One Commerce Square
Philadelphia, PA 19103
Delaware Investments
DELAWARE
INVESTMENTS
___________
1933 Act Rule 497(c)
File No. 2-60770
1940 Act File No. 811-2806
June 3, 1998
Filed via EDGAR (CIK #0000230173)
_________________________________
Securities and Exchange Commission
Document Control
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: File No. 2-60770
DELAWARE GROUP CASH RESERVE, INC.
Ladies and Gentlemen:
In accordance with the provisions of Rule 497(c), submitted
electronically via the EDGAR system, please find the Statement of
Additional Information for Delaware Group Cash Reserve, Inc.
Post-Effective Amendment No. 42 was electronically filed with the
Commission on May 29, 1998. Non-material changes were made to
the Statement of Additional Information after transmission of
this Amendment and the document has been tagged to note these
changes.
Very truly yours,
/s/ Michael D. Mabry
Michael D. Mabry
Assistant Vice President/
Assistant Secretary/
Senior Counsel
PART B--STATEMENT OF ADDITIONAL INFORMATION
MAY 29, 1998
DELAWARE GROUP CASH RESERVE, INC.
1818 Market Street
Philadelphia, PA 19103
For Prospectus and Performance: Nationwide 800-523-1918
Information on Existing Accounts: (SHAREHOLDERS ONLY) Nationwide
800-523-1918
Dealer Services: (BROKER/DEALERS ONLY) Nationwide 800-362-7500
TABLE OF CONTENTS
Cover Page
Investment Objective and Policy
Performance Information
Trading Practices
Purchasing Shares
Retirement Plans
Offering Price
Redemption
Dividends and Realized Securities Profits Distributions
Taxes
Investment Management Agreement
Officers and Directors
Exchange Privilege
General Information
Appendix A--Description of Ratings
Financial Statements
Delaware Group Cash Reserve, Inc. (the "Fund") is a
professionally-managed mutual fund. This Statement of Additional
Information ("Part B" of the Fund's registration statement)
describes Delaware Cash Reserve A Class (the "Class A Shares"),
Delaware Cash Reserve Consultant Class (the "Consultant Class
Shares"), Delaware Cash Reserve B Class (the "Class B
Shares") and Delaware Cash Reserve C Class (the "Class C Shares")
(individually, a "Class" and collectively, the "Classes").
Shares of each Class are purchased at net asset value,
without a front-end sales charge. Class A Shares are not subject
to annual 12b-1 Plan expenses; Consultant Class Shares are
subject to annual 12b-1 Plan expenses of up to 0.30% (currently,
no more than 0.25% of average daily net assets as set by the
Fund's Board of Directors) which are assessed against Consultant
Class Shares for the life of the investment; Class B Shares are
subject to a contingent deferred sales charge ("CDSC") which may
be imposed on redemptions made within six years of purchase and
annual 12b-1 Plan expenses of up to 1% for approximately eight
years after purchase; and Class C Shares are subject to a CDSC
which may be imposed on redemptions made within 12 months
of purchase and annual 12b-1 Plan expenses of up to 1% which are
assessed against Class C Shares for the life of the investment.
At the end of approximately eight years after purchase,
Class B Shares will be automatically converted into Consultant
Class Shares. See Automatic Conversion of Class B Shares in the
Prospectus for that Class. Such conversion will constitute a
tax-free exchange for federal income tax purposes. See Taxes in
the Prospectus for Class B Shares.
This Part B supplements the information contained in the
current Prospectus for Class B Shares and Class C Shares dated
May 29, 1998, and the current Prospectus for each of the Class
A Shares and Consultant Class Shares dated May 29, 1998, as they
may be amended from time to time. Part B should be read in
conjunction with the respective Class' Prospectus. Part B is not
itself a prospectus but is, in its entirety, incorporated by
reference into each Class' Prospectus. A prospectus relating to
Class B Shares and Class C Shares, a prospectus relating to Class
A Shares and a prospectus relating to Consultant Class Shares may
be obtained by writing or calling your investment dealer or by
contacting the Fund's national distributor, Delaware
Distributors, L.P. (the "Distributor"), 1818 Market Street,
Philadelphia, PA 19103.
All references to "shares" in this Part B refer to each
Class of shares of the Fund, except where noted.
INVESTMENT OBJECTIVE AND POLICY
The investment objective of the Fund is to obtain maximum
current income consistent with preservation of principal and
maintenance of liquidity by investing substantially all of its
assets in a portfolio of money market instruments. There is no
assurance that this objective can be achieved. This objective is
a matter of fundamental policy and may not be changed without
approval by the holders of a majority of the outstanding voting
securities of the Fund, which is a vote by the holders of the
lesser of (i) more than 50% of the outstanding voting securities;
or (ii) 67% of the voting securities present at a shareholder
meeting if 50% or more of the voting securities are present in
person or represented by proxy. See General Information.
The Fund intends to achieve its objective by investing at
least 80% of its assets in a diversified portfolio of money
market instruments. See Money Market Instruments, below, and
Appendix A-Description of Ratings.
The Fund maintains its net asset value at $1.00 per share by
valuing its securities on an amortized cost basis. See Offering
Price. The Fund maintains a dollar-weighted average portfolio
maturity of not more than 90 days and does not purchase any issue
having a remaining maturity of more than 13 months. In addition,
the Fund limits its investments, including repurchase agreements,
to those instruments which the Board of Directors determines
present minimal credit risks and which are of high quality. The
Fund may sell portfolio securities prior to maturity in order to
realize gains or losses or to shorten the average maturity if it
deems such actions appropriate to maintain a stable net asset
value per share. While the Fund will make every effort to
maintain a fixed net asset value of $1.00 per share, there can be
no assurance that this objective will be achieved.
While the Fund intends to hold its investments until
maturity when they will be redeemable at their full principal
value plus accrued interest, attempts may be made from time to
time to increase its yield by trading to take advantage of market
variations. Also, revised evaluations of the issuer or
redemptions by shareholders of the Fund may cause sales of
portfolio investments prior to maturity or at times when such
sales might otherwise not be desirable. The Fund's right to
borrow to make redemption payments may reduce, but does not
guarantee a reduction in, the need for such sales. The Fund will
not purchase new securities while any borrowings are outstanding.
See Taxes for the effect of any capital gains distributions.
A shareholder's rate of return will vary with the general
interest rate levels applicable to the money market instruments
in which the Fund invests. In the event of an increase in
current interest rates or a national credit crisis, or if one or
more of the issuers became insolvent prior to the maturity of the
instruments, principal values could be adversely affected.
Investments in obligations of foreign banks and of overseas
branches of U.S. banks may be subject to less stringent
regulations and different risks than those of U.S. domestic
banks. The rate of return and the net asset value will be
affected by such other factors as sales of portfolio securities
prior to maturity and the Fund's operating expenses.
Money Market Instruments
The Fund will invest all of its available assets in money
market instruments maturing in one year or less. The types of
instruments which the Fund may purchase are described below:
1. U.S. Government Securities--Securities issued or
guaranteed by the U.S. government, including Treasury Bills,
Notes and Bonds.
2. U.S. Government Agency Securities--Obligations issued or
guaranteed by agencies or instrumentalities of the U.S.
government whether supported by the full faith and credit of the
U.S. Treasury or the credit of a particular agency or
instrumentality.
3. Bank Obligations--Certificates of deposit, bankers'
acceptances and other short-term obligations of U.S. commercial
banks and their overseas branches and foreign banks of comparable
quality, provided each such bank combined with its branches has
total assets of at least one billion dollars. Any obligations of
foreign banks shall be denominated in U.S. dollars. Obligations
of foreign banks and obligations of overseas branches of U.S.
banks are subject to somewhat different regulations and risks
than those of U.S. domestic banks. In particular, a foreign
country could impose exchange controls which might delay the
release of proceeds from that country. Such deposits are not
covered by the Federal Deposit Insurance Corporation. Because of
conflicting laws and regulations, an issuing bank could maintain
that liability for an investment is solely that of the overseas
branch which could expose the Fund to a greater risk of loss.
The Fund will buy only short-term instruments of banks in nations
where these risks are minimal. The Fund will consider these
factors along with other appropriate factors in making an
investment decision to acquire such obligations and will only
acquire those which, in the opinion of management, are of an
investment quality comparable to other debt securities bought by
the Fund. In addition, the Fund is subject to certain maturity,
quality and diversification conditions applicable to taxable
money market funds. Thus, at the time of purchase a bank
obligation or, as relevant, its issuer must be rated in one of
the two highest rating categories (e.g. A-2 or better by Standard
& Poor's Ratings Group ("S&P") and P-2 or better by Moody's
Investors Service, Inc. ("Moody's")) by at least two
nationally-recognized statistical rating organizations or, if
such security or, as relevant, its issuer is not so rated, the
purchase of the security must be approved or ratified by the
Board of Directors in accordance with the maturity, quality and
diversification conditions with which taxable money market funds
must comply.
4. Commercial Paper--The Fund may invest in short-term
promissory notes issued by corporations if at the time of
purchase, such security or, as relevant, its issuer, is rated in
one of the two highest rating categories (e.g., A-2 or better by
S&P and P-2 or better by Moody's) by at least two
nationally-recognized statistical rating organizations approved
by the Board of Directors or, if such security is not so rated,
the purchase of the security must be approved or ratified by the
Board of Directors in accordance with the maturity, quality and
diversification conditions with which taxable money market funds
must comply.
5. Short-term Corporate Debt--The Fund may invest in
corporate notes, bonds and debentures if at the time of purchase,
such security or, as relevant, its issuer, is rated in one of the
two highest rating categories (e.g., AA or better by S&P and Aa
or better by Moody's) by at least two nationally-recognized
statistical rating organizations approved by the Board of
Directors or, if such security is not so rated, the purchase of
the security must be approved or ratified by the Board of
Directors in accordance with the maturity, quality and
diversification conditions with which taxable money market funds
must comply. Such securities generally have greater liquidity
and are subject to considerably less market fluctuation than
longer issues.
6. Repurchase Agreements--Instruments under which
securities are purchased from a bank or securities dealer with an
agreement by the seller to repurchase the securities. Under a
repurchase agreement, the purchaser acquires ownership of the
security but the seller agrees, at the time of sale, to
repurchase it at a mutually agreed-upon time and price. The Fund
will take custody of the collateral under repurchase agreements.
Repurchase agreements may be construed to be collateralized loans
by the purchaser to the seller secured by the securities
transferred. The resale price is in excess of the purchase price
and reflects an agreed-upon market rate unrelated to the coupon
rate or maturity of the purchased security. Such transactions
afford an opportunity for the Fund to invest temporarily
available cash on a short-term basis. The Fund's risk is limited
to the seller's ability to buy the security back at the
agreed-upon sum at the agreed-upon time, since the repurchase
agreement is secured by the underlying obligation. Should such
an issuer default, the investment manager believes that, barring
extraordinary circumstances, the Fund will be entitled to sell
the underlying securities or otherwise receive adequate
protection for its interest in such securities, although there
could be a delay in recovery. The Fund considers the
creditworthiness of the bank or dealer from whom it purchases
repurchase agreements. The Fund will monitor such transactions
to assure that the value of the underlying securities subject to
repurchase agreements is at least equal to the repurchase price.
The underlying securities will be limited to those described
above.
The ratings of S&P, Moody's and other rating services
represent their opinion as to the quality of the money market
instruments which they undertake to rate. It should be
emphasized, however, that ratings are general and are not
absolute standards of quality. These ratings are the initial
criteria for selection of portfolio investments, but the Fund
will further evaluate these securities. See Appendix A -
Description of Ratings.
Asset-Backed Securities
The Fund may also invest in securities which are backed by
assets such as receivables on home equity loans, credit card
loans, and automobile, mobile home and recreational vehicle
loans, wholesale dealer floor plans and leases. All such
securities must be rated in the highest rating category by a
reputable credit rating agency (e.g., AAA by S&P or Aaa by
Moody's). The credit quality of most asset-backed securities
depends primarily on the credit quality of the assets underlying
such securities, how well the entities issuing the securities are
insulated from the credit risk of the originator or affiliated
entities, and the amount of credit support provided to the
securities. Such receivables typically are securitized in either
a pass-through or a pay-through structure. Pass-through
securities provide investors with an income stream consisting of
both principal and interest payments in respect of the
receivables in the underlying pool. Pay-through securities are
debt obligations issued usually by a special purpose entity,
which are collateralized by the various receivables and in which
the payments on the underlying receivables provide the funds to
pay the debt service on the debt obligations issued. The Fund
may invest in these and other types of asset-backed securities
that may be developed in the future. It is the Fund's current
policy to limit asset-backed investments to those represented by
interests in credit card loans, wholesale dealer floor plans,
home equity loans and automobile loans.
The rate of principal payment on asset-backed securities
generally depends upon the rate of principal payments received on
the underlying assets. Such rate of payments may be affected by
economic and various other factors such as changes in interest
rates. Therefore, the yield may be difficult to predict and
actual yield to maturity may be more or less than the anticipated
yield to maturity. Such asset-backed securities also involve
certain other risks, including the risk that security interests
cannot be adequately or in many cases, ever, established. In
addition, with respect to credit card loans, a number of state
and federal consumer credit laws give debtors the right to set
off certain amounts owed on the credit cards, thereby reducing
the outstanding balance. In the case of automobile loans, there
is a risk that the holders may not have either a proper or first
security interest in all of the obligations backing the
receivables due to the large number of vehicles involved in a
typical issuance and technical requirements under state laws.
Therefore, recoveries on repossessed collateral may not always be
available to support payments on the securities.
Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties.
To lessen the effect of failures by obligors on underlying assets
to make payments, such securities may have credit support
supplied by a third party or derived from the structure of the
transaction. Such credit support falls into two categories: (i)
liquidity protection, and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying
assets.
Liquidity protection refers to the provision of advances,
generally by the entity administering the pool of assets, to
ensure that the receipt of payments due on the underlying pool is
timely. Protection against losses resulting from ultimate
default enhances the likelihood of payments of the obligations on
at least some of the assets in the pool. Such protection may be
provided through guarantees, insurance policies or letters of
credit obtained by the issuer or sponsor from third parties,
through various means of structuring the transaction or through a
combination of such approaches. The Fund will not pay any
additional fees for such credit support, although the existence
of credit support may increase the price of a security.
Examples of credit support arising out of the structure of
the transaction include "senior- subordinated securities"
(multiple class securities with one or more classes subordinate
to other classes as to the payment of principal thereof and
interest thereon, with the result that defaults on the underlying
assets are borne first by the holders of the subordinated class),
creation of "reserve funds" (where cash or investments, sometimes
funded from a portion of the payments on the underlying assets,
are held in reserve against future losses) and
"over-collateralization" (where the scheduled payments on, or the
principal amount of, the underlying assets exceeds that required
to make payments of the securities and pay any servicing or other
fees). The degree of credit support provided for each issue is
generally based on historical information respecting the level of
credit risk associated with the underlying assets. Delinquencies
or losses in excess of those anticipated could adversely affect
the return on an investment in such issue.
Investment Restrictions
The Fund has adopted the following restrictions and
fundamental policies which cannot be changed without approval by
the holders of a majority of the outstanding voting securities of
the Fund, as described above. The Fund may not under any
circumstances:
1. Invest more than 20% of its assets in securities other
than money market instruments as defined above.
2. Borrow money in excess of one-third of the value of its
net assets and then only as a temporary measure for extraordinary
purposes or to facilitate redemptions. The Fund has no intention
of increasing its net income through borrowing. Any borrowing
will be done from a bank and to the extent that such borrowing
exceeds 5% of the value of the Fund's net assets, asset coverage
of at least 300% is required. In the event that such asset
coverage shall at any time fall below 300%, the Fund shall,
within three days thereafter (not including Sunday or holidays)
or such longer period as the Securities and Exchange Commission
(the "SEC") may prescribe by rules and regulations, reduce the
amount of its borrowings to such an extent that the asset
coverage of such borrowings shall be at least 300%. The Fund
will not pledge more than 10% of its net assets. The Fund will
not issue senior securities as defined in the Investment Company
Act of 1940 (the "1940 Act"), except for notes to banks.
3. Sell securities short or purchase securities on margin.
4. Write or purchase put or call options.
5. Underwrite the securities of other issuers, except that
the Fund may acquire portfolio
securities under circumstances where, if the securities are later
publicly offered or sold by the Fund, it might be deemed an
underwriter for purposes of the Securities Act of 1933 (the "1933
Act"). Not more than 10% of the value of the Fund's net assets
at the time of acquisition will be invested in such securities.
6. Purchase or sell commodities or commodity contracts.
7. Purchase or sell real estate, but this shall not prevent
the Fund from investing in securities secured by real estate or
interests therein, or securities issued by companies which invest
in real estate or interests therein.
8. Make loans to other persons except by the purchase of
obligations in which the Fund is authorized to invest and to
enter into repurchase agreements. Not more than 10% of the
Fund's total assets will be invested in repurchase agreements
maturing in more than seven days and in other illiquid assets.
9. Invest more than 5% of the value of its assets in the
securities of any one issuer (other than obligations issued or
guaranteed by the U.S. government or federal agencies) or acquire
more than 10% of the voting securities of such an issuer. Where
securities are issued by one entity but are guaranteed by
another, "issuer" shall not be deemed to include the guarantor so
long as the value of all securities owned by the Fund which have
been issued or guaranteed by that guarantor does not exceed 10%
of the value of the Fund's assets.
10. Purchase more than 10% of the outstanding securities of
any issuer or invest in companies for the purpose of exercising
control.
11. Invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation
or acquisition of assets.
12. Invest more than 25% of its total assets in any
particular industry, except that the Fund may invest more than
25% of the value of its total assets in obligations issued or
guaranteed by the U.S. government, its agencies or
instrumentalities, certificates of deposit and bankers'
acceptances of banks with over one billion dollars in assets or
bank holding companies whose securities are rated A-2 or better
by S&P or P-2 or better by Moody's.
In addition, the following investment restrictions may be
changed by the Board of Directors without approval by the holders
of a majority of the outstanding voting securities of the Fund.
