<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 33-67490
File No. 811-7972
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. _______ / /
Post-Effective Amendment No. __15__ /X/
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. _17_
DELAWARE GROUP ADVISER FUNDS
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(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 255-1255
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Eric E. Miller, 1818 Market Street, Philadelphia, PA 19103
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(Name and Address of Agent for Service)
Approximate Date of Public Offering: February 1, 2000
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It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b)
__X__ on February 1, 2000 pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ on (date) pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 15 to Registration File No. 33-67490
includes the following:
1. Facing Page
2. Contents Page
3. Part A - Prospectuses*
4. Part B - Statement of Additional Information*
5. Part C - Other Information
6. Signatures
The Prospectuses and Statement of Additional Information for the Registrant's
Delaware Overseas Equity Fund Class A, Class B and Class C and Institutional
Class and Delaware New Pacific Fund Class A, Class B and Class C and
Institutional Class are incorporated into this filing by reference to
Post-Effective Amendment No. 25 to the Registration Statement of Delaware Group
Global & International Funds filed on February 1, 2000.
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Delaware U.S. Growth Fund
Class A * Class B * Class C
Prospectus
February 1, 2000
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.
<PAGE>
Table of contents
Fund profile page
Delaware 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 managers
Fund administration (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
Retirement plans
How to redeem shares
Account minimums
Special services
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
2
<PAGE>
Profile: Delaware U.S. Growth Fund
What is the Fund's goal?
Delaware U.S. Growth Fund seeks maximum 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. Although the
Fund will strive to achieve its investment goal, there is no assurance that it
will.
What are the Fund's main investment strategies?
We invest primarily in common stocks. Our goal is to identify companies whose
earnings are expected to grow faster than the U.S. economy in general. We look
for stocks with low dividend yields, strong balance sheets and high expected
earnings growth rates as compared to other companies in the same industry.
Whether companies provide dividend income and how much income they provide will
not be a primary factor in the Fund's selection decisions. We may also invest
up to 35% of the Fund's assets in debt securities, bonds and convertible bonds.
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 securities in the Fund's
portfolio. This Fund will be particularly affected by declines in stock
prices, which tend to fluctuate more than bond prices. Stock prices may be
negatively affected by a drop in the stock market or poor performance in
specific companies or industries . Stocks of companies with high growth
expectations may be more susceptible to price declines if they do not meet those
high expectations. For a more complete discussion of risk, please turn to page
___.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
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.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors looking for capital growth potential.
o Investors looking for a fund that can be a complement to income-producing or
value-oriented investments.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
o Investors whose primary goal is to receive current income.
3
<PAGE>
How has Delaware U.S. Growth Fund performed?
This bar chart 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 six calendar years, as well as average annual returns of all shares for
one-year, five-year and lifetime periods. 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. There is no longer a voluntary expense cap in place for this Fund.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (CLASS A)
Year-by-year total return (Class A)
1999 40.34%
1998 29.57%
1997 30.93%
1996 19.56%
1995 23.94%
1994 -3.39%
During the periods illustrated in this bar chart, the Fund's highest quarterly
return was 30.56% for the quarter ended December 31, 1999 and its
lowest quarterly return was - 14.21% for the quarter ended September 30,
1998.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above. If this fee were
included, the returns would be less than those shown. The average annual returns
shown on page ___ do include the sales charge.
4
<PAGE>
How has the Delaware U.S. Growth Fund performed? (continued)
<TABLE>
<CAPTION>
Average annual returns for periods ending 12/31/99
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CLASS A B C S&P 500
(if redeemed)* (if redeemed)* Composite Stock
(Inception 12/3/93) (Inception 3/29/94) (Inception 5/23/94) Price Index
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- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 year 32.26% 34.36% 38.37% 21.03%
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5 years 27.17% 27.60% 27.85% 28.54%
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Lifetime** 21.24% 22.90% 24.63% 23.54%
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</TABLE>
The Fund's returns above are compared to the performance of the S&P 500
Composite Stock Price Index. You should remember that unlike the Fund, the
Index is unmanaged and doesn't reflect the actual costs of operating a mutual
fund, such as the costs of buying, selling and holding securities.
* If shares were not redeemed, the returns for Class B would be 39.36%,
27.75% and 22.96% for the one-year, five-year and lifetime periods,
respectively. Returns for Class C would be 39.37% and 24.63% for the
one-year, five-year and lifetime periods, respectively.
** S&P 500 returns are for Class A lifetime. S&P 500 returns for Class B and
Class C lifetimes were 25.52% and 25.69%, respectively. Maximum sales
charges are included in the Fund returns above.
5
<PAGE>
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.
<TABLE>
<CAPTION>
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CLASS A B C
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<S> <C> <C> <C>
Maximum sales charge (load) imposed on purchases as 5.75% none none
a percentage of offering price
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Maximum contingent deferred sales charge (load) as a none(1) 5%(2) 1%(3)
percentage of original purchase price or redemption
price, whichever is lower
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Maximum sales charge (load) imposed on reinvested none none none
dividends
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Redemption fees none none none
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</TABLE>
Annual fund operating expenses are deducted from the Fund's assets.
<TABLE>
<CAPTION>
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CLASS A B C
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<S> <C> <C> <C>
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Management fees(4) 0.65% 0.65% 0.65%
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Distribution and service (12b-1) fees 0.30%(5) 1.00% 1.00%
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Other expenses 0.90% 0.90% 0.90%
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Total operating expenses 1.85% 2.55% 2.55%
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</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.(6) This
is an example only, and does not represent future expenses, which may be greater
or less than those shown here.
<TABLE>
<CAPTION>
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CLASS(7) A B B C C
(if redeemed) (if redeemed)
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<S> <C> <C> <C> <C> <C>
1 year $752 $258 $758 $258 $358
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3 years $1,123 $793 $1,093 $793 $793
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5 years $1,518 $1,355 $1,555 $1,355 $1,355
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10 years $2,619 $2,714 $2,714 $2,885 $2,885
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</TABLE>
(1) A purchase of Class A shares of $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 will apply to
redemptions made within two years 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%, which declines to 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.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) Reflects a new management fee which became effective on April 1, 1999.
(5) The Board of Trustees set the 12b-1 plan expenses for the Fund's Class A
shares at 0.30%. Expenses under the plan will not be more than 0.35%.
(6) 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.
(7) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
6
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for the Fund. Following are descriptions of how the portfolio
management team pursues the Fund's investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Delaware U.S. Growth Fund seeks to maximize capital appreciation. We invest
primarily in common stocks and though we have the flexibility to invest in
companies of all sizes, we generally focus on medium- sized and large and
companies. Our goal is to own companies with the potential to grow earnings
faster than the U.S. economy in general. We look for companies that have:
/ / low dividend yields;
/ / strong balance sheets; and
/ / high expected earnings growth rates relative to their industry.
There are a number of catalysts that might increase a company's potential for
accelerated earnings growth. Our disciplined, research-intensive selection
process is designed to identify earnings catalysts such as:
/ / management changes;
/ / new products;
/ / structural changes in the economy; or
/ / corporate restructurings and turnaround situations.
We maintain a diversified portfolio representing a number of different
industries. Such an approach helps to minimize the impact that any one security
or industry could have on the portfolio if it were to experience a period of
slow or declining earnings growth.
Because our objective is capital appreciation, the amount of dividend income
that a stock provides is only an incidental consideration for us.
Delaware U.S. Growth Fund's investment objective is non-fundamental. This
means that the Board of Trustees may change the objective without obtaining
shareholder approval. If the objective were changed, we would notify
shareholders before the change in the objective became effective.
7
<PAGE>
The securities we typically invest in
Stocks generally offer investors the potential for capital appreciation.
<TABLE>
<CAPTION>
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Securities How we use them
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Delaware U.S. Growth Fund
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<S> <C>
Common stocks: Securities that represent shares of Generally, we invest 85% to 100% of the Fund's net assets in common
ownership in a corporation. Stockholders participate stock of companies that we think have appreciation potential. We may
in the corporation's profits and losses, invest in companies of all sizes, but typically focus on medium and
proportionate to the number of shares they own. large-size companies.
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Foreign securities and American Depositary Receipts: The Fund may invest up to 20% of its assets in securities of foreign
Securities of foreign entities issued directly or, issuers. Such foreign securities may be traded on a foreign exchange, or
in the case of American Depositary Receipts (ADRs), they may be in the form of American Depositary Receipts (ADRs). Direct
through a U.S. bank. ADRs represent a bank's ownership of foreign securities will typically not be a significant part
holding of a stated number of shares of a of our strategy. We may, however own ADRs when we think they offer
foreign corporation. An ADR entitles the holder to greater appreciation potential than domestic stocks.
all dividends and capital gains earned by the
underlying foreign shares. ADRs are bought and sold
in the same way as U.S. securities.
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Repurchase agreements: An agreement between a buyer, Typically, we use repurchase agreements as a short-term investment for
such as the Fund, and a seller of securities in the Fund's cash position. In order to enter into these repurchase
which the seller agrees to buy the securities back agreements, the Fund must have collateral of at least 102% of the
within a specified time at the same price the buyer repurchase price. The Fund would only enter into repurchase agreements
paid for them, plus an amount equal to an agreed upon in which the collateral is composed of U.S. government securities.
interest rate. Repurchase agreements are often viewed
as equivalent to cash.
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Restricted securities: Privately placed securities We may invest in privately placed securities that are eligible for resale
whose resale is restricted under securities law. only among certain institutional buyers without registration, including
Rule 144A Securities. Restricted securities that are determined to be
illiquid may not exceed the Fund's 10% limit on illiquid securities,
which is described below.
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Illiquid securities: Securities that do not have a We may invest up to 10% of net assets in illiquid securities.
ready market, and cannot be easily sold within
seven days at approximately the price that a fund
has valued them.
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Fixed-income securities: Securities that may include We may invest up to 35% of the Fund's assets in debt securities, bonds,
debt securities, bonds, convertible bonds, as well convertible bonds, preferred stocks and convertible preferred stock.
as, non-investment grade fixed-income securities. We may also invest up to 10% of this portion in non-investment grade
bonds if we believe that doing so would help us to meet the Fund's
objective.
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</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
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Securities How we use them
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Delaware U.S. Growth Fund
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<S> <C>
Options and Futures: Options represent a right to buy We might use options or futures to neutralize the effect of any
or sell a security or group of securities at an anticipated price declines, without selling the security. We might also
agreed upon price at a future date. The purchaser of use options or futures to gain exposure to a particular market segment
an option may or may not choose to go through with without purchasing individual securities in that segment particularly if
the transaction. we had excess cash that we wanted to invest quickly.
Writing a covered call option on a security When writing call options we will only write covered call options - call
obligates the owner of the security to sell it at options on securities we actually own.
an agreed upon price on an agreed upon date (usually
no more than nine months in the future.) The Use of these strategies can increase the operating costs of the Fund and
owner of the security receives a premium payment can lead to loss of principal.
from the purchaser of the call, but if the security
appreciates to a price greater than the agreed upon
selling price, the fund would lose out on those gains.
Futures contracts are agreements for the purchase or
sale of securities at a specified price, on a
specified date. Unlike an option, a futures contract
must be executed unless it is sold before the
settlement date.
Options and futures are generally considered to be
derivative securities.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities, including preferred stock and U.S.
government securities. Please see the Statement of Additional Information for
additional descriptions on these securities as well as those listed in the
table above. You can find additional information about the investments in the
Fund's portfolio in the annual or semi-annual shareholder report.
Lending securities The Fund may lend up to one-third of its assets to qualified
dealers and institutional investors for their use in security transactions.
Borrowing from banks The Fund may borrow money as a temporary measure for
extraordinary purposes or to facilitate redemptions. To the extent that it does
so, the Fund may be unable to meet its investment objective.
Purchasing securities on a when-issued or delayed delivery basis The Fund may
buy or sell securities on a when-issued or delayed delivery basis; that is,
paying for securities before delivery or taking delivery at a later date. The
Fund will designate cash or securities in amounts sufficient to cover its
obligations, and will value the designated assets daily.
Portfolio turnover We anticipate that the Fund's annual portfolio turnover may
be greater than 100%. A turnover rate of 100% would occur if the Fund sold and
replaced securities valued at 100% of its net assets within one year. High
turnover can result in increased transaction costs and tax liability.
Temporary defensive positions For temporary defensive purposes, we may invest up
to 100% of the Fund's assets in money market instruments when the manager or
sub-adviser determines that market conditions warrant. We may also hold a
portion of the Fund's assets in cash for liquidity purposes. To the extent that
we do so, the Fund may be unable to meet its investment objective.
9
<PAGE>
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 the Fund you should
carefully evaluate the risks. An investment in the Fund typically provides the
best results when held for a number of years. The following are the
chief risks you assume when investing in Delaware U.S. Growth Fund. Please see
the Statement of Additional Information for further discussion of these risks
and other risks not discussed here.
<TABLE>
<CAPTION>
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Risks How we strive to manage them
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Delaware U.S. Growth Fund
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<S> <C>
Market risk is the risk that all or a We maintain a long-term investment approach and focus on stocks we believe can
majority of the securities in a appreciate over an extended time frame regardless of interim market fluctuations. We do
certain market -- like the stock or not try to predict overall stock market movements and generally do not trade for
bond market -- will decline in value short-term purposes.
because of factors such as economic
conditions, future expectations or We may hold a substantial part of the Fund's assets in cash or cash equivalents as a
investor confidence. temporary, defensive strategy.
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Industry and security risk is the risk We limit the amount of Delaware U.S. Growth Fund's assets invested in any one industry
that the value of securities in a and in any individual security.
particular industry or the 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.
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Foreign risk is the risk that foreign We are permitted to invest up to 20% of the Fund's portfolio in foreign securities.
securities may be adversely affected When we do purchase foreign securities, they are generally American Depositary Receipts
by political instability, changes in which are denominated in U.S. dollars and traded on U.S. stock exchanges.
currency exchange rates, foreign
economic conditions or inadequate
regulatory and accounting standards.
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Liquidity risk is the possibility that We limit exposure to illiquid securities.
securities cannot be readily sold, if
at all, at approximately the price that
a Fund has valued them.
- ---------------------------------------- ------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
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Risks How we strive to manage them
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Delaware U.S. Growth Fund
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<S> <C>
Credit risk is the possibility that a Fixed-income securities are not typically a significant component of our strategy.
bond's issuer (or an entity that However, when we do invest in fixed-income securities, we will not hold more than 10% of
insures the bond) will be unable to net assets in high-yield, non-investment grade bonds. This limitation, combined with our
make timely payments of interest and careful, credit-oriented bond selection and our commitment to hold a diversified
principal. Bonds rated below selection of high-yield bonds are designed to manage this risk.
investment grade are particularly
subject to this risk.
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Futures and options risk is the We will not use futures and options for speculative reasons. We may use options and
possibility that a fund may experience futures to protect gains in the portfolio without actually selling a security. We may
a loss if it employs an options or also use options and futures to quickly invest excess cash so that the portfolio is
futures strategy related to a security generally fully invested.
or a market index and that security or
index moves in the opposite direction
from what the manager anticipated.
Futures and options also involve
additional expenses, which could
reduce any benefit or increase any
loss that a fund gains from using the
strategy.
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</TABLE>
11
<PAGE>
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 of 0.66% of average daily net assets
for the last fiscal year.
Portfolio managers
Frank Houghton and Rufus Winton have primary responsibility for making
investment decisions for Delaware U.S. Growth Fund.
Frank Houghton, President and Portfolio Manager, joined Lynch & Mayer in 1990.
Prior to joining Lynch & Mayer, Mr. Houghton was Chairman of BMI Capital from
1984 to1990, a Portfolio Manager at Neuberger & Berman from 1977 to 1984 and a
Partner at Oppenheimer & Co., Inc. from 1969-1977. Mr. Houghton received a BBA
from Manhattan College and attended New York University Graduate School of
Business Administration.
Rufus Winton, Senior Vice President and Equity Analyst, joined Lynch & Mayer in
1993. Prior to joining Lynch & Mayer, Mr. Winton was a Planning Analyst at
Northwest Airlines, Inc., Director of Business Development at Postal Automation
Inc. and a Manager in Mortgage-Backed Securities Sales at Citicorp Investment
Bank. He received a BA in Economics from Connecticut College in 1982 and an MBA
from Kellogg Graduate School of Management in 1991, where he was an Amoco
Scholar.
12
<PAGE>
[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
<TABLE>
<CAPTION>
Board of Trustees
Investment manager The Fund Custodian
<S> <C> <C> <C>
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Sub-adviser Service agent Distributor
Lynch & Mayer, Inc. Delaware Service Company, Inc. Delaware Distributors, L.P.
350 Park Avenue 1818 Market Street 1818 Market Street
New York, NY 10022 Philadelphia, PA 19103 Philadelphia, PA 19103
Portfolio managers
(see page ___ for details)
Financial advisers
Shareholders
</TABLE>
Board of Trustees A mutual fund is governed by a Board of Trustees which
has oversight responsibility for the management of the fund's business affairs.
Trustees 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 Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective 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 daily 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.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
NASD Regulation, Inc. (NASD) rules governing mutual fund sales practices.
13
<PAGE>
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 also provide
customer service to shareholders.
Financial advisers Financial advisers provide 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 trustees. 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.
14
<PAGE>
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
o 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.
o If you invest $50,000 or more, your front-end sales charge will be reduced.
o 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.
o 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.
o Class A shares generally are not subject to a contingent deferred sales charge
except in the limited circumstances noted in the table below.
<TABLE>
<CAPTION>
Class A sales charges
- ------------------------------------------------------------------------------------------------------------------------
Amount of purchase Sales charge Sales charge as % of Dealer's commission as %
as % amount invested of offering price
of offering price
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
$50,000 but 4.75% 4.99% 4.00%
- ------------------------------------------------------------------------------------------------------------------------
under $100,000
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
$100,000 but 3.75% 3.90% 3.00%
- ------------------------------------------------------------------------------------------------------------------------
under $250,000
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
$250,000 but 2.50% 2.56% 2.00%
- ------------------------------------------------------------------------------------------------------------------------
under $500,000
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
$500,000 but 2.00% 2.04% 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 will 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 unless a specific waiver of the
charge applies.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Amount of purchase Sales charge as % Sales charge as % Dealer's commission as %
of offering price of amount invested of offering price
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$1,000,000 up to $5 million none none 1.00%
- ------------------------------------------------------------------------------------------------------------------------
Next $20 million none none 0.50%
up to $25 million
- ------------------------------------------------------------------------------------------------------------------------
Amount over $25 million none none 0.25%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
Class B
o 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.
o 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.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o 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 accounts.
o 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.
o 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 0.35% (currently
no more than 0.30%). Conversion may occur as late as three months after the
eighth anniversary of purchase, during which time Class B's higher 12b-1 fees
apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
Class C
o 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 of 1% if you redeem your shares within 12 months after you buy
them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o 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 services and maintaining
shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses and pay
lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o 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.
Each share class of the Fund has adopted a separate 12b-1 plan that allows it 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.
16
<PAGE>
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>
- ------------------------------------------------------------------------------------------------------------------------------
Program How it works Share class
A B C
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Letter of Intent Through a Letter of Intent you X Although the Letter of Intent and
agree to invest a certain amount Rights of Accumulation do not apply to
in Delaware Investments the purchase of Class B and C shares,
Funds (except money market funds you can combine your purchase of Class
with no sales charge) over a A shares with your purchase of Class
13-month period to qualify for B and C shares to fulfill your Letter
reduced front-end sales charges. of Intent or qualify for Rights of
Accumulation.
- ------------------------------------------------------------------------------------------------------------------------------
Rights of Accumulation You can combine your holdings or X
purchases of all funds in the
Delaware Investments family
(except money market funds with no
sales charge) as well as the
holdings and purchases of your
spouse and children under 21 to
qualify for reduced front-end
sales charges.
- ------------------------------------------------------------------------------------------------------------------------------
Reinvestment of Up to 12 months after you redeem For Class A, For Class B, your Not
redeemed shares shares, you can reinvest the you will not account will be available.
proceeds with no additional sales have to pay credited with the
charge. an additional contingent
front-end deferred sales
sales charge. charge you
previously paid on
the amount you
are reinvesting.
Your schedule for
contingent
deferred sales
charges and
conversion to
Class A will not
start over again,
it will pick up
from the point
at which you
redeemed your
shares.
- ------------------------------------------------------------------------------------------------------------------------------
SIMPLE IRA, SEP IRA, These investment plans may qualify X There is no reduction in sales charges
SARSEP, Prototype for reduced sales charges by for Class B or Class C shares for group
Profit Sharing, combining the purchases of all purchases by retirement plans.
Pension, 401(k), members of the group. Members of
SIMPLE 401(k), these groups may also qualify to
403(b)(7), and 457 purchase shares without a
Retirement Plans front-end sales charge and a
waiver of any contingent deferred
sales charges.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
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 separate 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 19103-3682. 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 2014 12893 4013. 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 you 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 are allowed to exchange only
between like classes 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.delawareinvestments.com. For more
information about how to sign up for these services, call our Shareholder
Service Center at 800.523.1918.
18
<PAGE>
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. The minimum for an Education IRA is $500. 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 receive your order before the close of regular
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 regular
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
regular 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 fixed-income
securities on the basis of valuations provided to us by an independent pricing
service that uses methods approved by the Board of Trustees. Any
fixed-income securities that have a maturity of less than 60 days we price at
amortized cost. For all other securities , we use methods approved by
the Board of Trustees that are designed to price securities at their fair market
value.
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.
19
<PAGE>
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 separate 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 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
[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, a bank wire fee may 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.delawareinvestments.com. For more information about
how to sign up for these services, call our Shareholder Service Center at
800.523.1918.
20
<PAGE>
About your account (continued)
How to redeem shares (continued)
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
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time), you will receive the net asset value as determined
on the business 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, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you 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 minimums
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.
21
<PAGE>
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 or quarterly
investments directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as social security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) 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. Under most circumstances, you may reinvest dividends only
into like classes of shares.
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 at the time of the 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. When
exchanging Class B and Class C shares of one fund for the same class of 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. 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 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.
22
<PAGE>
About your account (continued)
Special services (continued)
MoneyLine(SM) On Demand Service
Through our MoneyLine(SM) On Demand Service, you or your financial adviser may
transfer money between your Fund account and your predesignated bank account by
telephone request. This service is not available for retirement plans, except
for purchases into IRAs. MoneyLine has a minimum transfer of $25 and a maximum
transfer of $50,000. Delaware Investments does not charge a fee for this
service; however, your bank may assess one.
MoneyLine Direct Deposit Service
Through our MoneyLine 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 MoneyLine Direct Deposit Service.
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.
23
<PAGE>
Certain management considerations
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 has taken steps to obtain satisfactory assurances
that its major service providers have taken steps reasonably designed to
address the Year 2000 Problem on the computer systems that the service providers
use. However, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on the business of the Fund. Consistent with the
investment process utilized for the selection of securities for the Fund, the
portfolio managers focus solely on the quantitative characteristics of the
equity securities in which the Fund invests. This process assumes that the
effect of the Year 2000 problem on each company is already reflected in those
characteristics. Accordingly, except for surveying the widely reported
information regarding the companies in which the Fund invests, no additional
Year 2000 due diligence is performed. However, there can be no guarantees that,
even with these efforts, they will be able to predict the effect of Year
2000 on any company or the performance of its securities.
Investments by funds of funds
Delaware U.S. Growth Fund accepts investments from the series portfolios of
Delaware Group Foundation Funds, a fund of funds. From time to time, the Fund
may experience large investments or redemptions due to allocations or
rebalancings by Foundation Funds. While it is impossible to predict the overall
impact of these transactions over time, there could be adverse effects on
portfolio management. For example, the Fund 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 transaction costs or portfolio turnover. The manager will
monitor transactions by Foundation Funds and will attempt to minimize any
adverse effects on both the Fund and Foundation Funds as a result of these
transactions.
24
<PAGE>
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 for the years ended October 31, 1999,
1998 and 1997 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. The information for the
fiscal periods ending on or before October 31, 1996 have been audited by the
Fund's previous independent auditors.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Shares
Year Ended 10/31
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware U.S. Growth Fund 1999(3) 1998(3) 1997(3) 1996(4) 1995
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.490 $16.650 $13.820 $12.430 $10.210
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.161) (0.062) (0.060) (0.090) (0.090)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 3.981 1.272 4.250 1.480 2.310
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.820 1.210 4.190 1.390 2.220
- ------------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income none none none none none
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments none (6.370) (1.360) none none
- ------------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions none (6.370) (1.360) none none
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.310 $11.490 $16.650 $13.820 $12.430
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total return(1) 33.33% 10.52% 33.18% 11.18%(2) 21.74%(2)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $37,771 $14,130 $6,933 $16,118 $13,574
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 1.86% 1.49% 1.44% 1.80% 1.85%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to expense N/A N/A N/A 1.88% 2.18%
limitations and expenses paid indirectly
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss to average net assets (1.12%) (0.52%) (0.38%) (0.77%) (0.88%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss to average net assets prior to N/A N/A N/A (0.85%) (1.21%)
expense limitations and expenses paid indirectly
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 132% 135% 144% 131% 58%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(2) Total returns reflect voluntary expense caps.
