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. 10 X
_____
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 12
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: March 1, 1999
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b)
_____ on (date) pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
X on March 1, 1999 pursuant to paragraph (a)(1)
_____
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate:
_____ This post-effective amendment designates a new effective
date for a previously filed post-effective amendment
Title of Securities Being Registered
------------------------------------
U.S. Growth Fund A Class
U.S. Growth Fund B Class
U.S. Growth Fund C Class
U.S. Growth Fund Institutional Class
Overseas Equity Fund A Class
Overseas Equity Fund B Class
Overseas Equity Fund C Class
Overseas Equity Fund Institutional Class
New Pacific Fund A Class
New Pacific Fund B Class
New Pacific Fund C Class
New Pacific Fund
Institutional Class
--- C O N T E N T S ---
This Post-Effective Amendment No. 10 to Registration
File No. 33-67490 includes the following:
1. Facing Page
2. Contents Page
3. Cross-Reference Sheets
4. Part A - Prospectuses
5. Part B - Statement of Additional Information
6. Part C - Other Information
7. Signatures
CROSS-REFERENCE SHEET*
----------------------
PART A
-------
Location in
Item No. Description Prospectuses
- -------- --------------- ------------
U.S. Growth Fund
A Class/
B Class/ Institutional
C Class Class
1 Front and Back Cover Pages Same Same
2 Risk/Return Summary; Fund Profile Fund Profile
Investments, Risks and
Performances
3 Risk/Return Summary; Fund Profile Fund Profile
Fee Table
4 Investment Objectives; How we manage How we manage
Principal Investment the Fund; the Fund;
Strategies and Related Implementation Implementation
Risks of investment of investment
objective and objective and
policies policies
5 Management's Discussion of
Performance N/A N/A
6 Management, Organization and Who manages Who manages
Capital Structure the Fund the Fund
7 Shareholder Information How to buy shares; How to buy shares;
How to redeem How to redeem
shares; shares;
Special services; Special services;
Dividends, Dividends,
distributions and distributions and
taxes taxes
all under About all under About
your account your account
8 Distribution
Arrangements Choosing a share class; About your
How to reduce sales account
charges under About
your account
9 Financial Highlights
Information Financial Highlights Financial Highlights
CROSS-REFERENCE SHEET*
----------------------
PART A
-------
Location in
Item No. Description Prospectuses
- -------- --------------- ------------
Overseas Equity Fund
A Class/
B Class/ Institutional
C Class Class
1 Front and Back Same Same
Cover Pages
2 Risk/Return Summary; Fund Profile Fund Profile
Investments, Risks
and Performances
3 Risk/Return Summary;
Fee Table Fund Profile Fund Profile
4 Investment Objectives; How we manage How we manage
Principal Investment the Fund; the Fund;
Strategies and Related Implementation Implementation
Risks of investment of investment
objective and objective and
policies policies
5 Management's Discussion
of Performance N/A N/A
6 Management, Organization Who manages Who manages
and Capital Structure the Fund the Fund
7 Shareholder Information How to buy shares; How to buy shares;
How to redeem How to redeem
shares; shares;
Special services; Special services;
Dividends, Dividends,
distributions distributions
and taxes and taxes
all under About all under About
your account your account
8 Distribution Arrangements Choosing a share About your
class; How to account
reduce sales
charges under
About your account
9 Financial Highlights
Information Financial Highlights Financial Highlights
CROSS-REFERENCE SHEET*
----------------------
PART A
-------
Location in
Item No. Description Prospectuses
- -------- --------------- ------------
New Pacific Fund
A Class/
B Class/ Institutional
C Class Class
1 Front and Back Cover Pages Same Same
2 Risk/Return Summary; Fund Profile Fund Profile
Investments, Risks
and Performances
3 Risk/Return Summary; Fund Profile Fund Profile
Fee Table
4 Investment Objectives; How we manage How we manage
Principal Investment the Fund; the Fund;
Strategies and Implementation Implementation
Related Risks of investment of investment
objective and objective and
policies policies
5 Management's Discussion
of Performance N/A N/A
6 Management, Organization Who manages Who manages
and Capital Structure the Fund the Fund
7 Shareholder Information How to buy shares; How to buy shares;
How to redeem shares; How to redeem shares;
Special services; Special services;
Dividends, Dividends,
distributions and distributions and
taxes all under taxes all under
About your account About your account
8 Distribution
Arrangements Choosing a share class; About your account
How to reduce sales
Charges under About
your account
9 Financial Highlights
Information Financial Highlights Financial Highlights
CROSS-REFERENCE SHEET*
----------------------
PART B
-------
Location in Statement
Item No. Description of Additional Information
- -------- --------------- -------------------------
U.S. Growth Fund
Overseas Equity Fund
New Pacific Fund
10 Cover Page and Table of Contents Same
11 Fund History General Information
12 Description of the Fund Investment Restrictions
and Its Investments and Risks and Policies
13 Management of the Fund Officers and Directors;
Purchasing Shares
14 Control Persons and
Principal Holders of Securities Officers and Directors
15 Investment Advisory and Officers and Directors;
Other Services Purchasing Shares; Investment
Management Agreement;
General Information;
Financial Statements
16 Brokerage Allocation and Trading Practices
Other Practices and Brokerage
17 Capital Stock and Capitalization and
Other Securities Noncumulative Voting
(under General Information)
18 Purchase, Redemption and
Pricing of Shares Purchasing Shares; Redemption
and Exchange; Determining
Offering Price and Net Asset Value;
19 Taxation of the Fund Accounting and Tax Issues; Taxes
20 Underwriters Purchasing Shares
21 Calculation of Performance Data Performance Information
22 Financial Statements Financial Statements
CROSS-REFERENCE SHEET*
----------------------
PART C
-------
Location in
Item No. Description Part C
- -------- --------------- ------------
23 Exhibits Item 23
24 Persons Controlled by or under Common
Control with Registrant Item 24
25 Indemnification Item 25
26 Business and Other Connections of the
Investment Adviser Item 26
27 Principal Underwriters Item 27
28 Location of Accounts and Records Item 28
29 Management Services Item 29
30 Undertakings Item 30
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
U.S. Growth Fund
Class A * Class B * Class C
Prospectus
March 1, 1999
Growth of Capital Fund
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
[inside front cover]
Table of Contents
Fund profile page
U.S. Growth Fund
How we manage the Fund page
Our investment strategies
The risks of investing in the Fund
Who manages the Fund page
Investment manager and Sub-adviser
Portfolio manager
Who's who?
About your account page
Investing in the Fund
Choosing a share class
How to reduce your sales charge
How to buy shares
How to redeem shares
Special services
Dividends, distributions and taxes
Retirement plans
Implementation of investment
objectives and policies page
Financial Highlights page
[sidebar copy at bottom of page]
How to use this prospectus
Here are guidelines to help you use this prospectus to make well-
informed investment decisions about our funds. If you're looking for a
specific piece of information, the table of contents can guide you
directly to the appropriate section.
Step 1
- --------------------------------------------------------------
Take a look at the fund profiles for an overview of the Fund.
Step 2
- --------------------------------------------------------------
Learn in-depth information about how the Fund invests, the risks
involved and the people and organizations responsible for the Fund's
day-to-day operations.
Step 3
- --------------------------------------------------------------
Determine which fund features and services you would like to take
advantage of.
Step 4
- --------------------------------------------------------------
Use the glossary that begins on page x to find definitions of words
printed in bold type throughout the prospectus.
An Investment Overview
When choosing a mutual fund to invest in, you have a variety of options
and important information to consider. This prospectus provides
information about U.S. Growth Fund, a mutual fund from the Delaware
Investments Family of Funds.
However, before evaluating individual funds, your first step is to
define your personal financial goals. Knowing your goals and determining
your investment time horizon in advance can help you make a more
appropriate fund selection. It is also important to select a fund in the
context of your entire investment program. Diversification or spreading
of your money among different types of investments is usually a sound
investment strategy. A professional financial adviser can help you build
an investment portfolio that fits your financial situation, your
investment objectives and your risk tolerance. A financial adviser can
also explain the role that U.S. Growth Fund might play in your
investment plan.
Investing for growth of capital with U.S. Growth Fund...
Investors with long-term goals often choose mutual funds designed to
provide growth of capital. U.S. Growth Fund is a growth of capital fund.
These funds provide the potential to increase the value of your
investment through increases in stock prices. These funds generally
may experience a relatively high level of volatility, but generally
offer greater return opportunities than total return equity funds or
bond funds. Like all mutual funds, funds seeking growth of capital
allow you to invest conveniently in a diversified portfolio without
having to select and monitor individual securities on your own.
[House Graphic - Highlight 2nd blue tier of the house - growth of
capital funds]
Building Blocks of Asset Allocation
Aggressive Growth Equity Funds
Growth Equity Funds for...
Growth of Capital
These stock funds provide long-term growth potential with relatively
high volatility.
International and Global Funds
Asset Allocation Funds
Total Return
Taxable Bond Funds
Tax-Exempt Bond Funds
Money Market Funds (Taxable and Tax-Exempt)
Profile: U.S. Growth Fund
What is the Fund's goal?
U.S. Growth Fund seeks maximum capital appreciation. Although the Fund
will strive to achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in stocks of companies of all sizes. We look for
stocks with low dividend yields, strong balance sheets and high expected
growth rates as compared to other companies in the same industry. Our
strategy is to identify companies that will grow faster than the U.S.
economy in general. Whether companies provide dividend income and how
much income they provide will not be a primary factor in the Fund's
selection decisions.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you
may lose part or all of the money you invest. The price of Fund shares
will increase and decrease according to changes in the value of the
Fund's investments. This Fund will be affected by changes in stock
prices. An investment in the Fund is not a deposit of any bank and is
not insured or guaranteed by the Federal Deposit Insurance Corporation
or any other government agency. For a more complete discussion of risk,
please turn to page x.
Who should invest in the Fund
Investors with long-term financial goals.
Investors looking for capital growth potential.
Investors looking for a fund that can be a complement to income-
producing or value-oriented investments.
Who should not invest in the Fund
Investors with short-term financial goals.
Investors who are unwilling to accept share prices that may
fluctuate, sometimes significantly, over the short term.
Investors whose primary goal is to receive current income.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser
to determine whether it is an appropriate choice for you.
How has the Fund performed?
This bar chart and table can help you evaluate the potential risks of
investing in the Fund. We show how returns for the Fund's Class A shares
have varied over the past five calendar years and since inception, as
well as average annual returns of all shares for the one and five years
and since inception - - all compared to the performance of the S&P 500
Index. You should remember that unlike the Fund, the index is unmanaged
and doesn't include the actual costs of buying, selling, and holding
securities. The Fund's past performance does not necessarily indicate
how it will perform in the future. The Classes' returns reflect
voluntary expense caps. The returns would be lower without the
voluntary caps.
* U.S. Growth Fund
* S&P 500
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (CLASS A)
FPO]
[bar chart]
U.S. Growth Fund S&P 500
1998
1997
1996
1995
1994
1993
Year-by-year total return (Class A)
The maximum Class A sales charge of 5.75%, which is normally deducted
when you purchase shares, is not reflected in these total returns. If
this fee were included, the returns would be less than those shown. The
average annual returns shown below do include the sales charge.
As of December 31, 1998, the Fund had a year-to-date return of XX%.
During the periods illustrated in this bar chart, the Fund's highest
return was XX% [date] and its lowest return was XX% [date].
<TABLE>
<CAPTION>
[table] Average annual return for periods ending 12/31/98
CLASS A B (if C (if S&P 500
redeemed) redeemed)
<S> <C> <C> <C> <C>
1 year 0.00% 0.00% 0.00% 0.00%
5 years 0.00% 0.00% 0.00% 0.00%
Since
inception
(Class A -
12/3/93
Class B -
3/29/94
Class C -
5/23/94) 0.00% 0.00% 0.00% 0.00%
</TABLE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy
or sell shares of the Fund. The Fund may waive or reduce sales charges;
please see the Statement of Additional Information for details.
<TABLE>
<CAPTION>
CLASS A B C
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases as a
percentage of offering
price 5.75% None none
Maximum contingent deferred
sales charge (load) as a
percentage of original
purchase price or
redemption price, whichever
is lower None (1) 5% (2) 1% (3)
Maximum sales charge (load)
imposed on reinvested
dividends None None none
Redemption fees (4) None None none
</TABLE>
Annual fund operating expenses are deducted from the Fund's income or
assets before it pays dividends and before its total return is
calculated. We will not charge you separately for these expenses.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Management fees 00.0% 00.0% 00.0%
Distribution and service
(12-1) fees (5) 0.30% (6) 1.00% 1.00%
Other expenses 00.0% 00.0% 00.0%
Total operating expenses 0.00% 0.00% 0.00%
</TABLE>
This example is intended to help you compare the cost of investing in
the Fund to the cost of investing in other mutual funds with similar
investment objectives. We show the cumulative amount of Fund expenses on
a hypothetical investment of $10,000 with an annual 5% return over the
time shown. (7) This is an example only, and does not represent future
expenses, which may be greater or less than those shown here.
<TABLE>
<CAPTION>
CLASS (8) A B B (if C C (if
redeemed) redeemed)
<S> <C> <C> <C> <C> <C>
1 year $00 $00 $00 $00 $00
3 years $00 $00 $00 $00 $00
5 years $00 $00 $00 $00 $00
10 years $00 $00 $00 $00 $00
</TABLE>
1 A purchase of Class A shares at $1 million or more may be made at net
asset value. However, if you buy the shares through a financial
adviser who is paid a commission, a contingent deferred sales charge
of 1% will be imposed on certain redemptions within the first year of
purchase and 0.50% within the second year of purchase. Additional
Class A purchase options that involve a contingent deferred sales
charge may be permitted from time to time and will be disclosed in the
prospectus if they are available.
2 If you redeem Class B shares during the first year after you buy them,
you will pay a contingent deferred sales charge of 5%. The contingent
deferred sales charge is 4% during the second year, 3% during the
third and fourth years, 2% during the fifth year, 1% during the sixth
year, and 0% thereafter. Your Class B shares will automatically
convert to Class A shares after approximately eight years.
3 Class C shares redeemed within one year of purchase are subject to a
1% contingent deferred sales charge.
4 First Union Bank, N.A., the bank through which we wire money,
currently charges $7.50 per redemption for redemptions payable by
wire.
5 The Fund has adopted a plan under rule 12b-1 that allows the Fund to
pay distribution fees for the sales and distribution of its shares.
Because these fees are paid out of the Fund's assets on an ongoing
basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges. Each
share class is subject to a separate 12b-1 plan.
6 Prior to May 6, 1996, 12b-1 Plan expenses for Class A Shares were
0.35%. Beginning May 6, 1996, those expenses were reduced to 0.30%.
The expense information has been restated to reflect that change.
7 The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that
the Fund's total operating expenses remain unchanged in each of the
periods we show.
8 The Class B example reflects the conversion of Class B shares to
Class A 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.
How we manage the Fund
Our investment strategies
U.S. Growth 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.
We take a disciplined approach to investing, combining investment
strategies and risk management techniques that can help shareholders
meet their goals.
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, below, for a description of the risks inherent
in such securities.
The Fund may invest up to 20% of its assets in foreign securities.
Certain Investment Guidelines
Illiquid Securities. Up to 10% of the assets of the Fund may be invested
in securities that are not readily marketable, including, where
applicable:
(bullet) repurchase agreements with maturities greater than seven
calendar days;
(bullet) time deposits maturing in more than seven calendar days;
(bullet) certain instruments, futures contracts and options thereon for
which there is no liquid secondary market;
(bullet) certain over-the-counter options, as described in the Statement
of Additional Information;
(bullet) certain variable rate demand notes having a demand period of
more than seven days; and
(bullet) certain Rule 144A restricted securities (Rule 144A securities
for which a dealer or institutional market exists will not be
considered illiquid).
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 Fund's investment
restriction concerning illiquid securities.
Other Guidelines. In addition, the 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. The 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 the 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 the Fund's outstanding shares (as well as other non-fundamental
restrictions) is contained in the Statement of Additional Information.
Risk factors and special considerations
Fixed-Income Securities. The market value of fixed-income obligations
held by the Fund and, consequently, the net asset value per share of the
Fund when 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 the 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 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. U.S. Growth Fund may invest up to 20% of its assets
in foreign securities. There are certain risks involved in investing in
foreign securities, including those resulting from fluctuations in
currency exchange rates, devaluation of currencies, future political or
economic developments and the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic
companies. Although the manager or sub-adviser does not intend to expose
the Fund 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 manager
or sub-adviser believes that currency in which the 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 Fund's portfolio securities denominated in such foreign
currency.
Because foreign securities generally are denominated and pay dividends
or interest in foreign currencies, and the Fund holds various foreign
currencies from time to time, the value of the net assets of the Fund 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 Fund is 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-adviser 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
Fund's 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 Fund normally pays 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 Fund may purchase foreign equity and debt securities that are listed
on a principal foreign securities exchange or over-the-counter market,
represented by American Depositary Receipts (ADRs) or American
Depositary Shares (ADSs). An ADR or ADS facility may be either a
"sponsored" or "unsponsored" arrangement. In a sponsored arrangement,
the foreign issuer establishes the facility, pays some or all the
depository's fees, and usually agrees to provide shareholder
communications. In an unsponsored arrangement, the foreign issuer is not
involved and the ADR or ADS holders pay the fees of the depository.
Depository banks arrange unsponsored ADR and ADS facilities, either upon
their initiative or at the urging of large shareholders of or dealers in
the foreign securities.
Unsponsored ADRs or ADSs may involve more risk to the Fund than
sponsored ADRs or ADSs due to the additional costs involved to the Fund,
the relative illiquidity of the issue in U.S. markets, and the
possibility of higher trading costs in the over the counter market as
opposed to exchange-based trading. The Funds will take these and other
risk considerations into account before making an investment in an
unsponsored ADR or ADS. Investments in foreign securities offer
potential benefits not available from investments in securities of
domestic issuers. Such benefits include the opportunity to invest in
securities that appear to offer greater potential for long-term capital
appreciation than investments in domestic securities, and to reduce
fluctuations in Fund value by taking advantage of foreign stock markets
that do not move in a manner parallel to U.S. markets.
Lower-Rated Securities. U.S. Growth Fund may invest up to 10% of its
total assets in debt securities rated lower than Baa by Moody's or BBB
by S&P. Prices for securities rated below investment grade may be
affected by legislative and regulatory developments. Securities rated
Ba/BB or lower are commonly referred to as "junk bonds."
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. The Fund may borrow money for temporary or emergency purposes
in amounts not in excess of one-third of its total assets. If the Fund
borrows money, its share price may be subject to greater fluctuation
until the borrowing is repaid. If the Fund makes additional investments
while borrowings are outstanding, this may be construed as a form of
leverage. The Fund will purchase additional securities when money
borrowed exceeds 5% of its total assets.
Securities Lending. The 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. The 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 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, the 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, the
Fund may invest up to 100% of its assets in money market instruments. To
the extent the Fund is engaged in a temporary defensive position, the
Fund will not be pursuing its investment objective. The Fund may also
hold a portion of its assets in cash for liquidity purposes.
Portfolio Turnover. High turnover in the 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.
* * *
For additional information about the Fund's investment policies and
certain risks associated with investments in certain types of securities
including purchasing put and call options, futures contracts and options
thereon, and options on foreign currencies, see Implementation of
investment objectives and policies in this prospectus. The Statement of
Additional Information provides more information concerning the Fund's
investment policies, restrictions and risk factors.
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you
may receive little or no return on your investment, and the risk that
you may lose part or all of the money you invest. Before you invest in a
Fund you should carefully evaluate the risks. Because of the nature of
the U.S. Growth Fund, you should consider an investment in either one to
be a long-term investment that typically provides the best results when
held for a number of years. The following are the chief risks you assume
when investing in U.S. Growth Fund. Please see the Statement of
Additional Information for further discussion of these risks and the
other risks not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------
<S> <C>
U.S. Growth Fund
----------------------------------------------
Market risk is the risk that all We maintain a long-term investment approach
or a majority of the securities in and focus on stocks we believe can appreciate
a certain market -- like the stock over an extended time frame regardless of
or bond market -- will decline in interim market fluctuations. We do not try to
value because of factors such as predict overall stock market movements and do
economic conditions, future not trade for short-term purposes.
expectations or investor confidence.
We may hold a substantial part of the Fund's
assets in cash or cash equivalents as a
temporary, defensive strategy.
- ------------------------------------------------------------------------------------
Industry and security risk is the We limit the amount of U.S. Growth Fund's
risk that the value of securities assets invested in any one industry and in any
in a particular industry or the individual security.
value of an individual stock or bond
will decline because of changing
expectations for the performance of
that industry or for the individual
company issuing the stock or bond.
- ------------------------------------------------------------------------------------
Foreign risk is the risk that Though we are permitted to invest up to 20% of
foreign securities may be the Fund's portfolio, we typically invest only
adversely affected by political a small portion of U.S. Growth Fund's
instability, changes in currency portfolio in foreign securities. When we do
exchange rates, foreign economic purchase foreign securities, they are
conditions or inadequate regulatory generally American Depository receipts which
and accounting standards. are denominated in U.S. dollars and traded on
U.S. stock exchanges.
- ------------------------------------------------------------------------------------
Liquidity risk is the possibility We limit exposure to illiquid securities.
that securities cannot be readily
sold, or can only be sold at a
price significantly lower than
their broadly recognized value.
- ------------------------------------------------------------------------------------
</TABLE>
[begin glossary]
How to use this glossary
Words found in the glossary are printed in boldface the first time they
appear in the prospectus. So if you would like to know the meaning of a
word that isn't in boldface, you might still find it in the glossary.
Glossary A-B
Amortized cost
- --------------------------------------------------------------
Similar to depreciated value, amortized cost reflects the value of a
fixed-income security adjusted to account for any premium that was paid
above the par value when the security was purchased. The purpose of
amortization is to reflect resale or redemption value.
Appreciation
- --------------------------------------------------------------
An increase in the value of an investment.
Average maturity
- --------------------------------------------------------------
An average of when the individual bonds and other debt securities held
in a portfolio will mature.
Bond
- --------------------------------------------------------------
A debt security, like an IOU, issued by a company, municipality or
government agency. In return for lending money to the issuer, a bond
buyer generally receives fixed periodic interest payments and repayment
of the loan amount on a specified maturity date. A bond's price prior to
maturity changes and is inversely related to current interest rates.
When interest rates rise, prices fall, and when interest rates fall,
prices rise.
Bond ratings
- --------------------------------------------------------------
Independent evaluations of creditworthiness, ranging from Aaa/AAA
(highest quality) to D (lowest quality). Bonds rated Baa/BBB or better
are considered investment grade. Bonds rated Ba/BB or lower are commonly
known as junk bonds.
C-C
Capital
- --------------------------------------------------------------
The amount of money you invest.
Capital gains distributions
- --------------------------------------------------------------
Payments to mutual fund shareholders of profits (realized gains) from
the sale of a fund's portfolio securities. Usually paid once a year; may
be either short-term gains or long-term gains.
Commission
- --------------------------------------------------------------
The fee an investor pays to a financial adviser for investment advice
and help in buying or selling mutual funds, stocks, bonds or other
securities.
Compounding
- --------------------------------------------------------------
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
- --------------------------------------------------------------
Measurement of U.S. inflation; represents the price of a basket of
commonly purchased goods.
Contingent deferred sales charge (CDSC)
- --------------------------------------------------------------
Fee charged by some mutual funds when shares are redeemed (sold back to
the fund) within a set number of years; an alternative method for
investors to compensate a financial adviser for advice and service,
rather than an up-front commission.
[glossary to be continued]
Who manages the Fund
Investment Manager and Sub-Adviser
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary
of Delaware Management Holdings, Inc. Lynch & Mayer, Inc. is the Fund's
sub-adviser. As sub-adviser, Lynch & Mayer is responsible for day-to-day
management of the Fund's assets. Delaware Management Company administers
the Fund's affairs and has ultimate responsibility for all investment
advisory services for the Fund. Delaware Management Company also
supervises the sub-adviser's performance. For their services to the
Fund, the manager and sub-adviser were paid an aggregate fee for the
last fiscal year as follows:
Investment Management Fees
U.S. Growth Fund
As a percentage of average
daily net assets 0.00%
Portfolio Manager
Edward J. Petner, Chief Executive Officer and Chief Financial Officer of
Lynch & Mayer, Inc., has had primary responsibility for making day-to-
day investment decisions for the Fund since October 27, 1997. 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.
Year 2000
As with other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if
the computer systems used by its service providers do not properly
process and calculate date-related information from and after January
1, 2000. This is commonly known as the "Year 2000 Problem." The Fund
is taking steps to obtain satisfactory assurances that the Fund's major
service providers are taking steps reasonably designed to address the
Year 2000 Problem with respect to the computer systems that such service
providers use. There can be no assurance that these steps will be
sufficient to avoid any adverse impact on the business of the Fund.
Several European countries are participating in the European Economic
and Monetary Union, which will establish a common European currency for
participating countries. This currency will commonly be known as the
"Euro." It is anticipated that each such participating country will
replace its existing currency with the Euro on January 1, 1999.
Additional European countries may elect to participate after that date.
If the Fund is invested in securities of participating countries, it
could be adversely affected if the computer systems used by its major
service providers are not properly prepared to handle the implementation
of this single currency or the adoption of the Euro by additional
countries in the future. The Fund is taking steps to obtain satisfactory
assurances that its major service providers are taking steps reasonably
designed to address these matters with respect to the computer systems
that such service providers use. There can be no assurances that these
steps will be sufficient to avoid any adverse impact on the business of
the Fund.
[glossary continued]
C-E
Cost basis
- --------------------------------------------------------------
The original purchase price of an investment, used in determining
capital gains and losses.
Currency exchange rates
- --------------------------------------------------------------
The price at which one country's currency can be converted into
another's. This exchange rate varies almost daily according to a wide
range of political, economic and other factors.
Depreciation
- --------------------------------------------------------------
A decline in an investment's value.
Diversification
- --------------------------------------------------------------
The process of spreading investments among a number of different
securities, asset classes or investment styles to reduce the risks of
investing.
[glossary to be continued]
[sidebar]
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED
WITH MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS
FUNDS]
Board of Directors
Investment Manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Sub-Adviser
Lynch & Mayer, Inc.
520 Madison Avenue
New York, NY 10022
Portfolio Service agent Distributor
managers Delaware Service Company, Inc. Delaware Distributors, L.P.
(see page x 1818 Market Street 1818 Market Street
for details) Philadelphia, PA 19103 Philadelphia, PA 19103
Financial advisers
Shareholders
Board of directors A mutual fund is governed by a board of directors
which has oversight responsibility for the management of the fund's
business affairs. Directors establish procedures and oversee and review
the performance of the investment manager, the distributor and others
that perform services for the fund. At least 40% of the board of directors
must be independent of the fund's investment manager or distributor. These
independent fund directors, in particular, are advocates for shareholder
interests.
Custodian Mutual funds are legally required to protect their portfolio
securities by placing them with a custodian, typically a qualified bank
custodian who segregates fund securities from other bank assets.
Investment manager An investment manager is a company responsible for
selecting portfolio investments consistent with objectives and policies
stated in the mutual fund's prospectus. The investment manager places
portfolio orders with broker/dealers and is responsible for obtaining
the best overall execution of those orders. A written contract between a
mutual fund and its investment manager specifies the services the
manager performs. Most management contracts provide for the manager to
receive an annual fee based on a percentage of the fund's average net
assets. The manager is subject to numerous legal restrictions,
especially regarding transactions between itself and the funds it
advises.
Sub-adviser A sub-adviser is a company generally responsible for the
management of the fund's assets. They are selected and supervised by the
investment manager.
Portfolio managers Portfolio managers are employed by the investment
manager or sub-adviser to make investment decisions for individual
portfolios on a day-to-day basis.
Service agent Mutual fund companies employ service agents (sometimes
called transfer agents) to maintain records of shareholder accounts,
calculate and disburse dividends and capital gains and prepare and mail
shareholder statements and tax information, among other functions. Many
service agents provide customer service to shareholders, as well.
Distributor Most mutual funds continuously offer new shares to the
public through distributors who are regulated as broker-dealers and are
subject to National Association of Securities Dealers, Inc. (NASD) rules
governing mutual fund sales practices.
Financial advisers Financial advisers provide investment advice to their
clients, analyzing their financial objectives and recommending
appropriate funds or other investments. Financial advisers are
compensated for their services, generally through sales commissions, and
through 12b-1 and/or service fees deducted from the fund's assets.
Shareholders Like shareholders of other companies, mutual fund
shareholders have specific voting rights, including the right to elect
directors. Material changes in the terms of a fund's management contract
must be approved by a shareholder vote, and funds seeking to change
fundamental investment objectives or policies must also seek shareholder
approval.
[glossary continued]
Dividend distribution
- --------------------------------------------------------------
Payments to mutual fund shareholders of dividends passed along from the
fund's portfolio of securities.
Expense ratio
- --------------------------------------------------------------
A mutual fund's total operating expenses, expressed as a percentage of
its total net assets. Operating expenses are the costs of running a
mutual fund, including management fees, offices, staff, equipment and
expenses related to maintaining the fund's portfolio of securities. They
are paid from the fund's assets before any earnings are distributed to
shareholders.
[glossary to be continued]
About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each
share class has a different combination of sales charges, fees, and
other features, you should consult your financial adviser to determine
which class best suits your investment goals and time frame.
Choosing a share class
Class A
(bullet) Class A shares have an up-front sales charge of up to 5.75%
that you pay when you buy the shares. The offering price for
Class A shares includes the front-end sales charge.
(bullet) If you invest $50,000 or more, your front-end sales charge will
be reduced.
(bullet) You may qualify for other reduced sales charges, as described
in "How to reduce your sales charge," and under certain
circumstances the sales charge may be waived; please see the
Statement of Additional Information.
(bullet) Class A shares are also subject to an annual 12b-1 fee no
greater than 0.35% (currently, no more than 0.30%) of average
daily net assets, which is lower than the 12b-1 fee for Class B
and Class C shares.
(bullet) Class A shares generally are not subject to a contingent
deferred sales charge.
Class B
(bullet) Class B shares have no up-front sales charge, so the full
amount of your purchase is invested in the Fund. However, you
will pay a contingent deferred sales charge if you redeem your
shares within six years after you buy them.
(bullet) If you redeem Class B shares during the first year after you
buy them, the shares will be subject to a contingent deferred
sales charge of 5%. The contingent deferred sales charge is 4%
during the second year, 3% during the third and fourth years,
2% during the fifth year, 1% during the sixth year, and 0%
thereafter.
(bullet) Under certain circumstances the contingent deferred sales
charge may be waived; please see the Statement of Additional
Information.
(bullet) For approximately eight years after you buy your Class B
shares, they are subject to annual 12b-1 fees no greater than
1% of average daily net assets, of which 0.25% are service fees
paid to the distributor, dealers or others for providing
services and maintaining shareholder accounts.
(bullet) Because of the higher 12b-1 fees, Class B shares have higher
expenses and any dividends paid on these shares are lower than
dividends on Class A shares.
(bullet) Approximately eight years after you buy them, Class B shares
automatically convert into Class A shares with a 12b-1 fee of
no more than 0.30%.
(bullet) You may purchase up to $250,000 of Class B shares at any one
time. The limitation on maximum purchases varies for retirement
plans.
[glossary continued]
F-M
Financial adviser
- --------------------------------------------------------------
Financial professional (e.g., broker, banker, accountant, planner or
insurance agent) who analyzes clients' finances and prepares
personalized programs to meet objectives.
Fixed-income securities
- --------------------------------------------------------------
With fixed-income securities, the money you originally invested is
returned to you at a prespecified maturity date. These securities, which
include government, corporate or municipal bonds, as well as money
market securities, typically pay a fixed rate of return.
[glossary to be continued]
Class C
(bullet) Class C shares have no up-front sales charge, so the full
amount of your purchase is invested in the Fund. However, you
will pay a contingent deferred sales charge if you redeem your
shares within 12 months after you buy them.
(bullet) Under certain circumstances the contingent deferred sales
charge may be waived; please see the Statement of Additional
Information.
(bullet) Class C shares are subject to an annual 12b-1 fee which may not
be greater than 1% of average daily net assets, of which 0.25%
are service fees paid to the distributor, dealers or others for
providing personal services and maintaining shareholder
accounts.
(bullet) Because of the higher 12b-1 fees, Class C shares have higher
expenses and pay lower dividends than Class A shares.
(bullet) Unlike Class B shares, Class C shares do not automatically
convert into another class.
(bullet) You may purchase any amount less than $1,000,000 of Class C
shares at any one time. The limitation on maximum purchases
varies for retirement plans.
<TABLE>
<CAPTION>
Class A Sales Charges
Sales charge Sales charge Dealer's
as % of as % of commission as %
Amount of purchase offering price amount invested of offering price
<S> <C> <C> <C>
Less than $50,000 5.75% X.XX% 5.00%
$50,000 but 4.75% X.XX% 4.00%
under $100,000
$100,000 but 3.75% X.XX% 3.00%
under $250,000
$250,000 but 2.50% X.XX% 2.00%
under $500,000
$500,000 but 2.00% X.XX% 1.60%
under $1 million
</TABLE>
As shown below, there is no front-end sales charge when you purchase $1
million or more of Class A shares. However, if your financial adviser is
paid a commission on your purchase, you may have to pay a limited
contingent deferred sales charge of 1% if you redeem these shares within
the first year and 0.50% if you redeem them within the second year.
<TABLE>
<CAPTION>
Sales charge Sales charge Dealer's
as % of as % of commission as %
Amount of purchase offering price amount invested of offering price
<S> <C> <C> <C>
$1,000,000 up to $5 million none none 1.00
Next $20 million
up to $25 million none none 0.50
Amount over $25 million none none 0.25
</TABLE>
[glossary continued]
Inflation
- --------------------------------------------------------------
The increase in the cost of goods and services over time. U.S. inflation
is measured by the Consumer Price Index (CPI).
Investment goal
- --------------------------------------------------------------
The objective, such as long-term capital growth or high current income,
that a mutual fund pursues.
Management fee
- --------------------------------------------------------------
The amount paid by a mutual fund to the investment adviser for management
services, expressed as a percentage of the fund's net assets.
[glossary to be continued]
About your account continued
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on
shares. Please refer to the Statement of Additional Information for
detailed information and eligibility requirements. You can also get
additional information from your financial adviser. You or your
financial adviser must notify us at the time you purchase shares if you
are eligible for any of these programs.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Share class
Program How it works A B C
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Letter of Intent Through a Letter of Intent X Although the
you agree to invest a Letter of Intent
certain amount in Delaware and Rights of
Investment Funds (except Accumulation do
money market funds with no not apply to the
sales charge) over a 13-month purchase of Class
period to qualify for reduced B and C shares,
front-end sales charges. you can combine
your purchase of
Class B and C
shares to fulfill
your Letter of
Intent or qualify
for Rights of
Accumulation.
- ------------------------------------------------------------------------------------
Rights of Accumulation You can combine your holdings X
of all funds in the Delaware
Investments family (except
money market funds with no
sales charge) as well as the
holdings of your spouse and
children under 21 to qualify
for reduced front-end sales
charges.
- ------------------------------------------------------------------------------------
Reinvestment of Redeemed Up to 12 months after you X
Shares redeem shares, you can reinvest
the proceeds without paying a
front-end sales charge.
- ------------------------------------------------------------------------------------
SIMPLE IRA, SEP IRA, These investment plans may X
SARSEP, Prototype Profit qualify for reduced sales
Sharing, Pension, charges by combining the
SIMPLE 401(k), 403(b)(7), purchases of all members
and 457 Retirement Plans of the group. Members of
these groups may also qualify
to purchase shares without a
front-end sales charge and a
waiver of any contingent
deferred sales charges.
- ------------------------------------------------------------------------------------
</TABLE>
[glossary continued]
M-P
Market capitalization
- --------------------------------------------------------------
The value of a corporation determined by multiplying the current market
price of a share of common stock by the number of shares held by
shareholders. A corporation with one million shares outstanding and the
market price per share of $10 has a market capitalization of $10 million.
NASD (National Association of Securities Dealers)
- --------------------------------------------------------------
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the
actions of its members.
[glossary to be continued]
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a fee for this
service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to
the fund and class of shares you wish to purchase to Delaware Investments,
1818 Market Street, Philadelphia, PA 19103. If you are making an initial
purchase by mail, you must include a completed investment application, or
an appropriate retirement plan application if you are opening a retirement
account, with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank,
ABA #031201467, Bank Account number 2014128934013. Include your account
number and the name of the fund in which you want to invest. If you are
making an initial purchase by wire, you must call us so we can assign an
account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in
the Delaware Investments family for shares of other funds in the family.
Please keep in mind, however, that under most circumstances, you may only
exchange between the same class of shares. To open an account by exchange,
call the Shareholder Service Center at 800-523-1918.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated
telephone service, or through our web site, www.delawarefunds.com. For
more information about how to sign up for these services, call our
Shareholder Service Center at 800-523-1918.
[glossary continued]
NAV (Net asset value)
- --------------------------------------------------------------
The daily dollar value of one mutual fund share. Equal to a fund's net
assets divided by the number of shares outstanding.
NRSRO (Nationally recognized statistical rating organization)
- --------------------------------------------------------------
A company that assesses the quality and potential performance of bonds,
commercial paper, preferred and common stocks and municipal short-term
issues, rating the probability that the issuer of the debt will meet the
scheduled interest payments and repay the principal. Ratings are published
by such companies as Moody's Investors Service (Moody's), Standard &
Poor's Corporation (S&P), Duff & Phelps, Inc. (Duff), and Fitch Investor
Services, Inc. (Fitch).
Preferred stock
- --------------------------------------------------------------
Preferred stock has preference over common stock in the payment of
dividends and liquidation of assets. Preferred stocks also pay dividends
at a fixed rate.
[glossary to be continued]
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open an account with an
initial investment of $1,000, and make additional investments at any time
for as little as $100. If you are buying shares in an IRA or Roth IRA;
under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors
Act; or through an Automatic Investing Plan, the minimum purchase is $250,
and you can make additional investments of only $25. If you are buying
shares in an Education IRA, the minimum purchase is $500, and you can made
additional investments of only $25. The minimums vary for retirement plans
other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase
order. If we or an authorized agent receives your order before the close
of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
Time) on a business day, you will pay that day's closing share price which
is based on the Fund's net asset value. If we receive your order after the
close of trading, you will pay the next business day's price. A business
day is any day that the New York Stock Exchange is open for business. We
reserve the right to reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of
trading of the New York Stock Exchange each business day that the Exchange
is open. We calculate this value by adding the market value of all the
securities and assets in the Fund's portfolio, deducting all liabilities,
and dividing the resulting number by the number of shares outstanding. The
result is the net asset value per share. We price securities and other
assets for which market quotations are available at their market value. We
price debt securities on the basis of valuations provided to us by an
independent pricing service that uses methods approved by the board of
directors. Any investments that have a maturity of less than 60 days we
price at amortized cost. We price all other securities at their fair
market value using a method approved by the board of directors.
[glossary continued]
P-S
Price/earnings ratio
- --------------------------------------------------------------
A measure of a stock's value calculated by dividing the current market
price of a share of stock by its annual earnings per share. A stock
selling for $100 per share with annual earnings of $5 has a P/E of 20.
Principal
- --------------------------------------------------------------
Amount of money you invest. Also refers to a bond's original face value,
due to be repaid at maturity.
Prospectus
- --------------------------------------------------------------
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
[glossary to be continued]
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your
shares. Your adviser may charge a fee for this service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing
to: Delaware Investments, 1818 Market Street, Philadelphia, PA 19103. All
owners of the account must sign the request, and for redemptions of
$50,000 or more, you must include a signature guarantee for each owner.
Signature guarantees are also required when redemption proceeds are going
to anyone other than the account holder(s) of record.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or if you redeem at least $1,000 of shares,
you may have the proceeds sent directly to your bank by wire. Bank
information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds
deposited directly to your bank account the next business day after we
receive your request. If you request a wire deposit, the First Union Bank
fee (currently $7.50) will be deducted from your proceeds. Bank
information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service,
or through our web site, www.delawarefunds.com. For more information about
how to sign up for these services, call our Shareholder Service department
at 800-523-1918.
[glossary continued]
Redeem
- --------------------------------------------------------------
To cash in your shares by selling them back to the mutual fund.
Risk
- --------------------------------------------------------------
Generally defined as variability of value; also credit risk, inflation
risk, currency and interest rate risk. Different investments involve
different types and degrees of risk.
S&P 500 Index
- --------------------------------------------------------------
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of
the U.S. stock market.
Sales charge
- --------------------------------------------------------------
Charge on the purchase of fund shares sold through financial advisers. May
vary with the amount invested. Typically used to compensate advisers for
advice and service provided.
[glossary to be continued]
About your account continued
How to redeem shares (cont.)
If you hold your shares in certificates, you must submit the certificates
with your request to sell the shares. We recommend that you send your
certificates by certified mail.
When you send us a properly completed request to redeem or exchange
shares, you will receive the net asset value as determined at the close of
business on the day we receive your request. We will deduct any applicable
contingent deferred sales charges. You may also have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the
next business day, but no later than seven days after we receive your
request to sell your shares. If you purchased your shares by check, we
will wait until your check has cleared, which can take up to 15 days,
before we send your redemption proceeds.
If you are required to pay a contingent deferred sales charge when you
redeem your shares, the amount subject to the fee will be based on the
shares' net asset value when you purchased them or their net asset value
when you redeem them, whichever is less. This arrangement assures that you
will not pay a contingent deferred sales charge on any increase in the
value of your shares. You also will not pay the charge on any shares
acquired by reinvesting dividends or capital gains. If you exchange shares
of one fund for shares of another, and later redeem those shares, the
purchase price for purposes of the contingent deferred sales charge
formula will be the price you paid for the original shares not the
exchange price. The redemption price for purposes of this formula will be
the NAV of the shares you are actually redeeming.
Account Minimum
If you redeem shares and your account balance falls below the required
account minimum of $1,000 ($250 for IRAs and Roth IRAs, Uniform Gift to
Minors Act accounts or accounts with automatic investing plans, and $500
for Education IRAs) for three or more consecutive months, you will have
until the end of the current calendar quarter to raise the balance to the
minimum. If your account is not at the minimum by the required time, you
will be charged a $9 fee for that quarter and each quarter after that
until your account reaches the minimum balance. If your account does not
reach the minimum balance, the Fund may redeem your account after 60 days'
written notice to you.
[glossary continued]
S-S
SEC (Securities and Exchange Commission)
- --------------------------------------------------------------
Federal agency established by Congress to administer the laws governing
the securities industry, including mutual fund companies.
Share classes
- --------------------------------------------------------------
Different classifications of shares; mutual fund share classes offer a
variety of sales charge choices.
Signature guarantee
- --------------------------------------------------------------
Certification by a bank, brokerage firm or other financial institution
that a customer's signature is valid.
[glossary to be continued]
Special services
To help make investing with us as easy as possible, and to help you build
your investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly
investments directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions or direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
from your shares in one or more Delaware Investments funds into any other
Delaware Investments fund. Wealth Builder Exchanges are subject to the
same rules as regular exchanges and require a minimum monthly exchange of
$100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the
Dividend Reinvestment Plan are not subject to a front-end sales charge or
to a contingent deferred sales charge.
[glossary continued]
Standard deviation
- --------------------------------------------------------------
A measure of an investment's volatility; for mutual funds, measures how
much a fund's total return varies from its historical average.
Statement of Additional Information (SAI)
- --------------------------------------------------------------
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies
and risks.
Stock
- --------------------------------------------------------------
An investment that represents a share of ownership (equity) in a
corporation. Stocks are often referred to as "equities."
[glossary to be continued]
About your account (continued)
Special services (continued)
Exchanges
You can exchange all or part of your shares for shares of the same class
in another Delaware Investments fund without paying a sales charge and
without paying a contingent deferred sales charge on the shares of the
fund from which you make your exchange. However, if you exchange shares
from a money market fund that does not have a sales charge you will pay
any applicable sales charges on your new shares. You don't pay sales
charges on shares that you acquired through the reinvestment of dividends.
You may have to pay taxes on your exchange. When exchanging Class B and
Class C shares of one fund for similar shares in other funds, your new
shares will be subject to the same contingent deferred sales charge as the
shares you originally purchased. The holding period for the CDSC will also
remain the same, with the amount of time you held your original shares
being credited toward the holding period of your new shares. When you
exchange shares, you are purchasing shares in another fund so you should
be sure to get a copy of the fund's prospectus and read it carefully
before buying shares through an exchange.
MoneyLineSM On Demand Service
Through our MoneylineSM On Demand Service, you or your financial adviser
may transfer money from your Fund account to your predesignated bank
account by telephone request. This service is not available for retirement
plans.
MoneyLineSM Direct Deposit Service
Through our MoneylineSM Direct Deposit Service you can have $25 or more in
dividends and distributions deposited directly to your bank account.
Delaware Investments does not charge a fee for this service; however, your
bank may assess one. This service is not available for retirement plans.
Systematic Withdrawal Plan
Through our Systematic Withdrawal Plan you can arrange a regular monthly
or quarterly payment from your account made to you or someone you
designate. If the value of your account is $5,000 or more, you can make
withdrawals of at least $25 monthly, or $75 quarterly. You may also have
your withdrawals deposited directly to your bank account through our
MoneylineSM Direct Deposit Service.
[glossary continued]
T-V
Total return
- --------------------------------------------------------------
An investment performance measurement, expressed as a percentage, based on
the combined earnings from dividends, capital gains and change in price
over a given period.
[glossary to be continued]
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains, unless you tell us
otherwise.
Tax laws are subject to change, so we urge you to consult your tax adviser
about your particular tax situation and how it might be affected by
current tax law. The tax status of your dividends from the Fund is the
same whether you reinvest your dividends or receive them in cash.
Distributions from the Fund's long-term capital gains are taxable as
capital gains, while distributions from short-term capital gains and net
investment income are generally taxable as ordinary income. Any capital
gains may be taxable at different rates depending on the length of time
the Fund held the assets. In addition, you may be subject to state and
local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount
and nature of all dividends and capital gains that you were paid for the
prior year.
Retirement plans
In addition to being an appropriate investment for your Individual
Retirement Account (IRA), Roth IRA and Education IRA, shares in the Fund
may be suitable for group retirement plans. You may establish your IRA
account even if you are already a participant in an employer-sponsored
retirement plan. For more information on how shares in the Fund can play
an important role in your retirement planning or for details about group
plans, please consult your financial adviser, or call 800-523-1918.
[glossary continued]
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
- --------------------------------------------------------------
Federal and state laws that provide a simple way to transfer property to a
minor with special tax advantages.
Volatility
- --------------------------------------------------------------
The tendency of an investment to go up or down in value by different
magnitudes. There are "low volatility" and "high volatility" investments.
[end glossary]
Implementation of investment objectives and policies
In attempting to achieve its investment objective and policies, the Fund
may employ, among others, one or more of the strategies set forth below.
Convertible Securities
The Fund may invest in securities that either have warrants or rights
attached or are otherwise convertible into other or additional securities.
A convertible security is typically a fixed-income security (a bond or
preferred stock) that may be converted at a stated price within a
specified period of time into a specified number of shares of common stock
of the same or a different issuer. Convertible securities are generally
senior to common stocks in a corporation's capital structure but are
usually subordinated to similar non-convertible securities. While
providing a fixed-income stream (generally higher in yield than the income
derivable from a common stock but lower than that afforded by a similar
non-convertible security), a convertible security also affords an investor
the opportunity, through its conversion feature, to participate in capital
appreciation attendant upon a market price advance in the common stock
underlying the convertible security. In general, the market value of a
convertible security is at least the higher of its "investment value"
(i.e., its value as a fixed-income security) or its "conversion value"
(i.e., its value upon conversion into its underlying common stock). While
no securities investment is without some risk, investments in convertible
securities generally entail less risk than investments in the common stock
of the same issuer.
U.S. Government Securities
The Fund may invest in securities of the U.S. government. Securities
guaranteed by the U.S. government include:
(bullet) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and
(bullet) federal agency obligations guaranteed as to principal and
interest by the U.S. Treasury (such as GNMA certificates and Federal
Housing Administration debentures).
For these securities, the payment of principal and interest is
unconditionally guaranteed by the U.S. government, and thus they are of
the highest possible credit quality. Such securities are subject to
variations in market value due to fluctuations in interest rates, but if
held to maturity are deemed to be free of credit risk for the life of the
investment.
Securities issued by U.S. government instrumentalities and certain federal
agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they generally involve federal sponsorship in one way
or another: some are backed by specific types of collateral; some are
supported by the issuer's right to borrow from the U.S. Treasury; some are
supported by the discretionary authority of the U.S. Treasury to purchase
certain obligations of the issuer; and others are supported only by the
credit of the issuing government agency or instrumentality. These agencies
and instrumentalities include, but are not limited to, Federal Land Banks,
Farmers Home Administration, Central Bank for Cooperatives, Federal
Intermediate Credit Banks, and Federal Home Loan Banks.
Repurchase Agreements
The Fund may enter into repurchase agreements, under which the 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 Fund's Custodian collateral equal to at least 102% of
the repurchase price including accrued interest, as monitored daily by the
manager and/or sub-adviser. The 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 Delaware Investments have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow
Delaware Investments funds jointly to invest cash balances. The Fund may
invest cash balances in a joint repurchase agreement in accordance with
the terms of the Order and subject generally to the conditions described
above.
When-Issued Securities and Firm Commitment Agreements
The Fund 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. The 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 Fund 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.
The 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 the 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 the Fund's
portfolio securities decline while it is in a leveraged position, greater
depreciation of its net assets would likely occur than were it not in such
a position. The Fund will not borrow money to settle these transactions
and, therefore, will liquidate other Fund securities in advance of
settlement if necessary to generate additional cash to meet their
obligations thereunder.
Money Market Instruments
The Fund 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:
(bullet) commercial paper (short-term notes up to 9 months issued by
corporations or governmental bodies);
(bullet) 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);
(bullet) corporate bonds and notes (corporate obligations that mature,
or that may be redeemed, in one year or less);
(bullet) variable rate demand notes, short-term tax-exempt obligations;
and
(bullet) savings association obligations (certificates of deposit issued
by mutual savings banks or savings and loan associations).
Although certain floating or variable rate obligations
(securities which have a coupon rate that changes at least
annually and generally more frequently) have maturities in
excess of one year, they are also considered to be short-term
debt securities.
Investments by Funds of Funds
U.S. Growth Fund accepts investments from the series portfolios of
Delaware Group Foundation Funds, a fund of funds (the "Foundation Funds").
From time to time, the Funds may experience large investments or
redemptions due to allocations or rebalancings by the Foundation Funds.
While it is impossible to predict the overall impact of these transactions
over time, there could be adverse effects on portfolio management to the
extent that the Funds may be required to sell securities or invest cash at
times when it would not otherwise do so. These transactions could also
have tax consequences if sales of securities result in gains and could
also increase transactions costs or portfolio turnover. The manager will
monitor such transactions and will attempt to minimize any adverse effects
on both the Funds and the Foundation Funds resulting from such
transactions.
Strategic Transactions
General. The Fund may, but is 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 Fund 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 the 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 the 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 Fund 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. The 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 Fund 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, the Fund will not:
(bullet) sell futures contracts, purchase put options or write call
options if, as a result, more than 25% of its total assets
would be hedged with futures and options under normal
conditions;
(bullet) purchase futures contracts or write put options if, as a
result, the Fund's total obligations upon settlement or
exercise of purchased futures contracts and written put options
would exceed 25% of its total assets; or
(bullet) purchase call options if, as a result, the current value of
option premiums for call options purchased by the Fund would
exceed 5% of its total assets.
These limitations do not apply to options attached to or acquired or
traded together with their underlying securities, and do not apply to
securities that incorporate features similar to options.
The limitations on the Fund's investments in futures contracts and
options, and the Fund's policies regarding futures contracts and options
discussed elsewhere are not fundamental policies and may be changed as
regulatory agencies permit.
Options Transactions. The Fund 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 its 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 the 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. The Fund might, therefore, be obligated to
purchase the underlying securities for more than their current market
price.
The Fund will write only "covered" options. An option is covered if the
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 the
Statement of Additional Information.
Forward Foreign Currency Exchange Contracts. The Fund 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
Fund 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. The 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 Fund 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.
The 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 Fund may enter into interest rate swaps, currency
swaps, and other types of swap agreements such as caps, collars and
floors. In an interest rate swap, one party agrees to make regular
payments of a floating rate times a "notional" principal amount in return
for payments of a fixed rate times the same amount. Swaps may also depend
on other prices or rates such as the value of an index or mortgage
prepayment rates.
Swap agreements usually involve a small investment of cash relative to the
magnitude of risk assumed. As a result, swaps can be very volatile and may
substantially impact the Fund's performance. Swap agreements are also
subject to the risk of a counterpart's ability to perform (i.e.,
creditworthiness). The 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 the 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 the 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:
(bullet) 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;
(bullet) imperfect correlation between the price of options and futures
contracts and options thereon and movements in the prices of
securities being hedged;
(bullet) the fact that skills need to use these strategies are different
from those needed to select Fund securities;
(bullet) the possible absence of a liquid secondary market for any
particular instrument at any time;
(bullet) the possible need to defer closing out certain hedged positions
to avoid adverse tax consequences; and
(bullet) 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 Fund may use and some of their risks are
described more fully in the Statement of Additional Information.
The Fund's ability to engage in Strategic Transactions is limited by the
requirements of the Internal Revenue Code for qualification as a regulated
investment company. See the Statement of Additional Information.
* * *
The Statement of Additional Information describes certain of these
investment policies and risk considerations. The Statement of Additional
Information also sets forth other investment policies, risk considerations
and more specific investment restrictions.
<TABLE>
<CAPTION>
Financial Highlights
The financial highlights table is intended to help you understand the
Fund's financial performance. All "per share" information reflects
financial results for a single Fund share. This information has been
audited by Ernst & Young LLP, whose report, along with the Fund's
financial statements, is included in the Fund's annual report, which is
available upon request by calling 800-523-1918.
Class A Shares
- ------------------------------------------------------------------------------------
Year Ended 10/31
U.S. Growth Fund 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period ($) 13.82 12.43
Income From Investment
Operations
Net investment income ($) (0.06) (0.09)
Net realized & unrealized
gains (losses) on
investments ($) 4.25 1.48
Total from investment
operations ($) 4.19 1.39
Less Distributions
Dividends from net
investment income ($) none none
Distributions from realized
gains ($) (1.36) none
Total distributions ($) (1.36) none
Net asset value, end of
period ($) 16.65 13.82
Total Return (%) 33.18 11.18
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 6,933 16,118
Ratio of expenses to average
daily net assets (%) 1.44 1.80
Ratio of net investment
income to average daily net
assets (%) (0.38) (0.77)
Portfolio turnover rate (%) 144 131
- ------------------------------------------------------------------------------------
<CAPTION>
Period
12/3/93
Year Ended 10/31 through
U.S. Growth Fund 1995 10/31/94
- ------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning
of Period ($) 10.21 10.00
Income From Investment
Operations
Net investment income ($) (0.09) (0.04)
Net realized & unrealized
gains (losses) on
investments ($) 2.31 0.26
Total from investment
operations ($) 2.22 0.22
Less Distributions
Dividends from net
investment income ($) none (0.01)
Distributions from realized
gains ($) none none
Total distributions ($) none (0.01)
Net asset value, end of
period ($) 12.43 10.21
Total Return (%) 21.74 2.18
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 13,574 10,669
Ratio of expenses to average
daily net assets (%) 1.85 1.85
Ratio of net investment
income to average daily net
assets (%) (0.88) (0.51)
Portfolio turnover rate (%) 58 66
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class B Shares
- ------------------------------------------------------------------------------------
Year Ended 10/31
U.S. Growth Fund 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period ($) 13.61 12.33
Income From Investment
Operations
Net investment income ($) (0.16) (0.17)
Net realized & unrealized
gains (losses) on
investments ($) 4.17 1.45
Total from investment
operations ($) 4.01 1.28
Less Distributions
Dividends from net
investment income ($) none none
Distributions from realized
gains ($) (1.36) none
Total distributions ($) (1.36) none
Net asset value, end of
period ($) 16.26 13.61
Total Return (%) 32.30 10.38
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 1,653 809
Ratio of expenses to average
daily net assets (%) 2.14 2.48
Ratio of net investment
income to average daily net
assets (%) (1.08) (1.45)
Portfolio turnover rate (%) 144 131
- ------------------------------------------------------------------------------------
<CAPTION>
Period
3/29/94
Year Ended 10/31 through
U.S. Growth Fund 1995 10/31/94
- ------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning
of Period ($) 10.19 14.18
Income From Investment
Operations
Net investment income ($) (0.14) (0.03)
Net realized & unrealized
gains (losses) on
investments ($) 2.28 0.22
Total from investment
operations ($) 2.14 0.19
Less Distributions
Dividends from net
investment income ($) none none
Distributions from realized
gains ($) none none
Total distributions ($) none none
Net asset value, end of
period ($) 12.33 10.19
Total Return (%) 21.00 1.90
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 567 204
Ratio of expenses to average
daily net assets (%) 2.50 2.50
Ratio of net investment
income to average daily net
assets (%) (1.57) (1.26)
Portfolio turnover rate (%) 58 66
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
- ------------------------------------------------------------------------------------
Year Ended 10/31
U.S. Growth Fund 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period ($) 14.18 12.85
Income From Investment
Operations
Net investment income ($) (0.17) (0.16)
Net realized & unrealized
gains (losses) on
investments ($) 4.37 1.49
Total from investment
operations ($) 4.20 1.33
Less Distributions
Dividends from net
investment income ($) none none
Distributions from realized
gains ($) (1.36) none
Total distributions ($) (1.36) none
Net asset value, end of
period ($) 17.02 14.18
Total Return (%) 32.26 10.35
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 252 55
Ratio of expenses to average
daily net assets (%) 2.14 2.48
Ratio of net investment
income to average daily net
assets (%) (1.08) (1.45)
Portfolio turnover rate (%) 144 131
- ------------------------------------------------------------------------------------
<CAPTION>
Period
5/23/94
Year Ended 10/31 through
U.S. Growth Fund 1995 10/31/94
- ------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning
of Period ($) 10.62 10.00
Income From Investment
Operations
Net investment income ($) (0.10) (0.03)
Net realized & unrealized
gains (losses) on
investments ($) 2.33 0.65
Total from investment
operations ($) 2.23 0.62
Less Distributions
Dividends from net
investment income ($) none none
Distributions from realized
gains ($) none none
Total distributions ($) none none
Net asset value, end of
period ($) 12.85 10.62
Total Return (%) 21.00 6.17
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 27 5
Ratio of expenses to average
daily net assets (%) 2.50 2.50
Ratio of net investment
income to average daily net
assets (%) (1.61) (1.09)
Portfolio turnover rate (%) 58 66
- ------------------------------------------------------------------------------------
</TABLE>
How to read the financial highlights
Net investment income
- -----------------------------------------------------------------
Net investment income includes dividend and interest income earned from
the Fund's securities after its expenses have been deducted.
Net gains (losses) on investments (both realized and unrealized)
- -----------------------------------------------------------------
A realized gain occurs when we sell an investment at a profit, while a
realized loss occurs when we sell an investment at a loss. When an
investment increases or decreases in value but we do not sell it, we
record an unrealized gain or loss. The amount of realized gain per share
that we pay to shareholders is listed under "Less
Distributions-Distributions from realized gains."
Realized gains
- -----------------------------------------------------------------
Profits realized from the sale of securities.
Net asset value (NAV)
- -----------------------------------------------------------------
This is the value of a mutual fund share, calculated by dividing the net
assets by the number of shares outstanding.
Total return
- -----------------------------------------------------------------
This represents the percentage increase or decrease in the value of a
share of a fund during specific periods, in this case, annual periods. In
calculating this figure for the financial highlights table, we include fee
waivers, exclude front-end and contingent deferred sales charges, and
assume the shareholder has reinvested all dividends and realized gains.
Net assets
- -----------------------------------------------------------------
Net assets represent the total value of all the assets in the Fund's
portfolio, less any liabilities that are attributable to that class of the
Fund.
How to read the financial highlights
(continued)
Ratio of expenses to average daily net assets
- -----------------------------------------------------------------
The expense ratio is the percentage of total investment that a fund pays
annually for operating expenses and management fees. These expenses
include accounting and administration expenses, services for shareholders,
and similar expenses.
Ratio of net investment income to average daily net assets
- -----------------------------------------------------------------
We determine this ratio by dividing net investment income by average net
assets.
Portfolio turnover rate
- -----------------------------------------------------------------
This figure tells you the amount of trading activity in a fund's
portfolio. For example, a fund with a 50% turnover has bought and sold
half of the value of its total investment portfolio during the stated
period.
[back cover]
U.S. Growth Fund
Additional information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance
during their last fiscal year. You can find more detailed information
about the Fund in the current Statement of Additional Information, which
we have filed electronically with the Securities and Exchange Commission
(SEC) and which is legally a part of this prospectus. If you want a free
copy of the Statement of Additional Information, the annual or semi-annual
report, or if you have any questions about investing in the Fund, you can
write to us at 1818 Market Street, Philadelphia, PA 19103, or call
toll-free 800-523-1918. You may also obtain additional information about
the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web
site (http://www.sec.gov), or you can get copies of this information,
after payment of a duplicating fee, by writing to the Public Reference
Section of the SEC, Washington, D.C. 20549-6009. Information about the
Fund, including its Statement of Additional Information, can be reviewed
and copied at the Securities and Exchange Commission's Public Reference
Room in Washington, D.C. You can get information on the public reference
room by calling the SEC at 1-800-SEC-0330.
Web site
www.delawarefunds.com
E-mail
[email protected]
Shareholder Service Center
800-523-1918
Call the Shareholder Service Center:
Monday to Friday, 8 a.m. to 8 p.m. Eastern time.
For fund information; literature; price, yield and performance figures.
For information on existing regular investment accounts and retirement
plan accounts including wire investments; wire redemptions; telephone
redemptions and telephone exchanges.
Delaphone Service
800-362-FUND (800-362-3863)
For convenient access to account information or current performance
information on all Delaware Investment Funds seven days a week, 24 hours a
day, use this Touch-ToneR service.
Registrant's Investment Company Act file number: 811-7972
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
P-___ [--] PP 2/99
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
U.S. Growth Fund
Institutional Class
Prospectus
March 1, 1999
Growth of Capital Fund
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
[inside front cover]
Table of Contents
Fund profile page
U.S. Growth Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager and Sub-adviser
Portfolio manager
Who's who?
About your account page
Investing in the Fund
Institutional Class shares
How to buy shares
How to redeem shares
Implementation of investment
objectives and policies page
Financial Highlights page
[sidebar copy at bottom of page]
How to use this prospectus
Here are guidelines to help you use this prospectus to make well-informed
investment decisions about our funds. If you're looking for a specific
piece of information, the table of contents can guide you directly to the
appropriate section.
Step 1
- ------------------------------------------------------------------------
Take a look at the fund profiles for an overview of the Fund.
Step 2
- ------------------------------------------------------------------------
Learn in-depth information about how the Fund invests, the risks involved
and the people and organizations responsible for the Fund's day-to-day
operations.
Step 3
- ------------------------------------------------------------------------
Determine which fund features and services you would like to take
advantage of.
Step 4
- ------------------------------------------------------------------------
Use the glossary that begins on page x to find definitions of words
printed in bold type throughout the prospectus.
An Investment Overview
When choosing a mutual fund to invest in, you have a variety of options
and important information to consider. This prospectus provides
information about U.S. Growth Fund, a mutual fund from the Delaware
Investments Family of Funds.
However, before evaluating individual funds, your first step is to
define your personal financial goals. Knowing your goals and determining
your investment time horizon in advance can help you make a more
appropriate fund selection. It is also important to select a fund in the
context of your entire investment program. Diversification or spreading
of your money among different types of investments is usually a sound
investment strategy. A professional financial adviser can help you build
an investment portfolio that fits your financial situation, your
investment objectives and your risk tolerance. A financial adviser can
also explain the role that U.S. Growth Fund might play in your
investment plan.
Investing for growth of capital with U.S. Growth Fund...
Investors with long-term goals often choose mutual funds designed to
provide growth of capital. These funds provide the potential to increase
the value of your investment through increases in stock prices.
U.S. Growth Fund is a growth of capital fund. These funds generally may
experience a relatively high level of volatility, but generally offer
greater return opportunities than total return equity funds or bond
funds. Like all mutual funds, funds seeking growth of capital allow you
to invest conveniently in a diversified portfolio without having to
select and monitor individual securities on your own.
[House Graphic - Highlight 2nd blue tier of the house - growth of capital
funds]
Building Blocks of Asset Allocation
Aggressive Growth Equity Funds
Growth Equity Funds for...
Growth of Capital
These stock funds provide long-term growth potential with relatively high
volatility.
International and Global Funds
Asset Allocation Funds
Total Return
Taxable Bond Funds
Tax-Exempt Bond Funds
Money Market Funds (Taxable and Tax-Exempt)
Profile: U.S. Growth Fund
What is the Fund's goal?
U.S. Growth Fund seeks maximum capital appreciation. Although the Fund
will strive to achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in stocks of companies of all sizes. We look for
stocks with low dividend yields, strong balance sheets and high expected
growth rates as compared to other companies in the same industry. Our
strategy is to identify companies that will grow faster than the U.S.
economy in general. Whether companies provide dividend income and how much
income they provide will not be a primary factor in the Fund's selection
decisions.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you
may lose part or all of the money you invest. The price of Fund shares
will increase and decrease according to changes in the value of the Fund's
investments. This Fund will be affected by changes in stock prices. An
investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. For a more complete discussion of risk, please turn to
page x.
Who should invest in the Fund
Investors with long-term financial goals.
Investors looking for capital growth potential.
Investors looking for a fund that can be a complement to income-producing
or value-oriented investments.
Who should not invest in the Fund
Investors with short-term financial goals.
Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term. Investors whose primary
goal is to receive current income.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser
to determine whether it is an appropriate choice for you.
How has the Fund performed?
This bar chart and table can help you evaluate the potential risks of
investing in the Fund. We show how returns for the Fund's Institutional
Class shares have varied over the past four calendar years and since
inception, as well as average annual returns for the one and five years
and since inception - - all compared to the performance of the S&P 500
Index. You should remember that unlike the Fund, the index is unmanaged
and doesn't include the actual costs of buying, selling, and holding
securities. The Fund's past performance does not necessarily indicate how
it will perform in the future. The Class' returns reflect voluntary expense
caps. The returns would be lower without the voluntary caps.
* U.S. Growth Fund
* S&P 500
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (CLASS A)
FPO]
[bar chart]
U.S. Growth Fund S&P 500
1998
1997
1996
1995
1994
[bar chart]
Year-by-year total return (Institutional Class)
As of December 31, 1998, the Institutional Class had a year-to-date return
of XX%. During the periods illustrated in this bar chart, the
Institutional Class' highest return was XX% [date] and its lowest
return was XX% [date].
[table]
Average annual return for periods ending 12/31/98
Institutional S&P 500
Class
1 year 0.00% 0.00%
Since
inception
(2/3/94) 0.00% 0.00%
What are the Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy
or sell shares of the Institutional Class.
Maximum sales charge (load)
imposed on purchases as a
percentage of offering
price None
Maximum contingent deferred
sales charge (load) as a
percentage of original
purchase price or
redemption price, whichever
is lower None
Maximum sales charge (load)
imposed on reinvested
dividends None
Redemption fees None
Exchange Fees (1) None
Annual fund operating expenses are deducted from the Fund's income or
assets before it pays dividends and before its total return is calculated.
We will not charge you separately for these expenses.