The Fund may not:
(a) Retain in its portfolio securities issued by an issuer
any of whose officers, directors or security holders is an
officer or director of the Fund or of the investment manager of
the Fund if after the purchase of the securities of such issuer
by the Fund one or more of such officers or directors owns
beneficially more than 1/2 of 1% of the shares or securities or
both of such issuer and such officers and directors owning more
than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities.
(b) Invest funds of the Fund in the securities of companies
which have a record of less than three years' continuous
operation if such purchase at the time thereof would cause more
than 5% of the Fund's total assets to be invested in the
securities of such company or companies. Such period of three
years may include the operation of any predecessor company or
companies, partnership or individual enterprise if the company
whose securities are proposed as an investment for funds of the
Fund has come into existence as the result of a merger,
consolidation, reorganization or the purchase of substantially
all of the assets of such predecessor company or companies,
partnerships or individual enterprises.
(c) Invest in direct interests in oil, gas or other mineral
exploration or development programs.
(d) Invest more than 25% of its assets in foreign banks
except that this limitation shall not apply to United States
branches of foreign banks which are subject to the same
regulation as United States banks or to foreign branches of
United States banks where such a bank is liable for the
obligations of the branch.
Although not a fundamental investment restriction, the Fund
currently does not invest its assets in real estate limited
partnerships.
PERFORMANCE INFORMATION
For the seven-day period ended March 31, 1998, the
annualized current yield of Class A Shares, Class B Shares, Class
C Shares and Consultant Class Shares was 4.67%, 3.67%, 3.67% and
4.42%, respectively, and the compounded effective yield was
4.78%, 3.73%, 3.73% and 4.51%, respectively. These yields will
fluctuate daily as income earned fluctuates. On this date, the
weighted average portfolio maturity was 47 days for each Class.
The current yield of Class A Shares is expected to be higher than
that of Consultant Class Shares, Class B Shares and Class C
Shares because Class A Shares are not subject to the maximum
aggregate expenses under the Fund's 12b-1 Plans of up to 0.30%
for Consultant Class Shares and up to 1% for each of the Class B
Shares and Class C Shares. See Plans Under Rule 12b-1 for
Consultant Class Shares, Class B Shares and Class C Shares.
Shareholders and prospective investors will be interested in
learning from time to time the current and the effective
compounded yield of a Class of shares. As explained under
Dividends and Realized Securities Profits Distributions,
dividends are declared daily from net investment income. In
order to determine the current return, yield is calculated as
follows.
The calculation begins with the value of a hypothetical
account of one share at the beginning of a seven-day period; this
is compared with the value of that same account at the end of the
same period (including shares purchased for the account with
dividends earned during the period). The net change in the
account value is generally the net income earned per share during
the period, which consists of accrued interest income plus or
minus amortized purchase discount or premium, less all accrued
expenses (excluding expenses reimbursed by the investment
manager) but does not include realized gains or losses or
unrealized appreciation or depreciation.
The current yield of each Class represents the net change in
this hypothetical account annualized over 365 days. In addition,
a shareholder may achieve a compounding effect through
reinvestment of dividends, which is reflected in the effective
yield shown below.
The following is an example, for purposes of illustration
only, of the current and effective yield calculations for the
seven-day period ended March 31, 1998:
Class Class Class Consultant
A Shares B Shares C Shares Shares
Value of a
hypothetical
account with
one share
at the
beginning
of the
period. . $1.00000000 $1.00000000 $1.00000000 $1.00000000
Value of the
same account
at the end
of the
period . . $1.00089514 $1.00070332 $1.00070332 $1.00084723
Net change
in account
value. . . 0.00089514(1)0.00070332(1) 0.00070332(1) 0.00084723(1)
Base period
return = net
change in
account value/
beginning
account
value . . 0.00089514 0.00070332 0.00070332 0.00084723
Current yield
[base period
return x
(365/7)]. 4.67%(2) 3.67%(2) 3.67%(2) 4.42%(2)
Effective
yield (1 +
base period)
365/7 - 1. 4.78%(3) 3.73%(3) 3.73%(3) 4.51%(3)
Weighted average life to maturity of the portfolio on March 31,
1998 was 47 days.
(1) This represents the net income per share for the seven
calendar days ended March 31, 1998.
(2) This represents the average of annualized net investment
income per share for the seven calendar days ended March
31, 1998.
(3) This represents the current yield for the seven calendar
days ended March 31, 1998 compounded daily.
The average annual total rate of return for a Class is based
on a hypothetical $1,000 investment that includes capital
appreciation and depreciation during the stated periods. With
respect to Class B Shares and Class C Shares, each calculation
will include the CDSC that would be applicable upon complete
redemption of such shares during the stated period. In addition,
the Fund may present total return information that does not
reflect the deduction of any applicable CDSC. The following
formula will be used for the actual computations:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order of
$1,000;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical $1,000
purchase at the end of the period after the
deduction of the applicable CDSC, if any,
with respect to Class B Shares and Class C
Shares.
Aggregate or cumulative total return is calculated in a
similar manner, except that the results are not annualized. The
performance, as shown below, is the average annual total return
quotations for Class A Shares and Consultant Class Shares through
March 31, 1998, calculated as an average annual compounded rate
of return for the periods indicated. For this purpose, the
calculations assume the reinvestment of all dividend
distributions paid during the indicated periods. Interest rates
fluctuated during the periods covered by the table and the Fund's
results should not be considered as representative of future
performance. Total return for Consultant Class Shares for
periods prior to commencement of operations of such Class is
based on the performance of Class A Shares. For periods prior to
commencement of operations of Consultant Class Shares, the total
return does not reflect the 12b-1 payments applicable to such
Class. If such payments were reflected in the calculations,
performance would have been affected.
Average Annual Total Return
Consultant Class
Class A Shares Shares(1)
1 year ended
3/31/98 4.88% 4.62%
3 years ended
3/31/98 4.84% 4.58%
5 years ended
3/31/98 4.16% 3.90%
10 years ended
3/31/98 5.22% 4.96%
15 years ended
3/31/98 6.08% 5.89%
Period 6/30/78(2)
through 3/31/98 7.66% 7.51%
(1) Date of initial public offering of Consultant Class Shares
was March 10, 1988.
(2) Date of initial public offering of Class A Shares.
The performance of Class B Shares, as shown below, is the
average annual total return quotation through March 31, 1998.
The average annual total return for Class B Shares (including
deferred sales charge) reflects the deduction of the applicable
CDSC that would be paid if the shares were redeemed at March 31,
1998. The average annual total return for Class B Shares
(excluding deferred sales charge) assumes the shares were not
redeemed at March 31, 1998 and, therefore, does not reflect the
deduction of a CDSC.
Average Annual Total Return
Class B Shares Class B Shares
(Including Deferred (Excluding Deferred
Sales Charge) Sales Charge)
1 year ended
3/31/98 (0.16%) 3.84%
3 years ended
3/31/98 2.86% 3.80%
Period 5/2/94(1)
through 3/31/98 2.93% 3.63%
(1) Date of initial public offering of Class B Shares.
The performance of Class C Shares, as shown below, is the
average total return quotation through March 31, 1998. The
average total return quotation for Class C Shares (including
deferred sales charge) reflects the deduction of the applicable
CDSC that would be paid if the shares were redeemed at March 31,
1998. The average total return for Class C Shares (excluding
deferred sales charge) assumes the shares were not redeemed at
March 31, 1998 and, therefore, does not reflect the deduction of
a CDSC.
Average Annual Total Return
Class C Shares Class C Shares
(Including Deferred (Excluding Deferred
Sales Charge) Sales Charge)
1 year ended
3/31/98 2.84% 3.84%
Period 11/29/95(1)
through 3/31/98 3.71% 3.71%
(1) Date of initial public offering of Class C Shares.
From time to time, the Fund may quote current yield
information of the Classes with the sample average rates paid on
bank money market deposit accounts. The bank money market
deposit averages are the stated rates of 100 large banks and
thrifts in the top five standard metropolitan statistical areas
as determined by the Bank Rate Monitor. The Fund's figures for a
Class will be the annualized yields representing an average of
that Class' after-expense per share earnings divided by cost per
share for each day of the fiscal month, or period, noted. Yield
fluctuates depending on portfolio type, quality, maturity and
operating expenses. Principal is not insured and the results
shown should not be considered as representative of the yield
which may be realized from an investment made in the Fund at any
time in the future.
From time to time, the Fund may quote actual total return
and/or yield performance for its Classes in advertising and other
types of literature. This information may be compared to that of
other mutual funds with similar investment objectives and to
stock, bond an other relevant indices or to rankings prepared by
independent services or other financial or industry publications
that monitor the performance of mutual funds. For example, the
performance comparisons of the Fund (or Class) may include the
average return of various bank instruments, some of which may
carry certain return guarantees offered by leading banks and
thrifts, as monitored by the Bank Rate Monitor, and those of
corporate and government security price indices may be compared
to data prepared by Lipper Analytical Services, Inc.,
IBC/Donoghue or the performance of unmanaged indices compiled or
maintained by statistical research firms such as Lehman Brothers
or Salomon Brothers, Inc.
Lipper Analytical Services, Inc. and IBC/Donoghue maintain
statistical performance databases, as reported by a diverse
universe of independently-managed mutual funds. Rankings that
compare the Fund's performance to another fund in appropriate
categories over specific time periods also may be quoted in
advertising and other types of literature. The total return
performance reported for these indices will reflect the
reinvestment of all distributions on a quarterly basis and market
price fluctuations. The indices do not take into account any
fees. A direct investment in an unmanaged index is not possible.
Salomon Brothers and Lehman Brothers are statistical
research firms that maintain databases of international market,
bond market, corporate and government-issued securities of
various maturities. This information, as well as unmanaged
indices compiled and maintained by these firms, will be used in
preparing comparative illustrations. In addition, the
performance of multiple indices compiled and maintained by these
firms may be combined to create a blended performance result for
comparative purposes. Generally, the indices selected will be
representative of the types of securities in which the Fund may
invest and the assumptions that were used in calculating the
blended performance will be described.
Comparative information on the Consumer Price Index may also
be included in advertisements or other literature. The Consumer
Price Index, as prepared by the U.S. Bureau of Labor Statistics,
is the most commonly used measure of inflation. It indicates the
cost fluctuations of a representative group of consumer goods.
It does not represent a return from an investment.
Current interest rate and yield information on government
debt obligations of various durations, as reported weekly by the
Federal Reserve (Bulletin H.15) may also be used. Also, current
rate information on municipal debt obligations of various
durations, as reported daily by The Bond Buyer may also be used.
The Bond Buyer is published daily and is an industry-accepted
source for current municipal bond market information.
Ibbotson Associates of Chicago, Illinois ("Ibbotson")
provides historical returns of the capital markets in the United
States, including common stocks, small capitalization stocks,
long-term corporate bonds, intermediate-term government bonds,
long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the Consumer Price Index), and combinations
of various capital markets. The performance of these capital
markets is based on the returns of different indices. The Fund
may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a
hypothetical investment in any of these capital markets. The
risks associated with the security types in any capital market
may or may not correspond directly to those of the Fund. The
Fund may also compare performance to that of other compilations
or indices that may be developed and made available in the
future.
The Fund may include discussions or illustrations of the
potential investment goals of a prospective investor (including
materials that describe general principles of investing, such as
asset allocation, diversification, risk tolerance, and goal
setting, questionnaires designed to help create a personal
financial profile, worksheets used to project savings needs based
on assumed rates of inflation and hypothetical rates of return
and action plans offering investment alternatives), investment
management techniques, policies or investment suitability of the
Fund (such as value investing, market timing, dollar cost
averaging asset allocation, constant ratio transfer, automatic
account rebalancing, the advantages and disadvantages of
investing in tax-deferred and taxable investments), economic and
political conditions, the relationship between sectors of the
economy and the economy as a whole, the effects of inflation and
historical performance of various asset classes, including but
not limited to, stocks, bonds and Treasury bills. From time to
time advertisements, sales literature, communications to
shareholders or other materials may summarize the substance of
information contained in shareholder reports (including the
investment composition of the Fund), as well as the views as to
current market, economic, trade and interest rate trends,
legislative, regulatory and monetary developments, investment
strategies and related matters believed to be of relevance to the
Fund.
In addition, selected indices may be used to illustrate
historic performance of selected asset classes. The Fund may
also include in advertisements, sales literature, communications
to shareholders or other materials, charts, graphs or drawings
which illustrate the potential risks and rewards of investment in
various investment vehicles, including but not limited to,
domestic stocks, and/or bonds, treasury bills and shares of the
Fund. In addition, advertisements, sales literature,
communications to shareholders or other materials may include a
discussion of certain attributes or benefits to be derived by an
investment in the Fund and/or other mutual funds, shareholder
profiles and hypothetical investor scenarios, timely information
on financial management, tax and retirement planning (such as
information on Roth IRAs and Education IRAs) and investment
alternatives to certificates of deposit and other financial
instruments. Such sales literature, communications to
shareholders or other materials may include symbols, headlines or
other material which highlight or summarize the information
discussed in more detail therein.
Materials may refer to the CUSIP numbers of the Fund and may
illustrate how to find the listings of the Fund in newspapers and
periodicals. Materials may also include discussions of other
funds, products, and services.
The Fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the Fund may
compare these measures to those of other funds. Measures of
volatility seek to compare the historical share price
fluctuations or total returns to those of a benchmark. Measures
of benchmark correlation indicate how valid a comparative
benchmark may be. Measures of volatility and correlation may be
calculated using averages of historical data. The Fund may
advertise its current interest rate sensitivity, duration,
weighted average maturity or similar maturity characteristics.
Advertisements and sales materials relating to the Fund may
include information regarding the background and experience of
its portfolio managers.
The following tables present examples, for purposes of
illustration only, of cumulative total return performance for the
shares of each Class of the Fund through March 31, 1998. For
these purposes, the calculations assume the reinvestment of any
realized securities profits distributions and income dividends
paid during the indicated periods. Total return shown for
Consultant Class Shares for the periods prior to commencement of
operations of such Class is based on the performance of Class A
Shares. For periods prior to commencement of operations of
Consultant Class Shares, the total return does not reflect the
12b-1 payments applicable to such Class. If such payments were
reflected in the calculations, performance would have been
affected.
Cumulative Total Return
Consultant Class
Class A Shares Shares (1)
3 months
ended 3/31/98 1.17% 1.11%
6 months
ended 3/31/98 2.39% 2.26%
9 months
ended 3/31/98 3.64% 3.45%
1 year ended
3/31/98 4.88% 4.62%
3 years ended
3/31/98 15.22% 14.36%
5 years ended
3/31/98 22.59% 21.07%
10 years ended
3/31/98 66.35% 62.26%
15 years ended
3/31/98 142.41% 135.89%
Period 6/30/78(2)
through 3/31/98 329.64% 318.09%
(1) Date of initial public offering of Consultant Class Shares
was March 10, 1988.
(2) Date of initial public offering of Class A Shares.
Class B Shares Class B Shares
(Including Deferred (Excluding Deferred
Sales Charge) Sales Charge)
3 months ended
3/31/98 (3.08%) 0.92%
6 months ended
3/31/98 (2.12%) 1.88%
9 months ended
3/31/98 (1.13%) 2.87%
1 year ended
3/31/98 (0.16%) 3.84%
3 years ended
3/31/98 2.86% 3.80%
Period 5/2/94(1)
through 3/31/98 2.93% 3.63%
(1) Date of initial public offering of Class B Shares.
Class C Shares Class C Shares
(Including Deferred (Excluding Deferred
Sales Charge) Sales Charge)
3 months ended
3/31/98 (0.08%) 0.92%
6 months ended
3/31/98 0.88% 1.88%
9 months ended
3/31/98 1.87% 2.87%
1 year ended
3/31/98 2.84% 3.84%
Period 11/29/95(1)
through 3/31/98 3.71% 3.71%
(1) Date of initial public offering of Class C Shares.
Because every investor's goals and risk threshold are
different, the Distributor, as distributor for the Fund and other
mutual funds available from the Delaware Investments family, will
provide general information about investment alternatives and
scenarios that will allow investors to assess their personal
goals. This information will include general material about
investing as well as materials reinforcing various industry-
accepted principles of prudent and responsible personal financial
planning. One typical way of addressing these issues is to
compare an individual's goals and the length of time the
individual has to attain these goals to his or her risk
threshold. In addition, the Distributor will provide information
that discusses the overriding investment philosophy of Delaware
Management Company (the "Manager") and how that philosophy
impacts the Fund's, and other Delaware Investments funds',
investment disciplines employed in seeking their objectives. The
Distributor may also from time to time cite general or specific
information about the institutional clients of the Manager,
including the number of such clients serviced by the Manager.
Dollar-Cost Averaging
Money market funds, which are generally intended for your
short-term investment needs, can often be used as a basis for
building a long-term investment plan. For many people, deciding
when to purchase long-term investments, such as stock or
longer-term bond funds, can be a difficult decision. Unlike
money market fund shares, prices of other securities, such as
stocks and bonds, tend to move up and down over various market
cycles. Though logic says to invest when prices are low, even
experts can't always pick the highs and the lows. By using a
strategy known as dollar-cost averaging, you schedule your
investments ahead of time. If you invest a set amount on a
regular basis (perhaps using assets from your money market fund)
that money will always buy more shares when the price is low and
fewer when the price is high. You can choose to invest at any
regular interval--for example, monthly or quarterly--as long as
you stick to your regular schedule. Dollar-cost averaging looks
simple and it is, but there are important things to remember.
Dollar-cost averaging works best over longer time periods,
and it doesn't guarantee a profit or protect against losses in
declining markets. If you need to sell your investment when
prices are low, you may not realize a profit no matter what
investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the
potential success of a dollar-cost averaging program depends on
continuous investing, even through periods of fluctuating prices,
you should consider your dollar-cost averaging program a
long-term commitment and invest an amount you can afford and
probably won't need to withdraw. You should also consider your
financial ability to continue to purchase shares during low fund
share prices. Delaware Investments offers three services --
Automatic Investing Program, Direct Deposit Program and the
Wealth Builder Option -- that can help to keep your regular
investment program on track. See Investing by Electronic Fund
Transfer - Direct Deposit Purchase Plan and Automatic Investing
Plan under Purchasing Shares and Wealth Builder Option under
Purchasing Shares for a complete description of these services,
including restrictions or limitations.