(3) The average shares outstanding method has been applied for per share
information.
(4) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
25
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class B Shares
Year Ended 10/31
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware U.S. Growth Fund 1999(3) 1998(3) 1997(3) 1996(4) 1995
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.960 $16.260 $13.610 $12.330 $10.190
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.253) (0.140) (0.160) (0.170) (0.140)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 3.793 1.210 4.170 1.450 2.280
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.540 1.070 4.010 1.280 2.140
- ------------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income none none none none none
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments none (6.370) (1.360) none none
- ------------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions none (6.370) (1.360) none none
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.500 $10.960 $16.260 $13.610 $12.330
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total return(1) 32.39% 9.62% 32.30% 10.38%(2) 21.00%(2)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $25,938 $5,418 $1,653 $809 $567
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 2.56% 2.19% 2.14% 2.48% 2.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to expense N/A N/A N/A 2.56% 2.83%
limitations and expenses paid indirectly
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss to average net assets ( 1.82%) (1.22%) (1.08%) (1.45%) (1.57%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss to average net assets prior to N/A N/A N/A (1.53%) (1.90%)
expense limitations and expenses paid indirectly
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 132% 135% 144% 131% 58%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(2) Total returns reflect voluntary expense caps.
(3) The average shares outstanding method has been applied for per share
information.
(4) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
26
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class C Shares
Year Ended 10/31
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware U.S. Growth Fund 1999(3) 1998(3) 1997(3) 1996(4) 1995
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.830 $17.020 $14.180 $12.850 $10.620
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.264) (0.148) (0.170) (0.160) (0.100)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 4.084 1.328 4.370 1.490 2.330
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.820 1.180 4.200 1.330 2.230
- ------------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income none none none none none
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments none (6.370) (1.360) none none
- ------------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions none (6.370) (1.360) none none
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.650 $11.830 $17.020 $14.180 $12.850
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total return(1) 32.38% 10.04% 32.26% 10.35%(2) 21.00%(2)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $6,682 $1,657 $252 $55 $27
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 2.56% 2.19% 2.14% 2.48% 2.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to expense N/A N/A N/A 2.56% 2.82%
limitations and expenses paid indirectly
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss to average net assets (1.82%) (1.22%) (1.08%) (1.45%) (1.61%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss to average net assets prior N/A N/A N/A (1.53%) (1.93%)
to expense limitations and expenses paid indirectly
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 132% 135% 144% 131% 58%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(2) Total returns reflect voluntary expense caps.
(3) The average shares outstanding method was applied for per share information.
(4) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
27
<PAGE>
How to read the financial highlights
Net investment income (loss)
Net investment income includes dividend and interest income earned from a fund's
securities; it is after expenses have been deducted.
Net realized and unrealized gain on investments
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 dividends and distributions-Distributions from net realized
gain on investments."
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 rate that an investor would have earned or lost on an
investment in a fund. In calculating this figure for the financial highlights
table, we include applicable 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 a fund's portfolio,
less any liabilities, that are attributable to that class of the fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets 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 (loss) to average net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover
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.
28
<PAGE>
[begin glossary]
How to use this glossary
The glossary includes definitions of investment terms used throughout the
Prospectus. If you would like to know the meaning of an investment term that
is not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
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 changes prior to maturity and
typically is inversely related to current interest rates. Generally, when
interest rates rise, bond prices fall, and when interest rates fall, bond 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. See also Nationally recognized statistical rating
organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
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.
Corporate bond
A debt security issued by a corporation. See Bond.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
29
<PAGE>
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.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
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
a fund's portfolio of securities and distributing its shares. They are paid
from a fund's assets before any earnings are distributed to shareholders.
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 invest is paid back
at a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bond.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in 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 an annual percentage of the fund's average daily net
assets.
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.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
NASD Regulation, Inc. (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
30
<PAGE>
Nationally recognized statistical rating organization (NRSRO)
A company that assesses the credit quality 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,
Inc. (Moody's), Standard & Poor's Ratings Group (S&P), Duff & Phelps, Inc.
(Duff), and Fitch IBCA, Inc. (Fitch).
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pay dividends at a fixed
rate and are sometimes convertible into common stock.
Price-to-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 per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). 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.
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 Composite Stock 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 or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
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; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
31
<PAGE>
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."
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.
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.
U.S. Government securities
Securities issued by U.S. government or its agencies. They include Treasuries as
well as agency-backed securities such as Fannie Maes.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
32
<PAGE>
Delaware 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 shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. 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 19103-3682, 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.delawareinvestments.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.
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone redemptions
and telephone exchanges.
Delaphone Service
800-362-FUND (800-362-3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Registrant's Investment Company Act file number: 811-7972
- ------------------------------------------------------------------------
Delaware U.S. Growth Fund Symbols CUSIP NASDAQ
- ------------------------------------------------------------------------
Class A 245917505 DUGAX
- ------------------------------------------------------------------------
Class B 245917604 DEUBX
- ------------------------------------------------------------------------
Class C 245917703 DEUCX
- ------------------------------------------------------------------------
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
P-___ [--] PP 1/00
33
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Delaware U.S. Growth Fund
Institutional Class
Prospectus
February 1, 2000
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.
<PAGE>
Table of contents
Fund profile page
Delaware 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 managers
Fund administration (Who's who)
About your account page
Investing in the Fund
How to buy shares
How to redeem shares
Account minimum
Exchanges
Dividends, distributions and taxes
Certain management considerations
Financial highlights page
2
<PAGE>
Profile: Delaware U.S. Growth Fund
What is the Fund's goal?
Delaware U.S. Growth Fund seeks maximum 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. Although the
Fund will strive to achieve its investment goal, there is no assurance that it
will.
What are the Fund's main investment strategies?
We invest primarily in common stocks. Our goal is to identify companies whose
earnings are expected to grow faster than the U.S. economy in general. We look
for stocks with low dividend yields, strong balance sheets and high expected
earnings growth rates as compared to other companies in the same industry.
Whether companies provide dividend income and how much income they provide will
not be a primary factor in the Fund's selection decisions. We may also invest
up to 35% of the Fund's assets in debt securities, bonds and convertible bonds.
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 securities in the Fund's
portfolio. This Fund will be particularly affected by declines in stock
prices, which tend to fluctuate more than bond prices. Stock prices may be
negatively affected by a drop in the stock market or poor performance in
specific companies or industries . Stocks of companies with high growth
expectations may be more susceptible to price declines if they do not meet those
high expectations. For a more complete discussion of risk, please turn to page
___.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
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.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors looking for capital growth potential.
o Investors looking for a fund that can be a complement to income-producing or
value-oriented investments.
Who should not invest in the Fund o Investors with short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
o Investors whose primary goal is to receive current income.
3
<PAGE>
How has Delaware U.S. Growth Fund performed?
This bar chart can help you evaluate the potential risks of investing in the
Fund. We show how returns for the Institutional Class have varied over the past
five calendar years, as well as average annual returns for one-year, five-year
and lifetime periods. 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. There is no longer
a voluntary expense cap in place for this Fund.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (Institutional
Class)]
Year-by-year total return (Institutional Class)
1999 40.77%
1998 29.89%
1997 31.36%
1996 19.94%
1995 24.28%
During the periods illustrated in this bar chart, the Institutional Class'
highest quarterly return was 30.66% for the quarter ended December 31,
1999 and its lowest quarterly return was -14.07% for the quarter ended
September 30, 1998.
Average annual returns for periods ending 12/31/99
- ------------------ -------------------- ---------------------
Institutional S&P 500
Class Composite Stock Price
(Inception 2/3/94) Index
- ------------------ -------------------- -------------------
- ------------------ -------------------- -------------------
1 year 40.77% 21.03%
- ------------------ -------------------- -------------------
5 years 29.06% 28.54%
- ------------------ -------------------- -------------------
Lifetime 22.44% 24.14%
- ------------------ -------------------- -------------------
The Funds returns above are compared to the performance of the S&P 500 Composite
Stock Price Index. You should remember that unlike the Fund, the Index is
unmanaged and doesn't reflect the actual costs of operating a mutual fund, such
as the costs of buying, selling and holding securities.
4
<PAGE>
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 none
a percentage of offering price
- ------------------------------------------------------ ----------
Maximum contingent deferred sales charge (load) as a none
percentage of original purchase price or redemption
price, whichever is lower
- ------------------------------------------------------ ----------
Maximum sales charge (load) imposed on reinvested none
dividends
- ------------------------------------------------------ ----------
Redemption fees none
- ------------------------------------------------------ ----------
Exchange fees(1) none
- ------------------------------------------------------ ----------
Annual fund operating expenses are deducted from the Fund's assets.
- ------------------------------------------------------ ----------
Management fees 0.65%
- ------------------------------------------------------ ----------
Distribution and service (12b-1) fees none
- ------------------------------------------------------ ----------
Other expenses 0.90%
- ------------------------------------------------------ ----------
Total operating expenses 1.55%
- ------------------------------------------------------ ----------
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 $158
- --------------- ------------
3 years $490
- --------------- ------------
5 years $845
- --------------- ------------
10 years $1,845
- --------------- ------------
(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 your
shares into a fund that has a front-end sales charge.
(2) Reflects a new management fee which became effective on April 1, 1999.
(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.
5
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for the Fund. Following are descriptions of how the portfolio
management team pursues the Fund's investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Delaware U.S. Growth Fund seeks to maximize capital appreciation. We invest
primarily in common stocks and though we have the flexibility to invest in
companies of all sizes, we generally focus on medium and large-sized companies.
Our goal is to own companies with the potential to grow earnings faster than the
U.S. economy in general. We look for companies that have:
[ ] low dividend yields;
[ ] strong balance sheets; and
[ ] high expected earnings growth rates relative to their industry.
There are a number of catalysts that might increase a company's potential for
accelerated earnings growth. Our disciplined, research-intensive selection
process is designed to identify earnings catalysts such as:
[ ] management changes;
[ ] new products;
[ ] structural changes in the economy; or
[ ] corporate restructurings and turnaround situations.
We maintain a diversified portfolio representing a number of different
industries. Such an approach helps to minimize the impact that any one security
or industry could have on the portfolio if it were to experience a period of
slow or declining earnings growth.
Because our objective is capital appreciation, the amount of dividend income
that a stock provides is only an incidental consideration for us.
Delaware U.S. Growth Fund's investment objective is non-fundamental. This means
that the Board of Trustees may change the objective without obtaining
shareholder approval. If the objective were changed, we would notify
shareholders before the change in the objective became effective.
6
<PAGE>
The securities we typically invest in
Stocks generally offer investors the potential for capital appreciation.
<TABLE>
<CAPTION>
- ------------------------------------------------------- ----------------------------------------------------------------------------
Securities How we use them
Delaware U.S. Growth Fund
- ------------------------------------------------------- ----------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares Generally, we invest 85% to 100% of the Fund's net assets in common stock
of ownership in a corporation. Stockholders of companies that we think have appreciation potential. We may invest in
participate in the corporation's profits and companies of all sizes, but typically focus on medium and large-size
losses, proportionate to the number of shares companies.
they own.
- ------------------------------------------------------- ----------------------------------------------------------------------------
Foreign securities and American Depositary The Fund may invest up to 20% of its assets in securities of foreign
Receipts: Securities of foreign entities issued issuers. Such foreign securities may be traded on a foreign exchange, or
directly or, in the case of American Depositary they may be in the form of American Depositary Receipts (ADRs). Direct
Receipts (ADRs), through a U.S. bank. ADRs ownership of foreign securities will typically not be a significant part
represent a bank's holding of a stated number of our strategy. We may, however own ADRs when we think they offer
of shares of a foreign corporation. An ADR greater appreciation potential than domestic stocks.
entitles the holder to all dividends and
capital gains earned by the underlying foreign
shares. ADRs are bought and sold in the same
way as U.S. securities.
- ------------------------------------------------------- ----------------------------------------------------------------------------
Repurchase agreements: An agreement between a Typically, we use repurchase agreements as a short-term investment for
buyer, such as the Fund, and a seller of agreements, the Fund must have collateral of at least 102% of the
securities in the Fund's cash position. In repurchase price. The Fund would only enter into repurchase agreements in
order to enter into these repurchase which the which the collateral is composed of U.S. government securities.
seller agrees to buy the securities back within
a specified time at the same price the buyer
paid for them, plus an amount equal to an
agreed upon interest rate. Repurchase
agreements are often viewed as equivalent to
cash.
- ------------------------------------------------------- ----------------------------------------------------------------------------
Restricted securities: Privately placed We may invest in privately placed securities that are eligible for resale
securities whose resale is restricted under only among certain institutional buyers without registration, including
securities law. Rule 144A Securities. Restricted securities that are determined to be
illiquid may not exceed the Fund's 10% limit on illiquid securities,
which is described below.
- ------------------------------------------------------- ----------------------------------------------------------------------------
Illiquid securities: Securities that do not We may invest up to 10% of net assets in illiquid securities.
have a ready market, and cannot be easily sold
within seven days at approximately the price
that a fund has valued them.
- ------------------------------------------------------- ----------------------------------------------------------------------------
Fixed-income securities: Securities that may We may invest up to 35% of the Fund's assets in debt securities, bonds,
include debt securities, bonds, convertible convertible bonds, preferred stocks and convertible preferred stocks. We
bonds, as well as, non-investment grade may also invest up to 10% of this portion in non-investment grade bonds
fixed-income securities. if we believe that doing so would help us to meet the Fund's objective.
- ------------------------------------------------------- ----------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------- ----------------------------------------------------------------------------
Securities How we use them
Delaware U.S. Growth Fund
- ------------------------------------------------------- ----------------------------------------------------------------------------
<S> <C>
- ------------------------------------------------------- ----------------------------------------------------------------------------
Options and Futures: Options represent a right to If we have stocks that appreciated in price, we may want to protect
buy or sell a security or group of securities at those gains when we anticipate adverse conditions. We might use options
an agreed upon price at a future date. The or futures to neutralize the effect of any price declines, without
purchaser of an option may or may not choose to go selling the security. We might also use options or futures to gain
through with the transaction. exposure to a particular market segment without purchasing individual
securities in that segment. We might use this approach if we had excess
Writing a covered call option on a security cash that we wanted to invest quickly.
obligates the owner of the security to sell it at
an agreed upon price on an agreed upon date
(usually no more than nine months in the future.)
The owner of the security receives a premium
payment from the purchaser of the call, but if the We might use covered call options if we believe that doing so would
security appreciates to a price greater than the help the Fund to meet its investment objective.
agreed upon selling price, the fund would lose out
on those gains.
Futures contracts are agreements for the purchase
or sale of securities at a specified price, on a
specified date. Unlike an option, a futures
contract must be executed unless it is sold before
the settlement date. Use of these strategies can increase the operating costs of the Fund
and can lead to loss of principal.
Options and futures are generally considered to be
derivative securities.
- ------------------------------------------------------- ----------------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities, including preferred stock and U.S.
government securities. Please see the Statement of Additional Information for
additional descriptions on these securities as well as those listed in the
table above. You can find additional information about the investments in the
Fund's portfolio in the annual or semi-annual shareholder report.
Lending securities The Fund may lend up to one-third of its assets to qualified
dealers and institutional investors for their use in security transactions.
Borrowing from banks The Fund may borrow money as a temporary measure for
extraordinary purposes or to facilitate redemptions. To the extent that it does
so, the Fund may be unable to meet its investment objective.
Purchasing securities on a when-issued or delayed delivery basis The Fund may
buy or sell securities on a when-issued or delayed delivery basis; that is,
paying for securities before delivery or taking delivery at a later date. The
Fund will designate cash or securities in amounts sufficient to cover its
obligations, and will value the designated assets daily.
Portfolio turnover We anticipate that the Fund's annual portfolio turnover may
be greater than 100%. A turnover rate of 100% would occur if the Fund sold and
replaced securities valued at 100% of its net assets within one year. High
turnover can result in increased transaction costs and tax liability.
Temporary defensive positions For temporary defensive purposes, we may invest up
to 100% of the Fund's assets in money market instruments when the manager or
sub-adviser determines that market conditions warrant. We may also hold a
portion of the Fund's assets in cash for liquidity purposes. To the extent that
we do so, the Fund may be unable to meet its investment objective.
8
<PAGE>
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 the Fund you should
carefully evaluate the risks. An investment in the Fund typically provides the
best results when held for a number of years. The following are the
chief risks you assume when investing in the 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
- ------------------------------------------------------- ----------------------------------------------------------------------------
Delaware U.S. Growth Fund
- ------------------------------------------------------- ----------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority We maintain a long-term investment approach and focus on stocks we
of the securities in a certain market -- like believe can appreciate over an extended time frame regardless of interim
the stock or bond market -- will decline in market fluctuations. We do not try to predict overall stock market
value because of factors such as economic movements and do not generally trade for short-term purposes.
conditions, future 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 risk that the We limit the amount of Delaware U.S. Growth Fund's assets invested in any
value of securities in a particular industry or one industry and in any individual security.
the 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 foreign We are permitted to invest up to 20% of the Fund's portfolio in foreign
securities may be adversely affected by securities. When we do purchase foreign securities, they are generally
political instability, changes in currency American Depositary Receipts which are denominated in U.S. dollars and
exchange rates, foreign economic conditions or traded on U.S. stock exchanges.
inadequate regulatory and accounting standards.
- ------------------------------------------------------- ----------------------------------------------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid securities.
securities cannot be readily sold, if at all,
at approximately the price that a fund has
valued them.
- ------------------------------------------------------- ----------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------- ----------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------- ----------------------------------------------------------------------------
Delaware U.S. Growth Fund
- ------------------------------------------------------- ----------------------------------------------------------------------------
<S> <C>
Credit risk is the possibility that a bond's Fixed-income securities are not typically a significant component of our
issuer (or an entity that insures the bond) strategy. However, when we do invest in fixed-income securities, we will
will be unable to make timely payments of not hold more than 10% of net assets in high-yield, non-investment grade
interest and principal. Bonds rated below bonds. This limitation, combined with our careful, credit-oriented bond
investment grade are particularly subject to selection and our commitment to hold a diversified selection of
this risk. high-yield bonds are designed to manage this risk.
- ------------------------------------------------------- ----------------------------------------------------------------------------
Futures and options risk is the possibility We will not use futures and options for speculative reasons. We may use
that a fund may experience a loss if it employs options and futures to protect gains in the portfolio without actually
an options or futures strategy related to a selling a security. We may also use options and futures to quickly invest
security or a market index and that security or excess cash so that the portfolio is generally fully invested.
index moves in the opposite direction from what
the manager anticipated.Futures and options also
involve additional expenses, which could reduce
any benefit or increase any loss that a fund
gains from using the strategy.
- ------------------------------------------------------- ----------------------------------------------------------------------------
</TABLE>
10
<PAGE>
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 of 0.66% of average daily net assets for
the last fiscal year.
Portfolio managers
Frank Houghton and Rufus Winton have primary responsibility for making
investment decisions for Delaware U.S. Growth Fund.
Frank Houghton, President and Portfolio Manager, joined Lynch & Mayer in 1990.
Prior to joining Lynch & Mayer, Mr. Houghton was Chairman of BMI Capital from
1984 to 1990, a Portfolio Manager at Neuberger & Berman from 1977 to 1984 and a
Partner at Oppenheimer & Co., Inc. from 1969-1977. Mr. Houghton received a BBA
from Manhattan College and attended New York University Graduate School of
Business Administration.
Rufus Winton, Senior Vice President and Equity Analyst, joined Lynch & Mayer in
1993. Prior to joining Lynch & Mayer, Mr. Winton was a Planning Analyst at
Northwest Airlines, Inc., Director of Business Development at Postal Automation
Inc. and a Manager in Mortgage-Backed Securities Sales at Citicorp Investment
Bank. He received a BA in Economics from Connecticut College in 1982 and an MBA
from Kellogg Graduate School of Management in 1991, where he was an Amoco
Scholar.
11
<PAGE>
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
<TABLE>
<CAPTION>
Board of Trustees
<S> <C> <C>
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.
350 Park Avenue
New York, NY 10022
Portfolio managers Distributor Service agent
(see page __ for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Shareholders
</TABLE>
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees 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 Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective 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 daily 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.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
NASD Regulation, Inc. (NASD) rules governing mutual fund sales practices.
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
12
<PAGE>
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. 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.
13
<PAGE>
About your account
Investing in the Fund
Institutional Class shares are available for purchase only by the following:
o 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;
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor;
o 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;
o a bank, trust company and similar financial institution investing for its
own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing
shares of the Class, except where the investment is part of a program that
requires payment to the financial institution of a Rule 12b-1 Plan fee; and
o 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.
14
<PAGE>
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 19103-3682. 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 you 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 your Client Services Representative
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 separate fee for this
service.
15
<PAGE>
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 receive your order before the close of regular
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 regular
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 regular
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 fixed-income securities
on the basis of valuations provided to us by an independent pricing service that
uses methods approved by the Board of Trustees. Any fixed-income
securities that have a maturity of less than 60 days we price at amortized cost.
For all other securities, we use methods approved by the Board of
Trustees that are designed to price securities at their fair market value.
16
<PAGE>
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 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, 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 an address other than the address
of record on an account.
[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 separate fee for this service.
17
<PAGE>
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
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time), you will receive the net asset value as determined on
the business day we receive your request. You may 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. 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. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
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.
18
<PAGE>
Certain management considerations
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 has taken steps to obtain satisfactory assurances that
its major service providers have taken steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. Consistent with the investment
process utilized for the selection of securities for the Fund, the portfolio
managers focus solely on the quantitative characteristics of the equity
securities in which the Fund invests. This process assumes that the effect of
the Year 2000 problem on each company is already reflected in those
characteristics. Accordingly, except for surveying the widely reported
information regarding the companies in which the Fund invests, no additional
Year 2000 due diligence is performed. However, there can be no guarantees that,
even with these efforts, they will be able to predict the effect of Year 2000 on
any company or the performance of its securities.
Investments by fund of funds
The Fund accepts investments from the series portfolios of Delaware Group
Foundation Funds, a fund of funds. From time to time, the Fund may experience
large investments or redemptions due to allocations or rebalancings by
Foundation Funds. While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on portfolio management.
For example, the Fund 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
transaction costs or portfolio turnover. The manager will monitor transactions
by Foundation Funds and will attempt to minimize any adverse effects on both the
Fund and Foundation Funds as a result of these transactions.
19
<PAGE>
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 for the years ended October 31, 1999,
1998 and 1997 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. The information for the
fiscal periods ending on or before October 31, 1996 have been audited by the
Fund's previous independent auditors.
<TABLE>
<CAPTION>
- ------------------------------------------------------------- --------------------------------------------------------------
Institutional Class Shares
Year Ended 10/31
- ------------------------------------------------------------- --------------------------------------------------------------
U.S. Growth Fund 1999(3) 1998(3) 1997(3) 1996(4) 1995
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Net asset value, beginning of period $11.750 $16.860 $13.940 $12.500 $10.230
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Income (loss) from investment operations
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Net investment loss (0.118) (0.027) (0.010) (0.050) (0.050)
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Net realized and unrealized gain on investments 4.078 1.287 4.290 1.490 2.320
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Total from investment operations 3.960 1.260 4.280 1.440 2.270
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Less dividends and distributions
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Dividends from net investment income none none none none none
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Distributions from net realized gain on investments none (6.370) (1.360) none none
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Total dividends and distributions none (6.370) (1.360) none none
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Net asset value, end of period $15.710 $11.750 $16.860 $13.940 $12.500
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Total return(1) 33.79% 10.80% 33.57% 11.52%(2) 22.19%(2)
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Ratios and supplemental data
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Net assets, end of period (000 omitted) $52,769 $28,606 $18,455 $10,003 $4,819
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Ratio of expenses to average net assets 1.56% 1.19% 1.14% 1.48% 1.50%
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Ratio of expenses to average net assets prior to N/A N/A N/A 1.56% 1.83%
expense limitations and expenses paid indirectly
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Ratio of net investment loss to average net assets (0.82%) (0.22%) (0.08%) (0.45%) (0.59%)
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Ratio of net investment loss to average net assets N/A N/A N/A (0.53%) (0.92%)
prior to expense limitation and expenses paid indirectly
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
Portfolio turnover 132% 135% 144% 131% 58%
- ------------------------------------------------------------- ----------------- ---------- ---------- ----------- ----------
</TABLE>
(1) Total Investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions.
(2) Total return reflects voluntary expense caps.
(3) The average shares outstanding method has been applied for per share
information.
(4) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
20
<PAGE>
How to read the financial highlights
Net investment income (loss)
Net investment loss includes dividend and interest income earned from a fund's
investments; it is after expenses have been deducted.
Net realized and unrealized gain on investments
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 net realized gain on
investments."
