PROXY MATERIALS
DELAWARE INVESTMENTS® FAMILY OF FUNDSfor
Delaware Group® Adviser Funds
U.S. Growth Fund, a series of Delaware Group Cash ReserveDelaware Group Equity Funds IDelaware Group Equity Funds IIDelaware Group Equity Funds IIIDelaware Group Equity Funds IVDelaware Group Equity Funds VDelaware Group Foundation FundsDelaware Group Global & International FundsDelaware Group Government FundDelaware Group Income FundsDelaware Group Limited-Term Government FundsDelaware Group State Tax-Free Income TrustDelaware Group Tax-Free FundDelaware Group Tax-Free Money FundDelaware Pooled®Trust1
Adviser Funds
Voyageur InsuredDelaware Smid Cap Growth Fund, a series of Delaware Group Equity FundsVoyageur Intermediate Tax Free FundsVoyageur Mutual FundsVoyageur Mutual Funds II
IV
Delaware Focus Global Growth Fund, a series of Delaware Group Global and
International Funds
Delaware Select Growth Fund, a series of Voyageur Mutual Funds III
The Large-Cap Growth Equity Portfolio, The Focus Smid-Cap Growth EquityVoyageur Tax FreePortfolio and The Select 20 Portfolio, series of Delaware Pooled Trust
Delaware VIP® U.S. Growth Series and Delaware VIP Smid Cap Growth Series,
series of Delaware VIP Trust
Delaware Foundation® Growth Allocation Fund, Delaware Foundation®
Moderate Allocation Fund, and Delaware Foundation® Conservative Allocation
Fund, series of Delaware Group Foundation Funds®
Dear Shareholder:
I am writing to let you know that a joint special meeting (the “Meeting”) of shareholders of Delaware U.S. Growth Fund, Delaware Smid Cap Growth Fund, Delaware Focus Global Growth Fund, Delaware Select Growth Fund, The Large-Cap Growth Equity Portfolio, The Focus Smid-Cap Growth Equity Portfolio, The Select 20 Portfolio, Delaware VIP U.S. Growth Series, Delaware VIP Smid Cap Growth Series, Delaware Foundation Growth Allocation Fund, Delaware Foundation Moderate Allocation Fund, and Delaware Foundation Conservative Allocation Fund (each, a “Fund” and together, the “Funds”), series of Delaware Investments funds listed above (theGroup Adviser Funds, Delaware Group Equity Funds IV, Delaware Group Global and International Funds, Voyageur Mutual Funds III, Delaware Pooled Trust, Delaware VIP Trust, and Delaware Group Foundation Funds® (each, a “Trust” and together, the “Trusts”), will be held at the offices of Stradley Ronon Stevens & Young, LLP, 2005 Market Street, 21st26th Floor, Philadelphia, Pennsylvania 19103, on November 12, 2009May 16, 2014 at 3:00 p.m., Eastern time. The purpose of the Meeting is to vote on several important proposalsa proposal that affect the Trusts andaffects each of their separate series (each, a “Fund” and collectively, the “Funds”) and your investment in one or more of them. The Meeting will be held concurrently with the meetings of shareholders of other funds within the Delaware Investments Family of Funds.Fund. As a shareholder, you have the opportunity to voice your opinion on thethese matters, that affect your Fund(s).as applicable. This package contains information about the proposalsproposal and the materials to use when voting by mail, telephone, or through the Internet.
____________________
Please read the enclosed materials and cast your vote on the proxy card(s)card or by telephone or via the Internet.Please vote your shares promptly. Your vote is extremely important, no matter how large or small your holdings may be.
The proposals haveproposal has been carefully reviewed by the applicable Boards of Trustees of the Trusts. The Trustees, all but one of whom are not affiliated with Delaware Investments, are responsible for protectinglooking after your interests as a shareholder. The Trustees believe these proposals arethe proposal is in the best interests of shareholders.
The Trustees recommend that you voteTHE TRUSTEES RECOMMEND THAT YOU
VOTE FOR each proposal.THE PROPOSAL.
The enclosed Q&A is provided to assist you in understanding the proposals. Each of the proposalsproposal is described in greater detail in the enclosed Proxy Statement.
Voting is quick and easy. Everything you need is enclosed.Please refer to your proxy card for voting instructions. To cast your vote, simply complete the proxy card(s)card enclosed in this package. Be sure to sign the card(s)proxy card before mailing it (them) in the postage-paid envelope. You may also vote your shares by touch-tone telephone or through the Internet. Simply call the toll-free number or visit the Web sitewebsite indicated on your proxy card(s),card, enter the control number found on the card(s),card, and follow the recorded or online instructions.
If you have any questions before you vote, please call Computershare Fund Services, Inc. (“Computershare”), the Funds’ proxy solicitor,Delaware Investments at 877 520-8548. Computershare will help you get your vote in quickly. You may also receive a telephone call from Computershare reminding you to vote your shares.1-800-523-1918. Thank you for your participation in this important initiative.
Sincerely,
/s/ Patrick P. CoyneSincerely,
Patrick P. Coyne
Chairman, President, and Chief Executive Officer
September 25, 2009March 26, 2014
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
To be held on November 12, 2009
TO BE HELD ON MAY 16, 2014
Important notice regarding the availability of proxy materials for the shareholder
meeting to be held on November 12, 2009: thisMay 16, 2014: the proxy statement is available
at
www.delawareinvestments.com/proxy.proxy
To the Shareholders of:
Delaware Group® Adviser Funds
U.S. Growth Fund, a series of Delaware Group Cash ReserveDelaware Group Equity Funds IDelaware Group Equity Funds IIDelaware Group Equity Funds IIIDelaware Group Equity Funds IVDelaware Group Equity Funds VDelaware Group Foundation FundsDelaware Group Global & International FundsDelaware Group Government FundDelaware Group Income FundsDelaware Group Limited-Term Government FundsDelaware Group State Tax-Free Income TrustDelaware Group Tax-Free FundDelaware Group Tax-Free Money FundDelaware Pooled®Trust1
Adviser Funds
Voyageur InsuredDelaware Smid Cap Growth Fund, a series of Delaware Group Equity FundsVoyageur Intermediate Tax Free FundsVoyageur Mutual FundsVoyageur Mutual Funds II
IV
Delaware Focus Global Growth Fund, a series of Delaware Group Global and
International Funds
Delaware Select Growth Fund, a series of Voyageur Mutual Funds III
The Large-Cap Growth Equity Portfolio, The Focus Smid-Cap Growth EquityVoyageur Tax FreePortfolio and The Select 20 Portfolio, series of Delaware Pooled Trust
Delaware VIP® U.S. Growth Series and Delaware VIP Smid Cap Growth Series,
series of Delaware VIP Trust
Delaware Foundation® Growth Allocation Fund, Delaware Foundation®
Moderate Allocation Fund, and Delaware Foundation® Conservative Allocation
Fund, series of Delaware Group Foundation Funds®
To the Shareholders of Delaware U.S. Growth Fund, Delaware Smid Cap Growth Fund, Delaware Focus Global Growth Fund, Delaware Select Growth Fund, The Large-Cap Growth Equity Portfolio, The Focus Smid-Cap Growth Equity Portfolio, The Select 20 Portfolio, Delaware VIP U.S. Growth Series, Delaware VIP Smid Cap Growth Series, Delaware Foundation Growth Allocation Fund, Delaware Foundation Moderate Allocation Fund, and Delaware Foundation Conservative Allocation Fund (each, a “Fund” and together, the “Funds”), series of Delaware Group Adviser Funds, Delaware Group Equity Funds IV, Delaware Group Global and International Funds, Voyageur Mutual Funds III, Delaware Pooled Trust, Delaware VIP Trust, and Delaware Group Foundation Funds® (each, a “Trust” and together, the “Trusts”):
NOTICE IS HEREBY GIVEN that a joint special meeting (the “Meeting”) of shareholders of the open-end registered investment companies listed above (each, a “Trust” and collectively, the “Trusts”), along with certain other funds within the Delaware Investments® Family of Funds each of which is issuing proxy solicitation materials, will be held at the offices of Stradley Ronon Stevens & Young, LLP, 2005
____________________
Market Street, 21st26th Floor, Philadelphia, Pennsylvania 19103, on November 12, 2009May 16, 2014 at 3:00 p.m., Eastern time. The Meeting is being called to vote on the following proposals:approval of a sub-advisory agreement for the Funds.
Shareholders of record of the TrustsFunds as of the close of business on September 18, 2009March 20, 2014 are entitled to notice of, and to vote at, the Meeting or any adjournment thereof.Whether or not you plan to attend the Meeting, please vote your shares by returning the proxy card(s)card by mail in the enclosed postage-paid envelope, provided, or by voting by telephone or over the Internet. Your vote is important.
September 25, 2009
To secure the largest possible representation and to save the expense of further mailings, please mark your proxy card(s),card, sign, and return it (them) in the enclosed envelope, which requires no postage if mailed from the United States. If you prefer, you may instead vote by telephone or the Internet. You may revoke your proxy at any time before or at the Meeting or vote in person if you attend the Meeting, as provided in the attached Proxy Statement.proxy statement.
| By order of the Boards of Trustees, |
 |
Patrick P. Coyne |
SOME SHAREHOLDERS HOLD SHARES IN MORE THAN ONE FUND AND MAY RECEIVE PROXY CARDS AND/OR PROXY MATERIALS FOR EACH FUND OWNED. PLEASE SIGN AND PROMPTLY RETURN EACH PROXY CARD IN THE SELF-ADDRESSED ENVELOPE REGARDLESS OF THE NUMBER OF SHARES OWNED.March 26, 2014
PROXY STATEMENT
TABLE OF CONTENTS
| Page | ||
| 6 | ||
| Introduction to the Proposal | ||
| 8 | ||
| Board considerations in approving the | ||
| | 12 | |
| Required vote | ||
DELAWARE INVESTMENTS® FAMILY OF FUNDS
JOINT PROXY STATEMENT
Dated September 25, 2009
Delaware Group® Adviser FundsDelaware Group Cash ReserveDelaware Group Equity Funds IDelaware Group Equity Funds IIDelaware Group Equity Funds IIIDelaware Group Equity Funds IVDelaware Group Equity Funds VDelaware Group Foundation FundsDelaware Group Global & International FundsDelaware Group Government FundDelaware Group Income FundsDelaware Group Limited-Term Government FundsDelaware Group State Tax-Free Income TrustDelaware Group Tax-Free FundDelaware Group Tax-Free Money FundDelaware Pooled® Trust1Voyageur Insured FundsVoyageur Intermediate Tax Free FundsVoyageur Mutual FundsVoyageur Mutual Funds IIVoyageur Mutual Funds IIIVoyageur Tax Free Funds
Important notice regarding the availability of proxy materials for the shareholdermeeting to be held on November 12, 2009: this proxy statement is available atwww.delawareinvestments.com/proxy.
This joint proxy statement (the “Proxy Statement”) solicits proxies to be voted at a joint special meeting of shareholders (the “Meeting”) of the registered open-end management investment companies listed above (each, a “Trust” and collectively, the “Trusts”), along with other registered investment companies in the Delaware Investments Family of Funds, each of which is issuing proxy solicitation materials. Each of the separate funds within a Trust is referred to as a “Fund” and they are
____________________
collectively referred to as the “Funds.” The Meeting was called by the Boards of Trustees of the Trusts (each, a “Board” and collectively, the “Boards”) to vote on the following proposals (the “Proposals”), each of which is described more fully below:
The principal offices of the Trusts are located at 2005 Market Street, Philadelphia, Pennsylvania 19103. You can reach the offices of the Trusts by telephone by calling 800 523-1918. Each Trust is a Delaware statutory trust registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). A list of the Funds of each Trust is set forth in Appendix A.
The Meeting will be held at the offices of Stradley Ronon Stevens & Young, LLP, 2005 Market Street, 21st Floor, Philadelphia, Pennsylvania 19103, on November 12, 2009 at 3:00 p.m., Eastern time. Only Fund shareholders will be admitted to the Meeting. The Boards, on behalf of each Fund, are soliciting these proxies. This Proxy Statement is first being sent to shareholders on or about September 30, 2009.
This Proxy Statement gives you information about the Trustees, the new investment advisory agreement, and other matters that you should know before voting. The Board of each Trust has determined that the joint use of this Proxy Statement for the Meeting is in the best interests of each Fund and its shareholders in light of the similar matters being considered and voted on by the shareholders of all of the Funds.
Each Fund’s annual report to shareholders is sent to shareholders of record following the Fund’s fiscal year end. Each Fund will furnish, without charge, a copy of its most recent annual report and most recent succeeding semiannual report, if any, to a shareholder upon request. Such requests should be directed to a Fund by calling 800 523-1918 or by writing to the Fund at Attention: Account Services, P.O. Box 219691, Kansas City, MO 64121-9691 by regular mail or 430 W. 7th Street, Kansas City, MO 64105 by overnight courier service. Each Fund’s most recent annual report and most recent succeeding semiannual report, if any, are also available free of charge through the Funds’ Web site at www.delawareinvestments.com.
2
Two or more shareholders of a Fund who share an address might receive only one annual report or Proxy Statement, unless the Fund has received instructions to the contrary. Each Fund will promptly send a separate copy of such documents to any shareholder upon request. To request a separate copy of an annual report or the Proxy Statement, shareholders should contact their Fund at the address and phone number set forth above.
PROPOSAL 1: TO ELECT A BOARD OF TRUSTEES
Introduction to Proposal 1
In Proposal 1, shareholders of each Trust are being asked to elect nine trustees (together, the “Trustee Nominees”) to the Boards. All of the Trustee Nominees are currently members of the Boards.
Each Trust is governed by a Board, which has oversight responsibility for the management of the Trust’s business affairs. Trustees establish procedures and oversee and review the performance of the investment adviser, the distributor, and others who perform services for the Trust. All of the Trusts have Boards comprised of the same trustees, and all of the Trusts are served by the same officers.
Who are the Trustee Nominees?
The trustees of the Boards (each, a “Trustee” and collectively, the “Trustees”) are responsible for supervising the management of the Trusts and serving the needs and best interests of Fund shareholders. As noted above, all of the Trustee Nominees standing for election are currently members of the Boards. The nine Trustee Nominees are Thomas L. Bennett, Patrick P. Coyne, John A. Fry, Anthony D. Knerr, Lucinda S. Landreth, Ann R. Leven, Thomas F. Madison, Janet L. Yeomans, and J. Richard Zecher.
Each Board is comprised of the same nine Board members, eight of whom are not “interested persons” of the Trusts, as that term is defined in the 1940 Act (together, the “Independent Trustees”). Only Mr. Coyne is deemed to be an “Interested Trustee” of the Trusts, because he is an executive officer of the Funds’ investment adviser. Appendix B contains a list of the Trustee Nominees with certain background and related information.
If elected, each Trustee Nominee will hold office for an indefinite term until his or her successor is elected and qualified, or until his or her earlier death, resignation, or removal. Each Trustee Nominee currently is available and has consented to serve if elected. If any of the Trustee Nominees should become unavailable before the Meeting, the designated proxy holders will have the authority to vote in their discretion for another person or persons who may be nominated as Trustees. Ms. Leven serves as
3
Coordinating Trustee for each Trust. Although Mr. Coyne, the Chairman, President, and Chief Executive Officer of the Trusts, currently serves as a Trustee, he is standing for election by Fund shareholders for the first time. Mr. Coyne was appointed as a Trustee by the Boards in 2006, having been recommended for appointment to the Boards by the Nominating and Corporate Governance Committee, which consists solely of Independent Trustees.
How are nominees for Trustee selected?
Each Board’s Nominating and Corporate Governance Committee recommends Board members, fills vacancies, and considers the qualifications of prospective Board members. The committee also monitors the performance of counsel for the Independent Trustees. The committee will consider shareholder recommendations for Trustee nominations only in the event that there is a vacancy on a Board. Shareholders who wish to submit recommendations for nominations to fill a vacancy on a Board must submit their recommendations in writing to the Nominating and Corporate Governance Committee, c/o Delaware Investments Funds at 2005 Market Street, Philadelphia, Pennsylvania 19103-7094. Shareholders should include appropriate information on the background and qualifications of any candidate recommended (e.g., a resume), as well as the candidate’s contact information and a written consent from the candidate to serve if nominated and elected. Shareholder recommendations for nominations to a Board will be kept on file for consideration when there is a vacancy on the Board. The committee consists of John A. Fry, Chairman; Anthony D. Knerr; Lucinda S. Landreth; and Ann R. Leven (ex officio), all of whom are Independent Trustees. Each Board’s Nominating and Corporate Governance Committee held five meetings during the 12-month period ended June 30, 2009. Each Board has adopted and approved a formal written charter for the Nominating and Corporate Governance Committee, which is attached as Appendix C to this Proxy Statement.
The Nominating and Corporate Governance Committees met on September 3, 2009, to evaluate candidates for positions on the Boards, including evaluating candidates’ qualifications for Board membership and their independence from the Funds’ investment adviser and its affiliates and other Fund service providers, as well as such other information as the Committees deemed relevant to their considerations. The Nominating and Corporate Governance Committees recommended the Trustee Nominees for nomination by the Independent Trustees, and at their meeting on September 3, 2009, the Independent Trustees and the full Board selected and nominated the Trustee Nominees for election by the shareholders of each Trust.
4
How often do the Boards meet and how are the Trustees compensated?
The Boards held six meetings during the 12-month period ended June 30, 2009. Each Trustee Nominee attended at least 75% of the aggregate total number of meetings of the Boards held during each Trust’s last fiscal year, and attended at least 75% of the total number of meetings held during that year by all committees of the Boards on which he or she served. The Trusts do not have a formal policy regarding Trustee attendance at shareholders’ meetings but they encourage Trustees to attend. The Trusts do not hold annual meetings at which Trustees are elected.
No Independent Trustee owns, beneficially or of record, securities issued by any investment adviser or principal underwriter of any of the Funds, or a person directly or indirectly controlling, controlled by, or under common control with any of the foregoing. The table in Appendix D shows the dollar range of shares of each Fund and the aggregate dollar range of shares of the Delaware Investments® Family of Funds that were beneficially owned by each Trustee Nominee as of June 30, 2009.
Each Independent Trustee is compensated by the Trusts. Mr. Coyne, the sole Trustee who is not an Independent Trustee, is not compensated by the Trusts for serving as Trustee. Trust officers are not compensated by the Trust. The table in Appendix E shows the compensation that each Independent Trustee received from each Trust during the 12-month period ended June 30, 2009 and the aggregate compensation that each Independent Trustee received from the Delaware Investments Family of Funds during that period. In addition, the Independent Trustees received separate compensation from the Trusts for the meetings held in connection with their review of the transaction described under Proposal 2 below.
Who are the principal officers of the Trusts?
Officers of each Trust are appointed by the Trust’s Board and serve at the pleasure of the Board. Appendix F to this Proxy Statement identifies the principal officers of the Trusts, and provides certain background and related information.
What are the standing committees of the Boards?
Each Trust’s Board has four standing committees: the Audit Committee, the Nominating and Corporate Governance Committee, the Independent Trustees Committee, and the Investments Committee.
Audit Committee. This committee monitors accounting and financial reporting policies and practices and internal controls for a Trust. The Audit Committee also oversees the quality and objectivity of a Trust’s financial statements and the independent audit thereof, and acts as a liaison between the Trusts’ independent registered public accounting firm and the full Boards. Each Trust’s Audit Committee
5
consists of the following Independent Trustees: Thomas F. Madison, Chairman; Thomas L. Bennett; John A. Fry; and J. Richard Zecher. Each Trust’s Audit Committee held six meetings during the 12-month period ended June 30, 2009.
Nominating and Corporate Governance Committee. Information on the Nominating and Corporate Governance Committee is provided above under “How are nominees for Trustee selected?”
Independent Trustees Committee.This committee develops and recommends to the Boards a set of corporate governance principles and oversees the evaluation of the Boards, the committees, and Board activities. The committee is comprised of all of the Independent Trustees. Each Trust’s Independent Trustees Committee held four meetings during the 12-month period ended June 30, 2009.
Investments Committee. The primary purposes of the Investments Committee are to: (i) assist the Boards, upon request, in oversight of the investment advisory services provided to the Funds by their investment adviser as well as any sub-advisers; (ii) review all proposed advisory and sub-advisory agreements for new Funds or proposed amendments to existing agreements and to recommend actions the full Boards and the Independent Trustees should take regarding the approval of all such proposed agreements; and (iii) review from time to time reports supplied by the Funds’ investment adviser regarding investment performance and expenses and suggest changes to such reports. Each Board’s Investments Committee consists of the following Independent Trustees: Thomas L. Bennett, Chairman; Anthony D. Knerr; Lucinda S. Landreth; Ann R. Leven (ex officio); Janet L. Yeomans; and J. Richard Zecher. Each Investments Committee held four meetings during the 12-month period ended June 30, 2009.
Who are the Trusts’ independent auditors?
Selection of Auditors. For each Trust, the Audit Committee and the Board have selected the firm of Ernst & Young LLP (“E&Y”) to serve as the Funds’ independent registered public accounting firm. Representatives of E&Y are not expected to be present at the Meeting, but will be available telephonically if necessary.
Audit Fees. Appendix G shows for each Trust the aggregate fees billed for each of the last two fiscal years for professional services rendered by E&Y for the audit of the Trust’s annual financial statements and for review of the financial statements included in the Trust’s annual reports or for services that normally are provided by E&Y in connection with statutory and regulatory filings or engagements for those fiscal years.
6
Audit-Related Fees. No Trust was billed during its last two fiscal years for assurance and related services rendered by E&Y that were reasonably related to the audit or review of the Trust’s financial statements but where such services were not reported under “Audit Fees” above. Appendix G shows for the last two fiscal years of each Trust the aggregate audit-related fees billed by E&Y for providing such services to the Funds’ investment adviser or other service providers that are under common control with the Funds’ investment adviser. These audit-related services consisted of the issuance of reports concerning the Funds’ transfer agent’s system of internal accounting control pursuant to Rule 17Ad-13 of the Securities Exchange Act of 1934, as amended.
Tax Fees. Appendix G also shows for each Trust the aggregate fees billed in each of the last two fiscal years for professional services rendered by E&Y to the Trust for tax compliance, tax advice, and tax planning. These tax-related services consisted of the review of income tax returns and annual excise distribution calculations and, for certain of the Trusts, tax compliance services with respect to investments in foreign securities. E&Y did not during any Trust’s last two fiscal years provide any such services to the Funds’ investment adviser or other service providers under common control with the Funds’ investment adviser.
Aggregate Non-Audit Fees. Appendix G also shows, for each Trust’s last two fiscal years, the aggregate non-audit fees billed by E&Y for services rendered to the Trust, its investment adviser, and any entity controlling, controlled by, or under common control with its investment adviser that provides ongoing services to the Trust.
For each Trust, the Audit Committee has considered whether the provision of non-audit services that were rendered to the Trust’s investment adviser, and any entity controlling, controlled by, or under common control with the Trust’s investment adviser that provides ongoing services to the Trust, is compatible with maintaining the independence of E&Y. The Audit Committee has determined that E&Y’s provision of these services is compatible with maintaining E&Y’s independence. E&Y currently is analyzing whether its independence will be affected after the completion of the transaction described in Proposal 2 as a result of services provided by E&Y to Macquarie Group Limited and its affiliates.
All Other Fees. There were no additional fees paid by any Trust or by the Funds’ investment adviser or other service providers under common control with the Funds’ investment adviser during such Trust’s last two fiscal years for products and services provided by E&Y, other than the services reported above.