The example below illustrates how dollar-cost averaging can
work. In a fluctuating market, the average cost per share of a
stock or bond fund over a period of time will be lower than the
average price per share of the fund for the same time period.
Price Number of
Investment Per Shares
Amount Share Purchased
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $5.00 20
Month 4 $100 $10.00 10
____________________________________________
$400 $37.50 48
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not
intended to represent the actual performance of the Fund or any
stock or bond fund in the Delaware Investments family.
Dollar-cost averaging can be appropriate for investments in
shares of funds that tend to fluctuate in value. Please obtain
the prospectus of any fund in the Delaware Investments family in
which you plan to invest through a dollar-cost averaging program.
The prospectus contains additional information, including charges
and expenses. Please read it carefully before you invest or send
money.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional
Fund shares, your investment is given yet another opportunity to
grow. It's called the Power of Compounding. The Fund may
include illustrations showing the power of compounding in
advertisements and other types of literature.
The yield quoted at any time represents the amount being
earned on a current basis and is a function of the types of
instruments in the Fund's portfolio, their quality and length of
maturity and the Fund's operating expenses. The length of
maturity for the portfolio is the average dollar weighted
maturity of the portfolio. This means that the portfolio has an
average maturity of a stated number of days for its issues. The
calculation is weighted by the relative value of the investment.
The yield will fluctuate daily as the income earned on the
investments of the Fund fluctuates. Accordingly, there is no
assurance that the yield quoted on any given occasion will remain
in effect for any period of time. It should also be emphasized
that the Fund is an open-end investment company and that there is
no guarantee that the net asset value per share or any stated
rate of return will remain constant. A shareholder's investment
in the Fund is not insured. Investors comparing results of the
Fund with investment results and yields from other sources such
as banks or savings and loan associations should understand these
distinctions. Historical and comparative yield information may,
from time to time, be presented by the Fund. Although the Fund
determines the yield on the basis of a seven-calendar-day period,
it may from time to time use a different time span.
Other funds of the money market type may calculate their
yield on a different basis and the yield quoted by the Fund could
vary upward or downward if another method of calculation or base
period were used. Shareholders and prospective investors who
wish to learn the current yield of the Fund may call toll free,
nationwide 800-523-1918.
TRADING PRACTICES
Portfolio transactions are executed by the Manager on behalf
of the Fund in accordance with the standards described below.
Brokers, dealers and banks are selected to execute
transactions for the purchase or sale of portfolio securities on
the basis of the Manager's judgment of their professional
capability to provide the service. The primary consideration is
to have brokers, dealers or banks execute transactions at best
price and execution. Best price and execution refers to many
factors, including the price paid or received for a security, the
commission charged, the promptness and reliability of execution,
the confidentiality and placement accorded the order and other
factors affecting the overall benefit obtained by the account on
the transaction. When a commission is paid, the Fund pays
reasonably competitive brokerage commission rates based upon the
professional knowledge of its trading department as to rates paid
and charged for similar transactions throughout the securities
industry. In some instances, the Fund pays a minimal share
transaction cost when the transaction presents no difficulty.
Trades are generally made on a net basis where securities are
either bought or sold directly from or to a broker, dealer or
bank. In these instances, there is no direct commission charged,
but there is a spread (the difference between the buy and sell
price) which is the equivalent of a commission.
The Manager may allocate out of all commission business
generated by all of the funds and accounts under its management,
brokerage business to brokers or dealers who provide brokerage
and research services. These services include advice, either
directly or through publications or writings, as to the value of
securities, the advisability of investing in, purchasing or
selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing of analyses and
reports concerning issuers, securities or industries; providing
information on economic factors and trends; assisting in
determining portfolio strategy; providing computer software and
hardware used in security analyses; and providing portfolio
performance evaluation and technical market analyses. Such
services are used by the Manager in connection with its
investment decision-making process with respect to one or more
funds and accounts managed by it, and may not be used, or used
exclusively, with respect to the fund or account generating the
brokerage.
As provided in the Securities Exchange Act of 1934 (the
"1934 Act") and the Fund's Investment Management Agreement,
higher commissions are permitted to be paid to broker/dealers who
provide brokerage and research services than to broker/dealers
who do not provide such services if such higher commissions are
deemed reasonable in relation to the value of the brokerage and
research services provided. Although transactions are directed
to broker/dealers who provide such brokerage and research
services, the Fund believes that the commissions paid to such
broker/dealers are not, in general, higher than commissions that
would be paid to broker/dealers not providing such services and
that such commissions are reasonable in relation to the value of
the brokerage and research services provided. In some instances,
services may be provided to the Manager which constitute in some
part brokerage and research services used by the Manager in
connection with its investment decision-making process and
constitute in some part services used by the Manager in
connection with administrative or other functions not related to
its investment decision-making process. In such cases, the
Manager will make a good faith allocation of brokerage and
research services and will pay out of its own resources for
services used by the Manager in connection with administrative or
other functions not related to its investment decision-making
process. In addition, so long as no fund is disadvantaged,
portfolio transactions which generate commissions or their
equivalent are allocated to broker/dealers who provide daily
portfolio pricing services to the Fund and to other funds in the
Delaware Investments family. Subject to best price and
execution, commissions allocated to brokers providing such
pricing services may or may not be generated by the funds
receiving the pricing service.
The Manager may place a combined order for two or more
accounts or funds engaged in the purchase or sale of the same
security if, in its judgment, joint execution is in the best
interest of each participant and will result in best price and
execution. Transactions involving commingled orders are
allocated in a manner deemed equitable to each account or fund.
When a combined order is executed in a series of transactions at
different prices, each account participating in the order may be
allocated an average price obtained from the executing broker.
It is believed that the ability of the accounts to participate in
volume transactions will generally be beneficial to the accounts
and funds. Although it is recognized that, in some cases, the
joint execution of orders could adversely affect the price or
volume of the security that a particular account or fund may
obtain, it is the opinion of the Manager and the Fund's Board of
Directors that the advantages of combined orders outweigh the
possible disadvantages of separate transactions.
Portfolio trading will be undertaken principally to
accomplish the Fund's objective and not for the purpose of
realizing capital gains, although capital gains may be realized
on certain portfolio transactions. For example, capital gains
may be realized when a security is sold (i) so that, provided
capital is preserved or enhanced, another security can be
purchased to obtain a higher yield, (ii) to take advantage of
what the Manager believes to be a temporary disparity in the
normal yield relationship between the two securities to increase
income or improve the quality of the portfolio, (iii) to purchase
a security which the Manager believes is of higher quality than
its rating or current market value would indicate, or (iv) when
the Manager anticipates a decline in value due to market risk or
credit risk. Since portfolio assets will consist of short-term
instruments, replacement of portfolio securities will occur
frequently. However, since the Manager expects to usually
transact purchases and sales of portfolio securities on a net
basis, it is not anticipated that the Fund will pay any
significant brokerage commissions. The Manager is free to
dispose of portfolio securities at any time, subject to complying
with the Internal Revenue Code of 1986, as amended (the "Code")
and the 1940 Act, when changes in circumstances or conditions
make such a move desirable in light of the investment objective.
Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc. (the "NASD"), and subject
to seeking best price and execution, the Manager may place orders
with broker/dealers that have agreed to defray certain expenses
of the funds in the Delaware Investments family, such as
custodian fees, and may, at the request of the Distributor, give
consideration to sales of shares of the funds in the Delaware
Investments family as a factor in the selection of brokers and
dealers to execute Fund portfolio transactions.
PURCHASING SHARES
The Distributor serves as the national distributor for the
Fund's shares - Class A Shares, Consultant Class Shares, Class B
Shares and Class C Shares and has agreed to use its best efforts
to sell shares of the Fund.
Shares of the Fund are offered on a continuous basis. Class
A Shares can be purchased directly from the Fund or its
Distributor. Consultant Class Shares, Class B Shares and Class C
Shares are offered through brokers, financial institutions and
other entities which have a dealer agreement with the Fund's
Distributor or a service agreement with the Fund. In some
states, banks and/or other institutions effecting transactions in
Consultant Class Shares, Class B Shares or Class C Shares may be
required to register as dealers pursuant to state laws.
The minimum initial investment is generally $1,000 for each
Class. Subsequent purchases must generally be $100 or more. The
initial and subsequent investment minimums for Class A Shares
will be waived for purchases by officers, directors and employees
of any fund in the Delaware Investments family, the Manager or
any of the Manager's affiliates if the purchases are made
pursuant to a payroll deduction program. Shares purchased
pursuant to the Uniform Gifts to Minors Act or Uniform Transfers
to Minors Act and shares purchased in connection with an
Automatic Investing Plan are subject to a minimum initial
purchase of $250 and a minimum subsequent purchase of $25.
Accounts opened under the Asset Planner service are subject to a
minimum initial investment of $2,000 per Asset Planner strategy
selected. There is a maximum purchase limitation of $250,000 on
each purchase of Class B Shares; for Class C Shares, each
purchase must be in an amount that is less than $1,000,000. The
Fund will reject any order for purchase of more than $250,000 of
Class B Shares and $1,000,000 or more for Class C Shares. An
investor may exceed these limitations by making cumulative
purchases over a period of time.
Shares of each Class are sold without a front-end sales
charge at the net asset value per share next determined after the
receipt and effectiveness of a purchase order as described below.
See the Prospectuses for additional information on how to invest.
The Fund reserves the right to reject any order for the purchase
of its shares if in the opinion of management, such rejection is
in the Fund's best interest. See Suitability in the
Prospectuses.
Class A Shares have no CDSC or annual 12b-1 Plan expenses.
Consultant Class Shares have no CDSC; such shares are subject to
annual 12b-1 Plan expenses of up to of 0.30% of the average daily
net assets of such shares.
Class B Shares are subject to a CDSC of: (i) 4% if shares
are redeemed within two years of purchase; (ii) 3% if shares are
redeemed during the third or fourth year following purchase;
(iii) 2% if shares are redeemed during the fifth year following
purchase; (iv) 1% if shares are redeemed during the sixth year
following purchase; and (v) 0% thereafter. Class C Shares are
subject to a CDSC of 1% if shares are redeemed within 12 months
of purchase. For both Class B Shares and Class C Shares, the
charge will be assessed on an amount equal to the lesser of net
asset value at the time of purchase of the shares being redeemed
or the net asset value of the shares at the time of redemption.
The net asset values of Class B Shares and Class C Shares at the
time of purchase and at the time of redemption are expected to be
the same if redeemed directly from the Fund. In addition, no
CDSC will be assessed on redemption of shares received upon
reinvestment of dividends or capital gains. See Redemption and
Exchange in the Prospectus for Class B Shares and Class C Shares
for a list of the instances in which the CDSC is waived. Class B
Shares are subject to annual 12b-1 Plan expenses up to a maximum
of 1% of the average daily net assets of such Class for
approximately eight years. During the seventh year after purchase
and, thereafter, until converted to Consultant Class Shares,
Class B Shares will continue to be subject to annual 12b-1 Plan
expenses of 1% of average daily net assets representing such
shares. At the end of approximately eight years after purchase,
the investor's Class B Shares will be automatically converted
into Consultant Class Shares of the Fund. See Automatic
Conversion of Class B Shares in the Prospectus for Class B
Shares. Such conversion will constitute a tax-free exchange for
federal income tax purposes. See Taxes in the Prospectus for
Class B Shares. Class C Shares are subject to annual 12b-1 Plan
expenses up to a maximum of 1% of the average daily net assets of
such Class for the life of the investment.
With respect to Class A Shares and Consultant Class Shares,
certificates representing shares purchased are not ordinarily
issued unless a shareholder submits a specific request.
Certificates are not issued in the case of Class B Shares or
Class C Shares or in the case of any retirement plan account
including self-directed IRAs. However, purchases not involving
the issuance of certificates are confirmed to the investor and
credited to the shareholder's account on the books maintained by
Delaware Service Company, Inc. (the "Transfer Agent"). The
investor will have the same rights of ownership with respect to
such shares as if certificates had been issued. With respect to
Class A Shares and Consultant Class Shares, an investor may
receive a certificate representing full share denominations
purchased by sending a letter signed by each owner of the account
to the Transfer Agent requesting the certificate. No charge is
assessed by the Fund for any certificate issued. A shareholder
may be subject to fees for replacement of a lost or stolen
certificate under certain conditions, including the cost of
obtaining a bond covering the lost or stolen certificate. Please
contact the Fund for further information. Investors who hold
certificates representing any of their shares may only redeem
those shares by written request. The investor's certificate(s)
must accompany such request.
Investing by Mail
Initial Purchases--An Investment Application or, in the case
of a retirement account, an appropriate retirement plan
application, must be completed, signed and sent with a check,
payable to the specific Class selected, to Delaware Investments
at P.O. Box 7577, Philadelphia, PA 19101.
Subsequent Purchases--Additional purchases may be made at
any time by mailing a check or other negotiable bank draft made
payable to the specific Class desired. The account to which the
subsequent purchase is to be credited should be identified by the
name(s) of the registered owner(s) and by account number. An
investment slip (similar to a deposit slip) is provided at the
bottom of dividend statements that you will receive from the
Fund. Use of this investment slip can help to expedite
processing of your check when making additional purchases. Your
investment may be delayed if you send additional purchases by
certified mail. The Fund and the Transfer Agent will not be
responsible for inadvertent processing of post-dated checks or
checks more than six months old.
Direct Deposit Purchases by Mail--Shareholders of the
Classes may authorize a third party, such as a bank or employer,
to make investments directly to their Fund accounts. The Fund
will accept these investments, such as bank-by-phone, annuity
payments and payroll allotments, by mail directly from the third
party. Investors should contact their employers or financial
institutions who in turn should contact the Fund for proper
instructions.
Investing by Wire
Investors having an account with a bank that is a member or
correspondent of a member of the Federal Reserve System may
purchase shares by requesting their bank to transmit immediately
available funds (Federal Funds) by wire to CoreStates Bank, N.A.,
ABA #031000011, account number 1412893401, (include the
shareholder's name and Class account number in the wire).
Initial Purchases--When making an initial investment by
wire, you must first telephone the Fund at 800-523-1918 to advise
of your action and to be assigned an account number. If you do
not call first, it may not be possible to process your order
promptly, although in all cases shares purchased will be priced
at the close of business following receipt of Federal Funds. In
addition, you must promptly send your Investment Application or,
in the case of a retirement account, an appropriate retirement
plan application, must be promptly forwarded to the specific
Class desired, to Delaware Investments at P.O. Box 7577,
Philadelphia, PA 19101.
Subsequent Purchases--Additional investments may be made at
any time through the wire procedure described above. The Fund
must be immediately advised by telephone at 800-523-1918 of each
transmission of funds by wire.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for the
Fund to accept for investment, through an agent bank,
preauthorized government or private recurring payments. This
method of investment assures the timely credit to the
shareholder's account of payments such as social security,
veterans' pension or compensation benefits, federal salaries,
Railroad Retirement benefits, private payroll checks, dividends,
and disability or pension fund benefits. It also eliminates
lost, stolen and delayed checks.
Automatic Investing Plan--Shareholders may make regular
automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into
their Fund account. This type of investment will be handled in
either of the following ways. (1) If the shareholder's bank is
member of the National Automated Clearing House Association
("NACHA"), the amount of the investment will be electronically
deducted from the shareholder's account by Electronic Fund
Transfer ("EFT"). The shareholder's checking account will
reflect a debit each month at a specified date although no check
is required to initiate the transaction. (2) If the
shareholder's bank is not a member of NACHA, deductions will be
made by preauthorized checks, known as Depository Transfer
Checks. Should the shareholder's bank become a member of NACHA
in the future, his or her investments would be handled
electronically through EFT.
This option is not available to participants in the following
plans: SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit
Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, or 403(b)(7) or 457 Deferred Compensation
Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan
and the Automatic Investing Plan must be for $250 or more and
subsequent investments under such Plans must be for $25 or more.
An investor wishing to take advantage of either service must
complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by
giving written notice.
Payments to the Fund from the federal government or agencies
on behalf of a shareholder may be credited to the shareholder's
account after such payments should have been terminated by reason
of death or otherwise. Any such payments are subject to
reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private
sources may be subject to reclamation by the transmitting bank.
In the event of a reclamation, the Fund may liquidate sufficient
shares from a shareholder's account to reimburse the government
or the private source. In the event there are insufficient
shares in the shareholder's account, the shareholder is expected
to reimburse the Fund.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or
employer, to make investments directly to their Fund account.
The Fund will accept these investments, such as bank-by-phone,
annuity payments and payroll allotments, by mail directly from
the third party. Investors should contact their employers or
financial institutions who in turn should contact the Fund for
proper instructions.
When Orders are Effective
Transactions in money market instruments in which the Fund
invests normally require same day settlement in Federal Funds.
The Fund intends at all times to be as fully invested as possible
in order to maximize its earnings. Thus, purchase orders will be
executed at the net asset value next determined after their
receipt by the Fund or certain other authorized persons (see
Distribution and Service under Investment Management Agreement)
only if the Fund has received payment in Federal Funds by wire.
Dividends begin to accrue on the next business day. Thus,
investments effective the day before a weekend or holiday will
not accrue for that period but will earn dividends on the next
business day. If, however, the Fund is given prior notice of
Federal Funds wire and an acceptable written guarantee of timely
receipt from an investor satisfying the Fund's credit policies,
the purchase will start earning dividends on the date the wire is
received.
If remitted in other than the foregoing manner, such as by
money order or personal check, purchase orders will be executed
as of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open, on the day on which the payment is converted into Federal
Funds and is available for investment, normally one business day
after receipt of payment. Conversion into Federal Funds may be
delayed when the Fund receives (1) a check drawn on a nonmember
bank of the Federal Reserve, (2) a check drawn on a foreign bank,
(3) a check payable in a foreign currency, or (4) a check
requiring special handling. With respect to investments made
other than by wire, the investor becomes a shareholder after
declaration of the dividend on the day on which the order is
effective.
Information on how to procure a negotiable bank draft or to
transmit Federal Funds by wire is available at any national bank
or any state bank which is a member of the Federal Reserve
System. Any commercial bank can transmit Federal Funds by wire.