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 rate that an investor would have earned or lost on an
investment in a fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers and assume the shareholder has
reinvested all dividends and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's portfolio,
less any liabilities, that are attributable to that class of the fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets 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 (loss) to average net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover
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.
21
<PAGE>
begin glossary
How to use this glossary
The glossary includes definitions of investment terms used throughout the
Prospectus. If you would like to know the meaning of an investment term that
is not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
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 changes prior to maturity and
typically is inversely related to current interest rates. Generally, when
interest rates rise, bond prices fall, and when interest rates fall, bond 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. See also Nationally recognized statistical rating
organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
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.
Corporate bond
A debt security issued by a corporation. See Bond.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
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.
22
<PAGE>
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
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
a fund's portfolio of securities and distributing its shares. They are paid
from a fund's assets before any earnings are distributed to shareholders.
Fixed-income securities
With fixed-income securities, the money you originally invest is paid back
at a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bond.
Government securities
Securities issued by U.S. government or its agencies. They include Treasuries as
well as agency-backed securities such as Fannie Maes.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in 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 an annual percentage of the fund's average daily net
assets.
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.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
NASD Regulation, Inc. (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Nationally recognized statistical rating organization (NRSRO)
A company that assesses the credit quality 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,
Inc. (Moody's), Standard & Poor's Ratings Group (S&P), Duff & Phelps, Inc.
(Duff), and Fitch IBCA, Inc. (Fitch).
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
23
<PAGE>
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pay dividends at a fixed
rate and are sometimes convertible into common stock.
Price-to-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 per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). 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.
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 Composite Stock Price Index
The Standard & Poor's 500 Composite Stock Price Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of the
U.S. stock market.
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; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied 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."
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.
24
<PAGE>
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments. Delaware 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 shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. 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
19103-3682, 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.delawareinvestments.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 Investments Funds seven days a week, 24 hours a day, use this
Touch-Tone service.
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Registrant's Investment Company Act file number: 811-7972
- ----------------------------------------------------------------------------
Delaware U.S. Growth Fund Symbols CUSIP NASDAQ
- ----------------------------------------------------------------------------
Institutional Class 245917802 DEUIX
- ----------------------------------------------------------------------------
P-___ [--] PP 1/00
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 2000
DELAWARE GROUP ADVISER FUNDS
DELAWARE U.S. GROWTH FUND
1818 Market Street
Philadelphia, PA 19103
For more information about
the Institutional Class:
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 ("Adviser Funds") is a
professionally-managed mutual fund of the series type which currently offers
three series of shares: Delaware U.S. Growth Fund, Delaware Overseas Equity Fund
and Delaware New Pacific Fund. This Statement of Additional Information
describes Delaware U.S. Growth Fund (the "Fund")
The Fund offers three retail classes: Class A Shares, Class B Shares
and Class C Shares (together referred to as the "Fund Classes"). The Fund also
offers an institutional class: (the "Institutional Class"). 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 Prospectus for
the Fund Classes dated February 1, 2000 and the current Prospectus for the
Institutional Class dated February 1, 2000, 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 Class may be
obtained by writing or calling your investment dealer or by contacting the
Fund's national distributor, Delaware Distributors, L.P. (the "Distributor"), at
the above address or by calling the above phone numbers. The Fund's financial
statements, the notes relating thereto, the financial highlights and the report
of independent auditors are incorporated by reference from the Annual Report
into this Part B. The Annual Report will accompany any request for Part B. The
Annual Report can be obtained, without charge, by calling 800-523-1918.
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TABLE OF CONTENTS
Cover Page
Investment Restrictions and Policies
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 Agreement and Sub-Advisory Agreement
Officers and Trustees
General Information
Financial Statements
Appendix A--Description of Ratings
Appendix B--Investment Objectives of the Funds in the Delaware Investments
Family
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INVESTMENT RESTRICTIONS AND POLICIES
The Prospectus discusses the Fund's investment objective and the
policies followed to achieve that objective. The following discussion
supplements the description of the Fund's investment objectives and policies in
the Prospectus.
Lower-Rated Debt Securities
The 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 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
Trustees, 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
The 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.
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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
The 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.
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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 Fund 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
The 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 the 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 Fund 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 the Fund is obligated
as a writer. A call option written by the 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 the 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
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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 the 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 the Fund as a covered
call option writer is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
a clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at times, render certain of the facilities of any of the clearing
corporations inadequate, and thereby result in the institution by an exchange of
special procedures which may interfere with the timely execution of customers'
orders. However, the OCC, based on forecasts provided by the U.S. exchanges,
believes that its facilities are adequate to handle the volume of reasonably
anticipated options transactions, and such exchanges have advised such clearing
corporation that they believe their facilities will also be adequate to handle
reasonably anticipated volume.
Options on Stock Indices
Options on stock indices are similar to options on stock except that,
rather than the right to take or make delivery of stock at a specified price, an
option on a stock index gives the holder the right to receive, upon exercise of
the option, an amount of cash if the closing level of the stock index upon which
the option is based is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option. This amount of cash is equal to
such difference between the closing price of the index and the exercise price of
the option expressed in dollars times a specified multiple (the "multiplier").
The writer of the option is obligated, in return for the premium received, to
make delivery of this amount. Unlike stock options, all settlements are in cash.
The multiplier for an index option performs a function similar to the
unit of trading for a stock option. It determines the total dollar value per
contract of each point in the difference between the exercise price of an option
and the current level of the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on different indices may have
different multipliers.
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Except as described below, the 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 the
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. The 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 the 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, the 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 the 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 the 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, the 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 Fund's policy to purchase or write options only on
indices that 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 the 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 the 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 the 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, the Fund will not learn that an index option has been
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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 the 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. The Fund may deal in
over-the-counter ("OTC") options. The Fund understands 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 Fund, 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. The Fund has adopted procedures for engaging in OTC options for
the purpose of reducing any potential adverse impact of such transactions upon
the liquidity of the Fund's portfolio.
As part of these procedures the Fund will engage in OTC options
transactions only with primary dealers that have been specifically approved by
the Board of Trustees of Adviser Funds 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 Fund. The Fund anticipates entering into written agreements with those
dealers to whom the Fund may sell OTC options, pursuant to which the Fund 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. The 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 the 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.
The Fund intends to engage in futures contracts and options thereon as
a hedge against changes, resulting from market conditions, in the value of
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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 Fund may write options on futures
contracts to realize through the receipt of premium income a greater return than
would be realized in the 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 the 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 that 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 the Fund 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 the 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 the Fund may trade the underlying securities. To the extent that
the futures markets close before the securities markets, significant price and
rate movements can take place in the securities markets that cannot be reflected
in the futures market.
Foreign Currency Transactions. The 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
When dealings in forward contracts, the Fund 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 the 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. The 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 the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when the 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
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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, the 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, the 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 Fund 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 the Fund.
In connection with purchases and sales of securities donominated in
foreign currencies, the 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-adviser expect to enter into
settlement hedges in the normal course of managing the Fund's foreign
investments. The Fund 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 Fund may also use forward contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. For example,
if the 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, the Fund will
segregate assets to cover currency forward contracts, if any, whose purpose is
essentially speculative. The Fund 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 Fund's investment exposure to changes in
currency exchange rates, and could result in losses to the Fund if currencies do
not perform as the Manager and/or sub-adviser anticipate. For example, if a
currency's value rose at a time when the Manager and/or applicable sub-adviser
had hedged the 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, the
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 the 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-adviser's use of forward currency
contracts will be advantageous to the Fund or that it will hedge at an
appropriate time.
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Foreign Currency Options
The 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 that 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 the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer.
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Combined Transactions
The 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.
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.
Swaps, Caps, Floors and Collars
The Fund may enter into interest rate, currency and index swaps and the
purchase or sale of related caps, floors and collars. The Fund expects 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 Fund intends 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.
The 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,
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accordingly, will not treat them as being subject to its borrowing restrictions.
The 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 Fund 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. The 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
The 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 the Fund's total assets. The 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 Fund 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, the 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, the 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
Trustees 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
The Fund may purchase securities on a "when-issued" basis. When the
Fund agrees to purchase securities, it will reserve cash or securities in
amounts sufficient to cover its obligations, and will value the reserved assets
daily. It may be expected that the 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. The Fund does not intends to purchase
"when-issued" securities for speculative purposes but only in furtherance of its
investment objective. Because the Fund will set reserve 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
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Fund might be affected in the event its commitments to purchase when-issued
securities ever exceeded 25% of the value of its assets.
When the 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.
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Money Market Instruments
The Fund may invest for defensive purposes in corporate government
bonds and notes and money market instruments. Money market instruments in which
the Fund 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 Fund
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.
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Reverse Repurchase Agreements
The Fund is authorized to enter into reverse repurchase agreements. A
reverse repurchase agreement is the sale of a security by the Fund and its
agreement to repurchase the security at a specified time and price. The 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 the Fund;
accordingly, the 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 the 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, the 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
The Fund may engage in "roll" transactions. A "roll" transaction is the
sale of securities together with a commitment (for which the 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 Fund;
accordingly, the Fund will limit its use of these transactions, together with
any other borrowings, to no more than one-third of its total assets. The Fund
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 the 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 the 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 the Fund's aggregate commitments under
these transactions increase, the opportunity for leverage similarly increases.
Repurchase Agreements
While the Fund is permitted to do so, it normally does 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 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 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
Fund, if any, would be the difference between the repurchase price and the
market value of the security. The Fund will limit its investments in repurchase
agreements to those which the Manager and/or sub-adviser, under the guidelines
of the Board of Trustees, determines to present minimal credit risks and which
are of high quality. In addition, the 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.
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Illiquid Securities
The Fund may invest no more than 10% of the value of its net assets in
illiquid securities.
The 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 Fund.
While maintaining oversight, the Board of Trustees has delegated to the
Manager the day-to-day function of determining whether or not individual Rule
144A Securities are liquid for purposes of the 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, the 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 Fund 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. The Fund will not invest over 5% of its assets in variable rate
master demand notes. Because master demand notes are direct lending arrangements
between the Fund and the issuer, they are not normally traded. Although there is
no secondary market in the notes, the 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 the Fund will be determined by the
Fund's Manager and/or sub-adviser under guidelines established by the Fund's
Board of Trustees 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 the 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.
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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 Trustees, 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 Appendix A. 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").
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INVESTMENT RESTRICTIONS
Fundamental Restrictions - The Fund has adopted the following restrictions which
cannot be changed without approval by the holders of a "majority" of the Fund's
outstanding shares, which is a vote by the holders of the lesser of a) 67% or
more of the voting securities present in person or by proxy at a meeting, if the
holders of more than 50% of the outstanding voting securities are present or
represented by proxy; or b) more than 50% of the outstanding voting securities.
The percentage limitations contained in the restrictions and policies set forth
herein apply at the time of purchase of securities.
The Fund shall not:
1. Make investments that will result in the concentration (as that
term may be defined in the Investment Company Act of 1940 ("1940 Act"), any rule
or order thereunder, or U.S. Securities and Exchange Commission ("SEC") staff
interpretation thereof) of its investments in the securities of issuers
primarily engaged in the same industry, provided that this restriction does not
limit the Fund from investing in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or in tax-exempt securities or
certificates of deposit.
2. Borrow money or issue senior securities, except as the 1940 Act,
any rule or order thereunder, or SEC staff interpretation thereof, may permit.
3. Underwrite the securities of other issuers, except that the Fund
may engage in transactions involving the acquisition, disposition or resale of
its portfolio securities, under circumstances where it may be considered to be
an underwriter under the Securities Act of 1933 (the "1933 Act").
4. Purchase or sell real estate, unless acquired as a result of
ownership of securities or other instruments and provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
5. Purchase or sell physical commodities, unless acquired as a result
of ownership of securities or other instruments and provided that this
restriction does not prevent the Fund from engaging in transactions involving
futures contracts and options thereon or investing in securities that are
secured by physical commodities.
6. Make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
loaning its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
Non-fundamental Restrictions - In addition to the fundamental policies and
investment restrictions described above, and the various general investment
policies described in the prospectus, the Fund will be subject to the following
investment restrictions, which are considered non-fundamental and may be changed
by the Board of Trustees without shareholder approval.
1. The Fund is permitted to invest in other investment companies,
including open-end, closed-end or unregistered investment companies, either
within the percentage limits set forth in the 1940 Act, any rule or order
thereunder, or SEC staff interpretation thereof, or without regard to percentage
limits in connection with a merger, reorganization, consolidation or other
similar transaction. However, the Fund may not operate as a "fund of funds"
which invests primarily in the shares of other investment companies as permitted
by Section 12(d)(1)(F) or (G) of the 1940 Act, if its own shares are utilized as
investments by such a "fund of funds."
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<PAGE>
2. The Fund may not invest more than 15% of its net assets in
securities which it cannot sell or dispose of in the ordinary course of business
within seven days at approximately the value at which the Fund has valued the
investment.
The following are additional non-fundamental investment restrictions:
The 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, the 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 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 the
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 the 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 the Fund may not exceed
one-third of the Fund's total assets and if the Fund's borrowing, including
reverse repurchase agreements, exceeds 5% of the value of the Fund's total
assets, we will not purchase any additional securities;
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 the Fund 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;
-20-
<PAGE>
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, any officer or trustee of the Adviser Funds 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 trustees 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 the 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, the 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
(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.
-21-
<PAGE>
PERFORMANCE INFORMATION
From time to time, the 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. The 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, the Fund may present total
return information that does not reflect the deduction of the maximum front-end
sales charge or any applicable CDSC.
The 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, the 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.
-22-
<PAGE>
The average annual total return quotations through October 31, 1999 are
shown below for each Class and are computed as described above. Returns for
Class A Shares at offer reflects the maximum front-end sales charge of 5.75%
paid on the purchase of shares; returns for Class A Shares at net asset value
(NAV) does not reflect the payment of any front-end sales charge. Returns 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, 1999; returns for Class B Shares and Class C Shares excluding
deferred sales charge assumes the shares were not redeemed on October 31, 1999
and therefore does not reflect the deduction of a CDSC.
Securities prices fluctuated during the periods covered and past
results should not be considered as representative of future performance.
-23-
<PAGE>
Average Annual Total Return(1)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Delaware Class A (2)(3) Class A (2) Class B Class B Class C Class C Institutional
U.S. Growth Fund at offer at NAV including CDSC excluding CDSC including excluding Class
(Inception (Inception (Inception (4) CDSC CDSC (Inception
12/3/93) 12/3/93) 3/29/94) (Inception (Inception (Inception 2/3/94)
3/29/94) 5/23/94) 5/23/94)
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------- --------------- ---------------- ---------------- ----------------- -------------- -------------- ---------------
1 year ended
10/31/99 25.68% 33.33% 27.39% 32.39% 31.38% 32.38% 33.78%
- ----------------- --------------- ---------------- ---------------- ----------------- -------------- -------------- ---------------
3 years ended
10/31/99 22.76% 25.20% 23.64% 24.29% 24.43% 24.43% 25.57%
- ----------------- --------------- ---------------- ---------------- ----------------- -------------- -------------- ---------------
5 years ended
10/31/99 20.15% 21.58% 20.54% 20.73% 20.80% 20.80% 21.96%
- ----------------- --------------- ---------------- ---------------- ----------------- -------------- -------------- ---------------
Life of Fund 17.22% 18.40% 18.65% 18.73% 20.28% 20.28% 18.29%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Manager has committed to waive a portion of its annual compensation or
pay expenses to limit the operating expenses of the Fund during certain
periods. See Investment Management Agreement and Sub-Advisory Agreement. In
the absence of such waivers or payments, performance would have been
affected negatively.
(2)The 12b-1 fees payable by the 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
reflect 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) 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.
-24-
<PAGE>
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, the 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 the Fund (or Fund Class) may be compared
to data prepared by Lipper Analytical Services, Inc., Morningstar, Inc., or to
the S&P 500 Index and the Dow Jones Industrial Average
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 the 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.
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.
The 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 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 Fund 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 Fund 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 Fund. The Fund may also compare performance to that of other compilations
or indices that may be developed and made available in the future.
The Fund 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
-25-
<PAGE>
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 the 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 the 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 the Fund. In addition, selected
indices may be used to illustrate historic performance of selected asset
classes. The Fund 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 the 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 the 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.
-26-
<PAGE>
Materials may refer to the CUSIP numbers of the Fund and may illustrate
how to find the listings of the Fund in newspapers and periodicals. Materials
may also include discussions of other funds, products, and services.
The Fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Fund 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. The Fund may advertise its current interest rate sensitivity,
duration, weighted average maturity or similar maturity characteristics.
Advertisements and sales materials relating to the Fund may include information
regarding the background and experience of its portfolio managers.
The following table presents examples, for purposes of illustration
only, of cumulative total return performance for each Class through October 31,
1999. 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.
The net asset value of a Class fluctuates so shares, when redeemed, may
be worth more or less than the original investment, and a Class' results should
not be considered as representative of future performance.
Cumulative Total Return(1)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Delaware U.S. Class A (2)(3) Class A (2)(3) Class B Class B Class C Class C
Growth Fund at offer at NAV including CDSC excluding CDSC including excluding
(Inception (Inception (Inception (4) CDSC CDSC
12/3/93) 12/3/93) 3/29/94) (Inception (Inception (Inception
3/29/94) 5/23/94) 5/23/94)
<S> <C> <C> <C> <C> <C> <C>
- --------------------- ------------------ ------------------ ----------------- ---------------- -------------- --------------
3 months ended (1.79%) 4.22% 0.91% 4.09% 3.05% 4.05%
10/31/99
- --------------------- ------------------ ------------------ ----------------- ---------------- -------------- --------------
6 months ended [0.53% 6.69% 1.30% 6.30% 5.24% 6.24%
10/31/99
- --------------------- ------------------ ------------------ ----------------- ---------------- -------------- --------------
9 months ended [0.86% 6.98% 1.46% 6.46% 5.39% 6.39%
10/31/99
- --------------------- ------------------ ------------------ ----------------- ---------------- -------------- --------------
1 year ended [25.68% 33.33% 27.39% 32.39% 31.38% 32.38%
10/31/99
- --------------------- ------------------ ------------------ ----------------- ---------------- -------------- --------------
3 years ended [85.00% 96.25% 89.00% 92.00% 92.66% 92. 66%
10/31/99
- --------------------- ------------------ ------------------ ----------------- ---------------- -------------- --------------
5 years ended [150.43% 165.64% 154.44% 156.44% 157.25% 157.25%
10/31/99
- --------------------- ------------------ ------------------ ----------------- ---------------- -------------- --------------
Life of Fund 155.88% 171.49% 160.31% 161.31% 173.20% 173.20%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------
Delaware U.S. Institutional
Growth Fund Class
(Inception
2/3/94)
<S> <C>
- --------------------- ---------------
3 months ended 4.31%
10/31/99
- --------------------- ---------------
6 months ended 6.87%
10/31/99
- --------------------- ---------------
9 months ended 7.23%
10/31/99
- --------------------- ---------------
1 year ended 33.79%
10/31/99
- --------------------- ---------------
3 years ended 97.99%
10/31/99
- --------------------- ---------------
5 years ended 169.80%
10/31/99
- --------------------- ---------------
Life of Fund 162.36%
- -------------------------------------
</TABLE>
(1) The Manager has committed to waive a portion of its annual compensation or
pay expenses to limit the operating expenses of the Fund during certain
periods. See Investment Management Agreemen and Sub-Advisory Agreement. In
the absence of such waivers or payments, performance would have been
affected negatively.
(2) The 12b-1 fees payable by the 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 reflect the lower 12b-1 fee rate.
(3) 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.
(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.
-27-
<PAGE>
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Fund 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 Fund's, 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
affiliates of the Manager, including the number of such clients serviced by such
affiliates.
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.
-28-
<PAGE>
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.
Investment Price Per Number of
Amount Share Shares Purchased
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $5.00 12
Month 4 $100 $10.00 10
--------------------------------------------------------------
$400 $37.50 48
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to
represent the actual performance of any stock or bond fund 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. The Fund may include illustrations showing the power
of compounding in advertisements and other types of literature.
-29-
<PAGE>
TRADING PRACTICES AND BROKERAGE
Fund transactions are executed by the Manager or any sub-adviser
(collectively referred to in this section as the "Manager") on behalf of the
Fund in accordance with the standards described below.
Brokers, dealers, banks and others are selected to execute transactions
for the purchase or sale of portfolio securities or other instruments on the
basis of the Manager's judgment of their professional capability to provide the
service. The primary consideration is to have brokers, dealers or banks execute
securities transactions at best execution. Best execution refers to many
factors, including the price paid or received for a security, the commission
charged, the promptness and reliability of execution, the confidentiality and
placement accorded the order and other factors affecting the overall benefit
obtained by the account on the transaction. 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 Fund
pays 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 Fund pays 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 the Fund were as follows:
October 31,
1999 1998 1997
---- ---- ----
$213,389 $120,741 $85,141
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, 1999, portfolio
transactions of the Fund in the amount of $81,558,451, resulting in brokerage
commissions of $99,811 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
-30-
<PAGE>
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
Fund and to other funds available from Delaware Investments. Subject to best
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
Trustees that the advantages of combined orders outweigh the possible
disadvantages of separate transactions.
Consistent with the Conduct Rules of NASD Regulation, Inc. (the
"NASD"), and subject to seeking best 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.
Portfolio Turnover
While the Fund does 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 the Fund when warranted by the circumstances. The 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 Fund were as follows:
October 31,
1998 1999
---- ----
135% 132%
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<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for the Fund's
shares and has agreed to use its best efforts to sell shares of the Fund. See
the Prospectuses for information on how to invest. Shares of the Fund are
offered on a continuous basis and may be purchased through authorized investment
dealers or directly by contacting Adviser Funds 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 Class, but certain eligibility requirements must be satisfied.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. See Investment Plans for purchase limitations
applicable to retirement plans. Adviser Funds will reject any purchase order for
more than $250,000 of Class B Shares and $1,000,000 or more of Class C Shares.
An investor may exceed these limitations by making cumulative purchases over a
period of time. In doing so, an investor should keep in mind, however, that
reduced front-end sales charges apply to investments of $50,000 or more in Class
A Shares, and that Class A Shares are subject to lower annual 12b-1 Plan
expenses than Class B Shares and Class C Shares and generally are not subject to
a CDSC.
Selling dealers are responsible for transmitting orders promptly.
Adviser Funds reserves the right to reject any order for the purchase of its
shares of the Fund if in the opinion of management such rejection is in the
Fund's best interest. If a purchase is canceled because your check is returned
unpaid, you are responsible for any loss incurred. The 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. The 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.
The 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.
The 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 and the Distributor
intend to operate in compliance with these rules.
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<PAGE>
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 B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 5% if shares are redeemed within one year of purchase; (ii) 4% if
shares are redeemed within two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if shares
are redeemed during the fifth year following purchase; and (v) 1% if shares are
redeemed during the sixth year following purchase. Class B Shares are also
subject to annual 12b-1 Plan expenses which are higher than those to which Class
A Shares are subject and are assessed against Class B Shares for approximately
eight years after purchase. See Automatic Conversion of Class B Shares, below.
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Class C
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment which are equal to those to which Class B Shares are subject.
Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses.
See Plans Under Rule 12b-1 for the Fund Classes under Purchasing
Shares, and Determining Offering Price and Net Asset Value in this Part B.
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 for any certificate issued. A shareholder may be subject to
fees for replacement of a lost or stolen certificate, under certain conditions,
including the cost of obtaining a bond covering the lost or stolen certificate.
Please contact the 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 set at (0.30%) of average daily net assets of such shares.
Unlike Class B Shares, Class C Shares do not convert to another Class.
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<PAGE>
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 Fund, 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
the 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
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<PAGE>
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 the 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 Fund.
See Automatic Conversion of Class B Shares below. 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 set at 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
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<PAGE>
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees makes it possible for the 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 18th day or next
business day of March, June, September and December (each, a "Conversion Date").
If the eighth anniversary after a purchase of Class B Shares falls on a
Conversion Date, an investor's Class B Shares will be converted on that date. If
the eighth anniversary occurs between Conversion Dates, an investor's Class B
Shares will be converted on the next Conversion Date after such anniversary.
Consequently, if a shareholder's eighth anniversary falls on the day after a
Conversion Date, that shareholder will have to hold Class B Shares for as long
as three additional months after the eighth anniversary of purchase before the
shares will automatically convert into Class A Shares.
Class B Shares of the Fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of the Fund (or, in the case of
Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant Class)
pro-rata with Class B Shares of the Fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes.
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 has adopted a
separate plan for each of Class A Shares, Class B Shares and Class C Shares of
the Fund (the "Plans"). Each Plan permits the Fund to pay for certain
distribution, promotional and related expenses involved in the marketing of only
the Class of shares to which the Plan applies. The Plans do not apply to
Institutional Class of shares. Such shares are not included in calculating the
Plans' fees, and the Plans are not used to assist in the distribution and
marketing of shares of Institutional Class. Shareholders of Institutional Class
may not vote on matters affecting the Plans.