Management fees 0.00%
Distribution and service
(12-1) fees None
Other expenses 0.00%
Total operating expenses 0.00%
This example is intended to help you compare the cost of investing in
the Fund to the cost of investing in other mutual funds with similar
investment objectives. We show the cumulative amount of Fund expenses on
a hypothetical investment of $10,000 with an annual 5% return over the
time shown. (2) This is an example only, and does not represent future
expenses, which may be greater or less than those shown here.
1 year $00
3 years $00
5 years $00
10 years $00
1 Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange you
shares for another fund.
2 The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
How we manage the Fund
Our investment strategies
We take a disciplined approach to investing, combining investment
strategies and risk management techniques that can help shareholders meet
their goals.
U.S. Growth 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, below, for a description of the risks inherent in such
securities.
The Fund may invest up to 20% of its assets in foreign securities.
Certain Investment Guidelines
Illiquid Securities. Up to 10% of the assets of the Fund may be invested
in securities that are not readily marketable, including, where
applicable:
(bullet) repurchase agreements with maturities greater than seven calendar
days;
(bullet) time deposits maturing in more than seven calendar days;
(bullet) certain instruments, futures contracts and options thereon for
which there is no liquid secondary market;
(bullet) certain over-the-counter options, as described in the Statement
of Additional Information;
(bullet) certain variable rate demand notes having a demand period of more
than seven days; and
(bullet) certain Rule 144A restricted securities (Rule 144A securities for
which a dealer or institutional market exists will not be
considered illiquid).
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 Fund's investment restriction
concerning illiquid securities.
Other Guidelines. In addition, the 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. The 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 the
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 the Fund's outstanding shares (as well as
other non-fundamental restrictions) is contained in the Statement of
Additional Information.
Risk factors and special considerations
Fixed-Income Securities. The market value of fixed-income obligations held
by the Fund and, consequently, the net asset value per share of the Fund
when 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 the 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 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. U.S. Growth Fund may invest up to 20% of its assets
in foreign securities. There are certain risks involved in investing in
foreign securities, including those resulting from fluctuations in
currency exchange rates, devaluation of currencies, future political or
economic developments and the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic
companies. Although the manager or sub-adviser does not intend to expose
the Fund 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 manager or
sub-adviser believes that currency in which the 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 Fund's portfolio securities denominated in such foreign currency.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and the Fund holds various foreign
currencies from time to time, the value of the net assets of the Fund 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 Fund is 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-adviser 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
Fund's 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 Fund normally pays 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 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 of the depository's fees, and
usually agrees to provide shareholder communications. In an unsponsored
arrangement, the foreign issuer is not involved and the ADR or ADS holders
pay the fees of the depository. Depository banks arrange unsponsored ADR
and ADS facilities, either upon their initiative or at the urging of large
shareholders of or dealers in the foreign securities.
Unsponsored ADRs or ADSs may involve more risk to the Fund than sponsored
ADRs or ADSs due to the additional costs involved to the Fund, the
relative illiquidity of the issue in U.S. markets, and the possibility of
higher trading costs in the over the counter market as opposed to
exchange-based trading. The Funds will take these and other risk
considerations into account before making an investment in an unsponsored
ADR or ADS.
Investments in foreign securities offer potential benefits not available
from investments in securities of domestic issuers. Such benefits include
the opportunity to invest in securities that appear to offer greater
potential for long-term capital appreciation than investments in domestic
securities, and to reduce fluctuations in Fund value by taking advantage
of foreign stock markets that do not move in a manner parallel to U.S.
markets.
Lower-Rated Securities. U.S. Growth Fund may invest up to 10% of its total
assets in debt securities rated lower than Baa by Moody's or BBB by S&P.
Prices for securities rated below investment grade may be affected by
legislative and regulatory developments. Securities rated Ba/BB or lower
are commonly referred to as "junk bonds."
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. The Fund may borrow money for temporary or emergency purposes
in amounts not in excess of one-third of its total assets. If the Fund
borrows money, its share price may be subject to greater fluctuation until
the borrowing is repaid. If the Fund makes additional investments while
borrowings are outstanding, this may be construed as a form of leverage.
The Fund will purchase additional securities when money borrowed exceeds
5% of its total assets.
Securities Lending. The 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. The 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
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, the 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, the Fund
may invest up to 100% of its assets in money market instruments. To the
extent the Fund is engaged in a temporary defensive position, the Fund
will not be pursuing its investment objective. The Fund may also hold a
portion of its assets in cash for liquidity purposes.
Portfolio Turnover. High turnover in the 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.
* * *
For additional information about the Fund's investment policies and
certain risks associated with investments in certain types of securities
including purchasing put and call options, futures contracts and options
thereon, and options on foreign currencies, see Implementation of
investment objectives and policies in this prospectus. The Statement of
Additional Information provides more information concerning the Fund's
investment policies, restrictions and risk factors.
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you
may receive little or no return on your investment, and the risk that you
may lose part or all of the money you invest. Before you invest in a Fund
you should carefully evaluate the risks. Because of the nature of the U.S.
Growth Fund, you should consider an investment in either one to be a
long-term investment that typically provides the best results when held
for a number of years. The following are the chief risks you assume when
investing in U.S. Growth Fund. Please see the Statement of Additional
Information for further discussion of these risks and the other risks not
discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------
<S> <C>
U.S. Growth Fund
----------------------------------------------
Market risk is the risk that all We maintain a long-term investment approach
or a majority of the securities in and focus on stocks we believe can appreciate
a certain market -- like the stock over an extended time frame regardless of
or bond market -- will decline in interim market fluctuations. We do not try to
value because of factors such as predict overall stock market movements and do
economic conditions, future not trade for short-term purposes.
expectations or investor confidence.
We may hold a substantial part of the Fund's
assets in cash or cash equivalents as a
temporary, defensive strategy.
- ------------------------------------------------------------------------------------
Industry and security risk is the We limit the amount of U.S. Growth Fund's
risk that the value of securities assets invested in any one industry and in any
in a particular industry or the individual security.
value of an individual stock or bond
will decline because of changing
expectations for the performance of
that industry or for the individual
company issuing the stock or bond.
- ------------------------------------------------------------------------------------
Foreign risk is the risk that Though we are permitted to invest up to 20% of
foreign securities may be the Fund's portfolio, we typically invest only
adversely affected by political a small portion of U.S. Growth Fund's
instability, changes in currency portfolio in foreign securities. When we do
exchange rates, foreign economic purchase foreign securities, they are
conditions or inadequate regulatory generally American Depository receipts which
and accounting standards. are denominated in U.S. dollars and traded on
U.S. stock exchanges.
- ------------------------------------------------------------------------------------
Liquidity risk is the possibility We limit exposure to illiquid securities.
that securities cannot be readily
sold, or can only be sold at a
price significantly lower than
their broadly recognized value.
- ------------------------------------------------------------------------------------
</TABLE>
[begin glossary]
How to use this glossary
Words found in the glossary are printed in boldface the first time they
appear in the prospectus. So if you would like to know the meaning of a
word that isn't in boldface, you might still find it in the glossary.
Glossary A-B
Amortized cost
- ------------------------------------------------------------------------
Similar to depreciated value, amortized cost reflects the value of a
fixed-income security adjusted to account for any premium that was paid
above the par value when the security was purchased. The purpose of
amortization is to reflect resale or redemption value.
Appreciation
- ------------------------------------------------------------------------
An increase in the value of an investment.
Average maturity
- ------------------------------------------------------------------------
An average of when the individual bonds and other debt securities held in
a portfolio will mature.
Bond
- ------------------------------------------------------------------------
A debt security, like an IOU, issued by a company, municipality or
government agency. In return for lending money to the issuer, a bond buyer
generally receives fixed periodic interest payments and repayment of the
loan amount on a specified maturity date. A bond's price prior to maturity
changes and is inversely related to current interest rates. When interest
rates rise, prices fall, and when interest rates fall, prices rise.
Bond ratings
- ------------------------------------------------------------------------
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are
considered investment grade. Bonds rated Ba/BB or lower are commonly known
as junk bonds.
C-C
Capital
- ------------------------------------------------------------------------
The amount of money you invest.
Capital gains distributions
- ------------------------------------------------------------------------
Payments to mutual fund shareholders of profits (realized gains) from the
sale of a fund's portfolio securities. Usually paid once a year; may be
either short-term gains or long-term gains.
Commission
- ------------------------------------------------------------------------
The fee an investor pays to a financial adviser for investment advice and
help in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
- ------------------------------------------------------------------------
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
- ------------------------------------------------------------------------
Measurement of U.S. inflation; represents the price of a basket of
commonly purchased goods.
Contingent deferred sales charge (CDSC)
- ------------------------------------------------------------------------
Fee charged by some mutual funds when shares are redeemed (sold back to
the fund) within a set number of years; an alternative method for
investors to compensate a financial adviser for advice and service, rather
than an up-front commission.
[glossary to be continued]
Who manages the Fund
Investment Manager and Sub-Adviser
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Lynch & Mayer, Inc. is the Fund's
sub-adviser. As sub-adviser, Lynch & Mayer is responsible for day-to-day
management of the Fund's assets. Delaware Management Company administers
the Fund's affairs and has ultimate responsibility for all investment
advisory services for the Fund. Delaware Management Company also
supervises the sub-adviser's performance. For their services to the Fund,
the manager and sub-adviser were paid an aggregate fee for the last fiscal
year as follows:
Investment Management Fees
U.S. Growth
Fund
As a percentage of average
daily net assets 0.00%
Portfolio Manager
Edward J. Petner, Chief Executive Officer and Chief Financial Officer of
Lynch & Mayer, Inc., has had primary responsibility for making day-to-day
investment decisions for the Fund since October 27, 1997. 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.
Year 2000
As with other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by its service providers do not properly process and
calculate date-related information from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Fund is taking steps to
obtain satisfactory assurances that the Fund's major service providers are
taking steps reasonably designed to address the Year 2000 Problem with
respect to the computer systems that such service providers use. There can
be no assurance that these steps will be sufficient to avoid any adverse
impact on the business of the Fund.
Several European countries are participating in the European Economic and
Monetary Union, which will establish a common European currency for
participating countries. This currency will commonly be known as the
"Euro." It is anticipated that each such participating country will
replace its existing currency with the Euro on January 1, 1999. Additional
European countries may elect to participate after that date. If the Fund
is invested in securities of participating countries, it could be
adversely affected if the computer systems used by its major service
providers are not properly prepared to handle the implementation of this
single currency or the adoption of the Euro by additional countries in the
future. The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to
address these matters with respect to the computer systems that such
service providers use. There can be no assurances that these steps will be
sufficient to avoid any adverse impact on the business of the Fund.
[glossary continued]
C-E
Cost basis
- ------------------------------------------------------------------------
The original purchase price of an investment, used in determining capital
gains and losses.
Currency exchange rates
- ------------------------------------------------------------------------
The price at which one country's currency can be converted into another's.
This exchange rate varies almost daily according to a wide range of
political, economic and other factors.
Depreciation
- ------------------------------------------------------------------------
A decline in an investment's value.
Diversification
- ------------------------------------------------------------------------
The process of spreading investments among a number of different
securities, asset classes or investment styles to reduce the risks of
investing.
[glossary to be continued]
[sidebar]
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED
WITH MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS
FUNDS]
Board of Directors
Investment Manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Sub-Adviser
Lynch & Mayer, Inc.
520 Madison Avenue
New York, NY 10022
Portfolio Service agent Distributor
managers Delaware Service Company, Inc. Delaware Distributors, L.P.
(see page x 1818 Market Street 1818 Market Street
for details) Philadelphia, PA 19103 Philadelphia, PA 19103
Financial advisers
Shareholders
Board of directors A mutual fund is governed by a board of directors which
has oversight responsibility for the management of the fund's business
affairs. Directors establish procedures and oversee and review the
performance of the investment manager, the distributor and others that
perform services for the fund. At least 40% of the board of directors
must be independent of the fund's investment manager or distributor.
These independent fund directors, in particular, are advocates for
shareholder interests.
Custodian Mutual funds are legally required to protect their portfolio
securities by placing them with a custodian, typically a qualified bank
custodian who segregates fund securities from other bank assets.
Investment manager An investment manager is a company responsible for
selecting portfolio investments consistent with objectives and policies
stated in the mutual fund's prospectus. The investment manager places
portfolio orders with broker/dealers and is responsible for obtaining the
best overall execution of those orders. A written contract between a
mutual fund and its investment manager specifies the services the manager
performs. Most management contracts provide for the manager to receive an
annual fee based on a percentage of the fund's average net assets. The
manager is subject to numerous legal restrictions, especially regarding
transactions between itself and the funds it advises.
Sub-adviser A sub-adviser is a company generally responsible for the
management of the fund's assets. They are selected and supervised by the
investment manager.
Portfolio managers Portfolio managers are employed by the investment
manager or sub-adviser to make investment decisions for individual
portfolios on a day-to-day basis.
Service agent Mutual fund companies employ service agents (sometimes
called transfer agents) to maintain records of shareholder accounts,
calculate and disburse dividends and capital gains and prepare and mail
shareholder statements and tax information, among other functions. Many
service agents provide customer service to shareholders, as well.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject
to National Association of Securities Dealers, Inc. (NASD) rules governing
mutual fund sales practices.
Financial advisers Financial advisers provide investment advice to their
clients, analyzing their financial objectives and recommending appropriate
funds or other investments. Financial advisers are compensated for their
services, generally through sales commissions, and through 12b-1 and/or
service fees deducted from the fund's assets.
Shareholders Like shareholders of other companies, mutual fund
shareholders have specific voting rights, including the right to elect
directors. Material changes in the terms of a fund's management contract
must be approved by a shareholder vote, and funds seeking to change
fundamental investment objectives or policies must also seek shareholder
approval.
[glossary continued]
Dividend distribution
- ------------------------------------------------------------------------
Payments to mutual fund shareholders of dividends passed along from the
fund's portfolio of securities.
Expense ratio
- ------------------------------------------------------------------------
A mutual fund's total operating expenses, expressed as a percentage of its
total net assets. Operating expenses are the costs of running a mutual
fund, including management fees, offices, staff, equipment and expenses
related to maintaining the fund's portfolio of securities. They are paid
from the fund's assets before any earnings are distributed to
shareholders.
[glossary to be continued]
About your account
Investing in the Fund
Institutional Class shares are available for purchase only by the
following:
(bullet) 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
(bullet) tax-exempt employee benefit plans of the manager or its
affiliates and securities dealer firms with a selling agreement
with the distributor
(bullet) institutional advisory accounts of the manager, or its affiliates
and those having client relationships with Delaware Investment
Advisers, an affiliate 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
(bullet) 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
(bullet) 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
[glossary continued]
F-M
Financial adviser
- ------------------------------------------------------------------------
Financial professional (e.g., broker, banker, accountant, planner or
insurance agent) who analyzes clients' finances and prepares personalized
programs to meet objectives.
Fixed-income securities
- ------------------------------------------------------------------------
With fixed-income securities, the money you originally invested is
returned to you at a prespecified maturity date. These securities, which
include government, corporate or municipal bonds, as well as money market
securities, typically pay a fixed rate of return.
[glossary to be continued]
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to
the fund and class of shares you wish to purchase to Delaware Investments,
1818 Market Street, Philadelphia, PA 19103. If you are making an initial
purchase by mail, you must include a completed investment application, or
an appropriate retirement plan application if you are opening a retirement
account, with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank,
ABA #031201467, Bank Account number 2014128934013. Include your account
number and the name of the fund in which you want to invest. If you are
making an initial purchase by wire, you must call us at 800-510-4015 so we
can assign an account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in
the Delaware Investments family for shares of other funds in the family.
Please keep in mind, however, that you may not exchange your shares for
Class B or Class C shares. To open an account by exchange, call the
Shareholder Service Center at 800-510-4015.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a fee for this
service.
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase
order. If we or an authorized agent receives your order before the close
of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
Time) on a business day, you will pay that day's closing share price which
is based on the Fund's net asset value. If we receive your order after the
close of trading, you will pay the next business day's price. A business
day is any day that the New York Stock Exchange is open for business. We
reserve the right to reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of
trading of the New York Stock Exchange each business day that the Exchange
is open. We calculate this value by adding the market value of all the
securities and assets in the Fund's portfolio, deducting all liabilities,
and dividing the resulting number by the number of shares outstanding. The
result is the net asset value per share. We price securities and other
assets for which market quotations are available at their market value. We
price debt securities on the basis of valuations provided to us by an
independent pricing service that uses methods approved by the board of
directors. Any investments that have a maturity of less than 60 days we
price at amortized cost. We price all other securities at their fair
market value using a method approved by the board of directors.
[glossary continued]
Inflation
- ------------------------------------------------------------------------
The increase in the cost of goods and services over time. U.S. inflation
is measured by the Consumer Price Index (CPI).
Investment goal
- ------------------------------------------------------------------------
The objective, such as long-term capital growth or high current income,
that a mutual fund pursues.
Management fee
- ------------------------------------------------------------------------
The amount paid by a mutual fund to the investment adviser for management
services, expressed as a percentage of the fund's net assets.
[glossary to be continued]
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing
to: Delaware Investments, 1818 Market Street, Philadelphia, PA 19103. All
owners of the account must sign the request, and for redemptions of
$50,000 or more, you must include a signature guarantee for each owner.
You can also fax your written request to 215-255-8864. Signature
guarantees are also required when redemption proceeds are going to anyone
other than the account holder(s) of record.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or if you redeem at least $1,000 of shares,
you may have the proceeds sent directly to your bank by wire. Bank
information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds
deposited directly to your bank account the next business day after we
receive your request. Bank information must be on file before you request
a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your
shares. Your adviser may charge a fee for this service.
About your account continued
How to redeem shares (cont.)
If you hold your shares in certificates, you must submit the certificates
with your request to sell the shares. We recommend that you send your
certificates by certified mail.
When you send us a properly completed request to redeem or exchange
shares, you will receive the net asset value as determined at the close of
business on the day we receive your request. We will deduct any applicable
contingent deferred sales charges. You may also have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the
next business day, but no later than seven days after we receive your
request to sell your shares. If you purchased your shares by check, we
will wait until your check has cleared, which can take up to 15 days,
before we send your redemption proceeds.
Account Minimum
If you redeem shares and your account balance falls below $250, the Fund
may redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class
in another Delaware Investments fund. You may not exchange your shares for
Class B and Class C shares of the funds in the Delaware Investments
family. If you exchange shares to a fund that has a sales charge you will
pay any applicable sales charges on your new shares. You don't pay sales
charges on shares that are acquired through the reinvestment of dividends.
You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a
copy of the fund's prospectus and read it carefully before buying shares
through an exchange.
[glossary continued]
M-P
Market capitalization
- ------------------------------------------------------------------------
The value of a corporation determined by multiplying the current market
price of a share of common stock by the number of shares held by
shareholders. A corporation with one million shares outstanding and the
market price per share of $10 has a market capitalization of $10 million.
NASD (National Association of Securities Dealers)
- ------------------------------------------------------------------------
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the
actions of its members.
[glossary to be continued]
[glossary continued]
NAV (Net asset value)
- ------------------------------------------------------------------------
The daily dollar value of one mutual fund share. Equal to a fund's net
assets divided by the number of shares outstanding.
NRSRO (Nationally recognized statistical rating organization)
- ------------------------------------------------------------------------
A company that assesses the quality and potential performance of bonds,
commercial paper, preferred and common stocks and municipal short-term
issues, rating the probability that the issuer of the debt will meet the
scheduled interest payments and repay the principal. Ratings are published
by such companies as Moody's Investors Service (Moody's), Standard &
Poor's Corporation (S&P), Duff & Phelps, Inc. (Duff), and Fitch Investor
Services, Inc. (Fitch).
Preferred stock
- ------------------------------------------------------------------------
Preferred stock has preference over common stock in the payment of
dividends and liquidation of assets. Preferred stocks also pay dividends
at a fixed rate.
[glossary to be continued]
[glossary continued]
P-S
Price/earnings ratio
- ------------------------------------------------------------------------
A measure of a stock's value calculated by dividing the current market
price of a share of stock by its annual earnings per share. A stock
selling for $100 per share with annual earnings of $5 has a P/E of 20.
Principal
- ------------------------------------------------------------------------
Amount of money you invest. Also refers to a bond's original face value,
due to be repaid at maturity.
Prospectus
- ------------------------------------------------------------------------
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
[glossary to be continued]
[glossary continued]
Redeem
- ------------------------------------------------------------------------
To cash in your shares by selling them back to the mutual fund.
Risk
- ------------------------------------------------------------------------
Generally defined as variability of value; also credit risk, inflation
risk, currency and interest rate risk. Different investments involve
different types and degrees of risk.
S&P 500 Index
- ------------------------------------------------------------------------
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of
the U.S. stock market.
Sales charge
- ------------------------------------------------------------------------
Charge on the purchase of fund shares sold through financial advisers. May
vary with the amount invested. Typically used to compensate advisers for
advice and service provided.
[glossary to be continued]
[glossary continued]
S-S
SEC (Securities and Exchange Commission)
- ------------------------------------------------------------------------
Federal agency established by Congress to administer the laws governing
the securities industry, including mutual fund companies.
Share classes
- ------------------------------------------------------------------------
Different classifications of shares; mutual fund share classes offer a
variety of sales charge choices.
Signature guarantee
- ------------------------------------------------------------------------
Certification by a bank, brokerage firm or other financial institution
that a customer's signature is valid.
[glossary to be continued]
[glossary continued]
Standard deviation
- ------------------------------------------------------------------------
A measure of an investment's volatility; for mutual funds, measures how
much a fund's total return varies from its historical average.
Statement of Additional Information (SAI)
- ------------------------------------------------------------------------
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies
and risks.
Stock
- ------------------------------------------------------------------------
An investment that represents a share of ownership (equity) in a
corporation. Stocks are often referred to as "equities."
[glossary to be continued]
[glossary continued]
T-V
Total return
- ------------------------------------------------------------------------
An investment performance measurement, expressed as a percentage, based on
the combined earnings from dividends, capital gains and change in price
over a given period.
[glossary to be continued]
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains, unless you tell us
otherwise.
Tax laws are subject to change, so we urge you to consult your tax adviser
about your particular tax situation and how it might be affected by
current tax law. The tax status of your dividends from the Fund is the
same whether you reinvest your dividends or receive them in cash.
Distributions from the Fund's long-term capital gains are taxable as
capital gains, while distributions from short-term capital gains and net
investment income are generally taxable as ordinary income. Any capital
gains may be taxable at different rates depending on the length of time
the Fund held the assets. In addition, you may be subject to state and
local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount
and nature of all dividends and capital gains that you were paid for the
prior year.
[glossary continued]
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
- ------------------------------------------------------------------------
Federal and state laws that provide a simple way to transfer property to a
minor with special tax advantages.
Volatility
- ------------------------------------------------------------------------
The tendency of an investment to go up or down in value by different
magnitudes. There are "low volatility" and "high volatility" investments.
[end glossary]
Implementation of investment objectives and policies
In attempting to achieve its investment objective and policies, the Fund
may employ, among others, one or more of the strategies set forth below.
Convertible securities
The Fund may invest in securities that either have warrants or rights
attached or are otherwise convertible into other or additional securities.
A convertible security is typically a fixed-income security (a bond or
preferred stock) that may be converted at a stated price within a
specified period of time into a specified number of shares of common stock
of the same or a different issuer. Convertible securities are generally
senior to common stocks in a corporation's capital structure but are
usually subordinated to similar non-convertible securities. While
providing a fixed-income stream (generally higher in yield than the income
derivable from a common stock but lower than that afforded by a similar
non-convertible security), a convertible security also affords an investor
the opportunity, through its conversion feature, to participate in capital
appreciation attendant upon a market price advance in the common stock
underlying the convertible security. In general, the market value of a
convertible security is at least the higher of its "investment value"
(i.e., its value as a fixed-income security) or its "conversion value"
(i.e., its value upon conversion into its underlying common stock). While
no securities investment is without some risk, investments in convertible
securities generally entail less risk than investments in the common stock
of the same issuer.
U.S. government securities
The Fund may invest in securities of the U.S. government. Securities
guaranteed by the U.S. government include:
(bullet) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and
(bullet) federal agency obligations guaranteed as to principal and
interest by the U.S. Treasury (such as GNMA certificates and
Federal Housing Administration debentures).
For these securities, the payment of principal and interest is
unconditionally guaranteed by the U.S. government, and thus they are of
the highest possible credit quality. Such securities are subject to
variations in market value due to fluctuations in interest rates, but if
held to maturity are deemed to be free of credit risk for the life of the
investment.
Securities issued by U.S. government instrumentalities and certain federal
agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they generally involve federal sponsorship in one way
or another: some are backed by specific types of collateral; some are
supported by the issuer's right to borrow from the U.S. Treasury; some are
supported by the discretionary authority of the U.S. Treasury to purchase
certain obligations of the issuer; and others are supported only by the
credit of the issuing government agency or instrumentality. These agencies
and instrumentalities include, but are not limited to, Federal Land Banks,
Farmers Home Administration, Central Bank for Cooperatives, Federal
Intermediate Credit Banks, and Federal Home Loan Banks.
Repurchase agreements
The Fund may enter into repurchase agreements, under which the 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 Fund's Custodian collateral equal to at least 102% of
the repurchase price including accrued interest, as monitored daily by the
manager and/or sub-adviser. The 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 Delaware Investments have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow
Delaware Investments funds jointly to invest cash balances. The Fund may
invest cash balances in a joint repurchase agreement in accordance with
the terms of the Order and subject generally to the conditions described
above.
When-issued securities and firm commitment agreements
The Fund 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. The 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 Fund 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.
The 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 the 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 the Fund's
portfolio securities decline while it is in a leveraged position, greater
depreciation of its net assets would likely occur than were it not in such
a position. The Fund will not borrow money to settle these transactions
and, therefore, will liquidate other Fund securities in advance of
settlement if necessary to generate additional cash to meet their
obligations thereunder.
Money market instruments
The Fund 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:
(bullet) commercial paper (short-term notes up to 9 months issued by
corporations or governmental bodies);
(bullet) 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));
(bullet) corporate bonds and notes (corporate obligations that mature, or
that may be redeemed, in one year or less);
(bullet) variable rate demand notes, short-term tax-exempt obligations;
and
(bullet) savings association obligations (certificates of deposit issued
by mutual savings banks or savings and loan associations).
Although certain floating or variable rate obligations (securities
which have a coupon rate that changes at least annually and
generally more frequently) have maturities in excess of one year,
they are also considered to be short-term debt securities.
Investments by funds of funds
U.S. Growth Fund accepts investments from the series portfolios of
Delaware Group Foundation Funds, a fund of funds (the "Foundation Funds").
From time to time, the Funds may experience large investments or
redemptions due to allocations or rebalancings by the Foundation Funds.
While it is impossible to predict the overall impact of these transactions
over time, there could be adverse effects on portfolio management to the
extent that the Funds may be required to sell securities or invest cash at
times when it would not otherwise do so. These transactions could also
have tax consequences if sales of securities result in gains and could
also increase transactions costs or portfolio turnover. The manager will
monitor such transactions and will attempt to minimize any adverse effects
on both the Funds and the Foundation Funds resulting from such
transactions.
Strategic transactions
General. The Fund may, but is 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 Fund 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 the 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 the 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 Fund 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. The 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 Fund 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, the Fund will not:
(bullet) sell futures contracts, purchase put options or write call
options if, as a result, more than 25% of its total assets would
be hedged with futures and options under normal conditions;
(bullet) purchase futures contracts or write put options if, as a result,
the Fund's total obligations upon settlement or exercise of purchased
futures contracts and written put options would exceed 25% of its
total assets; or
(bullet) purchase call options if, as a result, the current value of
option premiums for call options purchased by the Fund would exceed
5% of its total assets.
These limitations do not apply to options attached to or acquired or
traded together with their underlying securities, and do not apply to
securities that incorporate features similar to options.
The limitations on the Fund's investments in futures contracts and
options, and the Fund's policies regarding futures contracts and options
discussed elsewhere are not fundamental policies and may be changed as
regulatory agencies permit.
Options Transactions. The Fund 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 its 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 the 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. The Fund might, therefore, be obligated to
purchase the underlying securities for more than their current market
price.
The Fund will write only "covered" options. An option is covered if the
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 the
Statement of Additional Information.
Forward Foreign Currency Exchange Contracts. The Fund 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
Fund 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. The 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 Fund 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.
The 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 Fund may enter into interest rate swaps, currency
swaps, and other types of swap agreements such as caps, collars and
floors. In an interest rate swap, one party agrees to make regular
payments of a floating rate times a "notional" principal amount in return
for payments of a fixed rate times the same amount. Swaps may also depend
on other prices or rates such as the value of an index or mortgage
prepayment rates.
Swap agreements usually involve a small investment of cash relative to the
magnitude of risk assumed. As a result, swaps can be very volatile and may
substantially impact the Fund's performance. Swap agreements are also
subject to the risk of a counterpart's ability to perform (i.e.,
creditworthiness). The 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 the 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 the 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:
(bullet) 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;
(bullet) imperfect correlation between the price of options and futures
contracts and options thereon and movements in the prices of
securities being hedged;
(bullet) the fact that skills need to use these strategies are different
from those needed to select Fund securities;
(bullet) the possible absence of a liquid secondary market for any
particular instrument at any time;
(bullet) the possible need to defer closing out certain hedged positions
to avoid adverse tax consequences; and
(bullet) 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 Fund may use and some of their risks are
described more fully in the Statement of Additional Information.
The Fund's ability to engage in Strategic Transactions is limited by the
requirements of the Internal Revenue Code for qualification as a regulated
investment company. See the Statement of Additional Information.
* * *
The Statement of Additional Information describes certain of these
investment policies and risk considerations. The Statement of Additional
Information also sets forth other investment policies, risk considerations
and more specific investment restrictions.
<TABLE>
<CAPTION>
Financial highlights
The financial highlights table is intended to help you understand the
Fund's financial performance. All "per share" information reflects
financial results for a single Fund share. This information has been
audited by Ernst & Young LLP, whose report, along with the Fund's
financial statements, is included in the Fund's annual report, which is
available upon request by calling 800-523-1918.
Institutional Class
- ------------------------------------------------------------------------------------
Year Ended 10/31
U.S. Growth Fund 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period ($) 13.94 12.50
Income From Investment
Operations
Net investment income ($) (0.01) (0.05)
Net realized & unrealized
gains (losses) on
investments ($) 4.29 1.49
Total from investment
operations ($) 4.28 1.44
Less Distributions
Dividends from net
investment income ($) none none
Distributions from realized
gains ($) (1.36) none
Total distributions ($) (1.36) none
Net asset value, end of
period ($) 16.86 13.94
Total Return (%) 33.57 11.52
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 18,455 10,003
Ratio of expenses to average
daily net assets (%) 1.14 1.48
Ratio of net investment
income to average daily net
assets (%) (0.08) (0.45)
Portfolio turnover rate (%) 144 131
- ------------------------------------------------------------------------------------
<CAPTION>
Financial Highlights (continued)
- ------------------------------------------------------------------------------------
Period
2/3/94
through
U.S. Growth Fund 1995 10/31/94
- ------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning
of Period ($) 10.23 10.52
Income From Investment
Operations
Net investment income ($) (0.05) (0.01)
Net realized & unrealized
gains (losses) on
investments ($) 2.32 (0.28)
Total from investment
operations ($) 2.27 (0.29)
Less Distributions
Dividends from net
investment income ($) none none
Distributions from realized
gains ($) none none
Total distributions ($) none none
Net asset value, end of
period ($) 12.50 10.23
Total Return (%) 22.19 (2.78)
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 4,819 1,630
Ratio of expenses to average
daily net assets (%) 1.50 1.50
Ratio of net investment
income to average daily net
assets (%) (0.59) (0.27)
Portfolio turnover rate (%) 58 66
- ------------------------------------------------------------------------------------
</TABLE>
How to read the financial highlights
Net investment income
- ------------------------------------------------------------------------
Net investment income includes dividend and interest income earned from
the Fund's securities after its expenses have been deducted.
Net gains (losses) on investments (both realized and unrealized)
- ------------------------------------------------------------------------
A realized gain occurs when we sell an investment at a profit, while a
realized loss occurs when we sell an investment at a loss. When an
investment increases or decreases in value but we do not sell it, we
record an unrealized gain or loss. The amount of realized gain per share
that we pay to shareholders is listed under "Less
Distributions-Distributions from realized gains."
Realized gains
- ------------------------------------------------------------------------
Profits realized from the sale of securities.
Net asset value (NAV)
- ------------------------------------------------------------------------
This is the value of a mutual fund share, calculated by dividing the net
assets by the number of shares outstanding.
Total return
- ------------------------------------------------------------------------
This represents the percentage increase or decrease in the value of a
share of a fund during specific periods, in this case, annual periods. In
calculating this figure for the financial highlights table, we include fee
waivers, exclude front-end and contingent deferred sales charges, and
assume the shareholder has reinvested all dividends and realized gains.
Net assets
- ------------------------------------------------------------------------
Net assets represent the total value of all the assets in the Fund's
portfolio, less any liabilities that are attributable to that class of the
Fund.
How to read the financial highlights
(continued)
Ratio of expenses to average daily net assets
- ------------------------------------------------------------------------
The expense ratio is the percentage of total investment that a fund pays
annually for operating expenses and management fees. These expenses
include accounting and administration expenses, services for shareholders,
and similar expenses.
Ratio of net investment income to average daily net assets
- ------------------------------------------------------------------------
We determine this ratio by dividing net investment income by average net
assets.
Portfolio turnover rate
- ------------------------------------------------------------------------
This figure tells you the amount of trading activity in a fund's
portfolio. For example, a fund with a 50% turnover has bought and sold
half of the value of its total investment portfolio during the stated
period.
[back cover]
U.S. Growth Fund
Additional information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance
during their last fiscal year. You can find more detailed information
about the Fund in the current Statement of Additional Information, which
we have filed electronically with the Securities and Exchange Commission
(SEC) and which is legally a part of this prospectus. If you want a free
copy of the Statement of Additional Information, the annual or semi-annual
report, or if you have any questions about investing in the Fund, you can
write to us at 1818 Market Street, Philadelphia, PA 19103, or call
toll-free 800-523-1918. You may also obtain additional information about
the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web
site (http://www.sec.gov), or you can get copies of this information,
after payment of a duplicating fee, by writing to the Public Reference
Section of the SEC, Washington, D.C. 20549-6009. Information about the
Fund, including its Statement of Additional Information, can be reviewed
and copied at the Securities and Exchange Commission's Public Reference
Room in Washington, D.C. You can get information on the public reference
room by calling the SEC at 1-800-SEC-0330.
Web site
www.delawarefunds.com
E-mail
[email protected]
Client Services Representative
800-510-4015
[Delaphone Service
800-362-FUND (800-362-3863)
For convenient access to account information or current performance
information on all Delaware Investment Funds seven days a week, 24 hours a
day, use this Touch-ToneR service.]
Registrant's Investment Company Act file number: 811-7972
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
P-___ [--] PP 2/99
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
New Pacific Fund
Class A * Class B * Class C
Prospectus
March 1, 1999
International Fund
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
[inside front cover]
Table of Contents
Fund profile page
New Pacific Fund
How we manage the Fund page
Our investment strategies
The risks of investing in the Fund
Who manages the Fund page
Investment manager and Sub-adviser
Portfolio manager
Who's who?
About your account page
Investing in the Fund
Choosing a share class
How to reduce your sales charge
How to buy shares
How to redeem shares
Special services
Dividends, distributions and taxes
Retirement plans
Implementation of investment
objective and policies page
Financial Highlights page
[sidebar copy at bottom of page]
How to use this prospectus
Here are guidelines to help you use this prospectus to make well-informed
investment decisions about our funds. If you're looking for a specific
piece of information, the table of contents can guide you directly to the
appropriate section.
Step 1
- ------------------------------------------------------------------------
Take a look at the fund profiles for an overview of the Fund.
Step 2
- ------------------------------------------------------------------------
Learn in-depth information about how the Fund invests, the risks involved
and the people and organizations responsible for the Fund's day-to-day
operations.
Step 3
- ------------------------------------------------------------------------
Determine which fund features and services you would like to take
advantage of.
Step 4
- ------------------------------------------------------------------------
Use the glossary that begins on page x to find definitions of words
printed in bold type throughout the prospectus.
An Investment Overview
When choosing a mutual fund to invest in, you have a variety of options
and important information to consider. This prospectus provides
information about New Pacific Fund, a mutual fund from the Delaware
Investments Family of Funds.
However, before evaluating individual funds, your first step is to
define your personal financial goals. Knowing your goals and determining
your investment time horizon in advance can help you make a more
appropriate fund selection. It is also important to select a fund in the
context of your entire investment program. Diversification or spreading
of your money among different types of investments is usually a sound
investment strategy. A professional financial adviser can help you build
an investment portfolio that fits your financial situation, your
investment objectives and your risk tolerance. A financial adviser can
also explain the role that New Pacific Fund might play in your
investment plan.
Investing for international diversification with New Pacific Fund...
Investors with long-term goals often choose mutual funds that provide
international or global diversification. New Pacific Fund is an
international fund. These funds provide the potential to increase the
value of your investment through either rising security prices or
through income from international or global securities. Individually,
these funds may experience a high level of volatility, but in
combination with a portfolio of U.S. securities, they may actually help
to reduce the risk of your total investment portfolio over the long term.
Like all mutual funds, international funds allow you to invest
conveniently in a variety of different securities without having to select
and monitor individual securities on your own.
[House Graphic - Highlight international "column" - international and
global funds]
Building Blocks of Asset Allocation
International and Global Funds
International and Global Funds for...
International Diversification
These funds may include stock and bond funds and may be broadly
diversified or focused on an individual country or region. Risk levels of
international funds vary, depending on the investment objectives and
strategies of the individual fund.
International and Global Funds
Asset Allocation Funds
Total Return
Taxable Bond Funds
Tax-Exempt Bond Funds
Money Market Funds (Taxable and Tax-Exempt)
Profile: New Pacific Fund
What is the Fund's goal?
New Pacific Fund seeks long-term capital appreciation by investing
primarily in companies that are domiciled in or have their principal
business activities in the Pacific Basin. Although the Fund will strive to
achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in stocks of companies of all sizes that are located
in or have their principal business activities in countries located in the
Pacific Basin. These countries include, but are not limited to, Australia,
China, Hong Kong, Japan, Philippines, Taiwan, Singapore and Malaysia. We
may invest in both established and developing countries. Under normal
circumstances we will invest at least 65% of our net assets in Pacific
Basin countries.
In selecting stocks for the portfolio, we look for companies that can
benefit from future economic growth in the region. We evaluate both
individual countries to determine how much of our portfolio should be
allocated to companies located there and also individual companies. When
evaluating individual companies, we consider the growth prospects for the
company and its industry, the financial strength of the company and the
quality of its management, and whether the stock appears overvalued or
undervalued compared to other stocks in the market or in its industry.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you
may lose part or all of the money you invest. The value of the securities
held by the Fund may increase and decrease, sometimes rapidly and
unpredictably. Consequently, the Fund's share price could increase or
decrease significantly, particularly over the short term. Because the Fund
invests in international securities in both established and developing
countries, it will be affected by international investment risks related
to changes in currency valuations, political instability, economic
instability or lax accounting and regulatory standards. These risks and
others are described more fully on page xx. An investment in the Fund is
not a deposit of any bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
Who should invest in the Fund
(bullet) Investors with long-term financial goals.
(bullet) Investors looking for capital growth potential.
(bullet) Investors willing to accept the sometimes sharp and unpredictable
fluctuations in value that a foreign fund can experience. These
fluctuations can be even more pronounced for funds like New Pacific which
concentrate investments in a single region.
Who should not invest in the Fund
(bullet) Investors with short-term financial goals.
(bullet) Investors who are unwilling to accept share prices that may
fluctuate, sometimes significantly, over the short term.
(bullet) Investors whose primary goal is to receive current income.
(bullet) Investors who do no understand the significant risks associated
with international investing.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser
to determine whether it is an appropriate choice for you.
How has the Fund performed?
This bar chart and table can help you evaluate the potential risks of
investing in the Fund. We show how returns for the Fund's Class A shares
have varied over the past five calendar years and since inception, as
well as average annual returns of all shares for the one and five years
and since inception - - all compared to the performance of the Morgan
Stanley Pacific Index. You should remember that unlike the Fund, the
index is unmanaged and doesn't include the actual costs of buying,
selling, and holding securities. The Fund's past performance does not
necessarily indicate how it will perform in the future. The Classes'
returns reflect voluntary expense caps. The returns would be lower
without the voluntary caps.
* New Pacific Fund
* Morgan Stanley Pacific Index
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (CLASS A)
FPO]
[bar chart]
New Pacific Fund Morgan Stanley Pacific Index
1998
1997
1996
1995
1994
1993
Year-by-year total return (Class A)
The maximum Class A sales charge of 5.75%, which is normally deducted when
you purchase shares, is not reflected in these total returns. If this fee
were included, the returns would be less than those shown. The average
annual returns shown below do include the sales charge.
As of December 31, 1998, the Fund had a year-to-date return of XX%. During
the periods illustrated in this bar chart, the Fund's highest return was
XX% [date] and its lowest return was XX% [date].
<TABLE>
<CAPTION>
Average annual return for periods ending 12/31/98
<S> <C> <C> <C> <C>
CLASS A B (if C (if S&P 500
redeemed) redeemed)
1 year 0.00% 0.00% 0.00% 0.00%
5 years 0.00% 0.00% 0.00% 0.00%
Since inception
(12/3/93) 0.00% 0.00% 0.00% 0.00%
</TABLE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or
sell shares of the Fund. The Fund may waive or reduce sales charges;
please see the Statement of Additional Information for details.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CLASS A B C
Maximum sales charge (load)
imposed on purchases as a
percentage of offering
price 5.75% None none
Maximum contingent deferred
sales charge (load) as a
percentage of original
purchase price or
redemption price, whichever
is lower None(1) 5%(2) 1%(3)
Maximum sales charge (load)
imposed on reinvested
dividends None None none
Redemption fees (4) None None none
</TABLE>
Annual fund operating expenses are deducted from the Fund's income or
assets before it pays dividends and before its total return is calculated.
We will not charge you separately for these expenses.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Management fees (7) 0.00% 0.00% 0.00%
Distribution and service
(12-1) fees (5) 0.30%(6) 1.00% 1.00%
Other expenses (7) 0.00% 0.00% 0.00%
Total operating expenses (7) 0.00% 0.00% 0.00%
</TABLE>
This example is intended to help you compare the cost of investing in the
Fund to the cost of investing in other mutual funds with similar
investment objectives. We show the cumulative amount of Fund expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown. (8) This is an example only, and does not represent future expenses,
which may be greater or less than those shown here.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CLASS (9) A B B (if redeemed) C C (if redeemed)
1 year $00 $00 $00 $00 $00
3 years $00 $00 $00 $00 $00
5 years $00 $00 $00 $00 $00
10 years $00 $00 $00 $00 $00
</TABLE>
1 A purchase of Class A shares at $1 million or more may be made at net
asset value. However, if you buy the shares through a financial adviser
who is paid a commission, a contingent deferred sales charge of 1% will be
imposed on certain redemptions within the first year of purchase and 0.50%
within the second year of purchase. Additional Class A purchase options
that involve a contingent deferred sales charge may be permitted from time
to time and will be disclosed in the prospectus if they are available.
2 If you redeem Class B shares during the first year after you buy them,
you will pay a contingent deferred sales charge of 5%. The contingent
deferred sales charge is 4% during the second year, 3% during the third
and fourth years, 2% during the fifth year, 1% during the sixth year, and
0% thereafter. Your Class B shares will automatically convert to Class A
shares after approximately eight years.
3 Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
4 First Union Bank, N.A., the bank through which we wire money, currently
charges $7.50 per redemption for redemptions payable by wire.
5 The Fund has adopted a plan under rule 12b-1 that allows the Fund to pay
distribution fees for the sales and distribution of its shares. Because
these fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges. Each share class is subject
to a separate 12b-1 plan.
6 Prior to May 6, 1996, 12b-1 Plan expenses for Class A Shares were 0.35%.
Beginning May 6, 1996, those expenses were reduced to 0.30%. The expense
information has been restated to reflect that change.
7 The investment manager has agreed to waive fees and reimburse expenses
through April 30, 1999 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees, extraordinary expenses and
12b-1 fees) from exceeding 1.70% of average daily net assets.
8 The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
9 The Class B example reflects the conversion of Class B shares to Class A
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.
How we manage the Fund
Our investment strategies
New Pacific 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.
We take a disciplined approach to investing, combining investment
strategies and risk management techniques that can help shareholders meet
their goals.
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
China
Hong Kong
India
Indonesia
Japan
Malaysia
New Zealand
Pakistan
Philippines
Singapore
South Korea
Sri Lanka
Taiwan
Thailand
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.
Certain Investment Guidelines
Illiquid Securities. Up to 10% of the assets of the Fund may be invested
in securities that are not readily marketable, including, where
applicable:
(bullet) repurchase agreements with maturities greater than seven calendar
days;
(bullet) time deposits maturing in more than seven calendar days;
(bullet) certain instruments, futures contracts and options thereon for
which there is no liquid secondary market;
(bullet) certain over-the-counter options, as described in the Statement
of Additional Information;
(bullet) certain variable rate demand notes having a demand period of more
than seven days; and
(bullet) certain Rule 144A restricted securities (Rule 144A securities for
which a dealer or institutional market exists will not be considered
illiquid).
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 Fund's investment restriction
concerning illiquid securities.
Other Guidelines. In addition, the 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. The 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 the
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 the Fund's outstanding shares (as well as
other non-fundamental restrictions) is contained in the Statement of
Additional Information.
Risk factors and special considerations
Fixed-Income Securities. The market value of fixed-income obligations held
by the Fund and, consequently, the net asset value per share of the Fund
when 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 the 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.
Foreign Investments. New Pacific Fund may invest substantially all of its
assets in foreign investments. 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 manager or sub-adviser does not intend to
expose the Fund 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 manager or
sub-adviser believes that currency in which the 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 Fund's portfolio securities denominated in such foreign currency.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and the Fund holds various foreign
currencies from time to time, the value of the net assets of the Fund 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 Fund is 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-adviser 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
Fund's 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 Fund normally pays 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 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.
Borrowing. The Fund may borrow money for temporary or emergency purposes
in amounts not in excess of one-third of its total assets. If the Fund
borrows money, its share price may be subject to greater fluctuation until
the borrowing is repaid. If the Fund makes additional investments while
borrowings are outstanding, this may be construed as a form of leverage.
Securities Lending. The 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. The 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
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, the 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, the Fund
may invest up to 100% of its assets in money market instruments. To the
extent the Fund is engaged in a temporary defensive position, the Fund
will not be pursuing its investment objective. The Fund may also hold a
portion of its assets in cash for liquidity purposes.
Portfolio Turnover. High turnover in the 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.
* * *
For additional information about the Fund's investment policies and
certain risks associated with investments in certain types of securities
including purchasing put and call options, futures contracts and options
thereon, and options on foreign currencies, see Implementation of
investment objectives and policies in this prospectus. The Statement of
Additional Information provides more information concerning the Fund's
investment policies, restrictions and risk factors.
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you
may receive little or no return on your investment, and the risk that you
may lose part or all of the money you invest. Before you invest in a Fund
you should carefully evaluate the risks. Because of the nature of the New
Pacific Fund, you should consider an investment in it be a long-term
investment that typically provides the best results when held for a long
period of time. The following are the chief risks you assume when
investing in New Pacific Fund. Please see the Statement of Additional
Information for further discussion of these risks and the other risks not
discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------
<S> <C>
New Pacific Fund
----------------------------------------------
Market risk is the risk that all We maintain a long-term investment approach
or a majority of the securities in and focus on stocks we believe can appreciate
a certain market -- like the stock over an extended time frame regardless of
or bond market -- or in a certain interim market fluctuations. In deciding what
country or region will decline in portion of our portfolio should be invested in
value because of factors such as any individual country, we evaluate the
economic conditions, future country's economy, politics, liquidity,
expectations or investor confidence. corporate earnings, interest rates and
valuations relative to other countries.
We may hold a substantial part of the Fund's
assets in cash or cash equivalents as a
temporary, defensive strategy.
- ------------------------------------------------------------------------------------
Industry and security risk is the We hold a number of different securities in a
risk that the value of securities variety of sectors and countries in order to
in a particular industry or the minimize the impact that any one poorly
value of an individual stock or bond performing security would have on New Pacific
will decline because of changing Fund's overall performance.
expectations for the performance of
that industry or for the individual
company issuing the stock or bond.
- ------------------------------------------------------------------------------------
Currency Risk The value of the New Pacific Fund may try to hedge its currency
Fund's investments may be negatively risk by purchasing foreign currency exchange
affected by changes in foreign contracts. By agreeing to purchase or sell
currency exchange rates. Adverse foreign securities at a pre-set price on a
changes in exchange rates may reduce future date, New Pacific Fund strives to
or eliminate any gains produced by protect the value of the stocks it owns from
investments that are denominated future changes in currency rates. However,
in foreign currencies and may there is no assurance that a strategy such as
increase any losses. this will be successful.
- ------------------------------------------------------------------------------------
Political Risk The Risk that We carefully evaluate the political situations
countries or the entire region where in the countries where we invest and take into
we invest may experience political account any potential risks before we select
instability, which may cause greater securities for the portfolio. However, there
fluctuation in the value of our is no way to eliminate political risk when
investments due to changes in investing internationally.
currency exhange rates, governmental
seizures or nationalization of
assets.
- ------------------------------------------------------------------------------------
Emerging Market Risk is the We carefully select securities within emerging
likelihood that the risks assoicated markets and strive to consider all relevant
with international investing will risks associated with an individual company.
be grater in emerging markets than Typically a larger percentage of our assets
in more developed foreign markets is allocated to established countries than to
because, among other things, developing countries. However, we cannot
emerging markets may have less eliminate emerging market risk and
stable political and economic consequently encourage shareholders to invest
environments. in this Fund only if they have a long-term
time horizon, over which the potential of
individual securities is more likely to be
realized.
- ------------------------------------------------------------------------------------
Inefficient Market Risk Foreign [to be inserted]
markets may be less liquid, have
greater price volatility, less
regulation and higher transaction
costs than U.S. markets.
- ------------------------------------------------------------------------------------
Information Risk Foreign companies We conduct a great deal of fundamental
are subject to different accounting, research on the companies we invest in rather
auditing and financial reporting than relying solely on information available
standards than U.S. companies. There through financial reporting.
may be less information available
about foreign issuers than domestic
issuers. Furthermore, regulatory
oversight of foreign issuers may be
less stringent or less consistently
applied than in the United States.
- ------------------------------------------------------------------------------------
</TABLE>
[begin glossary]
How to use this glossary
Words found in the glossary are printed in boldface the first time they
appear in the prospectus. So if you would like to know the meaning of a
word that isn't in boldface, you might still find it in the glossary.
Glossary A-B
Amortized cost
- ------------------------------------------------------------------------
Similar to depreciated value, amortized cost reflects the value of a
fixed-income security adjusted to account for any premium that was paid
above the par value when the security was purchased. The purpose of
amortization is to reflect resale or redemption value.
Appreciation
- ------------------------------------------------------------------------
An increase in the value of an investment.
Average maturity
- ------------------------------------------------------------------------
An average of when the individual bonds and other debt securities held in
a portfolio will mature.
Bond
- ------------------------------------------------------------------------
A debt security, like an IOU, issued by a company, municipality or
government agency. In return for lending money to the issuer, a bond buyer
generally receives fixed periodic interest payments and repayment of the
loan amount on a specified maturity date. A bond's price prior to maturity
changes and is inversely related to current interest rates. When interest
rates rise, prices fall, and when interest rates fall, prices rise.
Bond ratings
- ------------------------------------------------------------------------
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are
considered investment grade. Bonds rated Ba/BB or lower are commonly known
as junk bonds.
C-C
Capital
- ------------------------------------------------------------------------
The amount of money you invest.
Capital gains distributions
- ------------------------------------------------------------------------
Payments to mutual fund shareholders of profits (realized gains) from the
sale of a fund's portfolio securities. Usually paid once a year; may be
either short-term gains or long-term gains.
Commission
- ------------------------------------------------------------------------
The fee an investor pays to a financial adviser for investment advice and
help in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
- ------------------------------------------------------------------------
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
- ------------------------------------------------------------------------
Measurement of U.S. inflation; represents the price of a basket of
commonly purchased goods.
Contingent deferred sales charge (CDSC)
- ------------------------------------------------------------------------
Fee charged by some mutual funds when shares are redeemed (sold back to
the fund) within a set number of years; an alternative method for
investors to compensate a financial adviser for advice and service, rather
than an up-front commission.
[glossary to be continued]
Who manages the Fund
Investment Manager and Sub-Adviser
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. AIB Govett, Inc. is the Fund's
sub-adviser. As sub-adviser, AIB Govett is responsible for day-to-day
management of the Fund's assets. Delaware Management Company administers
the Fund's affairs and has ultimate responsibility for all investment
advisory services for the Fund. Delaware Management Company also
supervises the sub-adviser's performance. For their services to the Fund,
the manager and sub-adviser were paid an aggregate fee for the last fiscal
year as follows:
Investment Management Fees
New Pacific Fund
As a percentage of average
daily net assets 0.00%
Portfolio Manager
Jane Pickard has had primary responsibility for making day-to-day
investment decisions for the Fund since November 12, 1997. Ms. Pickard
graduated in law from Endinburgh University. She joined Barclays de Zoete
Wedd Securities Limited in 1991, where she initially worked as a
specialist in structured debt products moving into the Pacific Rim equity
division in 1992. She remained there until 1995 when she moved to IAI
International where she had responsibility for Pacific Region investment
for U.S. institutional and retail funds. Ms. Pickard joined AIB Govett
Asset Management, an affiliate of AIB Govett, Inc., in 1996 and
concentrates on investments in the Pacific region. As a result of a
corporate reorganization, sub-advisory services were transferred from John
Govett & Co., Inc. to AIB Govett, Inc., although there was no actual
change in control.
Year 2000
As with other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by its service providers do not properly process and
calculate date-related information from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Fund is taking steps to
obtain satisfactory assurances that the Fund's major service providers are
taking steps reasonably designed to address the Year 2000 Problem with
respect to the computer systems that such service providers use. There can
be no assurance that these steps will be sufficient to avoid any adverse
impact on the business of the Fund.
Several European countries are participating in the European Economic and
Monetary Union, which will establish a common European currency for
participating countries. This currency will commonly be known as the
"Euro." It is anticipated that each such participating country will
replace its existing currency with the Euro on January 1, 1999. Additional
European countries may elect to participate after that date. If the Fund
is invested in securities of participating countries, it could be
adversely affected if the computer systems used by its major service
providers are not properly prepared to handle the implementation of this
single currency or the adoption of the Euro by additional countries in the
future. The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to
address these matters with respect to the computer systems that such
service providers use. There can be no assurances that these steps will be
sufficient to avoid any adverse impact on the business of the Fund.
[glossary continued]
C-E
Cost basis
- ------------------------------------------------------------------------
The original purchase price of an investment, used in determining capital
gains and losses.
Currency exchange rates
- ------------------------------------------------------------------------
The price at which one country's currency can be converted into another's.
This exchange rate varies almost daily according to a wide range of
political, economic and other factors.
Depreciation
- ------------------------------------------------------------------------
A decline in an investment's value.
Diversification
- ------------------------------------------------------------------------
The process of spreading investments among a number of different
securities, asset classes or investment styles to reduce the risks of
investing.
[glossary to be continued]
[sidebar]
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED
WITH MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS
FUNDS]
Board of Directors
Investment Manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Sub-Adviser
AIB Govett, Inc.
250 Montgomery Street, Suite 1200,
San Francisco, California 94104
Portfolio Service agent Distributor
managers Delaware Service Company, Inc. Delaware Distributors, L.P.
(see page x 1818 Market Street 1818 Market Street
for details) Philadelphia, PA 19103 Philadelphia, PA 19103
Financial advisers
Shareholders
Board of directors A mutual fund is governed by a board of directors which
has oversight responsibility for the management of the fund's business
affairs. Directors establish procedures and oversee and review the
performance of the investment manager, the distributor and others that
perform services for the fund. At least 40% of the board of directors must
be independent of the fund's investment manager or distributor. These
independent fund directors, in particular, are advocates for shareholder
interests.
Custodian Mutual funds are legally required to protect their portfolio
securities by placing them with a custodian, typically a qualified bank
custodian who segregates fund securities from other bank assets.
Investment manager An investment manager is a company responsible for
selecting portfolio investments consistent with objectives and policies
stated in the mutual fund's prospectus. The investment manager places
portfolio orders with broker/dealers and is responsible for obtaining the
best overall execution of those orders. A written contract between a
mutual fund and its investment manager specifies the services the manager
performs. Most management contracts provide for the manager to receive an
annual fee based on a percentage of the fund's average net assets. The
manager is subject to numerous legal restrictions, especially regarding
transactions between itself and the funds it advises.
Sub-adviser A sub-adviser is a company generally responsible for the
management of the fund's assets. They are selected and supervised by the
investment manager.
Portfolio managers Portfolio managers are employed by the investment
manager or sub-adviser to make investment decisions for individual
portfolios on a day-to-day basis.
Service agent Mutual fund companies employ service agents (sometimes
called transfer agents) to maintain records of shareholder accounts,
calculate and disburse dividends and capital gains and prepare and mail
shareholder statements and tax information, among other functions. Many
service agents provide customer service to shareholders, as well.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject
to National Association of Securities Dealers, Inc. (NASD) rules governing
mutual fund sales practices.
Financial advisers Financial advisers provide investment advice to their
clients, analyzing their financial objectives and recommending appropriate
funds or other investments. Financial advisers are compensated for their
services, generally through sales commissions, and through 12b-1 and/or
service fees deducted from the fund's assets.
Shareholders Like shareholders of other companies, mutual fund
shareholders have specific voting rights, including the right to elect
directors. Material changes in the terms of a fund's management contract
must be approved by a shareholder vote, and funds seeking to change
fundamental investment objectives or policies must also seek shareholder
approval.
[glossary continued]
Dividend distribution
- ------------------------------------------------------------------------
Payments to mutual fund shareholders of dividends passed along from the
fund's portfolio of securities.
Expense ratio
- ------------------------------------------------------------------------
A mutual fund's total operating expenses, expressed as a percentage of its
total net assets. Operating expenses are the costs of running a mutual
fund, including management fees, offices, staff, equipment and expenses
related to maintaining the fund's portfolio of securities. They are paid
from the fund's assets before any earnings are distributed to
shareholders.
[glossary to be continued]
About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each
share class has a different combination of sales charges, fees, and other
features, you should consult your financial adviser to determine which
class best suits your investment goals and time frame.
Choosing a share class
Class A
(bullet) Class A shares have an up-front sales charge of up to 5.75% that
you pay when you buy the shares. The offering price for Class A shares
includes the front-end sales charge.
(bullet) If you invest $50,000 or more, your front-end sales charge will
be reduced.
(bullet) You may qualify for other reduced sales charges, as described in
"How to reduce your sales charge," and under certain circumstances the
sales charge may be waived; please see the Statement of Additional
Information.
(bullet) Class A shares are also subject to an annual 12b-1 fee no greater
than 0.35% (currently, no more than 0.30%) of average daily net assets,
which is lower than the 12b-1 fee for Class B and Class C shares.
(bullet) Class A shares generally are not subject to a contingent deferred
sales charge.
Class B
(bullet) Class B shares have no up-front sales charge, so the full amount
of your purchase is invested in the Fund. However, you will pay a
contingent deferred sales charge if you redeem your shares within six
years after you buy them.
(bullet) If you redeem Class B shares during the first year after you buy
them, the shares will be subject to a contingent deferred sales charge of
5%. The contingent deferred sales charge is 4% during the second year, 3%
during the third and fourth years, 2% during the fifth year, 1% during the
sixth year, and 0% thereafter.
(bullet) Under certain circumstances the contingent deferred sales charge
may be waived; please see the Statement of Additional Information.
(bullet) For approximately eight years after you buy your Class B shares,
they are subject to annual 12b-1 fees no greater than 1% of average daily
net assets, of which 0.25% are service fees paid to the distributor,
dealers or others for providing services and maintaining shareholder
accounts.
(bullet) Because of the higher 12b-1 fees, Class B shares have higher
expenses and any dividends paid on these shares are lower than dividends
on Class A shares.
(bullet) Approximately eight years after you buy them, Class B shares
automatically convert into Class A shares with a 12b-1 fee of no more than
0.30%.
(bullet) You may purchase up to $250,000 of Class B shares at any one
time. The limitation on maximum purchases varies for retirement plans.
[glossary continued]
F-M
Financial adviser
- ------------------------------------------------------------------------
Financial professional (e.g., broker, banker, accountant, planner or
insurance agent) who analyzes clients' finances and prepares personalized
programs to meet objectives.
Fixed-income securities
- ------------------------------------------------------------------------
With fixed-income securities, the money you originally invested is
returned to you at a prespecified maturity date. These securities, which
include government, corporate or municipal bonds, as well as money market
securities, typically pay a fixed rate of return.
[glossary to be continued]
Class C
(bullet) Class C shares have no up-front sales charge, so the full amount
of your purchase is invested in the Fund. However, you will pay a
contingent deferred sales charge if you redeem your shares within 12
months after you buy them.
(bullet) Under certain circumstances the contingent deferred sales charge
may be waived; please see the Statement of Additional Information.
(bullet) Class C shares are subject to an annual 12b-1 fee which may not
be greater than 1% of average daily net assets, of which 0.25% are service
fees paid to the distributor, dealers or others for providing personal
services and maintaining shareholder accounts.
(bullet) Because of the higher 12b-1 fees, Class C shares have higher
expenses and pay lower dividends than Class A shares.
(bullet) Unlike Class B shares, Class C shares do not automatically
convert into another class.
(bullet) You may purchase any amount less than $1,000,000 of Class C
shares at any one time. The limitation on maximum purchases varies for
retirement plans.
<TABLE>
<CAPTION>
Class A Sales Charges
Amount Sales charge Sales charge as Dealer's
of purchase as % % of amount commission as
of offering price invested %
Of offering price
<S> <C> <C> <C>
Less than $50,000 5.75% X.XX% 5.00%
$50,000 but 4.75% X.XX% 4.00%
under $100,000
$100,000 but 3.75% X.XX% 3.00%
under $250,000
$250,000 but 2.50% X.XX% 2.00%
under $500,000
$500,000 but 2.00% X.XX% 1.60%
under $1 million
</TABLE>
As shown below, there is no front-end sales charge when you purchase $1
million or more of Class A shares. However, if your financial adviser is
paid a commission on your purchase, you may have to pay a limited
contingent deferred sales charge of 1% if you redeem these shares within
the first year and 0.50% if you redeem them within the second year.
<TABLE>
<CAPTION>
Amount of Sales charge Sales charge Dealer's commission as
purchase as % as % %
of offering of amount of offering price
price invested
<S> <C> <C> <C>
$1 million up to $5 million none None 1.00
Next $20 million
up to $25 million none None 0.50
Amount over $25 million none None 0.25
</TABLE>
[glossary continued]
Inflation
- ------------------------------------------------------------------------
The increase in the cost of goods and services over time. U.S. inflation
is measured by the Consumer Price Index (CPI).
Investment goal
- ------------------------------------------------------------------------
The objective, such as long-term capital growth or high current income,
that a mutual fund pursues.
Management fee
- ------------------------------------------------------------------------
The amount paid by a mutual fund to the investment adviser for management
services, expressed as a percentage of the fund's net assets.
[glossary to be continued]
About your account continued
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on
shares. Please refer to the Statement of Additional Information for
detailed information and eligibility requirements. You can also get
additional information from your financial adviser. You or your financial
adviser must notify us at the time you purchase shares if you are eligible
for any of these programs.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Share class
Program How it works A B C
- ------------------------------------------------------------------------------------
Letter of Intent Through a Letter of Intent X Although the
you agree to invest a Letter of Intent
certain amount in Delaware and Rights of
Investment Funds (except Accumulation do
money market funds with no not apply to the
sales charge) over a 13-month purchase of Class
period to qualify for reduced B and C shares,
front-end sales charges. you can combine
your purchase of
Class B and C
shares to fulfill
your Letter of
Intent or qualify
for Rights of
Accumulation.
- ------------------------------------------------------------------------------------
Rights of Accumulation You can combine your holdings X
of all funds in the Delaware
Investments family (except
money market funds with no
sales charge) as well as the
holdings of your spouse and
children under 21 to qualify
for reduced front-end sales
charges.
- ------------------------------------------------------------------------------------
Reinvestment of Redeemed Up to 12 months after you X
Shares redeem shares, you can reinvest
the proceeds without paying a
front-end sales charge.
- ------------------------------------------------------------------------------------
SIMPLE IRA, SEP IRA, These investment plans may X
SARSEP, Prototype Profit qualify for reduced sales
Sharing, Pension, charges by combining the
SIMPLE 401(k), 403(b)(7), purchases of all members
and 457 Retirement Plans of the group. Members of
these groups may also qualify
to purchase shares without a
front-end sales charge and a
waiver of any contingent
deferred sales charges.
- ------------------------------------------------------------------------------------
</TABLE>
[glossary continued]
M-P
Market capitalization
- ------------------------------------------------------------------------
The value of a corporation determined by multiplying the current market
price of a share of common stock by the number of shares held by
shareholders. A corporation with one million shares outstanding and the
market price per share of $10 has a market capitalization of $10 million.
NASD (National Association of Securities Dealers)
- ------------------------------------------------------------------------
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the
actions of its members.
[glossary to be continued]
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a fee for this
service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to
the fund and class of shares you wish to purchase to Delaware Investments,
1818 Market Street, Philadelphia, PA 19103. If you are making an initial
purchase by mail, you must include a completed investment application, or
an appropriate retirement plan application if you are opening a retirement
account, with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank,
ABA #031201467, Bank Account number 2014128934013. Include your account
number and the name of the fund in which you want to invest. If you are
making an initial purchase by wire, you must call us so we can assign an
account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in
the Delaware Investments family for shares of other funds in the family.
Please keep in mind, however, that under most circumstances, you may only
exchange between the same class of shares. To open an account by exchange,
call the Shareholder Service Center at 800-523-1918.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated
telephone service, or through our web site, www.delawarefunds.com. For
more information about how to sign up for these services, call our
Shareholder Service Center at 800-523-1918.
[glossary continued]
NAV (Net asset value)
- ------------------------------------------------------------------------
The daily dollar value of one mutual fund share. Equal to a fund's net
assets divided by the number of shares outstanding.
NRSRO (Nationally recognized statistical rating organization)
- ------------------------------------------------------------------------
A company that assesses the quality and potential performance of bonds,
commercial paper, preferred and common stocks and municipal short-term
issues, rating the probability that the issuer of the debt will meet the
scheduled interest payments and repay the principal. Ratings are published
by such companies as Moody's Investors Service (Moody's), Standard &
Poor's Corporation (S&P), Duff & Phelps, Inc. (Duff), and Fitch Investor
Services, Inc. (Fitch).
Preferred stock
- ------------------------------------------------------------------------
Preferred stock has preference over common stock in the payment of
dividends and liquidation of assets. Preferred stocks also pay dividends
at a fixed rate.
[glossary to be continued]
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open an account with an
initial investment of $1,000, and make additional investments at any time
for as little as $100. If you are buying shares in an IRA or Roth IRA;
under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors
Act; or through an Automatic Investing Plan, the minimum purchase is $250,
and you can make additional investments of only $25. If you are buying
shares in an Education IRA, the minimum purchase is $500, and you can made
additional investments of only $25. The minimums vary for retirement plans
other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase
order. If we or an authorized agent receives your order before the close
of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
Time) on a business day, you will pay that day's closing share price which
is based on the Fund's net asset value. If we receive your order after the
close of trading, you will pay the next business day's price. A business
day is any day that the New York Stock Exchange is open for business. We
reserve the right to reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of
trading of the New York Stock Exchange each business day that the Exchange
is open. We calculate this value by adding the market value of all the
securities and assets in the Fund's portfolio, deducting all liabilities,
and dividing the resulting number by the number of shares outstanding. The
result is the net asset value per share. We price securities and other
assets for which market quotations are available at their market value. We
price debt securities on the basis of valuations provided to us by an
independent pricing service that uses methods approved by the board of
directors. Any investments that have a maturity of less than 60 days we
price at amortized cost. We price all other securities at their fair
market value using a method approved by the board of directors.