The bank may charge the shareholder for these services.
If a shareholder has been credited with a purchase by a check
which is subsequently returned unpaid for insufficient funds or
for any other reason, the Fund will automatically redeem from the
shareholder's account the amount credited by the check plus any
dividends earned thereon.
Plans Under Rule 12b-1 for Consultant Class Shares, Class B
Shares and Class C Shares
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has
adopted a separate distribution plan under Rule 12b-1 for each of
the Consultant Class Shares, Class B Shares and Class C Shares
(the "Plans"). Each Plan permits the Fund to pay for certain
distribution and promotional expenses related to marketing shares
of only the Class to which the Plan applies.
The Plans do not apply to the Fund's Class A Shares. Such
shares are not included in calculating the Plans' fees, and the
Plans are not used to assist in the distribution and marketing of
Class A Shares. Holders of Class A Shares may not vote on
matters affecting the Plans. The Plans permit the Fund, pursuant
to the Distribution Agreement, to pay out of the assets of
Consultant Class Shares, Class B Shares and Class C Shares, a
monthly fee to the Distributor for its services and expenses in
distributing and promoting sales of the shares of such Class.
These expenses include, among other things, preparing and
distributing advertisements, sales literature and prospectuses
and reports used for sales purposes, compensating sales and
marketing personnel, and paying distribution and maintenance fees
to securities brokers and dealers who enter into agreements with
the Distributor. Registered representatives of brokers, dealers
or other entities, who have sold a specified level of funds in
the Delaware Investments family having a 12b-1 Plan, are paid a
continuing trail fee of 0.25% of the average daily net assets of
Consultant Class Shares by the Distributor from 12b-1 payments of
Consultant Class Shares for assets maintained in that Class. The
12b-1 Plan fees relating to Class B Shares and Class C Shares are
also used to pay the Distributor for advancing commission costs
to dealers with respect to the initial sales of such shares.
In addition, the Fund may make payments out of the assets of
Consultant Class Shares, Class B Shares and Class C Shares
directly to other unaffiliated parties, such as banks, who either
aid in the distribution of its shares of, or provide services to,
such Classes.
The maximum aggregate fee payable by the Fund under each
respective Plan, and the Fund's Distribution Agreement, is on an
annual basis up to 0.30% of the Consultant Class Shares' average
daily net assets for the year, and up to 1% (0.25% of which are
service fees to be paid by the Fund to the Distributor, dealers
or others, for providing personal service and/or maintaining
shareholder accounts) of each of the Class B Shares' and the
Class C Shares' average daily net assets for the year. The
Fund's Board of Directors may reduce these amounts at any time.
The Fund's Board of Directors has set the current fee for
Consultant Class Shares at 0.25% of average daily net assets.
The Distributor has agreed to waive these fees to the extent the
fee for any day exceeds the net investment income realized by
Consultant Class Shares, Class B Shares or Class C Shares for
such day.
All of the distribution expenses incurred by the Distributor
and others, such as broker/dealers, in excess of the amount paid
on behalf of Consultant Class Shares, Class B Shares or Class C
Shares would be borne by such persons without any reimbursement
from that Class. Subject to seeking best price and execution,
the Fund may, from time to time, buy or sell portfolio securities
from or to firms which receive payments under the Plans.
From time to time, the Distributor may pay additional amounts
from its own resources to dealers for aid in distribution or for
aid in providing administrative services to shareholders.
The NASD has adopted amendments to its Rules of Fair Practice
relating to investment company sales charges. The Fund and the
Distributor intend to operate in compliance with these rules.
The Plans and the Distribution Agreement, as amended, have been
approved by the Board of Directors of the Fund, including a
majority of the directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund and who have no direct or
indirect financial interest in the Plans, by vote cast in person
at a meeting duly called for the purpose of voting on the Plans
and the Distribution Agreement. Continuation of the Plans and
the Distribution Agreement, as amended, must be approved annually
by the Board of Directors in the same manner as specified above.
Each year, the directors must determine whether continuation of
the Plans is in the best interest of the shareholders of
Consultant Class Shares, Class B Shares and Class C Shares,
respectively, and that there is a reasonable likelihood of the
Plan relating to a Class providing a benefit to that Class. The
Plans and the Distribution Agreement, as amended, may be
terminated at any time without penalty by a majority of those
directors who are not "interested persons" or by a majority vote
of the outstanding voting securities of the relevant Class. Any
amendment materially increasing the maximum percentage payable
under the Plans must likewise be approved by a majority vote of
the outstanding voting securities of the relevant Class, as well
as a majority vote of those directors who are not "interested
persons." Class B Shares may vote on any proposal to increase
materially the fees to be paid by the Fund under the Plan
relating to Consultant Class Shares. Also, any other material
amendment to the Plans must be approved by a majority vote of the
directors including a majority of the noninterested directors of
the Fund having no interest in the Plans. In addition, in order
for the Plans to remain effective, the selection and nomination
of directors who are not "interested persons" of the Fund must be
effected by the directors who themselves are not "interested
persons" and who have no direct or indirect financial interest in
the Plans. Persons authorized to make payments under the Plans
must provide written reports at least quarterly to the Board of
Directors for their review.
For the fiscal year ended March 31, 1998, payments from Class
B Shares, Class C Shares and Consultant Class Shares amounted to
$78,407, $28,007 and $72,393, respectively. Such amounts were
used for the following purposes:
Class B Class C Consultant Class
Advertising $132 ---- $175
Annual/Semi-
Annual Reports $24 ---- $273
Broker Trails $20,792 $6,030 $70,430
Broker Sales Charges $32,162 $15,482 ----
Dealer Service Expenses ---- ---- ----
Interest on Broker
Sales Charges $22,723 $902 ----
Commissions to
Wholesalers $2,069 $3,991 $252
Promotional-Broker
Meetings ---- $60 ----
Promotional-Other ---- ---- $1,068
Prospectus Printing $377 ---- $125
Telephone ---- $32 $70
Wholesaler Expenses $128 $1,510 ----
Other ---- ---- ----
Reinvestment of Dividends in Other Delaware Investments Funds
Subject to applicable eligibility and minimum initial
purchase requirements and the limitations set forth below,
shareholders may automatically reinvest dividends and/or
distributions in any of the mutual funds in the Delaware
Investments family, including the Fund, in states where its
shares may be sold. Such investments will be at net asset value
at the close of business on the reinvestment date without any
front-end sales charge or service fee. The shareholder must
notify the Transfer Agent in writing and must have established an
account in the fund into which the dividends and/or distributions
are to be invested. Any reinvestment directed to a fund in which
the investor does not then have an account, will be treated like
all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the
fund in which the investment is intended to be made before
investing or sending money. The prospectus contains more
complete information about the fund, including charges and
expenses. See also Additional Methods of Adding to Your
Investment - Dividend Reinvestment Plan in the Prospectuses.
Dividends on Class A Shares and Consultant Class Shares may be
reinvested in shares of any other mutual fund in the Delaware
Investments family, other than Class B Shares and Class C Shares
of the funds in the Delaware Investments family that offer such
classes of shares. Dividends on Class B Shares may only be
invested in Class B Shares of another fund in the Delaware
Investments family that offers such a class of shares. Dividends
on Class C Shares may only be invested in Class C Shares of
another fund in the Delaware Investments family that offers such
a class of shares.
This option is not available to participants in the following
plans: SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit
Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, or 403(b)(7) or 457 Deferred Compensation
Plans.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in
the Classes through regular liquidations of shares in their
accounts in other mutual funds available from the Delaware
Investments family. Shareholders of the Fund may elect to invest
in one or more of the other mutual funds available from the
Delaware Investments family through the Wealth Builder Option.
See Wealth Builder Option and Redemption and Exchange in the
Prospectuses.
Under this automatic exchange program, shareholders can
authorize regular monthly investments (minimum of $100 per fund)
to be liquidated from their account and invested automatically
into other mutual funds available from the Delaware Investments
family, subject to the conditions and limitations set forth in
the Prospectuses. The investment will be made on the 20th day of
each month (or, if the fund selected is not open that day, the
next business day) at the public offering price or net asset
value, as applicable, of the fund selected on the date of
investment. No investment will be made for any month if the
value of the shareholder's account is less than the amount
specified for investment.
Periodic investment through the Wealth Builder Option does not
insure profits or protect against losses in a declining market.
The price of the fund into which investments are made could
fluctuate. Since this program involves continuous investment
regardless of such fluctuating value, investors selecting this
option should consider their financial ability to continue to
participate in the program through periods of low fund share
prices. This program involves automatic exchanges between two or
more fund accounts and is treated as a purchase of shares of the
fund into which investments are made through the program. See
Exchange Privilege for a brief summary of the tax consequences of
exchanges. Shareholders can terminate their participation in
Wealth Builder at any time by giving written notice to the fund
from which exchanges are made.
This option is not available to participants in the following
plans: SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit
Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, or 403(b)(7) or 457 Deferred Compensation
Plans.
Account Statements
You will receive quarterly statements of your account
summarizing all transactions during that period and will include
the regular dividend information. However, in the case of Class
A Shares and Consultant Class Shares, accounts in which there has
been activity, other than a reinvestment of dividends, will
receive a monthly statement confirming transactions for that
period. In the case of Class B Shares and Class C Shares,
accounts in which there has been activity will receive a
confirmation after each transaction.
Asset Planner
To invest in the funds in the Delaware Investments family
using the Asset Planner asset allocation service, you should
complete a Asset Planner Account Registration Form, which is
available only from a financial adviser or investment dealer.
Effective September 1, 1997, the Asset Planner Service is only
available to financial advisers or investment dealers who have
previously used this service. The Asset Planner service offers a
choice of four predesigned asset allocation strategies (each with
a different risk/reward profile) in predetermined percentages in
Delaware Investments funds. With the help of a financial
adviser, you may also design a customized asset allocation
strategy.
The sales charge on an investment through the Asset Planner
service is determined by the individual sales charges of the
underlying funds and their percentage allocation in the selected
Strategy. Exchanges from existing Delaware Investments accounts
into the Asset Planner service may be made at net asset value
under the circumstances described under Investing by Exchange in
the Prospectus and the prospectus of each fund in the Delaware
Investments family. The minimum initial investment per Strategy
is $2,000; subsequent investments must be at least $100.
Individual fund minimums do not apply to investments made using
the Asset Planner service. Class A Shares, Class B Shares, Class
C Shares and Consultant Class Shares are available through the
Asset Planner service. Generally, only shares within the same
class may be used within the same Strategy. However, Class A
Shares of the Fund and of other funds available from Delaware
Investments may be used in the same Strategy with the Fund's
Consultant Class Shares and consultant class shares that are
offered by certain other funds in the Delaware Investments
family.
An annual maintenance fee, currently $35 per Strategy, is due
at the time of initial investment and by September 30 of each
subsequent year. The fee, payable to Delaware Service Company,
Inc. to defray extra costs associated with administering the
Asset Planner service, will be deducted automatically from one of
the funds within your Asset Planner account if not paid by
September 30. However, effective November 1, 1996, the annual
maintenance fee is waived until further notice. Investors who
utilize the Asset Planner for an IRA will continue to pay an
annual IRA fee of $15 per Social Security number. Investors will
receive a customized quarterly Strategy Report summarizing all
Asset Planner investment performance and account activity during
the prior period. Confirmation statements will be sent following
all transactions other than those involving a reinvestment of
distributions.
Certain shareholder services are not available to investors
using the Asset Planner service, due to its special design.
These include Delaphone, Checkwriting, Wealth Builder Option and
Letter of Intention. Systematic Withdrawal Plans are available
after the account has been open for two years.
RETIREMENT PLANS
An investment in the Fund may be suitable for tax-deferred
retirement plans. Delaware Investments offers a full spectrum of
retirement plans, including the 401(k) deferred compensation
plan, Individual Retirement Account ("IRA") and the new Roth IRA
and Education IRA.
Among the retirement plans the Delaware Investments offers,
Class B Shares are available for investment only by Individual
Retirement Accounts, SIMPLE IRAs, Roth IRAs, Education IRAs,
Simplified Employee Pension Plans, Salary Reduction Simplified
Employee Pension Plans and 403(b) and 457 Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B
Shares and Class C Shares. See Waiver of Contingent Deferred
Sales Charge under Redemption and Exchange in the Prospectus for
Class B Shares and Class C Shares for a list of the instances in
which the CDSC is waived.
Purchases of Class B Shares are subject to a maximum
purchase limitation of $250,000 for retirement plans. Purchases
of Class C Shares must be in an amount that is less than
$1,000,000 for such plans. The maximum purchase limitations
apply only to the initial purchase of shares by the retirement
plan.
Minimum investment limitations generally applicable to other
investors do not apply to retirement plans other than Individual
Retirement Accounts, for which there is a minimum initial
purchase of $250 and a minimum subsequent purchase of $25
regardless of which Class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees
and/or other administrative or trustee fees. Fees are based upon
the number of participants in the plan as well as the services
selected. Additional information about fees is included in
retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust
Company, the Transfer Agent, other affiliates of the Manager and
others that provide services to such plans.
Certain shareholder investment services available to
non-retirement plan shareholders may not be available to
retirement plan shareholders. Certain retirement plans may
qualify to purchase Class A Shares. For additional information
on any of the Plans and Delaware's retirement services, call the
Shareholder Service Center telephone number.
It is advisable for an investor considering any one of the
retirement plans described below to consult with an attorney,
accountant or a qualified retirement plan consultant. For
further details, including applications for any of these plans,
contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described
below may be subject to withholding.
Please contact your investment dealer or the Distributor for
the special application forms required for the plans described
below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships, corporations and other eligible forms of
organizations. These plans can be maintained as Section 401(k),
profit sharing or money purchase pension plans. Contributions
may be invested only in Class A Shares, Consultant Class Shares
and Class C Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to
establish an IRA and make contributions which may be
tax-deductible, even if the individual is already participating
in an employer-sponsored retirement plan. Even if contributions
are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make
contributions on behalf of a spouse who has no compensation for
the year; however, participation may be restricted based on
certain income limits.
IRA Disclosures
The Taxpayer Relief Act of 1997 provides new opportunities
for investors. Individuals have five types of tax-favored IRA
accounts that can be utilized depending on the individual's
circumstances. A new Roth IRA and Education IRA are available in
addition to the existing deductible IRA and non-deductible IRA.
Deductible and Non-deductible IRAs
An individual can contribute up to $2,000 in his or her IRA
each year. Contributions may or may not be deductible depending
upon the taxpayer's adjusted gross income ("AGI") and whether the
taxpayer is an active participant in an employer sponsored
retirement plan. Even if a taxpayer is an active participant in
an employer sponsored retirement plan, the full $2,000 is still
available if the taxpayer's AGI is below $30,000 ($50,000 for
taxpayers filing joint returns) for years beginning after
December 31, 1997. A partial deduction is allowed for married
couples with income between $50,000 and $60,000, and for single
individuals with incomes between $30,000 and $40,000. These
income phase-out limits reach $80,000-$100,000 in 2007 for joint
filers and $50,000-$60,000 in 2005 for single filers. No
deductions are available for contributions to IRAs by taxpayers
whose AGI after IRA deductions exceeds the maximum income limit
established for each year and who are active participants in an
employer sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA
contributions still can make non-deductible IRA contributions of
as much as $2,000 for each working spouse and defer taxes on
interest or other earnings from the IRAs.
Under the new law, a married individual is not considered an
active participant in an employer sponsored retirement plan
merely because the individual's spouse is an active participant
if the couple's combined AGI is below $150,000. The maximum
deductible IRA contribution for a married individual who is not
an active participant, but whose spouse is, is phased out for
combined AGI between $150,000 and $160,000.
Conduit (Rollover) IRAs
Certain individuals who have received or are about to
receive eligible rollover distributions from an
employer-sponsored retirement plan or another IRA may rollover
the distribution tax-free to a Conduit IRA. The rollover of the
eligible distribution must be completed by the 60th day after
receipt of the distribution; however, if the rollover is in the
form of a direct trustee-to-trustee transfer without going
through the distributee's hand, the 60-day limit does not apply.
A distribution qualifies as an "eligible rollover
distribution" if it is made from a qualified retirement plan, a
403(b) plan or another IRA and does not constitute one of the
following:
(i) Substantially equal periodic payments over the
employee's life or life expectancy or the joint lives or life
expectancies of the employee and his/her designated beneficiary;
(ii) Substantially equal installment payments for a period
certain of 10 or more years;
(iii) A distribution, all of which represents a required
minimum distribution after attaining age 70 1/2;
(iv) A distribution due to a Qualified Domestic Relations
Order to an alternate payee who is not the spouse (or former
spouse) of the employee; and
(v) A distribution of after-tax contributions which is not
includable in income.
Roth IRAs
For taxable years beginning after December 31, 1997,
non-deductible contributions of up to $2,000 per year can be made
to a new Roth IRA. The $2,000 annual limit is reduced by any
contributions to a deductible or nondeductible IRA for the same
year. The maximum contribution that can be made to a Roth IRA is
phased out for single filers with AGI between $95,000 and
$110,000, and for couples filing jointly with AGI between
$150,000 and $160,000. Qualified distributions from a Roth IRA
would be exempt from federal taxes. Qualified distributions are
distributions (1) made after the five-taxable year period
beginning with the first taxable year for which a contribution
was made to a Roth IRA and (2) that are (a) made on or
after the date on which the individual attains age 59 1/2, (b)
made to a beneficiary on or after the death of the individual,
(c) attributed to the individual being disabled, or (d) for a
qualified special purpose (e.g., first time homebuyer expenses).
Distributions that are not qualified distributions would
always be tax-free if the amount of the distribution is less than
the aggregate principal contributions.
Taxpayers with AGI of $100,000 or less are eligible to
convert an existing IRA (deductible, nondeductible and conduit)
to a Roth IRA. Earnings and contributions from a deductible IRA
are subject to a tax upon conversion; however, no 10% excise tax
for early withdrawal would apply. If the conversion is done
prior to January 1, 1999, then the income from the conversion can
be included in income ratably over a four-year period beginning
with the year of conversion.