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<PAGE>
The Plans permit the Fund, pursuant to its Distribution Agreement, to
pay out of the assets of Class A Shares, Class B Shares and Class C Shares
monthly fees to the Distributor for its services and expenses in distributing
and promoting sales of shares of such classes. These expenses include, among
other things, preparing and distributing advertisements, sales literature, and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, holding special promotions for specified periods of time
and paying distribution and maintenance fees to brokers, dealers and others. In
connection with the promotion of shares of the Classes, the Distributor may,
from time to time, pay to participate in dealer-sponsored seminars and
conferences, and reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising. The Distributor may pay or
allow additional promotional incentives to dealers as part of preapproved sales
contests and/or to dealers who provide extra training and information concerning
a Class and increase sales of the Class. In addition, the Fund may make payments
from the 12b-1 Plan fees of its respective Classes directly to others, such as
banks, who aid in the distribution of Class shares or provide services in
respect of a Class, pursuant to service agreements with Adviser Funds. 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.
The maximum aggregate fee payable by the Fund under the Plans, and the
Fund's Distribution Agreement, 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 the Class B Shares'
and Class C Shares' average daily net assets for the year. Adviser Funds' Board
of Trustees may reduce these amounts at any time.
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 reimbursement from such Fund Classes. Subject to seeking best
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 all been
approved by the Board of Trustees of Adviser Funds, including a majority of the
trustees who are not "interested persons" (as defined in the 1940 Act) of
Adviser Funds and who have no direct or indirect financial interest in the Plans
by vote cast in person at a meeting duly called for the purpose of voting on the
Plans and such Agreement. Continuation of the Plans and the Distribution
Agreement, as amended, must be approved annually by the Board of Trustees in the
same manner as specified above.
Each year, the trustees 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 the Fund and that there is a reasonable
likelihood of the Plan relating to a Class providing a benefit to that Class.
The Plans and the Distribution Agreement, as amended, may be terminated with
respect to a Class at any time without penalty by a majority of those trustees
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 trustees who are not "interested persons." With respect to each
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 Fund's B Class. Also, any other material amendment to the
Plans must be approved by a majority vote of the trustees including a majority
of the noninterested trustees of Adviser Funds having no interest in the Plans.
In addition, in order for the Plans to remain effective, the selection and
nomination of trustees who are not "interested persons" of Adviser Funds must be
effected by the trustees who themselves are not "interested persons" and who
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<PAGE>
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 Trustees for their review.
For the fiscal year ended October 31, 1999, payments from Class A
Shares, Class B Shares and Class C Shares of the Fund amounted to $78,781,
$146,053 and $38,976, respectively. Such amounts were used for the following
purposes:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advertising [---- ---- ----]
- ------------------------------------------------------------------------------------------------------------------------
Annual/Semi-Annual Reports [---- ---- ----]
- ------------------------------------------------------------------------------------------------------------------------
Broker Trails [$62,674 $34, 957 $11,224]
- ------------------------------------------------------------------------------------------------------------------------
Broker Sales Charges [---- $65,730 $25,201]
- ------------------------------------------------------------------------------------------------------------------------
Dealer Service Expenses [---- ---- ----]
- ------------------------------------------------------------------------------------------------------------------------
Interest on Broker Sales Charges [---- $33,683 $1,028]
- ------------------------------------------------------------------------------------------------------------------------
Commissions to Wholesalers [$16.107 6,683 $1,523]
- ------------------------------------------------------------------------------------------------------------------------
Promotional-Broker Meetings [--- ---- ----]
- ------------------------------------------------------------------------------------------------------------------------
Promotional-Other [---- ---- ----]
- ------------------------------------------------------------------------------------------------------------------------
Prospectus Printing [---- ---- ----]
- ------------------------------------------------------------------------------------------------------------------------
Telephone [---- ---- ----]
- ------------------------------------------------------------------------------------------------------------------------
Wholesaler Expenses [---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------
Other ---- ---- ----]
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
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,
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<PAGE>
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. Such purchasers are required to sign a letter stating that the
purchase is for investment only and that the securities may not be resold except
to the issuer. Such purchasers may also be required to sign or deliver such
other documents as the Fund may reasonably require to establish eligibility for
purchase at net asset value. 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 the 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.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to the 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 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.
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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 by
any such purchaser previously enumerated within a 13-month period pursuant to a
written Letter of Intention provided by the Distributor and signed by the
purchaser, and not legally binding on the signer or Adviser Funds 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 Fund 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 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. For purposes of satisfying an
investor's obligation under a Letter of Intention, Class B Shares and Class C
Shares of the Fund and the corresponding classes of shares of other funds in the
Delaware Investments family which offer such shares may be aggregated with Class
A Shares of the Fund and the corresponding class of shares of the other funds in
the Delaware Investments family.
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
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sales charge will be based on actual plan participation and the projected
investments in Delaware Investments funds that are offered with a front-end
sales charge, CDSC or Limited CDSC for a 13-month period. The Transfer Agent
reserves the right to adjust the signed Letter of Intention based on this
acceptance criteria. The 13-month period will begin on the date this Letter of
Intention is accepted by the Transfer Agent. If actual investments exceed the
anticipated level and equal an amount that would qualify the plan for further
discounts, any front-end sales charges will be automatically adjusted. In the
event this Letter of Intention is not fulfilled within the 13-month period, the
plan level will be adjusted (without completing another Letter of Intention) and
the employer will be billed for the difference in front-end sales charges due,
based on the plan's assets under management at that time. Employers may also
include the value (at offering price at the level designated in their Letter of
Intention) of all their shares intended for purchase that are offered with a
front-end sales charge, CDSC or Limited CDSC of any class. Class B Shares and
Class C Shares of the 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 Fund, 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 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 Delaware Investment Advisers, the Manager's affiliate, or any of the
Manager's other affiliates in a stable value account may be combined with other
Delaware Investments fund holdings.
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to the Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of the 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 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 $10,000 and
subsequently purchases $40,000 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 and Class B Shares of the Fund (and of the
Institutional Class holding shares which were acquired through an exchange from
one of the other mutual funds in the Delaware Investments family 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 the same
Class of the Fund or in the same Class of any of the other funds in the Delaware
Investments family. In the case of Class A Shares, the reinvestment will not be
assessed a front-end sales charge and in the case of Class B Shares, the amount
of the CDSC previously charged on the redemption will be reimbursed by the
Distributor. The reinvestment will be subject to applicable eligibility and
minimum purchase requirements and must be in states where shares of such other
funds may be sold. This reinvestment privilege does not extend to Class A Shares
where the redemption of the shares triggered the payment of a Limited CDSC.
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Persons investing redemption proceeds from direct investments in mutual funds in
the Delaware Investments family, offered without a front-end sales charge will
be required to pay the applicable sales charge when purchasing Class A Shares.
The reinvestment privilege does not extend to a redemption of Class 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. In the case of
Class B Shares, the time that the previous investment was held will be included
in determining any applicable CDSC due upon redemptions as well as the automatic
conversion into Class A Shares.
A redemption and reinvestment of Class B Shares could have income tax
consequences. Shareholders will receive from the Distributor the amount of the
CDSC paid at the time of redemption as part of the reinvested shares, which may
be treated as a capital gain to the shareholder for tax purposes. 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 the 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 Fund's shareholder servicing agent, about the
applicability of the Class A Limited CDSC in connection with the features
described above.
Group Investment Plans
Group Investment Plans which are not eligible to purchase shares of the
Institutional Class may also benefit from the reduced front-end sales charges
for investments in Class A Shares, 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 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 the Fund in the Delaware Investments family.
See Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange.
Institutional Class
The Institutional Class of the 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
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having at least $1,000,000 entrusted to the adviser for investment purposes, but
only if the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services.
Shares of the Institutional Class are available for purchase at net
asset value, without the imposition of a front-end or contingent deferred sales
charge and are not subject to Rule 12b-1 expenses.
<PAGE>
INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares of the respective
Fund Class in which an investor has an account (based on the net asset value in
effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of the Institutional Class
are reinvested in the accounts of the holders of such shares (based on the net
asset value in effect on the reinvestment date). A confirmation of each dividend
payment from net investment income and of distributions from realized securities
profits, if any, will be mailed to shareholders in the first quarter of the
fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the specific
Class in which shares are being purchased. Such purchases, which must meet the
minimum subsequent purchase requirements set forth in the Prospectuses and this
Part B, are made for Class A Shares at the public offering price, and for Class
B Shares, Class C Shares and Institutional Class at the net asset value, at the
end of the day of receipt. A reinvestment plan may be terminated at any time.
This plan does not assure a profit nor protect against depreciation in a
declining market.
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 Fund, in states where their shares may be sold. Such investments will be at
net asset value at the close of business on the reinvestment date without any
front-end sales charge or service fee. The shareholder must notify the Transfer
Agent in writing and must have established an account in the fund into which the
dividends and/or distributions are to be invested. Any reinvestment directed to
the Fund in which the investor does not then have an account will be treated
like all other initial purchases of the 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 Fund,
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.
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Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Investments family, you may write and authorize an exchange of part or all of
your investment into shares of the 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 the Fund's prospectus. See Redemption and Exchange for more complete
information concerning your exchange privileges.
Holders of Class A Shares of the 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 the 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 the 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 the
Fund and Class C Shares of the 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 the 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 the Fund.
Permissible exchanges into Class A Shares of the 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 the 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 the 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 or quarterly 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 or, as applicable, each quarter 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.
* * *
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Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to the 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,
the 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. The 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 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 the 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 Fund does not charge a fee
for this service; however, your bank may charge a fee.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the 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 Redemption and Exchange for a brief summary of the tax consequences
of exchanges. Shareholders can terminate their participation in Wealth Builder
at any time by giving written notice to the fund from which exchanges are made.
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This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Class.
Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete an Asset Planner Account Registration
Form, which is available only from a financial adviser or investment dealer.
Effective September 1, 1997, the Asset Planner Service is only available to
financial advisers or investment dealers who have previously used this service.
The Asset Planner service offers a choice of four predesigned asset allocation
strategies (each with a different risk/reward profile) in predetermined
percentages in Delaware Investments funds. With the help of a financial adviser,
you may also design a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Investments accounts into the Asset Planner service may be made at net asset
value under the circumstances described under Investing by Exchange. Also see
Buying Class A Shares at Net Asset Value. The minimum initial investment per
Strategy is $2,000; subsequent investments must be at least $100. Individual
fund minimums do not apply to investments made using the Asset Planner service.
Class A, Class B and Class C Shares are available through the Asset Planner
service. Generally, only shares within the same class may be used within the
same Strategy. However, Class A Shares of the 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 Fund may be suitable for tax-deferred retirement
plans. Delaware Investments offers a full spectrum of retirement plans,
including the 401(k) Defined Contribution Plan, Individual Retirement Account
("IRA") and the new Roth IRA and Education IRA.
Among the retirement plans that Delaware Investments offers, Class B
Shares are available only by Individual Retirement Accounts, SIMPLE IRAs, Roth
IRAs, Education IRAs, Simplified Employee Pension Plans, Salary Reduction
Simplified Employee Pension Plans, and 403(b)(7) and 457 Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares and Class
C Shares. See Waiver of Contingent Deferred Sales Charge - Class B Shares and
Class C Shares under Redemption and Exchange for a list of the instances in
which the CDSC is waived.
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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 Class, above. For additional information on any of the
plans and Delaware's retirement services, call the Shareholder Service Center
telephone number.
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the Plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships, 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.
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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.
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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 includable in gross income of the beneficiary and subject
to an additional 10% penalty tax if the distribution is not for qualified higher
education expenses. Tax-free (and penalty-free) transfers and rollovers of
account balances from one Education IRA benefiting one beneficiary to another
Education IRA benefiting a different beneficiary (as well as redesignations of
the named beneficiary) is permitted, provided that the new beneficiary is a
member of the family of the old beneficiary and that the transfer or rollover is
made before the time the old beneficiary reaches age 30 and the new beneficiary
reaches age 18.
A company or association may establish a Group IRA or Group Roth IRA
for employees or members who want to purchase shares of the 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.
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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 are 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.
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SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available
only to plan sponsors 100 or fewer employees and, in exchange for mandatory plan
sponsor contributions, discrimination testing is no longer required. Class B
Shares are not available for purchase by such plans.
DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering
price next calculated after receipt of the order by the Fund, its agent or
certain other authorized persons. See Distribution and Service under Investment
Management Agreement and Sub-Advisory Agreement. Orders for purchases of Class B
Shares, Class C Shares and Institutional Class shares are effected at the net
asset value per share next calculated after receipt of the order by the Fund its
agent or certain other authorized persons. Selling dealers are responsible for
transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable 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 Fund will generally be closed, pricing calculations will
not be made and purchase and redemption orders will not be processed.
An example showing how to calculate the net asset value per share and,
in the case of Class A Shares, the offering price per share, is included in the
Fund's financial statements which are incorporated by reference into this Part
B.
The Fund's net asset value per share is computed by adding the value of
all the securities and other assets in the Fund's portfolio, deducting any
liabilities of the Fund, and dividing by the number of Fund shares outstanding.
Expenses and fees are accrued daily. In determining the Fund's total net assets,
portfolio securities primarily listed or traded on a national or foreign
securities exchange, except for bonds, are valued at the last sale price on that
exchange. Exchange traded options are valued at the last reported sale price or,
if no sales are reported, at the mean between bid and asked prices. Non-exchange
traded options are valued at fair value using a mathematical model. Futures
contracts are valued at their daily quoted settlement price. Securities not
traded on a particular day, over-the-counter securities, and government and
agency securities are valued at the mean value between bid and asked prices.
Money market instruments having a maturity of less than 60 days are valued at
amortized cost. Debt securities (other than short-term obligations) are valued
on the basis of valuations provided by a pricing service when such prices are
believed to reflect the fair value of such securities. 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. Use of a pricing service has been approved by the Board of Trustees.
Prices provided by a pricing service take into account appropriate factors such
as institutional trading in similar groups of securities, yield, quality, coupon
rate, maturity, type of issue, trading characteristics and other market data.
Subject to the foregoing, securities for which market quotations are not readily
available and other assets are valued at fair value as determined in good faith
and in a method approved by the Board of Trustees.
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Each Class of the Fund will bear, pro-rata, all of the common expenses
of the Fund. The net asset values of all outstanding shares of each Class of the
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Fund represented by the value of shares
of that Class. All income earned and expenses incurred by the Fund, will be
borne on a pro-rata basis by each outstanding share of a Class, based on each
Class' percentage in the Fund represented by the value of shares of such
Classes, except that Institutional Class will not incur any of the expenses
under Adviser 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 will be
allocable to each Class, the net asset value of each Class of the Fund will
vary.
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REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways.
The exchange service is useful if your investment requirements change and you
want an easy way to invest in other equity funds, tax-advantaged funds, bond
funds or money market funds. This service is also useful if you are anticipating
a major expenditure and want to move a portion of your investment into the Fund
that has the checkwriting feature. Exchanges are subject to the requirements of
the Fund and all exchanges of shares constitute taxable events. Further, in
order for an exchange to be processed, shares of the fund being acquired must be
registered in the state where the acquiring shareholder resides. You may want to
consult your financial adviser or investment dealer to discuss which funds in
Delaware Investments will best meet your changing objectives, and the
consequences of any exchange transaction. You may also call the Delaware
Investments directly for fund information.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after the 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 the Prospectus. A shareholder submitting
a redemption request may indicate that he or she wishes to receive redemption
proceeds of a specific dollar amount. In the case of such a request, and in the
case of certain redemptions from retirement plan accounts, the Fund will redeem
the number of shares necessary to deduct the applicable CDSC in the case of
Class B 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. The 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 Fund, offers to repurchase Fund shares from broker/dealers acting
on behalf of shareholders. The redemption or repurchase price, which may be more
or less than the shareholder's cost, is the net asset value per share next
determined after receipt of the request in good order by the Fund, 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 Fund 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.
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Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order by the Fund or certain other authorized persons (see Distribution
and Service under Investment Management Agreement and Sub-Advisory Agreement);
provided, however, that each commitment to mail or wire redemption proceeds by a
certain time, as described below, is modified by the qualifications described in
the next paragraph.
The Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor redemption requests as to shares for which a check
was tendered as payment, but the 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. The 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 will automatically redeem from the shareholder's account the shares
purchased by the check plus any dividends earned thereon. Shareholders may be
responsible for any losses to the Fund or to the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by the Fund of securities owned by it is not reasonably
practical, or it is not reasonably practical for the Fund fairly to value its
assets, or in the event that the SEC has provided for such suspension for the
protection of shareholders, the 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 has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which the 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 the Fund's investments is subject to changing market
prices. Thus, a shareholder reselling shares to the Fund may sustain either a
gain or loss, depending upon the price paid and the price received for such
shares.
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 of purchase; (ii) 4% if shares are redeemed during the second year
after 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 may be
a bank wiring cost, neither the Fund nor the Distributor charges a fee for
redemptions or repurchases, but such fees could be charged at any time in the
future.
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Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Investments (in
each case, "New Shares") in a permitted exchange, will not be subject to a CDSC
that might otherwise be due upon redemption of the Original Shares. However,
such shareholders will continue to be subject to the CDSC and, in the case of
Class B Shares, the automatic conversion schedule of the Original Shares as
described in this Part B and any CDSC assessed upon redemption will be charged
by the fund from which the Original Shares were exchanged. In an exchange of
Class B Shares from the 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 the Fund for a longer period of time than if the investment in New
Shares were made directly.
Written Redemption
You can write to the 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 Fund requires a signature by all owners of the account and a
signature guarantee for each owner. A signature guarantee can be obtained from a
commercial bank, a trust company or a member of a Securities Transfer
Association Medallion Program ("STAMP"). The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares or Institutional Class 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 and Institutional Class
shares only if a shareholder submits a specific request. Certificates are not
issued for Class B Shares or Class C Shares.
Written Exchange
You may also write to the 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 or Institutional Class 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. The 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 Fund by telephone during periods when market or economic conditions
lead to an unusually large volume of telephone requests.
Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the 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.
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Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day. If the
proceeds are wired to the shareholder's account at a bank which is not a member
of the Federal Reserve System, there could be a delay in the crediting of the
funds to the shareholder's bank account. A bank wire fee may 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 the 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 the 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 Class
shares by phone using MoneyLine(SM) On Demand. When you authorize the 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.
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Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Fund will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Investments funds from Timing Firms. The 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)
Delaware Decatur Equity Income Fund, (2) Delaware Growth and Income Fund, (3)
Delaware Small Cap Value Fund, (4) Delaware Limited-Term Government Fund, (5)
Delaware Trend Fund, (6) Delaware Cash Reserve Fund, (7) Delaware Delchester
Fund and (8) Delaware Tax-Free Pennsylvania Fund. No other Delaware Investments
funds are available for timed exchanges. Assets redeemed or exchanged out of
Timing Accounts in Delaware Investments funds not listed above may not be
reinvested back into that Timing Account. The 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).
The 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 the
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 the Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
Systematic Withdrawal Plans
Shareholders of Class A Shares, Class B Shares and Class C Shares who
own or purchase $5,000 or more of shares at the offering price, or net asset
value, as applicable, for which certificates have not been issued may establish
a Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or
quarterly withdrawals of $75 or more, although the Fund does not recommend any
specific amount of withdrawal. This is particularly useful to shareholders
living on fixed incomes, since it can provide them with a stable supplemental
amount. This $5,000 minimum does not apply for the 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.
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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 the 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 Limited CDSC for Class A Shares and CDSC for Class B and C Shares
redeemed via a Systematic Withdrawal Plan will be waived if the annual amount
withdrawn in each year is less than 12% of the account balance on the date that
the Plan is established. If the annual amount withdrawn in any year exceeds 12%
of the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subjected to the applicable
contingent deferred sales charge, including an assessment for previously
redeemed amounts under the Plan. Whether a waiver of the contingent deferred
sales charge is available or not, the first shares to be redeemed for each
Systematic Withdrawal Plan payment will be those not subject to a contingent
deferred sales charge because they have either satisfied the required holding
period or were acquired through the reinvestment of distributions. See Waiver of
Contingent Deferred Sales Charges, 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 Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
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 Fund does not charge
a fee for any this service; however, your bank may charge a fee. This service is
not available for retirement plans.
The Systematic Withdrawal Plan is not available for the Institutional
Class. Shareholders should consult with their financial advisers to determine
whether a Systematic Withdrawal Plan would be suitable for them.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
For purchases of $1,000,000 or more made on or after July 1, 1998, a
Limited CDSC will be imposed on certain redemptions of Class A Shares (or shares
into which such Class A Shares are exchanged) according to the following
schedule: (1) 1.00% if shares are redeemed during the first year after the
purchase; and (2) 0.50% if such shares are redeemed during the second year after
the purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission described above.
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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 the 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.
Waivers of Contingent Deferred Sales Charges
Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from the Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"), or due to death of a participant in such a plan; (iii)
redemptions pursuant to the direction of a participant or beneficiary of a
retirement plan qualified under section 401(a) or 401(k) of the Code with
respect to that retirement plan; (iv) periodic distributions from an IRA, SIMPLE
IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to death, disability, or
attainment of age 59 1/2, and IRA distributions qualifying under Section 72(t)
of the Internal Revenue Code; (v) returns of excess contributions to an IRA;
(vi) distributions by other employee benefit plans to pay benefits; (vii)
distributions described in (ii), (iv), and (vi) above pursuant to a systematic
withdrawal plan; (viii) distributions form an account if the redemption results
from a death of a registered owner, or a registered joint owner, 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 disability (as defined in Section 72
of the Code) of all registered owners occurring after the purchase of the shares
being redeemed; and (ix) 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 the
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective minimum
account size; (ii) returns of excess contributions to an IRA, SIMPLE IRA,
SEP/IRA, or 403(b)(7) or 457 Deferred Compensation Plan; (iii) periodic
distributions from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, or 403(b)(7) or 457
Deferred Compensation Plan due to death, disability or attainment of age 59 1/2,
and IRA distributions qualifying under Section 72(t) of the Internal Revenue
Code; and (iv) distributions from an account if the redemption results from the
death of a registered owner, or a registered joint owner, 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.
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The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution plan; (iii) periodic distributions from a 403(b)(7) or 457
Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan,
Money Purchase 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 a registered owner, or a
registered joint owner, 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 A Shares, Class B Shares
and Class C Shares redeemed in accordance with a Systematic Withdrawal Plan if
the annual amount selected to be withdrawn under the Plan does not exceed 12% of
the value of the account on the date that the Systematic Withdrawal Plan was
established or modified.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
The following supplements the information in each Prospectus.
Under the 1997 Act, as revised by the 1998 Act and the Omnibus
Consolidated and Emergency Supplemental Appropriations Act, the 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:
Long-term capital gains": gains on securities sold after December 31,
1997 and held for more than 12 months as capital assets in the hands of
the holder are taxed at the 20% rate when distributed to shareholders
(15% for individual investors in the 15% tax bracket.
"Short -term capital gains": Gains on securities sold by the Fund that
do not meet the long-term holdings period are considered short term
capital gains and are taxable as ordinary income.
"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 individuals 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.
Any loss incurred on the redemption or exchange of shares held for six
months or less will be disallowed to the extent of any exempt-interest dividends
distributed to you with respect to your Fund shares and any remaining loss will
be treated as a long-term capital loss to the extent of any long-term capital
gains distributed to you by the Fund on those shares.
All or a portion of any loss that you realize upon the redemption of
your Fund shares will be disallowed to the extent that you buy other shares in
the Fund (through reinvestment of dividends or otherwise) within 30 days before
or after your share redemption. Any loss disallowed under these rules will be
added to your tax basis in the new shares you buy.
If you redeem some or all of yours shares in the Fund, and then
reinvest the sales proceeds in such Fund or in another Delaware Investments fund
within 90 days of buying the original shares, the sales charge that would
otherwise apply to your reinvestment may be reduced or eliminated. The IRS will
require you to report gain or loss on the redemption of your original shares in
the Fund. In doing so, all or a portion of the sales charge that you paid for
your original shares in the Fund will be excluded from your tax basis in the
shares sold (for the purpose of determining gain or loss upon the sale of such
shares). The portion of the sales charge excluded will equal the amount that the
sales charge is reduced on your reinvestment. Any portion of the sales charge
excluded from your tax basis in the shares sold will be added to the tax basis
of the shares you acquire from your reinvestment.
The Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, the Fund
will not be subject to federal income tax, or to any excise tax, to the extent
its earnings are distributed as provided in the Code and it satisfies other
requirements relating to the sources of its income and diversification of its
assets. In order to qualify as a regulated investment company for federal income
tax purposes, the Fund must meet certain specific requirements, including:
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(i) The Fund must maintain a diversified portfolio of securities,
wherein no security (other than U.S. government securities and securities of
other regulated investment companies) can exceed 25% of the Fund's total assets,
and, with respect to 50% of the Fund's total assets, no investment (other than
cash and cash items, U.S. government securities and securities of other
regulated investment companies) can exceed 5% of the Fund's total assets;
(ii) The Fund must derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or disposition of stock and securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies;
(iii) The Fund must distribute to its shareholders at least 90% of its
investment company taxable income and net tax-exempt income for each of its
fiscal years, and
(iv) The Fund must realize less than 30% of its gross income for each
fiscal year from gains from the sale of securities and certain other assets that
have been held by the Fund for less than three months ("short-short income").
