vice President Chairman, President, Chief Executive Officer,
Assistant Secretary Chief Investment Officer
-8-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
WORLD GROWTH FUND
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP ADVISER FUNDS, INC.,
Maryland corporation ("Fund") on behalf of the WORLD GROWTH 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 six 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 restructuring
("Restructuring") of the Fund and each of its portfolios for the purpose of
integrating the Fund into the Delaware Group of Funds; and further
WHEREAS, as part of the Restructuring, the names of the Fund and the
Portfolio were changed from the Lincoln Advisor Funds, Inc. and Lincoln World
Growth Portfolio to, respectively,
-1-
<PAGE>
Delaware Group Adviser Funds, Inc. and World Growth Fund; and the Investment
Manager was selected to replace Lincoln Investment Management, Inc. (formerly
Lincoln National Investment Management Company), which served as investment
manager for the Portfolio under an Investment Advisory Agreement dated as of the
25th of October, 1993; and further
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-
<PAGE>
2. The Fund shall conduct its own business and affairs and shall bear
the expenses and salaries necessary and incidental thereto including, but not in
limitation of the foregoing, the costs incurred in: the maintenance of its
corporate existence; the maintenance of its own books, records and procedures;
dealing with its own shareholders; the payment of dividends; transfer of stock,
including issuance, redemption and repurchase of shares; preparation of share
certificates; reports and notices to shareholders; calling and holding of
shareholders' meetings; miscellaneous office expenses; brokerage commissions;
custodian fees; legal and accounting fees; taxes; and federal and state
registration fees. 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
-3-
<PAGE>
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.
(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 1.10% 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
-4-
<PAGE>
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 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
-5-
<PAGE>
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 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.
-6-
<PAGE>
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.
-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 4th day of May, 1996.
Attest: DELAWARE ADVISER FUNDS, INC. for the
WORLD GROWTH FUND
/s/John M. Zerr By: /s/David K. Downes
----------------- --------------------------------------------
John M. Zerr David K. Downes
Vice President Senior Vice President/Chief Administrative
Assistant Secretary Officer/Chief Financial Officer
Attest: DELAWARE MANAGEMENT COMPANY, INC.
/s/Eric E. Miller By: /s/Wayne A. Stork
----------------- --------------------------------------------
Eric E. Miller Wayne A. Stork
Vice President Chairman, President, Chief Executive Officer,
Assistant Secretary Chief Investment Officer
-8-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
NEW PACIFIC FUND
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP ADVISER FUNDS, INC.,
Maryland corporation ("Fund") on behalf of the NEW PACIFIC 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 six 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 restructuring
("Restructuring") of the Fund and each of its portfolios for the purpose of
integrating the Fund into the Delaware Group of Funds; and further
WHEREAS, as part of the Restructuring, the names of the Fund and the
Portfolio were changed from the Lincoln Advisor Funds, Inc. and Lincoln New
Pacific Portfolio to, respectively,
-1-
<PAGE>
Delaware Group Adviser Funds, Inc. and New Pacific Fund; and the Investment
Manager was selected to replace Lincoln Investment Management, Inc. (formerly
Lincoln National Investment Management Company), which served as investment
manager for the Portfolio under an Investment Advisory Agreement dated as of the
25th of October, 1993; and further
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-
<PAGE>
2. The Fund shall conduct its own business and affairs and shall bear
the expenses and salaries necessary and incidental thereto including, but not in
limitation of the foregoing, the costs incurred in: the maintenance of its
corporate existence; the maintenance of its own books, records and procedures;
dealing with its own shareholders; the payment of dividends; transfer of stock,
including issuance, redemption and repurchase of shares; preparation of share
certificates; reports and notices to shareholders; calling and holding of
shareholders' meetings; miscellaneous office expenses; brokerage commissions;
custodian fees; legal and accounting fees; taxes; and federal and state
registration fees. 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
-3-
<PAGE>
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.
(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 .80% 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
-4-
<PAGE>
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 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
-5-
<PAGE>
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 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.
-6-
<PAGE>
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.
-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 4th day of May, 1996.
Attest: DELAWARE ADVISER FUNDS, INC. for the
NEW PACIFIC FUND
/s/John M. Zerr By: /s/David K. Downes
----------------- --------------------------------------------
John M. Zerr David K. Downes
Vice President Senior Vice President/Chief Administrative
Assistant Secretary Officer/Chief Financial Officer
Attest: DELAWARE MANAGEMENT COMPANY, INC.
/s/Eric E. Miller By: /s/Wayne A. Stork
----------------- --------------------------------------------
Eric E. Miller Wayne A. Stork
Vice President Chairman, President, Chief Executive Officer,
Assistant Secretary Chief Investment Officer
-8-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
FEDERAL BOND FUND
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP ADVISER FUNDS, INC.,
Maryland corporation ("Fund") on behalf of the FEDERAL BOND 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 six 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 restructuring
("Restructuring") of the Fund and each of its portfolios for the purpose of
integrating the Fund into the Delaware Group of Funds; and further
WHEREAS, as part of the Restructuring, the names of the Fund and the
Portfolio were changed from the Lincoln Advisor Funds, Inc. and Lincoln
Government Income Portfolio to,
-1-
<PAGE>
respectively, Delaware Group Adviser Funds, Inc. and Federal Bond Fund; and the
Investment Manager was selected to replace Lincoln Investment Management, Inc.
(formerly Lincoln National Investment Management Company), which served as
investment manager for the Portfolio under an Investment Advisory Agreement
dated as of the 25th of October, 1993; and further
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-
<PAGE>
2. The Fund shall conduct its own business and affairs and shall bear
the expenses and salaries necessary and incidental thereto including, but not in
limitation of the foregoing, the costs incurred in: the maintenance of its
corporate existence; the maintenance of its own books, records and procedures;
dealing with its own shareholders; the payment of dividends; transfer of stock,
including issuance, redemption and repurchase of shares; preparation of share
certificates; reports and notices to shareholders; calling and holding of
shareholders' meetings; miscellaneous office expenses; brokerage commissions;
custodian fees; legal and accounting fees; taxes; and federal and state
registration fees. 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
-3-
<PAGE>
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.
(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 .30% 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
-4-
<PAGE>
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 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
-5-
<PAGE>
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 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.
-6-
<PAGE>
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.
-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 4th day of May, 1996.
Attest: DELAWARE ADVISER FUNDS, INC. for the
FEDERAL BOND FUND
/s/John M. Zerr By: /s/David K. Downes
----------------- --------------------------------------------
John M. Zerr David K. Downes
Vice President Senior Vice President/Chief Administrative
Assistant Secretary Officer/Chief Financial Officer
Attest: DELAWARE MANAGEMENT COMPANY, INC.
/s/Eric E. Miller By: /s/Wayne A. Stork
----------------- --------------------------------------------
Eric E. Miller Wayne A. Stork
Vice President Chairman, President, Chief Executive Officer,
Assistant Secretary Chief Investment Officer
-8-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
CORPORATE INCOME FUND
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP ADVISER FUNDS, INC.,
Maryland corporation ("Fund") on behalf of the CORPORATE INCOME 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 six 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 restructuring
("Restructuring") of the Fund and each of its portfolios for the purpose of
integrating the Fund into the Delaware Group of Funds; and further
WHEREAS, as part of the Restructuring, the names of the Fund and the
Portfolio were changed from the Lincoln Advisor Funds, Inc. and Lincoln
Corporate Income Portfolio to,
-1-
<PAGE>
respectively, Delaware Group Adviser Funds, Inc. and Corporate Income Fund; and
the Investment Manager was selected to replace Lincoln Investment Management,
Inc. (formerly Lincoln National Investment Management Company), which served as
investment manager for the Portfolio under an Investment Advisory Agreement
dated as of the 25th of October, 1993; and further
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-
<PAGE>
2. The Fund shall conduct its own business and affairs and shall bear
the expenses and salaries necessary and incidental thereto including, but not in
limitation of the foregoing, the costs incurred in: the maintenance of its
corporate existence; the maintenance of its own books, records and procedures;
dealing with its own shareholders; the payment of dividends; transfer of stock,
including issuance, redemption and repurchase of shares; preparation of share
certificates; reports and notices to shareholders; calling and holding of
shareholders' meetings; miscellaneous office expenses; brokerage commissions;
custodian fees; legal and accounting fees; taxes; and federal and state
registration fees. 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
-3-
<PAGE>
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.
(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 .30% 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
-4-
<PAGE>
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 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
-5-
<PAGE>
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 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.
-6-
<PAGE>
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.
-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 4th day of May, 1996.
Attest: DELAWARE ADVISER FUNDS, INC. for the
CORPORATE INCOME FUND
/s/John M. Zerr By: /s/David K. Downes
----------------- --------------------------------------------
John M. Zerr David K. Downes
Vice President Senior Vice President/Chief Administrative
Assistant Secretary Officer/Chief Financial Officer
Attest: DELAWARE MANAGEMENT COMPANY, INC.
/s/Eric E. Miller By: /s/Wayne A. Stork
----------------- --------------------------------------------
Eric E. Miller Wayne A. Stork
Vice President Chairman, President, Chief Executive Officer,
Assistant Secretary Chief Investment Officer
-8-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
SUB-ADVISORY AGREEMENT
AGREEMENT, made by and between DELAWARE MANAGEMENT COMPANY, INC., a
Delaware corporation ("Investment Manager"), and LYNCH & MAYER, INC., an Indiana
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 Enterprise 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
-1-
<PAGE>
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.
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 of 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
-2-
<PAGE>
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 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.
-3-
<PAGE>
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.
-4-
<PAGE>
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 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
-5-
<PAGE>
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. 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
-6-
<PAGE>
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 on the first $150 million of
the Portfolio, and .35% of the average daily net assets over $150 million 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 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
-7-
<PAGE>
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 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.
-8-
<PAGE>
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. 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.
-9-
<PAGE>
11. 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.
-10-
<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 4th day of May, 1996.
DELAWARE MANAGEMENT COMPANY, INC.
By: /s/Wayne A. Stork
--------------------------------------------
Wayne A. Stork
Chairman, President, Chief Executive Officer
Chief Investment Officer
Attest: /s/Eric E. Miller
--------------------------------------------
Eric E. Miller
Vice President/Assistant Secretary
LINCOLN INVESTMENT MANAGEMENT, INC.
By: /s/Howard Kaufman
--------------------------------------------
Howard Kaufman
Attest: /s/Laura Jean Conrad
--------------------------------------------
Laura Jean Conrad
Agreed to and accepted as of the day and year first above written:
DELAWARE GROUP ADVISER FUNDS, INC.
on behalf of the Corporate Income Fund
By: /s/David K. Downes
-----------------------------------------------------
David K. Downes
Senior Vice President/Chief Administrative Officer/
Chief Financial Officer
Attest: /s/John M. Zerr
-----------------------------------------------------
John M. Zerr
Vice President/Assistant Secretary
-11-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
SUB-ADVISORY AGREEMENT
AGREEMENT, made by and between DELAWARE MANAGEMENT COMPANY, INC., a
Delaware corporation ("Investment Manager"), and LYNCH & MAYER, INC., an Indiana
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 U.S. Growth 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
-1-
<PAGE>
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.
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 of 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
-2-
<PAGE>
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 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.
-3-
<PAGE>
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 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
-4-
<PAGE>
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. 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-
-5-
<PAGE>
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 .40% 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 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
-6-
<PAGE>
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 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
-7-
<PAGE>
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. This Agreement shall extend to and bind the successors of the
parties hereto.
-8-
<PAGE>
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.
11. 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.
-9-
<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 4th day of May, 1996.
DELAWARE MANAGEMENT COMPANY, INC.
By: /s/Wayne A. Stork
----------------------------------------------
Wayne A. Stork
Chairman, President, Chief Executive Officer
Chief Investment Officer
Attest: /s/Eric E. Miller
---------------------------------------------
Eric E. Miller
Vice President/Assistant Secretary
LINCOLN INVESTMENT MANAGEMENT, INC.
By: /s/Howard Kaufman
----------------------------------------------
Howard Kaufman
Attest: /s/Laura Jean Conrad
----------------------------------------------
Laura Jean Conrad
Agreed to and accepted as of the day and year first above written:
DELAWARE GROUP ADVISER FUNDS, INC.
on behalf of the Corporate Income Fund
By: /s/David K. Downes
------------------------------------------------------
David K. Downes
Senior Vice President/Chief Administrative Officer/
Chief Financial Officer
Attest: /s/John M. Zerr
------------------------------------------------------
John M. Zerr
Vice President/Assistant Secretary
-10-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
SUB-ADVISORY AGREEMENT
AGREEMENT, made by and between DELAWARE MANAGEMENT COMPANY, INC., a
Delaware corporation ("Investment Manager"), and WALTER SCOTT & PARTNERS, LTD.,
an entity organized under the laws of Scotland ("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 World Growth 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
<PAGE>
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
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
-2-
<PAGE>
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 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
-3-
<PAGE>
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 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.
-4-
<PAGE>
(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. 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
-5-
<PAGE>
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 .80% 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 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;
-6-
<PAGE>
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 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
-7-
<PAGE>
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
-8-
<PAGE>
the complaint and 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.
-9-
<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 4th day of May, 1996.
DELAWARE MANAGEMENT COMPANY, INC.
By: /s/Wayne A. Stork
-------------------------------------------------
Wayne A. Stork
Chairman, President, Chief Executive Officer
Chief Investment Officer
Attest: /s/Eric E. Miller
---------------------------------------------
Eric E. Miller
Vice President/Assistant Secretary
LINCOLN INVESTMENT MANAGEMENT, INC.
By: /s/Marilyn R. Harrison
-------------------------------------------------
Marilyn R. Harrison
Attest:
---------------------------------------------
Agreed to and accepted as of the
day and year first above written:
DELAWARE GROUP ADVISER FUNDS, INC.
on behalf of the Corporate Income Fund
By: /s/David K. Downes
-------------------------------------------------------
David K. Downes
Senior Vice President/Chief Administrative Officer/
Chief Financial Officer
Attest: /s/John M. Zerr
---------------------------------------------------
John M. Zerr
Vice President/Assistant Secretary
-10-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
SUB-ADVISORY AGREEMENT
AGREEMENT, made by and between DELAWARE MANAGEMENT COMPANY, INC., a
Delaware corporation ("Investment Manager"), and JOHN GOVETT & COMPANY LIMITED,
an entity organized under the laws of England ("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
<PAGE>
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
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
-2-
<PAGE>
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 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
-3-
<PAGE>
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 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.
-4-
<PAGE>
(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. 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
-5-
<PAGE>
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 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;
-6-
<PAGE>
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 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
-7-
<PAGE>
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
-8-
<PAGE>
the complaint and 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.
-9-
<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 4th day of May, 1996.
DELAWARE MANAGEMENT COMPANY, INC.
By: /s/Wayne A. Stork
------------------------------------------------
Wayne A. Stork
Chairman, President, Chief Executive Officer
Chief Investment Officer
Attest: /s/Eric E. Miller
--------------------------------------------
Eric E. Miller
Vice President/Assistant Secretary
JOHN GOVETT & COMPANY LIMITED
By: /s/Peter Moffatt
------------------------------------------------
Peter Moffatt, Director
Attest: /s/Colin Kreidewolf
--------------------------------------------
Colin Kreidewolf
Agreed to and accepted as of the
day and year first above written:
DELAWARE GROUP ADVISER FUNDS, INC.
on behalf of the Corporate Income Fund
By: /s/David K. Downes
-------------------------------------------------------
David K. Downes
Senior Vice President/Chief Administrative Officer/
Chief Financial Officer
Attest: /s/John M. Zerr
---------------------------------------------------
John M. Zerr
Vice President/Assistant Secretary
-10-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
SUB-ADVISORY AGREEMENT
AGREEMENT, made by and between DELAWARE MANAGEMENT COMPANY, INC., a
Delaware corporation ("Investment Manager"), and LINCOLN INVESTMENT MANAGEMENT,
INC., an Illinois 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 Federal Bond 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
<PAGE>
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.
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 of 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
-2-
<PAGE>
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 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.
-3-
<PAGE>
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 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
-4-
<PAGE>
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. 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-
-5-
<PAGE>
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 .30% 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 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
-6-
<PAGE>
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 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
-7-
<PAGE>
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. 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
-8-
<PAGE>
deemed an original. This Agreement shall become effective when one or more
counterparts have been signed and delivered by each of the parties hereto.
11. 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.
-9-
<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 4th day of May, 1996.
DELAWARE MANAGEMENT COMPANY, INC.
By: /s/Wayne A. Stork
-------------------------------------------------
Wayne A. Stork
Chairman, President, Chief Executive Officer
Chief Investment Officer
Attest: /s/Eric E. Miller
---------------------------------------------
Eric E. Miller
Vice President/Assistant Secretary
LINCOLN INVESTMENT MANAGEMENT, INC.
By: /s/Ann L. Warner
-------------------------------------------------
Ann L. Warner, Senior Vice President
Attest: /s/Virginia Schroeder
---------------------------------------------
Virginia L. Schroeder
Agreed to and accepted as of the
day and year first above written:
DELAWARE GROUP ADVISER FUNDS, INC.
on behalf of the Corporate Income Fund
By: /s/David K. Downes
-------------------------------------------------------
David K. Downes
Senior Vice President/Chief Administrative Officer/
Chief Financial Officer
Attest: /s/John M. Zerr
---------------------------------------------------
John M. Zerr
Vice President/Assistant Secretary
-10-
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
SUB-ADVISORY AGREEMENT
AGREEMENT, made by and between DELAWARE MANAGEMENT COMPANY, INC., a
Delaware corporation ("Investment Manager"), and LINCOLN INVESTMENT MANAGEMENT,
INC., an Illinois 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 Corporate Income 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
<PAGE>
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.
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 of 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
-2-
<PAGE>
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 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.
-3-
<PAGE>
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 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
-4-
<PAGE>
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. 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-
-5-
<PAGE>
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 .30% 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 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
-6-
<PAGE>
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 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
-7-
<PAGE>
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. 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.
-8-
<PAGE>
11. 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.
-9-
<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 4th day of May, 1996.
DELAWARE MANAGEMENT COMPANY, INC.
By: /s/Wayne A. Stork
-------------------------------------------------
Wayne A. Stork
Chairman, President, Chief Executive Officer
Chief Investment Officer
Attest: /s/Eric E. Miller
-------------------------------------------------
Eric E. Miller
Vice President/Assistant Secretary
LINCOLN INVESTMENT MANAGEMENT, INC.
By: /s/Ann L. Warner
-------------------------------------------------
Ann L. Warner, Senior Vice President
Attest: /s/Virginia Schroeder
---------------------------------------------
Virginia Schroeder
Agreed to and accepted as of the
day and year first above written:
DELAWARE GROUP ADVISER FUNDS, INC.
on behalf of the Corporate Income Fund
By: /s/David K. Downes
-------------------------------------------------------
David K. Downes
Senior Vice President/Chief Administrative Officer/
Chief Financial Officer
Attest: /s/John M. Zerr
---------------------------------------------------
John M. Zerr
Vice President/Assistant Secretary
-10-
CHASE
GLOBAL CUSTODY AGREEMENT
AGREEMENT, effective May 1, 1996, between THE CHASE MANHATTAN BANK, N.A.
(the "Bank") and those registered investment companies listed on Schedule A
hereto (each a Customer ) on behalf of certain of their respective series,
as listed on Schedule A (individually and collectively the Series ).
1. Customer Accounts.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer on behalf of each
Series ("Custody Account") for any and all stocks, shares, bonds, debentures,
notes, mortgages or other obligations for the payment of money, bullion, coin
and any certificates, receipts, warrants or other instruments representing
rights to receive, purchase or subscribe for the same or evidencing or
representing any other rights or interests therein and other similar property
whether certificated or uncertificated as may be received by the Bank or its
Subcustodian (as defined in Section 3) for the account of the Customer
("Securities"); and
(b) A deposit account in the name of the Customer on behalf of each
Series ("Deposit Account") for any and all cash in any currency received by
the Bank or its Subcustodian for the account of the Customer, which cash
shall not be subject to withdrawal by draft or check.
The Customer warrants its authority to: 1) deposit the cash and
Securities ("Assets") received in the Accounts and 2) give Instructions (as
defined in Section 11) concerning the Accounts. Such Instructions shall
specifically indicate to which Series such Assets belong or, if such Assets
belong to more than one Series, shall allocate such Assets to the appropriate
Series. The Bank may deliver securities of the same class in place of those
deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional
Accounts under the terms of this Agreement.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable to
the Bank:
(a) Securities will be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
To the extent available and permissible under applicable law and
regulation, Cash held pursuant to Instructions shall be held in interest
bearing accounts. If interest bearing accounts are not available, such cash
may be held in non-interest bearing accounts. The Bank is authorized to
maintain cash balances on deposit for the Customer with itself or one of its
affiliates. Interest bearing accounts shall bear interest at such reasonable
rates of interest as may from time to time be paid on such accounts by the
Bank or its affiliates.
(iii) For each Series that is exclusively a domestic Series, the following
additional provisions shall apply:
(x) In the event that during a given calendar month a Series has maintained
an average daily cash balance greater than zero, the Bank shall provide an
earnings credit against custody fees otherwise owing hereunder by such Series
during such calendar month in an amount equal to the product of (A) 75% of
the 90 day U.S. government Treasury bill rate as quoted in the Wall Street
Journal for the last Business Day (being a day on which the Bank is open
for the transaction of all its ordinary business) of such calendar month, (B)
the average daily cash balance for such month, and (C) the number of days in
such calendar month divided by 365.
(y) In the event that during a given calendar month a Series has maintained
an average daily cash balance less than or equal to zero, the Bank shall be
paid interest on such amount by such Series in an amount equal to the product
of (A) the Overnight Fed Funds Rate (as defined below) plus 25 basis points
for the last Business Day of such calendar month, (B) the average daily cash
balance for such month, and (C) the number of days in such calendar month
divided by 365.
(z) For purposes of (y) above, the term Overnight Fed Funds Rate shall mean
the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers,
as published by the Federal Reserve Bank of New York (with the rate for the
last Business Day of a given calendar month being the rate so published on
the Business Day immediately following such Day), or, if such rate is note so
published, the average quotations, for the last Business Day of a given
calendar month, of such transactions received by the Bank from three Federal
funds brokers of recognized standing selected by the Bank.
If the Customer wishes to have any of its Assets held in the custody of
an institution other than the established Subcustodians as defined in Section
3 (or their securities depositories), such arrangement must be authorized by
a written agreement, signed by the Bank and the Customer.
3. Subcustodians and Securities Depositories.
The Bank may act under this Agreement through the subcustodians listed
in Schedule B of this Agreement with which the Bank has entered into
subcustodial agreements ("Subcustodians"). The Customer authorizes the Bank
to hold Assets in the Accounts in accounts which the Bank has established
with one or more of its branches or Subcustodians. The Bank and
Subcustodians are authorized to hold any of the Securities in their account
with any securities depository in which they participate.
The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule B. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such Subcustodian.
Upon receipt of Instructions, the Bank shall cease using any
Subcustodian with respect to the customer, and arrange for delivery of
Securities held with such Subcustodian to another entity as designated by the
Customer; provided that, the Bank shall have no responsibility for the
performance of such other entity.
4. Use of Subcustodian.
(a) The Bank will identify the Assets on its books as belonging to the
Customer.
(b) A Subcustodian will hold such Assets together with assets belonging
to other customers of the Bank in accounts identified on such Subcustodian's
books as special custody accounts for the exclusive benefit of customers of
the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject
only to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only
to the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding
its customer's assets shall provide that: (i) such assets will not be subject
to any right, charge, security interest, lien or claim of any kind in favor
of such Subcustodian except for safe custody or administration, (ii) the
beneficial ownership of such assets will be freely transferable without the
payment of money or value other than for safe custody or administration;
(iii) adequate records will be maintained identifying the assets held
pursuant to such agreement as belonging to the customers of the Bank; (iv)
subject to applicable law, Subcustodian shall permit independent public
accountants for Bank and customers of the Bank reasonable access to
Subcustodian s books and records as they pertain to the subcustody account in
connection with such accountants' examination of the books and records of
such account; and (v) the Bank will receive periodic reports with respect to
the safekeeping of assets in the subcustody account, including advices and/or
notifications of any transfers to or from such subcustody account. The
foregoing shall not apply to the extent of any special agreement or
arrangement made by the Customer with any particular Subcustodian.
(e) Upon request of the Customer, the Bank shall deliver to the Customer
annually a report stating: (i) the identity of each Subcustodian then acting
on behalf of the Bank and the name and address of the governmental agency or
other regulatory authority that supervises or regulates such Subcustodian;
(ii) the countries in which each Subcustodian is located; and (iii) as long
as Securities and Exchange Commission ("SEC") Rule 17f-5 under the Investment
Company Act of 1940, as amended ("1940 Act"), requires the Customer s Board
of Directors/Trustees directly to approve its foreign custody arrangements,
such other information relating to such Subcustodians as may reasonably be
requested by the Customer to ensure compliance with Rule 17f-5. As long as
Rule 17f-5 requires the Customer s Board of Directors/Trustees directly to
approve its foreign custody arrangements, the Bank shall also furnish
annually to the Customer information concerning such Subcustodians similar in
kind and scope as that furnished to the Customer in connection with the
initial approval hereof. The Bank shall timely advise the Customer of any
material adverse change in the facts or circumstances upon which such
information is based where such changes would affect the eligibility of the
Subcustodian under Rule 17f-5 as soon as practicable after it becomes aware
of any such material adverse change in the normal course of its custodial
activities.
5. Deposit Account Transactions
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required
by the Bank.
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, the Bank, in its
discretion, may advance the Customer such excess amount which shall be deemed
a loan payable on demand, bearing interest at the rate customarily charged by
the Bank on similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or at
any time prior to actual collection and reconciliation to the Deposit
Account, with interest, dividends, redemptions or any other amount due, the
Customer will promptly return any such amount upon oral or written
notification: (i) that such amount has not been received in the ordinary
course of business or (ii) that such amount was incorrectly credited. If the
Customer does not promptly return any amount upon such notification, the Bank
shall be entitled, upon oral or written notification to the Customer, to
reverse such credit by debiting the Deposit Account for the amount previously
credited. The Bank or its Subcustodian shall have no duty or obligation to
institute legal proceedings, file a claim or a proof of claim in any
insolvency proceeding or take any other action with respect to the collection
of such amount, but may act for the Customer upon Instructions after
consultation with the Customer.
