The Delaware Group includes 22 different
funds with a wide range of investment
objectives. Stock funds, income funds,
tax-free funds, money market funds and
closed-end equity funds give investors the
ability to create a portfolio that fits their
personal financial goals. For more information,
shareholders of the Fund Classes should contact
their financial adviser or call the Delaware
Group at 800-523-4640, in Philadelphia
215-988-1333 and shareholders of the
Institutional Class should contact the
Delaware Group at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Chemical Bank
450 West 33rd Street
New York, NY 10001
AI-001/AI-062/AI-051-1/95-U
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DECATUR INCOME
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FUND
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A CLASS
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B CLASS
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INSTITUTIONAL CLASS
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CLASSES OF DELAWARE GROUP
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DECATUR FUND, INC.
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PART B
STATEMENT OF
ADDITIONAL INFORMATION
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JANUARY 30, 1995
DELAWARE
GROUP
=========
<PAGE>
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PART B--STATEMENT OF ADDITIONAL INFORMATION
JANUARY 30, 1995
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DELAWARE GROUP
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DECATUR FUND, INC.
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DECATUR INCOME
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FUND
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1818 MARKET STREET
PHILADELPHIA, PA 19103
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FOR MORE INFORMATION ABOUT THE DECATUR INCOME
FUND INSTITUTIONAL CLASS: 800-828-5052
FOR PROSPECTUS AND PERFORMANCE OF THE DECATUR
INCOME FUND A CLASS AND THE DECATUR INCOME
FUND B CLASS:
NATIONWIDE 800-523-4640
PHILADELPHIA 988-1333
INFORMATION ON EXISTING ACCOUNTS OF THE DECATUR
INCOME FUND A CLASS AND THE DECATUR INCOME
FUND B CLASS:
(SHAREHOLDERS ONLY)
NATIONWIDE 800-523-1918
PHILADELPHIA 988-1241
DEALER SERVICES:
(BROKER/DEALERS ONLY)
NATIONWIDE 800-362-7500
PHILADELPHIA 988-1050
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TABLE OF CONTENTS
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COVER PAGE 1
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INVESTMENT POLICIES AND PORTFOLIO TECHNIQUES 2
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ACCOUNTING AND TAX ISSUES 6
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PERFORMANCE INFORMATION 6
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TRADING PRACTICES AND BROKERAGE 9
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PURCHASING SHARES 10
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INVESTMENT PLANS 16
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DETERMINING OFFERING PRICE AND
NET ASSET VALUE 19
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REDEMPTION AND REPURCHASE 20
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DISTRIBUTIONS AND TAXES 22
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INVESTMENT MANAGEMENT AGREEMENT 23
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OFFICERS AND DIRECTORS 24
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EXCHANGE PRIVILEGE 28
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GENERAL INFORMATION 30
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APPENDIX A--IRA INFORMATION 31
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APPENDIX B 35
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APPENDIX C 38
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FINANCIAL STATEMENTS 39
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<PAGE>
Delaware Group Decatur Fund, Inc. (the "Fund") is a professionally-managed
mutual fund of the series type. This STATEMENT OF ADDITIONAL INFORMATION ("PART
B" of the registration statement) describes the Decatur Income Fund series (the
"Series") of the Fund. The Series offers three classes (individually, a "Class"
and collectively, the "Classes") of shares -- Decatur Income Fund A Class (the
"Class A Shares"), Decatur Income Fund B Class (the "Class B Shares") (Class A
Shares and Class B Shares together referred to as the "Fund Classes") and
Decatur Income Fund Institutional Class (the "Institutional Class"). Class B
Shares and Institutional Class shares of the Series may be purchased at a price
equal to the next determined net asset value per share. Class A Shares of the
Series may be purchased at the public offering price, which is equal to the next
determined net asset value per share, plus a front-end sales charge. The Class A
Shares are subject to a maximum front-end sales charge of 5.75% and annual 12b-1
Plan expenses. The 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 12b-1 Plan expenses which are higher than those to which Class A
Shares are subject and are assessed against the Class B Shares for no longer
than approximately eight years after purchase. See AUTOMATIC CONVERSION OF CLASS
B SHARES in the Fund Classes' PROSPECTUS. All references to "shares" in this
PART B refer to all Classes of shares of the Series, except where noted.
This PART B supplements the information contained in the current PROSPECTUSES
for the Fund Classes and the Institutional Class dated January 30, 1995, as may
be amended from time to time. It should be read in conjunction with the
respective Class' PROSPECTUS. PART B is not itself a prospectus but is, in its
entirety, incorporated by reference into each Class' PROSPECTUS. A PROSPECTUS
relating to the Fund Classes and a PROSPECTUS relating to the Institutional
Class may be obtained by writing or calling your investment dealer or by
contacting the Fund's national distributor, Delaware Distributors, L.P. (the
"Distributor"), 1818 Market Street, Philadelphia, PA 19103.
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INVESTMENT POLICIES AND PORTFOLIO TECHNIQUES
INVESTMENT RESTRICTIONS--The Fund has adopted the following restrictions
for the Series which, along with its investment objective, cannot be changed
without approval by the holders of a "majority" of the Series' outstanding
shares, which is a vote by the holders of the lesser of a) 67% or more of the
voting securities present in person or by proxy at a meeting, if the holders
of more than 50% of the outstanding voting securities are present or
represented by proxy; or b) more than 50% of the outstanding voting
securities. The percentage limitations contained in the restrictions and
policies set forth herein apply at the time of purchase of securities.
1. Not to invest more than 5% of the value of its assets in securities of
any one company (except U.S. government bonds) or purchase more than 10% of
the voting or nonvoting securities of any one company.
2. Not to acquire control of any company. (The Fund's Certificate of
Incorporation permits control of companies to protect investments already
made, but its policy is not to acquire control.)
3. Not to purchase or retain securities of a company which has an officer
or director who is an officer or director of the Fund, or an officer,
director or partner of its investment manager if, to the knowledge of the
Fund, one or more of such persons own beneficially more than 1/2 of 1% of the
shares of the company, and in the aggregate more than 5% thereof.
4. No long or short positions on shares of the Series may be taken by the
Fund's officers, directors or any of its affiliated persons. Such persons may
buy shares of the Series for investment purposes, however.
5. Not to purchase any security issued by any other investment company if
after such purchase it would:
(a) own more than 3% of the voting stock of such company, (b) own securities
of such company having a value in excess of 5% of the Series' assets or (c)
own securities of investment companies having an aggregate value in excess of
10% of the Series' assets.
6. Not to invest more than 10% of the value of its total assets in
illiquid assets.
7. Not to invest in securities of other investment companies except at
customary brokerage commission rates or in connection with mergers,
consolidations or offers of exchange.
8. Not to make any investment in real estate unless necessary for office
space or the protection of investments already made. (This restriction does
not preclude the Series' purchase of securities issued by real estate
investment trusts.)
9. Not to sell short any security or property.
10. Not to deal in commodities, except that the Series may invest in
financial futures, including futures contracts on stocks and stock indices,
interest rates and foreign currencies and other types of financial futures
that may be developed in the future, and may purchase or sell options
<PAGE>
on such futures, and enter into closing transactions with respect to those
activities.
11. Not to borrow, except as a temporary measure for extraordinary or
emergency purposes, and then not in excess of 10% of gross assets taken at
cost or market, whichever is lower, and not to pledge more than 15% of gross
assets taken at cost. Any borrowing will be done from a bank, and to the
extent that such borrowing exceeds 5% of the value of the Series' assets,
asset coverage of at least 300% is required. In the event that such asset
coverage shall at any time fall below 300%, the Series shall, within three
days thereafter (not including Sunday and holidays) or such longer period as
the Securities and Exchange Commission may prescribe by rules and
regulations, reduce the amount of its borrowings to an extent that the asset
coverage of such borrowings shall be at least 300%. The Series shall not
issue senior securities as defined in the Investment Company Act of 1940,
except for notes to banks.
12. Not to make loans. However, the purchase of a portion of an issue of
publicly distributed bonds, debentures, or other securities, whether or not the
purchase was made upon the original issuance of the securities, and the entry
into "repurchase agreements" are not to be considered the making of a loan by
the Series and the Series may loan up to 25% of its assets to qualified
broker/dealers or institutional investors for their use relating to short sales
or other transactions.
13. Not to invest more than 5% of the value of its total assets in
securities of companies less than three years old. Such three-year period
shall include the operation of any predecessor company or companies.
14. The Series may act as an underwriter of securities of other issuers,
but its present policy is not to do so.
Notwithstanding restrictions 6 and 13 above and although not a matter of
fundamental policy, the Fund has made a commitment that the Series will not
invest more than 10% of its total assets in a combination of illiquid
securities and securities of companies less than three years old, such
three-year old period to include the operation of any predecessor company or
companies. In addition, notwithstanding restriction 8 above and although not
a matter of fundamental policy, the Fund has made a commitment that the
Series' investments in securities issued by real estate investment trusts
will not exceed 10% of its total assets.
Although it is not a matter of fundamental policy, the Fund has also made a
commitment that the Series will not invest in warrants valued at lower of
cost or market exceeding 5% of the Series' net assets. Included within that
amount, but not to exceed 2% of the Series' net assets, may be warrants not
listed on the New York Stock Exchange or American Stock Exchange. In
addition, the Series may not concentrate investments in any particular
industry, which means not investing more than 25% of its assets in any
industry.
Although it is not a matter of fundamental policy, the Fund may invest not
more than 5% of its assets in foreign securities (other than securities of
Canadian issuers registered under the Securities Exchange Act of 1934 or
2
<PAGE>
American Depository Receipts, on which there are no such limits). Foreign
markets may be more volatile than U.S. markets. Such investments involve
sovereign risk in addition to the normal risks associated with American
securities. These risks include political risks, foreign taxes and exchange
controls and currency fluctuations. For example, foreign portfolio
investments may fluctuate in value due to changes in currency rates (i.e.,
the value of foreign investments would increase with a fall in the value of
the dollar, and decrease with a rise in the value of the dollar) and control
regulations apart from market fluctuations. The Fund may also experience
delays in foreign securities settlement.
Although not a fundamental investment restriction, the Series currently
does not invest its assets in real estate limited partnerships or oil, gas
and other mineral leases.
OPTIONS--The Series may write call options and purchase put options on a
covered basis only, and will not engage in option writing strategies for
speculative purposes.
A. COVERED CALL WRITING--The Series may write covered call options from time
to time on such portion of its portfolio, without limit, as Delaware Management
Company, Inc. (the "Manager") determines is appropriate in seeking to obtain the
Series' investment objective. A call option gives the purchaser of such option
the right to buy, and the writer, in this case the Series, has the obligation to
sell the underlying security at the exercise price during the option period. The
advantage to the Series of writing covered calls is that the Series receives
additional income, in the form of a premium, which may offset any capital loss
or decline in market value of the security. However, if the security rises in
value, the Series may not fully participate in the market appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.
With respect to both options on actual portfolio securities owned by the
Series and options on stock indices, the Series may enter into closing purchase
transactions. A closing purchase transaction is one in which the Series, when
obligated as a writer of an option, terminates its obligation by purchasing an
option of the same series as the option previously written.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable the
Series to write another call option on the underlying security with either a
different exercise price or expiration date or both. The Series may realize a
<PAGE>
net gain or loss from a closing purchase transaction depending upon whether
the net amount of the original premium received on the call option is more or
less than the cost of effecting the closing purchase transaction. Any loss
incurred in a closing purchase transaction may be partially or entirely
offset by the premium received from a sale of a different call option on the
same underlying security. Such a loss may also be wholly or partially offset by
unrealized appreciation in the market value of the underlying security.
Conversely, a gain resulting from a closing purchase transaction could be
offset in whole or in part by a decline in the market value of the underlying
security.
If a call option expires unexercised, the Series will realize a short-term
capital gain in the amount of the premium on the option, less the commission
paid. Such a gain, however, may be offset by depreciation in the market value
of the underlying security during the option period. If a call option is
exercised, the Series will realize a gain or loss from the sale of the
underlying security equal to the difference between the cost of the
underlying security, and the proceeds of the sale of the security plus the
amount of the premium on the option, less the commission paid.
The market value of a call option generally reflects the market price of an
underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the price volatility of the underlying
security and the time remaining until the expiration date.
The Series will write call options only on a covered basis, which means
that the Series will own the underlying security subject to a call option at
all times during the option period. Unless a closing purchase transaction is
effected, the Series would be required to continue to hold a security which
it might otherwise wish to sell, or deliver a security it would want to hold.
Options written by the Series will normally have expiration dates between one
and nine months from the date written. The exercise price of a call option
may be below, equal to or above the current market value of the underlying
security at the time the option is written.
B. PURCHASING PUT OPTIONS--The Series may invest up to 2% of its total
assets in the purchase of put options. The Series will, at all times during
which it holds a put option, own the security covered by such option.
The Series intends to purchase put options in order to protect against a
decline in the market value of the underlying security below the exercise
price less the premium paid for the option ("protective puts"). The ability
to purchase put options will allow the Series to protect an unrealized gain
in an appreciated security in its portfolio without actually selling the
security. If the security does not drop in value, the Series will lose the
value of the premium paid. The Series may sell a put option which it has
previously purchased prior to the sale of the securities underlying such
option. Such sales will result in a net gain or loss depending on whether the
amount received on the sale is more or less than the premium and other
transaction costs paid on the put option which is sold.
The Series may sell a put option purchased on individual portfolio
securities or stock indices. Additionally, the Series may enter into closing
sale transactions. A closing sale transaction is one in which the Series,
3
<PAGE>
when it is the holder of an outstanding option, liquidates its position by
selling an option of the same series as the option previously purchased.
OPTIONS ON STOCK INDICES
A stock index assigns relative values to the common stocks included in the
index with the index fluctuating with changes in the market values of the
underlying common stock.
Options on stock indices are similar to options on stocks but have different
delivery requirements. Stock options provide the right to take or make delivery
of the underlying stock at a specified price. A stock index option gives the
holder the right to receive a cash "exercise settlement amount" equal to (i) the
amount by which the fixed exercise price of the option exceeds (in the case of a
put) or is less than (in the case of a call) the closing value of the underlying
index on the date of exercise, multiplied by (ii) a fixed "index multiplier."
Receipt of this cash amount will depend upon the closing level of the stock
index upon which the option is based being greater than (in the case of a call)
or less than (in the case of a put) the exercise price of the option. The amount
of cash received will be equal to such difference between the closing price of
the index and exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Gain or loss to the Series on
transactions in stock index options will depend on price movements in the stock
market generally (or in a particular industry or segment of the market) rather
than price movements of individual securities.
As with stock options, the Series may offset its position in stock index
options prior to expiration by entering into a closing transaction on an
Exchange or it may let the option expire unexercised.
A stock index fluctuates with changes in the market values of the stock so
included. Some stock index options are based on a broad market index such as
the Standard & Poor's 500 or the New York Stock Exchange Composite Index, or
a narrower market index such as the Standard & Poor's 100. Indices are also
based on an industry or market segment such as the AMEX Oil and Gas Index or
the Computer and Business Equipment Index. Options on stock indices are
currently traded on the following Exchanges among others: The Chicago Board
Options Exchange, New York Stock Exchange and American Stock Exchange.
The effectiveness of purchasing or writing stock index options as a hedging
technique will depend upon the extent to which price movements in the Series'
portfolio correlate with price movements of the stock index selected. Because
the value of an index option depends upon movements in the level of the index
rather than the price of a particular stock, whether the Series will realize
a gain or loss from the purchase or writing of options on an index depends
upon movements in the level of stock prices in the stock market generally or,
in the case of certain indices, in an industry or market segment, rather than
<PAGE>
movements in the price of a particular stock. Since the Series' portfolio
will not duplicate the components of an index, the correlation will not be
exact. Consequently, the Series bears the risk that the prices of the
securities being hedged will not move in the same amount as the hedging
instrument. It is also possible that there may be a negative correlation
between the index or other securities underlying the hedging instrument and
the hedged securities which would result in a loss on both such securities
and the hedging instrument. Accordingly, successful use by the Series of
options on stock indices will be subject to the Manager's ability to predict
correctly movements in the direction of the stock market generally or of a
particular industry. This requires different skills and techniques than
predicting changes in the price of individual stocks.
Positions in stock index options may be closed out only on an Exchange
which provides a secondary market. There can be no assurance that a liquid
secondary market will exist for any particular stock index option. Thus, it
may not be possible to close such an option. The inability to close options
positions could have an adverse impact on the Series' ability to effectively
hedge its securities. The Series will enter into an option position only if
there appears to be a liquid secondary market for such options.
The Series will not engage in transactions in options on stock indices for
speculative purposes but only to protect appreciation attained, to offset
capital losses and to take advantage of the liquidity available in the option
markets.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS--As noted in the
PROSPECTUSES, the Series may enter into futures contracts relating to
securities, securities indices, interest rates or foreign currencies. (Unless
otherwise specified, interest rate futures contracts, securities and securities
index futures contracts and foreign currency futures contracts are collectively
referred to as "futures contracts.") Such investment strategies will be used as
a hedge and not for speculation.
As noted in the PROSPECTUSES, the Series may purchase and write options on
the types of futures contracts, as further described in the PROSPECTUSES.
The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the securities in the Series' portfolio. If the
futures price at expiration of the option is below the exercise price, the
Series will retain the full amount of the option premium, which provides a
partial hedge against any decline that may have occurred in the Series'
portfolio holdings. The writing of a put option on a futures contract
constitutes a partial hedge against increasing prices of the securities or other
instruments required to be delivered under the terms of the futures contract. If
the futures price at expiration of the put option is higher than the exercise
price, the Series will retain the full amount of the option premium, which
provides a partial hedge against any increase in the price of securities which
the Series intends to purchase. If a put or call option the Series has written
is exercised, the Series will incur a loss which will be reduced by the amount
of the premium it receives. Depending on the degree of correlation between
4
<PAGE>
changes in the value of its portfolio securities and changes in the value of its
options on futures positions, the Series' losses from exercised options on
futures may to some extent be reduced or increased by changes in the value of
portfolio securities.