[glossary continued]
P-S
Price/earnings ratio
- ------------------------------------------------------------------------
A measure of a stock's value calculated by dividing the current market
price of a share of stock by its annual earnings per share. A stock
selling for $100 per share with annual earnings of $5 has a P/E of 20.
Principal
- ------------------------------------------------------------------------
Amount of money you invest. Also refers to a bond's original face value,
due to be repaid at maturity.
Prospectus
- ------------------------------------------------------------------------
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
[glossary to be continued]
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your
shares. Your adviser may charge a fee for this service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing
to: Delaware Investments, 1818 Market Street, Philadelphia, PA 19103. All
owners of the account must sign the request, and for redemptions of
$50,000 or more, you must include a signature guarantee for each owner.
Signature guarantees are also required when redemption proceeds are going
to anyone other than the account holder(s) of record.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or if you redeem at least $1,000 of shares,
you may have the proceeds sent directly to your bank by wire. Bank
information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds
deposited directly to your bank account the next business day after we
receive your request. If you request a wire deposit, the First Union Bank
fee (currently $7.50) will be deducted from your proceeds. Bank
information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service,
or through our web site, www.delawarefunds.com. For more information about
how to sign up for these services, call our Shareholder Service department
at 800-523-1918.
[glossary continued]
Redeem
- ------------------------------------------------------------------------
To cash in your shares by selling them back to the mutual fund.
Risk
- ------------------------------------------------------------------------
Generally defined as variability of value; also credit risk, inflation
risk, currency and interest rate risk. Different investments involve
different types and degrees of risk.
S&P 500 Index
- ------------------------------------------------------------------------
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of
the U.S. stock market.
Sales charge
- ------------------------------------------------------------------------
Charge on the purchase of fund shares sold through financial advisers. May
vary with the amount invested. Typically used to compensate advisers for
advice and service provided.
[glossary to be continued]
About your account continued
How to redeem shares (cont.)
If you hold your shares in certificates, you must submit the certificates
with your request to sell the shares. We recommend that you send your
certificates by certified mail.
When you send us a properly completed request to redeem or exchange
shares, you will receive the net asset value as determined at the close of
business on the day we receive your request. We will deduct any applicable
contingent deferred sales charges. You may also have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the
next business day, but no later than seven days after we receive your
request to sell your shares. If you purchased your shares by check, we
will wait until your check has cleared, which can take up to 15 days,
before we send your redemption proceeds.
If you are required to pay a contingent deferred sales charge when you
redeem your shares, the amount subject to the fee will be based on the
shares' net asset value when you purchased them or their net asset value
when you redeem them, whichever is less. This arrangement assures that you
will not pay a contingent deferred sales charge on any increase in the
value of your shares. You also will not pay the charge on any shares
acquired by reinvesting dividends or capital gains. If you exchange shares
of one fund for shares of another, and later redeem those shares, the
purchase price for purposes of the contingent deferred sales charge
formula will be the price you paid for the original shares not the
exchange price. The redemption price for purposes of this formula will be
the NAV of the shares you are actually redeeming.
Account Minimum
If you redeem shares and your account balance falls below the required
account minimum of $1,000 ($250 for IRAs and Roth IRAs, Uniform Gift to
Minors Act accounts or accounts with automatic investing plans, and $500
for Education IRAs) for three or more consecutive months, you will have
until the end of the current calendar quarter to raise the balance to the
minimum. If your account is not at the minimum by the required time, you
will be charged a $9 fee for that quarter and each quarter after that
until your account reaches the minimum balance. If your account does not
reach the minimum balance, the Fund may redeem your account after 60 days'
written notice to you.
[glossary continued]
S-S
SEC (Securities and Exchange Commission)
- ------------------------------------------------------------------------
Federal agency established by Congress to administer the laws governing
the securities industry, including mutual fund companies.
Share classes
- ------------------------------------------------------------------------
Different classifications of shares; mutual fund share classes offer a
variety of sales charge choices.
Signature guarantee
- ------------------------------------------------------------------------
Certification by a bank, brokerage firm or other financial institution
that a customer's signature is valid.
[glossary to be continued]
Special services
To help make investing with us as easy as possible, and to help you build
your investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly
investments directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions or direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
from your shares in one or more Delaware Investments funds into any other
Delaware Investments fund. Wealth Builder Exchanges are subject to the
same rules as regular exchanges and require a minimum monthly exchange of
$100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the
Dividend Reinvestment Plan are not subject to a front-end sales charge or
to a contingent deferred sales charge.
[glossary continued]
Standard deviation
- ------------------------------------------------------------------------
A measure of an investment's volatility; for mutual funds, measures how
much a fund's total return varies from its historical average.
Statement of Additional Information (SAI)
- ------------------------------------------------------------------------
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies
and risks.
Stock
- ------------------------------------------------------------------------
An investment that represents a share of ownership (equity) in a
corporation. Stocks are often referred to as "equities."
[glossary to be continued]
About your account (continued)
Special services (continued)
Exchanges
You can exchange all or part of your shares for shares of the same class
in another Delaware Investments fund without paying a sales charge and
without paying a contingent deferred sales charge on the shares of the
fund from which you make your exchange. However, if you exchange shares
from a money market fund that does not have a sales charge you will pay
any applicable sales charges on your new shares. You don't pay sales
charges on shares that you acquired through the reinvestment of dividends.
You may have to pay taxes on your exchange. When exchanging Class B and
Class C shares of one fund for similar shares in other funds, your new
shares will be subject to the same contingent deferred sales charge as the
shares you originally purchased. The holding period for the CDSC will also
remain the same, with the amount of time you held your original shares
being credited toward the holding period of your new shares. When you
exchange shares, you are purchasing shares in another fund so you should
be sure to get a copy of the fund's prospectus and read it carefully
before buying shares through an exchange.
MoneyLineSM On Demand Service
Through our MoneylineSM On Demand Service, you or your financial adviser
may transfer money from your Fund account to your predesignated bank
account by telephone request. This service is not available for retirement
plans.
MoneyLineSM Direct Deposit Service
Through our MoneylineSM Direct Deposit Service you can have $25 or more in
dividends and distributions deposited directly to your bank account.
Delaware Investments does not charge a fee for this service; however, your
bank may assess one. This service is not available for retirement plans.
Systematic Withdrawal Plan
Through our Systematic Withdrawal Plan you can arrange a regular monthly
or quarterly payment from your account made to you or someone you
designate. If the value of your account is $5,000 or more, you can make
withdrawals of at least $25 monthly, or $75 quarterly. You may also have
your withdrawals deposited directly to your bank account through our
MoneylineSM Direct Deposit Service.
[glossary continued]
T-V
Total return
- ------------------------------------------------------------------------
An investment performance measurement, expressed as a percentage, based on
the combined earnings from dividends, capital gains and change in price
over a given period.
[glossary to be continued]
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains, unless you tell us
otherwise.
Tax laws are subject to change, so we urge you to consult your tax adviser
about your particular tax situation and how it might be affected by
current tax law. The tax status of your dividends from the Fund is the
same whether you reinvest your dividends or receive them in cash.
Distributions from the Fund's long-term capital gains are taxable as
capital gains, while distributions from short-term capital gains and net
investment income are generally taxable as ordinary income. Any capital
gains may be taxable at different rates depending on the length of time
the Fund held the assets. In addition, you may be subject to state and
local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount
and nature of all dividends and capital gains that you were paid for the
prior year.
Retirement plans
In addition to being an appropriate investment for your Individual
Retirement Account (IRA), Roth IRA and Education IRA, shares in the Fund
may be suitable for group retirement plans. You may establish your IRA
account even if you are already a participant in an employer-sponsored
retirement plan. For more information on how shares in the Fund can play
an important role in your retirement planning or for details about group
plans, please consult your financial adviser, or call 800-523-1918.
[glossary continued]
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
- ------------------------------------------------------------------------
Federal and state laws that provide a simple way to transfer property to a
minor with special tax advantages.
Volatility
- ------------------------------------------------------------------------
The tendency of an investment to go up or down in value by different
magnitudes. There are "low volatility" and "high volatility" investments.
[end glossary]
Implementation of investment objectives and policies
In attempting to achieve its investment objective and policies, the Fund
may employ, among others, one or more of the strategies set forth below.
Convertible Securities
The Fund may invest in securities that either have warrants or rights
attached or are otherwise convertible into other or additional securities.
A convertible security is typically a fixed-income security (a bond or
preferred stock) that may be converted at a stated price within a
specified period of time into a specified number of shares of common stock
of the same or a different issuer. Convertible securities are generally
senior to common stocks in a corporation's capital structure but are
usually subordinated to similar non-convertible securities. While
providing a fixed-income stream (generally higher in yield than the income
derivable from a common stock but lower than that afforded by a similar
non-convertible security), a convertible security also affords an investor
the opportunity, through its conversion feature, to participate in capital
appreciation attendant upon a market price advance in the common stock
underlying the convertible security. In general, the market value of a
convertible security is at least the higher of its "investment value"
(i.e., its value as a fixed-income security) or its "conversion value"
(i.e., its value upon conversion into its underlying common stock). While
no securities investment is without some risk, investments in convertible
securities generally entail less risk than investments in the common stock
of the same issuer.
U.S. Government Securities
The Fund may invest in securities of the U.S. government. Securities
guaranteed by the U.S. government include:
(bullet) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and
(bullet) federal agency obligations guaranteed as to principal and
interest by the U.S. Treasury (such as GNMA certificates and Federal
Housing Administration debentures).
For these securities, the payment of principal and interest is
unconditionally guaranteed by the U.S. government, and thus they are of
the highest possible credit quality. Such securities are subject to
variations in market value due to fluctuations in interest rates, but if
held to maturity are deemed to be free of credit risk for the life of the
investment.
Securities issued by U.S. government instrumentalities and certain federal
agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they generally involve federal sponsorship in one way
or another: some are backed by specific types of collateral; some are
supported by the issuer's right to borrow from the U.S. Treasury; some are
supported by the discretionary authority of the U.S. Treasury to purchase
certain obligations of the issuer; and others are supported only by the
credit of the issuing government agency or instrumentality. These agencies
and instrumentalities include, but are not limited to, Federal Land Banks,
Farmers Home Administration, Central Bank for Cooperatives, Federal
Intermediate Credit Banks, and Federal Home Loan Banks.
Repurchase Agreements
The Fund may enter into repurchase agreements, under which the 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 Fund's Custodian collateral equal to at least 102% of
the repurchase price including accrued interest, as monitored daily by the
manager and/or sub-adviser. The 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 Delaware Investments have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow
Delaware Investments funds jointly to invest cash balances. The Fund may
invest cash balances in a joint repurchase agreement in accordance with
the terms of the Order and subject generally to the conditions described
above.
When-Issued Securities and Firm Commitment Agreements
The Fund 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. The 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 Fund 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.
The 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 the 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 the Fund's
portfolio securities decline while it is in a leveraged position, greater
depreciation of its net assets would likely occur than were it not in such
a position. The Fund will not borrow money to settle these transactions
and, therefore, will liquidate other Fund securities in advance of
settlement if necessary to generate additional cash to meet their
obligations thereunder.
Money Market Instruments
The Fund 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:
(bullet) commercial paper (short-term notes up to 9 months issued by
corporations or governmental bodies);
(bullet) 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));
(bullet) corporate bonds and notes (corporate obligations that mature, or
that may be redeemed, in one year or less);
(bullet) variable rate demand notes, short-term tax-exempt obligations;
and
(bullet) savings association obligations (certificates of deposit issued
by mutual savings banks or savings and loan associations). Although
certain floating or variable rate obligations (securities which have a
coupon rate that changes at least annually and generally more frequently)
have maturities in excess of one year, they are also considered to be
short-term debt securities.
Investments by Funds of Funds
New Pacific Fund accepts investments from the series portfolios of
Delaware Group Foundation Funds, a fund of funds (the "Foundation Funds").
From time to time, the Funds may experience large investments or
redemptions due to allocations or rebalancings by the Foundation Funds.
While it is impossible to predict the overall impact of these transactions
over time, there could be adverse effects on portfolio management to the
extent that the Funds may be required to sell securities or invest cash at
times when it would not otherwise do so. These transactions could also
have tax consequences if sales of securities result in gains and could
also increase transactions costs or portfolio turnover. The manager will
monitor such transactions and will attempt to minimize any adverse effects
on both the Funds and the Foundation Funds resulting from such
transactions.
Strategic Transactions
General. The Fund may, but is 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 Fund 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 the 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 the 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 Fund 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. The 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 Fund 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, the Fund will not:
(bullet) sell futures contracts, purchase put options or write call
options if, as a result, more than 25% of its total assets would be hedged
with futures and options under normal conditions;
(bullet) purchase futures contracts or write put options if, as a result,
the Fund's total obligations upon settlement or exercise of purchased
futures contracts and written put options would exceed 25% of its total
assets; or
(bullet) purchase call options if, as a result, the current value of
option premiums for call options purchased by the Fund would exceed 5% of
its total assets.
These limitations do not apply to options attached to or acquired or
traded together with their underlying securities, and do not apply to
securities that incorporate features similar to options.
The limitations on the Fund's investments in futures contracts and
options, and the Fund's policies regarding futures contracts and options
discussed elsewhere are not fundamental policies and may be changed as
regulatory agencies permit.
Options Transactions. The Fund 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 its 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 the 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. The Fund might, therefore, be obligated to
purchase the underlying securities for more than their current market
price.
The Fund will write only "covered" options. An option is covered if the
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 the
Statement of Additional Information.
Forward Foreign Currency Exchange Contracts. The Fund 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
Fund 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. The 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 Fund 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.
The 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 Fund may enter into interest rate swaps, currency
swaps, and other types of swap agreements such as caps, collars and
floors. In an interest rate swap, one party agrees to make regular
payments of a floating rate times a "notional" principal amount in return
for payments of a fixed rate times the same amount. Swaps may also depend
on other prices or rates such as the value of an index or mortgage
prepayment rates.
Swap agreements usually involve a small investment of cash relative to the
magnitude of risk assumed. As a result, swaps can be very volatile and may
substantially impact the Fund's performance. Swap agreements are also
subject to the risk of a counterpart's ability to perform (i.e.,
creditworthiness). The 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 the 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 the 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:
(bullet) 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;
(bullet) imperfect correlation between the price of options and futures
contracts and options thereon and movements in the prices of securities
being hedged;
(bullet) the fact that skills need to use these strategies are different
from those needed to select Fund securities;
(bullet) the possible absence of a liquid secondary market for any
particular instrument at any time;
(bullet) the possible need to defer closing out certain hedged positions
to avoid adverse tax consequences; and
(bullet) 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 Fund may use and some of their risks are
described more fully in the Statement of Additional Information.
The Fund's ability to engage in Strategic Transactions is limited by the
requirements of the Internal Revenue Code for qualification as a regulated
investment company. See the Statement of Additional Information.
* * *
The Statement of Additional Information describes certain of these
investment policies and risk considerations. The Statement of Additional
Information also sets forth other investment policies, risk considerations
and more specific investment restrictions.
<TABLE>
<CAPTION>
Financial Highlights
The financial highlights table is intended to help you understand the
Fund's financial performance. All "per share" information reflects
financial results for a single Fund share. This information has been
audited by Ernst & Young LLP, whose report, along with the Fund's
financial statements, is included in the Fund's annual report, which is
available upon request by calling 800-523-1918.
Class A Shares
- ------------------------------------------------------------------------------------
Year Ended 10/31
New Pacific Fund 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period ($) 9.42 8.71
Income From Investment
Operations
Net investment income ($) (0.01) (0.05)
Net realized & unrealized
gains (losses) on
investments ($) (1.94) 0.77
Total from investment
operations ($) (1.95) 0.72
Less Distributions
Dividends from net
investment income ($) (0.15) (0.01)
Distributions from realized
gains ($) none none
Total distributions ($) (0.15) (0.01)
Net asset value, end of
period ($) 7.32 9.42
Total Return (%) (21.15) 8.26
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 7,144 11,752
Ratio of expenses to average
daily net assets (%) 1.80 1.82
Ratio of net investment
income to average daily net
assets (%) (0.08) (0.41)
Portfolio turnover rate (%) 178 163
- ------------------------------------------------------------------------------------
<CAPTION>
Financial Highlights
The financial highlights table is intended to help you understand the
Fund's financial performance. All "per share" information reflects
financial results for a single Fund share. This information has been
audited by Ernst & Young LLP, whose report, along with the Fund's
financial statements, is included in the Fund's annual report, which is
available upon request by calling 800-523-1918.
- ------------------------------------------------------------------------------------
Period
12/3/93
Year Ended 10/31 through
New Pacific Fund 1995 10/31/94
- ------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning
of Period ($) 10.44 10.00
Income From Investment
Operations
Net investment income ($) (0.05) (0.02)
Net realized & unrealized
gains (losses) on
investments ($) (1.39) 0.47
Total from investment
operations ($) (1.44) 0.45
Less Distributions
Dividends from net
investment income ($) none (0.01)
Distributions from realized
gains ($) (0.29) none
Total distributions ($) (0.29) (0.01)
Net asset value, end of
period ($) 8.71 10.44
Total Return (%) 13.99 4.53
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 10,353 11,333
Ratio of expenses to average
daily net assets (%) 1.85 1.85
Ratio of net investment
income to average daily net
assets (%) (0.60) (0.21)
Portfolio turnover rate (%) 163 104
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Class B Shares
- ------------------------------------------------------------------------------------
Year Ended 10/31
New Pacific Fund 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period ($) 9.68 9.01
Income From Investment
Operations
Net investment income ($) (0.08) (0.05)
Net realized & unrealized
gains (losses) on
investments ($) (1.98) 0.73
Total from investment
operations ($) (2.06) 0.68
Less Distributions
Dividends from net
investment income ($) (0.15) (0.01)
Distributions from realized
gains ($) none none
Total distributions ($) (0.15) (0.01)
Net asset value, end of
period ($) 7.47 9.68
Total Return (%) 21.72 7.54
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 2,534 562
Ratio of expenses to average
daily net assets (%) 2.50 2.50
Ratio of net investment
income to average daily net
assets (%) (0.77) (1.09)
Portfolio turnover rate (%) 178 163
- ------------------------------------------------------------------------------------
Financial Highlights
Class B Shares
- ------------------------------------------------------------------------------------
Period
3/29/94
Year Ended 10/31 through
New Pacific Fund 1995 10/31/94
- ------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning
of Period ($) 10.86 10.00
Income From Investment
Operations
Net investment income ($) (0.10) (0.03)
Net realized & unrealized
gains (losses) on
investments ($) (1.46) 0.89
Total from investment
operations ($) (1.56) 0.86
Less Distributions
Dividends from net
investment income ($) none (0.01)
Distributions from realized
gains ($) (0.29) None
Total distributions ($) (0.29) (0.01)
Net asset value, end of
period ($) 9.01 10.86
Total Return (%) 14.56 8.58
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 573 431
Ratio of expenses to average
daily net assets (%) 2.50 2.50
Ratio of net investment
income to average daily net
assets (%) (1.20) (0.88)
Portfolio turnover rate (%) 163 104
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Class C Shares
- ------------------------------------------------------------------------------------
Year Ended 10/31
New Pacific Fund 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period ($) 9.49 8.83
Income From Investment
Operations
Net investment income ($) (0.08) (0.05)
Net realized & unrealized
gains (losses) on
investments ($) (1.94) 0.72
Total from investment
operations ($) (2.02) 0.67
Less Distributions
Dividends from net
investment income ($) (0.15) (0.01)
Distributions from realized
gains ($) none none
Total distributions ($) (0.15) (0.01)
Net asset value, end of
period ($) 7.32 9.49
Total Return (%) 21.85 7.58
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 129 44
Ratio of expenses to average
daily net assets (%) 2.50 2.50
Ratio of net investment
income to average daily net
assets (%) (0.77) (1.09)
Portfolio turnover rate (%) 178 163
- ------------------------------------------------------------------------------------
Financial Highlights
Class C Shares
- ------------------------------------------------------------------------------------
Period
5/23/94
Year Ended 10/31 through
New Pacific Fund 1995 10/31/94
- ------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning
of Period ($) 10.66 10.00
Income From Investment
Operations
Net investment income ($) (0.08) (0.02)
Net realized & unrealized
gains (losses) on
investments ($) (1.46) 0.68
Total from investment
operations ($) (1.54) 0.66
Less Distributions
Dividends from net
investment income ($) none (0.01)
Distributions from realized
gains ($) (0.29) none
Total distributions ($) (0.29) (0.01)
Net asset value, end of
period ($) 8.83 10.66
Total Return (%) (14.57) 6.55
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 17 12
Ratio of expenses to average
daily net assets (%) 2.50 2.50
Ratio of net investment
income to average daily net
assets (%) (1.02) (0.83)
Portfolio turnover rate (%) 163 104
- ------------------------------------------------------------------------------------
</TABLE>
How to read the financial highlights
Net investment income
- ------------------------------------------------------------------------
Net investment income includes dividend and interest income earned from
the Fund's securities after its expenses have been deducted.
Net gains (losses) on investments (both realized and unrealized)
- ------------------------------------------------------------------------
A realized gain occurs when we sell an investment at a profit, while a
realized loss occurs when we sell an investment at a loss. When an
investment increases or decreases in value but we do not sell it, we
record an unrealized gain or loss. The amount of realized gain per share
that we pay to shareholders is listed under "Less
Distributions-Distributions from realized gains."
Realized gains
- ------------------------------------------------------------------------
Profits realized from the sale of securities.
Net asset value (NAV)
- ------------------------------------------------------------------------
This is the value of a mutual fund share, calculated by dividing the net
assets by the number of shares outstanding.
Total return
- ------------------------------------------------------------------------
This represents the percentage increase or decrease in the value of a
share of a fund during specific periods, in this case, annual periods. In
calculating this figure for the financial highlights table, we include fee
waivers, exclude front-end and contingent deferred sales charges, and
assume the shareholder has reinvested all dividends and realized gains.
Net assets
- ------------------------------------------------------------------------
Net assets represent the total value of all the assets in the Fund's
portfolio, less any liabilities that are attributable to that class of the
Fund.
How to read the financial highlights
(continued)
Ratio of expenses to average daily net assets
- ------------------------------------------------------------------------
The expense ratio is the percentage of total investment that a fund pays
annually for operating expenses and management fees. These expenses
include accounting and administration expenses, services for shareholders,
and similar expenses.
Ratio of net investment income to average daily net assets
- ------------------------------------------------------------------------
We determine this ratio by dividing net investment income by average net
assets.
Portfolio turnover rate
- ------------------------------------------------------------------------
This figure tells you the amount of trading activity in a fund's
portfolio. For example, a fund with a 50% turnover has bought and sold
half of the value of its total investment portfolio during the stated
period.
[back cover]
New Pacific Fund
Additional information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance
during their last fiscal year. You can find more detailed information
about the Fund in the current Statement of Additional Information, which
we have filed electronically with the Securities and Exchange Commission
(SEC) and which is legally a part of this prospectus. If you want a free
copy of the Statement of Additional Information, the annual or semi-annual
report, or if you have any questions about investing in the Fund, you can
write to us at 1818 Market Street, Philadelphia, PA 19103, or call
toll-free 800-523-1918. You may also obtain additional information about
the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web
site (http://www.sec.gov), or you can get copies of this information,
after payment of a duplicating fee, by writing to the Public Reference
Section of the SEC, Washington, D.C. 20549-6009. Information about the
Fund, including its Statement of Additional Information, can be reviewed
and copied at the Securities and Exchange Commission's Public Reference
Room in Washington, D.C. You can get information on the public reference
room by calling the SEC at 1-800-SEC-0330.
Web site
www.delawarefunds.com
E-mail
[email protected]
Shareholder Service Center
800-523-1918
Call the Shareholder Service Center:
Monday to Friday, 8 a.m. to 8 p.m. Eastern time.
For fund information; literature; price, yield and performance figures.
For information on existing regular investment accounts and retirement
plan accounts including wire investments; wire redemptions; telephone
redemptions and telephone exchanges.
Delaphone Service
800-362-FUND (800-362-3863)
For convenient access to account information or current performance
information on all Delaware Investment Funds seven days a week, 24 hours a
day, use this Touch-ToneR service.
Registrant's Investment Company Act file number: 811-7972
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
P-___ [--] PP 2/99
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
New Pacific Fund
Institutional Class
Prospectus
March 1, 1999
International Fund
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy of this prospectus, and
representation to the contrary is a criminal offense.
[inside front cover]
Table of Contents
Fund profile page
New Pacific Fund
How we manage the Fund page
Our investment strategies
The risks of investing in the Fund
Who manages the Fund page
Investment manager and Sub-adviser
Portfolio manager
Who's who?
About your account page
Investing in the Fund
Institutional Class shares
How to buy shares
How to redeem shares
Implementation of investment
objectives and policies page
Financial Highlights page
[sidebar copy at bottom of page]
How to use this prospectus
Here are guidelines to help you use this prospectus to make well-
Informed investment decisions about our funds. If you're looking for
a specific piece of information, the table of contents can guide you
directly to the appropriate section.
Step 1
- -----------------------------------------------------------------------
Take a look at the fund profiles for an overview of the Fund.
Step 2
- -----------------------------------------------------------------------
Learn in-depth information about how the Fund invests, the risks
Involved and the people and organizations responsible for the Fund's
day-to-day operations.
Step 3
- -----------------------------------------------------------------------
Determine which fund features and services you would like to take
advantage of.
Step 4
- -----------------------------------------------------------------------
Use the glossary that begins on page x to find definitions of words
printed in bold type throughout the prospectus.
An Investment Overview
When choosing a mutual fund to invest in, you have a variety of options
and important information to consider. This prospectus provides
information about New Pacific Fund, a mutual fund from the Delaware
Investments Family of Funds.
However, before evaluating individual funds, your first step is to
define your personal financial goals. Knowing your goals and determining
your investment time horizon in advance can help you make a more
appropriate fund selection. It is also important to select a fund in the
context of your entire investment program. Diversification or spreading
of your money among different types of investments is usually a sound
investment strategy. A professional financial adviser can help you build
an investment portfolio that fits your financial situation, your
investment objectives and your risk tolerance. A financial adviser can
also explain the role that New Pacific Fund might play in your
investment plan.
Investing for international diversification with New Pacific Fund...
Investors with long-term goals often choose mutual funds that provide
international or global diversification. New Pacific Fund is an
international fund. These funds provide the potential to increase the
value of your investment through either rising security prices or
through income from international or global securities. Individually,
these funds may experience a high level of volatility, but in
combination with a portfolio of U.S. securities, they may actually
help to reduce the risk of your total investment portfolio over the
long term. Like all mutual funds, international funds allow you to
invest conveniently in a variety of different securities without
having to select and monitor individual securities on your own.
[House Graphic - Highlight international "column" - international and
global funds]
Building Blocks of Asset Allocation
International and Global Funds
International and Global Funds for...
International Diversification
These funds may include stock and bond funds and may be broadly
diversified or focused on an individual country or region. Risk levels of
international funds vary, depending on the investment objectives and
strategies of the individual fund.
International and Global Funds
Asset Allocation Funds
Total Return
Taxable Bond Funds
Tax-Exempt Bond Funds
Money Market Funds (Taxable and Tax-Exempt)
Profile: New Pacific Fund
What is the Fund's goal?
New Pacific Fund seeks long-term capital appreciation by investing
primarily in companies that are domiciled in or have their principal
business activities in the Pacific Basin. Although the Fund will strive to
achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in stocks of companies of all sizes that are located
in or have their principal business activities in countries located in the
Pacific Basin. These countries include, but are not limited to, Australia,
China, Hong Kong, Japan, Philippines, Taiwan, Singapore and Malaysia. We
may invest in both established and developing countries. Under normal
circumstances we will invest at least 65% of our net assets in Pacific
Basin countries.
In selecting stocks for the portfolio, we look for companies that can
benefit from future economic growth in the region. We evaluate both
individual countries to determine how much of our portfolio should be
allocated to companies located there and also individual companies. When
evaluating individual companies, we consider the growth prospects for the
company and its industry, the financial strength of the company and the
quality of its management, and whether the stock appears overvalued or
undervalued compared to other stocks in the market or in its industry.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you
may lose part or all of the money you invest. The value of the securities
held by the Fund may increase and decrease, sometimes rapidly and
unpredictably. Consequently, the Fund's share price could increase or
decrease significantly, particularly over the short term. Because the Fund
invests in international securities in both established and developing
countries, it will be affected by international investment risks related
to changes in currency valuations, political instability, economic
instability or lax accounting and regulatory standards. These risks and
others are described more fully on page xx. An investment in the Fund is
not a deposit of any bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
Who should invest in the Fund
(bullet) Investors with long-term financial goals.
(bullet) Investors looking for capital growth potential.
(bullet) Investors willing to accept the sometimes sharp and unpredictable
fluctuations in value that a foreign fund can experience. These
fluctuations can be even more pronounced for funds like New Pacific which
concentrate investments in a single region.
Who should not invest in the Fund
(bullet) Investors with short-term financial goals.
(bullet) Investors who are unwilling to accept share prices that may
fluctuate, sometimes significantly, over the short term.
(bullet) Investors whose primary goal is to receive current income.
(bullet) Investors who do no understand the significant risks associated
with international investing.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser
to determine whether it is an appropriate choice for you.
How has the Fund performed?
This bar chart and table can help you evaluate the potential risks of
investing in the Fund. We show how returns for the Fund's Institutional
Class shares have varied over the past four calendar years and since
inception, as well as average annual returns for the one and five years
and since inception--all compared to the performance of the Morgan
Stanley Pacific Index. You should remember that unlike the Fund, the
index is unmanaged and doesn't include the actual costs of buying,
selling, and holding securities. The Fund's past performance does not
necessarily indicate how it will perform in the future. The Class' returns
reflect voluntary expense caps. The returns would be lower without the
voluntary caps.
* New Pacific Fund
* Morgan Stanley Pacific Index
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (CLASS A)
FPO]
[bar chart]
New Pacific Fund Morgan Stanley Pacific Index
1998
1997
1996
1995
1994
[bar chart]
Year-by-year total return (Institutional Class)
As of December 31, 1998, the Institutional Class had a year-to-date return
of XX%. During the periods illustrated in this bar chart, the
Institutional Class' highest return was XX% [date] and its lowest
return was XX% [date].
[table] Average annual return for periods ending 12/31/98
Institutional
Class S&P 500
1 year 0.00% 0.00%
Since
inception
(2/3/94) 0.00% 0.00%
What are the Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy
or sell shares of the Institutional Class.
Maximum sales charge (load)
imposed on purchases as a
percentage of offering
price none
Maximum contingent deferred
sales charge (load) as a
percentage of original
purchase price or
redemption price, whichever
is lower none
Maximum sales charge (load)
imposed on reinvested
dividends none
Redemption fees none
Exchange Fees (1) none
Annual fund operating expenses are deducted from the Fund's income or
assets before it pays dividends and before its total return is calculated.
We will not charge you separately for these expenses.
Management fees (2) 0.00%
Distribution and service
(12-1) fees none
Other expenses (2) 0.00%
Total operating expenses (2) 0.00%
This example is intended to help you compare the cost of investing in the
Fund to the cost of investing in other mutual funds with similar
investment objectives. We show the cumulative amount of Fund expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown. (3) This is an example only, and does not represent future expenses,
which may be greater or less than those shown here.
1 year $00
3 years $00
5 years $00
10 years $00
1 Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange you
shares for another fund.
2 The investment manager has agreed to waive fees and reimburse expenses
through April 30,1999 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 1.70% of average daily net assets.
3 The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
How we manage the Fund
Our investment strategies
New Pacific 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.
We take a disciplined approach to investing, combining investment
strategies and risk management techniques that can help shareholders meet
their goals.
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
China
Hong Kong
India
Indonesia
Japan
Malaysia
New Zealand
Pakistan
Philippines
Singapore
South Korea
Sri Lanka
Taiwan
Thailand
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.
Certain Investment Guidelines
Illiquid Securities. Up to 10% of the assets of the Fund may be invested
in securities that are not readily marketable, including, where
applicable:
(bullet) repurchase agreements with maturities greater than seven calendar
days;
(bullet) time deposits maturing in more than seven calendar days;
(bullet) certain instruments, futures contracts and options thereon for
which there is no liquid secondary market;
(bullet) certain over-the-counter options, as described in the Statement
of Additional Information;
(bullet) certain variable rate demand notes having a demand period of more
than seven days; and
(bullet) certain Rule 144A restricted securities (Rule 144A securities for
which a dealer or institutional market exists will not be considered
illiquid).
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 Fund's investment restriction
concerning illiquid securities.
Other Guidelines. In addition, the 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. The 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 the
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 the Fund's outstanding shares (as well as
other non-fundamental restrictions) is contained in the Statement of
Additional Information.
Risk factors and special considerations
Fixed-Income Securities. The market value of fixed-income obligations held
by the Fund and, consequently, the net asset value per share of the Fund
when 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 the 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.
Foreign Investments. New Pacific Fund may invest substantially all of its
assets in foreign investments. 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 manager or sub-adviser does not intend to
expose the Fund 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 manager or
sub-adviser believes that currency in which the 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 Fund's portfolio securities denominated in such foreign currency.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and the Fund holds various foreign
currencies from time to time, the value of the net assets of the Fund 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 Fund is 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-adviser 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
Fund's 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 Fund normally pays 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 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.
Borrowing. The Fund may borrow money for temporary or emergency purposes
in amounts not in excess of one-third of its total assets. If the Fund
borrows money, its share price may be subject to greater fluctuation until
the borrowing is repaid. If the Fund makes additional investments while
borrowings are outstanding, this may be construed as a form of leverage.
Securities Lending. The 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. The 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
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, the 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, the Fund
may invest up to 100% of its assets in money market instruments. To the
extent the Fund is engaged in a temporary defensive position, the Fund
will not be pursuing its investment objective. The Fund may also hold a
portion of its assets in cash for liquidity purposes.
Portfolio Turnover. High turnover in the 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.
* * *
For additional information about the Fund's investment policies and
certain risks associated with investments in certain types of securities
including purchasing put and call options, futures contracts and options
thereon, and options on foreign currencies, see Implementation of
investment objectives and policies in this prospectus. The Statement of
Additional Information provides more information concerning the Fund's
investment policies, restrictions and risk factors.
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you
may receive little or no return on your investment, and the risk that you
may lose part or all of the money you invest. Before you invest in a Fund
you should carefully evaluate the risks. Because of the nature of the New
Pacific Fund, you should consider an investment in it be a long-term
investment that typically provides the best results when held for a long
period of time. The following are the chief risks you assume when
investing in New Pacific Fund. Please see the Statement of Additional
Information for further discussion of these risks and the other risks not
discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------
<S> <C>
New Pacific Fund
----------------------------------------------
Market risk is the risk that all We maintain a long-term investment approach
or a majority of the securities in and focus on stocks we believe can appreciate
a certain market -- like the stock over an extended time frame regardless of
or bond market -- or in a certain interim market fluctuations. In deciding what
country or region will decline in portion of our portfolio should be invested in
value because of factors such as any individual country, we evaluate the
economic conditions, future country's economy, politics, liquidity,
expectations or investor confidence. corporate earnings, interest rates and
valuations relative to other countries.
We may hold a substantial part of the Fund's
assets in cash or cash equivalents as a
temporary, defensive strategy.
- ------------------------------------------------------------------------------------
Industry and security risk is the We hold a number of different securities in a
risk that the value of securities variety of sectors and countries in order to
in a particular industry or the minimize the impact that any one poorly
value of an individual stock or bond performing security would have on New Pacific
will decline because of changing Fund's overall performance.
expectations for the performance of
that industry or for the individual
company issuing the stock or bond.
- ------------------------------------------------------------------------------------
Currency Risk The value of the New Pacific Fund may try to hedge its currency
Fund's investments may be negatively risk by purchasing foreign currency exchange
affected by changes in foreign contracts. By agreeing to purchase or sell
currency exchange rates. Adverse foreign securities at a pre-set price on a
changes in exchange rates may reduce future date, New Pacific Fund strives to
or eliminate any gains produced by protect the value of the stocks it owns from
investments that are denominated future changes in currency rates. However,
in foreign currencies and may there is no assurance that a strategy such as
increase any losses. this will be successful.
- ------------------------------------------------------------------------------------
Political Risk The risk that We carefully evaluate the political situations
countries or the entire region where in the countries where we invest and take into
we invest may experience political account any potential risks before we select
instability, which may cause greater securities for the portfolio. However, there
fluctuation in the value of our is no way to eliminate political risk when
investments due to changes in investing internationally.
currency exchange rates, governmental
seizures or nationalization of
assets.
- ------------------------------------------------------------------------------------
Emerging Market Risk is the We carefully select securities within emerging
likelihood that the risks associated markets and strive to consider all relevant
with international investing will risks associated with an individual company.
be greater in emerging markets than Typically a larger percentage of our assets
in more developed foreign markets is allocated to established countries than to
because, among other things, developing countries. However, we cannot
emerging markets may have less eliminate emerging market risk and
stable political and economic consequently encourage shareholders to invest
environments. in this Fund only if they have a long-term
time horizon, over which the potential of
individual securities is more likely to be
realized.
- ------------------------------------------------------------------------------------
Inefficient Market Risk Foreign [to be inserted]
markets may be less liquid, have
greater price volatility, less
regulation and higher transaction
costs than U.S. markets.
- ------------------------------------------------------------------------------------
Information Risk Foreign companies We conduct a great deal of fundamental
are subject to different accounting, research on the companies we invest in rather
auditing and financial reporting than relying solely on information available
standards than U.S. companies. There through financial reporting.
may be less information available
about foreign issuers than domestic
issuers. Furthermore, regulatory
oversight of foreign issuers may be
less stringent or less consistently
applied than in the United States.
- ------------------------------------------------------------------------------------
</TABLE>
[begin glossary]
How to use this glossary
Words found in the glossary are printed in boldface the first time they
appear in the prospectus. So if you would like to know the meaning of a
word that isn't in boldface, you might still find it in the glossary.
Glossary A-B
Amortized cost
- ------------------------------------------------------------------------
Similar to depreciated value, amortized cost reflects the value of a
fixed-income security adjusted to account for any premium that was paid
above the par value when the security was purchased. The purpose of
amortization is to reflect resale or redemption value.
Appreciation
- ------------------------------------------------------------------------
An increase in the value of an investment.
Average maturity
- ------------------------------------------------------------------------
An average of when the individual bonds and other debt securities held in
a portfolio will mature.
Bond
- ------------------------------------------------------------------------
A debt security, like an IOU, issued by a company, municipality or
government agency. In return for lending money to the issuer, a bond buyer
generally receives fixed periodic interest payments and repayment of the
loan amount on a specified maturity date. A bond's price prior to maturity
changes and is inversely related to current interest rates. When interest
rates rise, prices fall, and when interest rates fall, prices rise.
Bond ratings
- ------------------------------------------------------------------------
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are
considered investment grade. Bonds rated Ba/BB or lower are commonly known
as junk bonds.
C-C
Capital
- ------------------------------------------------------------------------
The amount of money you invest.
Capital gains distributions
- ------------------------------------------------------------------------
Payments to mutual fund shareholders of profits (realized gains) from the
sale of a fund's portfolio securities. Usually paid once a year; may be
either short-term gains or long-term gains.
Commission
- ------------------------------------------------------------------------
The fee an investor pays to a financial adviser for investment advice and
help in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
- ------------------------------------------------------------------------
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
- ------------------------------------------------------------------------
Measurement of U.S. inflation; represents the price of a basket of
commonly purchased goods.
Contingent deferred sales charge (CDSC)
- ------------------------------------------------------------------------
Fee charged by some mutual funds when shares are redeemed (sold back to
the fund) within a set number of years; an alternative method for
investors to compensate a financial adviser for advice and service, rather
than an up-front commission.
[glossary to be continued]
Who manages the Fund
Investment Manager and Sub-Adviser
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. AIB Govett, Inc. is the Fund's
sub-adviser. As sub-adviser, AIB Govett is responsible for day-to-day
management of the Fund's assets. Delaware Management Company administers
the Fund's affairs and has ultimate responsibility for all investment
advisory services for the Fund. Delaware Management Company also
supervises the sub-adviser's performance. For their services to the Fund,
the manager and sub-adviser were paid an aggregate fee for the last fiscal
year as follows:
Investment Management Fees
New Pacific
Fund
As a percentage of average
daily net assets 0.00%
Portfolio Manager
Jane Pickard has had primary responsibility for making day-to-day
investment decisions for the Fund since November 12, 1997. Ms. Pickard
graduated in law from Endinburgh University. She joined Barclays de Zoete
Wedd Securities Limited in 1991, where she initially worked as a
specialist in structured debt products moving into the Pacific Rim equity
division in 1992. She remained there until 1995 when she moved to IAI
International where she had responsibility for Pacific Region investment
for U.S. institutional and retail funds. Ms. Pickard joined AIB Govett
Asset Management, an affiliate of AIB Govett, Inc., in 1996 and
concentrates on investments in the Pacific region. As a result of a
corporate reorganization, sub-advisory services were transferred from John
Govett & Co., Inc. to AIB Govett, Inc., although there was no actual
change in control.
Year 2000
As with other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by its service providers do not properly process and
calculate date-related information from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Fund is taking steps to
obtain satisfactory assurances that the Fund's major service providers are
taking steps reasonably designed to address the Year 2000 Problem with
respect to the computer systems that such service providers use. There can
be no assurance that these steps will be sufficient to avoid any adverse
impact on the business of the Fund.
Several European countries are participating in the European Economic and
Monetary Union, which will establish a common European currency for
participating countries. This currency will commonly be known as the
"Euro." It is anticipated that each such participating country will
replace its existing currency with the Euro on January 1, 1999. Additional
European countries may elect to participate after that date. If the Fund
is invested in securities of participating countries, it could be
adversely affected if the computer systems used by its major service
providers are not properly prepared to handle the implementation of this
single currency or the adoption of the Euro by additional countries in the
future. The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to
address these matters with respect to the computer systems that such
service providers use. There can be no assurances that these steps will be
sufficient to avoid any adverse impact on the business of the Fund.
[glossary continued]
C-E
Cost basis
- ------------------------------------------------------------------------
The original purchase price of an investment, used in determining capital
gains and losses.
Currency exchange rates
- ------------------------------------------------------------------------
The price at which one country's currency can be converted into another's.
This exchange rate varies almost daily according to a wide range of
political, economic and other factors.
Depreciation
- ------------------------------------------------------------------------
A decline in an investment's value.
Diversification
- ------------------------------------------------------------------------
The process of spreading investments among a number of different
securities, asset classes or investment styles to reduce the risks of
investing.
[glossary to be continued]
[sidebar]
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED
WITH MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS
FUNDS]
Board of Directors
Investment Manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Sub-Adviser
AIB Govett, Inc.
250 Montgomery Street, Suite 1200,
San Francisco, California 94104
Portfolio Service agent Distributor
managers Delaware Service Company, Inc. Delaware Distributors, L.P.
(see page x 1818 Market Street 1818 Market Street
for details) Philadelphia, PA 19103 Philadelphia, PA 19103
Financial advisers
Shareholders
Board of directors A mutual fund is governed by a board of directors which
has oversight responsibility for the management of the fund's business
affairs. Directors establish procedures and oversee and review the
performance of the investment manager, the distributor and others that
perform services for the fund. At least 40% of the board of directors must
be independent of the fund's investment manager or distributor. These
independent fund directors, in particular, are advocates for shareholder
interests.
Custodian Mutual funds are legally required to protect their portfolio
securities by placing them with a custodian, typically a qualified bank
custodian who segregates fund securities from other bank assets.
Investment manager An investment manager is a company responsible for
selecting portfolio investments consistent with objectives and policies
stated in the mutual fund's prospectus. The investment manager places
portfolio orders with broker/dealers and is responsible for obtaining the
best overall execution of those orders. A written contract between a
mutual fund and its investment manager specifies the services the manager
performs. Most management contracts provide for the manager to receive an
annual fee based on a percentage of the fund's average net assets. The
manager is subject to numerous legal restrictions, especially regarding
transactions between itself and the funds it advises.
Sub-adviser A sub-adviser is a company generally responsible for the
management of the fund's assets. They are selected and supervised by the
investment manager.
Portfolio managers Portfolio managers are employed by the investment
manager or sub-adviser to make investment decisions for individual
portfolios on a day-to-day basis.
Service agent Mutual fund companies employ service agents (sometimes
called transfer agents) to maintain records of shareholder accounts,
calculate and disburse dividends and capital gains and prepare and mail
shareholder statements and tax information, among other functions. Many
service agents provide customer service to shareholders, as well.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject
to National Association of Securities Dealers, Inc. (NASD) rules governing
mutual fund sales practices.
Financial advisers Financial advisers provide investment advice to their
clients, analyzing their financial objectives and recommending appropriate
funds or other investments. Financial advisers are compensated for their
services, generally through sales commissions, and through 12b-1 and/or
service fees deducted from the fund's assets.
Shareholders Like shareholders of other companies, mutual fund
shareholders have specific voting rights, including the right to elect
directors. Material changes in the terms of a fund's management contract
must be approved by a shareholder vote, and funds seeking to change
fundamental investment objectives or policies must also seek shareholder
approval.
[glossary continued]
Dividend distribution
- ------------------------------------------------------------------------
Payments to mutual fund shareholders of dividends passed along from the
fund's portfolio of securities.
Expense ratio
- ------------------------------------------------------------------------
A mutual fund's total operating expenses, expressed as a percentage of its
total net assets. Operating expenses are the costs of running a mutual
fund, including management fees, offices, staff, equipment and expenses
related to maintaining the fund's portfolio of securities. They are paid
from the fund's assets before any earnings are distributed to
shareholders.
[glossary to be continued]
About your account
Investing in the Fund
Institutional Class shares are available for purchase only by the
following:
(bullet) 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
(bullet) tax-exempt employee benefit plans of the manager or its
affiliates and securities dealer firms with a selling agreement with the
distributor
(bullet) institutional advisory accounts of the manager, or its affiliates
and those having client relationships with Delaware Investment Advisers,
an affiliate 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
(bullet) 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
(bullet) 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
[glossary continued]
F-M
Financial adviser
- ------------------------------------------------------------------------
Financial professional (e.g., broker, banker, accountant, planner or
insurance agent) who analyzes clients' finances and prepares personalized
programs to meet objectives.
Fixed-income securities
- ------------------------------------------------------------------------
With fixed-income securities, the money you originally invested is
returned to you at a prespecified maturity date. These securities, which
include government, corporate or municipal bonds, as well as money market
securities, typically pay a fixed rate of return.
[glossary to be continued]
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to
the fund and class of shares you wish to purchase to Delaware Investments,
1818 Market Street, Philadelphia, PA 19103. If you are making an initial
purchase by mail, you must include a completed investment application, or
an appropriate retirement plan application if you are opening a retirement
account, with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank,
ABA #031201467, Bank Account number 2014128934013. Include your account
number and the name of the fund in which you want to invest. If you are
making an initial purchase by wire, you must call us at 800-510-4015 so we
can assign an account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in
the Delaware Investments family for shares of other funds in the family.
Please keep in mind, however, that you may not exchange your shares for
Class B or Class C shares. To open an account by exchange, call the
Shareholder Service Center at 800-510-4015.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a fee for this
service.
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase
order. If we or an authorized agent receives your order before the close
of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
Time) on a business day, you will pay that day's closing share price which
is based on the Fund's net asset value. If we receive your order after the
close of trading, you will pay the next business day's price. A business
day is any day that the New York Stock Exchange is open for business. We
reserve the right to reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of
trading of the New York Stock Exchange each business day that the Exchange
is open. We calculate this value by adding the market value of all the
securities and assets in the Fund's portfolio, deducting all liabilities,
and dividing the resulting number by the number of shares outstanding. The
result is the net asset value per share. We price securities and other
assets for which market quotations are available at their market value. We
price debt securities on the basis of valuations provided to us by an
independent pricing service that uses methods approved by the board of
directors. Any investments that have a maturity of less than 60 days we
price at amortized cost. We price all other securities at their fair
market value using a method approved by the board of directors.
[glossary continued]
Inflation
- ------------------------------------------------------------------------
The increase in the cost of goods and services over time. U.S. inflation
is measured by the Consumer Price Index (CPI).
Investment goal
- ------------------------------------------------------------------------
The objective, such as long-term capital growth or high current income,
that a mutual fund pursues.
Management fee
- ------------------------------------------------------------------------
The amount paid by a mutual fund to the investment adviser for management
services, expressed as a percentage of the fund's net assets.
[glossary to be continued]
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing
to: Delaware Investments, 1818 Market Street, Philadelphia, PA 19103. All
owners of the account must sign the request, and for redemptions of
$50,000 or more, you must include a signature guarantee for each owner.
You can also fax your written request to 215-255-8864. Signature
guarantees are also required when redemption proceeds are going to anyone
other than the account holder(s) of record.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or if you redeem at least $1,000 of shares,
you may have the proceeds sent directly to your bank by wire. Bank
information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds
deposited directly to your bank account the next business day after we
receive your request. Bank information must be on file before you request
a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your
shares. Your adviser may charge a fee for this service.
About your account continued
How to redeem shares (cont.)
If you hold your shares in certificates, you must submit the certificates
with your request to sell the shares. We recommend that you send your
certificates by certified mail.
When you send us a properly completed request to redeem or exchange
shares, you will receive the net asset value as determined at the close of
business on the day we receive your request. We will deduct any applicable
contingent deferred sales charges. You may also have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the
next business day, but no later than seven days after we receive your
request to sell your shares. If you purchased your shares by check, we
will wait until your check has cleared, which can take up to 15 days,
before we send your redemption proceeds.
Account Minimum
If you redeem shares and your account balance falls below $250, the Fund
may redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class
in another Delaware Investments fund. You may not exchange your shares for
Class B and Class C shares of the funds in the Delaware Investments
family. If you exchange shares to a fund that has a sales charge you will
pay any applicable sales charges on your new shares. You don't pay sales
charges on shares that are acquired through the reinvestment of dividends.
You may have to pay taxes on your exchange. When you exchange shares, you
are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through
an exchange.
[glossary continued]
M-P
Market capitalization
- ------------------------------------------------------------------------
The value of a corporation determined by multiplying the current market
price of a share of common stock by the number of shares held by
shareholders. A corporation with one million shares outstanding and the
market price per share of $10 has a market capitalization of $10 million.
NASD (National Association of Securities Dealers)
- ------------------------------------------------------------------------
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the
actions of its members.
[glossary to be continued]
[glossary continued]
NAV (Net asset value)
- ------------------------------------------------------------------------
The daily dollar value of one mutual fund share. Equal to a fund's net
assets divided by the number of shares outstanding.
NRSRO (Nationally recognized statistical rating organization)
- ------------------------------------------------------------------------
A company that assesses the quality and potential performance of bonds,
commercial paper, preferred and common stocks and municipal short-term
issues, rating the probability that the issuer of the debt will meet the
scheduled interest payments and repay the principal. Ratings are published
by such companies as Moody's Investors Service (Moody's), Standard &
Poor's Corporation (S&P), Duff & Phelps, Inc. (Duff), and Fitch Investor
Services, Inc. (Fitch).
Preferred stock
- ------------------------------------------------------------------------
Preferred stock has preference over common stock in the payment of
dividends and liquidation of assets. Preferred stocks also pay dividends
at a fixed rate.
[glossary to be continued]
[glossary continued]
P-S
Price/earnings ratio
- ------------------------------------------------------------------------
A measure of a stock's value calculated by dividing the current market
price of a share of stock by its annual earnings per share. A stock
selling for $100 per share with annual earnings of $5 has a P/E of 20.
Principal
- ------------------------------------------------------------------------
Amount of money you invest. Also refers to a bond's original face value,
due to be repaid at maturity.
Prospectus
- ------------------------------------------------------------------------
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
[glossary to be continued]
[glossary continued]
Redeem
- ------------------------------------------------------------------------
To cash in your shares by selling them back to the mutual fund.
Risk
- ------------------------------------------------------------------------
Generally defined as variability of value; also credit risk, inflation
risk, currency and interest rate risk. Different investments involve
different types and degrees of risk.
S&P 500 Index
- ------------------------------------------------------------------------
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of
the U.S. stock market.
Sales charge
- ------------------------------------------------------------------------
Charge on the purchase of fund shares sold through financial advisers.
May vary with the amount invested. Typically used to compensate advisers
For advice and service provided.
[glossary to be continued]
[glossary continued]
S-S
SEC (Securities and Exchange Commission)
- ------------------------------------------------------------------------
Federal agency established by Congress to administer the laws governing
the securities industry, including mutual fund companies.
Share classes
- ------------------------------------------------------------------------
Different classifications of shares; mutual fund share classes offer a
variety of sales charge choices.
Signature guarantee
- ------------------------------------------------------------------------
Certification by a bank, brokerage firm or other financial institution
that a customer's signature is valid.
[glossary to be continued]
[glossary continued]
Standard deviation
- ------------------------------------------------------------------------
A measure of an investment's volatility; for mutual funds, measures how
much a fund's total return varies from its historical average.
Statement of Additional Information (SAI)
- ------------------------------------------------------------------------
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies
and risks.
Stock
- ------------------------------------------------------------------------
An investment that represents a share of ownership (equity) in a
corporation. Stocks are often referred to as "equities."
[glossary to be continued]
[glossary continued]
T-V
Total return
- ------------------------------------------------------------------------
An investment performance measurement, expressed as a percentage, based on
the combined earnings from dividends, capital gains and change in price
over a given period.
[glossary to be continued]
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains, unless you tell us
otherwise.
Tax laws are subject to change, so we urge you to consult your tax adviser
about your particular tax situation and how it might be affected by
current tax law. The tax status of your dividends from the Fund is the
same whether you reinvest your dividends or receive them in cash.
Distributions from the Fund's long-term capital gains are taxable as
capital gains, while distributions from short-term capital gains and net
investment income are generally taxable as ordinary income. Any capital
gains may be taxable at different rates depending on the length of time
the Fund held the assets. In addition, you may be subject to state and
local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount
and nature of all dividends and capital gains that you were paid for the
prior year.
[glossary continued]
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
- ------------------------------------------------------------------------
Federal and state laws that provide a simple way to transfer property to a
minor with special tax advantages.
Volatility
- ------------------------------------------------------------------------
The tendency of an investment to go up or down in value by different
magnitudes. There are "low volatility" and "high volatility" investments.
[end glossary]
Implementation of investment objective and policies
In attempting to achieve its investment objective and policies, the Fund
may employ, among others, one or more of the strategies set forth below.
Convertible securities
The Fund may invest in securities that either have warrants or rights
attached or are otherwise convertible into other or additional securities.
A convertible security is typically a fixed-income security (a bond or
preferred stock) that may be converted at a stated price within a
specified period of time into a specified number of shares of common stock
of the same or a different issuer. Convertible securities are generally
senior to common stocks in a corporation's capital structure but are
usually subordinated to similar non-convertible securities. While
providing a fixed-income stream (generally higher in yield than the income
derivable from a common stock but lower than that afforded by a similar
non-convertible security), a convertible security also affords an investor
the opportunity, through its conversion feature, to participate in capital
appreciation attendant upon a market price advance in the common stock
underlying the convertible security. In general, the market value of a
convertible security is at least the higher of its "investment value"
(i.e., its value as a fixed-income security) or its "conversion value"
(i.e., its value upon conversion into its underlying common stock). While
no securities investment is without some risk, investments in convertible
securities generally entail less risk than investments in the common stock
of the same issuer.
U.S. government securities
The Fund may invest in securities of the U.S. government. Securities
guaranteed by the U.S. government include:
(bullet) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and
(bullet) federal agency obligations guaranteed as to principal and
interest by the U.S. Treasury (such as GNMA certificates and Federal
Housing Administration debentures).
For these securities, the payment of principal and interest is
unconditionally guaranteed by the U.S. government, and thus they are of
the highest possible credit quality. Such securities are subject to
variations in market value due to fluctuations in interest rates, but if
held to maturity are deemed to be free of credit risk for the life of the
investment.
Securities issued by U.S. government instrumentalities and certain federal
agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they generally involve federal sponsorship in one way
or another: some are backed by specific types of collateral; some are
supported by the issuer's right to borrow from the U.S. Treasury; some are
supported by the discretionary authority of the U.S. Treasury to purchase
certain obligations of the issuer; and others are supported only by the
credit of the issuing government agency or instrumentality. These agencies
and instrumentalities include, but are not limited to, Federal Land Banks,
Farmers Home Administration, Central Bank for Cooperatives, Federal
Intermediate Credit Banks, and Federal Home Loan Banks.
Repurchase agreements
The Fund may enter into repurchase agreements, under which the 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 Fund's Custodian collateral equal to at least 102% of
the repurchase price including accrued interest, as monitored daily by the
manager and/or sub-adviser. The 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 Delaware Investments have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow
Delaware Investments funds jointly to invest cash balances. The Fund may
invest cash balances in a joint repurchase agreement in accordance with
the terms of the Order and subject generally to the conditions described
above.
When-issued securities and firm commitment agreements
The Fund 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. The 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 Fund 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.
The 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 the 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 the Fund's
portfolio securities decline while it is in a leveraged position, greater
depreciation of its net assets would likely occur than were it not in such
a position. The Fund will not borrow money to settle these transactions
and, therefore, will liquidate other Fund securities in advance of
settlement if necessary to generate additional cash to meet their
obligations thereunder.
Money market instruments
The Fund 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:
(bullet) commercial paper (short-term notes up to 9 months issued by
corporations or governmental bodies);
(bullet) 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));
(bullet) corporate bonds and notes (corporate obligations that mature, or
that may be redeemed, in one year or less);
(bullet) variable rate demand notes, short-term tax-exempt obligations;
and
(bullet) savings association obligations (certificates of deposit issued
by mutual savings banks or savings and loan associations). Although
certain floating or variable rate obligations (securities which have a
coupon rate that changes at least annually and generally more frequently)
have maturities in excess of one year, they are also considered to be
short-term debt securities.
Investments by funds of funds
New Pacific Fund accepts investments from the series portfolios of
Delaware Group Foundation Funds, a fund of funds (the "Foundation Funds").
From time to time, the Funds may experience large investments or
redemptions due to allocations or rebalancings by the Foundation Funds.
While it is impossible to predict the overall impact of these transactions
over time, there could be adverse effects on portfolio management to the
extent that the Funds may be required to sell securities or invest cash at
times when it would not otherwise do so. These transactions could also
have tax consequences if sales of securities result in gains and could
also increase transactions costs or portfolio turnover. The manager will
monitor such transactions and will attempt to minimize any adverse effects
on both the Funds and the Foundation Funds resulting from such
transactions.
Strategic transactions
General. The Fund may, but is 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 Fund 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 the 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 the 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 Fund 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. The 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 Fund 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, the Fund will not:
(bullet) sell futures contracts, purchase put options or write call
options if, as a result, more than 25% of its total assets would be hedged
with futures and options under normal conditions;
(bullet) purchase futures contracts or write put options if, as a result,
the Fund's total obligations upon settlement or exercise of purchased
futures contracts and written put options would exceed 25% of its total
assets; or
(bullet) purchase call options if, as a result, the current value of
option premiums for call options purchased by the Fund would exceed 5% of
its total assets.
These limitations do not apply to options attached to or acquired or
traded together with their underlying securities, and do not apply to
securities that incorporate features similar to options.
The limitations on the Fund's investments in futures contracts and
options, and the Fund's policies regarding futures contracts and options
discussed elsewhere are not fundamental policies and may be changed as
regulatory agencies permit.
Options Transactions. The Fund 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 its 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 the 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. The Fund might, therefore, be obligated to
purchase the underlying securities for more than their current market
price.
The Fund will write only "covered" options. An option is covered if the
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 the
Statement of Additional Information.
Forward Foreign Currency Exchange Contracts. The Fund 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
Fund 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. The 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 Fund 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.
The 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 Fund may enter into interest rate swaps, currency
swaps, and other types of swap agreements such as caps, collars and
floors. In an interest rate swap, one party agrees to make regular
payments of a floating rate times a "notional" principal amount in return
for payments of a fixed rate times the same amount. Swaps may also depend
on other prices or rates such as the value of an index or mortgage
prepayment rates.
Swap agreements usually involve a small investment of cash relative to the
magnitude of risk assumed. As a result, swaps can be very volatile and may
substantially impact the Fund's performance. Swap agreements are also
subject to the risk of a counterpart's ability to perform (i.e.,
creditworthiness). The 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 the 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 the 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:
(bullet) 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;
(bullet) imperfect correlation between the price of options and futures
contracts and options thereon and movements in the prices of securities
being hedged;
(bullet) the fact that skills need to use these strategies are different
from those needed to select Fund securities;
(bullet) the possible absence of a liquid secondary market for any
particular instrument at any time;
(bullet) the possible need to defer closing out certain hedged positions
to avoid adverse tax consequences; and
(bullet) 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 Fund may use and some of their risks are
described more fully in the Statement of Additional Information.
The Fund's ability to engage in Strategic Transactions is limited by the
requirements of the Internal Revenue Code for qualification as a regulated
investment company. See the Statement of Additional Information.
* * *
The Statement of Additional Information describes certain of these
investment policies and risk considerations. The Statement of Additional
Information also sets forth other investment policies, risk considerations
and more specific investment restrictions.
<TABLE>
<CAPTION>
Financial highlights
The financial highlights table is intended to help you understand the
Fund's financial performance. All "per share" information reflects
financial results for a single Fund share. This information has been
audited by Ernst & Young LLP, whose report, along with the Fund's
financial statements, is included in the Fund's annual report, which is
available upon request by calling 800-523-1918.
Institutional Class
- ----------------------------------------------------------------------------
Year Ended 10/31
New Pacific Fund 1998 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period ($) 9.53 8.77
Income From Investment
Operations
Net investment income ($) 0.02 (0.05)
Net realized & unrealized
gains (losses) on
investments ($) (1.96) 0.82
Total from investment
operations ($) (1.94) 0.77
Less Distributions
Dividends from net
investment income ($) (0.15) (0.01)
Distributions from realized
gains ($) none none
Total distributions ($) (0.15) (0.01)
Net asset value, end of
period ($) 7.44 9.53
Total Return (%) (20.79) 8.77
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 250 119
Ratio of expenses to average
daily net assets (%) 1.50 1.50
Ratio of net investment
income to average daily net
assets (%) 0.22 (0.09)
Portfolio turnover rate (%) 178 163
- ----------------------------------------------------------------------------
<CAPTION>
Financial highlights
The financial highlights table is intended to help you understand the
Fund's financial performance. All "per share" information reflects
financial results for a single Fund share. This information has been
audited by Ernst & Young LLP, whose report, along with the Fund's
financial statements, is included in the Fund's annual report, which is
available upon request by calling 800-523-1918.
Institutional Class
- ----------------------------------------------------------------------------
Period
2/3/94
Year Ended 10/31 through
New Pacific Fund 1995 10/31/94
- ----------------------------------------------------------------------------
Net Asset Value, Beginning
of Period ($) 10.48 11.14
Income From Investment
Operations
Net investment income ($) (0.01) 0.01
Net realized & unrealized
gains (losses) on
investments ($) (1.41) (0.67)
Total from investment
operations ($) (1.42) (0.66)
Less Distributions
Dividends from net
investment income ($) none none
Distributions from realized
gains ($) (0.29) none
Total distributions ($) (0.29) none
Net asset value, end of
period ($) 8.77 10.48
Total Return (%) (13.65) (5.98)
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 62 47
Ratio of expenses to average
daily net assets (%) 1.50 1.50
Ratio of net investment
income to average daily net
assets (%) (0.16) 0.23
Portfolio turnover rate (%) 163 104
- ----------------------------------------------------------------------------
</TABLE>
How to read the financial highlights
Net investment income
- ------------------------------------------------------------------------
Net investment income includes dividend and interest income earned from
the Fund's securities after its expenses have been deducted.
Net gains (losses) on investments (both realized and unrealized)
- ------------------------------------------------------------------------
A realized gain occurs when we sell an investment at a profit, while a
realized loss occurs when we sell an investment at a loss. When an
investment increases or decreases in value but we do not sell it, we
record an unrealized gain or loss. The amount of realized gain per share
that we pay to shareholders is listed under "Less
Distributions-Distributions from realized gains."
Realized gains
- ------------------------------------------------------------------------
Profits realized from the sale of securities.
Net asset value (NAV)
- ------------------------------------------------------------------------
This is the value of a mutual fund share, calculated by dividing the net
assets by the number of shares outstanding.
Total return
- ------------------------------------------------------------------------
This represents the percentage increase or decrease in the value of a
share of a fund during specific periods, in this case, annual periods. In
calculating this figure for the financial highlights table, we include fee
waivers, exclude front-end and contingent deferred sales charges, and
assume the shareholder has reinvested all dividends and realized gains.
Net assets
- ------------------------------------------------------------------------
Net assets represent the total value of all the assets in the Fund's
portfolio, less any liabilities that are attributable to that class of the
Fund.
How to read the financial highlights
(continued)
Ratio of expenses to average daily net assets
- ------------------------------------------------------------------------
The expense ratio is the percentage of total investment that a fund pays
annually for operating expenses and management fees. These expenses
include accounting and administration expenses, services for shareholders,
and similar expenses.
Ratio of net investment income to average daily net assets
- ------------------------------------------------------------------------
We determine this ratio by dividing net investment income by average net
assets.
Portfolio turnover rate
- ------------------------------------------------------------------------
This figure tells you the amount of trading activity in a fund's
portfolio. For example, a fund with a 50% turnover has bought and sold
half of the value of its total investment portfolio during the stated
period.
[back cover]
New Pacific Fund
Additional information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance
during their last fiscal year. You can find more detailed information
about the Fund in the current Statement of Additional Information, which
we have filed electronically with the Securities and Exchange Commission
(SEC) and which is legally a part of this prospectus. If you want a free
copy of the Statement of Additional Information, the annual or semi-annual
report, or if you have any questions about investing in the Fund, you can
write to us at 1818 Market Street, Philadelphia, PA 19103, or call
toll-free 800-523-1918. You may also obtain additional information about
the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web
site (http://www.sec.gov), or you can get copies of this information,
after payment of a duplicating fee, by writing to the Public Reference
Section of the SEC, Washington, D.C. 20549-6009. Information about the
Fund, including its Statement of Additional Information, can be reviewed
and copied at the Securities and Exchange Commission's Public Reference
Room in Washington, D.C. You can get information on the public reference
room by calling the SEC at 1-800-SEC-0330.
Web site
www.delawarefunds.com
E-mail
[email protected]
Client Services Representative
800-510-4015
[Delaphone Service
800-362-FUND (800-362-3863)
For convenient access to account information or current performance
information on all Delaware Investment Funds seven days a week, 24 hours a
day, use this Touch-ToneR service.]
Registrant's Investment Company Act file number: 811-7972
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
P-___ [--] PP 2/99
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
Overseas Equity Fund
Class A * Class B * Class C
Prospectus
March 1, 1999
International Fund
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
[inside front cover]
Table of Contents
Fund profile page
Overseas Equity Fund
How we manage the Fund page
Our investment strategies
The risks of investing in the Fund
Who manages the Fund page
Investment manager and Sub-adviser
Portfolio manager
Who's who?
About your account page
Investing in the Fund
Choosing a share class
How to reduce your sales charge
How to buy shares
How to redeem shares
Special services
Dividends, distributions and taxes
Retirement plans
Implementation of investment
objective and policies page
Financial Highlights page
[sidebar copy at bottom of page]
How to use this prospectus
Here are guidelines to help you use this prospectus to make well-informed
investment decisions about our funds. If you're looking for a specific
piece of information, the table of contents can guide you directly to the
appropriate section.