Pre-Approval Policies and Procedures. Each Trust’s Audit Committee has adopted Pre-Approval Policies and Procedures, which are set forth in Appendix H to this Proxy Statement. All of the fees disclosed above were pre-approved pursuant to
7
the Pre-Approval Policies and Procedures. The Audit Committee for each Trust did not approve any of the services described above pursuant to thede minimis exceptions set forth in Rule 2-01(c)(7)(i)(C) and Rule 2-01(c)(7)(ii) of Regulation S-X.
What is the required vote to elect Trustees?
Provided that Quorum requirements (as defined below in “Voting Information”) have been satisfied, the Trustee Nominees will be elected to the Board of each Trust by the affirmative vote of a plurality of votes cast collectively by shareholders of all of the Funds of such Trust. This means that the nine Trustee Nominees receiving the largest number of votes will be elected. For a Trust that is made up of more than one Fund, the votes of all the shares of the Funds of that Trust will be counted together in determining the results of the voting for Proposal 1.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” ALLTRUSTEE NOMINEES.
PROPOSAL 2: TO APPROVE A NEW INVESTMENTADVISORY AGREEMENT
Introduction to Proposal 2
In Proposal 2, you are being asked to approve a new investment advisory agreement between your Fund and Delaware Management Company (“DMC”) (each, a “New Investment Advisory Agreement”). DMC currently serves as investment adviser for each Fund, but, for the reasons discussed below, a New Investment Advisory Agreement will be required if the Transaction (as defined below) is completed. For a general description of the proposed New Investment Advisory Agreements and a comparison of the proposed New Investment Advisory Agreements and the investment advisory agreements currently in effect for each Fund (each, a “Current Investment Advisory Agreement”), see “The New Investment Advisory Agreements” below. The form of the New Investment Advisory Agreements is presented in Appendix I. The date of each Fund’s Current Investment Advisory Agreement and the date on which it was last approved by shareholders are provided in Appendix J.
The Boards are proposing the approval of the New Investment Advisory Agreements because the Current Investment Advisory Agreements will terminate upon completion of the Transaction. As required by the 1940 Act, each Current Investment Advisory Agreement terminates automatically upon its “assignment.” Under the 1940 Act, a change in control of an investment adviser constitutes an “assignment.” The consummation of the Transaction will result in a change of
8
control of DMC, and thus, the assignment and automatic termination of the Current Investment Advisory Agreements. Shareholders of each Fund are therefore being asked to approve a New Investment Advisory Agreement for their Fund. Each New Investment Advisory Agreement would become effective only if approved by the shareholders of the applicable Fund and if the Transaction is completed. Although the closing of the Transaction (the “Closing”) is currently expected to take place on or about December 31, 2009, if the Transaction is not completed or the Transaction Agreement (as defined below) is terminated, the New Investment Advisory Agreements will not go into effect and the Current Investment Advisory Agreements will continue in effect.
Description of the Transaction
Lincoln National Corporation (“LNC”) and its indirect, wholly owned subsidiary, Lincoln National Investment Companies, Inc. (“LNIC”), entered into a definitive agreement (the “Transaction Agreement”), dated as of August 18, 2009, with Macquarie Bank Limited, whereby LNIC will sell all of the issued and outstanding capital stock of Delaware Management Holdings, Inc. (“DMHI”) to Macquarie Bank Limited (or a subsidiary thereof) (the “Transaction”). Certain Fund service providers are subsidiaries of DMHI and will be included in the Transaction, including DMC, Delaware Service Company, Inc. (“DSC”), the fund accounting and financial administration oversight provider and transfer agent for the Funds, and Delaware Distributors, L.P. (“DDLP”), the principal underwriter for the Funds. DMHI and its subsidiaries are referred to collectively as “Delaware Investments.”
Macquarie Group Limited and its various subsidiaries (including Macquarie Bank Limited) are referred to collectively as “Macquarie Group.” The Transaction Agreement requires Macquarie Bank Limited (or a permitted assignee) to pay LNIC approximately $428 million in cash at the Closing to acquire DMHI and its subsidiaries, subject to certain specified closing adjustments at and after the Closing. The Closing is subject to the satisfaction or waiver of customary closing conditions, including (i) annualized advisory fees payable to Delaware Investments by all clients that have consented to the assignment of their investment advisory agreements or approved a new investment advisory agreement (including the Trusts) not being less than a minimum percentage of annualized advisory fees payable to Delaware Investments as of April 30, 2009 and (ii) the parties obtaining certain domestic and international regulatory approvals (including expiration of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended).
DMC manages the assets of each Fund and makes each Fund’s investment decisions, subject to the supervision of the Board of each Trust. DMC is a series of Delaware Management Business Trust (“DMBT”), which is an indirect subsidiary of
9
DMHI. DMC, DMBT, and DMHI are located at 2005 Market Street, Philadelphia, Pennsylvania 19103. Delaware Investments has been managing mutual funds since 1938. As of June 30, 2009, Delaware Investments managed, in the aggregate, more than $120 billion in assets in various institutional, separately managed, investment company, and insurance accounts. DMHI, a Delaware corporation, is a holding company that, through its subsidiaries and affiliates, provides investment advisory, asset management, administrative, broker/dealer, and related products and services. DMHI’s asset management capabilities include the ability to manage equity, fixed income, and money market securities, which are offered through vehicles such as mutual funds, closed-end funds, privately managed accounts, and institutional separate accounts. DMHI is an indirect, wholly owned subsidiary of, and subject to ultimate majority control of, LNC, which is a publicly traded corporation. LNC is a diversified organization with operations in many aspects of the financial services industry, including insurance and investment management. LNIC is an Indiana corporation and an indirect, wholly owned subsidiary of LNC. LNIC owns 100% of the issued and outstanding common stock of DMHI. After the Transaction, DMHI will be an indirect, wholly owned subsidiary of Macquarie Group Limited.
Macquarie Group is a global provider of banking, financial, advisory, investment and fund management services. Macquarie Group Limited, No. 1 Martin Place, Sydney, New South Wales 2000, Australia, is listed on the Australian Securities Exchange (ASX:MQG) and is regulated by the Australian Prudential Regulation Authority, the Australian banking regulator, as the owner of Macquarie Bank Limited, an authorized deposit taker. Founded in 1969, Macquarie Group now operates in more than 70 office locations in over 26 countries. Macquarie Group employed approximately 12,500 people and had assets under management of $190 billion as of July 31, 2009. Macquarie Group has been active in North America for over a decade. Macquarie Group currently has more than 1,900 professionals in offices in 25 North American locations. Macquarie Funds Group, the asset management arm of Macquarie Group, is a full service global fund manager with over 25 years’ experience and offers a range of investments for retail and institutional investors across a variety of asset classes including fixed income, cash, currencies, equities, commodities, emerging markets, listed infrastructure and listed real estate as well as private equity and hedge fund of funds. Macquarie Funds Group employs over 600 staff across 19 locations globally with assets under management of approximately $67 billion as of July 31, 2009. More information on Macquarie Group’s operations is available at www.macquarie.com.au and at www.macquarie.com/us.
Australian Banking Regulations require the following disclaimer to be made:Investments in the Funds are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46 008 583 542 and its holding companies including their subsidiaries or related companies, and are subject to investment risk,
10
including possible delays in repayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of any Fund, the repayment of capital from any Fund, or any particular rate of return.
The Transaction is part of Macquarie Group’s strategy to develop a global asset management capability through building a highly regarded team of investment professionals, offering an attractive suite of investment products and gaining broader access to markets in the United States. Macquarie Group values DMC’s focus on the advisory segment of the U.S. market, its significant investment management capabilities, and its experienced management team. The Transaction is not currently expected to result in a change in the persons responsible for the day-to-day management of the Funds or in the operation of the Funds. Moreover, it is currently anticipated that following the Closing, DMHI, DMC, DDLP, DSC, and the Funds will continue to operate in substantially the same manner as at present, and the Delaware Investments brand will remain with the business. Upon completion of the Transaction, the combined assets under management of Macquarie Group, including DMHI and its subsidiaries, are expected to be over $300 billion. After the Transaction, DMHI and its subsidiaries (including DMC) will remain headquartered in Philadelphia. Investment management professionals serving DMC’s clients are not currently expected to change as a result of the Transaction. Clients of DMC may be offered opportunities to invest in new products with access to Macquarie Group’s investment strategies, notably in real assets, global fixed income securities, and alternative investments. Macquarie Group clients across its global network may be offered investment products involving Delaware Investments’ investment strategies in structures designed specifically for them. Macquarie Group also currently anticipates providing additional funding to support the growth of DMC and its affiliates, for example through potential investment in operations and distribution and a commitment to expanding its multi-boutique approach.
In anticipation of the Transaction, the Boards have had a number of telephonic and in-person meetings and met both formally and in informational sessions between April 16, 2009 and September 3, 2009, for purposes of, among other things, considering whether it would be in the best interests of each Fund and its shareholders to approve a New Investment Advisory Agreement. The 1940 Act requires that each Fund’s New Investment Advisory Agreement be approved by the Fund’s shareholders in order to become effective. At the in-person meeting held on September 3, 2009, for the reasons discussed below under “Board considerations in approving the New Investment Advisory Agreements,” the Boards, including a majority of each Board’s Independent Trustees, approved the New Investment Advisory Agreements as being in the best interests of the Funds and their shareholders and recommended their approval by shareholders. In the event shareholders of a Fund do not approve a New Investment Advisory Agreement, the Fund’s Board will take such action as it deems
11
to be in the best interests of the Fund and its shareholders, including entering into a temporary, interim advisory agreement with DMC pursuant to Rule 15a-4 of the 1940 Act pending further solicitation of shareholder approval.
Section 15(f) of the 1940 Act
The Boards have been advised that the parties intend to rely on Section 15(f) of the 1940 Act, which provides a non-exclusive safe-harbor whereby an owner (such as LNC and LNIC) of an investment adviser (such as DMC) to an investment company (such as a Fund) may receive payment or benefit in connection with the sale of an interest in the investment adviser if two conditions are satisfied. The first condition is that during the three-year period following the transaction, at least 75% of the investment company’s board must not be “interested persons” (as defined in the 1940 Act) of the investment adviser or its predecessor. Each Board currently meets this test and is expected to do so after the Transaction is completed. Second, no “unfair burden” can be imposed on the investment company as a result of the transaction. An “unfair burden” includes any arrangement during the two-year period after the transaction where the investment adviser (or predecessor or successor adviser), or any of its “interested persons” (as defined in the 1940 Act), receive or is entitled to receive any compensation, directly or indirectly, (i) from any person in connection with the purchase or sale of securities or other property to, from or on behalf of the investment company (other than bona fide ordinary compensation as principal underwriter for the investment company) or (ii) from the investment company or its shareholders (other than fees for bona fide investment advisory or other services). Macquarie Bank Limited has agreed as part of the Transaction Agreement that, following the Closing, to the extent within its control, it will not take or fail to take (and will not cause its affiliates to take or fail to take) any action, if such action or failure to take action would have the effect, directly or indirectly, of causing the requirements of Section 15(f) of the 1940 Act not to be met with respect to the Transaction. In that regard, from and after the Closing date and to the extent within its control, Macquarie Bank Limited has agreed to conduct its business (and to cause each of its affiliates to conduct its business) so as to assure that the two aforementioned conditions are satisfied.
The New Investment Advisory Agreements
Each Fund’s New Investment Advisory Agreement will be substantially similar to its Current Investment Advisory Agreement. Appendix I contains the form of the New Investment Advisory Agreement. The following is a comparison of certain provisions of the New Investment Advisory Agreements and Current Investment Advisory Agreements.
12
Fees. There will be no change in the fee schedule applicable to any Fund under its New Investment Advisory Agreement. All currently effective contractual expense limitations or reimbursements will remain in place after the Transaction until the end of their respective terms, and Macquarie Group has no present intention to cause DMC to alter any voluntary expense limitations or reimbursements currently in effect for the Funds.
Investment Advisory Services. Each New Investment Advisory Agreement requires DMC to provide the same services to the applicable Funds as it does under the Current Investment Advisory Agreement. Each Fund’s New Investment Advisory Agreement generally provides that, subject to the direction and control of the Fund’s Board, DMC shall (i) regularly make decisions as to what securities and other instruments to purchase and sell on behalf of the Fund; (ii) effect the purchase and sale of those investments in furtherance of the Fund’s objectives and policies; and (iii) furnish the Board with information and reports regarding the Fund’s investments as DMC deems appropriate or as the Board may reasonably request.
Subject to the primary objective of obtaining best execution, DMC may place orders for the purchase and sale of portfolio securities and other instruments with broker/dealers that provide statistical, factual, or financial information and services to a Fund, to DMC, or to other clients of DMC. Both the Current and New Investment Advisory Agreement for each Fund provide that the services of DMC are not exclusive to the Funds, and DMC and its affiliates may render services to others.
The New Investment Advisory Agreements provide that DMC may, to the extent permitted by applicable law, appoint at its own expense one or more sub-advisers, including affiliates of DMC, to perform investment advisory services for the Fund. DMC may terminate a sub-adviser in its sole discretion at any time to the extent permitted by applicable law. A similar provision is included in the Current Investment Advisory Agreements.
Fund Administration Services. DMC and Macquarie Group have advised the Boards that they anticipate and intend that the nature and level of administrative services provided to the Funds under their Current Investment Advisory Agreements, in combination with any administrative services agreements, will not be diminished as a result of the Transaction or the implementation of the New Investment Advisory Agreements. In addition, any fees for administrative services, whether payable under a Current Investment Advisory Agreement or a separate administrative agreement, will not increase as a direct result of the Transaction or the New Investment Advisory Agreement.
13
Payment of Expenses. The provisions contained in each Fund’s New Investment Advisory Agreement addressing allocation of expenses are substantially similar in all material respects to those contained in that Fund’s Current Investment Advisory Agreement. Both the Current and New Investment Advisory Agreements provide that each Fund is responsible for its own expenses, including costs incurred in the maintenance of a Fund’s corporate existence; the maintenance of the Fund’s books, records and procedures; dealing with the Fund’s shareholders; the payment of dividends; transfer of shares, including issuance, redemption and repurchase of shares; preparation of share certificates; reports and notices to shareholders; calling and holding of shareholders’ and trustees’ meetings; miscellaneous office expenses; brokerage commissions; custodian fees; legal and accounting fees; taxes; and federal and state registration fees. In addition, to avoid uncertainty, certain other expenses paid by the Funds under the Current Investment Advisory Agreement are listed expressly as Fund expenses in the New Investment Advisory Agreement. These expenses include auditing, fund accounting and financial administration fees, and other costs and expenses approved by the Board. Except as expressly provided for in the Current and New Investment Advisory Agreements, DMC is not responsible for a Fund’s expenses. The costs of the Transaction, however, are treated differently. See “Board considerations in approving the New Investment Advisory Agreement – Comparative Expenses.”
Trustees, officers, and employees of DMC may be Trustees and officers of the Trusts, but trustees, officers, and employees of DMC who are Trustees, officers and/ or employees of the Trusts do not receive any compensation from the Trusts for acting in a dual capacity. DMC and the Trusts may share common facilities, which may include legal and accounting personnel, with appropriate proration of expenses between the applicable Fund and DMC.
Limitation on Liability. Under the Current and New Investment Advisory Agreements, in the absence of willful misfeasance, bad faith, gross negligence, or a reckless disregard of the performance of its duties as the investment adviser to a Fund, DMC shall not be liable to a Fund or to any shareholder for any action or omission arising in the course of, or connected with, rendering its services under the Agreement or for any losses arising from the purchase, holding, or sale of any security, or otherwise.
Term and Continuance. If approved by shareholders of a Fund, the New Investment Advisory Agreement for the Fund will continue in effect for an initial period of two years from the date of implementation, and may be renewed thereafter provided that its renewal is specifically approved at least annually by both (i) the vote of a majority of the Fund’s Board or the vote of a 1940 Act Majority (as defined below) of the outstanding voting securities of the Fund and (ii) the vote of a majority
14
of the Independent Trustees cast in person at a meeting called for the purpose of voting on the approval. The Current Investment Advisory Agreements have similar provisions for their term and continuance. The initial two-year period has elapsed for most of the Current Investment Advisory Agreements, which were most recently approved by the applicable Fund’s Board in May 2009.
A “1940 Act Majority” of the outstanding voting securities of a Fund means the lesser of (i) 67% or more of the voting securities of the Fund that are present in person or by proxy at a meeting if holders of shares representing more than 50% of the outstanding voting securities of the Fund are present in person or by proxy or (ii) more than 50% of the outstanding voting securities of the Fund.
Termination. Each Fund’s New Investment Advisory Agreement generally provides that the Agreement may be terminated at any time, without the payment of any penalty, by the Fund upon giving DMC 60 days’ written notice, provided that the termination is directed or approved by the vote of a majority of the Fund’s Board or by the vote of a 1940 Act Majority of the Fund’s outstanding voting securities. The New Investment Advisory Agreements may also be terminated by DMC on 60 days’ written notice. As required by the 1940 Act, each New Investment Advisory Agreement will also immediately terminate in the event of its “assignment” (as defined in the 1940 Act). The Current Investment Advisory Agreements contain similar termination provisions.
Proxy Voting. Each Fund’s New Investment Advisory Agreement provides explicitly that DMC shall be responsible for voting proxies of portfolio securities of each Fund, a service currently provided by DMC but not provided for explicitly in the Current Investment Advisory Agreement.
Amendments. To incorporate explicitly the requirements of the 1940 Act, each Fund’s New Investment Advisory Agreement provides that it may not be amended without a shareholder vote and a vote of the Independent Trustees, but that it may be amended without shareholder approval if the amendment relates solely to a change for which applicable laws and regulations do not require shareholder approval. Each Fund’s Current Investment Advisory Agreement does not contain a similar provision. The New Investment Advisory Agreements provide that they may be amended pursuant to a written agreement executed by a Fund and DMC.
Other Changes. Each Fund’s New Investment Advisory Agreement conforms the Current Investment Advisory Agreement to currently applicable laws and regulations and includes a number of minor wording changes that clarify non-material ambiguities in the Current Investment Advisory Agreement.
15
Additional Information. A discussion of the basis for a Board’s approval of each Fund’s Current Investment Advisory Agreement is available, or will be made available, in the Fund’s most recent or next-published annual or semiannual report to shareholders. Appendix J provides information on the Current Investment Advisory Agreements, including their dates, the dates of last shareholder approval, and the reason for the most recent submission to shareholders. Exhibit A to Appendix I discloses the rate of compensation of DMC under both the Current Investment Advisory Agreement and the New Investment Advisory Agreement. Appendix K describes for each Fund the aggregate amount of DMC’s fees and the amount and purpose of any other material payments to DMC (including any affiliated person of DMC) for services provided to each Fund during the last fiscal year of the Fund. These services will continue to be provided if the New Investment Advisory Agreements are approved. For other registered funds advised by DMC that have investment objectives similar to those of the Funds, Appendix L sets forth the fund’s name, the fund’s net assets as of July 31, 2009, the rate of DMC’s compensation, and whether DMC has waived, reduced, or otherwise agreed to reduce its compensation under the applicable contract.
Additional information about DMC
Appendix M provides the name, address and principal occupation of each executive officer and each trustee of DMC, and each individual who is an officer or Trustee of the Trusts and who is also an officer, employee or shareholder of DMC. Mr. Coyne, a Trustee and executive officer of the Trusts, and certain other executive officers of the Trusts, may be deemed to have a substantial interest in this Proposal 2 arising from equity interests (the “Equity Interests”) they hold in Delaware Investments U.S., Inc. (“DIUS”), a subsidiary of DMHI and indirect parent of DMC. These persons may indirectly receive a portion of the purchase consideration for the Transaction as a result of the accelerated vesting of the Equity Interests caused by the Transaction. Based on the purchase consideration described above and other valuations, the approximate Equity Interests as a percentage of issued and outstanding equity of DIUS held by these persons as of August 18, 2009 are as follows: Patrick P. Coyne 0.32%; Michael J. Hogan 0.25%; See Yeng Quek 0.29%; David P. O’Connor 0.17%; and Richard Salus 0.01%. See Appendix M for a list of the executive officer positions with the Trusts of each of the above named individuals. Generally, the Equity Interests will be fully vested and may be put back to DIUS or called by DIUS not later than thirteen months following the Closing. The holders of the Equity Interests will only obtain a portion of the purchase consideration if they put their vested Equity Interests back to DIUS or their Equity Interests are called by DIUS, and the dollar value of the Equity Interests will be ascertained at the time of the put or call, as the case may be. Certain other officers of DMC who are also officers of the Trusts own or hold vested or unvested stock or options on stock of LNC.
16
Board considerations in approving the New Investment Advisory Agreements
At an in-person meeting held on September 3, 2009, the Boards, including the Independent Trustees, discussed and unanimously approved the New Investment Advisory Agreement between each Fund and DMC. Concluding that approval of the New Investment Advisory Agreement would be in the best interests of each Fund and its shareholders, the Boards also directed that each New Investment Advisory Agreement be submitted to the applicable Fund shareholders for approval, and recommended that shareholders vote“FOR” approval of each New Investment Advisory Agreement.
Prior to their consideration of the New Investment Advisory Agreements, pursuant to letters from their independent legal counsel addressed to Macquarie Group and DMC, the Independent Trustees requested extensive materials about the Transaction and matters related to the proposed approvals. To assist the Boards in considering the New Investment Advisory Agreements, Macquarie Group provided materials and information about Macquarie Group, including detailed written responses to the questions posed to it by the Independent Trustees. DMC also provided materials and information about the Transaction, including detailed written responses to the questions posed to it by the Independent Trustees. The Boards requested and received certain information regarding the policies of DMC with respect to advisory fee levels and DMC’s philosophy with respect to breakpoints; the structure of portfolio manager compensation; DMC’s profitability; as well as any constraints or limitations on the availability of securities in certain investment styles that might inhibit DMC’s ability to invest fully in accordance with Fund policies.
The Coordinating Trustee and the Chair of each committee of the Boards, together with their independent legal counsel and Fund counsel, met with representatives of DMC and Macquarie Group to discuss the Transaction in very preliminary terms. Thereafter, the Independent Trustees, together with their independent legal counsel and Fund counsel, participated in a combination of four separate in-person meetings and telephone conference calls with representatives of DMC and Macquarie Group. In addition, management of DMC and certain Independent Trustees met in person or by telephone on several other occasions during the months preceding the Boards’ in-person meeting on September 3, 2009. At these meetings and on these telephone calls, the Transaction and future plans for DMC and the Funds were discussed at length. Finally, the Independent Trustees consulted with their independent legal counsel in executive sessions on numerous occasions during the time period covered by the negotiation of the Transaction and discussed, among other things, the legal standards applicable to their review of the New Investment Advisory Agreements and certain other contracts and considerations relevant to their deliberations on whether to approve the New Investment Advisory Agreements.
17
At the in-person meetings and telephonic conference calls, the Trustees discussed the Transaction with DMC management and with key Macquarie Group representatives. The meetings included discussions of the strategic rationale for the Transaction as discussed above under “Description of the Transaction,” and Macquarie Group’s general plans and intentions regarding the Funds and DMC. On these occasions, representatives of DMC and Macquarie Group made presentations to, and responded to questions from, the Trustees. The Board members also inquired about the plans for, and anticipated roles and responsibilities of, key employees and officers of DMHI and DMC in connection with the Transaction.
In connection with the Trustees’ review of the New Investment Advisory Agreements, DMC and/or Macquarie Group emphasized that:
They expected that there will be no adverse changes as a result of the Transaction in the nature, quality, or extent of services currently provided to the Funds and their shareholders, including investment management, distribution, or other shareholder services;No material changes in personnel or operations are currently contemplated in the operation of DMC under Macquarie Group as a result of the Transaction and no material changes are currently contemplated in connection with third party service providers to the Funds;Macquarie Group has no present intention to cause DMC to alter the voluntary expense limitations and reimbursements currently in effect for the Funds; andUnder the Transaction Agreement, Macquarie Bank Limited has agreed to conduct, and to cause its affiliates to conduct, their respective businesses in compliance with the conditions of Section 15(f) of the 1940 Act with respect to the Funds to the extent within its control, including maintaining Board composition of at least 75% of the Board members qualifying as Independent Trustees and not imposing any “unfair burden” on the Funds for at least two years from the Closing.