Education IRAs
For taxable years beginning after December 31, 1997, an
Education IRA has been created exclusively for the purpose of
paying qualified higher education expenses. Taxpayers can make
non-deductible contributions up to $500 per year per beneficiary.
The $500 annual limit is in addition to the $2,000 annual
contribution limit applicable to IRAs and Roth IRAs. Eligible
contributions must be in cash and made prior to the date the
beneficiary reaches age 18. Similar to the Roth IRA, earnings
would accumulate tax-free. There is no requirement that the
contributor be related to the beneficiary, and there is no limit
on the number of beneficiaries for whom one contributor can
establish Education IRAs. In addition, multiple Education IRAs
can be created for the same beneficiaries, however, the
contribution limit of all contributions for a single beneficiary
cannot exceed $500 annually.
This $500 annual contribution limit for Education IRAs is
phased out ratably for single contributors with modified AGI
between $95,000 and $110,000, and for couples filing jointly with
modified AGI of between $150,000 and $160,000. Individuals with
modified AGI above the phase-out range are not allowed to make
contributions to an Education IRA established on behalf of any
other individual.
Distributions from an Education IRA are excludable from
gross income to the extent that the distribution does not exceed
qualified higher education expenses incurred by the beneficiary
during the year the distribution is made regardless of whether
the beneficiary is enrolled at an eligible educational
institution on a full-time, half-time, or less than half-time
basis.
Any balance remaining in an Education IRA at the time a
beneficiary becomes 30 years old must be distributed, and the
earnings portion of such a distribution will be includible in
gross income of the beneficiary and subject to an additional 10%
penalty tax if the distribution is not for qualified higher
educations expenses. Tax-free (and penalty-free) transfers and
rollovers of account balances from one Education IRA benefiting
one beneficiary to another Education IRA benefiting a different
beneficiary (as well as redesignations of the named beneficiary)
is permitted, provided that the new beneficiary is a member of
the family of the old beneficiary and that the transfer or
rollover is made before the time the old beneficiary reaches age
30 and the new beneficiary reaches age 18.
A company or association may establish a Group IRA or Group
Roth IRA for employees or members who want to purchase shares of
the Fund.
Investments generally must be held in the IRA until age 59
1/2 in order to avoid premature distribution penalties, but
distributions generally must commence no later than April 1 of
the calendar year following the year in which the participant
reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written
notice of revocation to Delaware Management Trust Company within
seven days after the receipt of the IRA Disclosure Statement or
within seven days after the establishment of the IRA, except, if
the IRA is established more than seven days after receipt of the
IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion
of any nondeductible contributions) are fully taxable as ordinary
income in the year received. Excess contributions removed after
the tax filing deadline, plus extensions, for the year in which
the excess contributions were made are subject to a 6% excise tax
on the amount of excess. Premature distributions (distributions
made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax
on the amount prematurely distributed, in addition to the income
tax resulting from the distribution. For information concerning
the applicability of a CDSC upon redemption of Class B Shares and
Class C Shares, see Contingent Deferred Sales Charge - Class B
Shares and Class C Shares under Classes of Shares in the
Prospectus for Class B Shares and Class C Shares.
Effective January 1, 1997, the 10% premature distribution
penalty will not apply to distributions from an IRA that are used
to pay medical expenses in excess of 7.5% of adjusted gross
income or to pay health insurance premiums by an individual who
has received unemployment compensation for 12 consecutive weeks.
In addition, effective January 1, 1998, the new law allows for
premature distribution without a 10% penalty if (i) the amounts
are used to pay qualified higher education expenses (including
graduate level courses) of the taxpayer, the taxpayer's spouse or
any child or grandchild of the taxpayer or the taxpayer's spouse,
or (ii) used to pay acquisition costs of a principle residence
for the purchase of a first-time home by the taxpayer, taxpayer's
spouse or any child or grandchild of the taxpayer or the
taxpayer's spouse. A qualified first-time homebuyer is someone
who has had no ownership interest in a residence during the past
two years. The aggregate amount of distribution for first-time
home purchases cannot exceed a lifetime cap of $10,000.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to
sponsor a tax-sheltered retirement program by making
contributions on behalf of all eligible employees. Each of the
Classes is available for investment by a SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Although new SAR/SEP plans may not be established after
December 31, 1996, existing plans may continue to be maintained
by employers having 25 or fewer employees. An employer may elect
to make additional contributions to such existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish
qualified plans based on salary deferral contributions.
Effective January 1, 1997, non-governmental tax-exempt
organizations may establish 401(k) plans. Plan documents are
available to enable employers to establish a plan. An employer
may also elect to make profit sharing contributions and/or
matching contributions with investments in only Class A Shares,
Consultant Class Shares and Class C Shares or certain other funds
in the Delaware Investments family.
Deferred Compensation Plan for Public Schools and Non-Profit
Organizations ("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems
and certain non-profit organizations to use mutual fund shares
held in a custodial account to fund deferred compensation
arrangements for their employees. A custodial account agreement
is available for those employers who wish to purchase shares of
any of the Classes in conjunction with such an arrangement.
Deferred Compensation Plan for State and Local Government
Employees ("457")
Section 457 of the Code permits state and local governments,
their agencies and certain other entities to establish a deferred
compensation plan for their employees who wish to participate.
This enables employees to defer a portion of their salaries and
any federal (and possibly state) taxes thereon. Such plans may
invest in shares of the Fund. Although investors may use their
own plan, there is available a Delaware Investments 457 Deferred
Compensation Plan. Interested investors should contact the
Distributor or their investment dealers to obtain further
information.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a
401(k) Plan but is easier to administer than a typical 401(k)
Plan. It requires employers to make contributions on behalf of
their employees and also has a salary deferral feature that
permits employees to defer a portion of their salary into the
plan on a pre-tax basis. A SIMPLE IRA is available only to plan
sponsors with 100 or fewer employees.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is
available only to plan sponsors 100 or fewer employees and, in
exchange for mandatory plan sponsor contributions, discrimination
testing is not required.
OFFERING PRICE
The offering price of shares is the net asset value per share
next to be determined after an order is received and becomes
effective. There is no front-end sales charge.
The purchase will be effected at the net asset value next
computed after the receipt of Federal Funds provided they are
received by the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the
Exchange is open. The New York Stock Exchange is scheduled to be
open Monday through Friday throughout the year except for New
Year's Day, Martin Luther King, Jr.'s Birthday, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. When the New York Stock Exchange is
closed, the Fund will generally be closed, pricing calculations
will not be made and purchase and redemption orders will not be
processed.
An example showing how to calculate the net asset value per
share is included in the Fund's financial statements which are
incorporated by reference into this Part B.
The investor becomes a shareholder at the close of and after
declaration of the dividend on the day on which the order is
effective. See Purchasing Shares. Dividends begin to accrue on
the next business day. In the event of changes in SEC
requirements or the Fund's change in time of closing, the Fund
reserves the right to price at a different time, to price more
often than once daily or to make the offering price effective at
a different time.
The Fund's net asset value per share is computed by adding the
value of all securities and other assets in the portfolio,
deducting any liabilities and dividing by the number of shares
outstanding. Expenses and fees are accrued daily. In
determining the Fund's total net assets, portfolio securities are
valued at amortized cost.
The Board of Directors has adopted certain procedures to
monitor and stabilize the price per share. Calculations are made
each day to compare part of the Fund's value with the market
value of instruments of similar character. At regular intervals
all issues in the portfolio are valued at market value.
Securities maturing in more than 60 days are valued more
frequently by obtaining market quotations from market makers.
The portfolio will also be valued by market makers at such other
times as is felt appropriate. In the event that a deviation of
more than 1/2 of 1% exists between the Fund's $1.00 per share
offering and redemption prices and the net asset value calculated
by reference to market quotations, or if there is any other
deviation which the Board of Directors believes would result in a
material dilution to shareholders or purchasers, the Board of
Directors will promptly consider what action, if any, should be
initiated, such as changing the price to more or less than $1.00
per share.
Each Class of the Fund will bear, pro-rata, all of the common
expenses of the Fund. The net asset values of all outstanding
shares of each Class of the Fund will be computed on a pro-rata
basis for each outstanding share based on the proportionate
participation in the Fund represented by the value of shares of
that Class. All income earned and expenses incurred by the Fund
will be borne on a pro-rata basis by each outstanding share of a
Class, based on each Class' percentage in the Fund represented by
the value of shares of such Classes, except that Class A Shares
will not incur any of the expenses under the Fund's 12b-1 Plans
and Class B Shares, Class C Shares and Consultant Class Shares
alone will bear the 12b-1 Plan expenses payable under their
respective Plans. Due to the specific distribution expenses and
other costs that will be allocable to each Class, the dividends
paid to each Class of the Fund may vary. However, the net asset
value per share of each Class is expected to be equivalent.
REDEMPTION
Any shareholder may require the Fund to redeem shares by
sending a written request, signed by the record owner or owners
exactly as the shares are registered, to the Fund at 1818 Market
Street, Philadelphia, PA 19103. In addition, certain expedited
redemption methods described below are available when stock
certificates have not been issued. If stock certificates have
been issued for shares being redeemed, they must accompany the
written request. For redemptions of $50,000 or less paid to the
shareholder at the address of record, the request must be signed
by all owners of the shares or the investment dealer of record,
but a signature guarantee is not required. When the redemption
is for more than $50,000, or if payment is made to someone else
or to another address, signatures of all record owners and a
signature guarantee are required. Each signature guarantee must
be supplied by an eligible guarantor institution. The Fund
reserves the right to reject a signature guarantee supplied by an
eligible institution based on its creditworthiness. The Fund may
request further documentation from corporations, executors,
retirement plans, administrators, trustees or guardians. The
redemption price is the net asset value next calculated after
receipt of the redemption request in good order. See Offering
Price for time of calculation of net asset value.
Class B Shares are subject to a CDSC of: (i) 4% if shares are
redeemed within two years of purchase; (ii) 3% if shares are
redeemed during the third or fourth year following purchase;
(iii) 2% if shares are redeemed during the fifth year following
purchase; (iv) 1% if shares are redeemed during the sixth year
following purchase; and (v) 0% thereafter. Class C Shares are
subject to a CDSC of 1% if shares are redeemed within 12 months
following purchase. See Contingent Deferred Sales Charge - Class
B Shares and Class C Shares under Classes of Shares in the Fund's
Prospectus for Class B Shares and Class C Shares. Except for
such CDSC and with respect to the expedited payment by wire, for
which there is currently a $7.50 bank wiring cost, neither the
Fund nor the Distributor charges a fee for redemptions or
repurchases, but such fees could be charged at any time in the
future.
Payment for shares redeemed will ordinarily be mailed the next
business day, but no later than seven days, after receipt of a
redemption request in good order by the Fund, or certain other
authorized persons (see Distribution and Service under Investment
Management Agreement), provided, however, that each commitment to
mail or wire redemption proceeds by a certain time, as described
below, is modified by the qualifications described in the next
paragraph.
The Fund will process written or telephone redemption
requests to the extent that the purchase orders for the shares
being redeemed have already been settled. The Fund will honor
the redemption requests as to shares for which a check was
tendered as payment, but the Fund will not mail or wire the
proceeds until it is reasonably satisfied that the check has
cleared. This potential delay can be avoided by making
investments by wiring Federal Funds. The hold period against a
recent purchase may be up to but not in excess of 15 days,
depending upon the origin of the investment check. Dividends
will continue to be earned until the redemption is processed.
This potential delay can be avoided by making investments by
wiring Federal Funds. If a shareholder redeems an entire
account, all dividends accrued to the time of the withdrawal will
be paid by separate check at the end of that particular monthly
dividend period.
If a shareholder has been credited with a purchase by a
check which is subsequently returned unpaid for insufficient
funds or for any other reason, the Fund will automatically redeem
from the shareholder's account the shares purchased by the check
plus any dividends earned thereon. Shareholders may be
responsible for any losses to the Fund or to the Distributor.
In case of a suspension of the determination of the net asset
value because the New York Stock Exchange is closed for a reason
other than weekends or holidays, or trading thereon is restricted
or an emergency exists as a result of which disposal by the Fund
of securities owned by it is not reasonably practical or it is
not reasonably practical for the Fund fairly to value its assets,
or in the event that the SEC has provided for such suspension for
the protection of shareholders, the Fund may postpone payment or
suspend the right of redemption. In such case, the shareholder
may withdraw the request for redemption or leave it standing as a
request for redemption at the net asset value next determined
after the suspension has been terminated.
See Account Statements under Purchasing Shares for information
relating to the mailing of confirmations of redemptions
Small Accounts
Before the Fund involuntarily redeems shares from an account
that, under the circumstances noted in the Prospectuses, has
remained below the minimum amounts required by the Prospectuses,
the shareholder will be notified in writing that the value of the
shares in the account is less than the minimum amounts required
by the Prospectuses and will be allowed 60 days from the date of
notice to make an additional investment to meet the required
minimum. If no such action is taken by the shareholder, the
proceeds will be sent to the shareholder. Any redemption in an
inactive account established with a minimum investment may
trigger mandatory redemption. No CDSC will apply to redemptions
described in this paragraph of Class B Shares and Class C Shares
described above.
Checkwriting Feature
Holders of Class A Shares and Consultant Class Shares
holding shares for which certificates have not been issued may
request on the investment application that they be provided with
special forms of checks which may be issued to redeem their
shares by drawing on the Delaware Group Cash Reserve, Inc.
account with CoreStates Bank, N.A. Normally, it takes two weeks
from the date the shareholder's initial purchase check clears to
receive the first order of checks. The use of any form of check
other than the Fund's check will not be permitted unless approved
by the Fund. The Checkwriting Feature is not available for Class
B Shares or Class C Shares of the Fund.
(1) These redemption checks must be made payable in an
amount of $500 or more.
(2) Checks must be signed by the shareholder(s) of record or,
in the case of an organization, by the authorized person(s). If
registration is in more than one name, unless otherwise indicated
on the investment application or your checkwriting authorization
form, these checks must be signed by all owners before the Fund
will honor them. Shareholders using redemption checks will
continue to be entitled to distributions paid on those shares up
to the time the checks are presented for payment.
(3) If a shareholder who recently purchased shares by check
seeks to redeem all or a portion of those shares through the
Checkwriting Feature, the Fund will not honor the redemption
request unless it is reasonably satisfied of the collection of
the investment check. A hold period against a recent purchase
may be up to but not in excess of 15 days, depending upon the
origin of the investment check.
(4) If the amount of the check is greater than the value of
the shares held in the shareholder's account, the check will be
returned and the shareholder's bank may charge a fee.
(5) Checks may not be used to close accounts.
The Fund reserves the right to revoke the Checkwriting Feature
of shareholders who overdraw their accounts or if, in the opinion
of management, such revocation is in the Fund's best interest.
Shareholders will be subject to CoreStates Bank, N.A.'s rules
and regulations governing similar accounts. This service may be
terminated or suspended at any time by CoreStates Bank, N.A., the
Fund or the Fund's Transfer Agent. The Fund and the Transfer
Agent will not be responsible for the inadvertent processing of
post-dated checks or checks more than six months old.
Stop-Payment Requests--Investors may request a stop payment on
checks by providing the Fund with a written authorization to do
so. Oral requests will be accepted provided that the Fund
promptly receives a written authorization. Such requests will
remain in effect for six months unless renewed or canceled. The
Fund will use its best efforts to effect stop-payment
instructions, but does not promise or guarantee that such
instructions will be effective.
Return of Checks--Checks used in redeeming shares from a
shareholder's account will be accumulated and returned
semi-annually. Shareholders needing a copy of a redemption check
before the regular mailing should contact the Transfer Agent
nationwide at 800-523-1918.
* * *
The Fund has made available certain redemption privileges,
as described below. The Fund reserves the right to suspend or
terminate these expedited payment procedures upon 60 days'
written notice to shareholders.
Expedited Telephone Redemptions
Shareholders or their investment dealers of record wishing to
redeem any amount of shares of $50,000 or less for which
certificates have not been issued may call the Shareholder
Service Center at 800-523-1918 prior to the time the offering
price and net asset value are determined, as noted above, and
have the proceeds mailed to them at the address of record.
Checks payable to the shareholder(s) of record will normally be
mailed the next business day, but no later than seven days, after
the receipt of the redemption request. This option is only
available to individual, joint and individual fiduciary-type
accounts.
In addition, redemption proceeds of $1,000 or more can be
transferred to your predesignated bank account by wire or by
check by calling the phone number listed above. An authorization
form must have been completed by the shareholder and filed with
the Fund before the request is received. Payment will be made by
wire or check to the bank account designated on the authorization
form as follows:
1. Payment by Wire: Request that Federal Funds be wired to
the bank account designated on the authorization form.
Redemption proceeds will normally be wired on the next business
day following receipt of the redemption request. There is a
$7.50 wiring fee (subject to change) charged by CoreStates Bank,
N.A. which will be deducted from the withdrawal proceeds each
time the shareholder requests a redemption. If the proceeds are
wired to the shareholder's account at a bank which is not a
member of the Federal Reserve System, there could be a delay in
the crediting of the funds to the shareholder's bank account.
2. Payment by Check: Request a check be mailed to the bank
account designated on the authorization form. Redemption
proceeds will normally be mailed the next business day, but no
later than seven days, from the date of the telephone request.
This procedure will take longer than the Payment by Wire option
(1 above) because of the extra time necessary for the mailing and
clearing of the check after the bank receives it.
Redemption Requirements: In order to change the name of the
bank and the account number it will be necessary to send a
written request to the Fund with a signature guarantee. Each
signature guarantee must be supplied by an eligible guarantor
institution. The Fund reserves the right to reject a signature
guarantee supplied by an eligible institution based on its
creditworthiness.
To reduce the shareholder's risk of attempted fraudulent use
of the telephone redemption procedure, payment will be made only
to the bank account designated on the authorization form.
If expedited payment under these procedures could adversely
affect the Fund, the Fund may take up to seven days to pay the
shareholder.
Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone
instructions for redemption or exchange of Fund shares which are
reasonably believed to be genuine. With respect to such
telephone transactions, the Fund will follow reasonable
procedures to confirm that instructions communicated by telephone
are genuine (including verification of a form of personal
identification) as, if it does not, the Fund or the Transfer
Agent may be liable for any losses due to unauthorized or
fraudulent transactions. Telephone instructions received from
shareholders are generally tape recorded, and a written
confirmation will be provided for all purchase, exchange and
redemption transactions initiated by telephone.