Step 1
- ------------------------------------------------------------------------
Take a look at the fund profiles for an overview of the Fund.
Step 2
- ------------------------------------------------------------------------
Learn in-depth information about how the Fund invests, the risks involved
and the people and organizations responsible for the Fund's day-to-day
operations.
Step 3
- ------------------------------------------------------------------------
Determine which fund features and services you would like to take
advantage of.
Step 4
- ------------------------------------------------------------------------
Use the glossary that begins on page x to find definitions of words
printed in bold type throughout the prospectus.
An Investment Overview
When choosing a mutual fund to invest in, you have a variety of options
and important information to consider. This prospectus provides
information about Overseas Equity Fund, a mutual fund from the Delaware
Investments Family of Funds.
However, before evaluating individual funds, your first step is to
define your personal financial goals. Knowing your goals and determining
your investment time horizon in advance can help you make a more
appropriate fund selection. It is also important to select a fund in the
context of your entire investment program. Diversification or spreading
of your money among different types of investments is usually a sound
investment strategy. A professional financial adviser can help you build
an investment portfolio that fits your financial situation, your
investment objectives and your risk tolerance. A financial adviser can
also explain the role that Overseas Equity Fund might play in your
investment plan.
Investing for international diversification with Overseas Equity Fund...
Investors with long-term goals often choose mutual funds that provide
international or global diversification. Overseas Equity Fund is an
international fund. These funds provide the potential to increase the
value of your investment through either rising security prices or through
income from international or global securities. Individually, these funds
may experience a high level of volatility, but in combination with a
portfolio of U.S. securities, they may actually help to reduce the risk
of your total investment portfolio over the long term. Like all mutual
funds, international funds allow you to invest conveniently in a variety
of different securities without having to select and monitor individual
securities on your own.
[House Graphic - Highlight international "column" - international and
global funds]
Building Blocks of Asset Allocation
International and Global Funds
International and Global Funds for...
International Diversification
These funds may include stock and bond funds and may be broadly
diversified or focused on an individual country or region. Risk levels of
international funds vary, depending on the investment objectives and
strategies of the individual fund.
International and Global Funds
Asset Allocation Funds
Total Return
Taxable Bond Funds
Tax-Exempt Bond Funds
Money Market Funds (Taxable and Tax-Exempt)
Profile: Overseas Equity Fund
What is the Fund's goal?
Overseas Equity Fund seeks to maximize total return (capital appreciation
and income) principally through investments in an internationally
diversified portfolio of equity securities. Although the Fund will strive
to achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest in stocks of companies based in foreign countries which are
believed to offer appreciation potential. We may invest in companies based
in established countries. We may also invest up to 40% of our net assets
in companies located in developing countries.
In determining what portion of the Overseas Equity Fund's assets should be
allocated to a particular country, we consider: how weak or strong the
country's currency is, the country's prospects for economic growth
compared to other countries, expected levels of inflation, political
environment and the range of investment opportunities available in the
country.
In selecting individual stocks for the portfolio, we evaluate each stock
on its growth prospects and the potential value of its future income
stream. We estimate how much a stock is likely to pay in dividends. We
then adjust that for inflation to determine a current value for the stock.
We compare that value to other stocks available to us and decide what
companies appear to have the best future prospects. This strategy which
allows us to compare stocks across a variety of countries and is typically
considered to be a value approach to investing.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you
may lose part or all of the money you invest. The value of the securities
held by the Fund may increase and decrease, sometimes rapidly and
unpredictably. Consequently, the Fund's share price could increase or
decrease significantly, particularly over the short term. Because the Fund
invests in international securities in both established and developing
countries, it will be affected by international investment risks related
to changes in currency valuations, political instability, economic
instability or lax accounting and regulatory standards. These risks and
others are described more fully on page xx. An investment in the Fund is
not a deposit of any bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
Who should invest in the Fund
(bullet) Investors with long-term financial goals.
(bullet) Investors looking for capital growth potential.
(bullet) Investors willing to accept the sometimes sharp and unpredictable
fluctuations in value that a foreign fund, can experience. These
fluctuations can be even more pronounced for funds like Overseas Equity
Fund, which invests in developing countries.
Who should not invest in the Fund
(bullet) Investors with short-term financial goals.
(bullet) Investors who are unwilling to accept share prices that may
fluctuate, sometimes significantly, over the short term.
(bullet) Investors whose primary goal is to receive current income.
(bullet) Investors who do no understand the significant risks associated
with international investing.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser
to determine whether it is an appropriate choice for you.
How has the Fund performed?
This bar chart and table can help you evaluate the potential risks of
investing in the Fund. We show how returns for the Fund's Class A shares
have varied over the past five calendar years and since inception, as well
as average annual returns of all shares for the one and five years and since
inception - - all compared to the performance of the Morgan Stanley EAFE
Index. You should remember that unlike the Fund, the index is unmanaged
and doesn't include the actual costs of buying, selling, and holding
securities. The Fund's past performance does not necessarily indicate how
it will perform in the future. The Classes' returns reflect voluntary
expense caps. The returns would be lower without the voluntary caps.
* Overseas Equity Fund
* Morgan Stanley EAFE Index
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (CLASS A)
FPO]
[bar chart]
Overseas Equity Fund Morgan Stanley EAFE Index
1998
1997
1996
1995
1994
1993
Year-by-year total return (Class A)
The maximum Class A sales charge of 5.75%, which is normally deducted when
you purchase shares, is not reflected in these total returns. If this fee
were included, the returns would be less than those shown. The average
annual returns shown below do include the sales charge.
As of December 31, 1998, the Fund had a year-to-date return of XX%. During
the periods illustrated in this bar chart, the Fund's highest return was
XX% [date] and its lowest return was XX% [date].
<TABLE>
<CAPTION>
Average annual return for periods ending 12/31/98
CLASS A B (if C (if
redeemed) redeemed) S&P 500
<S> <C> <C> <C> <C>
1 year 0.00% 0.00% 0.00% 0.00%
5 years 0.00% 0.00% 0.00% 0.00%
Since inception 0.00% 0.00% 0.00% 0.00%
(Class A-12/3/93)
(Class B-3/29/94)
(Class C-5/10/94)
</TABLE>
<TABLE>
<CAPTION>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or
sell shares of the Fund. The Fund may waive or reduce sales charges;
please see the Statement of Additional Information for details.
CLASS A B C
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases as a
percentage of offering
price 5.75% none none
Maximum contingent deferred
sales charge (load) as a
percentage of original
purchase price or
redemption price, whichever
is lower none(1) 5%(2) 1%(3)
Maximum sales charge (load)
imposed on reinvested
dividends none none none
Redemption fees(4) none none none
</TABLE>
<TABLE>
<CAPTION>
Annual fund operating expenses are deducted from the Fund's income or
assets before it pays dividends and before its total return is calculated.
We will not charge you separately for these expenses.
<S> <C> <C> <C>
Management fees(7) 0.00% 0.00% 0.00%
Distribution and service
(12-1) fees(5) 0.30%(6) 1.00% 1.00%
Other expenses(7) 0.00% 0.00% 0.00%
Total operating expenses(7) 0.00% 0.00% 0.00%
</TABLE>
<TABLE>
<CAPTION>
This example is intended to help you compare the cost of investing in the
Fund to the cost of investing in other mutual funds with similar
investment objectives. We show the cumulative amount of Fund expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown.(8) This is an example only, and does not represent future expenses,
which may be greater or less than those shown here.
CLASS(9) A B B (if C (if
redeemed) C redeemed)
<S> <C> <C> <C> <C> <C>
1 year $00 $00 $00 $00 $00
3 years $00 $00 $00 $00 $00
5 years $00 $00 $00 $00 $00
10 years $00 $00 $00 $00 $00
</TABLE>
1 A purchase of Class A shares at $1 million or more may be made at net
asset value. However, if you buy the shares through a financial adviser
who is paid a commission, a contingent deferred sales charge of 1% will be
imposed on certain redemptions within the first year of purchase and 0.50%
within the second year of purchase. Additional Class A purchase options
that involve a contingent deferred sales charge may be permitted from time
to time and will be disclosed in the prospectus if they are available.
2 If you redeem Class B shares during the first year after you buy them,
you will pay a contingent deferred sales charge of 5%. The contingent
deferred sales charge is 4% during the second year, 3% during the third
and fourth years, 2% during the fifth year, 1% during the sixth year, and
0% thereafter. Your Class B shares will automatically convert to Class A
shares after approximately eight years.
3 Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
4 First Union Bank, N.A., the bank through which we wire money, currently
charges $7.50 per redemption for redemptions payable by wire.
5 The Fund has adopted a plan under rule 12b-1 that allows the Fund to pay
distribution fees for the sales and distribution of its shares. Because
these fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges. Each share class is subject
to a separate 12b-1 plan.
6 Prior to May 6, 1996, 12b-1 Plan expenses for Class A Shares were 0.35%.
Beginning May 6, 1996, those expenses were reduced to 0.30%. The expense
information has been restated to reflect that change.
7 The investment manager has agreed to waive fees and pay expenses through
April 30, 1999 in order to prevent total operating expenses (excluding any
taxes, interest, brokerage fees and extraordinary expenses) from exceeding
1.55% of average daily net assets.
8 The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
9 The Class B example reflects the conversion of Class B shares to Class A
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.
How we manage the Fund
Our investment strategies
Overseas Equity Fund's fundamental investment objective is to maximize
total return (capital appreciation and income) principally through
investments in an internationally diversified portfolio of equity
securities.
We take a disciplined approach to investing, combining investment
strategies and risk management techniques that can help shareholders meet
their goals.
Overseas Equity 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 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
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 the
Statement of Additional Information.
The Fund may invest up to 40% of its assets in securities of companies
located in, or governments of, developing countries. For temporary
defensive purposes, the Fund may invest a major portion of its assets in
securities of U.S. issuers. In addition, the Fund may be invested in
short-term debt instruments to meet anticipated day-to-day operating
expenses and liquidity requirements.
Certain Investment Guidelines
Illiquid Securities. Up to 10% of the assets of the Fund may be invested
in securities that are not readily marketable, including, where
applicable:
(bullet) repurchase agreements with maturities greater than seven calendar
days;
(bullet) time deposits maturing in more than seven calendar days;
(bullet) certain instruments, futures contracts and options thereon for
which there is no liquid secondary market;
(bullet) certain over-the-counter options, as described in the Statement
of Additional Information;
(bullet) certain variable rate demand notes having a demand period of more
than seven days; and
(bullet) certain Rule 144A restricted securities (Rule 144A securities for
which a dealer or institutional market exists will not be considered
illiquid).
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 Fund's investment restriction
concerning illiquid securities.
Other Guidelines. In addition, the 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. The 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 the
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 the Fund's outstanding shares (as well as
other non-fundamental restrictions) is contained in the Statement of
Additional Information.
Risk factors and special considerations
Fixed-Income Securities. The market value of fixed-income obligations held
by the Fund and, consequently, the net asset value per share of the Fund
when 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 the 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.
Foreign Investments. Overseas Equity Fund may invest substantially all of
its assets in foreign investments. 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 manager or sub-adviser does not intend to
expose the Fund 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 manager or
sub-adviser believes that currency in which the 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 Fund's portfolio securities denominated in such foreign currency.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and the Fund holds various foreign
currencies from time to time, the value of the net assets of the Fund 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 Fund is 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-adviser 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
Fund's 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 Fund normally pays 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 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.
Borrowing. The Fund may borrow money for temporary or emergency purposes
in amounts not in excess of one-third of its total assets. If the Fund
borrows money, its share price may be subject to greater fluctuation until
the borrowing is repaid. If the Fund makes additional investments while
borrowings are outstanding, this may be construed as a form of leverage.
Securities Lending. The 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. The 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
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, the 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, the Fund
may invest up to 100% of its assets in money market instruments. To the
extent the Fund is engaged in a temporary defensive position, the Fund
will not be pursuing its investment objective. The Fund may also hold a
portion of its assets in cash for liquidity purposes.
Portfolio Turnover. High turnover in the 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.
* * *
For additional information about the Fund's investment policies and
certain risks associated with investments in certain types of securities
including purchasing put and call options, futures contracts and options
thereon, and options on foreign currencies, see Implementation of
investment objectives and policies in this prospectus. The Statement of
Additional Information provides more information concerning the Fund's
investment policies, restrictions and risk factors.
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you
may receive little or no return on your investment, and the risk that you
may lose part or all of the money you invest. Before you invest in a Fund
you should carefully evaluate the risks. Because of the nature of the
Overseas Equity Fund, you should consider an investment in it to be a
long-term investment that typically provides the best results when held
for a long period of time. The following are the chief risks you assume
when investing in Overseas Equity Fund. Please see the Statement of
Additional Information for further discussion of these risks and the other
risks not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------
<S> <C>
Overseas Equity Fund
----------------------------------------------
Market risk is the risk that all We maintain a long-term investment approach
or a majority of the securities in and focus on stocks we believe can appreciate
a certain market -- like the stock over an extended time frame regardless of
or bond market -- or in a certain interim market fluctuations. In deciding what
country or region will decline in portion of our portfolio should be invested in
value because of factors such as any individual country, we evaluate the
economic conditions, future country's economy, politics, liquidity,
expectations or investor confidence. corporate earnings, interest rates and
valuations relative to other countries.
We may hold a substantial part of the Fund's
assets in cash or cash equivalents as a
temporary, defensive strategy. We may also
invest a major portion of the Fund's net assets
in U.S. securities as a temporary defensive
measure.
- ------------------------------------------------------------------------------------
Industry and security risk is the We hold a number of different securities in a
risk that the value of securities variety of sectors and countries in order to
in a particular industry or the minimize the impact that any one poorly
value of an individual stock or bond performing security would have on Overseas
will decline because of changing Equity Fund's overall performance.
expectations for the performance of
that industry or for the individual
company issuing the stock or bond.
- ------------------------------------------------------------------------------------
Currency Risk The value of the Overseas Equity Fund may try to hedge its
Fund's investments may be negatively currency risk by purchasing foreign currency
affected by changes in foreign exchange contracts. By agreeing to purchase or
currency exchange rates. Adverse sell foreign securities at a pre-set price on
changes in exchange rates may reduce a future date, Overseas Equity Fund strives to
or eliminate any gains produced by protect the value of the stocks it owns from
investments that are denominated future changes in currency rates. Overseas
in foreign currencies and may Equity Fund will use currency exchange
increase any losses. contracts only for defensive measures, not to
enhance portfolio returns. However, there is
no assurance that a strategy such as this will
be successful.
- ------------------------------------------------------------------------------------
Political Risk The Risk that We carefully evaluate the political situations
countries or the entire region where in the countries where we invest and take into
we invest may experience political account any potential risks before we select
instability, which may cause greater securities for the portfolio. However, there
fluctuation in the value of our is no way to eliminate political risk when
investments due to changes in investing internationally.
currency exhange rates, governmental
seizures or nationalization of
assets.
- ------------------------------------------------------------------------------------
Emerging Market Risk is the We carefully select securities within emerging
likelihood that the risks assoicated markets and strive to consider all relevant
with international investing will risks associated with an individual company.
be grater in emerging markets than Typically a slightly larger percentage of our
in more developed foreign markets assets is allocated to established countries
because, among other things, than to developing countries. However, we
emerging markets may have less cannot eliminate emerging market risk and
stable political and economic consequently encourage shareholders to invest
environments. in this Fund only if they have a long-term
time horizon, over which the potential of
individual securities is more likely to be
realized.
- ------------------------------------------------------------------------------------
Inefficient Market Risk Foreign [to be inserted]
markets may be less liquid, have
greater price volatility, less
regulation and higher transaction
costs than U.S. markets.
- ------------------------------------------------------------------------------------
Information Risk Foreign companies We conduct a great deal of fundamental
are subject to different accounting, research on the companies we invest in rather
auditing and financial reporting than relying solely on information available
standards than U.S. companies. There through financial reporting. We believe this
may be less information available will help us better uncover any potential
about foreign issuers than domestic weaknesses in individual companies.
issuers. Furthermore, regulatory
oversight of foreign issuers may be
less stringent or less consistently
applied than in the United States.
- ------------------------------------------------------------------------------------
</TABLE>
[begin glossary]
How to use this glossary
Words found in the glossary are printed in boldface the first time they
appear in the prospectus. So if you would like to know the meaning of a
word that isn't in boldface, you might still find it in the glossary.
Glossary A-B
Amortized cost
- ------------------------------------------------------------------------
Similar to depreciated value, amortized cost reflects the value of a
fixed-income security adjusted to account for any premium that was paid
above the par value when the security was purchased. The purpose of
amortization is to reflect resale or redemption value.
Appreciation
- ------------------------------------------------------------------------
An increase in the value of an investment.
Average maturity
- ------------------------------------------------------------------------
An average of when the individual bonds and other debt securities held in
a portfolio will mature.
Bond
- ------------------------------------------------------------------------
A debt security, like an IOU, issued by a company, municipality or
government agency. In return for lending money to the issuer, a bond buyer
generally receives fixed periodic interest payments and repayment of the
loan amount on a specified maturity date. A bond's price prior to maturity
changes and is inversely related to current interest rates. When interest
rates rise, prices fall, and when interest rates fall, prices rise.
Bond ratings
- ------------------------------------------------------------------------
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are
considered investment grade. Bonds rated Ba/BB or lower are commonly known
as junk bonds.
C-C
Capital
- ------------------------------------------------------------------------
The amount of money you invest.
Capital gains distributions
- ------------------------------------------------------------------------
Payments to mutual fund shareholders of profits (realized gains) from the
sale of a fund's portfolio securities. Usually paid once a year; may be
either short-term gains or long-term gains.
Commission
- ------------------------------------------------------------------------
The fee an investor pays to a financial adviser for investment advice and
help in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
- ------------------------------------------------------------------------
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
- ------------------------------------------------------------------------
Measurement of U.S. inflation; represents the price of a basket of
commonly purchased goods.
Contingent deferred sales charge (CDSC)
- ------------------------------------------------------------------------
Fee charged by some mutual funds when shares are redeemed (sold back to
the fund) within a set number of years; an alternative method for
investors to compensate a financial adviser for advice and service, rather
than an up-front commission.
[glossary to be continued]
Who manages the Fund
Investment Manager and Sub-Adviser
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware International Advisers Ltd.,
an affiliate of Delaware Management Company, is the Fund's sub-adviser. As
sub-adviser, Delaware International is responsible for day-to-day
management of the Fund's assets. Delaware Management Company administers
the Fund's affairs and has ultimate responsibility for all investment
advisory services for the Fund. Delaware Management Company also
supervises the sub-adviser's performance. For their services to the Fund,
the manager and sub-adviser were paid an aggregate fee for the last fiscal
year as follows:
Investment Management Fees
Overseas Equity Fund
As a percentage of average
daily net assets 0.00%
Portfolio Manager
Clive A. Gillmore and Robert Akester have had primary responsibility for
making day-to-day investment decisions for the Fund since September 15,
1997.
Clive A. Gilmore is a graduate of the University of Warwick. He began his
career at Legal and General Investment Management and joined Delaware
International in 1990 after eight years of investment experience. His most
recent position prior to joining Delaware International was as a Pacific
Basin equity analyst and senior portfolio manager for Hill Samuel
Investment Advisers Ltd. Mr. Gillmore completed the London Business School
Investment program.
Robert Akester joined Delaware International in 1996 as a Senior Portfolio
Manager. He began his investment career in 1969 and was most recently a
Director of Hill Samuel Investment Advisers Ltd., which he joined in 1985.
His prior experience included working as a Senior Analyst and head of the
South-East Asian Research team at James Capel, and as a Fund Manager at
Prudential Assurance Co., Ltd. Mr. Akester holds a BS in Statistics and
Economics from University College, London and is an associate of the
Institute of Actuaries, with a certificate in Finance and Investment.
David G. Tilles, Chief Investment Officer for Delaware International, is a
graduate of the University of Warwick with a BS in management sciences.
Before joining Delaware Innternational in 1990, he was Chief Investment
Officer of Hill Samuel Investment Advisers Ltd. He is a member of the
Institute of Investment Management & Research and the Operational Research
Society.
In making investment decisions for Overseas Equity Fund, Mr. Gillmore and
Mr. Akester regularly consult with an international equity team of nine
members, five of whom research the Pacific Basin and four of whom research
the European Markets.
Year 2000
As with other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by its service providers do not properly process and
calculate date-related information from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Fund is taking steps to
obtain satisfactory assurances that the Fund's major service providers are
taking steps reasonably designed to address the Year 2000 Problem with
respect to the computer systems that such service providers use. There can
be no assurance that these steps will be sufficient to avoid any adverse
impact on the business of the Fund.
Several European countries are participating in the European Economic and
Monetary Union, which will establish a common European currency for
participating countries. This currency will commonly be known as the
"Euro." It is anticipated that each such participating country will
replace its existing currency with the Euro on January 1, 1999. Additional
European countries may elect to participate after that date. If the Fund
is invested in securities of participating countries, it could be
adversely affected if the computer systems used by its major service
providers are not properly prepared to handle the implementation of this
single currency or the adoption of the Euro by additional countries in the
future. The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to
address these matters with respect to the computer systems that such
service providers use. There can be no assurances that these steps will be
sufficient to avoid any adverse impact on the business of the Fund.
[glossary continued]
C-E
Cost basis
- ------------------------------------------------------------------------
The original purchase price of an investment, used in determining capital
gains and losses.
Currency exchange rates
- ------------------------------------------------------------------------
The price at which one country's currency can be converted into another's.
This exchange rate varies almost daily according to a wide range of
political, economic and other factors.
Depreciation
- ------------------------------------------------------------------------
A decline in an investment's value.
Diversification
- ------------------------------------------------------------------------
The process of spreading investments among a number of different
securities, asset classes or investment styles to reduce the risks of
investing.
[glossary to be continued]
[sidebar]
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED
WITH MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS
FUNDS]
Board of Directors
Investment Manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Sub-Adviser
Delaware International Advisers Ltd.
Third Floor
80 Cheapside
London, England EC2V 6EE
Portfolio Service agent Distributor
managers Delaware Service Company, Inc. Delaware Distributors, L.P.
(see page x 1818 Market Street 1818 Market Street
for details) Philadelphia, PA 19103 Philadelphia, PA 19103
Financial advisers
Shareholders
Board of directors A mutual fund is governed by a board of directors which
has oversight responsibility for the management of the fund's business
affairs. Directors establish procedures and oversee and review the
performance of the investment manager, the distributor and others that
perform services for the fund. At least 40% of the board of directors must
be independent of the fund's investment manager or distributor. These
independent fund directors, in particular, are advocates for shareholder
interests.
Custodian Mutual funds are legally required to protect their portfolio
securities by placing them with a custodian, typically a qualified bank
custodian who segregates fund securities from other bank assets.
Investment manager An investment manager is a company responsible for
selecting portfolio investments consistent with objectives and policies
stated in the mutual fund's prospectus. The investment manager places
portfolio orders with broker/dealers and is responsible for obtaining the
best overall execution of those orders. A written contract between a
mutual fund and its investment manager specifies the services the manager
performs. Most management contracts provide for the manager to receive an
annual fee based on a percentage of the fund's average net assets. The
manager is subject to numerous legal restrictions, especially regarding
transactions between itself and the funds it advises.
Sub-adviser A sub-adviser is a company generally responsible for the
management of the fund's assets. They are selected and supervised by the
investment manager.
Portfolio managers Portfolio managers are employed by the investment
manager or sub-adviser to make investment decisions for individual
portfolios on a day-to-day basis.
Service agent Mutual fund companies employ service agents (sometimes
called transfer agents) to maintain records of shareholder accounts,
calculate and disburse dividends and capital gains and prepare and mail
shareholder statements and tax information, among other functions. Many
service agents provide customer service to shareholders, as well.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject
to National Association of Securities Dealers, Inc. (NASD) rules governing
mutual fund sales practices.
Financial advisers Financial advisers provide investment advice to their
clients, analyzing their financial objectives and recommending appropriate
funds or other investments. Financial advisers are compensated for their
services, generally through sales commissions, and through 12b-1 and/or
service fees deducted from the fund's assets.
Shareholders Like shareholders of other companies, mutual fund
shareholders have specific voting rights, including the right to elect
directors. Material changes in the terms of a fund's management contract
must be approved by a shareholder vote, and funds seeking to change
fundamental investment objectives or policies must also seek shareholder
approval.
[glossary continued]
Dividend distribution
- ------------------------------------------------------------------------
Payments to mutual fund shareholders of dividends passed along from the
fund's portfolio of securities.
Expense ratio
- ------------------------------------------------------------------------
A mutual fund's total operating expenses, expressed as a percentage of its
total net assets. Operating expenses are the costs of running a mutual
fund, including management fees, offices, staff, equipment and expenses
related to maintaining the fund's portfolio of securities. They are paid
from the fund's assets before any earnings are distributed to
shareholders.
[glossary to be continued]
About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each
share class has a different combination of sales charges, fees, and other
features, you should consult your financial adviser to determine which
class best suits your investment goals and time frame.
Choosing a share class
Class A
(bullet) Class A shares have an up-front sales charge of up to 5.75% that
you pay when you buy the shares. The offering price for Class A shares
includes the front-end sales charge.
(bullet) If you invest $50,000 or more, your front-end sales charge will
be reduced.
(bullet) You may qualify for other reduced sales charges, as described in
"How to reduce your sales charge," and under certain circumstances the
sales charge may be waived; please see the Statement of Additional
Information.
(bullet) Class A shares are also subject to an annual 12b-1 fee no greater
than 0.35% (currently, no more than 0.30%) of average daily net assets,
which is lower than the 12b-1 fee for Class B and Class C shares.
(bullet) Class A shares generally are not subject to a contingent deferred
sales charge.
Class B
(bullet) Class B shares have no up-front sales charge, so the full amount
of your purchase is invested in the Fund. However, you will pay a
contingent deferred sales charge if you redeem your shares within six
years after you buy them.
(bullet) If you redeem Class B shares during the first year after you buy
them, the shares will be subject to a contingent deferred sales charge of
5%. The contingent deferred sales charge is 4% during the second year, 3%
during the third and fourth years, 2% during the fifth year, 1% during the
sixth year, and 0% thereafter.
(bullet) Under certain circumstances the contingent deferred sales charge
may be waived; please see the Statement of Additional Information.
(bullet) For approximately eight years after you buy your Class B shares,
they are subject to annual 12b-1 fees no greater than 1% of average daily
net assets, of which 0.25% are service fees paid to the distributor,
dealers or others for providing services and maintaining shareholder
accounts.
(bullet) Because of the higher 12b-1 fees, Class B shares have higher
expenses and any dividends paid on these shares are lower than dividends
on Class A shares.
(bullet) Approximately eight years after you buy them, Class B shares
automatically convert into Class A shares with a 12b-1 fee of no more than
0.30%.
(bullet) You may purchase up to $250,000 of Class B shares at any one
time. The limitation on maximum purchases varies for retirement plans.
[glossary continued]
F-M
Financial adviser
- ------------------------------------------------------------------------
Financial professional (e.g., broker, banker, accountant, planner or
insurance agent) who analyzes clients' finances and prepares personalized
programs to meet objectives.
Fixed-income securities
- ------------------------------------------------------------------------
With fixed-income securities, the money you originally invested is
returned to you at a prespecified maturity date. These securities, which
include government, corporate or municipal bonds, as well as money market
securities, typically pay a fixed rate of return.
[glossary to be continued]
Class C
(bullet) Class C shares have no up-front sales charge, so the full amount
of your purchase is invested in the Fund. However, you will pay a
contingent deferred sales charge if you redeem your shares within 12
months after you buy them.
(bullet) Under certain circumstances the contingent deferred sales charge
may be waived; please see the Statement of Additional Information.
(bullet) Class C shares are subject to an annual 12b-1 fee which may not
be greater than 1% of average daily net assets, of which 0.25% are service
fees paid to the distributor, dealers or others for providing personal
services and maintaining shareholder accounts.
(bullet) Because of the higher 12b-1 fees, Class C shares have higher
expenses and pay lower dividends than Class A shares.
(bullet) Unlike Class B shares, Class C shares do not automatically
convert into another class.
(bullet) You may purchase any amount less than $1,000,000 of Class C
shares at any one time. The limitation on maximum purchases varies for
retirement plans.
<TABLE>
<CAPTION>
Class A Sales Charges
Amount Sales charge Sales charge as Dealer's
of purchase as % % of amount commission as
of offering price invested %
of offering price
<S> <C> <C> <C>
Less than $50,000 5.75% X.XX% 5.00%
$50,000 but 4.75% X.XX% 4.00%
under $100,000
$100,000 but 3.75% X.XX% 3.00%
under $250,000
$250,000 but 2.50% X.XX% 2.00%
under $500,000
$500,000 but 2.00% X.XX% 1.60%
under $1 million
</TABLE>
As shown below, there is no front-end sales charge when you purchase $1
million or more of Class A shares. However, if your financial adviser is
paid a commission on your purchase, you may have to pay a limited
contingent deferred sales charge of 1% if you redeem these shares within
the first year and 0.50% if you redeem them within the second year.
<TABLE>
<CAPTION>
Amount of Sales charge Sales charge as Dealer's commission as
purchase as % % %
of offering price of amount of offering price
invested
<S> <C> <C> <C>
$1 million up to
$5 million none none 1.00
Next $20 million
up to $25 million none none 0.50
Amount over $25
million none none 0.25
</TABLE>
[glossary continued]
Inflation
- ------------------------------------------------------------------------
The increase in the cost of goods and services over time. U.S. inflation
is measured by the Consumer Price Index (CPI).
Investment goal
- ------------------------------------------------------------------------
The objective, such as long-term capital growth or high current income,
that a mutual fund pursues.
Management fee
- ------------------------------------------------------------------------
The amount paid by a mutual fund to the investment adviser for management
services, expressed as a percentage of the fund's net assets.
[glossary to be continued]
About your account continued
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on
shares. Please refer to the Statement of Additional Information for
detailed information and eligibility requirements. You can also get
additional information from your financial adviser. You or your financial
adviser must notify us at the time you purchase shares if you are eligible
for any of these programs.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Share class
Program How it works A B C
- ------------------------------------------------------------------------------------
Letter of Intent Through a Letter of Intent X Although the
you agree to invest a Letter of Intent
certain amount in Delaware and Rights of
Investment Funds (except Accumulation do
money market funds with no not apply to the
sales charge) over a 13-month purchase of Class
period to qualify for reduced B and C shares,
front-end sales charges. you can combine
your purchase of
Class B and C
shares to fulfill
your Letter of
Intent or qualify
for Rights of
Accumulation.
- ------------------------------------------------------------------------------------
Rights of Accumulation You can combine your holdings X
of all funds in the Delaware
Investments family (except
money market funds with no
sales charge) as well as the
holdings of your spouse and
children under 21 to qualify
for reduced front-end sales
charges.
- ------------------------------------------------------------------------------------
Reinvestment of Redeemed Up to 12 months after you X
Shares redeem shares, you can reinvest
the proceeds without paying a
front-end sales charge.
- ------------------------------------------------------------------------------------
SIMPLE IRA, SEP IRA, These investment plans may X
SARSEP, Prototype Profit qualify for reduced sales
Sharing, Pension, charges by combining the
SIMPLE 401(k), 403(b)(7), purchases of all members
and 457 Retirement Plans of the group. Members of
these groups may also qualify
to purchase shares without a
front-end sales charge and a
waiver of any contingent
deferred sales charges.
- ------------------------------------------------------------------------------------
</TABLE>
[glossary continued]
M-P
Market capitalization
- ------------------------------------------------------------------------
The value of a corporation determined by multiplying the current market
price of a share of common stock by the number of shares held by
shareholders. A corporation with one million shares outstanding and the
market price per share of $10 has a market capitalization of $10 million.
NASD (National Association of Securities Dealers)
- ------------------------------------------------------------------------
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the
actions of its members.
[glossary to be continued]
How to buy shares
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Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a fee for this
service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to
the fund and class of shares you wish to purchase to Delaware Investments,
1818 Market Street, Philadelphia, PA 19103. If you are making an initial
purchase by mail, you must include a completed investment application, or
an appropriate retirement plan application if you are opening a retirement
account, with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank,
ABA #031201467, Bank Account number 2014128934013. Include your account
number and the name of the fund in which you want to invest. If you are
making an initial purchase by wire, you must call us so we can assign an
account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in
the Delaware Investments family for shares of other funds in the family.
Please keep in mind, however, that under most circumstances, you may only
exchange between the same class of shares. To open an account by exchange,
call the Shareholder Service Center at 800-523-1918.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated
telephone service, or through our web site, www.delawarefunds.com. For
more information about how to sign up for these services, call our
Shareholder Service Center at 800-523-1918.
[glossary continued]
NAV (Net asset value)
- ------------------------------------------------------------------------
The daily dollar value of one mutual fund share. Equal to a fund's net
assets divided by the number of shares outstanding.
NRSRO (Nationally recognized statistical rating organization)
- ------------------------------------------------------------------------
A company that assesses the quality and potential performance of bonds,
commercial paper, preferred and common stocks and municipal short-term
issues, rating the probability that the issuer of the debt will meet the
scheduled interest payments and repay the principal. Ratings are published
by such companies as Moody's Investors Service (Moody's), Standard &
Poor's Corporation (S&P), Duff & Phelps, Inc. (Duff), and Fitch Investor
Services, Inc. (Fitch).
Preferred stock
- ------------------------------------------------------------------------
Preferred stock has preference over common stock in the payment of
dividends and liquidation of assets. Preferred stocks also pay dividends
at a fixed rate.
[glossary to be continued]
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open an account with an
initial investment of $1,000, and make additional investments at any time
for as little as $100. If you are buying shares in an IRA or Roth IRA;
under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors
Act; or through an Automatic Investing Plan, the minimum purchase is $250,
and you can make additional investments of only $25. If you are buying
shares in an Education IRA, the minimum purchase is $500, and you can made
additional investments of only $25. The minimums vary for retirement plans
other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase
order. If we or an authorized agent receives your order before the close
of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
Time) on a business day, you will pay that day's closing share price which
is based on the Fund's net asset value. If we receive your order after the
close of trading, you will pay the next business day's price. A business
day is any day that the New York Stock Exchange is open for business. We
reserve the right to reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of
trading of the New York Stock Exchange each business day that the Exchange
is open. We calculate this value by adding the market value of all the
securities and assets in the Fund's portfolio, deducting all liabilities,
and dividing the resulting number by the number of shares outstanding. The
result is the net asset value per share. We price securities and other
assets for which market quotations are available at their market value. We
price debt securities on the basis of valuations provided to us by an
independent pricing service that uses methods approved by the board of
directors. Any investments that have a maturity of less than 60 days we
price at amortized cost. We price all other securities at their fair
market value using a method approved by the board of directors.
[glossary continued]
P-S
Price/earnings ratio
- ------------------------------------------------------------------------
A measure of a stock's value calculated by dividing the current market
price of a share of stock by its annual earnings per share. A stock
selling for $100 per share with annual earnings of $5 has a P/E of 20.
Principal
- ------------------------------------------------------------------------
Amount of money you invest. Also refers to a bond's original face value,
due to be repaid at maturity.
Prospectus
- ------------------------------------------------------------------------
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
[glossary to be continued]
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your
shares. Your adviser may charge a fee for this service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing
to: Delaware Investments, 1818 Market Street, Philadelphia, PA 19103. All
owners of the account must sign the request, and for redemptions of
$50,000 or more, you must include a signature guarantee for each owner.
Signature guarantees are also required when redemption proceeds are going
to anyone other than the account holder(s) of record.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or if you redeem at least $1,000 of shares,
you may have the proceeds sent directly to your bank by wire. Bank
information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds
deposited directly to your bank account the next business day after we
receive your request. If you request a wire deposit, the First Union Bank
fee (currently $7.50) will be deducted from your proceeds. Bank
information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service,
or through our web site, www.delawarefunds.com. For more information about
how to sign up for these services, call our Shareholder Service department
at 800-523-1918.
[glossary continued]
Redeem
- ------------------------------------------------------------------------
To cash in your shares by selling them back to the mutual fund.
Risk
- ------------------------------------------------------------------------
Generally defined as variability of value; also credit risk, inflation
risk, currency and interest rate risk. Different investments involve
different types and degrees of risk.
S&P 500 Index
- ------------------------------------------------------------------------
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of
the U.S. stock market.
Sales charge
- ------------------------------------------------------------------------
Charge on the purchase of fund shares sold through financial advisers. May
vary with the amount invested. Typically used to compensate advisers for
advice and service provided.
[glossary to be continued]
About your account continued
How to redeem shares (cont.)
If you hold your shares in certificates, you must submit the certificates
with your request to sell the shares. We recommend that you send your
certificates by certified mail.
When you send us a properly completed request to redeem or exchange
shares, you will receive the net asset value as determined at the close of
business on the day we receive your request. We will deduct any applicable
contingent deferred sales charges. You may also have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the
next business day, but no later than seven days after we receive your
request to sell your shares. If you purchased your shares by check, we
will wait until your check has cleared, which can take up to 15 days,
before we send your redemption proceeds.
If you are required to pay a contingent deferred sales charge when you
redeem your shares, the amount subject to the fee will be based on the
shares' net asset value when you purchased them or their net asset value
when you redeem them, whichever is less. This arrangement assures that you
will not pay a contingent deferred sales charge on any increase in the
value of your shares. You also will not pay the charge on any shares
acquired by reinvesting dividends or capital gains. If you exchange shares
of one fund for shares of another, and later redeem those shares, the
purchase price for purposes of the contingent deferred sales charge
formula will be the price you paid for the original shares not the
exchange price. The redemption price for purposes of this formula will be
the NAV of the shares you are actually redeeming.
Account Minimum
If you redeem shares and your account balance falls below the required
account minimum of $1,000 ($250 for IRAs and Roth IRAs, Uniform Gift to
Minors Act accounts or accounts with automatic investing plans, and $500
for Education IRAs) for three or more consecutive months, you will have
until the end of the current calendar quarter to raise the balance to the
minimum. If your account is not at the minimum by the required time, you
will be charged a $9 fee for that quarter and each quarter after that
until your account reaches the minimum balance. If your account does not
reach the minimum balance, the Fund may redeem your account after 60 days'
written notice to you.
[glossary continued]
S-S
SEC (Securities and Exchange Commission)
- ------------------------------------------------------------------------
Federal agency established by Congress to administer the laws governing
the securities industry, including mutual fund companies.
Share classes
- ------------------------------------------------------------------------
Different classifications of shares; mutual fund share classes offer a
variety of sales charge choices.
Signature guarantee
- ------------------------------------------------------------------------
Certification by a bank, brokerage firm or other financial institution
that a customer's signature is valid.
[glossary to be continued]
Special services
To help make investing with us as easy as possible, and to help you build
your investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly
investments directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions or direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
from your shares in one or more Delaware Investments funds into any other
Delaware Investments fund. Wealth Builder Exchanges are subject to the
same rules as regular exchanges and require a minimum monthly exchange of
$100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the
Dividend Reinvestment Plan are not subject to a front-end sales charge or
to a contingent deferred sales charge.
[glossary continued]
Standard deviation
- ------------------------------------------------------------------------
A measure of an investment's volatility; for mutual funds, measures how
much a fund's total return varies from its historical average.
Statement of Additional Information (SAI)
- ------------------------------------------------------------------------
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies
and risks.
Stock
- ------------------------------------------------------------------------
An investment that represents a share of ownership (equity) in a
corporation. Stocks are often referred to as "equities."
[glossary to be continued]
About your account (continued)
Special services (continued)
Exchanges
You can exchange all or part of your shares for shares of the same class
in another Delaware Investments fund without paying a sales charge and
without paying a contingent deferred sales charge on the shares of the
fund from which you make your exchange. However, if you exchange shares
from a money market fund that does not have a sales charge you will pay
any applicable sales charges on your new shares. You don't pay sales
charges on shares that you acquired through the reinvestment of dividends.
You may have to pay taxes on your exchange. When exchanging Class B and
Class C shares of one fund for similar shares in other funds, your new
shares will be subject to the same contingent deferred sales charge as the
shares you originally purchased. The holding period for the CDSC will also
remain the same, with the amount of time you held your original shares
being credited toward the holding period of your new shares. When you
exchange shares, you are purchasing shares in another fund so you should
be sure to get a copy of the fund's prospectus and read it carefully
before buying shares through an exchange.
MoneyLineSM On Demand Service
Through our MoneylineSM On Demand Service, you or your financial adviser
may transfer money from your Fund account to your predesignated bank
account by telephone request. This service is not available for retirement
plans.
MoneyLineSM Direct Deposit Service
Through our MoneylineSM Direct Deposit Service you can have $25 or more in
dividends and distributions deposited directly to your bank account.
Delaware Investments does not charge a fee for this service; however, your
bank may assess one. This service is not available for retirement plans.
Systematic Withdrawal Plan
Through our Systematic Withdrawal Plan you can arrange a regular monthly
or quarterly payment from your account made to you or someone you
designate. If the value of your account is $5,000 or more, you can make
withdrawals of at least $25 monthly, or $75 quarterly. You may also have
your withdrawals deposited directly to your bank account through our
MoneylineSM Direct Deposit Service.
[glossary continued]
T-V
Total return
- ------------------------------------------------------------------------
An investment performance measurement, expressed as a percentage, based on
the combined earnings from dividends, capital gains and change in price
over a given period.
[glossary to be continued]
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains, unless you tell us
otherwise.
Tax laws are subject to change, so we urge you to consult your tax adviser
about your particular tax situation and how it might be affected by
current tax law. The tax status of your dividends from the Fund is the
same whether you reinvest your dividends or receive them in cash.
Distributions from the Fund's long-term capital gains are taxable as
capital gains, while distributions from short-term capital gains and net
investment income are generally taxable as ordinary income. Any capital
gains may be taxable at different rates depending on the length of time
the Fund held the assets. In addition, you may be subject to state and
local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount
and nature of all dividends and capital gains that you were paid for the
prior year.
Retirement plans
In addition to being an appropriate investment for your Individual
Retirement Account (IRA), Roth IRA and Education IRA, shares in the Fund
may be suitable for group retirement plans. You may establish your IRA
account even if you are already a participant in an employer-sponsored
retirement plan. For more information on how shares in the Fund can play
an important role in your retirement planning or for details about group
plans, please consult your financial adviser, or call 800-523-1918.
[glossary continued]
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
- ------------------------------------------------------------------------
Federal and state laws that provide a simple way to transfer property to a
minor with special tax advantages.
Volatility
- ------------------------------------------------------------------------
The tendency of an investment to go up or down in value by different
magnitudes. There are "low volatility" and "high volatility" investments.
[end glossary]
Implementation of investment objective and policies
In attempting to achieve its investment objective and policies, the Fund
may employ, among others, one or more of the strategies set forth below.
Convertible Securities
The Fund may invest in securities that either have warrants or rights
attached or are otherwise convertible into other or additional securities.
A convertible security is typically a fixed-income security (a bond or
preferred stock) that may be converted at a stated price within a
specified period of time into a specified number of shares of common stock
of the same or a different issuer. Convertible securities are generally
senior to common stocks in a corporation's capital structure but are
usually subordinated to similar non-convertible securities. While
providing a fixed-income stream (generally higher in yield than the income
derivable from a common stock but lower than that afforded by a similar
non-convertible security), a convertible security also affords an investor
the opportunity, through its conversion feature, to participate in capital
appreciation attendant upon a market price advance in the common stock
underlying the convertible security. In general, the market value of a
convertible security is at least the higher of its "investment value"
(i.e., its value as a fixed-income security) or its "conversion value"
(i.e., its value upon conversion into its underlying common stock). While
no securities investment is without some risk, investments in convertible
securities generally entail less risk than investments in the common stock
of the same issuer.
U.S. Government Securities
The Fund may invest in securities of the U.S. government. Securities
guaranteed by the U.S. government include:
(bullet) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and
(bullet) federal agency obligations guaranteed as to principal and
interest by the U.S. Treasury (such as GNMA certificates and Federal
Housing Administration debentures).
For these securities, the payment of principal and interest is
unconditionally guaranteed by the U.S. government, and thus they are of
the highest possible credit quality. Such securities are subject to
variations in market value due to fluctuations in interest rates, but if
held to maturity are deemed to be free of credit risk for the life of the
investment.
Securities issued by U.S. government instrumentalities and certain federal
agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they generally involve federal sponsorship in one way
or another: some are backed by specific types of collateral; some are
supported by the issuer's right to borrow from the U.S. Treasury; some are
supported by the discretionary authority of the U.S. Treasury to purchase
certain obligations of the issuer; and others are supported only by the
credit of the issuing government agency or instrumentality. These agencies
and instrumentalities include, but are not limited to, Federal Land Banks,
Farmers Home Administration, Central Bank for Cooperatives, Federal
Intermediate Credit Banks, and Federal Home Loan Banks.
Repurchase Agreements
The Fund may enter into repurchase agreements, under which the 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 Fund's Custodian collateral equal to at least 102% of
the repurchase price including accrued interest, as monitored daily by the
manager and/or sub-adviser. The 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 Delaware Investments have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow
Delaware Investments funds jointly to invest cash balances. The Fund may
invest cash balances in a joint repurchase agreement in accordance with
the terms of the Order and subject generally to the conditions described
above.
When-Issued Securities and Firm Commitment Agreements
The Fund 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. The 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 Fund 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.
The 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 the 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 the Fund's
portfolio securities decline while it is in a leveraged position, greater
depreciation of its net assets would likely occur than were it not in such
a position. The Fund will not borrow money to settle these transactions
and, therefore, will liquidate other Fund securities in advance of
settlement if necessary to generate additional cash to meet their
obligations thereunder.
Money Market Instruments
The Fund 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:
(bullet) commercial paper (short-term notes up to 9 months issued by
corporations or governmental bodies);
(bullet) 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));
(bullet) corporate bonds and notes (corporate obligations that mature, or
that may be redeemed, in one year or less);
(bullet) variable rate demand notes, short-term tax-exempt obligations;
and
(bullet) savings association obligations (certificates of deposit issued
by mutual savings banks or savings and loan associations). Although
certain floating or variable rate obligations (securities which have a
coupon rate that changes at least annually and generally more frequently)
have maturities in excess of one year, they are also considered to be
short-term debt securities.
Strategic Transactions
General. The Fund may, but is 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 Fund 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 the 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 the 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 Fund 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. The 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 Fund 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, the Fund will not:
(bullet) sell futures contracts, purchase put options or write call
options if, as a result, more than 25% of its total assets would be hedged
with futures and options under normal conditions;
(bullet) purchase futures contracts or write put options if, as a result,
the Fund's total obligations upon settlement or exercise of purchased
futures contracts and written put options would exceed 25% of its total
assets; or
(bullet) purchase call options if, as a result, the current value of
option premiums for call options purchased by the Fund would exceed 5% of
its total assets.
These limitations do not apply to options attached to or acquired or
traded together with their underlying securities, and do not apply to
securities that incorporate features similar to options.
The limitations on the Fund's investments in futures contracts and
options, and the Fund's policies regarding futures contracts and options
discussed elsewhere are not fundamental policies and may be changed as
regulatory agencies permit.
Options Transactions. The Fund 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 its 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 the 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. The Fund might, therefore, be obligated to
purchase the underlying securities for more than their current market
price.
The Fund will write only "covered" options. An option is covered if the
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 the
Statement of Additional Information.
Forward Foreign Currency Exchange Contracts. The Fund 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
Fund 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. The 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 Fund 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.
The 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 Fund may enter into interest rate swaps, currency
swaps, and other types of swap agreements such as caps, collars and
floors. In an interest rate swap, one party agrees to make regular
payments of a floating rate times a "notional" principal amount in return
for payments of a fixed rate times the same amount. Swaps may also depend
on other prices or rates such as the value of an index or mortgage
prepayment rates.
Swap agreements usually involve a small investment of cash relative to the
magnitude of risk assumed. As a result, swaps can be very volatile and may
substantially impact the Fund's performance. Swap agreements are also
subject to the risk of a counterpart's ability to perform (i.e.,
creditworthiness). The 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 the 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 the 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:
(bullet) 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;
(bullet) imperfect correlation between the price of options and futures
contracts and options thereon and movements in the prices of securities
being hedged;
(bullet) the fact that skills need to use these strategies are different
from those needed to select Fund securities;
(bullet) the possible absence of a liquid secondary market for any
particular instrument at any time;
(bullet) the possible need to defer closing out certain hedged positions
to avoid adverse tax consequences; and
(bullet) 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 Fund may use and some of their risks are
described more fully in the Statement of Additional Information.
The Fund's ability to engage in Strategic Transactions is limited by the
requirements of the Internal Revenue Code for qualification as a regulated
investment company. See the Statement of Additional Information.
* * *
The Statement of Additional Information describes certain of these
investment policies and risk considerations. The Statement of Additional
Information also sets forth other investment policies, risk considerations
and more specific investment restrictions.
<TABLE>
<CAPTION>
Financial highlights
The financial highlights table is intended to help you understand the
Fund's financial performance. All "per share" information reflects
financial results for a single Fund share. This information has been
audited by Ernst & Young LLP, whose report, along with the Fund's
financial statements, is included in the Fund's annual report, which is
available upon request by calling 800-523-1918.
Class A Shares
- ------------------------------------------------------------------------------------
Year Ended 10/31
Overseas Equity Fund 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period ($) 12.39 11.40
Income From Investment
Operations
Net investment income ($) (0.06) (0.06)
Net realized & unrealized
gains (losses) on
investments ($) 0.96 1.07
Total from investment
operations ($) 0.90 1.01
Less Distributions
Dividends from net
investment income ($) (0.44) (0.02)
Distributions from realized
gains ($) (0.33) none
Total distributions ($) (0.77) (0.02)
Net asset value, end of
period ($) 12.52 12.39
Total Return (%) 7.74 8.90
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 10,868 14,886
Ratio of expenses to average
daily net assets (%) 1.80 1.82
Ratio of net investment
income to average daily net
assets (%) (0.45) (0.51)
Portfolio turnover rate (%) 18 21
- ------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
The financial highlights table is intended to help you understand the
Fund's financial performance. All "per share" information reflects
financial results for a single Fund share. This information has been
audited by Ernst & Young LLP, whose report, along with the Fund's
financial statements, is included in the Fund's annual report, which is
available upon request by calling 800-523-1918.
- ------------------------------------------------------------------------------------
Period
12/3/93
Year Ended 10/31 through
Overseas Equity Fund 1995 10/31/94
- ------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning
of Period ($) 11.00 10.00
Income From Investment
Operations
Net investment income ($) 0.01 0.02
Net realized & unrealized
gains (losses) on
investments ($) 0.40 1.01
Total from investment
operations ($) 0.41 1.03
Less Distributions
Dividends from net
investment income ($) (0.01) (0.03)
Distributions from realized
gains ($) none none
Total distributions ($) (0.01) (0.03)
Net asset value, end of
period ($) 11.40 11.00
Total Return (%) 3.81 10.25
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 13,018 11,721
Ratio of expenses to average
daily net assets (%) 1.85 1.85
Ratio of net investment
income to average daily net
assets (%) 0.00 0.25
Portfolio turnover rate (%) 9 6
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
Class B Shares
- ------------------------------------------------------------------------------------
Year Ended 10/31
Overseas Equity Fund 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period ($) 11.56 10.71
Income From Investment
Operations
Net investment income ($) (0.14) (0.06)
Net realized & unrealized
gains (losses) on
investments ($) 0.89 0.93
Total from investment
operations ($) 0.75 0.87
Less Distributions
Dividends from net
investment income ($) (0.44) (0.02)
Distributions from realized
gains ($) (0.33) none
Total distributions ($) (0.77) (0.02)
Net asset value, end of
period ($) 11.54 11.56
Total Return (%) 6.95 8.16
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 1,450 1,208
Ratio of expenses to average
daily net assets (%) 2.50 2.50
Ratio of net investment
income to average daily net
assets (%) (1.16) (1.19)
Portfolio turnover rate (%) 18 21
- ------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
- ------------------------------------------------------------------------------------
Period
3/29/94
Year Ended 10/31 Through
Overseas Equity Fund 1995 10/31/94
- ------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning
of Period ($) 10.40 10.00
Income From Investment
Operations
Net investment income ($) (0.02) none
Net realized & unrealized
gains (losses) on
investments ($) 0.35 0.43
Total from investment
operations ($) 0.33 0.43
Less Distributions
Dividends from net
investment income ($) (0.02) (0.03)
Distributions from realized
gains ($) none none
Total distributions ($) (0.02) (0.03)
Net asset value, end of
period ($) 10.71 10.40
Total Return (%) 3.19 4.28
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 1,183 523
Ratio of expenses to average
daily net assets (%) 2.50 2.50
Ratio of net investment
income to average daily net
assets (%) (0.57) (0.37)
Portfolio turnover rate (%) 9 6
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
Class C Shares
- ------------------------------------------------------------------------------------
Year Ended 10/31
Overseas Equity Fund 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period ($) 11.58 10.73
Income From Investment
Operations
Net investment income ($) (0.14) (0.06)
Net realized & unrealized
gains (losses) on
investments ($) 0.88 0.93
Total from investment
operations ($) 0.74 0.87
Less Distributions
Dividends from net
investment income ($) (0.44) (0.02)
Distributions from realized
gains ($) (0.33) none
Total distributions ($) (0.77) (0.02)
Net asset value, end of
period ($) 11.55 11.58
Total Return (%) 6.85 8.15
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 159 112
Ratio of expenses to average
daily net assets (%) 2.50 2.50
Ratio of net investment
income to average daily net
assets (%) (1.16) (1.19)
Portfolio turnover rate (%) 18 21
- ------------------------------------------------------------------------------------
<CAPTION>
Financial highlights
- ------------------------------------------------------------------------------------
Period
5/23/94
Year Ended 10/31 Through
Overseas Equity Fund 1995 10/31/94
- ------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning
of Period ($) 10.43 10.00
Income From Investment
Operations
Net investment income ($) (0.06) 0.01
Net realized & unrealized
gains (losses) on
investments ($) 0.39 0.44
Total from investment
operations ($) 0.33 0.45
Less Distributions
Dividends from net
investment income ($) (0.03) (0.02)
Distributions from realized
gains ($) none None
Total distributions ($) (0.03) (0.02)
Net asset value, end of
period ($) 10.73 10.43
Total Return (%) 3.16 4.45
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 43 38
Ratio of expenses to average
daily net assets (%) 2.50 2.50
Ratio of net investment
income to average daily net
assets (%) (0.62) 0.16
Portfolio turnover rate (%) 9 6
- ------------------------------------------------------------------------------------
</TABLE>
How to read the financial highlights
Net investment income
- ------------------------------------------------------------------------
Net investment income includes dividend and interest income earned from
the Fund's securities after its expenses have been deducted.
Net gains (losses) on investments (both realized and unrealized)
- ------------------------------------------------------------------------
A realized gain occurs when we sell an investment at a profit, while a
realized loss occurs when we sell an investment at a loss. When an
investment increases or decreases in value but we do not sell it, we
record an unrealized gain or loss. The amount of realized gain per share
that we pay to shareholders is listed under "Less
Distributions-Distributions from realized gains."
Realized gains
- ------------------------------------------------------------------------
Profits realized from the sale of securities.
Net asset value (NAV)
- ------------------------------------------------------------------------
This is the value of a mutual fund share, calculated by dividing the net
assets by the number of shares outstanding.
Total return
- ------------------------------------------------------------------------
This represents the percentage increase or decrease in the value of a
share of a fund during specific periods, in this case, annual periods. In
calculating this figure for the financial highlights table, we include fee
waivers, exclude front-end and contingent deferred sales charges, and
assume the shareholder has reinvested all dividends and realized gains.
Net assets
- ------------------------------------------------------------------------
Net assets represent the total value of all the assets in the Fund's
portfolio, less any liabilities that are attributable to that class of the
Fund.
How to read the financial highlights
(continued)
Ratio of expenses to average daily net assets
- ------------------------------------------------------------------------
The expense ratio is the percentage of total investment that a fund pays
annually for operating expenses and management fees. These expenses
include accounting and administration expenses, services for shareholders,
and similar expenses.
Ratio of net investment income to average daily net assets
- ------------------------------------------------------------------------
We determine this ratio by dividing net investment income by average net
assets.
Portfolio turnover rate
- ------------------------------------------------------------------------
This figure tells you the amount of trading activity in a fund's
portfolio. For example, a fund with a 50% turnover has bought and sold
half of the value of its total investment portfolio during the stated
period.
[back cover]
Overseas Equity Fund
Additional information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance
during their last fiscal year. You can find more detailed information
about the Fund in the current Statement of Additional Information, which
we have filed electronically with the Securities and Exchange Commission
(SEC) and which is legally a part of this prospectus. If you want a free
copy of the Statement of Additional Information, the annual or semi-annual
report, or if you have any questions about investing in the Fund, you can
write to us at 1818 Market Street, Philadelphia, PA 19103, or call
toll-free 800-523-1918. You may also obtain additional information about
the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web
site (http://www.sec.gov), or you can get copies of this information,
after payment of a duplicating fee, by writing to the Public Reference
Section of the SEC, Washington, D.C. 20549-6009. Information about the
Fund, including its Statement of Additional Information, can be reviewed
and copied at the Securities and Exchange Commission's Public Reference
Room in Washington, D.C. You can get information on the public reference
room by calling the SEC at 1-800-SEC-0330.
Web site
www.delawarefunds.com
E-mail
[email protected]
Shareholder Service Center
800-523-1918
Call the Shareholder Service Center:
Monday to Friday, 8 a.m. to 8 p.m. Eastern time.
For fund information; literature; price, yield and performance figures.
For information on existing regular investment accounts and retirement
plan accounts including wire investments; wire redemptions; telephone
redemptions and telephone exchanges.
Delaphone Service
800-362-FUND (800-362-3863)
For convenient access to account information or current performance
information on all Delaware Investment Funds seven days a week, 24 hours a
day, use this Touch-ToneR service.
Registrant's Investment Company Act file number: 811-7972
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
P-___ [--] PP 2/99
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
Overseas Equity Fund
Institutional Class
Prospectus
March 1, 1999
International Fund
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
[inside front cover]
Table of Contents
Fund profile page
Overseas Equity Fund
How we manage the Fund page
Our investment strategies
The risks of investing in the Fund
Who manages the Fund page
Investment manager and Sub-adviser
Portfolio manager
Who's who?
About your account page
Investing in the Fund
Institutional Class shares
How to buy shares
How to redeem shares
Implementation of investment
objectives and policies page
Financial Highlights page
[sidebar copy at bottom of page]
How to use this prospectus
Here are guidelines to help you use this prospectus to make well-informed
investment decisions about our funds. If you're looking for a specific
piece of information, the table of contents can guide you directly to the
appropriate section.
Step 1
- ------------------------------------------------------------------------
Take a look at the fund profiles for an overview of the Fund.
Step 2
- ------------------------------------------------------------------------
Learn in-depth information about how the Fund invests, the risks involved
and the people and organizations responsible for the Fund's day-to-day
operations.
Step 3
- ------------------------------------------------------------------------
Determine which fund features and services you would like to take
advantage of.
Step 4
- ------------------------------------------------------------------------
Use the glossary that begins on page x to find definitions of words
printed in bold type throughout the prospectus.
An Investment Overview
When choosing a mutual fund to invest in, you have a variety of options
and important information to consider. This prospectus provides
information about Overseas Equity Fund, a mutual fund from the Delaware
Investments Family of Funds.
However, before evaluating individual funds, your first step is to
define your personal financial goals. Knowing your goals and determining
your investment time horizon in advance can help you make a more
appropriate fund selection. It is also important to select a fund in the
context of your entire investment program. Diversification or spreading
of your money among different types of investments is usually a sound
investment strategy. A professional financial adviser can help you build
an investment portfolio that fits your financial situation, your
investment objectives and your risk tolerance. A financial adviser can
also explain the role that Overseas Equity Fund might play in your
investment plan.
Investing for international diversification with Overseas Equity Fund...
Investors with long-term goals often choose mutual funds that provide
international or global diversification. Overseas Equity Fund is an
international fund. These funds provide the potential to increase the
value of your investment through either rising security prices or through
income from international or global securities. Individually, these
funds may experience a high level of volatility, but in combination
with a portfolio of U.S. securities, they may actually help to reduce
the risk of your total investment portfolio over the long term. Like
all mutual funds, international funds allow you to invest conveniently
in a variety of different securities without having to select and
monitor individual securities on your own.
[House Graphic - Highlight international "column" - international and
global funds]
Building Blocks of Asset Allocation
International and Global Funds
International and Global Funds for...
International Diversification
These funds may include stock and bond funds and may be broadly
diversified or focused on an individual country or region. Risk levels of
international funds vary, depending on the investment objectives and
strategies of the individual fund.
International and Global Funds
Asset Allocation Funds
Total Return
Taxable Bond Funds
Tax-Exempt Bond Funds
Money Market Funds (Taxable and Tax-Exempt)
Profile: Overseas Equity Fund
What is the Fund's goal?
Overseas Equity Fund seeks to maximize total return (capital appreciation
and income) principally through investments in an internationally
diversified portfolio of equity securities. Although the Fund will strive
to achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest in stocks of companies based in foreign countries which are
believed to offer appreciation potential. We may invest in companies based
in established countries. We may also invest up to 40% of our net assets
in companies located in developing countries.
In determining what portion of the Overseas Equity Fund's assets should be
allocated to a particular country, we consider: how weak or strong the
country's currency is, the country's prospects for economic growth
compared to other countries, expected levels of inflation, political
environment and the range of investment opportunities available in the
country.
In selecting individual stocks for the portfolio, we evaluate each stock
on its growth prospects and the potential value of its future income
stream. We estimate how much a stock is likely to pay in dividends. We
then adjust that for inflation to determine a current value for the stock.
We compare that value to other stocks available to us and decide what
companies appear to have the best future prospects. This strategy which
allows us to compare stocks across a variety of countries and is typically
considered to be a value approach to investing.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you
may lose part or all of the money you invest. The value of the securities
held by the Fund may increase and decrease, sometimes rapidly and
unpredictably. Consequently, the Fund's share price could increase or
decrease significantly, particularly over the short term. Because the Fund
invests in international securities in both established and developing
countries, it will be affected by international investment risks related
to changes in currency valuations, political instability, economic
instability or lax accounting and regulatory standards. These risks and
others are described more fully on page xx. An investment in the Fund is
not a deposit of any bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
Who should invest in the Fund
(bullet) Investors with long-term financial goals.
(bullet) Investors looking for capital growth potential.
(bullet) Investors willing to accept the sometimes sharp and unpredictable
fluctuations in value that a foreign fund, can experience. These
fluctuations can be even more pronounced for funds like Overseas Equity
Fund, which invests in developing countries.
Who should not invest in the Fund
(bullet) Investors with short-term financial goals.
(bullet) Investors who are unwilling to accept share prices that may
fluctuate, sometimes significantly, over the short term.
(bullet) Investors whose primary goal is to receive current income.
(bullet) Investors who do no understand the significant risks associated
with international investing.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser
to determine whether it is an appropriate choice for you.
How has the Fund performed?
This bar chart and table can help you evaluate the potential risks of
investing in the Fund. We show how returns for the Fund's Institutional
Class shares have varied over the past four calendar years and since
inception, as well as average annual returns for the one and five years
and since inception - - all compared to the performance of the Morgan
Stanley EAFE Index. You should remember that unlike the Fund, the index
is unmanaged and doesn't include the actual costs of buying, selling, and
holding securities. The Fund's past performance does not necessarily
indicate how it will perform in the future. The Class' returns reflect
voluntary expense caps. The returns would be lower without the
voluntary caps.
* Overseas Equity Fund
* Morgan Stanley EAFE Index
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (CLASS A)
FPO]
[bar chart]
Overseas Equity Fund Morgan Stanley EAFE Index
1998
1997
1996
1995
1994
[bar chart]
Year-by-year total return (Institutional Class)
As of December 31, 1998, the Institutional Class had a year-to-date return
of XX%. During the periods illustrated in this bar chart, the
Institutional Class' highest return was XX% [date] and its lowest
return was XX% [date].
[table]
Average annual return for periods ending 12/31/98
Institutional Class Morgan Stanley EAFE Index
1 year 0.00% 0.00%
Since
inception
(2/3/94) 0.00% 0.00%
What are the Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy
or sell shares of the Institutional Class.
Maximum sales charge (load)
imposed on purchases as a
percentage of offering
price None
Maximum contingent deferred
sales charge (load) as a
percentage of original
purchase price or
redemption price, whichever
is lower None
Maximum sales charge (load)
imposed on reinvested
dividends None
Redemption fees None
Exchange Fees (1) None
Annual fund operating expenses are deducted from the Fund's income or
assets before it pays dividends and before its total return is calculated.
We will not charge you separately for these expenses.
Management fees (2) 0.00%
Distribution and service
(12b-1) fees None
Other expenses (2) 0.00%
Total operating expenses (2) 0.00%
This example is intended to help you compare the cost of investing in the
Fund to the cost of investing in other mutual funds with similar
investment objectives. We show the cumulative amount of Fund expenses on a
hypothetical investment of $10,000 with an annual 5% return over the time
shown. (3) This is an example only, and does not represent future expenses,
which may be greater or less than those shown here.
1 year $00
3 years $00
5 years $00
10 years $00
1 Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange you
shares for another fund.
2 The investment manager has agreed to waive fees and pay expenses through
April 30, 1999 in order to prevent total operating expenses (excluding any
taxes, interest, brokerage fees and extraordinary expenses) from exceeding
1.55% of average daily net assets.
3 The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
How we manage the Fund
Our investment strategies
Overseas Equity Fund's fundamental investment objective is to maximize
total return (capital appreciation and income) principally through
investments in an internationally diversified portfolio of equity
securities.
We take a disciplined approach to investing, combining investment
strategies and risk management techniques that can help shareholders meet
their goals.
Overseas Equity 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 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
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 the
Statement of Additional Information.
The Fund may invest up to 40% of its assets in securities of companies
located in, or governments of, developing countries. For temporary
defensive purposes, the Fund may invest a major portion of its assets in
securities of U.S. issuers. In addition, the Fund may be invested in
short-term debt instruments to meet anticipated day-to-day operating
expenses and liquidity requirements.
Certain Investment Guidelines
Illiquid Securities. Up to 10% of the assets of the Fund may be invested
in securities that are not readily marketable, including, where
applicable:
(bullet) repurchase agreements with maturities greater than seven calendar
days;
(bullet) time deposits maturing in more than seven calendar days;
(bullet) certain instruments, futures contracts and options thereon for
which there is no liquid secondary market;
(bullet) certain over-the-counter options, as described in the Statement
of Additional Information;
(bullet) certain variable rate demand notes having a demand period of more
than seven days; and
(bullet) certain Rule 144A restricted securities (Rule 144A securities for
which a dealer or institutional market exists will not be considered
illiquid).
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 Fund's investment restriction
concerning illiquid securities.
Other Guidelines. In addition, the 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. The 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 the
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 the Fund's outstanding shares (as well as
other non-fundamental restrictions) is contained in the Statement of
Additional Information.
Risk factors and special considerations
Fixed-Income Securities. The market value of fixed-income obligations held
by the Fund and, consequently, the net asset value per share of the Fund
when 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 the 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.
Foreign Investments. Overseas Equity Fund may invest substantially all of
its assets in foreign investments. 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 manager or sub-adviser does not intend to
expose the Fund 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 manager or
sub-adviser believes that currency in which the 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 Fund's portfolio securities denominated in such foreign currency.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and the Fund holds various foreign
currencies from time to time, the value of the net assets of the Fund 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 Fund is 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-adviser 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
Fund's 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 Fund normally pays 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 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.
Borrowing. The Fund may borrow money for temporary or emergency purposes
in amounts not in excess of one-third of its total assets. If the Fund
borrows money, its share price may be subject to greater fluctuation until
the borrowing is repaid. If the Fund makes additional investments while
borrowings are outstanding, this may be construed as a form of leverage.