In addition to the information provided by DMC and Macquarie Group as described above, the Trustees also considered all other factors they believed to be relevant to evaluating the New Investment Advisory Agreements, including the specific matters discussed below. In their deliberations, the Trustees did not identify any particular information that was controlling, and different Trustees may have attributed different weights to the various factors. However, for each Fund, the Trustees determined that the overall arrangements between the Fund and DMC, as provided in its respective New Investment Advisory Agreement, including the proposed advisory fees and
18
the related administration arrangements between the Fund and DMC, were fair and reasonable in light of the services to be performed, expenses incurred and such other matters as the Trustees considered relevant. Factors evaluated included:
The potential for expanding distribution of Fund shares through access to Macquarie Group’s existing distribution channels;Delaware Investments’ acquisition of an exclusive wholesaling sales force from a subsidiary of LNC;The reputation, financial strength, and resources of Macquarie Group as well as its historic and ongoing commitment to the asset management business in Australia and other parts of the world;The terms and conditions of the New Investment Advisory Agreements, including that each Fund’s contractual fee rate under the New Investment Advisory Agreements will remain the same (see “The New Investment Advisory Agreements” above);The Boards’ full annual review (or initial approval) of the Current Investment Advisory Agreements at their in-person meeting in May 2009 as required by the 1940 Act and their determination at that time that (i) DMC had the capabilities, resources, and personnel necessary to provide the satisfactory advisory and administrative services currently provided to each Fund and (ii) the advisory and/or management fees paid by each Fund, taking into account any applicable fee limitations and breakpoints, represented reasonable compensation to DMC in light of the services provided, the costs to DMC of providing those services, economies of scale, and the fees and other expenses paid by similar funds and such other matters that the Boards considered relevant in the exercise of their reasonable judgment;The portfolio management teams for the Funds are not currently expected to change as a result of the Transaction;LNIC’s and Macquarie Bank Limited’s execution of an agreement with the Trusts (the “Expense Agreement”) pursuant to which LNIC and Macquarie Bank Limited have agreed to pay (or reimburse) all reasonable out-of-pocket costs and expenses of the Funds in connection with the Boards’ consideration of the Transaction, the New Investment Advisory Agreements and related agreements, and all costs related to proxy solicitation (subject to certain limited exceptions);
19
The likelihood that Macquarie Group would invest additional amounts in Delaware Investments, including DMC, which could result in increased assets under management, which would in turn allow some Funds the potential opportunity to achieve economies of scale and lower fees payable by Fund shareholders; andThe compliance and regulatory history of Macquarie Group and its affiliates.
Certain of these considerations are discussed in more detail below.
In making their decision relating to the approval of each Fund’s New Investment Advisory Agreement, the Independent Trustees gave attention to all information furnished. The following discussion, however, identifies the primary factors taken into account by the Trustees and the conclusions reached in approving the New Investment Advisory Agreements.
Nature, Extent, and Quality of Service. The Trustees considered the services historically provided by DMC to the Funds and their shareholders. In reviewing the nature, extent, and quality of services, the Boards considered that the New Investment Advisory Agreements will be substantially similar to the Current Investment Advisory Agreements (as discussed above under “The New Investment Advisory Agreements”), and they therefore considered the many reports furnished to them throughout 2008 and 2009 at regular Board meetings covering matters such as the relative performance of the Funds; the compliance of portfolio managers with the investment policies, strategies, and restrictions for the Funds; the compliance of management personnel with the Code of Ethics adopted throughout the Delaware Investments® Family of Funds; and the adherence to fair value pricing procedures as established by the Boards. The Trustees were pleased with the current staffing of DMC and the emphasis placed on research and risk management in the investment process. Favorable consideration was given to DMC’s efforts to maintain expenditures and, in some instances, increase financial and human resources committed to Fund matters.
The Boards also considered the transfer agent and shareholder services that would continue to be provided to Fund shareholders by DMC’s affiliate, DSC. The Boards routinely review and have been impressed by DSC’s performance. The Trustees noted, in particular, DSC’s commitment to maintain a high level of service as well as DSC’s expenditures to improve the delivery of shareholder services. The Boards were assured that shareholders would continue to receive the benefits provided to Fund shareholders by being part of the Delaware Investments Family of Funds, including each shareholder’s ability to exchange an investment in one Fund for the same class of shares in another Fund without a sales charge, to reinvest Fund dividends into additional shares of any of the Funds, and the privilege to combine holdings in other Funds to obtain a reduced sales charge.
20
Based on the information provided by DMC and Macquarie Group, including that Macquarie Group and DMC currently expected no material changes as a result of the Transaction in (i) personnel or operations of DMC or (ii) third party service providers to the Funds, the Boards concluded that the satisfactory nature, extent, and quality of services currently provided to the Funds and their shareholders were very likely to continue under the New Investment Advisory Agreements. Moreover, the Boards concluded that the Funds would probably benefit from the expanded distribution resources that would become available to Delaware Investments following the Transaction. The Boards also concluded that it was very unlikely that any “unfair burden” would be imposed on any of the Funds for the first two years following the Closing as a result of the Transaction. Consequently, the Boards concluded that they did not expect the Transaction to result in any adverse changes in the nature, quality, or extent of services (including investment management, distribution, or other shareholder services) currently provided to the Funds and their shareholders.
Investment Performance. The Boards considered the overall investment performance of DMC and the Funds. The Trustees placed significant emphasis on the investment performance of the Funds in view of its importance to shareholders. Although the Trustees gave appropriate consideration to performance reports and discussions with portfolio managers at Board meetings throughout the year, the Trustees gave particular weight to their review of investment performance in connection with the approval of the Current Investment Advisory Agreements at the Board meeting held in May 2009. At that meeting, the Trustees reviewed reports for each Fund prepared by Lipper, Inc., an independent statistical compilation organization (“Lipper”), which showed the Fund’s investment performance as of December 31, 2008 in comparison to a group of funds selected by Lipper as being similar to the Fund (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest performance ranked last. The highest/best performing 25% of funds in the Performance Universe made up the first quartile; the next 25% made up the second quartile; the next 25% made up the third quartile; and the poorest/worst performing 25% of funds in the Performance Universe made up the fourth quartile. Annualized investment performance for each Fund was shown for the past 1-, 3-, 5-, and 10-year periods, to the extent applicable, compared to that of the Performance Universe. The Boards’ objective was that each Fund’s performance for the periods considered be at or above the median of its Performance Universe. During the May 2009 review process, the Trustees observed the significant improvements to relative investment performance of the funds in the Delaware Investments® Family of Funds as compared to the funds’ performance as of December 31, 2007.
At their meeting on September 3, 2009, the Trustees, including the Independent Trustees in consultation with their independent counsel, updated their examination of the investment performance of each fund in the Delaware Investments Family
21
of Funds. The Trustees compared the performance of each fund in the Delaware Investments® Family of Funds to that of its respective Performance Universe for the 1-, 3-, 5-, and 10-year periods ended June 30, 2009 and compared its relative investment performance against the corresponding relative investment performance of each fund in the Delaware Investments Family of Funds for such time periods ended December 31, 2008, to the extent applicable. As of June 30, 2009, 30 of the funds in the Delaware Investments Family of Funds had investment performance relative to that of the respective Performance Universe that was better than the corresponding relative investment performance at December 31, 2008 for all applicable time periods. At June 30, 2009, an additional six funds in the Delaware Investments Family of Funds had investment performance relative to that of their respective Performance Universe that was better than the corresponding relative investment performance at December 31, 2008 for a majority of the applicable time periods. At June 30, 2009, 15 additional funds in the Delaware Investments Family of Funds had investment performance relative to that of their respective Performance Universe that was better than the corresponding relative investment performance at December 31, 2008 for an equal number of the applicable time periods, and only 29 funds in the Delaware Investments Family of Funds had poorer relative investment performance at June 30, 2009 compared to that at December 31, 2008.
The Boards therefore concluded that the investment performance of the funds in the Delaware Investments Family of Funds on an aggregate basis had continued to improve relative to their respective Performance Universe since the data reviewed at the May 2009 meeting.Based on information provided by DMC and Macquarie Group, the Boards concluded that neither the Transaction nor the New Investment Advisory Agreement would likely have an adverse effect on the investment performance of any Fund because (i) DMC and Macquarie Group did not currently expect the Transaction to cause any material change to the Funds’ portfolio management teams responsible for investment performance, which the Boards found to be satisfactory and improving, (ii) as discussed in more detail below, the Funds’ expenses were not expected to increase as a result of the Transaction, (iii) the Trustees thought it was extremely unlikely that the Funds would bear any Transaction-related expenses, and (iv) there was not expected to be any “unfair burden” imposed on the Funds as a result of the Transaction.
Comparative Expenses.The Trustees also evaluated expense comparison data for the Funds previously considered in May 2009. At that meeting, DMC had provided the Boards with information on pricing levels and fee structures for the Funds and comparative funds. The Trustees focused on the comparative analysis of the effective management fees and total expense ratios of each Fund versus the effective management fees and expense ratios of a group of funds selected by Lipper as being similar to each Fund (the “Expense Group”). In reviewing comparative costs, each
22
Fund’s contractual management fee and the actual management fee incurred by the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) of other funds within the Expense Group, taking into account any applicable breakpoints and fee limitations. Each Fund’s total expenses were also compared with those of its Expense Group. The Trustees also considered fees paid to Delaware Investments for non-management services. The Trustees’ objective was for each Fund’s total expense ratio to be competitive with that of the funds in the Expense Group. According to the Lipper reports furnished for the May 2009 meeting, the effective management fees and total expense ratios for a majority of the funds in the Delaware Investments® Family of Funds were below the respective Expense Group median. At the September 3, 2009 meeting, DMC advised the Boards that the more recent comparative expenses for the Funds remained consistent with the previous review in May 2009, and consequently the Trustees concluded that expenses of the Funds were satisfactory.
The Boards also considered the Expense Agreement in evaluating Fund expenses. The Expense Agreement provides that LNIC and Macquarie Bank Limited will pay or reimburse the Trusts for all reasonable out-of-pocket costs and expenses in connection with the Transaction and the consideration of the New Investment Advisory Agreements (subject to certain limited exceptions). These obligations of LNIC and Macquarie Bank Limited apply regardless of whether or not the Transaction is consummated. As a result, the Funds will bear no costs in connection with or related to evaluating the Transaction or seeking or obtaining shareholder approval of the New Investment Advisory Agreements (other than as described above).
Based on information provided by DMC and Macquarie Group, the Boards concluded that neither the Transaction nor the New Investment Advisory Agreements would likely have an adverse effect on the Funds’ expenses because (i) each Fund’s contractual fee rates under the New Investment Advisory Agreements would remain the same, (ii) the Boards were assured by DMC and Macquarie Group that they had no current intention to change DMC’s existing voluntary expense limitations and reimbursement policy as a result of the Transaction, (iii) under the Expense Agreement, the Funds would be reimbursed for all reasonable out-of-pocket costs and expenses in connection with the Transaction and the related proxy solicitation (subject to certain limited exceptions), (iv) consistent with Section 15(f) of the 1940 Act, no “unfair burden” would be imposed on the Funds for the first two years after the Closing, and (v) the expense ratios of certain Funds might decline as a result of the possible increased investment in Delaware Investments by Macquarie Group, as discussed below under “Economies of Scale.”
23
Management Profitability. At their meeting on September 3, 2009, the Boards evaluated DMC’s profitability in connection with the operation of the Funds. The Boards had previously considered DMC’s profitability in connection with the operation of the Funds at their May 2009 meeting. At that meeting, the Boards reviewed an analysis that addressed the overall profitability of Delaware Investments’ business in providing management and other services to each of the Funds and the Delaware Investments® Family of Funds as a whole. Specific attention was given to the methodology followed in allocating costs for the purpose of determining profitability.
At the May 2009 meeting, representatives of DMC had stated that the level of profits of DMC, to a certain extent, reflected operational cost savings and efficiencies initiated by Delaware Investments (including DMC and its affiliates that provide services to the Funds). The Boards considered Delaware Investments’ efforts to improve services provided to Fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide SEC initiatives. At that meeting, the Boards found that the management fees charged were reasonable in light of the services rendered and the level of profitability of DMC. At the September 3, 2009 meeting, DMC advised the Boards that DMC did not expect the Transaction to affect materially the profitability of Delaware Investments compared to the level of profitability considered during the May 2009 review. Moreover, the Trustees reviewedpro forma balance sheets of certain key companies in Delaware Investments as of June 30, 2009 (which were provided by Macquarie Group and DMC in response to the Trustees’ requests), and evaluated the projections of Delaware Investments’ capitalization following the Transaction for purposes of evaluating the financial ability of Delaware Investments to continue to provide the nature, extent, and quality of services as it had under the Current Investment Advisory Agreement.
Based on information provided by DMC and Macquarie Group, the Boards concluded that DMC and Delaware Investments would be sufficiently capitalized following the Transaction to continue the same level and quality of services to the Funds under the New Investment Advisory Agreements as was the case under the Current Investment Advisory Agreements. The Board also concluded that Macquarie Group had sufficient financial strength and resources, as well as an ongoing commitment to a global asset management business, to continue investing in Delaware Investments, including DMC to the extent that Macquarie Group determined it was appropriate. Finally, because services and costs were expected to be substantially the same (and that DMC had represented that, correspondingly, profitability would be about the same), under the New Investment Advisory Agreements as under the Current Investment Advisory Agreements, the Trustees concluded that the profitability of Delaware Investments would not result in an inequitable charge on the Funds or
24
their shareholders. Accordingly, the Boards concluded that the fees charged under the New Investment Advisory Agreements would be reasonable in light of the services to be provided and the expected profitability of DMC.
Economies of Scale. The Trustees considered whether economies of scale would be realized by Delaware Investments as each Fund’s assets increase and the extent to which any economies of scale would be reflected in the management fees charged. The Trustees took into account DMC’s practice of maintaining the competitive nature of management fees based on its analysis of fees charged by comparable funds. DMC management believed, and the Boards agreed, that the Funds were priced with breakpoints and relatively low management fees to reflect potential economies of scale to Fund shareholders.
The Boards also acknowledged Macquarie Group’s statement that the Transaction would not by itself immediately provide additional economies of scale given Macquarie Group’s limited presence in the U.S. mutual fund market. Nonetheless, the Trustees concluded that additional economies of scale could potentially be achieved in the future if DMC were owned by Macquarie Group as a result of Macquarie Group’s willingness to invest additional amounts in Delaware Investments if appropriate opportunities arise. The Board further concluded that potential economies of scale could be achieved as a result of Delaware Investments’ expanded distribution capabilities arising from the Transaction, as well as opportunities that might arise from Macquarie Group’s global asset management business.
Fall-Out Benefits. The Boards acknowledged that DMC would continue to benefit from soft dollar arrangements using portfolio brokerage of each Fund that invests in equity securities and that DMC’s profitability would likely be somewhat lower without the benefit of practices with respect to allocating Fund portfolio brokerage for brokerage and research services. The Boards also considered that Macquarie Group and Delaware Investments may derive reputational, strategic, and other benefits from their association with the Delaware Investments® Family of Funds, including service relationships with DMC, DSC, and DDLP, and evaluated the extent to which Delaware Investments might derive ancillary benefits from Fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Investments Family of Funds and the benefits from allocation of Fund brokerage to improve trading efficiencies. However, the Boards concluded that (i) any such benefits under the New Investment Advisory Agreements would not be dissimilar from those existing under the Current Investment Advisory Agreements, (ii) such benefits did not impose a cost or burden on the Funds or their shareholders, and (iii) such benefits would probably have an indirectly beneficial effect on the Funds and their shareholders because of the added importance that DMC and Macquarie Group might attach to the Funds as a result of the fall-out benefits that the Funds conveyed.
25
The Transaction Agreement.The Trustees reviewed the Transaction Agreement in advance of the September 3, 2009 meeting. The Trustees considered the terms of the Transaction Agreement, including those related to Section 15(f) of the 1940 Act and that LNIC and Macquarie Bank Limited will bear the expenses related to the Funds’ proxy solicitation. At the meeting, the Trustees discussed the purchase price to be paid and noted the conditions to the Closing, including the requirements for obtaining consents to the change in control from Delaware Investments’ advisory clients, such as the Funds. The Trustees believed that Delaware Investments’ ability to continue to manage the general account assets of certain LNC subsidiaries was important because it allowed Delaware Investments’ overhead expenses to be spread over a larger base of assets under management and thus potentially reduce costs to the Funds and their shareholders as compared to the costs that might apply if Delaware Investments did not manage the general account assets. Consequently, the Trustees evaluated the provisions of the Transaction Agreement related to the management of those assets and concluded that those provisions were satisfactory and likely to be beneficial to Fund shareholders.
Board Review of Macquarie Group.The Trustees reviewed detailed information supplied by Macquarie Group about its operations as well as other information regarding Macquarie Group provided by independent legal counsel to the Independent Trustees. As previously noted, to consider Delaware Investments’ ability to continue to provide the same level and quality of services to the Funds, the Boards requested, received and reviewedpro forma balance sheets of certain key companies in Delaware Investments as of June 30, 2009, which projected Delaware Investments’ capitalization following the Transaction. Based on this review, the Trustees concluded that Delaware Investments would continue to have the financial ability to maintain the high quality of services required by the Funds. The Trustees noted that there would be a limited transition period during which some services previously provided by LNC to Delaware Investments would continue to be provided by LNC after the Closing, and concluded that this arrangement would help minimize disruption in Delaware Investments’ provision of services to the Funds following the Transaction.
Macquarie Group described its proposed changes to Delaware Investments’ corporate governance, primarily through the anticipated addition of certain Macquarie Group officers to DMHI’s board of directors and to Delaware Investments’ distribution and product management affiliates. The Trustees considered favorably Macquarie Group’s statement that it had no current intention to change the executive, administrative, investment, or support staff of Delaware Investments in any significant way as a result of the Transaction. Macquarie Group described the proposed harmonization of the compensation system in use at Delaware Investments with the compensation plan used by Macquarie Group, including short-term and
26
long-term incentive compensation and equity interests for executive officers and investment personnel. Macquarie Group described its current intention to enhance certain administrative and operational areas of DMC following the Transaction, including information technology, product management, and risk management.
The Boards considered Macquarie Group’s support for Delaware Investments’ plans for Fund distribution by transferring wholesalers from Lincoln Financial Distributors, Inc., LNC’s retail distributor, to Delaware Investments, and Macquarie Group’s current intention to leave the Funds’ other service providers in place. The Boards also considered Macquarie Group’s current strategic plans to increase its asset management activities, one of its core businesses, particularly in North America, and its statement that its acquisition of DMC is an important component of this strategic growth and the establishment of a significant presence in the United States. Based in part on the information provided by DMC and Macquarie Group, the Boards concluded that Macquarie Group’s acquisition of Delaware Investments could potentially enhance the nature, quality, and extent of services provided to the Funds and their shareholders.
DMC and Macquarie Group explained to the Boards that, as a subsidiary of an Australian authorized deposit-taking institution, Delaware Investments would become subject to certain Australian regulatory oversight and requirements following the Transaction, including those related to disclosure, fund holdings, affiliated transactions, advisory agreements, and expense limitation agreements. DMC and Macquarie Group also explained to the Boards that certain exemptive relief had been provided to Macquarie Group by the Australian bank regulator in anticipation of the Transaction, and the Boards were informed of the nature of future relief that may be required. Based on the information provided and representations made by DMC and Macquarie Group, the Board concluded that the Australian bank regulatory requirements would not have a material effect on the operations of DMC or the Funds, including DMC’s ability to continue in its discretion to provide voluntary expense limitations and reimbursements to the Funds or to contribute appropriate levels of seed capital to new funds.
The Boards noted that DMC has placed brokerage transactions with a broker/ dealer affiliate of Macquarie Group and received research in connection with those transactions. In addition, certain other Macquarie Group affiliates participate as underwriters for securities offerings outside of the United States. Consequently, the Boards determined to have DMC report to them regularly to monitor any brokerage transactions with Macquarie Group affiliates for compliance with the requirements of Section 15(f) and Section 17(e) of the 1940 Act, and to ensure compliance with the Funds’ procedures under Rule 10f-3 promulgated under the 1940 Act for offerings in which a Macquarie Group affiliate is a member of the underwriting syndicate.
27
Conclusion. The Independent Trustees of each Trust deliberated in executive session; the entire Board of each Fund, including the Independent Trustees, then approved each New Investment Advisory Agreement. The Boards concluded that the advisory fee rate under each New Investment Advisory Agreement is reasonable in relation to the services provided and that execution of the New Investment Advisory Agreement is in the best interests of the shareholders. For each Fund, the Trustees noted that they had concluded in their most recent advisory agreement continuance considerations in May 2009 that the management fees and total expense ratios were at acceptable levels in light of the quality of services provided to the Funds and in comparison to those of the Funds’ respective peer groups; that the advisory fee schedule would not be increased and would stay the same for all of the Funds; that the total expense ratio had not changed materially since that determination; and that DMC had represented that the overall expenses for each Fund were not expected to be adversely affected by the Transaction. The Trustees also noted, with respect to the Funds that currently had the benefit of voluntary fee limitations, that Macquarie Group had no present intention to cause DMC to alter any voluntary expense limitations or reimbursements currently in effect for the Funds. On that basis, the Trustees concluded that the total expense ratio and proposed advisory fee for the Funds anticipated to result from the Transaction was acceptable. In approving each New Investment Advisory Agreement, each Board stated that it anticipated reviewing the continuance of the agreement in advance of the expiration of the initial two-year period.
Required vote
To become effective with respect to a particular Fund, the New Investment Advisory Agreement for that Fund must be approved by a 1940 Act Majority vote of the Fund’s outstanding voting securities. The approval of one Fund’s New Investment Advisory Agreement is not contingent on the approval of any other Fund’s New Investment Advisory Agreement. Each New Investment Advisory Agreement was approved separately by the Independent Trustees and by the Board of the applicable Trust as a whole after consideration of all factors that it determined to be relevant to its deliberations, including those discussed above. The Board of each Trust also determined to submit each applicable Fund’s New Investment Advisory Agreement for consideration by the shareholders of the Fund. If the shareholders of a Fund do not approve the Fund’s New Investment Advisory Agreement, the Board of that Fund will consider other possible courses of action for the Fund, including entering into an interim advisory agreement with DMC pursuant to Rule 15a-4 of the 1940 Act.
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OFEACH TRUST UNANIMOUSLY RECOMMENDS THAT YOU VOTE FORTHE APPROVAL OF THE NEW INVESTMENT ADVISORY AGREEMENT.
28
VOTING INFORMATION
Only shareholders of record of the Funds at the close of business on September 18, 2009 (the “Record Date”), will be entitled to notice of, and to vote at, the Meeting on the matters described in this Proxy Statement. Shareholders will be entitled to one vote for each full share and a fractional vote for each fractional share that they hold. If sufficient votes to approve a Proposal for a Fund are not received by the date of the Meeting, the Meeting may be adjourned for that Fund or for that Proposal to permit further solicitations of proxies. The persons named as proxies on the enclosed proxy cards will vote their proxies in their discretion on questions of adjournment and any other items (other than the Proposals) that properly come before the Meeting. A majority of the votes cast by shareholders of a Fund present in person or by proxy at the Meeting (whether or not sufficient to constitute a quorum for the Fund) may adjourn the Meeting with respect to that Fund. The Meeting may also be adjourned by the Chairperson of the Meeting.