The Taxpayer Relief Act of 1997 (the "1997 Act") repealed the 30% short-short
income test for tax years of regulated investment companies beginning after
August 5, 1997; however, this rule may have continuing effect in some states for
purposes of classifying the Fund as a regulated investment company.
The Code requires the Fund to distribute at least 98% of its taxable
ordinary income earned during the calendar year and 98% of its capital gain net
income earned during the 12 month period ending October 31 (in addition to
amounts from the prior year that were neither distributed nor taxed to the Fund)
to shareholders by December 31 of each year in order to avoid federal excise
taxes. The Fund intends as a matter of policy to declare and pay sufficient
dividends in December or January (which are treated by shareholders as received
in December) but does not guarantee and can give no assurances that its
distributions will be sufficient to eliminate all such taxes.
The straddle rules of Section 1092 may apply. Generally, the straddle
provisions require the deferral of losses to the extent of unrecognized gains
related to the offsetting positions in the straddle. Excess losses, if any, can
be recognized in the year of loss. Deferred losses will be carried forward and
recognized in the year that unrealized losses exceed unrealized gains or when
the offsetting position is sold.
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, the Fund must recognize gain (but not loss) on any constructive
sale of an appreciated financial position in stock, a partnership interest or
certain debt instruments. The Fund will generally be treated as making a
constructive sale when it: 1) enters into a short sale on the same or
substantially identical property; 2) enters into an offsetting notional
principal contract; or 3) enters into a futures or forward contract to deliver
the same or substantially identical property. Other transactions (including
certain financial instruments called collars) will be treated as constructive
sales as provided in Treasury regulations to be published. There are also
certain exceptions that apply for transactions that are closed before the end of
the 30th day after the close of the taxable year.
Investment in Foreign Currencies and Foreign Securities--The Fund is authorized
to invest certain limited amounts in foreign securities. Such investments, if
made, will have the following additional tax consequences to the Fund:
Under the Code, gains or losses attributable to fluctuations in
foreign currency exchange rates which occur between the time the Fund accrues
income (including dividends), or accrues expenses which are denominated in a
foreign currency, and the time the Fund actually collects such income or pays
such expenses generally are treated as ordinary income or loss. Similarly, on
the disposition of debt securities denominated in a foreign currency and on the
disposition of certain options, futures, forward contracts, gain or loss
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of its disposition are
also treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "Section 988" gains or losses, may increase or decrease the amount
of the Fund's net investment company taxable income, which, in turn, will affect
the amount of income to be distributed to you by the Fund.
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If the Fund's Section 988 losses exceed the Fund's other investment
company taxable income during a taxable year, the Fund generally will not be
able to make ordinary dividend distributions to you for that year, or
distributions made before the losses were realized will be recharacterized as
return of capital distributions for federal income tax purposes, rather than as
an ordinary dividend or capital gain distribution. If a distribution is treated
as a return of capital, your tax basis in your Fund shares will be reduced by a
like amount (to the extent of such basis), and any excess of the distribution
over your tax basis in your Fund shares will be treated as capital gain to you.
The 1997 Act generally requires that foreign income be translated into
U.S. dollars at the average exchange rate for the tax year in which the
transactions are conducted. Certain exceptions apply to taxes paid more than two
years after the taxable year to which they relate. This new law may require the
Fund to track and record adjustments to foreign taxes paid on foreign securities
in which it invests. Under the Fund's current reporting procedure, foreign
security transactions are recorded generally at the time of each transaction
using the foreign currency spot rate available for the date of each transaction.
Under the new law, the Fund will be required to record at fiscal year end (and
at calendar year end for excise tax purposes) an adjustment that reflects the
difference between the spot rates recorded for each transaction and the year-end
average exchange rate for all of the Fund's foreign securities transactions.
There is a possibility that the mutual fund industry will be given relief from
this new provision, in which case no year-end adjustments will be required.
The Fund may be subject to foreign withholding taxes on income from
certain of its foreign securities. If more than 50% of the total assets of the
Fund at the end of its fiscal year are invested in securities of foreign
corporations, the Fund may elect to pass-through to you your pro rata share of
foreign taxes paid by the Fund. If this election is made, you will be: (i)
required to include in your gross income your pro rata share of foreign source
income (including any foreign taxes paid by the Fund); and (ii) entitled to
either deduct your share of such foreign taxes in computing your taxable income
or to claim a credit for such taxes against your U.S. income tax, subject to
certain limitations under the Code. You will be informed by the Fund at the end
of each calendar year regarding the availability of any such foreign tax credits
and the amount of foreign source income (including any foreign taxes paid by the
Fund). If the Fund elects to pass-through to you the foreign income taxes that
it has paid, you will be informed at the end of the calendar year of the amount
of foreign taxes paid and foreign source income that must be included on your
federal income tax return. If the Fund invests 50% or less of its total assets
in securities of foreign corporations, it will not be entitled to pass-through
to you your pro-rata shares of foreign taxes paid by the Fund. In this case,
these taxes will be taken as a deduction by the Fund, and the income reported to
you will be the net amount after these deductions. The 1997 Act also simplifies
the procedures by which investors in funds that invest in foreign securities can
claim tax credits on their individual income tax returns for the foreign taxes
paid by the Fund. These provisions will allow investors who pay foreign taxes of
$300 or less on a single return or $600 or less on a joint return during any
year (all of which must be reported on IRS Form 1099-DIV from the Fund to the
investor) to claim a tax credit against their U.S. federal income tax for the
amount of foreign taxes paid by the Fund. This process will allow you, if you
qualify, to bypass the burdensome and detailed reporting requirements on the
foreign tax credit schedule (Form 1116) and report your foreign taxes paid
directly on page 2 of Form 1040.
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Investment in Passive Foreign Investment Company Securities--The Fund may invest
in shares of foreign corporations which may be classified under the Code as
passive foreign investment companies ("PFICs"). In general, a foreign
corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. If the Fund receives an "excess distribution" with
respect to PFIC stock, the Fund itself may be subject to U.S. federal income tax
on a portion of the distribution, whether or not the corresponding income is
distributed by the Fund to you. In general, under the PFIC rules, an excess
distribution is treated as having been realized ratably over the period during
which the Fund held the PFIC shares. The Fund itself will be subject to tax on
the portion, if any, of an excess distribution that is so allocated to prior
Fund taxable years, and an interest factor will be added to the tax, as if the
tax had been payable in such prior taxable years. In this case, you would not be
permitted to claim a credit on your own tax return for the tax paid by the Fund.
Certain distributions from a PFIC as well as gain from the sale of PFIC shares
are treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
distribution might have been classified as capital gain. This may have the
effect of increasing Fund distributions to you that are treated as ordinary
dividends rather than long-term capital gain dividends.
The Fund may be eligible to elect alternative tax treatment with
respect to PFIC shares. Under an election that currently is available in some
circumstances, the Fund generally would be required to include in its gross
income its share of the earnings of a PFIC on a current basis, regardless of
whether distributions are received from the PFIC during such period. If this
election were made, the special rules, discussed above, relating to the taxation
of excess distributions, would not apply. In addition, the 1997 Act provides for
another election that would involve marking-to-market the Fund's PFIC shares at
the end of each taxable year (and on certain other dates as prescribed in the
Code), with the result that unrealized gains would be treated as though they
were realized. The Fund would also be allowed an ordinary deduction for the
excess, if any, of the adjusted basis of its investment in the PFIC stock over
its fair market value at the end of the taxable year. This deduction would be
limited to the amount of any net mark-to-market gains previously included with
respect to that particular PFIC security. If the Fund were to make this second
PFIC election, tax at the Fund level under the PFIC rules would generally be
eliminated.
The application of the PFIC rules may affect, among other things, the
amount of tax payable by the Fund (if any), the amounts distributable to you by
the Fund, the time at which these distributions must be made, and whether these
distributions will be classified as ordinary income or capital gain
distributions to you.
You should be aware that it is not always possible at the time shares
of a foreign corporation are acquired to ascertain that the foreign corporation
is a PFIC, and that there is always a possibility that a foreign corporation
will become a PFIC after the Fund acquires shares in that corporation. While the
Fund will generally seek to avoid investing in PFIC shares to avoid the tax
consequences detailed above, there are no guarantees that it will do so and it
reserves the right to make such investments as a matter of its fundamental
investment policy.
Most foreign exchange gains are classified as ordinary income which
will be taxable to you as such when distributed. Similarly, you should be aware
that any foreign exchange losses realized by the Fund, including any losses
realized on the sale of foreign debt securities, are generally treated as
ordinary losses for federal income tax purposes. This treatment could increase
or reduce the Fund's income available for distribution to you, and may cause
some or all of the Fund's previously distributed income to be classified as a
return of capital.
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INVESTMENT MANAGEMENT AGREEMENT AND SUB-ADVISORY AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to the Fund, subject to the supervision
and direction of the Board of Trustees of Adviser Funds
The Manager and its predecessors have been managing the funds in
Delaware Investments since 1938. On October 31, 1999, the Manager and its
affiliates within Delaware Investments, including the Delaware International
Advisers Ltd., were managing in the aggregate more than $43 billion in assets in
the various institutional or separately managed (approximately $24,854,600,000)
and investment company (approximately $17,780,970,000) accounts.
The Investment Management Agreement for the Fund is dated November 23,
1999 and was approved by the initial shareholder on that date. The Agreement has
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 Trustees or by vote of a majority of the outstanding voting securities
of the Fund, and only if the terms and renewal thereof have been approved by the
vote of a majority of the trustees of Adviser Funds who are not parties thereto
or interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. The Agreement is terminable without
penalty on 60 days' notice by the trustees of Adviser Funds or by the Manager.
The Agreement will terminate automatically in the event of its assignment.
The Investment Management Agreement provide that the Fund shall pay the
Manager an annual management fee payable monthly and computed on the average
daily net assets of the Fund at the following annual rate:
0.65% on first $500 million;
0.60% on next $500 million;
0.55% on next $1,500 million; and
0.50% on assets in excess of $2,500 million
On October 31, 1999 the Fund's total net assets were $123,160,437
The total investment management fees incurred by the Fund during the
fiscal years ended October 31, 1999, 1998 and 1997 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
1999 1998 1997
$606,515 earned $277,028 earned $230,497 earned
$606,515 paid $276,361 paid $230,497 paid
$ -0- waived $667 waived $ -0- waived
As authorized by the Investment Management Agreement, the Investment
Manager, under the general supervision of the Board of Trustees, has selected
and contracted with a sub-advisers to assist with the management of the Fund's
portfolios in accordance with the Fund's stated objectives and policies. The
Manager is responsible for compensating such sub-advisers. The Manager has
entered into a separate Sub-Advisory Agreement with Lynch & Mayer, Inc. on
behalf of the Fund dated November 23, 1999. The terms of the Sub-Advisory
Agreement and requirements for Board approval and termination are the same for
these agreements as they are for the Investment Management Agreement described
-65-
<PAGE>
above. As compensation for the services to berendered to the Adviser Funds for
the benefit of the Fund by the Sub-Adviser under the provisions of this
Agreement, the Manager pays to the Sub-Adviser an annual fee equal to 0.40% of
the average daily net assets of the Fund.
During the past three fiscal years, the Sub-Adviser received fees from
the Manager in the following amounts:
October 31
1999 1998 1997
---- ---- ----
Lynch & Mayer, Inc. $367,422 $158,302 $131,858
Lynch & Mayer, Inc., 350 Park Avenue, New York, NY 10022, -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, 1999, Lynch & Mayer, Inc. had total assets under management in
excess of $1.4 billion.
The Fund pays all of its other expenses, including its proportionate
share of rent and certain other administrative expenses.
The Manager elected voluntarily to waive that portion, if any, of the
annual management fees payable by the Fund and to pay the 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% a percentage of average net assets
(exclusive of 12b-1 Plan expenses, taxes, interest, brokerage commissions and
extraordinary expenses) from May 1, 1998 through October 31, 1998.
The Manager voluntarily committed to waive its fees or pay expenses for
the Fund beginning as of the close of business May 3, 1996 through April 30,
1998, as reflected below. The cap for the Fund was 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 Fund with respect to Class A Shares.
The expense waivers and/or payments will be reevaluated by the Manager
periodically.
Class A Shares 1.86%
Class B Shares 2.56%
Class C Shares 2.56%
Institutional Class Shares 1.56%
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 Fund's shares
under separate Distribution Agreements dated November 23, 1999. 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 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 the Fund
pursuant to a Shareholders Services Agreement dated November 23, 1999. The
Transfer Agent also provides accounting services to the Fund pursuant to the
terms of a separate Fund Accounting
-66-
<PAGE>
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 Fund. For purposes of pricing, the Fund
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.
-67-
<PAGE>
OFFICERS AND TRUSTEES
The business and affairs of Adviser Funds are managed under the
direction of its Board of Trustees.
Certain officers and trustees of Adviser Funds hold identical positions
in each of the other funds in Delaware Investments. As of December 31, 1999,
Adviser Funds' officers and trustees 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 the Fund, respectively.
As of December 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 the Fund:
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
RS Money Purchase Pension Plan FBO
A Class Windermere Retirement Plan
c/o Delpac 16th Floor
1818 Market Street.
Philadelphia, PA 19103-3638 137,947 5.32%
Merrill Lynch, Pierce, Fenner & Smith
B Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive, 2nd Floor
Jacksonville, FL 32246-6484 121,299 6.14%
Merrill Lynch, Pierce, Fenner & Smith
C Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive, 2nd Floor
Jacksonville, FL 32246-6484 28,133 6.03%
Federated Life Insurance Co.
Institutional Class Separate Account A
Attn: Debbie Miller
P.O. Box 328
Owatonna, MN 55060-0328 2,814,339 82.31%
Waterfield Group 401(k) Plan
Attn: Greg Lawrence
P.O. Box 128
Fort Wayne, IN 46804
</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
-68-
<PAGE>
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 trustees 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 Agreement and other matters giving effect
to the restructuring of the Fund to integrate it into Delaware Investments. See
Restructuring of the Fund in this Part B.
-69-
<PAGE>
Trustees and principal officers of Adviser Funds are noted below along
with their ages and their business experience for the past five years. Unless
otherwise noted, the address of each officer and trustee is One Commerce Square,
Philadelphia, PA 19103.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Trustee and Officer Business Experience
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
*Wayne A. Stork (62) Chairman, Director/Trustee of Adviser Funds and each of the other 32
investment companies in the Delaware Investments family.
Prior to January 1, 1999, Mr. Stork was Director of Delaware Capital
Management, Inc.; Chairman, President and Chief Executive Officer and
Director/Trustee of DMH Corp., Delaware Distributors, Inc. and Founders
Holdings, Inc.; Chairman, President, Chief Executive Officer, Chief
Investment Officer and Director/Trustee of Delaware Management Company, Inc.
and Delaware Management Business Trust; Chairman, President, Chief Executive
Officer and Chief Investment Officer of Delaware Management Company (a series
of Delaware Management Business Trust); Chairman, Chief Executive Officer and
Chief Investment Officer of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Chairman and Chief Executive Officer of
Delaware International Advisers Ltd.; Chairman, Chief Executive Officer and
Director of Delaware International Holdings Ltd.; Chief Executive Officer of
Delaware Management Holdings, Inc.; President and Chief Executive Officer of
Delvoy, Inc.; Chairman of Delaware Distributors, L.P.; Director of Delaware
Service Company, Inc. and Retirement Financial Services, Inc. Prior to
January 1, 2000, Mr. Stork was Chairman and Director of Delaware Management
Holdings, Inc. and Director of Delaware International Advisers Ltd.
In addition, during the five years
prior to January 1, 2000, Mr. Stork
has served in various executive
capacities at different times within
the Delaware organization.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------
* Trustee affiliated with Adviser Funds' investment manager and considered an
"interested person" as defined in the 1940 Act.
- -------------------------------------------------------------------------------
-70-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Trustee and Officer Business Experience
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
*David K. Downes (59) President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer and Director/Trustee of Adviser Funds and each of the other 32
investment companies in the Delaware Investments family.
President and Director of Delaware Management Company, Inc.
President of Delaware Management Company (a series of Delaware Management
Business Trust)
President, Chief Executive Officer and Director of Delaware Capital
Management, Inc.
Chairman, President, Chief Executive Officer and Director of Delaware
Service Company, Inc.
President, Chief Operating Officer, Chief Financial Officer and Director of
Delaware International Holdings Ltd.
Chairman and Director of Delaware Management Trust Company and Retirement
Financial Services, Inc. Executive Vice President, Chief Operating Officer,
Chief Financial Officer of Delaware Management Holdings, Inc., Founders CBO
Corporation, Delaware Investment Advisers (a series of Delaware Management
Business Trust) and Delaware Distributors, L.P.
Executive Vice President, Chief Operating Officer, Chief Financial Officer
and Director of DMH Corp., Delaware Distributors, Inc., Founders Holdings,
Inc. and Delvoy, Inc.
Executive Vice President and Trustee of Delaware Management Business Trust
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Downes has served in various executive
capacities at different times within the Delaware organization.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------
* Trustee affiliated with Adviser Funds' investment manager and considered an
"interested person" as defined in the 1940 Act.
- --------------------------------------------------------------------------------
-71-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Trustee Business Experience
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Walter P. Babich (72) Director/Trustee Adviser Funds and each of the other 32 investment companies
in the Delaware Investments family
460 North Gulph Road, King of Prussia, PA 19406
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from
1988 to 1991, he was a partner of I&L Investors.
- ---------------------------------------------------------------------------------------------------------------------------
John H. Durham (62) Director/Trustee of Adviser Funds and 18 other investment companies in the
Delaware Investments family
Private Investor.
P.O. Box 819, Gwynedd Valley, PA 19437
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. He was also a Partner of Complete Care Services from 1995 to 1999.
- ---------------------------------------------------------------------------------------------------------------------------
Anthony D. Knerr (60) Director/Trustee of Adviser Funds and each of the 32 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 (58) Director/Trustee of Adviser Funds and each of the other 32 other investment
companies in the Delaware Investments family
785 Park Avenue, New York, NY 10021
Retired Treasurer, National Gallery of Art
From 1994 to 1999, Ms. Leven was the Treasurer of the National Gallery of
Art and from 1990 to 1994, Ms. Leven was Deputy Treasurer of the National
Gallery of Art. In addition, from 1984 to 1990, Ms. Leven was Treasurer and
Chief Fiscal Officer of the Smithsonian Institution, Washington, DC, and
from 1975 to 1992, she was Adjunct Professor of Columbia Business School.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
-72-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Trustee Business Experience
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Thomas F. Madison (63) Director/Trustee of Adviser Fundss and each of the other 32 investment
companies in the Delaware Investments family
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402
President and Chief Executive Officer, MLM Partners, Inc.
Mr. Madison has also been Chairman of the Board of Communications Holdings,
Inc. since 1996. From February to September 1994, Mr. Madison served as Vice
Chairman--Office of the CEO of The Minnesota Mutual Life Insurance Company and
from 1988 to 1993, he was President of U.S. WEST Communications--Markets.
- ---------------------------------------------------------------------------------------------------------------------------
Charles E. Peck (73) Director/Trustee of Adviser Funds and each of the other 32 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.
- ---------------------------------------------------------------------------------------------------------------------------
Janet L. Yeomans (51) Director/Trustee of Adviser Funds and 32 other investment companies in the
Delaware Investments family.
Building 220-13W-37, St. Paul, MN 55144
Vice President and Treasurer, 3M Corporation.
From 1987-1994, Ms. Yeomans was Director of Benefit Funds and Financial
Markets for the 3M Corporation; Manager of Benefit Fund Investments for the
3M Corporation, 1985-1987; Manager of Pension Funds for the 3M Corporation,
1983-1985; Consultant--Investment Technology Group of Chase Econometrics,
1982-1983; Consultant for Data Resources, 1980-1982; Programmer for the
Federal Reserve Bank of Chicago, 1970-1974.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
-73-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Trustee Business Experience
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Richard G. Unruh, Jr. (60) Executive Vice President and Chief Investment Officer, Equity of Adviser
Funds, each of the other 32 investment companies in the Delaware Investments
family
Chief Executive Officer/Chief Investment Officer of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
Executive Vice President of Delaware Management Holdings, Inc. and Delaware
Capital Management, Inc.
Executive Vice President/Chief Investment Officer of Delaware Management
Company (a series of Delaware Management Business Trust)
Executive Vice President and Trustee of Delaware Management Business Trust
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.
- ---------------------------------------------------------------------------------------------------------------------------
H. Thomas McMeekin (46) Executive Vice President and Chief Investment Officer, Fixed Income of
Adviser Funds and each of the other 32 investment companies in the
Delaware Investments family.
Director of Delaware Management Holdings, Inc. and Founders CBO
Corporation.
Executive Vice President/Chief Investment Officer, DMC-Fixed Income of
Delaware Management Company (a series of Delaware Management Business
Trust)
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Management Business Trust and Delaware
Capital Management, Inc.
Mr. McMeekin joined Delaware Investments in 1999. During the past five
years, he has also served in various executive capacities for Lincoln
National Corporation.
- ---------------------------------------------------------------------------------------------------------------------------
Richard J. Flannery (42) Executive Vice President/General Counsel of Adviser Funds and each of the
other 32 investment companies in the Delaware Investments family, Delaware
Management Holdings, Inc., 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
Founders CBO Corporation.
Executive Vice President/General Counsel and Director of Delaware
International Holdings Ltd., Founders Holdings, Inc., Delvoy, Inc., DMH
Corp., Delaware Management Company, Inc., Delaware Service Company, Inc.,
Delaware Capital Management, Inc., Retirement Financial Services, Inc.,
Delaware Distributors, Inc. and Delaware Management Trust Company.
Executive Vice President and Trustee of Delaware Management Business Trust.
Director of Delaware International Advisers Ltd.
Director of HYPPCO Finance Company Ltd.
During the past five years, Mr. Flannery has served in various executive
capacities at different times within the Delaware organization.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
-74-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Trustee Business Experience
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Eric E. Miller (46) Senior Vice President/Deputy General Counsel and Secretary of Adviser Funds
and each of the other 32 investment companies in Delaware Investments.
Senior Vice President/Deputy General Counsel and Assistant Secretary of
Delaware Management Holdings, Inc., DMH Corp., Delvoy, Inc., Delaware
Management Company, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business
Trust), Delaware Service Company, Inc., Delaware Capital Management, Inc.,
Retirement Financial Services, Inc., Delaware Distributors, Inc., Delaware
Distributors, L.P. and Founders Holdings, Inc.
During the past five years, Mr. Miller has served in various executive
capacities at different times within Delaware Investments.
- ---------------------------------------------------------------------------------------------------------------------------
Joseph H. Hastings (49)
Senior Vice President/Corporate Controller of Adviser Funds and each of the
other 32 investment companies in the Delaware Investments family and
Delaware Investment Advisers (a series of Delaware Management Business
Trust)
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delvoy , Inc., Delaware Management
Company, Inc., Delaware Management Business Trust, 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., Founders Holdings, Inc. and Delaware Management Business Trust
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company
Senior Vice President/Assistant Treasurer of Founders CBO Corporation
Chief Financial Officer of Retirement Financial Services, Inc.
During the past five years, Mr. Hastings has served in various executive
capacities at different times within the Delaware organization.
- ---------------------------------------------------------------------------------------------------------------------------
Michael P. Bishof (37) Senior Vice President and Treasurer of Adviser Funds and each of the other
32 investment companies in the Delaware Investments family.
Senior Vice President/Investment Accounting of Delaware Management Company
(a series of Delaware Management Business Trust), Delaware Service Company,
Inc. and Delaware Capital Management, Inc. and Founders Holdings, Inc.
Senior Vice President and Treasurer/ Investment Accounting of Delaware
Distributors, L.P. and Delaware Investment Advisers (a series of Delaware
Management Business Trust)
Senior Vice President/Manager of Investment Accounting of Delaware
International Holdings, Inc.