The Series may purchase options on futures contracts for hedging purposes
instead of purchasing or selling the underlying futures contracts. For
example, where a decrease in the value of portfolio securities is anticipated
as a result of a projected market-wide decline or changes in interest or
exchange rates, the Series could, in lieu of selling futures contracts,
purchase put options thereon. In the event that such decrease occurs, it may
be offset, in whole or part, by a profit on the option. If the market decline
does not occur, the Series will suffer a loss equal to the price of the put.
Where it is projected that the value of securities to be acquired by the
Series will increase prior to acquisition, due to a market advance or changes
in interest or exchange rates, the Series could purchase call options on
futures contracts, rather than purchasing the underlying futures contracts.
If the market advances, the increased cost of securities to be purchased may
be offset by a profit on the call. However, if the market declines, the
Series will suffer a loss equal to the price of the call, but the securities
which the Series intends to purchase may be less expensive.
REPURCHASE AGREEMENTS--In order to invest its cash reserves or when in a
temporary defensive posture, the Series may enter into repurchase agreements
with banks or broker/dealers deemed to be creditworthy by the Manager under
guidelines approved by the Board of Directors. A repurchase agreement is a
short-term investment in which the purchaser (i.e., the Series) acquires
ownership of a debt security and the seller agrees to repurchase the obligation
at a future time and set price, thereby determining the yield during the
purchaser's holding period. Generally, repurchase agreements are of short
duration, often less than one week, but on occasion for longer periods. Not more
than 10% of the Series' assets may be invested in repurchase agreements of over
seven days' maturity or other illiquid assets. Should an issuer of a repurchase
agreement fail to repurchase the underlying security, the loss to the Series, if
any, would be the difference between the repurchase price and the market value
of the security. The Series will limit its investments in repurchase agreements
to those which the Manager under the guidelines of the Board of Directors
determines to present minimal credit risks and which are of high quality. In
addition, the Series must have collateral of at least 100% of the repurchase
price, including the portion representing the Series' yield under such
agreements which is monitored on a daily basis. Such collateral is held by the
Custodian in book entry form. Such agreements may be considered loans under the
Investment Company Act, but the Series considers repurchase agreements
contracts for the purchase and sale of securities, and it seeks to perfect a
security interest in the collateral securities so that it has the right to keep
and dispose of the underlying collateral in the event of a default.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the Investment Company Act of
<PAGE>
1940 to allow the Delaware Group funds jointly to invest cash balances. Each
Series of the Fund may invest cash balances in a joint repurchase agreement in
accordance with the terms of the Order and subject generally to the conditions
described above.
PORTFOLIO LOAN TRANSACTIONS
The Series may loan up to 25% of its assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other
security transactions.
It is the understanding of the Manager that the staff of the Securities and
Exchange Commission permits portfolio lending by registered investment
companies if certain conditions are met. These conditions are as follows: 1)
each transaction must have 100% collateral in the form of cash, short-term
U.S. government securities, or irrevocable letters of credit payable by banks
acceptable to the Fund from the borrower; 2) this collateral must be valued
daily and should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Series; 3) the Fund must
be able to terminate the loan after notice, at any time; 4) the Series must
receive reasonable interest on any loan, and any dividends, interest or other
distributions on the lent securities, and any increase in the market value of
such securities; 5) the Series may pay reasonable custodian fees in
connection with the loan; and 6) the voting rights on the lent securities may
pass to the borrower; however, if the directors of the Fund know that a
material event will occur affecting an investment loan, they must either
terminate the loan in order to vote the proxy or enter into an alternative
arrangement with the borrower to enable the directors to vote the proxy.
The major risk to which the Series would be exposed on a loan transaction
is the risk that the borrower would go bankrupt at a time when the value of
the security goes up. Therefore, the Series will only enter into loan
arrangements after a review of all pertinent facts by the Manager, under the
supervision of the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to
be received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
* * *
The Series may invest in restricted securities, including unregistered
securities eligible for resale without registration pursuant to Rule 144A
("Rule 144A Securities") under the Securities Act of 1933. Rule 144A
Securities may be freely traded among qualified institutional investors
without registration under the 1933 Act.
Investing in Rule 144A Securities could have the effect of increasing the
level of the Series' illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these securities. After
the purchase of a Rule 144A Security, however, the Board of Directors and the
Manager will continue to monitor the liquidity of that security to ensure
that the Series has no more than 10% of its net assets in illiquid
securities.
5
<PAGE>
ACCOUNTING AND TAX ISSUES
When the Series writes a call option, an amount equal to the premium received
by it is included in the section of the Series' assets and liabilities as an
asset and as an equivalent liability. The amount of the liability is
subsequently "marked to market" to reflect the current market value of the
option written. The current market value of a written option is the last sale
price on the principal Exchange on which such option is traded or, in the
absence of a sale, the mean between the last bid and asked prices. If an option
which the Series has written expires on its stipulated expiration date, the
Series reports a realized gain. If the Series enters into a closing purchase
transaction with respect to an option which the Series has written, the Series
realizes a gain (or loss if the cost of the closing transaction exceeds the
premium received when the option was sold) without regard to any unrealized gain
or loss on the underlying security, and the liability related to such option is
extinguished. Any such gain or loss is a short-term capital gain or loss for
federal income tax purposes. If a call option which the Series has written is
exercised, the Series realizes a capital gain or loss (long-term or short-term,
depending on the holding period of the underlying security) from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received.
OTHER TAX REQUIREMENTS--The Series has qualified, and intends to continue to
qualify, as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. The Series must meet several requirements to
maintain its status as a regulated investment company. Among these requirements
are that at least 90% of its investment company taxable income be derived from
dividends, interest, payment with respect to securities loans and gains from the
sale or disposition of securities; that at the close of each quarter of its
taxable year at least 50% of the value of its assets consists of cash and cash
items, government securities, securities of other regulated investment companies
and, subject to certain diversification requirements, other securities; and that
less than 30% of its gross income be derived from sales of securities held for
less than three months.
The requirement that not more than 30% of the Fund's gross income be
derived from gains from the sale or other disposition of securities held for
less than three months may restrict the Series in its ability to write
covered call options on securities which it has held less than three months,
to write options which expire in less than three months, to sell securities
which have been held less than three months and to effect closing purchase
transactions with respect to options which have been written less than three
months prior to such transactions. Consequently, in order to avoid realizing
a gain within the three-month period, the Series may be required to defer the
closing out of a contract beyond the time when it might otherwise be
advantageous to do so.
The straddle rules of Section 1092 may apply. Generally, the straddle
provisions require the deferral of losses to the extent of unrecognized gains
related to the offsetting positions in the straddle. Excess losses, if any,
<PAGE>
can be recognized in the year of loss. Deferred losses will be carried
forward and recognized in the following year, subject to the same limitation.
PERFORMANCE INFORMATION
From time to time, the Fund may state each Class' total return in
advertisements and other types of literature. Any statements of total return
performance data for a Class will be accompanied by information on the
average annual compounded rate of return for that Class over, as relevant,
the most recent one-, five- and ten-year (or life of fund, if applicable)
periods. The Fund may also advertise aggregate and average compounded return
information of each Class over additional periods of time.
The average annual total rate of return for each Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used
for the actual computations:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order
of $1,000 from which the maximum
front-end sales charge with respect to
Class A Shares, if any, is deducted;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical
$1,000 purchase at the end of the period
after the deduction of the applicable
CDSC, if any, with respect to Class B
Shares.
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes the maximum front-end
sales charge, if any, is deducted from the initial $1,000 investment at the
time it is made with respect to the Class A Shares and that all distributions
are reinvested at net asset value, and, with respect to the Class B Shares,
includes the CDSC that would be applicable upon complete redemption of such
shares. In addition, the Series may present total return information that
does not reflect the deduction of the maximum front-end sales charge or any
applicable CDSC.
The performance of the Class A Shares and the Institutional Class, as shown
below, is the average annual total return quotations for the one-, three-,
five-, ten- and fifteen-year periods ended November 30, 1994, and for the
life of the Series, computed as described above. The average annual total
return for the Class A Shares at offer reflects the maximum front-end sales
charges paid on the purchase of shares. The average annual total return for
Class A Shares at net asset value (NAV) does not reflect the payment of the
maximum front-end sales charge of 5.75%. Securities prices fluctuated during
the periods covered and past results should not be considered as
representative of future performance. Pursuant to applicable regulation,
6
<PAGE>
total return shown for the Institutional Class for the periods prior to the
commencement of operations of such Class, as noted below, is calculated by
taking the performance of the Class A Shares and adjusting it to reflect the
elimination of all front-end sales charges.
AVERAGE ANNUAL TOTAL RETURN
CLASS A CLASS A INSTITU-
SHARES* SHARES TIONAL
(AT OFFER) (AT NAV) CLASS**
1 year ended 11/30/94 (6.28%) (0.57%) (0.45%)
3 years ended 11/30/94 7.54% 9.68% 9.73%
5 years ended 11/30/94 4.78% 6.03% 6.05%
10 years ended 11/30/94 11.44% 12.10% 12.11%
15 years ended 11/30/94 13.46% 13.91% 13.92%
3/18/57*** through 11/30/94 11.39% 11.56% 11.57%
*A front-end sales charge of 8.50% was charged until May 2, 1994, at which
time the maximum front-end sales charge was reduced to 5.75%.
The above performance figures are calculated using 5.75%, the applicable
sales charge. Also, performance figures for periods after May 1, 1994
reflect applicable Rule 12b-1 distribution expenses. Future performance
will be affected by such expenses.
**Date of initial public offering was January 13, 1994.
***Date of initial public offering for Decatur Income Fund.
The performance of the Class B Shares, as shown below, is the aggregate
total return quotation for the period September 6, 1994 (date of initial
public offering) through November 30, 1994. The aggregate 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
November 30, 1994. The aggregate total return for Class B Shares (Excluding
Deferred Sales Charge) assumes the shares were not redeemed at November 30,
1994 and therefore does not reflect the deduction of a CDSC.
AGGREGATE TOTAL RETURN
CLASS B SHARES CLASS B SHARES
(INCLUDING (EXCLUDING
DEFERRED SALES DEFERRED SALES
CHARGE) CHARGE)
Period 9/6/94* through 11/30/94 (9.02%) (5.27%)
*Date of initial public offering of Class B Shares; total return for this
short of a time period may not be representative of longer-term results.
Decatur's investment strategy relies on the consistency, reliability and
predictability of corporate dividends. Dividends tend to rise over time,
despite market conditions, and keep pace with rising prices; they are paid
out in "current" dollars. And, just as important, current dividend income can
help lessen the effects of adverse market conditions. Decatur's dividend
discipline, coupled with the potential for capital gains, seeks to provide
investors with a consistently higher total-rate-of-return over time.
In 1972, Delaware Investment Advisers, a division of the Manager, offered
Decatur's time-proven investment style to the institutional investing
<PAGE>
community. Currently, Delaware Investment Advisers manages approximately $12
billion in institutional assets under management in that style.
From time to time, the Fund may also quote each Class' actual total return
performance, dividend results and other performance information in advertising
and other types of literature and may compare that information to, or may
separately illustrate similar information reported by, the Standard & Poor's 500
Stock Index and the Dow Jones Industrial Average and other unmanaged indices.
The Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average
are industry-accepted unmanaged indices of stocks which are representative of
and used to measure broad stock market performance. The total return
performance reported will reflect the reinvestment of all distributions on a
quarterly basis and market price fluctuations. The indices do not take into
account any sales charge or other fees.
The total return performance for each Class will be computed by adding all
reinvested income and realized securities profits distributions plus the
change in net asset value during a specific period and dividing by the
offering price at the beginning of the period. It will also reflect the
maximum front-end sales charge, if any, paid for the illustrated investment
amount, but not any income taxes payable by shareholders on the reinvested
distributions included in the calculation. Because securities prices fluctuate,
past performance should not be considered as a representation of the results
which may be realized from an investment in the Series in the future.
The Series may also state the total return performance for each Class in
the form of an average annual return. This average annual return figure will
be computed by taking the sum of a Class' annual returns, then dividing that
figure by the number of years in the overall period indicated. The computation
will reflect the impact of the maximum front-end or contingent deferred sales
charge, if any, paid on the illustrated investment amount against the first
year's return. From time to time, the Series may quote actual total return
performance for each class in advertising and other types of literature
compared to indices or averages of alternative financial products available to
prospective investors. For example, the performance comparisons may include the
average return of various bank instruments, some of which may carry certain
return guarantees offered by leading banks and thrifts as monitored by
BANK RATE MONITOR, and those of generally-accepted corporate bond and
government security price indices of various durations prepared by Lehman
Brothers and Salomon Brothers, Inc. These indices are not managed for any
investment goal.
Comparative information on the Consumer Price Index may also be included.
The Consumer Price Index, as prepared by the U.S. Bureau of Labor Statistics,
is the most commonly used measure of inflation. It indicates the cost
fluctuations of a representative group of consumer goods. It does not represent
a return from an investment.
7
<PAGE>
Statistical and performance information and various indices compiled and
maintained by organizations such as the following may also be used in preparing
exhibits comparing certain industry trends and competitive mutual fund
performance to comparable Series activity and performance and in illustrating
general financial planning principles. From time to time, certain mutual fund
performance ranking information, calculated and provided by these organizations,
may also be used in the promotion of sales in the Series. Any indices used are
not managed for any investment goal.
CDA TECHNOLOGIES, INC., LIPPER ANALYTICAL SERVICES, INC. and MORNINGSTAR,
INC. are performance evaluation services that maintain statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds.
IBBOTSON ASSOCIATES, INC. is a consulting firm that provides a variety of
historical data including total return, capital appreciation and income on the
stock market as well as other investment asset classes, and inflation. With
their permission, this information will be used primarily for comparative
purposes and to illustrate general financial planning principles.
INTERACTIVE DATA CORPORATION is a statistical access service that maintains a
database of various international industry indicators, such as historical and
current price/earning information, individual equity and fixed income price
and return information.
COMPUSTAT INDUSTRIAL DATABASES, a service of Standard & Poor's, may also be
used in preparing performance and historical stock and bond market exhibits.
This firm maintains fundamental databases that provide financial, statistical
and market information covering more than 7,000 industrial and non-industrial
companies.
RUSSELL INDEXES is an investment analysis service that provides both current
and historical stock performance information, focusing on the business
fundamentals of those firms issuing the security.
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.
The performance of each Class, as shown below, reflects maximum sales charges,
if any, paid on the purchase or redemption of shares, as applicable, but not any
income taxes payable by shareholders on the reinvested distributions included in
the calculations. The net asset value of a Class fluctuates so shares, when
redeemed, may be worth more or less than the original investment, and a Class'
results should not be considered as representative of future performance.
The following table is an example, for purposes of illustration only, of
cumulative total return performance for the Class A Shares and the Institutional
<PAGE>
Class for the three-, six- and nine-month periods ended November 30, 1994, for
the one-, three-, five-, ten- and fifteen-year periods ended November 30, 1994
and for the life of the Series. Cumulative total return for the Class B Shares
for the period September 6, 1994 (date of initial public offering) through
November 30, 1994 is also provided below. For these purposes, the calculations
assume the reinvestment of any realized securities profits distributions and
income dividends paid during the indicated periods. Comparative information on
the Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average is
also included. Pursuant to applicable regulation, total return shown for the
Institutional Class for the periods prior to the commencement of operations of
such Class is calculated by taking the performance of the Class A Shares and
adjusting it to reflect the elimination of all sales charges.
CUMULATIVE TOTAL RETURN
CLASS A STANDARD & DOW
SHARES(1) INSTITUTIONAL POOR'S JONES
(AT OFFER) CLASS(2) 500(3) INDUSTRIAL(3)
3 months ended
11/30/94 (11.10%) (5.60%) (3.89%) (3.80%)
6 months ended
11/30/94 (7.28%) (1.52%) 0.84% 0.87%
9 months ended
11/30/94 (8.19%) (2.49%) (0.78%) (0.39%)
1 year ended
11/30/94 (6.28%) (0.45%) 1.03% 4.28%
3 years ended
11/30/94 24.37% 32.11% 31.75% 40.71%
5 years ended
11/30/94 26.30% 34.16% 52.86% 61.65%
10 years ended
11/30/94 195.29% 213.71% 287.01% 347.81%
15 years ended
11/30/94 564.81% 606.25% 668.36% 736.72%
3/18/57(4)
through
11/30/94 5,733.87% 6,098.84% N/A N/A
CLASS B CLASS B
SHARES SHARES
(INCLUDING (EXCLUDING
DEFERRED DEFERRED STANDARD & DOW
SALES SALES POOR'S JONES
CHARGE) CHARGE) 500(3) INDUSTRIAL(3)
Period 9/6/94(5)
through
11/30/94 (9.02%) (5.27%) (3.89%) (3.80%)
(1)A front-end sales charge of 8.50% was charged until May 2, 1994, at
which time the maximum front-end sales charge was reduced to 5.75%. The
above performance figures are calculated using 5.75%, the applicable sales
charge. Also, performance figures for periods after May 1, 1994 reflect
applicable Rule 12b-1 distribution expenses. Future performance will be
affected by such expenses.
(2)Date of initial public offering was January 13, 1994.
(3)Source: Interactive Data Corp.
(4)Date of initial public offering for Decatur Income Fund.
(5)Date of initial public offering of Class B Shares; total return for this
short of a time period may not be representative of longer-term results.
8
<PAGE>
See APPENDIX B for additional performance information.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Fund and other mutual funds in the Delaware
Group, will provide general information about investment alternatives and
scenarios that will allow investors to assess their personal goals. This
information will include general material about investing as well as materials
reinforcing various industry-accepted principles of prudent and responsible
personal financial planning. One typical way of addressing these issues is to
compare an individual's goals and the length of time the individual has to
attain these goals to his or her risk threshold. In addition, the Distributor
will provide information that discusses the Manager's overriding investment
philosophy and how that philosophy impacts the Series', and other Delaware Group
funds', investment disciplines employed in meeting 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.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Series shares,
your investment is given yet another opportunity to grow. It's called the Power
of Compounding and the following chart illustrates just how powerful it can be.