6. Custody Account Transactions.
(a) Securities will be transferred, exchanged or delivered by the Bank
or its Subcustodian upon receipt by the Bank of Instructions which include
all information required by the Bank. Settlement and payment for Securities
received for, and delivery of Securities out of, the Custody Account may be
made in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without limitation, delivery of
Securities to a purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery. Delivery of
Securities out of the Custody Account may also be made in any manner
specifically required by Instructions acceptable to the Bank.
(b) The Bank shall credit or debit the Accounts on a contractual
settlement date with cash or Securities with respect to any sale, exchange or
purchase of Securities in those countries set forth in Appendix A hereto;
provided that, the Bank may amend Appendix A from time to time in its sole
discretion and shall advise the Customer of such amendments. Otherwise,
transactions will be credited or debited to the Accounts on the date cash or
Securities are actually received by the Bank and reconciled to the Account.
(i) The Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by the Bank in its discretion, after the contractual
settlement date for the related transaction; provided that, the Bank shall
give Customer prior notification of any such reversal. Where the foregoing
notification is oral, the Bank shall promptly provide written confirmation of
the same (which confirmation may be electronic).
(ii) If any Securities delivered pursuant to this Section 6 are returned
by the recipient thereof, the Bank may reverse the credits and debits of the
particular transaction at any time.
7. Actions of the Bank.
The Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items
which call for payment upon presentation, to the extent that the Bank or
Subcustodian is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian, subject to applicable SEC rules and regulations under the Act.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any
transfers of Assets to or from the Accounts. Such statements, advices or
notifications shall indicate the identity of the entity having custody of the
Assets. Unless the Customer advises the Bank orally and then promptly sends
the Bank a written exception or objection to any Bank statement within 180
days of receipt, the Customer shall be deemed to have approved such
statement.
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of the
Customer. Subject to the standard of care in Section 12 hereof, the Bank shall
have no liability for any loss occasioned by delay in the actual receipt of
notice by the Bank or by its Subcustodians of any payment, redemption or other
transaction regarding Securities in the Custody Account in respect of which
the Bank has agreed to take any action under this Agreement.
8. Corporate Actions; Proxies; Tax Reclaims.
a. Corporate Actions. Whenever the Bank receives information
concerning the Securities which requires discretionary action by the
beneficial owner of the Securities (other than a proxy), such as subscription
rights, bonus issues, stock repurchase plans and rights offerings, or legal
notices or other material intended to be transmitted to securities holders
("Corporate Actions"), the Bank will give the Customer written notice (which
may be electronic) of such Corporate Actions to the extent that the Bank's
central corporate actions department has actual knowledge of a Corporate
Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank will endeavor to obtain
Instructions from the Customer or its Authorized Person (as defined in Section
10 hereof), but if Instructions are not received in time for the Bank to take
timely action, or actual notice of such Corporate Action was received too
late to seek Instructions, the Bank is authorized to sell such rights
entitlement or fractional interest and to credit the Deposit Account with the
proceeds or take any other action it deems, in good faith, to be appropriate
in which case it shall be held harmless for any such action.
b. Proxy Voting. With respect to domestic U.S. and Canadian Securities
(the latter if held in DTC), the Bank will send to the Customer or the
Authorized Person (as defined in Section 10) for a Custody Account, such proxies
(signed in blank, if issued in the name of the Bank's nominee or the nominee
of a central depository) and communications with respect to Securities in the
Custody Account as call for voting or relate to legal proceedings within a
reasonable time after sufficient copies are received by the Bank for
forwarding to its customers. In addition, the Bank will follow coupon
payments, redemptions, exchanges or similar matters with respect to
Securities in the Custody Account and advise the Customer or the Authorized
Person for such Account of rights issued, tender offers or any other
discretionary rights with respect to such Securities, in each case, of which
the Bank has received notice from the issuer of the Securities, or as to
which notice is published in publications routinely utilized by the Bank for
this purpose.
With respect to Securities other than the foregoing, proxy voting
services shall be provided in accordance with separate proxy voting agreement
annexed hereto a Appendix B.
The foregoing proxy voting services may be provided by Bank, in whole or
in part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank), provided that the Bank shall be liable for the
performance of any such third parties to the same extent as the Bank would
have been if it performed such services itself..
c. Tax Reclaims. (i) Subject to the provisions hereof, the Bank will
apply for a reduction of withholding tax and any refund of any tax paid or
tax credits which apply in each applicable market in respect of income
payments on Securities for the benefit of the Customer which the Bank
believes may be available to such Customer. Where such reports are available,
the Bank shall periodically report to Customer concerning the making of
applications for a reduction of withholding tax and refund of any tax paid or
tax credits which apply in each applicable market in respect of income
payments on Securities for the benefit of the Customer.
(ii) The provision of tax reclaim services by the Bank is conditional
upon the Bank receiving from the beneficial owner of Securities (A) a
declaration of its identity and place of residence and (B) certain other
documentation (pro forma copies of which are available from the Bank). The
Bank shall use reasonable means to advise the Customer of the declarations,
documentation and information which the Customer is to provide to the Bank in
order for the Bank to provide the tax reclaim services described herein. The
Customer acknowledges that, if the Bank does not receive such declarations,
documentation and information, additional United Kingdom taxation will be
deducted from all income received in respect of Securities issued outside the
United Kingdom and that U.S. non-resident alien tax or U.S. backup
withholding tax will be deducted from U.S. source income. The Customer shall
provide to the Bank such documentation and information as it may require in
connection with taxation, and warrants that, when given, this information
shall be true and correct in every respect, not misleading in any way, and
contain all material information. The Customer undertakes to notify the Bank
immediately if any such information requires updating or amendment.
(iii) Subject to subsection (vii) hereof, the Bank shall not be liable
to the Customer or any third party for any tax, fines or penalties payable by
the Bank or the Customer, and shall be indemnified accordingly, whether these
result from the inaccurate completion of documents by the Customer or any
third party, or as a result of the provision to the Bank or any third party
of inaccurate or misleading information or the withholding of material
information by the Customer or any other third party, or as a result of any
delay of any revenue authority or any other matter beyond the control of the
Bank.
(iv) The Customer confirms that the Bank is authorized to deduct from
any cash received or credited to the Cash Account any taxes or levies
required by any revenue or governmental authority for whatever reason in
respect of the Securities or Cash Accounts.
(v) The Bank shall perform tax reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified to the
Customer from time to time and the Bank may, by notification in writing, at
its absolute discretion, supplement or amend the markets in which the tax
reclaim services are offered. Other than as expressly provided in this sub-
clause, the Bank shall have no responsibility with regard to the Customer's
tax position or status in any jurisdiction. Except as provided in Section
8(c)(ii) and pursuant to Instructions, the Bank shall take no action in the
servicing of the Customer s Securities which, in and of itself, creates a
taxable nexus for the Customer in any jurisdiction other than with respect to
interest, dividends and capital gains that may otherwise be subject to tax by
such jurisdiction with respect to a foreign investor not otherwise engaged in
a trade or business in such jurisdiction in a given taxable year. Bank shall
not be liable for any tax liability caused, directly or indirectly, by
Customer's actions or status in any jurisdiction.
(vi) In connection with obtaining tax relief, the Customer confirms
that the Bank is authorized to disclose any information requested by any
revenue authority or any governmental body in relation to the Customer or the
Securities and/or Cash held for the Customer. This provision does not
authorize any other voluntary disclosure to any revenue authority or any
governmental body without the prior written consent of Customer.
(vii) Tax reclaim services may be provided by the Bank or, in whole or
in part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank); provided that the Bank shall be liable for the
performance of any such third party to the same extent as the Bank would have
been if it performed such services itself.
9. Nominees.
Securities which are ordinarily held in registered form may be
registered in a nominee name of the Bank, Subcustodian or securities
depository, as the case may be. The Bank may without notice to the Customer
cause any such Securities to cease to be registered in the name of any such
nominee and to be registered in the name of the Customer. In the event that
any Securities registered in a nominee name are called for partial redemption
by the issuer, the Bank may allot the called portion to the respective
beneficial holders of such class of security in any manner the Bank deems to
be fair and equitable. The Customer agrees to hold the Bank, Subcustodians,
and their respective nominees harmless from any liability arising directly or
indirectly from their status as a mere record holder of Securities in the
Custody Account.
10. Authorized Persons.
As used in this Agreement, the term "Authorized Person" means employees
or agents including investment managers as have been designated by written
notice from the Customer or its designated agent to act on behalf of the
Customer under this Agreement. Such persons shall continue to be Authorized
Persons until such time as the Bank receives Instructions from the Customer
or its designated agent that any such employee or agent is no longer an
Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information
system acceptable to the Bank which the Bank reasonably believes in good
faith to have been given by Authorized Persons or which are transmitted with
proper testing or authentication pursuant to terms and conditions which the
Bank may specify. Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until canceled or superseded. For
purposes hereof, reasonableness shall mean compliance with applicable
procedures.
Any Instructions delivered to the Bank by telephone (including cash
transfer instructions as described below) shall promptly thereafter be
confirmed in writing by any two Authorized Persons (which confirmation may
bear the facsimile signature of such Persons), but the Customer will hold the
Bank harmless for the failure of such Authorized Persons to send such
confirmation in writing, the failure of such confirmation to conform to the
telephone instructions received or the Bank's failure to produce such
confirmation at any subsequent time; provided that, where the Bank receives
a telephone Instruction from an Authorized Person requiring the transfer of
cash, prior to executing such Instruction the Bank will, to confirm such
Instruction, call back any one of the individuals on a list of persons
authorized to confirm such oral transfer Instructions (which Person shall be
a person other than the initiator of the transfer Instruction) and the Bank
shall not execute the Instruction until it has received such confirmation.
Either party may electronically record any Instructions given by telephone,
and any other telephone discussions with respect to the Custody Account. The
Customer shall be responsible for safeguarding any testkeys, identification
codes or other security devices which the Bank shall make available to the
Customer or its Authorized Persons.
12. Standard of Care; Liabilities.
(a) The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement or expressly contained in
Instructions which are consistent with the provisions of this Agreement as
follows:
(i) The Bank will use reasonable care with respect to its obligations
under this Agreement and the safekeeping of Assets. The Bank shall be liable
to the Customer for any loss which shall occur as the result of the failure
of a Subcustodian to exercise reasonable care with respect to the safekeeping
of such Assets to the same extent that the Bank would be liable to the
Customer if the Bank were holding such Assets in New York. In the event that
Securities are lost by reason of the failure of the Bank or its Subcustodian
to use reasonable care, the Bank shall be liable to the Customer based on the
market value of the property which is the subject of the loss on the date it
is replaced by the Bank and without reference to any special conditions or
circumstances, it being understood that for purposes of measuring damages
hereunder, the value of Securities which are sold by the Customer prior to
the replacement thereof shall be equal to the sale price thereof less the
expenses of such sale incurred by the Customer. The Bank shall act with
reasonable promptness in making such replacements. In no event shall the
Bank be liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Bank
has been advised of the likelihood of such loss or damage and regardless of
the form of action. Subject to the Bank's obligations pursuant to Section 4(e)
hereof, the Bank will not be responsible for the insolvency of any
Subcustodian which is not a branch or affiliate of Bank.
(ii) The Bank will not be responsible for any act, omission, default or
the solvency of any broker or agent which it or a Subcustodian appoints
unless such appointment was made negligently or in bad faith.
(iii) (a) The Bank shall be indemnified by, and without liability to
the Customer for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise pursuant to this Agreement if such act or omission
was in good faith, without negligence. In performing its obligations under
this Agreement, the Bank may rely on the genuineness of any Customer document
which it reasonably believes in good faith to have been validly executed.
(b) The Bank shall hold Customer harmless from, and shall indemnify Customer
for, any loss, liability, claim or expense incurred by Customer (including,
but not limited to, Customer's reasonable legal fees) to the extent that such
loss, liability, claim or expense arises from the negligence or willful mis-
conduct on the part of the Bank or a Subcustodian; provided that, in no event
shall the Bank be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits),
even if the Bank has been advised of the likelihood of such loss or damage
and regardless of the form of action. Subject to the Bank's obligations
pursuant to Section 4(e) hereof, the Bank will not be responsible for the
insolvency of any Subcustodian which is not a branch or affiliate of Bank.
(iv) The Customer agrees to pay for and hold the Bank harmless from any
liability or loss resulting from the imposition or assessment of any taxes or
other governmental charges, and any related expenses with respect to income
from or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act, upon the advice of
counsel (who may be counsel for the Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
(vi) The Bank need not maintain any insurance for the benefit of the
Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable
for any loss which results from: 1) the general risk of investing, or 2)
investing or holding Assets in a particular country including, but not
limited to, losses resulting from nationalization, expropriation or other
governmental actions; regulation of the banking or securities industry;
currency restrictions, devaluations or fluctuations; and market conditions
which prevent the orderly execution of securities transactions or affect the
value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear
fusion, fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty
or responsibility to:
(i) question Instructions or make any suggestions to the Customer or an
Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or
the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other than a
Security.
(iv) except as may be otherwise provided in any securities lending
agreement between the Customer and the Bank, evaluate or report to the
Customer or an Authorized Person regarding the financial condition of any
broker, agent or other party to which Securities are delivered or payments
are made pursuant to this Agreement;
(v) except for trades settled at DTC where the broker provides to the
Bank the trade confirmation and the Customer provides for the Bank to receive
the trade instruction, review or reconcile trade confirmations received from
brokers. The Customer or its Authorized Persons (as defined in Section 10)
issuing Instructions shall bear any responsibility to review such
confirmations against Instructions issued to and statements issued by the
Bank.
(c) The Customer authorizes the Bank to act, hereunder, in its capacity
as a custodian notwithstanding that the Bank or any of its divisions or
affiliates may have a material interest in a transaction, or circumstances
are such that the Bank may have a potential conflict of duty or interest
including the fact that the Bank or any of its affiliates may provide
brokerage services to other customers, act as financial advisor to the issuer
of Securities, act as a lender to the issuer of Securities, act in the same
transaction as agent for more than one customer, have a material interest in
the issue of Securities, or earn profits from any of the activities listed
herein.
13. Fees and Expenses.
The Customer agrees to pay the Bank for its services under this
Agreement such amount as may be agreed upon in writing ("Fee Schedule"),
together with the Bank's reasonable out-of-pocket or incidental expenses (as
further defined in the Fee Schedule), including, but not limited to, legal
fees. The Bank shall have a lien on and is authorized to charge any Accounts
of the Customer for any amount owing to the Bank under any provision of this
Agreement.
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration of
the Customer's trading and investment activity, the Bank is authorized to
enter into spot or forward foreign exchange contracts with the Customer or an
Authorized Person for the Customer and may also provide foreign exchange
through its subsidiaries, affiliates or Subcustodians. Instructions,
including standing instructions, may be issued with respect to such contracts
but the Bank may establish rules or limitations concerning any foreign
exchange facility made available. In all cases where the Bank, its
subsidiaries, affiliates or Subcustodians enter into a foreign exchange
contract related to Accounts, the terms and conditions of the then current
foreign exchange contract of the Bank, its subsidiary, affiliate or
Subcustodian and, to the extent not inconsistent, this Agreement shall apply
to such transaction.
(b) Certification of Residency, etc. The Customer certifies that it is
a resident of the United States and agrees to notify the Bank of any changes
in residency. The Bank may rely upon this certification or the certification
of such other facts as may be required to administer the Bank's obligations
under this Agreement. The Customer will indemnify the Bank against all
losses, liability, claims or demands arising directly or indirectly from any
such certifications.
(c) Access to Records. Applicable accounts, books and records of the
Bank shall be open to inspection and audit at all reasonable times during
normal business hours upon reasonable advance notice by Customer s
independent public accountants and by employees of Customer designated to the
Bank. All such materials shall, to the extent applicable, be maintained and
preserved in conformity with the Act and the rules and regulations
thereunder, including without limitation, SEC Rules 31a-1 and 31a-2. Subject
to restrictions under applicable law, the Bank shall also obtain an
undertaking to permit the Customer's independent public accountants
reasonable access to the records of any Subcustodian which has physical
possession of any Assets as may be required in connection with the
examination of the Customer's books and records.
(d) Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and
the Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that the
Assets deposited in the Accounts are Mutual Fund assets subject to certain
Securities and Exchange Commission ("SEC") rules and regulations.
This Agreement consists exclusively of this document together with
Schedules A and B, Appendices 1 and 2, Exhibits I - _______ and the following
Rider(s) [Check applicable rider(s)]:
X MUTUAL FUND
----
X SPECIAL TERMS AND CONDITIONS
----
There are no other provisions of this Agreement, and this Agreement
supersedes any other agreements, whether written or oral, between the
parties. Any amendment to this Agreement must be in writing, executed by
both parties.
(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or unenforceable in any respect on the
basis of any particular circumstances or in any jurisdiction, the validity,
legality and enforceability of such provision or provisions under other
circumstances or in other jurisdictions and of the remaining provisions will
not in any way be affected or impaired.
(g) Waiver. Except as otherwise provided in this Agreement, no failure
or delay on the part of either party in exercising any power or right under
this Agreement operates as a waiver, nor does any single or partial exercise
of any power or right preclude any other or further exercise, or the exercise
of any other power or right. No waiver by a party of any provision of this
Agreement, or waiver of any breach or default, is effective unless in writing
and signed by the party against whom the waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses
or such other addresses as may subsequently be given to the other party in
writing:
Bank: The Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Custody Division
or telex:
-------------------------------------
Customer: Delaware Group of Funds
1818 Market St.
Philadelphia, PA 19103
att: Messrs. Bishof and O Conner
or telex:
--------------------------------------
(i) Termination. This Agreement may be terminated by the Customer or
the Bank by giving sixty (60) days written notice to the other, provided that
such notice to the Bank shall specify the names of the persons to whom the
Bank shall deliver the Assets in the Accounts. If notice of termination is
given by the Bank, the Customer shall, within sixty (60) days following
receipt of the notice, deliver to the Bank Instructions specifying the names
of the persons to whom the Bank shall deliver the Assets. In either case the
Bank will deliver the Assets to the persons so specified, after deducting any
amounts which the Bank determines in good faith to be owed to it under
Section 13. If within sixty (60) days following receipt of a notice of
termination by the Bank, the Bank does not receive Instructions from the
Customer specifying the names of the persons to whom the Bank shall deliver
the Assets, the Bank, at its election, may deliver the Assets to a bank or
trust company doing business in the State of New York to be held and disposed
of pursuant to the provisions of this Agreement, or to Authorized Persons, or
may continue to hold the Assets until Instructions are provided to the Bank;
provided that, where the Bank is the terminating party and the Bank had not
notified the Customer that termination was for breach of this Agreement by
the Customer, such 60 day period shall be extended for an additional period
as requested by Customer of up to 120 days.
Termination as to One or More Series. This Agreement may be terminated
as to one or more Series (but less than all the Series) by delivery of an
amended Schedule A deleting such Series, in which case termination as to the
deleted Series shall take effect sixty (60) days after the date of such
delivery. The execution and delivery of an amended Schedule A which deletes
one or more Series, shall constitute a termination hereof only with respect
to such deleted Series, shall be governed by the preceding provisions of
Section 14 as to the identification of a successor custodian and the delivery
of the Assets of the Series so deleted to such successor custodian, and shall
not affect the obligations of the Bank and the Customer hereunder with
respect to the other Series set forth in Schedule A, as amended from time to
time.
(j) Several Obligations of the Series. With respect to any obligations
of the Customer on behalf of the Series and their related Accounts arising
hereunder, the Custodian shall look for payment or satisfaction of any such
obligation solely to the assets and property of the Series and such Accounts
to which such obligation relates as though the Customer had separately
contracted with the Custodian by separate written instrument with respect to
each Series and its Accounts.
CUSTOMER
By: /s/ Michael P. Bishof
---------------------
Title Vice President and Treasurer
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Rosemary M. Stidmon
-----------------------
Title Vice President
STATE OF Pennsylvania)
: ss.
COUNTY OF Philadelphia)
On this 9th day of July, 1996, before me personally came Michael P. Bishof,
to me known, who being by me duly sworn, did depose and say that he resides
in Blue Bell, PA at 110 Spyglass Drive; that he is Vice President/Treasurer
of Delaware Group of Funds, the entity described in and which executed the
foregoing instrument; that he knows the seal of said entity, that the seal
affixed to said instrument is such seal, that it was so affixed by order of
said entity, and that he signed his name thereto by like order.
/s/ Maritza H. Cruzado
-----------------------
Maritza H. Cruzado
Notary
Sworn to before me this 9th
day of July, 1996.
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 24th day of May, 1996, before me personally came Rosemary
Stidmon, to me known, who being by me duly sworn, did depose and say that she
resides in New Providence, NJ at 31 Sagamore Drive; that she is a Vice
President of THE CHASE MANHATTAN BANK, (National Association), the
corporation described in and which executed the foregoing instrument; that
she knows the seal of said corporation, that the seal affixed to said
instrument is such corporate seal, that it was so affixed by order of the
Board of Directors of said corporation, and that she signed her name thereto
by like order.
Sworn to before me this 24th
day of May, 1996.
/s/ Laiyee Ng
- -------------
Laiyee Ng
Notary
Schedule A
Delaware Pooled Trust, Inc. - Global Fixed Income Portfolio
Delaware Pooled Trust, Inc. - International Equity Portfolio
Delaware Pooled Trust, Inc. - Labor Select International Equity Portfolio
Delaware Pooled Trust, Inc. - Real Estate Investment Trust Portfolio
Delaware Pooled Trust, Inc. - High Yield Portfolio
Delaware Pooled Trust, Inc. - International Fixed Income Portfolio
Delaware Pooled Trust, Inc. - Defensive Equity Utility Portfolio
Delaware Group Global & International Funds, Inc. - International Equity Fund
Delaware Group Global & International Funds, Inc. - Global Assets Fund
Delaware Group Global & International Funds, Inc. - Global Bond Fund
Delaware Group Global & International Funds, Inc. - Emerging Markets Fund
Delaware Group Premium Fund, Inc. - International Equity Series
Delaware Group Premium Fund, Inc. - Equity Income Series
Delaware Group Premium Fund, Inc. - High Yield Series
Delaware Group Premium Fund, Inc. - Capital Reserves Series
Delaware Group Premium Fund, Inc. - Money Market Series
Delaware Group Premium Fund, Inc. - Growth Series
Delaware Group Premium Fund, Inc. - Multiple Strategy Series
Delaware Group Premium Fund, Inc. - Value Series
Delaware Group Premium Fund, Inc. - Emerging Growth Series
Delaware Group Premium Fund, Inc. - Global Bond Series
Delaware Group Delchester High-Yield Bond Fund, Inc.
Delaware Group Delaware Fund, Inc. - Delaware Fund
Delaware Group Delaware Fund, Inc. - Devon Fund
Delaware Group Value Fund, Inc.
Delaware Group DelCap Fund, Inc.
Delaware Group Dividend & Income Fund, Inc.
Delaware Group Advisor Funds, Inc. - Enterprise Fund
Delaware Group Advisor Funds, Inc. - U.S. Growth Fund
Delaware Group Advisor Funds, Inc. - World Growth Fund
Delaware Group Advisor Funds, Inc. - New Pacific Fund
Delaware Group Advisor Funds, Inc. - Federal Bond Fund
Delaware Group Advisor Funds, Inc. - Corporate Income Fund
March, 1996 Schedule B
SUB-CUSTODIANS EMPLOYED BY
THE CHASE MANHATTAN BANK, N.A. LONDON, GLOBAL CUSTODY
<TABLE>
<CAPTION>
<S> <C> <C>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
ARGENTINA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Arenales 707, 5th Floor Buenos Aires
De Mayo 130/140
1061Buenos Aires
ARGENTINA
AUSTRALIA The Chase Manhattan Bank The Chase Manhattan Bank
Australia Limited Australia Limited
36th Floor Sydney
World Trade Centre
Jamison Street
Sydney
New South Wales 2000
AUSTRALIA
AUSTRIA Creditanstalt - Bankverein Credit Lyonnais
Schottengasse 6 Vienna
A - 1011, Vienna
AUSTRIA
BANGLADESH Standard Chartered Bank Standard Chartered Bank
18-20 Motijheel C.A. Dhaka
Box 536,
Dhaka-1000
BANGLADESH
BELGIUM Generale Bank Credit Lyonnais Bank
3 Montagne Du Parc Brussels
1000 Bruxelles
BELGIUM
BOTSWANA Barclays Bank of Botswana Limited Barclays Bank of Botswana
Barclays House Gaborone
Khama Crescent
Gaborone
BOTSWANA
BRAZIL Banco Chase Manhattan, S.A. Banco Chase Manhattan S.A.
Chase Manhattan Center Sao Paulo
Rua Verbo Divino, 1400
Sao Paulo, SP 04719-002
BRAZIL
CANADA The Royal Bank of Canada Royal Bank of Canada
Royal Bank Plaza Toronto
Toronto
Ontario M5J 2J5
CANADA
Canada Trust Royal Bank of Canada
Canada Trust Tower Toronto
BCE Place
161 Bay at Front
Toronto
Ontario M5J 2T2
CANADA
CHILE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Agustinas 1235 Santiago
Casilla 9192
Santiago
CHILE
COLOMBIA Cititrust Colombia S.A. Cititrust Colombia S.A.