Senior Vice President and Assistant Treasurer of Founders CBO Corporation
Before joining Delaware Investments in 1995, Mr. Bishof was a Vice President
for Bankers Trust, New York, NY from 1994 to 1995, a Vice President for CS
First Boston Investment Management, New York, NY from 1993 to 1994 and an
Assistant Vice President for Equitable Capital Management Corporation, New
York, NY from 1987 to 1993.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
-75-
<PAGE>
The following is a compensation table listing for each trustee entitled
to receive compensation, the aggregate compensation received from Adviser Funds
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, 1999 and an estimate of annual benefits to
be received upon retirement under the Delaware Group Retirement Plan for
Directors/Trustees as of October 31, 1999. Only the independent trustees of
Adviser Funds receive compensation from the Fund.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Pension or
Retirement
Benefits Total
Accrued Estimated Compensation
Aggregate as Part of Annual from
Compensation Adviser Benefits Delaware
from Adviser Funds Upon Investments
Name(3) Funds Expenses Retirement(1) Companies(2)
<S> <C> <C> <C> <C>
- ---------------------------------- --------------------- ------------------- -------------------- ---------------------------
- ---------------------------------- --------------------- ------------------- -------------------- ---------------------------
Walter P. Babich $739 None $38,000 $42,975
- ---------------------------------- --------------------- ------------------- -------------------- ---------------------------
John H. Durham $734 None $32,180 $42,975
- ---------------------------------- --------------------- ------------------- -------------------- ---------------------------
Anthony D. Knerr $849 None $38,000 $49,012
- ---------------------------------- --------------------- ------------------- -------------------- ---------------------------
Ann R. Leven $854 None $38,000 $49,858
- ---------------------------------- --------------------- ------------------- -------------------- ---------------------------
Thomas F. Madison $850 None $38,000 $49,012
- ---------------------------------- --------------------- ------------------- -------------------- ---------------------------
Charles E. Peck $843 None $38,000 $47,607
- ---------------------------------- --------------------- ------------------- -------------------- ---------------------------
Janet L. Yeomans(4) $574 None $38,000 $27,820
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director/trustee who, at the time of
his or her retirement from the Board, has attained the age of 70 and served
on the Board for at least five continuous years, is entitled to receive
payments from each investment company in the Delaware Investments family for
which he or she serves as a director or trustee for a period equal to the
lesser of the number of years that such person served as a director or
trustee or the remainder of such person's life. The amount of such payments
will be equal, on an annual basis, to the amount of the annual retainer that
is paid to directors/trustees of each investment company at the time of such
person's retirement. If an eligible director/trustee retired as of October
31, 1999, 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 $38,000 for serving as a director or
trustee for all 33 investment companies in Delaware Investments, plus $3,143
for each Board Meeting attended. John H. Durham currently receives a total
annual retainer fee of $32,180 for serving as a director or trustee for 19
investment companies in Delaware Investments, plus $1,810 for each Board
Meeting attended. Ann R. Leven, Charles E. Peck, 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) W. Thacher Longstreth served as an independent trustee of Adviser Funds
during its last fiscal year for the period November 1, 1998 through March
17, 1999, the date on which he retired. For this period, Mr. Longstreth
received $350 from Adviser Funds and $14,314 for all investment companies in
the Delaware Investments family.
(4) Janet L Yeomans joined the Boards of all investment companies in the
Delaware Investments family in March 1999 for some funds and in April 1999
for other funds.
-76-
<PAGE>
GENERAL INFORMATION
Adviser Funds is an open-end management investment company. The Fund's
portfolio of assets is diversified as defined by the 1940 Act. Adviser Funds was
organized as a Maryland corporation on August 10, 1993 and reorganized as a
Delaware business trust on November 23, 1999.
The Manager is the investment manager of the Fund. 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 Fund 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 Fund.
The Manager and its affiliate Delaware International Advisers Ltd.,
manage the investment options for Delaware-Lincoln Choice Plus and Delaware
Medallion (SM) III Variable Annuities. Choice Plus is issued and distributed by
Lincoln National Life Insurance Company. Choice Plus offers a variety of
different investment styles managed by leading money managers. Medallion is
issued by Allmerica Financial Life Insurance and Annuity Company (First
Allmerica Financial Life Insurance Company in New York and Hawaii). Delaware
Medallion offers various investment series ranging from domestic equity funds,
international equity and bond funds and domestic fixed income funds. Each
investment series available through Choice Plus and Medallion utilizes an
investment strategy and discipline the same as or similar to one of the Delaware
Investments mutual funds available outside the annuity. The Manager or Delaware
International Advisers Ltd. also manages many of the investment options for the
Delaware-Lincoln Choice Plus Variable Annuity. Choice Plus is issued and
distributed by Lincoln National Life Insurance Company. Choice Plus offers a
variety of different investment styles managed by ten leading money managers.
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 Delaware Management, Delaware International or their
affiliates, are permitted to engage in personal securities transactions subject
to the exceptions set forth in Rule 17j-1 and the following general restrictions
and procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance is received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions by certain covered persons in certain securities may only
be closed-out at a profit after a 60-day holding period has elapsed; and (5) the
Compliance Officer must be informed periodically of all securities transactions
and duplicate copies of brokerage confirmations and account statements must be
supplied to the Compliance Officer.
The Distributor acts as national distributor for the Fund and for the
other mutual funds in the Delaware Investments family. The Distributor received
net commissions from the Fund on behalf of Class A Shares, after reallowances to
dealers, as follows:
Class A Shares
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers to DDLP
----- ----------- ---------- -------
10/31/99 $229,593 $195,191 $34,402
10/31/98 121,399 101,827 19,572
10/31/97 32,142 7,034 25,108
The Distributor received in the aggregate Limited CDSC payments with
respect to Class A Shares and CDSC payments with respect to Class B Shares and
Class C Shares as follows:
-77-
<PAGE>
Fiscal
Year
Ended Class A Class B Class C
----- ------- ------- -------
10/31/99 none $47,841 $1,753
10/31/98 none 5,189 552
10/31/97 none 3,339 108
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for the Fund and for the other
mutual funds in the Delaware Investments family. The Transfer Agent is paid a
fee by the 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 Trustees,
including a majority of the disinterested trustees. The Transfer Agent also
provides accounting services to the Fund. Those services include performing all
functions related to calculating the 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 the 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' advisory
relationship with the Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause Adviser Funds to delete
the words "Delaware Group" from Adviser Funds' name.
The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn,
NY 11245 is custodian of the Fund's securities and cash. As custodian for the
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 Adviser Funds
Until April 26, 1996, Adviser Funds 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. 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.
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On July 17, 1997, the Board of Trustees 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 this
Part B 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 has a present unlimited authorized number of shares of
beneficial interest with no par value allocated to each Class. Each Class
represents a proportionate interest in the assets of the Fund, and each has the
same voting and other rights and preferences as the other classes of the Fund,
except that shares of the Institutional Class may not vote on any matter that
affects the Fund Classes' 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, Class B Shares may vote on any proposal
to increase materially the fees to be paid by the Fund under the Rule 12b-1 Plan
relating to Class A Shares. General expenses of the Fund will be allocated on a
pro-rata basis to the classes according to asset size, except that expenses of
the Plans of Class A Shares, Class B Shares and Class C Shares will be allocated
solely to those classes.
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.
On November 29, 1993, the name Lincoln Renaissance Funds, Inc. was
changed to Lincoln Advisor Funds, Inc.
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. As of December 18, 1997, the name of Word Growth Fund
changed to Overseas Equity Fund. As of August 16, 1999, the names of U.S. Growth
Fund, Overseas Equity Fund and New Pacific Fund changed to Delaware U.S. Growth
Fund, Delaware Overseas Equity Fund and Delaware New Pacific Fund. Corresponding
changes were also made to the names of each fund's classes on that date.
Effective November 23, 1999, the name of Delaware Group Adviser Funds, Inc. was
changed to Delaware Group Adviser Funds.
Noncumulative Voting
Adviser Funds' shares have noncumulative voting rights which means that
the holders of more than 50% of the shares of Adviser Funds voting for the
election of trustees can elect all the trustees if they choose to do so, and, in
such event, the holders of the remaining shares will not be able to elect any
trustees.
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This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC.
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FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Delaware
Group Adviser Funds and, in its capacity as such, audits the financial
statements contained in the Fund's Annual Report. The Fund's Statements of Net
Assets, Statement of Operations, Statement of Changes in Net Assets, Financial
Highlights and Notes to Financial Statements, as well as the report of Ernst &
Young LLP, for the fiscal year ended October 31, 1999 are included in the Fund's
Annual Report to shareholders. The financial statements and financial
highlights, the notes relating thereto and the report of Ernst & Young LLP are
incorporated by reference from the Annual Report into this Part B. The Fund's
previous auditors audited the financial highlights of the Fund for the fiscal
periods ending on or before October 31, 1996.
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APPENDIX A--DESCRIPTION OF RATINGS
The Fund has the ability to invest up to 10% of its net assets in high
yield, high risk fixed-income securities. 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.
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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.
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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.
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APPENDIX B--INVESTMENT OBJECTIVES OF THE FUNDS IN THE DELAWARE INVESTMENTS
FAMILY
Following is a summary of the investment objectives of the other funds
in the Delaware Investments family:
Following is a summary of the investment objectives of the funds in the Delaware
Investments family:
Delaware Balanced Fund seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. Delaware Devon
Fund seeks current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks the Manager
believes have the potential for above average dividend increases over time.
Delaware Trend Fund seeks long-term growth by investing in common
stocks issued by emerging growth companies exhibiting strong capital
appreciation potential.
Delaware Small Cap Value Fund seeks capital appreciation by investing
primarily in common stocks whose market values appear low relative to their
underlying value or future potential.
Delaware DelCap Fund seeks long-term capital growth by investing in
common stocks and securities convertible into common stocks of companies that
have a demonstrated history of growth and have the potential to support
continued growth.
Delaware Decatur Equity Income Fund seeks the highest possible current
income by investing primarily in common stocks that provide the potential for
income and capital appreciation without undue risk to principal. Delaware Growth
and Income Fund seeks long-term growth by investing primarily in securities that
provide the potential for income and capital appreciation without undue risk to
principal. Delaware Blue Chip Fund seeks to achieve long-term capital
appreciation. Current income is a secondary objective. It seeks to achieve these
objectives by investing primarily in equity securities and any securities that
are convertible into equity securities. Delaware Social Awareness Fund seeks to
achieve long-term capital appreciation. It seeks to achieve this objective by
investing primarily in equity securities of medium- to large-sized companies
expected to grow over time that meet the Fund's "Social Criteria" strategy.
Delaware Delchester Fund seeks as high a current income as possible by
investing principally in high yield, high risk corporate bonds, and also in U.S.
government securities and commercial paper. Delaware Strategic Income Fund seeks
to provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities. Delaware High-Yield Opportunities Fund seeks to provide
investors with total return and, as a secondary objective, high current income.
Delaware Corporate Bond Fund seeks to provide investors with total return by
investing primarily in corporate bonds. Delaware Extended Duration Bond Fund
seeks to provide investors with total return by investing primarily in corporate
bonds.
Delaware Limited-Term Government Fund seeks high, stable income by
investing primarily in a portfolio of short- and intermediate-term securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities
and instruments secured by such securities.
Delaware American Government Bond Fund seeks high current income by
investing primarily in long-term debt obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities.
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Delaware Cash Reserve Fund seeks the highest level of income consistent
with the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
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.
Delaware Tax-Free USA Fund seeks high current income exempt from
federal income tax by investing in municipal bonds of geographically-diverse
issuers. Delaware Tax-Free Insured Fund invests in these same types of
securities but with an emphasis on municipal bonds protected by insurance
guaranteeing principal and interest are paid when due. Delaware Tax-Free USA
Intermediate Fund seeks a high level of current interest income exempt from
federal income tax, consistent with the preservation of capital by investing
primarily in municipal bonds.
Delaware Tax-Free Money Fund seeks high current income, exempt from
federal income tax, by investing in short-term municipal obligations, while
maintaining a stable net asset value.
Delaware Tax-Free New Jersey Fund seeks a high level of current
interest income exempt from federal income tax and New Jersey state and local
taxes, consistent with preservation of capital. Delaware Tax-Free Ohio Fund
seeks a high level of current interest income exempt from federal income tax and
Ohio state and local taxes, consistent with preservation of capital. Delaware
Tax-Free Pennsylvania Fund seeks a high level of current interest income exempt
from federal income tax and Pennsylvania state and local taxes, consistent with
the preservation of capital.
Foundation Funds are "fund of funds" which invest in other funds in the
Delaware Investments family (referred to as "Underlying Funds"). Foundation
Funds Delaware 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 Delaware 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 Delaware
Growth Portfolio seeks long term capital growth by investing primarily in equity
securities, including equity Underlying Funds, and, to a lesser extent, in fixed
income securities, including fixed-income Underlying Funds.
Delaware International Equity Fund seeks to achieve long-term growth
without undue risk to principal by investing primarily in international
securities that provide the potential for capital appreciation and income.
Delaware Global Bond Fund seeks to achieve current income consistent with the
preservation of principal by investing primarily in global fixed-income
securities that may also provide the potential for capital appreciation.
Delaware Global Equity Fund seeks to achieve long-term total return by investing
in global securities that provide the potential for capital appreciation and
income. Delaware Emerging Markets Fund seeks long-term capital appreciation by
investing primarily in equity securities of issuers located or operating in
emerging countries.
Delaware U.S. Growth Fund seeks to maximize capital appreciation by
investing in companies of all sizes which have low dividend yields, strong
balance sheets and high expected earnings growth rates relative to their
industry. Delaware Overseas Equity Fund seeks to maximize total return (capital
appreciation and income), principally through investments in an internationally
diversified portfolio of equity securities. Delaware New Pacific Fund seeks
long-term capital appreciation by investing primarily in companies which are
domiciled in or have their principal business activities in the Pacific Basin.
Delaware Group Premium Fund offers various funds available exclusively
as funding vehicles for certain insurance company separate accounts. Growth and
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Income Series seeks the highest possible total rate of return by selecting
issues that exhibit the potential for capital appreciation while providing
higher than average dividend income. Delchester Series seeks as high a current
income as possible by investing in rated and unrated corporate bonds, U.S.
government securities and commercial paper. Capital Reserves Series seeks a high
stable level of current income while minimizing fluctuations in principal by
investing in a diversified portfolio of short- and intermediate-term securities.
Cash Reserve Series seeks the highest level of income consistent with
preservation of capital and liquidity through investments in short-term money
market instruments. DelCap Series seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. Delaware Balanced Series seeks a balance of
capital appreciation, income and preservation of capital. It uses a
dividend-oriented valuation strategy to select securities issued by established
companies that are believed to demonstrate potential for income and capital
growth. International Equity Series seeks long-term growth without undue risk to
principal by investing primarily in equity securities of foreign issuers that
provide the potential for capital appreciation and income. Small Cap Value
Series seeks capital appreciation by investing primarily in small-cap common
stocks whose market values appear low relative to their underlying value or
future earnings and growth potential. Emphasis will also be placed on securities
of companies that may be temporarily out of favor or whose value is not yet
recognized by the market. Trend Series seeks long-term capital appreciation by
investing primarily in small-cap common stocks and convertible securities of
emerging and other growth-oriented companies. These securities will have been
judged to be responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. Global Bond
Series seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. Strategic Income Series seeks
high current income and total return by using a multi-sector investment
approach, investing primarily in three sectors of the fixed-income securities
markets: high-yield, higher risk securities; investment grade fixed-income
securities; and foreign government and other foreign fixed-income securities.
Devon Series seeks current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on common stocks that
the investment manager believes have the potential for above-average dividend
increases over time. Emerging Markets Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of issuers located or
operating in emerging countries. Convertible Securities Series seeks a high
level of total return on its assets through a combination of capital
appreciation and current income by investing primarily in convertible
securities. Social Awareness Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series' "Social
Criteria" strategy. REIT Series seeks to achieve maximum long-term total return,
with capital appreciation as a secondary objective, by investing in securities
of companies primarily engaged in the real estate industry. Aggressive Growth
Series seeks long-term capital appreciation. The Series attempts to achieve its
investment objective by investing primarily in equity securities of companies
which the manager believes have the potential for high earnings growth. U.S.
Growth Series seeks to maximize capital appreciation. The Series seeks to
achieve its investment objective by investing in companies of all sizes which
have low dividend yields, strong balance sheets and high expected earnings
growth rates relative to their industry.
Delaware U.S. Government Securities Fund seeks to provide a high level
of current income consistent with the prudent investment risk by investing in
U.S. Treasury bills, notes, bonds, and other obligations issued or
unconditionally guaranteed by the full faith and credit of the U.S. Treasury,
and repurchase agreements fully secured by such obligations.
Delaware Tax-Free Arizona Insured Fund seeks to provide a high level of
current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware Minnesota Insured
Fund seeks to provide a high level of current income exempt from federal income
tax and the Minnesota personal income tax, consistent with the preservation of
capital.
Delaware Tax-Free Minnesota Intermediate Fund seeks to provide a high
level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.
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Delaware Tax-Free California Insured Fund seeks to provide a high level
of current income exempt from federal income tax and the California personal
income tax, consistent with the preservation of capital. Delaware Tax-Free
Florida Insured Fund seeks to provide a high level of current income exempt from
federal income tax, consistent with the preservation of capital. The Fund will
seek to select investments that will enable its shares to be exempt from the
Florida intangible personal property tax. Delaware Tax-Free Florida Fund seeks
to provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital. The Fund will seek to select
investments that will enable its shares to be exempt from the Florida intangible
personal property tax. Delaware Tax-Free Kansas Fund seeks to provide a high
level of current income exempt from federal income tax, the Kansas personal
income tax and the Kansas intangible personal property tax, consistent with the
preservation of capital. Delaware Tax-Free Missouri Insured Fund seeks to
provide a high level of current income exempt from federal income tax and the
Missouri personal income tax, consistent with the preservation of capital.
Delaware Tax-Free New Mexico Fund seeks to provide a high level of current
income exempt from federal income tax and the New Mexico personal income tax,
consistent with the preservation of capital. Delaware Tax-Free Oregon Insured
Fund seeks to provide a high level of current income exempt from federal income
tax and the Oregon personal income tax, consistent with the preservation of
capital.
Delaware Tax-Free Arizona Fund seeks to provide a high level of current
income exempt from federal income tax and the Arizona personal income tax,
consistent with the preservation of capital. Delaware Tax-Free California Fund
seeks to provide a high level of current income exempt from federal income tax
and the California personal income tax, consistent with the preservation of
capital. Delaware Tax-Free Iowa Fund seeks to provide a high level of current
income exempt from federal income tax and the Iowa personal income tax,
consistent with the preservation of capital. Delaware Tax-Free Idaho Fund seeks
to provide a high level of current income exempt from federal income tax and the
Idaho personal income tax, consistent with the preservation of capital. Delaware
Minnesota High-Yield Municipal Bond Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax primarily through investment in medium and lower grade municipal
obligations. Delaware National High-Yield Municipal Fund seeks to provide a high
level of income exempt from federal income tax, primarily through investment in
medium and lower grade municipal obligations. Delaware Tax-Free New York Fund
seeks to provide a high level of current income exempt from federal income tax
and the personal income tax of the state of New York and the city of New York,
consistent with the preservation of capital. Delaware Tax-Free Wisconsin Fund
seeks to provide a high level of current income exempt from federal income tax
and the Wisconsin personal income tax, consistent with the preservation of
capital. Delaware Montana Municipal Bond Fund seek as high a level of current
income exempt from federal income tax and from the Montana personal income tax,
as is consistent with preservation of capital.
Delaware Tax-Free Colorado Fund seeks to provide a high level of
current income exempt from federal income tax and the Colorado personal income
tax, consistent with the preservation of capital.
Delaware Tax-Free Minnesota Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax, consistent with the preservation of capital. Delaware Tax-Free North Dakota
Fund seeks to provide a high level of current income exempt from federal income
tax and the North Dakota personal income tax, consistent with the preservation
of capital.
Delaware Select Growth Fund seeks long-term capital appreciation, which
the Fund attempts to achieve by investing primarily in equity securities
believed to have the potential for high earnings growth. Although the Fund, in
seeking its objective, may receive current income from dividends and interest,
income is only an incidental consideration in the selection of the Fund's
investments. Delaware Growth Stock Fund has an objective of long-term capital
appreciation. The Fund seeks to achieve its objective from equity securities
diversified among individual companies and industries. Delaware Tax-Efficient
Equity Fund seeks to obtain for taxable investors a high total return on an
after-tax basis. The Fund will attempt to achieve this objective by seeking to
provide a high long-term after-tax total return through managing its portfolio
in a manner that will defer the realization of accrued capital gains and
minimize dividend income.
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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).
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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 Class should contact Delaware Investments
at 800-510-4015.
INVESTMENT MANAGER
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
SUB-ADVISER
Lynch & Mayer, Inc.
350 Park Avenue
New York, NY 10022
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
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DELAWARE GROUP ADVISER
FUNDS
DELAWARE U.S. GROWTH FUND
PART B
STATEMENT OF
ADDITIONAL INFORMATION
February 1, 2000
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DELAWARE(SM)
INVESTGMENTS
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<PAGE>
PART C
Other Information
Item 23. Exhibits
(a) Agreement and Declaration of Trust.
(1) Agreement and Declaration of Trust (December 17, 1998)
incorporated into this filing by reference to
Post-Effective Amendment No. 12 filed November 22, 1999.
(2) Certificate of Trust (December 17, 1998) incorporated into
this filing by reference to Post-Effective Amendment No. 12
filed November 22, 1999.
(b) By-Laws. By-Laws (December 17, 1998) incorporated into this
filing by reference to Post-Effective Amendment No. 12 filed
November 22, 1999.
(c) Copies of All Instruments Defining the Rights of Holders.
(1) Agreement and Declaration of Trust. Articles III, V and VI
of Agreement and Declaration of Trust incorporated into
this filing by reference to Post-Effective Amendment No. 12
filed November 22, 1999.
(2) By-Laws. Article II of By-Laws incorporated into this
filing by reference to Post-Effective Amendment No. 12
filed November 22, 1999.
(d) Investment Management Agreements and Sub-Advisory Agreements.
(1) Form of Investment Management Agreement (November 1999)
between Delaware Management Company and the Registrant on
behalf of each Fund incorporated into this filing by
reference to Post-Effective Amendment No. 12 filed November
22, 1999.
(2) Form of Sub-Advisory Agreement (November 1999) between
Delaware Management Company and Lynch & Mayer, Inc. on
behalf of Delaware U.S. Growth Fund incorporated into this
filing by reference to Post-Effective Amendment No. 12
filed November 22, 1999.
(3) Form of Sub-Advisory Agreement (November 1999) between
Delaware Management Company and Delaware International
Advisers Ltd. on behalf of Delaware Overseas Equity Fund
incorporated into this filing by reference to
Post-Effective Amendment No. 12 filed November 22, 1999.
(4) Form of Sub-Advisory Agreement (November 1999) between
Delaware Management Company and AIB Govett, Inc. on behalf
of Delaware New Pacific Fund (November 1999) incorporated
into this filing by reference to Post-Effective Amendment
No. 12 filed November 22, 1999.
(e) (1) Distribution Agreements. Form of Distribution Agreements
(November 1999) between Delaware Distributors, L.P. and the
Registrant on behalf of each Class incorporated into this
filing by reference to Post-Effective Amendment No. 4 filed
February 28, 1996.
(2) Administration and Service Agreement. Form of
Administration and Service Agreement (as amended November
1995) incorporated into this filing by reference to
Post-Effective Amendment No. 5 filed March 12, 1996.
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(3) Dealer's Agreement. Form of Dealer's Agreement (as amended
November 1995) incorporated into this filing by reference
to Post-Effective Amendment No. 5 filed March 12, 1996.
(4) Form of 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) Inapplicable.
(g) Custodian Agreements.
(1) Form of Custodian Agreement (November 1999) between The
Chase Manhattan Bank and the Registrant incorporated into
this filing by reference to Post-Effective Amendment No. 7
filed February 28, 1997 and Post-Effective Amendment No. 8
filed December 23, 1997.
(2) Form of Securities Lending Agreement (November 1999)
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) Form of Shareholders Services Agreement (November 1999)
between Delaware Service Company, Inc. and the Registrant
incorporated into this filing by reference Post-Effective
Amendment No. 4 filed February 28, 1996.
(2) Form of Fund Accounting Agreement (November 1999) 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) Legal Opinion. Incorporated into this filing by reference to
Post-Effective Amendment No. 12 filed November 22, 1999.
(j) Consent of Auditors. To be filed by Amendment.
(k) Inapplicable.
(l) Inapplicable.
(m) Plans under Rule 12b-1.
(1) Form of Plan under Rule 12b-1 for A Class (November 1999)
incorporated into this filing by reference to
Post-Effective Amendment No. 4 filed February 28, 1996.
(2) Form of Plan under Rule 12b-1 for B Class (November 1999)
incorporated into this filing by reference to
Post-Effective Amendment No. 4 filed February 28, 1996.
(3) Form of Plan under Rule 12b-1 for C Class (November 1999)
incorporated into this filing by reference to
Post-Effective Amendment No. 4 filed February 28, 1996.
(n) Inapplicable.
<PAGE>
(o) Other: Trustees' Power of Attorney. Incorporated into this filing
by reference to Post-Effective Amendment No. 12 filed
November 22, 1999.
Item 24. Persons Controlled by or under Common Control with Registrant. None.
Item 25. Indemnification. Article VI of the By-Laws incorporated into this
filing by reference to Post-Effective Amendment No. 12 filed
November 22, 1999.
Item 26. Business and Other Connections of Investment Adviser.