COMPOUNDED RETURNS
Results of various assumed fixed rates of return on a $10,000 investment
compounded monthly for 10 years:
9% Rate of Return 11% Rate of Return 13% Rate of Return
Dec. '85 $10,938 $11,157 $11,380
Dec. '86 11,964 12,448 12,951
Dec. '87 13,086 13,889 14,739
Dec. '88 14,314 15,496 16,773
Dec. '89 15,657 17,289 19,089
Dec. '90 17,126 19,289 21,723
Dec. '91 18,732 21,522 24,722
Dec. '92 20,489 24,012 28,134
Dec. '93 22,411 26,791 32,017
Dec. '94 24,514 29,891 36,437
These figures are calculated assuming a fixed constant investment return
and assume no fluctuation in the value of principal. These figures do not
reflect payment of applicable taxes, are not intended to be a projection of
investment results and do not reflect the actual performance results of any
of the Classes.
<PAGE>
TRADING PRACTICES
AND BROKERAGE
The Fund selects brokers or dealers to execute transactions on behalf of the
Series for the purchase or sale of portfolio securities on the basis of its
judgment of their professional capability to provide the service. The primary
consideration is to have brokers or dealers 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. 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. Some trades are made on a net basis where
the Fund either buys securities directly from the dealer or sells them to the
dealer. 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.
During the fiscal years ended November 30, 1992, 1993 and 1994, the aggregate
dollar amounts of brokerage commissions paid by the Series were $2,553,674,
$3,497,612 and $3,843,614, respectively.
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.
During the fiscal year ended November 30, 1994, portfolio transactions of the
Series in the amount of $1,163,364,208, resulting in brokerage commissions of
$1,945,804, were directed to brokers for brokerage and research services
provided.
9
<PAGE>
As provided in the Securities Exchange Act of 1934 and the Series' 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
Group. Subject to best price and execution, commissions allocated to brokers
providing such pricing services may or may not be generated by the funds recei
ving 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.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Fund may place orders with broker/dealers that have agreed to
defray certain Series expenses such as custodian fees, and may, at the request
of the Distributor, give consideration to sales of shares of the Series as a
factor in the selection of brokers and dealers to execute Series portfolio
transactions.
<PAGE>
PORTFOLIO TURNOVER
Portfolio trading will be undertaken principally to accomplish the Series'
objective in relation to anticipated movements in the general level of interest
rates. The Series is free to dispose of portfolio securities at any time,
subject to complying with the Internal Revenue Code and the Investment Company
Act of 1940, when changes in circumstances or conditions make such a move
desirable in light of the investment objective. The Fund will not attempt to
achieve or be limited to a predetermined rate of portfolio turnover for the
Series, such a turnover always being incidental to transactions undertaken with
a view to achieving the Series' investment objective.
The degree of portfolio activity may affect brokerage costs of the Series and
taxes payable by the Series' shareholders to the extent of any net realized
capital gains. The Series' portfolio turnover rate is not expected to exceed
100%; however, under certain market conditions, the Series may experience a high
rate of portfolio turnover which could exceed 100%. The Series' portfolio
turnover rate is calculated by dividing the lesser of purchases or sales of
portfolio securities for the particular fiscal year by the monthly average of
the value of the portfolio securities owned by the Series during the particular
fiscal year, exclusive of securities whose maturities at the time of acquisition
are one year or less. A turnover rate of 100% would occur, for example, if all
the investments in the Series' portfolio at the beginning of the year were
replaced by the end of the year.
During the past two fiscal years, the Series' portfolio turnover rates were
80% for 1993 and 92% for 1994.
PURCHASING SHARES
The Distributor serves as the national distributor for the Series' three
classes of shares -- the Class A Shares, the Class B Shares and the
Institutional Class, and has agreed to use its best efforts to sell shares of
the Fund. See the PROSPECTUSES for additional information on how to invest.
Shares of the Series are offered on a continuous basis, and may be purchased
through authorized investment dealers or directly by contacting the Fund or its
agent. The minimum for initial investments with respect to the Class A Shares is
$250 and with respect to the Class B Shares is $1,000. For any subsequent
investment, the investment minimum is $25 with respect to the Class A Shares and
$100 with respect to the Class B Shares. Class B Shares are also subject to a
maximum purchase limitation of $250,000. The Fund will therefore reject any
order for purchase of more than $250,000 of Class B Shares. (See INVESTMENT
PLANS for minimums applicable to each of the Fund's master Retirement Plans.)
There are no minimum purchase requirements for the Institutional Class, but
certain eligibility requirements must be satisfied. Selling dealers have the
responsibility of transmitting orders promptly. 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 Series' best interest.
10
<PAGE>
Certificates representing shares purchased are not ordinarily issued unless a
shareholder submits a specific request. Certificates are not issued in the case
of the Class B Shares. However, purchases not involving the issuance of
certificates are confirmed to the investor and credited to the shareholder's
account on the books maintained by Delaware Service Company, Inc. (the "Transfer
Agent"). The investor will have the same rights of ownership with respect to
such shares as if certificates had been issued. An investor that is permitted to
obtain a certificate may receive a certificate representing shares purchased by
sending a letter to the Transfer Agent requesting the certificate. No charge is
made for any certificate issued. Investors who hold certificates representing
any of their shares may only redeem those shares by written request. The
investor's certificate(s) must accompany such request.
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.
Class A Shares are purchased at the offering price which reflects a maximum
front-end sales charge of 5.75%; however, lower front-end sales charges apply
for larger purchases. See the table below. Class A Shares are also subject to
annual 12b-1 Plan expenses.
Class B Shares are purchased at net asset value and are subject to a CDSC of:
(i) 4% if shares are redeemed within two years of purchase; (ii) 3% if shares
are redeemed during the third or fourth year following purchase; (iii) 2% if
shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class B Shares are
also subject to 12b-1 Plan expenses which are higher than those to which Class A
Shares are subject and are assessed against the Class B Shares for no longer
than approximately eight years after purchase. See AUTOMATIC CONVERSION OF CLASS
B SHARES in the Fund Classes' PROSPECTUS, and DETERMINING OFFERING PRICE AND NET
ASSET VALUE and PLANS UNDER RULE 12B-1 FOR THE FUND CLASSES in this PART B.
Institutional Class shares are purchased at the net asset value per share
without the imposition of a front-end or contingent deferred sales charge or
12b-1 Plan expenses. Institutional Class shares, Class A Shares and Class B
Shares represent a proportionate interest in the Series' assets and will receive
a proportionate interest in the Series' income, before application, as to the
Class A and Class B Shares, of any expenses under the Series' 12b-1 Plans.
ALTERNATIVE PURCHASE ARRANGEMENTS
The alternative purchase arrangements of the Class A and Class B Shares permit
investors to choose the method of purchasing shares that is most beneficial
given the amount of their purchase, the length of time they expect to hold their
shares and other relevant circumstances. Investors should determine whether,
under their particular circumstances, it is more advantageous to purchase the
Class A Shares and incur a front-end sales charge and annual 12b-1 Plan expenses
of up to a maximum of .30% of the average daily net assets of the Class A Shares
or to purchase the Class B Shares and have the entire initial purchase price
<PAGE>
invested in the Series with the investment thereafter subject to a CDSC if
shares are redeemed within six years of purchase and annual 12b-1 Plan expenses
of 1% (.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 the average daily net assets of the Class B Shares for no longer
than approximately eight years after purchase.
CLASS A SHARES
Purchases of $100,000 or more of the Class A Shares at the offering price
currently carry a reduced front-end sales charge as shown in the accompanying
table, and may include a series of purchases over a 13-month period under a
Letter of Intention signed by the purchaser. See SPECIAL PURCHASE FEATURES --
CLASS A SHARES for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
Class A Shares
- ------------------------------|------------------------------|-----------------
| Front-End Sales Charge | Dealer's
| as % of | Concession**
Amount of Purchase | Offering | Amount | as % of
| Price | Invested | Offering Price
- ------------------------------|---------------|--------------|-----------------
Less than $100,000 | 5.75% | 6.10% | 5.00%
$100,000 but under $250,000 | 4.75 | 4.99 | 4.00
$250,000 but under $500,000 | 3.50 | 3.62 | 3.00
$500,000 but under $1,000,000*| 3.00 | 3.09 | 2.60
*There is no front-end sales charge on purchases of $1 million or more but,
under certain limited circumstances, a 1% contingent deferred sales charge may
apply. The contingent deferred sales charge ("Limited CDSC") that may be
applicable to purchases of Class A Shares arises only in the case of certain
net asset value purchases which have triggered the payment of a dealer's
commission.
- -------------------------------------------------------------------------------
The Fund must be notified when a sale takes place which would qualify for the
reduced front-end sales charge on the basis of previous purchases and current
purchases. The reduced front-end sales charge will be granted upon confirmation
of the shareholder's holdings by the Fund. Such reduced front-end sales charges
are not retroactive.
From time to time, upon written notice to all of its dealers, the Distributor
may hold special promotions for specified periods during which the Distributor
may reallow dealers up to the full front-end sales charge shown above. Dealers
who receive 90% or more of the sales charge may be deemed to be underwriters
under the Securities Act of 1933.
**Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- -------------------------------------------------------------------------------
Certain dealers who enter into an agreement to provide extra training and
information on Delaware Group products and services and to increase sales of
Delaware Group funds may receive an additional concession of up to .15% of the
offering price in connection with sales of Class A Shares. Such dealers must
meet certain requirements in terms of organization and distribution capabilities
and their ability to increase sales. The Distributor should be contacted for
further information on these requirements as well as the basis and circumstances
upon which the additional concession will be paid. Participating dealers may be
deemed to have additional responsibilities under the securities laws.
11
<PAGE>
DEALER'S COMMISSION--CLASS A SHARES
For initial purchases of Class A Shares of $1,000,000 or more made on or after
June 1, 1993, a dealer's commission may be paid by the Distributor to financial
advisers through whom such purchases are effected in accordance with the
following schedule:
DEALER'S COMMISSION
-------------------
AMOUNT OF PURCHASE (as a percentage of
- ------------------ amount purchased)
Up to $2 million 1.00%
Next $1 million up to $3 million .75
Next $2 million up to $5 million .50
Amount over $5 million .25
In determining a financial adviser's eligibility for the dealer's commission,
purchases of Class A Shares of other Delaware Group funds, as to which a Limited
CDSC applies (see REDEMPTION AND REPURCHASE) may be aggregated with those of the
Class A Shares of the Series. Financial advisers should contact the Distributor
concerning the applicability and calculation of the dealer's commission in the
case of combined purchases. Financial advisers also may be eligible for a
dealer's commission in connection with certain purchases made under a Letter of
Intention or pursuant to an investor's Right of Accumulation. The Distributor
also should be consulted concerning the availability of and program for these
payments.
An exchange from other Delaware Group funds will not qualify for payment of
the dealer's commission, unless such exchange is from a Delaware Group fund with
assets as to which a dealer's commission or similar payment has not been
previously paid. The schedule and program for payment of the dealer's commission
are subject to change or termination at any time by the Distributor in its
discretion.
CLASS B SHARES
Class B Shares are purchased without the imposition of a front-end sales
charge at the time of purchase. Class B Shares redeemed within six years of
purchase may be subject to a CDSC at the rates set forth below, charged as a
percentage of the dollar amount subject thereto. The charge will be assessed on
an amount equal to the lesser of the net asset value at the time of purchase of
the shares being redeemed or the net asset value of the shares at the time of
redemption. Accordingly, no CDSC will be imposed on increases in net asset value
above the initial purchase price. In addition, no CDSC will be assessed on
redemption of shares received upon reinvestment of dividends or capital gains.
See the PROSPECTUS for the Fund Classes under BUYING SHARES -- CONTINGENT
DEFERRED SALES CHARGE for a list of the instances in which the CDSC is waived.
<PAGE>
The following table sets forth the rates of the CDSC for the Class B Shares of
the Series:
CONTINGENT DEFERRED
SALES CHARGE
(AS A PERCENTAGE OF
YEAR AFTER DOLLAR AMOUNT
PURCHASE MADE SUBJECT TO CHARGE)
- ------------- --------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares of the Series, the 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 no longer than approximately
eight years after purchase, the investor's Class B Shares will be automatically
converted into Class A Shares of the Series. See AUTOMATIC CONVERSION OF CLASS B
SHARES in the Fund Classes' PROSPECTUS. Such conversion will constitute a
tax-free exchange for federal income tax purposes. See TAXES in the PROSPECTUS
for the Fund Classes.
PLANS UNDER RULE 12B-1 FOR THE FUND CLASSES
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund has
adopted a separate plan for each of the Class A Shares and the Class B Shares of
the Series (the "Plans"). The Plan relating to the Class A Shares permits the
Series to pay for certain distribution, promotional and related expenses
involved in the marketing of only the Class A Shares. Similarly, the Plan
relating to the Class B Shares permits the Fund to pay for certain distribution,
promotional and related expenses involved in the marketing of only the Class B
Shares. The Plans do not apply to the Institutional Class of shares. Such shares
are not included in calculating the Plans' fees, and the Plans are not used to
assist in the distribution and marketing of the Institutional Class shares.
Shareholders of the Institutional Class may not vote on matters affecting the
Plans.
The Plans permit the Series, pursuant to an Amended and Restated Distribution
Agreement, to pay out of the assets of the Class A Shares and Class B Shares
monthly fees to the Distributor for its services and expenses in distributing
and promoting sales of shares of such classes. These expenses include, among
other things, preparing and distributing advertisements, sales literature and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, and paying distribution and maintenance fees to securities
brokers and dealers who enter into agreements with the Distributor. The 12b-1
Plan expenses relating to the Class B Shares are also used to pay the
12
<PAGE>
Distributor for advancing the commission costs to dealers with respect to the
initial sale of such shares.
In addition, the Series may make payments out of the assets of the Class A
Shares and the Class B Shares directly to other unaffiliated parties, such as
banks, who either aid in the distribution of shares of the Fund Classes or
provide services to such classes.
The maximum aggregate fee payable by the Series under the Plans, and the
agreements relating to distribution, is on an annual basis .30% of the Class A
Shares' average daily net assets for the year, and 1% (.25% of which are service
fees to be paid to the Distributor, dealers and others for providing personal
service and/or maintaining shareholder accounts) of the Class B Shares' average
daily net assets for the year. The Fund's Board of Directors may reduce these
amounts at any time.
The Board of Directors has determined that the annual fee, payable on a
monthly basis, under the Plan for the Class A Shares, will be equal to the sum
of: (i) the amount obtained by multiplying .30% by the average daily net assets
represented by the Class A Shares that were acquired by shareholders on or after
May 2, 1994, and (ii) the amount obtained by multiplying .10% by the average
daily net assets represented by the Class A Shares that were acquired before May
2, 1994. While this is the method for calculating the 12b-1 fees to be paid by
the Class A Shares, the fee is a Class expense so that all shareholders
regardless of when they purchased their shares will bear 12b-1 expenses at the
same per share rate. As Class A Shares are sold on or after May 2, 1994, the
initial rate of at least .10% will increase over time. Thus, as the proportion
of Class A Shares purchased on or after May 2, 1994 to outstanding Class A
Shares increases, the expenses attributable to payments under the Plan will also
increase (but will not exceed .30% of average daily net assets). While this
describes the current formula for calculating the fees which will be payable
under the Plan, the Plan permits the Series to pay a full .30% on all Class A
Shares assets at any time.
All of the distribution expenses incurred by the Distributor and others, such
as broker/dealers, in excess of the amount paid on behalf of the Class A and
Class B Shares would be borne by such persons without any reimbursement from
such classes. Subject to seeking best price and execution, the Series may, from
time to time, buy or sell portfolio securities from or to firms which receive
payments under the Plans.
From time to time, the Distributor may pay additional amounts from its own
resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans, the Amended and Restated Distribution Agreement and the form of
dealer's and services agreements relating thereto have all 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 Investment Company Act of 1940) of
the Fund and who have no direct or indirect financial interest in the Plans or
any related agreements, by vote cast in person at a meeting duly called for the
<PAGE>
purpose of voting on the Plans and such Agreements. Continuation of the Plans,
the Amended and Restated Distribution Agreement and the form of dealer's and
services agreements must be approved annually by the Board of Directors in the
same manner as specified above.
Each year, the directors must determine whether continuation of the Plans is
in the best interest of shareholders of, respectively, the Class A Shares and
Class B Shares and that there is a reasonable likelihood of the Plan relating to
a Fund Class providing a benefit to that Class. The Plans, the Amended and
Restated Distribution Agreement and the dealer's and services agreements with
any broker/dealers or others relating to a Fund Class may be terminated at any
time without penalty by a majority of those directors who are not "interested
persons" or by a majority vote of the outstanding voting securities of the
relevant Fund Class. Any amendment materially increasing the percentage payable
under the Plans must likewise be approved by a majority vote of the outstanding
voting securities of the relevant Fund Class, as well as by a majority vote of
those directors who are not "interested persons." 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 period May 2, 1994 to November 30, 1994, payments from the Class A
Shares pursuant to its Plan amount to $769,060 and such amount was broken down
as follows: $4,043--Advertising; $1,801--Annual/Semi-Annual Reports; $669,105--
Broker Trails; $60,989--Commission to Wholesalers; $23,526--Promotional-Other
and $9,596--Promotional-Broker Meetings.
For the period September 6, 1994 (date of initial public offering) through
November 30, 1994, payments from the Class B Shares pursuant to its Plan
amounted to $2,282 and such amount was broken down as follows: $760--Broker
Sales Charges; $557--Broker Trails; $128--Commission to Wholesalers; and
$837--Interest on Broker Sales Charges.
OTHER PAYMENTS TO DEALERS--CLASS A AND CLASS B SHARES
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to .25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
13
<PAGE>
In connection with the sale of Delaware Group fund shares, the Distributor
may, at its own expense, pay to participate in or reimburse dealers with whom it
has a selling agreement for expenses incurred in connection with seminars and
conferences sponsored by such dealers and may pay or allow additional
promotional incentives, which shall include non-cash concessions, such as
certain luxury merchandise or a trip to or attendance at a business or
investment seminar at a luxury resort, in the form of sales contests to dealers
who sell shares of the funds. Such seminars and conferences and the terms of
such sales contests must be preapproved by the Distributor. Payment may be up to
100% of the expenses incurred or awards made in connection with seminars,
conferences or contests relating to the promotion of fund shares. The
Distributor may also pay a portion of the expense of preapproved dealer
advertisements promoting the sale of Delaware Group fund shares.
SPECIAL PURCHASE FEATURES--CLASS A SHARES
BUYING AT NET ASSET VALUE
The Class A Shares may be purchased without a front-end sales charge under the
DIVIDEND REINVESTMENT PLAN and, under certain circumstances, the 12-MONTH
REINVESTMENT PRIVILEGE and the EXCHANGE PRIVILEGE.