Sociedad Fiduciaria Sociedad Fiduciaria
Carrera 9a No 99-02 Santafe de Bogota
Santafe de Bogota, DC
COLOMBIA
CZECH REPUBLIC
Ceskoslovenska Obchodni Banka, A.S. Komercni Banka, A.S.,
Na Prikope 14 Praha
115 20 Praha 1
CZECH REPUBLIC
DENMARK Den Danske Bank Den Danske Bank
2 Holmens Kanala DK 1091 Copenhagen
Copenhagen
DENMARK
EGYPT National Bank of Egypt National Bank of Egypt
24 Sherif Street Cairo
Cairo
EGYPT
EUROBONDS Cedel S.A. ECU:Lloyds Bank PLC
67 Boulevard Grande Duchesse Charlotte International Banking Division
LUXEMBOURG London
A/c The Chase Manhattan Bank, N.A. For all other currencies: see
London relevant country
A/c No. 17817
EURO CDS First Chicago Clearing Centre ECU:Lloyds Bank PLC
27 Leadenhall Street Banking Division London
London EC3A 1AA For all other currencies: see
UNITED KINGDOM relevant country
FINLAND Merita Bank KOP Merita Bank KOP
Aleksis Kiven 3-5 Helsinki
00500 Helsinki
FINLAND
FRANCE Banque Paribas Societe Generale
Ref 256 Paris
BP 141
3, Rue D'Antin
75078 Paris
Cedex 02
FRANCE
GERMANY Chase Bank A.G. Chase Bank A.G.
Alexanderstrasse 59 Frankfurt
Postfach 90 01 09
60441 Frankfurt/Main
GERMANY
GHANA Barclays Bank of Ghana Barclays Bank
Barclays House Accra
High Street
Accra
GHANA
GREECE Barclays Bank Plc National Bank of Greece S.A.
1 Kolokotroni Street Athens
10562 Athens A/c Chase Manhattan Bank, N.A.,
GREECE London
A/c No. 040/7/921578-68
HONG KONG The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
40/F One Exchange Square Hong Kong
8, Connaught Place
Central, Hong Kong
HONG KONG
HUNGARY Citibank Budapest Rt. Citibank Budapest Rt.
Vaci Utca 19-21 Budapest
1052 Budapest V
HUNGARY
INDIA The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
52/60 Mahatma Gandhi Road Bombay
Bombay 400 001
INDIA
Deutsche Bank AG, Bombay Branch Deutsche Bank
Securities & Custody Services Bombay
Kodak House
222 D.N. Road, Fort
Bombay 400 001
INDIA
INDONESIA The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
Banking Corporation Limited Jakarta
World Trade Center
J1. Jend Sudirman Kav. 29-31
Jakarta 10023
INDONESIA
IRELAND Bank of Ireland Allied Irish Bank
International Financial Services Centre Dublin
1 Harbourmaster Place
Dublin 1
IRELAND
ISRAEL Bank Leumi Le-Israel B.M. Bank Leumi Le-Israel B.M.
19 Herzl Street Tel Aviv
61000 Tel Aviv
ISRAEL
ITALY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Piazza Meda 1 Milan
20121 Milan
ITALY
JAPAN The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1-3 Marunouchi 1-Chome Tokyo
Chiyoda-Ku
Tokyo 100
JAPAN
JORDAN Arab Bank Limited Arab Bank Limited
P O Box 950544-5 Amman
Amman
Shmeisani
JORDAN
KENYA Barclays Bank of Kenya Barclays Bank of Kenya
Third Floor Nairobi
Queensway House
Nairobi
Kenya
LUXEMBOURG
Banque Generale du Luxembourg S.A. Banque Generale du Luxembourg
50 Avenue J.F. Kennedy S.A.
L-2951 LUXEMBOURG Luxembourg
MALAYSIA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Pernas International Kuala Lumpur
Jalan Sultan Ismail
50250, Kuala Lumpur
MALAYSIA
MAURITIUS Hongkong and Shanghai Banking The Hongkong and Shanghai Banking
Corporation Ltd Corporation Ltd.
Curepipe Road Curepipe
Curepipe
MAURITIUS
MEXICO The Chase Manhattan Bank, S.A. No correspondent Bank
(Equities)Montes Urales no. 470, 4th Floor
Col. Lomas de Chapultepec
11000 Mexico D.F.
(Government Banco Nacional de Mexico, No correspondent Bank
Bonds) Avenida Juarez No. 104 - 11 Piso
06040 Mexico D.F.
MEXICO
MOROCCO Banque Commerciale du Maroc Banque Commerciale du Maroc
2 Boulevard Moulay Youssef Casablanca
Casablanca 20000
MOROCCO
NETHERLANDS
ABN AMRO N.V. Generale Bank
Securities Centre Nederland N.V.
P O Box 3200 Rotterdam
4800 De Breda
NETHERLANDS
NEW ZEALAND
National Nominees Limited National Bank of New Zealand
Level 2 BNZ Tower Wellington
125 Queen Street
Auckland
NEW ZEALAND
NORWAY Den Norske Bank Den Norske Bank
Kirkegaten 21 Oslo
Oslo 1
NORWAY
PAKISTAN Citibank N.A. Citibank N.A.
I.I. Chundrigar Road Karachi
AWT Plaza
Karachi
PAKISTAN
Deutsche Bank Deutsche Bank
Unitowers Karachi
I.I. Chundrigar Road
Karachi
PAKISTAN
PERU Citibank, N.A. Citibank N.A.
Camino Real 457 Lima
CC Torre Real - 5th Floor
San Isidro, Lima 27
PERU
PHILIPPINES
The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
Hong Kong Bank Centre 3/F Manila
San Miguel Avenue
Ortigas Commercial Centre
Pasig Metro Manila
PHILIPPINES
POLAND Bank Polska Kasa Opieki S.A. Bank Polska Kasa Opieki S.A.
Curtis Plaza Warsaw
Woloska 18
02-675 Warsaw
POLAND
For Mutual Funds:
Bank Handlowy W. Warsawie. S.A. Bank Polska Kasa Opieki S.A.
Custody Dept. Warsaw
Capital Markets Centre
Ul, Nowy Swiat 6/12
00-920 Warsaw
POLAND
PORTUGAL Banco Espirito Santo & Comercial Banco Nacional Ultra Marino
de Lisboa Lisbon
Servico de Gestaode Titulos
R. Mouzinho da Silveira, 36 r/c
1200 Lisbon
PORTUGAL
SHANGHAI The Hongkong and Shanghai Citibank
(CHINA) Banking Corporation Limited New York
Shanghai Branch
Corporate Banking Centre
Unit 504, 5/F Shanghai Centre
1376 Nanjing Xi Lu
Shanghai
THE PEOPLE'S REPUBLIC OF CHINA
SHENZHEN The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
(CHINA) Banking Corporation Limited Hong Kong
1st Floor
Central Plaza Hotel
No.1 Chun Feng Lu
Shenzhen
THE PEOPLE'S REPUBLIC OF CHINA
SINGAPORE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Shell Tower Singapore
50 Raffles Place
Singapore 0104
SINGAPORE
SLOVAK REPUBLIC
Ceskoslovenska Obchodni Banka, A.S. Ceskoslovenska Obchodni Banka
Michalska 18 Slovak Republic
815 63 Bratislava
SLOVAK REPUBLIC
SOUTH AFRICA
Standard Bank of South Africa Standard Bank of South Africa
Standard Bank Chambers South Africa
46 Marshall Street
Johannesburg 2001
SOUTH AFRICA
SOUTH KOREA
The Hongkong & Shanghai The Hongkong & Shanghai
Banking Corporation Limited Banking Corporation Limited
6/F Kyobo Building Seoul
#1 Chongro, 1-ka Chongro-Ku,
Seoul
SOUTH KOREA
SPAIN The Chase Manhattan Bank, N.A. Banco Bilbao Vizcaya,
Calle Peonias 2 Madrid
7th Floor
La Piovera
28042 Madrid
SPAIN
SRI LANKA The Hongkong & Shanghai The Hongkong & Shangai
Banking Corporation Limited Banking Corporation Limited
Unit #02-02 West Block, Colombo
World Trade Center
Colombo 1,
SRI LANKA
SWEDEN Skandinaviska Enskilda Banken Svenska Handelsbanken
Kungstradgardsgatan 8 Stockholm
Stockholm S-106 40
SWEDEN
SWITZERLAND
Union Bank of Switzerland Union Bank of Switzerland
45 Bahnhofstrasse Zurich
8021 Zurich
SWITZERLAND
TAIWAN The Chase Manhattan Bank, N.A. No correspondent Bank
115 Min Sheng East Road - Sec 3,
9th Floor
Taipei
TAIWAN
Republic of China
THAILAND The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Bubhajit Building Bangkok
20 North Sathorn Road
Silom, Bangrak
Bangkok 10500
THAILAND
TUNISIA Banque Internationale Arabe de Tunisie Banque Internationale Arabe de
70-72 Avenue Habib Bourguiba Tunisie, Tunisia
P.O. Box 520
1080 Tunis Cedex
Tunisia
TURKEY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Emirhan Cad. No: 145 Istanbul
Atakule, A Blok Kat:11
80700-Dikilitas/Besiktas
Istanbul
Turkey
U.K. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Woolgate House London
Coleman Street
London EC2P 2HD
UNITED KINGDOM
URUGUAY The First National Bank of Boston The First National Bank of Boston
Zabala 1463 Montevideo
Montevideo
URUGUAY
U.S.A. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza New York
New York
NY 10081
U.S.A.
VENEZUELA Citibank N.A. Citibank N.A.
Carmelitas a Altagracia Caracas
Edificio Citibank
Caracas 1010
VENEZUELA
ZAMBIA Barclays Bank of Zambia Barclays Bank of Zambia
Kafue House Lusaka
Cairo Road
P.O.Box 31936
Lusaka
ZAMBIA
ZIMBABWE Barclays Bank of Zimbabwe Barclays Bank of Zimbabwe
Ground Floor Harare
Tanganyika House
Corner of 3rd Street & Union Avenue
Harare
ZIMBABWE
</TABLE>
<PAGE>
SECURITIES LENDING AGREEMENT ("Lending Agreement"), dated as of ,
1996 between ("Lender"), having its principal place of
business at , and The Chase Manhattan Bank, N.A. ("Chase"), having its principal
place of business at One Chase Manhattan Plaza, New York, New York 10081.
It is hereby agreed as follows:
Section 1 - Definitions
Unless the context clearly requires otherwise, the following words
shall have the meanings set forth below when used herein:
a. "Account" shall mean the securities account established and
maintained by Chase on behalf of Lender pursuant to, as the case may be, a
separate custody agreement or a separate directed trust agreement ("Agreement")
between Chase and Lender, which Agreement provides, inter alia, for the
safekeeping of Securities received by Chase from time to time on behalf of
Lender.
b. "Agreement" shall have the meaning assigned thereto in Section 1(a)
hereof.
c. "Authorized Investment" shall mean any type of instrument, security,
participation or other property in which Cash Collateral may be invested or
reinvested, as described in Section 5(f) hereof and Appendix 4 hereto (and as
such Appendix may be amended from time to time by written agreement of the
parties).
d. "Authorized Person" shall mean, except to the extent that Chase is
advised to the contrary by Proper Instruction, any person who is authorized to
give instructions to Chase pursuant to the Agreement and any mandates given to
Chase in connection with such Agreement. An Authorized Person shall continue to
be so until such time as Chase receives Proper Instructions that nay such person
is no longer an Authorized Person.
e. "Borrower" shall mean an entity listed on Appendix 1 hereto, other
than an entity which Chase shall have been instructed to delete from list
pursuant to Written Instructions and as such Appendix may be amended in
accordance with Section 4(b) hereof.
f. "Business Day" shall have the meaning assigned thereto in the
applicable MSLA.
g. "Buy-in" shall have the meaning assigned thereto in Section 7(c)
hereof.
<PAGE>
h. "Cash Collateral" shall mean fed funds, New York Clearing House
Association funds and such non-U.S. currencies as may be pledged by a Borrower
in connection with a particular Loan.
i. "Collateral" shall have the meaning assigned thereto in the
applicable MSLA, together with Cash Collateral.
j. "Collateral Account" shall mean, as the case may be, an account
maintained by Chase with itself, with any Depository or with any Triparty
Institution and designated as a Collateral Account for the purpose of holding
any one or more of Collateral, Authorized Investments, and Proceeds in
connection with Loans hereunder.
k. "Collateral Amount" shall have the meaning assigned thereto in
Section 5(c) hereof.
l. "Collateral Criterion" shall have the meaning assigned thereto in
Section 5(c) hereof.
m. "Depository" shall mean: (1) the Depository Trust Company, the
Participants' Trust Company and any other securities depository or clearing
agency (and each of their respective successors and nominees) registered with
the U.S. Securities and Exchange Commission or registered with or regulated by
the applicable foreign equivalent thereof or otherwise able to act as a
securities depository or clearing agency, (ii) any transnational depository,
(iii) the Federal Reserve book-entry system for the receiving and delivering of
U.S. Government Securities, and (iv) any other national system for the receiving
and delivering of that country's government securities.
n. "Difference" shall have the meaning assigned thereto in Section 7(c)
hereof.
o. "Distributions" shall have the meaning assigned thereto in Section
3(b)(v) hereof.
p. "Dollars" shall have the meaning assigned thereto in Section 7(b)
hereof.
q. "Due Date" shall have the meaning assigned thereto in Section 7(b)
hereof.
r. "Insolvency Event" shall have the meaning assigned thereto in
Section 7(b) hereof.
s. "Letter of Credit" shall have the meaning assigned thereto in the
applicable MSLA and be issued by a bank listed on Appendix 2 hereto (as such
list may be amended by Chase from time to time on notice to Lender), other than
a bank deleted from such list pursuant to Written Instruction.
<PAGE>
t. "Loan" shall mean a loan of Securities hereunder and under the
applicable MSLA.
u. "Loan Fee" shall mean the amount payable by a Borrower to Chase
pursuant to the applicable MSLA in connection with Loans collateralized other
than by Cash Collateral.
v. "Market Value" shall have the meaning assigned thereto in the
applicable MSLA.
w. "MSLA" shall mean a master securities lending agreement between
Chase and a Borrower, pursuant to which Chase as agent lends securities on
behalf of its customers (including Lender) from time to time. A copy of Chase's
standard form of MSLA, including the international addendum thereto, is annexed
as Appendix 3.
x. "Net Assets" shall have the meaning assigned thereto in Section 8
hereof.
y. "Net Realized Income" shall have the meaning thereto in Section 8
hereof.
z. "Oral Instructions" shall have the meaning assigned thereto in
Section 10 hereof.
aa. "Proceeds" shall mean interest, dividends and other payments and
Distributions received by Chase in connection with Authorized Investments.
bb. "Proper Instructions" shall mean Oral Instructions and Written
Instructions.
cc. "Rebate" shall mean the amount payable by Chase on behalf of Lender
to a Borrower in connection with Loans collateralized by Cash Collateral.
dd. "Return Date" shall have the meaning assigned thereto in Section
7(c) hereof.
ee. "Securities" shall mean government securities (including U.S.
Government Securities), equity securities, bonds, debentures, other corporate
debt securities, notes, mortgages or other obligations, and any certificates,
warrants or other instruments representing rights to receive, purchase, or
subscribe for the same, or evidencing or representing any other rights or
interests therein and held pursuant to the Agreement.
ff. "Term Loan" shall have the meaning assigned thereto in Section 5(i)
hereof.
<PAGE>
gg. "Triparty Institution" shall mean a financial institution with
which Chase shall have previously entered a triparty agreement among itself,
such Triparty Institution and a particular Borrower providing, among other
things, for the holding of Collateral in a Collateral Account at such Triparty
Institution in Chase's name on behalf of Chase's lending customers and for the
substitution of Collateral; provided, however, that any substituted Collateral
shall meet the then standards for acceptable Collateral set by Chase.
hh. "U.S. Government Security" shall mean book-entry securities issued
by the U.S. Treasury defined in Subpart 0 of Treasury Department Circular No.
300 and any successor provisions) and any other securities issued or fully
guaranteed by the United States government or any agency, instrumentality or
establishment of the U.S. government, including, without limitation, securities
commonly known as "Ginnie Maes," Sally Maes," "Fannie Maes" and "Freddie Maes".
ii. "Written Instructions" shall have the meaning assigned thereto in
Section 10 hereof.
Section 2 - Appointment, Authority
(a) Appointment. Lender hereby appoints Chase as its agent to lend
Securities in the Account on Lender's behalf on a fully disclosed basis to
Borrowers from time to time in accordance with the terms hereof and on such
terms and conditions and at such times as Chase shall determine and Chase may
exercise all rights and powers provided under any MSLA as may be incidental
thereto, and Chase hereby accepts appointment as such agent and agrees to so
act.
(b) Authority. Lender hereby authorizes and empowers Chase to execute
in Lender's name on its behalf and at its risk all agreements and documents as
may be necessary to carry out any of the powers herein granted to Chase. Lender
grants Chase the authority set forth herein notwithstanding its awareness that
Chase, in its individual capacity or acting in a fiduciary capacity for other
accounts, may have transactions with the same institutions to which Chase may be
lending Securities hereunder, which transactions may give rise to actual or
potential conflict of interest situations. Chase shall not be bound to: (i)
account to Lender for any sum received or profit made by Chase for its own
account or the account of any other person or (ii) disclose or refuse to
disclose any information or take any other action if the same would or might in
Chase's judgment, made in good faith, constitute a breach of any law or
regulation or be otherwise actionable with respect to Chase; provided that, in
circumstances mentioned in (ii) above, Chase shall promptly inform Lender of the
relevant facts (except where doing so would, or might in Chase's judgment, made
in good faith, constitute a breach of any law or regulation or be otherwise
actionable as aforesaid).
<PAGE>
Section 3 - Representation and Warranties
(a) Representations of each party. Each party hereto represents and
warrants to the other that: (i) it has the power to execute and deliver this
Lending Agreement, to enter into the transactions contemplated hereby, and to
perform its obligations hereunder; (ii) it has taken all necessary action to
authorize such execution, delivery, and performance; (iii) this Lending
Agreement constitutes a legal, valid, and binding obligation enforceable against
it; and (iv) the execution, delivery, and performance by it of this Lending
Agreement shall at all times comply with all applicable laws and regulations.
(b) Representations of Lender. Lender represents and warrants to Chase
that: (i) this Lending Agreement is, and each Loan shall be, legally and validly
entered into, and does not and shall not violate any statute, regulation, rule,
order or judgment binding on Lender, or any provision of Lender's charter or
by-laws, or any agreement binding on Lender or affecting its property, and is
enforceable against Lender in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency or similar laws, or by equitable
principles relating to or limiting creditors' rights generally; (ii) the person
executing this Lending Agreement and all Authorized Persons acting on behalf of
Lender has and have been duly and properly authorized to do so; (iii) it is
lending Securities as principal and shall not transfer, assign or encumber its
interest in, or rights with respect to, any Securities available for Loan
hereunder; (iv) it is the beneficial owner of all Securities or otherwise has
the right to lend Securities; and (v) it is entitled to receive all interest,
dividends and other distributions ("Distributions") made by the issuer with
respect thereto. Lender shall promptly identify to Chase by notice, which notice
may be oral, any Securities that are no longer subject to the representations
contained in (b).
Section 4 - Borrowers
(a) MSLA. Lender hereby acknowledges receipt of the form of MSLA and
authorizes Chase to lend Securities in the Account to Borrowers thereunder
pursuant to an agreement substantially in the form thereof.
(b) Borrowers. Securities may be lent to any Borrower selected by Chase
in Chase's sole discretion, in accordance with the terms hereof. In that
connection, Appendix 1 may be amended from time to time by Chase on notice to
Lender.
<PAGE>
Section 5 - Loans
(a) Securities to be lent, Lending opportunities, Loan initiation. All
Securities of Lender held by Chase that are issued, settled or traded in the
markets that have been approved by Chase from time to time for purposes of
Chase's discretionary securities lending program shall be subject to the terms
hereof. Chase shall seek to assure that Lender receives a fair allocation of
lending opportunities vis-a-vis other lenders, taking into account the demand
for and availability of Securities, types of Collateral, eligibility of
Borrowers, limitations on investments of Cash Collateral, tax treatment, and
similar commercial factors. From time to time, Chase may lend to Borrowers
Securities held in the Account (except Securities that are no longer subject to
the representations set forth in Section 3) and shall deliver such Securities
against receipt of Collateral in accordance with the applicable MSLA. Chase
shall have the right to decline to make any Loans to any Borrower and to
discontinue lending to any Borrower in its sole discretion and without notice to
Lender.
(b) Receipt of Collateral, Collateral substitution. For each Loan,
Chase shall receive and hold Letters of Credit received as Collateral and Chase
or a Triparty Institution shall receive and hold all other Collateral required
by the applicable MSLA in a Collateral Account, and Chase is hereby authorized
and directed, without obtaining any further approval from Lender, to invest and
reinvest all or substantially all Cash Collateral. Chase shall credit, or where
applicable shall have a Triparty Institution credit, all Collateral, Authorized
Investments and Proceeds to a Collateral Account and Chase shall not mark its
books and records to identify Lender's interest therein, it being understood,
however, that all monies credited to a Collateral Account may for purposes of
investment be commingled with cash collateral held for other lenders of
securities on whose behalf Chase may act. Chase may, in its sole discretion,
liquidate any Authorized Investment and credit the net proceeds in a Collateral
Account. Chase shall accept substitutions of Collateral in accordance with the
applicable MSLA and shall credit, or where applicable shall have a Triparty
Institution credit, all such substitutions to a Collateral Account.
(c) Mark to market procedures. (i) Chase shall require initial
Collateral for a Loan in an amount determined by applying the then applicable
"Collateral Criterion" (as defined below) to the Market Value of the Security
that is the subject of the Loan. The Collateral Criterion with respect to a
given Security shall be an amount equal to the then applicable percentage
(currently 102% for securities issued in the U.S. and 105% for securities issued
outside of the U.S.) of the Market Value of the Security (plus accrued interest,
if any, with respect to debt securities) which is the subject of a Loan as
determined as of the close of trading on the preceding Business Day. (ii) Each
Business Day Chase shall determine if the Market Value of all Collateral
received by Chase from a given Borrower in connection with all loans to such
Borrower from all lenders is at least equal to the aggregate amount ("Collateral
Amount") determined by applying the applicable Collateral Criterion to each
security on loan to such Borrower from all lenders. (iii) In accordance with
general market practice, the Market Value of certain securities (including,
without limitation, U.S. Government Securities) whether on Loan or received as
Collateral, may be determined on a same day basis by reference to recognized
pricing services.
(d) Demand for additional Collateral. If the determination made in
Section 5(c)(ii) above demonstrates that the Market Value of all Collateral
received from a given Borrower is
<PAGE>
(not at least equal to the Collateral Amount, Chase shall demand additional
Collateral from such Borrower in accordance with the applicable MSLA so as to
meet the Collateral Amount by making specific Loans; provided that, Chase may
from time to time establish de minimis guidelines pursuant to which a mark would
not be made even where the aggregate Collateral Amount has not been met.
(e) Changes in procedures applicable to Collateral. The Collateral
procedures set forth in Sections 5(b)-(d) above reflect Chase's current practice
and may be changed by Chase from time to time based on general market conditions
(including volatility of Securities on Loan and of securities Collateral), the
Market Value of Securities on Loan to a given Borrower, and in accordance with
general market practice and regulatory requirements. Chase shall notify Lender
of material revisions to the foregoing procedures.
(f) Investment of Cash Collateral. (i) Chase is hereby authorized to
invest and reinvest cash Collateral in accordance with the investment guidelines
(and the interpretations, procedures and definitions included therewith) annexed
hereto as Appendix 4. (ii) Authorized Investments are made for the account of,
and at the sole risk of, Lender. In that connection, Lender shall pay to Chase
on demand in cash an amount equal to any deficiency in the amount of Collateral
available for return to a Borrower pursuant to an applicable MSLA.
(g) Lender's rights with respect to Securities on Loan; Distribution
and voting rights. (i) An amount equal to the amount of all Distributions paid
with respect to Securities on Loan that Lender would have received had such
Securities not been on Loan shall be credited to Lender's account on the date
such Distributions are delivered by Borrower to Chase. Any non-cash Distribution
on Securities on Loan which is in the nature of a stock split or a stock
dividend, shall be added to the Loan (and shall be considered to constitute
Securities on Loan) as of the date such non-cash Distribution is received by the
Borrower and shall be subject to the provisions of this Lending Agreement;
provided that the Lender may, by giving chase ten (10) Business Days' notice
prior to the date of such non-cash Distribution (or such different amount of
time as Chase may from time to time require on advice to Lender), direct Chase
to request that the Borrower deliver such non-cash Distribution to Chase
pursuant to the applicable MSLA, in which case Chase shall credit such non-cash
Distribution to Lender's account on the date it is delivered to Chase. Without
regard to the reference to "delivered" in the foregoing, the "AutoCredit"
provisions of the Agreement shall apply where a Borrower fails to make a
Distribution payment to Chase, the effect of which would be for Chase to credit
Lender's account with Distributions on the payable date. (ii) During the term of
any Loan, Chase will permit the Securities on Loan to be transferred into the
name of and be voted by the Borrower or others. Lender shall not be entitled to
participate in any dividend reinvestment program or to vote proxies with respect
to Securities that are eligible for Loan (whether or not actually on Loan) as of
the applicable record date for such Securities.
(h) Advances, overdrafts and indebtedness, Security Interest. Chase
may, in its sole discretion, advance funds on behalf of Lender in order to pay
to Borrowers any Rebates or to return to Borrowers Cash Collateral to which they
are entitled pursuant to the applicable MSLA. Lender shall repay Chase on demand
the amount of any advance or any other amount owned by Lender hereunder plus
accrued interest at a rate per annum not to exceed the rate customarily
<PAGE>
charged by Chase for such loans at the time such loan is made and shall
otherwise be on such terms and conditions as Chase customarily makes such loans
available. In order to secure repayment of any advance or other indebtedness of
Lender to Chase arising hereunder, Chase shall have a continuing lien and
security interest in and to all assets now or hereafter held in the Account and
any Collateral Account (to which Lender is entitled hereunder) and any other
property at any time held by it for the benefit of Lender or in which Lender may
have an interest which is then in Chase's possession or control or in the
possession or control of any third party acting on Chase's behalf. In this
regard, Chase shall be entitled to all the rights and remedies of a pledgee
under common law and a secured party under the New York Uniform Commercial Code
and/or any other applicable laws and/or regulations as then in effect.