Abstentions and broker non-votes will be counted for purposes of determining whether a quorum is present at the Meeting. Abstentions and broker non-votes will have no effect on Proposal 1 but will have the same effect as a vote “against” Proposal 2. Broker non-votes are proxies from brokers or nominees indicating that they have not received voting instructions from the beneficial owner or other person entitled to vote shares on a particular matter for which the brokers or nominees do not have discretionary authority to vote. This generally occurs only when there is another matter at the meeting for which the brokers or nominees do have discretionary authority to vote, such as Proposal 1.
You may attend the Meeting and vote in person. You may also vote by completing, signing, and returning the enclosed proxy card in the enclosed postage paid envelope, or by telephone or through the Internet. If you return your signed proxy card or vote by telephone or through the Internet, your vote will be officially cast at the Meeting by the persons appointed as proxies. A proxy card is, in essence, a ballot. If you sign and date the proxy card but give no voting instructions, your shares will be voted in favor of all the Trustee Nominees in Proposal 1 and “For” Proposal 2. Your proxies will also be voted in the discretion of the persons appointed as proxies on any other matters that may properly come before the Meeting or any adjournment or postponement of the Meeting, although management of the Funds does not expect any such matters to come before the Meeting. If your shares are held of record by a broker/dealer and you wish to vote in person at the Meeting, you must obtain a legal proxy from the broker of record and present it at the Meeting.
29
You may revoke your proxy at any time for a Fund before it is voted by sending a written notice to the Fund expressly revoking your proxy, by signing and forwarding to the Fund a later-dated proxy, or by attending the Meeting and voting in person. If your shares are held in the name of your broker, you will have to make arrangements with your broker to revoke a previously executed proxy. If you wish to vote in-person at the Meeting, you must obtain a legal proxy from your broker of record and present it at the Meeting.
The Boards do not intend to bring any matters before the Meeting other than as described in this Proxy Statement. Because the Meeting is a special meeting, the Boards do not anticipate that any other matters will be brought before the Meeting by others. However, if any other matter legally comes before the Meeting, proxies will be voted in the discretion of the persons appointed as proxies.
Only shareholders of record on the Record Date will be entitled to vote at the Meeting on the matters described in this Proxy Statement. The table in Appendix N shows as of July 31, 2009, as to each class of voting securities of the Funds, the number of shares outstanding.
A “Quorum” is the minimum number of shares that must be present in order to conduct the Meeting. A Quorum for a Trust or a particular Fund means one-third (331/3%) of the shares of that Trust or Fund that are entitled to vote at the Meeting, present in person or represented by proxy.
Under the Expense Agreement, all reasonable out-of-pocket costs and expenses incurred by the Funds related to the Meeting, including the costs of preparing proxy solicitation materials and soliciting proxies in connection with the Meeting, will be reimbursed by Macquarie Bank Limited and LNIC (subject to certain limited exceptions). The Funds have engaged Computershare Fund Services, Inc. (“Computershare”) to solicit proxies from brokers, banks, other institutional holders and individual shareholders at an anticipated cost of approximately $750,000. Fees and expenses may be greater depending on the effort necessary to obtain shareholder votes. The agreement with Computershare provides that Computershare shall be indemnified against certain liabilities and expenses, including liabilities under the federal securities laws.
30
This proxy solicitation is being made by the Boards for use at the Meeting. In addition to solicitations by mail, solicitations also may be made by advertisement, telephone, telegram, facsimile transmission or other electronic media, or personal contacts. The Funds will request broker/dealer firms, custodians, nominees, and fiduciaries to forward proxy materials to the beneficial owners of the shares of record. Reasonable out-of-pocket expenses of broker/dealer firms, custodians, nominees, and fiduciaries for their reasonable expenses incurred in connection with the proxy solicitation will be shared equally by LNIC and Macquarie Bank Limited as provided above. In addition to solicitations by mail, officers and employees of the Trusts, DMC, and their affiliates may, without extra pay, conduct additional solicitations by telephone, telecopy, and personal interviews. The Funds expect that any solicitations will be primarily by mail, but also may include telephone, telecopy, or oral solicitations.
As the Meeting date approaches, you may receive a telephone call from a representative of Computershare if your votes have not yet been received. Proxies that are obtained telephonically will be recorded in accordance with the procedures described below. These procedures are designed to ensure that both the identity of the shareholder casting the vote and the voting instructions of the shareholder are accurately determined.
In all cases where a telephonic proxy is solicited, the Computershare representative is required to ask for each shareholder’s full name and address, and to confirm that the shareholder has received the proxy materials in the mail. If the shareholder is a corporation or other entity, the Computershare representative is required to ask for the person’s title and confirmation that the person is authorized to direct the voting of the shares. If the information elicited matches the information previously provided to Computershare, then the Computershare representative has the responsibility to explain the voting process, read the Proposals listed on the proxy card, and ask for the shareholder’s instructions on the Proposals. Although the Computershare representative is permitted to answer questions about the process, he or she is not permitted to recommend to the shareholder how to vote, other than to read any recommendation set forth in this Proxy Statement. Computershare will record the shareholder’s instructions on the card. Within 72 hours, the shareholder will be sent a letter or mailgram to confirm his or her vote and asking the shareholder to call Computershare immediately if his or her instructions are not correctly reflected in the confirmation.
31
Unless you have instructed the Funds not to do so, only one copy of this Proxy Statement will be mailed to multiple Fund shareholders sharing an address(a “Household”), even if more than one shareholder in a Household is a Fund shareholder of record. If you need additional copies of this Proxy Statement, if you do not want the mailing of proxy solicitation materials to be combined with those of other members of your Household in the future, or if you are receiving multiple copies and would rather receive just one copy for the Household, please contact your participating broker/dealer firm or other financial intermediary or, if you hold Fund shares directly with the Funds, you may write to the Funds by regular mail to P.O. Box 219691, Kansas City, MO 64121-9691, by overnight courier service to 430 W. 7th Street, Kansas City, MO 64105, or by calling toll-free 800 523-1918.
The governing instruments of the Trusts do not require that the Funds hold annual meetings of shareholders. Each Fund is, however, required to call meetings of shareholders in accordance with the requirements of the 1940 Act to seek approval of new or material amendments to advisory arrangements or of a change in the fundamental investment policies, objectives or restrictions of the Fund. Each Trust also would be required to hold a shareholders meeting to elect new Trustees at such time as less than a majority of the Trustees holding office have been elected by shareholders. The Trusts’ governing instruments generally provide that a shareholder meeting may be called by a majority of the Trustees, the Chairperson of the Board, or the President of the Trust.
Shareholders of a Fund wishing to submit proposals for inclusion in a proxy statement for a future shareholder meeting must send their written proposal to that Fund a reasonable time before the Board’s solicitation relating to that meeting is to be made. Shareholder proposals must meet certain legal requirements established by the SEC, so there is no guarantee that a shareholder’s proposal will actually be included in the next proxy statement. The persons named as proxies in future proxy materials of a Fund may exercise discretionary authority with respect to any shareholder proposal presented at any subsequent shareholder meeting if written notice of that proposal has not been received by that Fund within a reasonable period of time before the Board’s solicitation relating to that meeting is made. Written proposals with regard to a Fund should be sent to the Secretary of the Trusts, David F. Connor, at the address of the Funds given above.
32
Shareholders who wish to communicate to the Boards may address correspondence to Ann R. Leven, Coordinating Trustee for the Trusts, c/o the applicable Trust at 2005 Market Street, Philadelphia, Pennsylvania, 19103. Shareholders may also send correspondence to the Coordinating Trustee, or any individual Trustee, c/o the applicable Trust at 2005 Market Street, Philadelphia, Pennsylvania 19103. Without opening any such correspondence, Trust management will promptly forward all such correspondence to the intended recipient(s).
DST Systems, Inc. (“DST”), 430 W. 7th Street, Kansas City, Missouri 64105, provides subtransfer agency services to the Funds. In connection with these services, DST administers the overnight investment of cash pending investment in a Fund or payment of redemptions. The proceeds of this investment program are used to offset the Funds’ transfer agency expenses.
Fund Accountants. The Bank of New York Mellon (“BNY Mellon”), One Wall Street, New York, New York 10286-0001, provides fund accounting and financial administration services to each Fund. Those services include performing functions related to calculating each Fund’s net asset value (“NAV”) and providing financial reporting information, regulatory compliance testing, and other related accounting services. For these services, the Funds pay BNY Mellon an asset-based fee, subject to certain fee minimums plus certain out-of-pocket expenses and transactional charges.
DSC provides fund accounting and financial administration oversight services to the Funds. Those services include overseeing the Funds’ pricing process, the calculation and payment of fund expenses, and financial reporting in shareholder reports, registration statements and other regulatory filings. DSC also manages the process for the payment of dividends and distributions and the dissemination of Fund NAVs and performance data. For these services, the Funds pay DSC an asset-based
33
fee, plus certain out-of-pocket expenses and transactional charges. The fees payable to BNY Mellon and DSC for the services described above are allocated among all funds in the Delaware Investments® Family of Funds on a relative NAV basis.
Distribution Services. Pursuant to distribution agreements with each Trust, DDLP, 2005 Market Street, Philadelphia, Pennsylvania 19103, serves as the national distributor for the Funds. DDLP pays the expenses of the promotion and distribution of the Funds’ shares, except for payments by the Funds on behalf of Class A Shares, Class B Shares, Class C Shares, and Class R Shares, as applicable under their respective 12b-1 Plans. DDLP also receives sales loads in connection with the purchase and redemption of certain classes of shares. DDLP is an indirect subsidiary of DMHIand is an affiliate of DMC. The Boards annually review fees paid to DDLP.
Following the Transaction, DDLP will be primarily responsible for promoting the sale of Fund shares through broker/dealers, financial advisors and other financial intermediaries. This function is currently provided by Lincoln Financial Distributors, Inc. (“LFD”), 130 N. Radnor-Chester Road, Radnor, Pennsylvania 19087-5221, pursuant to a contractual arrangement with DDLP. LFD is owned by LNC and is an affiliate of DDLP and DMC.
No Fund paid any brokerage commissions for portfolio securities to any broker that is an affiliate (or an affiliate of an affiliate) of the Funds, DMC, DDLP, or DSC during the Fund’s most recently completed fiscal year.
As of July 31, 2009, the officers and Trustees of the Trusts, as a group, owned less than 1% of the outstanding voting shares of each Fund or class thereof, except as noted in Appendix O.
To the best knowledge of the Trusts, as of July 31, 2009, no person, except as set forth in Appendix P, owned of record 5% or more of the outstanding shares of any class of any Fund. Except as noted in Appendix P, the Trusts have no knowledge of beneficial ownership of 5% or more of the outstanding shares of any class of any Fund.
34
| APPENDIX A - FORM OF PROPOSED | |
| SUB-ADVISORY AGREEMENT | A-1 |
35
APPENDIX A — TRUSTS AND SERIES USING THIS PROXYSTATEMENT
| ||
| ||
| ||
A-1
A-2
A-3
APPENDIX B — TRUSTEES- MEMBERS AND OFFICERS OF THE TRUSTS
| JACKSON SQUARE PARTNERS, LLC | B-1 | ||||||||||
| APPENDIX C - 5% SHARE OWNERSHIP | C-1 | ||||||||||
PROXY STATEMENT
for
Delaware U.S. Growth Fund, a series of Delaware Group® Adviser Funds
Delaware Smid Cap Growth Fund, a series of Delaware Group Equity Funds IV
Delaware Focus Global Growth Fund, a series of Delaware Group Global and
International Funds
Delaware Select Growth Fund, a series of Voyageur Mutual Funds III
The Large-Cap Growth Equity Portfolio, The Focus Smid-Cap Growth Equity
Portfolio and The Select 20 Portfolio, series of Delaware Pooled Trust
Delaware VIP® U.S. Growth Series and Delaware VIP Smid Cap Growth Series,
series of Delaware VIP Trust
Delaware Foundation® Growth Allocation Fund, Delaware Foundation® Moderate
Allocation Fund, and Delaware Foundation® Conservative Allocation Fund, series
of Delaware Group Foundation Funds®
Dated March 26, 2014
Important notice regarding the availability of proxy materials for the shareholder
meeting to be held on May 16, 2014: this proxy statement is available at
www.delawareinvestments.com/proxy.
This proxy statement (the “Proxy Statement”) solicits proxies to be voted at a joint special meeting of shareholders (the “Meeting”) of Delaware U.S. Growth Fund, Delaware Smid Cap Growth Fund, Delaware Focus Global Growth Fund, Delaware Select Growth Fund, The Large-Cap Growth Equity Portfolio, The Focus Smid-Cap Growth Equity Portfolio, The Select 20 Portfolio, Delaware VIP U.S. Growth Series, Delaware VIP Smid Cap Growth Series, Delaware Foundation Growth Allocation Fund, Delaware Foundation Moderate Allocation Fund, and Delaware Foundation Conservative Allocation Fund (each, a “Fund” and together, the “Funds”), series of Delaware Group Adviser Funds, Delaware Group Equity Funds IV, Delaware Group Global and International Funds, Voyageur Mutual Funds III, Delaware Pooled Trust, Delaware VIP Trust, and Delaware Group Foundation Funds® (each, a “Trust” and together, the “Trusts”). The Meeting was called by the Boards of Trustees of the Trusts (the “Boards” or the “Trustees”)to vote on the approval of a sub-advisory agreement for the Funds (the “Proposal”).
The principal office of the Trusts is located at 2005 Market Street, Philadelphia, Pennsylvania 19103. You can reach the office of the Trusts by telephone by calling 1-800-523-1918. Each Trust is a Delaware statutory trust registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”).
The Meeting will be held at the offices of Stradley Ronon Stevens & Young, LLP, 2005 Market Street, 26th Floor, Philadelphia, Pennsylvania 19103, on May 16, 2014 at 3:00 p.m., Eastern time. Only Fund shareholders and officers, agents, and employees of the Trusts or their investment adviser or sub-adviser will be admitted to the Meeting. The Boards, on behalf of the Funds, are soliciting these proxies. This Proxy Statement is first being sent to shareholders on or about April 4, 2014.
This Proxy Statement gives you information about the proposed sub-advisory agreement and other matters that you should know before voting on the Proposal.
Each Fund’s annual report to shareholders is sent to shareholders of record following the Fund’s fiscal year end. Each Fund will furnish, without charge, a copy of its most recent annual report and most recent succeeding semiannual report, if any, to a shareholder upon request. Such requests should be directed to the Funds by calling 1-800-523-1918 or by writing to a Fund at Attention: Shareholder Services, 2005 Market Street, Philadelphia, Pennsylvania 19103-7094. Each Fund’s most recent annual report and most recent succeeding semiannual report, if any, are also available free of charge through the Funds’ website at www.delawareinvestments.com.
PROPOSAL: TO APPROVE A SUB-ADVISORY AGREEMENT
Introduction to the Proposal
At the Meeting, shareholders of each Fund will be asked to approve an investment sub-advisory agreement (the “Proposed Sub-Advisory Agreement”) between Delaware Management Company, the Funds’ investment adviser (“DMC”), and Jackson Square Partners, LLC (the “Jackson Square”). Jackson Square will be a joint venture between Delaware Investments Advisers Partner, Inc., an affiliate of DMC (“DIAP” and with DMC, “Delaware Investments”), and California Street Partners, LLC, a California limited liability company. Jackson Square will be comprised of the portfolio managers currently responsible for managing all or part of each Fund (the “Focus Growth Team”). In connection with the transition of the Focus Growth Team into Jackson Square, the Focus Growth Team will become owners and officers of Jackson Square, and will continue to provide portfolio management services to the Funds pursuant to the Proposed Sub-Advisory Agreement (the “Transaction”). Accordingly, the Funds’ Boards are seeking your approval of the Proposed Sub-Advisory Agreement.
The Boards are proposing the approval of the Proposed Sub-Advisory Agreement in order to continue to capitalize on the skill and expertise of the Focus Growth Team. For the Funds (other than Delaware Foundation Growth Allocation Fund, Delaware Foundation Moderate Allocation Fund, and Delaware Foundation Conservative Allocation Fund), it is proposed that the same members of the Focus Growth Team who have managed the Funds’ portfolios will continue to manage the entirety of the Funds’ portfolios in their new roles as portfolio managers at Jackson Square. It is also proposed that the Focus Growth Team will continue to manage the same sleeves of the portfolios as they had previously managed for Delaware Foundation Growth Allocation Fund, Delaware Foundation Moderate Allocation Fund, and Delaware Foundation Conservative Allocation Fund in their new roles as portfolio managers of Jackson Square. The Focus Growth Team has managed all or part of each Fund since 2005, except in the case of the Delaware Smid Cap Growth Fund, which the Focus Growth Team has been managing since 2010.
The Proposed Sub-Advisory Agreement will not become effective with respect to each Fund unless it is approved by the shareholders of that Fund. In the event that the shareholders of a Fund do not approve the Proposed Sub-Advisory Agreement, the applicable Fund’s Board will take such action that it deems to be in the best interests of the Fund and its shareholders, including having the Fund be fully managed by DMC under the current investment advisory agreement.
For a general description of the key terms of the Proposed Sub-Advisory Agreement, see “The Proposed Sub-Advisory Agreement” below. A form of Proposed Sub-Advisory Agreement is included in Appendix A. Shareholder approval of the Proposal will not change the fees charged to Fund shareholders. Shareholders will continue to pay management fees to DMC and DMC, in turn, will compensate Jackson Square for its services to the Funds out of the fees paid to DMC.
The Current Sub-Advisory Agreement
On behalf of each of the Funds, DMC engaged Delaware Investments Advisory Services (“DIAS”), an affiliate of DMC, to serve as the Funds’ sub-adviser pursuant to a sub-advisory agreement (the “Current Sub-Advisory Agreement”) between DMC and DIAS. Subject to the supervision of DMC and the Funds’ Boards, DIAS will direct the investment of all or part of the Funds’ assets. The terms of the Current Sub-Advisory Agreement are substantially similar to the Proposed Sub-Advisory agreement.
DIAS was formed and filed its investment adviser registration with the U.S. Securities and Exchange Commission (the “SEC”) in March 2014. After the SEC declares DIAS’ registration effective, members of the Focus Growth Team will become officers of DIAS. DIAS is a wholly owned subsidiary of Delaware Investments Fund Advisers (“DIFA”). DIFA and DMC are both series of Delaware Management Business Trust, a Delaware statutory trust (“DMBT”). DMBT is a direct wholly owned subsidiary of Delaware Management Holdings, Inc. (“DMHI”), which, in turn, is an indirect, wholly owned subsidiary, and subject to the ultimate control, of Macquarie Group Ltd. (“Macquarie”). DMC, DMBT, DIAP, DIAS, DIFA, and DMHI are located at 2005 Market Street, Philadelphia, Pennsylvania 19103. Macquarie is located at No. 1 Martin Place, Sydney, New South Wales 2000, Australia. Macquarie is a global provider of banking, financial, advisory, investment and funds management services.
Transition of the Focus Growth Team from DIAS to Jackson Square
Following the closing of the Transaction, which is expected to occur on or about April 30, 2014, the Focus Growth Team will move from DIAS to Jackson Square. At that time, Jackson Square will become the sub-adviser to the Funds pursuant to an interim sub-advisory agreement (as discussed below). Shareholder approval of the interim sub-advisory agreement is not required but in order for Jackson Square to serve as the Funds’ sub-adviser for more than 150 days, shareholders must approve a final sub-advisory agreement between DMC and Jackson Square. The terms of that agreement are discussed in detail below. Jackson Square is a California limited liability company located at 101 California Street, San Francisco, CA 94111.
Jackson Square will provide investment management services to mutual funds, high net worth individuals, and institutional investors. More information about Jackson Square’s members and officers is contained in Appendix B.
The Interim Sub-Advisory Agreement
When the Transaction closes on or about April 30, 2014, the Current Sub-Advisory Agreement will terminate because it will be assigned to Jackson Square, although DMC will continue to serve as the Funds’ investment adviser. Because the Current Sub-Advisory Agreement will terminate prior to the Meeting, the Board has approved an interim sub-advisory agreement between DMC and Jackson Square (the “Interim Agreement”) in order to ensure continuity of portfolio management services. As a result, the Interim Agreement will become effective at the time of the closing of the Transaction. The Interim Agreement will remain in effect for 150 days or until Fund shareholders approve the Proposed Sub-Advisory Agreement. The Interim Agreement is substantially similar to the Current Sub-Advisory Agreement except for the provisions (i) governing the length of, and the ability to terminate, the Interim Agreement; and (ii) requiring that the fees earned under the Interim Agreement must be held in an interest-bearing escrow pending shareholder approval of the Proposed Sub-Advisory Agreement. With respect to the escrow provisions, the amount placed in an escrow account during the term of the Interim Agreement will be paid to Jackson Square if Fund shareholders approve the Proposed Sub-Advisory Agreement. If the Funds’ shareholders do not approve the Proposed Sub-Advisory Agreement, Jackson Square will be paid out of the escrow account the lesser of its costs in performing under the Interim Agreement or the total amount in the escrow account plus interest earned. The Interim Agreement is intended to comply with the rules under the 1940 Act governing interim advisory agreements.
The Proposed Final Sub-Advisory Agreement
Each Board approved the Proposed Sub-Advisory Agreement with respect to its Fund(s) at an in-person meeting on February 18-20, 2014. A copy of the Proposed Sub-Advisory Agreement is contained in Appendix A.
Under the Proposed Sub-Advisory Agreement, DMC will pay Jackson Square a fee for each Fund sub-advised by Jackson Square at the following rates:
| Fund | Sub-Advisory Fee | |||||||||
| 0.325% on first $500 million | ||||||||||
| Delaware U.S. Growth Fund | 0.30% on next $500 million | |||||||||
| 0.275% on next $1.5 billion | ||||||||||
| 0.25% on assets in excess of $2.5 billion | ||||||||||
| ||
| 0.375% on first $500 million | ||
| Delaware Smid Cap Growth Fund | 0.35% on next $500 million | |
| 0.325% on next $1.5 billion | ||
| 0.30% on assets in excess of $2.5 billion | ||
| 0.325% on first $500 million | ||
| Delaware Foundation®Conservative | 0.30% on next $500 million | |
| Allocation Fund | 0.275% on next $1.5 billion | |
| 0.25% on assets in excess of $2.5 billion | ||
| ||
B-1
B-2
| 0.325% on first $500 million | ||||||||||
| Delaware Foundation®Growth | 0.30% on next $500 million | |||||||||
| Allocation Fund | 0.275% on next $1.5 billion | |||||||||
| 0.25% on assets in excess of $2.5 billion | ||||||||||
|
B-3
B-4
Nominating and Corporate Governance Committee Charter
DELAWARE INVESTMENTS FAMILY OF FUNDS
Nominating and Corporate Governance Committee Membership
The Nominating and Corporate Governance Committee (the “Committee”) shall be composed of not less than three members, each of whom shall be independent as defined in Rule 10A-3(b) under the Securities Exchange Act of 1934 and the listing standards of any national securities exchange on which any fund of the Delaware Investments Family of Funds (each a “Fund”) is listed, and the Coordinating Trustee, as an ex officio member. One member of the Committee shall be designated by the Board as Chairperson. The Chairperson and members of the Committee shall have one year terms, renewable for a maximum of six (6) terms. The Chairperson and members of the Committee shall receive such compensation for their service on the Committee as the Board may determine from time to time.