Officers, directors and employees (including former officers and directors and
former employees who had been employed for at least ten years) of the Fund, any
other fund in the Delaware Group, the Manager, any affiliate, any fund or
affiliate that may in the future be created, legal counsel to the funds and
registered representatives and employees of broker/dealers who have entered into
Dealer's Agreements with the Distributor may purchase Class A Shares and any
such class of shares of any of the funds in the Delaware Group, including any
fund that may be created, at the net asset value per share. Spouses, parents,
brothers, sisters and children (regardless of age) of such persons at their
direction, and any employee benefit plan established by any of the foregoing
funds, corporations, counsel or broker/dealers may also purchase shares at net
asset value. Purchases of Class A Shares may also be made by clients of
registered representatives of an authorized investment dealer at net asset value
within six months of a change of the registered representative's employment, if
the purchase is funded by proceeds from an investment where a front-end sales
charge has been assessed and the redemption of the investment did not result in
the imposition of a contingent deferred sales charge or other redemption
charges. Purchase of Class A Shares also may be made at net asset value by bank
employees that provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of Class A Shares. Also,
officers, directors and key employees of institutional clients of the Manager,
or any of its affiliates, may purchase Class A Shares at net asset value.
Moreover, purchases may be effected at net asset value for the benefit of the
clients of brokers, dealers and registered investment advisers affiliated with a
broker or dealer, if such broker, dealer or investment adviser has entered into
an agreement with the Distributor providing specifically for the purchase of
<PAGE>
Class A Shares in connection with special investment products, such as wrap
accounts or similar fee based programs. Such purchasers are required to sign a
letter stating that the purchase is for investment only and that the securities
may not be resold except to the issuer. Such purchasers may also be required to
sign or deliver such other documents as the Fund may reasonably require to
establish eligibility for purchase at net asset value. The Fund must be notified
in advance that the trade qualifies for purchase at net asset value.
Investments in Class A Shares made by plan level and/or participant retirement
accounts that are for the purpose of repaying a loan taken from such accounts
will be made at net asset value. Loan repayments made to a Delaware Group
account in connection with loans originated from accounts previously maintained
by another investment firm will also be invested at net asset value.
LETTER OF INTENTION
The reduced front-end sales charges described above with respect to the Class
A Shares are also applicable to the aggregate amount of purchases made by any
such purchaser previously enumerated within a 13-month period pursuant to a
written Letter of Intention provided by the Distributor and signed by the
purchaser, and not legally binding on the signer or the Fund, which provides for
the holding in escrow by the Transfer Agent, of 5% of the total amount of Class
A Shares intended to be purchased until such purchase is completed within the
13-month period. A Letter of Intention may be dated to include shares purchased
up to 90 days prior to the date the Letter is signed. The 13-month period begins
on the date of the earliest purchase. If the intended investment is not
completed, except as noted below, the purchaser will be asked to pay an amount
equal to the difference between the front-end sales charge on the Class A
Shares purchased at the reduced rate and the front-end sales charge otherwise
applicable to the total shares purchased. If such payment is not made within 20
days following the expiration of the 13-month period, the Transfer Agent will
surrender an appropriate number of the escrowed shares for redemption in order
to realize the difference. Such purchasers may include the value (at offering
price at the level designated in their Letter of Intention) of all their shares
of the Fund and of any class of any of the other mutual funds in the Delaware
Group (except shares of any Delaware Group fund which do not carry a front-end
sales charge or contingent deferred sales charge, other than shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange from
shares which do) previously purchased and still held as of the date of their
Letter of Intention toward the completion of such Letter. For purposes of
satisfying an investor's obligation under a Letter of Intention, Class B Shares
of the Series and the corresponding class of shares of other Delaware Group
funds which offer such shares may be aggregated with the Class A Shares of the
Series and the corresponding class of shares of the other Delaware Group funds.
14
<PAGE>
Employers offering a Delaware Group Retirement Plan may also complete a Letter
of Intention to obtain a reduced front-end sales charge on investments of the
Class A Shares made by the Plan. The aggregate investment level of the Letter of
Intention will be determined and accepted by the Transfer Agent at the point of
Plan establishment. The level and any reduction in front-end sales charge will
be based on actual Plan participation and the projected investments in Delaware
Group funds that are offered with a front-end sales charge or contingent
deferred sales charge for a 13-month period. The Transfer Agent reserves the
right to adjust the signed Letter of Intention based on this acceptance
criteria. The 13-month period will begin on the date this Letter of Intention is
accepted by the Transfer Agent. If actual investments exceed the anticipated
level and equal an amount that would qualify the Plan for further discounts, any
front-end sales charges will be automatically adjusted. In the event this Letter
of Intention is not fulfilled within the 13-month period, the Plan level will be
adjusted (without completing another Letter of Intention) and the employer will
be billed for the difference in front-end sales charges due, based on the Plan's
assets under management at that time. Employers may also include the value (at
offering price at the level designated in their Letter of Intention) of all
their shares intended for purchase that are offered with a front-end sales
charge or contingent deferred sales charge of any class. Class B Shares of the
Series and other Delaware Group funds which offer a corresponding class of
shares may also be aggregated for this purpose.
COMBINED PURCHASES PRIVILEGE
In determining the availability of the reduced front-end sales charge
previously set forth with respect to the Class A Shares, purchasers may combine
the total amount of any combination of the Fund Classes of the Series as well as
any other class of any of the other Delaware Group funds (except shares of any
Delaware Group fund which do not carry a front-end sales charge or contingent
deferred sales charge, other than shares of Delaware Group Premium Fund, Inc.
beneficially owned in connection with the ownership of variable insurance
products, unless they were acquired through an exchange from shares which do).
The privilege also extends to all purchases made at one time by an individual;
or an individual, his or her spouse and their children under the age 21; or a
trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
RIGHT OF ACCUMULATION
In determining the availability of the reduced front-end sales charge with
respect to the Class A Shares, purchasers may also combine any subsequent
purchases of the Fund Classes of the Series as well as any other class of any
of the other Delaware Group funds which offer such classes (except shares of
any Delaware Group fund which do not carry a front-end sales charge or
contingent deferred sales charge, other than shares of Delaware Group Premium
<PAGE>
Fund, Inc. beneficially owned in connection with the ownership of variable
insurance products, unless they were acquired through an exchange from shares
which do). If, for example, any such purchaser has previously purchased and
still holds Class A Shares and/or shares of any other of the classes
described in the previous sentence with a value of $40,000 and subsequently
purchases $60,000 at offering price of additional shares of the Class A
Shares, the charge applicable to the $60,000 purchase would currently be
4.75%. For the purpose of this calculation, the shares presently held shall
be valued at the public offering price that would have been in effect were
the shares purchased simultaneously with the current purchase. Investors
should refer to the table of sales charges for Class A Shares to determine
the applicability of the Right of Accumulation to their particular
circumstances.
12-MONTH REINVESTMENT PRIVILEGE
Shareholders of the Class A Shares (and of the Institutional Class holding
shares which were acquired through an exchange of one of the other mutual funds
in the Delaware Group offered with a front-end sales charge) who redeem such
shares of the Series have one year from the date of redemption to reinvest all
or part of their redemption proceeds in Class A Shares of the Series or in Class
A Shares of any of the other funds in the Delaware Group, subject to applicable
eligibility and minimum purchase requirements, in states where their shares may
be sold, at net asset value without the payment of a front-end sales charge.
This privilege does not extend to Class A Shares where the redemption of the
shares triggered the payment of a Limited CDSC. Persons investing redemption
proceeds from direct investments in mutual funds in the Delaware Group offered
without a front-end sales charge will be required to pay the applicable sales
charge when purchasing Class A Shares. The reinvestment privilege does not
extend to redemption of Class B Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any amount
necessary to purchase a full share). The reinvestment will be made at the net
asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is proposed to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
Investors should consult their financial advisers or the Transfer Agent, which
also serves as the Fund's shareholder servicing agent, about the applicability
of the Limited CDSC (see CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN PURCHASES
15
<PAGE>
OF CLASS A SHARES MADE AT NET ASSET VALUE under REDEMPTION AND EXCHANGE in the
Fund Classes' PROSPECTUS) in connection with the features described above.
GROUP INVESTMENT PLANS
Group Investment Plans which are not eligible to purchase shares of the
Institutional Class may also benefit from the reduced front-end sales charges
for investments in Class A Shares set forth in the table on page 11, based on
total plan assets. If a company has more than one plan investing in the Delaware
Group of funds, then the total amount invested in all plans would be used in
determining the applicable front-end sales charge reduction. Employees
participating in such Group Investment Plans may also combine the investments
made in their plan account when determining the applicable front-end sales
charge on purchases to non-retirement Delaware Group investment accounts. For
other Retirement Plans and special services, see RETIREMENT PLANS FOR THE FUND
CLASSES under INVESTMENT PLANS.
DECATUR INCOME FUND INSTITUTIONAL CLASS
The Institutional Class is available for purchase only by: (a) retirement
plans introduced by persons not associated with brokers or dealers that are
primarily engaged in the retail securities business and rollover individual
retirement accounts from such plans; (b) tax-exempt employee benefit plans of
the Manager or its affiliates and securities dealer firms with a selling
agreement with the Distributor; (c) institutional advisory accounts of the
Manager or its affiliates and those having client relationships with Delaware
Investment Advisers, a division of the Manager, or its affiliates and their
corporate sponsors, as well as subsidiaries and related employee benefit plans
and rollover individual retirement account from such institutional advisory
accounts; (d) banks, trust companies and similar financial institutions
investing for their own account or for the account of their trust customers for
whom such financial institution is exercising investment discretion in
purchasing shares of the class; and (e) registered investment advisers investing
on behalf of clients that consist solely of institutions and high net-worth
individuals having at least $1,000,000 entrusted to the adviser for investment
purposes, but only if the adviser is not affiliated or associated with a broker
or dealer and derives compensation for its services exclusively from its clients
for such advisory services.
Shares of the Institutional Class are available for purchase at net asset
value, without the imposition of a front-end or contingent deferred sales charge
and are not subject to Rule 12b-1 expenses.
<PAGE>
INVESTMENT PLANS
REINVESTMENT PLAN/OPEN ACCOUNT
Unless otherwise designated by shareholders in writing, dividends from net
investment income and distributions from realized securities profits, if any,
will be automatically reinvested in additional shares of the respective Fund
Class in which an investor has an account (based on the net asset value in
effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of the Institutional Class
are reinvested in the account of the holders of such shares (based on the net
asset value of the Fund in effect on the reinvestment date). A confirmation of
each dividend payment from net investment income and of any distributions from
realized securities profits will be mailed to shareholders in the first quarter
of the fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and add
full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the Fund for
$25 or more with respect to the Class A Shares and $100 or more with respect to
the Class B Shares; no minimum applies to the Institutional Class. Such
purchases are made for the Class A Shares at the public offering price and, for
the Class B Shares and Institutional Class at the net asset value, at the end of
the day of receipt. A reinvestment plan may be terminated at any time. This plan
does not assure a profit nor protect against depreciation in a declining market.
REINVESTMENT OF DIVIDENDS IN OTHER
DELAWARE GROUP FUNDS
Subject to applicable eligibility and minimum purchase requirements, and the
limitations set forth below, shareholders of the Class A Shares and Class B
Shares may automatically reinvest dividends and/or distributions from the Series
in any of the other mutual funds in the Delaware Group, including the Series, in
states where their shares may be sold. Such investments will be at net asset
value at the close of business on the reinvestment date without any front-end
sales charge or service fee. The shareholder must notify the Transfer Agent in
writing and must have established an account in the fund into which the
dividends and/or distributions are to be invested. Any reinvestment directed to
a fund in which the investor does not then have an account will be treated like
all other initial purchases of a fund's shares. Consequently, an investor should
obtain and read carefully the prospectus for the fund in which the investment is
16
<PAGE>
proposed to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses.
See also DIVIDEND REINVESTMENT PLAN in the PROSPECTUS for the Fund Classes.
Subject to the following limitations, dividends and/or distributions from
other funds in the Delaware Group may be invested in shares of the Fund,
provided an account has been established. Dividends from the Class A Shares may
not be directed to the Class B Shares of another fund in the Delaware Group.
Dividends from the Class B Shares may only be directed to the Class B Shares of
another fund in the Delaware Group that offers such class of shares. See CLASS B
FUNDS in the Fund Classes' PROSPECTUS for the funds in the Delaware Group that
are eligible for investment by holders of Series shares.
This option is not available to participants in the following plans: SAR/SEP,
SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans.
INVESTING BY ELECTRONIC FUND TRANSFER
DIRECT DEPOSIT PURCHASE PLAN--Investors of the Class A Shares and Class B
Shares may arrange for the Series 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 of the Class A Shares and Class B
Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into the Class.
This type of investment will be handled in either of the two ways noted below.
(1) If the shareholder's bank is a member of the National Automated Clearing
House Association ("NACHA"), the amount of the investment will be electronically
deducted from his or her account by Electronic Fund Transfer ("EFT"). The
shareholder's checking account will reflect a debit each month at a specified
date although no check is required to initiate the transaction. (2) If the
shareholder's bank is not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans: SAR/SEP,
SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans.
* * *
<PAGE>
Investments under the Direct Deposit Purchase Plan and the Automatic Investing
Plan must be for $25 or more with respect to the Class A Shares and $100 or more
with respect to the Class B Shares. 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 Series from the federal government or its agencies on behalf
of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
the Series 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 Series.
DIRECT DEPOSIT PURCHASES BY MAIL
Shareholders may authorize a third party, such as a bank or employer, to make
investments directly to their Series accounts. The Series 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.
RETIREMENT PLANS FOR THE FUND CLASSES
An investment in the Series may be suitable for tax-deferred Retirement Plans.
Among the Retirement Plans noted below, Class B Shares are available for
investment only by Individual Retirement Accounts, Simplified Employee Pension
Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares. See the
PROSPECTUS for the Fund Classes under BUYING SHARES -- CONTINGENT DEFERRED SALES
CHARGE for a list of the instances in which the CDSC is waived.
The minimum initial investment for each of the Retirement Plans described
below is $250; subsequent investments must be at least $25. Many of the
Retirement Plans described below are subject to one-time fees, as well as annual
maintenance fees. Prototype Profit Sharing and Money Purchase Pension Plans are
each subject to a one-time fee of $200 per plan, or $300 for paired plans. No
such fee is charged for owner-only plans if the Delaware Group does not provide
a Summary Plan Description. In addition, these plans are subject to an annual
maintenance fee of $30 per participant account. Each of the other Retirement
Plans described below (other than 401(k) Defined Contribution Plans) is subject
to an annual maintenance fee of $15 for each participant's account, even in
years when no contributions are made, regardless of the number of funds
selected. Annual maintenance fees for 401(k) Defined Contribution Plans are
based on the number of participants in the Plan and the services selected by the
17
<PAGE>
employer. 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. Fees are subject to
change.
Certain shareholder investment services available to non-retirement plan
shareholders may not be available to Retirement Plan shareholders. Certain
Retirement Plans may qualify to purchase shares of the Institutional Class. See
DECATUR INCOME FUND INSTITUTIONAL CLASS above. For additional information on any
of the Plans and Delaware's retirement services, call the Shareholder Service
Center telephone number.
With respect to the annual maintenance fees per account referred to above,
"account" shall mean any account or group of accounts within a Plan type
identified by a common tax identification number between or among them.
Shareholders are responsible for notifying the Fund when more than one account
is maintained under a single tax identification 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 and
corporations which replace the former Keogh and corporate retirement plans.
These Plans contain profit sharing or money purchase pension plan provisions.
Contributions may be invested only in Class A Shares.
INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
A document is available for an individual who wants to establish an INDIVIDUAL
RETIREMENT ACCOUNT ("IRA") by making contributions which may be tax-deductible,
even if the individual is already participating in an employer-sponsored
retirement plan. Even if contributions are not deductible for tax purposes, as
indicated below, earnings will be tax-deferred. In addition, an individual may
make contributions on behalf of a spouse who has no compensation for the year or
elects to be treated as having no compensation for the year. Investments in each
of the Fund Classes are permissible.
The Tax Reform Act of 1986 (the "Act") restructured, and in some cases
eliminated, the tax deductibility of IRA contributions. Under the Act, the full
deduction for IRAs ($2,000 for each working spouse and $2,250 for one-income
couples) was retained for all taxpayers who are not covered by an
employer-sponsored retirement plan. Even if a taxpayer (or his or her spouse) is
covered by an employer-sponsored retirement plan, the full deduction is still
available if the taxpayer's adjusted gross income is below $25,000 ($40,000 for
<PAGE>
taxpayers filing joint returns). A partial deduction is allowed for married
couples with incomes between $40,000 and $50,000, and for single individuals
with incomes between $25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross income before IRA
deductions exceeds $50,000 ($35,000 for singles) and who are active participants
in an employer-sponsored retirement plan. Taxpayers who are not allowed
deductions on IRA contributions still can make nondeductible IRA contributions
of as much as $2,000 for each working spouse ($2,250 for one-income couples),
and defer taxes on interest or other earnings from the IRAs. Special rules apply
for determining the deductibility of contributions made by married individuals
filing separate returns.
A company or association may establish a Group IRA for employees or members
who want to purchase shares of the Series. Purchases of $1 million or more of
the Class A Shares qualify for purchase at net asset value but may, under
certain circumstances, be subject to a Limited CDSC. See PURCHASING SHARES
concerning reduced front-end sales charges applicable to Class A Shares.
Investments generally must be held in the IRA until age 59 1/2 in order to
avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. See CLASS B SHARES under ALTERNATIVE PURCHASE ARRANGEMENTS
concerning the applicability of a CDSC upon redemption.
See APPENDIX A for additional IRA information.
SIMPLIFIED EMPLOYEE PENSION PLAN ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making IRA contributions on behalf of all
eligible employees. Each of the Fund Classes is available for investment by a
SEP/IRA.
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLAN ("SAR/SEP")
Employers with 25 or fewer eligible employees can establish this plan which
permits employer contributions and salary deferral contributions in Class A
Shares only.