(i) Termination of a Loan. (i) Loans shall generally be terminable on
demand. With the prior approval of Lender, however, Loans may be made on the
basis of a reasonably anticipated termination date ("Term Loan") and without
providing for the right of substitution of equivalent Securities. Termination of
a Term Loan prior to its anticipated termination date by either Lender or
Borrower may result in the terminating party having to pay non-terminating party
damages based on the cost of obtaining a replacement loan. (ii) Chase shall
terminate any Loan of Securities to a Borrower as soon as practicable after (a)
receipt by Chase of a notice of termination of the respective MSLA; (b) receipt
by Chase of Written Instructions directing it to terminate a Loan; (c) receipt
by Chase of Written Instructions instructing it to delete from Appendix 2 the
Borrower to whom such Loans was made; (d) receipt by Chase of Written
Instructions advising that the Security subject to a Loan is no longer subject
to the representation contained in Section 3 hereof; (e) receipt by Chase of
notice advising that an Event of Default (as defined in the applicable MSLA) has
occurred and is continuing beyond any applicable grace period; (f) whenever
Chase, in its sole discretion, elects to terminate such Loan other than a Term
Loan; or (g) termination of this Lending Agreement. (iii) If Securities which
are the subject of a Loan being terminated are to be sold by Lender, Written
Instructions shall in no event be given to Chase later than the trade date
established by Lender for such sale or such earlier date of which Chase may
advise Lender from time to time with respect to particular markets. Chase shall
not be liable for any failure of a Borrower to return Securities on Loans in a
time fashion.
(j) Recordkeeping and Reports. Chase shall establish and maintain such
records as are reasonably necessary to account for Loans that are made and the
income derived therefrom. Chase shall provide Lender with a monthly statement
describing the Loans made during the preceding month, and the income derived
from Loans, during the period covered by such statement. A party shall comply
with the reasonable requests of the other party for information necessary to the
requester's performance of its duties hereunder.
Section 6 - Default by Borrower
(1) Chase may assume (unless it has actual knowledge to the contrary)
that any representations made by a Borrower in connection with any Loan are
true, that no event which is or may become an Event of Default (as defined in
the applicable MSLA) has occurred and that a Borrower has complied with its
obligations under the applicable MSLA. Subject to Sections 7(b)-(d), Chase shall
have no responsibility for the accuracy or completeness of any information
<PAGE>
supplied, or for any breach of any obligation, by any Borrower under or in
connection with any MSLA or Loan. Chase shall not be liable as a result of
taking or omitting to take any action provided that Chase shall have carried out
its responsibilities hereunder in good faith. (ii) If any Borrower with respect
to any Loan affected pursuant hereto and pursuant to the applicable MSLA fails
to return any loaned Securities when due thereunder for reasons other than
relating to the solvency of the Borrower, Chase shall then take whatever action
its deems appropriate in accordance with general market practice and Chase's
reasonable judgment, including, but no necessarily limited to, claiming
compensation from such Borrower on behalf of Lender in the event a trade
executed by Lender fails on account of such Borrower's failure timely to have
returned Securities on Loan or, where Chase deems it necessary, such other
action as may be permitted by the applicable MSLA, including collecting any
applicable MSLA fails to return any Securities on Loan when due thereunder for
reasons relating to the solvency of the Borrower, Chase shall take such action
as its deems appropriate in accordance with Chase's reasonable judgment under
the applicable MSLA.
Section 7 - Standard of Care, Liabilities, Indemnification
(a) Standard of care, Liabilities. Except as provided in paragraphs (b)
and (c) hereof, Chase shall be liable for any costs, expenses, damages,
liabilities or claims (including attorneys' and accountants' fees) incurred by
Lender, except those costs, expenses, damages, liabilities and claims arising
out of the negligence, bad faith or willful misconduct of Chase. Chase shall
have no obligation hereunder for: (i) costs, expenses, damages, liabilities or
claims (including attorneys' and accountants' fees), which are sustained or
incurred by Lender by reason of any action or inaction by any pricing service,
any Depository or a Triparty Institution or their respective successors or
nominees; and (ii) any failure to perform any obligation due to any matters
beyond the control of Chase. In no event shall Chase be liable for indirect or
consequential damages or lost profits or loss of business, arising hereunder or
in connection herewith, even if previously informed of the possibility of such
damages and regardless of the form of action.
Except for any costs or expenses incurred by Chase in performing its
obligations pursuant to paragraphs (b) and (c) hereof any ordinary operating
expenses incurred by Chase in providing services hereunder, Lender shall
indemnify Chase and hold it harmless from and against any and all costs,
expenses, damages, liabilities or claims, including reasonable fees and expenses
of counsel, which Chase may sustain or incur or which may be asserted against
Chase by reason of or as a result of any action taken or omitted by Chase in
connection with operating under this Lending Agreement or enforcing Lender's
rights under the applicable MSLA, other than those costs, expenses, damages,
liabilities or claims arising out of the negligence, bad faith or willful
misconduct of Chase. The foregoing indemnity shall be a continuing obligation of
the Lender, its successors and assigns, notwithstanding the termination of any
Loans hereunder or of this Lending Agreement. Chase may charge any amounts to
which it is entitled hereunder against the Account, and Lender shall be entitled
to an accounting of all amounts so charged. Actions taken or omitted in reliance
upon Proper Instructions, or upon any information, order, indenture, stock
certificate, power of attorney, assignment, affidavit or other instrument
reasonably believed by Chase, in good faith, to be genuine or bearing the
signature of a person or
<PAGE>
persons believed, in good faith, to be authorized to sign, countersign or
execute the same, shall be conclusively presumed to have been taken or omitted
in good faith.
(b) Indemnification of Lender in respect to Distributions. If the
Borrower in respect of any Loan effected pursuant hereto and pursuant to the
applicable MSLA fails, as a result of its bankruptcy, insolvency,
reorganization, liquidation, receivership or similar event (each an "Insolvency
Event"), to remit to Chase for Lender's account any Distributions on or with
respect to Securities on Loan when due (the "Due Date") in accordance with such
MSLA and such Due Date occurs at least one day prior to an Insolvency Event then
Chase shall at its expense (subject to paragraph (d) hereof) and within one (1)
Business Day of the Due Date, undertake the following: (i) with respect to
Distributions in the form of cash, Chase shall credit Lender's account with the
full amount of such Distributions and (ii) with respect to Distributions in the
form of securities, Chase shall, at its option, either purchase replacement
securities (of an equal amount of the same issue, class, type or series as the
Distributions) on the principal market in which such securities are traded or
credit Lender's account with the market value in United States dollars
("Dollars") of such Distributions on the Due Date as determined by Chase in good
faith. Market value shall be determined by Chase in accordance with the
applicable MSLA, including the computation of Dollar equivalents where
Securities on Loan and/or Collateral (and Proceeds) are denominated in a
currency other than Dollars.
(c) Indemnification of Lender in respect of Securities. If the Borrower
in respect of any Loan effected pursuant hereto and pursuant to the applicable
MSLA fails to return any Securities on Loan to Chase for Lender's account when
due thereunder (the "Return Date") which is the date of default, then Chase
shall, at its expense (subject to paragraph (d) hereof) and within one (1)
Business Day of the Return Date, credit Lender's account in Dollars with the
difference ("Difference") (where a positive number), if any, between (x) the
market value of such lent Securities on the Return Date (including, in the case
of debt Securities, accrued but unpaid interest), and (y) in the case of Loans
collateralized by (i) Cash Collateral, the greater of (A) the Market Value of
the Cash Collateral on the date of initial pledge as adjusted for any subsequent
marks-to-market through the Return Date and (B) the Market Value of Cash
Collateral investments on the Return Date, (ii) non-Cash Collateral comprising
securities Collateral, the greater of the Market Value of such Collateral on the
(A) Business Day immediately preceding the Return Date and (B) Return Date, or
(iii) non-Cash Collateral comprising Letter of Credit Collateral, the Market
Value of the Letter of Credit Collateral on the date of initial pledge as
adjusted for any subsequent marks-to-market through the Return Date. Market
Value shall be determined by Chase in accordance with the applicable MSLA,
including the computation of Dollar equivalents where Securities on Loan and/or
Collateral (and Proceeds) are denominated in a currency other than Dollars.
Where Cash Collateral and non-Cash Collateral have each been allocated to a Loan
as of the Return Date, the Difference payable by Chase shall be computed in
accordance with the foregoing as if there had been two Loans in effect on the
Return Date, one collateralized by Cash Collateral and the other collateralized
by non-Cash Collateral. In lieu of paying Lender the Difference, Chase may, at
its sole option and expense, purchase for Lender's account ("Buy-in")
replacement securities of the same issue, type, class, and series as that of the
Securities on Loan.
<PAGE>
(d) Subrogation. If Chase makes a payment or a purchase pursuant to
Section 7(b) or effects a Buy-in pursuant to Section 7(c), or if Chase effects a
Difference payment pursuant to Section 7(c) on account of a failure to return
Securities on Loan not arising from an Insolvency Event, Chase shall, to the
extent of such payment, purchase, Difference payment or Buy-in, be subrogated
to, and Lender shall assign and be deemed to have assigned to Chase, all of its
rights in, to and against the Borrower (and any guarantor thereof) in respect of
such Loan, any Collateral pledged by the Borrower in respect of such Loan, and
all proceeds of such Collateral. In the event that Lender receives or is
credited with any payment, benefit or value from or on behalf of the Borrower in
respect of rights to which Chase is subrogated as provided herein, Lender shall
promptly remit or pay to Chase the same (or its Dollar equivalent) but only to
the extent that Lender has been paid all amounts owed to it by Borrower.
Section 8 - Chase Compensation
(a) In connection with each Loan hereunder, Lender shall pay to Chase a
fee equal to ___% of (i) earnings (less any Rebate paid by Chase to a Borrower)
derived from Authorized Investments in connection with Loans collateralized by
cash, and (ii) any Securities Loan Fee paid or payable by the Borrower on Loans
not collateralized by cash. (b) The fee payable to Chase for services performed
pursuant to Section 5(f) hereof shall be equal to one tenth of the one percent
(0.1%) of the Fund's average daily Assets (with "Fund" being as defined in
Appendix 4 hereto). All securities in the Fund shall be valued based on their
amortized cost. Fees shall be accrued and charged daily against the Fund's yield
or assets, as appropriate, and shall be payable monthly in arrears on the first
business day of the month following the month in which earned. (c) Chase is
authorized, on a monthly basis, to charge all the foregoing fees (together with
reasonable expenses incurred by Chase hereunder) and any other amounts owed by
Lender hereunder against the Account and/or a Collateral Account.
Section 9 - Taxes
Lender shall be responsible for all filings, tax returns and reports on
any Loans undertaken by Chase on Lender's behalf which are to be made to any
authority whether governmental or otherwise and for the payment of all unpaid
calls, taxes (including, without limitations, any value added tax), imposts,
levies or duties due on any principal or interest, or any other liability or
payments arising out of or in connection with any Securities or any Collateral,
and in so far as Chase is under obligation (whether of a governmental nature or
otherwise) to pay the same on Lender's behalf Chase may do so out of any monies
or assets held by it pursuant to the terms of the Agreement or hereunder.
Section 10 - Instructions
(a)(i) Written Instructions. "Written Instructions" shall mean written
communications actually received by Chase from an Authorized Person or from a
person reasonably believed by Chase to be an Authorized Person by letter,
memorandum, telegram, cable, telex, telecopy facsimile, computer, video (CRT)
terminal or other on-line system, or any other method reasonably acceptable to
Chase and whereby Chase is able to verify with a reasonable degree of certainty
the identity of the sender of such communications or with communications are
<PAGE>
transmitted with proper testing or authentication pursuant to terms and
conditions which Chase may specify. (ii) Oral Instructions. "Oral Instructions"
shall mean oral communications actually received by Chase from an Authorized
Person or from a person reasonably believed by Chase to be an Authorized Person.
Oral Instructions shall promptly thereafter be confirmed in writing by an
Authorized Person (which confirmation may bear the facsimile signature of such
Person), but Lender will hold Chase harmless for the failure of an Authorized
Person to send such confirmation in writing, the failure of such confirmation to
conform to the Oral Instructions received, or Chase's failure to produce such
confirmation at any subsequent time. Lender shall be responsible for
safeguarding any testkeys, identification codes or other security devices which
Chase may make available to Lender or its Authorized Persons.
(b) Unless otherwise expressly provided, all Proper Instructions shall
continue in full force and effect until canceled or superseded.
Section 11 - Pricing Services
Chase may use any pricing service referred to in an applicable MSLA and
any other recognized pricing service (including itself and any of its
affiliates) in order to perform its valuation responsibilities with respect to
Securities, Collateral and Authorized Investments, and Lender shall hold Chase
harmless from and against any loss or damage suffered or incurred as a result of
errors or omissions of any such pricing service.
Section 12 - Termination
This Lending Agreement may be terminated at any time by either party
upon delivery to the other party of notice specifying the date of such
termination, which shall be not less than 30 days after the date of receipt of
such notice. Notwithstanding any such notice, this Lending Agreement shall
continue in full force and effect with respect to all Loans outstanding on the
termination date, which Loans shall, however, be terminated as soon as
reasonably practicable.
Section 13 - Miscellaneous
(a) Legal proceedings. Chase may refrain from bringing any legal action
or proceeding arising out of or in connection with any Loan until it shall have
received such security as it may require for all costs, expenses (including
legal fees) and liabilities which it will or may expend or incur in relation
thereto.
(b) Integration, Lending Agreement to Govern. This Lending Agreement
and the Agreement contain the complete agreement of the parties with respect to
the subject matter hereof and supersede and replace any previously made
proposals, representations, warranties or agreements with respect thereto by the
parties. In the event of any conflict between this Lending Agreement, and the
Agreement, this Lending Agreement shall govern.
(c) Notice. Unless expressly provided herein to the contrary, notices
hereunder shall be in writing, and delivered by telecopier, overnight express
mail, first-class postage prepaid,
<PAGE>
delivered personally or by receipt courier service. All such notices which are
mailed shall be deemed delivered upon receipt. Notices shall be addresses as
follows (or to such other address as a party may from time to time designate on
notice duly given in accordance with this paragraph): notices to Chase shall be
addressed to it at 2 Chase Manhattan Plaza, 19th Floor, New York, New York
10081, Attention: Securities Lending Division; notices to be given to Lender
shall be addressed to it at its offices at Attention: .
(d) Amendments, Waiver. This Lending Agreement may be modified only by
a written amendment signed by both parties, and no waiver of any provisions
hereof shall be effective unless expressed in a writing signed by the party to
be charged.
(e) Government Law, Consent to Jurisdiction, Waiver of Immunity. This
Lending Agreement shall be construed in accordance with laws of the State of New
York, without regard to the conflict of laws principles thereof. Chase and
Lender each hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and Lender hereby waives any claim of forum non conveniens to the
extent that it may lawfully do so. To the extent that in any jurisdiction Lender
may now or hereafter be entitled to claim, for itself or its assets, immunity
from suit, execution, attachment (before or after judgment) or other legal
process, Lender irrevocably shall not claim, and it hereby waives, such
immunity.
<PAGE>
(f) Counterparts, Headings. This Lending Agreement may be executed in
several counterparts, each one of which shall constitute an original, and all
collectively shall constitute but one instrument. The headings of the sections
hereof are included for convenience of reference only and do not form part of
this Lending Agreement.
(g) Severability. Any provisions of this Lending Agreement which may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceably in any jurisdiction
shall not invalidate or render unenforceable such provisions in any other
jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Lending Agreement as
of the date first above-written.
[Insert name of LENDER] THE CHASE MANHATTAN BANK, N.A.
By: By:
Title: Title:
<PAGE>
DELAWARE GROUP OF FUNDS
FUND ACCOUNTING AGREEMENT
THIS AGREEMENT, made as of this 19th day of August, 1996 by and between
the registered investment companies in the Delaware Group listed on Schedule A,
which Schedule may be amended from time to time as provided in Section 8 hereof
(each corporation or common law or business trust, hereinafter referred to as a
"Company," and all such entities collectively hereinafter referred to as, the
"Companies"), on behalf of the portfolio(s) of securities of such Companies
listed on Schedule A, which Schedule may be amended from time to time (when used
in this Agreement in the context of a Company that offers only a single
portfolio/series of shares, the term "Portfolio" shall be a reference to such
Company, and when used in the context of a Company that offers multiple
portfolios/series of shares, shall be a reference to each portfolio/series of
such Company) and DELAWARE SERVICE COMPANY, INC. ("DSC"), a Delaware
corporation, having its principal office and place of business at 1818 Market
Street, Philadelphia, Pennsylvania 19103.
W I T N E S S E T H:
WHEREAS, the Investment Management Agreements between the Companies
with respect to each Portfolio and either Delaware Management Company, Inc. or
its U.K. affiliate, Delaware
<PAGE>
International Advisers Ltd., provide, in part, that each Portfolio shall conduct
its business and affairs and shall bear the expenses necessary and incidental
thereto including, but not in limitation of the foregoing, the costs incurred
with respect to accounting services; and
WHEREAS, the services to be provided under this agreement previously
were provided by employees of the Companies; and
WHEREAS, the Companies and DSC desire to have a written agreement
concerning the performance of accounting services for each Portfolio and
providing compensation therefor;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:
I. APPOINTMENT AS AGENT
Section 11 The Companies hereby appoint DSC the accounting
agent ("Accounting Agent") for all of the classes of each Portfolio, to provide
such accounting services as are set forth herein and DSC hereby accepts such
appointment and agrees to provide the Companies, as their agent, the services
described herein.
Section 12 The Companies shall pay DSC and DSC shall accept,
for the services provided hereunder, the compensation provided for in Section VI
hereof. The Companies
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<PAGE>
also shall reimburse DSC for expenses incurred or advanced by it for the
Companies in connection with its services hereunder.
II DOCUMENTATION
Section 21 Each Company represents that it has provided or
made available to DSC (or has given DSC an opportunity to examine) copies of,
and, DSC represents that it has received from the Companies (or is otherwise
familiar with), the following documents:
A. The Articles of Incorporation or Agreement and
Declaration of Trust or other document, as relevant, evidencing each Company's
form of organization and any current amendments thereto;
B. The By-Laws or Procedural Guidelines of each
Company;
C. Any resolution or other action of each Company
or the Board of Directors or Trustees of each Company establishing or affecting
the rights, privileges or other status of any class of shares of a Portfolio, or
altering or abolishing any such class;
D. A certified copy of a resolution of the Board of
Directors or Trustees of each Company appointing DSC as Accounting Agent for
each Portfolio and authorizing the execution of this Agreement or an amendment
to Schedule A of this Agreement;
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<PAGE>
E. A copy of each Company's currently effective
prospectus[es] and Statement[s] of Additional Information under the Securities
Act of 1933, if effective;
F. A certified copy of any resolution of the Board
of Directors or Trustees of each Company authorizing any person to give
instructions to DSC under this Agreement (with a specimen signature of such
person if not already provided), setting forth the scope of such authority; and
G. Any amendment, revocation or other document
altering, adding, qualifying or repealing any document or authority called for
under this Section 2.1.
Section 22 Each Company and DSC may consult as to forms or
documents that may be required in performing services hereunder.
Section 23 Each Company warrants the following:
A. The Company is, or will be, a properly
registered investment company under the Investment Company Act of 1940 (the
"1940 Act") and any and all shares of a Portfolio which it issues will be
properly registered and lawfully issued under applicable federal and state laws.
B. The provisions of this contract do not violate
the terms of any instrument by which the Company or the Company on behalf of a
Portfolio is bound; nor do they violate any law or regulation of any body having
jurisdiction over the Company or its property.
Section 24 DSC warrants the following:
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<PAGE>
A. The provisions of this contract do not violate
the terms of any instrument by which DSC is bound; nor do they violate any law
or regulation of any body having jurisdiction over DSC or its property.
III. SERVICES TO BE PROVIDED BY DSC
Section 31 Daily Net Asset Value ("NAV") Calculation. As
Accounting Agent for each Portfolio of the Companies, DSC will perform all
functions necessary to provide daily Portfolio NAV calculations, including:
A. Maintaining each Portfolio's securities
portfolio history by:
1. recording portfolio purchases and sales;
2. recording corporate actions and capital
changes relating to portfolio securities;
3. accruing interest, dividends and expenses;
and
4. maintaining the income history for securities
purchased by a Portfolio.
B. Determining distributions to Portfolio
shareholders;
C. Recording and reconciling shareholder activity
including:
1. recording subscription, liquidations and
dividend reinvestments;
-5-
<PAGE>
2. recording settlements of shareholder
activity; and
3. reconciling Portfolio shares outstanding to
the records maintained by DSC, as transfer agent of the Portfolio.
D. Valuing a Portfolio's securities portfolio which
includes determining the NAVs for all classes of the Portfolio;
E. Disseminating Portfolio NAVs and dividends to
interested parties (including the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), the Investment Company Institute ("ICI"),
Morningstar, and Lipper Analytical Services, Inc. ("Lipper")); and
F. Resolving pricing and/or custody discrepancies.
Section 32 Financial Reporting. As Accounting Agent, DSC shall
perform financial reporting services for each Portfolio, which shall include:
A. The preparation of semi-annual and annual
reports for shareholders which involves the performance of the following
functions:
1. preparing all statements of net assets,
statements of operations and statements of changes in net assets for the
Portfolio;
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<PAGE>
2. preparing footnotes to financial statements
for the Portfolio;
3. preparing workpapers for each Company's
annual audit by its independent public accountants; and
4. coordinating the annual audit by each
Company's independent public accountants.
B. Reporting to the ICI in response to requests for
monthly and other periodic information;
C. Performing statistical reporting, which includes
daily, monthly, quarterly and annual reports for Lipper, Weisenberger and other
third party reporting agencies; and
D. Furnishing financial information for any
additional required SEC reporting, such as the preparation of financial
information for each Company's reporting on Form N-SAR, the furnishing of
financial information for each Company's prospectus[es] and statement[s] of
additional information, and the financial information required for each
Company's annual Rule 24f-2 notice filing;
Section 33 Compliance Testing. DSC will monitor, test and
prepare and maintain supporting schedules which evidence compliance with the
definitional and distribution requirements under the Internal Revenue Code of
1986, as amended ("IRC"), including the following:
-7-
<PAGE>
A. The requirement to be registered at all times
during the taxable year under the 1940 Act (IRC Section 851(a));
B. The annual ninety percent gross income test (IRC
Section 851(b)(2));
C. The short/short (thirty percent) gross income
test (IRC Section 851(b)(3));
D. The quarterly IRC industry diversification tests
(IRC Sections 851(b)(4) and 817(h)); and
E. The 90% distribution requirements (IRC Section
852(a)).
Section 34 Other Services. In addition to the above, DSC, in
its capacity as Accounting Agent for the Company, will perform the following
services:
A. The calculation of required Portfolio monthly
yields and total return calculations in accordance with the prescribed rules of
the U.S. Securities and Exchange Commission;
B. Providing the financial information necessary
for the preparation of all federal and state tax returns and ancillary
schedules, including:
1. year-end excise tax distributions; and
2. compliance with Subchapter M and Section 4982
of the IRC;
-8-
<PAGE>
C. Performing special tax reporting to
shareholders, including the preparation of reports which reflect income earned
by each Portfolio by state, exempt income and distributions that qualify for the
corporate dividends received deduction;
D. The preparation of expense and budget figures
for each Portfolio, including the maintenance of detailed records pertaining to
expense accruals and payments and adjusting reports to reflect accrual
adjustments;
E. The preparation of reports for Board of
Directors' or Trustees' meetings;
F. Coordination of the custody relationships;
G. Facilitating security settlements;
H. Performance of required foreign security
accounting functions;
I. Performance of daily cash reconciliations for
each Portfolio;
J. Providing identified reports to portfolio
managers including:
1. providing portfolio holdings and security
valuation reports;
2. preparing cash forecasts and reconciliations
as mutually agreed upon; and
3. preparing income projections.
-9-
<PAGE>
IV. PERFORMANCE OF DUTIES
Section 41 DSC may request or receive instructions from a
Company and may, at a Portfolio's expense, consult with counsel for the Company
or its own counsel, with respect to any matter arising in connection with the
performance of its duties hereunder, and shall not be liable for any action
taken or omitted by it in good faith in accordance with such instructions or
opinions of counsel.
Section 42 DSC shall maintain reasonable insurance coverage
for errors and omissions and reasonable bond coverage for fraud.
Section 43 Upon notice thereof to a Company, DSC may employ
others to provide services to DSC in its performance of this Agreement.
Section 44 Personnel and facilities of DSC used to perform
services hereunder may be used to perform similar services to all Companies of
the Delaware Group and their Portfolios and to others, and may be used to
perform other services for all of the Companies of the Delaware Group and
others.
Section 45 The Companies and DSC may, from time to time, set
forth in writing at the Companies' expense certain guidelines to be applicable
to the services hereunder.
-10-
<PAGE>
V. ACCOUNTS AND RECORDS
Section 51 The parties hereto agree and acknowledge that the
accounts and records maintained by DSC with respect to a Portfolio shall be the
property of such Portfolio, and shall be made available to the relevant Company
promptly upon request and shall be maintained for the periods prescribed in Rule
31a-2 under the Investment Company Act of 1940 or such longer period as shall be
agreed to by the parties hereto, at such Portfolio's expense.
VI. COMPENSATION
Section 61 The Companies and DSC acknowledge that the
compensation to be paid hereunder to DSC is intended to induce DSC to provide
services under this Agreement of a nature and quality which the Boards of
Directors or Trustees of the Companies, including a majority who are not parties
to this Agreement or interested person of the parties hereto, have determined
after due consideration to be necessary for the conduct of the business of a
Portfolio in the best interests of a Portfolio and its shareholders.
Section 62 Compensation by a Portfolio hereunder shall be
determined in accordance with Schedule B hereto as it shall be amended from time
to time as provided for herein and which is incorporated herein as a part
hereof.