Board Nominations
| ||
| ||
| ||
C-1
Corporate Governance
Other Powers and Responsibilities
C-2
C-3
APPENDIX D — FUNDSHAREBENEFICIALOWNERSHIP BYTRUSTEENOMINEES
Thefollowing tableshows the dollar range of shares of the Funds and theaggregate dollar range of shares of theDelawareInvestments®FamilyModerate
| Thomas L. | Patrick P. | John A. | Anthony D. | Lucinda S. | Ann R. | Thomas F. | Janet L. | J. Richard | ||||||||||
| Fund | Bennett | Coyne | Fry | Knerr | Landreth | Leven | Madison | Yeomans | Zecher | |||||||||
| Delaware Aggressive Allocation Portfolio1 | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware American Services Fund | - | - | - | - | $10,001 - | - | - | - | - | |||||||||
| $50,000 | ||||||||||||||||||
| Delaware Cash Reserve Fund | - | $50,001 - | - | Over | $10,001 - | - | - | - | - | |||||||||
| $100,000 | $100,000 | $50,000 | ||||||||||||||||
| Delaware Conservative Allocation Portfolio2 | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Core Plus Bond Fund | - | $10,001 - | - | - | - | - | - | - | - | |||||||||
| $50,000 | ||||||||||||||||||
| Delaware Corporate Bond Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Diversified Income Fund | - | $10,001 - | - | - | $10,001 - | - | - | - | - | |||||||||
| $50,000 | $50,000 | |||||||||||||||||
| Delaware Dividend Income Fund | - | - | - | - | - | $10,001 - | $1 - | - | - | |||||||||
| $50,000 | $10,000 | |||||||||||||||||
| Delaware Emerging Markets Fund | - | - | - | - | - | - | $1 - | $10,001 - | - | |||||||||
| $10,000 | $50,000 | |||||||||||||||||
| Delaware Extended Duration Bond Fund | - | $10,001 - | - | - | - | - | - | - | - | |||||||||
| $50,000 | ||||||||||||||||||
| Delaware Focus Global Growth Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Foundation®Equity Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Global Real Estate Securities Fund | - | - | - | - | - | - | - | - | - |
D-1
| Thomas L. | Patrick P. | John A. | Anthony D. | Lucinda S. | Ann R. | Thomas F. | Janet L. | J. Richard | ||||||||||
| Fund | Bennett | Coyne | Fry | Knerr | Landreth | Leven | Madison | Yeomans | Zecher | |||||||||
| Delaware Global Value Fund | - | - | - | - | $1 - | - | - | - | - | |||||||||
| $10,000 | ||||||||||||||||||
| Delaware Growth Opportunities Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Healthcare Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware High-Yield Opportunities Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Inflation Protected Bond Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware International Value Equity Fund | - | $50,001 - | - | - | - | $10,001 - | $1 - | - | - | |||||||||
| $100,000 | $50,000 | $10,000 | ||||||||||||||||
| Delaware Large Cap Core Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Large Cap Value Fund | $10,001 - | $50,001 - | Over | - | $10,001 - | $50,001 - | $1 - | - | - | |||||||||
| $50,000 | $100,000 | $100,000 | $50,000 | $100,000 | $10,000 | |||||||||||||
| Delaware Limited-Term Diversified Income Fund | - | Over | - | - | - | - | - | - | - | |||||||||
| $100,000 | ||||||||||||||||||
| Delaware Mid Cap Value Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Minnesota High-Yield Municipal Bond Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Moderate Allocation Portfolio3 | - | $10,001 - | - | - | - | - | $1 - | - | - | |||||||||
| $50,000 | $10,000 | |||||||||||||||||
| Delaware National High-Yield Municipal Bond Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware REIT Fund | - | $10,001 - | $1 - | - | - | - | $1 - | - | - | |||||||||
| (also known as The Real Estate Investment Trust Portfolio) | $50,000 | $10,000 | $10,000 | |||||||||||||||
| Delaware Select Growth Fund | - | - | - | $10,001 - | - | $10,001 - | $1 - | $10,001 - | - | |||||||||
| $50,000 | $50,000 | $10,000 | $50,000 | |||||||||||||||
| Delaware Small Cap Core Fund | - | - | - | - | $10,001 - | - | - | - | - | |||||||||
| $50,000 |
D-2
| Thomas L. | Patrick P. | John A. | Anthony D. | Lucinda S. | Ann R. | Thomas F. | Janet L. | J. Richard | ||||||||||
| Fund | Bennett | Coyne | Fry | Knerr | Landreth | Leven | Madison | Yeomans | Zecher | |||||||||
| Delaware Small Cap Growth Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Small Cap Value Fund | - | $50,001 - | $1 - | $1 - $10,000 | - | $10,001 - | - | - | - | |||||||||
| $100,000 | $10,000 | $50,000 | ||||||||||||||||
| Delaware Tax-Free Arizona Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Tax-Free California Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Tax-Free Colorado Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Tax-Free Idaho Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Tax-Free Minnesota Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Tax-Free Minnesota Intermediate Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Tax-Free Money Fund | - | Over | - | - | - | - | - | - | - | |||||||||
| $100,000 | ||||||||||||||||||
| Delaware Tax-Free New York Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Tax-Free Pennsylvania Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Tax-Free USA Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Tax-Free USA Intermediate Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Trend®Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware U.S. Growth Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Delaware Value®Fund | - | - | - | - | - | - | - | - | - | |||||||||
| Aggregate dollar range of shares of the | $10,001 - | Over | Over | Over | Over | Over | $10,001 - | Over | $10,001 - | |||||||||
| Delaware Investments® Family of Funds: | $50,000 | $100,000 | $100,000 | $100,000 | $100,000 | $100,000 | $50,000 | $100,000 | $50,000 |
D-3
Thefollowing tabledescribes theaggregatecompensationreceived by theIndependentTrustees from each Trust and the totalcompensationreceived from theDelawareInvestments®Funds for which he or she served as aTrustee for the 12-month period ended June 30, 2009. Only theIndependentSmid CapTrusteesreceivedcompensation from the Trust.
| Thomas L. | John A. | Anthony D. | Lucinda S. | Ann R. | Thomas F. | Janet L. | J. Richard | |||||||||
| Trust | Bennett | Fry | Knerr | Landreth | Leven | Madison | Yeomans | Zecher | ||||||||
| Delaware Group®Adviser Funds | $39,430 | $33,839 | $37,907 | $34,772 | $44,904 | $38,304 | $33,159 | $35,323 | ||||||||
| Delaware Group Cash Reserve | $4,600 | $3,950 | $4,426 | $4,064 | $5,246 | $4,473 | $3,876 | $4,122 | ||||||||
| Delaware Group Equity Funds I | $1,409 | $1,234 | $1,063 | $1,182 | $1,101 | $1,207 | $1,061 | $1,102 | ||||||||
| Delaware Group Equity Funds II | $9,968 | $8,569 | $9,594 | $8,838 | $11,397 | $9,748 | $8,475 | $8,957 | ||||||||
| Delaware Group Equity Funds III | $5,289 | $4,546 | $5,075 | $4,704 | $6,047 | $5,167 | $4,524 | $4,756 | ||||||||
| Delaware Group Equity Funds IV | $2,155 | $1,854 | $2,073 | $1,914 | $2,465 | $2,106 | $1,836 | $1,938 | ||||||||
| Delaware Group Equity Funds V | $7,545 | $6,482 | $7,246 | $6,696 | $8,618 | $7,368 | $6,429 | $6,776 | ||||||||
| Delaware Group Foundation Funds | $1,644 | $1,411 | $1,592 | $1,443 | $1,877 | $1,600 | $1,369 | $1,481 | ||||||||
| Delaware Group Global & International Funds | $8,992 | $7,728 | $8,634 | $7,995 | $10,289 | $8,805 | $7,700 | $8,091 | ||||||||
| Delaware Group Government Fund | $2,144 | $1,849 | $2,070 | $1,899 | $2,452 | $2,091 | $1,810 | $1,928 | ||||||||
| Delaware Group Income Funds | $9,618 | $8,235 | $9,230 | $8,457 | $10,932 | $9,337 | $8,073 | $8,604 | ||||||||
| Delaware Group Limited-Term Government Funds | $3,235 | $2,794 | $3,145 | $2,852 | $3,708 | $3,157 | $2,699 | $2,918 | ||||||||
| Delaware Group State Tax-Free Income Trust | $4,619 | $3,957 | $4,431 | $4,067 | $5,250 | $4,477 | $3,877 | $4,129 | ||||||||
| Delaware Group Tax-Free Fund | $9,079 | $7,780 | $8,719 | $7,987 | $10,323 | $8,805 | $7,610 | $8,118 | ||||||||
| Delaware Group Tax-Free Money Fund | $164 | $139 | $156 | $143 | $184 | $157 | $136 | $145 | ||||||||
| Delaware Pooled®Trust | $29,434 | $25,305 | $28,273 | $26,154 | $33,638 | $28,771 | $25,133 | $26,450 | ||||||||
| Voyageur Insured Funds | $1,198 | $1,027 | $1,150 | $1,056 | $1,363 | $1,162 | $1,008 | $1,072 | ||||||||
| Voyageur Intermediate Tax Free Funds | $663 | $569 | $638 | $583 | $754 | $643 | $555 | $593 | ||||||||
| Voyageur Mutual Funds | $3,731 | $3,201 | $3,582 | $3,289 | $4,244 | $3,619 | $3,137 | $3,338 | ||||||||
| Voyageur Mutual Funds II | $2,205 | $1,889 | $2,115 | $1,941 | $2,506 | $2,137 | $1,851 | $1,971 | ||||||||
| Voyageur Mutual Funds III | $1,834 | $1,581 | $1,771 | $1,631 | $2,104 | $1,798 | $1,563 | $1,654 | ||||||||
| Voyageur Tax Free Funds | $5,549 | $4,759 | $5,330 | $4,890 | $6,314 | $5,383 | $4,660 | $4,965 | ||||||||
| TOTAL – 12-month period ended June 30, 2009 | $195,000 | $167,500 | $187,500 | $172,500 | $222,500 | $190,000 | $165,000 | $175,000 |
E-1
APPENDIX F — PRINCIPAL OFFICERS OF THE TRUSTS
| Number of | ||||||||||
| Portfolios | ||||||||||
| Principal | in Fund | Other | ||||||||
| Position(s) | Occupation(s) | Complex | Directorships | |||||||
| Name, Address, | Held with | Length of | During Past | Overseen | Held by | |||||
| and Birth Date | the Trusts | Time Served | 5 Years | by Officer | Officer | |||||
| Patrick P. Coyne | Chairman, | Chairman and | Patrick P. Coyne | 81 | Director — Kaydon | |||||
| 2005 Market Street | President, | Trustee since | has served in | Corp. | ||||||
| Philadelphia, PA | Chief | August 16, | various executive | |||||||
| 19103 | Executive | 2006 | capacities at | |||||||
| Officer, and | different times | |||||||||
| April 1963 | Trustee | President | at Delaware | |||||||
| and Chief | Investments.1 | |||||||||
| Executive | ||||||||||
| Officer since | ||||||||||
| August 1, | ||||||||||
| 2006 | ||||||||||
| David P. O’Connor | Senior Vice | Senior Vice | David P. | 81 | None2 | |||||
| 2005 Market Street | President, | President, | O’Connor has | |||||||
| Philadelphia, PA | General | General | served in various | |||||||
| 19103 | Counsel, and | Counsel, and | executive and | |||||||
| Chief Legal | Chief Legal | legal capacities | ||||||||
| February 1966 | Officer | Officer since | at different times | |||||||
| October 2005 | at Delaware | |||||||||
| Investments. | ||||||||||
| Richard Salus | Senior Vice | Chief | Richard Salus | 81 | None2 | |||||
| 2005 Market Street | President | Financial | has served in | |||||||
| Philadelphia, PA | and Chief | Officer since | various executive | |||||||
| 19103 | Financial | November | capacities at | |||||||
| Officer | 2006 | different times | ||||||||
| October 1963 | at Delaware | |||||||||
| Investments. | ||||||||||
| David F. Connor | Vice | Vice President | David F. Connor | 81 | None2 | |||||
| 2005 Market Street | President, | since | has served as | |||||||
| Philadelphia, PA | Deputy | September | Vice President | |||||||
| 19103 | General | 2000 and | and Deputy | |||||||
| Counsel, and | Secretary | General Counsel | ||||||||
| December 1963 | Secretary | since October | at Delaware | |||||||
| 2005 | Investments since | |||||||||
| 2000. | ||||||||||
| Daniel V. Geatens | Vice | Treasurer | Daniel V. Geatens | 81 | None2 | |||||
| 2005 Market Street | President and | since October | has served in | |||||||
| Philadelphia, PA | Treasurer | 2007 | various capacities | |||||||
| 19103 | at different times | |||||||||
| at Delaware | ||||||||||
| October 1972 | Investments. | |||||||||
F-1
| 0.35% on next $500 million | ||||
F-2
APPENDIX G — AUDITOR INFORMATION
The following table shows, for each Trust:
Audit Fees. The aggregate fees billed for each of the last two fiscal years for professional services rendered by E&Y for the audit of the Trust’s annual financial statements and for review of the financial statements included in the Trust’s annual reports or for services that normally are provided by E&Y in connection with statutory and regulatory filings or engagements for those fiscal years.
Tax Fees. The aggregate fees billed in each of the last two fiscal years for professional services rendered by E&Y for tax compliance, tax advice and tax planning.
Affiliate Audit-Related Fees. The aggregate fees billed by E&Y for services relating to the performance of the audit of the financial statements of DMC and other service providers under common control with DMC and that relate directly to the operations or financial reporting of the Trusts.
Aggregate Non-Audit Fees. The aggregate non-audit fees billed by E&Y for services rendered to the Trusts and to DMC and other service providers under common control with DMC.
| Affiliate | Aggregate | |||||||
| Audit | Tax | Audit- | Non- | |||||
| Trust | Fees | Fees | Related Fees | Audit Fees | ||||
| Delaware Group®Adviser Funds | ||||||||
| 10/31/08 | $174,400 | $72,465 | $19,074 | $324,467 | ||||
| 10/31/07 | $117,000 | $46,900 | $19,074 | $301,262 | ||||
| Delaware Group Cash Reserve | ||||||||
| 3/31/09 | $27,000 | $9,150 | $19,074 | $261,152 | ||||
| 3/31/08 | $23,800 | $8,650 | $19,074 | $263,012 | ||||
| Delaware Group Equity Funds I | ||||||||
| 10/31/08 | $25,700 | $6,300 | $19,074 | $258,302 | ||||
| 10/31/07 | $17,100 | $5,350 | $19,074 | $259,712 | ||||
| Delaware Group Equity Funds II | ||||||||
| 11/30/08 | $91,800 | $34,300 | $19,074 | $288,302 | ||||
| 11/30/07 | $86,100 | $35,600 | $19,074 | $289,962 | ||||
| Delaware Group Equity Funds III | ||||||||
| 6/30/09 | $49,100 | $14,950 | $19,074 | $264,064 | ||||
| 6/30/08 | $64,700 | $20,550 | $19,074 | $274,912 |
G-1
| Affiliate | Aggregate | |||||||
| Audit | Tax | Audit- | Non- | |||||
| Trust | Fees | Fees | Related Fees | Audit Fees | ||||
| Delaware Group® Equity Funds IV | ||||||||
| 9/30/08 | $40,900 | $10,350 | $19,074 | $262,352 | ||||
| 9/30/07 | $40,500 | $13,800 | $19,074 | $268,162 | ||||
| Delaware Group Equity Funds V | ||||||||
| 11/30/08 | $93,200 | $32,650 | $19,074 | $286,652 | ||||
| 11/30/07 | $89,800 | $34,650 | $19,074 | $289,012 | ||||
| Delaware Group Foundation Funds | ||||||||
| 9/30/08 | $49,000 | $14,380 | $19,074 | $266,382 | ||||
| 9/30/07 | $32,700 | $7,250 | $19,074 | $261,612 | ||||
| Delaware Group Global & International Funds | ||||||||
| 11/30/08 | $94,100 | $44,490 | $19,074 | $298,492 | ||||
| 11/30/07 | $96,400 | $47,485 | $19,074 | $301,847 | ||||
| Delaware Group Government Fund | ||||||||
| 7/31/09 | $26,600 | $6,700 | $19,074 | $258,702 | ||||
| 7/31/08 | $23,600 | $5,700 | $19,074 | $260,062 | ||||
| Delaware Group Income Funds | ||||||||
| 7/31/08 | $80,700 | $25,000 | $19,074 | $277,002 | ||||
| 7/31/07 | $79,200 | $26,700 | $19,074 | $281,062 | ||||
| Delaware Group Limited-Term Government Funds | ||||||||
| 12/31/08 | $17,200 | $4,950 | $19,074 | $258,952 | ||||
| 12/31/07 | $15,900 | $4,750 | $19,074 | $259,112 | ||||
| Delaware Group State Tax-Free Income Trust | ||||||||
| 2/28/09 | $28,000 | $9,550 | $19,074 | $261,552 | ||||
| 2/29/08 | $26,900 | $10,050 | $19,074 | $264,412 | ||||
| Delaware Group Tax-Free Fund | ||||||||
| 8/31/08 | $54,600 | $18,500 | $19,074 | $270,502 | ||||
| 8/31/07 | $62,400 | $22,200 | $13,400 | $270,888 | ||||
| Delaware Group Tax-Free Money Fund | ||||||||
| 4/30/09 | $9,900 | $1,950 | $19,074 | $253,952 | ||||
| 4/30/08 | $10,000 | $1,950 | $19,074 | $256,312 |
G-2
| Affiliate | Aggregate | |||||||
| Audit | Tax | Audit- | Non- | |||||
| Trust | Fees | Fees | Related Fees | Audit Fees | ||||
| Delaware Pooled®Trust | ||||||||
| 10/31/08 | $372,800 | $147,505 | $19,074 | $399,507 | ||||
| 10/31/07 | $368,500 | $129,520 | $19,074 | $383,882 | ||||
| Voyageur Insured Funds | ||||||||
| 8/31/08 | $14,300 | $3,750 | $19,074 | $255,752 | ||||
| 8/31/07 | $14,000 | $3,950 | $13,400 | $252,638 | ||||
| Voyageur Intermediate Tax Free Funds | ||||||||
| 8/31/08 | $11,500 | $2,550 | $19,074 | $254,552 | ||||
| 8/31/07 | $11,000 | $2,450 | $13,400 | $251,138 | ||||
| Voyageur Mutual Funds | ||||||||
| 8/31/08 | $61,700 | $14,650 | $19,074 | $266,652 | ||||
| 8/31/07 | $60,200 | $14,850 | $13,400 | $263,538 | ||||
| Voyageur Mutual Funds II | ||||||||
| 8/31/08 | $18,200 | $5,450 | $19,074 | $257,452 | ||||
| 8/31/07 | $17,900 | $5,750 | $13,400 | $254,438 | ||||
| Voyageur Mutual Funds III | ||||||||
| 4/30/09 | $29,400 | $7,900 | $19,074 | $259,902 | ||||
| 4/30/08 | $30,600 | $9,000 | $19,074 | $263,362 | ||||
| Voyageur Tax Free Funds | ||||||||
| 8/31/08 | $31,300 | $10,950 | $19,074 | $262,952 | ||||
| 8/31/07 | $45,700 | $14,650 | $13,400 | $263,338 |
G-3
APPENDIX H — PRE-APPROVAL POLICIES AND PROCEDURES
The Trust’s Audit Committee has adopted Pre-Approval Policies and Procedures, which are set forth below.
AUDIT COMMITTEE OF THEDELAWARE INVESTMENTS FAMILY OF FUNDSPROCEDURES FOR ENGAGEMENTOFINDEPENDENT AUDITORSFOR AUDIT AND NON-AUDIT SERVICES
I.Objective
These procedures (the “Procedures”) set forth the understanding of the Audit Committee of the Delaware Investments Family of Funds (the “Funds”) regarding the retention of the Funds’ independent auditors (the “Auditors”) to provide: (i) audit and permissible non-audit services to the Funds; (ii) non-audit services to the Funds’ investment advisers, and to any “control affiliates” (as defined below) of such investment advisers, that relate directly to the Funds’ operations or financial reporting; and (iii) certain other non-audit services to the Funds’ investment advisers and their control affiliates. The purpose of these Procedures is to ensure the Auditors’ independence and objectivity with respect to their audit services to the Funds.
II.Approval Procedures
A.Services provided to the Funds.
The engagement of the Auditors to provide audit or non-audit services to the Funds (referred to herein as “Fund Services”) shall be approved by the Funds’ Audit Committee prior to the commencement of any such engagement.
The engagement of the Auditors to provide the Fund Services listed
The engagement of the Auditors to provide any other Fund Services shall require prior approval by the Audit Committee and/or by the Chairperson or another member of the Audit Committee in accordance with Section IV of these Procedures.
H-1
The Auditors shall report to the Audit Committee at each of its regular meetings regarding all Fund Services initiated since the last such report was rendered, including a general description of the services and projected fees, and the means by which such Fund Services were approved by the Audit Committee (i.e., whether listednext $1.5 billion
B.Fund-related services provided to Adviser entities.
The engagement of the Auditors to provide non-audit services to the Funds’ investment advisers, or to any control affiliates of such investment advisers, that relate directly to the Funds’ operations or financial reporting (referred to herein as “Fund-Related Adviser Services”) shall be approved by the Funds’ Audit Committee prior to the commencement of any such engagement. For purposes of these Procedures, the term “control affiliate” means any entity controlling, controlled by, or under common control with a Fund’s investment adviser that provides ongoing services to a Fund, and the term “investment adviser” is deemed to exclude any unaffiliated sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by a Fund’s investment adviser. Attached as Annex II is a list of parties deemed to be either an investment adviser to a Fund or a control affiliate of any such investment adviser (collectively referred to herein as “Adviser entities”) for purposes of these Procedures.
The engagement of the Auditors to provide the Fund-Related Adviser Services listed on Annex I-B, which include services customarily required by one or more Adviser entities in the ordinary course of their operations, is hereby approved by the Audit Committee.
The engagement of the Auditors to provide any other Fund-Related Adviser Services shall require prior approval by the Audit Committee and/or by the Chairperson or another member of the Audit Committee in accordance with Section IV of these Procedures.
The Auditors shall report to the Audit Committee at each of its regular meetings regarding all Fund-Related Adviser Services initiated since the last such report was rendered, including a general description of the services and projected fees, and the means by which such Fund-Related Adviser Services were approved by the Audit Committee (i.e., whether listed on Annex I-B or specifically approved in accordance with Section IV).
C.Certain other services provided to Adviser entities.
The Audit Committee recognizes that there are cases where services proposed to be provided by the Auditors to Adviser entities are not Fund-Related Adviser Services within the meaning of these Procedures, but nonetheless may be relevant to
H-2
the Committee’s ongoing evaluation of the Auditors’ independence and objectivity with respect to their audit services to the Funds. As a result, in all cases where an Adviser entity engages the Auditors to provide non-audit services that are not Fund Services or Fund-Related Adviser Services and the projected fees for such engagement exceed $25,000, the Auditors will notify the Audit Committee not later than its next meeting. Such notification shall include a general description of the services to be provided, the entity that is to be the recipient of such services and the projected fees.
III.Internal Controls
The Audit Committee expects the Auditors to implement and maintain effective internal controls to: (A) monitor the Auditors’ independence; (B) prevent the Auditors from providing any impermissible non-audit services to the Funds; (C) prevent the Auditors from providing any Fund Services or Fund-Related Adviser Services without first obtaining assurances that any pre-approval required by these Procedures has been obtained; and (D) tabulate and calculate its fees that are required to be disclosed annually in compliance with Independence Standards Board No. 1.
The Audit Committee also expects Delaware Management Company (“DMC”) to develop, implement and maintain effective internal controls with respect to (B) and (C) above.