Systematic Withdrawal Plans
Shareholders of Class A Shares, Consultant Class Shares,
Class B Shares and Class C Shares who own or purchase $5,000 or
more of shares for which certificates have not been issued may
establish a Systematic Withdrawal Plan for monthly withdrawals of
$25 or more, or quarterly withdrawals of $75 or more, although
the Fund does not recommend any specific amount of withdrawal.
This $5,000 minimum does not apply for the Fund's prototype
retirement plans. Shares purchased with the initial investment
and through reinvestment of cash dividends and realized
securities profits distributions will be credited to the
shareholder's account, and sufficient full and fractional shares
will be redeemed at the net asset value calculated on the third
business day preceding the mailing date.
Checks are dated either the 1st or the 15th of the month,
as selected by the shareholder (unless such date falls on a
holiday or a weekend), and are normally mailed within two
business days. Both ordinary income dividends and realized
securities profits distributions will be automatically reinvested
in additional shares of a Class at net asset value. This plan is
not recommended for all investors and should be started only
after careful consideration of its operation and effect upon the
investor's savings and investment program. To the extent that
withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held
under the plan, the withdrawal payments will represent a return
of capital and the share balance may in time be depleted,
particularly in a declining market.
The sale of shares for withdrawal payments constitutes a
taxable event and a shareholder may incur a capital gain or loss
for federal income tax purposes, although the Fund expects to
maintain a fixed net asset value. If there were a gain or loss,
it would be long-term or short-term depending on the holding
period for the specific shares liquidated. Premature withdrawals
from retirement plans may have adverse tax consequences.
An investor wishing to start a Systematic Withdrawal Plan must
complete an authorization form. If the recipient of Systematic
Withdrawal Plan payments is other than the registered
shareholder, the shareholder's signature on this authorization
must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The Fund reserves the right
to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. This plan may be
terminated by the shareholder or the Transfer Agent at any time
by giving written notice. Shareholders should consult their
financial advisers to determine whether a Systematic Withdrawal
Plan would be suitable for them.
DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
The Fund declares a dividend of its net investment income on
a daily basis to shareholders of record of each Class of Fund
shares at the time of the previous calculation of the Fund's net
asset value each day that the Fund is open for business. The
amount of net investment income will be determined at the time
the offering price and net asset value are determined and shall
include investment income accrued, less the estimated expenses of
the Fund incurred since the last determination of net asset
value. Gross investment income consists principally of interest
accrued and, where applicable, net pro-rata amortization of
premiums and discounts since the last determination. The
dividend declared, as noted above, will be deducted immediately
before the net asset value calculation is made. See Offering
Price. Net investment income earned on days when the Fund is not
open will be declared as a dividend on the next business day.
Each Class of shares of the Fund will share proportionately in
the investment income and expenses of the Fund, except that
Consultant Class Shares, Class B Shares and Class C Shares alone
will incur distribution fees under their respective 12b-1 Plans.
See Plans Under Rule 12b-1 for Consultant Class Shares, Class B
Shares and Class C Shares under Purchasing Shares.
Purchases of Fund shares by wire begin earning dividends when
converted into Federal Funds and available for investment,
normally the next business day after receipt. However, if the
Fund is given prior notice of Federal Funds wire and an
acceptable written guarantee of timely receipt from an investor
satisfying the Fund's credit policies, the purchase will start
earning dividends on the date the wire is received. Investors
desiring to guarantee wire payments must have an acceptable
financial condition and credit history in the sole discretion of
the Fund. The Fund reserves the right to terminate this option
at any time. Purchases by check earn dividends upon conversion
to Federal Funds, normally one business day after receipt.
Payment of dividends will be made monthly. Dividends are
automatically reinvested in additional shares of the same Class
of the Fund at the net asset value in effect on the payable date,
which provides the effect of compounding dividends, unless the
election to receive dividends in cash has been made. Payment by
check of cash dividends will ordinarily be mailed within three
business days after the payable date. Dividend payments of $1.00
or less will be automatically reinvested, notwithstanding a
shareholder's election to receive dividends in cash. If such a
shareholder's dividends increase to greater than $1.00, the
shareholder would have to file a new election in order to begin
receiving dividends in cash again. If a shareholder redeems an
entire account, all dividends accrued to the time of the
withdrawal will be paid by separate check at the end of that
particular monthly dividend period, consistent with the payment
and mailing schedule described above. Any check in payment of
dividends or other distributions which cannot be delivered by the
United States Post Office or which remains uncashed for a period
of more than one year may be reinvested in the shareholder's
account at the then-current net asset value and the dividend
option may be changed from cash to reinvest. The Fund may deduct
from a shareholder's account the costs of the Fund's effort to
locate a shareholder if a shareholder's mail is returned by the
United States Post Office or the Fund is otherwise unable to
locate the shareholder or verify the shareholder's mailing
address. These costs may include a percentage of the account
when a search company charges a percentage fee in exchange for
their location services. To the extent necessary to maintain a
$1.00 per share net asset value, the Fund's Board of Directors
will consider temporarily reducing or suspending payment of daily
dividends, or making a distribution of realized securities
profits or other distributions at the time the net asset value
per share has changed.
Short-term realized securities profits or losses, if any, may
be paid with the daily dividend. Any such profits not so paid
will be distributed annually during the first quarter following
the close of the fiscal year. See Account Statements under
Purchasing Shares for the statement mailing of dividend
information. Information as to the tax status of dividends will
be provided annually.
TAXES
The Fund has qualified, and intends to continue to qualify,
as a regulated investment company under Subchapter M of the Code.
As such, the Fund will not be subject to federal income tax, or
to any excise tax, to the extent its earnings are distributed as
provided in the Code. See Taxes in the Prospectuses.
Under the Taxpayer Relief Act of 1997 (the "1997 Act"), the
Fund is required to track its sales of portfolio securities and
to report its capital gain distributions to you according to the
following categories of holding periods:
"Pre-Act long-term capital gains" or
"28 percent rate gain": securities sold
by the Fund before May 7, 1997, that
were held for more than 12 months.
These gains will be taxable to individual
investors at a maximum rate of 28%.
"Mid-term capital gains" or "28
percent rate gain": securities sold
by the Fund after July 28, 1997 that
were held more than one year but not
more than 18 months. These gains will
be taxable to individual investors at
a maximum rate of 28%.
"1997 Act long-term capital gains" or
"20 percent rate gain": securities sold
by the Fund between May 7, 1997 and
July 28, 1997 that were held for more
than 12 months, and securities sold
by the Fund after July 28, 1997 that
were held for more than 18 months.
These gains will be taxable to individual
investors at a maximum rate of 20%
for investors in the 28% or higher
federal income tax brackets, and at
a maximum rate of 10% for investors
in the 15% federal income tax bracket.
"Qualified 5-year gains": For individuals
in the 15% bracket, qualified 5-year
gains are net gains on securities held for
more than 5 years which are sold after
December 31, 2000. For individuals who
are subject to tax at higher rate
brackets, qualified 5-year gains are
net gains on securities which are
purchased after December 31, 2000 and
are held for more than 5 years. Taxpayers
subject to tax at a higher rate brackets
may also make an election for shares
held on January 1, 2001 to recognize
gain on their shares (any loss is disallowed)
in order to qualify such shares as qualified
5-year property as though purchased
after December 31, 2000.
These gains will be taxable to individual investors at a
maximum rate of 18% for investors in the 28% or higher federal
income tax brackets, and at a maximum rate of 8% for investors in
the 15% federal income tax bracket when sold after the 5 year
holding period.
INVESTMENT MANAGEMENT AGREEMENT
The Manager, located at One Commerce Square, Philadelphia,
PA 19103, furnishes investment management services to the Fund,
subject to the supervision and direction of the Fund's Board of
Directors.
The Manager and its predecessors have been managing the funds
in the Delaware Investments family since 1938. On March 31,
1998, the Manager and its affiliates within Delaware Investments,
including Delaware International Advisers Ltd., were managing in
the aggregate more than $44 billion in assets in the various
institutional or separately managed (approximately
$27,148,680,000) and investment company (approximately
$17,698,080,000) accounts.
Subject to the supervision and direction of the Board of
Directors, the Manager manages the Fund's portfolio in accordance
with the Fund's stated investment objective and policy and makes
and implements all investment decisions on behalf of the Fund.
The Fund's Investment Management Agreement is dated April 3,
1995 and was approved by shareholders on March 29, 1995. The
Agreement has an initial term of two years and may be renewed
each year so long as such renewal and continuance are
specifically approved at least annually by the Board of Directors
or by vote of a majority of the outstanding voting securities of
the Fund, and only if the terms of and the renewal thereof have
been approved by the vote of a majority of the directors of the
Fund, who are not parties thereto or interested persons of any
such party, cast in person at a meeting called for the purpose of
voting on such approval. The Agreement is terminable without
penalty on 60 days' notice by the directors of the Fund or by the
Manager. The Agreement will terminate automatically in the event
of its assignment.
The annual compensation paid by the Fund for investment
management services is equal to 0.5% on the first $500 million of
average daily net assets of the Fund, 0.475% on the next $250
million, 0.45% on the next $250 million, 0.425% on the next $250
million, 0.375% on the next $250 million, 0.325% on the next $250
million, 0.3% on the next $250 million and 0.275% on the average
daily net assets over $2 billion, less all directors' fees paid
to the unaffiliated directors by the Fund. If the Fund's average
daily net assets exceed $3 billion for any month, the Board of
Directors will conduct a substantive review of the Investment
Management Agreement. The Manager pays the Fund's rent and the
salaries of all directors, officers and employees of the Fund who
are affiliated with the Manager.
On March 31, 1998, the total net assets of the Fund were
$574,737,875. Investment management fees paid by the Fund were
$2,965,417 for the fiscal year ended March 31, 1996, $2,898,736
for the fiscal year ended March 31, 1997 and $2,904,636 for the
fiscal year ended March 31, 1998.
Except for those expenses borne by the Manager under the
Investment Management Agreement and the Distributor under the
Distribution Agreement, the Fund is responsible for all of its
own expenses. Among others, these include the investment
management fees; shareholder servicing, dividend disbursing,
accounting services and transfer agent fees and costs; custodian
expenses; federal and state securities registration fees; proxy
costs; and the costs of preparing prospectuses and reports sent
to shareholders
Distribution and Service
The Distributor, Delaware Distributors, L.P., located at 1818
Market Street, Philadelphia, PA 19103, serves as the national
distributor of Fund shares under a Distribution Agreement dated
April 3, 1995, as amended on November 29, 1995. The Distributor
is an affiliate of the Manager and bears all of the costs of
promotion and distribution, except for payments by the Fund on
behalf of Consultant Class Shares, Class B Shares and Class C
Shares under their respective 12b-1 Plans. Delaware
Distributors, L.P. is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc.
The Transfer Agent, Delaware Service Company, Inc., another
affiliate of the Manager located at 1818 Market Street,
Philadelphia, PA 19103, serves as the Fund's shareholder
servicing, dividend disbursing and transfer agent pursuant to a
Shareholders Services Agreement dated December 20, 1990. The
Transfer Agent also provides accounting services to the Fund
pursuant to the terms of a separate Fund Accounting Agreement.
The Transfer Agent is also an indirect, wholly owned subsidiary
of Delaware Management Holdings, Inc.
The Fund has authorized one or more brokers to accept on its
behalf purchase and redemption orders in addition to the Transfer
Agent. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the
behalf of the Fund. For purposes of pricing, the Fund will be
deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized
designee, accepts the order. Investors may be charged a fee when
effecting transactions through a broker or agent.
OFFICERS AND DIRECTORS
The business and affairs of the Fund are managed under the
direction of its Board of Directors.
Certain officers and directors of the Fund hold identical
positions in each of the other funds in the Delaware Investments
family. On April 30, 1998, the Fund's officers and directors
owned less than 1% of outstanding shares of Consultant Class
Shares, Class B Shares and Class C Shares and approximately 1% of
the outstanding shares of Class A Shares.
As of April 30, 1998, the Fund believes the following accounts
held 5% or more of record of a Fund Class. The Fund has no
knowledge of beneficial ownership.
Name and Share
Class Address of Account Amount Percentage
Consultant
Class Shares RS DMTC 401(k) Plan 2,529,159 7.30%
Goodman Truck and Tractor
401(k)
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
RS DMTC
401(k) Plan 2,273,103 6.55%
HC Yu & Associates
401(k) Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
Enele Co. FBO Tharco 1,836,739 5.29%
1211 SW 5th Avenue,
Suite 1900
Portland, OR 97204
Class B
Shares Independent Trust Corp. 624,455 9.49%
FBO CGMI
15255 South 94th Avenue,
Suite 303
Orland Park, IL 60462
Donaldson Lufkin Jenrette 421,635 6.41%
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303
Class C
Shares Whitestone Logging, Inc. 401(k) Plan 566,250 15.49%
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
Class C
Shares Resources Trust Company 277,609 7.59%
Trustee For Russell C. Staurovsky
P.O. Box 5900
Denver, CO 80217
Class C Brenda J. Whitt 217,450 5.94%
Shares 548 Union Avenue
Providence, RI 02909
DMH Corp., Delvoy, Inc., Delaware Management Business Trust,
Delaware Management Company, Delaware Management Company, Inc. (a
series of Delaware Management Business Trust), Delaware
Investment Advisers, (a series of Delaware Management Business
Trust), Delaware Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware Management Trust
Company, Delaware International Holdings Ltd., Founders Holdings,
Inc., Delaware International Advisers Ltd., Delaware Capital
Management, Inc. and Delaware Investment & Retirement Services,
Inc. are direct or indirect, wholly owned subsidiaries of
Delaware Management Holdings, Inc. ("DMH"). On April 3, 1995, a
merger between DMH and a wholly owned subsidiary of Lincoln
National Corporation ("Lincoln National") was completed. DMH and
the Manager are now indirect, wholly owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln
National, with headquarters in Fort Wayne, Indiana, is a
diversified organization with operations in many aspects of the
financial services industry, including insurance and investment
management.
Certain officers and directors of the Fund hold identical
positions in each of the other funds in the Delaware Investments
family. Directors and principal officers of the Fund are noted
below along with their ages and their business experience for the
past five years. Unless otherwise noted, the address of each
officer and director is One Commerce Square, Philadelphia, PA
19103.
*Wayne A. Stork (60)
Chairman and Director and/or Trustee of the Fund, 33 other
investment companies in the Delaware Investments
family and Delaware Capital Management, Inc.
Chairman, President, Chief Executive Officer and Director
of DMH Corp., Delaware Distributors, Inc. and Founders
Holdings, Inc.
Chairman, President, Chief Executive Officer, Chief
Investment Officer and Director/Trustee of
Delaware Management Company, Inc. and Delaware
Management Business Trust
Chairman, President, Chief Executive Officer and Chief
Investment Officer of Delaware Management
Company (a series of Delaware Management Business
Trust)
Chairman, Chief Executive Officer and Chief Investment
Officer of Delaware Investment Advisers (a series of
Delaware Management Business Trust)
Chairman, Chief Executive Officer and Director of Delaware
International Advisers Ltd., Delaware International
Holdings Ltd. and Delaware Management Holdings, Inc.
President and Chief Executive Officer of Delvoy, Inc.
Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc. and Delaware
Investment & Retirement Services, Inc.
During the past five years, Mr. Stork has served in
various executive capacities at different times
within the Delaware organization.
*Jeffrey J. Nick (45)
President, Chief Executive Officer and Director of the Fund
and 33 other investment companies in the Delaware
Investments family President and Director of Delaware
Management Holdings, Inc.
President, Chief Executive Officer and Director of Lincoln
National Investment Companies, Inc.
President of Lincoln Funds Corporation
Director of Delaware International Advisers Ltd. From 1992
to 1996, Mr. Nick was Managing
Director of Lincoln National UK plc and from 1989 to 1992,
he was Senior Vice President responsible for corporate
planning and development for Lincoln National
Corporation.
______________________
*Director affiliated with the Fund's investment manager and
considered an "interested person" as defined in the 1940 Act.
Richard G. Unruh, Jr. (58)
Executive Vice President of the Fund, 33 other investment
companies in the Delaware Investments family, Delaware
Management Holdings, Inc., Delaware Management Company
(a series of Delaware Management Business Trust) and
Delaware Capital Management, Inc.
President of Delaware Investment Advisers (a series of
Delaware Management Business Trust) Executive Vice
President and Director/Trustee of Delaware
Management Company, Inc. and Delaware Management
Business Trust
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various
executive capacities at different times within the
Delaware organization.
Paul E. Suckow (50)
Executive Vice President/Chief Investment Officer, Fixed
Income of the Fund, 33 other investment companies in
the Delaware Investments family, Delaware Management
Company, Inc., Delaware Management Company
(a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust) and Delaware Management
Holdings, Inc. Executive Vice President and Director
of Founders Holdings, Inc.
Executive Vice President of Delaware Capital Management,
Inc. and Delaware Management Business Trust
Director of Founders CBO Corporation
Director of HYPPCO Finance Company Ltd.
Before returning to Delaware Investments in 1993, Mr.
Suckow was Executive Vice President and Director of
Fixed Income for Oppenheimer Management Corporation,
New York, NY from 1985 to 1992. Prior to that, Mr.
Suckow was a fixed-income portfolio manager for
Delaware Investments.
David K. Downes (58)
Executive Vice President, Chief Operating Officer, Chief
Financial Officer of the Fund, 33 other investment
companies in the Delaware Investments family, Delaware
Management Holdings, Inc., Founders CBO Corporation,
Delaware Capital Management, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and Delaware
Distributors, L.P.
Executive Vice President, Chief Financial Officer, Chief
Administrative Officer and Trustee of Delaware
Management Business Trust Executive Vice President,
Chief Operating Officer, Chief Financial Officer and
Director of Delaware Management Company, Inc., DMH
Corp., Delaware Distributors, Inc., Founders Holdings,
Inc. and Delvoy, Inc.