Section 63 Compensation as provided in Schedule B shall be
reviewed and approved for each Portfolio in the manner
-11-
<PAGE>
set forth in Section 8.1 hereof by the Boards of Directors or Trustees of the
Companies at least annually and may be reviewed and approved more frequently at
the request of either party. The Boards may request and DSC shall provide such
information as the Boards may reasonably require to evaluate the basis of and
approve the compensation.
VII, STANDARD OF CARE
Section 71 The Companies on behalf of each Portfolio
acknowledge that DSC shall not be liable for, and in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
performance of its duties under this contract, agree to indemnify DSC against,
any claim or deficiency arising from the performance of DSC's duties hereunder,
including DSC's costs, counsel fees and expenses incurred in investigating or
defending any such claim or any administrative or other proceeding, and
acknowledge that any risk of loss or damage arising from the conduct of a
Portfolio's affairs in accordance herewith or in accordance with guidelines or
instructions given hereunder, shall be borne by the Portfolio. The
indemnification provided for in this Section 7.1 shall be made Portfolio by
Portfolio so that DSC is only entitled to indemnification from a Company on
behalf of a Portfolio for actions arising from the performance of DSC's duties
as to that Portfolio.
-12-
<PAGE>
VIII. CONTRACTUAL STATUS
Section 81 This Agreement shall be executed and become
effective as to a Company with regard to a Portfolio listed on Schedule A as of
the date first written above if approved by a vote of such Company's Board of
Directors or Trustees, including an affirmative vote of a majority of the
non-interested members of the Board of such Company, cast in person at a meeting
called for the purpose of voting on such approval. It shall continue in effect
for an indeterminate period, and is subject to termination as to a Company on
behalf of a Portfolio or DSC, as the case may be, on sixty (60) days notice by
either that Company or DSC, unless earlier terminated or amended by agreement
among the parties. A Company shall be permitted to terminate this Agreement as
to a Portfolio on sixty (60) days notice to DSC. Compensation under this
Agreement by a Portfolio shall require approval by a majority vote of the Board
of Directors or Trustees of such Portfolio's Company, including an affirmative
vote of the majority of the non-interested members of such Board cast in person
at a meeting called for the purpose of voting such approval.
Section 82 This Agreement shall become effective as to any
Company or Portfolio not included on Schedule A as of the date first written
above, but desiring to participate in this Agreement, on such date as an amended
Schedule A adding such new Company or Portfolio to such Schedule is executed by
DSC and such new Company or a Company on behalf of a new Portfolio following
-13-
<PAGE>
approval by the Company or by the Company on behalf of a new Portfolio desiring
to be included in this Agreement in accordance with the method specified in
Section 8.1. Any such amended Schedule A shall not affect the validity of this
Agreement as between DSC and the other Companies which have executed this
Agreement or any subsequent amendment to Schedule A of this Agreement.
Section 83 This Agreement may not be assigned by DSC without
the approval of all of the Companies.
Section 84 This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania.
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
--------------------------------
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT
FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP DELCHESTER HIGH-YIELD
BOND FUND, INC.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
DELAWARE GROUP VALUE FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL
FUNDS, INC.
-14-
<PAGE>
DELAWARE GROUP DELCAP FUND, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
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, Chairman
-15-
<PAGE>
SCHEDULE A
COMPANIES AND PORTFOLIOS COMPRISING THE DELAWARE GROUP
Delaware Group Cash Reserve, Inc.
Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund
Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund
Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Trend Fund, Inc.
Delaware Group Delchester High-Yield Bond Fund, Inc.
- --------
* 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.
-16-
<PAGE>
DMC Tax-Free Income Trust - Pennsylvania
Delaware Group Value Fund, Inc.
Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund (New)
Delaware Group DelCap Fund, Inc.
Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio (New)
The Global Fixed Income Portfolio
The International Fixed Income Portfolio (New)
The High-Yield Bond Portfolio (New)
Delaware Group Premium Fund, Inc.
Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series (New)
Delaware Group Government Fund, Inc.
-17-
<PAGE>
Delaware Group Adviser Funds, Inc.
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
Dated as of: August 19, 1996
-18-
<PAGE>
SCHEDULE B
COMPENSATION
Fee Schedule for The Delaware Group of Funds
Part 1 -- Fees for Existing Portfolios
Existing Portfolios are those so designated on Schedule A to the Fund Accounting
Agreement between Delaware Service Company, Inc. and the Delaware Group of Funds
dated as of August 19, 1996 ("Agreement").
Annual Asset Based Fees
First $10 Billion of Aggregate
Complex Net Assets 2.5 Basis Points
Aggregate Complex Net Assets
over $10 Billion 2.0 Basis Points
Annual asset based fees will be charged at a rate of 2.5 basis points for the
first $10 Billion of Aggregate Complex Net Assets. Aggregate Complex Net Assets
over $10 Billion will be charged at a rate of 2.0 basis points. These fees will
be charged to a Portfolio on an aggregated pro rated basis.
Annual Minimum Fees
Domestic Equity Portfolio $35,000
Domestic Fixed Income Portfolio $45,000
International Series Portfolio $70,000
Per Class of Share Fee $ 4,000
There is an annual minimum fee that will be charged only if the annual asset
based fee is less than the calculation for the minimum fee. This fee is based on
the type and the number of classes per Portfolio. For an equity Portfolio
$35,000 will be charged; for a fixed income Portfolio $45,000 will be charged,
and for an international Portfolio $70,000 will be charged. For each class of
shares, $4,000 will be charged, such amount to be prorated over a period of less
than a year for any classes added after April 30, 1996. A total of all minimum
fees will be compared to the total asset based fee to determine which fee is
higher and, subsequently, will be used to bill the Companies.
Part 2 -- Fees for New Portfolios
For each Portfolio designated as a New Portfolio on Schedule A to the Agreement,
there will be a fee of 2.0 basis points, providing that the Delaware complex net
assets are above $10 Billion (the
-19-
<PAGE>
rate would be 2.5 basis points if under $10 Billion and then 2.0 basis points
once the net assets cross $10 Billion), or an annual minimum fee calculated in
the manner described above, whichever is higher. This new fee would be added to
the total of Existing Portfolio fees and then pro rated. Fees shall not be
charged for New Portfolios included on Schedule A until such Portfolios shall
have commenced operations.
Dated as of: August 19, 1996
-20-
<PAGE>
AMENDMENT NO. 1 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Cash Reserve, Inc.
Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund
Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Trend Fund, Inc.
Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund (New)
DMC Tax-Free Income Trust - Pennsylvania
*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 Value Fund, Inc.
Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund (New)
Delaware Group DelCap Fund, Inc.
Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio (New)
The Global Fixed Income Portfolio
The International Fixed Income Portfolio (New)
The High-Yield Bond Portfolio (New)
Delaware Group Premium Fund, Inc.
Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series (New)
Delaware Group Government Fund, Inc.
<PAGE>
Delaware Group Adviser Funds, Inc.
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
Dated as of: September 30, 1996
-------------------------
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
---------------------------------
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY
FUND,INC.
DELAWARE GROUP LIMITED-TERM
GOVERNMENT FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DMC TAX-FREE INCOME TRUST -
PENNSYLVANIA
DELAWARE GROUP VALUE FUND, INC.
DELAWARE GROUP GLOBAL &
INTERNATIONAL FUNDS, INC.
DELAWARE GROUP DELCAP FUND, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
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
Chairman
-3-
<PAGE>
AMENDMENT NO. 2 TO
SCHEDULE A
TO 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 Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund
Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund
Delaware Group Equity Funds IV, Inc.
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc.
Retirement Income Fund (New)
Value 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.
1
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Delaware Group Government Fund, Inc.
Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Emerging Growth Series
Equity/Income Series
Global Bond Series (New)
Growth Series
High Yield Series
International Equity Series
Money Market Series
Multiple Strategy Series
Value Series
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.
2
<PAGE>
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap 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
DMC Tax-Free Income Trust - Pennsylvania
3
<PAGE>
Dated as of: November 29, 1996
------------------------
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
-------------------------------------
David K. Downes
Senior Vice President/
Chief Administrative Officer/
Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL
FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, 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
Chairman
4
<PAGE>
AMENDMENT NO.3 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Cash Reserve, Inc.
Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund
Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Trend Fund, Inc.
Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund (New)
*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.
2
<PAGE>
DMC Tax-Free Income Trust - Pennsylvania
Delaware Group Value Fund, Inc.
Value Fund
Retirement Income Fund (New)
Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund (New)
Delaware Group Equity Funds IV, Inc.
DelCap Fund
Multi-Cap Equity Fund (New)
Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio (New)
The Global Fixed Income Portfolio
The International Fixed Income Portfolio (New)
The High-Yield Bond Portfolio (New)
Delaware Group Premium Fund, Inc.
Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series (New)
Delaware Group Government Fund, Inc.
3
<PAGE>
Delaware Group Adviser Funds, Inc.
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
Dated as of: December 27, 1996
-----------------------
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
-------------------------------
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND,INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT
FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
DELAWARE GROUP VALUE FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL
FUNDS, INC.
DELAWARE GROUP DELCAP FUND, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
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
Chairman
4
<PAGE>
AMENDMENT NO. 4 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds II, Inc.
Decatur Income Fund
Decatur Total Return Fund
Blue Chip Fund (New)
Quantum Fund (New)
Delaware Group Equity Funds I, Inc.
Delaware Fund
Devon Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Trend Fund, Inc.
*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. DMC Tax-Free Income Trust - Pennsylvania
1
<PAGE>
Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund
High-Yield Opportunities Fund (New)
Delaware Group Equity Funds V, Inc.
Value Fund
Retirement Income Fund
Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund
Delaware Group Equity Funds IV, Inc.
DelCap Fund
Capital Appreciation Fund
Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio
The Defensive Equity Utility Portfolio
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio
The Global Fixed Income Portfolio
The International Fixed Income Portfolio
The High-Yield Bond Portfolio
Delaware Group Premium Fund, Inc.
Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series
2
<PAGE>
Delaware Group Government Fund, Inc.
Delaware Group Adviser Funds, Inc.
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
Dated as of: FEBRUARY 24, 1997
-----------------
DELAWARE SERVICE COMPANY, INC.
By: /S/ DAVID K. DOWNES
------------------------------
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS II,
INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND,INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT
FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL
FUNDS, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
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
Chairman
3
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 7 to the Registration Statement under the Securities Act of 1933 on Form
N-1A (File No. 33-67490) of our report dated December 20, 1996 on our audit of
the financial statements and financial highlights of Delaware Group Adviser
Funds, Inc. We also consent to the reference to our Firm under the caption
"Financial Highlights" in the Prospectus and under the caption "Financial
Statements" in the Statement of Additional Information.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 24, 1997
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of the Delaware Group Adviser Funds, Inc.:
We have audited the accompanying statements of net assets of the Delaware Group
Adviser Funds, Inc., (the Fund) consisting of the Enterprise Fund, the U.S.
Growth Fund, the World Growth Fund, the New Pacific Fund, the Corporate Income
Fund and the Federal Bond Fund as of October 31, 1996, and the related
statements of operations for the year then ended, changes in net assets for the
two years in the period then ended and the financial highlights appearing in
note 8 for each of the respective periods presented. These financial statements
and financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios comprising the Delaware Group Adviser Funds,
Inc. as of October 31, 1996, the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the period
then ended, and their financial highlights for each of the respective periods
presented, in conformity with generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
December 20, 1996
<PAGE>
DELAWARE GROUP ENTERPRISE FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- --------------
1
$1000(1 - T) = $1,146.83
T = 14.68%
LIFE
OF FUND
- ---------------
2.91232876
$1000(1 - T) = $1,294.92
T = 9.28%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ---------------
1
$1000(1 - T) = $1,203.72
T = 20.37%
LIFE
OF FUND
- ----------------
2.91232876
$1000(1 - T) = $1,359.68
T = 11.13%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ---------------
1
$1000(1 - T) = $1,159.00
T = 15.90%
LIFE
OF FUND
- ----------------
2.55068493
$1000(1 - T) = $1,404.00
T = 14.23%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ---------------
1
$1000(1 - T) = $1,199.00
T = 19.90%
LIFE
OF FUND
- ---------------
2.55068493
$1000(1 - T) = $1,434.00
T = 15.18%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND C
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ---------------
1
$1000(1 - T) = $1,185.74
T = 18.57%
LIFE
OF FUND
- ---------------
2.47945205
$1000(1 - T) = $1,460.00
T = 16.49%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND C
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ---------------
1
$1000(1 - T) = $1,195.74
T = 19.57%
LIFE
OF FUND
- ---------------
2.47945205
$1000(1 - T) = $1,460.00
T = 16.49%
<PAGE>
DELAWARE GROUP ENTERPRISE INSTITUTIONAL
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ---------------
1
$1000(1 - T) = $1,207.97
T = 20.80%
LIFE
OF FUND
- -----------------
2.74246575
$1000(1 - T) = $1,307.47
T = 10.27%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND A
TOTAL RETURN PERFORMANCE
THREE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.76
Initial Shares 78.370
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 78.370 $0.000 0.000 78.370
- --------------------------------------------------------------------------------
Ending Shares 78.370
Ending NAV x $13.59
---------
Investment Return $1,065.05
Total Return Performance
- ------------------------
Investment Return $1,065.05
Less Initial Investment $1,000.00
----------
$65.05 / $1,000.00 x 100
Total Return: 6.51%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND A
TOTAL RETURN PERFORMANCE
SIX MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $14.15
Initial Shares 70.671
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 70.671 $0.000 0.000 70.671
- --------------------------------------------------------------------------------
Ending Shares 70.671
Ending NAV x $13.59
---------
Investment Return $ 960.42
Total Return Performance
- ------------------------
Investment Return $ 960.42
Less Initial Investment $1,000.00
----------
($39.58) / $1,000.00 x 100
Total Return: -3.96%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND A
TOTAL RETURN PERFORMANCE
NINE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.89
Initial Shares 77.580
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 77.580 $0.000 0.000 77.580
- --------------------------------------------------------------------------------
Ending Shares 77.58
Ending NAV x $13.59
---------
Investment Return $1,054.31
Total Return Performance
- ------------------------
Investment Return $1,054.31
Less Initial Investment $1,000.00
----------
$54.31 / $1,000.00 x 100
Total Return: 5.43%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND A
TOTAL RETURN PERFORMANCE
ONE YEAR
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $11.85
Initial Shares 84.388
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 84.388 $0.000 0.000 84.388
- --------------------------------------------------------------------------------
Ending Shares 84.388
Ending NAV x $13.59
---------
Investment Return $1,146,83
Total Return Performance
- ------------------------
Investment Return $1,146.83
Less Initial Investment $1,000.00
----------
$146.83 / $1,000.00 x 100
Total Return: 14.68%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND A
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.50
Initial Shares 95.238
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 95.238 $0.005 0.047 95.285
- --------------------------------------------------------------------------------
1995 95.285 $0.000 0.000 95.285
- --------------------------------------------------------------------------------
1996 95.285 $0.000 0.000 95.285
- --------------------------------------------------------------------------------
Ending Shares 95.285
Ending NAV x $13.59
---------
Investment Return $1,294.92
Total Return Performance
- ------------------------
Investment Return $1,294.92
Less Initial Investment $1,000.00
----------
$294.92 / $1,000.00 x 100
Total Return: 29.49%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.84
Initial Shares 77.882
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 77.882 $0.000 0.000 77.882
- --------------------------------------------------------------------------------
Ending Shares 77.882
Ending NAV x $14.34
---------
$1,116.83
Less CDSC $40.00
---------
Investment Return $1,076.83
Total Return Performance
- ------------------------
Investment Return $1,076.83
Less Initial Investment $1,000.00
----------
$76.83 / $1,000.00 x 100
Total Return: 7.68%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.84
Initial Shares 77.882
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 77.882 $0.000 0.000 77.882
- --------------------------------------------------------------------------------
Ending Shares 77.882
Ending NAV x $14.34
---------
Investment Return $1,116.83
Total Return Performance
- ------------------------
Investment Return $1,116.83
Less Initial Investment $1,000.00
----------
$116.83 / $1,000.00 x 100
Total Return: 11.68%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $14.27
Initial Shares 70.077
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 70.077 $0.000 0.000 70.077
- --------------------------------------------------------------------------------
Ending Shares 70.077
Ending NAV x $14.34
---------
$1,004.90
Less CDSC $40.00
---------
Investment Return $964.90
Total Return Performance
- ------------------------
Investment Return $964.90
Less Initial Investment $1,000.00
----------
($35.10) / $1,000.00 x 100
Total Return: -3.51%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $14.27
Initial Shares 70.077
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 70.077 $0.000 0.000 70.077
- --------------------------------------------------------------------------------
Ending Shares 70.077
Ending NAV x $14.34
---------
Investment Return $1,004.90
Total Return Performance
- ------------------------
Investment Return $1,004.90
Less Initial Investment $1,000.00
----------
$4.90 / $1,000.00 x 100
Total Return: 0.49%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.00
Initial Shares 76.923
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 76.923 $0.000 0.000 76.923
- --------------------------------------------------------------------------------
Ending Shares 76.923
Ending NAV x $14.34
---------
$1,103.08
Less CDSC $40.00
---------
Investment Return $1,063.08
Total Return Performance
- ------------------------
Investment Return $1,063.08
Less Initial Investment $1,000.00
----------
$63.08 / $1,000.00 x 100
Total Return: 6.31%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.00
Initial Shares 76.923
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 76.923 $0.000 0.000 76.923
- --------------------------------------------------------------------------------
Ending Shares 76.923
Ending NAV x $14.34
---------
Investment Return $1,103.08
Total Return Performance
- ------------------------
Investment Return $1,103.08
Less Initial Investment $1,000.00
----------
$103.08 / $1,000.00 x 100
Total Return: 10.31%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND B
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $11.96
Initial Shares 83.612
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 83.612 $0.000 0.000 83.612
- --------------------------------------------------------------------------------
Ending Shares 83.612
Ending NAV x $14.34
---------
$1,199.00
Less CDSC $40.00
---------
Investment Return $1,159.00
Total Return Performance
- ------------------------
Investment Return $1,159.08
Less Initial Investment $1,000.00
----------
$159.00 / $1,000.00 x 100
Total Return: 15.90%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND B
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $11.96
Initial Shares 83.612
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 83.612 $0.000 0.000 83.612
- --------------------------------------------------------------------------------
Ending Shares 83.612
Ending NAV x $14.34
---------
Investment Return $1,199.00
Total Return Performance
- ------------------------
Investment Return $1,199.00
Less Initial Investment $1,000.00
----------
$199.00 / $1,000.00 x 100
Total Return: 19.90%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.00
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1995 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1996 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
Ending Shares 100.000
Ending NAV x $14.34
---------
$1,434.00
Less CDSC $30.00
---------
Investment Return $1,404.00
Total Return Performance
- ------------------------
Investment Return $1,404.00
Less Initial Investment $1,000.00
----------
$404.00 / $1,000.00 x 100
Total Return: 40.40%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.00
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1995 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1996 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
Ending Shares 100.000
Ending NAV x $14.34
---------
Investment Return $1,434.00
Total Return Performance
- ------------------------
Investment Return $1,434.00
Less Initial Investment $1,000.00
----------
$434.00 / $1,000.00 x 100
Total Return: 43.40%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.08
Initial Shares 76.453
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 76.453 $0.000 0.000 76.453
- --------------------------------------------------------------------------------
Ending Shares 76.453
Ending NAV x $14.60
---------
$1,116.21
Less CDSC $10.00
---------
Investment Return $1,106.21
Total Return Performance
- ------------------------
Investment Return $1,106.21
Less Initial Investment $1,000.00
----------
$106.21 / $1,000.00 x 100
Total Return: 10.62%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.08
Initial Shares 76.453
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 76.453 $0.000 0.000 76.453
- --------------------------------------------------------------------------------
Ending Shares 76.453
Ending NAV x $14.60
---------
Investment Return $1,116.21
Total Return Performance
- ------------------------
Investment Return $1,116.21
Less Initial Investment $1,000.00
----------
$116.21 / $1,000.00 x 100
Total Return: 11.62%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $14.54
Initial Shares 68.776
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 68.776 $0.000 0.000 68.776
- --------------------------------------------------------------------------------
Ending Shares 68.776
Ending NAV x $14.60
---------
$1,004.12
Less CDSC $10.00
---------
Investment Return $994.13
Total Return Performance
- ------------------------
Investment Return $994.13
Less Initial Investment $1,000.00
----------
$(5.87) / $1,000.00 x 100
Total Return: -0.59%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $14.54
Initial Shares 68.776
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 68.776 $0.000 0.000 68.776
- --------------------------------------------------------------------------------
Ending Shares 68.776
Ending NAV x $14.60
---------
Investment Return $1,004.13
Total Return Performance
- ------------------------
Investment Return $1,004.13
Less Initial Investment $1,000.00
----------
$4.13 / $1,000.00 x 100
Total Return: 0.41%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.27
Initial Shares 75.358
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 75.358 $0.000 0.000 75.358
- --------------------------------------------------------------------------------
Ending Shares 75.358
Ending NAV x $14.60
---------
$1,100.23
Less CDSC $10.00
---------
Investment Return $1,090.23
Total Return Performance
- ------------------------
Investment Return $1,090.23
Less Initial Investment $1,000.00
----------
$90.23 / $1,000.00 x 100
Total Return: 9.02%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.27
Initial Shares 75.358
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 75.358 $0.000 0.000 75.358
- --------------------------------------------------------------------------------
Ending Shares 75.358
Ending NAV x $14.60
---------
Investment Return $1,100.23
Total Return Performance
- ------------------------
Investment Return $1,100.23
Less Initial Investment $1,000.00
----------
$100.23 / $1,000.00 x 100
Total Return: 10.02%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND C
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.21
Initial Shares 81.900
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 81.900 $0.000 0.000 81.900
- --------------------------------------------------------------------------------
Ending Shares 81.900
Ending NAV x $14.60
---------
$1,195.74
Less CDSC $10.00
---------
Investment Return $1,185.74
Total Return Performance
- ------------------------
Investment Return $1,185.74
Less Initial Investment $1,000.00
----------
$185.74 / $1,000.00 x 100
Total Return: 18.57%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND C
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.21
Initial Shares 81.900
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 81.900 $0.000 0.000 81.900
- --------------------------------------------------------------------------------
Ending Shares 81.900
Ending NAV x $14.60
---------
Investment Return $1,195.74
Total Return Performance
- ------------------------
Investment Return $1,195.74
Less Initial Investment $1,000.00
----------
$195.74 / $1,000.00 x 100
Total Return: 19.57%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.00
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1995 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1996 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
Ending Shares 100.000
Ending NAV x $14.60
---------
Investment Return $1,460.00
Total Return Performance
- ------------------------
Investment Return $1,460.00
Less Initial Investment $1,000.00
----------
$460.00 / $1,000.00 x 100
Total Return: 46.00%
<PAGE>
DELAWARE GROUP ENTERPRISE FUND C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.00
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1995 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1996 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
Ending Shares 100.000
Ending NAV x $14.60
---------
$1,460.00
Less CDSC $0.00
---------
$1,460.00
Total Return Performance
- ------------------------
Investment Return $1,460.00
Less Initial Investment $1,000.00
----------
$460.00 / $1,000.00 x 100
Total Return: 46.00%
<PAGE>
DELAWARE GROUP ENTERPRISE INSTITUTIONAL
TOTAL RETURN PERFORMANCE
THREE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.20
Initial Shares 81.967
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 81.967 $0.000 0.000 81.967
- --------------------------------------------------------------------------------
Ending Shares 81.967
Ending NAV x $13.65
---------
Investment Return $1,118.85
Total Return Performance
- ------------------------
Investment Return $1,118.85
Less Initial Investment $1,000.00
----------
$118.85 / $1,000.00 x 100
Total Return: 11.89%
<PAGE>
DELAWARE GROUP ENTERPRISE INSTITUTIONAL
TOTAL RETURN PERFORMANCE
SIX MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.53
Initial Shares 73.910
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 73.910 $0.000 0.000 73.910
- --------------------------------------------------------------------------------
Ending Shares 73.910
Ending NAV x $13.65
---------
Investment Return $1,008.87
Total Return Performance
- ------------------------
Investment Return $1,008.87
Less Initial Investment $1,000.00
----------
$8.87 / $1,000.00 x 100
Total Return: 0.89%
<PAGE>
DELAWARE GROUP ENTERPRISE INSTITUTIONAL
TOTAL RETURN PERFORMANCE
NINE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.31
Initial Shares 81.235
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 81.235 $0.000 0.000 81.235
- --------------------------------------------------------------------------------
Ending Shares 81.235
Ending NAV x $13.65
---------
Investment Return $1,108.86
Total Return Performance
- ------------------------
Investment Return $1,108.86
Less Initial Investment $1,000.00
----------