IV.Pre-Approval Process
Pre-approval procedures for the engagement of the Auditors to provide any Fund Services not listed on Annex I-A to these Procedures or any Fund-Related Adviser Services not listed Annex I-B to these Procedures shall be as follows:
a brief written request shall be prepared detailing the proposed engagement with explanation as to why the work is proposed to be performed by the Auditors (e.g., particular expertise, timing, etc.);the request should be addressed to the Audit Committee with copies to the Funds’ Chief Financial Officer and Chief Legal Officer;if time reasonably permits, the request shall be included in the meeting materials for the upcoming Audit Committee meeting when the Committee will consider the proposed engagement and approve or deny the request;should the request require more immediate action, the written request should be e-mailed, faxed or otherwise delivered to the Audit Committee Chairperson, with copies to the Funds’ Chief Financial Officer and Chief Legal Officer, followed by a telephone call to the Chairperson of
H-3
the Audit Committee. The Chairperson of the Audit Committee may approve or deny the request on behalf of the Audit Committee, or, in the Chairperson’s discretion, determine to call a special meeting of the Audit Committee for the purpose of considering the proposal. Should the Chairperson of the Audit Committee be unavailable, any other member of the Audit Committee may serve as an alternate for the purpose of approving or denying the request.
V.Scope of Procedures
These Procedures shall apply to both direct and indirect engagements of the Auditors. Indirect engagements are situations where the Auditors are engaged by a service provider to a Fund or Adviser entity at an Adviser entity’s explicit or implicit direction or recommendation (e.g., the engagement of the Auditors by counsel to an Adviser entity to provide services relating to a Fund or Adviser entity).
VI.Periodic Certification by Auditors
In connection with each regular Audit Committee meeting, the Auditors shall certify in writing to the Audit Committee that they have complied with all provisions of these Procedures.
VII.Amendments; Annual Approval by Audit Committee
These Procedures may be amended from time to time by the Audit Committee. Prompt notice of any amendments will be provided to the Auditors and DMC. These Procedures shall be reviewed and approved at least annually by the Audit Committee. Each approval of these Procedures shall be deemed to constitute a new prospective approval of those services listed above as of the date of such approval.
Initially Approved: December 15, 2005Last Approved: November 20, 2008
ANNEX I-A - PRE-APPROVED FUND SERVICES
H-4
H-5
ANNEX I-B - PRE-APPROVED FUND-RELATED ADVISER SERVICES
ANNEX II - ADVISER ENTITIES
Delaware Management Business Trust; Delaware Distributors, L.P.; Lincoln Financial Distributors, Inc.; Delaware Service Company, Inc.; Retirement Financial Services, Inc.
H-6
APPENDIX I — FORM OF NEW INVESTMENT ADVISORY AGREEMENTS
AGREEMENT, made by and between[NAME OF INVESTMENT COMPANY], a Delaware statutory trust (the “Trust”), on behalf of each series of shares of beneficial interest of the Trust that is listed on Exhibit A to this Agreement, as that Exhibit may be amended from time to time (each such series of shares is hereinafter referred to as a “Fund” and, together with other series of shares listed on such Exhibit, the “Funds”), andDELAWARE MANAGEMENT COMPANY, a series of Delaware Management Business Trust, a Delaware statutory trust (the “Investment Manager”).
WITNESSETH:
WHEREAS, the Trust has been organized and operates as an investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”);
WHEREAS, each Fund engages in the business of investing and reinvesting its assets in securities;
WHEREAS, the Investment Manager is registered under the Investment Advisers Actexcess of 1940, as amended (the “Advisers Act”), as an investment adviser and engages$2.5 billion
| Fund | Sub-Advisory Fee | |
| 0.325% on first $500 million | ||
| Delaware VIP®U.S. Growth Series | 0.30% on next $500 million | |
| 0.275% on next $1.5 billion | ||
| 0.25% on assets in
| ||
| 0.375% on | ||
| Delaware Select Growth Fund | 0.35% on next $500 million | |
| 0.325% on next $1.5 billion | ||
| 0.30% on assets in excess of
| ||
Sub-Advisory Services.The Proposed Sub-Advisory Agreement generally provides that, subject to the direction and control of a Trust’s Board and DMC, Jackson Square shall (i) regularly make decisions as to what securities and other instruments to purchase and sell on behalf of each Fund; (ii) effect the purchase and sale of those investments in furtherance of each Fund’s objective(s) and strategies; and (iii) furnish the applicable Board with information and reports regarding each Fund’s investments. Subject to the primary objective of obtaining best execution, Jackson Square may place orders for the purchase and sale of portfolio securities and other instruments with broker/dealers that provide brokerage and research services to DMC, Jackson Square, and each Fund.
The Proposed Sub-Advisory Agreement provides that Jackson Square’s services to the Funds are not exclusive, and Jackson Square may render services to other persons or entities, including other mutual funds.
Limitation on Liability.Under the Proposed Sub-Advisory Agreement, in the absence of willful misfeasance, bad faith, gross negligence, or a reckless disregard of the performance of its duties as a sub-adviser to the Trusts, on behalf of the Funds, neither Jackson Square nor any of its controlling persons, officers, directors, employees, or agents (“Sub-adviser Related Persons”) shall be liable to the Trusts, the Funds, DMC, or any shareholder of the Trusts for any action or omission in the course of, or connected with, rendering services thereunder or for any losses that may be sustained in the purchase, holding or sale of any security, or otherwise.
Indemnity.Under the Proposed Sub-Advisory Agreement, DMC shall indemnify Jackson Square and Sub-adviser Related Persons to the fullest extent permitted by law against any and all loss, damage, judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys’ fees (collectively, “Losses”), incurred by Jackson Square or Sub-adviser Related Persons arising from or in connection with the Proposed Sub-Advisory Agreement or the performance by Jackson Square or Sub-adviser Related Persons of the duties under the Proposed Sub-Advisory Agreement. However, DMC is only required to indemnify for Losses that arise out
of DMC’s willful misfeasance, bad faith, gross negligence, or reckless disregard in performing its responsibilities under the Proposed Sub-Advisory Agreement. Subject to the foregoing, Losses that may be based upon any untrue statement of a material fact contained in the Trusts’ Registration Statements or the omission to state therein a material fact that was known or that should have been known and was required to be stated make the statement not misleading, unless such statement or omission was made in reasonable reliance upon information furnished to DMC or the Trusts by Jackson Square specifically for inclusion in the Trusts’ registration statements or any amendment thereof or supplement thereto, except to the extent any such Losses result from willful misfeasance, bad faith, gross negligence, or reckless disregard on the part of Jackson Square in the performance of any of its duties under, or in connection with, the Proposed Sub-Advisory Agreement.
Term and Continuance.If approved by shareholders of a Fund, the Proposed Sub-Advisory Agreement will have an initial two year term, and will only continue in effect from year to year if its continuance is specifically approved at least annually by both (a) the vote of a majority of the respective Trust’s Board or a 1940 Act Majority (as defined below) of the outstanding voting securities of the applicable Fund, and (b) the vote of a majority of the Trustees of a Trust who are not “interested persons” as defined by the 1940 Act (the “Independent Trustees”) cast in person at a meeting called for the purpose of voting on the approval.
A “1940 Act Majority” of the outstanding voting securities of a Fund means the lesser of (i) 67% or more of the voting securities of the Fund that are present in person or by proxy at a meeting if holders of shares representing more than 50% of the outstanding voting securities of the Fund are present in person or by proxy, or (ii) more than 50% of the outstanding voting securities of the Fund.
Termination.The Proposed Sub-Advisory Agreement generally provides that it may be terminated at any time, without the payment of any penalty, (i) by DMC upon giving sixty days’ written notice to Jackson Square, or (ii) by a Trust upon giving sixty days’ written notice to Jackson Square, provided that the termination by the Trust is directed or approved by the vote of a majority of the Trust’s Board or by the vote of a 1940 Act Majority of the outstanding voting securities of the applicable Fund. The Proposed Sub-Advisory Agreement may also be terminated by Jackson Square on sixty days’ written notice. As required by the 1940 Act, the Proposed Sub-Advisory Agreement will also immediately terminate in the event of its “assignment” (as defined in the 1940 Act). Furthermore, the Proposed Sub-Advisory Agreement will terminate upon the termination of the investment advisory agreement between a Trust, on behalf of a Fund, and DMC.
BOARD CONSIDERATIONS IN APPROVING THE PROPOSED
SUB-ADVISORY AGREEMENT
At an in-person meeting held on February 18-20, 2014, the Funds’ Boards, including a majority of the Independent Trustees, discussed and unanimously approved the Current Sub-Advisory Agreement between DMC and DIAS, as well as the Interim Agreement and the Proposed Sub-Advisory Agreement between DMC and Jackson Square (collectively, the “Sub-Advisory Agreements”). Concluding that approval of the Sub-Advisory Agreements would be in the best interests of each Fund and its shareholders, the Boards also directed that the Proposed Sub-Advisory Agreement be submitted to each Fund’s shareholders for approval, and recommended that shareholders vote“FOR” approval of the Proposed Sub-Advisory Agreement.
In considering whether to approve the Proposed Sub-Advisory Agreement, the Independent Trustees consulted with independent legal counsel and Fund counsel, and discussed, among other things, the legal standards applicable to their review of the Proposed Sub-Advisory Agreement and certain other considerations relevant to their deliberations on whether to approve the Proposed Sub-Advisory Agreement. At the in-person meeting, the Trustees discussed the Transaction and the resulting termination of the Current Sub-Advisory Agreement. The Trustees discussed the fact that the Current Sub-Advisory Agreement and the Proposed Sub-Advisory Agreement are virtually identical. After reviewing the written materials provided by Jackson Square, the Independent Trustees discussed materials provided to them by their independent legal counsel with respect to their consideration of the Proposed Sub-Advisory Agreement.
In connection with the Trustees’ review of the Proposed Sub-Advisory Agreement, DMC and/or Jackson Square advised the Trustees about a variety of matters, including the following:
The Transaction will have no effect on Jackson Square or the Focus Growth Team and there will be no adverse changes in the nature, quality, or extent of services currently provided by Jackson Square to the Funds and their shareholders because the Funds will retain the same portfolio management team;
The Transaction will not affect the level of expenses currently in effect for the Funds because the Funds’ expense ratios will not change as a result of the Transaction and Jackson Square will be compensated by DMC; and
The terms and conditions of the Proposed Sub-Advisory Agreement, including the Funds’ contractual fee rates under the Proposed Sub-Advisory Agreement, will remain the same as the Current Sub-Advisory Agreement.
Certain of these considerations are discussed in more detail below.
In making their decision relating to the approval of the Proposed Sub-Advisory Agreement, the Trustees gave attention to all information furnished. The following discussion, however, identifies the primary factors taken into account by the Trustees and the conclusions reached in approving the Proposed Sub-Advisory Agreement.
Nature, Extent, and Quality of Service. The Trustees considered the continuity of investment management to be provided to the Funds and their shareholders. Following the close of the Transaction, the Focus Growth Team will continue to provide portfolio management services to the Funds as owners or employees of Jackson Square. In reviewing the nature, extent, and quality of services, the Trustees considered that the Proposed Sub-Advisory Agreement will be virtually identical to the Current Sub-Advisory Agreement (as discussed above under “The Proposed Sub-Advisory Agreement”). They also considered that the same personnel will be providing portfolio management services to the Funds following the completion of the Transaction, and therefore, considered the many reports furnished to them throughout 2012 and 2013 at regular Board meetings covering matters such as the relative performance of the Funds, and the compliance of portfolio managers with the investment policies, strategies, and restrictions for the Funds. The Trustees were pleased with the emphasis placed on research and risk management in the investment process. The Trustees concluded that, because both the services provided under, and the terms of, the Proposed Sub-Advisory Agreement were generally identical to those under the Current Sub-Advisory and Interim Agreements, they remained satisfied with the nature, extent, and quality of the overall services to be provided by Jackson Square.
In addition, the Trustees considered that in connection with the Transaction, DIAP and Jackson Square would enter into a transition services agreement. Under the terms of this agreement, DIAP and certain of its affiliates would provide compliance and other administrative support to Jackson Square for an 18-month period following the close of the Transaction.
Investment Performance. The Trustees considered the overall investment performance of the Focus Growth Team and the Funds. The Trustees placed significant emphasis on the investment performance of the Funds in view of its importance to shareholders. The Trustees reviewed reports prepared by Lipper Inc. (“Lipper”) for each Fund that showed the Fund’s investment performance as of March 31, 2013 in comparison to a group of funds selected by Lipper as being similar to the Fund (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest performance ranked last. The highest/best
performing 25% of funds in the Performance Universe made up the first quartile; the next 25% made up the second quartile; the next 25% made up the third quartile; and the poorest/worst performing 25% of funds in the Performance Universe made up the fourth quartile. Annualized investment performance for the Funds was shown for the past 1-, 3-, 5-, and 10-year periods, as applicable, compared to that of the Performance Universe. The Trustees’ objective was that the Fund’s performance for the periods considered be at or above the median of its Performance Universe. In addition, the Boards reviewed more recent Lipper data that had been provided at the quarterly Board meetings held since March 31, 2013. With respect to each Fund’s performance as of December 31, 2013, they noted:
Delaware Focus Global Growth Fund – The Performance Universe for the Fund consisted of the Fund and all retail and institutional global multi-cap growth funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one-year period was in the third quartile of its Performance Universe. The report further showed that the Fund’s total return for the three-year period was in the second quartile of its Performance Universe, and the Fund’s total return for the five-year period was in the first quartile of its Performance Universe.
The Large Cap Growth Equity Portfolio – The Performance Universe for the Portfolio consisted of the Portfolio and all retail and institutional large-cap growth funds as selected by Lipper. The Lipper report comparison showed that the Portfolio’s total return for the one-year period was in the second quartile of its Performance Universe. The report further showed that the Portfolio’s total return for the three- and five-year periods was in the first quartile of its Performance Universe.
Delaware U.S. Growth Fund – The Performance Universe for the Fund consisted of the Fund and all retail and institutional large-cap growth funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one-year period was in the second quartile of its Performance Universe. The report further showed that the Fund’s total return for the three- and five-year periods was in the first quartile of its Performance Universe, and the Fund’s total return for the ten-year period was in the second quartile of its Performance Universe.
The Focus Smid-Cap Growth Equity Portfolio– The Performance Universe for the Portfolio consisted of the Portfolio and all retail and institutional mid-cap growth funds as selected by Lipper. The Lipper report comparison showed that the Portfolio’s total return for one-, three-, five-, and ten-year periods was in the first quartile of its Performance Universe.
Delaware Smid Cap Growth Fund – The Performance Universe for the Fund consisted of the Fund and all retail and institutional mid-cap growth funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one-, three-, five-, and ten-year periods was in the first quartile of its Performance Universe.
The Select 20 Portfolio – The Performance Universe for the Portfolio consisted of the Portfolio and all retail and institutional multi-cap growth funds as selected by Lipper. The Lipper report comparison showed that the Portfolio’s total return for the one-year period was in the fourth quartile of its Performance Universe. The report further showed that the Portfolio’s total return for the three- and five-year periods was in the first quartile of its Performance Universe, and the Portfolio’s total return for the ten-year period was in the third quartile of its Performance Universe.
Delaware Select Growth Fund – The Performance Universe for the Fund consisted of the Fund and all retail and institutional multi-cap growth funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one-year period was in the fourth quartile of its Performance Universe. The report further showed that the Fund’s total return for the three-, five-, and ten-year periods was in the first quartile of its Performance Universe.
Delaware VIP® U.S. Growth Series – The Performance Universe for the Series consisted of the Series and all large-cap growth funds underlying variable insurance products as selected by Lipper. The Lipper report comparison showed that the Series’ total return for the one-year period was in the second quartile of its Performance Universe. The report further showed that the Series’ total return for the three- and five-year periods was in the first quartile of its Performance Universe, and the Series’ total return for the ten-year period was in the second quartile of its Performance Universe.
Delaware VIP Smid Cap Growth Series – The Performance Universe for the Series consisted of the Series and all mid-cap growth funds underlying variable insurance products as selected by Lipper. The Lipper report comparison showed that the Series’ total return for the one-, three-, five-, and ten-year periods was in the first quartile of its Performance Universe.
Delaware Foundation® Conservative Allocation Fund – The Performance Universe for the Fund consisted of the Fund and all retail and institutional mixed-asset target allocation conservative funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one- and three-year periods was in the second quartile of its Performance Universe. The report further showed that the Fund’s total return for the five- and ten-year periods was in the first quartile of its Performance Universe.
Delaware Foundation® Growth Allocation Fund – The Performance Universe for the Fund consisted of the Fund and all retail and institutional mixed-asset target allocation growth funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one- and three-year periods was in the third quartile of its Performance Universe. The report further showed that the Fund’s total return for the five- and ten-year periods was in the second quartile of its Performance Universe.
Delaware Foundation® Moderate Allocation Fund – The Performance Universe for the Fund consisted of the Fund and all retail and institutional mixed-asset target allocation moderate funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one- and three-year periods was in the third quartile of its Performance Universe. The report further showed that the Fund’s total return for the five- and ten-year periods was in the second quartile of its Performance Universe.
The Trustees noted that they were satisfied with the overall performance of the Funds. Moreover, the Trustees concluded that the Transaction was unlikely to have any effect on Jackson Square’s management of the Funds or their investment performance because the current portfolio management personnel will continue to provide portfolio management services to the Funds.
Comparative Expenses. The Trustees also evaluated expense comparison data for each Fund. Jackson Square provided the Trustees with information on pricing levels and fee structures for each Fund and comparative funds. The Trustees noted that Jackson Square’s fee will paid by DMC, not by the Funds. They also focused on the comparative analysis of the effective management fees (including sub-advisory fees) and total expense ratios of each Fund versus the effective management fees (including sub-advisory fees) and expense ratios of a group of funds selected by Lipper as being similar to each Fund (the “Expense Group”). In reviewing comparative costs, each Fund’s contractual management fee (including sub-advisory fees) and the actual management fee incurred by a Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the applicable Fund) and actual management fees (as reported by each fund) of other funds within the Expense Group. Each Fund’s total expenses were also compared with those of its Expense Group. The Trustees’ objective was for a Fund’s total expense ratio to be competitive with that of the funds in the Expense Group. They concluded that, because the terms of the Proposed Sub-Advisory Agreement were not substantially changing from the terms of the Current Sub-Advisory and Interim Agreements, including the sub-advisory fee rate paid by DMC on behalf of each Fund, each Fund’s expenses were satisfactory.
Management Profitability. Jackson Square provided a pro forma profitability analysis to the Trustees, and the Trustees considered the level of profits expected to be realized by Jackson Square. The Trustees considered the extent to which Jackson Square might derive ancillary benefits from the Funds’ operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as Sub-adviser to the Funds and the benefits from allocation of the Funds’ brokerage to improve trading efficiencies. The Trustees concluded that the sub-advisory fees were reasonable in light of the services to be rendered.
Economies of Scale. The Trustees considered whether economies of scale would be realized by Jackson Square and the extent to which any economies of scale would be reflected in the level of sub-advisory fees). The Trustees considered the fact that several of the Funds had already reached breakpoints in their management fees.
Fall-Out Benefits. The Board considered that Jackson Square may derive reputational, strategic and other benefits from its association with the Funds, and evaluated the extent to which Jackson Square might derive ancillary benefits from Fund operations, including the potential for procuring additional business as a result of its role as a service provider to the Funds and the benefits from allocation of Fund brokerage to improve trading efficiencies. However, the Trustees concluded that (i) such benefits did not impose a cost or burden on the Funds or their shareholders, and (ii) such benefits would probably have an indirectly beneficial effect on the Funds and their shareholders because of the added importance that Jackson Square might attach to the Funds as a result of the fall-out benefits that the Funds conveyed.
Conclusion. After further discussion, each Board, including a majority of its Independent Trustees, approved the Proposed Sub-Advisory Agreement. Each Board concluded that the sub-advisory fee rate is reasonable in relation to the services expected to be provided and that execution of the Proposed Sub-Advisory Agreement is in the best interests of the shareholders of each Fund. The Trustees concluded that the sub-advisory fee and total expense ratio were at acceptable levels in light of the quality of services expected to be provided to the Funds and in comparison to those of the Funds’ peer groups.
Section 15(f) of the 1940 Act
The Boards have been advised that DMBT intends to rely on Section 15(f) of the 1940 Act, which provides a non-exclusive safe-harbor whereby an owner (such as DMBT) of an investment adviser (such as DMC) to an investment company (such as a Fund) may receive payment or benefit in connection with the sale of an interest in the investment adviser if two conditions are satisfied. The first condition is that during the three-year period following the transaction, at least 75% of the investment company’s board must not be “interested persons” (as defined in the 1940 Act) of the investment adviser or its predecessor. Each Board currently meets this
test and is expected to do so after the Transaction is completed. Second, no “unfair burden” can be imposed on the investment company as a result of the transaction. An “unfair burden” includes any arrangement during the two-year period after the transaction where the investment adviser (or predecessor or successor adviser), or any of its “interested persons” (as defined in the 1940 Act), receive or is entitled to receive any compensation, directly or indirectly, (i) from any person in connection with the purchase or sale of securities or other property to, from or on behalf of the investment company (other than bona fide ordinary compensation as principal underwriter for the investment company) or (ii) from the investment company or its shareholders (other than fees for bona fide investment advisory or other services). DMBT has agreed as part of the Transaction Agreement that, following the closing of the Transaction, to the extent within its control, it will not take or fail to take (and will not cause its affiliates to take or fail to take) any action, if such action or failure to take action would have the effect, directly or indirectly, of causing the requirements of Section 15(f) of the 1940 Act not to be met with respect to the Transaction. In that regard, from and after the closing of the Transaction and to the extent within its control, DMBT has agreed to conduct its business (and to cause each of its affiliates to conduct its business) so as to assure that the two conditions are satisfied.
Required vote
To become effective, the Proposed Sub-Advisory Agreement must be approved by a 1940 Act Majority vote of each Fund’s outstanding voting securities. The Proposed Sub-Advisory Agreement was approved separately by each Trust’s Independent Trustees and Board as a whole, on behalf of each Fund, after consideration of all factors that it determined to be relevant to its deliberations, including those discussed above. The Boards also determined to submit the Proposed Sub-Advisory Agreement for consideration by the shareholders of the Funds. If the shareholders of a Fund do not approve the Proposed Sub-Advisory Agreement, the Fund’s Board will consider other possible courses of action for the Fund, including having DMC assume full portfolio management of the Fund as the investment adviser.
FOR THE REASONS DISCUSSED ABOVE, THE BOARDS OF TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR THE APPROVAL OF THE PROPOSED SUB-ADVISORY AGREEMENT.
VOTING INFORMATION
How will shareholder voting be handled?
Only shareholders of record of the Funds at the close of business on March 20, 2014 (the “Record Date”), will be entitled to notice of, and to vote at, the Meeting on the Proposal described in this Proxy Statement. Shareholders will be entitled to one vote for each full share and a fractional vote for each fractional share that they hold. If sufficient votes to approve the Proposal is not received by the date of the Meeting, the Meeting may be adjourned to permit further solicitations of proxies. The persons named as proxies on the enclosed proxy card will vote their proxies in their discretion on questions of adjournment and any other items (other than the Proposal) that may properly come before the Meeting. A majority of the votes cast by shareholders of a Fund present in person or by proxy at the Meeting (whether or not sufficient to constitute a quorum for the Fund) may adjourn the Meeting. The Meeting may also be adjourned by the Chairperson of the Meeting.