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<PAGE>
PROTOTYPE 401(K) DEFINED CONTRIBUTION PLAN
Section 401(k) of the Internal Revenue Code of 1986 (the "Code") permits
employers to establish qualified plans based on salary deferral contributions.
Plan documents are available to enable employers to establish a plan. An
employer may also elect to make profit sharing contributions and/or matching
contributions with investments in only Class A Shares or certain other funds in
the Delaware Group. Purchases under the Plan may be combined for purposes of
computing the reduced front-end sales charge applicable to Class A Shares as
set forth in the table on page 11.
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 either
of the Fund Classes in conjunction with such an arrangement. Applicable
front-end sales charges with respect to Class A Shares for such purchases are
set forth in the table on page 11.
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 either of the Fund Classes. Although investors may use
their own plan, there is available a Delaware Group 457 Deferred Compensation
Plan. Interested investors should contact the Distributor or their investment
dealers to obtain further information. Applicable front-end sales charges for
such purchases of Class A Shares are set forth in the table on page 11.
DETERMINING OFFERING
PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering price next
calculated by the Fund after receipt of the order by the Fund or its agent.
Orders for purchases of Class B Shares and the Institutional Class are effected
at the net asset value per share next calculated after receipt of the order by
the Fund or its agent. Selling dealers have the responsibility of transmitting
orders promptly.
The offering price for the Class A Shares consists of the net asset value per
share plus any applicable front-end sales charges. Offering price and net asset
value are computed as of the close of regular trading on the New York Stock
<PAGE>
Exchange (ordinarily, 4 p.m., Eastern time) on days when such exchange is open.
The New York Stock Exchange is scheduled to be open Monday through Friday
throughout the year except for New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. When the
New York Stock Exchange is closed, the Fund will generally be closed, pricing
calculations will not be made and purchase and redemption orders will not be
processed.
An example showing how to calculate the net asset value per share and, in the
case of the Class A Shares, the offering price per share, is included in the
Series' financial statements which are incorporated by reference into this
PART B.
The Series' net asset value per share is computed by adding the value of all
the Series' securities and other assets, deducting any liabilities of the
Series, and dividing by the number of Series shares outstanding. Expenses and
fees are accrued daily. Portfolio securities, except for bonds, which are
primarily traded on a national or foreign securities exchange are valued at the
last sale price on that exchange. Options are valued at the last reported sales
price or, if no sales are reported, at the mean between bid and asked prices.
Securities not traded on a particular day, over-the-counter securities and
government and agency securities are valued at the mean value between bid and
asked prices. Money market instruments having a maturity of less than 60 days
are valued at amortized cost. Debt securities (other than short-term
obligations) are valued on the basis of valuations provided by a pricing service
when such prices are believed to reflect the fair value of such securities. Use
of a pricing service has been approved by the Board of Directors. Subject to the
foregoing, securities for which market quotations are not readily available and
other assets are valued at fair value as determined in good faith and in a
method approved by the Board of Directors.
Each Class of the Series will bear, pro-rata, all of the common expenses of
the Series. The net asset values of all outstanding shares of each Class of the
Series will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Series represented by the value of shares
of that Class. All income earned and expenses incurred by the Series will be
borne on a pro-rata basis by each outstanding share of a Class, based on each
Class' percentage in the Series represented by the value of shares of such
Classes, except that the Institutional Class will not incur any of the expenses
under the Series' 12b-1 Plans and shares of the Fund Classes alone will bear the
12b-1 Plan fees payable under their respective Plans. Due to the specific
distribution expenses and other costs that will be allocable to each Class, the
net asset value of and dividends paid to each Class of the Series will vary.
19
<PAGE>
REDEMPTION AND
REPURCHASE
Any shareholder may require the Fund to redeem Series shares by sending a
WRITTEN REQUEST, signed by the record owner or owners exactly as the shares are
registered, to the Fund, 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. The Fund does not issue
certificates for Class A Shares or Institutional Class shares, unless a
shareholder specifically requests them. The Fund does not issue certificates for
Class B Shares. If stock certificates have been issued for shares being
redeemed, they must accompany the written request. For redemptions of $50,000 or
less paid to the shareholder at the address of record, the Fund requires a
request signed by all owners of the shares or the investment dealer of record,
but does not require signature guarantees. When the redemption is for more than
$50,000, or if payment is made to someone else or to another address, signatures
of all record owners are required and a signature guarantee may be required.
Each signature guarantee must be supplied by an eligible guarantor institution.
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, retirement plans, executors, administrators,
trustees or guardians.
In addition to redemption of Series shares by the Fund, the Distributor,
acting as agent of the Fund, offers to repurchase Series shares from
broker/dealers acting on behalf of shareholders. The redemption or repurchase
price, which may be more or less than the shareholder's cost, is the net asset
value per share next determined after receipt of the request in good order by
the Fund or its agent, less any applicable contingent deferred sales charge.
This is computed and effective at the time the offering price and net asset
value are determined. See DETERMINING OFFERING PRICE AND NET ASSET VALUE. The
Fund and the Distributor end their business day at 5 p.m., Eastern time. This
offer is discretionary and may be completely withdrawn without further notice by
the Distributor.
Orders for the repurchase of Series shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (less any applicable contingent deferred
sales charge), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Certain redemptions of Class A Shares purchased at net asset value may result
in the imposition of a Limited CDSC. See CONTINGENT DEFERRED SALES CHARGE FOR
CERTAIN PURCHASES OF CLASS A SHARES MADE AT NET ASSET VALUE under REDEMPTION
<PAGE>
AND EXCHANGE in the Series' PROSPECTUS for the Fund Classes. The 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; and (iv) 1% if shares are redeemed during the sixth year
following purchase. See CONTINGENT DEFERRED SALES CHARGE under BUYING SHARES in
the Series' PROSPECTUS for the Fund Classes. Except for such contingent deferred
sales charges and, with respect to the expedited payment by wire described
below, 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 in no case later than seven days, after receipt of a redemption request in
good order.
If a shareholder who recently purchased shares by check seeks to redeem all or
a portion of those shares in a written request, the Fund will honor the
redemption request but will not mail the proceeds until it is reasonably
satisfied of the collection of the investment check. This potential delay can be
avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund will automatically redeem from the shareholder's account the Series shares
purchased by the check plus any dividends earned thereon. Shareholders may be
responsible for any losses to the Series or to the Distributor.
In case of a suspension of the determination of the net asset value because
the New York Stock Exchange is closed for other than weekends or holidays, or
trading thereon is restricted or an emergency exists as a result of which
disposal by the Series of securities owned by it is not reasonably practical, or
it is not reasonably practical for the Series fairly to value its assets, or in
the event that the Securities and Exchange Commission has provided for such
suspension for the protection of shareholders, the Series may postpone payment
or suspend the right of redemption or repurchase. In such case, the shareholder
may withdraw the request for redemption or leave it standing as a request for
redemption at the net asset value next determined after the suspension has been
terminated.
Payment for shares redeemed or repurchased may be made either in cash or kind,
or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in DETERMINING OFFERING PRICE
AND NET ASSET VALUE. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, the Fund has
elected to be governed by Rule 18f-1 under the Investment Company Act of 1940
pursuant to which the Fund is obligated to redeem Series shares solely in cash
up to the lesser of $250,000 or 1% of the net asset value of the Series during
any 90-day period for any one shareholder.
20
<PAGE>
The value of the Series' investments is subject to changing market prices.
Thus, a shareholder reselling shares to the Series may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
SMALL ACCOUNTS
Due to the relatively higher costs of maintaining small accounts, the Fund
reserves the right to redeem Series shares in any of its accounts at the
then-current net asset value if the total investment in the Series has a value
of less than $250 as a result of redemptions. As a consequence, an investor who
makes only the minimum investment in a Class will be subject to involuntary
redemption if any portion of the investment is redeemed. Before the Fund redeems
such shares and sends the proceeds to the shareholder, the shareholder will be
notified in writing that the value of the shares in the account is less than
$250 and will be allowed 60 days from that date of notice to make an additional
investment to meet the required minimum of $250. Any redemption in an inactive
account established with a minimum investment may trigger mandatory redemption.
No contingent deferred sales charge will apply to the redemptions described in
this paragraph of the Class A and the Class B Shares.
EXPEDITED TELEPHONE REDEMPTIONS
The Fund has available certain redemption privileges, as described below. The
Fund reserves the right to suspend or terminate the expedited payment procedures
upon 60 days' written notice to shareholders.
Shareholders of the Fund Classes or their investment dealers of record wishing
to redeem any amount of shares of $50,000 or less for which certificates have
not been issued may call the Fund at 800-523-1918 (in Philadelphia, 988-1241)
or, in the case of shareholders of the Institutional Class, their Client
Services Representative at 800-828-5052 prior to the time the offering price and
net asset value are determined, as noted above, and have the proceeds mailed to
them at the record address. 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 Fund, as described
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.
<PAGE>
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 more 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 and a
signature guarantee may be 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.
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.
The Fund will not honor telephone redemptions for Series shares recently
purchased by check unless it is reasonably satisfied that the purchase check has
cleared.
If expedited payment under these procedures could adversely affect the Series,
the Fund may take up to seven days to pay the shareholder.
Neither the Fund nor the Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption or
exchange of Series 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 by
shareholders of the Fund Classes are generally tape recorded. A written
confirmation will be provided for all purchase, exchange and redemption
transactions initiated by telephone.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders of the Class A Shares who own or purchase $5,000 or more of
shares at the offering price 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 Series does not recommend
any specific amount of withdrawal. This $5,000 minimum does not apply for the
Series' 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 the 20th of the month (unless such date falls on a holiday or
a Sunday) and mailed on or about the 19th of every month. Both ordinary income
21
<PAGE>
dividends and realized securities profits distributions will be automatically
reinvested in additional shares of the Class at net asset value. This plan is
not recommended for all investors and should be started only after careful
consideration of its operation and effect upon the investor's savings and
investment program. To the extent that withdrawal payments from the plan exceed
any dividends and/or realized securities profits distributions paid on shares
held under the plan, the withdrawal payments will represent a return of capital,
and the share balance may in time be depleted, particularly in a declining
market.
The sale of shares for withdrawal payments constitutes a taxable event and a
shareholder may incur a capital gain or loss for federal income tax purposes.
This gain or loss may be long-term or short-term depending on the holding period
for the specific shares liquidated. Premature withdrawals from Retirement Plans
may have adverse tax consequences.
Withdrawals under this plan by the holders of Class A Shares or any similar
plan of any other investment company charging a front-end sales charge made
concurrently with the purchases of the Class A Shares of this or the shares of
any other investment company will ordinarily be disadvantageous to the
shareholder because of the payment of duplicative sales charges. Shareholders
should not purchase Class A Shares while participating in a Systematic
Withdrawal Plan and a periodic investment program in a fund managed by the
Manager must be terminated before a Systematic Withdrawal Plan can take effect,
except if the shareholder is a participant in one of our Retirement Plans or is
investing in Delaware Group funds which do not carry a sales charge. Also,
redemptions pursuant to a Systematic Withdrawal Plan may be subject to a Limited
CDSC if the purchase was made at net asset value and a dealer's commission has
been paid on that purchase.
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
credit-worthiness. This plan may be terminated by the shareholder or the
Transfer Agent at any time by giving written notice.
The Systematic Withdrawal Plan is not available with respect to the Class B
Shares or the Institutional Class.
WEALTH BUILDER OPTION
Shareholders of the Fund Classes may elect to invest in one or more of the
other mutual funds in the Delaware Group through our Wealth Builder Option.
Under this automatic exchange program, shareholders can authorize regular
monthly investments (minimum of $100 per fund) to be liquidated from their
account and invested automatically into other mutual funds in the Delaware
Group, subject to the conditions and limitations set forth in the Fund Classes'
PROSPECTUS. See WEALTH BUILDER OPTION and REDEMPTION AND EXCHANGE in the
PROSPECTUS for the Fund Classes.
<PAGE>
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 also use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Group, subject to the conditions and limitations described
in the Fund Classes' PROSPECTUS. Shareholders can terminate their participation
at any time by written notice to the Fund.
This option is not available to participants in the following plans: SAR/SEP,
SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Class.
DISTRIBUTIONS AND TAXES
The Series has qualified, and intends to continue to qualify, as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended. As such, the Fund will not be subject to federal income tax on net
investment income and net realized capital gains which are distributed to
shareholders.
The Series currently intends to pay dividends from net investment income on a
monthly basis. Distributions of net capital gains, if any, realized on sales of
investments will be distributed annually during the quarter following the close
of the fiscal year. All dividends and any capital gains distributions will be
automatically credited to the shareholder's account in additional Series shares
of the same class of the Series unless, in the case of shareholders in the Fund
Classes, the shareholder requests in writing that such dividends and/or
distributions be paid in cash. 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.
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<PAGE>
Each Class of shares of the Series will share proportionately in the
investment income and expenses of the Series, except that the Class A Shares and
the Class B Shares alone will incur distribution fees under their respective
12b-1 Plans.
Any check in payment of dividends or other distributions which cannot be
delivered by the 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
Series may deduct from a shareholder's account the costs of the Series' effort
to locate a shareholder if a shareholder's mail is returned by the Post Office
or the Series 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. During the fiscal year ended November 30, 1994, dividends
totaling $0.86, $0.17 and $0.62 per share of the Class A Shares, the Class B
Shares and the Institutional Class, respectively, were paid from net investment
income and a long-term capital gain of $0.952 and short-term capital gain of
$0.798 per share of the Class A Shares was paid from realized securities
profits. In addition to dividend payments from net investment income, a capital
gain of $0.42 per share of each Class was paid from realized securities profits
on January 5, 1995 to shareholders of record December 27, 1994. Class B Shares
were first offered to the public on September 6, 1994 and the Institutional
Class was first offered to the public on January 13, 1994.
Persons not subject to tax will not be required to pay taxes on distributions.
Dividends from investment income and short-term capital gains distributions
are treated by shareholders as ordinary income for federal income tax purposes,
whether received in cash or in additional shares. Distributions of long-term
capital gains, if any, are taxable to shareholders as long-term capital gains,
regardless of the length of time an investor has held such shares, and these
gains are currently taxed at long-term capital gain rates.
Under the Tax Reform Act of 1986, each Series of the Fund is treated as a
single tax entity and capital gains and losses for each Series are calculated
separately.
A portion of the Series' dividends may qualify for the dividends-received
deduction for corporations provided in the federal income tax law. The portion
of dividends paid by the Series that so qualifies will be designated each year
in a notice mailed to the Series' shareholders, and cannot exceed the gross
amount of dividends received by the Series from domestic (U.S.) corporations
that would have qualified for the dividends-received deduction in the hands of
the Series if the Series was a regular corporation. The availability of the
dividends-received deduction is subject to certain holding period and debt
financing restrictions imposed under the Code on the corporation claiming the
deduction. For the fiscal year ended November 30, 1994, 100% of the Series'
dividends from net investment income were eligible for this deduction.
<PAGE>
Shareholders will be notified annually by the Fund as to the federal income
tax status of dividends and distributions paid by the Series.
INVESTMENT MANAGEMENT
AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103, furnishes
investment management services to the Series, 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
Group since 1938. The aggregate assets of these funds on November 30, 1994 were
approximately $9,237,192,000. Investment advisory services are also provided to
institutional accounts with assets on November 30, 1994 of approximately
$15,544,258,000.
The Investment Management Agreement for the Series, dated June 29, 1988, was
approved by shareholders on June 14, 1988, and renewed for a period of an
additional year by the Board of Directors at a meeting held on January 28, 1995.
The Agreement may be renewed each year only 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
Series, and only if the terms 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 Investment Management Agreement provides that the Series shall pay the
Manager a management fee payable monthly and computed on the net asset value of
the Series as of each day at the annual rate of .6% on the first $100 million of
average daily net assets of the Series, .525% on the next $150 million, .5% on
the next $250 million and .475% on the average daily net assets in excess of
$500 million, less all directors' fees paid to the unaffiliated directors by the
Series.
On November 30, 1994, the total net assets of the Series were $1,338,753,689.
Investment management fees paid by the Series during the past three fiscal years
were $7,657,581 for 1992, $7,496,533 for 1993 and $7,128,034 for 1994.
Under the general supervision of the Board of Directors, the Manager makes all
investment decisions which are implemented by the Fund. The Manager pays the
salaries of all directors, officers and employees of the Fund who are affiliated
with the Manager. The Series pays all of its other expenses, including its
proportionate share of rent and certain other administrative expenses.
The ratio of expenses to average daily net assets for the Decatur Income Fund
A Class for the fiscal year ended November 30, 1994 was 0.81%. The ratio of
23
<PAGE>
expenses to average daily net assets for the Decatur Income Fund Institutional
Class for the period January 13, 1994 (date of initial public offering) to
November 30, 1994 was 0.70%, annualized. Based on expenses incurred by the Class
A Shares during its fiscal year ended November 30, 1994 the expenses of the
Class B Shares are expected to be 1.70% for the fiscal year ending November 30,
1995. The ratios for the Class A Shares and the Class B Shares reflect the
impact of their respective 12b-1 Plan.
By California regulation, the Manager is required to waive certain fees and
reimburse the Series for certain expenses to the extent that the Series' annual
operating expenses, exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, exceed 2 1/2% of the first $30 million of average daily
net assets, 2% of the next $70 million of average daily net assets and 1 1/2% of
any additional average daily net assets. For the fiscal year ended November 30,
1994, no such reimbursement was necessary or paid.
DISTRIBUTION AND SERVICE
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor of Series shares
under an Amended and Restated Distribution Agreement dated as of September 6,
1994. The Distributor is an affiliate of the Manager and bears all of the costs
of promotion and distribution, except for payments by the Series on behalf of
the Class A Shares and Class B Shares under their respective 12b-1 Plans. Prior
to January 3, 1995, Delaware Distributors, Inc. ("DDI") served as the national
distributor of the Series' shares. On that date Delaware Distributors, L.P., a
newly formed limited partnership, succeeded to the business of DDI. All officers
and employees of DDI became officers and employees of Delaware Distributors,
L.P. DDI is the corporate general partner of Delaware Distributors, L.P. and
both DDI and Delaware Distributors, L.P. are indirect, wholly-owned subsidiaries
of Delaware Management Holdings, Inc.