$108.86 / $1,000.00 x 100
Total Return: 10.89%
<PAGE>
DELAWARE GROUP ENTERPRISE INSTITUTIONAL
TOTAL RETURN PERFORMANCE
ONE YEAR
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $11.30
Initial Shares 88.496
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 88.496 $0.000 0.000 88.496
- --------------------------------------------------------------------------------
Ending Shares 88.496
Ending NAV x $13.65
---------
Investment Return $1,207.97
Total Return Performance
- ------------------------
Investment Return $1,207.97
Less Initial Investment $1,000.00
----------
$207.97 / $1,000.00 x 100
Total Return: 20.80%
<PAGE>
DELAWARE GROUP ENTERPRISE INSTITUTIONAL
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $11.30
Initial Shares 95.785
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 95.785 $0.000 0.000 95.785
- --------------------------------------------------------------------------------
1995 95.785 $0.000 0.000 95.785
- --------------------------------------------------------------------------------
1996 95.785 $0.000 0.000 95.785
- --------------------------------------------------------------------------------
Ending Shares 95.785
Ending NAV x $13.65
---------
Investment Return $1,307.47
Total Return Performance
- ------------------------
Investment Return $1,307.47
Less Initial Investment $1,000.00
----------
$307.47 / $1,000.00 x 100
Total Return: 30.75%
<PAGE>
DELAWARE GROUP US GROWTH FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $1,059.00
T = 5.90%
LIFE
OF FUND
- -----------------
2.91232876
$1000(1 - T) = $1,317.50
T = 9.93%
<PAGE>
DELAWARE GROUP US GROWTH FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $1,111.83
T = 11.18%
LIFE
OF FUND
- -----------------
2.91232876
$1000(1 - T) = $1,383.38
T = 11.79%
<PAGE>
DELAWARE GROUP US GROWTH FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $1,063.81
T = 6.38%
LIFE
OF FUND
- -----------------
2.59452055
$1000(1 - T) = $1,331.00
T = 11.65%
<PAGE>
DELAWARE GROUP US GROWTH FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------------
1
$1000(1 - T) = $1,103.81
T = 10.38%
LIFE
OF FUND
- ----------------
2.59452055
$1000(1 - T) = $1,361.00
T = 12.61%
<PAGE>
DELAWARE GROUP US GROWTH FUND C
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ---------------
1
$1000(1 - T) = $1,093.50
T = 9.35%
LIFE
OF FUND
- ---------------
2.44383562
$1000(1 - T) = $1,418.00
T = 15.36%
<PAGE>
DELAWARE GROUP US GROWTH FUND C
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ---------------
1
$1000(1 - T) = $1,103.50
T = 10.35%
LIFE
OF FUND
- ---------------
2.44383562
$1000(1 - T) = $1,418.00
T = 15.36%
<PAGE>
DELAWARE GROUP US GROWTH INSTITUTIONAL
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ---------------
1
$1000(1 - T) = $1,115.20
T = 11.52%
LIFE
OF FUND
- ---------------
2.74246575
$1000(1 - T) = $1,325.09
T = 10.81%
<PAGE>
DELAWARE GROUP US GROWTH FUND A
TOTAL RETURN PERFORMANCE
THREE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.18
Initial Shares 75.873
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 75.873 $0.000 0.000 75.873
- --------------------------------------------------------------------------------
Ending Shares 75.873
Ending NAV x $13.82
----------
Investment Return $1,048.56
Total Return Performance
- ------------------------
Investment Return $1,048.56
Less Initial Investment $1,000.00
----------
$48.56 / $1,000.00 x 100
Total Return: 4.86%
<PAGE>
DELAWARE GROUP US GROWTH FUND A
TOTAL RETURN PERFORMANCE
SIX MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.64
Initial Shares 73.314
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 73.314 $0.000 0.000 73.314
- --------------------------------------------------------------------------------
Ending Shares 73.314
Ending NAV x $13.82
----------
Investment Return $1,013.20
Total Return Performance
- ------------------------
Investment Return $1,013.20
Less Initial Investment $1,000.00
----------
$13.20 / $1,000.00 x 100
Total Return: 1.32%
<PAGE>
DELAWARE GROUP US GROWTH FUND A
TOTAL RETURN PERFORMANCE
NINE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.94
Initial Shares 77.280
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 77.280 $0.000 0.000 77.280
- --------------------------------------------------------------------------------
Ending Shares 77.280
Ending NAV x $13.82
----------
Investment Return $1,068.01
Total Return Performance
- ------------------------
Investment Return $1,068.01
Less Initial Investment $1,000.00
----------
$68.01 / $1,000.00 x 100
Total Return: 6.80%
<PAGE>
DELAWARE GROUP US GROWTH FUND A
TOTAL RETURN PERFORMANCE
ONE YEAR
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.05
Initial Shares 76.628
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 76.628 $0.000 0.000 76.628
- --------------------------------------------------------------------------------
Ending Shares 76.628
Ending NAV x $13.82
----------
Investment Return $1,059.00
Total Return Performance
- ------------------------
Investment Return $1,059.00
Less Initial Investment $1,000.00
----------
$59.00 / $1,000.00 x 100
Total Return: 5.90%
<PAGE>
DELAWARE GROUP US GROWTH FUND A
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.50
Initial Shares 95.238
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 95.238 $0.010 0.095 95.333
- --------------------------------------------------------------------------------
1995 95.333 $0.000 0.000 95.333
- --------------------------------------------------------------------------------
1996 95.333 $0.000 0.000 95.333
- --------------------------------------------------------------------------------
Ending Shares 95.333
Ending NAV x $13.82
----------
Investment Return $1,317.50
Total Return Performance
- ------------------------
Investment Return $1,317.50
Less Initial Investment $1,000.00
---------
$31.75 / $1,000.00 x 100
Total Return: 31.75%
<PAGE>
DELAWARE GROUP US GROWTH FUND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.38
Initial Shares 80.775
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 80.775 $0.000 0.000 80.775
- --------------------------------------------------------------------------------
Ending Shares 80.775
Ending NAV x $13.61
----------
$1,099.35
Less CDSC $40.00
----------
Investment Return $1,059.35
Total Return Performance
- ------------------------
Investment Return $1,059.35
Less Initial Investment $1,000.00
----------
$59.35 / $1,000.00 x 100
Total Return: 5.94%
<PAGE>
DELAWARE GROUP US GROWTH FUND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.38
Initial Shares 80.775
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 80.775 $0.000 0.000 80.775
- --------------------------------------------------------------------------------
Ending Shares 80.775
Ending NAV x $13.61
----------
Investment Return $1,099.35
Total Return Performance
- ------------------------
Investment Return $1,099.35
Less Initial Investment $1,000.00
----------
$99.35 / $1,000.00 x 100
Total Return: 9.94%
<PAGE>
DELAWARE GROUP US GROWTH FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.84
Initial Shares 77.882
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 77.882 $0.000 77.882 77.882
- --------------------------------------------------------------------------------
Ending Shares 77.882
Ending NAV x $13.61
----------
$1,059.97
Less CDSC $40.00
----------
Investment Return $1,019.97
Total Return Performance
- ------------------------
Investment Return $1,019.97
Less Initial Investment $1,000.00
----------
$19.97 / $1,000.00 x 100
Total Return: 2.00%
<PAGE>
DELAWARE GROUP US GROWTH FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.84
Initial Shares 77.882
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 77.882 $0.000 0.000 77.882
- --------------------------------------------------------------------------------
Ending Shares 77.882
Ending NAV x $13.61
----------
Investment Return $1,059.97
Total Return Performance
- ------------------------
Investment Return $1,059.97
Less Initial Investment $1,000.00
----------
$59.97 / $1,000.00 x 100
Total Return: 6.00%
<PAGE>
DELAWARE GROUP US GROWTH FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.21
Initial Shares 81.900
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 81.900 $0.000 0.000 81.900
- --------------------------------------------------------------------------------
Ending Shares 81.900
Ending NAV x $13.61
----------
$1,114.66
Less CDSC $40.00
----------
Investment Return $1,074.66
Total Return Performance
- ------------------------
Investment Return $1,074.66
Less Initial Investment $1,000.00
----------
$74.66 / $1,000.00 x 100
Total Return: 7.47%
<PAGE>
DELAWARE GROUP US GROWTH FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.21
Initial Shares 81.900
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 81.900 $0.000 0.000 81.900
- --------------------------------------------------------------------------------
Ending Shares 81.900
Ending NAV x $13.61
----------
Investment Return $1,114.66
Total Return Performance
- ------------------------
Investment Return $1,114.66
Less Initial Investment $1,000.00
----------
$114.66 / $1,000.00 x 100
Total Return: 11.47%
<PAGE>
DELAWARE GROUP US GROWTH FUND B
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.33
Initial Shares 81.103
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 81.103 $0.000 0.000 81.103
- --------------------------------------------------------------------------------
Ending Shares 81.103
Ending NAV x $13.61
----------
$1,103.81
Less CDSC $40.00
----------
Investment Return $1,063.81
Total Return Performance
- ------------------------
Investment Return $1,063.81
Less Initial Investment $1,000.00
----------
$63.81 / $1,000.00 x 100
Total Return: 6.38%
<PAGE>
DELAWARE GROUP US GROWTH FUND B
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.33
Initial Shares 81.103
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 81.103 $0.000 0.000 81.103
- --------------------------------------------------------------------------------
Ending Shares 81.103
Ending NAV x $13.61
----------
Investment Return $1,103.81
Total Return Performance
- ------------------------
Investment Return $1,103.81
Less Initial Investment $1,000.00
----------
$103.81 / $1,000.00 x 100
Total Return: 10.38%
<PAGE>
DELAWARE GROUP US GROWTH FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1995 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1996 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
Ending Shares 100.000
Ending NAV x $13.61
----------
$1,361.00
Less CDSC $30.00
----------
Investment Return $1,331.00
Total Return Performance
- ------------------------
Investment Return $1,331.00
Less Initial Investment $1,000.00
----------
$331.00 / $1,000.00 x 100
Total Return: 33.10%
<PAGE>
DELAWARE GROUP US GROWTH FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1995 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1996 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
Ending Shares 100.000
Ending NAV x $13.61
----------
Investment Return $1,361.00
Total Return Performance
- ------------------------
Investment Return $1,361.00
Less Initial Investment $1,000.00
----------
$361.00 / $1,000.00 x 100
Total Return: 36.10%
<PAGE>
DELAWARE GROUP US GROWTH FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.90
Initial Shares 77.519
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 77.519 $0.000 0.000 77.519
- --------------------------------------------------------------------------------
Ending Shares 77.519
Ending NAV x $14.18
----------
$1,099.22
Less CDSC $10.00
----------
Investment Return $1,089.22
Total Return Performance
- ------------------------
Investment Return $1,089.22
Less Initial Investment $1,000.00
----------
$89.22 / $1,000.00 x 100
Total Return: 8.92%
<PAGE>
DELAWARE GROUP US GROWTH FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.90
Initial Shares 77.519
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 77.519 $0.000 0.000 77.519
- --------------------------------------------------------------------------------
Ending Shares 77.519
Ending NAV x $14.18
----------
Investment Return $1,099.22
Total Return Performance
- ------------------------
Investment Return $1,099.22
Less Initial Investment $1,000.00
----------
$99.22 / $1,000.00 x 100
Total Return: 9.92%
<PAGE>
DELAWARE GROUP US GROWTH FUND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.38
Initial Shares 74.738
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 74.738 $0.000 0.000 74.738
- --------------------------------------------------------------------------------
Ending Shares 74.738
Ending NAV x $14.18
----------
$1,059.78
Less CDSC $10.00
----------
Investment Return $1,049.78
Total Return Performance
- ------------------------
Investment Return $1,049.78
Less Initial Investment $1,000.00
----------
$49.78 / $1,000.00 x 100
Total Return: 4.98%
<PAGE>
DELAWARE GROUP US GROWTH FUND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.38
Initial Shares 74.738
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 74.738 $0.000 0.000 74.738
- --------------------------------------------------------------------------------
Ending Shares 74.738
Ending NAV x $14.18
----------
Investment Return $1,059.78
Total Return Performance
- ------------------------
Investment Return $1,059.78
Less Initial Investment $1,000.00
----------
$59.78 / $1,000.00 x 100
Total Return: 5.98%
<PAGE>
DELAWARE GROUP US GROWTH FUND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.72
Initial Shares 78.616
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 78.616 $0.000 0.000 78.616
- --------------------------------------------------------------------------------
Ending Shares 78.616
Ending NAV x $14.18
----------
$1,114.77
Less CDSC $10.00
----------
Investment Return $1,104.77
Total Return Performance
- ------------------------
Investment Return $1,104.77
Less Initial Investment $1,000.00
----------
$104.77 / $1,000.00 x 100
Total Return: 10.48%
<PAGE>
DELAWARE GROUP US GROWTH FUND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.72
Initial Shares 78.616
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 78.616 $0.000 0.000 78.616
- --------------------------------------------------------------------------------
Ending Shares 78.616
Ending NAV x $14.18
----------
Investment Return $1,114.77
Total Return Performance
- ------------------------
Investment Return $1,114.77
Less Initial Investment $1,000.00
----------
$114.77 / $1,000.00 x 100
Total Return: 11.48%
<PAGE>
DELAWARE GROUP US GROWTH FUND C
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.85
Initial Shares 77.821
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 77.821 $0.000 0.000 77.821
- --------------------------------------------------------------------------------
Ending Shares 77.821
Ending NAV x $14.18
----------
$1,103.50
Less CDSC $10.00
----------
Investment Return $1,093.50
Total Return Performance
- ------------------------
Investment Return $1,093.50
Less Initial Investment $1,000.00
----------
$93.50 / $1,000.00 x 100
Total Return: 9.35%
<PAGE>
DELAWARE GROUP US GROWTH FUND C
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.85
Initial Shares 77.821
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 77.821 $0.000 0.000 77.821
- --------------------------------------------------------------------------------
Ending Shares 77.821
Ending NAV x $14.18
----------
Investment Return $1,103.50
Total Return Performance
- ------------------------
Investment Return $1,103.50
Less Initial Investment $1,000.00
----------
$103.50 / $1,000.00 x 100
Total Return: 10.35%
<PAGE>
DELAWARE GROUP US GROWTH FUND C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1995 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1996 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
Ending Shares 100.000
Ending NAV x $14.18
----------
$1,418.00
Less CDSC $0.00
----------
Investment Return $1,418.00
Total Return Performance
- ------------------------
Investment Return $1,418.00
Less Initial Investment $1,000.00
----------
$418.00 / $1,000.00 x 100
Total Return: 41.80%
<PAGE>
DELAWARE GROUP US GROWTH FUND C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1995 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1996 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
Ending Shares 100.000
Ending NAV x $14.18
----------
Investment Return $1,418.00
Total Return Performance
- ------------------------
Investment Return $1,418.00
Less Initial Investment $1,000.00
----------
$418.00 / $1,000.00 x 100
Total Return: 41.80%
<PAGE>
DELAWARE GROUP US GROWTH INSTITUTIONAL
TOTAL RETURN PERFORMANCE
THREE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.65
Initial Shares 79.051
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 79.051 $0.000 0.000 79.051
- --------------------------------------------------------------------------------
Ending Shares 79.051
Ending NAV x $13.94
----------
Investment Return $1,101.97
Total Return Performance
- ------------------------
Investment Return $1,101.97
Less Initial Investment $1,000.00
----------
$101.97 / $1,000.00 x 100
Total Return: 10.20%
<PAGE>
DELAWARE GROUP US GROWTH INSTITUTIONAL
TOTAL RETURN PERFORMANCE
SIX MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.08
Initial Shares 76.453
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 76.453 $0.000 0.000 76.453
- --------------------------------------------------------------------------------
Ending Shares 76.453
Ending NAV x $13.94
----------
Investment Return $1,065.75
Total Return Performance
- ------------------------
Investment Return $1,065.75
Less Initial Investment $1,000.00
----------
$65.75 / $1,000.00 x 100
Total Return: 6.58%
<PAGE>
DELAWARE GROUP US GROWTH INSTITUTIONAL
TOTAL RETURN PERFORMANCE
NINE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.41
Initial Shares 80.580
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 80.580 $0.000 0.000 80.580
- --------------------------------------------------------------------------------
Ending Shares 80.580
Ending NAV x $13.94
----------
Investment Return $1,123.29
Total Return Performance
- ------------------------
Investment Return $1,123.29
Less Initial Investment $1,000.00
----------
$123.29 / $1,000.00 x 100
Total Return: 12.33%
<PAGE>
DELAWARE GROUP US GROWTH INSTITUTIONAL
TOTAL RETURN PERFORMANCE
ONE YEAR
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.50
Initial Shares 80.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 80.000 $0.010 0.000 80.000
- --------------------------------------------------------------------------------
Ending Shares 80.000
Ending NAV x $13.94
----------
Investment Return $1,115.20
Total Return Performance
- ------------------------
Investment Return $1,115.20
Less Initial Investment $1,000.00
----------
$115.20 / $1,000.00 x 100
Total Return: 11.52%
<PAGE>
DELAWARE GROUP US GROWTH INSTITUTIONAL
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.52
Initial Shares 95.057
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 95.057 $0.000 0.000 95.057
- --------------------------------------------------------------------------------
1995 95.057 $0.000 0.000 95.057
- --------------------------------------------------------------------------------
1996 95.057 $0.000 0.000 95.057
- --------------------------------------------------------------------------------
Ending Shares 95.057
Ending NAV x $13.94
----------
Investment Return $1,325.09
Total Return Performance
- ------------------------
Investment Return $1,325.09
Less Initial Investment $1,000.00
----------
$325.09 / $1,000.00 x 100
Total Return: 32.51%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- -------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------------
1
$1000(1 - T) = $1,037.13
T = 3.71%
LIFE
OF FUND
- ----------------
2.91232876
$1000(1 - T) = $1,186.60
T = 6.05%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- -------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------------
1
$1000(1 - T) = $1,088.98
T = 8.90%
LIFE
OF FUND
- ----------------
2.91232876
$1000(1 - T) = $1,245.93
T = 7.84%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- -------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------------
1
$1000(1 - T) = $1,041.63
T = 4.16%
LIFE
OF FUND
- ----------------
2.59452055
$1000(1 - T) = $1,133.63
T = 4.95%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- -------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------------
1
$1000(1 - T) = $1,081.63
T = 8.16%
LIFE
OF FUND
- ----------------
2.59452055
$1000(1 - T) = $1,163.63
T = 6.01%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND C
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- -------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $1,071.49
T = 7.15%
LIFE
OF FUND
- ----------------
2.47945205
$1000(1 - T) = $1,165.34
T = 6.37%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND C
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- -------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $1,081.49
T = 8.15%
LIFE
OF FUND
- ----------------
2.47945205
$1000(1 - T) = $1,165.34
T = 6.37%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND INSTITUTIONAL
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- -------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------------
1
$1000(1 - T) = $1,079.07
T = 7.91%
LIFE
OF FUND
- ----------------
2.74246575
$1000(1 - T) = $1,183.19
T = 6.33%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND A
TOTAL RETURN PERFORMANCE
THREE MONTHS
- -------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.89
Initial Shares 77.580
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 77.580 $0.000 0.000 77.580
- --------------------------------------------------------------------------------
Ending Shares 77.580
Ending NAV x $12.39
--------
Investment Return $961.22
Total Return Performance
- ------------------------
Investment Return $961.22
Less Initial Investment $1,000.00
----------
($38.78) / $1,000.00 x 100
Total Return: -3.88%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND A
TOTAL RETURN PERFORMANCE
SIX MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.04
Initial Shares 76.68712
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 76.687 $0.000 0.000 76.687
- --------------------------------------------------------------------------------
Ending Shares 76.687
Ending NAV x $12.39
--------
Investment Return $950.15
Total Return Performance
- ------------------------
Investment Return $950.15
Less Initial Investment $1,000.00
----------
($49.85) / $1,000.00 x 100
Total Return: -4.99%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND A
TOTAL RETURN PERFORMANCE
NINE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.24
Initial Shares 81.699
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 81.699 $0.000 0.000 81.699
- --------------------------------------------------------------------------------
Ending Shares 81.699
Ending NAV x $12.39
---------
Investment Return $1,012.25
Total Return Performance
- ------------------------
Investment Return $1,012.25
Less Initial Investment $1,000.00
----------
$12.25 / $1,000.00 x 100
Total Return: 1.23%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND A
TOTAL RETURN PERFORMANCE
ONE YEAR
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $11.97
Initial Shares 83.54219
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 83.542 $0.023 0.165 83.707
- --------------------------------------------------------------------------------
Ending Shares 83.707
Ending NAV x $12.39
---------
Investment Return $1,037.13
Total Return Performance
- ------------------------
Investment Return $1,037.13
Less Initial Investment $1,000.00
---------
$37.13 / $1,000.00 x 100
Total Return: 3.71%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND A
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.50
Initial Shares 95.238
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 95.238 $0.030 0.267 95.505
- --------------------------------------------------------------------------------
1995 95.505 $0.009 0.077 95.582
- --------------------------------------------------------------------------------
1996 95.582 $0.023 0.189 95.771
- --------------------------------------------------------------------------------
Ending Shares 95.771
Ending NAV x $12.39
---------
Investment Return $1,186.60
Total Return Performance
- ------------------------
Investment Return $1,186.60
Less Initial Investment $1,000.00
---------
$186.60 / $1,000.00 x 100
Total Return: 18.66%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- -------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $11.48
Initial Shares 87.108
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 87.108 $0.000 0.000 87.108
- --------------------------------------------------------------------------------
Ending Shares 87.108
Ending NAV x $11.56
---------
$1,006.97
Less CDSC $40.00
---------
Investment Return $966.97
Total Return Performance
- ------------------------
Investment Return $966.97
Less Initial Investment $1,000.00
---------
($33.03) / $1,000.00 x 100
Total Return: -3.30%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $11.48
Initial Shares 87.108
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 87.108 $0.000 0.000 87.108
- --------------------------------------------------------------------------------
Ending Shares 87.108
Ending NAV x $11.56
---------
Investment Return $1,006.97
Total Return Performance
- ------------------------
Investment Return $1,006.97
Less Initial Investment $1,000.00
---------
$6.97 / $1,000.00 x 100
Total Return: 0.70%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $11.63
Initial Shares 85.985
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 85.985 $0.000 85.985 85.985
- --------------------------------------------------------------------------------
Ending Shares 85.985
Ending NAV x $11.56
--------
$993.99
Less CDSC $39.76
--------
Investment Return $954.23
Total Return Performance
- ------------------------
Investment Return $954.23
Less Initial Investment $1,000.00
---------
($45.77) / $1,000.00 x 100
Total Return: -4.58%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $11.63
Initial Shares 85.985
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 85.985 $0.000 0.000 85.985
- --------------------------------------------------------------------------------
Ending Shares 85.985
Ending NAV x $11.56
-------
Investment Return $993.99
Total Return Performance
- ------------------------
Investment Return $993.99
Less Initial Investment $1,000.00
---------
($6.01) / $1,000.00 x 100
Total Return: -0.60%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.94
Initial Shares 91.408
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 91.408 $0.000 0.000 91.408
- --------------------------------------------------------------------------------
Ending Shares 91.408
Ending NAV x $11.56
---------
$1,056.68
Less CDSC $40.00
---------
Investment Return $1,016.68
Total Return Performance
- ------------------------
Investment Return $1,016.68
Less Initial Investment $1,000.00
---------
$16.68 / $1,000.00 x 100
Total Return: 1.67%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.94
Initial Shares 91.408
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 91.408 $0.000 0.000 91.408
- --------------------------------------------------------------------------------
Ending Shares 91.408
Ending NAV x $11.56
---------
Investment Return $1,056.68
Total Return Performance
- ------------------------
Investment Return $1,056.68
Less Initial Investment $1,000.00
---------
$56.68 / $1,000.00 x 100
Total Return: 5.67%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND B
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.71
Initial Shares 93.371
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 93.371 $0.023 0.196 93.567
- --------------------------------------------------------------------------------
Ending Shares 93.567
Ending NAV x $11.56
---------
$1,081.63
Less CDSC $40.00
---------
Investment Return $1,041.63
Total Return Performance
- ------------------------
Investment Return $1,041.63
Less Initial Investment $1,000.00
---------
$41.63 / $1,000.00 x 100
Total Return: 4.16%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND B
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.71
Initial Shares 93.371
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 93.371 $0.023 0.196 93.567
- --------------------------------------------------------------------------------
Ending Shares 93.567
Ending NAV x $11.56
---------
Investment Return $1,081.63
Total Return Performance
- ------------------------
Investment Return $1,081.63
Less Initial Investment $1,000.00
---------
$81.63 / $1,000.00 x 100
Total Return: 8.16%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.025 0.242 100.242
- --------------------------------------------------------------------------------
1995 100.242 $0.020 0.207 100.449
- --------------------------------------------------------------------------------
1996 100.449 $0.023 0.211 100.660
- --------------------------------------------------------------------------------
Ending Shares 100.660
Ending NAV x $11.56
---------
$1,163.63
Less CDSC $30.00
---------
Investment Return $1,133.63
Total Return Performance
- ------------------------
Investment Return $1,133.63
Less Initial Investment $1,000.00
---------
$133.63 / $1,000.00 x 100
Total Return: 13.36%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.025 0.242 100.242
- --------------------------------------------------------------------------------
1995 100.242 $0.020 0.207 100.449
- --------------------------------------------------------------------------------
1996 100.449 $0.023 0.211 100.660
- --------------------------------------------------------------------------------
Ending Shares 100.660
Ending NAV x $11.56
---------
Investment Return $1,163.63
Total Return Performance
- ------------------------
Investment Return $1,163.63
Less Initial Investment $1,000.00
---------
$163.63 / $1,000.00 x 100
Total Return: 16.36%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $11.49
Initial Shares 87.032
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 87.032 $0.000 0.000 87.032
- --------------------------------------------------------------------------------
Ending Shares 87.032
Ending NAV x $11.58
---------
$1,007.83
Less CDSC $10.00
---------
Investment Return $997.83
Total Return Performance
- ------------------------
Investment Return $997.83
Less Initial Investment $1,000.00
---------
($2.17) / $1,000.00 x 100
Total Return: -0.22%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $11.49
Initial Shares 87.032
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 87.032 $0.000 0.000 87.032
- --------------------------------------------------------------------------------
Ending Shares 87.032
Ending NAV x $11.58
--------
Investment Return $1,007.83
Total Return Performance
- ------------------------
Investment Return $1,007.83
Less Initial Investment $1,000.00
---------
$7.83 / $1,000.00 x 100
Total Return: 0.78%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $11.65
Initial Shares 85.837
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 85.837 $0.000 85.837 85.837
- --------------------------------------------------------------------------------
Ending Shares 85.837
Ending NAV x $11.58
--------
$993.99
Less CDSC $10.00
--------
Investment Return $983.99
Total Return Performance
- ------------------------
Investment Return $983.99
Less Initial Investment $1,000.00
---------
($16.01) / $1,000.00 x 100
Total Return: -1.60%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $11.65
Initial Shares 85.837