Abstentions will be counted for purposes of determining whether a quorum is present at the Meeting. Abstentions will have the same effect as a vote “AGAINST” the Proposal. Because (i) the Proposal is expected to be classified as “non-routine” by the New York Stock Exchange (“NYSE”), and therefore may not be voted in the discretion of NYSE member brokers, and (ii) there are no “routine” proposals to be presented at the Meeting, the Funds do not expect to receive any broker non-votes.
How do I ensure my vote is accurately recorded?
You may attend the Meeting and vote in person. You may also vote by completing, signing, and returning the enclosed proxy card in the enclosed postage-paid envelope, or by telephone or through the Internet. If you return your signed proxy card or vote by telephone or through the Internet, your vote will be officially cast at the Meeting by the persons appointed as proxies. A proxy card is, in essence, a ballot. If you sign and date the proxy card but give no voting instructions, your shares will be voted “FOR” the Proposal. Your proxies will also be voted in the discretion of the persons appointed as proxies on any other matters that may properly come before the Meeting or any adjournment or postponement of the Meeting, although management of the Funds does not expect any such matters to come before the Meeting. If your shares are held of record by a broker/dealer and you wish to vote in person at the Meeting, you must obtain a legal proxy from the broker of record and present it at the Meeting.
May I revoke my proxy?
You may revoke your proxy at any time before it is voted by sending a written notice to a Fund expressly revoking your proxy, by signing and forwarding to the Fund a later-dated proxy, or by attending the Meeting and voting in person. If your shares are held in the name of your broker, you will have to make arrangements with your broker to revoke a previously executed proxy. If you wish to vote in-person at the Meeting, you must obtain a legal proxy from your broker of record and present it at the Meeting.
What other matters will be voted upon at the Meeting?
The Boards do not intend to bring any matters before the Meeting other than as described in this Proxy Statement. Because the Meeting is a special meeting, the Boards do not anticipate that any other matters will be brought before the Meeting by others. However, if any other matters legally come before the Meeting, proxies will be voted in the discretion of the persons appointed as proxies.
Who is entitled to vote?
Only shareholders of record on the Record Date will be entitled to vote at the Meeting on the matter described in this Proxy Statement. As of the Record Date, each Fund’s common shares outstanding were as follows:
| Fund | Number of Common Shares Outstanding | |||
| Delaware U.S. Growth Fund | 118,403,732.52 | |||
| Delaware Smid Cap Growth Fund | 44,755,820.84 | |||
| Delaware Focus Global Growth Fund | 6,379,868.52 | |||
| Delaware Select Growth Fund | 21,806,338.58 | |||
| The Large-Cap Growth Equity Portfolio | 16,382,710.00 | |||
| The Focus Smid-Cap Growth Equity Portfolio | 2,423,938.47 | |||
| The Select 20 Portfolio | 10,651,071.08 | |||
| Delaware VIP®U.S. Growth Series | 37,205,350.55 | |||
| Delaware VIP Smid Cap Growth Series | 19,915,066.45 | |||
| Delaware Foundation®Conservative Allocation Fund | 14,097,497.19 | |||
| Delaware Foundation®Growth Allocation Fund | 8,259,400.53 | |||
| Delaware Foundation®Moderate Allocation Fund | 26,758,352.74 | |||
What is the Quorum requirement?
A “Quorum” is the minimum number of shares that must be present in order to conduct the Meeting. A Quorum for a Fund means one-third (33⅓%) of the shares of the Fund entitled to vote at the Meeting, present in person or represented by proxy.
Who will pay the expenses of the Meeting?
All reasonable out-of-pocket costs and expenses incurred by each Fund related to the Meeting, including the costs of preparing proxy solicitation materials and soliciting proxies in connection with the Meeting, will be reimbursed by Jackson Square and DIAP or an affiliate.
What other solicitations will be made?
This proxy solicitation is being made by the Boards for use at the Meeting. In addition to solicitations by mail, solicitations also may be made by advertisement, telephone, telegram, facsimile transmission or other electronic media, or personal contacts. The Funds will request broker/dealer firms, custodians, nominees, and fiduciaries to forward proxy materials to the beneficial owners of the shares of record and their reasonable out-of-pocket expenses incurred in connection with the proxy solicitation will be borne by Jackson Square and DIAP or an affiliate. In addition to solicitations by mail, officers and employees of the Trusts, DMC, Jackson Square, and their affiliates may, without extra pay, conduct additional solicitations by telephone, telecopy, and personal interviews.The Trusts expect that any solicitations will be primarily by mail, but also may include telephone, telecopy, or oral solicitations.
If the Trusts do not receive your proxy card or voting instruction by a certain time, you may receive a telephone call from one of the officers or employees of the Trusts, an employee of AST Fund Solutions, the Fund’s proxy solicitor, or one of the officers or employees of Jackson Square, DMC, or their affiliates asking you to vote.
How do I submit a shareholder proposal for inclusion in a Trust’s proxy statement for a future shareholder meeting?
The governing instruments of the Trusts do not require that the Funds hold annual meetings of shareholders. The Funds are, however, required to call meetings of shareholders in accordance with the requirements of the 1940 Act to seek approval of new or material amendments to advisory arrangements or of a change in the fundamental investment policies, objectives or restrictions of the Funds. Each Fund also would be required to hold a shareholders meeting to elect new Trustees at such time as less than a majority of the Trustees holding office have been elected by
shareholders. The Trusts’ governing instruments generally provide that a shareholder meeting may be called by a majority of the Trustees, the Chairperson of a Board, or the President of a Trust.
Shareholders of a Fund wishing to submit proposals for inclusion in a proxy statement for a future shareholder meeting must send their written proposal to the Fund a reasonable time before the Board’s solicitation relating to that meeting is to be made. Shareholder proposals must meet certain legal requirements established by the SEC, so there is no guarantee that a shareholder’s proposal will actually be included in the next proxy statement. The persons named as proxies in future proxy materials of a Fund may exercise discretionary authority with respect to any shareholder proposal presented at any subsequent shareholder meeting if written notice of that proposal has not been received by the Fund within a reasonable period of time before the Board’s solicitation relating to that meeting is made. Written proposals with regard to a Fund should be sent to the Secretary of the Trusts, David F. Connor, at the address of the Trusts given above.
How may I communicate with the Boards?
Shareholders who wish to communicate to the Boards may address correspondence to Thomas L. Bennett, Coordinating Trustee for the Trusts, c/o their Trust at 2005 Market Street, Philadelphia, Pennsylvania 19103. Without opening any such correspondence, Trust management will promptly forward all such correspondence to the intended recipient(s).
MORE INFORMATION ABOUT THE FUNDS
Investment Advisory Services. DMC, 2005 Market Street, Philadelphia, Pennsylvania 19103, a series of DMBT, manages the assets of the Funds and makes the Funds’ investment decisions, subject to the supervision of the Boards. Pursuant to its investment advisory agreement with the Trusts, DMC may, to the extent permitted by applicable law, appoint at its own expense one or more sub-advisers, including affiliates of DMC, to perform investment advisory services for the Funds. DMC may terminate a sub-adviser in its sole discretion at any time to the extent permitted by applicable law. For its investment advisory services to the Funds, DMC is paid as follows:
| Management Fee Schedule | ||
| (as a percentage of average daily net assets) | ||
| Portfolio Name | Annual Rate | |
| Delaware U.S. Growth Fund | 0.65% on the first $500 million | |
| 0.60% on the next $500 million | ||
| 0.55% on the next $1.5 billion | ||
| 0.50% on assets in excess of $2.5 billion | ||
| Delaware Smid Cap Growth Fund | 0.71% | |
| Delaware Focus Global Growth Fund | 0.85% | |
| Delaware Select Growth Fund | 0.75% on the first $500 million | |
| 0.70% on the next $500 million | ||
| 0.65% on the next $1.5 billion | ||
| 0.60% on assets in excess of $2.5 billion | ||
| The Large-Cap Growth Equity Portfolio | 0.55% | |
| The Focus Smid-Cap Growth Equity Portfolio | 0.75% | |
| The Select 20 Portfolio | 0.75% | |
| Delaware VIP®U.S. Growth Series | 0.65% on the first $500 million | |
| 0.60% on the next $500 million | ||
| 0.55% on the next $1.5 billion | ||
| 0.50% on assets in excess of $2.5 billion | ||
| Delaware VIP Smid Cap Growth Series | 0.75% | |
| Delaware Foundation®Conservative Allocation Fund | 0.65% on the first $500 million | |
| 0.60% on the next $500 million | ||
| Delaware Foundation®Growth Allocation Fund | 0.55% on the next $1.5 billion | |
| 0.50% on assets in excess of $2.5 billion. | ||
| Delaware Foundation®Moderate Allocation Fund | ||
Transfer Agency Services. Delaware Service Company, Inc. (“DSC”), an affiliate of DMC, is located at 2005 Market Street, Philadelphia, Pennsylvania 19103-7094, and serves as the Funds’ shareholder servicing, dividend disbursing, and transfer agent pursuant to a Shareholder Services Agreement. DSC is paid a fee by each Fund for providing these services, consisting of an asset-based fee and certain out-of-pocket expenses.
BNY Mellon Investment Servicing (US) Inc. (“BNYMIS”) provides sub-transfer agency services to the Fund. In connection with these services, BNYMIS administers the overnight investment of cash pending investment in the Fund or payment of redemptions. The proceeds of this investment program are used to offset the Fund’s transfer agency expenses.
Fund Accountant. The Bank of New York Mellon (“BNY Mellon”), One Wall Street, New York, New York 10286-0001, provides custody, fund accounting and financial administration services to the Funds. Those services include performing
functions related to calculating each Fund’s net asset value (“NAV”) and providing financial reporting information, regulatory compliance testing, and other related accounting services. For these services, the Funds pay BNY Mellon an asset-based fee, subject to certain fee minimums plus certain out-of-pocket expenses and transactional charges.
DSC provides fund accounting and financial administration oversight services to the Funds. Those services include overseeing the Funds’ pricing process, the calculation and payment of fund expenses, and financial reporting in shareholder reports, registration statements and other regulatory filings. DSC also manages the process for the payment of dividends and distributions and the dissemination of Fund NAVs and performance data. For these services, the Funds pay DSC an asset-based fee, plus certain out-of-pocket expenses and transactional charges. The fees payable to BNY Mellon and DSC for the services described above are allocated among all funds in the Delaware Investments® Family of Funds on a relative NAV basis.
Distribution Services. Pursuant to a distribution agreement with the Trusts, Delaware Distributors, L.P. (“DDLP”), 2005 Market Street, Philadelphia, Pennsylvania 19103, serves as the distributor for the Funds. DDLP pays the expenses of the promotion and distribution of the Funds’ shares. DDLP is an indirect subsidiary of DMHI and is an affiliate of DMC. The Boards annually review fees paid to DDLP.
The Funds did not pay any brokerage commissions for transactions in/with portfolio securities to any broker that is an affiliate (or an affiliate of an affiliate) of the Funds, DMC, DDLP, or DSC during any of the Funds’ most recently completed fiscal years.
Future votes. The Delaware Investments® Family of Funds, which includes all the Funds seeking approval of the Proposal, and DMC currently have the authority to rely on a manager of managers order granted by the SEC, which allows DMC to hire, terminate, and replace unaffiliated sub-advisers for the Funds with the approval of a Trust’s Board, but without having to obtain shareholder approval. The current manager of managers order does not allow DMC to hire affiliated sub-advisers for the Funds. Currently, before DMC may engage an affiliated sub-adviser for a Fund, shareholders of the Fund must approve an investment advisory agreement with such a sub-adviser. In the future, DMC and the Delaware Investments Family of Funds, including the Funds, may seek authority from the SEC to rely on a manager of managers order that would allow DMC to hire, terminate, and replace both affiliated and unaffiliated sub-advisers for a Fund with the approval of its Trust’s Board, but without having to obtain shareholder approval.
PRINCIPAL HOLDERS OF SHARES
To the best knowledge of the Trusts, as of Record Date, the officers and Trustees of each Trust, as a group, owned less than 1% of the outstanding voting shares of each Fund, except for The Select 20 Portfolio, in which they owned 2.24% of the outstanding shares; the Delaware Focus Global Growth Fund, in which they owned 2.84% of the outstanding shares; and The Focus Smid-Cap Growth Equity Portfolio, in which they owned 4.80% of the outstanding shares.
To the best knowledge of the Trusts, as of Record Date, no person, except as set forth in Appendix C, owned of record 5% or more of the outstanding shares of a Fund. Except as noted in Appendix C, the Trusts have no knowledge of beneficial ownership of 5% or more of the outstanding shares of any Fund.
APPENDICES TO PROXY STATEMENT
| APPENDIX A - FORM OF SUB-ADVISORY AGREEMENT | A-1 |
| APPENDIX B - MEMBERS AND OFFICERS OF | |
| JACKSON SQUARE PARTNERS, LLC | B-1 |
| APPENDIX C - 5% SHARE OWNERSHIP | C-1 |
APPENDIX A - FORM OF SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT
AGREEMENT made by and betweenDELAWARE MANAGEMENT COMPANY, a series of Delaware Management Business Trust, a Delaware statutory trust (the “Investment Manager”), andJACKSON SQUARE PARTNERS, LLC, a Delaware limited liability company (the “Sub-Adviser’’).
WITNESSETH:
WHEREAS, each open-end management company listed on Exhibit A is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and each is organized as a statutory trust under the laws of the State of Delaware (each a “Trust” and collectively, the “Trusts”);
WHEREAS, each fund listed on Exhibit A is a series of its respective Trust as indicated on Exhibit A (each a “Fund” and together, the “Funds”);
WHEREAS, the Investment Manager and the Trusts, on behalf of their respective Funds, have entered into investment management agreements (each an “Investment Management Agreement” and collectively, the “Investment Management Agreements”) whereby the Investment Manager will provide investment advisory services to the Trusts with respect to the Funds;
WHEREAS, the Investment Manager has the authority under the Investment Management Agreements to retain one or more sub-advisers to assist the Investment Manager in providing investment advisory services to the Trusts with respect to the Funds;
WHEREAS, the Investment Manager and the Sub-Adviser are registered investment advisers under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and engage in the business of providing investment advisory services; and
WHEREAS, the Boards of Trustees (collectively, the “Board” or the “Trustees”) of the Trusts and the Investment Manager desire that the Investment Manager retain the Sub-Adviser to render investment advisory and other services with respect to that portion of the Funds as the Investment Manager shall from time to time allocate to the Sub-Adviser (the “Managed Portion”) in the manner, for the period, and on the terms hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, and each of the parties hereto intending to be legally bound, it is agreed as follows:
1. (a) The Sub-Adviser will supervise and direct the investments of the assets of the Managed Portion of each Fund in accordance with such Fund’s investment objectives, policies, and restrictions as provided in its Prospectus (“Prospectus”) and Statement of Additional Information (“SAI”), as currently in effect and as amended or supplemented from time to time, and such other limitations as the Funds may impose by notice in writing to the Sub-Adviser, subject always to the supervision and control of the Investment Manager and the Board.
(b) As part of the services it will provide hereunder, the Sub-Adviser is authorized, in its discretion and without prior consultation with the Funds or the Investment Manager to:
| (i) | obtain and evaluate information relating to investment recommendations, asset allocation advice, industries, businesses, securities markets, research, economic analysis, and other investment services with respect to the securities that are included in the Managed Portion or that are under consideration for inclusion in the Managed Portion and invest the Managed Portion in accordance with the Investment Manager’s and the Board’s written direction as more fully set forth herein and as otherwise directed; | ||
| (ii) | regularly make decisions as to what securities to purchase and sell on behalf of each Fund
Manager reasonably deems appropriate or as the
| ||
| (iii) | provide any and all material composite or other | ||
| necessary, under applicable laws, to allow the
| |||
| (iv) | provide
| ||
| (v) | vote proxies, exercise conversion or subscription rights, and respond to tender offers and other consent solicitations (“Corporate Actions”) with respect to the issuers of securities held in the Managed Portion, provided materials relating to such Corporate Actions have been timely received by the | ||
| (vi) | provide performance and other information as reasonably requested by the Investment Manager or the Board to assist them or their agent in conducting ongoing due diligence and performance monitoring; and | ||
| (vii) | maintain all accounts, books, and records with respect to the Managed Portion as are required of
| ||
(c) The Sub-Adviser shall not consult with any other sub-adviser of a Fund or of any fund that is an “affiliated person” of the Fund concerning transactions for the Fund in securities or other assets, except as such consultations may be reasonably necessary in order to ensure compliance with Rule 12d3-l under the 1940 Act.
(d) In furnishing services hereunder, the Sub-Adviser shall be subject to, and shall perform in accordance with, the following: (i) provisions of a Trust’s Agreement and Declaration of Trust, as the same may be hereafter modified, amended, and/or supplemented from time to time, that are applicable to the Managed Portion; (ii) provisions of a Trust’s By-Laws, as the same may be hereafter modified, amended, and/or supplemented from time to time that are applicable to the Managed Portion; (iii) a Fund’s Prospectus; (iv) the 1940 Act and the Advisers Act and the rules under each and all other international, federal and state securities laws or regulations applicable to the Trusts and the Funds; (v) the Trusts’ compliance policies and procedures and other policies and procedures adopted from time to time by the Board applicable to the Managed Portion; and (vi) the written instructions of the Investment Manager.
(e) The Investment Manager agrees to provide the Sub-Adviser with current copies of the documents mentioned in paragraph l(d)(i), (ii), (iii) and (v) above and all changes made to such documents at, or if practicable, before the time such changes become effective, and the Investment Manager acknowledges and agrees that the Sub-Adviser shall not be responsible for compliance with such documents or amendments unless and until they are received by the Sub-Adviser. The Sub-Adviser shall be fully protected in acting upon any proper instructions reasonably believed by it to be genuine and signed or communicated by or on behalf of the Investment Manager or the Funds.
(f) In order to assist the Trusts and the Trusts’ chief compliance officer (the “Trust CCO”) and the Investment Manager and the Investment Manager’s Chief Compliance Officer (the “IM CCO”) in satisfying the requirements contained in Rule 38a-1 under the 1940 Act and Rule 206(4)-7 under the Advisers Act, respectively, the Sub-Adviser shall provide to the Trust CCO and/or IM CCO: (i) direct access to the Sub-Adviser’s chief compliance officer (the “Sub-Adviser CCO”) and its officers and employees, as reasonably requested by the Trust CCO and/or IM CCO; (ii) quarterly reports confirming that the Sub-Adviser has complied with the Trusts’ Compliance Procedures in managing the Managed Portion; and (iii) quarterly certifications with respect to Material Compliance Matters (as that term is defined in Rule 38a-1(e)(2) under the 1940 Act) related to the Sub-Adviser’s management of the Managed Portion.
The Sub-Adviser shall promptly provide the Trust CCO and IM CCO with copies and summaries of: (i) the Sub-Adviser’s policies and procedures for compliance by the Sub-Adviser with the federal securities laws and to prevent violation of the Advisers Act (together, the “Sub-Adviser Compliance Procedures”); and (ii) any material changes to the Sub-Adviser Compliance Procedures. The Sub-Adviser shall cooperate fully with the Trust CCO and IM CCO so as to facilitate the Trust CCO’s and IM CCO’s performance of their respective responsibilities under Rule 38a-1 and Rule 206(4)-7, including to review, evaluate and report to the Board on the operation of the Sub-Adviser Compliance Procedures, and shall promptly report to the Trust CCO and IM CCO any Material Compliance Matter arising under the Sub-Adviser Compliance Procedures involving the Managed Portion. The Sub-Adviser shall allow the Trust CCO and/or the IM CCO, as reasonably requested from time to time, access to examine and review the Sub-Adviser’s Compliance Procedures and the Sub-Adviser’s adherence thereto. The Sub-Adviser shall provide to the Trust CCO and IM CCO: (i) quarterly reports confirming the Sub-Adviser’s compliance with the Sub-Adviser Compliance Procedures in managing the Managed Portion; and (ii) certifications that there were no Material Compliance Matters involving the Sub-Adviser that arose under the Sub-Adviser Compliance Procedures that affected the Managed Portion. At least annually, the Sub-Adviser shall provide a certification to the Trust CCO and IM CCO to the effect that the Sub-Adviser has in place and has implemented policies and procedures that are reasonably designed to ensure compliance by the Sub-Adviser with the federal securities laws, including the conduct and results of our annual review for adequacy and effectiveness.
(g) The Sub-Adviser shall assist the Funds in the preparation of the Trusts’ registration statements, the Prospectuses and SAIs, shareholder reports and other regulatory filings, or any amendment or supplement thereto (collectively, “Regulatory Filings”) as may relate to the Managed Portion, and shall provide the Funds with information for use in the Funds’ Regulatory Filings, including, without limitation, information related to the Sub-Adviser’s investment management personnel, portfolio manager compensation, investment management strategies and techniques, and proxy voting policies. The Sub-Adviser shall provide such certifications regarding the Funds as the Trusts’ officers may reasonably request for purposes of the preparation of any Regulatory Filings.
(h) The Sub-Adviser hereby agrees during the period hereinafter set forth to render the services and assume the obligations herein set forth for the compensation herein provided. The Sub-Adviser shall for all purposes herein be deemed to be an independent contractor, and shall, unless otherwise expressly provided and authorized herein or otherwise, have no authority to act for or represent the Trusts, the Funds or the Investment Manager in any way, or in any way be deemed an agent of the Trusts, the Funds or the Investment Manager. Notwithstanding the foregoing,
the Sub-Adviser may execute Fund documentation, agreements, contracts and other documents requested by brokers, dealers, counterparties and other persons in connection with providing advisory services to the Funds.
(i) The Sub-Adviser may perform its services through its employees, officers or agents, and the Investment Manager shall not be entitled to the advice, recommendation or judgment of any specific person; provided, however, that the persons identified in each Fund’s Prospectus shall perform the portfolio management duties described therein until the Sub-Adviser notifies the Investment Manager that one or more other affiliates, employees, officers or agents identified in such notice shall assume such duties as of a specific date.
(j) The Investment Manager shall provide (or use its best efforts to cause to be provided) timely information to the Sub-Adviser regarding such matters as the cash requirements and cash available for investment in the Managed Portion, and all other information as may be reasonably necessary for the Sub-Adviser to perform its responsibilities under this Agreement.
2. (a) Under the terms of each Investment Management Agreement, a Trust shall conduct its own business and affairs and shall bear the expenses and salaries necessary and incidental thereto including, but not in limitation of the foregoing, the costs incurred in: the maintenance of its existence as a statutory trust organized under the laws of the State of Delaware; the maintenance of its own books, records, and procedures; dealing with its own shareholders; the payment of dividends; transfer of shares, including issuance and repurchase of shares; preparation of share certificates, if any; reports and notices to shareholders; calling and holding of shareholders’ meetings; miscellaneous office expenses; transfer agency expenses; pricing service expenses; expenses relating to tax services; brokerage commissions; custodian fees; legal and accounting fees; taxes; interest; federal securities law filing expenses; and federal and state registration fees. The Sub-Adviser shall not be obligated to pay any expenses of the Investment Manager, the Trusts or the Funds unless expressly assumed by the Sub-Adviser pursuant to this Agreement or otherwise agreed to in writing. Any reimbursement of investment management or other fees required by an expense limitation or waiver provision, and any liability arising out of a violation by the Investment Manager of Section 36(b) of the 1940 Act, shall be the sole responsibility of the Investment Manager, provided that nothing herein shall relieve the Sub-Adviser from its own liability under Section 36(b) of the 1940 Act with respect to its duties under this Agreement.
(b) Directors, members, officers and employees of the Sub-Adviser may be directors, officers and employees of other funds that have employed the Sub-Adviser as sub-adviser or investment manager. Directors, members, officers and employees of the Sub-Adviser who are Trustees, officers and/or employees of the Trusts, shall not receive any compensation from the Trusts for acting in such dual capacity.