The Transfer Agent, Delaware Service Company, Inc., another affiliate of the
Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as the
Series' shareholder servicing, dividend disbursing and transfer agent pursuant
to a Shareholders Services Agreement dated June 29, 1988. The Transfer Agent is
also an indirect, wholly-owned subsidiary of Delaware Management Holdings, Inc.
<PAGE>
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 Group. On December 31, 1994, the Fund's officers
and directors owned less than 1% of the Series' shares outstanding.
As of December 31, 1994, the Fund believes Painewebber, FBO Angela Leabo,
23015 Elephant Walk, Spring, TX 77389 held 19,698 shares (9.42%); and Merrill
Lynch, Pierce Fenner & Smith, Mutual Fund Operations, 4800 Deer Lake Dr. East,
3rd Fl., Jacksonville, FL 32246 held of record 16,556 shares (7.81%) of the
outstanding shares of the Class B Shares.
As of the same date, the Fund believes the following held of record 5% or more
of the outstanding shares of the Institutional Class: The Northern Trust
Company, Cust J. Paul Getty Trust, P.O. Box 92956, Chicago, IL 60690 --
1,906,464 shares (16.32%); Price Waterhouse Savings Plan, 1410 N. Westshore
Blvd., Tampa, FL 33630 -- 1,337,950 shares (11.45%); Patterson & Co., PNB
Personal Trust Acctg, P.O. Box 7829, Philadelphia, PA 19101 -- 1,004,496 shares
(8.60%); Brigham Young Univ., R L Ball & Associates, c-242 ASB, Provo, UT 84602
- -- 938,477 shares (8.03%); Grace S & W Linton Nelson Foundation Incorporated,
7/5/84, 940 W. Valley Rd., Suite 1601, Wayne, PA 19087 -- 721,254 shares
(6.17%). Shares held of record by The Northern Trust Company and Price
Waterhouse Savings Plan were believed to be beneficially owned by others.
DMH Corp., Delaware Management Company, Inc., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware Management
Trust Company, Delaware International Holdings Ltd., Founders Holdings, Inc.,
Delaware International Advisers Ltd. and Delaware Investment Counselors, Inc.
are direct or indirect, wholly-owned subsidiaries of Delaware Management
Holdings, Inc. ("DMH"). By reason of its percentage ownership of DMH common
stock and through a Voting Trust Agreement with certain other DMH shareholders,
Legend Capital Group, L.P. ("Legend") controls DMH and its direct and indirect,
wholly-owned subsidiaries. As General Partners of Legend, Leonard M. Harlan and
John K. Castle have the ability to direct the voting of more than a majority of
the shares of DMH and thereby control DMH and its direct and indirect,
wholly-owned subsidiaries.
On December 12, 1994, DMH entered into a merger agreement with Lincoln
National Corporation ("Lincoln National") and a newly-formed subsidiary of
Lincoln National. Pursuant to that agreement, the new subsidiary will be
24
<PAGE>
merged with and into DMH. This merger will result in DMH becoming a wholly-owned
subsidiary of Lincoln National. The transaction is expected to close in the
early spring of 1995, subject to the receipt of all regulatory approvals and
satisfaction of conditions precedent to closing. See MANAGEMENT OF THE FUND in
the PROSPECTUSES for more information regarding this merger transaction.
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 (57)
CHAIRMAN, DIRECTOR AND/OR TRUSTEE of the Fund and each of the other 16 Funds
in the Delaware Group.
CHAIRMAN, CHIEF EXECUTIVE OFFICER, CHIEF INVESTMENT OFFICER AND DIRECTOR of
Delaware Management Company, Inc.
CHAIRMAN, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR of Delaware
International Holdings Ltd.
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND DIRECTOR of Delaware Management
Holdings, Inc., DMH Corp., Delaware International Advisers Ltd. and Founders
Holdings, Inc.
CHAIRMAN AND DIRECTOR of Delaware Management Trust Company.
DIRECTOR of Delaware Distributors, Inc., Delaware Service Company, Inc. and
Delaware Investment Counselors, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.
*BRIAN F. WRUBLE (51)
PRESIDENT, CHIEF EXECUTIVE OFFICER, DIRECTOR AND/OR TRUSTEE of the Fund and
15 other Funds in the Delaware Group (which excludes Delaware Pooled Trust,
Inc.).
DIRECTOR of Delaware Pooled Trust, Inc., Delaware International Advisers Ltd.
and Delaware Investment Counselors, Inc.
PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR of Delaware Management
Holdings, Inc., DMH Corp. and Delaware Management Company, Inc.
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND DIRECTOR of Delaware Service Company,
Inc.
CHAIRMAN AND DIRECTOR of Delaware Distributors, Inc.
CHAIRMAN of Delaware Distributors, L.P.
PRESIDENT of Founders Holdings, Inc.
Before joining the Delaware Group in 1992, Mr. Wruble was Chairman, President
and Chief Executive Officer of Equitable Capital Management Corporation and
Executive Vice President and Chief Investment Officer of Equitable Life
Assurance Society of the United States. Mr. Wruble has previously held
executive positions with Smith Barney, Harris Upham and H.C. Wainwright &
Co.
- ------------
*Director affiliated with the investment manager of the Fund and considered an
"interested person" as defined in the Investment Company Act of 1940.
<PAGE>
WINTHROP S. JESSUP (49)
EXECUTIVE VICE PRESIDENT of the Fund and 15 other Funds in the Delaware Group
(which excludes Delaware Pooled Trust, Inc.).
PRESIDENT AND CHIEF EXECUTIVE OFFICER of Delaware Pooled Trust, Inc.
PRESIDENT AND DIRECTOR of Delaware Investment Counselors, Inc.
EXECUTIVE VICE PRESIDENT AND DIRECTOR of Delaware Management Holdings, Inc.,
DMH Corp., Delaware Management Company, Inc., Delaware Management Trust
Company, Delaware International Holdings Ltd. and Founders Holdings, Inc.
VICE CHAIRMAN AND DIRECTOR of Delaware Distributors, Inc.
VICE CHAIRMAN, Delaware Distributors, L.P.
DIRECTOR of Delaware Service Company, Inc. and Delaware International
Advisers Ltd.
During the past five years, Mr. Jessup has served in various
executive capacities at different times within the Delaware organization.
RICHARD G. UNRUH, JR. (55)
EXECUTIVE VICE PRESIDENT of the Fund and each of the other 16 Funds in the
Delaware Group.
EXECUTIVE VICE PRESIDENT AND DIRECTOR of Delaware Management Company, Inc.
SENIOR VICE PRESIDENT of Delaware Management Holdings, Inc.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.
WALTER P. BABICH (67)
DIRECTOR AND/OR TRUSTEE of the Fund and each of the other 16 Funds in the
Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
BOARD CHAIRMAN, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from 1988
to 1991, he was a partner of I&L Investors.
25
<PAGE>
*JOHN K. CASTLE (54)
DIRECTOR AND/OR TRUSTEE of the Fund, each of the other 16 Funds in the
Delaware Group and Delaware Management Holdings, Inc.
150 East 58th Street, New York, NY 10155.
GENERAL PARTNER, Legend Capital Group, L.P.
CHAIRMAN, Castle Harlan, Inc., a private merchant bank in New York City.
CHAIRMAN, Castle Harlan Partners II GP, Inc.
PRESIDENT AND CHIEF EXECUTIVE OFFICER, Branford Castle, Inc., an investment
holding company.
CHAIRMAN, Castle Connolly Medical Ltd.
DIRECTOR, Sealed Air Corp.
DIRECTOR, UNC, Inc.
DIRECTOR, Quantum Restaurant Group, Inc.
DIRECTOR, INDSPEC Chemical Corporation.
DIRECTOR, Truck Components, Inc.
TRUSTEE, New York Medical College.
Immediately prior to forming Branford Castle, Inc. in 1986, Mr. Castle was
President and Chief Executive Officer and a director of Donaldson, Lufkin &
Jenrette, which he joined in 1965. Mr. Castle also served as Chairman of the
Board of the New York Medical College for 11 years and has served as a
director of the Equitable Life Assurance Society of the United States and as
a member of the Corporation of the Massachusetts Institute of Technology.
*LEONARD M. HARLAN (58)
DIRECTOR AND/OR TRUSTEE of the Fund, each of the other 16 Funds in the
Delaware Group and Delaware Management Holdings, Inc.
150 East 58th Street, New York, NY 10155.
GENERAL PARTNER, Legend Capital Group, L.P.
PRESIDENT, Castle Harlan, Inc., a private merchant bank in New York City.
PRESIDENT, Castle Harlan Partners II GP, Inc.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, The Harlan Company, Inc.
DIRECTOR, Long John Silver's Holdings, Inc.
DIRECTOR, The Ryland Group, Inc.
DIRECTOR, SmarteCarte, Inc.
DIRECTOR, MAG Aerospace Industries, Inc.
DIRECTOR, Strawberries, Inc.
TRUSTEE, North Country School/CTT.
TRUSTEE, New York City Citizens Budget Commission.
MEMBER, Visiting Committee of the Harvard Business School.
- ------------
*Director affiliated with the investment manager of the Fund and considered an
"interested person" as defined in the Investment Company Act of 1940.
<PAGE>
ANTHONY D. KNERR (56)
DIRECTOR AND/OR TRUSTEE of the Fund and each of the other 16 Funds in the
Delaware Group.
500 Fifth Avenue, New York, NY 10110.
CONSULTANT, 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 (54)
DIRECTOR AND/OR TRUSTEE of the Fund and each of the other 16 Funds in the
Delaware Group.
785 Park Avenue, New York, NY 10021.
TREASURER, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of the
Smithsonian Institution, Washington, DC., and from 1975 to 1994, she was
Adjunct Professor of Columbia Business School.
W. THACHER LONGSTRETH (74)
DIRECTOR AND/OR TRUSTEE of the Fund and each of the other 16 Funds in the
Delaware Group.
1617 John F. Kennedy Boulevard, Philadelphia, PA 19103.
VICE CHAIRMAN, Packard Press, a financial printing, commercial printing and
information processing firm.
PHILADELPHIA CITY COUNCILMAN.
CHARLES E. PECK (69)
DIRECTOR AND/OR TRUSTEE of the Fund and each of the other 16 Funds in the
Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
RETIRED.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer of The
Ryland Group, Inc., Columbia, MD.
26
<PAGE>
DAVID K. DOWNES (55)
SENIOR VICE PRESIDENT/CHIEF ADMINISTRATIVE OFFICER/CHIEF
FINANCIAL OFFICER of the Fund, each of the other 16 Funds in the Delaware
Group and Delaware Management Company, Inc.
PRESIDENT/CHIEF EXECUTIVE OFFICER AND DIRECTOR of Delaware Management Trust
Company.
SENIOR VICE PRESIDENT/CHIEF ADMINISTRATIVE OFFICER/CHIEF FINANCIAL
OFFICER/TREASURER of Delaware Management Holdings, Inc.
SENIOR VICE PRESIDENT/CHIEF FINANCIAL OFFICER/TREASURER AND DIRECTOR of DMH
Corp.
SENIOR VICE PRESIDENT/CHIEF ADMINISTRATIVE OFFICER AND DIRECTOR of Delaware
Distributors, Inc.
SENIOR VICE PRESIDENT/CHIEF ADMINISTRATIVE OFFICER of Delaware Distributors,
L.P.
SENIOR VICE PRESIDENT/CHIEF ADMINISTRATIVE OFFICER/CHIEF FINANCIAL OFFICER
AND DIRECTOR of Delaware Service Company, Inc.
CHIEF FINANCIAL OFFICER AND DIRECTOR of Delaware International Holdings Ltd.
CHIEF FINANCIAL OFFICER/CHIEF OPERATING OFFICER of Delaware Investment
Counselors, Inc.
SENIOR VICE PRESIDENT AND DIRECTOR of Founders Holdings, Inc.
DIRECTOR of Delaware International Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes was Chief
Administrative Officer, Chief Financial Officer and Treasurer of Equitable
Capital Management Corporation, New York, from December 1985 through August
1992, Executive Vice President from December 1985 through March 1992, and
Vice Chairman from March 1992 through August 1992.
GEORGE M. CHAMBERLAIN, JR. (47)
SENIOR VICE PRESIDENT AND SECRETARY of the Fund, each of the other 16 Funds
in the Delaware Group, Delaware Management Holdings, Inc. and Delaware
Distributors, L.P.
CORPORATE VICE PRESIDENT, SECRETARY AND DIRECTOR of Founders Holdings, Inc.
SENIOR VICE PRESIDENT, SECRETARY AND DIRECTOR of DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc., Delaware Service
Company, Inc. and Delaware Management Trust Company.
SECRETARY AND DIRECTOR of Delaware International Holdings Ltd.
SECRETARY of Delaware Investment Counselors, Inc.
DIRECTOR of Delaware International Advisers Ltd.
ATTORNEY.
During the past five years, Mr. Chamberlain has served in various
capacities at different times within the Delaware organization.
<PAGE>
JOHN B. FIELDS (49)
VICE PRESIDENT/SENIOR PORTFOLIO MANAGER of the Fund, of seven other equity
funds in the Delaware Group and of Delaware Management Company, Inc.
Before joining the Delaware Group in 1992, Mr. Fields served as a director of
domestic equity risk management for DuPont, Wilmington, DE.
JOSEPH H. HASTINGS (45)
VICE PRESIDENT/CORPORATE CONTROLLER of the Fund, each of the other 16 Funds
in the Delaware Group, Delaware Management Holdings, Inc., DMH Corp.,
Delaware Management Company, Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc. and Founders Holdings,
Inc.
VICE PRESIDENT/CORPORATE CONTROLLER/TREASURER of Delaware Management Trust
Company.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings was Chief Financial
Officer for Prudential Residential Services, L.P., New York, NY from 1989 to
1992. Prior to that, Mr. Hastings served as Controller and Treasurer for
Fine Homes International, L.P., Stamford, CT from 1987 to 1989.
EUGENE J. CICHANOWSKY (48)
VICE PRESIDENT/CORPORATE TAX of the Fund, each of the other 16 Funds in the
Delaware Group, Delaware Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Founders Holdings, Inc.
and Delaware Management Trust Company.
VICE PRESIDENT of Delaware Pooled Trust, Inc.
1818 Market Street,
Philadelphia, PA 19103.
During the past five years, Mr. Cichanowsky has served in various capacities
at different times within the Delaware organization.
THERESA M. MESSINA (33)
VICE PRESIDENT/TREASURER of the Fund, each of the other 16 Funds in the
Delaware Group and Delaware Service Company, Inc.
VICE PRESIDENT/TREASURER/CHIEF FINANCIAL OFFICER of Founders Holdings, Inc.
VICE PRESIDENT/ASSISTANT TREASURER of Delaware Management Company,Inc.,
Delaware Distributors, L.P. and Delaware Distributors, Inc.
VICE PRESIDENT of Delaware International Holdings Ltd.
Before joining the Delaware Group in 1994, Ms. Messina was Vice
President/Treasurer for Capital Holdings, Frazer, PA. Prior to that, Ms.
Messina was Vice President/Fund Accounting for SEI Corporation, Wayne, PA
from 1988 to 1994.
27
<PAGE>
The following table provides for each disinterested director compensation
received as of November 30, 1994 from the Fund, the total compensation
received from all Delaware Group funds, and an estimate of annual benefits to
be received upon retirement under the Delaware Group Retirement Plan.
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT ESTIMATED TOTAL
BENEFITS ANNUAL COMPENSATION
AGGREGATE ACCRUED BENEFITS FROM ALL 17
COMPENSATION AS PART OF UPON DELAWARE
NAME FROM FUND FUND EXPENSES RETIREMENT* GROUP FUNDS
<S> <C> <C> <C> <C>
W. Thacher Longstreth $5,401.00 None $18,100 $39,619.35
Ann R. Leven $6,253.86 None $18,100 $44,590.02
Walter P. Babich $6,083.32 None $18,100 $43,595.90
John J. Connolly, Ed.D. $5,401.00 None $18,100 $39,619.35
Anthony D. Knerr $6,166.48 None $18,100 $43,962.29
Charles E. Peck $5,058.00 None $18,100 $36,483.40
John H. Durham $4,715.00 None $18,100 $33,813.40
</TABLE>
*Under the terms of the Delaware Group Retirement Plan for directors/trustees,
each disinterested director who, at the time of his or her retirement from the
Board, has attained the age of 70 and served on the Board for at least five
continuous years, is entitled to receive payments from the Fund for a period
equal to the lesser of the number of years that such person served as a
director or the remainder of such person's life. The amount of such payments
will be equal, on an annual basis, to the amount of the annual retainer that
is paid to directors of the Fund at the time of such person's retirement. If
an eligible director retired as of November 30, 1994, he or she would be
entitled to annual payments totaling $18,100, in the aggregate, from all of
the Funds in the Delaware Group, based on the number of funds in the Delaware
Group as of that date.
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the Classes and for
shareholders of classes of other funds in the Delaware Group are set forth in
the relevant prospectuses for such classes. The following supplements that
information. The Fund reserves the right to reject exchange requests at any
time. 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 will be sent a current prospectus
and an authorization form for any of the other mutual funds in the Delaware
Group. Exchange instructions must be signed by the record owner(s) exactly as
the shares are registered.
An exchange constitutes, for tax purposes, the sale of one fund or series and
the purchase of another. The sale may involve either a capital gain or loss to
the shareholder for federal income tax purposes.
In addition, investment advisers and dealers may make exchanges between funds
in the Delaware Group on behalf of their clients by telephone or other expedited
<PAGE>
means. This service may be discontinued or revised at any time by the Transfer
Agent. Such exchange requests may be rejected if it is determined that a
particular request or the total requests at any time could have an adverse
effect on any of the funds. Requests for expedited exchanges may be submitted
with a properly completed exchange authorization form, as described above.
TELEPHONE EXCHANGE PRIVILEGE
Shareholders owning shares for which certificates have not been issued or
their investment dealers of record may exchange shares by telephone for shares
in other mutual funds in the Delaware Group. This service is automatically
provided unless the Fund receives written notice from the shareholder to the
contrary.