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 85.837 $0.000 0.000 85.837
- --------------------------------------------------------------------------------
Ending Shares 85.837
Ending NAV x $11.58
--------
Investment Return $993.99
Total Return Performance
- ------------------------
Investment Return $993.99
Less Initial Investment $1,000.00
---------
($6.01) / $1,000.00 x 100
Total Return: -0.60%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.95
Initial Shares 91.324
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 91.324 $0.000 0.000 91.324
- --------------------------------------------------------------------------------
Ending Shares 91.324
Ending NAV x $11.58
----------
$1,057.53
Less CDSC $10.00
----------
Investment Return $1,047.53
Total Return Performance
- ------------------------
Investment Return $1,047.53
Less Initial Investment $1,000.00
----------
$47.53 / $1,000.00 x 100
Total Return: 4.75%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.95
Initial Shares 91.324
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 91.324 $0.000 0.000 91.324
- --------------------------------------------------------------------------------
Ending Shares 91.324
Ending NAV x $11.58
---------
Investment Return $1,057.53
Total Return Performance
- ------------------------
Investment Return $1,057.53
Less Initial Investment $1,000.00
----------
$57.53 / $1,000.00 x 100
Total Return: 5.75%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND C
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.73
Initial Shares 93.197
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 93.197 $0.023 0.196 93.393
- --------------------------------------------------------------------------------
Ending Shares 93.393
Ending NAV x $11.58
---------
$1,081.49
Less CDSC $10.00
----------
Investment Return $1,071.49
Total Return Performance
- ------------------------
Investment Return $1,071.49
Less Initial Investment $1,000.00
----------
$71.49 / $1,000.00 x 100
Total Return: 7.15%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND C
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.73
Initial Shares 93.197
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 93.197 $0.023 0.196 93.393
- --------------------------------------------------------------------------------
Ending Shares 93.393
Ending NAV x $11.58
--------
Investment Return $1,081.49
Total Return Performance
- ------------------------
Investment Return $1,081.49
Less Initial Investment $1,000.00
---------
$81.49 / $1,000.00 x 100
Total Return: 8.15%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.015 0.145 100.145
- --------------------------------------------------------------------------------
1995 100.145 $0.027 0.278 100.423
- --------------------------------------------------------------------------------
1996 100.423 $0.023 0.211 100.634
- --------------------------------------------------------------------------------
Ending Shares 100.634
Ending NAV x $11.58
---------
Investment Return $1,165.34
Total Return Performance
- ------------------------
Investment Return $1,165.34
Less Initial Investment $1,000.00
---------
$165.34 / $1,000.00 x 100
Total Return: 16.53%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.015 0.145 100.145
- --------------------------------------------------------------------------------
1995 100.145 $0.027 0.278 100.423
- --------------------------------------------------------------------------------
1996 100.423 $0.023 0.211 100.634
- --------------------------------------------------------------------------------
Ending Shares 100.634
Ending NAV x $11.58
---------
$1,165.34
Less CDSC $0.00
----------
Investment Return $1,165.34
Total Return Performance
- ------------------------
Investment Return $1,165.34
Less Initial Investment $1,000.00
----------
$165.34 / $1,000.00 x 100
Total Return: 16.53%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
THREE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.20
Initial Shares 81.967
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 81.967 $0.000 0.000 81.967
- --------------------------------------------------------------------------------
Ending Shares 81.967
Ending NAV x $12.32
--------
Investment Return $1,009.83
Total Return Performance
- ------------------------
Investment Return $1,009.83
Less Initial Investment $1,000.00
---------
$9.83 / $1,000.00 x 100
Total Return: 0.98%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
SIX MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $12.33
Initial Shares 81.103
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 81.103 $0.000 0.000 81.103
- --------------------------------------------------------------------------------
Ending Shares 81.103
Ending NAV x $12.32
--------
Investment Return $999.19
Total Return Performance
- ------------------------
Investment Return $999.19
Less Initial Investment $1,000.00
---------
($0.81) / $1,000.00 x 100
Total Return: -0.08%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
NINE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $11.57
Initial Shares 86.430
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 86.430 $0.000 0.000 86.430
- --------------------------------------------------------------------------------
Ending Shares 86.430
Ending NAV x $12.32
--------
Investment Return $1,064.82
Total Return Performance
- ------------------------
Investment Return $1,064.82
Less Initial Investment $1,000.00
---------
$64.82 / $1,000.00 x 100
Total Return: 6.48%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
ONE YEAR
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $11.44
Initial Shares 87.413
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 87.413 $0.023 0.174 87.587
- --------------------------------------------------------------------------------
Ending Shares 87.587
Ending NAV x $12.32
--------
Investment Return $1,079.07
Total Return Performance
- ------------------------
Investment Return $1,079.07
Less Initial Investment $1,000.00
---------
$79.07 / $1,000.00 x 100
Total Return: 7.91%
<PAGE>
DELAWARE GROUP WORLD GROWTH FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.037 -4.439 95.561
- --------------------------------------------------------------------------------
1995 95.561 $0.031 0.286 95.847
- --------------------------------------------------------------------------------
1996 95.847 $0.023 0.191 96.038
- --------------------------------------------------------------------------------
Ending Shares 96.038
Ending NAV x $12.32
--------
Investment Return $1,183.19
Total Return Performance
- ------------------------
Investment Return $1,183.19
Less Initial Investment $1,000.00
---------
$183.19 / $1,000.00 x 100
Total Return: 18.32%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $1,031.65
T = 3.17%
LIFE
OF FUND
- ----------------
2.91232876
$1000(1 - T) = $ 926.65
T = -2.58%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $1,082.58
T = 8.26%
LIFE
OF FUND
- ----------------
2.91232876
$1000(1 - T) = $ 972.99
T = -.94%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $1,035.39
T = 3.54%
LIFE
OF FUND
- ----------------
2.59452055
$1000(1 - T) = $ 968.73
T = -1.22%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $1,075.39
T = 7.54%
LIFE
OF FUND
- ----------------
2.59452055
$1000(1 - T) = $ 997.77
T = -.09%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND C
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $1,065.79
T = 6.58%
LIFE
OF FUND
- ----------------
2.32054795
$1000(1 - T) = $ 978.74
T = -0.92%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND C
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $1,075.79
T = 7.58%
LIFE
OF FUND
- ----------------
2.32054795
$1000(1 - T) = $ 978.74
T = -0.92%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND INSTITUTIONAL
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $1,087.72
T = 8.77%
LIFE
OF FUND
- ----------------
2.74246575
$1000(1 - T) = $ 882.71
T = -4.45%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND A
TOTAL RETURN PERFORMANCE
THREE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.88
Initial Shares 101.215
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 101.215 $0.000 0.000 101.215
- --------------------------------------------------------------------------------
Ending Shares 101.215
Ending NAV x $9.42
----------
Investment Return $953.45
Total Return Performance
- ------------------------
Investment Return $953.45
Less Initial Investment $1,000.00
---------
($45.55) / $1,000.00 x 100
Total Return: -4.66%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND A
TOTAL RETURN PERFORMANCE
SIX MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.58
Initial Shares 94.518
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 94.518 $0.000 0.000 94.518
- --------------------------------------------------------------------------------
Ending Shares 94.518
Ending NAV x $9.42
----------
Investment Return $890.36
Total Return Performance
- ------------------------
Investment Return $890.36
Less Initial Investment $1,000.00
---------
($109.64) / $1,000.00 x 100
Total Return: -10.96%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND A
TOTAL RETURN PERFORMANCE
NINE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.14
Initial Shares 98.619
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 98.619 $0.000 0.000 98.619
- --------------------------------------------------------------------------------
Ending Shares 98.619
Ending NAV x $9.42
----------
Investment Return $928.99
Total Return Performance
- ------------------------
Investment Return $928.99
Less Initial Investment $1,000.00
---------
($71.01) / $1,000.00 x 100
Total Return: -7.10%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND A
TOTAL RETURN PERFORMANCE
ONE YEAR
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.14
Initial Shares 109.409
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 109.409 $0.000 0.000 109.517
- --------------------------------------------------------------------------------
Ending Shares 109.517
Ending NAV x $9.42
----------
Investment Return $1,031.65
Total Return Performance
- ------------------------
Investment Return $1,031.65
Less Initial Investment $1,000.00
---------
$31.65 / $1,000.00 x 100
Total Return: 3.17%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND A
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.50
Initial Shares 95.238
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 95.238 $0.010 0.088 95.326
- --------------------------------------------------------------------------------
1995 95.326 $0.287 2.948 98.274
- --------------------------------------------------------------------------------
1996 98.274 $0.010 0.097 98.371
- --------------------------------------------------------------------------------
Ending Shares 98.371
Ending NAV x $9.42
----------
Investment Return $926.65
Total Return Performance
- ------------------------
Investment Return $926.65
Less Initial Investment $1,000.00
---------
($73.35) / $1,000.00 x 100
Total Return: -7.34%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.69
Initial Shares 103.199
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 103.199 $0.000 0.000 103.199
- --------------------------------------------------------------------------------
Ending Shares 103.199
Ending NAV x $9.68
----------
$998.97
Less CDSC $40.00
----------
Investment Return $958.97
Total Return Performance
- ------------------------
Investment Return $958.97
Less Initial Investment $1,000.00
---------
($41.03) / $1,000.00 x 100
Total Return: -4.10%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.69
Initial Shares 103.199
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 103.199 $0.000 0.000 103.199
- --------------------------------------------------------------------------------
Ending Shares 103.199
Ending NAV x $9.68
----------
Investment Return $998.97
Total Return Performance
- ------------------------
Investment Return $998.97
Less Initial Investment $1,000.00
---------
($1.03) / $1,000.00 x 100
Total Return: -0.10%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.39
Initial Shares 96.246
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 96.246 $0.000 96.246 96.246
- --------------------------------------------------------------------------------
Ending Shares 96.246
Ending NAV x $9.68
----------
$931.66
Less CDSC $37.27
----------
Investment Return $894.39
Total Return Performance
- ------------------------
Investment Return $894.39
Less Initial Investment $1,000.00
---------
($105.61) / $1,000.00 x 100
Total Return: -10.56%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.39
Initial Shares 96.246
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 96.246 $0.000 0.000 96.246
- --------------------------------------------------------------------------------
Ending Shares 96.246
Ending NAV x $9.68
----------
Investment Return $931.66
Total Return Performance
- ------------------------
Investment Return $931.66
Less Initial Investment $1,000.00
---------
($68.34) / $1,000.00 x 100
Total Return: -6.83%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.98
Initial Shares 100.200
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 100.200 $0.000 0.000 100.200
- --------------------------------------------------------------------------------
Ending Shares 100.200
Ending NAV x $9.68
----------
$969.94
Less CDSC $38.80
----------
Investment Return $931.14
Total Return Performance
- ------------------------
Investment Return $931.14
Less Initial Investment $1,000.00
---------
($68.86) / $1,000.00 x 100
Total Return: -6.89%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.98
Initial Shares 100.200
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 100.200 $0.000 0.000 100.200
- --------------------------------------------------------------------------------
Ending Shares 100.200
Ending NAV x $9.68
----------
Investment Return $969.94
Total Return Performance
- ------------------------
Investment Return $969.94
Less Initial Investment $1,000.00
---------
($30.06) / $1,000.00 x 100
Total Return: -3.01%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND B
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.01
Initial Shares 110.988
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 110.988 $0.010 0.106 111.094
- --------------------------------------------------------------------------------
Ending Shares 111.094
Ending NAV x $9.68
----------
$1,075.39
Less CDSC $40.00
----------
Investment Return $1,035.39
Total Return Performance
- ------------------------
Investment Return $1,035.39
Less Initial Investment $1,000.00
---------
$35.39 / $1,000.00 x 100
Total Return: 3.54%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND B
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.01
Initial Shares 110.988
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 110.988 $0.010 0.106 111.094
- --------------------------------------------------------------------------------
Ending Shares 111.094
Ending NAV x $9.68
----------
Investment Return $1,075.39
Total Return Performance
- ------------------------
Investment Return $1,075.39
Less Initial Investment $1,000.00
---------
$75.39 / $1,000.00 x 100
Total Return: 7.54%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1995 100.000 $0.287 2.977 102.977
- --------------------------------------------------------------------------------
1996 102.977 $0.010 0.098 103.075
- --------------------------------------------------------------------------------
Ending Shares 103.075
Ending NAV x $9.68
----------
$997.77
Less CDSC $29.04
----------
Investment Return $968.73
Total Return Performance
- ------------------------
Investment Return $968.73
Less Initial Investment $1,000.00
---------
($31.27) / $1,000.00 x 100
Total Return: -3.13%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1995 100.000 $0.287 2.977 102.977
- --------------------------------------------------------------------------------
1996 102.977 $0.010 0.098 103.075
- --------------------------------------------------------------------------------
Ending Shares 103.075
Ending NAV x $9.68
----------
Investment Return $997.77
Total Return Performance
- ------------------------
Investment Return $997.77
Less Initial Investment $1,000.00
---------
$2.23 / $1,000.00 x 100
Total Return: -0.22%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.50
Initial Shares 105.263
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 105.263 $0.000 0.000 105.263
- --------------------------------------------------------------------------------
Ending Shares 105.263
Ending NAV x $9.49
----------
$998.95
Less CDSC $10.00
----------
Investment Return $988.95
Total Return Performance
- ------------------------
Investment Return $988.95
Less Initial Investment $1,000.00
---------
($11.05) / $1,000.00 x 100
Total Return: -1.10%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.50
Initial Shares 105.263
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 105.263 $0.000 0.000 105.263
- --------------------------------------------------------------------------------
Ending Shares 105.263
Ending NAV x $9.49
----------
Investment Return $998.95
Total Return Performance
- ------------------------
Investment Return $998.95
Less Initial Investment $1,000.00
---------
($1.05) / $1,000.00 x 100
Total Return: -0.11%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.18
Initial Shares 98.232
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 98.232 $0.000 98.232 98.232
- --------------------------------------------------------------------------------
Ending Shares 98.232
Ending NAV x $9.49
----------
$932.22
Less CDSC $9.32
----------
Investment Return $922.90
Total Return Performance
- ------------------------
Investment Return $922.90
Less Initial Investment $1,000.00
---------
($77.10) / $1,000.00 x 100
Total Return: -7.71%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.18
Initial Shares 98.232
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 98.232 $0.000 0.000 98.232
- --------------------------------------------------------------------------------
Ending Shares 98.232
Ending NAV x $9.49
----------
Investment Return $932.22
Total Return Performance
- ------------------------
Investment Return $932.22
Less Initial Investment $1,000.00
---------
($67.78) / $1,000.00 x 100
Total Return: -6.78%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.78
Initial Shares 102.249
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 102.249 $0.000 0.000 102.249
- --------------------------------------------------------------------------------
Ending Shares 102.249
Ending NAV x $9.49
----------
$970.34
Less CDSC $9.70
----------
Investment Return $960.64
Total Return Performance
- ------------------------
Investment Return $960.64
Less Initial Investment $1,000.00
---------
($39.36) / $1,000.00 x 100
Total Return: -3.94%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.78
Initial Shares 102.249
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 102.249 $0.000 0.000 102.249
- --------------------------------------------------------------------------------
Ending Shares 102.249
Ending NAV x $9.49
----------
Investment Return $970.34
Total Return Performance
- ------------------------
Investment Return $970.34
Less Initial Investment $1,000.00
---------
($29.66) / $1,000.00 x 100
Total Return: -2.97%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND C
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.83
Initial Shares 113.250
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 113.250 $0.010 0.110 113.360
- --------------------------------------------------------------------------------
Ending Shares 113.360
Ending NAV x $9.49
----------
$1,075.79
Less CDSC $10.00
----------
Investment Return $1,065.79
Total Return Performance
- ------------------------
Investment Return $1,065.79
Less Initial Investment $1,000.00
---------
$65.79 / $1,000.00 x 100
Total Return: 6.58%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND C
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.83
Initial Shares 113.250
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 113.250 $0.010 0.110 113.360
- --------------------------------------------------------------------------------
Ending Shares 113.360
Ending NAV x $9.49
----------
Investment Return $1,075.79
Total Return Performance
- ------------------------
Investment Return $1,075.79
Less Initial Investment $1,000.00
---------
$75.79 / $1,000.00 x 100
Total Return: 7.58%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1995 100.000 $0.287 3.034 103.034
- --------------------------------------------------------------------------------
1996 103.034 $0.010 0.100 103.134
- --------------------------------------------------------------------------------
Ending Shares 103.134
Ending NAV x $9.49
----------
$978.74
Less CDSC $0.00
----------
Investment Return $978.74
Total Return Performance
- ------------------------
Investment Return $978.74
Less Initial Investment $1,000.00
---------
($21.26) / $1,000.00 x 100
Total Return: -2.13%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1995 100.000 $0.287 3.034 103.034
- --------------------------------------------------------------------------------
1996 103.034 $0.010 0.100 103.134
- --------------------------------------------------------------------------------
Ending Shares 103.134
Ending NAV x $9.49
----------
Investment Return $978.74
Total Return Performance
- ------------------------
Investment Return $978.74
Less Initial Investment $1,000.00
---------
($21.26) / $1,000.00 x 100
Total Return: -2.13%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
THREE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.51
Initial Shares 105.152
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 105.152 $0.000 0.000 105.152
- --------------------------------------------------------------------------------
Ending Shares 105.152
Ending NAV x $9.53
----------
Investment Return $1,002.10
Total Return Performance
- ------------------------
Investment Return $1,002.10
Less Initial Investment $1,000.00
---------
$2.10 / $1,000.00 x 100
Total Return: 0.21%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
SIX MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.17
Initial Shares 98.328
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 98.328 $0.000 0.000 98.328
- --------------------------------------------------------------------------------
Ending Shares 98.38
Ending NAV x $9.53
----------
Investment Return $937.07
Total Return Performance
- ------------------------
Investment Return $937.07
Less Initial Investment $1,000.00
---------
($62.93) / $1,000.00 x 100
Total Return: -6.29%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
NINE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.75
Initial Shares 102.564
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 102.564 $0.000 0.000 102.564
- --------------------------------------------------------------------------------
Ending Shares 102.564
Ending NAV x $9.53
----------
Investment Return $977.43
Total Return Performance
- ------------------------
Investment Return $977.43
Less Initial Investment $1,000.00
---------
($22.57) / $1,000.00 x 100
Total Return: -2.26%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
ONE YEAR
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.77
Initial Shares 114.025
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 114.025 $0.010 0.111 114.136
- --------------------------------------------------------------------------------
Ending Shares 114.136
Ending NAV x $9.53
----------
Investment Return $1,087.72
Total Return Performance
- ------------------------
Investment Return $1,087.72
Less Initial Investment $1,000.00
---------
$87.72 / $1,000.00 x 100
Total Return: 8.77%
<PAGE>
DELAWARE GROUP NEW PACIFIC FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.000 0.000 100.000
- --------------------------------------------------------------------------------
1995 100.000 $0.287 -7.466 92.534
- --------------------------------------------------------------------------------
1996 92.534 $0.010 0.090 92.624
- --------------------------------------------------------------------------------
Ending Shares 92.624
Ending NAV x $9.53
----------
Investment Return $882.71
Total Return Performance
- ------------------------
Investment Return $882.71
Less Initial Investment $1,000.00
---------
($117.29) / $1,000.00 x 100
Total Return: -11.73%
<PAGE>
DELAWARE GROUP FEDERAL BOND FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $985.06
T = -1.49%
LIFE
OF FUND
- ----------------
2.91232876
$1000(1 - T) = $ 1,065.38
T = 2.20%
<PAGE>
DELAWARE GROUP FEDERAL BOND FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $1,034.31
T = 3.43%
LIFE
OF FUND
- ----------------
2.91232876
$1000(1 - T) = $ 1,118.71
T = 3.93%
<PAGE>
DELAWARE GROUP FEDERAL BOND FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $ 988.29
T = -1.17%
LIFE
OF FUND
- ----------------
2.26575342
$1000(1 - T) = $ 1,119.03
T = 5.09%
<PAGE>
DELAWARE GROUP FEDERAL BOND FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $1,027.58
T = 2.76%
LIFE
OF FUND
- ----------------
2.26575342
$1000(1 - T) = $ 1,149.03
T = 6.32%
<PAGE>
DELAWARE GROUP FEDERAL BOND FUND C
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $1,017.53
T = 1.75%
LIFE
OF FUND
- ----------------
2.32054795
$1000(1 - T) = $ 1,138.39
T = 5.74%
<PAGE>
DELAWARE GROUP FEDERAL BOND FUND C
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $1,027.35
T = 2.74%
LIFE
OF FUND
- ----------------
2.32054795
$1000(1 - T) = $ 1,138.39
T = 5.74%
<PAGE>
DELAWARE GROUP FEDERAL BOND FUND INSTITUTIONAL
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------
1
$1000(1 - T) = $1,005.95
T = .60%
LIFE
OF FUND
- ----------------
2.74246575
$1000(1 - T) = $ 1,088.76
T = 3.15%
<PAGE>
DELAWARE GROUP FEDERAL BOND FUND A
TOTAL RETURN PERFORMANCE
THREE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.91
Initial Shares 100.908
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 100.908 $0.155 1.660 102.568
- --------------------------------------------------------------------------------
Ending Shares 102.568
Ending NAV x $9.60
----------
Investment Return $984.65
Total Return Performance
- ------------------------
Investment Return $984.65
Less Initial Investment $1,000.00
---------
($15.35) / $1,000.00 x 100
Total Return: -1.53%
<PAGE>
DELAWARE GROUP FEDERAL BOND FUND A
TOTAL RETURN PERFORMANCE
SIX MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.95
Initial Shares 100.5025
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 100.503 $0.280 3.013 103.516
- --------------------------------------------------------------------------------
Ending Shares 103.516
Ending NAV x $9.60
----------
Investment Return $993.75
Total Return Performance
- ------------------------
Investment Return $993.75
Less Initial Investment $1,000.00
---------
($6.25) / $1,000.00 x 100
Total Return: -0.63%
<PAGE>
DELAWARE GROUP FEDERAL BOND FUND A
TOTAL RETURN PERFORMANCE
NINE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.52
Initial Shares 95.05703
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 95.057 $0.404 4.120 99.177
- --------------------------------------------------------------------------------
Ending Shares 99.177
Ending NAV x $9.60
----------
Investment Return $952.10
Total Return Performance
- ------------------------
Investment Return $952.10
Less Initial Investment $1,000.00
---------
($47.90) / $1,000.00 x 100
Total Return: -4.79%
<PAGE>
DELAWARE GROUP FEDERAL BOND FUND A
TOTAL RETURN PERFORMANCE
ONE YEAR
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.29
Initial Shares 97.18173
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 97.182 $0.523 5.428 102.610
- --------------------------------------------------------------------------------
Ending Shares 102.61
Ending NAV x $9.60
----------
Investment Return $985.06
Total Return Performance
- ------------------------
Investment Return $985.06
Less Initial Investment $1,000.00
---------
($14.94) / $1,000.00 x 100
Total Return: -1.49%
<PAGE>
DELAWARE GROUP FEDERAL BOND FUND A
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.50
Initial Shares 95.238
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 95.238 $0.366 3.754 98.992
- --------------------------------------------------------------------------------
1995 98.992 $0.569 6.114 105.106
- --------------------------------------------------------------------------------
1996 105.106 $0.523 5.871 110.977
- --------------------------------------------------------------------------------
Ending Shares 110.977
Ending NAV x $9.60
----------
Investment Return $1,065.38
Total Return Performance
- ------------------------
Investment Return $1,065.38
Less Initial Investment $1,000.00
---------
$65.38 / $1,000.00 x 100
Total Return: 6.54%
<PAGE>
DELAWARE GROUP FEDERAL BOND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.89
Initial Shares 101.112
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 101.112 $0.137 1.401 102.513
- --------------------------------------------------------------------------------
Ending Shares 102.513
Ending NAV x $10.07
----------
$1,032.31
Less CDSC $40.00
----------
Investment Return $992.31
Total Return Performance
- ------------------------
Investment Return $992.31
Less Initial Investment $1,000.00
---------
($7.69) / $1,000.00 x 100
Total Return: -0.77%
<PAGE>
DELAWARE GROUP FEDERAL BOND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.89
Initial Shares 101.112
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 101.112 $0.137 1.401 102.513
- --------------------------------------------------------------------------------
Ending Shares 102.513
Ending NAV x $10.07
----------
Investment Return $1,032.31
Total Return Performance
- ------------------------
Investment Return $1,032.31
Less Initial Investment $1,000.00
---------
$32.31 / $1,000.00 x 100
Total Return: 3.23%
<PAGE>
DELAWARE GROUP FEDERAL BOND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.92
Initial Shares 100.806
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 100.806 $0.244 103.312 103.312
- --------------------------------------------------------------------------------
Ending Shares 103.312
Ending NAV x $10.07
----------
$1,040.35
Less CDSC $40.00
----------
Investment Return $1,000.35
Total Return Performance
- ------------------------
Investment Return $1,000.35
Less Initial Investment $1,000.00
---------
$.35 / $1,000.00 x 100
Total Return: 0.04%
<PAGE>
DELAWARE GROUP FEDERAL BOND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.92
Initial Shares 100.806
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 100.806 $0.244 2.506 103.312
- --------------------------------------------------------------------------------
Ending Shares 103.312
Ending NAV x $10.07
----------
Investment Return $1,040.35
Total Return Performance
- ------------------------
Investment Return $1,040.35
Less Initial Investment $1,000.00
---------
$40.35 / $1,000.00 x 100
Total Return: 4.04%
<PAGE>
DELAWARE GROUP FEDERAL BOND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.48
Initial Shares 95.420
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 95.420 $0.351 3.414 98.834
- --------------------------------------------------------------------------------
Ending Shares 98.834
Ending NAV x $10.07
----------
$995.26
Less CDSC $38.44
----------
Investment Return $956.82
Total Return Performance
- ------------------------
Investment Return $956.82
Less Initial Investment $1,000.00
---------
($43.18) / $1,000.00 x 100
Total Return: -4.32%
<PAGE>
DELAWARE GROUP FEDERAL FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.48