3. (a) The Sub-Adviser will select brokers and dealers to effect all Fund transactions with respect to the Managed Portion subject to the conditions set forth herein. The Sub-Adviser may combine orders for the Managed Portion with orders for other accounts or funds under management. Transactions involving combined orders are allocated in a manner deemed equitable to each account. The Sub-Adviser will place all necessary orders with brokers, dealers, or issuers, and will negotiate brokerage commissions, if applicable. The Sub-Adviser is directed at all times to seek to execute transactions for the Managed Portion (i) in accordance with any written policies, practices or procedures that may be established by the Board or the Investment Manager from time to time and provided to the Sub-Adviser, and (ii) as described in a Fund’s Prospectus and SAI. In placing any orders for the purchase or sale of investments for a Fund, with respect to the Managed Portion, the Sub-Adviser shall use its best efforts to obtain for the Managed Portion “best execution,” considering all of the circumstances, and shall maintain records adequate to demonstrate compliance with this requirement.
(b) Subject to the appropriate policies and procedures approved by the Board and provided to the Sub-Adviser in writing, the Sub-Adviser may, to the extent authorized by Section 28(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), cause the Managed Portion to pay a broker or dealer that provides brokerage or research services to any of the Investment Manager, the Sub-Adviser or the Managed Portion an amount of commission for effecting a Fund transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if the Sub-Adviser determines, in good faith, that such amount of commission is reasonable in relation to the value of such brokerage and research services provided viewed in terms of that particular transaction or the Sub-Adviser’s overall responsibilities to its clients for which the Investment Manager or the Sub-Adviser exercises investment discretion. To the extent authorized by Section 28(e) and the Board, the Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any duty created by this Agreement or otherwise solely by reason of such action. Subject to seeking best execution and compliance with applicable federal and state securities laws and regulations, the Board or the Investment Manager may direct the Sub-Adviser to effect up to 2 percent of transactions in Fund securities through broker-dealers in a manner that will help generate resources to pay the cost of certain expenses that a Trust is required to pay or for which such Trust is required to arrange payment.
(c) Subject to applicable law and regulations, including Section 17(e) of the 1940 Act and Rule 17e-l thereunder, the Sub-Adviser is authorized to place orders for the purchase and sale of securities for the Managed Portion with brokers or dealers that are affiliated with the Sub-Adviser. Any entity or person associated with the Investment Manager or the Sub-Adviser that is a member of a national securities
exchange is authorized to effect any transaction on such exchange for the account of a Fund to the extent and as permitted by Section 11(a)(1)(H) of the Exchange Act and Rule 11a2-2(T) thereunder.
4. As compensation for the services to be rendered to the Trusts for the benefit of their Funds by the Sub-Adviser under the provisions of this Agreement, the Investment Manager shall pay to the Sub-Adviser the fees at the rates provided in Exhibit B attached hereto. The compensation payable to the Sub-Adviser for its services hereunder shall be paid at the end of each calendar quarter (within 30 days of receipt by the Investment Manager of an invoice from the Sub-Adviser) based upon the average daily Fund net assets during the preceding quarter. The fee payable for the quarter shall be accrued daily based on 365/366 year. If this Agreement becomes effective or terminates before the end of any quarter, the sub-advisory fee for the period shall be prorated accordingly.
5. The services to be rendered by the Sub-Adviser to the Trusts for the benefit of the Funds under the provisions of this Agreement are not to be deemed to be exclusive, and the Sub-Adviser shall be free to render similar or different services to others so long as its ability to render the services provided for in this Agreement shall not be materially impaired thereby.
6. (a) Subject to the limitation set forth in Paragraph 5, the Sub-Adviser, its directors, officers, employees, agents, and shareholders may engage in other businesses, may render investment advisory services to other investment companies, or to any other corporation, association, firm or individual, and may render underwriting services to the Trusts or to any other investment company, corporation, association, firm or individual.
(b) Neither the Investment Manager, the Trusts nor the Funds shall use the Sub-Adviser’s actual or fictitious name(s), mark(s), derivative(s) and/or logo(s) (or that of any affiliate of the Sub-Adviser, other than that of the Funds, the Trusts, the Investment Manager or any affiliate of the Investment Manager that is an affiliate of the Sub-Adviser solely by reason of the Sub-Adviser’s provision of services pursuant to this Agreement or solely because of the Sub-Adviser’s affiliation with the Investment Manager) or otherwise refer to the Sub-Adviser in any materials related to the Trusts or the Funds distributed to third parties, including the Funds’ shareholders, without prior review and written approval by the Sub-Adviser, which may not be unreasonably withheld or delayed. Upon termination of this Agreement, the Investment Manager, the Trusts and the Funds, shall, to the extent applicable and as soon as is reasonably possible, cease to use the Sub-Adviser’s actual or fictitious name(s), mark(s), derivative(s) and/or logo(s) in materials related to the Funds.
(c) The Sub-Adviser shall not use the Investment Manager’s name (or that of any affiliate of the Investment Manager, other than that of the Sub-Adviser or any affiliate of the Sub-Adviser that is an affiliate of the Investment Manager solely by
reason of the Sub-Adviser’s provision of services pursuant to this Agreement or solely because of the Investment Manager’s affiliation with the Sub-Adviser) or otherwise refer to the Investment Manager in any materials related to the Trusts or the Funds distributed to third parties, including the Funds’ shareholders, without prior review and written approval by the Investment Manager, which may not be unreasonably withheld or delayed. Upon termination of this Agreement, the Sub-Adviser, shall, to the extent applicable and as soon as is reasonably possible, cease to use the actual or fictitious name(s), mark(s), derivative(s) and/or logo(s) of the Trusts and the Funds, except for the purpose of describing prior clients or prior performance of the Sub-Adviser, as permitted by the Advisers Act or other applicable requirements.
(d) This Section 6 applies solely to materials related to the Funds and the Trusts only, and not to other products or relationships between the Sub-Adviser and the Investment Manager.
7. (a) In the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard in the performance of its duties as Sub-Adviser to the Trusts on behalf of the Funds, neither the Sub-Adviser nor any of its affiliates nor any of its or their controlling persons, members, officers, directors, employees or agents (collectively, “Sub-Adviser Related Persons”) shall be liable to the Trusts, the Funds, the Investment Manager or any shareholder of a Trust for any action or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security, or otherwise. The Sub-Adviser makes no representation or warranty, express or implied, that any level of performance or investment results will be achieved by the Managed Portion or the Funds, or that the Managed Portion or the Funds will perform comparably with any standard or index, including other clients of the Sub-Adviser, whether public or private. Subject to the first sentence of this Section 7(a), the Sub-Adviser shall not be responsible for any loss incurred by any reason of any act or omission of any bank, broker, the custodian bank or any administrator or trustee whether appointed on behalf of the Investment Manager, the Funds or the Trusts. Nothing contained herein shall be deemed to waive any liability which cannot be waived under applicable law, including applicable U.S. state and federal securities laws, ERISA or any rules or regulations adopted under any of those laws.
(b) The Investment Manager shall indemnify Sub-Adviser Related Persons to the fullest extent permitted by law against any and all loss, damage, judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys’ fees (collectively “Losses”), incurred by the Sub-Adviser or Sub-Adviser Related Persons arising from or in connection with this Agreement or the performance by the Sub-Adviser or Sub-Adviser Related Persons of its or their duties hereunder so long as such Losses arise out of the Investment Manager’s willful misfeasance, bad faith,
gross negligence, or reckless disregard in performing its responsibilities hereunder, including, without limitation, such Losses arising under any applicable law or that may be based upon any untrue statement of a material fact contained in the Trusts’ Registration Statements, or any amendment thereof or any supplement thereto, or the omission to state therein a material fact that was known or that should have been known and was required to be stated therein or necessary to make the statements therein not misleading, unless such statement or omission was made in reasonable reliance upon information furnished to the Investment Manager or the Trusts by the Sub-Adviser or a Sub-Adviser Related Person specifically for inclusion in the Registration Statements or any amendment thereof or supplement thereto, except to the extent any such Losses referred to in this paragraph (b) result from willful misfeasance, bad faith, gross negligence or reckless disregard on the part of the Sub-Adviser or a Sub-Adviser Related Person in the performance of any of its duties under, or in connection with, this Agreement.
(c) The Sub-Adviser shall indemnify the Investment Manager and its affiliates and its or their controlling persons, officers, directors, employees, agents, legal representatives and persons controlled by it (collectively “Investment Manager Related Persons”) to the fullest extent permitted by law against any and all Losses incurred by the Investment Manager or Investment Manager Related Persons arising from or in connection with this Agreement or the performance by the Investment Manager or Investment Manager Related Persons of its or their duties hereunder so long as such Losses arise out of the Sub-Adviser’s willful misfeasance, bad faith, gross negligence, or reckless disregard in performing its responsibilities hereunder, including, without limitation, such Losses arising under any applicable law or that may be based upon any untrue statement of a material fact contained in the Trusts’ Registration Statements, or any amendment thereof or any supplement thereto, or the omission to state therein a material fact that was known or that should have been known and was required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission was made in reasonable reliance upon information furnished to the Investment Manager or the Trusts by the Sub-Adviser or a Sub-Adviser Related Person specifically for inclusion in the Registration Statements or any amendment thereof or supplement thereto, except to the extent any such Losses referred to in this paragraph (c) result from willful misfeasance, bad faith, gross negligence or reckless disregard on the part of the Investment Manager or an Investment Manager Related Person in the performance of any of its duties under, or in connection with, this Agreement.
8. (a) This Agreement shall be executed and become effective as of the date written below;provided,however, that this Agreement shall not become effective with respect to a Fund unless it has first been approved with respect to such Fund in the manner required by the 1940 Act and the rules thereunder or in accordance with exemptive or other relief granted by the U.S. Securities and Exchange Commission
(the “SEC”) or its staff. This Agreement shall continue in effect with respect to such Fund for a period of two (2) years and may be renewed thereafter with respect to such Fund only so long as such renewal and continuance with respect to such Fund is specifically approved at least annually by the applicable Board or by the vote of a majority of the outstanding voting securities of such Fund and only if the terms and the renewal hereof have been approved by the vote of a majority of those Trustees of the applicable Trust who are not parties hereto or “interested persons” of such Trust, its Fund(s), or any party hereto, cast in person at a meeting called for the purpose of voting on such approval.
(b) This Agreement may be amended only by written agreement of the Investment Manager and the Sub-Adviser and only in accordance with the provisions of the 1940 Act and the rules and regulations promulgated thereunder or any applicable exemptive order.
(c) This Agreement may be terminated with respect to a single Fund or all of the Funds (i) by the Investment Manager at any time, without the payment of a penalty, on 60 days’ written notice to the Sub-Adviser of the Investment Manager’s intention to do so and (ii) by a Trust with respect to a Fund in such Trust at any time, without the payment of a penalty, on 60 days’ written notice to the Sub-Adviser of such Trust’s intention to do so pursuant to action by the applicable Board or pursuant to the vote of a majority of the outstanding voting securities of the applicable Fund. The Sub-Adviser may terminate this Agreement with respect to a single Fund or all of the Funds at any time, without the payment of a penalty, on 60 days’ written notice to the Investment Manager and a Trust or Trusts, as the case may be, of its intention to do so. Upon termination of this Agreement, the obligations of all the parties hereunder shall cease and terminate as of the date of such termination, except for (i) any obligation arising out of or relating to a breach of this Agreement committed prior to such termination, (ii) the obligation of the Investment Manager to pay to the Sub-Adviser the fee provided in Paragraph 4 hereof prorated to the date of termination, and (iii) any indemnification obligation provided in Paragraph 7 hereof. This Agreement shall automatically terminate in the event of its assignment (as such term is defined in the 1940 Act) or upon the termination of an Investment Management Agreement.
9. Any information and advice furnished by either party to this Agreement to the other party shall be treated as confidential and shall not be disclosed to third parties without the consent of the other party hereto. Notwithstanding the foregoing, information shall not be subject to such confidentiality obligations if it:
| (i) | is already known to the receiving party at the time it is obtained (other than through previous disclosure by the protected party or by a party known by the receiving party to be bound by a confidentiality obligation to the protected party); |
| (ii) | is or becomes publicly known or available through no wrongful act of the receiving party; | ||
| (iii) | is rightfully received from a third party who, to the best of the receiving party’s knowledge, is not under a duty of confidentiality; | ||
| (iv) | is required to be disclosed by the receiving party pursuant to a requirement of a court order, subpoena, governmental or regulatory agency or law (provided the receiving party provides the protected party written | ||
| (v) | is relevant to the defense of any claim or cause of action asserted against the receiving party (provided the receiving party provides the protected party with sixty (60) days’ written notice of any disclosure if practicable or such lesser amount as may be necessary and provided such notice does not prejudice the receiving party); or | ||
| (vi) | has been or is independently developed or obtained by the | ||
The Sub-Adviser shall not disclose any “nonpublic personal information” (as such term is defined in Regulation S-P, including any amendments thereto) pertaining to the customers (as such term is defined in Regulation S-P, including any amendments thereto) of the Trusts to any third party or use such information other than for the purpose of providing the services contemplated by this Agreement.
10. The Sub-Adviser represents, warrants and agrees that:
(a) The Sub-Adviser: (i) is registered as an investment adviser under the Advisers Act and will continue to be so registered for so long as this Agreement remains in effect; (ii) is not prohibited by the 1940 Act, the Advisers Act or other law, regulation or order from performing the services contemplated by this Agreement (iii) to the best of its knowledge, has met and will seek to continue to meet for so long as this Agreement remains in effect, any other applicable federal or state requirements, or the applicable requirements of any regulatory or industry self-regulatory agency necessary to be met in order to perform the services contemplated by this Agreement; (iv) has the authority to enter into and perform the services contemplated by this Agreement; and (v) will promptly notify the Investment Manager of the occurrence of any event that would disqualify the Sub-Adviser from serving as an investment adviser of an investment company pursuant to Section 9(a) of the 1940 Act or otherwise. The Sub-Adviser will also promptly notify a Fund and the Investment Manager if it is served or otherwise receives notice of any action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, involving the affairs of the Fund, provided, however, that routine regulatory examinations that do not specifically relate to the Managed Portion or the Fund shall not be required to be reported by this provision.
(b) The Sub-Adviser has adopted policies and procedures and a written code of ethics complying with the requirements of Rule 17j-l under the 1940 Act and 204A-1 under the Advisers Act and will provide the Investment Manager and the Board with a copy of such policies and procedures and code of ethics, together with evidence of its adoption. In accordance with the requirements of Rule 17j-l, the Sub-Adviser shall certify to the Investment Manager that the Sub-Adviser has complied in all material respects with the requirements of Rule 17j-l during the previous year and that there has been no material violation of the Sub-Adviser’s code of ethics relating to the services the Sub-Adviser performs under this Agreement or, if such a material violation has occurred, that appropriate action was taken in response to such violation. Upon the written request of the Investment Manager, the Sub-Adviser shall provide to the Investment Manager, its employees or its agents all information required by Rule 17j-l(c)(l) relating to the approval by the Board of the Sub-Adviser’s code of ethics relating to the services the Sub-Adviser performs under this Agreement.
(c) The Sub-Adviser has provided the Trusts and the Investment Manager with a copy of its Form ADV at least forty-eight (48) hours prior to execution of this Agreement, which as of the date of this Agreement is its Form ADV as most recently filed with the SEC, and promptly will furnish a copy of all amendments to the Trusts and the Investment Manager at least annually. Such amendments shall reflect all changes in the Sub-Adviser’s organizational structure, professional staff or other significant developments affecting the Sub-Adviser, as required by the Advisers Act.
(d) The Sub-Adviser will notify the Trusts and the Investment Manager of any event that would be deemed an assignment of this Agreement, with the exception of any assignment by or with respect to the Investment Manager, or change of control of the Sub-Adviser, as applicable, and any changes in the key personnel who are the portfolio manager(s) of the Managed Portion prior to or promptly after such change. The Sub-Adviser agrees to bear all reasonable expenses of the Funds, if any, arising out of an assignment of this Agreement or change in control of the Sub-Adviser so long as the assignment is not by or with respect to the Investment Manager. In addition, if the Sub-Adviser shall resign on or after September 1, 2016, the Sub-Adviser agrees to assume all reasonable costs and expenses (including the costs of mailing) associated with the preparation of a proxy statement and soliciting materials or an information statement, as applicable.
(e) The Sub-Adviser agrees to maintain an appropriate level of errors and omissions or professional liability insurance coverage as shall be reasonably necessary in light of its obligations under this Agreement.
11. The Investment Manager will notify the Sub-Adviser of any event that would be deemed an assignment of this Agreement, with the exception of any assignment by or with respect to the Sub-Adviser, or change of control of the Investment Manager, as applicable.
12. The Sub-Adviser has implemented policies and procedures designed to prevent the disclosure by the Sub-Adviser, its employees or agents of the Funds’ portfolio holdings to any person or entity other than the Investment Manager, the Trusts’ custodian, or other persons expressly designated by the Investment Manager.
13. This Agreement shall extend to and bind the successors of the parties hereto. Nothing in this Agreement, express or implied, is intended to or shall (a) confer on any person other than the parties hereto and their respective successors or permitted assigns any rights (including third party beneficiary rights), remedies, obligations or liabilities under or by reason of this Agreement, or (b) constitute the parties hereto as partners or as participants in a joint venture.
14. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
15. All written notices, requests or other communications to any party hereunder shall be given to the following addresses and telecopy numbers, or such other address and telecopy number communicated to the other parties from time to time:
| If to the
| Van Tran | |
| 101 California Street | ||
| Suite 3750 | ||
| San Francisco, CA 94111 | ||
| If to the Investment Manager or | Patrick P. Coyne | |
| the Funds: | 2005 Market Street | |
| Philadelphia, PA 19103 | ||
16. For the purposes of this Agreement, the terms “vote of a majority of the outstanding voting securities,” “interested person,” “affiliated person,” and “assignment” shall have the meanings given them in the 1940 Act, subject, however to such exemptions as may be granted by the SEC and its staff under the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their duly authorized officers as of April [__], 2014.
| JACKSON SQUARE PARTNERS, LLC | DELAWARE MANAGEMENT | ||||
| COMPANY, a series of | |||||
| Management Business Trust | |||||
| By | By | ||||
| Name: | Name: David P. O’Connor | ||||
| Title: | Title: Executive Vice President | ||||
Agreed to
| |||||
Delaware Investment
| |||||
| By | |||||
| Name: Patrick P. Coyne | |||||
| Title: President | |||||
A-15
EXHIBIT A
LIST OF REGISTRANTS AND THEIR RESPECTIVE SERIES
Delaware Group® Adviser Funds
Delaware U.S. Growth Fund
Delaware Group Equity Funds IV
Delaware Smid Cap Growth Fund
Delaware Group Global and International Funds
Delaware Focus Global Growth Fund
Voyageur Mutual Funds III
Delaware Select Growth Fund
Delaware Pooled Trust®
The Large-Cap Growth Equity Portfolio
The Focus Smid-Cap Growth Equity Portfolio
The Select 20 Portfolio
Delaware VIP® Trust
Delaware VIP U.S. Growth Series
Delaware VIP Smid Cap Growth Series
Delaware Group Foundation Funds®
Delaware Foundation® Growth Allocation Fund
Delaware Foundation Moderate Allocation Fund
Delaware Foundation Conservative Allocation Fund
Ex. A-1
EXHIBIT B
FEE SCHEDULE
11. For the purposes of this Agreement, (i) the terms “vote of a majority of the outstanding voting securities”; “interested persons”; and “assignment” shall have the meaning ascribed to them in the 1940 Act, and (ii) references to the SEC and FINRA shall be deemed to include any successor regulators.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their duly authorized officers as of the ___ day of _________, ____.
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ex. B-1
EXHIBIT A
APPENDIX B - MEMBERS AND OFFICERS OF
JACKSON SQUARE PARTNERS, LLC
The following persons hold the following positions with the Sub-adviser. The principal business address of the Sub-adviser is 101 California Street, San Francisco, CA 94111.
APPENDIX C - 5% SHARE OWNERSHIP The following table shows, as of March 20, 2014, the shareholders that own of record 5% or more of a Fund.
THIS PROXY CARD IS ONLY VALID WHEN SIGNED AND DATED. PLEASE DATE AND SIGN NAME OR NAMES BELOW AS PRINTED ABOVE TO AUTHORIZE THE VOTING OF YOUR SHARES AS INDICATED ABOVE. PERSONS SIGNING AS EXECUTOR, ADMINISTRATOR, TRUSTEE, OR OTHER REPRESENTATIVE SHOULD GIVE FULL TITLE AS SUCH. YOUR VOTE IS IMPORTANT NO MERGE FUND NAME 1.MAILyour signed and voted proxy back in thepostage paid envelopeprovided 2.ONLINEatproxyonline.comusing your proxycontrol numberfound below 3.PHONEdial toll-free(888) 227-9349to reach an automated touchtone voting line 4.LIVEwith alive operatorwhen you call toll-free(877) 536-1563Monday through Friday 9 a.m. to 10 p.m. Eastern time CONTROL NUMBER ð 12345678910 PROXY FOR A JOINT SPECIAL MEETING OF SHAREHOLDERS The undersigned hereby revokes all previous proxies for his/her shares and appoints Cori E. Daggett, David F. Connor, and Kathryn R. Williams, or any of them, with the right of substitution, proxies of the undersigned at the Joint Special Meeting of Shareholders of Delaware Investments® Funds, including shareholders of each registrant (each, a “Trust”) and fund (“Fund”) listed on Exhibit A, to be held at the offices of Stradley Ronon Stevens & Young, LLP, One Commerce Square, 2005 Market Street, 21st Floor, Philadelphia, Pennsylvania 19103, on Friday, May 16, 2014 at 3:00 p.m. Eastern time, or at any postponements or adjournments thereof, with all the powers which the undersigned would possess if personally present, and instructs them to vote in their discretion upon any matters which may properly be acted upon at this Meeting and specifically as indicated on the reverse side of this proxy card. Please refer to the proxy statement for a discussion of these matters. Do you have questions? If you have any questions about how to vote your proxy or about the meeting in general, please call toll-free (877) 536-1563. Representatives are available to assist you Monday through Friday 9 a.m. to 10 p.m. Eastern Time. Important notice regarding the availability of proxy materials for the shareholder meeting to be held on May 16, 2014: the proxy statement is available athttp://www.delawareinvestments.com/proxy. YOUR SIGNATURE IS REQUIRED FOR YOUR VOTE TO BE COUNTED. Please sign exactly as your name(s) appear(s) on this proxy, and date it.When signing in a representative capacity, please give title. RECEIPT OF THE NOTICE OF THE JOINT SPECIAL MEETING OF SHAREHOLDERS AND THE ACCOMPANYING PROXY STATEMENT, WHICH DESCRIBES THE MATTER TO BE CONSIDERED AND VOTED ON, IS HEREBY ACKNOWLEDGED. BY SIGNING AND DATING THIS PROXY CARD, YOU AUTHORIZE THE PROXIES TO VOTE ON THE PROPOSAL DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT AS MARKED, OR IF NOT MARKED, TO VOTE "FOR" THE PROPOSAL, AND TO USE THEIR DISCRETION TO VOTE ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING. PLEASE COMPLETE AND MAIL THIS PROXY CARD AT ONCE IN THE ENCLOSED ENVELOPE. This proxy is solicited on behalf of the Board of Trustees, and the proposal (set forth below) has been proposed by the Board of Trustees. THE BOARDS OF TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR THE APPROVAL OF THE PROPOSED SUB-ADVISORY AGREEMENT. PROPOSAL: FOR AGAINST ABSTAIN THANK YOU FOR VOTING | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