Shareholders or their investment dealers of record may contact the Transfer
Agent at 800-523-1918 (in Philadelphia, 988-1241) or, in the case of
shareholders of the Institutional Class, their Client Services Representative at
800-828-5052, to effect an exchange. The shareholder's current Series account
number must be identified, as well as the registration of the account, the share
or dollar amount to be exchanged and the fund into which the exchange is to be
made. Requests received on any day after the time the offering price and net
asset value are determined will be processed the following day. See DETERMINING
OFFERING PRICE AND NET ASSET VALUE. Any new account established through the
exchange will automatically carry the same registration, shareholder information
and dividend option as the account from which the shares were exchanged. The
exchange requirements of the fund into which the exchange is being made, such as
sales charges, eligibility and investment minimums, must be met. (See the
prospectus of the fund desired or inquire by calling the Transfer Agent or, as
relevant, your Client Services Representative.) Certain funds are not available
for Retirement Plans.
The telephone exchange privilege is intended as a convenience to shareholders
and is not intended to be a vehicle to speculate on short-term swings in the
securities market through frequent transactions in and out of the funds in the
Delaware Group. Telephone exchanges may be subject to limitations as to amounts
or frequency. The Transfer Agent and 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 Fund's prospectuses, neither the Fund nor the Transfer
Agent is responsible for any shareholder loss incurred in acting upon written or
telephone instructions for redemption or exchange of Series shares which are
reasonably believed to be genuine.
Following is a summary of the investment objectives of the other Delaware
Group funds:
DELAWARE FUND seeks long-term growth by a balance of capital appreciation,
income and preservation of capital. It uses a dividend-oriented valuation
strategy to select securities issued by established companies that are believed
to demonstrate potential for income and capital growth. DIVIDEND GROWTH FUND
seeks current income and capital appreciation by investing primarily in
28
<PAGE>
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 stock issued by
emerging growth companies exhibiting strong capital appreciation potential.
VALUE FUND seeks capital appreciation by investing primarily in common stocks
whose market values appear low relative to their underlying value or future
potential.
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 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.
DELCHESTER FUND seeks as high a current income as possible by investing
principally in corporate bonds, and also in U.S. government securities and
commercial paper.
U.S. GOVERNMENT FUND seeks high current income by investing in long-term
U.S. government debt obligations.
TREASURY RESERVES INTERMEDIATE 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 and instrumentalities. U.S.
GOVERNMENT MONEY FUND seeks maximum current income with preservation of
principal and maintenance of liquidity by investing only in short-term
securities issued or guaranteed as to principal and interest by the U.S.
government, its agencies or instrumentalities, and repurchase agreements
collateralized by such securities, while maintaining a stable net asset value.
DELAWARE CASH RESERVE seeks the highest level of income consistent with the
preservation of capital and liquidity through investments in short-term money
market instruments, while maintaining a stable net asset value.
TAX-FREE USA FUND seeks high current income exempt from federal income tax by
investing in municipal bonds of geographically-diverse issuers. TAX-FREE INSURED
FUND invests in these same types of securities but with an emphasis on municipal
bonds protected by insurance guaranteeing principal and interest are paid when
due. TAX-FREE USA INTERMEDIATE FUND seeks a high level of current interest
income exempt from federal income tax, consistent with the preservation of
capital by investing primarily in municipal bonds.
TAX-FREE MONEY FUND seeks high current income, exempt from federal income
tax, by investing in short-term municipal obligations, while maintaining a
stable net asset value.
TAX-FREE PENNSYLVANIA FUND seeks a high level of current interest income
exempt from federal and, to the extent possible, certain Pennsylvania state and
local taxes, consistent with the preservation of capital.
<PAGE>
INTERNATIONAL EQUITY FUND seeks to achieve long-term growth without undue
risk to principal by investing primarily in international securities that
provide the potential for capital appreciation and income. GLOBAL BOND FUND
seeks to achieve current income consistent with the preservation of principal by
investing primarily in global fixed income securities that may also provide the
potential for capital appreciation. GLOBAL ASSETS FUND seeks to achieve
long-term total return by investing in global securities which will provide
higher current income than a portfolio comprised exclusively of equity
securities, along with the potential for capital growth.
DELAWARE GROUP PREMIUM FUND offers nine series available exclusively as
funding vehicles for certain insurance company separate accounts. EQUITY/INCOME
SERIES seeks the highest possible total rate of return by selecting issues that
exhibit the potential for capital appreciation while providing higher than
average dividend income. HIGH YIELD SERIES seeks as high a current income as
possible by investing in rated and unrated corporate bonds, U.S. government
securities and commercial paper. CAPITAL RESERVES SERIES seeks a high stable
level of current income while minimizing fluctuations in principal by investing
in a diversified portfolio of short- and intermediate-term securities. MONEY
MARKET SERIES seeks the highest level of income consistent with preservation of
capital and liquidity through investments in short-term money market
instruments. GROWTH SERIES seeks long-term capital appreciation by investing its
assets in a diversified portfolio of securities exhibiting the potential for
significant growth. MULTIPLE STRATEGY SERIES seeks a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. INTERNATIONAL
EQUITY SERIES seeks long-term growth without undue risk to principal by
investing primarily in equity securities of foreign issuers that provide the
potential for capital appreciation and income. VALUE SERIES seeks capital
appreciation by investing in small- to mid-cap common stocks whose market values
appear low relative to their underlying value or future earnings and growth
potential. Emphasis will also be placed on securities of companies that may be
temporarily out of favor or whose value is not yet recognized by the market.
EMERGING GROWTH SERIES seeks long-term capital appreciation by investing
primarily in small-cap common stocks and convertible securities of emerging and
other growth-oriented companies. These securities will have been judged to be
responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective.
For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus from the Distributor. Read it carefully
before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the information
contained in each Fund's prospectus(es).
29
<PAGE>
GENERAL INFORMATION
The Manager is the investment manager of the Fund. The Manager or its
affiliate, Delaware International Advisers Ltd., manages the other funds in the
Delaware Group. 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, they may make
investment decisions at the same time.
The Distributor acts as national distributor for the Fund and for the other
mutual funds in the Delaware Group. As previously described, prior to January 3,
1995, DDI served as the national distributor for the Fund. In its capacity as
such, DDI received net commissions from the Fund on behalf of the Class A Shares
of the Series after reallowances to dealers, as follows:
TOTAL AMOUNT OF AMOUNTS
FISCAL YEAR UNDERWRITING REALLOWED NET COMMISSION
ENDING COMMISSION TO DEALERS TO DDI
- -------------------------------------------------------------------------------
11/30/94 $2,113,539 $1,761,778 $351,761
11/30/93 2,354,791 1,898,608 456,183
11/30/92 3,077,967 2,484,505 593,462
For the period September 6, 1994 (date of initial public offering) through
November 30, 1994, in its capacity as the Fund's national distributor, DDI
received CDSC payments in the amount of $10 with respect to the Class B Shares.
Effective as of Janaury 3, 1995, all such payments described above will be
paid to Delaware Distributors, L.P.
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 Group. The Transfer Agent is paid a fee by the
Series for providing these services consisting of an annual per account charge
of $5.50 plus transaction charges for particular services according to a
schedule. Compensation is fixed each year and approved by the Board of
Directors, including a majority of the unaffiliated directors.
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.
Chemical Bank, 450 West 33rd Street, New York, NY 10001, is custodian of the
Fund's securities and cash. As custodian for the Fund, Chemical Bank 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.
The legality of the issuance of the shares offered hereby, pursuant to
registration under the Investment Company Act Rule 24f-2, has been passed upon
for the Fund by Messrs. Stradley, Ronon, Stevens & Young, Philadelphia,
Pennsylvania.
<PAGE>
CAPITALIZATION
The Fund has a present authorized capitalization of seven hundred fifty
million shares of capital stock with a $1.00 par value per share. Prior to
January 13, 1994, the Series offered only one class of shares, the class
currently designated the Class A Shares. Beginning January 13, 1994, the
Series began offering the Decatur Income Fund Institutional Class and
beginning September 6, 1994, the Series began offering the Decatur Income
Fund B Class. Each Class represents a proportionate interest in the assets of
the Series, and each has the same voting and other rights and preferences as
the other classes of the Series, except that shares of the Institutional
Class may not vote on any matter affecting the Fund Classes' Distribution
Plans under Rule 12b-1. Similarly, the shareholders of the Class A Shares may
not vote on matters affecting the Series' Plan under Rule 12b-1 relating to
the Class B Shares, and the shareholders of the Class B Shares may not vote
on matters affecting the Series' Plan under Rule 12b-1 relating to the Class
A Shares. General expenses of the Series will be allocated on a pro-rata
basis to the classes according to asset size, except that expenses of the
Rule 12b-1 Plans of the Class A Shares and Class B Shares will be allocated
solely to those classes. While all shares have equal voting rights on matters
affecting the entire Fund, the Series would vote separately on any matter
which affects only this Series, such as any change in its own investment
objective and policies or action to dissolve the Series and as otherwise
prescribed by the Investment Company Act of 1940. Shares of the Series have a
priority in the Series' assets, and in gains on and income from the portfolio
of the Series. The Board of Directors has allocated four hundred fifty
million shares to the Class A Shares, fifty million shares to the Class B
Shares and fifty million shares to the Institutional Class.
Shares have no preemptive rights, are fully transferable and, when issued,
are fully paid and nonassessable.
Prior to May 2, 1994, the Decatur Income Fund series was named the Decatur
I Series (which was known and does business as Decatur Fund I). From May 2,
1994 to September 5, 1994, the Decatur Income Fund A Class was known as the
Decatur Income Fund class and prior to May 2, 1994, it was known as the
Decatur Fund I class. From May 2, 1994 to September 5, 1994, the Decatur
Income Fund Institutional Class was known as the Decatur Income Fund
(Institutional) class and prior to May 2, 1994, it was known as the Decatur
Fund I (Institutional) class.
NONCUMULATIVE VOTING
THESE 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 SECURITIES AND EXCHANGE
COMMISSION.
30
<PAGE>
APPENDIX A -- IRA INFORMATION
The Tax Reform Act of 1986 restructured, and in some cases eliminated, the
tax deductibility of IRA contributions. Under the Act, the full deduction for
IRAs ($2,000 for each working spouse and $2,250 for one-income couples) was
retained for all taxpayers who are not covered by an employer-sponsored
retirement plan. Even if a taxpayer (or his or her spouse) is covered by an
employer-sponsored retirement plan, the full deduction is still available if the
taxpayer's adjusted gross income is below $25,000 ($40,000 for taxpayers filing
joint returns). A partial deduction is allowed for married couples with incomes
between $40,000 and $50,000, and for single individuals with incomes between
$25,000 and $35,000. The Act does not permit deductions for contributions to
IRAs by taxpayers whose adjusted gross income before IRA deductions exceeds
$50,000 ($35,000 for singles) and who are active participants in an
employer-sponsored retirement plan. Taxpayers who were not allowed deductions on
IRA contributions still can make nondeductible IRA contributions of as much as
$2,000 for each working spouse ($2,250 for one-income couples), and defer taxes
on interest or other earnings from the IRAs. Special rules apply for determining
the deductibility of contributions made by married individuals filing separate
returns.
As illustrated in the following tables, maintaining an Individual Retirement
Account remains a valuable opportunity.
For many, an IRA will continue to offer both an up-front tax break with its
tax deduction each year and the real benefit that comes with tax-deferred
compounding. For others, losing the tax deduction will impact their taxable
income status each year. Over the long-term, however, being able to defer taxes
on earnings still provides an impressive investment opportunity -- a way to have
money grow faster due to tax-deferred compounding.
31
<PAGE>
Even if your IRA contribution is no longer deductible, the benefits of saving
on a tax-deferred basis can be substantial. The following tables illustrate the
benefits of tax-deferred versus taxable compounding. Each reflects a constant
10% rate of return, compounded annually, with the reinvestment of all proceeds.
The tables do not take into account any sales charges or fees. Of course,
earnings accumulated in your IRA will be subject to tax upon withdrawal. If you
choose a mutual fund with a fluctuating net asset value, like the Series, your
bottom line at retirement could be lower -- it could also be much higher.
$2,000 INVESTED ANNUALLY ASSUMING A 10% ANNUALIZED RETURN
15% Tax Bracket Single -- $0 - $22,750
--------------- Joint -- $0 - $38,000
<TABLE>
<CAPTION>
HOW MUCH YOU
END OF CUMULATIVE HOW MUCH YOU HAVE WITH FULL IRA
YEAR INVESTMENT AMOUNT HAVE WITHOUT IRA DEDUCTION
<S> <C> <C> <C>
---------------- ---------------------------- --------------------------------- ---------------------------
1 $ 2,000 $ 1,844 $ 2,200
---------------- ---------------------------- --------------------------------- ---------------------------
5 10,000 10,929 13,431
---------------- ---------------------------- --------------------------------- ---------------------------
10 20,000 27,363 35,062
---------------- ---------------------------- --------------------------------- ---------------------------
15 30,000 52,074 69,899
---------------- ---------------------------- --------------------------------- ---------------------------
20 40,000 89,231 126,005
---------------- ---------------------------- --------------------------------- ---------------------------
25 50,000 145,103 216,364
---------------- ---------------------------- --------------------------------- ---------------------------
30 60,000 229,114 361,887
---------------- ---------------------------- --------------------------------- ---------------------------
35 70,000 355,438 596,254
---------------- ---------------------------- --------------------------------- ---------------------------
40 80,000 545,386 973,704
---------------- ---------------------------- --------------------------------- ---------------------------
</TABLE>
[Without IRA--investment of $1,700 ($2,000 less 15%) earning 8.5% (10%
less 15%)]
28% Tax Bracket Single -- $22,751 - $55,100
--------------- Joint -- $38,001 - $91,850
<TABLE>
<CAPTION>
END OF CUMULATIVE HOW MUCH YOU HOW MUCH YOU HAVE WITH FULL IRA
YEAR INVESTMENT AMOUNT HAVE WITHOUT IRA NO DEDUCTION DEDUCTION
<S> <C> <C> <C> <C>
---------------- ----------------------- ----------------------- ----------------------- -----------------------
1 $ 2,000 $ 1,544 $ 1,584 $ 2,200
---------------- ----------------------- ----------------------- ----------------------- -----------------------
5 10,000 8,913 9,670 13,431
---------------- ----------------------- ----------------------- ----------------------- -----------------------
10 20,000 21,531 25,245 35,062
---------------- ----------------------- ----------------------- ----------------------- -----------------------
15 30,000 39,394 50,328 69,899
---------------- ----------------------- ----------------------- ----------------------- -----------------------
20 40,000 64,683 90,724 126,005
---------------- ----------------------- ----------------------- ----------------------- -----------------------
25 50,000 100,485 155,782 216,364
---------------- ----------------------- ----------------------- ----------------------- -----------------------
30 60,000 151,171 260,559 361,887
---------------- ----------------------- ----------------------- ----------------------- -----------------------
35 70,000 222,927 429,303 596,254
---------------- ----------------------- ----------------------- ----------------------- -----------------------
40 80,000 324,512 701,067 973,704
---------------- ----------------------- ----------------------- ----------------------- -----------------------
</TABLE>
[Without IRA--investment of $1,440 ($2,000 less 28%) earning 7.2% (10%
less 28%)]
[With IRA--No Deduction -- investment of $1,440 ($2,000 less 28%) earning 10%]
<PAGE>
31% Tax Bracket Single -- $55,101 - $115,000
--------------- Joint -- $91,851 - $140,000
<TABLE>
<CAPTION>
END OF CUMULATIVE HOW MUCH YOU HOW MUCH YOU HAVE WITH FULL IRA
YEAR INVESTMENT AMOUNT HAVE WITHOUT IRA NO DEDUCTION DEDUCTION
<S> <C> <C> <C> <C>
---------------- ----------------------- ----------------------- ----------------------- -----------------------
1 $ 2,000 $ 1,475 $ 1,518 $ 2,200
---------------- ----------------------- ----------------------- ----------------------- -----------------------
5 10,000 8,467 9,268 13,431
---------------- ----------------------- ----------------------- ----------------------- -----------------------
10 20,000 20,286 24,193 35,062
---------------- ----------------------- ----------------------- ----------------------- -----------------------
15 30,000 36,787 48,231 69,899
---------------- ----------------------- ----------------------- ----------------------- -----------------------
20 40,000 59,821 86,943 126,005
---------------- ----------------------- ----------------------- ----------------------- -----------------------
25 50,000 91,978 149,291 216,364
---------------- ----------------------- ----------------------- ----------------------- -----------------------
30 60,000 136,868 249,702 361,887
---------------- ----------------------- ----------------------- ----------------------- -----------------------
35 70,000 199,536 411,415 596,254
---------------- ----------------------- ----------------------- ----------------------- -----------------------
40 80,000 287,021 671,855 973,704
---------------- ----------------------- ----------------------- ----------------------- -----------------------
</TABLE>
[Without IRA--investment of $1,380 ($2,000 less 31%) earning 6.9% (10%
less 31%)]
[With IRA--No Deduction -- investment of $1,380 ($2,000 less 31%) earning 10%]
32
<PAGE>
36% Tax Bracket* Single -- $115,001 - $250,000
--------------- Joint -- $140,001 - $250,000
<TABLE>
<CAPTION>
END OF CUMULATIVE HOW MUCH YOU HOW MUCH YOU HAVE WITH FULL IRA
YEAR INVESTMENT AMOUNT HAVE WITHOUT IRA NO DEDUCTION DEDUCTION
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
1 $ 2,000 $ 1,362 $ 1,408 $ 2,200
- -----------------------------------------------------------------------------------------------------------------
5 10,000 7,739 8,596 13,431
- -----------------------------------------------------------------------------------------------------------------
10 20,000 18,292 22,440 35,062
- -----------------------------------------------------------------------------------------------------------------
15 30,000 32,683 44,736 69,899
- -----------------------------------------------------------------------------------------------------------------
20 40,000 52,308 80,643 126,005
- -----------------------------------------------------------------------------------------------------------------
25 50,000 79,069 138,473 216,364
- -----------------------------------------------------------------------------------------------------------------
30 60,000 115,562 231,608 361,887
- -----------------------------------------------------------------------------------------------------------------
35 70,000 165,327 381,602 596,254
- -----------------------------------------------------------------------------------------------------------------
40 80,000 233,190 623,170 973,704
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
[Without IRA--investment of $1,280 ($2,000 less 36%) earning 6.4% (10%
less 36%)]
[With IRA--No Deduction -- investment of $1,280 ($2,000 less 36%) earning 10%]
39.6% Tax Bracket* Single -- over $250,000
----------------- Joint -- over $250,000
<TABLE>
<CAPTION>
END OF CUMULATIVE HOW MUCH YOU HOW MUCH YOU HAVE WITH FULL IRA
YEAR INVESTMENT AMOUNT HAVE WITHOUT IRA NO DEDUCTION DEDUCTION
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
1 $ 2,000 $ 1,281 $ 1,329 $ 2,200
- -----------------------------------------------------------------------------------------------------------------
5 10,000 7,227 8,112 13,431
- -----------------------------------------------------------------------------------------------------------------
10 20,000 16,916 21,178 35,062
- -----------------------------------------------------------------------------------------------------------------
15 30,000 29,907 42,219 69,899
- -----------------------------------------------------------------------------------------------------------------
20 40,000 47,324 76,107 126,005
- -----------------------------------------------------------------------------------------------------------------
25 50,000 70,677 130,684 216,364
- -----------------------------------------------------------------------------------------------------------------
30 60,000 101,986 218,580 361,887
- -----------------------------------------------------------------------------------------------------------------
35 70,000 143,965 360,137 596,254
- -----------------------------------------------------------------------------------------------------------------
40 80,000 200,249 588,117 973,704
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
[Without IRA--investment of $1,208 ($2,000 less 39.6%) earning 6.04% (10%
less 39.6%)]
[With IRA--No Deduction -- investment of $1,208 ($2,000 less 39.6%) earning 10%]
<PAGE>
$2,000 SINGLE INVESTMENT AT A RETURN OF 10% COMPOUNDED QUARTERLY
<TABLE>
<CAPTION>
TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
10 $ 3,642 $ 3,774 $ 3,964 $ 4,083 $ 4,638 $ 5,370
- ----------------------------------------------------------------------------------------------------------------------
15 4,915 5,184 5,581 5,833 7,062 8,800
- ----------------------------------------------------------------------------------------------------------------------
20 6,633 7,121 7,857 8,334 10,755 14,419
- ----------------------------------------------------------------------------------------------------------------------
30 12,081 13,436 15,572 17,012 24,939 38,716
- ----------------------------------------------------------------------------------------------------------------------
40 22,001 25,352 30,865 34,728 57,831 103,956
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
$2,000 INVESTED ANNUALLY AT A RETURN OF 10% COMPOUNDED QUARTERLY
<TABLE>
<CAPTION>
TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
10 $ 28,226 $ 28,833 $ 29,702 $ 30,239 $ 32,699 $ 35,834
- ----------------------------------------------------------------------------------------------------------------------
15 50,104 51,753 54,152 55,654 62,755 72,298
- ----------------------------------------------------------------------------------------------------------------------
20 79,629 83,239 88,573 91,966 108,525 132,049
- ----------------------------------------------------------------------------------------------------------------------
30 173,245 185,894 205,256 217,971 284,358 390,394
- ----------------------------------------------------------------------------------------------------------------------
40 343,737 379,596 436,523 475,187 692,097 1,084,066
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
*For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate. In
addition, a 10% surtax (not applicable to capital gains) applies to certain
high-income taxpayers. It is computed by applying a 39.6% rate to taxable
income in excess of $250,000. The above tables do not reflect the personal
exemption phaseout nor the limitations of itemized deductions that may apply.