Initial Shares 95.420
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 95.420 $0.351 3.414 98.834
- --------------------------------------------------------------------------------
Ending Shares 98.834
Ending NAV x $10.07
----------
Investment Return $995.26
Total Return Performance
- ------------------------
Investment Return $995.26
Less Initial Investment $1,000.00
---------
($4.74) / $1,000.00 x 100
Total Return: -0.47%
<PAGE>
DELAWARE GROUP FEDERAL BOND B
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.25
Initial Shares 97.561
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 97.561 $0.453 4.483 102.044
- --------------------------------------------------------------------------------
Ending Shares 102.044
Ending NAV x $10.07
$1,027.58
Less CDSC $39.29
----------
Investment Return $988.29
Total Return Performance
- ------------------------
Investment Return $988.29
Less Initial Investment $1,000.00
---------
($11.71) / $1,000.00 x 100
Total Return: -1.17%
<PAGE>
DELAWARE GROUP FEDERAL BOND B
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.25
Initial Shares 97.561
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 97.561 $0.453 4.483 102.044
- --------------------------------------------------------------------------------
Ending Shares 102.044
Ending NAV x $10.07
----------
Investment Return $1,027.58
Total Return Performance
- ------------------------
Investment Return $1,027.58
Less Initial Investment $1,000.00
---------
$27.58 / $1,000.00 x 100
Total Return: 2.76%
<PAGE>
DELAWARE GROUP FEDERAL BOND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.106 1.075 101.075
- --------------------------------------------------------------------------------
1995 101.075 $0.751 8.018 109.093
- --------------------------------------------------------------------------------
1996 109.093 $0.453 5.011 114.104
- --------------------------------------------------------------------------------
Ending Shares 114.104
Ending NAV x $10.07
----------
$1,149.03
Less CDSC $30.00
----------
Investment Return $1,119.03
Total Return Performance
- ------------------------
Investment Return $1,119.03
Less Initial Investment $1,000.00
---------
$119.03 / $1,000.00 x 100
Total Return: 11.90%
<PAGE>
DELAWARE GROUP FEDERAL BOND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.106 1.075 101.075
- --------------------------------------------------------------------------------
1995 101.075 $0.751 8.018 109.093
- --------------------------------------------------------------------------------
1996 109.093 $0.453 5.011 114.104
- --------------------------------------------------------------------------------
Ending Shares 114.104
Ending NAV x $10.07
----------
Investment Return $1,149.03
Total Return Performance
- ------------------------
Investment Return $1,149.03
Less Initial Investment $1,000.00
---------
$149.03 / $1,000.00 x 100
Total Return: 14.90%
<PAGE>
DELAWARE GROUP FEDERAL BOND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.02
----------
Initial Shares 99.800
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 99.800 $0.137 1.365 101.165
- --------------------------------------------------------------------------------
Ending Shares 101.165
Ending NAV x $10.20
----------
$1,031.88
Less CDSC $10.00
----------
Investment Return $1,021.88
Total Return Performance
- ------------------------
Investment Return $1,021.88
Less Initial Investment $1,000.00
---------
$21.88 / $1,000.00 x 100
Total Return: 2.19%
<PAGE>
DELAWARE GROUP FEDERAL BOND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.02
Initial Shares 99.800
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 99.800 $0.137 1.365 101.165
- --------------------------------------------------------------------------------
Ending Shares 101.165
Ending NAV x $10.20
----------
Investment Return $1,031.88
Total Return Performance
- ------------------------
Investment Return $1,031.88
Less Initial Investment $1,000.00
---------
$31.88 / $1,000.00 x 100
Total Return: 3.19%
<PAGE>
DELAWARE GROUP FEDERAL BOND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.05
----------
Initial Shares 99.502
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 99.502 $0.244 101.945 101.945
- --------------------------------------------------------------------------------
Ending Shares 101.945
Ending NAV x $10.20
----------
$1,039.84
Less CDSC $10.00
----------
Investment Return $1,029.84
Total Return Performance
- ------------------------
Investment Return $1,029.84
Less Initial Investment $1,000.00
---------
$29.84 / $1,000.00 x 100
Total Return: 2.98%
<PAGE>
DELAWARE GROUP FEDERAL BOND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.05
Initial Shares 99.502
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 99.502 $0.244 2.433 101.945
- --------------------------------------------------------------------------------
Ending Shares 101.945
Ending NAV x $10.20
----------
Investment Return $1,039.84
Total Return Performance
- ------------------------
Investment Return $1,039.84
Less Initial Investment $1,000.00
---------
$39.84 / $1,000.00 x 100
Total Return: 3.98%
<PAGE>
DELAWARE GROUP FEDERAL BOND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.62
Initial Shares 94.162
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 94.162 $0.351 3.325 97.487
- --------------------------------------------------------------------------------
Ending Shares 97.487
Ending NAV x $10.20
---------
$ 994.37
Less CDSC $9.61
----------
Investment Return $984.76
Total Return Performance
- ------------------------
Investment Return $984.76
Less Initial Investment $1,000.00
---------
($15.24) / $1,000.00 x 100
Total Return: -1.52%
<PAGE>
DELAWARE GROUP FEDERAL BOND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.48
Initial Shares 95.420
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 95.420 $0.351 2.067 97.487
- --------------------------------------------------------------------------------
Ending Shares 97.487
Ending NAV x $10.20
---------
Investment Return $994.37
Total Return Performance
- ------------------------
Investment Return $994.37
Less Initial Investment $1,000.00
---------
($5.63) / $1,000.00 x 100
Total Return: -0.56%
<PAGE>
DELAWARE GROUP FEDERAL BOND C
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.38
Initial Shares 96.339
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 96.339 $0.454 4.382 100.721
- --------------------------------------------------------------------------------
Ending Shares 100.721
Ending NAV x $10.20
---------
$1,027.35
Less CDSC $9.82
---------
Investment Return $1,017.53
Total Return Performance
- ------------------------
Investment Return $1,017.53
Less Initial Investment $1,000.00
---------
$17.53 / $1,000.00 x 100
Total Return: 1.75%
<PAGE>
DELAWARE GROUP FEDERAL BOND C
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.38
Initial Shares 96.339
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 96.339 $0.454 4.382 100.721
- --------------------------------------------------------------------------------
Ending Shares 100.721
Ending NAV x $10.20
---------
Investment Return $1,027.35
Total Return Performance
- ------------------------
Investment Return $1,027.35
Less Initial Investment $1,000.00
---------
$27.35 / $1,000.00 x 100
Total Return: 2.74%
<PAGE>
DELAWARE GROUP FEDERAL BOND C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.141 1.425 101.425
- --------------------------------------------------------------------------------
1995 101.425 $0.513 5.325 106.750
- --------------------------------------------------------------------------------
1996 106.750 $0.454 4.857 111.607
- --------------------------------------------------------------------------------
Ending Shares 111.607
Ending NAV x $10.20
---------
$1,138.39
Less CDSC $0.00
---------
Investment Return $1,138.39
Total Return Performance
- ------------------------
Investment Return $1,138.39
Less Initial Investment $1,000.00
---------
$138.39 / $1,000.00 x 100
Total Return: 13.84%
<PAGE>
DELAWARE GROUP FEDERAL BOND C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.141 1.425 101.425
- --------------------------------------------------------------------------------
1996 101.425 $0.513 5.325 106.750
- --------------------------------------------------------------------------------
1996 106.750 $0.454 4.857 111.607
- --------------------------------------------------------------------------------
Ending Shares 111.607
Ending NAV x $10.20
---------
Investment Return $1,138.39
Total Return Performance
- ------------------------
Investment Return $1,138.39
Less Initial Investment $1,000.00
---------
$138.39 / $1,000.00 x 100
Total Return: 13.84%
<PAGE>
DELAWARE GROUP FEDERAL BOND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
THREE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.95
Initial Shares 111.732
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 111.732 $0.162 2.029 113.761
- --------------------------------------------------------------------------------
Ending Shares 113.761
Ending NAV x $ 9.09
---------
Investment Return $1,034.09
Total Return Performance
- ------------------------
Investment Return $1,034.09
Less Initial Investment $1,000.00
---------
B $34.09 / $1,000.00 x 100
Total Return: 3.41%
<PAGE>
DELAWARE GROUP FEDERAL BOND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
SIX MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $ 8.99
Initial Shares 111.235
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 111.235 $0.295 3.706 114.941
- --------------------------------------------------------------------------------
Ending Shares 114.941
Ending NAV x $ 9.09
---------
Investment Return $1,044.81
Total Return Performance
- ------------------------
Investment Return $1,044.81
Less Initial Investment $1,000.00
---------
$44.81 / $1,000.00 x 100
Total Return: 4.48%
<PAGE>
DELAWARE GROUP FEDERAL BOND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
NINE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $ 9.51
Initial Shares 105.152
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 105.152 $0.427 5.086 110.238
- --------------------------------------------------------------------------------
Ending Shares 110.238
Ending NAV x $ 9.09
---------
Investment Return $1,002.06
Total Return Performance
- ------------------------
Investment Return $1,002.06
Less Initial Investment $1,000.00
---------
$ 2.06 / $1,000.00 x 100
Total Return: 0.21%
<PAGE>
DELAWARE GROUP FEDERAL BOND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
ONE YEAR
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $ 9.60
Initial Shares 104.167
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 104.167 $0.554 6.499 110.666
- --------------------------------------------------------------------------------
Ending Shares 110.666
Ending NAV x $ 9.09
---------
Investment Return $1,005.95
Total Return Performance
- ------------------------
Investment Return $1,005.95
Less Initial Investment $1,000.00
---------
$ 5.95 / $1,000.00 x 100
Total Return: 0.60%
<PAGE>
DELAWARE GROUP FEDERAL BOND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.334 3.620 103.620
- --------------------------------------------------------------------------------
1995 103.620 $0.781 9.121 112.741
- --------------------------------------------------------------------------------
1996 112.741 $0.554 7.035 119.776
- --------------------------------------------------------------------------------
Ending Shares 119.776
Ending NAV x $ 9.09
---------
Investment Return $1,088.76
Total Return Performance
- ------------------------
Investment Return $1,088.76
Less Initial Investment $1,000.00
---------
$88.76 / $1,000.00 x 100
Total Return: 8.88%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------------
1
$1000(1 - T) = $ 997.99
T = -0.20%
LIFE
OF FUND
- ----------------
2.91232876
$1000(1 - T) = $1,092.47
T = 3.08%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------------
1
$1000(1 - T) = $1,048.10
T = 4.81%
LIFE
OF FUND
- ----------------
2.91232876
$1000(1 - T) = $1,147.07
T = 4.82%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------------
1
$1000(1 - T) = $1,001.99
T = 0.20%
LIFE
OF FUND
- ----------------
2.47671233
$1000(1 - T) = $1,190.24
T = 7.28%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------------
1
$1000(1 - T) = $1,041.60
T = 4.16%
LIFE
OF FUND
- ----------------
2.47671233
$1000(1 - T) = $1,220.24
T = 8.37%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND C
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------------
1
$1000(1 - T) = $1,030.66
T = 3.07%
LIFE
OF FUND
- ----------------
2.13150685
$1000(1 - T) = $1,197.55
T = 8.83%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND C
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------------
1
$1000(1 - T) = $1,040.55
T = 4.06%
LIFE
OF FUND
- ----------------
2.13150685
$1000(1 - T) = $1,197.55
T = 8.83%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------------
1
$1000(1 - T) = $1,048.10
T = 4.81%
LIFE
OF FUND
- ----------------
2.91232876
$1000(1 - T) = $1,147.07
T = 4.82%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------------
1
$1000(1 - T) = $1,001.99
T = 0.20%
LIFE
OF FUND
- ----------------
2.47671233
$1000(1 - T) = $1,1990.24
T = 7.28%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------------
1
$1000(1 - T) = $1,041.60
T = 4.16%
LIFE
OF FUND
- ----------------
2.47671233
$1000(1 - T) = $1,220.24
T = 8.37%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND C
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------------
1
$1000(1 - T) = $1,030.66
T = 3.07%
LIFE
OF FUND
- ----------------
2.13150685
$1000(1 - T) = $1,197.55
T = 8.83%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND INSTITUTIONAL
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------------
1
$1000(1 - T) = $1,051.88
T = 5.19%
LIFE
OF FUND
- ----------------
2.74246575
$1000(1 - T) = $1,153.82
T = 5.36%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND A
TOTAL RETURN PERFORMANCE
THREE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.85
Initial Shares 101.523
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 101.523 $0.156 1.684 103.207
- --------------------------------------------------------------------------------
Ending Shares 103.207
Ending NAV x $9.62
----------
Investment Return $992.85
Total Return Performance
- -----------------
Investment Return $992.85
Less Initial Investment $1,000.00
----------
($7.15) / $1,000.00 x 100
Total Return: -0.72%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND A
TOTAL RETURN PERFORMANCE
SIX MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.87
Initial Shares 101.3171
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 101.317 $0.300 3.266 104.583
- --------------------------------------------------------------------------------
Ending Shares 104.583
Ending NAV x $9.62
----------
Investment Return $1,006.90
Total Return Performance
- -----------------
Investment Return $1,006.90
Less Initial Investment $1,000.00
----------
$6.09 / $1,000.00 x 100
Total Return: 0.61%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND A
TOTAL RETURN PERFORMANCE
NINE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.51
Initial Shares 95.14748
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 95.147 $0.443 4.548 99.695
- --------------------------------------------------------------------------------
Ending Shares 99.695
Ending NAV x $9.62
----------
Investment Return $959.07
Total Return Performance
- -----------------
Investment Return $959.07
Less Initial Investment $1,000.00
----------
($40.93) / $1,000.00 x 100
Total Return: -4.09%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND A
TOTAL RETURN PERFORMANCE
ONE YEAR
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.25
Initial Shares 97.56098
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 97.561 $0.590 6.180 103.741
- --------------------------------------------------------------------------------
Ending Shares 103.741
Ending NAV x $9.62
----------
Investment Return $997.99
Total Return Performance
- -----------------
Investment Return $997.99
Less Initial Investment $1,000.00
----------
($2.01) / $1,000.00 x 100
Total Return: -0.20%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND A
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.50
Initial Shares 95.238
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 95.238 $0.509 5.381 100.619
- --------------------------------------------------------------------------------
1995 100.619 $0.558 6.178 106.797
- --------------------------------------------------------------------------------
1996 106.797 $0.590 6.765 113.562
- --------------------------------------------------------------------------------
Ending Shares 113.562
Ending NAV x $9.62
----------
Investment Return $1,092.47
Total Return Performance
- -----------------
Investment Return $1,092.47
Less Initial Investment $1,000.00
----------
$92.47 / $1,000.00 x 100
Total Return: 9.25%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.08
Initial Shares 99.206
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 99.206 $0.138 1.347 100.553
- --------------------------------------------------------------------------------
Ending Shares 100.553
Ending NAV x $10.35
----------
$1,040.72
Less CDSC $40.00
---------
Investment Return $1,000.72
Total Return Performance
- -----------------
Investment Return $1,000.72
Less Initial Investment $1,000.00
----------
$0.72 / $1,000.00 x 100
Total Return: 0.07%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.08
Initial Shares 99.206
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 99.206 $0.138 1.347 100.553
- --------------------------------------------------------------------------------
Ending Shares 100.553
Ending NAV x $10.35
----------
Investment Return $1,040.72
Total Return Performance
- -----------------
Investment Return $1,040.72
Less Initial Investment $1,000.00
----------
$40.72 / $1,000.00 x 100
Total Return: 4.07%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.09
Initial Shares 99.108
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 99.108 $0.264 101.717 101.717
- --------------------------------------------------------------------------------
Ending Shares 100.717
Ending NAV x $10.35
----------
$1,052.77
Less CDSC $40.00
---------
Investment Return $1,012.77
Total Return Performance
- -----------------
Investment Return $1,012.77
Less Initial Investment $1,000.00
----------
$12.77 / $1,000.00 x 100
Total Return: 1.28%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.09
Initial Shares 99.108
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 99.108 $0.264 2.609 101.717
- --------------------------------------------------------------------------------
Ending Shares 100.717
Ending NAV x $10.35
----------
Investment Return $1,052.77
Total Return Performance
- -----------------
Investment Return $1,052.77
Less Initial Investment $1,000.00
----------
$52.77 / $1,000.00 x 100
Total Return: 5.28%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.72
Initial Shares 93.284
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 93.284 $0.390 3.641 96.925
- --------------------------------------------------------------------------------
Ending Shares 96.925
Ending NAV x $10.35
----------
$1,003.17
Less CDSC $38.62
---------
Investment Return $964.55
Total Return Performance
- -----------------
Investment Return $964.55
Less Initial Investment $1,000.00
----------
($35.45) / $1,000.00 x 100
Total Return: -3.55%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.72
Initial Shares 93.284
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 93.284 $0.390 3.641 96.925
- --------------------------------------------------------------------------------
Ending Shares 96.925
Ending NAV x $10.35
----------
Investment Return $1,003.17
Total Return Performance
- -----------------
Investment Return $1,003.17
Less Initial Investment $1,000.00
----------
$3.17 / $1,000.00 x 100
Total Return: 0.32%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND B
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.45
Initial Shares 95.694
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 95.694 $0.519 4.944 100.638
- --------------------------------------------------------------------------------
Ending Shares 100.638
Ending NAV x $10.35
----------
$1,041.60
Less CDSC $39.61
---------
Investment Return $1,001.99
Total Return Performance
- -----------------
Investment Return $1,001.99
Less Initial Investment $1,000.00
----------
$1.99 / $1,000.00 x 100
Total Return: 0.20%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND B
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.45
Initial Shares 95.694
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 95.694 $0.519 4.944 100.638
- --------------------------------------------------------------------------------
Ending Shares 100.638
Ending NAV x $10.35
----------
Investment Return $1,041.60
Total Return Performance
- -----------------
Investment Return $1,041.60
Less Initial Investment $1,000.00
----------
$41.60 / $1,000.00 x 100
Total Return: 4.16%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.281 2.857 102.857
- --------------------------------------------------------------------------------
1995 102.857 $0.847 9.249 112.106
- --------------------------------------------------------------------------------
1996 112.106 $0.519 5.792 117.898
- --------------------------------------------------------------------------------
Ending Shares 117.898
Ending NAV x $10.35
----------
$1,220.24
Less CDSC $30.00
---------
Investment Return $1,190.24
Total Return Performance
- -----------------
Investment Return $1,190.24
Less Initial Investment $1,000.00
----------
$190.24 / $1,000.00 x 100
Total Return: 19.02%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.281 2.857 102.857
- --------------------------------------------------------------------------------
1995 102.857 $0.847 9.249 112.106
- --------------------------------------------------------------------------------
1996 112.106 $0.519 5.792 117.898
- --------------------------------------------------------------------------------
Ending Shares 117.898
Ending NAV x $10.35
----------
Investment Return $1,220.24
Total Return Performance
- -----------------
Investment Return $1,220.24
Less Initial Investment $1,000.00
----------
$220.24 / $1,000.00 x 100
Total Return: 22.02%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.06
Initial Shares 99.404
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 99.404 $0.138 1.352 100.756
- --------------------------------------------------------------------------------
Ending Shares 100.756
Ending NAV x $10.33
----------
$1,040.81
Less CDSC $10.00
---------
Investment Return $1,030.81
Total Return Performance
- -----------------
Investment Return $1,030.81
Less Initial Investment $1,000.00
----------
$30.81 / $1,000.00 x 100
Total Return: 3.08%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.06
Initial Shares 99.404
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 99.404 $0.138 1.352 100.756
- --------------------------------------------------------------------------------
Ending Shares 100.756
Ending NAV x $10.33
----------
Investment Return $1,040.81
Total Return Performance
- -----------------
Investment Return $1,040.81
Less Initial Investment $1,000.00
----------
$40.81 / $1,000.00 x 100
Total Return: 4.08%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.08
Initial Shares 99.206
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 99.206 $0.264 2.617 101.823
- --------------------------------------------------------------------------------
Ending Shares 101.823
Ending NAV x $10.33
----------
$1,051.83
Less CDSC $10.00
---------
Investment Return $1,041.83
Total Return Performance
- -----------------
Investment Return $1,041.83
Less Initial Investment $1,000.00
----------
$41.83 / $1,000.00 x 100
Total Return: 4.18%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.08
Initial Shares 99.206
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 99.206 $0.264 2.617 101.823
- --------------------------------------------------------------------------------
Ending Shares 101.823
Ending NAV x $10.33
----------
Investment Return $1,051.83
Total Return Performance
- -----------------
Investment Return $1,051.83
Less Initial Investment $1,000.00
----------
$51.83 / $1,000.00 x 100
Total Return: 5.18%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.71
Initial Shares 93.371
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 93.371 $0.390 3.649 97.020
- --------------------------------------------------------------------------------
Ending Shares 97.020
Ending NAV x $10.33
----------
$1,002.22
Less CDSC $9.65
---------
Investment Return $992.57
Total Return Performance
- -----------------
Investment Return $992.57
Less Initial Investment $1,000.00
----------
($7.43) / $1,000.00 x 100
Total Return: -0.74%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.71
Initial Shares 93.371
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 93.371 $0.390 3.649 97.020
- --------------------------------------------------------------------------------
Ending Shares 97.020
Ending NAV x $10.33
----------
Investment Return $1,002.22
Total Return Performance
- -----------------
Investment Return $1,002.22
Less Initial Investment $1,000.00
----------
$2.22 / $1,000.00 x 100
Total Return: 0.22%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND C
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.44
Initial Shares 95.785
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 95.785 $0.518 4.946 100.731
- --------------------------------------------------------------------------------
Ending Shares 100.731
Ending NAV x $10.33
----------
$1,040.55
Less CDSC $9.89
---------
Investment Return $1,030.66
Total Return Performance
- -----------------
Investment Return $1,030.66
Less Initial Investment $1,000.00
----------
$30.66 / $1,000.00 x 100
Total Return: 3.07%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND C
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.44
Initial Shares 95.785
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 95.785 $0.518 4.946 100.731
- --------------------------------------------------------------------------------
Ending Shares 100.731
Ending NAV x $10.33
----------
Investment Return $1,040.55
Total Return Performance
- -----------------
Investment Return $1,040.55
Less Initial Investment $1,000.00
----------
$40.55 / $1,000.00 x 100
Total Return: 4.06%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.092 0.936 100.936
- --------------------------------------------------------------------------------
1995 100.936 $0.869 9.298 110.234
- --------------------------------------------------------------------------------
1996 110.234 $0.518 5.695 115.929
- --------------------------------------------------------------------------------
Ending Shares 115.929
Ending NAV x $10.33
----------
$1,197.55
Less CDSC $0.00
---------
Investment Return $1,197.55
Total Return Performance
- -----------------
Investment Return $1,197.55
Less Initial Investment $1,000.00
----------
$197.55 / $1,000.00 x 100
Total Return: 19.76%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.092 0.936 100.936
- --------------------------------------------------------------------------------
1995 100.936 $0.869 9.298 110.234
- --------------------------------------------------------------------------------
1996 110.234 $0.518 5.695 115.929
- --------------------------------------------------------------------------------
Ending Shares 115.929
Ending NAV x $10.33
----------
Investment Return $1,197.55
Total Return Performance
- -----------------
Investment Return $1,197.55
Less Initial Investment $1,000.00
----------
$197.55 / $1,000.00 x 100
Total Return: 19.76%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
THREE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.11
Initial Shares 109.769
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 109.769 $0.163 1.955 111.724
- --------------------------------------------------------------------------------
Ending Shares 111.724
Ending NAV x $9.34
----------
Investment Return $1,043.50
Total Return Performance
- -----------------
Investment Return $1,043.50
Less Initial Investment $1,000.00
----------
$43.50 / $1,000.00 x 100
Total Return: 4.35%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
SIX MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.14
Initial Shares 109.409
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 109.409 $0.314 3.806 113.215
- --------------------------------------------------------------------------------
Ending Shares 113.215
Ending NAV x $9.34
----------
Investment Return $1,057.43
Total Return Performance
- -----------------
Investment Return $1,057.43
Less Initial Investment $1,000.00
----------
$57.43 / $1,000.00 x 100
Total Return: 5.74%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
NINE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.72
Initial Shares 102.881
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 102.881 $0.465 5.323 108.204
- --------------------------------------------------------------------------------
Ending Shares 108.204
Ending NAV x $9.34
----------
Investment Return $1,010.63
Total Return Performance
- -----------------
Investment Return $1,010.63
Less Initial Investment $1,000.00
----------
$10.63 / $1,000.00 x 100
Total Return: 1.06%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
ONE YEAR
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.49
Initial Shares 105.374
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 105.374 $0.621 7.247 112.621
- --------------------------------------------------------------------------------
Ending Shares 112.621
Ending NAV x $9.34
----------
Investment Return $1,051.88
Total Return Performance
- -----------------
Investment Return $1,051.88
Less Initial Investment $1,000.00
----------
$51.88 / $1,000.00 x 100
Total Return: 5.19%
<PAGE>
DELAWARE GROUP CORPORATE INCOME FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.00
Initial Shares 100.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 100.000 $0.432 5.034 105.034
- --------------------------------------------------------------------------------
1995 105.034 $0.861 10.551 115.585
- --------------------------------------------------------------------------------
1996 115.585 $0.621 7.950 123.535
- --------------------------------------------------------------------------------
Ending Shares 123.535
Ending NAV x $9.34
----------
Investment Return $1,153.82
Total Return Performance
- -----------------
Investment Return $1,153.82
Less Initial Investment $1,000.00
----------
$153.82 / $1,000.00 x 100
Total Return: 15.38%
<PAGE>
POWER OF ATTORNEY
Each of the undersigned, a member of the Board of Directors of DELAWARE
GROUP ADVISER FUNDS, INC., 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 have executed this instrument as of
this 6th day of May, 1996.
/s/Walter P. Babich /s/W. Thacher Longstreth
- ------------------------- ------------------------------
Walter P. Babich W. Thacher Longstreth
/s/Anthony D. Knerr /s/Charles E. Peck
- ------------------------- ------------------------------
Anthony D. Knerr Charles E. Peck
/s/Ann R. Leven /s/Wayne A. Stork
- ------------------------- ------------------------------
Ann R. Leven Wayne A. Stork
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<SERIES>
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<NAME> WORLD GROWTH FUND A CLASS
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