Securities Lending. The 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. The 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
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, the 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, the Fund
may invest up to 100% of its assets in money market instruments. To the
extent the Fund is engaged in a temporary defensive position, the Fund
will not be pursuing its investment objective. The Fund may also hold a
portion of its assets in cash for liquidity purposes.
Portfolio Turnover. High turnover in the 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.
* * *
For additional information about the Fund's investment policies and
certain risks associated with investments in certain types of securities
including purchasing put and call options, futures contracts and options
thereon, and options on foreign currencies, see Implementation of
investment objectives and policies in this prospectus. The Statement of
Additional Information provides more information concerning the Fund's
investment policies, restrictions and risk factors.
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you
may receive little or no return on your investment, and the risk that you
may lose part or all of the money you invest. Before you invest in a Fund
you should carefully evaluate the risks. Because of the nature of the
Overseas Equity Fund, you should consider an investment in it to be a
long-term investment that typically provides the best results when held
for a long period of time. The following are the chief risks you assume
when investing in Overseas Equity Fund. Please see the Statement of
Additional Information for further discussion of these risks and the other
risks not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------
<S> <C>
Overseas Equity Fund
----------------------------------------------
Market risk is the risk that all We maintain a long-term investment approach
or a majority of the securities in and focus on stocks we believe can appreciate
a certain market -- like the stock over an extended time frame regardless of
or bond market -- or in a certain interim market fluctuations. In deciding what
country or region will decline in portion of our portfolio should be invested in
value because of factors such as any individual country, we evaluate the
economic conditions, future country's economy, politics, liquidity,
expectations or investor confidence. corporate earnings, interest rates and
valuations relative to other countries.
We may hold a substantial part of the Fund's
assets in cash or cash equivalents as a
temporary, defensive strategy. We may also
invest a major of the Fund's net assets in
U.S. securities as a temporary defensive
measure.
- ------------------------------------------------------------------------------------
Industry and security risk is the We hold a number of different securities in a
risk that the value of securities variety of sectors and countries in order to
in a particular industry or the minimize the impact that any one poorly
value of an individual stock or bond performing security would have on Overseas
will decline because of changing Equity Fund's overall performance.
expectations for the performance of
that industry or for the individual
company issuing the stock or bond.
- ------------------------------------------------------------------------------------
Currency Risk The value of the Overseas Equity Fund may try to hedge its
Fund's investments may be negatively currency risk by purchasing foreign currency
affected by changes in foreign exchange contracts. By agreeing to purchase or
currency exchange rates. Adverse sell foreign securities at a pre-set price on
changes in exchange rates may reduce a future date, Overseas Equity Fund strives to
or eliminate any gains produced by protect the value of the stocks it owns from
investments that are denominated future changes in currency rates. Overseas
in foreign currencies and may Equity Fund will use currency exchange
increase any losses. contracts only for defensive measures, not to
enhance portfolio returns. However, there is
no assurance that a strategy such as this will
be successful.
- ------------------------------------------------------------------------------------
Political Risk The Risk that We carefully evaluate the political situations
countries or the entire region where in the countries where we invest and take into
we invest may experience political account any potential risks before we select
instability, which may cause greater securities for the portfolio. However, there
fluctuation in the value of our is no way to eliminate political risk when
investments due to changes in investing internationally.
currency exhange rates, governmental
seizures or nationalization of
assets.
- ------------------------------------------------------------------------------------
Emerging Market Risk is the We carefully select securities within emerging
likelihood that the risks assoicated markets and strive to consider all relevant
with international investing will risks associated with an individual company.
be grater in emerging markets than Typically a slightly larger percentage of our
in more developed foreign markets assets is allocated to established countries
because, among other things, than to developing countries. However, we
emerging markets may have less cannot eliminate emerging market risk and
stable political and economic consequently encourage shareholders to invest
environments. in this Fund only if they have a long-term
time horizon, over which the potential of
individual securities is more likely to be
realized.
- ------------------------------------------------------------------------------------
Inefficient Market Risk Foreign [to be inserted]
markets may be less liquid, have
greater price volatility, less
regulation and higher transaction
costs than U.S. markets.
- ------------------------------------------------------------------------------------
Information Risk Foreign companies We conduct a great deal of fundamental
are subject to different accounting, research on the companies we invest in rather
auditing and financial reporting than relying solely on information available
standards than U.S. companies. There through financial reporting. We believe this
may be less information available will help us better uncover any potential
about foreign issuers than domestic weaknesses in individual companies.
issuers. Furthermore, regulatory
oversight of foreign issuers may be
less stringent or less consistently
applied than in the United States.
- ------------------------------------------------------------------------------------
</TABLE>
[begin glossary]
How to use this glossary
Words found in the glossary are printed in boldface the first time they
appear in the prospectus. So if you would like to know the meaning of a
word that isn't in boldface, you might still find it in the glossary.
Glossary A-B
Amortized cost
- ------------------------------------------------------------------------
Similar to depreciated value, amortized cost reflects the value of a
fixed-income security adjusted to account for any premium that was paid
above the par value when the security was purchased. The purpose of
amortization is to reflect resale or redemption value.
Appreciation
- ------------------------------------------------------------------------
An increase in the value of an investment.
Average maturity
- ------------------------------------------------------------------------
An average of when the individual bonds and other debt securities held in
a portfolio will mature.
Bond
- ------------------------------------------------------------------------
A debt security, like an IOU, issued by a company, municipality or
government agency. In return for lending money to the issuer, a bond buyer
generally receives fixed periodic interest payments and repayment of the
loan amount on a specified maturity date. A bond's price prior to maturity
changes and is inversely related to current interest rates. When interest
rates rise, prices fall, and when interest rates fall, prices rise.
Bond ratings
- ------------------------------------------------------------------------
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are
considered investment grade. Bonds rated Ba/BB or lower are commonly known
as junk bonds.
C-C
Capital
- ------------------------------------------------------------------------
The amount of money you invest.
Capital gains distributions
- ------------------------------------------------------------------------
Payments to mutual fund shareholders of profits (realized gains) from the
sale of a fund's portfolio securities. Usually paid once a year; may be
either short-term gains or long-term gains.
Commission
- ------------------------------------------------------------------------
The fee an investor pays to a financial adviser for investment advice and
help in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
- ------------------------------------------------------------------------
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
- ------------------------------------------------------------------------
Measurement of U.S. inflation; represents the price of a basket of
commonly purchased goods.
Contingent deferred sales charge (CDSC)
- ------------------------------------------------------------------------
Fee charged by some mutual funds when shares are redeemed (sold back to
the fund) within a set number of years; an alternative method for
investors to compensate a financial adviser for advice and service, rather
than an up-front commission.
[glossary to be continued]
Who manages the Fund
Investment Manager and Sub-Adviser
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware International Advisers Ltd.,
an affiliate of Delaware Management Company, is the Fund's sub-adviser. As
sub-adviser, Delaware International is responsible for day-to-day
management of the Fund's assets. Delaware Management Company administers
the Fund's affairs and has ultimate responsibility for all investment
advisory services for the Fund. Delaware Management Company also
supervises the sub-adviser's performance. For their services to the Fund,
the manager and sub-adviser were paid an aggregate fee for the last fiscal
year as follows:
Investment Management Fees
Overseas Equity Fund
As a percentage of average
daily net assets 0.00%
Portfolio Manager
Clive A. Gillmore and Robert Akester have had primary responsibility for
making day-to-day investment decisions for the Fund since September 15,
1997.
Clive A. Gilmore is a graduate of the University of Warwick. He began his
career at Legal and General Investment Management and joined Delaware
International in 1990 after eight years of investment experience. His most
recent position prior to joining Delaware International was as a Pacific
Basin equity analyst and senior portfolio manager for Hill Samuel
Investment Advisers Ltd. Mr. Gillmore completed the London Business School
Investment program.
Robert Akester joined Delaware International in 1996 as a Senior Portfolio
Manager. He began his investment career in 1969 and was most recently a
Director of Hill Samuel Investment Advisers Ltd., which he joined in 1985.
His prior experience included working as a Senior Analyst and head of the
South-East Asian Research team at James Capel, and as a Fund Manager at
Prudential Assurance Co., Ltd. Mr. Akester holds a BS in Statistics and
Economics from University College, London and is an associate of the
Institute of Actuaries, with a certificate in Finance and Investment.
David G. Tilles, Chief Investment Officer for Delaware International, is a
graduate of the University of Warwick with a BS in management sciences.
Before joining Delaware Innternational in 1990, he was Chief Investment
Officer of Hill Samuel Investment Advisers Ltd. He is a member of the
Institute of Investment Management & Research and the Operational Research
Society.
In making investment decisions for Overseas Equity Fund, Mr. Gillmore and
Mr. Akester regularly consult with an international equity team of nine
members, five of whom research the Pacific Basin and four of whom research
the European Markets.
Year 2000
As with other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by its service providers do not properly process and
calculate date-related information from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Fund is taking steps to
obtain satisfactory assurances that the Fund's major service providers are
taking steps reasonably designed to address the Year 2000 Problem with
respect to the computer systems that such service providers use. There can
be no assurance that these steps will be sufficient to avoid any adverse
impact on the business of the Fund.
Several European countries are participating in the European Economic and
Monetary Union, which will establish a common European currency for
participating countries. This currency will commonly be known as the
"Euro." It is anticipated that each such participating country will
replace its existing currency with the Euro on January 1, 1999. Additional
European countries may elect to participate after that date. If the Fund
is invested in securities of participating countries, it could be
adversely affected if the computer systems used by its major service
providers are not properly prepared to handle the implementation of this
single currency or the adoption of the Euro by additional countries in the
future. The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to
address these matters with respect to the computer systems that such
service providers use. There can be no assurances that these steps will be
sufficient to avoid any adverse impact on the business of the Fund.
[glossary continued]
C-E
Cost basis
- ------------------------------------------------------------------------
The original purchase price of an investment, used in determining capital
gains and losses.
Currency exchange rates
- ------------------------------------------------------------------------
The price at which one country's currency can be converted into another's.
This exchange rate varies almost daily according to a wide range of
political, economic and other factors.
Depreciation
- ------------------------------------------------------------------------
A decline in an investment's value.
Diversification
- ------------------------------------------------------------------------
The process of spreading investments among a number of different
securities, asset classes or investment styles to reduce the risks of
investing.
[glossary to be continued]
[sidebar]
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED
WITH MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS
FUNDS]
Board of Directors
Investment Manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Sub-Adviser
Delaware International Advisers Ltd.
Third Floor
80 Cheapside
London, England EC2V 6EE
Portfolio Service agent Distributor
managers Delaware Service Company, Inc. Delaware Distributors, L.P.
(see page x 1818 Market Street 1818 Market Street
for details) Philadelphia, PA 19103 Philadelphia, PA 19103
Financial advisers
Shareholders
Board of directors A mutual fund is governed by a board of directors which
has oversight responsibility for the management of the fund's business
affairs. Directors establish procedures and oversee and review the
performance of the investment manager, the distributor and others that
perform services for the fund. At least 40% of the board of directors must
be independent of the fund's investment manager or distributor. These
independent fund directors, in particular, are advocates for shareholder
interests.
Custodian Mutual funds are legally required to protect their portfolio
securities by placing them with a custodian, typically a qualified bank
custodian who segregates fund securities from other bank assets.
Investment manager An investment manager is a company responsible for
selecting portfolio investments consistent with objectives and policies
stated in the mutual fund's prospectus. The investment manager places
portfolio orders with broker/dealers and is responsible for obtaining the
best overall execution of those orders. A written contract between a
mutual fund and its investment manager specifies the services the manager
performs. Most management contracts provide for the manager to receive an
annual fee based on a percentage of the fund's average net assets. The
manager is subject to numerous legal restrictions, especially regarding
transactions between itself and the funds it advises.
Sub-adviser A sub-adviser is a company generally responsible for the
management of the fund's assets. They are selected and supervised by the
investment manager.
Portfolio managers Portfolio managers are employed by the investment
manager or sub-adviser to make investment decisions for individual
portfolios on a day-to-day basis.
Service agent Mutual fund companies employ service agents (sometimes
called transfer agents) to maintain records of shareholder accounts,
calculate and disburse dividends and capital gains and prepare and mail
shareholder statements and tax information, among other functions. Many
service agents provide customer service to shareholders, as well.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject
to National Association of Securities Dealers, Inc. (NASD) rules governing
mutual fund sales practices.
Financial advisers Financial advisers provide investment advice to their
clients, analyzing their financial objectives and recommending appropriate
funds or other investments. Financial advisers are compensated for their
services, generally through sales commissions, and through 12b-1 and/or
service fees deducted from the fund's assets.
Shareholders Like shareholders of other companies, mutual fund
shareholders have specific voting rights, including the right to elect
directors. Material changes in the terms of a fund's management contract
must be approved by a shareholder vote, and funds seeking to change
fundamental investment objectives or policies must also seek shareholder
approval.
[glossary continued]
Dividend distribution
- ------------------------------------------------------------------------
Payments to mutual fund shareholders of dividends passed along from the
fund's portfolio of securities.
Expense ratio
- ------------------------------------------------------------------------
A mutual fund's total operating expenses, expressed as a percentage of its
total net assets. Operating expenses are the costs of running a mutual
fund, including management fees, offices, staff, equipment and expenses
related to maintaining the fund's portfolio of securities. They are paid
from the fund's assets before any earnings are distributed to
shareholders.
[glossary to be continued]
About your account
Investing in the Fund
Institutional Class shares are available for purchase only by the
following:
(bullet) 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
(bullet) tax-exempt employee benefit plans of the manager or its
affiliates and securities dealer firms with a selling agreement with the
distributor
(bullet) institutional advisory accounts of the manager, or its affiliates
and those having client relationships with Delaware Investment Advisers,
an affiliate 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
(bullet) 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
(bullet) 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
[glossary continued]
F-M
Financial adviser
- ------------------------------------------------------------------------
Financial professional (e.g., broker, banker, accountant, planner or
insurance agent) who analyzes clients' finances and prepares personalized
programs to meet objectives.
Fixed-income securities
- ------------------------------------------------------------------------
With fixed-income securities, the money you originally invested is
returned to you at a prespecified maturity date. These securities, which
include government, corporate or municipal bonds, as well as money market
securities, typically pay a fixed rate of return.
[glossary to be continued]
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to
the fund and class of shares you wish to purchase to Delaware Investments,
1818 Market Street, Philadelphia, PA 19103. If you are making an initial
purchase by mail, you must include a completed investment application, or
an appropriate retirement plan application if you are opening a retirement
account, with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank,
ABA #031201467, Bank Account number 2014128934013. Include your account
number and the name of the fund in which you want to invest. If you are
making an initial purchase by wire, you must call us at 800-510-4015 so we
can assign an account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in
the Delaware Investments family for shares of other funds in the family.
Please keep in mind, however, that you may not exchange your shares for
Class B or Class C shares. To open an account by exchange, call the
Shareholder Service Center at 800-510-4015.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a fee for this
service.
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase
order. If we or an authorized agent receives your order before the close
of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
Time) on a business day, you will pay that day's closing share price which
is based on the Fund's net asset value. If we receive your order after the
close of trading, you will pay the next business day's price. A business
day is any day that the New York Stock Exchange is open for business. We
reserve the right to reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of
trading of the New York Stock Exchange each business day that the Exchange
is open. We calculate this value by adding the market value of all the
securities and assets in the Fund's portfolio, deducting all liabilities,
and dividing the resulting number by the number of shares outstanding. The
result is the net asset value per share. We price securities and other
assets for which market quotations are available at their market value. We
price debt securities on the basis of valuations provided to us by an
independent pricing service that uses methods approved by the board of
directors. Any investments that have a maturity of less than 60 days we
price at amortized cost. We price all other securities at their fair
market value using a method approved by the board of directors.
[glossary continued]
Inflation
- ------------------------------------------------------------------------
The increase in the cost of goods and services over time. U.S. inflation
is measured by the Consumer Price Index (CPI).
Investment goal
- ------------------------------------------------------------------------
The objective, such as long-term capital growth or high current income,
that a mutual fund pursues.
Management fee
- ------------------------------------------------------------------------
The amount paid by a mutual fund to the investment adviser for management
services, expressed as a percentage of the fund's net assets.
[glossary to be continued]
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing
to: Delaware Investments, 1818 Market Street, Philadelphia, PA 19103. All
owners of the account must sign the request, and for redemptions of
$50,000 or more, you must include a signature guarantee for each owner.
You can also fax your written request to 215-255-8864. Signature
guarantees are also required when redemption proceeds are going to anyone
other than the account holder(s) of record.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or if you redeem at least $1,000 of shares,
you may have the proceeds sent directly to your bank by wire. Bank
information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds
deposited directly to your bank account the next business day after we
receive your request. Bank information must be on file before you request
a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your
shares. Your adviser may charge a fee for this service.
About your account continued
How to redeem shares (cont.)
If you hold your shares in certificates, you must submit the certificates
with your request to sell the shares. We recommend that you send your
certificates by certified mail.
When you send us a properly completed request to redeem or exchange
shares, you will receive the net asset value as determined at the close of
business on the day we receive your request. We will deduct any applicable
contingent deferred sales charges. You may also have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the
next business day, but no later than seven days after we receive your
request to sell your shares. If you purchased your shares by check, we
will wait until your check has cleared, which can take up to 15 days,
before we send your redemption proceeds.
Account Minimum
If you redeem shares and your account balance falls below $250, the Fund
may redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class
in another Delaware Investments fund. You may not exchange your shares for
Class B and Class C shares of the funds in the Delaware Investments
family. If you exchange shares to a fund that has a sales charge you will
pay any applicable sales charges on your new shares. You don't pay sales
charges on shares that are acquired through the reinvestment of dividends.
You may have to pay taxes on your exchange. When you exchange shares, you
are purchasing shares in another fund so you should be sure to get a copy
of the fund's prospectus and read it carefully before buying shares through
an exchange.
[glossary continued]
M-P
Market capitalization
- ------------------------------------------------------------------------
The value of a corporation determined by multiplying the current market
price of a share of common stock by the number of shares held by
shareholders. A corporation with one million shares outstanding and the
market price per share of $10 has a market capitalization of $10 million.
NASD (National Association of Securities Dealers)
- ------------------------------------------------------------------------
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the
actions of its members.
[glossary to be continued]
[glossary continued]
NAV (Net asset value)
- ------------------------------------------------------------------------
The daily dollar value of one mutual fund share. Equal to a fund's net
assets divided by the number of shares outstanding.
NRSRO (Nationally recognized statistical rating organization)
- ------------------------------------------------------------------------
A company that assesses the quality and potential performance of bonds,
commercial paper, preferred and common stocks and municipal short-term
issues, rating the probability that the issuer of the debt will meet the
scheduled interest payments and repay the principal. Ratings are published
by such companies as Moody's Investors Service (Moody's), Standard &
Poor's Corporation (S&P), Duff & Phelps, Inc. (Duff), and Fitch Investor
Services, Inc. (Fitch).
Preferred stock
- ------------------------------------------------------------------------
Preferred stock has preference over common stock in the payment of
dividends and liquidation of assets. Preferred stocks also pay dividends
at a fixed rate.
[glossary to be continued]
[glossary continued]
P-S
Price/earnings ratio
- ------------------------------------------------------------------------
A measure of a stock's value calculated by dividing the current market
price of a share of stock by its annual earnings per share. A stock
selling for $100 per share with annual earnings of $5 has a P/E of 20.
Principal
- ------------------------------------------------------------------------
Amount of money you invest. Also refers to a bond's original face value,
due to be repaid at maturity.
Prospectus
- ------------------------------------------------------------------------
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
[glossary to be continued]
[glossary continued]
Redeem
- ------------------------------------------------------------------------
To cash in your shares by selling them back to the mutual fund.
Risk
- ------------------------------------------------------------------------
Generally defined as variability of value; also credit risk, inflation
risk, currency and interest rate risk. Different investments involve
different types and degrees of risk.
S&P 500 Index
- ------------------------------------------------------------------------
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of
the U.S. stock market.
Sales charge
- ------------------------------------------------------------------------
Charge on the purchase of fund shares sold through financial advisers. May
vary with the amount invested. Typically used to compensate advisers for
advice and service provided.
[glossary to be continued]
[glossary continued]
S-S
SEC (Securities and Exchange Commission)
- ------------------------------------------------------------------------
Federal agency established by Congress to administer the laws governing
the securities industry, including mutual fund companies.
Share classes
- ------------------------------------------------------------------------
Different classifications of shares; mutual fund share classes offer a
variety of sales charge choices.
Signature guarantee
- ------------------------------------------------------------------------
Certification by a bank, brokerage firm or other financial institution
that a customer's signature is valid.
[glossary to be continued]
[glossary continued]
Standard deviation
- ------------------------------------------------------------------------
A measure of an investment's volatility; for mutual funds, measures how
much a fund's total return varies from its historical average.
Statement of Additional Information (SAI)
- ------------------------------------------------------------------------
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies
and risks.
Stock
- ------------------------------------------------------------------------
An investment that represents a share of ownership (equity) in a
corporation. Stocks are often referred to as "equities."
[glossary to be continued]
[glossary continued]
T-V
Total return
- ------------------------------------------------------------------------
An investment performance measurement, expressed as a percentage, based on
the combined earnings from dividends, capital gains and change in price
over a given period.
[glossary to be continued]
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains, unless you tell us
otherwise.
Tax laws are subject to change, so we urge you to consult your tax adviser
about your particular tax situation and how it might be affected by
current tax law. The tax status of your dividends from the Fund is the
same whether you reinvest your dividends or receive them in cash.
Distributions from the Fund's long-term capital gains are taxable as
capital gains, while distributions from short-term capital gains and net
investment income are generally taxable as ordinary income. Any capital
gains may be taxable at different rates depending on the length of time
the Fund held the assets. In addition, you may be subject to state and
local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount
and nature of all dividends and capital gains that you were paid for the
prior year.
[glossary continued]
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
- ------------------------------------------------------------------------
Federal and state laws that provide a simple way to transfer property to a
minor with special tax advantages.
Volatility
- ------------------------------------------------------------------------
The tendency of an investment to go up or down in value by different
magnitudes. There are "low volatility" and "high volatility" investments.
[end glossary]
Implementation of investment objective and policies
In attempting to achieve its investment objective and policies, the Fund
may employ, among others, one or more of the strategies set forth below.
Convertible securities
The Fund may invest in securities that either have warrants or rights
attached or are otherwise convertible into other or additional securities.
A convertible security is typically a fixed-income security (a bond or
preferred stock) that may be converted at a stated price within a
specified period of time into a specified number of shares of common stock
of the same or a different issuer. Convertible securities are generally
senior to common stocks in a corporation's capital structure but are
usually subordinated to similar non-convertible securities. While
providing a fixed-income stream (generally higher in yield than the income
derivable from a common stock but lower than that afforded by a similar
non-convertible security), a convertible security also affords an investor
the opportunity, through its conversion feature, to participate in capital
appreciation attendant upon a market price advance in the common stock
underlying the convertible security. In general, the market value of a
convertible security is at least the higher of its "investment value"
(i.e., its value as a fixed-income security) or its "conversion value"
(i.e., its value upon conversion into its underlying common stock). While
no securities investment is without some risk, investments in convertible
securities generally entail less risk than investments in the common stock
of the same issuer.
U.S. government securities
The Fund may invest in securities of the U.S. government. Securities
guaranteed by the U.S. government include:
(bullet) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and
(bullet) federal agency obligations guaranteed as to principal and
interest by the U.S. Treasury (such as GNMA certificates and Federal
Housing Administration debentures).
For these securities, the payment of principal and interest is
unconditionally guaranteed by the U.S. government, and thus they are of
the highest possible credit quality. Such securities are subject to
variations in market value due to fluctuations in interest rates, but if
held to maturity are deemed to be free of credit risk for the life of the
investment.
Securities issued by U.S. government instrumentalities and certain federal
agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they generally involve federal sponsorship in one way
or another: some are backed by specific types of collateral; some are
supported by the issuer's right to borrow from the U.S. Treasury; some are
supported by the discretionary authority of the U.S. Treasury to purchase
certain obligations of the issuer; and others are supported only by the
credit of the issuing government agency or instrumentality. These agencies
and instrumentalities include, but are not limited to, Federal Land Banks,
Farmers Home Administration, Central Bank for Cooperatives, Federal
Intermediate Credit Banks, and Federal Home Loan Banks.
Repurchase agreements
The Fund may enter into repurchase agreements, under which the 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 Fund's Custodian collateral equal to at least 102% of
the repurchase price including accrued interest, as monitored daily by the
manager and/or sub-adviser. The 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 Delaware Investments have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow
Delaware Investments funds jointly to invest cash balances. The Fund may
invest cash balances in a joint repurchase agreement in accordance with
the terms of the Order and subject generally to the conditions described
above.
When-issued securities and firm commitment agreements
The Fund 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. The 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 Fund 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.
The 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 the 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 the Fund's
portfolio securities decline while it is in a leveraged position, greater
depreciation of its net assets would likely occur than were it not in such
a position. The Fund will not borrow money to settle these transactions
and, therefore, will liquidate other Fund securities in advance of
settlement if necessary to generate additional cash to meet their
obligations thereunder.
Money market instruments
The Fund 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:
(bullet) commercial paper (short-term notes up to 9 months issued by
corporations or governmental bodies);
(bullet) 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));
(bullet) corporate bonds and notes (corporate obligations that mature, or
that may be redeemed, in one year or less);
(bullet) variable rate demand notes, short-term tax-exempt obligations;
and
(bullet) savings association obligations (certificates of deposit issued
by mutual savings banks or savings and loan associations). Although
certain floating or variable rate obligations (securities which have a
coupon rate that changes at least annually and generally more frequently)
have maturities in excess of one year, they are also considered to be
short-term debt securities.
Strategic transactions
General. The Fund may, but is 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 Fund 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 the 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 the 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 Fund 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. The 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 Fund 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, the Fund will not:
(bullet) sell futures contracts, purchase put options or write call
options if, as a result, more than 25% of its total assets would be hedged
with futures and options under normal conditions;
(bullet) purchase futures contracts or write put options if, as a result,
the Fund's total obligations upon settlement or exercise of purchased
futures contracts and written put options would exceed 25% of its total
assets; or
(bullet) purchase call options if, as a result, the current value of
option premiums for call options purchased by the Fund would exceed 5% of
its total assets.
These limitations do not apply to options attached to or acquired or
traded together with their underlying securities, and do not apply to
securities that incorporate features similar to options.
The limitations on the Fund's investments in futures contracts and
options, and the Fund's policies regarding futures contracts and options
discussed elsewhere are not fundamental policies and may be changed as
regulatory agencies permit.
Options Transactions. The Fund 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 its 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 the 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. The Fund might, therefore, be obligated to
purchase the underlying securities for more than their current market
price.
The Fund will write only "covered" options. An option is covered if the
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 the
Statement of Additional Information.
Forward Foreign Currency Exchange Contracts. The Fund 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
Fund 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. The 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 Fund 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.
The 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 Fund may enter into interest rate swaps, currency
swaps, and other types of swap agreements such as caps, collars and
floors. In an interest rate swap, one party agrees to make regular
payments of a floating rate times a "notional" principal amount in return
for payments of a fixed rate times the same amount. Swaps may also depend
on other prices or rates such as the value of an index or mortgage
prepayment rates.
Swap agreements usually involve a small investment of cash relative to the
magnitude of risk assumed. As a result, swaps can be very volatile and may
substantially impact the Fund's performance. Swap agreements are also
subject to the risk of a counterpart's ability to perform (i.e.,
creditworthiness). The 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 the 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 the 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:
(bullet) 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;
(bullet) imperfect correlation between the price of options and futures
contracts and options thereon and movements in the prices of securities
being hedged;
(bullet) the fact that skills need to use these strategies are different
from those needed to select Fund securities;
(bullet) the possible absence of a liquid secondary market for any
particular instrument at any time;
(bullet) the possible need to defer closing out certain hedged positions
to avoid adverse tax consequences; and
(bullet) 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 Fund may use and some of their risks are
described more fully in the Statement of Additional Information.
The Fund's ability to engage in Strategic Transactions is limited by the
requirements of the Internal Revenue Code for qualification as a regulated
investment company. See the Statement of Additional Information.
* * *
The Statement of Additional Information describes certain of these
investment policies and risk considerations. The Statement of Additional
Information also sets forth other investment policies, risk considerations
and more specific investment restrictions.
<TABLE>
<CAPTION>
Financial highlights
The financial highlights table is intended to help you understand the
Fund's financial performance. All "per share" information reflects
financial results for a single Fund share. This information has been
audited by Ernst & Young LLP, whose report, along with the Fund's
financial statements, is included in the Fund's annual report, which is
available upon request by calling 800-523-1918.
Institutional Class
- ----------------------------------------------------------------------------
Year Ended 10/31
Overseas Equity Fund 1998 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period ($) 12.32 11.44
Income From Investment
Operations
Net investment income ($) (0.02) (0.06)
Net realized & unrealized
gains (losses) on
investments ($) 0.95 0.96
Total from investment
operations ($) 0.93 0.90
Less Distributions
Dividends from net
investment income ($) (0.44) (0.02)
Distributions from realized
gains ($) (0.33) none
Total distributions ($) (0.77) (0.02)
Net asset value, end of
period ($) 12.48 12.32
Total Return (%) 8.04 7.91
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 60 284
Ratio of expenses to average
daily net assets (%) 1.50 1.50
Ratio of net investment
income to average daily net
assets (%) (0.15) (0.19)
Portfolio turnover rate (%) 18 21
- ----------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
The financial highlights table is intended to help you understand the
Fund's financial performance. All "per share" information reflects
financial results for a single Fund share. This information has been
audited by Ernst & Young LLP, whose report, along with the Fund's
financial statements, is included in the Fund's annual report, which is
available upon request by calling 800-523-1918.
- ----------------------------------------------------------------------------
Period
2/3/94
Year Ended 10/31 through
Overseas Equity Fund 1995 10/31/94
- ----------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning
of Period ($) 11.02 10.50
Income From Investment
Operations
Net investment income ($) 0.04 0.04
Net realized & unrealized
gains (losses) on
investments ($) 0.41 0.52
Total from investment
operations ($) 0.45 0.56
Less Distributions
Dividends from net
investment income ($) (0.03) (0.04)
Distributions from realized
gains ($) none none
Total distributions ($) (0.03) (0.04)
Net asset value, end of
period ($) 11.44 11.02
Total Return (%) 4.22 5.26
Ratios and Supplemental
Data:
Net asset value, end of
period (000's omitted) ($) 161 63
Ratio of expenses to average
daily net assets (%) 1.50 1.50
Ratio of net investment
income to average daily net
assets (%) 0.40 0.76
Portfolio turnover rate (%) 9 6
- ----------------------------------------------------------------------------
</TABLE>
How to read the financial highlights
Net investment income
- ------------------------------------------------------------------------
Net investment income includes dividend and interest income earned from
the Fund's securities after its expenses have been deducted.
Net gains (losses) on investments (both realized and unrealized)
- ------------------------------------------------------------------------
A realized gain occurs when we sell an investment at a profit, while a
realized loss occurs when we sell an investment at a loss. When an
investment increases or decreases in value but we do not sell it, we
record an unrealized gain or loss. The amount of realized gain per share
that we pay to shareholders is listed under "Less
Distributions-Distributions from realized gains."
Realized gains
- ------------------------------------------------------------------------
Profits realized from the sale of securities.
Net asset value (NAV)
- ------------------------------------------------------------------------
This is the value of a mutual fund share, calculated by dividing the net
assets by the number of shares outstanding.
Total return
- ------------------------------------------------------------------------
This represents the percentage increase or decrease in the value of a
share of a fund during specific periods, in this case, annual periods. In
calculating this figure for the financial highlights table, we include fee
waivers, exclude front-end and contingent deferred sales charges, and
assume the shareholder has reinvested all dividends and realized gains.
Net assets
- ------------------------------------------------------------------------
Net assets represent the total value of all the assets in the Fund's
portfolio, less any liabilities that are attributable to that class of the
Fund.
How to read the financial highlights
(continued)
Ratio of expenses to average daily net assets
- ------------------------------------------------------------------------
The expense ratio is the percentage of total investment that a fund pays
annually for operating expenses and management fees. These expenses
include accounting and administration expenses, services for shareholders,
and similar expenses.
Ratio of net investment income to average daily net assets
- ------------------------------------------------------------------------
We determine this ratio by dividing net investment income by average net
assets.
Portfolio turnover rate
- ------------------------------------------------------------------------
This figure tells you the amount of trading activity in a fund's
portfolio. For example, a fund with a 50% turnover has bought and sold
half of the value of its total investment portfolio during the stated
period.
[back cover]
Overseas Equity Fund
Additional information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance
during their last fiscal year. You can find more detailed information
about the Fund in the current Statement of Additional Information, which
we have filed electronically with the Securities and Exchange Commission
(SEC) and which is legally a part of this prospectus. If you want a free
copy of the Statement of Additional Information, the annual or semi-annual
report, or if you have any questions about investing in the Fund, you can
write to us at 1818 Market Street, Philadelphia, PA 19103, or call
toll-free 800-523-1918. You may also obtain additional information about
the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web
site (http://www.sec.gov), or you can get copies of this information,
after payment of a duplicating fee, by writing to the Public Reference
Section of the SEC, Washington, D.C. 20549-6009. Information about the
Fund, including its Statement of Additional Information, can be reviewed
and copied at the Securities and Exchange Commission's Public Reference
Room in Washington, D.C. You can get information on the public reference
room by calling the SEC at 1-800-SEC-0330.
Web site
www.delawarefunds.com
E-mail
[email protected]
Client Services Representative
800-510-4015
[Delaphone Service
800-362-FUND (800-362-3863)
For convenient access to account information or current performance
information on all Delaware Investment Funds seven days a week, 24 hours a
day, use this Touch-ToneR service.]
Registrant's Investment Company Act file number: 811-7972
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
P-___ [--] PP 2/99
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1999
DELAWARE GROUP ADVISER FUNDS, INC.
U.S GROWTH FUND
OVERSEAS EQUITY FUND
NEW PACIFIC FUND
1818 Market Street
Philadelphia, PA 19103
For more information about
the Institutional Classes:
800-510-4015
For Prospectus, Performance and Information on Existing Accounts of
Class A Shares, Class B Shares and Class C Shares:
Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY) Nationwide 800-362-7500
Delaware Group Adviser Funds, Inc. ("Adviser Funds, Inc.") is a
professionally-managed mutual fund of the series type which currently
offers three series of shares: U.S. Growth Fund, Overseas Equity Fund and
New Pacific Fund (individually, a "Fund", and collectively, the "Funds").
Each Fund of Adviser Funds, Inc. offers three retail classes: U.S. Growth
Fund A Class, Overseas Equity Fund A Class and New Pacific Fund A Class
(the "Class A Shares"); U.S. Growth Fund B Class, Overseas Equity Fund B
Class and New Pacific Fund B Class (the "Class B Shares"); and U.S. Growth
Fund C Class, Overseas Equity Fund C Class and New Pacific Fund C Class
(the "Class C Shares"). Class A Shares, Class B Shares and Class C Shares
are collectively referred to as the "Fund Classes." Each Fund also offers
an institutional class: U.S. Growth Fund Institutional Class, Overseas
Equity Fund Institutional Class and New Pacific Fund Institutional Class
(collectively, the "Institutional Classes"). Each class may be referred to
individually as a "Class" and collectively as the "Classes."
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current
Prospectuses for the Fund Classes dated March 1, 1999 and the current
Prospectuses for the Institutional Classes dated March 1, 1999, as they
may be amended from time to time. Part B 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 each Fund's national
distributor, Delaware Distributors, L.P. (the "Distributor"), at the above
address or by calling the above phone numbers. The Funds' financial
statements, the notes relating thereto, the financial highlights and the
report of independent auditors are incorporated by reference from the
Annual Reports into this Part B. The Annual Reports will accompany any
request for Part B. The Annual Report can be obtained, without charge, by
calling 800-523-1918.
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 Exchange
Dividends, Distributions and Taxes
Investment Management Agreements
Officers and Directors
General Information
Appendix A--Description of Ratings
Appendix B--Investment Objectives of the Other Funds in the Delaware
Investments Family
Financial Statements
INVESTMENT RESTRICTIONS AND POLICIES
The Prospectuses discuss the Funds' investment objectives and the policies
followed to achieve those objectives. The following discussion supplements
the description of the Funds' investment objectives and policies in the
Prospectuses. Capitalized terms that are not defined herein are defined in
the Funds' Prospectuses.
Lower-Rated Debt Securities
U.S. Growth Fund may purchase securities that are rated lower than Baa by
Moody's Investors Service, Inc. ("Moody's") or lower than BBB by Standard
& Poor's Ratings Group ("S&P"). These securities are often considered to
be speculative and involve significantly higher risk of default on the
payment of principal and interest or are more likely to experience
significant price fluctuation due to changes in the issuer's
creditworthiness. Market prices of these securities may fluctuate more
than higher-rated debt securities and may decline significantly in periods
of general economic difficulty which may follow periods of rising interest
rates. While the market for high yield corporate debt securities has been
in existence for many years and has weathered previous economic downturns,
the market in recent years has experienced a dramatic increase in the
large-scale use of such securities to fund highly leveraged corporate
acquisitions and restructurings. Accordingly, past experience may not
provide an accurate indication of future performance of the high yield
bond market, especially during periods of economic recession. See Appendix
A - Description of Security Ratings in this Part B.
The market for lower-rated securities may be less active than that for
higher-rated securities, which can adversely affect the prices at which
these securities can be sold. If market quotations are not available,
these securities will be valued in accordance with procedures established
by the Board of Directors, including the use of outside pricing services.
Judgment plays a greater role in valuing high yield corporate debt
securities than is the case for securities for which more external sources
for quotations and last-sale information are available. Adverse publicity
and changing investor perceptions may affect the ability of outside
pricing services used by the Fund to value its portfolio securities and
the Fund's ability to dispose of these lower-rated debt securities.
Since the risk of default is higher for lower-quality securities, the
Manager's and/or sub-adviser's research and credit analysis is an integral
part of managing any securities of this type held by the Fund. In
considering investments for the Fund, the Manager and/or sub-adviser will
attempt to identify those issuers of high-yielding securities whose
financial condition is adequate to meet future obligations, has improved,
or is expected to improve in the future. The Manager's and/or
sub-adviser's analysis focuses on relative values based on such factors as
interest or dividend coverage, asset coverage, earnings prospects, and the
experience and managerial strength of the issuer. There can be no
assurance that such analysis will prove accurate.
The Fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as security holder to
seek to protect the interests of security holders if it determines this to
be in the best interest of shareholders.
Mortgage-Backed Securities
Each Fund may invest in mortgage-related securities including those
representing an undivided ownership interest in a pool of mortgages.
Government National Mortgage Association Certificates. Certificates issued
by the Government National Mortgage Association ("GNMA") are
mortgage-backed securities representing part ownership of a pool of
mortgage loans, which are issued by lenders such as mortgage bankers,
commercial banks and savings and loan associations, and are either insured
by the Federal Housing Administration or guaranteed by the Veterans
Administration. A pool of these mortgages is assembled and, after being
approved by GNMA, is offered to investors through securities dealers. The
timely payment of interest and principal on each mortgage is guaranteed by
GNMA and backed by the full faith and credit of the U.S. government.
Principal is paid back monthly by the borrower over the term of the loan.
Investment of prepayments may occur at higher or lower rates than the
anticipated yield on the certificates. Due to the prepayment feature and
the need to reinvest prepayments of principal at current market rates,
GNMA certificates can be less effective than typical bonds of similar
maturities at "locking in" yields during periods of declining interest
rates. GNMA certificates typically appreciate or decline in market value
during periods of declining or rising interest rates, respectively. Due to
the regular repayment of principal and the prepayment feature, the
effective maturities of mortgage pass-through securities are shorter than
stated maturities, will vary based on market conditions and cannot be
predicted in advance. The effective maturities of newly-issued GNMA
certificates backed by relatively new loans at or near the prevailing
interest rates are generally assumed to range between approximately nine
and 12 years.
FNMA and FHLMC Mortgage-Backed Obligations. The Federal National Mortgage
Association ("FNMA"), a federally chartered and privately-owned
corporation, issues pass-through securities representing interests in a
pool of conventional mortgage loans. FNMA guarantees the timely payment of
principal and interest but this guarantee is not backed by the full faith
and credit of the U.S. government. The Federal Home Loan Mortgage
Corporation ("FHLMC"), a corporate instrumentality of the U.S. government,
issues participation certificates which represent an interest in a pool of
conventional mortgage loans. FHLMC guarantees the timely payment of
interest and the ultimate collection of principal, and maintains reserves
to protect holders against losses due to default, but the certificates are
not backed by the full faith and credit of the U.S. government.
As is the case with GNMA certificates, the actual maturity of and realized
yield on particular FNMA and FHLMC pass-through securities will vary based
on the prepayments of the underlying pool of mortgages and cannot be
predicted.
Foreign Investments
Overseas Equity Fund and New Pacific Fund may invest substantially all of
their assets in foreign investments, and U.S. Growth Fund may invest 20%
of its assets in foreign securities. Foreign investments can involve
significant risks in addition to the risks inherent in U.S. investments.
The value of securities denominated in or indexed to foreign currencies,
and of dividends and interest from such securities, can change
significantly when foreign currencies strengthen or weaken relative to the
U.S. dollar. Foreign securities markets generally have less trading volume
and less liquidity than U.S. markets, and prices on some foreign markets
can be highly volatile. Many foreign countries lack uniform accounting and
disclosure standards comparable to those applicable to U.S. companies, and
it may be more difficult to obtain reliable information regarding an
issuer's financial condition and operations. In addition, the costs of
foreign investing, including withholding taxes, brokerage commissions, and
custodial costs, are generally higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including
those involving the release of assets in advance of payment, may involve
increased risks in the event of a failed trade or the insolvency of a
broker-dealer, and may involve substantial delays. It may also be
difficult to enforce legal rights in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments
adverse to the interests of U.S. investors, including the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention.
There may be a greater possibility of default by foreign governments or
foreign government-sponsored enterprises. Investments in foreign countries
also involve a risk of local political, economic, or social instability,
military action or unrest, or adverse diplomatic developments. There is no
assurance that the Manager or sub-adviser will be able to anticipate or
counter these potential events.
The considerations noted above generally are intensified for investments
in developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities
markets that trade a small number of securities.
The Funds may invest in foreign securities that impose restrictions on
transfer within the United States or to U.S. persons. Although securities
subject to transfer restrictions may be marketable abroad, they may be
less liquid than foreign securities of the same class that are not subject
to such restrictions.
American Depositary Receipts and European Depositary Receipts ("ADRs" and
"EDRs") are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed
for use in U.S. and European securities markets, respectively, ADRs and
EDRs are alternatives to the purchase of the underlying securities in
their national markets and currencies.
Mortgage Dollar Rolls
Each Fund may enter into mortgage "dollar rolls" in which the Fund sells
mortgage-backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type,
coupon and maturity) securities on a specified future date. Dollar roll
transactions consist of the sale by a Fund of mortgage-backed securities,
together with a commitment to purchase similar, but not necessarily
identical, securities at a future date. Any difference between the sale
price and the purchase price is netted against the interest income
foregone on the securities to arrive at an implied borrowing (reverse
repurchase) rate. Alternatively, the sale and purchase transactions which
constitute the dollar roll can be executed at the same price, with the
Fund being paid a fee as consideration for entering into the commitment to
purchase. Dollar rolls may be renewed prior to cash settlement and
initially may involve only a firm commitment agreement by the Fund to buy
a security. If the broker/dealer to whom the Fund sells the security
becomes insolvent, the Fund's right to purchase or repurchase the security
may be restricted; the value of the security may change adversely over the
term of the dollar roll; the security that the Fund is required to
repurchase may be worth less than the security that the Fund originally
held, and the return earned by the Fund with the proceeds of a dollar roll
may not exceed transaction costs. The Fund will place U.S. government or
other liquid, high quality assets in a segregated account in an amount
sufficient to cover its repurchase obligation.
Options on Foreign and U.S. Currencies and Securities
The Funds may purchase and sell (write) put and call options on
securities, although the present intent is to write only covered call
options. These covered call options must remain covered so long as a Fund
is obligated as a writer. A call option written by a Fund is "covered" if
the Fund owns the security underlying the option or has an absolute and
immediate right to acquire that security without additional cash
consideration (or for additional cash consideration held in a segregated
account by the Fund's Custodian) upon conversion or exchange of other
securities held in its fund. A call option is also covered if a Fund holds
on a share-for-share basis a call on the same security as the call written
where the exercise price of the call held is equal to or less than the
exercise price of the call written or greater than the exercise price of
the call written if the difference is maintained by the Fund in cash,
treasury bills or other high grade, short-term debt obligations in a
segregated account with the Custodian. The premium paid by the purchaser
of an option will reflect, among other things, the relationship of the
exercise price to the market price and volatility of the underlying
security, the remaining term of the option, supply and demand and interest
rates.
If the writer of an option wishes to terminate the obligation, he or she
may effect a "closing purchase transaction." This is accomplished by
buying an option of the same series as the option previously written. The
effect of the purchase is that the writer's position will be canceled by
the clearing corporation. However, a writer may not effect a closing
purchase transaction after he or she has been notified of the exercise of
an option. Similarly, an investor who is the holder of an option may
liquidate his or her position by effecting a "closing sale transaction."
This is accomplished by selling an option of the same series as the option
previously purchased. There is no guarantee that either a closing purchase
or a closing sale transaction can be effected. To secure the obligation to
deliver the underlying security in the case of a call option, the writer
of the option (whether an exchange-traded option or a NASDAQ option) is
required to pledge for the benefit of the broker the underlying security
or other assets in accordance with the rules of The Options Clearing
Corporation (OCC), the Chicago Board of Trade and the Chicago Mercantile
Exchange, institutions which interpose themselves between buyers and
sellers of options. Technically, each of these institutions assumes the
other side of every purchase and sale transaction on an exchange and, by
doing so, guarantees the transaction.
An option position may be closed out only on an exchange, board of trade
or other trading facility which provides a secondary market for an option
of the same series. Although a Fund will generally purchase or write only
those options for which there appears to be an active secondary market,
there is no assurance that a liquid secondary market on an exchange or
other trading facility will exist for any particular option, or at any
particular time, and for some options no secondary market on an exchange
or otherwise may exist. In such event it might not be possible to effect
closing transactions in particular options, with the result that the Fund
would have to exercise its options in order to realize any profit and
would incur brokerage commissions upon the exercise of call options and
upon the subsequent disposition of underlying securities acquired through
the exercise of call options or upon the purchase of underlying securities
for the exercise of put options. If a Fund as a covered call option writer
is unable to effect a closing purchase transaction in a secondary market,
it will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in
certain options; (ii) restrictions may be imposed by an exchange on
opening transactions or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to
particular classes or series of options or underlying securities; (iv)
unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing corporation may
not at all times be adequate to handle current trading volume; or (vi) one
or more exchanges could, for economic or other reasons, decide or be
compelled at some future date to discontinue the trading of options (or a
particular class or series of options), in which event the secondary
market on that exchange (or in the class or series of options) would cease
to exist, although outstanding options on that exchange that had been
issued by a clearing corporation as a result of trades on that exchange
would continue to be exercisable in accordance with their terms. There is
no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain of the facilities of
any of the clearing corporations inadequate, and thereby result in the
institution by an exchange of special procedures which may interfere with
the timely execution of customers' orders. However, the OCC, based on
forecasts provided by the U.S. exchanges, believes that its facilities are
adequate to handle the volume of reasonably anticipated options
transactions, and such exchanges have advised such clearing corporation
that they believe their facilities will also be adequate to handle
reasonably anticipated volume.
Options on Stock Indices
Options on stock indices are similar to options on stock except that,
rather than the right to take or make delivery of stock at a specified
price, an option on a stock index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the
stock index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the
option. This amount of cash is equal to such difference between the
closing price of the index and the exercise price of the option expressed
in dollars times a specified multiple (the "multiplier"). The writer of
the option is obligated, in return for the premium received, to make
delivery of this amount. Unlike stock options, all settlements are in
cash.
The multiplier for an index option performs a function similar to the unit
of trading for a stock option. It determines the total dollar value per
contract of each point in the difference between the exercise price of an
option and the current level of the underlying index. A multiplier of 100
means that a one-point difference will yield $100. Options on different
indices may have different multipliers.
Except as described below, a Fund will write call options on indices only
if on such date it holds a portfolio of securities at least equal to the
value of the index times the multiplier times the number of contracts.
When a Fund writes a call option on a broadly-based stock market index,
the Fund will segregate or put into escrow with the Custodian, or pledge
to a broker as collateral for the option, cash, cash equivalents or at
least one "qualified security" with a market value at the time the option
is written of not less than 100% of the current index value times the
multiplier times the number of contracts. A Fund will write call options
on broadly-based stock market indices only if at the time of writing it
holds a diversified portfolio of stocks.
If a Fund has written an option on an industry or market segment index, it
will so segregate or put into escrow with the Custodian, or pledge to a
broker as collateral for the option, at least ten "qualified securities,"
which are stocks of an issuer in such industry or market segment, with a
market value at the time the option is written of not less than 100% of
the current index value times the multiplier times the number of
contracts. Such stocks will include stocks which represent at least 50% of
the Fund's holdings in that industry or market segment. No individual
security will represent more than 15% of the amount so segregated, pledged
or escrowed in the case of broadly-based stock market index options or 25%
of such amount in the case of industry or market segment index options.
If at the close of business, the market value of such qualified securities
so segregated, escrowed or pledged falls below 100% of the current index
value times the multiplier times the number of contracts, a Fund will
segregate, escrow or pledge an amount in cash, Treasury bills or other
high grade short-term debt obligations equal in value to the difference.
In addition, when a Fund writes a call on an index which is in-the-money
at the time the call is written, the Fund will segregate with the
Custodian or pledge to the broker as collateral, cash, U.S. government or
other high grade short-term debt obligations equal in value to the amount
by which the call is in-the-money times the multiplier times the number of
contracts. Any amount segregated pursuant to the foregoing sentence may be
applied to the Fund's obligation to segregate additional amounts in the
event that the market value of the qualified securities falls below 100%
of the current index value times the multiplier times the number of
contracts. However, if a Fund holds a call on the same index as the call
written where the exercise price of the call held is equal to or less than
the exercise price of the call written or greater than the exercise price
of the call written if the difference is maintained by the Fund in cash,
Treasury bills or other high grade short-term debt obligations in a
segregated account with the Custodian, it will not be subject to the
requirements described in this paragraph.
Risks of Options on Stock Indices. Index prices may be distorted if
trading of certain securities included in the index is interrupted.
Trading in the index options also may be interrupted in certain
circumstances, such as if trading were halted in a substantial number of
securities included in the index. If this occurred, a Fund would not be
able to close out options which it had purchased or written and, if
restrictions on exercise were imposed, may be unable to exercise an option
it holds, which could result in substantial losses to the Fund. It is the
Funds' policy to purchase or write options only on indices which include a
number of securities sufficient to minimize the likelihood of a trading
halt in the index.
Special Risks of Writing Calls on Stock Indices. Unless a Fund has other
liquid assets which are sufficient to satisfy the exercise of a call, the
Fund would be required to liquidate portfolio securities in order to
satisfy the exercise. Because an exercise must be settled within hours
after receiving the notice of exercise, if a Fund fails to anticipate an
exercise it may have to borrow from a bank (in amounts not exceeding 20%
of the value of the Fund's total assets) pending settlement of the sale of
securities in its portfolio and would incur interest charges thereon.
When a Fund has written a call, there is also a risk that the market may
decline between the time the Fund has a call exercised against it, at a
price which is fixed as of the closing level of the index on the date of
exercise, and the time the Fund is able to sell securities in its
portfolio. As with stock options, a Fund will not learn that an index
option has been exercised until the day following the exercise date.
Unlike a call on stock where the Fund would be able to deliver the
underlying securities in settlement, the Fund may have to sell part of its
portfolio in order to make settlement in cash, and the price of such
securities might decline before they can be sold. This timing risk makes
certain strategies involving more than one option substantially more risky
with index options than with stock options. For example, even if an index
call which a Fund has written is "covered" by an index call held by the
Fund with the same strike price, the Fund will bear the risk that the
level of the index may decline between the close of trading on the date
the exercise notice is filed with the clearing corporation and the close
of trading on the date the Fund exercises the call it holds or the time
the Fund sells the call, which in either case would occur no earlier than
the day following the day the exercise notice was filed.
Over-the-Counter Options and Illiquid Securities. As indicated in the
Prospectuses, each Fund may deal in over-the-counter ("OTC") options. The
Funds understand the position of the staff of the Securities and Exchange
Commission ("SEC") to be that purchased OTC options and the assets used as
"cover" for written OTC options are illiquid securities. The Funds, the
Manager, and the sub-advisers disagree with this position and have found
the dealers with which they engage in OTC options transactions generally
agreeable to and capable of entering into closing transactions. As also
indicated in the Prospectuses, the Funds have adopted procedures for
engaging in OTC options for the purpose of reducing any potential adverse
impact of such transactions upon the liquidity of each Fund's portfolio.
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, below.
Futures Contracts and Options Thereon
A futures contract is an agreement in which the writer (or seller) of the
contract agrees to deliver to the buyer an amount of cash or securities
equal to a specific dollar amount times the difference between the value
of a specific fixed-income security or index at the close of the last
trading day of the contract and the price at which the agreement is made.
No physical delivery of the underlying securities is made. When the
futures contract is entered into, each party deposits with a broker or in
a segregated custodial account approximately 5% of the contract amount,
called the "initial margin." Subsequent payments to and from the broker,
called "variation margin," will be made on a daily basis as the price of
the underlying security or index fluctuates, making the long and short
positions in the futures contracts more or less valuable, a process known
as "marking to market." In the case of options on futures contracts, the
holder of the option pays a premium and receives the right, upon exercise
of the option at a specified price during the option period, to assume a
position in the futures contract (a long position if the option is a call
and a short position if the option is a put). If the option is exercised
by the holder before the last trading day during the option period, the
option writer delivers the futures position, as well as any balance in the
writer's futures margin account. If it is exercised on the last trading
day, the option writer delivers to the option holder cash in an amount
equal to the difference between the option exercise price and the closing
level of the relevant security or index on the date the option expires.
Each Fund intends to engage in futures contracts and options thereon as a
hedge against changes, resulting from market conditions, in the value of
securities which are held by the Fund or which the Fund intends to
purchase, in accordance with the rules and regulations of the Commodity
Futures Trading Commission ("CFTC"). Additionally, the Funds may write
options on futures contracts to realize through the receipt of premium
income a greater return than would be realized in a Fund's portfolio
securities alone.
Risks of Transactions in Futures Contracts. There are several risks in
connection with the use of futures contracts as a hedging device.
Successful use of futures contracts by a Fund is subject to the ability of
the Fund's Manager or sub-adviser to correctly predict movements in the
direction of interest rates or changes in market conditions. These
predictions involve skills and techniques that may be different from those
involved in the management of the portfolio being hedged. In addition,
there can be no assurance that there will be a correlation between
movements in the price of the underlying index or securities and movements
in the price of the securities which are the subject of the hedge. A
decision of whether, when and how to hedge involves the exercise of skill
and judgment, and even a well-conceived hedge may be unsuccessful to some
degree because of market behavior or unexpected trends in interest rates.
Although certain Funds will purchase or sell futures contracts only on
exchanges where there appears to be an adequate secondary market, there is
no assurance that a liquid secondary market on an exchange will exist for
any particular contract or at any particular time. Accordingly, there can
be no assurance that it will be possible, at any particular time, to close
a futures position. In the event a Fund could not close a futures position
and the value of such position declined, the Fund would be required to
continue to make daily cash payments of variation margin. However, in the
event futures contracts have been used to hedge portfolio securities, such
securities will not be sold until the futures contract can be terminated.
In such circumstances, an increase in the price of the securities, if any,
may partially or completely offset losses on the futures contract.
However, there is no guarantee that the price movements of the securities
will, in fact, correlate with the price movements in the futures contract
and thus provide an offset to losses on a futures contract.
The hours of trading of futures contracts may not conform to the hours
during which a Fund may trade the underlying securities. To the extent
that the futures markets close before the securities markets, significant
price and rate movements can take place in the securities markets that
cannot be reflected in the futures market.
Foreign Currency Transactions. U.S. Growth Fund, Overseas Equity Fund and
New Pacific Fund may hold foreign currency deposits from time to time and
may convert dollars and foreign currencies in the foreign exchange
markets. Currency conversion involves dealer spreads and other costs,
although commissions usually are not charged. Currencies may be exchanged
on a spot (i.e., cash) basis, or by entering into forward contracts to
purchase or sell foreign currencies at a future date and price. Forward
contracts generally are traded in an interbank market conducted directly
between currency traders (usually large commercial banks) and their
customers. The parties to a forward contract may agree to offset or
terminate the contract before its maturity, or may hold the contract to
maturity and complete the contemplated currency exchange.
Forward Foreign Currency Exchange Contracts
The Funds' dealings in forward contracts will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward contracts with respect to
specific receivables or payables of a Fund generally arising in connection
with the purchase or sale of its portfolio securities and accruals of
interest or dividends receivable and Fund expenses. Position hedging is
the sale of a foreign currency with respect to portfolio security
positions denominated or quoted in that currency. A Fund may not position
hedge with respect to a particular currency for an amount greater than the
aggregate market value (determined at the time of making any sale of a
forward contract) of securities held in its portfolio denominated or
quoted in, or currently convertible into, such currency.
When a Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, or when a Fund anticipates the receipt
in a foreign currency of dividends or interest payments on a security
which it holds, the Fund may desire to "lock in" the U.S. dollar price of
the security or the U.S. dollar equivalent of such dividend or interest
payment as the case may be. By entering into a forward contract for a
fixed amount of dollars for the purchase or sale of the amount of foreign
currency involved in the underlying transactions, a Fund will be able to
protect itself against a possible loss resulting from an adverse change in
the relationship between the U.S. dollar and the subject foreign currency
during the period between the date on which the security is purchased or
sold, or on which the dividend or interest payment is declared, and the
date on which such payments are made or received.
Additionally, when the Manager and/or applicable sub-adviser believes that
the currency of a particular foreign country may suffer a substantial
decline against the U.S. dollar, a Fund may enter into a forward contract
for a fixed amount of dollars, to sell the amount of foreign currency
approximating the value of some or all of the securities of the Fund
denominated in such foreign currency.
The Funds may use currency forward contracts to manage currency risks and
to facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by these Funds.
In connection with purchases and sales of securities denominated in
foreign currencies, a Fund may enter into currency forward contracts to
fix a definite price for the purchase or sale in advance of the trade's
settlement date. This technique is sometimes referred to as a "settlement
hedge" or "transaction hedge." The Manager and/or sub-advisers expect to
enter into settlement hedges in the normal course of managing the Funds'
foreign investments. The Funds could also enter into forward contracts to
purchase or sell a foreign currency in anticipation of future purchases or
sales of securities denominated in foreign currency, even if the specific
investments have not yet been selected by the Manager and/or sub-adviser.
The Funds may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For
example, if a Fund owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return for
U.S. dollars to hedge against possible declines in the pound's value. Such
a hedge (sometimes referred to as a "position hedge") would tend to offset
both positive and negative currency fluctuations, but would not offset
changes in security values caused by other factors. The Fund could also
hedge the position by selling another currency expected to perform
similarly to the pound sterling -- for example, by entering into a forward
contract to sell Deutschemarks or European Currency Units in return for
U.S. dollars. This type of hedge, sometimes referred to as a "proxy
hedge," could offer advantages in terms of cost, yield, or efficiency, but
generally will not hedge currency exposure as effectively as a simple
hedge into U.S. dollars. Proxy hedges may result in losses if the currency
used to hedge does not perform similarly to the currency in which the
hedged securities are denominated.
Under certain conditions, SEC guidelines require mutual funds to set aside
cash and appropriate liquid assets in a segregated custodian account to
cover currency forward contracts. As required by SEC guidelines, U.S.
Growth Fund, Overseas Equity Fund and New Pacific Fund will segregate
assets to cover currency forward contracts, if any, whose purpose is
essentially speculative. The Funds will not segregate assets to cover
forward contracts, including settlement hedges, position hedges, and proxy
hedges. Successful use of forward currency contracts will depend on the
Manager's and/or sub-advisers' skill in analyzing and predicting currency
values. Forward contracts may substantially change the Funds' investment
exposure to changes in currency exchange rates, and could result in losses
to the Funds if currencies do not perform as the Manager and/or
sub-advisers anticipate. For example, if a currency's value rose at a time
when the Manager and/or applicable sub-adviser had hedged a Fund by
selling that currency in exchange for dollars, the Fund would be unable to
participate in the currency's appreciation. If the Manager and/or
applicable sub-adviser hedges currency exposure through proxy hedges, a
Fund could realize currency losses from the hedge and the security
position at the same time if the two currencies do not move in tandem.
Similarly, if the Manager and/or sub-adviser increases a Fund's exposure
to a foreign currency, and that currency's value declines, the Fund will
realize a loss. There is no assurance that the Manager's and/or
sub-advisers' use of forward currency contracts will be advantageous to
the Funds or that it will hedge at an appropriate time.
Foreign Currency Options
U.S. Growth Fund, Overseas Equity Fund and New Pacific Fund may purchase
U.S. exchange-listed call and put options on foreign currencies. Such
options on foreign currencies operate similarly to options on securities.
Options on foreign currencies are affected by all of those factors which
influence foreign exchange rates and investments generally.
The value of a foreign currency option is dependent upon the value of the
foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency
transactions occurring in the interbank market involve substantially
larger amounts than those that may be involved in the use of foreign
currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1
million) for the underlying foreign currencies at prices that are less
favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations
available through dealer or other market sources be firm or revised on a
timely basis. Available quotation information is generally representative
of very large transactions in the interbank market and thus may not
reflect relatively smaller transactions (less than $1 million) where rates
may be less favorable. The interbank market in foreign currencies is a
global, around-the-clock market. To the extent that the U.S. options
markets are closed while the markets for the underlying currencies remain
open, significant price and rate movements may take place in the
underlying markets that cannot be reflected in the options market.
Foreign Currency Conversion
Although foreign exchange dealers do not charge a fee for currency
conversion, they do realize a profit based on the difference (the
"spread") between prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to U.S.
Growth Fund, Overseas Equity Fund or New Pacific Fund at one rate, while
offering a lesser rate of exchange should those Funds desire to resell
that currency to the dealer.
Combined Transactions
Each Fund may enter into multiple transactions, including multiple options
transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest
rate transactions and any combination of futures, options, currency and
interest rate transactions ("component" transactions), instead of a single
transaction, as part of a single or combined strategy when, in the opinion
of the Manager and/or sub-adviser, it is in the best interests of the Fund
to do so. A combined transaction will usually contain elements of risk
that are present in each of its component transactions. Although combined
transactions are normally entered into based on the Manager's and/or
sub-adviser's judgment that the combined strategies will reduce risk or
otherwise more effectively achieve the desired portfolio management goal,
it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars
Each Fund may enter into interest rate, currency and index swaps and the
purchase or sale of related caps, floors and collars. The Funds expect to
enter into these transactions primarily to preserve a return or spread on
a particular investment or portion of its portfolio, to protect against
currency fluctuations, as a duration management technique or to protect
against any increase in the price of securities the Fund anticipates
purchasing at a later date. The Funds intend to use these transactions as
hedges and not speculative investments and will not sell interest rate
caps or floors where it does not own securities or other instruments
providing the income stream the Fund may be obligated to pay. Interest
rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments with respect to a nominal
amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative
value differential among them and an index swap is an agreement to swap
cash flows on a notional amount based on changes in the values of the
reference indices. The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling such cap to
the extent that a specified index exceeds a predetermined interest rate or
amount. The purchase of a floor entitles the purchaser to receive payments
on a notional principal amount from the party selling such floor to the
extent that a specified index falls below a predetermined interest rate or
amount. A collar is a combination of a cap and a floor that preserves a
certain return within a predetermined range of interest rates or values.
A Fund will usually enter into swaps on a net basis, i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the
case may be, only the net amount of the two payments. Inasmuch as these
swaps, caps, floors and collars are entered into for good faith hedging
purposes, the investment manager and the Fund believe such obligations do
not constitute senior securities under the Investment Company Act of 1940
(the "1940 Act") and, accordingly, will not treat them as being subject to
its borrowing restrictions. A Fund will not enter into any swap, cap,
floor or collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the counterparty, combined
with any credit enhancements, is rated at least A by S&P or Moody's or is
determined to be of equivalent credit quality by the Manager and/or
sub-adviser. If there is a default by the counterparty, the Fund may have
contractual remedies pursuant to the agreements related to the
transaction. The swap market has grown substantially in recent years with
a large number of banks and investment banking firms acting both as
principals and as agent utilizing standardized swap documentation. As a
result, the swap market has become relatively liquid. Caps, floors and
collars are more recent innovations for which standardized documentation
has not yet been fully developed and, accordingly, they are less liquid
than swaps.
Eurodollar Instruments
The Funds may make investments in Eurodollar instruments. Eurodollar
instruments are U.S. dollar-denominated futures contracts or options
thereon which are linked to the London Interbank Offered Rate ("LIBOR"),
although foreign currency-denominated instruments are available from time
to time. Eurodollar futures contracts enable purchasers to obtain a fixed
rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. A Fund might use Eurodollar futures contracts and options
thereon to hedge against changes in LIBOR, to which many interest rate
swaps and fixed-income instruments are linked.
Lending of Portfolio Securities
As discussed in the Prospectuses, each Fund has the ability to lend
securities from its portfolio to brokers, dealers and other financial
organizations. Such loans, if and when made, may not exceed one-third of a
Fund's total assets. A Fund may not lend its portfolio securities to
Lincoln National Corporation or its affiliates unless it has applied for
and received specific authority from the SEC. Loans of securities by the
Funds will be collateralized by cash, letters of credit or U.S. government
securities, which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. From time
to time, a Fund may return a part of the interest earned from the
investment of collateral received for securities loaned to the borrower
and/or a third party, which is unaffiliated with the Fund or with Lincoln
National Corporation, and which is acting as a "finder."
In lending its portfolio securities, a Fund can increase its income by
continuing to receive interest on the loaned securities as well as by
either investing the cash collateral in short-term instruments or
obtaining yield in the form of interest paid by the borrower when
government securities are used as collateral. Requirements of the SEC,
which may be subject to future modifications, currently provide that the
following conditions must be met whenever portfolio securities are loaned:
(a) the Fund must receive at least 102% cash collateral or equivalent
securities from the borrower; (b) the borrower must increase such
collateral whenever the market value of the loaned securities rises above
the level of such collateral; (c) the Fund must be able to terminate the
loan at any time; (d) the Fund must receive reasonable interest on the
loan, as well as an amount equal to any dividends, interest or other
distributions on the loaned securities, and any increase in market value;
(e)the Fund may pay only reasonable custodian fees in connection with the
loan; and (f) voting rights on the loaned securities may pass to the
borrower; however, if a material event adversely affecting the investment
occurs, the Fund's Board of Directors must terminate the loan and regain
the right to vote the securities. The risks in lending portfolio
securities, as with other extensions of secured credit, consist of
possible delay in receiving additional collateral or in the recovery of
the securities or possible loss of rights in the collateral should the
borrower fail financially.