(a) 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 Investments family (Delaware Group Equity Funds I, Delaware
Group Equity Funds II, Delaware Group Equity Funds III, Delaware Group Equity
Funds IV, Delaware Group Equity Funds V, Delaware Group Government Fund,
Delaware Group Income Funds, Delaware Group Limited-Term Government Funds,
Delaware Group Cash Reserve, Delaware Group Tax-Free Fund, Delaware Group State
Tax-Free Income Trust, Delaware Group Tax-Free Money Fund, Delaware Group
Premium Fund, Delaware Group Global & International Funds, Delaware Pooled
Trust, Delaware Group Dividend and Income Fund, Inc., Delaware Group Global
Dividend and Income Fund, Inc., Delaware Group Foundation Funds, Voyageur
Tax-Free Funds, Voyageur Intermediate Tax-Free Funds, Voyageur Insured Funds,
Voyageur Funds, Voyageur Investment Trust, Voyageur Mutual Funds, Voyageur
Mutual Funds II, Voyageur Mutual Funds III, Voyageur Arizona Municipal Income
Fund, Inc., Voyageur Colorado Insured Municipal Income Fund, Inc., Voyageur
Florida Insured Municipal Income Fund, Voyageur Minnesota Municipal Fund, Inc.,
Voyageur Minnesota Municipal Fund II, Inc. and Voyageur Minnesota Municipal Fund
III, Inc.). In addition, certain officers of the Manager also serve as
directors/trustees of the other funds in the Delaware Investments family, and
certain officers are also officers of these other funds. A company indirectly
owned by the Manager's indirect parent company acts as principal underwriter to
the mutual funds in the Delaware Investments family (see Item 27 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:
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Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
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David K. Downes President of Delaware Management Company (a series of Delaware Management Business
Trust); President, Chief Executive Officer and Director of Delaware Capital
Management, Inc.; Director of Delaware International Advisers Ltd.; President,
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and
Director/Trustee of the Registrant and each of the other investment companies in
the Delaware Investments family; President and Director of Delaware Management
Company, Inc.; Chairman, President, Chief Executive Officer and Director of
Delaware Service Company, Inc.; President, Chief Operating Officer, Chief
Financial Officer and Director of Delaware International Holdings Ltd.; Chairman
and Director of Delaware Management Trust Company and Retirement Financial
Services, Inc.; Executive Vice President, Chief Operating Officer, Chief Financial
Officer of Delaware Management Holdings, Inc., Founders CBO Corporation, Delaware
Investment Advisers (a series of Delaware Management Business Trust) and Delaware
Distributors, L.P.; Executive Vice President, Chief Operating Officer, Chief
Financial Officer and Director of DMH Corp., Delaware Distributors, Inc., Founders
Holdings, Inc. and Delvoy, Inc.; Executive Vice President and Trustee of Delaware
Management Business Trust
Chief Executive Officer and Director of Forewarn, Inc. since 1993, 8 Clayton
Place, Newtown Square, PA
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Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates
and other Positions and Offices Held
<S> <C>
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Richard J. Flannery Executive Vice President/General Counsel of the Registrant and each of the other
investment companies in the Delaware Investments family, Delaware Management
Holdings, Inc., 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 Founders CBO Corporation; Director of
Delaware International Advisers Ltd.; Executive Vice President/General Counsel and
Director of Delaware International Holdings Ltd., Founders Holdings, Inc., Delvoy,
Inc., DMH Corp., Delaware Management Company, Inc., Delaware Service Company,
Inc., Delaware Capital Management, Inc., Retirement Financial Services, Inc.,
Delaware Distributors, Inc. and Delaware Management Trust Company.; Executive Vice
President and Trustee of Delaware Management Business Trust; Director of HYPPCO
Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd., Elverton, PA;
Director and Member of Executive Committee of Stonewall Links, Inc. since 1991,
Bulltown Rd., Elverton, PA
- ------------------------------------------------- ----------------------------------------------------------------------------------
Richard G. Unruh Executive Vice President/Chief Investment Officer of Delaware Management Company
(a series of Delaware Management Business Trust); Director of Delaware
International Advisers Ltd.; Executive Vice President and Chief Investment
Officer, Equity of the Registrant and each of the other investment companies in
the Delaware Investments family; Chief Executive Officer/Chief Investment Officer
of Delaware Investment Advisers (a series of Delaware Management Business Trust);
Executive Vice President of Delaware Management Holdings, Inc. and Delaware
Capital Management, Inc.; Executive Vice President and Trustee of Delaware
Management Business Trust
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
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H. Thomas McMeekin(1) Executive Vice President of Delaware Management Business Trust; Executive
Vice President/Chief Investment Officer DMC-Fixed Income of Delaware
Management Company (a series of Delaware Management Business Trust);
Executive Vice President/Chief Investment Officer DIA-Fixed Income of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Executive Vice President of Delaware Capital Management, Inc.;
Executive Vice President and Director of Delaware Management Holdings, Inc.;
Executive Vice President and Chief Investment Officer, Fixed Income of the
Registrant and each of the other investment companies in the Delaware
Investments family.
- ------------------------------------------------- ----------------------------------------------------------------------------------
William E. Dodge(2) Executive Vice President/Chief Investment Officer, DMC-Equity of Delaware
Management Company (a series of Delaware Management Trust Company); Executive Vice
President of Delaware Management Business Trust; President/Chief Investment
Officer, DIA-Equity of Delaware Investment Advisers (a series of Delaware
Management Business Trust)
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Douglas L. Anderson Senior Vice President/Operations of Delaware Management Company (a series of
Delaware Management Business Trust; Senior Vice President/Operations of Delaware
Service Company, Inc.; Senior Vice President/Operations of Retirement Financial
Services, Inc.; Senior Vice President/Operations of Delaware Management Trust
Company.
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Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
- ------------------------------------------------- ----------------------------------------------------------------------------------
Michael P. Bishof Senior Vice President/Investment Accounting of Delaware Management Company (a
series of Delaware Management Business Trust), Delaware Service Company, Inc. and
Delaware Capital Management, Inc. and Founders Holdings, Inc.; Senior Vice
President and Treasurer of the Registrant and each of the other investment
companies in the Delaware Investments family; Senior Vice President and Treasurer/
Investment Accounting of Delaware Distributors, L.P. and Delaware Investment
Advisers (a series of Delaware Management Business Trust); Senior Vice
President/Manager of Investment Accounting of Delaware International Holdings,
Inc.; Senior Vice President and Assistant Treasurer of Founders CBO Corporation
- ------------------------------------------------- ----------------------------------------------------------------------------------
Robert J. DiBraccio Senior Vice President/Head of Equity Trading of Delaware Management Company (a
series of Delaware Management Business Trust); Senior Vice President/Head of
Equity Trading of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Senior Vice President/Head of Equity Trading of Delaware Capital
Management, Inc.
- ------------------------------------------------- ----------------------------------------------------------------------------------
John B. Fields Senior Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Trustee of Delaware Management
Business Trust; Senior Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Senior Vice
President/Senior Portfolio Manager of Delaware Capital Management, Inc.; Senior
Vice President/Senior Portfolio Manager of the Registrant and each of the other
investment companies in the Delaware Investments family.
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Gerald S. Frey Senior Vice President/Senior Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family, Delaware Management
Company (a series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Delaware Capital
Management, Inc.
- ------------------------------------------------- ----------------------------------------------------------------------------------
Susan L. Hanson Senior Vice President/Global Marketing and Client Services of Delaware Management
Company (a series of Delaware Management Business Trust); Senior Vice
President/Global Marketing and Client Services of Delaware Investment Advisers (a
series of Delaware Management Business Trust)
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Joseph H. Hastings Senior Vice President/Corporate Controller and Treasurer of Delaware Management
Holdings, Inc., DMH Corp., Delvoy , Inc., Delaware Management Company, Inc.,
Delaware Management Business Trust, 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., Founders Holdings, Inc. and Delaware
Management Business Trust; Senior Vice President/Corporate Controller of the
Registrant and each of the other investment companies in the Delaware Investments
family and Delaware Investment Advisers (a series of Delaware Management Business
Trust); Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company; Senior Vice President/Assistant Treasurer of Founders
CBO Corporation; Chief Financial Officer of Retirement Financial Services, Inc.
- ------------------------------------------------- ----------------------------------------------------------------------------------
Joanne O. Hutcheson Senior Vice President/Human Resources of Delaware Management Company (a series of
Delaware Management Business Trust); Senior Vice President/Human Resources of
Delaware Management Holdings, Inc.; Senior Vice President/Human Resources of DMH
Corp.; Senior Vice President/Human Resources of Delvoy, Inc.; Senior Vice
President/Human Resources of Delaware Management Company, Inc.; Senior Vice
President/Human Resources of Delaware Management Business Trust; Senior Vice
President/Human Resources of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Senior Vice President/Human Resources of Delaware
Service Company, Inc.; Senior Vice President/Human Resources of Delaware Capital
Management, Inc.; Senior Vice President/Human Resources of Delaware Retirement
Financial Services, Inc.; Senior Vice President/Human Resources of Delaware
Management Trust Company; Senior Vice President/Human Resources of Delaware
Distributors, Inc.; Senior Vice President/Human Resources of Delaware
Distributors, L.P.; Senior Vice President/Human Resources of the Registrant and
each of the other investment companies in the Delaware Investments family
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Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
- ------------------------------------------------- ----------------------------------------------------------------------------------
Richelle S. Maestro Senior Vice President, Deputy General Counsel and Secretary of Delaware Management
Company (a series of Delaware Management Business Trust); Senior Vice President,
Deputy General Counsel and Secretary of Delaware Management Holdings, Inc.; Senior
Vice President, Deputy General Counsel and Secretary of DMH Corp.; Senior Vice
President, Deputy General Counsel and Secretary of Delaware Management Business
Trust; Senior Vice President, Deputy General Counsel and Secretary of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Senior Vice
President, Deputy General Counsel and Secretary of Retirement Financial Services,
Inc.; Senior Vice President, Deputy General Counsel and Secretary of Delaware
Distributors, Inc.; Senior Vice President, Deputy General Counsel and Assistant
Secretary of Delaware Distributors, L.P.; Senior Vice President, Secretary and
Deputy General Counsel of Delaware Management Trust Company; Senior Vice
President, Secretary and Deputy General Counsel of Delaware International Holdings
Ltd.; Senior Vice President, Secretary and Deputy General Counsel of Delvoy, Inc.;
Senior Vice President, Secretary and Deputy General Counsel of Delaware Management
Company, Inc.; Senior Vice President, Secretary and Deputy General Counsel of
Delaware Service Company, Inc.; Senior Vice President, Secretary and Deputy
General Counsel of Delaware Capital Management, Inc.; Secretary of Founders CBO
Corporation; Senior Vice President, Deputy General Counsel and Secretary of
Founders Holdings, Inc.; Senior Vice President, Deputy General Counsel and
Assistant Secretary of the Registrant and each of the other investment companies
in the Delaware Investments family
General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Lane,
Philadelphia, PA.
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Eric E. Miller Senior Vice President, Deputy General Counsel and Assistant Secretary of Delaware
Management Company (a series of Delaware Management Business Trust); Senior Vice
President, Deputy General Counsel and Assistant Secretary of Delaware Management
Holdings, Inc.; Senior Vice President, Deputy General Counsel and Assistant
Secretary of DMH Corp.; Senior Vice President, Deputy General Counsel and
Assistant Secretary of Delvoy, Inc.; Senior Vice President, Deputy General Counsel
and Assistant Secretary of Delaware Management Company, Inc.; Senior Vice
President, Deputy General Counsel and Assistant Secretary of Delaware Management
Business Trust; Senior Vice President, Deputy General Counsel and Assistant
Secretary of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Senior Vice President, Deputy General Counsel and Assistant
Secretary of Delaware Service Company, Inc.; Senior Vice President, Deputy General
Counsel and Assistant Secretary of Delaware Capital Management, Inc.; Senior Vice
President, Deputy General Counsel and Assistant Secretary of Retirement Financial
Services, Inc.; Senior Vice President, Deputy General Counsel and Assistant
Secretary of Delaware Distributors, Inc.; Senior Vice President, Deputy General
Counsel and Assistant Secretary of Delaware Distributors, L.P.; Senior Vice
President, Deputy General Counsel and Assistant Secretary of Founders Holdings,
Inc.; Senior Vice President, Deputy General Counsel and Secretary of the
Registrant and each of the other investment companies in the Delaware Investments
family
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Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
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James L. Shields Senior Vice President, Chief Information Officer of Delaware Management Company (a
series of Delaware Management Business Trust); Senior Vice President, Chief
Information Officer of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Senior Vice President, Chief Information Officer of
Delaware Service Company, Inc.; Senior Vice President, Chief Information Officer
of Delaware Capital Management Company, Inc.; Senior Vice President, Chief
Information Officer of Retirement Financial Services, Inc.; Senior Vice President,
Chief Information Officer of Delaware Distributors, L.P.
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Gary T. Abrams Vice President/Equity Trading of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Equity Trading of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
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Christopher S. Adams Vice President/Equity Analyst of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Equity Analyst of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
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Robert L. Arnold Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of Delaware Capital Management, Inc.; Vice
President/Senior Portfolio Manager of the Registrant and each of the other
investment companies in the Delaware Investments family
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Marshall T. Bassett Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager of each fund in the Delaware Investments family
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Christopher S. Beck Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of each fund in the Delaware Investments
family.
Trustee of New Castle County Pension Board since October 1992, Wilmington DE.
- ------------------------------------------------- ----------------------------------------------------------------------------------
Richard E. Beister Vice President/Trading Operations of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Trading Operations of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
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Lisa O. Brinkley Vice President/Compliance Director of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Compliance Director of
Delaware Management Holdings, Inc.; Vice President/Compliance Director of DMH
Corp.; Vice President/Compliance Director of Delvoy, Inc.; Vice
President/Compliance Director of Delaware Management Company, Inc.; Vice
President/Compliance Director of Delaware Management Business Trust; Vice
President/Compliance Director of Delaware Investment Advisers (a series of
Delaware Management Business Trust);Vice President/Compliance Director of Delaware
Service Company, Inc.; Vice President/Compliance Director of Delaware Capital
Management, Inc.; Vice President/Compliance Director of Retirement Financial
Services, Inc.; Vice President/Compliance Director/Assistant Secretary of Delaware
Management Business Trust; Vice President/Compliance Director of Delaware
Distributors, Inc.; Vice President/Compliance Director of Delaware Distributors,
L.P.; Vice President/Compliance Director of the Registrant and each of the other
investment companies in the Delaware Investments family
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Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
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Michael P. Buckley Vice President/Portfolio Manager/Senior Municipal Analyst of Delaware Management
Company (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager/Senior Municipal Analyst of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager/Senior
Municipal Analyst of the Registrant and each of the other investment companies in
the Delaware Investments family
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MaryEllen M. Carrozza Vice President/Client Services of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Client Services of Delaware
Investment Advisers (a series of Delaware Management Business Trust);Vice
President/Client Services of the Registrant and each of the other investment
companies in the Delaware Investments family
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Stephen R. Cianci Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager of the Registrant and each of the other investment
companies in the Delaware Investments family
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Mitchell L. Conery Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of the Registrant and each of the other
investment companies in the Delaware Investments family
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Timothy G. Connors Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of the Registrant and each of the other
investment companies in the Delaware Investments family
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Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of Delaware Capital Management, Inc.; Vice
President/Senior Portfolio Manager of the Registrant and each of the other
investment companies in the Delaware Investments family
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George E. Deming Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of the Registrant and each of the other
investment companies in the Delaware Investments family
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James P. Dokas Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/ Portfolio Manager of the Registrant and each of the other investment
companies in the Delaware Investments family
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Michael J. Dugan Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of the Registrant and each of the other
investment companies in the Delaware Investments family
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Roger A. Early Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio of the Registrant and each of the other investment
companies in the Delaware Investments family
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Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
- ------------------------------------------------- ----------------------------------------------------------------------------------
Joel A. Ettinger Vice President/Taxation of Delaware Management Company (a series of Delaware
Management Business Trust);Vice President/Taxation of Delaware Management
Holdings, Inc.; Vice President/Taxation of DMH Corp.; Vice President/Taxation of
Delvoy, Inc.; Vice President/Taxation of Delaware Management Company, Inc.; Vice
President/Taxation of Delaware Management Business Trust; Vice President/Taxation
of Delaware Investment Advisers (a series of Delaware Management Business
Trust);Vice President/Taxation of Delaware Service Company, Inc.; Vice
President/Taxation of Delaware Capital Management, Inc.; Vice President/Taxation
of Retirement Financial Services, Inc.; Vice President/Taxation of Delaware
Distributors, Inc.; Vice President/Taxation of Delaware Distributors, L.P.; Vice
President/Taxation of Founders Holdings, Inc.; Vice President/Taxation of Founders
CBO Corporation; Vice President/Taxation of the Registrant and each of the other
investment companies in the Delaware Investments family
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Joseph Fiorilla Vice President/Performance Analyst of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Performance Analyst of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ----------------------------------------------------------------------------------
James A. Furgele Vice President/Investment Accounting of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Investment Accounting of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Investment Accounting of Delaware Service Company, Inc.; Vice
President/Investment Accounting of the Registrant and each of the other investment
companies in the Delaware Investments family
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Thomas C. Gariepy(3) Vice President/Director of Corporate Communications of Delaware Management Company
(a series of Delaware Management Business Trust); Vice President/Director of
Corporate Communications of Delaware Investment Advisers (a series of Delaware
Management Business Trust)
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Stuart M. George Vice President/Equity Trading of Delaware Management Company (a series of Delaware
Management Business Trust);Vice President/Equity Trading of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
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Barry Gladstein Vice President/Business Manager of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Business Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust)
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Paul Grillo Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager of the Registrant and each of the other investment
companies in the Delaware Investments family
- ------------------------------------------------- ----------------------------------------------------------------------------------
Brian T. Hannon Vice President of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
the Registrant and each of the other investment companies in the Delaware
Investments family
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John A. Heffern Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager of the Registrant and each of the other investment
companies in the Delaware Investments family
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<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
- ------------------------------------------------- ----------------------------------------------------------------------------------
Elizabeth H. Howell Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of the Registrant and each of the other
investment companies in the Delaware Investments family
- ------------------------------------------------- ----------------------------------------------------------------------------------
Jeffrey W. Hynoski Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust);Vice
President/Portfolio Manager of the Registrant and each of the other investment
companies in the Delaware Investments family
- ------------------------------------------------- ----------------------------------------------------------------------------------
Cynthia Isom Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager of the Registrant and each of the other investment
companies in the Delaware Investments family
- ------------------------------------------------- ----------------------------------------------------------------------------------
Karina J. Ivstan Vice President/Strategic Planning of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Strategic Planning of Delaware
Management Holdings, Inc.; Vice President/Strategic Planning of Delaware
Management Business Trust; Vice President/Strategic Planning of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Strategic Planning of Delaware Service Company, Inc.; Vice
President/Strategic Planning of Delaware Capital Management, Inc.; Vice
President/Strategic Planning of Retirement Financial Services, Inc.; Vice
President/Strategic Planning of Delaware Management Trust Company; Vice
President/Strategic of Delaware Distributors, L.P.; Vice President/Strategic
Planning of the Registrant and each of the other investment companies in the
Delaware Investments family
- ------------------------------------------------- ----------------------------------------------------------------------------------
Audrey E. Kohart Vice President/Assistant Controller/Corporate Accounting of Delaware Management
Company (a series of Delaware Management Business Trust); Vice President/Assistant
Controller/Corporate Accounting of Delaware Investment Advisers (a series of
Delaware Management Business Trust)
- ------------------------------------------------- ----------------------------------------------------------------------------------
Steven T. Lampe Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/ Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager of the Registrant and each of the other investment
companies in the Delaware Investments family
- ------------------------------------------------- ----------------------------------------------------------------------------------
Philip Y. Lin Vice President, Associate General Counsel and Assistant Secretary of Delaware
Management Company (a series of Delaware Management Business Trust); Vice
President, Associate General Counsel and Assistant Secretary of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President, Associate General Counsel and Assistant Secretary of Delaware Service
Company, Inc.; Vice President, Associate General Counsel and Assistant Secretary
of Delaware Capital Management, Inc.; Vice President, Associate General Counsel
and Assistant Secretary of Retirement Financial Services, Inc.; Vice President,
Associate General Counsel and Assistant Secretary of Delaware Management Trust
Company; Vice President, Associate General Counsel and Assistant Secretary of
Delaware Distributors, L.P.; Vice President, Associate General Counsel and
Assistant Secretary of the Registrant and each of the other investment companies
in the Delaware Investments family
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
- ------------------------------------------------- ----------------------------------------------------------------------------------
Michael D. Mabry Vice President, Associate General Counsel and Assistant Secretary of Delaware
Management Company (a series of Delaware Management Business Trust); Vice
President, Associate General Counsel and Assistant Secretary of Delaware
Investment Advisers (a series of Delaware Management Business Trust);Vice
President, Associate General Counsel and Assistant Secretary of Delaware Service
Company, Inc.; Vice President, Associate General Counsel and Assistant Secretary
of Delaware Capital Management, Inc.; Vice President, Associate General Counsel
and Assistant Secretary of Retirement Financial Services, Inc.; Vice President,
Associate General Counsel and Assistant Secretary of Delaware Distributors, L.P.;
Vice President, Associate General Counsel and Assistant Secretary of the
Registrant and each of the other investment companies in the Delaware Investments
family
- ------------------------------------------------- ----------------------------------------------------------------------------------
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of Founders Holdings, Inc., President and
Director of Founders CBO Corporation; Vice President/Senior Portfolio Manager of
the Registrant and each of the other investment companies in the Delaware
Investments family.
- ------------------------------------------------- ----------------------------------------------------------------------------------
Andrew M. McCullagh, Jr. Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of the Registrant and each of the other
investment companies in the Delaware Investments family
- ------------------------------------------------- ----------------------------------------------------------------------------------
Francis X. Morris Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio of the Registrant and each of the other investment
companies in the Delaware Investments family
- ------------------------------------------------- ----------------------------------------------------------------------------------
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of Founders Holdings, Inc., Treasurer,
Assistant Secretary and Director of Founders CBO Corporation; Vice
President/Senior Portfolio Manager of the Registrant and each of the other
investment companies in the Delaware Investments family
- ------------------------------------------------- ----------------------------------------------------------------------------------
Robert A. Norton, Jr. Vice President/Research Analyst of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Research Analyst of Delaware
Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ----------------------------------------------------------------------------------
David P. O'Connor Vice President, Associate General Counsel and Assistant Secretary of Delaware
Management Company (a series of Delaware Management Business Trust); Vice
President, Associate General Counsel and Assistant Secretary of Delaware
Investment Advisers (a series of Delaware Management Business Trust);Vice
President, Associate General Counsel and Assistant Secretary of Delaware Service
Company, Inc.; Vice President, Associate General Counsel and Assistant Secretary
of Delaware Capital Management, Inc.; Vice President, Associate General Counsel
and Assistant Secretary of Retirement Financial Services, Inc.; Vice President,
Associate General Counsel and Assistant Secretary of Delaware Distributors, L.P.;
Vice President, Associate General Counsel and Assistant Secretary of the
Registrant and each of the other investment companies in the Delaware Investments
family
- ------------------------------------------------- ----------------------------------------------------------------------------------
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of the Registrant and each of the other
investment companies in the Delaware Investments family
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
- ------------------------------------------------- ----------------------------------------------------------------------------------
Richard Salus Vice President/Assistant Controller of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Assistant Controller of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Assistant Controller of Delaware Management Trust Company; Vice
President/Assistant Controller of Delaware International Holdings Ltd.
- ------------------------------------------------- ----------------------------------------------------------------------------------
Richard D. Siedel Vice President/Assistant Controller/Manager, Payroll of Delaware Management
Company (a series of Delaware Management Business Trust); Vice President/Assistant
Controller/Manager, Payroll of Delaware Investment Advisers (a series of Delaware
Management Business Trust)
- ------------------------------------------------- ----------------------------------------------------------------------------------
Michael T. Taggart Vice President/Facilities and Administration Services of Delaware Management
Company (a series of Delaware Management Business Trust); Vice
President/Facilities and Administration Services of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Vice President/Facilities and
Administration Services of Delaware Service Company, Inc.; Vice
President/Facilities and Administration Services of Delaware Distributors, L.P.
- ------------------------------------------------- ----------------------------------------------------------------------------------
Thomas J. Trotman Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager of the Registrant and each of the other investment
companies in the Delaware Investments family
- ------------------------------------------------- ----------------------------------------------------------------------------------
Lori P. Wachs Vice President/ Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/ Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/ Portfolio Manager of the Registrant and each of the other investment
companies in the Delaware Investments family
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Business Address is 1818 Market Street, Philadelphia, PA 19103.
- --------------------------------------------------------------------------------
1 PRESIDENT AND DIRECTOR, Lincoln Investment Management, Inc. 1987 to
present. EXECUTIVE VICE PRESIDENT/CHIEF INVESTMENT OFFICER of Lincoln
National Corporation 1992 to present.