33
<PAGE>
THE VALUE OF STARTING YOUR IRA EARLY
The following illustrates how much more you would have contributing $2,000
each January -- the earliest opportunity -- compared to contributing on April
15th of the following year the latest, for each tax year.
After 5 years $3,528 more
10 years $6,113
20 years $17,228
30 years $47,295
Compounded returns for the longest period of time is the key. The above
illustration assumes a 10% rate of return and the reinvestment of all proceeds.
AND IT PAYS TO SHOP AROUND. If you get just 2% more per year, it can make a
big difference when you retire. A constant 8% versus 10% return, both
compounded quarterly, illustrates the point. This chart is based on a yearly
investment of $2,000 on January 1. After 30 years the difference can mean as
much as 50% more!
8% Return 10% Return
10 Years $ 31,726 $ 35,834
30 Years 256,465 390,394
The statistical exhibits above are for illustration purposes only and do
not reflect the actual performance for the Series either in the past or in
the future.
34
<PAGE>
APPENDIX B
DECATUR INCOME FUND PERFORMANCE OVERVIEW
The following table illustrates the total return on one share invested in the
Decatur Income Fund A Class(1) during the 10-year period ended November 30,
1994. The results reflect the reinvestment of all dividends and realized
securities profits distributions at the net asset value reported at the time of
distribution. No adjustment has been made for any income taxes payable by
shareholders on income dividends or realized securities profits distributions
accepted in shares.
DECATUR INCOME FUND A CLASS
<TABLE>
<CAPTION>
CUMULA-
TIVE NET
ASSET
VALUE AT
MAXIMUM NET ASSET DISTRIBUTIONS YEAR-END
OFFERING VALUE ----------------------- WITH ALL
YEAR PRICE AT -------------------- FROM FROM DISTRIBU-
ENDED BEGIN- BEGIN- INVEST- REALIZED TIONS
NOV. NING OF NING OF END OF MENT SECURI- REIN-
30 YEAR(2) YEAR YEAR INCOME TIES PROFITS VESTED
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
1985 $16.35 $15.41 $17.20 $ .91 $ 1.00 $19.45
1986 18.25 17.20 19.32 .80 1.56 25.15
1987 20.50 19.32 15.86 .80 2.00 24.01
1988 16.83 15.86 16.89 .73 1.75 30.07
1989 17.92 16.89 19.07 .81 .26 36.02
1990 20.23 19.07 14.53 1.05 1.49 31.70
1991 15.42 14.53 15.76 .97 -- 36.61
1992 16.72 15.76 17.20 .81 -- 41.95
1993 18.25 17.20 18.24 .68 .85 48.62
1994 19.35 18.24 15.57 .86 1.75 48.33
----- ------
TOTAL DISTRIBUTIONS $8.42 $10.66
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
- ------------------------------------------------------------------------------------------------------------
DECATUR INCOME FUND
- --------------------------------------------
MAXIMUM OFFERING PRICE NET ASSET VALUE STANDARD & DOW JONES CONSUMER
TO NET ASSET VALUE TO NET ASSET VALUE POOR'S 500(5) INDUSTRIAL(5) PRICE INDEX(6)
- ------------------------------------------------------------------------------------------------------------
ANNUAL CUMULATIVE(3) ANNUAL CUMULATIVE(4) ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
18.9% 18.9% 26.2% 26.2% 29.0% 29.0% 29.8% 29.8% 3.6% 3.6%
21.9 53.8 29.3 63.2 27.7 64.7 35.1 75.4 1.3 4.9
- -10.0 46.9 -4.5 55.8 -4.7 57.0 -1.0 73.6 4.5 9.7
18.0 83.9 25.2 95.1 23.3 93.6 19.8 108.0 4.2 14.3
12.9 120.3 19.8 133.7 30.8 153.2 33.4 177.4 4.7 19.6
- -17.1 93.9 -12.0 105.7 -3.5 144.3 -1.7 172.7 6.3 27.2
8.9 123.9 15.5 137.6 20.3 193.9 16.9 218.8 3.0 31.0
8.0 156.6 14.6 172.3 18.5 248.3 17.7 275.3 3.0 34.9
9.2 197.4 15.9 215.5 10.1 283.5 14.7 330.4 2.7 38.6
-6.3 195.3 -0.6 213.3 1.1 287.2 4.3 348.2 2.5 42.1
</TABLE>
- --------------------
(1) The Decatur Income Fund A Class began paying 12b-1 payments on May 2, 1994
and performance prior to that date does not reflect such payments.
(2) Reflects a maximum sales charge of 5.75% of total investment. There are
reduced sales charges for investments of $100,000 or more.
(3) Reflects an offering price of $16.35 on November 30, 1984.
(4) Reflects a net asset value of $15.41 on November 30, 1984.
(5) Source: Interactive Data Corp.
(6) Source: John Russell Company.
This period was one of generally rising common stock prices but also covers
several years of declining prices. The results illustrated should not be
considered as representative of dividend income or capital gain or loss which
may be realized from an investment in the Series today.
The Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average
are industry-accepted indices of unmanaged securities used for measuring general
market performance. The performance illustrated for these indices reflects the
reinvestment of all distributions on a quarterly basis and market price
fluctuations. The indices do not take into account any sales charges or other
fees. In seeking a particular investment objective, the Series' portfolio
primarily includes common stocks, which may differ from those in the indices,
and may also include investments in preferred and fixed income securities.
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.
35
<PAGE>
DECATUR INCOME FUND PERFORMANCE OVERVIEW
The following table illustrates the total return on one share invested in the
Decatur Income Fund B Class during the period September 6, 1994 (date of
initial public offering) through November 30, 1994. The results reflect the
reinvestment of all dividends and realized securities profits distributions at
the net asset value reported at the time of distribution. No adjustment has been
made for any income taxes payable by shareholders on income dividends or
realized securities profits distributions accepted in shares.
DECATUR INCOME FUND B CLASS
<TABLE>
<CAPTION>
CUMULA-
TIVE NET
ASSET
VALUE AT
MAXIMUM NET ASSET DISTRIBUTIONS YEAR-END
OFFERING VALUE ----------------------- WITH ALL
PERIOD PRICE AT -------------------- FROM FROM DISTRIBU-
ENDED BEGIN- BEGIN- INVEST- REALIZED TIONS
NOV. NING OF NING OF END OF MENT SECURI- REIN-
30 YEAR YEAR YEAR INCOME TIES PROFITS VESTED
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
1994 $16.61 $16.61 $15.55 $.17 -- $14.02
---- -----
Total Distributions $.17 $0.00
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
- ------------------------------------------------------------------------------------------------------------
DECATUR INCOME FUND
- --------------------------------------------
RETURNS INCLUDING RETURNS EXCLUDING STANDARD & DOW JONES CONSUMER
CDSC(1) CDSC(1) POOR'S 500(3) INDUSTRIAL(3) PRICE INDEX(4)
- ------------------------------------------------------------------------------------------------------------
ANNUAL CUMULATIVE(2) ANNUAL CUMULATIVE(2) ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -5.3% -5.3% -9.0% -9.0% -3.2% -3.2% -3.4% -3.4% 0.4% 0.4%
</TABLE>
- -----------
(1) Total return provided below is on an aggregate basis. Total return for this
short of a time period may not be representative of longer-term results.
(2) Reflects a net asset value of $16.59 on September 2, 1994.
(3) Source: Interactive Data Corp.
(4) Source: John Russell Company.
The Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average
are industry-accepted unmanaged indices of generally-conservative securities
used for measuring general market performance. The performance illustrated for
these indices reflects the reinvestment of all distributions on a quarterly
basis and market price fluctuations. The indices do not take into account any
sales charge or other fees. In seeking a particular investment objective, the
Fund's portfolio primarily includes common stocks, which may differ from those
in the indices, and may also include investments in fixed income securities.
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 repreent
a return from an investment.
36
<PAGE>
Decatur Income Fund Performance Overview
The following table illustrates the total return on one share invested in the
Decatur Income Fund Institutional Class(1) during the 10-year period ended
November 30, 1994. The results reflect the reinvestment of all dividends and
realized securities profits distributions at the net asset value reported at the
time of distribution. No adjustment has been made for any income taxes payable
by shareholders on income dividends or realized securities profits distributions
accepted in shares.
DECATUR INCOME FUND INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
CUMULA-
TIVE NET
ASSET
VALUE AT
MAXIMUM NET ASSET DISTRIBUTIONS YEAR-END
OFFERING VALUE ----------------------- WITH ALL
YEAR PRICE AT -------------------- FROM FROM DISTRIBU-
ENDED BEGIN- BEGIN- INVEST- REALIZED TIONS
NOV. NING OF NING OF END OF MENT SECURI- REIN-
30 YEAR YEAR YEAR INCOME TIES PROFITS VESTED
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
1985 $15.41 $15.41 $17.20 $ .91 $ 1.00 $19.45
1986 17.20 17.20 19.32 .80 1.56 25.15
1987 19.32 19.32 15.86 .80 2.00 24.01
1988 15.86 15.86 16.89 .73 1.75 30.07
1989 16.89 16.89 19.07 .81 .26 36.02
1990 19.07 19.07 14.53 1.05 1.49 31.70
1991 14.53 14.53 15.76 .97 -- 36.61
1992 15.76 15.76 17.20 .81 -- 41.95
1993 17.20 17.20 18.24 .68 .85 48.62
1994 18.24 18.24 15.59 .86 1.75 48.38
----- -----
TOTAL DISTRIBUTIONS $8.42 $10.66
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
- -------------------------------------------------------------------------------------
DECATUR INCOME FUND
- --------------------------------------------
NET ASSET VALUE STANDARD & DOW JONES CONSUMER
TO NET ASSET VALUE POOR'S 500(3) INDUSTRIAL(3) PRICE INDEX(4)
- -------------------------------------------------------------------------------------
ANNUAL CUMULATIVE(2) ANNUAL CUMULATIVE(2) ANNUAL CUMULATIVE ANNUAL CUMULATIVE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
26.2% 26.2% 29.0% 29.0% 29.8% 29.8% 3.6% 3.6%
29.3 63.2 27.7 64.7 35.1 75.4 1.3 4.9
-4.5 55.8 -4.7 57.0 -1.0 73.6 4.5 9.7
25.2 95.1 23.3 93.6 19.8 108.0 4.2 14.3
19.8 133.7 30.8 153.2 33.4 177.4 4.7 19.6
- -12.0 105.7 -3.5 144.3 -1.7 172.7 6.3 27.2
15.5 137.6 20.3 193.9 16.9 218.8 3.0 31.0
14.6 172.3 18.5 248.3 17.7 275.3 3.0 34.9
15.9 215.5 10.1 283.5 14.7 330.4 2.7 38.6
-0.5 213.7 1.1 287.2 4.3 348.2 2.5 42.1
</TABLE>
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(1)Performance for Decatur Income Fund Institutional Class for periods prior to
January 13, 1994 (date of initial public offering) is calculated by taking
the performance of the Decatur Income Fund A Class and adjusting it to
reflect the elimination of all sales charges.
(2) Reflects a net asset value of $15.41 on November 30, 1984.
(3) Source: Interactive Data Corp.
(4) Source: John Russell Company.
This period was one of generally rising common stock prices but also covers
several years of declining prices. The results illustrated should not be
considered as representative of dividend income or capital gain or loss which
may be realized from an investment in the Fund today.
The Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average are
industry-accepted unmanaged indices of generally-conservative securities used
for measuring general market performance. The performance illustrated for these
indices reflects the reinvestment of all distributions on a quarterly basis and
market price fluctuations. The indices do not take into account any sales charge
or other fees. In seeking a particular investment objective, the Fund's
portfolio primarily includes common stocks, which may differ from those in the
indices, and may also include investments in fixed income securities.
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.
37
<PAGE>
APPENDIX C
THE COMPANY LIFE CYCLE
Traditional business theory contends that a typical company progresses
through basically four stages of development, keyed closely to a firm's sales.
1. EMERGING GROWTH--a period of experimentation in which the company builds
awareness of a new product or firm.
2. ACCELERATED DEVELOPMENT--a period of rapid growth with potentially high
profitability and acceptance of the product.
3. MATURING PHASE--a period of diminished real growth due to dependence on
replacement or sustained product demand.
4. CYCLICAL STAGE--a period in which a company faces a potential saturation
of demand for its product. At this point, a firm either diversifies or
becomes obsolete.
(CHART GOES HERE)
Hypothetical Corporate Life Cycle Chart shows in a line illustration, the
stages that a typical company would go through, beginning with the emerging
state where sales growth continues at a steep pace to the mature phase where
growth levels off to the cyclical stage where sales show more definitive
highs and lows.
The above chart illustrates the path traditionally
followed by companies that successfully survive the growth sequence.
38
<PAGE>
FINANCIAL STATEMENTS
The Delaware Group Decatur Fund, Inc.-Decatur Income Fund's STATEMENT OF NET
ASSETS, STATEMENT OF OPERATIONS, STATEMENT OF CHANGES IN NET ASSETS, and NOTES
TO FINANCIAL STATEMENTS, as well as the report of Ernst & Young LLP, independent
auditors, for the fiscal year ended November 30, 1994, are included in the
Series' ANNUAL REPORT to shareholders. The Series was formerly known as Decatur
Fund I. The financial statements, 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.
39
<PAGE>
Supplement Dated August 29, 1995
to the Current Statements of Additional Information
of the Following Delaware Group Funds
Delaware Group Delaware Fund, Inc.,
Delaware Group Trend Fund, Inc.,
Delaware Group Value Fund, Inc.,
Delaware Group Decatur Fund, Inc.,
Delaware Group DelCap Fund, Inc.,
Delaware Group Global & International Funds, Inc.,
Delaware Group Delchester High-Yield Bond Fund, Inc.,
Delaware Group Government Fund, Inc.,
Delaware Group Tax-Free Fund, Inc.,
Delaware Group Limited-Term Government Funds, Inc.,
Delaware Group Tax-Free Money Fund, Inc.,
Delaware Group Cash Reserve, Inc.,
DMC Tax-Free Income Trust-Pennsylvania
The exchange policy of the Fund as stated under
"Redemption and Exchange" is amended as follows 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"):
Right To Refuse Timing Accounts
Effective immediately, the Fund reserves the right to
refuse any new Timing Arrangements as well as any new
purchases (as opposed to exchanges) in Delaware Group funds
from Timing Firms.
Restrictions on Timed Exchanges
Effective 60 days from this notice, Timing Accounts
operating under existing Timing Agreements may only execute
exchanges between the following six Delaware Group funds: 1)
Decatur Income Fund, 2) Decatur Total Return Fund, 3)
Delaware Fund, 4) Limited-Term Government Fund, 5) Tax-Free
USA Fund and 6) Delaware Cash Reserve. No other Delaware
Group funds will be available for Timed Exchanges. Assets
redeemed or exchanged out of Timing Accounts in Delaware
Group funds not listed above may not be reinvested back into
that Timing Account.
In addition, 60 days hence, the Fund will terminate,
except as noted above, all exchanges privileges, including
telephone and written redemption privileges, previously made
available to Timing Firms. At such time, only shareholders
and their authorized brokers of record will be permitted to
make exchanges or redemptions.