When-Issued Securities
As discussed in the Prospectuses, the Funds may purchase securities on a
"when-issued" basis. When a Fund agrees to purchase securities, the
Custodian will set aside cash or liquid portfolio securities equal to the
amount of the commitment in a separate account. Normally, the Custodian
will set aside portfolio securities to satisfy a purchase commitment. In
such a case, a Fund may be required subsequently to place additional
assets in the separate account in order to assure that the value of the
account remains equal to the amount of the Fund's commitment. It may be
expected that a Fund's net assets will fluctuate to a greater degree when
it sets aside portfolio securities to cover such purchase commitments than
when it sets aside cash. No Fund intends to purchase "when-issued"
securities for speculative purposes but only in furtherance of its
investment objective. Because a Fund will set aside cash or liquid
portfolio securities to satisfy its purchase commitments in the manner
described, the Fund's liquidity and the ability of the Manager or
sub-adviser to manage the Fund might be affected in the event its
commitments to purchase when-issued securities ever exceeded 25% of the
value of its assets.
When a Fund engages in "when-issued" transactions, it relies on the seller
to consummate the trade. Failure of the seller to do so may result in the
Fund's incurring a loss or missing the opportunity to obtain a price
considered to be advantageous.
Money Market Instruments
Each Fund may invest for defensive purposes in corporate government bonds
and notes and money market instruments. Money market instruments in which
the Funds may invest include U.S. government securities; certificates of
deposit, time deposits and bankers' acceptances issued by domestic banks
(including their branches located outside the U.S. and subsidiaries
located in Canada), domestic branches of foreign banks, savings and loan
associations and similar institutions; high grade commercial paper; and
repurchase agreements with respect to the foregoing types of instruments.
The following is a more detailed description of such money market
instruments.
Bank Obligations
Certificates of deposit ("CDs") are short-term negotiable obligations of
commercial banks; time deposits ("TDs") are non-negotiable deposits
maintained in banking institutions for specified periods of time at stated
interest rates; and bankers' acceptances are time drafts drawn on
commercial banks by borrowers usually in connection with international
transactions.
Obligations of foreign branches of domestic banks, such as CDs and TDs,
may be general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and
government regulation. Such obligations are subject to different risks
than are those of domestic banks or domestic branches of foreign banks.
These risks include foreign economic and political developments, foreign
governmental restrictions that may adversely affect payment of principal
and interest on the obligations, foreign exchange controls and foreign
withholding and other taxes on interest income. Foreign branches of
domestic banks are not necessarily subject to the same or similar
regulatory requirements that apply to domestic banks, such as mandatory
reserve requirements, loan limitations, and accounting, auditing and
financial recordkeeping requirements. In addition, less information may be
publicly available about a foreign branch of a domestic bank than about a
domestic bank. CDs issued by wholly owned Canadian subsidiaries of
domestic banks are guaranteed as to repayment of principal and interest
(but not as to sovereign risk) by the domestic parent bank.
Obligations of domestic branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may
be limited by the terms of a specific obligation and by governmental
regulation as well as governmental action in the country in which the
foreign bank has its head office. A domestic branch of a foreign bank with
assets in excess of $1 billion may or may not be subject to reserve
requirements imposed by the Federal Reserve System or by the state in
which the branch is located if the branch is licensed in that state. In
addition, branches licensed by the Comptroller of the Currency and
branches licensed by certain states ("State Branches") may or may not be
required to: (a) pledge to the regulator by depositing assets with a
designated bank within the state, an amount of its assets equal to 5% of
its total liabilities; and (b) maintain assets within the state in an
amount equal to a specified percentage of the aggregate amount of
liabilities of the foreign bank payable at or through all of its agencies
or branches within the state. The deposits of state branches may not
necessarily be insured by the FDIC. In addition, there may be less
publicly available information about a domestic branch of a foreign bank
than about a domestic bank.
In view of the foregoing factors associated with the purchase of CDs and
TDs issued by foreign branches of domestic banks or by domestic branches
of foreign banks, the Manager and/or sub-advisers will carefully evaluate
such investments on a case-by-case basis.
Savings and loan associations whose CDs may be purchased by the Funds are
supervised by the Office of Thrift Supervision and are insured by the
Savings Association Insurance Fund, which is administered by the FDIC and
is backed by the full faith and credit of the U.S. government. As a
result, such savings and loan associations are subject to regulation and
examination.
Reverse Repurchase Agreements
All Funds are authorized to enter into reverse repurchase agreements. A
reverse repurchase agreement is the sale of a security by a Fund and its
agreement to repurchase the security at a specified time and price. A Fund
will maintain in a segregated account with the Custodian cash, cash
equivalents or U.S. government securities in an amount sufficient to cover
its obligations under reverse repurchase agreements with broker/dealers
(but no collateral is required on reverse repurchase agreements with
banks). Under the 1940 Act, reverse repurchase agreements may be
considered borrowings by a Fund; accordingly, each Fund will limit its
investments in reverse repurchase agreements, together with any other
borrowings, to no more than one-third of its total assets. The use of
reverse repurchase agreements by a Fund creates leverage which increases
the Fund's investment risk. If the income and gains on securities
purchased with the proceeds of reverse repurchase 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 available from Delaware Investments have obtained an exemption
(the "Order") from the joint-transaction prohibitions of Section 17(d) of
the 1940 Act to allow Delaware Investments 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 102% of the repurchase price, including the portion
representing the Fund's yield under such agreements, which is monitored on
a daily basis.
Illiquid Securities
Each Fund may invest no more than 10% of the value of its net assets in
illiquid securities.
Each Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933 (the "1933 Act"). Rule 144A
permits many privately placed and legally restricted securities to be
freely traded among certain institutional buyers such as the Funds.
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 Board of Directors, to be of comparable quality to instruments that
are rated high quality. A rating may be relied upon only if it is provided
by a nationally recognized statistical rating organization that is not
affiliated with the issuer or guarantor of the instruments. For a
description of the rating symbols of S&P and Moody's used in this
paragraph, see the Prospectuses. The Fund may also invest in Canadian
Commercial Paper, which is commercial paper issued by a Canadian
corporation or a Canadian counterpart of a U.S. corporation, and in
Europaper which is U.S. dollar denominated commercial paper of a foreign
issuer.
Municipal Securities
Municipal Securities are issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities
such as bridges, highways, roads, schools, water and sewer works, and
other utilities. Other public purposes for which Municipal Securities may
be issued include refunding outstanding obligations, obtaining funds for
general operating expenses and obtaining funds to lend to other public
institutions and facilities. In addition, certain debt obligations known
as "private activity bonds" may be issued by or on behalf of
municipalities and public authorities to obtain funds to provide certain
water, sewage and solid waste facilities, qualified residential rental
projects, certain local electric, gas and other heating or cooling
facilities, qualified hazardous waste facilities, high-speed intercity
rail facilities, governmentally-owned airports, docks and wharves and mass
commuting facilities, certain qualified mortgages, student loan and
redevelopment bonds and bonds used for certain organizations exempt from
federal income taxation. Certain debt obligations known as "industrial
development bonds" under prior federal tax law may have been issued by or
on behalf of public authorities to obtain funds to provide certain
privately-operated housing facilities, sports facilities, industrial
parks, convention or trade show facilities, airport, mass transit, port or
parking facilities, air or water pollution control facilities, sewage or
solid waste disposal facilities, and certain facilities for water supply.
Other private activity bonds and industrial development bonds issued to
finance the construction, improvement, equipment or repair of
privately-operated industrial, distribution, research, or commercial
facilities may also be Municipal Securities, but the size of such issues
is limited under current and prior federal tax law.
Information about the financial condition of issuers of Municipal
Securities may be less available than about corporations with a class of
securities registered under the Securities Exchange Act of 1934 (the "1934
Act").
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 Adviser Funds, Inc. to be considered an underwriter as
that term is defined under the 1933 Act, as amended;
5. Make loans in an aggregate amount in excess of one-third of a Fund's
total assets, taken at the time any loan is made, provided that entering
into certain repurchase agreements and purchasing debt securities shall
not be deemed loans for the purposes of this restriction;
6. Make short sales of securities or maintain a short position if, when
added together, more than 25% of the value of the Fund's net assets would
be (i) deposited as collateral for the obligation to replace securities
borrowed to effect short sales and (ii) allocated to segregated accounts
in connection with short sales;
7. Borrow money, except from banks for temporary or emergency purposes not
in excess of one-third of the value of a Fund's assets, and except that
Funds may enter into reverse repurchase agreements 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
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.
PERFORMANCE INFORMATION
From time to time, each Fund may state total return for its Classes in
advertisements and other types of literature. Any statements of total
return performance data for a Class will be accompanied by information on
the average annual compounded rate of return for that Class over, as
relevant, the most recent one-, five- and ten-year or life-of-fund
periods, as applicable. Each Fund may also advertise aggregate and average
compounded rate of return information of each Class over additional
periods of time.
In 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.
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.
Each Fund may also state total return performance for its Classes in the
form of an average annual return. This average annual return figure will
be computed by taking the sum of a Class' annual returns, then dividing
that figure by the number of years in the overall period indicated. The
computation will reflect the impact of the maximum front-end sales charge
or CDSC, if any, paid on the illustrated investment amount against the
first year's return. From time to time, each Fund may quote actual total
return performance for its Classes in advertising and other types of
literature compared to indices or averages of alternative financial
products available to prospective investors. For example, the performance
comparisons may include the average return of various bank instruments,
some of which may carry certain return guarantees offered by leading banks
and thrifts as monitored by Bank Rate Monitor, and those of
generally-accepted corporate bond and government security price indices of
various durations prepared by Lehman Brothers and Salomon Brothers, Inc.
These indices are not managed for any investment goal.
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, 1998, computed as described above.
The average annual total return for Class A Shares at offer reflects the
maximum front-end sales charge of 5.75% paid on the purchase of shares.
The average annual total return for Class A Shares at net asset value
(NAV) does not reflect the payment of any front-end sales charge.
The average annual total return for Class B Shares and Class C Shares
including deferred sales charge reflects the deduction of the applicable
CDSC that would be paid if the shares were redeemed on October 31, 1998.
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, 1998 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)
U.S. Growth Fund
Class B Class B Class C Class C
Class A Class A Shares Shares Shares Shares Institut-
Shares(2)(3) Shares(2) (including excluding (including (excluding ional
(at offer) (at NAV) CDSC)(5) CDSC) CDSC) CDSC) Class
<S> <C> <C> <C>
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
3 years 3 years 3 years 3 years
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
Period Period Period Period
12/3/93(4) 3/29/94(4) 5/23/94(4) 2/3/94(4)
through through through through
10/31/98 10/31/98 10/31/98 10/31/98
____________________________
(1) The Manager has committed to waive a portion of its annual
compensation or pay expenses to limit the operating expenses of the Funds.
See Investment Management Agreements. In the absence of such waivers or
payments, performance would have been affected negatively.
(2) The 12b-1 fees payable by each Fund for Class A Shares were at a rate
equal to 0.35% of the average daily net assets. Beginning May 6, 1996, the
payments were set at 0.30%. Performance calculations for periods after May
6, 1996 will be made using the lower 12b-1 fee rate.
(3) Effective November 2, 1998, the maximum front-end sales charge was
increased from 4.75% to 5.75%. The above performance figures are
calculated using 5.75% as the applicable sales charge for all time
periods.
(4) Commencement of operations.
(5) Effective November 2, 1998, the CDSC schedule for Class B Shares is as
follows: (i) 5% if shares are redeemed within one year of purchase (ii) 4%
if shares are redeemed during the second year of purchase; (iii) 3% if
shares are redeemed during the third or fourth year following purchase;
(iv) 2% if shares are redeemed during the fifth year following purchase;
(v) 1% if shares are redeemed during the sixth year following purchase;
and (vi) 0% thereafter. The above performance figures are calculated using
the new applicable CDSC schedule.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return(1)
Overseas Equity Fund
Class B Class B Class C Class C
Class A Class A Shares Shares Shares Shares Institut-
Shares(2)(3) Shares(2) (including excluding (including (excluding ional
(at offer) (at NAV) CDSC)(5) CDSC) CDSC) CDSC) Class
<S> <C> <C> <C>
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
3 years 3 years 3 years 3 years
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
Period Period Period Period
12/3/93(4) 3/29/94(4) 5/23/94(4) 2/3/94(4)
through through through through
10/31/98 10/31/98 10/31/98 10/31/98
New Pacific Fund
Class B Class B Class C Class C
Class A Class A Shares Shares Shares Shares Institut-
Shares(2)(3) Shares(2) (including excluding (including (excluding ional
(at offer) (at NAV) CDSC)(5) CDSC) CDSC) CDSC) Class
<S> <C> <C> <C>
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
3 years 3 years 3 years 3 years
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
Period Period Period Period
12/3/93(4) 3/29/94(4) 5/23/94(4) 2/3/94(4)
through through through through
10/31/98 10/31/98 10/31/98 10/31/98
____________________________
(1) The Manager has committed to waive a portion of its annual
compensation or pay expenses to limit the operating expenses of the Funds.
See Investment Management Agreements. In the absence of such waivers or
payments, performance would have been affected negatively.
(2) The 12b-1 fees payable by each Fund for Class A Shares were at a rate
equal to 0.35% of the average daily net assets. Beginning May 6, 1996, the
payments were set at 0.30%. Performance calculations for periods after May
6, 1996 will be made using the lower 12b-1 fee rate.
(3) Effective November 2, 1998, the maximum front-end sales charge was
increased from 4.74% to 5.75%. The above performance figures are
calculated using 5.75% 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) 5% if shares are redeemed with one year of purchase; (ii)
4% if shares are redeemed during the second year of purchase; (iii) 3% if
shares are redeemed during the third or fourth year following purchase;
(iv) 2% if shares are redeemed during the fifth year following purchase;
(v) 1% if shares are redeemed during the sixth year following purchase;
and (vi) 0% thereafter. The above performance figures are calculated using
the new applicable CDSC schedule.
</TABLE>
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.
From time to time, each Fund may also quote its Classes' actual total
return performance, dividend results and other performance information in
advertising and other types of literature. This information may be
compared to that of other mutual funds with similar investment objectives
and to stock, bond and other relevant indices or to rankings prepared by
independent services or other financial or industry publications that
monitor the performance of mutual funds. For example, the performance of a
Fund (or Fund Class) may be compared to data prepared by Lipper Analytical
Services, Inc., Morningstar, Inc., or to the S&P 500 Index, the Dow Jones
Industrial Average, the Morgan Stanley Capital International (MSCI),
Europe, Australia and Far East (EAFE) Index, the MSCI Emerging Markets
Free Index, or the Salomon Brothers World Government Bond Index.
Lipper Analytical Services, Inc. maintains statistical performance
databases, as reported by a diverse universe of independently-managed
mutual funds. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare a Fund's performance to another fund in appropriate categories
over specific time periods also may be quoted in advertising and other
types of literature. The S&P 500 and the Dow Jones Industrial Average are
industry-accepted unmanaged indices of generally-conservative securities
used for measuring general market performance. Similarly, the MSCI EAFE
Index, the MSCI Emerging Markets Free Index, and the Salomon Brothers
World Government Bond Index are industry-accepted unmanaged indices of
equity securities in developed countries and global debt securities,
respectively, used for measuring general market performance. The total
return performance reported for these indices will reflect the
reinvestment of all distributions on a quarterly basis and market price
fluctuations. The indices do not take into account any sales charges or
other fees. A direct investment in an unmanaged index is not possible.
Current interest rate and yield information on government debt obligations
of various durations, as reported weekly by the Federal Reserve (Bulletin
H.15), may also be used. As well, current industry rate and yield
information on all industry available fixed-income securities, as reported
weekly by The Bond Buyer, may also be used in preparing comparative
illustrations.
Each Fund may also promote its Classes' yield and/or total return
performance and use comparative performance information computed by and
available from certain industry and general market research and
publications, such as Lipper Analytical Services, Inc., IBC/Donoghue's
Money Market Report and Morningstar, Inc.
The performance of multiple indices compiled and maintained by statistical
research firms, such as Morgan Stanley, Salomon Brothers and Lehman
Brothers, may be combined to create a blended performance result for
comparative purposes. Generally, the indices selected will be
representative of the types of securities in which the Funds may invest
and the assumptions that were used in calculating the blended performance
will be described.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the Consumer Price Index), and
combinations of various capital markets. The performance of these capital
markets is based on the returns of different indices. The Funds may use
the performance of these capital markets in order to demonstrate general
risk-versus-reward investment scenarios. Performance comparisons may also
include the value of a hypothetical investment in any of these capital
markets. The risks associated with the security types in any capital
market may or may not correspond directly to those of the Funds. The Funds
may also compare performance to that of other compilations or indices that
may be developed and made available in the future.
The Funds may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that
describe general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting, questionnaires designed
to help create a personal financial profile, worksheets used to project
savings needs based on assumed rates of inflation and hypothetical rates
of return and action plans offering investment alternatives), investment
management techniques, policies or investment suitability of a Fund (such
as value investing, market timing, dollar cost averaging, asset
allocation, constant ratio transfer, automatic account rebalancing, the
advantages and disadvantages of investing in tax-deferred and taxable
investments or global or international investments), economic and
political conditions, the relationship between sectors of the economy and
the economy as a whole, the effects of inflation and historical
performance of various asset classes, including but not limited to,
stocks, bonds and Treasury bills. From time to time advertisements, sales
literature, communications to shareholders or other materials may
summarize the substance of information contained in shareholder reports
(including the investment composition of a Fund), as well as the views as
to current market, economic, trade and interest rate trends, legislative,
regulatory and monetary developments, investment strategies and related
matters believed to be of relevance to a Fund. In addition, selected
indices may be used to illustrate historic performance of selected asset
classes. The Funds may also include in advertisements, sales literature,
communications to shareholders or other materials, charts, graphs or
drawings which illustrate the potential risks and rewards of investment in
various investment vehicles, including but not limited to, domestic and
international stocks, and/or bonds, treasury bills and shares of a Fund.
In addition, advertisements, sales literature, communications to
shareholders or other materials may include a discussion of certain
attributes or benefits to be derived by an investment in a Fund and/or
other mutual funds, shareholder profiles and hypothetical investor
scenarios, timely information on financial management, tax and retirement
planning (such as information on Roth IRAs and Educational IRAs) and
investment alternatives to certificates of deposit and other financial
instruments. Such sales literature, communications to shareholders or
other materials may include symbols, headlines or other material which
highlight or summarize the information discussed in more detail therein.
Materials may refer to the CUSIP numbers of the Funds and may illustrate
how to find the listings of the Funds in newspapers and periodicals.
Materials may also include discussions of other Funds, products, and
services.
The Funds may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Funds may compare these
measures to those of other funds. Measures of volatility seek to compare
the historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. Measures of volatility and correlation may
be calculated using averages of historical data. A Fund may advertise its
current interest rate sensitivity, duration, weighted average maturity or
similar maturity characteristics. Advertisements and sales materials
relating to a Fund may include information regarding the background and
experience of its portfolio managers.
The following tables present examples, for purposes of illustration only,
of cumulative total return performance for each Class through October 31,
1998. For these purposes, the calculations reflect maximum sales charges,
if any, and assume the reinvestment of any capital gains distributions and
income dividends paid during the indicated periods. The performance does
not reflect any income taxes payable by shareholders on the reinvested
distributions included in the calculations. The performance of Class A
Shares reflects the maximum front-end sales charge paid on the purchase of
shares but may also be shown without reflecting the impact of any
front-end sales charge. The performance of Class B Shares and Class C
Shares is calculated both with the applicable CDSC included and excluded.
Pursuant to applicable regulation, total return shown for an Institutional
Class for the periods prior to the commencement of operations of such
Class is calculated by taking the performance of the respective Class A
Shares and adjusting it to reflect the elimination of all sales charges.
However, for those periods, no adjustment has been made to eliminate the
impact of 12b-1 payments, and performance may have been affected had such
an adjustment been made.
The net asset value of a Class fluctuates so shares, when redeemed, may be
worth more or less than the original investment, and a Class' results
should not be considered as representative of future performance.
<TABLE>
<CAPTION>
Cumulative Total Return(1)
U.S. Growth Fund
Class B Class B Class C Class C
Class A Shares Shares Shares Shares
Shares(2) (including (excluding (including (excluding Institutional
(at offer) CDSC)(4) CDSC) CDSC) CDSC) Class
<S> <C> <C> <C> <C> <C>
3 months 3 months 3 months 3 months
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
6 months 6 months 6 months 6 months
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
9 months 9 months 9 months 9 months
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
3 years 3 years 3 years 3 years
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
Period Period Period Period
12/3/93(3) 3/29/94(3) 5/23/94(3) 2/3/94(3)
through through through through
10/31/98 10/31/98 10/31/98 10/31/98
____________________________
(1) The Manager has committed to waive a portion of its annual
compensation or pay expenses to limit the operating expenses of the Funds.
See Investment Management Agreements. In the absence of such waivers or
payments, performance would have been affected negatively.
(2) The 12b-1 fees payable by each Fund for Class A Shares were at a rate
equal to 0.35% of the average daily net assets. Beginning May 6, 1996, the
payments were set at 0.30%. Performance calculations for periods after May
6, 1996 will be made using the lower 12b-1 fee rate. The maximum front-end
sales charge was increased from 4.76% to 5.75% effective November 2, 1998.
The above performance figures are calculated using 5.75% as the applicable
sales charge for all time periods.
(3) Commencement of operations.
(4) Effective November 2, 1998, the CDSC schedule for Class B Shares is as
follows: (i) 5% if shares are redeemed within one year of purchase; (ii)
4% if shares are redeemed during the second years of purchase; (iii) 3% if
shares are redeemed during the third or fourth year following purchase;
(iv) 2% if shares are redeemed during the fifth year following purchase;
(v) 1% if shares are redeemed during the sixth year following purchase;
and (vi) 0% thereafter. The above performance figures are calculated using
the new applicable CDSC schedule.
(5) For the six months ended October 31, 1998, cumulative total return for
U.S. Growth Fund A Class at net asset value was ______%.
</TABLE>
<TABLE>
<CAPTION>
Cumulative Total Return(1)
Overseas Equity Fund
Class B Class B Class C Class C
Class A Shares Shares Shares Shares
Shares(2) (including (excluding (including (excluding Institutional
(at offer) CDSC)(4) CDSC) CDSC) CDSC) Class
<S> <C> <C> <C> <C> <C>
3 months 3 months 3 months 3 months
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
6 months 6 months 6 months 6 months
ended ended ended ended
10/31/98(5) 10/31/98 10/31/98 10/31/98
9 months 9 months 9 months 9 months
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
3 years 3 years 3 years 3 years
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
Period Period Period Period
12/3/93(3) 3/29/94(3) 5/10/94(3) 2/3/94(3)
through through through through
10/31/98 10/31/98 10/31/98 10/31/98
____________________________
(1) The Manager has committed to waive a portion of its annual
compensation or pay expenses to limit the operating expenses of the Funds.
See Investment Management Agreements. In the absence of such waivers or
payments, performance would have been affected negatively.
(2) The 12b-1 fees payable by each Fund for Class A Shares were at a rate
equal to 0.35% of the average daily net assets. Beginning May 6, 1996, the
payments were set at 0.30%. Performance calculations for periods after May
6, 1996 will be made using the lower 12b-1 fee rate. The maximum front-end
sales charge was increased from 4.75% to 5.75% effective November 2, 1998.
The above performance figures are calculated using 5.75% as the applicable
sales charge for all time periods.
(3) Commencement of operations.
(4) Effective November 2, 1998, the CDSC schedule for Class B Shares is as
follows: (i) 5% if shares are redeemed within one year of purchase; (ii)
4% if shares are redeemed during the second years of purchase; (iii) 3% if
shares are redeemed during the third or fourth year following purchase;
(iv) 2% if shares are redeemed during the fifth year following purchase;
(v) 1% if shares are redeemed during the sixth year following purchase;
and (vi) 0% thereafter. The above performance figures are calculated using
the new applicable CDSC schedule.
(5) For the six months ended October 31, 1998, cumulative total return for
Overseas Equity Fund A Class at net asset value was _______%.
</TABLE>
<TABLE>
<CAPTION>
New Pacific Fund
Class B Class B Class C Class C
Class A Shares Shares Shares Shares
Shares(2) (including (excluding (including (excluding Institutional
(at offer) CDSC)(4) CDSC) CDSC) CDSC) Class
<S> <C> <C> <C> <C> <C>
3 months 3 months 3 months 3 months
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
6 months 6 months 6 months 6 months
ended ended ended ended
10/31/98(5) 10/31/98 10/31/98 10/31/98
9 months 9 months 9 months 9 months
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
1 year 1 year 1 year 1 year
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
3 years 3 years 3 years 3 years
ended ended ended ended
10/31/98 10/31/98 10/31/98 10/31/98
Period Period Period Period
12/3/93(3) 3/29/94(3) 7/7/94(3) 2/3/94(3)
through through through through
10/31/98 10/31/98 10/31/98 10/31/98
____________________________
(1) The Manager has committed to waive a portion of its annual
compensation or pay expenses to limit the operating expenses of the Funds.
See Investment Management Agreements. In the absence of such waivers or
payments, performance would have been affected negatively.
(2) The 12b-1 fees payable by each Fund for Class A Shares were at a rate
equal to 0.35% of the average daily net assets. Beginning May 6, 1996, the
payments were set at 0.30%. Performance calculations for periods after May
6, 1996 will be made using the lower 12b-1 fee rate. The maximum front-end
sales charge was increased from 4.75% to 5.75% effective November 2, 1998.
The above performance figures are calculated using 5.75% as the applicable
sales charge for all time periods.
(3) Commencement of operations.
(4) Effective November 2, 1998, the CDSC schedule for Class B Shares is as
follows: (i) 5% if shares are redeemed within one year of purchase; (ii)
4% if shares are redeemed during the second years of purchase; (iii) 3% if
shares are redeemed during the third or fourth year following purchase;
(iv) 2% if shares are redeemed during the fifth year following purchase;
(v) 1% if shares are redeemed during the sixth year following purchase;
and (vi) 0% thereafter. The above performance figures are calculated using
the new applicable CDSC schedule.
(5) For the six months ended October 31, 1998, cumulative total return for
New Pacific Fund A Class at net asset value was ________.
</TABLE>
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Funds and other mutual funds available
from Delaware Investments, will provide general information about
investment alternatives and scenarios that will allow investors to assess
their personal goals. This information will include general material about
investing as well as materials reinforcing various industry-accepted
principles of prudent and responsible personal financial planning. One
typical way of addressing these issues is to compare an individual's goals
and the length of time the individual has to attain these goals to his or
her risk threshold. In addition, the Distributor will provide information
that discusses the Manager's and Sub-Adviser's overriding investment
philosophy and how that philosophy impacts the Funds', and other Delaware
Investments funds', investment disciplines employed in seeking their
objectives. The Distributor may also from time to time cite general or
specific information about the institutional clients of the Manager and
Sub-Adviser, including the number of such clients serviced by such
persons.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and
logic says to invest when prices are low. However, even experts can't
always pick the highs and the lows. By using a strategy known as
dollar-cost averaging, you schedule your investments ahead of time. If you
invest a set amount on a regular basis, that money will always buy more
shares when the price is low and fewer when the price is high. You can
choose to invest at any regular interval--for example, monthly or
quarterly--as long as you stick to your regular schedule. Dollar-cost
averaging looks simple and it is, but there are important things to
remember.
Dollar-cost averaging works best over longer time periods, and it doesn't
guarantee a profit or protect against losses in declining markets. If you
need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why
dollar-cost averaging can make sense for long-term goals. Since the
potential success of a dollar-cost averaging program depends on continuous
investing, even through periods of fluctuating prices, you should consider
your dollar-cost averaging program a long-term commitment and invest an
amount you can afford and probably won't need to withdraw. You also should
consider your financial ability to continue to purchase shares during
periods of high fund share prices. Delaware Investments 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.
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will
be lower than the average price per share for the same time period.
Investment Price Per Number of
Amount Share Shares Purchased
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $5.00 12
Month 4 $100 $10.00 10
$400 $37.50 48
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to
represent the actual performance of any stock or bond fund available from
Delaware Investments.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Fund shares,
your investment is given yet another opportunity to grow. It's called the
Power of Compounding. Each Fund may include illustrations showing the
power of compounding in advertisements and other types of literature.
TRADING PRACTICES AND BROKERAGE
Fund transactions are executed by the Manager or any sub-adviser
(collectively referred to in this section as the "Manager") on behalf of
the Fund in accordance with the standards described below.
Brokers, dealers, banks and others are selected to execute transactions
for the purchase or sale of portfolio securities or other instruments on
the basis of the Manager's judgment of their professional capability to
provide the service. The primary consideration is to have brokers, dealers
or banks execute securities transactions at best price and execution. Best
price and execution refers to many factors, including the price paid or
received for a security, the commission charged, the promptness and
reliability of execution, the confidentiality and placement accorded the
order and other factors affecting the overall benefit obtained by the
account on the transaction. Trades are generally made on a net basis where
securities are either bought or sold directly from or to a broker, dealer
or bank or others. In these instances, there is no direct commission
charged, but there is a spread (the difference between the buy and sell
price) which is the equivalent of a commission. When a commission is paid,
the Funds pay reasonably competitive brokerage commission rates based upon
the professional knowledge of the Manager's trading department as to rates
paid and charged for similar transactions throughout the securities
industry. In some instances, the Funds pay a minimal share transaction
cost when the transaction presents no difficulty.
During the past three fiscal years, the aggregate dollar amounts of
brokerage commissions paid by U.S. Growth Fund, Overseas Equity Fund and
New Pacific Fund were as follows:
October 31,
1998 1997 1996
U.S. Growth Fund $00,000 $85,141 $55,744
Overseas Equity Fund $00,000 $30,918 $31,960
New Pacific Fund $00,000 $264,369 $236,538
The Manager may allocate out of all commission business generated by all
of the funds and accounts under their management, brokerage business to
brokers, dealers or members of an exchange who provide brokerage and
research services. These services include advice, either directly or
through publications or writings, as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities;
furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends;
assisting in determining portfolio strategy; providing computer software
and hardware used in security analyses; and providing portfolio
performance evaluation and technical market analyses. Such services are
used by the Manager in connection with its investment decision-making
process with respect to one or more funds and accounts managed by it, and
may not be used, or used exclusively, with respect to the fund or account
generating the brokerage.
During the fiscal year ended October 31, 1998, portfolio transactions of
U.S. Growth Fund, Overseas Equity Fund and New Pacific Fund in the amounts
of $00,000,000,$00,000,000 and $00,000,000, respectively, resulting in
brokerage commissions of $00,000, $00,000 and $000,000, respectively, were
directed to brokers for brokerage and research services provided.
As provided in the 1934 Act and the Investment Management and Sub-Advisory
Agreements, higher commissions are permitted to be paid to brokers,
dealers or members of an exchange who provide brokerage and research
services than to broker, dealers or members of an exchange who do not
provide such services, if such higher commissions are deemed reasonable in
relation to the value of the brokerage and research services provided.
Although transactions are directed to brokers, dealers or members of an
exchange who provide such brokerage and research services, the Fund
believes that the commissions paid to such broker/dealers are not, in
general, higher than commissions that would be paid to broker/dealers not
providing such services and that such commissions are reasonable in
relation to the value of the brokerage and research services provided. In
some instances, services may be provided to the Manager which constitute
in some part brokerage and research services used by the Manager in
connection with its investment decision-making process and constitute in
some part services used by the Manager in connection with administrative
or other functions not related to its investment decision-making process.
In such cases, the Manager will make a good faith allocation of brokerage
and research services and will pay out of its own resources for services
used by the Manager in connection with administrative or other functions
not related to its investment decision-making process. In addition, so
long as no fund is disadvantaged, portfolio transactions which generate
commissions or their equivalent are allocated to broker/dealers who
provide daily portfolio pricing services to the Funds and to other funds
available from Delaware Investments. Subject to best price and execution,
commissions allocated to brokers providing such pricing services may or
may not be generated by the funds receiving the pricing service.
The Manager may place a combined order for two or more accounts or funds
engaged in the purchase or sale of the same security if, in its judgment,
joint execution is in the best interest of each participant and will
result in best price and execution. Transactions involving commingled
orders are allocated in a manner deemed equitable to each account or fund.
When a combined order is executed in a series of transactions at different
prices, each account participating in the order may be allocated an
average price obtained from the executing broker. It is believed that the
ability of the accounts to participate in volume transactions will
generally be beneficial to the accounts and funds. Although it is
recognized that, in some cases, the joint execution of orders could
adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager and the Board
of Directors that the advantages of combined orders outweigh the possible
disadvantages of separate transactions.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), and subject to seeking best price
and execution, the Manager may place orders with broker/dealers that have
agreed to defray certain expenses of the funds available from Delaware
Investments such as custodian fees, and may, at the request of the
Distributor, give consideration to sales of shares of such funds as a
factor in the selection of brokers and dealers to execute portfolio
transactions.
Subject to the above considerations, an affiliate of the Manager may act
as a securities broker for the Funds. In order for an affiliate of the
Manager to effect any portfolio transactions for the Funds, the
commissions, fees or other remuneration received by the affiliate must be
reasonable and fair compared to the commissions, fees or other
remuneration paid to other brokers in connection with comparable
transactions involving similar securities being purchased or sold on an
exchange during a comparable period of time. This standard would allow an
affiliate of the Manager to receive no more than the remuneration which
would be expected to be received by an unaffiliated broker in a
commensurate arm's-length transaction. Furthermore, the Directors of
Adviser Funds, Inc., including a majority of the Directors who are not
"interested" persons, have adopted procedures which are reasonably
designed to provide that any commissions, fees or other remuneration paid
to an affiliate of the Manager are consistent with the foregoing standard.
In accordance with Section 11(a) under the 1934 Act, an affiliate of the
Manager may not retain compensation for effecting transactions on a
national securities exchange for the Funds unless Adviser Funds, Inc. has
expressly authorized the retention of such compensation in a written
contract executed by Adviser Funds, Inc. and such affiliate. Section 11(a)
provides that an affiliate of the Manager must furnish to the Adviser
Funds, Inc. at least annually a statement setting forth the total amount
of all compensation retain by the affiliate from transactions effected for
the Funds during the applicable period. Brokerage and futures transactions
with an affiliate of the Manager are also subject to such fiduciary
standards as may be imposed by applicable law. No such trade have been
made through affiliates to date.
Portfolio Turnover
While the Funds do not intend to trade in securities for short-term
profits, securities may be sold without regard to the amount of time they
have been held by a Fund when warranted by the circumstances. A Fund's
portfolio turnover rate is calculated by dividing the lesser of purchases
or sales of portfolio securities for the particular fiscal year by the
monthly average of the value of the portfolio securities owned by the
Fund, during the particular fiscal year, exclusive of securities whose
maturities at the time of acquisition are one year or less. Securities
with remaining maturities of one year or less at the date of acquisition
are excluded from the calculation. A portfolio turnover rate of 100% would
occur, for example, if all the securities in the Fund's portfolio were
replaced once during a period of one year. A high rate of portfolio
turnover in any year may increase brokerage commissions paid and could
result in high amounts of realized investment gain subject to the payment
of taxes by shareholders. The turnover rate may also be affected by cash
requirements from redemptions and repurchases of fund shares.
During the past two fiscal years, the portfolio turnover rates of the
Funds were as follows:
October 31,
1998 1997
U.S. Growth Fund 00% 144%
Overseas Equity Fund 00% 18%
New Pacific Fund 00% 178%
PURCHASING SHARES
The Distributor serves as the national distributor for each Fund's shares
and has agreed to use its best efforts to sell shares of each Fund. See
the Prospectuses for information on how to invest. Shares of each Fund are
offered on a continuous basis and may be purchased through authorized
investment dealers or directly by contacting Adviser Funds, Inc. or the
Distributor.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of such Classes
generally must be at least $100. The initial and subsequent investment
minimums for Class A Shares will be waived for purchases by officers,
directors and employees of any Delaware Investments 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 Investments Asset Planner service are
subject to a minimum initial investment of $2,000 per Asset Planner
Strategy selected. There are no minimum purchase requirements for the
Institutional 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 $50,000 or more in Class A Shares, and
that Class A Shares are subject to lower annual 12b-1 Plan expenses than
Class B Shares and Class C Shares and generally are not subject to a CDSC.
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 either Fund if in the opinion of management such rejection is in
such Fund's best interest. 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 Investments family. Each Fund reserves the right to reject
purchase orders paid by third-party checks or checks that are not drawn on
a domestic branch of a United States financial institution. If a check
drawn on a foreign financial institution is accepted, you may be subject
to additional bank charges for clearance and currency conversion.
Each Fund also reserves the right, following shareholder notification, to
charge a service fee on non-retirement accounts that, as a result of
redemption, have remained below the minimum stated account balance for a
period of three or more consecutive months. Holders of such accounts may
be notified of their insufficient account balance and advised that they
have until the end of the current calendar quarter to raise their balance
to the stated minimum. If the account has not reached the minimum balance
requirement by that time, the Fund will charge a $9 fee for that quarter
and each subsequent calendar quarter until the account is brought up to
the minimum balance. The service fee will be deducted from the account
during the first week of each calendar quarter for the previous quarter,
and will be used to help defray the cost of maintaining low-balance
accounts. No fees will be charged without proper notice, and no CDSC will
apply to such assessments.
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.
The NASD has adopted amendments to its Conduct Rules, as amended, relating
to investment company sales charges. Adviser Funds, Inc. and the
Distributor intend to operate in compliance with these rules.
Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 5.75%; however, lower front-end sales
charges apply for larger purchases. See the table in the Fund Classes'
Prospectus. Class A Shares are also subject to annual 12b-1 Plan expenses
for the life of the investment.
Class B Shares are purchased at net asset value and are subject to a CDSC
of: (i) 5% if shares are redeemed within one year of purchase; (ii) 4% if
shares are redeemed during the second year of purchase; (iii) 3% if shares
are redeemed during the third or fourth year following purchase; (iv) 2%
if shares are redeemed during the fifth year following purchase; and (v)
1% if shares are redeemed during the sixth year following purchase. Class
B Shares are also subject to annual 12b-1 Plan expenses which are higher
than those to which Class A Shares are subject and are assessed against
Class B Shares for approximately eight years after purchase. See Automatic
Conversion of Class B Shares, below.
Class C Shares are purchased at net asset value and are subject to a CDSC
of 1% if shares are redeemed within 12 months following purchase. Class C
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment which are equal to those to which Class B Shares are subject.
Institutional Class shares are purchased at the net asset value per share
without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses. See Plans Under Rule 12b-1 for the Fund Classes
under Purchasing Shares, and Determining Offering Price and Net Asset
Value in this Part B.
Class A Shares, Class B Shares, Class C Shares and Institutional Class
shares represent a proportionate interest in a Fund's assets and will
receive a proportionate interest in that Fund's income, before
application, as to Class A, Class B and Class C Shares, of any expenses
under that Fund's 12b-1 Plans.
Certificates representing shares purchased are not ordinarily issued
unless, in the case of Class A Shares or Institutional Class shares, a
shareholder submits a specific request. Certificates are not issued in the
case of Class B Shares or Class C Shares or in the case of any retirement
plan account including self-directed IRAs. However, purchases not
involving the issuance of certificates are confirmed to the investor and
credited to the shareholder's account on the books maintained by Delaware
Service Company, Inc. (the "Transfer Agent"). The investor will have the
same rights of ownership with respect to such shares as if certificates
had been issued. An investor that is permitted to obtain a certificate may
receive a certificate representing full share denominations purchased by
sending a letter signed by each owner of the account to the Transfer Agent
requesting the certificate. No charge is assessed by Adviser Funds, Inc.
for any certificate issued. A shareholder may be subject to fees for
replacement of a lost or stolen certificate, under certain conditions,
including the cost of obtaining a bond covering the lost or stolen
certificate. Please contact a Fund for further information. Investors who
hold certificates representing any of their shares may only redeem those
shares by written request. The investor's certificate(s) must accompany
such request.
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A Shares, Class B Shares
and Class C Shares permit investors to choose the method of purchasing
shares that is most suitable for their needs given the amount of their
purchase, the length of time they expect to hold their shares and other
relevant circumstances. Investors should determine whether, given their
particular circumstances, it is more advantageous to purchase Class A
Shares and incur a front-end sales charge and annual 12b-1 Plan expenses
of up to a maximum of 0.30% 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.
The higher 12b-1 Plan expenses on Class B Shares and Class C Shares will
be offset to the extent a return is realized on the additional money
initially invested upon the purchase of such shares. However, there can be
no assurance as to the return, if any, that will be realized on such
additional money. In addition, the effect of any return earned on such
additional money will diminish over time. In comparing Class B Shares to
Class C Shares, investors should also consider the duration of the annual
12b-1 Plan expenses to which each of the classes is subject and the
desirability of an automatic conversion feature, which is available only
for Class B Shares.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Funds, the Distributor and others will be paid, in
the case of Class A Shares, from the proceeds of the front-end sales
charge and 12b-1 Plan fees and, in the case of Class B Shares and Class C
Shares, from the proceeds of the 12b-1 Plan fees and, if applicable, the
CDSC incurred upon redemption. Financial advisers may receive different
compensation for selling Class A Shares, Class B Shares and Class C
Shares. Investors should understand that the purpose and function of the
respective 12b-1 Plans and the CDSCs applicable to Class B Shares and
Class C Shares are the same as those of the 12b-1 Plan and the front-end
sales charge applicable to Class A Shares in that such fees and charges
are used to finance the distribution of the respective Classes. See Plans
Under Rule 12b-1 for the Fund Classes.
Dividends, if any, paid on Class A Shares, Class B Shares and Class C
Shares will be calculated in the same manner, at the same time and on the
same day and will be in the same amount, except that the additional amount
of 12b-1 Plan expenses relating to Class B Shares and Class C Shares will
be borne exclusively by such shares. See Determining Offering Price and
Net Asset Value.
Class A Shares
Purchases of $50,000 or more of Class A Shares at the offering price carry
reduced front-end sales charges as shown in the table in the Fund Classes'
Prospectus, and may include a series of purchases over a 13- month period
under a Letter of Intention signed by the purchaser. See Special Purchase
Features - Class A Shares, below for more information on ways in which
investors can avail themselves of reduced front-end sales charges and
other purchase features.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which
the Distributor may reallow to dealers up to the full amount of the
front-end sales. In addition, certain dealers who enter into an agreement
to provide extra training and information on Delaware Investments products
and services and who increase sales of Delaware Investments funds may
receive an additional commission of up to 0.15% of the offering price in
connection with sales of Class A Shares. Such dealers must meet certain
requirements in terms of organization and distribution capabilities and
their ability to increase sales. The Distributor should be contacted for
further information on these requirements as well as the basis and
circumstances upon which the additional commission will be paid.
Participating dealers may be deemed to have additional responsibilities
under the securities laws. Dealers who receive 90% or more of the sales
charge may be deemed to be underwriters under the 1933 Act.
Dealer's Commission
As described in the Prospectus, for initial purchases of Class A Shares of
$1,000,000 or more, a dealer's commission may be paid by the Distributor
to financial advisers through whom such purchases are effected.
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of
the first purchase. In determining a financial adviser's eligibility for
the dealer's commission, purchases of Class A Shares of other Delaware
Investments funds as to which a Limited CDSC applies (see Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased
at Net Asset Value under Redemption and Exchange) may be aggregated with
those of the Class A Shares of 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 Investments funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or
similar payment has not been previously paid on the assets being
exchanged. The schedule and program for payment of the dealer's commission
are subject to change or termination at any time by the Distributor at its
discretion.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares and Class C Shares are purchased without a front-end sales
charge. Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth above, and Class C Shares
redeemed within 12 months of purchase may be subject to a CDSC of 1%.
CDSCs are charged as a percentage of the dollar amount subject to the
CDSC. The charge will be assessed on an amount equal to the lesser of the
net asset value at the time of purchase of the shares being redeemed or
the net asset value of those shares at the time of redemption. No CDSC
will be imposed on increases in net asset value above the initial purchase
price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestment of dividends or capital gains distributions. For
purposes of this formula, the "net asset value at the time of purchase"
will be the net asset value at purchase of Class B Shares or Class C
Shares of a Fund, even if those shares are later exchanged for shares of
another Delaware Investments fund. In the event of an exchange of the
shares, the "net asset value of such shares at the time of redemption"
will be the net asset value of the shares that were acquired in the
exchange. See Waiver of Contingent Deferred Sales Charge--Class B Shares
and Class C Shares under Redemption and Exchange for the Fund Classes for
a list of the instances in which the CDSC is waived.
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to
the annual 12b-1 Plan expenses of up to 1% of average daily net assets of
those shares. At the end of approximately eight years after purchase, the
investor's Class B Shares will be automatically converted into Class A
Shares of the 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 Taxes.
Investors are reminded that the Class A Shares into which Class B Shares
will convert are subject to ongoing annual 12b-1 Plan expenses of up to a
maximum of 0.35% (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.
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
compensates dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than 5% of the
dollar amount purchased. In addition, from time to time, upon written
notice to all of its dealers, the Distributor may hold special promotions
for specified periods during which the Distributor may pay additional
compensation to dealers or brokers for selling Class B Shares at the time
of purchase. As discussed below, however, Class B Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within six years of purchase,
a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services,
and bearing related expenses, in connection with the sale of Class B
Shares. These payments support the compensation paid to dealers or brokers
for selling Class B Shares. Payments to the Distributor and others under
the Class B 12b-1 Plan may be in an amount equal to no more than 1%
annually. The combination of the CDSC and the proceeds of the 12b-1 Plan
fees makes it possible for a Fund to sell Class B Shares without deducting
a front-end sales charge at the time of purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class B Shares
described in this Part B, even after the exchange. Such CDSC schedule may
be higher than the CDSC schedule for Class B Shares acquired as a result
of the exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the last
business day of the second full week of March, June, September and
December (each, a "Conversion Date"). If the eighth anniversary after a
purchase of Class B Shares falls on a Conversion Date, an investor's Class
B Shares will be converted on that date. If the eighth anniversary occurs
between Conversion Dates, an investor's Class B Shares will be converted
on the next Conversion Date after such anniversary. Consequently, if a
shareholder's eighth anniversary falls on the day after a Conversion Date,
that shareholder will have to hold Class B Shares for as long as three
additional months after the eighth anniversary of purchase before the
shares will automatically convert into Class A Shares.
Class B Shares of a fund acquired through a reinvestment of dividends will
convert to the corresponding Class A Shares of that fund (or, in the case
of Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant
Class) pro-rata with Class B Shares of that fund not acquired through
dividend reinvestment.
All such automatic conversions of Class B Shares will constitute tax-free
exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently
compensates dealers or brokers for selling Class C Shares at the time of
purchase from its own assets in an amount equal to no more than 1% of the
dollar amount purchased. As discussed below, Class C Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within 12 months of purchase,
a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services,
and bearing related expenses, in connection with the sale of Class C
Shares. These payments support the compensation paid to dealers or brokers
for selling Class C Shares. Payments to the Distributor and others under
the Class C 12b-1 Plan may be in an amount equal to no more than 1%
annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class C Shares
as described in this Part B. See Redemption and Exchange.
Plans Under Rule 12b-1 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 Classes 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
Shares and Class C Shares are also used to pay the Distributor for
advancing the commission costs to dealers with respect to the initial sale
of such shares.
In addition, the Funds may make payments out of the assets of Class A
Shares, Class B Shares and Class C Shares directly to other unaffiliated
parties, such as banks, who either aid in the distribution of shares of,
or provide services to, such classes.
The maximum aggregate fee payable by the Funds under the Plans, and the
Funds' Distribution Agreements, is on an annual basis up to 0.35% of
average daily net assets of Class A Shares, and up to 1% (0.25% of which
are service fees to be paid to the Distributor, dealers and others for
providing personal service and/or maintaining shareholder accounts) of
each of Class B Shares' and Class C Shares' average daily net assets for
the year. Adviser Funds, Inc.'s Board of Directors may reduce these
amounts at any time. The Distributor has agreed to waive these
distribution fees to the extent such fees for any day exceeds the net
investment income realized by the Fund Classes for such day.
Effective at the close of business on May 3, 1996, the annual fee payable
on a monthly basis under Class A Shares' Plan is equal to 0.30% of average
daily net assets.
All of the distribution expenses incurred by the Distributor and others,
such as broker/dealers, in excess of the amount paid on behalf of Class A
Shares, Class B Shares and Class C Shares would be borne by such persons
without any payment 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 of each Fund 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 relevant Class' outstanding voting
securities. Any amendment materially increasing the percentage payable
under the Plans must likewise be approved by a majority vote of the
relevant Class' outstanding voting securities, as well as by a majority
vote of those directors who are not "interested persons." With respect to
the Class A Shares' Plan, any material increase in the maximum percentage
payable thereunder must also be approved by a majority of the outstanding
voting securities of the respective Fund's B Class. 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.
For the fiscal year ended October 31, 1998, payments from Class A Shares,
Class B Shares and Class C Shares of U.S. Growth Fund amounted to
$________, $_______ and $_________, respectively. Such amounts were used
for the following purposes:
U.S. Growth U.S. Growth U.S. Growth
Fund Fund Fund
A Class B Class C Class
Advertising
Annual/Semi-Annual Reports
Broker Trails
Broker Sales Charges
Dealer Service Expenses
Interest on Broker Sales Charges
Commissions to Wholesalers
Promotional-Broker Meetings
Promotional-Other
Prospectus Printing
Telephone
Wholesaler Expenses
Other
For the fiscal year ended October 31, 1998, payments from Class A Shares,
Class B Shares and Class C Shares of Overseas Equity Fund amounted to
$______, $______ and $______, respectively. Such amounts were used for the
following purposes:
Overseas Overseas Overseas
Equity Fund Equity Fund Equity Fund
A Class B Class C Class
Advertising
Annual/Semi-Annual Reports
Broker Trails
Broker Sales Charges
Dealer Service Expenses
Interest on Broker Sales Charges
Commissions to Wholesalers
Promotional-Broker Meetings
Promotional-Other
Prospectus Printing
Telephone
Wholesaler Expenses
Other
For the fiscal year ended October 31, 1998, payments from Class A Shares,
Class B Shares and Class C Shares of New Pacfic Fund amounted to $______,
$______ and $______, respectively. Such amounts were used for the
following purposes:
New Pacific New Pacific New Pacific
Fund Fund Fund
A Class B Class C Class
Advertising
Annual/Semi-Annual Reports
Broker Trails
Broker Sales Charges
Dealer Service Expenses
Interest on Broker Sales Charges
Commissions to Wholesalers
Promotional-Broker Meetings
Promotional-Other
Prospectus Printing
Telephone
Wholesaler Expenses
Other
Other Payments to Dealers - Class A Shares, Class B Shares and Class C
Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of 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 Investments family of funds. In some
instances, these incentives or payments may be offered only to certain
dealers who maintain, have sold or may sell certain amounts of shares. The
Distributor may also pay a portion of the expense of preapproved dealer
advertisements promoting the sale of Delaware Investments fund shares.
Subject to pending amendments to the NASD's Conduct Rules, in connection
with the promotion of Delaware Investments fund shares, the Distributor
may, from time to time, pay to participate in dealer-sponsored seminars
and conferences, reimburse dealers for expenses incurred in connection
with preapproved seminars, conferences and advertising and may, from time
to time, pay or allow additional promotional incentives to dealers, which
shall include non-cash concessions, such as certain luxury merchandise or
a trip to or attendance at a business or investment seminar at a luxury
resort, as part of preapproved sales contests. Payment of non-cash
compensation to dealers is currently under review by the NASD and the
Securities and Exchange Commission. It is likely that the NASD's Conduct
Rules will be amended such that the ability of the Distributor to pay
non-cash compensation as described above will be restricted in some
fashion. The Distributor intends to comply with the NASD's Conduct Rules
as they may be amended.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under the
Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment
Privilege.
Purchases of Class A Shares may be made at net asset value by current and
former officers, directors and employees (and members of their families)
of the Manager, any affiliate, any of the funds in the Delaware
Investments family, certain of their agents and registered representatives
and employees of authorized investment dealers and by employee benefit
plans for such entities. Individual purchases, including those in
retirement accounts, must be for accounts in the name of the individual or
a qualifying family member. Class A Shares may also be purchased at net
asset value by current and former officers, directors and employees (and
members of their families) of the Dougherty Financial Group LLC.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value
within 12 months after the registered representative changes employment,
if the purchase is funded by proceeds from an investment where a front-end
sales charge, contingent deferred sales charge or other sales charge has
been assessed. Purchases of Class A Shares may also be made at net asset
value by bank employees who provide services in connection with agreements
between the bank and unaffiliated brokers or dealers concerning sales of
shares of funds in the Delaware Investments family. Officers, directors
and key employees of institutional clients of the 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. Investors
may be charged a fee when effecting transactions in Class A Shares through
a broker or agent that offers these special investment products.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase shares of the Institutional
Class of a Fund; any group retirement plan (excluding defined benefit
pension plans), or such plans of the same employer, for which plan
participant records are maintained on the Retirement Financial Services,
Inc. (formerly known as Delaware Investment & Retirement Services, Inc.)
proprietary record keeping system that (i) has in excess of $500,000 of
plan assets invested in Class A Shares of funds in the Delaware
Investments family and any stable value account available to investment
advisory clients of the Manager or its affiliates; or (ii) is sponsored by
an employer that has at any point after May 1, 1997 had more than 100
employees while such plan has held Class A Shares of a fund in the
Delaware Investments family and such employer has properly represented to,
and received written confirmation back from, Retirement Financial
Services, Inc. in writing that it has the requisite number of employees.
See Group Investment Plans for information regarding the applicability of
the Limited CDSC.
Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase
Institutional Class Shares or purchase interests in a collective trust as
a result of a change in distribution arrangements.
Investors in Delaware Investments Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A
Shares of any of the funds in the Delaware Investments family at net asset
value.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from
such accounts will be made at net asset value. Loan repayments made to a
fund account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset
value.
Adviser Funds, Inc. must be notified in advance that the trade qualifies
for purchase at net asset value.
Allied Plans
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made
available under a joint venture agreement between the Distributor and
another institution through which mutual funds are marketed and which
allow investments in Class A Shares of designated Delaware Investments
funds ("eligible Delaware Investments fund shares"), as well as shares of
designated classes of non-Delaware Investments funds ("eligible
non-Delaware Investments fund shares"). Class B Shares and Class C Shares
are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Investments and eligible non-Delaware
Investments fund shares held by the Allied Plan may be combined with the
dollar amount of new purchases by that Allied Plan to obtain a reduced
front-end sales charge on additional purchases of eligible Delaware
Investments fund shares. See Combined Purchases Privilege, below.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments
fund shares or for eligible non-Delaware Investments fund shares at net
asset value without payment of a front-end sales charge. However,
exchanges of eligible fund shares, both Delaware Investments and
non-Delaware Investments, which were not subject to a front end sales
charge, will be subject to the applicable sales charge if exchanged for
eligible Delaware Investments fund shares to which a sales charge applies.
No sales charge will apply if the eligible fund shares were previously
acquired through the exchange of eligible shares on which a sales charge
was already paid or through the reinvestment of dividends. See Investing
by Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Investments fund shares under an Allied Plan. In determining a financial
adviser's eligibility for a dealer's commission on net asset value
purchases of eligible Delaware Investments fund shares in connection with
Allied Plans, all participant holdings in the Allied Plan will be
aggregated. See Class A Shares.
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 Investments and non-Delaware
Investments fund shares. When eligible Delaware Investments fund shares
are exchanged into eligible non-Delaware Investments fund shares, the
Limited CDSC will be imposed at the time of the exchange, unless the joint
venture agreement specifies that the amount of the Limited CDSC will be
paid by the financial adviser or selling dealer. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange.
Letter of Intention
The reduced front-end sales charges described above with respect to Class
A Shares are also applicable to the aggregate amount of purchases made
within a 13-month period pursuant to a written Letter of Intention
provided by the Distributor and signed by the purchaser, and not legally
binding on the signer or Adviser Funds, Inc. which provides for the
holding in escrow by the Transfer Agent, of 5% of the total amount of
Class A Shares intended to be purchased until such purchase is completed
within the 13-month period. A Letter of Intention may be dated to include
shares purchased up to 90 days prior to the date the Letter is signed. The
13-month period begins on the date of the earliest purchase. If the
intended investment is not completed, except as noted below, the purchaser
will be asked to pay an amount equal to the difference between the
front-end sales charge on Class A Shares purchased at the reduced rate and
the front-end sales charge otherwise applicable to the total shares
purchased. If such payment is not made within 20 days following the
expiration of the 13-month period, the Transfer Agent will surrender an
appropriate number of the escrowed shares for redemption in order to
realize the difference. Such purchasers may include the value (at offering
price at the level designated in their Letter of Intention) of all their
shares of the Funds and of any class of any of the other mutual funds in
Delaware Investments (except shares of any Delaware Investments fund which
do not carry a front-end sales charge, CDSC or Limited CDSC other than
shares of Delaware Group Premium Fund, Inc. beneficially owned in
connection with the ownership of variable insurance products, unless they
were acquired through an exchange from a Delaware Investments fund which
carried a front-end sales charge, CDSC or Limited CDSC) previously
purchased and still held as of the date of their Letter of Intention
toward the completion of such Letter.
Employers offering a Delaware Investments retirement plan may also
complete a Letter of Intention to obtain a reduced front-end sales charge
on investments of Class A Shares made by the plan. The aggregate
investment level of the Letter of Intention will be determined and
accepted by the Transfer Agent at the point of plan establishment. The
level and any reduction in front-end sales charge will be based on actual
plan participation and the projected investments in Delaware Investments
funds that are offered with a front-end sales charge, CDSC or Limited CDSC
for a 13-month period. The Transfer Agent reserves the right to adjust the
signed Letter of Intention based on this acceptance criteria. The 13-month
period will begin on the date this Letter of Intention is accepted by the
Transfer Agent. If actual investments exceed the anticipated level and
equal an amount that would qualify the plan for further discounts, any
front-end sales charges will be automatically adjusted. In the event this
Letter of Intention is not fulfilled within the 13-month period, the plan
level will be adjusted (without completing another Letter of Intention)
and the employer will be billed for the difference in front-end sales
charges due, based on the plan's assets under management at that time.
Employers may also include the value (at offering price at the level
designated in their Letter of Intention) of all their shares intended for
purchase that are offered with a front-end sales charge, CDSC or Limited
CDSC of any class. Class B Shares and Class C Shares of a Fund and other
Delaware Investments funds which offer corresponding classes of shares may
also be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may
combine the total amount of any combination of Class A Shares, Class B
Shares and/or Class C Shares of the Funds, as well as shares of any other
class of any of the other Delaware Investments funds (except shares of any
Delaware Investments fund which do not carry a front-end sales charge,
CDSC or Limited CDSC, other than shares of Delaware Group Premium Fund,
Inc. beneficially owned in connection with the ownership of variable
insurance products, unless they were acquired through an exchange from a
Delaware Investments fund which carried a front-end sales charge, CDSC or
Limited CDSC). In addition, assets held by investment advisory clients of
the Manager or its affiliates in a stable value account may be combined
with other Delaware Investments fund holdings.
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under
21; or a trustee or other fiduciary of trust estates or fiduciary accounts
for the benefit of such family members (including certain employee benefit
programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge with
respect to the Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of a Fund,
as well as shares of any other class of any of the other Delaware
Investments funds which offer such classes (except shares of any Delaware
Investments fund which do not carry a front-end sales charge, CDSC or
Limited CDSC, other than shares of Delaware Group Premium Fund, Inc.
beneficially owned in connection with the ownership of variable insurance
products, unless they were acquired through an exchange from a Delaware
Investments fund which carried a front-end sales charge, CDSC or Limited
CDSC). If, for example, any such purchaser has previously purchased and
still holds Class A Shares and/or shares of any other of the classes
described in the previous sentence with a value of $40,000 and
subsequently purchases $10,000 at offering price of additional shares of
Class A Shares, the charge applicable to the $10,000 purchase would
currently be 4.75%. For the purpose of this calculation, the shares
presently held shall be valued at the public offering price that would
have been in effect were the shares purchased simultaneously with the
current purchase. Investors should refer to the table of sales charges for
Class A Shares to determine the applicability of the Right of Accumulation
to their particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares of a Fund (and of Institutional Classes holding
shares which were acquired through an exchange from one of the other
mutual funds in Delaware Investments offered with a front-end sales
charge) who redeem such shares have one year from the date of redemption
to reinvest all or part of their redemption proceeds in Class A Shares of
that Fund or in Class A Shares of any of the other funds in the Delaware
Investments family, subject to applicable eligibility and minimum purchase
requirements, in states where shares of such other funds may be sold, at
net asset value without the payment of a front-end sales charge. This
privilege does not extend to Class A Shares where the redemption of the
shares triggered the payment of a Limited CDSC. Persons investing
redemption proceeds from direct investments in mutual funds in the
Delaware Investments family offered without a front-end sales charge will
be required to pay the applicable sales charge when purchasing Class A
Shares. The reinvestment privilege does not extend to a redemption of
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 connection with the features described
above.
Group Investment Plans
Group Investment Plans which are not eligible to purchase shares of the
Institutional Classes may also benefit from the reduced front-end sales
charges for investments in Class A Shares set forth in the table on page
00, based on total plan assets. If a company has more than one plan
investing in the Delaware Investments family of funds, then the total
amount invested in all plans would be used in determining the applicable
front-end sales charge reduction upon each purchase, both initial and
subsequent, upon notification to the 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 Investments investment accounts if
they so notify the Fund in which they are investing in connection with
each purchase. See Retirement Plans for the Fund Classes under Investment
Plans for information about Retirement Plans.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from a fund in the Delaware Investments
family. See Contingent Deferred Sales Charge for Certain Redemptions of
Class A Shares Purchased at Net Asset Value under Redemption and Exchange.
Institutional 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, an
affiliate of the Manager, or its other affiliates and their corporate
sponsors, as well as subsidiaries and related employee benefit plans and
rollover individual retirement accounts from such institutional advisory
accounts; (d) a bank, trust company and similar financial institution
investing for its own account or for the account of its trust customers
for whom such financial institution is exercising investment discretion in
purchasing shares of the Class, except where the investment is part of a
program that requires payment of the financial institution of a Rule 12b-1
Plan fee; and (e) registered investment advisers investing on behalf of
clients that consist solely of institutions and high net-worth individuals
having at least $1,000,000 entrusted to the adviser for investment
purposes, but only if the adviser is not affiliated or associated with a
broker or dealer and derives compensation for its services exclusively
from its clients for such advisory services.
Shares of 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.
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 Institutional Classes are reinvested in the accounts of the holders of
such shares (based on the net asset value in effect on the reinvestment
date). A confirmation of each dividend payment from net investment income
will be mailed to shareholders quarterly. A confirmation of any
distributions from realized securities profits will be mailed to
shareholders in the first quarter of the fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either
through their investment dealers or by sending a check or money order to
the specific 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 Class B Shares, Class C Shares and
Institutional Classes 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 Investments Family of Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A
Shares, Class B Shares and Class C Shares may automatically reinvest
dividends and/or distributions in any of the mutual funds in the Delaware
Investments, including the 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.
Subject to the following limitations, dividends and/or distributions from
other funds in Delaware Investments may be invested in shares of the
Funds, provided an account has been established. Dividends from Class A
Shares may not be directed to Class B Shares or Class C Shares. Dividends
from Class B Shares may only be directed to other Class B Shares and
dividends from Class C Shares may only be directed to other Class C
Shares.
Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the same
Delaware Investments fund in which their investments are held: SAR/SEP,
SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457
Deferred Compensation Plans.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Investments family, you may write and authorize an exchange of part or all
of your investment into shares of 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 privileges.
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
Investments family, including other Class A Shares, but may not exchange
their Class A Shares for Class B Shares or Class C Shares of the Fund or
of any other fund in the Delaware Investments family. 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 Investments 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 Investments funds. Class B Shares of a Fund and Class C Shares of
a Fund acquired by exchange will continue to carry the CDSC and, in the
case of Class B Shares, the automatic conversion schedule of the fund from
which the exchange is made. The holding period of Class B Shares of a Fund
acquired by exchange will be added to that of the shares that were
exchanged for purposes of determining the time of the automatic conversion
into Class A Shares of that Fund.
Permissible exchanges into Class A Shares of a Fund will be made without a
front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were
acquired through the reinvestment of dividends). Permissible exchanges
into Class B Shares or Class C Shares of a Fund will be made without the
imposition of a CDSC by the fund from which the exchange is being made at
the time of the exchange.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for either Fund to
accept for investment in Class A Shares, Class B Shares or Class C Shares,
through an agent bank, preauthorized government or private recurring
payments. This method of investment assures the timely credit to the
shareholder's account of payments such as social security, veterans'
pension or compensation benefits, federal salaries, Railroad Retirement
benefits, private payroll checks, dividends, and disability or pension
fund benefits. It also eliminates lost, stolen and delayed checks.
Automatic Investing Plan--Shareholders of Class A Shares, Class B Shares
and Class C Shares may make automatic investments by authorizing, in
advance, monthly payments directly from their checking account for deposit
into their Fund account. This type of investment will be handled in either
of the following ways. (1) If the shareholder's bank is a member of the
National Automated Clearing House Association ("NACHA"), the amount of the
investment will be electronically deducted from his or her account by
Electronic Fund Transfer ("EFT"). The shareholder's checking account will
reflect a debit each month at a specified date although no check is
required to initiate the transaction. (2) If the shareholder's bank is not
a member of NACHA, deductions will be made by preauthorized checks, known
as Depository Transfer Checks. Should the shareholder's bank become a
member of NACHA in the future, his or her investments would be handled
electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money
Purchase Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or
457 Deferred Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent
investments under such plans must be for $25 or more. An investor wishing
to take advantage of either service must complete an authorization form.
Either service can be discontinued by the shareholder at any time without
penalty by giving written notice.
Payments to a Fund from the federal government or its agencies on behalf
of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any
such payments are subject to reclamation by the federal government or its
agencies. Similarly, under certain circumstances, investments from private
sources may be subject to reclamation by the transmitting bank. In the
event of a reclamation, a Fund may liquidate sufficient shares from a
shareholder's account to reimburse the government or the private source.
In the event there are insufficient shares in the shareholder's account,
the shareholder is expected to reimburse the Fund.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer, to
make investments directly to their Fund accounts. Either 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.
MoneyLine (SM) On Demand
You or your investment dealer may request purchases of Fund shares by
phone using MoneyLine (SM) On Demand. When you authorize a Fund to accept
such requests from you or your investment dealer, funds will be withdrawn
from (for share purchases) your predesignated bank account. Your request
will be processed the same day if you call prior to 4 p.m., Eastern time.
There is a $25 minimum and $50,000 maximum limit for MoneyLine (SM) On
Demand transactions.
It may take up to four business days for the transactions to be completed.
You can initiate this service by completing an Account Services form. If
your name and address are not identical to the name and address on your
Fund account, you must have your signature guaranteed. The Funds do not
charge a fee for this service; however, your bank may charge a fee.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other
mutual funds in the Delaware Investments family. Shareholders of the Fund
Classes may elect to invest in one or more of the other mutual funds in
Delaware Investments family through the Wealth Builder Option. If in
connection with the election of the Wealth Builder Option, you wish to
open a new account to receive the automatic investment, such new account
must meet the minimum initial purchase requirements described in the
prospectus of the fund that you select. All investments under this option
are exchanges and are therefore subject to the same conditions and
limitations as other exchanges noted above.
Under this automatic exchange program, shareholders can authorize regular
monthly investments (minimum of $100 per fund) to be liquidated from their
account and invested automatically into other mutual funds in the Delaware
Investments family, subject to the conditions and limitations set forth in
the Fund Classes' Prospectus. The investment will be made on the 20th day
of each month (or, if the fund selected is not open that day, the next
business day) at the public offering price or net asset value, as
applicable, of the fund selected on the date of investment. No investment
will be made for any month if the value of the shareholder's account is
less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the
fund into which investments are made could fluctuate. Since this program
involves continuous investment regardless of such fluctuating value,
investors selecting this option should consider their financial ability to
continue to participate in the program through periods of low fund share
prices. This program involves automatic exchanges between two or more fund
accounts and is treated as a purchase of shares of the fund into which
investments are made through the program. See Exchange Privilege for a
brief summary of the tax consequences of exchanges. Shareholders can
terminate their participation in Wealth Builder at any time by giving
written notice to the fund from which exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money
Purchase Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or
457 Deferred Compensation Plans. This option also is not available to
shareholders of the Institutional Classes.
Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete an Asset Planner Account
Registration Form, which is available only from a financial adviser or
investment dealer. Effective September 1, 1997, the Asset Planner Service
is only available to financial advisers or investment dealers who have
previously used this service. The Asset Planner service offers a choice of
four predesigned asset allocation strategies (each with a different
risk/reward profile) in predetermined percentages in Delaware Investments
funds. With the help of a financial adviser, you may also design a
customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and
their percentage allocation in the selected Strategy. Exchanges from
existing Delaware Investments accounts into the Asset Planner service may
be made at net asset value under the circumstances described under
Investing by Exchange. Also see Buying Class A Shares at Net Asset Value.
The minimum initial investment per Strategy is $2,000; subsequent
investments must be at least $100. Individual fund minimums do not apply
to investments made using the Asset Planner service. Class A, Class B and
Class C Shares are available through the Asset Planner service. Generally,
only shares within the same class may be used within the same Strategy.
However, Class A Shares of a Fund and of other funds in the Delaware
Investments family may be used in the same Strategy with consultant class
shares that are offered by certain other Delaware Investments funds.
An annual maintenance fee, currently $35 per Strategy, is due at the time
of initial investment and by September 30 of each subsequent year. The
fee, payable to Delaware Service Company, Inc. to defray extra costs
associated with administering the Asset Planner service, will be deducted
automatically from one of the funds within your Asset Planner account if
not paid by September 30. However, effective November 1, 1996, the annual
maintenance fee is waived until further notice. Investors who utilize the
Asset Planner for an IRA will continue to pay an annual IRA fee of $15 per
Social Security number. Investors will receive a customized quarterly
Strategy Report summarizing all Asset Planner investment performance and
account activity during the prior period. Confirmation statements will be
sent following all transactions other than those involving a reinvestment
of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two
years.
Retirement Plans for the Fund Classes
An investment in the Funds may be suitable for tax-deferred retirement
plans. Delaware Investments offers a full spectrum of retirement plans,
including the 401(k) Defined Contribution Plan, Individual Retirement
Account ("IRA") and the new Roth IRA and Education IRA.
Among the retirement plans that Delaware Investments offers, Class B
Shares are available only by Individual Retirement Accounts, SIMPLE IRAs,
Roth IRAs, Education IRAs, Simplified Employee Pension Plans, Salary
Reduction Simplified Employee Pension Plans, and 403(b)(7) and 457
Deferred Compensation Plans. The CDSC may be waived on certain redemptions
of Class B Shares and Class C Shares. See Waiver of Contingent Deferred
Sales Charge - Class B Shares and Class C Shares under Redemption and
Exchange 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 Class
shares. See Institutional Classes, above. For additional information on
any of the plans and Delaware's retirement services, call the Shareholder
Service Center telephone number.
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a
qualified retirement plan consultant. For further details, including
applications for any of these plans, contact your investment dealer or the
Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the special
application forms required for the Plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals, partnerships,
corporations and other eligible forms of organizations. These plans can be
maintained as Section 401(k), profit sharing or money purchase pension
plans. Contributions may be invested only in Class A Shares and Class C
Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
and make contributions which may be tax-deductible, even if the individual
is already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below,
earnings will be tax-deferred. In addition, an individual may make
contributions on behalf of a spouse who has no compensation for the year;
however, participation may be restricted based on certain income limits.
IRA Disclosures
The Taxpayer Relief Act of 1997 provides new opportunities for investors.
Individuals have five types of tax-favored IRA accounts that can be
utilized depending on the individual's circumstances. A new Roth IRA and
Education IRA are available in addition to the existing deductible IRA and
non-deductible IRA.
Deductible and Non-deductible IRAs
An individual can contribute up to $2,000 in his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income ("AGI") and whether the taxpayer is an active
participant in an employer sponsored retirement plan. Even if a taxpayer
is an active participant in an employer sponsored retirement plan, the
full $2,000 is still available if the taxpayer's AGI is below $30,000
($50,000 for taxpayers filing joint returns) for years beginning after
December 31, 1997. A partial deduction is allowed for married couples with
income between $50,000 and $60,000, and for single individuals with
incomes between $30,000 and $40,000. These income phase-out limits reach
$80,000-$100,000 in 2007 for joint filers and $50,000-$60,000 in 2005 for
single filers. No deductions are available for contributions to IRAs by
taxpayers whose AGI after IRA deductions exceeds the maximum income limit
established for each year and who are active participants in an employer
sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA contributions still can
make non-deductible IRA contributions of as much as $2,000 for each
working spouse and defer taxes on interest or other earnings from the
IRAs.
Under the new law, a married individual is not considered an active
participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant if the couple's combined AGI
is below $150,000. The maximum deductible IRA contribution for a married
individual who is not an active participant, but whose spouse is, is
phased out for combined AGI between $150,000 and $160,000.
Conduit (Rollover) IRAs
Certain individuals who have received or are about to receive eligible
rollover distributions from an employer-sponsored retirement plan or
another IRA may rollover the distribution tax-free to a Conduit IRA. The
rollover of the eligible distribution must be completed by the 60th day
after receipt of the distribution; however, if the rollover is in the form
of a direct trustee-to-trustee transfer without going through the
distributee's hand, the 60-day limit does not apply.
A distribution qualifies as an "eligible rollover distribution" if it is
made from a qualified retirement plan, a 403(b) plan or another IRA and
does not constitute one of the following:
(1) Substantially equal periodic payments over the employee's life or life
expectancy or the joint lives or life expectancies of the employee and
his/her designated beneficiary;
(2) Substantially equal installment payments for a period certain of 10 or
more years;
(3) A distribution, all of which represents a required minimum
distribution after attaining age 70 1/2;
(4) A distribution due to a Qualified Domestic Relations Order to an
alternate payee who is not the spouse (or former spouse) of the employee;
and
(5) A distribution of after-tax contributions which is not includable in
income.
Roth IRAs
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $2,000 per year can be made to a new Roth IRA. As a
result of the Internal Revenue Service Restructuring and Reform Act of
1998 (the "1998 Act"), the $2,000 annual limit will not be reduced by any
contributions to a deductible or nondeductible IRA for the same year. The
maximum contribution that can be made to a Roth IRA is phased out for
single filers with AGI between $95,000 and $110,000, and for couples
filing jointly with AGI between $150,000 and $160,000. Qualified
distributions from a Roth IRA would be exempt from federal taxes.
Qualified distributions are distributions (1) made after the five-taxable
year period beginning with the first taxable year for which a contribution
was made to a Roth IRA and (2) that are (a) made on or after the date on
which the individual attains age 59 1/2, (b) made to a beneficiary on or
after the death of the individual, (c) attributed to the individual being
disabled, or (d) for a qualified special purpose (e.g., first time
homebuyer expenses).
Distributions that are not qualified distributions would always be
tax-free if the taxpayer is withdrawing contributions, not accumulated
earnings.
Taxpayers with AGI of $100,000 or less are eligible to convert an existing
IRA (deductible, nondeductible and conduit) to a Roth IRA. Earnings and
contributions from a deductible IRA are subject to a tax upon conversion;
however, no 10% excise tax for early withdrawal would apply. If the
conversion is done prior to January 1, 1999, then the income from the
conversion can be included in income ratably over a four-year period
beginning with the year of conversion.
Education IRAs
For taxable years beginning after December 31, 1997, an Education IRA has
been created exclusively for the purpose of paying qualified higher
education expenses. Taxpayers can make non-deductible contributions up to
$500 per year per beneficiary. The $500 annual limit is in addition to the
$2,000 annual contribution limit applicable to IRAs and Roth IRAs.
Eligible contributions must be in cash and made prior to the date the
beneficiary reaches age 18. Similar to the Roth IRA, earnings would
accumulate tax-free. There is no requirement that the contributor be
related to the beneficiary, and there is no limit on the number of
beneficiaries for whom one contributor can establish Education IRAs. In
addition, multiple Education IRAs can be created for the same
beneficiaries, however, the contribution limit of all contributions for a
single beneficiary cannot exceed $500 annually.
This $500 annual contribution limit for Education IRAs is phased out
ratably for single contributors with modified AGI between $95,000 and
$110,000, and for couples filing jointly with modified AGI of between
$150,000 and $160,000. Individuals with modified AGI above the phase-out
range are not allowed to make contributions to an Education IRA
established on behalf of any other individual.
Distributions from an Education IRA are excludable from gross income to
the extent that the distribution does not exceed qualified higher
education expenses incurred by the beneficiary during the year the
distribution is made regardless of whether the beneficiary is enrolled at
an eligible educational institution on a full-time, half-time, or less
than half-time basis.
Any balance remaining in an Education IRA at the time a beneficiary
becomes 30 years old must be distributed, and the earnings portion of such
a distribution will be includible in gross income of the beneficiary and
subject to an additional 10% penalty tax if the distribution is not for
qualified higher educations expenses. Tax-free (and penalty-free)
transfers and rollovers of account balances from one Education IRA
benefiting one beneficiary to another Education IRA benefiting a different
beneficiary (as well as redesignations of the named beneficiary) is
permitted, provided that the new beneficiary is a member of the family of
the old beneficiary and that the transfer or rollover is made before the
time the old beneficiary reaches age 30 and the new beneficiary reaches
age 18.
A company or association may establish a Group IRA or Group Roth IRA for
employees or members who want to purchase shares of the Fund.
Investments generally must be held in the IRA until age 59 1/2 in order to
avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in
which the participant reaches age 70 1/2. Individuals are entitled to
revoke the account, for any reason and without penalty, by mailing written
notice of revocation to Delaware Management Trust Company within seven
days after the receipt of the IRA Disclosure Statement or within seven
days after the establishment of the IRA, except, if the IRA is established
more than seven days after receipt of the IRA Disclosure Statement, the
account may not be revoked. Distributions from the account (except for the
pro-rata portion of any nondeductible contributions) are fully taxable as
ordinary income in the year received. Excess contributions removed after
the tax filing deadline, plus extensions, for the year in which the excess
contributions were made are subject to a 6% excise tax on the amount of
excess. Premature distributions (distributions made before age 59 1/2,
except for death, disability and certain other limited circumstances) will
be subject to a 10% excise tax on the amount prematurely distributed, in
addition to the income tax resulting from the distribution. For
information concerning the applicability of a CDSC upon redemption of
Class B Shares and Class C Shares, see Contingent Deferred Sales Charge -
Class B Shares and Class C Shares.
Effective January 1, 1997, the 10% premature distribution penalty will not
apply to distributions from an IRA that are used to pay medical expenses
in excess of 7.5% of adjusted gross income or to pay health insurance
premiums by an individual who has received unemployment compensation for
12 consecutive weeks. In addition, effective January 1, 1998, the new law
allows for premature distribution without a 10% penalty if (i) the amounts
are used to pay qualified higher education expenses (including graduate
level courses) of the taxpayer, the taxpayer's spouse or any child or
grandchild of the taxpayer or the taxpayer's spouse, or (ii) used to pay
acquisition costs of a principle residence for the purchase of a
first-time home by the taxpayer, taxpayer's spouse or any child or
grandchild of the taxpayer or the taxpayer's spouse. A qualified
first-time homebuyer is someone who has had no ownership interest in a
residence during the past two years. The aggregate amount of distribution
for first-time home purchases cannot exceed a lifetime cap of $10,000.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31, 1996,
existing plans may continue to be maintained by employers having 25 or
fewer employees. An employer may elect to make additional contributions to
such existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified plans
based on salary deferral contributions. Effective January 1, 1997,
non-governmental tax-exempt organizations may establish 401(k) plans. Plan
documents are available to enable employers to establish a plan. An
employer may also elect to make profit sharing contributions and/or
matching contributions with investments in only Class A Shares and Class C
Shares or certain other funds in the Delaware Investments family.
Purchases under the Plan may be combined for purposes of computing the
reduced front-end sales charge applicable to Class A Shares as set forth
in the table the Prospectus for the Fund Classes.
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial
account to fund deferred compensation arrangements for their employees. A
custodial account agreement is available for those employers who wish to
purchase shares of any of the Classes in conjunction with such an
arrangement. Purchases under the Plan may be combined for purposes of
computing the reduced front-end sales charge applicable to Class A Shares
as set forth in the table the Prospectus for the Fund Classes.
Deferred Compensation Plan for State and Local Government Employees
("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation
plan for their employees who wish to participate. This enables employees
to defer a portion of their salaries and any federal (and possibly state)
taxes thereon. Such plans may invest in shares of the Fund. Although
investors may use their own plan, there is available a Delaware
Investments 457 Deferred Compensation Plan. Interested investors should
contact the Distributor or their investment dealers to obtain further
information. Purchases under the Plan may be combined for purposes of
computing the reduced front-end sales charge applicable to Class A Shares
as set forth in the table in the Prospectus for the Fund Classes.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan but
is easier to administer than a typical 401(k) Plan. It requires employers
to make contributions on behalf of their employees and also has a salary
deferral feature that permits employees to defer a portion of their salary
into the plan on a pre-tax basis. A SIMPLE IRA is available only to plan
sponsors with 100 or fewer employees.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available only
to plan sponsors 100 or fewer employees and, in exchange for mandatory
plan sponsor contributions, discrimination testing is no longer required.
Class B Shares are not available for purchase by such plans.
DETERMINING OFFERING PRICE AND NET ASSET VALUE
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 the Institutional Classes are effected
at the net asset value per share next calculated after receipt of the
order by the Fund in which shares are being purchased or its agent. See
Distribution and Service under Investment Management Agreement. 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 days when the
following holidays are observed: New Year's Day, Martin Luther King, Jr.'s
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas. When the New York Stock Exchange is
closed, 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.
Each Fund's net asset value per share is computed by adding the value of
all securities and other assets in the portfolio of the Funds, deducting
any liabilities and dividing by the number of shares outstanding. Expenses
and income are accrued daily. U.S. government and other debt securities
are valued at the mean between the last reported bid and asked prices.
Options are valued at the last reported sales price or, if no sales are
reported, at the mean between the last reported bid and asked prices.
Short-term investments having remaining maturities of 60 days or less are
valued at amortized cost. Foreign securities and the prices of foreign
securities denominated in foreign currencies are translated to U.S.
dollars at the mean between the bid and offer quotations of such
currencies based on rates in effect as of the close of the London Stock
Exchange. 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 Shares, Class B Shares 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.
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
Delaware Investments will best meet your changing objectives, and the
consequences of any exchange transaction. You may also call the Delaware
Investments directly for fund information.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after a Fund receives your request in good
order, subject, in the case of a redemption, to any applicable CDSC or
Limited CDSC. For example, redemption or exchange requests received in
good order after the time the offering price and net asset value of shares
are determined will be processed on the next business day. See Purchase
Price and Effective Date under How to Buy Shares. A shareholder submitting
a redemption request may indicate that he or she wishes to receive
redemption proceeds of a specific dollar amount. In the case of such a
request, and in the case of certain redemptions from retirement plan
accounts, a Fund will redeem the number of shares necessary to deduct the
applicable CDSC in the case of Class B Shares and Class C Shares, and, if
applicable, the Limited CDSC in the case of Class A Shares and tender to
the shareholder the requested amount, assuming the shareholder holds
enough shares in his or her account for the redemption to be processed in
this manner. Otherwise, the amount tendered to the shareholder upon
redemption will be reduced by the amount of the applicable CDSC or Limited
CDSC. Redemption proceeds will be distributed promptly, as described
below, but not later than seven days after receipt of a redemption
request.
Except as noted below, for a redemption request to be in "good order," you
must provide your account number, account registration, and the total
number of shares or dollar amount of the transaction. For exchange
requests, you must also provide the name of the fund in which you want to
invest the proceeds. Exchange instructions and redemption requests must be
signed by the record owner(s) exactly as the shares are registered. You
may request a redemption or an exchange by calling the Shareholder Service
Center at 800-523-1918. Each Fund may suspend, terminate, or amend the
terms of the exchange privilege upon 60 days' written notice to
shareholders.
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, its agent, or certain authorized persons, subject to
applicable CDSC or Limited CDSC. This is computed and effective at the
time the offering price and net asset value are determined. See
Determining Offering Price and Net Asset Value. The 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.
Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption
request in good order by the Fund or certain other authorized persons (see
Distribution and Service under Investment Management Agreements);
provided, however, that each commitment to mail or wire redemption
proceeds by a certain time, as described below, is modified by the
qualifications described in the next paragraph.
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.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other
reason, the Fund involved will automatically redeem from the shareholder's
account the shares purchased by the check plus any dividends earned
thereon. Shareholders may be responsible for any losses to a Fund or to
the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a
result of which disposal by a Fund of securities owned by it is not
reasonably practical, or it is not reasonably practical for a Fund fairly
to value its assets, or in the event that the SEC has provided for such
suspension for the protection of shareholders, a Fund may postpone payment
or suspend the right of redemption or repurchase. In such case, the
shareholder may withdraw the request for redemption or leave it standing
as a request for redemption at the net asset value next determined after
the suspension has been terminated.
Payment for shares redeemed or repurchased may be made either in cash or
kind, or partly in cash and partly in kind. Any portfolio securities paid
or distributed in kind would be valued as described in Determining
Offering Price and Net Asset Value. Subsequent sale by an investor
receiving a distribution in kind could result in the payment of brokerage
commissions. However, Adviser Funds, Inc. has elected to be governed by
Rule 18f-1 under the 1940 Act pursuant to which each Fund is obligated to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the net
asset value of such Fund during any 90-day period for any one shareholder.
The value of a Fund's investments is subject to changing market prices.
Thus, a shareholder reselling shares to a Fund may sustain either a gain
or loss, depending upon the price paid and the price received for such
shares.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value, below. Class B Shares are subject to a CDSC of: (i) 5 % if shares
are redeemed within one year after purchase; (ii) 4% if shares are
redeemed during the second year of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if
shares are redeemed during the fifth year following purchase; and (v) 1%
if shares are redeemed during the sixth year following purchase. Class C
Shares are subject to a CDSC of 1% if shares are redeemed within 12 months
following purchase. See Contingent Deferred Sales Charge - Class B Shares
and Class C Shares under Purchasing Shares. Except for the applicable CDSC
or Limited CDSC and, with respect to the expedited payment by wire
described below for which, in the case of the 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.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Investments
(in each case, "New Shares") in a permitted exchange, will not be subject
to a CDSC that might otherwise be due upon redemption of the Original
Shares. However, such shareholders will continue to be subject to the CDSC
and, in the case of Class B Shares, the automatic conversion schedule of
the Original Shares as described in this Part B and any CDSC assessed upon
redemption will be charged by the fund from which the Original Shares were
exchanged. In an exchange of Class B Shares from 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.
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. A
signature guarantee can be obtained from a commercial bank, a trust
company or a member of a Securities Transfer Association Medallion Program
("STAMP"). Each Fund reserves the right to reject a signature guarantee
supplied by an eligible institution based on its creditworthiness. The
Funds may require further documentation from corporations, executors,
retirement plans, administrators, trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificate(s) must accompany your request and also be in good order.
Certificates are issued for Class A Shares only if a shareholder submits a
specific request. Certificates are not issued for Class B Shares or Class
C Shares.
Written Exchange
You may also write to each Fund (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your shares into another
mutual fund in Delaware Investments, subject to the same conditions and
limitations as other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without
charge) for you. If you choose to have your Class A Shares in certificate
form, you may redeem or exchange only by written request and you must
return your certificates.
The Telephone Redemption - Check to Your Address of Record service and the
Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the 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.
Telephone instructions received by the Fund Classes are generally tape
recorded, and a written confirmation will be provided for all purchase,
exchange and redemption transactions initiated by telephone. By exchanging
shares by telephone, you are acknowledging prior receipt of a prospectus
for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption
proceeds of $50,000 or less mailed to you at your address of record.
Checks will be payable to the shareholder(s) of record. Payment is
normally mailed the next business day after receipt of the redemption
request. This service is only available to individual, joint and
individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If
you request a wire, your funds will normally be sent the next business
day. If the proceeds are wired to the shareholder's account at a bank
which is not a member of the Federal Reserve System, there could be a
delay in the crediting of the funds to the shareholder's bank account.
First Union National Bank's fee (currently $7.50) will be deducted from
Fund Class redemption proceeds. If you ask for a check, it will normally
be mailed the next business day after receipt of your redemption request
to your predesignated bank account. There are no separate fees for this
redemption method, but the mail time may delay getting funds into your
bank account. Simply call the Shareholder Service Center prior to the time
the offering price and net asset value are determined, as noted above.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to adjust
your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange
your shares into other funds in Delaware Investments under the same
registration, subject to the same conditions and limitations as other
exchanges noted above. As with the written exchange service, telephone
exchanges are subject to the requirements of each fund, as described
above. Telephone exchanges may be subject to limitations as to amounts or
frequency.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on
short-term swings in the securities market through frequent transactions
in and out of the funds in the Delaware Investments family. Telephone
exchanges may be subject to limitations as to amounts or frequency. The
Transfer Agent and each Fund reserve the right to record exchange
instructions received by telephone and to reject exchange requests at any
time in the future.
MoneyLine (SM) On Demand
You or your investment dealer may request redemptions of Fund shares by
phone using MoneyLine (SM) On Demand. When you authorize a Fund to accept
such requests from you or your investment dealer, funds will be deposited
to (for share redemptions) your predesignated bank account. Your request
will be processed the same day if you call prior to 4 p.m., Eastern time.
There is a $25 minimum and $50,000 maximum limit for MoneyLine (SM) On
Demand transactions. See MoneyLine (SM) On Demand under Investment Plans.
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 Investments funds from Timing Firms. A Fund
reserves the right to temporarily or permanently terminate the exchange
privilege or reject any specific purchase order for any person whose
transactions seem to follow a timing pattern who: (i) makes an exchange
request out of the Fund within two weeks of an earlier exchange request
out of the Fund, or (ii) makes more than two exchanges out of the Fund per
calendar quarter, or (iii) exchanges shares equal in value to at least $5
million, or more than 1/4 of 1% of the 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 Investments funds:
(1) Decatur Income Fund, (2) Decatur Total Return Fund, (3) Delaware
Balanced Fund, (4) Limited-Term Government Fund, (5) USA Fund, (6)
Delaware Cash Reserve, (7) Delchester Fund and (8) Tax-Free Pennsylvania
Fund. No other Delaware Investments funds are available for timed
exchanges. Assets redeemed or exchanged out of Timing Accounts in Delaware
Investments funds not listed above may not be reinvested back into that
Timing Account. Each Fund reserves the right to apply these same
restrictions to the account(s) of any person whose transactions seem to
follow a time pattern (as described above).
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, the Fund would be unable to invest effectively in
accordance with its investment objectives and policies, or would otherwise
potentially be adversely affected. A shareholder's purchase exchanges may
be restricted or refused if 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.
Systematic Withdrawal Plans
Shareholders of Class A Shares, Class B Shares and Class C Shares who own
or purchase $5,000 or more of shares at the offering price, or net asset
value, as applicable, for which certificates have not been issued may
establish a Systematic Withdrawal Plan for monthly withdrawals of $25 or
more, or quarterly withdrawals of $75 or more, although the Funds do not
recommend any specific amount of withdrawal. This is particularly useful
to shareholders living on fixed incomes, since it can provide them with a
stable supplemental amount. This $5,000 minimum does not apply for 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.
Shareholders should not purchase additional shares while participating in
a Systematic Withdrawal Plan.
The sale of shares for withdrawal payments constitutes a taxable event and
a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on
the holding period for the specific shares liquidated. Premature
withdrawals from retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of
Class A Shares through a periodic investment program in a fund managed by
the 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
Investments funds which do not carry a sales charge. Redemptions of Class
A Shares pursuant to a Systematic Withdrawal Plan may be subject to a
Limited CDSC if the purchase was made at net asset value and a dealer's
commission has been paid on that purchase. The applicable CDSC for Class B
Shares and Class C Shares redeemed via a Systematic Withdrawal Plan will
be waived if, on the date that the Plan is established, the annual amount
selected to be withdrawn is less than 12% of the account balance. If the
annual amount selected to be withdrawn exceeds 12% of the account balance
on the date that the Systematic Withdrawal Plan is established, all
redemptions under the Plan will be subject to the applicable CDSC. Whether
a waiver of the CDSC is available or not, the first shares to be redeemed
for each Systematic Withdrawal Plan payment will be those not subject to a
CDSC because they have either satisfied the required holding period or
were acquired through the reinvestment of distributions. The 12% annual
limit will be reset on the date that any Systematic Withdrawal Plan is
modified (for example, a change in the amount selected to be withdrawn or
the frequency or date of withdrawals), based on the balance in the account
on that date. See Waiver of Contingent Deferred Sales Charge - Class B
Shares and Class C Shares, below.
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.
Systematic Withdrawal Plan payments are normally made by check. In the
alternative, you may elect to have your payments transferred from your
Fund account to your predesignated bank account through the MoneyLine (SM)
Direct Deposit Service. Your funds will normally be credited to your bank
account up to four business days after the payment date. There are no
separate fees for this redemption method. It may take up to four business
days for the transactions to be completed. You can initiate this service
by completing an Account Services form. If your name and address are not
identical to the name and address on your Fund account, you must have your
signature guaranteed. The Funds do not charge a fee for any this service;
however, your bank may charge a fee. This service is not available for
retirement plans.
The Systematic Withdrawal Plan is not available for Institutional Classes.
Shareholders should consult with their financial advisers to determine
whether a Systematic Withdrawal Plan would be suitable for them.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
For purchases of $1,000,000 or more made on or after July 1, 1998, a
Limited CDSC will be imposed on certain redemptions of Class A Shares (or
shares into which such Class A Shares are exchanged) according to the
following schedule: (1) 1.00% if shares are redeemed during the first year
after the purchase; and (2) 0.50% if such shares are redeemed during the
second year after the purchase, if such purchases were made at net asset
value and triggered the payment by the Distributor of the dealer's
commission described above.
The Limited CDSC will be paid to the Distributor and will be assessed on
an amount equal to the lesser of : (1) the net asset value at the time of
purchase of the Class A Shares being redeemed or (2) the net asset value
of such Class A Shares at the time of redemption. For purposes of this
formula, the "net asset value at the time of purchase" will be the net
asset value at purchase of the Class A Shares even if those shares are
later exchanged for shares of another Delaware Investments fund and, in
the event of an exchange of Class A Shares, the "net asset value of such
shares at the time of redemption" will be the net asset value of the
shares acquired in the exchange.
Redemptions of such Class A Shares held for more than two years will not
be subjected to the Limited CDSC and an exchange of such Class A Shares
into another Delaware Investments fund will not trigger the imposition of
the Limited CDSC at the time of such exchange. The period a shareholder
owns shares into which Class A Shares are exchanged will count towards
satisfying the two-year holding period. The Limited CDSC is assessed if
such two year period is not satisfied irrespective of whether the
redemption triggering its payment is of Class A Shares of a Fund or Class
A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed that
shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will
not be imposed upon shares representing reinvested dividends or capital
gains distributions, or upon amounts representing share appreciation. All
investments made during a calendar month, regardless of what day of the
month the investment occurred, will age one month on the last day of that
month and each subsequent month.
Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that
result from a Fund's right to liquidate a shareholder's account if the
aggregate net asset value of the shares held in the account is less than
the then-effective minimum account size; (ii) distributions to
participants from a retirement plan qualified under section 401(a) or
401(k) of the Internal Revenue Code of 1986, as amended (the "Code"), or
due to death of a participant in such a plan; (iii) redemptions pursuant
to the direction of a participant or beneficiary of a retirement plan
qualified under section 401(a) or 401(k) of the Code with respect to that
retirement plan; (iv) periodic distributions from an IRA, SIMPLE IRA, or
403(b)(7) or 457 Deferred Compensation Plan due to death, disability, or
attainment of age 59 1/2, and IRA distributions qualifying under Section
72(t) of the Internal Revenue Code; (v) returns of excess contributions to
an IRA; (vi) distributions by other employee benefit plans to pay
benefits; (vii) distributions described in (ii), (iv), and (vi) above
pursuant to a systematic withdrawal plan; and (viii) redemptions by the
classes of shareholders who are permitted to purchase shares at net asset
value, regardless of the size of the purchase (see Buying Class A Shares
at Net Asset Value under Purchasing Shares).
Waiver of Contingent Deferred Sales Charge - Class B Shares and Class C
Shares
The CDSC is waived on certain redemptions of Class B Shares in connection
with the following redemptions: (i) redemptions that result from 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,
SIMPLE IRA, SEP/IRA, or 403(b)(7) or 457 Deferred Compensation Plan; (iii)
periodic distributions from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, or
403(b)(7) or 457 Deferred Compensation Plan due to death, disability or
attainment of age 59 1/2, and IRA distributions qualifying under Section
72(t) of the Internal Revenue Code; and (iv) distributions from an account
if the redemption results from the death of all registered owners of the
account (in the case of accounts established under the Uniform Gifts to
Minors or Uniform Transfers to Minors Acts or trust accounts, the waiver
applies upon the death of all beneficial owners) or a total and permanent
disability (as defined in Section 72 of the Code) of all registered owners
occurring after the purchase of the shares being redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from 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, SIMPLE IRA, 403(b)(7) or
457 Deferred Compensation Plan, Profit Sharing Plan, Money Purchase
Pension Plan, or 401(k) Defined Contribution plan; (iii) periodic
distributions from a 403(b)(7) or 457 Deferred Compensation Plan upon
attainment of age 59 1/2, Profit Sharing Plan, Money Purchase Plan, 401(k)
Defined Contribution Plan upon attainment of age 70 1/2, and IRA
distributions qualifying under Section 72(t) of the Internal Revenue Code;
(iv) distributions from a 403(b)(7) or 457 Deferred Compensation Plan,
Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or a
401(k) Defined Contribution Plan upon attainment of normal retirement age
under the plan or upon separation from service; (vi) periodic
distributions from an IRA or SIMPLE IRA on or after attainment of age 59
1/2; and (vii) distributions from an account if the redemption results
from the death of all registered owners of the account (in the case of
accounts established under the Uniform Gifts to Minors or Uniform
Transfers to Minors Acts or trust accounts, the waiver applies upon the
death of all beneficial owners) or a total and permanent disability (as
defined in Section 72 of the Code) of all registered owners occurring
after the purchase of the shares being redeemed.
In addition, the CDSC will be waived on Class B Shares and Class C Shares
redeemed in accordance with a Systematic Withdrawal Plan if the annual
amount selected to be withdrawn under the Plan does not exceed 12% of the
value of the account on the date that the Systematic Withdrawal Plan was
established or modified.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following supplements the information in each Prospectus under the
heading Dividends, Distributions and Taxes.
Under the 1997 Act, as revised by the 1998 Act and the Omnibus
Consolidated and Emergency Supplemental Appropriations Act, a Fund is
required to track its sales of portfolio securities and to report its
capital gain distributions to you according to the following categories of
holding periods:
"Mid-term capital gains" or "28 percent rate gain": securities sold by a
Fund after July 28, 1997 that were held more than one year but not more
than 18 months. These gains will be taxable to individual investors at a
maximum rate of 28%. This category of gains applied only to gains and
distributions in 1997.
"1997 Act long-term capital gains" or "20 percent rate gain": securities
sold between May 7, 1997 and July 28, 1997 that were held for more than 12
months, and securities sold by the Fund after July 28, 1997 that were held
for more than 18 months. As revised by the 1998 Act, this rate applies to
securities held for more than 12 months and sold in tax years beginning
after December 1, 1997. These gains will be taxable to individual
investors at a maximum rate of 20% for investors in the 28% or higher
federal income tax brackets, and at a maximum rate of 10% for investors in
the 15% federal income tax bracket. The Omnibus Consolidated and Emergency
Supplemental Appropriations Act passed in October of 1998 included
technical corrections to the 1998 Act. The effect of this correction is
that essentially all capital gain distributions paid to shareholders
during 1998 will be taxed at a maximum rate of 20%.
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
five-year gains are net gains on securities held for more than 5 years
which are sold after December 31, 2000. For individual who are subject to
tax at higher rate brackets, qualified five-year gains are net gains on
securities which are purchased after December 31, 2000 and are held for
more than five years. Taxpayers subject to tax at a higher rate brackets
may also make an election for shares held on January 1, 2001 to recognize
gain on their shares in order to qualify such shares as qualified
five-year property. These gains will be taxable to individual investors at
a maximum rate of 18% for investors in the 28% or higher federal income
tax brackets, and at a maximum rate of 8% for investors in the 15% federal
income tax bracket when sold after the five-year holding period.
Tax Information Concerning All Funds
Each Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). By doing so, each Fund expects to eliminate
or reduce to a nominal amount the federal income taxes to which it may be
subject.
In order to qualify as a regulated investment company, each Fund must,
among other things, (1) derive at least 90% of its gross income from
dividends, interest, payment with respect to securities loans, and gains
from the sale or other disposition of stock or securities, foreign
currencies or other income (including gains from options, futures or
forward contracts) derived with respect to its business of investing in
stock, securities or currencies, (2) derive less than 30% of its gross
income from the sale or other disposition of stock, securities, options,
futures, forward contracts, and certain foreign currencies (or options,
futures, or forward contracts on foreign currencies) held for less than
three months, and (3) diversify its holdings so that at the end of each
quarter of its taxable year (i) at least 50% of the market value of the
Fund's assets is represented by cash or cash items (including
receivables), United States Government securities, securities of other
regulated investment companies, and other securities limited, in respect
of any one issuer, to an amount not greater than 5% of the value of the
Fund's assets at the date of purchase and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than United
States Government securities or the securities of other regulated
investment companies) or of two or more issuers that Adviser Funds, Inc.
controls and that are engaged in the same, similar or related trades or
businesses. These requirements may restrict the degree to which the
Adviser Funds, Inc. may engage in short-term trading and limit the range
of Adviser Funds, Inc.'s investments. If a Fund qualifies as a regulated
investment company, it will not be subject to federal income tax on the
part of its income distributed to shareholders, provided the Fund
distributes at least 90% of its net investment income (including
short-term capital gains) other than long-term capital gains in each year.
Each Fund intends to make sufficient distributions to shareholders
to meet this requirement.
Consequently, in order to avoid realizing a gain within the three-month
period, each Fund may be required to defer the closing out of a contract
beyond the time when it might otherwise be advantageous to do so. Each
Fund may also be restricted in the sale of purchased put options and the
purchase of put options for the purpose of hedging underlying securities
because of the application of the short sale holding period rules with
respect to such underlying securities.
The Code imposes a non-deductible excise tax on regulated investment
companies that do not distribute in each calendar year (regardless of
whether they otherwise have a non-calendar taxable year) an amount equal
to 98% of their "ordinary income" (as defined) for the calendar year plus
98% of their "capital gain net income" (as defined) for the one-year
period ending on October 31 of such calendar year plus 100% of the prior
calendar year's undistributed income (if any). The balance, if any, of
such income must be distributed during the next calendar year. For the
foregoing purposes, a Fund is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such
calendar year. If distributions during a calendar year are less than the
required amount, that particular Fund will be subject to a non-deductible
excise tax equal to 4% of the deficiency.
Shareholders of the Funds will generally pay federal income tax on
distributions received from the Fund. Dividends that are attributable to a
Fund's taxable net investment income will be taxed as ordinary income.
Distributions of net capital gain that are designated by a Fund as capital
gain dividends will generally be taxable as long-term capital gain.
Distributions in excess of a Fund's current and accumulated earnings and
profits will be treated by shareholders receiving such distributions as a
return of capital; a return of capital is taxable to a shareholder as
capital gain to the extent that it exceeds such shareholder's basis in its
shares in the Fund. Shareholders not subject to tax on their income
generally will not be required to pay tax on amounts distributed to them.
Such shareholders will include qualified retirement plans.
Each Fund intends to pay out substantially all of its net investment
income and net realized capital gains. Such payments, if any, will be made
once a year. Checks are normally mailed within three business days of the
payable date. Any check in payment of dividends or other distributions
which cannot be delivered by the United States Post Office or which
remains uncashed for a period of more than one year may be reinvested in
the shareholder's account at the then-current net asset value and the
dividend option may be changed from cash to reinvest. A Fund may deduct
from a shareholder's account the costs of the Fund's effort to locate a
shareholder if a shareholder's mail is returned by the United States Post
Office or the Fund is otherwise unable to locate the shareholder or verify
the shareholder's mailing address. These costs may include a percentage of
the account when a search company charges a percentage fee in exchange for
their location services. Net investment income earned on days when a Fund
is not open will be declared as a dividend on the next business day.
Purchases of Fund shares by wire begin earning dividends when converted
into Federal Funds and available for investment, normally the next
business day after receipt. Purchases by check earn dividends upon
conversion to Federal Funds, normally one business day after receipt.
Each class of a Fund will share proportionately in the investment income
and expenses of the Fund, except that Class A Shares, Class B Shares and
Class C Shares alone will incur distribution fees under their respective
12b-1 Plans.
For each of the Fund classes, dividends and realized securities profits
distributions are automatically reinvested in additional shares of a Fund
at net asset value in effect on the payable date, and credited to the
shareholder's account, unless an election to receive distributions in cash
has been made by the shareholder. All dividends and distributions are
reinvested for the Institutional Class. Dividend payments of $1.00 or less
will be automatically reinvested, notwithstanding a shareholder's election
to receive dividends in cash. If such a shareholder's dividends increase
to greater than $1.00, the shareholder would have to file a new election
in order to begin receiving dividends in cash again.
Adviser Funds, Inc. anticipates distributing to its shareholders
substantially all of a Fund's net investment income. Any net short-term
capital gains after deducting any net long-term capital losses (including
carryforwards) would be distributed quarterly but, in the discretion of
Adviser Funds, Inc.'s Board of Directors, might be distributed less
frequently. Distributions of net long-term gains, if any, realized on
sales of investments will be distributed annually during the quarter
following the close of the fiscal year.
Taxation of Shareholders
Gain or loss on the sale of a security generally will be long-term capital
gain or loss if a Fund has held the securities for more than one year.
Gain or loss on the sale of securities held for not more than one year
will be short-term. If one of the Funds acquires a debt security at a
substantial discount, a portion of any gain upon the sale or redemption
will be taxed as ordinary income, rather than capital gain to the extent
it reflects accrued market discount. Alternatively, this discount may be
accredited as ordinary income on a daily basis rather than recognized at
disposition.
Dividends of net investment income and distributions of net realized
short-term capital gains will be taxable to shareholders as ordinary
income for federal income tax purposes, whether received in cash or
reinvested in additional shares. Dividends received by corporate
shareholders will qualify for the dividends-received deduction only to the
extent that each Fund designates the amount distributed as a dividend and
the amount so designated does not exceed the aggregate amount of dividends
received by the Funds from domestic corporations for the taxable year. The
federal dividends-received deduction for corporate shareholders may be
further reduced or disallowed if the shares with respect to which
dividends are received are treated as debt-financed or are deemed to have
been held for less than 46 days.
Foreign countries may impose withholding and other taxes on dividends and
interest paid to the Funds with respect to investments in foreign
securities. However, certain foreign countries have entered into tax
conventions with the U.S. to reduce or eliminate such taxes.
Distributions of long-term capital gains will be taxable to shareholders
as such, whether paid in cash or reinvested in additional shares and
regardless of the length of time that the shareholder has held his or her
interest in one of the Funds. If a shareholder receives a distribution
taxable as long-term capital gain with respect to his or her investment in
a Fund and redeems or exchanges the shares before he or she has held them
for more than six months, any loss on the redemption or exchange that is
less than or equal to the amount of the distribution will be treated as a
long-term capital loss.
If a shareholder: (a) incurs a sales charge or in acquiring or redeeming
shares of one of the Funds; (b) disposes of those shares and acquires
within 90 days after the original acquisition; or (c) acquires within 90
days of the redemption those shares in a mutual fund for which the
otherwise applicable sales charge is reduced by reason of reinvestment
right (i.e., an exchange privilege), the original sales charge increases
the shareholder's tax basis in the original shares only to the extent the
other applicable sales charge for the second acquisition is not reduced.
The portion of the original sales charge that does not increase the
shareholder's tax basis in the original shares would be treated as
incurred with respect to the second acquisition and, as a general rule,
would increase the shareholder's tax basis in the newly acquired shares.
Furthermore, the same rule also applies to a disposition of the newly
acquired or redeemed shares made within 90 days of the second acquisition.
This provision prevents a shareholder from immediately deducting the sales
charge by shifting his or her investment in a family of mutual funds.
Investors considering buying shares of a Fund just prior to a record date
for a taxable dividend or capital gain distribution should be aware that,
regardless of whether the price of the Fund shares to be purchased
reflects the amount of the forthcoming dividend or distribution payment,
any such payment will be a taxable dividend or distribution payment. This
is of particular concern for investors in the Equity Funds since these
Funds may make distributions on an annual basis.
Each Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends or of gross proceeds from
redemptions paid to any shareholder who has provided either an incorrect
tax identification number or no number at all, or who is subject to
withholding by the Internal Revenue Service for failure to properly
include on his tax return payments of interest or dividends. This
withholding, known as backup withholding, is not an additional tax, and
any amounts withheld may be credited against the shareholder's ultimate
U.S. tax liability.
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, below. In a given case, these rules may accelerate income to a
Fund, defer losses to a Fund, cause adjustments in the holding periods of
a Fund's securities, convert short-term capital losses into long-term
capital losses, or otherwise affect the character of a Fund's income.
These rules could therefore affect the amount, timing and character of
distributions to shareholders. Each Fund will endeavor to make any
available elections pertaining to such transactions in a manner believed
to be in the best interest of a Fund.
Certain securities purchased by the Funds (such as STRIPS, CUBES, TRs,
TIGRs and CATS), are sold at original issue discount and do not make
periodic cash interest payments. A Fund will be required to include as
part of its current income the imputed interest on such obligations even
though a Fund has not received any interest payments on such obligations
during that period. Because a Fund distributes all of its net investment
income to its shareholders (including such imputed interest), a Fund may
have to sell securities in order to generate the cash necessary for the
required distributions. Such sales may occur at a time when the Manager or
sub-adviser would not have chosen to sell such securities and which may
result in a taxable gain or loss.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting purchasers of shares of each Fund of
Adviser Funds, Inc. Further tax information regarding Overseas Equity and
New Pacific Funds are included in following sections of this Part B. No
attempt is made to present a detailed explanation of the federal income
tax treatment of each Fund or its shareholders, and this discussion is not
intended as a substitute for careful tax planning. Accordingly,
prospective purchasers of shares of a Fund are urged to consult their tax
advisors with specific reference to their own tax situation, including the
potential application of state and local taxes.
The foregoing discussion and the discussion below regarding Overseas
Equity Fund and New Pacific Fund are based on tax laws and regulations
which are in effect on the date of this Part B; such laws and regulations
may be changed by legislative or administrative action, and such changes
may be retroactive.
Additional Tax Information Concerning Overseas Equity Fund and New Pacific
Fund
Gain or loss on the sale or other disposition of foreign currency by
Overseas Equity Fund and New Pacific Fund on a spot (or cash) basis will
result in ordinary gain or loss for federal income tax purposes.
Gains from foreign currencies (including foreign currency options, foreign
currency futures and foreign currency forward contracts) will constitute
qualifying income for purposes of the 90% test. However, future Treasury
regulations may exclude from qualifying income foreign currency gains not
directly related to a Fund's business of investing in stock or securities
(and may further define those foreign currency transactions that are not
directly related).
Investment by a Fund in certain "passive foreign investment companies"
could subject a Fund to U.S. federal income tax or other charge on
distributions received from, or the sale of its investment in, such a
company, which tax cannot be eliminated by making distributions to
shareholders. If the Funds elect to treat a passive foreign investment
company as a "qualified electing fund," different rules would apply,
although the Funds do not expect to be in the position to make such
elections.
Foreign Tax Credit
Shareholders of Overseas Equity Fund and New Pacific Fund who are U.S.
citizens may be able to claim a foreign tax credit or deduction on their
U.S. income tax returns with respect to foreign taxes paid by the Funds.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his or her total
foreign source taxable income. For this purpose, the source of a Fund's
income flows through to its shareholders. A Fund's gains from the sale of
securities generally will be treated as derived from U.S. sources and
certain currency fluctuation gains, including fluctuation gains from
foreign currency denominated debt securities, receivables and payables,
will be treated as ordinary income derived from U.S. sources. With limited
exceptions, the foreign tax credit is allowed to offset only 90% of the
alternative minimum tax imposed on corporations and individuals. Because
of these limitations, shareholders may be unable to claim a credit for the
full amount of their proportionate share of the foreign taxes paid by a
Fund.
The foregoing is only a general description of the treatment of foreign
withholding or other foreign taxes under the U.S. federal income tax laws.
Because the availability of a credit or deduction depends on the
particular circumstances of each shareholder, shareholders are advised to
consult their own tax advisers.
Options Transactions
When a Fund writes a call option, an amount equal to the premium received
by it is included in the Fund's assets and liabilities as an asset and as
an equivalent liability. The amount of the liability is subsequently
"marked to market" to reflect the current market value of the option
written. The current market value of a written option is the last sale
price on the principal Exchange on which such option is traded or, in the
absence of a sale, the mean between the last bid and asked prices. If an
option which a Fund has written expires on its stipulated expiration date,
or if a Fund enters into a closing purchase transaction, the Fund realizes
a gain (or loss if the cost of the closing transaction exceeds the premium
received when the option was sold) without regard to any unrealized gain
or loss on the underlying security, and the liability related to such
option is extinguished. Any such gain or loss is a short-term capital gain
or loss for federal income tax purposes. If a call option which a Fund has
written is exercised, the Fund realizes a capital gain or loss (long-term
or short-term, depending on the holding period of the underlying security)
from the sale of the underlying security, and the proceeds from such sale
are increased by the premium originally received.
The premium paid by a Fund for the purchase of a put option is recorded in
the section of the Fund's assets and liabilities as an investment and
subsequently adjusted daily to the current market value of the option. For
example, if the current market value of the option exceeds the premium
paid, the excess would be unrealized appreciation and, conversely, if the
premium exceeds the current market value, such excess would be unrealized
depreciation. If a put option which a Fund has purchased expires on the
stipulated expiration date, that Fund realizes a long- or short-term
capital loss for federal income tax purposes in the amount of the cost of
the option. If the Fund sells the put option, it realizes a long- or
short-term capital gain or loss, depending on whether the proceeds from
the sale are greater or less than the cost of the option. If the Fund
exercises a put option, it realizes a capital gain or loss (long-term or
short-term, depending on the holding period of the underlying security)
from the sale of the underlying security and the proceeds from such sale
will be decreased by the premium originally paid. However, since the
purchase of a put option is treated as a short sale for federal income tax
purposes, the holding period of the underlying security will be affected
by such a purchase.
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.
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 Delaware
Investments since 1938. On October 31, 1998, the Manager and its
affiliates within Delaware Investments, including the Delaware
International Advisers Ltd., were managing in the aggregate more than $00
billion in assets in the various institutional or separately managed
(approximately $000,000,000,000) and investment company (approximately
$00,000,000,000) accounts.
Separate Investment Management Agreements for U.S. Growth Fund and New
Pacific Fund are dated May 4, 1996. An Amended and Restated Investment
Management Agreement for Overseas Equity Fund is dated September 15, 1997.
The Agreements have an initial term of two years and may be further
renewed only so long as such renewals and continuance are specifically
approved at least annually by the Board of Directors or by vote of a
majority of the outstanding voting securities of the relevant Fund, and
only if the terms and renewal thereof have been approved by the vote of a
majority of the directors of Adviser Funds, Inc. who are not parties
thereto or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval. The Agreements
are terminable without penalty on 60 days' notice by the directors of
Adviser Funds, Inc. or by the Manager. An Agreement will terminate
automatically in the event of its assignment.
The Investment Management Agreements provide that each Fund shall pay the
Manager an annual management fee payable monthly and computed on the
average daily net assets of each Fund at the following annual rates:
Management
Fund Fee Rate
U.S. Growth Fund 0.70%
Overseas Equity Fund 1.00%
New Pacific Fund 0.80%
On October 31, 1998 each Fund's total net assets were as follows:
U.S. Growth Fund $
Overseas Equity Fund $
New Pacific Fund $
The total investment management fees incurred by each Fund during the
fiscal years ended October 31, 1998, October 31, 1997 and October 31, 1996
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.
Management Fees Incurred
Fund 1998 1997 1996
U.S. Growth Fund $ earned $230,497 earned $154,309 earned
$ paid $230,497 paid $137,359 paid
$ waived -$0- waived $16,950 waived
Overseas Equity Fund $ earned $176,619 earned $167,584 earned
$ paid $176,619 paid $47,994 paid
$ waived -$0- waived $119,590 waived
New Pacific Fund $ earned $118,010 earned $116,131 earned
$ paid $109,011 paid $203 paid
$ waived $8,999 waived $115,928 waived
As authorized by the Investment Management Agreements relating to each
Fund, the Investment Manager, under the general supervision of the Board
of Directors, has selected and contracted with various sub-advisers to
assist with the management of the Fund's portfolios in accordance with
each Fund's stated objectives and policies. The Manager is responsible for
compensating such sub-advisers. The Manager has entered into separate
Sub-Advisory Agreements on behalf of U.S. Growth Fund and New Pacific Fund
dated May 4, 1996 and on behalf of Overseas Equity Fund dated November 18,
1997. The terms of the Sub-Advisory Agreements and requirements for Board
approval and termination are the same for these agreements as they are for
the Investment Management Agreements described above.
Each Fund pays all of its other expenses, including its proportionate
share of rent and certain other administrative expenses.
Beginning May 1, 1998, the Manager elected voluntarily to waive that
portion, if any, of the annual management fees payable by each Fund and to
pay a Fund for its expenses to the extent necessary to ensure that the
total operating expenses of the Fund do not exceed on an annualized basis
1.50% for U.S. Growth Fund, 1.55% for Overseas Equity Fund and 1.70% for
New Pacific Fund, in each case as a percentage of average net assets
(exclusive of 12b-1 Plan expenses, taxes, interest, brokerage commissions
and extraordinary expenses) through October 31, 1998. These voluntary
waivers and payments of expenses have been extended through April 30, 1999
for Overseas Equity Fund and New Pacific Fund but have not been extended
for U.S. Growth Fund.
The Manager had voluntarily committed to waive its fees or pay expenses
for the Funds beginning as of the close of business May 3, 1996 through
April 30, 1998, as reflected below. The cap for each Fund has been lowered
from that maintained by the previous investment manager by 0.05%,
reflecting the reduction from 0.35% to 0.30% of the 12b-1 fees payable by
the Funds with respect to Class A Shares. The expense waivers and/or
payments will be reevaluated by the Manager periodically.
U.S. Growth Overseas Equity New Pacific
Fund Fund Fund
Class A Shares 1.44% 1.80% 1.80%
Class B Shares 2.14% 2.50% 2.50%
Class C Shares 2.14% 2.50% 2.50%
Institutional Class Shares 1.14% 1.50% 1.50%
Sub-Advisers
The following registered investment advisers serve as sub-advisers to the
Funds indicated: Lynch & Mayer, Inc. serves as sub-adviser of U.S. Growth
Fund; Delaware International Advisers Ltd. serves as sub-adviser of
Overseas Equity Fund; and AIB Govett, Inc. serves as sub-adviser of New
Pacific Fund.
During the past three fiscal years, the Sub-Adviser received fees from the
Manager in the following amounts:
October 31
1998 1997 1996
Lynch & Mayer, Inc. $ $131,858 $88,177
Delaware InternationalAdvisers Ltd. 132,730 121,879
AIB Govett, Inc. 73,483 72,581
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, 1998, Lynch & Mayer, Inc. had total assets
under management in excess of $0.0 billion.
Delaware International Adviser Ltd. was established in 1990 and began
serving as Sub-Adviser to Overseas Equity Fund on September 15, 1997.
Delaware International Advisers Ltd. provides investment advisory services
to certain other funds available from Delaware Investments and to
institutional clients. As of October 31, 1998, Delaware International
Advisers Ltd. had total assets under management in excess of $0 billion.
AIB Govett, Inc. is a unit of AIB Asset Management Holdings Limited, a
majority owned subsidiary of Allied Irish Bank plc ("AIB"), Ireland's
largest bank. AIB Govett, Inc. coordinates with its offices and affiliates
worldwide, including AIB Govett Asset Management Limited in London to
provide asset management, client service, marketing and business
development for AIB's North American asset management business. AIB
Govett, Inc. has been an investment adviser to clients such as investment
trusts, investment companies, mutual funds and pension funds since its
inception in the 1920s. As of October 31, 1998, AIB Govett, Inc. had
assets under management in excess of $00 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.
The Fund has authorized one or more brokers to accept on its behalf
purchase and redemption orders in addition to the Transfer Agent. Such
brokers are authorized to designate other intermediaries to accept
purchase and redemption orders on the behalf of the Funds. For purposes of
pricing, the Funds will be deemed to have received a purchase or
redemption order when an authorized broker or, if applicable, a broker's
authorized designee, accepts the order.
OFFICERS AND DIRECTORS
The business and affairs of Adviser Funds, Inc. are managed under the
direction of its Board of Directors.
Certain officers and directors of Adviser Funds, Inc. hold identical
positions in each of the other funds in Delaware Investments. As of
January 31, 1999, Adviser Funds, Inc.'s officers and directors owned less
than 1% of the outstanding shares of each of the Class A Shares, Class B
Shares, Class C Shares and the Institutional Class of each Fund,
respectively.
As of January 31, 1999, management believes the following accounts held 5%
or more of the outstanding shares of Class A Shares, Class B Shares, Class
C Shares and the Institutional Class of each Fund:
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
<S> <C> <C> <C>
U.S. Growth Fund Donaldson Lufkin Jenrette
A Class Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303
U.S. Growth Fund Merrill Lynch, Pierce, Fenner & Smith
B Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive, 3rd Floor
Jacksonville, FL 32246
U.S. Growth Fund RS Cimm's Inc. 401(k) Plan
C Class Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
RS- Rommel Electric Co.
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
Nelson Family Trust
Mary Corina Nelson TTE
P.O. Box 189
Hondo, TX 78861
Robert M. Wells
11508 Cherry Blossom W. Dr.
Fishers, IN 46038
U.S. Growth Fund Federated Life Insurance Co.
Institutional Class Separate Account A
Attn: Tom Koch
P.O. Box 328
Owatonna, MN 55060
Overseas Equity Fund Merrill Lynch, Pierce, Fenner & Smith
B Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246
DMTC C/F The Rollover IRA of
Carl W. Niederwimmer
301 NW 73rd Terrace
Gladstone, MO 64118
Overseas Equity Fund Prudential Securities Inc. FBO
C Class Crane Rental Service, Inc.
Account B
1901 West Collins Avenue
Orange, CA 92867
Merrill Lynch, Pierce,Fenner & Smith
For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246
NFSC FBO Chester M. Boltwood
and Karen A. Boltwood
BNW-302864
828 Cobblestone Circle
Modesto, CA 95355
J.C. Bradford & Co. Cust FBO
Sally S. Alterman
330 Commerce Street
Nashville, TN 37201
Overseas Equity Fund PJH Prime Account
C Class Donald W. Nelson, M.D.
Joanna R. Nelson
JT TEN WROS
5015 NW 127th Street
Vancouver, WA 98685
Carroll L. Englehardt and
Joan L. Englehardt JT WROS
1210 3rd Street, South
Moorhead, MN 56560
DMTC Custodian for the IRAof
Andrew W. Morris
3725 Arrowhead Drive
St. Augustine, FL 32086
Overseas Equity Fund RS DMC Employee Profit Sharing Plan
Institutional Class Delaware Management Co.
Employee Profit Sharing Trust
C/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103
Lincoln National Investment Management
Attn: Securities Adm. -3RO3
200 East Berry Street
Fort Wayne, IN 46802
New Pacific Fund Dale L. Sheaffer TTE
C Class Dale L. Sheaffer DDS RET PL
FBO Dale L. Sheaffer
50 Evergreen Lane
Carlisle, PA 17013
Ronald Hoffman
6 Elm Street
Newton, NJ 07860
New Pacific Fund David F. Lewis
C Class 10750 Longfellow Trace
Shreveport, LA 71106
Mark M. Elkins
1552 Heatherstone Drive
Fredericksburg, VA 22407
NFSC/FMTC IRA
FBO Joseph G. Chin
33 Loughran Avenue
Stamford, CT 06902
New Pacific Fund RS DMC Employee Profit Sharing Plan
Institutional Class Delaware Management Co.
Employee Profit Sharing Trust
c/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103
</TABLE>
DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust),
Delaware Management Company, Inc., Delaware Investment Advisers (a series
of Delaware Management Business Trust), Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware International Holdings Ltd., Founders
Holdings, Inc., Delaware International Advisers Ltd., Delaware Capital
Management, Inc. and Retirement Financial Services, Inc. are direct or
indirect, wholly owned subsidiaries of Delaware Management Holdings, Inc.
("DMH"). On April 3, 1995, a merger between DMH and a wholly owned
subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National.
Lincoln National, with headquarters in Fort Wayne, Indiana, is a
diversified organization with operations in many aspects of the financial
services industry, including insurance and investment management. After
Lincoln National's acquisition of DMH and the Manager, Lincoln National
was operating two mutual fund complexes, Delaware Investments 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 Delaware Investments warranted the
consolidation of Lincoln Funds into Delaware Investments. 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 Delaware Investments.
See Restructuring of the Funds in this Part B.
Directors and principal officers of Adviser Funds, Inc. are noted below
along with their ages and their business experience for the past five
years. Unless otherwise noted, the address of each officer and director is
One Commerce Square, Philadelphia, PA 19103.
*Wayne A. Stork (61)
Chairman and Director and/or Trustee of Adviser Funds, Inc. and 33 other
investment companies in the Delaware Investments family and Delaware
Capital Management, Inc.
Chairman, President, Chief Executive Officer and Director of DMH Corp.,
Delaware Distributors, Inc. and Founders Holdings, Inc.
Chairman, President, Chief Executive Officer, Chief Investment Officer and
Director/Trustee of Delaware Management Company, Inc. and Delaware
Management Business Trust
Chairman, President, Chief Executive Officer and Chief Investment Officer
of Delaware Management Company (a series of Delaware Management Business
Trust)
Chairman, Chief Executive Officer and Chief Investment Officer of Delaware
Investment Advisers (a series of Delaware Management Business Trust)
Chairman, Chief Executive Officer and Director of Delaware International
Advisers Ltd., Delaware International Holdings Ltd. and Delaware
Management Holdings, Inc.
President and Chief Executive Officer of Delvoy, Inc.
Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc. and Retirement Financial
Services, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.
*Jeffrey J. Nick (45)
President, Chief Executive Officer and Director and/or Trustee of Adviser
Funds, Inc. and 33 other investment companies in the Delaware Investments
family
President and Director of Delaware Management Holdings, Inc.
President, Chief Executive Officer and Director of Lincoln National
Investment Companies, Inc.
President of Lincoln Funds Corporation
Director of Delaware International Advisers Ltd.
From 1992 to 1996, Mr. Nick was Managing Director of Lincoln National UK
plc and from 1989 to 1992, he was Senior Vice President responsible for
corporate planning and development for Lincoln National Corporation.
* Director affiliated with the Fund's investment manager and considered an
"interested person" as defined in the 1940 Act.
Richard G. Unruh, Jr. (58)
Executive Vice President of Adviser Funds, Inc. and 33 other investment
companies in the Delaware Investments family, Delaware Management
Holdings, Inc., Delaware Management Company (a series of Delaware
Management Business Trust) and Delaware Capital Management, Inc.
President of Delaware Investment Advisers (a series of Delaware Management
Business Trust)
Executive Vice President and Director/Trustee of Delaware Management
Company, Inc. and Delaware Management Business Trust
Director of Delaware International Advisers Ltd.
[/R]
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.
Paul E. Suckow (51)
Executive Vice President/Chief Investment Officer, Fixed Income of Adviser
Funds, Inc. and 33 other investment companies in the Delaware Investments
family, Delaware Management Company, Inc., Delaware Management Company (a
series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Delaware
Management Holdings, Inc.
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Capital Management, Inc. and Delaware
Management Business Trust
Director of Founders CBO Corporation
Director of HYPPCO Finance Company Ltd.
Before returning to Delaware Investments 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 Delaware Investments.
David K. Downes (58)
Executive Vice President, Chief Operating Officer, Chief Financial Officer
of Adviser Funds, Inc. and 33 other investment companies in the Delaware
Investments family, Delaware Management Holdings, Inc, Founders CBO
Corporation, Delaware Capital Management, Inc., Delaware Management
Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust) and
Delaware Distributors, L.P.
Executive Vice President, Chief Financial Officer, Chief Administrative
Officer and Trustee of Delaware Management Business Trust
Executive Vice President, Chief Operating Officer, Chief Financial Officer
and Director of Delaware Management Company, Inc., DMH Corp., Delaware
Distributors, Inc., Founders Holdings, Inc. and Delvoy, Inc.
President, Chief Executive Officer, Chief Financial Officer and Director
of Delaware Service Company, Inc.
President, Chief Operating Officer, Chief Financial Officer and Director
of Delaware International Holdings Ltd.
Chairman, Chief Executive Officer and Director of Delaware Management
Trust Company and Retirement Financial Services, Inc.
Director of Delaware International Advisers Ltd.
Vice President of Lincoln Funds Corporation
During the past five years, Mr. Downes has served in various executive
capacities at different times within the Delaware organization.
Walter P. Babich (70)
Director and/or Trustee of Adviser Funds, Inc. and 33 other investment
companies in the Delaware Investment family
460 North Gulph Road, King of Prussia, PA 19406
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from
1988 to 1991, he was a partner of I&L Investors.
John H. Durham (61)
Director and/or Trustee of Adviser Funds, Inc. and 18 other investment
companies in the Delaware Investments family
Partner, Complete Care Services
120 Gibraltar Road, Horsham, PA 19044
Mr. Durham served as Chairman of the Board of each fund in the Delaware
Investments family from 1986 to 1991; President of each fund from 1977 to
1990; and Chief Executive Officer of each fund from 1984 to 1990. Prior to
1992, with respect to Delaware Management Holdings, Inc., Delaware
Management Company, Delaware Distributors, Inc. and Delaware Service
Company, Inc., Mr. Durham served as a director and in various executive
capacities at different times.
Anthony D. Knerr (59)
Director and/or Trustee of Adviser Funds, Inc. and 33 other investment
companies in the Delaware Investments family
500 Fifth Avenue, New York, NY 10110
Founder and Managing Director, Anthony Knerr & Associates
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to 1989, he was also
a lecturer in English at the University. In addition, Mr. Knerr was
Chairman of The Publishing Group, Inc., New York, from 1988 to 1990. Mr.
Knerr founded The Publishing Group, Inc. in 1988.
Ann R. Leven (57)
Director and/or Trustee of Adviser Funds, Inc. and 33 other investment
companies in the Delaware Investments family
785 Park Avenue, New York, NY 10021
Treasurer, National Gallery of Art
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of the
Smithsonian Institution, Washington, DC, and from 1975 to 1992, she was
Adjunct Professor of Columbia Business School.
W. Thacher Longstreth (77)
Director and/or Trustee of Adviser Funds, Inc. and 33 other investment
companies in the Delaware Investments family
City Hall, Philadelphia, PA 19107
Philadelphia City Councilman
Thomas F. Madison (62)
Director and/or Trustee of Adviser Funds, Inc. and 33 other investment
companies in the Delaware Investments family
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402
President and Chief Executive Officer, MLM Partners, Inc.
Mr. Madison has also been Chairman of the Board of Communications
Holdings, Inc. since 1996.
From February to September 1994, Mr. Madison served as Vice
Chairman--Office of the CEO of The Minnesota Mutual Life Insurance Company
and from 1988 to 1993, he was President of U.S. WEST
Communications--Markets.
Charles E. Peck (72)
Director and/or Trustee of Adviser Funds, Inc. and 33 other investment
companies in the Delaware Investments family
P.O. Box 1102, Columbia, MD 21044
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer of
The Ryland Group, Inc., Columbia, MD.
George M. Chamberlain, Jr. (51)
Senior Vice President, Secretary and General Counsel of Adviser Funds,
Inc. and 33 other investment companies in the Delaware Investments family.
Senior Vice President and Secretary of Delaware Distributors, L.P.,
Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of Delaware Management
Business Trust) and Delaware Management Holdings, Inc.
Senior Vice President, Secretary and Director/Trustee of DMH Corp.,
Delaware Management Company, Inc., Delaware Distributors, Inc., Delaware
Service Company, Inc., Founders Holdings, Inc., Retirement Financial
Services, Inc. , Delaware Capital Management, Inc., Delvoy, Inc. and
Delaware Management Business Trust
Executive Vice President, Secretary and Director of Delaware Management
Trust Company
Senior Vice President and Director of Delaware International Holdings Ltd.
Director of Delaware International Advisers Ltd.
Secretary of Lincoln Funds Corporation
Attorney.
During the past five years, Mr. Chamberlain has served in various
executive capacities at different times within the Delaware organization.
Joseph H. Hastings (48)
Senior Vice President/Corporate Controller of Adviser Funds, Inc. and 33
other investment companies in the Delaware Investments family and Founders
Holdings, Inc.
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware
Service Company, Inc., Delaware Capital Management, Inc., Delaware
International Holdings Ltd., Delvoy, Inc. and Delaware Management Business
Trust
Chief Financial Officer/Treasurer of Retirement Financial Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company
Senior Vice President/Assistant Treasurer of Founders CBO Corporation
Treasurer of Lincoln Funds Corporation
During the past five years, Mr. Hastings has served in various executive
capacities at different times within the Delaware organization.
Michael P. Bishof (36)
Senior Vice President/Treasurer of Adviser Funds, Inc. and 33 other
investment companies in the Delaware Investments family and Founders
Holdings, Inc.
Senior Vice President/Investment Accounting of Delaware Management
Company, Inc., Delaware Management Company (a series of Delaware
Management Business Trust) and Delaware Service Company, Inc.
Senior Vice President and Treasurer/Manager of Investment Accounting of
Delaware Distributors, L.P. and Delaware Investment Advisers (a series of
Delaware Management Business Trust)
Senior Vice President and Manager of Investment Accounting of Delaware
International Holdings Ltd.
Senior Vice President and Assistant Treasurer of Founders CBO Corporation
Before joining Delaware Investments in 1995, Mr. Bishof was a Vice
President for Bankers Trust, New York, NY from 1994 to 1995, a Vice
President for CS First Boston Investment Management, New York, NY from
1993 to 1994 and an Assistant Vice President for Equitable Capital
Management Corporation, New York, NY from 1987 to 1993.
The following is a compensation table listing for each director entitled
to receive compensation, the aggregate compensation received from the Fund
and the total compensation received from all investment companies in the
Delaware Investments family for which he or she serves as a director or
trustee for the fiscal year ended October 31, 1998 and an estimate of
annual benefits to be received upon retirement under the Delaware Group
Retirement Plan for Directors/Trustees as of October 31, 1998. Only the
independent directors of the Fund receive compensation from the Fund.
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Total
Accrued Estimated Compensation
Aggregate as Part of Annual from
Compensation Equity Benefits Delaware
from Adviser Funds I, Inc. Upon Investments
Name Funds, Inc. Expenses Retirement(1) Companies(2)
<S> <C> <C> <C> <C>
John H. Durham(3) $0,000 None $31,000 $00,000
W. Thacher Longstreth $0,000 None $38,500 $00,000
Ann R. Leven $0,000 None $38,500 $00,000
Walter P. Babich $0,000 None $38,500 $00,000
Anthony D. Knerr $0,000 None $38,500 $00,000
Charles E. Peck $0,000 None $38,500 $00,000
Thomas F. Madison $0,000 None $38,500 $00,000
(1) Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director/trustee who, at the time
of his or her retirement from the Board, has attained the age of 70 and
served on the Board for at least five continuous years, is entitled to
receive payments from each investment company in the Delaware Investments
family for which he or she serves as a director or trustee for a period
equal to the lesser of the number of years that such person served as a
director or trustee or the remainder of such person's life. The amount of
such payments will be equal, on an annual basis, to the amount of the
annual retainer that is paid to directors/trustees of each investment
company at the time of such person's retirement. If an eligible
director/trustee retired as of October 31, 1998 he or she would be
entitled to annual payments totaling the amount noted above, in the
aggregate, from all of the investment companies in the Delaware
Investments family for which he or she served as director or trustee,
based on the number of investment companies in the Delaware Investments
family as of that date.