2 PRESIDENT, DIRECTOR OF MARKETING AND SENIOR PORTFOLIO MANAGER, Marvin &
Palmer Associates, Wilmington, DE 1996-1998.
3 VICE PRESIDENT/DIRECTOR OF PUBLIC RELATIONS, Liberty Funds Distributor,
Inc., Boston, MA, 1996-1998.
- --------------------------------------------------------------------------------
(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 350 Park Avenue, New York,
New York 10022.
<PAGE>
<TABLE>
<CAPTION>
Name Positions and Offices with Lynch & Mayer, Inc. and other Positions Held
- ---- ----------------------------------------------------------------------------
<S> <C>
Francis J. Houghton, Jr. President and Director
Vice President of Lynch & Mayer Securities Corp, New York, NY.
David K. Downes* Executive Vice President/Chief Operating Officer/Chief Financial Officer
Chief Operating Officer of Lincoln national Investment Companies, Inc.; Director
of Delaware International Advisers Ltd.; President, Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer and Director/Trustee of the Registrant
and each of the other investment companies in the Delaware Investments family;
President and Director of Delaware Management Company, Inc.; President of Delaware
Management Company (a series of Delaware Management Business Trust); President,
Chief Executive Officer and Director of Delaware Capital Management, Inc.;
Chairman, President, Chief Executive Officer and Director of Delaware Service
Company, Inc.;President, Chief Operating Officer, Chief Financial Officer and
Director of Delaware International Holdings Ltd.; Chairman and Director of
Delaware Management Trust Company and Retirement Financial Services, Inc.;
Executive Vice President, Chief Operating Officer, Chief Financial Officer of
Delaware Management Holdings, Inc., Founders CBO Corporation, Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Delaware
Distributors, L.P.; Executive Vice President, Chief Operating Officer, Chief
Financial Officer and Director of DMH Corp., Delaware Distributors, Inc., Founders
Holdings, Inc. and Delvoy, Inc.; Executive Vice President and Trustee of Delaware
Management Business Trust; Chief Executive Officer and Director of Forewarn, Inc.,
Newtown Square, PA
Richard J. Flannery* Executive Vice President/General Counsel
Director of Delaware International Advisers Ltd.; Executive Vice President/General
Counsel of the Registrant and each of the other investment companies in the
Delaware Investments family, Delaware Management Holdings, Inc., 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 Founders CBO Corporation; Executive Vice President/General
Counsel and Director of Delaware International Holdings Ltd., Founders Holdings,
Inc., Delvoy, Inc., DMH Corp., Delaware Management Company, Inc., Delaware Service
Company, Inc., Delaware Capital Management, Inc., Retirement Financial Services,
Inc., Delaware Distributors, Inc. and Delaware Management Trust Company.;
Executive Vice President and Trustee of Delaware Management Business Trust;
Director of HYPPCO Finance Company Ltd. Limited Partner of Stonewall Links, L.P.,
Elverton, PA; Director and Member of Executive Committee of Stonewall Links, Inc.,
Elverton, PA
Robert J. DiBraccio* Senior Vice President/Head Trader
Senior Vice President/Head of Equity Trading of Delaware Management Company (a
series of Delaware Management Business Trust); Senior Vice President/Head of
Equity Trading of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Senior Vice President/Head of Equity Trading of Delaware Capital
Management, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name Positions and Offices with Lynch & Mayer, Inc. and other Positions Held
- ---- -----------------------------------------------------------------------
<S> <C>
Rufus R. Winton Senior Vice President
Joseph H. Hastings* Senior Vice President/Treasurer/Corporate Controller
Senior Vice President/Corporate Controller and Treasurer of Delaware Management
Holdings, Inc., DMH Corp., Delvoy , Inc., Delaware Management Company, Inc.,
Delaware Management Business Trust, 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., Founders Holdings, Inc. and Delaware
Management Business Trust; Senior Vice President/Corporate Controller of the
Registrant and each of the other investment companies in the Delaware Investments
family and Delaware Investment Advisers (a series of Delaware Management Business
Trust); Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company; Senior Vice President/Assistant Treasurer of Founders
CBO Corporation; Chief Financial Officer of Retirement Financial Services, Inc.
Robert D. Schwartz Vice President/Portfolio Manager
Registered Representative of Lynch & Mayer Securities Corp, New York, NY
</TABLE>
* Business address is 1818 Market Street, Philadelphia, PA 19103.
(2) Delaware International Advisers Ltd. ("Delaware International")
serves as sub-investment adviser to Delaware 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.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Positions and Offices with the Manager and its Affiliates and
Name and Principal Business Address Other Positions and Offices Held
<S> <C>
- -------------------------------------------------------------------- ---------------------------------------------------------------
G. Roger H. Kitson* Vice Chairman and Director of Delaware International Advisers
Ltd.
- -------------------------------------------------------------------- ---------------------------------------------------------------
David G. Tilles* Managing Director/Chief Investment Officer and Director of
Delaware International Advisers Ltd.
- -------------------------------------------------------------------- ---------------------------------------------------------------
Elizabeth A. Desmond* Senior Portfolio Manager and Director of Delaware International
Advisers Ltd.
- -------------------------------------------------------------------- ---------------------------------------------------------------
John Emberson* Finance Director/Company Secretary/Compliance Officer of
Delaware International Advisers Ltd.
- -------------------------------------------------------------------- ---------------------------------------------------------------
Clive A. Gillmore* Senior Portfolio Manager and Director of Delaware International
Advisers Ltd.
- -------------------------------------------------------------------- ---------------------------------------------------------------
Nigel G. May* Senior Portfolio Manager and Director of Delaware International
Advisers Ltd.
- -------------------------------------------------------------------- ---------------------------------------------------------------
Hamish O. Parker* Senior Portfolio Manager and Director of Delaware International
Advisers Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Positions and Offices with the Manager and its Affiliates and
Name and Principal Business Address Other Positions and Offices Held
<S> <C>
- -------------------------------------------------------------------- ---------------------------------------------------------------
Robert Akester* Senior Portfolio Manager of Delaware International Advisers Ltd
- -------------------------------------------------------------------- ---------------------------------------------------------------
Fiona A. Barwick* Senior Portfolio Manager of Delaware International Advisers Ltd
- -------------------------------------------------------------------- ---------------------------------------------------------------
Joanna Bates* Senior Portfolio Manager of Delaware International Advisers Ltd
- -------------------------------------------------------------------- ---------------------------------------------------------------
Joshua H. Brooks* Senior Portfolio Manager of Delaware International Advisers Ltd
- -------------------------------------------------------------------- ---------------------------------------------------------------
Gavin A. Hall* Senior Portfolio Manager of Delaware International Advisers Ltd
- -------------------------------------------------------------------- ---------------------------------------------------------------
John Kirk* Senior Portfolio Manager of Delaware International Advisers Ltd
- -------------------------------------------------------------------- ---------------------------------------------------------------
W. Hywel Morgan* Senior Portfolio Manager of Delaware International Advisers Ltd
- -------------------------------------------------------------------- ---------------------------------------------------------------
Richard J. Ginty* Portfolio Manager of Delaware International Advisers Ltd.
- -------------------------------------------------------------------- ---------------------------------------------------------------
R. Emma Lewis* Portfolio Manager of Delaware International Advisers Ltd.
- -------------------------------------------------------------------- ---------------------------------------------------------------
Hugh A. Serjeant* Portfolio Manager of Delaware International Advisers Ltd.
- -------------------------------------------------------------------- ---------------------------------------------------------------
John C. E. Campbell** Director of Delaware International Advisers Ltd.; Executive
Vice President/Global Marketing & Client Services of Delaware
Management Company (a series of Delaware Management Business
Trust) and Delaware Investment Advisers (a series of Delaware
Management Business Trust)
- -------------------------------------------------------------------- ---------------------------------------------------------------
George E. Deming** Director of Delaware International Advisers Ltd.; Vice
President/Senior Portfolio Manager of Delaware Management
Company (a series of Delaware Management Business Trust) and
Delaware Investment Advisers (a series of Delaware Management
Business Trust)
- -------------------------------------------------------------------- ---------------------------------------------------------------
David K. Downes** Director of Delaware International Advisers Ltd.; President,
Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer and Director/Trustee of the Registrant and
each of the other investment companies in the Delaware
Investments family; President and Director of Delaware
Management Company, Inc.; President of Delaware Management
Company (a series of Delaware Management Business Trust);
President, Chief Executive Officer and Director of Delaware
Capital Management, Inc.; Chairman, President, Chief Executive
Officer and Director of Delaware Service Company, Inc.;
President, Chief Operating Officer, Chief Financial Officer
and Director of Delaware International Holdings Ltd.; Chairman
and Director of Delaware Management Trust Company and
Retirement Financial Services, Inc.; Executive Vice President,
Chief Operating Officer, Chief Financial Officer of Delaware
Management Holdings, Inc., Founders CBO Corporation, Delaware
Investment Advisers (a series of Delaware Management Business
Trust) and Delaware Distributors, L.P.; Executive Vice
President, Chief Operating Officer, Chief Financial Officer and
Director of DMH Corp., Delaware Distributors, Inc., Founders
Holdings, Inc. and Delvoy, Inc.; Executive Vice President and
Trustee of Delaware Management Business Trust
Chief Executive Officer and Director of Forewarn, Inc. since
1993, 8 Clayton Place, Newtown Square, PA
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Positions and Offices with the Manager and its Affiliates and
Name and Principal Business Address Other Positions and Offices Held
<S> <C>
- -------------------------------------------------------------------- ---------------------------------------------------------------
Richard J. Flannery** Director of Delaware International Advisers Ltd.; Executive
Vice President/General Counsel of the Registrant and each of
the other investment companies in the Delaware Investments
family, Delaware Management Holdings, Inc., 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
Founders CBO Corporation; Executive Vice President/General
Counsel and Director of Delaware International Holdings Ltd.,
Founders Holdings, Inc., Delvoy, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Service Company, Inc.,
Delaware Capital Management, Inc., Retirement Financial
Services, Inc., Delaware Distributors, Inc. and Delaware
Management Trust Company.; Executive Vice President and Trustee
of Delaware Management Business Trust; Director of HYPPCO
Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown
Rd., Elverton, PA; Director and Member of Executive Committee
of Stonewall Links, Inc. since 1991, Bulltown Rd., Elverton, PA
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Positions and Offices with the Manager and its Affiliates and
Name and Principal Business Address Other Positions and Offices Held
<S> <C>
- -------------------------------------------------------------------- ---------------------------------------------------------------
Wayne A. Stork** Director of Delaware International Advisers Ltd.; Chairman,
Director/Trustee of the Fund and each of the other 32
investment companies in the Delaware Investments family;
Chairman and Director of Delaware Management Holdings, Inc.;
Prior to January 1, 1999, Mr. Stork was Director of Delaware
Capital Management, Inc.; Chairman, President and Chief
Executive Officer and Director/Trustee of DMH Corp., Delaware
Distributors, Inc. and Founders Holdings, Inc.; Chairman,
President, Chief Executive Officer, Chief Investment Officer
and Director/Trustee of Delaware Management Company, Inc. and
Delaware Management Business Trust; Chairman, President, Chief
Executive Officer and Chief Investment Officer of Delaware
Management Company (a series of Delaware Management Business
Trust); Chairman, Chief Executive Officer and Chief Investment
Officer of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Chairman and Chief Executive
Officer of Delaware International Advisers Ltd.; Chairman,
Chief Executive Officer and Director of Delaware International
Holdings Ltd.; Chief Executive Officer of Delaware Management
Holdings, Inc.; President and Chief Executive Officer of
Delvoy, Inc.; Chairman of Delaware Distributors, L.P.; Director
of Delaware Service Company, Inc. and Retirement Financial
Services, Inc.
- -------------------------------------------------------------------- ---------------------------------------------------------------
Richard G. Unruh** Director of Delaware International Advisers Ltd.; Executive
Vice President and Chief Investment Officer, Equity of the
Fund, each of the other 32 investment companies in the Delaware
Investments family; Chief Executive Officer/Chief Investment
Officer of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Executive Vice President of
Delaware Management Holdings, Inc. and Delaware Capital
Management, Inc.; Executive Vice President/Chief Investment
Officer of Delaware Management Company (a series of Delaware
Management Business Trust); Executive Vice President and
Trustee of Delaware Management Business Trust
Board of Directors, Chairman of Finance Committee, Keystone
Insurance Company since 1989, 2040 Market Street, Philadelphia,
PA; Board of Directors, Chairman of Finance Committee, AAA Mid
Atlantic, Inc. since 1989, 2040 Market Street, Philadelphia,
PA; Board of Directors, Metron, Inc. since 1995, 11911 Freedom
Drive, Reston, VA
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Business address of each is Third Floor, 80 Cheapside, London, England EC2V
6EE.
** Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(3) AIB Govett, Inc. serves as sub-investment adviser to New Pacific
Fund. The directors and officers of AIB Govett, Inc., a wholly-owned subsidiary
of AIB Asset Management Holdings Ltd., are listed below. Unless otherwise
indicated, the address of each person is 250 Montgomery Street, Suite 1200, San
Francisco, CA 94104.
<TABLE>
<CAPTION>
Name Positions and Offices with AIB Govett, Inc.
- ---- -------------------------------------------
<S> <C>
Kevin J.T. Pakenham Chairman
Chief Executive Officer and Chairman of AIB Govett Asset Management Limited; Chairman
of AIB Asset Management Holding Limited, London SE1 2HR
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name Positions and Offices with AIB Govett, Inc.
- ---- -------------------------------------------
<S> <C>
Keith E. Mitchell President
Director - Member of the Board of AIB Asset Management Holding Limited, London SE1 2HR
Eileen M. Fitzpatrick Chief Investment Officer
Investment Director of AIB Investment Managers Limited
Colm E. Doherty Director
Head of Investment Banking, AIB Capital Markets, AIB International Centre, IFSC, Dublin 1
Maurice Harte Director
Managing Director of AIB Investment Managers Limited
Brian M. Lee Director
Managing Director - Operations of AIB Govett Asset Management Limited, London SE1 2HR
Colin J. Kreidenwolf Senior Vice President/Treasurer
Associate Director of AIB Govett Asset Management Limited, London SE1 2HR
James L. Cook Senior Vice President
Paul Niednagel Senior Vice President
Susan Marshall Vice President
John W. Murray Joint Chief Investment Officer
Managing Director of AIB Govett Asset Management Limited, London SE1 2HR
Jane Pickard Portfolio Manager
Fund Manager of AIB Govett Asset Management Limited, London SE1 2HR
Rachel Maunder Portfolio Manager
Director of AIB Govett Asset Management Limited, London SE1 2HR
Catherine MacGregor Compliance Officer
</TABLE>
<PAGE>
Item 27. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal underwriter for
all the mutual funds in the Delaware Investments family.
(b) Information with respect to each director, officer or partner of
principal underwriter:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
<S> <C> <C
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Delaware Distributors, Inc. General Partner None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Delaware Investment Advisers Limited Partner None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Delaware Capital Management, Inc. Limited Partner None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Bruce D. Barton President and Chief Executive Officer None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
David K. Downes Executive Vice President/Chief Operating President and Chief Executive
Officer/Chief Financial Officer Officer/Chief Financial Officer/Chief
Operating Officer and Trustee
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Richard J. Flannery Executive Vice President/General Counsel Executive Vice President/General Counsel
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Diane M. Anderson Senior Vice President/Retirement None
Operations
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Michael P. Bishof Senior Vice President/Treasurer/ Senior Vice President/Treasurer
Investment Accounting
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Daniel J. Brooks III Senior Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Terrence P. Cunningham Senior Vice President/National Sales None
Director, Financial Institutions
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Joseph H. Hastings Senior Vice President/Treasurer/ Senior Vice President/Corporate
Corporate Controller Controller
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Joanne O. Hutcheson Senior Vice President/Human Resources Senior Vice President/Human Resources
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Bradley L. Kolstoe Senior Vice President/Western Division None
Sales, Independent Plannner and Insurance
Channel
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Richelle S. Maestro Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/ Secretary Counsel/ Secretary
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Mac Macaulliffe Senior Vice President/Divisional Sales None
Manager
- --------------------------------------------- ------------------------------------------- -----------------------------------------
J. Chris Meyer Senior Vice President/Director, Product None
Management
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Eric E. Miller Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/Assistant Secretary Counsel/Secretary
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Stephen C. Nell Senior Vice President/National Retirement None
Sales
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
<S> <C> <C
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Henry W. Orvin Senior Vice President/Eastern Divisional None
Sales Manager
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Christopher H. Price Senior Vice President/Channel Manager, None
Insurance
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Thomas E. Sawyer Senior Vice President/Director, National None
Sales
- --------------------------------------------- ------------------------------------------- -----------------------------------------
James L. Shields Senior Vice President/Chief Information None
Officer
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Steven Sorenson Senior Vice President/National Director,
Independent Planner Channel None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Richard P. Allen Vice President/Wholesaler, Midwest None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
David P. Anderson, Jr. Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Jeffrey H. Arcy Vice President/Wholesaler, None
South East Region
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Patrick A. Bearss Vice President/Wholesaler - Midwest None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Gabriella Bercze Vice President/Wholesaler, Financial None
Institutions
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Larry D. Bridwell Vice President/Financial Institutions None
Wholesaler
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Lisa O. Brinkley Vice President/Compliance Director Vice President/Compliance Director
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Terrance L. Bussard Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Daniel H. Carlson Vice President/Marketing Services None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Larry Carr Vice President/Variable Annuity Sales None
Manager
- --------------------------------------------- ------------------------------------------- -----------------------------------------
William S. Carroll Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Matthew Coldren Vice President/National Accounts None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Patrick A Connelly Vice President/Registered Investment None
Adviser Sales
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Jessie V. Emery Vice President/Marketing Communications None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Joel A. Ettinger Vice President/Taxation Vice President/Taxation
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Edward A. Foley Vice President/Marketing Communications None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Susan T. Friestedt Vice President/Retirement Services None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Douglas R. Glennon Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Darryl S. Grayson Vice President/Director, Internal Sales None
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
<S> <C> <C
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Rhonda J. Guido Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Ronald A. Haimowitz Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Edward J. Hecker Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
John R. Herron Vice President/Variable Annuity Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Steven N. Horton Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Dinah J. Huntoon Vice President/Product Manager, Equities None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Karina J. Istvan Vice President/Strategic Planning Vice President/Strategic Planning
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Christopher L. Johnston Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Michael J. Jordan Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Carolyn Kelly Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Richard M. Koerner Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Ellen M. Krott Vice President/Marketing None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
John LeBoeuf Vice President/Independent Planner and None
Insurance Sales-East
- --------------------------------------------- ------------------------------------------- -----------------------------------------
SooHee Lee Vice President/Fixed Income & None
International Product Management
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Philip Y. Lin Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- --------------------------------------------- ------------------------------------------- -----------------------------------------
John R. Logan Vice President/Wholesaler, Financial None
Institutions
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Michael D. Mabry Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Theodore T. Malone Vice President/ Independent Planner and None
Insurance Sales Wholesaler
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Debbie Marler Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Raymond G. McCarthy Vice President/National Accounts,
Independent Planner & Insurance Channel None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Joanne C. McCranie Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Gregory J. McMillan Vice President/National Accounts None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Nathan W. Medin Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Scott L. Metzger Vice President/Business Development None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Jamie L. Meyer Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
<S> <C> <C
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Roger J. Miller Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Christopher W. Moore Vice President/Variable Annuity Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Andrew F. Morris Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Patrick L. Murphy Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Scott E. Naughton Vice President/Independent Planner & None
Insurance Wholesaler
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Julie Nusbaum Vice President/Wholesaler, Financial None
Institutions
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Julie A. Nye Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Daniel J. O'Brien Vice President/Insurance Products None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
David P. O'Connor Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Joseph T. Owczarek Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Otis S. Page Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Mary Ellen Pernice-Fadden Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Eric Preus Vice President/Wrap Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Philip G. Rickards Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Laura E. Roman Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Robert A. Rosso Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Terri Lynn Sabby Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Richard Salus Vice President/Assistant Controller None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Linda D. Shulz Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Gordon E. Searles Vice President/Client Services None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Catherine A. Seklecki Vice President/Retirement Sales None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
John C. Shalloe Vice President/Wrap Fee Wholesaler, None
Western Region
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Edward B. Sheridan Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Kimberly Spangler Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Robert E. Stansbury Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Stephanie R. Szabo Vice President/Retirement Marketing None
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
<S> <C> <C
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Michael T. Taggart Vice President/Facilities and None
Administration Services
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Julia R. Vander Els Vice President/Retirement Plan None
Communications
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Wayne W. Wagner Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
John A. Wells Vice President/Marketing Technology None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Courtney S. West Vice President/Institutional Sales None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Andrew J. Whitaker Vice President/Wholesaler, Financial None
Institutions
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Scott Whitehouse Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Wesley Williams Vice President/Wholesaler
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Theodore V. Wood Vice President/Technical Systems Officer None
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Not Applicable.
Item 28. Location of Accounts and Records.
(a) Delaware Group Adviser Funds, Inc. (Declaration of Trust and
By-Laws) One Commerce Square Philadelphia, PA 19103
(b) Delaware Management Company (with respect to their services as
investment adviser) One Commerce Square Philadelphia, PA 19103
(c) The Chase Manhattan Bank (with respect to their services as
custodian) 4 Chase Metrotech Center Brooklyn, N.Y. 11245
(d) Delaware Distributors, L.P. (with respect to their services as
distributor) 1818 Market Street Philadelphia, PA 19103
(e) Delaware Service Company, Inc. (with respect to their services as
shareholder services agent) 1818 Market Street Philadelphia, PA
19103
(f) Lynch & Mayer, Inc. (with respect to their services as
sub-adviser) 350 Park Avenue New York, NY 10022
<PAGE>
(g) Delaware International Advisers Ltd. (with respect to their
services as sub-adviser) Third Floor 80 Cheapside London, England
EC2V 6EE
(h) AIB Govett, Inc. (with respect to their services as sub-adviser)
250 Montgomery Street, Suite 1200 San Francisco, CA 94104
Item 29. Management Services. None.
Item 30. Undertakings. Inapplicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia and Commonwealth of Pennsylvania on
this 24th day of January, 2000.
DELAWARE GROUP ADVISER FUNDS
By /s/ David K. Downes
-----------------------------
David K. Downes
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------------------------------------- ------------------------------- ----------------
<S> <C> <C>
/s/David K. Downes President/Chief Executive Officer January 24, 2000
- --------------------------------------- Chief Operating Officer/Chief
David K. Downes Financial Officer and Trustee
(Principal Executive Officer, Principal
Financial Officer and Principal
Accounting Officer)
/s/Wayne A. Stork Trustee January 24, 2000
- ---------------------------------------
Wayne A. Stork
/s/ Walter P. Babich * Trustee January 24, 2000
- ---------------------------------------
Walter P. Babich
/s/ John H. Durham * Trustee January 24, 2000
- ---------------------------------------
John H. Durham
/s/ Anthony D. Knerr * Trustee January 24, 2000
- ---------------------------------------
Anthony D. Knerr
/s/ Ann R. Leven * Trustee January 24, 2000
- ---------------------------------------
Ann R. Leven
/s/Thomas F. Madison * Trustee January 24, 2000
- ---------------------------------------
Thomas F. Madison
/s/Charles E. Peck * Trustee January 24, 2000
- ---------------------------------------
Charles E. Peck
/s/ Janet L. Yeomans * Trustee January 24, 2000
- ---------------------------------------
Janet L. Yeomans
/s/David K. Downes
*By____________________________________
David K. Downes
as Attorney-in-Fact for
each of the persons indicated
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit
EX-99.J Consent of Auditors
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses and "Financial Statements" in the Statements of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 15 to the Registration Statement (Form N-1A) (No.
33-67490) of Delaware Group Adviser Funds of our reports dated December 3, 1999,
included in the 1999 Annual Reports to shareholders.
/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
January 26, 2000
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Adviser Funds, Inc. - Delaware U.S. Growth Fund
We have audited the accompanying statement of net assets of Delaware U.S. Growth
Fund (the "Fund") as of October 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the three years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for the
periods ended October 31, 1995 and 1996 were audited by other auditors whose
report dated December 20, 1996 expressed an unqualified opinion on those
financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1999, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware U.S. Growth Fund at October 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and its financial highlights for each of the three years
in the period then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
December 3, 1999
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Adviser Funds, Inc. - Delaware Overseas Equity Fund
Delaware Group Adviser Funds, Inc. - Delaware New Pacific Fund
We have audited the accompanying statements of net assets of Delaware Overseas
Equity Fund and Delaware New Pacific Fund (the "Funds") as of October 31, 1999,
and the related statements of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the three years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for the periods ended October 31, 1995 and 1996 were audited by other
auditors whose report dated December 20, 1996 expressed an unqualified opinion
on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1999, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds at October 31, 1999, the results of their operations for
the year then ended, the changes in their net assets for each of the two years
in the period then ended, and their financial highlights for each of the three
years in the period then ended, in conformity with generally accepted accounting
principles.
/s/Ernst & Young LLP
Philadelphia, Pennsylvania
December 3, 1999