President, Chief Executive Officer, Chief Financial Officer
and Director of Delaware Service Company, Inc.
President, Chief Operating Officer, Chief Financial Officer
and Director of Delaware International Holdings Ltd.
Chairman, Chief Executive Officer and Director of Delaware
Management Trust Company and Delaware Investment &
Retirement Services, Inc.
Director of Delaware International Advisers Ltd.
Vice President of Lincoln Funds Corporation
During the past five years, Mr. Downes has served in
various executive capacities at different times
within the Delaware organization.
Walter P. Babich (70)
Director and/or Trustee of the Fund and 33 other
investment companies in the Delaware Investments
family
460 North Gulph Road, King of Prussia, PA 19406
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin &
Leighton and from 1988 to 1991, he was a partner of
I&L Investors.
John H. Durham (60)
Director and/or Trustee of the Fund and 18 other investment
companies in the Delaware Investments family.
Partner, Complete Care Services.
120 Gilbraltar Road, Horsham, PA 19044.
Mr. Durham served as Chairman of the Board of each fund
in the Delaware Investments family from 1986 to 1991;
President of each fund from 1977 to 1990; and Chief
Executive Officer of each fund from 1984 to 1990.
Prior to 1992, with respect to Delaware Management
Holdings, Inc., Delaware Management Company, Delaware
Distributors, Inc. and Delaware Service Company, Inc.,
Mr. Durham served as a director and in various
executive capacities at different times.
Anthony D. Knerr (59)
Director and/or Trustee of the Fund and 33 other investment
companies in the Delaware Investments family
500 Fifth Avenue, New York, NY 10110
Founder and Managing Director, Anthony Knerr & Associates
From 1982 to 1988, Mr. Knerr was Executive Vice
President/Finance and Treasurer of Columbia
University, New York. From 1987 to 1989, he was also a
lecturer in English at the University. In addition,
Mr. Knerr was Chairman of The Publishing Group, Inc.,
New York, from 1988 to 1990. Mr. Knerr founded The
Publishing Group, Inc. in 1988.
Ann R. Leven (57)
Director and/or Trustee of the Fund and 33 other investment
companies in the Delaware Investments family
785 Park Avenue, New York, NY 10021
Treasurer, National Gallery of Art
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal
Officer of the Smithsonian Institution, Washington, DC,
and from 1975 to 1992, she was Adjunct Professor of
Columbia Business School.
W. Thacher Longstreth (77)
Director and/or Trustee of the Fund and 33 other investment
companies in the Delaware Investments family
City Hall, Philadelphia, PA 19107
Philadelphia City Councilman.
Thomas F. Madison (62)
Director and/or Trustee of the Fund and 33 other investment
companies in the Delaware Investments family
200 South Fifth Street, Suite 2100,
Minneapolis, Minnesota 55402
President and Chief Executive Officer, MLM Partners, Inc.
Mr. Madison has also been Chairman of the
Board of Communications Holdings, Inc. since 1996.
From February to September 1994, Mr. Madison
served as Vice Chairman--Office of the CEO of The
Minnesota Mutual Life Insurance Company and
from 1988 to 1993, he was President of U.S. WEST
Communications--Markets.
Charles E. Peck (72)
Director and/or Trustee of the Fund and 33 other investment
companies in the Delaware Investments family
P.O. Box 1102, Columbia, MD 21044
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief
Executive Officer of The Ryland Group, Inc.,
Columbia, MD.
George M. Chamberlain, Jr. (51)
Senior Vice President, Secretary and General Counsel of the
Fund, 33 other investment companies in the Delaware
Investments family, Delaware Distributors, L.P.,
Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust) and Delaware Management Holdings, Inc.
Senior Vice President, Secretary, General Counsel and
Director/Trustee of DMH Corp., Delaware Management
Company, Inc., Delaware Distributors, Inc., Delaware
Service Company, Inc., Founders Holdings, Inc.,
Delaware Investment & Retirement Services, Inc.,
Delaware Capital Management, Inc., Delvoy, Inc. and
Delaware Management Business Trust
Executive Vice President, Secretary, General Counsel and
Director of Delaware Management Trust Company
Senior Vice President and Director of Delaware
International Holdings Ltd.
Director of Delaware International Advisers Ltd.
Secretary of Lincoln Funds Corporation
Attorney.
During the past five years, Mr. Chamberlain has served in
various executive capacities at different times
within the Delaware organization.
Joseph H. Hastings (48)
Senior Vice President/Corporate Controller of the Fund,
33 other investment companies in the Delaware
Investments family and Founders Holdings, Inc.
Senior Vice President/Corporate Controller and Treasurer of
Delaware Management Holdings, Inc., DMH Corp.,
Delaware Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc.,
Delaware Capital Management, Inc., Delaware
International Holdings Ltd., Delvoy, Inc. and Delaware
Management Business Trust
Chief Financial Officer/Treasurer of Delaware Investment &
Retirement Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer
of Delaware Management Trust Company
Senior Vice President/Assistant Treasurer of Founders
CBO Corporation
Treasurer of Lincoln Funds Corporation
During the past five years, Mr. Hastings has served in
various executive capacities at different times
within the Delaware organization. <PAGE>
Michael P. Bishof (35)
Senior Vice President/Treasurer of the Fund, 33 other
investment companies in the Delaware Investments family
and Founders Holdings, Inc.
Senior Vice President/Investment Accounting of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust) and Delaware Service Company, Inc.
Senior Vice President and Treasurer/Manager of Investment
Accounting of Delaware Distributors, L.P.
and Delaware Investment Advisers (a series of Delaware
Management Business Trust)
Senior Vice President and Manager of Investment Accounting
of Delaware International Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation
Before joining Delaware Investments in 1995, Mr.
Bishof was a Vice President for Bankers Trust, New
York, NY from 1994 to 1995, a Vice President for
CS First Boston Investment Management, New York, NY
from 1993 to 1994 and an Assistant Vice President
for Equitable Capital Management Corporation, New York,
NY from 1987 to 1993.
Cynthia I. Isom (44)
Vice President/Portfolio Manager of the Fund, 17 other
investment companies in the Delaware Investments
family, Delaware Management Company, Inc. and Delaware
Management Company (a series of Delaware Management
Business Trust)
During the past five years, Ms. Isom has served as a
trader for money markets, high grade corporates and
treasury securities.
The following is a compensation table listing for each
director/trustee entitled to receive compensation, the aggregate
compensation received from the Fund and the total compensation
received from all investment companies in the Delaware
Investments family which he or she serves as a director or
trustee for the fiscal year ended March 31, 1998 and an estimate
of annual benefits to be received upon retirement under the
Delaware Group Retirement Plan for Directors/Trustees as of
March 31, 1998. Only the independent directors/trustees of the
Fund receive compensation from the Fund.
Total
Pension or Compensation
Retirement Estimated from the
Aggregate Benefits Annual Investment
Compen- Accrued as Benefits Companies in
sation as Part Upon Delaware
from the of Fund Retire- Invest-
Name Fund Expenses ment(1) ments(2)
W. Thacher
Longstreth $2,272 None $38,500 $61,910
Ann R. Leven $2,603 None $38,500 $67,885
Walter P.
Babich $2,449 None $38,500 $66,493
Anthony D.
Knerr $2,449 None $38,500 $66,493
Charles E.
Peck $2,175 None $38,500 $58,765
Thomas F.
Madison(3) $1,975 None $38,500 $56,265
John H.
Durham(4) N/A None $31,000 N/A
(1) Under the terms of the Delaware Group Retirement Plan
for Directors/Trustees, each disinterested director/trustee
who, at the time of his or her retirement from the Board, has
attained the age of 70 and served on the Board for at least
five continuous years, is entitled to receive payments from
each investment company in the Delaware Investments
family for which he or she serves as director or trustee for a
period equal to the lesser of the number of years that such
person served as a director or trustee or the remainder of such
person's life. The amount of such payments will be equal,
on an annual basis, to the amount of the annual retainer that
is paid to directors/trustees of each investment company at
the time of such person's retirement. If an eligible director/
trustee retired as of March 31, 998, he or she would be
entitled to annual payments totaling $38,500, in the
aggregate, from all of the investment companies in the
Delaware Investments family for which he or she served as
director or trustee, based on the number of investment
companies in the Delaware Investments family as of that date.
(2) Each independent director/trustee (other than John H.
Durham) currently receives a total annual retainer fee
of $38,500 for serving as a director or trustee for all 34
investment companies in Delaware Investments, plus
$3,145 for each Board Meeting attended. John H.
Durham currently receives a total annual retainer fee of
$31,000 for serving as a director or trustee for 25
investment companies in Delaware Investments, plus
$1,757.50 for each Board Meeting attended. Ann R.
Leven, Walter P. Babich, and Anthony D. Knerr serve
on the Fund's audit committee; Ms. Leven is the
chairperson. Members of the audit committee currently
receive additional annual compensation of $5,000 from
all investment companies, in the aggregate, with the
exception of the chairperson, who receives $6,000.
(3) Thomas F. Madison joined the Board of Directors on April
30, 1997.
(4) John H. Durham joined the Board of Directors of the Fund
and 24 other investment companies in Delaware Investments
on April 16, 1998.
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the
Classes and the shareholders of other classes of other funds
available from the Delaware Investments family are set forth in
the relevant prospectuses for such classes. The following
supplements that information. The Fund may modify, terminate or
suspend the exchange privilege upon 60 days' notice to
shareholders.
All exchanges involve a purchase of shares of the fund into
which the exchange is made. As with any purchase, an investor
should obtain and carefully read that fund's prospectus before
buying shares in an exchange. The prospectus contains more
complete information about the fund, including charges and
expenses. A shareholder requesting an exchange or purchase will
be sent a current prospectus and an exchange authorization form
for any of the other mutual funds available from the Delaware
Investments family. Exchange instructions must be signed by the
record owner(s) exactly as the shares are registered. This
feature is available only in states where the fund into which the
exchange is being made is registered.
An exchange constitutes, for tax purposes, the sale of one
fund and the purchase of another. The sale may involve either a
capital gain or loss to the shareholder for federal income tax
purposes.
In addition, investment advisers and dealers may make
exchanges between funds available from the Delaware Investments
family on behalf of their clients by telephone or other expedited
means. This service may be discontinued or revised at any time
by the Transfer Agent. Such exchange requests may be rejected if
it is determined that a particular request or the total requests
at any time could have an adverse effect on any of the funds.
Requests for expedited exchanges may be submitted with a properly
completed exchange authorization form, as described above.
Telephone Exchange Privilege
Shareholders owning shares for which certificates have not
been issued or their investment dealers of record may exchange
shares by telephone for shares in other mutual funds available
from the Delaware Investments family. This service is
automatically provided unless the Fund receives written notice
from the shareholder to the contrary.
Shareholders or their investment dealers of record may contact
the Shareholder Service Center at 800-523- 1918 to effect an
exchange. The shareholder's current Fund account number must be
identified, as well as the registration of the account, the share
or dollar amount to be exchanged and the fund into which the
exchange is to be made. Requests received on any day after the
time the offering price and net asset value are determined will
be processed the following day. See Offering Price. Any new
account established through the exchange will automatically carry
the same registration, shareholder information and dividend
option as the account from which the shares were exchanged. The
exchange requirements of the fund into which the exchange is
being made, such as eligibility and investment minimums, must be
met and may entail the payment of a front-end sales charge which
will be deducted from the investment. (See the prospectus of the
fund desired or inquire by calling the Transfer Agent.) Certain
funds are not available for retirement plans.
The telephone exchange privilege is intended as a convenience
to shareholders and is not intended to be a vehicle to speculate
on short-term swings in the securities market through frequent
transactions in and out of the funds available from the Delaware
Investments family. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and
the Fund reserve the right to record exchange instructions
received by telephone and to reject exchange requests at any time
in the future.
As described in the Prospectuses, neither the Fund nor its
Transfer Agent is responsible for any shareholder loss incurred
in acting upon written or telephone instructions for redemption
or exchange of Fund shares which are reasonably believed to be
genuine.
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing
services ("Timing Firms") to purchase or redeem shares based on
changing economic and market conditions ("Timing Accounts"), the
Fund will refuse any new timing arrangements, as well as any new
purchases (as opposed to exchanges) in funds in the Delaware
Investments family from Timing Firms. The Fund reserves the
right to temporarily or permanently terminate the exchange
privilege or reject any specific purchase order for any person
whose transactions seem to follow a timing pattern who: (i) makes
an exchange request out of the Fund within two weeks of an
earlier exchange request out of the Fund, or (ii) makes more than
two exchanges out of the Fund per calendar quarter, or (iii)
exchanges shares equal in value to at least $5 million, or more
than 1/4 of 1% of the Fund's net assets. Accounts under common
ownership or control, including accounts administered so as to
redeem or purchase shares based upon certain predetermined market
indicators, will be aggregated for purposes of the exchange
limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may
only execute exchanges between the following eight funds in the
Delaware Investments family: (1) Decatur Income Fund, (2)
Decatur Total Return Fund, (3) Delaware Fund, (4) Limited-Term
Government Fund, (5) Tax-Free USA Fund, (6) Delchester Fund, (7)
Tax-Free Pennsylvania Fund and (8) the Fund. No other funds in
the Delaware Investments family are available for timed
exchanges. Assets redeemed or exchanged out of Timing Accounts
in funds in the Delaware Investments family not listed above may
not be reinvested back into that Timing Account. The Fund
reserves the right to apply these same restrictions to the
account(s) of any person whose transactions seem to follow a time
pattern (as described above).
The Fund also reserves the right to refuse the purchase side
of an exchange request by any Timing Account, person, or group
if, in the Manager's judgment, the Fund would be unable to invest
effectively in accordance with its investment objectives and
policies, or would otherwise potentially be adversely affected.
A shareholder's purchase exchanges may be restricted or refused
if the Fund receives or anticipates simultaneous orders affecting
significant portions of the Fund's assets. In particular, a
pattern of exchanges that coincide with a "market timing"
strategy may be disruptive to the Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized
brokers of record will be permitted to make exchanges or
redemptions.
* * *
Following is a summary of the investment objectives of the
other funds in the Delaware Investments family:
Delaware Fund seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a
dividend-oriented valuation strategy to select securities issued
by established companies that are believed to demonstrate
potential for income and capital growth. Devon Fund seeks
current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks the
Manager believes have the potential for above average dividend
increases over time.
Trend Fund seeks long-term growth by investing in common
stocks issued by emerging growth companies exhibiting strong
capital appreciation potential.
Small Cap Value Fund seeks capital appreciation by investing
primarily in common stocks whose market values appear low
relative to their underlying value or future potential.
DelCap Fund seeks long-term capital growth by investing in
common stocks and securities convertible into common stocks of
companies that have a demonstrated history of growth and have the
potential to support continued growth.
Decatur Income Fund seeks the highest possible current income
by investing primarily in common stocks that provide the
potential for income and capital appreciation without undue risk
to principal. Decatur Total Return Fund seeks long-term growth
by investing primarily in securities that provide the potential
for income and capital appreciation without undue risk to
principal. Blue Chip Fund seeks to achieve long-term capital
appreciation. Current income is a secondary objective. It seeks
to achieve these objectives by investing primarily in equity
securities and any securities that are convertible into equity
securities. Social Awareness Fund seeks to achieve long-term
capital appreciation. It seeks to achieve this objective by
investing primarily in equity securities of medium- to
large-sized companies expected to grow over time that meet the
Fund's "Social Criteria" strategy.
Delchester Fund seeks as high a current income as possible by
investing principally high yield, high risk in corporate bonds,
and also in U.S. government securities and commercial paper.
Strategic Income Fund seeks to provide investors with high
current income and total return by using a multi-sector
investment approach, investing principally in three sectors of
the fixed-income securities markets: high yield, higher risk
securities, investment grade fixed-income securities and foreign
government and other foreign fixed-income securities. High-Yield
Opportunities Fund seeks to provide investors with total return
and, as a secondary objective, high current income.
U.S. Government Fund seeks high current income by investing
primarily in long-term debt obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities.
Limited-Term Government Fund seeks high, stable income by
investing primarily in a portfolio of short- and
intermediate-term securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities and instruments
secured by such securities. U.S. Government Money Fund seeks
maximum current income with preservation of principal and
maintenance of liquidity by investing only in short-term
securities issued or guaranteed as to principal and interest by
the U.S. government, its agencies or instrumentalities, and
repurchase agreements collateralized by such securities, while
maintaining a stable net asset value.
REIT Fund seeks to achieve maximum long-term total return with
capital appreciation as a secondary objective. It seeks to
achieve its objectives by investing in securities of companies
primarily engaged in the real estate industry.
Tax-Free USA Fund seeks high current income exempt from
federal income tax by investing in municipal bonds of
geographically-diverse issuers. Tax-Free Insured Fund invests in
these same types of securities but with an emphasis on municipal
bonds protected by insurance guaranteeing principal and interest
are paid when due. Tax-Free USA Intermediate Fund seeks a high
level of current interest income exempt from federal income tax,
consistent with the preservation of capital by investing
primarily in municipal bonds.
Tax-Free Money Fund seeks high current income, exempt from
federal income tax, by investing in short- term municipal
obligations, while maintaining a stable net asset value.
Tax-Free New Jersey Fund seeks a high level of current
interest income exempt from federal income tax and New Jersey
state and local taxes, consistent with preservation of capital.
Tax-Free Ohio Fund seeks a high level of current interest income
exempt from federal income tax and Ohio state and local taxes,
consistent with preservation of capital. Tax-Free Pennsylvania
Fund seeks a high level of current interest income exempt from
federal income tax and Pennsylvania state and local taxes,
consistent with the preservation of capital.
Foundation Funds are "fund of funds" which invest in other
funds in the Delaware Investments family (referred to as
"Underlying Funds"). Foundation Funds Income Portfolio seeks a
combination of current income and preservation of capital with
capital appreciation by investing in primarily a mix of fixed
income and domestic equity securities, including fixed income and
domestic equity Underlying Funds. Foundation Funds Balanced
Portfolio seeks capital appreciation with current income as a
secondary objective by investing primarily in domestic equity and
fixed income securities, including domestic equity and fixed
income Underlying Funds. Foundation Funds Growth Portfolio seeks
long term capital growth by investing primarily in equity
securities, including equity Underlying Funds, and, to a lesser
extent, in fixed income securities, including fixed-income
Underlying Funds.