(2) Each independent director/trustee (other than John H. Durham)
currently receives a total annual retainer fee of $38,500 for serving as a
director or trustee for all 34 investment companies in Delaware
Investments, plus $3,145 for each Board Meeting attended. John H. Durham
currently receives a total annual retainer fee of $31,000 for serving as a
director or trustee for 19 investment companies in Delaware Investments,
plus $1,757.50 for each Board Meeting attended. Ann R. Leven, Walter P.
Babich, Anthony D. Knerr and Thomas F. Madison serve on the Fund's audit
committee; Ms. Leven is the chairperson. Members of the audit committee
currently receive additional annual compensation of $5,000 from all
investment companies, in the aggregate, with the exception of the
chairperson, who receives $6,000.
(3) John H. Durham joined the Board of Directors of the Fund and 18 other
investment companies in Delaware Investments on April 16, 1998.
</TABLE>
GENERAL INFORMATION
Adviser Funds, Inc. is an open-end management investment company. Each
Fund's portfolio of assets is diversified as defined by the 1940 Act.
Adviser Funds, Inc. was organized as a Maryland corporation on August 10,
1993.
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 Investments family. An affiliate of the Manager 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 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 various
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 Investments mutual funds
available outside the annuity. See Delaware Group Premium Fund, Inc. in
Appendix B.
Access persons and advisory persons of the Delaware Investments family 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 is received; (3) certain persons are prohibited
from investing in initial public offerings of securities and other
restrictions apply to investments in private placements of securities; (4)
opening positions may only be closed-out at a profit after a 60-day
holding period has elapsed; and (5) the Compliance Officer must be
informed periodically of all securities transactions and duplicate copies
of brokerage confirmations and account statements must be supplied to the
Compliance Officer.
The Distributor acts as national distributor for each Fund and for the
other mutual funds in the Delaware Investments family. The Distributor
received net commissions from each Fund on behalf of Class A Shares, after
reallowances to dealers, as follows:
U.S. Growth Fund
Class A Shares
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers to DDLP
10/31/98
10/31/97 $32,142 $7,034 $25,108
10/31/96 $2,551 $2,141 $410
Overseas Equity Fund
Class A Shares
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers to DDLP
10/31/98
10/31/97 $15,657 $3,194 $12,463
10/31/96 $4,626 $3,880 $746
New Pacific
Fund
Class A Shares
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers to DDLP
10/31/98
10/31/97 $28,375 $5,847 $22,528
10/31/96 $4,740 $3,912 $828
The Distributor received in the aggregate Limited CDSC payments with
respect to Class A Shares of each Fund as follows:
Limited CDSC Payments
FiscalYear U.S. Growth Overseas Equity New Pacific
Ended Fund A Class Fund A Class Fund A Class
10/31/98
10/31/97 $-0- $-0- $-0-
10/31/96 $-0- $-0- $-0-
The Distributor received in the aggregate CDSC payments with respect to
Class B Shares of each Fund as follows:
CDSC Payments
FiscalYear U.S. Growth Overseas Equity New Pacific
Ended Fund B Class Fund B Class Fund B Class
10/31/98
10/31/97 $3,339 $2,815 $4,476
10/31/96 $643 $3,542 $742
The Distributor received in the aggregate CDSC payments with respect to
Class C Shares of each Fund as follows:
CDSC Payments
FiscalYear U.S. Growth Overseas Equity New Pacific
Ended Fund C Class Fund C Class Fund C Class
10/31/98
10/31/97 $108 $24 $33
10/31/96 $36 $20 $4
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for each Fund and for
the other mutual funds in the Delaware Investments family. 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 Investments
family for which it provides such accounting services. Such fee is equal
to 0.25% multiplied by the total amount of assets in the complex for which
the Transfer Agent furnishes accounting services, where such aggregate
complex assets are $10 billion or less, and 0.20% of assets if such
aggregate complex assets exceed $10 billion. The fees are charged to 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 ("Chase"), 4 Chase Metrotech Center, Brooklyn, NY
11245 is custodian of each Fund's securities and cash. As custodian for a
Fund, Chase maintains a separate account or accounts for the Fund;
receives, holds and releases portfolio securities on account of the Fund;
receives and disburses money on behalf of the Fund; and collects and
receives income and other payments and distributions on account of the
Fund's portfolio securities.
Restructuring of the Funds
Until April 26, 1996, Adviser Funds, Inc. consisted of nine series of
shares (U.S. Growth Fund, World Growth Fund (now named Overseas Equity
Fund) and New Pacific Fund, as well as six other funds) and was named
Lincoln Advisor Funds, Inc. ("LAF"). On February 23, 1996, LAF's Board of
Directors approved a restructuring to integrate fully LAF into the
Delaware Investments family of funds. The restructuring provided, among
other things, for the liquidation of three funds; the appointment of
Delaware Management Company, Inc. as the investment manager of each of the
Funds; the appointment of certain sub-advisers; changes in certain names,
including: Lincoln U.S. Growth Portfolio to U.S. Growth Fund; Lincoln
World Growth Portfolio to World Growth Fund; and Lincoln New Pacific
Portfolio to New Pacific Fund; and the change of the LAF to Delaware Group
Adviser Funds, Inc. The liquidations were completed on April 26, 1996 and
following required shareholder approval of the investment management and
sub-advisory arrangements at a meeting of shareholders held on May 3,
1996, the restructuring was consummated.
In accordance with the restructuring, beginning May 6, 1996, the former
Class D shares have been redesignated as the Institutional Class shares.
On July 17, 1997, the Board of Directors approved the liquidations of
three additional funds. These liquidations were completed on September 19,
1997. Effective September 15, 1997, the name of World Growth Fund changed
to Overseas Equity Fund.
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 Investments 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 the
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.
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 be fairly
made. The officers of Adviser Funds, Inc., subject to the general
supervision of the Board of Directors, have the power to determine which
liabilities are allocable to a given Fund or which are general or
allocable to two or more Funds. Upon redemption of shares of a Fund, the
shareholder will receive proceeds solely of the assets of such Fund. In
the event of the dissolution or liquidation of Adviser Funds, Inc., the
holders of the shares of any Fund are entitled to receive as a class the
underlying assets of such Fund available for distribution to shareholders.
Pursuant to the Articles of Incorporation, the directors may authorize the
creation of additional series of shares (the proceeds of which would be
invested in separate, independently managed portfolios with distinct
investment objectives and policies and share purchase, redemption and net
asset valuation procedures) and additional classes of shares within any
Fund (which would be used to distinguish among the rights of different
categories of shareholders as might be required by future regulations or
other unforeseen circumstances) with such preferences, privileges,
limitations and voting and dividend rights as the directors may determine.
All consideration received by Adviser Funds, Inc. for shares of any
additional series or class, and all assets in which such consideration is
invested, would belong to that series or class (subject only to the rights
of creditors of such series or class) and would be subject to the
liabilities related thereto. Pursuant to the 1940 Act, shareholders of any
additional series or class of shares would normally have to approve the
adoption of any advisory contract relating to such series or class and of
any changes in the investment policies related thereto.
Adviser Funds, Inc. does not intend to hold shareholders' meetings unless
otherwise required by law. Adviser Funds, Inc. will not be required to
hold meetings of shareholders unless the election of directors is required
to be acted on by shareholders under the 1940 Act. Shareholders have
certain rights, including the right to call a meeting upon a vote of 10%
of a Fund's outstanding shares for the purpose of voting on the removal of
one or more directors or to transact any other business.
Identifiable expenses to each Fund will be paid by that Fund. General
expenses of all Funds will be allocated on a pro-rata basis according to
asset size. Where matters must be submitted to a vote of shareholders, the
holders of a majority of shares of each Fund affected must vote
affirmatively for that class to be affected.
All shares have no preemptive rights, are fully transferable and, when
issued, are fully paid and nonassessable and, except as described above,
have equal voting rights. All shares of the Advisers Funds, Inc.
participate equally in dividends, and upon liquidation would share
equally.
Each Class of each Fund represents a proportionate interest in the assets
of each Fund of Adviser Funds, Inc. and has the same voting and other
rights and preferences, except that shares of Institutional Classes may
not vote on matters affecting the Funds' Distribution Plans under Rule
12b-1. Similarly, as a general matter, shareholders of Class A Shares,
Class B Shares and Class C Shares may vote only on matters affecting the
12b-1 Plan that relates to the class of shares that they hold. However,
shareholders of Class B Shares must be given a vote on any material
increase in the 12b-1 fees payable by Class A Shares under the Plans for
the Funds. General expenses of each Fund will be allocated on a pro-rata
basis to the Classes according to asset size, except that expenses of the
12b-1 Plans of Class A Shares, Class B Shares and Class C Shares will be
allocated solely to those classes.
As of the close of business on May 3, 1996, the changes of the names of
the Funds were as follows: Lincoln U.S. Growth Portfolio to U.S. Growth
Fund; Lincoln World Growth Portfolio to World Growth Fund; and Lincoln New
Pacific Portfolio to New Pacific Fund. In addition, as of the close of
business May 3, 1996, the name of Lincoln Advisor Funds, Inc. was changed
to Delaware Group Adviser Funds, Inc.
Noncumulative Voting
Adviser Funds, Inc.'s shares have noncumulative voting rights which means
that the holders of more than 50% of the shares of Adviser Funds, Inc.
voting for the election of directors can elect all the directors if they
choose to do so, and, in such event, the holders of the remaining shares
will not be able to elect any directors.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC.
APPENDIX A--DESCRIPTION OF RATINGS
U.S. Growth Fund has the ability to invest up to 10% of its net assets in
high yield, high risk fixed- income securities. However, the Fund had no
such investments as of its fiscal year ended October 31, 1997. The
following paragraphs 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.
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.
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.
MUNICIPAL NOTE RATINGS
Issuers or the features associated with Moody's MIG or VMIG ratings are
identified by date of issue, date of maturity or maturities or rating
expiration date and description to distinguish each rating from other
ratings. Each rating designation is unique with no implication as to any
other similar issue of the same obligor. MIG ratings terminate at the
retirement of the obligation while VMIG rating expiration will be a
function of each issue's specific structural or credit features.
MIG 1/VMIG 1: This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support,
or demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG 3/VMIG 3: This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be narrow and
market access for refinancing is likely to be less well established.
MIG 4/VMIG 4: This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is specific
risk.
STANDARD & POOR'S RATINGS GROUP
BOND RATINGS
AAA: Debt rated AAA has the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely
strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small
degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest an repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB, B, CCC and CC: Debt rated BB, B, CCC or CC is regarded, on balance, as
predominately speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C: This rating is reserved for income bonds on which no interest is being
paid.
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.
APPENDIX B--INVESTMENT OBJECTIVES OF THE OTHER FUNDS IN THE DELAWARE
INVESTMENTS FAMILY
Following is a summary of the investment objectives of the other funds in
the Delaware Investments family:
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.
Small Cap Value Fund seeks capital appreciation by investing primarily in
common stocks whose market values appear low relative to their underlying
value or future potential.
DelCap Fund seeks long-term capital growth by investing in common stocks
and securities convertible into common stocks of companies that have a
demonstrated history of growth and have the potential to support continued
growth.
Decatur Income Fund seeks the highest possible current income by investing
primarily in common stocks that provide the potential for income and
capital appreciation without undue risk to principal. Decatur Total Return
Fund seeks long-term growth by investing primarily in securities that
provide the potential for income and capital appreciation without undue
risk to principal. Blue Chip Fund seeks to achieve long-term capital
appreciation. Current income is a secondary objective. It seeks to achieve
these objectives by investing primarily in equity securities and any
securities that are convertible into equity securities. Social Awareness
Fund seeks to achieve long-term capital appreciation. It seeks to achieve
this objective by investing primarily in equity securities of medium- to
large-sized companies expected to grow over time that meet the Fund's
"Social Criteria" strategy.
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. High-Yield
Opportunities Fund seeks to provide investors with total return and, as a
secondary objective, high current income. Corporate Bond Fund seeks to
provide investors with total return by investing primarily in corporate
bonds. Extended Duration Bond Fund seeks to provide investors with total
return by investing primarily in corporate bonds
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.
Delaware Cash Reserve seeks the highest level of income consistent with
the preservation of capital and liquidity through investments in
short-term money market instruments, while maintaining a stable net asset
value.
REIT Fund seeks to achieve maximum long-term total return with capital
appreciation as a secondary objective. It seeks to achieve its objectives
by investing in securities of companies primarily engaged in the real
estate industry.
Tax-Free 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 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 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. Tax-
Free New Jersey Fund seeks a high level of current interest income exempt
from federal income tax and New Jersey state and local taxes, consistent
with preservation of capital. Tax-Free Ohio Fund seeks a high level of
current interest income exempt from federal income tax and Ohio state and
local taxes, consistent with preservation of capital.
Foundation Funds are "fund of funds" which invest in other funds in the
Delaware Investments family (referred to as "Underlying Funds").
Foundation Funds Income Portfolio seeks a combination of current income
and preservation of capital with capital appreciation by investing
primarily in a mix of fixed income and domestic equity securities,
including fixed income and domestic equity Underlying Funds. Foundation
Funds Balanced Portfolio seeks capital appreciation with current income as
a secondary objective by investing primarily in domestic equity and fixed
income securities, including domestic equity and fixed income Underlying
Funds. Foundation Funds Growth Portfolio seeks long-term capital growth by
investing primarily in equity securities, including equity Underlying
Funds, and, to a lesser extent, in fixed income securities, including
fixed-income Underlying Funds.
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 Equity
Fund seeks to achieve long-term total return by investing in global
securities that provide the potential for capital appreciation and income.
Emerging Markets Fund seeks long-term capital appreciation by investing
primarily in equity securities of issuers located or operating in emerging
countries.
U.S. Growth Fund seeks to maximize capital appreciation by investing in
companies of all sizes which have low dividend yields, strong balance
sheets and high expected earnings growth rates relative to their industry.
Overseas Equity Fund seeks to maximize total return (capital appreciation
and income), principally through investments in an internationally
diversified portfolio of equity securities. New Pacific Fund seeks
long-term capital appreciation by investing primarily in companies which
are domiciled in or have their principal business activities in the
Pacific Basin.
Delaware Group Premium Fund, Inc. offers 16 funds available exclusively as
funding vehicles for certain insurance company separate accounts. Decatur
Total Return Series seeks the highest possible total rate of return by
selecting issues that exhibit the potential for capital appreciation while
providing higher than average dividend income. Delchester Series seeks as
high a current income as possible by investing in rated and unrated
corporate bonds, U.S. government securities and commercial paper. Capital
Reserves Series seeks a high stable level of current income while
minimizing fluctuations in principal by investing in a diversified
portfolio of short- and intermediate-term securities. Cash Reserve Series
seeks the highest level of income consistent with preservation of capital
and liquidity through investments in short-term money market instruments.
DelCap Series seeks long-term capital appreciation by investing its assets
in a diversified portfolio of securities exhibiting the potential for
significant growth. Delaware Series seeks a balance of capital
appreciation, income and preservation of capital. It uses a
dividend-oriented valuation strategy to select securities issued by
established companies that are believed to demonstrate potential for
income and capital growth. International Equity Series seeks long-term
growth without undue risk to principal by investing primarily in equity
securities of foreign issuers that provide the potential for capital
appreciation and income. Small Cap Value Series seeks capital appreciation
by investing primarily in small-cap common stocks whose market values
appear low relative to their underlying value or future earnings and
growth potential. Emphasis will also be placed on securities of companies
that may be temporarily out of favor or whose value is not yet recognized
by the market. Trend Series seeks long-term capital appreciation by
investing primarily in small- cap common stocks and convertible securities
of emerging and other growth-oriented companies. These securities will
have been judged to be responsive to changes in the market place and to
have fundamental characteristics to support growth. Income is not an
objective. Global Bond Series seeks to achieve current income consistent
with the preservation of principal by investing primarily in global
fixed-income securities that may also provide the potential for capital
appreciation. Strategic Income Series seeks high current income and total
return by using a multi-sector investment approach, investing primarily in
three sectors of the fixed-income securities markets: high-yield, higher
risk securities; investment grade fixed-income securities; and foreign
government and other foreign fixed-income securities. Devon Series seeks
current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks that the
investment manager believes have the potential for above-average dividend
increases over time. Emerging Markets Series seeks to achieve long-term
capital appreciation by investing primarily in equity securities of
issuers located or operating in emerging countries. Convertible Securities
Series seeks a high level of total return on its assets through a
combination of capital appreciation and current income by investing
primarily in convertible securities. Social Awareness Series seeks to
achieve long-term capital appreciation by investing primarily in equity
securities of medium to large-sized companies expected to grow over time
that meet the Series' "Social Criteria" strategy. REIT Series seeks to
achieve maximum long-term total return, with capital appreciation as
a secondary objective, by investing in securities of companies
primarily engaged in the real estate industry.
Delaware-Voyageur US Government Securities Fund seeks to provide a high
level of current income consistent with the prudent investment risk by
investing in U.S. Treasury bills, notes, bonds, and other obligations
issued or unconditionally guaranteed by the full faith and credit of the
U.S. Treasury, and repurchase agreements fully secured by such
obligations.
Delaware-Voyageur Tax-Free Arizona Insured Fund seeks to provide a high
level of current income exempt from federal income tax and the Arizona
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Minnesota Insured Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal
income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Minnesota Intermediate Fund seeks to provide a
high level of current income exempt from federal income tax and the
Minnesota personal income tax, consistent with preservation of capital.
The Fund seeks to reduce market risk by maintaining an average weighted
maturity from five to ten years.
Delaware-Voyageur Tax-Free California Insured Fund seeks to provide a high
level of current income exempt from federal income tax and the California
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Florida Insured Fund seeks to provide a high
level of current income exempt from federal income tax, consistent with
the preservation of capital. The Fund will seek to select investments that
will enable its shares to be exempt from the Florida intangible personal
property tax. Delaware-Voyageur Tax-Free Florida Fund seeks to provide a
high level of current income exempt from federal income tax, consistent
with the preservation of capital. The Fund will seek to select investments
that will enable its shares to be exempt from the Florida intangible
personal property tax. Delaware-Voyageur Tax-Free Kansas Fund seeks to
provide a high level of current income exempt from federal income tax, the
Kansas personal income tax and the Kansas intangible personal property
tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free Missouri Insured Fund seeks to provide a high level of current
income exempt from federal income tax and the Missouri personal income
tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free New Mexico Fund seeks to provide a high level of current income
exempt from federal income tax and the New Mexico personal income tax,
consistent with the preservation of capital. Delaware-Voyageur Tax-Free
Oregon Insured Fund seeks to provide a high level of current income exempt
from federal income tax and the Oregon personal income tax, consistent
with the preservation of capital. Delaware-Voyageur Tax-Free Utah Fund
seeks to provide a high level of current income exempt from federal income
tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free Washington Insured Fund seeks to provide a high level of current
income exempt from federal income tax, consistent with the preservation of
capital.
Delaware-Voyageur Tax-Free Arizona Fund seeks to provide a high level of
current income exempt from federal income tax and the Arizona personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free California Fund seeks to provide a high level of current income
exempt from federal income tax and the California personal income tax,
consistent with the preservation of capital. Delaware-Voyageur Tax-Free
Iowa Fund seeks to provide a high level of current income exempt from
federal income tax and the Iowa personal income tax, consistent with the
preservation of capital. Delaware- Voyageur Tax-Free Idaho Fund seeks to
provide a high level of current income exempt from federal income tax and
the Idaho personal income tax, consistent with the preservation of
capital. Delaware-Voyageur Minnesota High Yield Municipal Bond Fund seeks
to provide a high level of current income exempt from federal income tax
and the Minnesota personal income tax primarily through investment in
medium and lower grade municipal obligations. National High Yield
Municipal Fund seeks to provide a high level of income exempt from federal
income tax, primarily through investment in medium and lower grade
municipal obligations. Delaware-Voyageur Tax-Free New York Fund seeks to
provide a high level of current income exempt from federal income tax and
the personal income tax of the state of New York and the city of New York,
consistent with the preservation of capital. Delaware-Voyageur Tax-Free
Wisconsin Fund seeks to provide a high level of current income exempt from
federal income tax and the Wisconsin personal income tax, consistent with
the preservation of capital.
Delaware-Voyageur Tax-Free Colorado Fund seeks to provide a high level of
current income exempt from federal income tax and the Colorado personal
income tax, consistent with the preservation of capital.
Aggressive Growth Fund seeks long-term capital appreciation, which the
Fund attempts to achieve by investing primarily in equity securities
believed to have the potential for high earnings growth. Although the
Fund, in seeking its objective, may receive current income from dividends
and interest, income is only an incidental consideration in the selection
of the Fund's investments. Growth Stock Fund has an objective of long-term
capital appreciation. The Fund seeks to achieve its objective from equity
securities diversified among individual companies and industries.
Tax-Efficient Equity Fund seeks to obtain for taxable investors a high
total return on an after-tax basis. The Fund will attempt to achieve this
objective by seeking to provide a high long-term after-tax total return
through managing its portfolio in a manner that will defer the realization
of accrued capital gains and minimize dividend income.
Delaware-Voyageur Tax-Free Minnesota Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free North Dakota Fund seeks to provide a high level of current income
exempt from federal income tax and the North Dakota personal income tax,
consistent with the preservation of capital.
For more complete information about any of the funds in the Delaware
Investments family, including charges and expenses, you can obtain a
prospectus from the Distributor. Read it carefully before you invest or
forward funds.
Each of the summaries above is qualified in its entirety by the
information contained in each fund's prospectus(es).
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Delaware Group
Adviser Funds, Inc. and, in its capacity as such, audits the financial
statements contained in the Funds' Annual Reports. The Funds' Statements
of Net Assets, Statements of Assets and Liabilities, Statements of
Operations, Statements of Changes in Net Assets, Financial Highlights and
Notes to Financial Statements, as well as the reports of Ernst & Young
LLP, independent auditors, for the fiscal year ended October 31, 1998 are
included in the Funds' Annual Reports to shareholders. The financial
statements and financial highlights, the notes relating thereto and the
report of Ernst & Young LLP listed above are incorporated by reference
from the Annual Reports into this Part B. [The Statements of Changes in
Net Assets for the year ended October 31, 1996 and Financial Highlights
for the periods ended October 31, 1994 through October 31, 1996 were
audited by Coopers & Lybrand LLP whose report, dated December 20, 1996,
expressed an unqualified opinion on those statements and financial
highlights.]
Delaware Investments includes funds with a wide range of investment
objectives. Stock funds, income funds, national and state-specific
tax-exempt funds, money market funds, global and international funds and
closed-end funds give investors the ability to create a portfolio that
fits their personal financial goals. For more information, shareholders of
the Fund Classes should contact their financial adviser or call Delaware
Investments at 800-523-1918 and shareholders of the Institutional Classes
should contact Delaware Investments at 800-510-4015.
INVESTMENT MANAGER
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
INVESTMENT SUB-ADVISERS
Lynch & Mayer, Inc.
520 Madison Avenue
New York, NY 10022
Delaware International Advisers Ltd.
Third Floor, 80 Cheapside
London, England EC 2V 6EE
AIB Govett, Inc.
250 Montgomery Street, Suite 1200
San Francisco, CA 94104
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
DELAWARE GROUP ADVISER FUNDS, INC.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
INSTITUTIONAL CLASS SHARES
CLASSES OF DELAWARE GROUP
ADVISER FUNDS, INC.
PART B
STATEMENT OF
ADDITIONAL INFORMATION
March 1, 1999
PART C
Other Information
Item 23. Exhibits
(a) Articles of Incorporation. Articles of Incorporation, as
amended and supplemented to date incorporated into this
filing by reference to Post-Effective Amendment No. 7 filed
February 28, 1997.
(1) Executed Articles Supplementary (December 18, 1997)
incorporated into this filing by reference to Post-
Effective Amendment No. 8 filed December 23, 1997.
(b) By-Laws. By-Laws, as amended to date, incorporated into this
filing by reference to Post-Effective Amendment No. 7 filed
February 28, 1997.
(c) Instruments Defining the Rights of Security Holders.
(1) Articles of Incorporation. Article IV of Articles of
Incorporation (August 12, 1993) incorporated into this
filing by reference to Post-Effective Amendment No. 7
filed February 28, 1997.
(i) Executed Articles Supplementary (December 18, 1997)
incorporated into this filing by reference to Post-
Effective Amendment No. 8 filed December 23, 1997.
(2) By-Laws. Article I and Article IV incorporated into this
filing by reference to Post-Effective Amendment No. 7
filed February 28, 1997.
(d) Investment Management and Sub-Advisory Agreements.
(1) Executed Investment Management Agreement between Delaware
Management Company, Inc. and the Registrant on behalf of
U.S. Growth Fund (May 6, 1996) incorporated into this
filing by reference to Post-Effective Amendment No. 7
filed February 28, 1997.
(2) Amended and Restated Investment Management Agreement
between Delaware Management Company, Inc. and the
Registrant on behalf of Overseas Equity Fund (December
1997) incorporated into this filing by reference to Post-
Effective Amendment No. 8 filed December 23, 1997.
(3) Executed Investment Management Agreement between Delaware
Management Company, Inc. and the Registrant on behalf of
New Pacific Fund (May 6, 1996) incorporated into this
filing by reference to Post-Effective Amendment No. 7
filed February 28, 1997.
(4) Executed Sub-Advisory Agreement between Delaware
Management Company, Inc. and Lynch & Mayer, Inc. on
behalf of U.S. Growth Fund (May 6, 1996) incorporated
into this filing by reference to Post-Effective Amendment
No. 7 filed February 28, 1997.
(5) Form of Sub-Advisory Agreement between Delaware
Management Company, Inc. and Delaware International
Advisors Ltd. on behalf of Overseas Equity Fund (1997)
incorporated into this filing by reference to Post-
Effective Amendment No. 8 filed December 23,
1997.
(6) Form of Sub-Advisory Agreement between Delaware
Management Company, Inc. and AIB Govett, Inc. on behalf
of New Pacific Fund (1997) incorporated into this filing
by reference to Post-Effective Amendment No. 9 filed
February 27, 1998.
(e) (1) 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.
(2) 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.
(3) 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.
(4) 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.
(f) Bonus, Profit Sharing, Pension Contracts.
(1) Amended and Restated Profit Sharing Plan (November 17,
1994) incorporated into this filing by reference to Post-
Effective Amendment No. 5 filed March 12, 1996.
(2) Amendment to Profit Sharing Plan (December 21, 1995)
incorporated into this filing by reference to
Post-Effective Amendment No. 5 filed March 12, 1996.
(g) Custodian Agreements.
(1) Form of Custodian Agreement (May 1996)
between The Chase Manhattan Bank and the Registrant
incorporated into this filing by reference to Post-
Effective Amendment No. 7 filed February 28, 1997.
(i) Form of Amendment (November 1997) to Custodian
Agreement between The Chase Manhattan Bank and the
Registrant incorporated into this filing by reference to
Post-Effective Amendment No. 8 filed December 23,1997.
(2) Form of Securities Lending Agreement (May 1996) between
The Chase Manhattan Bank and the Registrant
incorporated into this filing by reference to Post-
Effective Amendment No. 7 filed February 28, 1997.
(h) Other Material Contracts.
(1) 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.
(2) Executed Fund Accounting Agreement (August 19, 1996)
between Delaware Service Company, Inc. and the Registrant
incorporated into this filing by reference to Post-
Effective Amendment No. 7 filed February 28, 1997.
(i) Executed Amendment No. 9 (March 31, 1998) to Schedule A
to Delaware Group of Funds Fund Accounting Agreement
attached as Exhibit.
(ii) Executed Amendment No. 10 (August 31, 1998)
to Schedule A to Delaware Group of Funds Fund Accounting
Agreement attached as Exhibit.
(iii) Executed Amendment No. 11 (September 14, 1998)
to Schedule A to Delaware Group of Funds Fund
Accounting Agreement attached as Exhibit.
(iv) Executed Amendment No. 12 (1998) to Schedule A
to Delaware Group of Funds Fund Accounting Agreement
attached as Exhibit.
(v) Executed Amendment No. 13 (1998) to Schedule A
to Delaware Group of Funds Fund Accounting Agreement
attached as Exhibit.
(i) Legal Opinion. Attached as Exhibit.
(j) Consent of Auditors. To be filed by Amendment.
(k) Inapplicable.
(l) Inapplicable.
(m) Plans under Rule 12b-1.
(1) Plan under Rule 12b-1 for U.S. Growth Fund A Class
(September 25, 1995) incorporated into this filing by
reference to Post-Effective Amendment No. 4 filed
February 28, 1996.
(2) Plan under Rule 12b-1 for U.S. Growth Fund B Class
(September 25,1995) incorporated into this filing by
reference to Post-Effective Amendment No. 4 filed
February 28, 1996.
(3) Plan under Rule 12b-1 for U.S. Growth Fund C Class
(September 25,1995) incorporated into this filing by
reference to Post-Effective Amendment No. 4 filed
February 28, 1996.
(4) Plan under Rule 12b-1 for Overseas Equity Fund A Class
(September 25,1995) incorporated into this filing by
reference to Post-Effective Amendment No. 4 filed
February 28, 1996.
(5) Plan under Rule 12b-1 for Overseas Equity Fund B Class
(September 25,1995) incorporated into this filing by
reference to Post-Effective Amendment No. 4 filed
February 28, 1996.
(6) Plan under Rule 12b-1 for Overseas Equity Fund C Class
(September 25,1995) incorporated into this filing by
reference to Post-Effective Amendment No. 4 filed
February 28, 1996.
(7) Plan under Rule 12b-1 for New Pacific Fund A Class
(September 25,1995) incorporated into this filing by
reference to Post-Effective Amendment No. 4 filed
February 28, 1996.
(8) Plan under Rule 12b-1 for New Pacific Fund B Class
(September 25,1995) incorporated into this filing by
reference to Post-Effective Amendment No. 4 filed
February 28, 1996.
(9) Plan under Rule 12b-1 for New Pacific Fund B Class
(September 25,1995) incorporated into this filing by
reference to Post-Effective Amendment No. 4 filed
February 28, 1996.
(n) Financial Data Schedules. To be filed by Amendment.
(o) Inapplicable
(p) Other: Directors' Power of Attorney. Incorporated into this
filing by reference to Post-Effective Amendment No. 9 filed
February 27, 1998.
Item 24. Persons Controlled by or under Common Control with Registrant.
None.
Item 25. Indemnification. Incorporated into this filing by reference to
Post-Effective Amendment No. 6 filed May 2, 1996.
Item 26.(a) Business and Other Connections of Investment Adviser.
Delaware Management Company (the "Manager"), a series of Delaware
Management Business Trust serves as investment manager to the Registrant
and also serves as investment manager or sub-adviser to certain of the
other funds in the Delaware Group (Delaware Group Equity Funds I, Inc.,
Delaware Group Equity Funds II, Inc., Delaware Group Equity Funds III,
Inc., Delaware Group Equity Funds IV, Inc., Delaware Group Equity Funds
V, Inc., Delaware Group Government Fund, Inc., Delaware Group Income
Funds, Inc., Delaware Group Limited-Term Government Funds, Inc.,
Delaware Group Cash Reserve, Inc., Delaware Group Tax-Free Fund, Inc.,
Delaware Group State Tax-Free Income Trust, Delaware Group Tax-Free
Money Fund, Inc., Delaware Group Premium Fund, Inc., Delaware Group
Global & International Funds, Inc., Delaware Pooled Trust, Inc.,
Delaware Group Dividend and Income Fund, Inc., Delaware Group Global
Dividend and Income Fund, Inc., Delaware Group Foundation Funds, Inc.,
Voyageur Tax-Free Funds, Inc., Voyageur Intermediate Tax-Free Funds,
Inc., Voyageur Insured Funds, Inc., Voyageur Funds, Inc., Voyageur
Investment Trust, Voyageur Investment Trust II, Voyageur Mutual Funds,
Inc., Voyageur Mutual Funds II, Inc., Voyageur Mutual Funds III, Inc.,
Voyageur Arizona Municipal Income Fund, Inc., Voyageur Colorado Insured
Municipal Income Fund, Inc., Voyageur Florida Insured Municipal Income
Fund, Voyageur Minnesota Municipal Fund, Inc., Voyageur Minnesota
Municipal Fund II, Inc. and Voyageur Minnesota Municipal Fund III, Inc.)
and provides investment advisory services to institutional accounts,
primarily retirement plans and endowment funds. In addition, certain
directors of the Manager also serve as directors/trustees of the other
funds in the Delaware Investments family, and certain officers are also
officers of these other funds. A company owned by the Manager's parent
company acts as principal underwriter to the mutual funds in the
Delaware Investments family (see Item 29 below) and another such company
acts as the shareholder services, dividend disbursing, accounting
servicing and transfer agent for all of the mutual funds in the Delaware
Investments family.
The following persons serving as directors or officers of the Manager
Have held the following positions during the past two years:
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
Wayne A. Stork Chairman of the Board, President, Chief Executive
Officer, Chief Investment Officer and Director/
Trustee of Delaware Management Company, Inc. and
Delaware Management Business Trust; Chairman of the
Board, President, Chief Executive Officer, Chief
Investment Officer of Delaware Management
Company (a series of Delaware Management Business
Trust); Chairman of the Board, President, Chief
Executive Officer and Director of DMH Corp.,
Delaware Distributors, Inc. and Founders Holdings,
Inc.; Chairman, Chief Executive Officer and Chief
Investment Officer of Delaware Investment Advisers
(a series of Delaware Management Business Trust);
Chairman, Chief Executive Officer and Director of
Delaware International Holdings Ltd. And Delaware
International Advisers Ltd.; Chairman of the Board
and Director of Delaware Management Holdings, Inc.,
and Delaware Capital Management, Inc.; Chairman of
Delaware Distributors, L.P.; President and Chief
Executive Officer of Delvoy, Inc.; and Director
and/or Trustee of the Registrant, each of the other
funds in the Delaware Investments family, Delaware
Service Company, Inc. and Retirement Financial
Services, Inc.
Richard G. Executive Vice President of the Registrant, each of
Unruh, Jr. the other funds in the Delaware Investments family,
Delaware Management Holdings, Inc., Delaware
Capital Management, Inc. and Delaware Management
Company (a series of Delaware Management Business
Trust); Executive Vice President and Director/
Trustee of Delaware Management Company, Inc. and
Delaware Management Business Trust; President of
Delaware Investment Advisers (a series of Delaware
Management Business Trust); 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.,
Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), the Registrant, each of the other funds in
the Delaware Investments family and Delaware
Management Holdings, Inc.; Executive Vice President
and Director of Founders Holdings, Inc.; Executive
Vice President of Delaware Capital Management, Inc.
and Delaware Management Business Trust; and
Director of Founders CBO Corporation
Director, HYPPCO Finance Company Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
David K. Downes Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Director of Delaware
Management Company, Inc., DMH Corp, Delaware
Distributors, Inc., Founders Holdings, Inc. and
Delvoy, Inc.; Executive Vice President, Chief
Financial Officer, Chief Administrative Officer and
Trustee of Delaware Management Business Trust;
Executive Vice President, Chief Operating Officer
and Chief Financial Officer of the Registrant and
each of the other funds in the Delaware Investments
family, Delaware Management Holdings, Inc.,
Founders CBO Corporation, Delaware Capital
Management, Inc., Delaware Management Company
(a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust) and Delaware
Distributors, L.P.; President, Chief Executive
Officer, Chief Financial Officer and Director of
Delaware Service Company, Inc.; President, Chief
Operating Officer, Chief Financial Officer and
Director of Delaware International Holdings Ltd.;
Chairman, Chief Executive Officer and Director of
Retirement Financial Services, Inc.; Chairman and
Director of Delaware Management Trust Company; and
Director of Delaware International Advisers Ltd.
Chief Executive Officer and Director of Forewarn,
Inc. since 1993, 8 Clayton Place, Newtown
Square, PA
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
Richard J. Flannery Executive Vice President and General Counsel of
Delaware Management Holdings, Inc., DMH Corp.,
Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Distributors, L.P.,
Delaware Management Trust Company, Delaware Capital
Management, Inc., Delaware Service Company, Inc.,
Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), Founders CBO Corporation and Retirement
Financial Services, Inc.; Executive Vice
President/General Counsel and Director of Delaware
International Holdings Ltd., Founders Holdings,
Inc. and Delvoy, Inc.; Senior Vice President of the
Registrant and each of the other funds in the
Delaware Investments family; Director of Delaware
International Advisers Ltd.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since
1991, Bulltown Rd., Elverton, PA; Director and
Member of Executive Committee of Stonewall
Links, Inc. since 1991, Bulltown Rd., Elverton, PA
George M. Senior Vice President, Secretary and Director/
Chamberlain, Jr. Trustee of Delaware Management Company, Inc., DMH
Corp., Delaware Distributors, Inc., Delaware
Service Company, Inc., Founders Holdings,
Inc., Delaware Capital Management, Inc., Retirement
Financial Services, Inc., Delvoy, Inc. and Delaware
Management Business Trust; Senior Vice President,
Secretary and General Counsel of the Registrant and
each of the other funds in the Delaware Investments
family; Senior Vice President and Secretary of
Delaware Distributors, L.P., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and Delaware
Management Holdings, Inc.; Senior Vice President
and Director of Delaware International Holdings
Ltd.; Executive Vice President, Secretary and
Director of Delaware Management Trust Company; and
Director of Delaware International Advisers Ltd.
Michael P. Bishof Senior Vice President and Treasurer of the
Registrant, each of the other funds in the Delaware
Investments family and Founders Holdings, Inc.;
Senior Vice President/Investment Accounting of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management
Business Trust) and Delaware Service Company, Inc.;
Senior Vice President and Treasurer/ Manager,
Investment Accounting of Delaware Distributors,
L.P. and Delaware Investment Advisers
Accounting of Delaware Distributors, L.P. and
Delaware Investment Advisers (a series of Delaware
Management Business Trust); Senior Vice President
and Assistant Treasurer of Founders CBO
Corporation; and Senior 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 Holdings, Inc.,
DMH Corp., Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Capital
Management, Inc., Delaware Distributors, L.P.,
Delaware Service Company, Inc., Delaware
International Holdings Ltd., Delaware Management
Company (a series of Delaware Management Business
Trust), Delvoy, Inc. and Delaware Management
Business Trust; Senior Vice President/Corporate
Controller of the Registrant, each of the other
funds in the Delaware Investments family and
Founders Holdings, Inc.; Executive Vice President,
Chief Financial Officer and Treasurer of Delaware
Management Trust Company; Chief Financial Officer
and Treasurer of Retirement Financial Services,
Inc.; and Senior Vice President/Assistant Treasurer
of Founders CBO Corporation
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
Susan L. Hanson Senior Vice President/Global Marketing & Client
Services of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware
Management Business Trust) and Delaware Service
Company, Inc.
Michael T. Taggart Vice President/Facilities Management and
Administrative Services of Delaware Management
Company, Inc. and Delaware Management Company
(a series of Delaware Management Business Trust)
Douglas L. Anderson Senior Vice President/Operations of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Retirement Financial Services, Inc. and
Delaware Service Company, Inc.; Senior Vice
President/Operations and Director of Delaware
Management Trust Company
James L. Shields Senior Vice President/Chief Information Officer of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management
Business Trust), Delaware Service Company, Inc. and
Retirement Financial Services, Inc.
Eric E. Miller Vice President, Assistant Secretary and Deputy
General Counsel of the Registrant and each of the
other funds in the Delaware Investments family,
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers
(a series of Delaware Management Business Trust),
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 Retirement
Financial Services, Inc.; Assistant Secretary of
Delaware Management Business Trust; and Vice
President and Assistant Secretary of Delvoy, Inc.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
Richelle S. Maestro Vice President and Assistant Secretary of the
Registrant, each of the other funds in the Delaware
Investments family, Delaware Management Company,
Inc., Delaware Management Company (a series of
Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware
Management Business Trust), 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.,
Retirement Financial Services, Inc., Founders
Holdings, Inc. and Delvoy, Inc.; Vice President and
Secretary of Delaware International Holdings Ltd.;
and Secretary of Founders CBO Corporation
Partner of Tri-R Associates since 1989, 10001
Sandmeyer Lane, Philadelphia, PA
Richard Salus Vice President/Assistant Controller of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust) and Delaware Management Trust Company
Bruce A. Ulmer Vice President/Director of LNC Internal Audit of
the Registrant, each of the other funds in the
Delaware Investments family, Delaware Management
Company, Inc., Delaware Management Company
(a series of Delaware Management Business Trust),
Delaware Management Holdings, Inc., DMH Corp.,
Delaware Management Trust Company and Retirement
Financial Services, Inc.; Vice President/Director
of Internal Audit of Delvoy, Inc.
Joel A. Ettinger1 Vice President/Director of Taxation of the
Registrant, each of the other funds in the Delaware
Investments family, Delaware Management Company,
Inc., Delaware Management Company (a series of
Delaware Management Business Trust) and Delaware
Management Holdings, Inc., Founders Holdings, Inc.
and Founders CBO Corporation
Christopher Adams Vice President/Business Manager, Equity Department
of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management
Business Trust) and Delaware Service Company, Inc.
Dennis J. Mara2 Vice President/Acquisitions of Delaware Management
Company, Inc. and Delaware Management Company
(a series of Delaware Management Business Trust)
Scott Metzger Vice President/Business Development of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust) and Delaware Service Company, Inc.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
Lisa O. Brinkley Vice President/Compliance of the Registrant,
Delaware Management Company, Inc., each of the
other funds in the Delaware Investments family,
Delaware Management Company (a series of Delaware
Management Business Trust), DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware Management
Trust Company, Delaware Capital Management, Inc.
and Retirement Financial Services, Inc.; Vice
President/Compliance Officer of Delaware Management
Business Trust; and Vice President of Delvoy, Inc.
Mary Ellen Carrozza Vice President/Client Services of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and the
Registrant
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), the Registrant
and the fixed-income investment companies in the
Delaware Investments family; Vice President of
Founders Holdings, Inc.; and Treasurer, Assistant
Secretary and Director of Founders CBO Corporation
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), the Registrant
and the fixed-income investment companies in the
Delaware Investments family; Vice President of
Founders Holdings, Inc.; and President and Director
of Founders CBO Corporation
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), the
Registrant, the fixed-income investment companies
in the Delaware Investments family and Delaware
Capital Management, Inc.
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), the
Registrant, the fixed-income investment companies
in the Delaware Investments family and Delaware
Capital Management, Inc.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
Roger A. Early Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), the
Registrant, and the fixed-income other investment
companies in the Delaware Investments family
Mitchell L. Conery Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), the
Registrant, the fixed-income investment companies
in the Delaware Investments family and Delaware
Capital Management, Inc.
George H. Burwell Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust) and the other equity investment companies in
the Delaware Investments family
John B. Fields Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), the other
equity investment companies in the Delaware
Investments family, Delaware Capital Management,
Inc. and Trustee of Delaware Management Business
Trust
Gerald S. Frey Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and the other
equity investment companies in the Delaware
Investments family
Christopher Beck3 Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and the other
equity investment companies in the Delaware
Investments family
Elizabeth H. Vice President/Senior Portfolio Manager of Delaware
Howell4 Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), and the fixed-income investment companies
in the Delaware Investments family
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
Andrew M. Vice President/Senior Portfolio Manager of
McCullagh, Jr.5 Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management
Business Trust) and the fixed-income investment
companies in the Delaware Investments family
Babak Zenouzi Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust) and the other equity investment companies in
the Delaware Investments family
J. Paul Dokas6 Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust) and the other equity investment companies in
the Delaware Investments family
Cynthia Isom Vice President/Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), the Registrant and the fixed-income
investment companies in the Delaware Investments
family
Paul Grillo Vice PresidentSenior/Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), the Registrant
and the fixed-income investment companies in the
Delaware Investments family
Marshall T. Vice President/Senior Portfolio Manager of Delaware
Bassett7 Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), the Registrant
and the other equity investment companies in the
Delaware Investments family
John A. Heffern8 Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), the Registrant and the other equity
investment companies in the Delaware Investments
family
Lori P. Wachs Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), the Registrant and the other equity
investment companies in the Delaware Investments
family
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
1 TAX PRINCIPAL, Ernst & Young LLP prior to April 1998.
2 CORPORATE CONTROLLER, IIS prior to July 1997.
3 SENIOR PORTFOLIO MANAGER, Pitcairn Trust Company prior to May 1997.
4 SENIOR PORTFOLIO MANAGER, Voyageur Fund Managers, Inc. prior to
May 1997.
5 SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, Voyageur Asset
Management LLC prior to May 1997.
6 DIRECTOR OF TRUST INVESTMENTS, Bell Atlantic Corporation prior to
February 1997.
7 VICE PRESIDENT, Morgan Stanley Asset Management prior to March 1997.
8 SENIOR VICE PRESIDENT, EQUITY RESEARCH, NatWest Securities
Corporation prior to March 1997.
(b) Business and Other Connections of Sub-Investment Advisers
(1) Lynch & Mayer, Inc. serves as sub-investment adviser to U.S.
Growth Fund. The directors and officers of Lynch & Mayer,
Inc. are listed below. Unless otherwise indicated, the
address of each person is 520 Madison Avenue, New York, New
York 10022.
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
* Business address is 200 East Berry Street, Fort Wayne, IN 46802.
Name Positions and Offices with Lynch & Mayer, Inc.
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
(2) Delaware International Advisers Ltd. ("Delaware International")
serves as sub-investment adviser to Overseas Equity Fund of the
Registrant and also serves as investment manager or sub-investment
adviser to certain of the other funds in the Delaware Investments
family (Delaware Group Global Dividend and Income Fund, Inc.,
Delaware Group Global & International Funds, Inc., Delaware Pooled
Trust, Inc. and Delaware Group Premium Fund, Inc.) and other
institutional accounts.
Information regarding the officers and directors of Delaware
International and the positions they have held with the Registrant
during the past two fiscal years is provided below.
Positions and Offices with Delaware
Name and Principal International Advisers Ltd. and its Affiliates
Business Address * and Other Positions and Offices Held
*Wayne A. Stork Chairman, Chief Executive Officer and Director of
Delaware International Holdings Ltd. and Delaware
International Advisers Ltd.; Chairman of the Board,
President, Chief Executive Officer, Chief
Investment Officer and Director/Trustee of Delaware
Management Company, Inc. and Delaware Management
Business Trust; Chairman of the Board, President,
Chief Executive Officer, Chief Investment Officer
of Delaware Management Company (a series of
Delaware Management Business Trust); Chairman of
the Board, President, Chief Executive Officer and
Director of DMH Corp., Delaware Distributors, Inc.
and Founders Holdings, Inc.; Chairman, Chief
Executive Officer and Chief Investment Officer of
Delaware Investment Advisers (a series of Delaware
Management Business Trust); Chairman of the Board
and Director of Delaware Management Holdings, Inc.
and Delaware Capital Management, Inc.; Chairman of
Delaware Distributors, L.P.; President and Chief
Executive Officer of Delvoy, Inc.; and Director
and/or Trustee of the Registrant, each of the other
funds in the Delaware Investments family, Delaware
Service Company, Inc. and Retirement Financial
Services, Inc.
*Jeffrey J. Nick Director of Delaware International Advisers Ltd.;
President, Chief Executive Officer and Director
and/or Trustee of the Registrant and each of the
other investment companies in the Delaware
Investments family; President and Director of
Delaware Management Holdings, Inc.; and President,
Chief Executive Officer and Director of Lincoln
National Investment Companies, Inc.
**David G. Tilles Managing Director, Chief Investment Officer and
Director of Delaware International Advisers Ltd.
and Chief Investment Officer and Director of
Delaware International Holdings, Ltd.
**G. Roger H.
Kitson Vice Chairman and Director of Delaware International
Advisers Ltd.
**Ian G. Sims Deputy Managing Director/Chief Investment
Officer/Global Fixed Income and Director of
Delaware International Advisers Ltd.
**John Emberson Secretary, Compliance Officer, Finance Director and
Director of Delaware International Advisers Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London,
England EC2V 6EE.
Positions and Offices with Delaware
Name and Principal International Advisers Ltd. and its Affiliates
Business Address * and Other Positions and Offices Held
**Nigel G. May Senior Portfolio Manager/Head of Pacific Basin
Group and Director of Delaware International
Advisers Ltd.
**Elizabeth A.
Desmond Senior Portfolio Manager/Head of European Group and
Director of Delaware International Advisers Ltd.
*David K. Downes Director of Delaware International Advisers Ltd.;
Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Director of Delaware
Management Company, Inc., DMH Corp, Delaware
Distributors, Inc., Founders Holdings, Inc. and
Delvoy, Inc.; Executive Vice President, Chief
Financial Officer, Chief Administrative Officer and
Trustee of Delaware Management Business Trust;
Executive Vice President, Chief Operating Officer
and Chief Financial Officer of the Registrant and
each of the other funds in the Delaware Investments
family, Delaware Management Holdings, Inc.,
Founders CBO Corporation, Delaware Capital
Management, Inc., Delaware Management Company
(a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust) and Delaware
Distributors, L.P.; President, Chief Executive
Officer, Chief Financial Officer and Director of
Delaware Service Company, Inc.; President, Chief
Operating Officer, Chief Financial Officer and
Director of Delaware International Holdings Ltd.;
Chairman, Chief Executive Officer and Director of
Retirement Financial Services, Inc.; and Chairman
and Director of Delaware Management Trust Company
Chief Executive Officer and Director of Forewarn,
Inc. since 1993, 8 Clayton Place, Newtown Square, PA
*Richard G.
Unruh, Jr. President of Delaware Investment Advisers (a series
of Delaware Management Business Trust); Executive
Vice President and Director/Trustee of Delaware
Management Company, Inc. and Delaware Management
Business Trust; Executive Vice President of the
Registrant, each of the other funds in the Delaware
Investments family, Delaware Management Holdings,
Inc., Delaware Capital Management, Inc. and
Delaware Management Company (a series of Delaware
Management Business Trust); 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. since1989, 2040 Market Street, Philadelphia,
PA; Board of Directors, Metron, Inc. since 1995,
11911 Freedom Drive, Reston, VA
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London,
England EC2V 6EE.
Positions and Offices with Delaware
Name and Principal International Advisers Ltd. and its Affiliates
Business Address * and Other Positions and Offices Held
*Richard J.
Flannery Director of Delaware International Advisers Ltd.;
Executive Vice President and General Counsel of
Delaware Management Holdings, Inc., DMH Corp.,
Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Distributors, L.P.,
Delaware Management Trust Company, Delaware Capital
Management, Inc., Delaware Service Company, Inc.,
Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), Founders CBO Corporation and Retirement
Financial Services, Inc.; Executive Vice President/
General Counsel and Director of Delaware
International Holdings Ltd., Founders Holdings,
Inc. and Delvoy, Inc.; Senior Vice President of the
Registrant and each of the other funds in the
Delaware Investments family
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since
1991, Bulltown Rd., Elverton, PA; Director and
Member of Executive Committee of Stonewall
Links, Inc. since 1991, Bulltown Rd., Elverton, PA
*John C. E.
Campbell Director of Delaware International Advisers Ltd.;
Executive Vice President of Delaware Investment
Advisers
*George M. Senior Vice President, Secretary and General
Chamberlain, Jr. Counsel of the Registrant and each of the other
funds in the Delaware Investments family; Senior
Vice President and Secretary of Delaware
Distributors, L.P., Delaware Management Company
(a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust) and Delaware Management
Holdings, Inc.; Senior Vice President Secretary and
Director/Trustee of Delaware Management Company,
Inc., DMH Corp., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Founders Holdings,
Inc., Delaware Capital Management, Inc., Retirement
Financial Services, Inc., Delvoy, Inc. and Delaware
Management Business Trust; Senior Vice President
and Director of Delaware International Holdings
Ltd.; Executive Vice President, Secretary and
Director of Delaware Management Trust Company; and
Director of Delaware International Advisers Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London,
England EC2V 6EE.)
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
*George E. Deming Director of Delaware International Advisers Ltd.;
Vice President/Senior Portfolio Manager of Delaware
Investment Advisers
**Timothy W.
Sanderson Senior Portfolio Manager, Deputy Compliance Officer,
Director Equity Research, Chief Investment Officer and
Director of Delaware International Advisers Ltd.
**Clive A. Gillmore Senior Portfolio Manager, Director U.S. Mutual Fund
Liaison and Director of Delaware International
Advisers Ltd.
**Hamish O. Parker Senior Portfolio Manager, Director U.S. Marketing
Liaison and Director of Delaware International
Advisers Ltd.
**Gavin A. Hall Senior Portfolio Manager of Delaware International
Advisers Ltd.
**Robert Akester Senior Portfolio Manager of Delaware International
Advisers Ltd.
**Hywel Morgan Senior Portfolio Manager of Delaware International
Advisers Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London, England
EC2V 6EE.
(3) AIB Govett, Inc. serves as sub-investment adviser to New Pacific
Fund. The directors and officers of AIB Govett, Inc., a majority
owned indirect subsidiary of the AIB Group of Companies as of
December 29, 1995, are listed below. Unless otherwise indicated, the
address of each person is 250 Montgomery Street, Suite 1200, San
Francisco, CA 94104.
Name Positions and Offices with AIB Govett, Inc.
Andrew Barnett Director
Peter Cotgrove Director
Charles Fowler Joint Chairman
Peter Kysel Director
Caroline Lane Director
Brian Lee Managing Director Operations
Rachael Maunder Director
Name Positions and Offices with AIB Govett, Inc.
Peter Moffatt Director
Rosemary Morgan Director
Ian Morley Director
John Murray Director
Kevin Pakenham Joint Chairman and Chief Executive Officer
Peter Pejacsevich Director and Chief Investment Officer
Gareth Watts Director
Steve Wood Director
Andrew Yates Director
Colm Doherty Director
Patrick Cunneen Director
Michael Wilson Director
Item 27. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal underwriter
for all the mutual funds in the Delaware Investments family.
(b) Information with respect to each director, officer or partner
of principal underwriter:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------- ---------------------- ---------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
Delaware Investment Limited Partner None
Advisers
Delaware Capital
Management, Inc. Limited Partner None
Bruce D. Barton President and Chief Executive None
Officer
David K. Downes Executive Vice President, Executive Vice
Chief Operating Officer President, Chief
and Chief Financial Officer Operating Officer
and Chief Financial
Officer
Richard J. Flannery Executive Vice President/ Senior Vice
General Counsel President
George M. Chamberlain, Jr. Senior Vice President/Secretary Senior Vice
President/
Secretary/General
Counsel
Joseph H. Hastings Senior Vice President/Corporate Senior Vice
President/Controller & Corporate
Treasurer Controller
Terrence P. Cunningham Senior Vice President/ None
Financial Institutions/
National Sales Manager
Thomas E. Sawyer Senior Vice President/ None
National Sales Director
Mac McAuliffe Senior Vice President/Sales None
Manager, Western Division
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------- ---------------------- ---------------------
J. Chris Meyer Senior Vice President/ None
Director Product
Management
William M. Kimbrough Senior Vice President/ None
Wholesaler
Daniel J. Brooks Senior Vice President/ None
Wholesaler
Bradley L. Kolstoe Senior Vice President/Western None
Division Sales Manager
Henry W. Orvin Senior Vice President/Eastern None
Division Sales Manager
Michael P. Bishof Senior Vice President and Senior Vice President/
Treasurer/ Manager, Treasurer
Investment Accounting
Eric E. Miller Vice President/Assistant Vice President/
Secretary/Deputy General Assistant Secretary/
Counsel Deputy General Counsel
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Lisa O. Brinkley Vice President/Compliance Vice President/
Compliance
Daniel H. Carlson Vice President/ None
Strategic Marketing
Diane M. Anderson Vice President/Plan Record None
Keeping and Administration
Anthony J. Scalia Vice President/Defined None
Contribution Sales,
SW Territory
Courtney S. West Vice President/Defined None
Contribution Sales,
NE Territory
Denise F. Guerriere Vice President/Client Services None
Gordon E. Searles Vice President/Client Services None
Lori M. Burgess Vice President/Client Services None
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------- ---------------------- ---------------------
Julia R. Vander Els Vice President/Participant None
Services
Jerome J. Alrutz Vice President/Retail None
Sales
Scott Metzger Vice President/Business Vice President/
Development Business
Development
Larry Carr Vice President/Sales None
Manager
Stephen C. Hall Vice President/Institutional None
Sales
Gregory J. McMillan Vice President/ National None
Accounts
Holly W. Reimel Senior Vice President/Manager, None
National Accounts
Christopher H. Price Vice President/Manager, None
Insurance
Stephen J. DeAngelis Senior Vice President, None
National Director/Manager
Account Services
Andrew W. Whitaker Vice President/Financial None
Institutions
Jessie Emery Vice President/Marketing None
Communications
Darryl S. Grayson Vice President, Broker/Dealer None
Internal Sales
Dinah J. Huntoon Vice President/Product None
Manager Equity
Soohee Lee Vice President/Fixed Income None
Product Management
Michael J. Woods Vice President/Financial None
Institutions
Ellen M. Krott Vice President/Marketing None
Dale L. Kurtz Vice President/Marketing None
Support
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------- ---------------------- ---------------------
David P. Anderson Vice President/Wholesaler None
Lee D. Beck Vice President/Wholesaler None
Gabriella Bercze Vice President/Wholesaler None
Larry D. Birdwell Vice President/Wholesaler None
Terrence L. Bussard Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William L. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Joseph Gallagher Vice President/Wholesaler None
Thomas C. Gallagher Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Ronald A. Haimowitz Vice President/Wholesaler None
Edward J. Hecker Vice President/Wholesaler None
Christopher L. Johnston Vice President/Wholesaler None
Michael P. Jordan Vice President/Wholesaler None
Jeffrey A. Keinert Vice President/Wholesaler None
Thomas P. Kennett Vice President/ Wholesaler None
Theodore T. Malone Vice President/Wholesaler None
Debbie A. Marler Vice President/Wholesaler None
Nathan W. Medin Vice President/Wholesaler None
Roger J. Miller Vice President/Wholesaler None
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------- ---------------------- ---------------------
Andrew Morris Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
Scott Naughton Vice President/Wholesaler None
Stephen C. Nell Vice President/Wholesaler None
Julia A. Nye Vice President/Wholesaler None
Joseph T. Owczarek Vice President/Wholesaler None
Mary Ellen Pernice-Fadden Vice President/Wholesaler None
Mark A. Pletts Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
Laura E. Roman Vice President/Wholesaler None
Linda Schulz Vice President/Wholesaler None
Edward B. Sheridan Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Julia A. Stanton Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
Edward J. Wagner Vice President/Wholesaler None
Wayne W. Wagner Vice President/Wholesaler None
John A. Wells Vice President/Marketing None
Technology
Scott Whitehouse Vice President/Wholesaler None
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Not Applicable.
</TABLE>
Item 28. 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
One Commerce Square
Philadelphia, PA 19103
(with respect to their services
as investment adviser)
(c) The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, N.Y. 11245
(with respect to their services as custodian)
(d) Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
(with respect to their services as distributor)
(e) Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
(with respect to their services as
shareholder services agent)
(f) Lynch & Mayer, Inc.
520 Madison Avenue
New York, NY 10022
(with respect to their services as sub-adviser)
(g) Delaware International Advisers Ltd.
Third Floor
80 Cheapside
London, England EC2V 6EE
(with respect to their services as sub-adviser)
(h) AIB Govett, Inc.
250 Montgomery Street, Suite 1200
San Francisco, CA 94104
(with respect to their services as sub-adviser)
Item 29. Management Services. None.
Item 30. 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.
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in this City of Philadelphia, Commonwealth of
Pennsylvania on this 23rd day of December, 1998.
DELAWARE GROUP ADVISER FUNDS, INC.
By /s/ Jeffrey J. Nick
Jeffrey J. Nick
Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ------------------ -------------- ----------
<S> <C> <C>
/s/ Jeffrey J. Nick President, Chief Executive December 23, 1998
- ------------------ Officer, Chairman and Director
Jeffrey J. Nick
Executive Vice President/Chief
Operating Officer/Chief Financial
Officer
/s/David K. Downes (Principal Financial Officer December 23, 1998
- ------------------ and Principal Accounting
David K. Downes Officer)
/s/Walter P. Babich * Director December 23, 1998
- ------------------
Walter P. Babich
/s/John H. Durham * Director December 23, 1998
- ------------------
John H. Durham
/s/Anthony D. Knerr * Director December 23, 1998
- ------------------
Anthony D. Knerr
/s/Ann R. Leven * Director December 23, 1998
- ------------------
Ann R. Leven
/s/W. Thacher Longstreth * Director December 23, 1998
- ------------------
W. Thacher Longstreth
/s/Thomas F. Madison * Director December 23, 1998
- ------------------
Thomas F. Madison
/s/Charles E. Peck * Director December 23, 1998
- ------------------
Charles E. Peck
/s/Wayne A. Stork * Director December 23, 1998
- ------------------
Wayne A. Stork
*By /s/Jeffrey J. Nick
------------------
Jeffrey J. Nick
as Attorney-in-Fact for
each of the persons indicated
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INDEX TO EXHIBITS
Exhibit No. Exhibit
- ---------- ------------
EX-99.H2I Executed Amendment No. 9
(March 31, 1997) to Schedule A to Delaware Group of Funds
Fund Accounting Agreement
EX-99.H2II Executed Amendment No. 10
(August 31, 1997) to Schedule A to Delaware Group of Funds
Fund Accounting Agreement
EX-99.H2III Executed Amendment No. 11
(September 14, 1997) to Schedule A to Delaware Group of
Funds Fund Accounting Agreement
EX-99.H2IV Executed Amendment No. 12
(1998) to Schedule A to Delaware Group of Funds Fund
Accounting Agreement
EX-99.H2V Executed Amendment No. 13
(1998) to Schedule A to Delaware Group of Funds Fund
Accounting Agreement
EX-99.I Legal Opinion
AMENDMENT NO. 9
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement 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.
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly 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
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
REIT Series (New)
Strategic Income Series (New)
Trend 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 State Tax-Free Income Trust (formerly DMCT Tax-Free
Income Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
Dated as of March 31, 1998
DELAWARE SERVICE COMPANY, INC.
/s/David K. Downes
By: ---------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
/s/ Wayne A. Stork
By: ---------------------
Wayne A. Stork
Chairman
AMENDMENT NO. 10
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Social Awareness Fund (formerly Quantum Fund) (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement 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.
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
The Asset Allocation Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly 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
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)
The Small-Cap Growth Equity Portfolio (New)
The Growth and Income Portfolio (New)
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly 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 State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur US Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
Dated as of August 31, 1998
DELAWARE SERVICE COMPANY, INC.
By: ---------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: ---------------------
Wayne A. Stork
Chairman
AMENDMENT NO. 11
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Social Awareness Fund (formerly Quantum Fund) (New)
Diversified Value Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement 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.
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
The Asset Allocation Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly 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
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)
The Small-Cap Growth Equity Portfolio (New)
The Growth and Income Portfolio (New)
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly 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 State Tax-Free Income Trust (formerly DMCT Tax-
Free Income Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur US Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
Dated as of September 14, 1998
DELAWARE SERVICE COMPANY, INC.
/s/David K. Downes
By: ---------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
/s/Wayne A. Stork
By: ---------------------
Wayne A. Stork
Chairman
AMENDMENT NO. 12
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Social Awareness Fund (formerly Quantum Fund) (New)
Diversified Value Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement 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.
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
The Asset Allocation Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Corporate Bond Fund (New)
Extended Duration Bond Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly 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
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)
The Small-Cap Growth Equity Portfolio (New)
The Growth and Income Portfolio (New)
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly 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 State Tax-Free Income Trust (formerly DMCT
Tax-Free Income Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur US Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
Dated as of September 14, 1998
DELAWARE SERVICE COMPANY, INC.
/s/David K. Downes
By: ---------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
/s/Wayne A. Stork
By: ---------------------
Wayne A. Stork
Chairman
AMENDMENT NO. 13
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Social Awareness Fund (formerly Quantum Fund) (New)
Diversified Value Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)
Mid-Cap Value Fund (New)
Small Cap Contrarian 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.
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
The Asset Allocation Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
New Europe Fund (New)
Latin America Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Corporate Bond Fund (New)
Extended Duration Bond Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Mid-Cap Growth Equity Portfolio (formerly The Aggressive Growth
Portfolio)
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly 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
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)
The Small-Cap Growth Equity Portfolio (New)
The Growth and Income Portfolio (New)
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly 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 State Tax-Free Income Trust (formerly DMCT Tax-
Free Income Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur US Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New) (liquidated
November 18, 1998)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
Dated as of December 18, 1998
DELAWARE SERVICE COMPANY, INC.
/s/David K. Downes
By: ---------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
/s/Wayne A. Stork
By: ---------------------
Wayne A. Stork
Chairman
EX-99.I
Law Office
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000
Direct Dial: (215) 564-8115
December 30, 1998
Delaware Group Adviser Funds, Inc.
1818 Market Street
Philadelphia, PA 19103
Re: Legal Opinion-Securities Act of 1933
Ladies and Gentlemen:
We have examined the Articles of Incorporation, as amended and
supplemented (the "Articles"), of Delaware Group Adviser Funds, Inc.
(the "Fund"), a series corporation organized under Maryland law, the By-
Laws of the Fund, and its proposed form of Share Certificates (if any),
all as amended to date, and the various pertinent corporate proceedings
we deem material. We have also examined the Notification of
Registration and the Registration Statements filed under the Investment
Company Act of 1940 as amended, (the "Investment Company Act") and the
Securities Act of 1933 as amended, (the "Securities Act"), all as
amended to date, as well as other items we deem material to this
opinion.
The Fund is authorized by the Articles to issue eight hundred ten
million (810,000,000) shares of common stock at a par value of $0.01 and
currently issues shares of the New Pacific Fund, the Overseas Equity
Fund, and the U.S. Growth Fund series of shares. The Articles also
empower the Board to designate any additional series or classes and
allocate shares to such series or classes.
The Fund has filed with the U.S. Securities and Exchange Commission, a
registration statement under the Securities Act, which registration
statement is deemed to register an indefinite number of shares of the
Fund pursuant to the provisions of Section 24(f) of the Investment
Company Act. You have further advised us that the Fund has filed, and
each year hereafter will timely file, a Notice pursuant to Rule 24f-2
under the Investment Company Act perfecting the registration of the
shares sold by the Fund during each fiscal year during which such
registration of an indefinite number of shares remains in effect.
You have also informed us that the shares of the Fund have been, and
will continue to be, sold in accordance with the Fund's usual method of
distributing its registered shares, under which prospectuses are made
available for delivery to offerees and purchasers of such shares in
accordance with Section 5(b) of the Securities Act.
Based upon the foregoing information and examination, so long as the
Fund remains a valid and subsisting entity under the laws of its state
of organization, and the registration of an indefinite number of shares
of the Fund remains effective, the authorized shares of the Fund when
issued for the consideration set by the Board of Directors pursuant to
the Articles, and subject to compliance with Rule 24f-2, will be legally
outstanding, fully-paid, and non-assessable shares, and the holders of
such shares will have all the rights provided for with respect to such
holding by the Articles and the laws of the State of Maryland.
We hereby consent to the use of this opinion, in lieu of any other, as
an exhibit to the Registration Statement of the Fund, along with any
amendments thereto, covering the registration of the shares of the Fund
under the Securities Act and the applications, registration statements
or notice filings, and amendments thereto, filed in accordance with the
securities laws of the several states in which shares of the Fund are
offered, and we further consent to reference in the registration
statement of the Fund to the fact that this opinion concerning the
legality of the issue has been rendered by us.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
BY: /S/BRUCE G. LETO
Bruce G. Leto