International Equity Fund seeks to achieve long-term growth
without undue risk to principal by investing primarily in
international securities that provide the potential for capital
appreciation and income. Global Bond Fund seeks to achieve
current income consistent with the preservation of principal by
investing primarily in global fixed-income securities that may
also provide the potential for capital appreciation. Global
Assets Fund seeks to achieve long-term total return by investing
in global securities which will provide higher current income
than a portfolio comprised exclusively of equity securities,
along with the potential for capital growth. Emerging Markets
Fund seeks long-term capital appreciation by investing primarily
in equity securities of issuers located or operating in emerging
countries.
U.S. Growth Fund seeks to maximize capital appreciation by
investing in companies of all sizes which have low dividend
yields, strong balance sheets and high expected earnings growth
rates relative to their industry. Overseas Equity Fund seeks to
maximize total return (capital appreciation and income),
principally through investments in an internationally diversified
portfolio of equity securities. New Pacific Fund seeks long-term
capital appreciation by investing primarily in companies which
are domiciled in or have their principal business activities in
the Pacific Basin.
Delaware Group Premium Fund, Inc. offers 16 funds available
exclusively as funding vehicles for certain insurance company
separate accounts. Decatur Total Return Series seeks the highest
possible total rate of return by selecting issues that exhibit
the potential for capital appreciation while providing higher
than average dividend income. Delchester Series seeks as high a
current income as possible by investing in rated and unrated
corporate bonds, U.S. government securities and commercial paper.
Capital Reserves Series seeks a high stable level of current
income while minimizing fluctuations in principal by investing in
a diversified portfolio of short- and intermediate-term
securities. Cash Reserve Series seeks the highest level of
income consistent with preservation of capital and liquidity
through investments in short-term money market instruments.
DelCap Series seeks long-term capital appreciation by investing
its assets in a diversified portfolio of securities exhibiting
the potential for significant growth. Delaware Series seeks a
balance of capital appreciation, income and preservation of
capital. It uses a dividend-oriented valuation strategy to
select securities issued by established companies that are
believed to demonstrate potential for income and capital growth.
International Equity Series seeks long-term growth without undue
risk to principal by investing primarily in equity securities of
foreign issuers that provide the potential for capital
appreciation and income. Small Cap Value Series seeks capital
appreciation by investing primarily in small-cap common stocks
whose market values appear low relative to their underlying value
or future earnings and growth potential. Emphasis will also be
placed on securities of companies that may be temporarily out of
favor or whose value is not yet recognized by the market. Trend
Series seeks long-term capital appreciation by investing
primarily in small- cap common stocks and convertible securities
of emerging and other growth-oriented companies. These
securities will have been judged to be responsive to changes in
the market place and to have fundamental characteristics to
support growth. Income is not an objective. Global Bond Series
seeks to achieve current income consistent with the preservation
of principal by investing primarily in global fixed-income
securities that may also provide the potential for capital
appreciation. Strategic Income Series seeks high current income
and total return by using a multi-sector investment approach,
investing primarily in three sectors of the fixed- income
securities markets: high-yield, higher risk securities;
investment grade fixed-income securities; and foreign government
and other foreign fixed-income securities. Devon Series seeks
current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks
that the investment manager believes have the potential for
above-average dividend increases over time. Emerging Markets
Series seeks to achieve long-term capital appreciation by
investing primarily in equity securities of issuers located or
operating in emerging countries. Convertible Securities Series
seeks a high level of total return on its assets through a
combination of capital appreciation and current income by
investing primarily in convertible securities. Social Awareness
Series seeks to achieve long-term capital appreciation by
investing primarily in equity securities of medium to large-sized
companies expected to grow over time that meet the Series'
"Social Criteria" strategy. REIT Series seeks to achieve maximum
long-term total return, with capital appreciation as a secondary
objective, by investing in securities of companies primarily
engaged in the real estate industry.
Delaware-Voyageur US Government Securities Fund seeks to
provide a high level of current income consistent with the
prudent investment risk by investing in U.S. Treasury bills,
notes, bonds, and other obligations issued or unconditionally
guaranteed by the full faith and credit of the U.S. Treasury, and
repurchase agreements fully secured by such obligations.
Delaware-Voyageur Tax-Free Arizona Insured Fund seeks to
provide a high level of current income exempt from federal income
tax and the Arizona personal income tax, consistent with the
preservation of capital.
Delaware-Voyageur Minnesota Insured Fund seeks to provide a
high level of current income exempt from federal income tax and
the Minnesota personal income tax, consistent with the
preservation of capital.
Delaware-Voyageur Tax-Free Minnesota Intermediate Fund seeks
to provide a high level of current income exempt from federal
income tax and the Minnesota personal income tax, consistent with
preservation of capital. The Fund seeks to reduce market risk by
maintaining an average weighted maturity from five to ten years.
Delaware-Voyageur Tax-Free California Insured Fund seeks to
provide a high level of current income exempt from federal income
tax and the California personal income tax, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Florida
Insured Fund seeks to provide a high level of current income
exempt from federal income tax, consistent with the preservation
of capital. The Fund will seek to select investments that will
enable its shares to be exempt from the Florida intangible
personal property tax. Delaware-Voyageur Tax-Free Florida Fund
seeks to provide a high level of current income exempt from
federal income tax, consistent with the preservation of capital.
The Fund will seek to select investments that will enable its
shares to be exempt from the Florida intangible personal property
tax. Delaware-Voyageur Tax-Free Kansas Fund seeks to provide a
high level of current income exempt from federal income tax, the
Kansas personal income tax and the Kansas intangible personal
property tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Missouri Insured Fund seeks to provide
a high level of current income exempt from federal income tax and
the Missouri personal income tax, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free New Mexico
Fund seeks to provide a high level of current income exempt from
federal income tax and the New Mexico personal income tax,
consistent with the preservation of capital. Delaware-Voyageur
Tax-Free Oregon Insured Fund seeks to provide a high level of
current income exempt from federal income tax and the Oregon
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Utah Fund seeks to provide a high
level of current income exempt from federal income tax,
consistent with the preservation of capital. Delaware-Voyageur
Tax-Free Washington Insured Fund seeks to provide a high level of
current income exempt from federal income tax, consistent with
the preservation of capital.
Delaware-Voyageur Tax-Free Florida Intermediate Fund seeks
to provide a high level of current income exempt from federal
income tax, consistent with the preservation of capital. The
Fund will seek to select investments that will enable its shares
to be exempt from the Florida intangible personal property tax.
The Fund seeks to reduce market risk by maintaining an average
weighted maturity from five to ten years.
Delaware-Voyageur Tax-Free Arizona Fund seeks to provide a
high level of current income exempt from federal income tax and
the Arizona personal income tax, consistent with the preservation
of capital. Delaware-Voyageur Tax-Free California Fund seeks to
provide a high level of current income exempt from federal income
tax and the California personal income tax, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Iowa Fund
seeks to provide a high level of current income exempt from
federal income tax and the Iowa personal income tax, consistent
with the preservation of capital. Delaware- Voyageur Tax-Free
Idaho Fund seeks to provide a high level of current income exempt
from federal income tax and the Idaho personal income tax,
consistent with the preservation of capital. Delaware-Voyageur
Minnesota High Yield Municipal Bond Fund seeks to provide a high
level of current income exempt from federal income tax and the
Minnesota personal income tax primarily through investment in
medium and lower grade municipal obligations. National High
Yield Municipal Fund seeks to provide a high level of income
exempt from federal income tax, primarily through investment in
medium and lower grade municipal obligations. Delaware-Voyageur
Tax-Free New York Fund seeks to provide a high level of current
income exempt from federal income tax and the personal income tax
of the state of New York and the city of New York, consistent
with the preservation of capital. Delaware-Voyageur Tax-Free
Wisconsin Fund seeks to provide a high level of current income
exempt from federal income tax and the Wisconsin personal income
tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Colorado Fund seeks to provide a
high level of current income exempt from federal income tax and
the Colorado personal income tax, consistent with the
preservation of capital.
Aggressive Growth Fund seeks long-term capital appreciation,
which the Fund attempts to achieve by investing primarily
in equity securities believed to have the potential for high
earnings growth. Although the Fund, in seeking its objective,
may receive current income from dividends and interest, income is
only an incidental consideration in the selection of the Fund's
investments. Growth Stock Fund has an objective of long-term
capital appreciation. The Fund seeks to achieve its objective
from equity securities diversified among individual companies and
industries. Tax-Efficient Equity Fund seeks to obtain for
taxable investors a high total return on an after-tax basis. The
Fund will attempt to achieve this objective by seeking to provide
a high long-term after-tax total return through managing its
portfolio in a manner that will defer the realization of accrued
capital gains and minimize dividend income.
Delaware-Voyageur Tax-Free Minnesota Fund seeks to provide a
high level of current income exempt from federal income tax and
the Minnesota personal income tax, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free North Dakota
Fund seeks to provide a high level of current income exempt from
federal income tax and the North Dakota personal income tax,
consistent with the preservation of capital.
For more complete information about any of the funds in the
Delaware Investments family, including charges and expenses, you
can obtain a prospectus from the Distributor. Read it carefully
before you invest or forward funds.
Each of the summaries above is qualified in its entirety by
the information contained in each fund's prospectus(es).
GENERAL INFORMATION
The Manager is the investment manager of the Fund. The Manager
also provides investment management services to certain of the
other funds available from the Delaware Investments family. The
Manager, through a separate division, also manages private
investment accounts. While investment decisions of the Fund are
made independently from those of the other funds and accounts,
investment decisions for such other funds and accounts may be
made at the same time as investment decisions of the Fund.
The Manager, or its affiliate Delaware International Advisers
Ltd., also manages the investment options for Delaware
Medallion(SM) III Variable Annuity. Medallion is issued by
Allmerica Financial Life Insurance and Annuity Company (First
Allmerica Financial Life Insurance Company in New York and
Hawaii). Delaware Medallion offers 16 different investment
series ranging from domestic equity funds, international equity
and bond funds and domestic fixed income funds. Each investment
series available through Medallion utilizes an investment
strategy and discipline the same as or similar to one of the
mutual funds in the Delaware Investments family available outside
the annuity. See Delaware Group Premium Fund, Inc., above.
Access persons and advisory persons of the funds in the
Delaware Investments family, as those terms are defined in SEC
Rule 17j-1 under the 1940 Act, who provide services to the
Manager, Delaware International Advisers Ltd. or their
affiliates, are permitted to engage in personal securities
transactions subject to the exceptions set forth in Rule 17j-1
and the following general restrictions and procedures: (1)
certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive
advance clearance and must be completed on the same day as the
clearance is received; (3) certain persons are prohibited from
investing in initial public offerings of securities and other
restrictions apply to investments in private placements of
securities; (4) opening positions may only be closed-out at a
profit after a 60-day holding period has elapsed; and (5) the
Compliance Officer must be informed periodically of all
securities transactions and duplicate copies of brokerage
confirmations and account statements must be supplied to the
Compliance Officer.
The Distributor acts as national distributor for the Fund and
for the other mutual funds in the Delaware Investments family.
For the fiscal years ended March 31, 1996, March 31, 1997 and
March 31, 1998, the Distributor received CDSC payments in the
amount of $14,479, $42,420 and $61,531, respectively, with
respect to Class B Shares.
For the period November 29, 1995 (date of initial public
offering) through March 31, 1996, the Distributor received CDSC
payments in the amount of $1.74 with respect to Class C Shares.
For the fiscal years ended March 31, 1997 and March 31, 1998, the
Distributor received CDSC payments in the amount of $484 and
$1,187, respectively, with respect to Class C Shares.
The Transfer Agent, an affiliate of the Manager, acts as
shareholder servicing, dividend disbursing and transfer agent for
the Fund and for the other mutual funds in the Delaware
Investments family. The Transfer Agent is paid a fee by the Fund
for providing these services consisting of an annual per account
charge of $11.00 plus transaction charges for particular services
according to a schedule. Compensation is fixed each year and
approved by the Board of Directors, including a majority of the
disinterested directors. The Transfer Agent also provides
accounting services to the Fund. Those services include
performing all functions related to calculating the Fund's net
asset value and providing all financial reporting services,
regulatory compliance testing and the related accounting
services. For its services, the Transfer Agent is paid a fee
based on total assets of all funds in the Delaware Investments
family for which it provides such accounting services. Such fee
is equal to 0.25% multiplied by the total amount of assets in the
complex for which the Transfer Agent furnishes accounting
services, where such aggregate complex assets are $10 billion or
less, and 0.20% of assets if such aggregate complex assets exceed
$10 billion. The fees are charged to each fund, including the
Fund, on an aggregate pro-rata basis. The asset-based fee
payable to the Transfer Agent is subject to a minimum fee
calculated by determining the total number of investment
portfolios and associated classes.
The Manager and its affiliates own the name "Delaware Group."
Under certain circumstances, including the termination of the
Fund's advisory relationship with the Manager or its distribution
relationship with the Distributor, the Manager and its affiliates
could cause the Fund to delete the words "Delaware Group" from
the Fund's name.
Bankers Trust Company ("Bankers Trust"), One Bankers Trust
Plaza, New York, NY 10006, is custodian of the Fund's securities
and cash. As custodian for the Fund, Bankers Trust maintains a
separate account or accounts for the Fund; receives, holds and
releases portfolio securities on account of the Fund; receives
and disburses money on behalf of the Fund; and collects and
receives income and other payments and distributions on account
of the Fund's portfolio securities.
Capitalization
The Fund has an authorized capital of ten billion shares of
common stock, $.001 par value per share. The directors are
authorized to issue different series and classes of shares of
common stock. At present, only one series has been issued which
offers shares of four classes--Cash Reserve A Class (which is
known as Delaware Cash Reserve A Class, and was known as the
Delaware Cash Reserve class from May 1992 to May 1994 and the
original class prior to May 1992); Cash Reserve Consultant Class
(which is known as Delaware Cash Reserve Consultant Class, and
was known as the Delaware Cash Reserve Consultant class from
November 1992 to May 1994, the Delaware Cash Reserve
(Institutional) class from May 1992 to November 1992 and the
consultant class prior to May 1992); Cash Reserve B Class (which
is known as Delaware Cash Reserve B Class) and Cash Reserve C
Class (which is known as Delaware Cash Reserve C Class). Two
billion shares have been allocated to each of Class A Shares,
Class B Shares and Class C Shares and five hundred million shares
have been allocated to Consultant Class Shares.
Shares have no preemptive rights, are fully transferable and,
when issued, are fully paid and nonassessable.
General expenses of the Fund will be allocated on a pro-rata
basis to the Classes according to asset size, except that
expenses of the 12b-1 Plans of Consultant Class Shares, Class B
Shares and Class C Shares will be allocated solely to those
respective Classes. Each Class represents a proportionate
interest in the assets of the Fund, and each has the same voting
and other rights and preferences as the other Class, except that
Class A Shares may not vote on any matter affecting the
Consultant Class Shares', Class B Shares' or Class C Shares'
12b-1 Plans. As a general matter, shareholders of Consultant
Class Shares, Class B Shares and Class C Shares may only vote on
matters affecting the 12b-1 Plan that relates to the Class of
shares that they hold. However, Class B Shares may vote on any
proposal to increase materially the fees to be paid by the Fund
under the 12b-1 Plan relating to Consultant Class Shares.
Noncumulative Voting
Fund shares have noncumulative voting rights which means that
the holders of more than 50% of the shares of the Fund voting for
the election of directors can elect all the directors if they
choose to do so, and, in such event, the holders of the remaining
shares will not be able to elect any directors.
This Part B does not include all of the information contained
in the Registration Statement which is on file with the SEC.
<PAGE>
APPENDIX A--DESCRIPTION OF RATINGS
Bonds
Moody's Investors Service, Inc.
Aaa Highest quality; smallest degree of investment risk.
Aa High quality; together with Aaa bonds, they compose the
high-grade bond group.
Standard & Poor's Ratings Group
AAA Highest rating; extremely strong capacity to pay
principal and interest.
AA High quality; very strong capacity to pay principal and
interest.
Fitch IBCA, Inc.
AAA Highest quality; exceptionally strong ability to pay
principal and interest.
AA Very high quality; very strong ability to pay principal
and interest.
Commercial Paper
Moody's Investors Service, Inc. Standard & Poor's Ratings Group
P-1 Superior quality A-1+ Extremely strong quality
P-2 Strong quality A-1 Strong quality
A-2 Satisfactory quality
Duff and Phelps, Inc. Fitch IBCA, Inc.
Duff 1-Plus Highest quality F-1+ Exceptionally strong quality.
Duff 1 Very high quality F-1 Very strong quality
Duff 1-Minus High quality F-2 Good credit quality
Duff 2 Good quality.
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for
Delaware Group Cash Reserve, Inc. and, in its capacity as such,
audits the annual financial statements contained in the Fund's
Annual Report. The Fund's Statement of Net Assets, Statement of
Operations, Statement of Changes in Net Assets, Financial
Highlights and Notes to Financial Statements, as well as the
report of Ernst & Young LLP, independent auditors, for the fiscal
year ended March 31, 1998, are included in the Fund's Annual
Report to shareholders. The financial statements and financial
highlights, the notes relating thereto and the report of Ernst &
Young LLP listed above are incorporated by reference from the
Annual Report into this Part B.
Delaware Investments includes funds with a wide range of
investment objectives. Stock funds, income funds, national and
state-specific tax-exempt funds, money market funds, global and
international funds and closed-end funds give investors the
ability to create a portfolio that fits their personal financial
goals. For more information, contact your financial adviser or
call Delaware Investments at 800-523- 1918.
INVESTMENT MANAGER
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES AND
TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Bankers Trust Company
One Bankers Trust Plaza
New York, NY 10006
<PAGE>
DELAWARE CASH RESERVE
A CLASS
B CLASS
C CLASS
CONSULTANT CLASS
CLASSES OF DELAWARE GROUP CASH RESERVE, INC.
No Front-End Sales Charge
PART B
STATEMENT OF ADDITIONAL INFORMATION
MAY 29, 1998
