<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 2-10765
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 104 X
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AND
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 104
DELAWARE GROUP DELAWARE FUND, INC.
(to be renamed Delaware Group Equity Funds I, Inc.)
----------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
----------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 751-2923
--------------
George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
----------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Public Offering: December 30, 1996
-----------------
It is proposed that this filing will become effective:
_________ immediately upon filing pursuant to paragraph (b)
___ X ___ on December 30, 1996 pursuant to paragraph (b)
_________ 60 days after filing pursuant to paragraph (a)(1)
_________ on (date) pursuant to paragraph (a)(1)
_________ 75 days after filing pursuant to paragraph (a)(2)
_________ on (date) pursuant to paragraph (a)(2) of Rule 485.
Registrant has registered an indefinite amount of securities
under the Securities Act of 1933 pursuant to Section 24(f)
of the Investment Company Act of 1940. Registrant's 24f-2 Notice
for its most recent fiscal year will be filed on or about December 30, 1996.
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 104 to Registration File No. 2-10765
includes the following:
1. Facing Page
2. Contents Page
3. Cross-Reference Sheet
4. Part A - Prospectuses
5. Part B - Statement of Additional Information
6. Part C - Other Information
7. Signatures
<PAGE>
CROSS-REFERENCE SHEET*
PART A
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
- -------- ----------- ------------
<S> <C> <C> <C>
A Classes/ Institutional
B Classes/ Classes
C Classes
1 Cover Page.................................... Cover Cover
2 Synopsis...................................... Synopsis; Synopsis;
Summary of Summary of
Expenses Expenses
3 Condensed Financial Information............... Financial Financial
Highlights Highlights
4 General Description of Registrant ............ Investment Investment
Objectives and Objectives and
Policies; Shares; Policies; Shares
Other Investment Other Invest-
Policies and ment Policies
Risk Factors and Risk Factors
5 Management of the Fund ....................... Management of Management of
the Funds the Funds
6 Capital Stock and Other Securities ........... Delaware Dividends and
Difference; Distributions;
Dividends and Taxes;
Distributions; Shares
Taxes; Shares
7 Purchase of Securities Being Offered.......... Cover; Cover;
How to Buy How to Buy Shares;
Shares; Calculation Calculation of
of Offering Price Net Asset
and Net Asset Value Per Share;
Value Per Share; Management of
Management of the Funds
the Funds
8 Redemption or Repurchase...................... How to Buy How to Buy
Shares; Redemption Shares;
and Exchange Redemption and
Exchange
9 Pending Legal Proceedings..................... None None
</TABLE>
* This filing relates to Registrant's Delaware Fund A Class, Delaware Fund B
Class, Delaware Fund C Class and Delaware Fund Institutional Class of
Delaware Fund, and Devon Fund A Class, Devon Fund B Class, Devon Fund C Class
and Devon Fund Institutional Class of Devon Fund. The Class A Shares, Class B
Shares and Class C Shares of Delaware Fund and Devon Fund are combined in one
Prospectus, and the Institutional Class of such Funds is combined in one
Prospectus. The two Funds (and 8 classes) have a common Statement of
Additional Information and Part C.
<PAGE>
CROSS-REFERENCE SHEET
PART B
<TABLE>
<CAPTION>
Location in Statement
Item No. Description of Additional Information
- -------- ----------- -------------------------
<S> <C> <C>
10 Cover Page............................................... Cover
11 Table of Contents........................................ Table of Contents
12 General Information and History.......................... General Information
13 Investment Objectives and Policies....................... Investment Restrictions
and Policies
14 Management of the Registrant............................. Officers and Directors
15 Control Persons and Principal Holders of Securities...... Officers and Directors
16 Investment Advisory and Other Services................... Plans Under Rule 12b-1
for the Fund Classes
(under Purchasing Shares);
Investment Management
Agreements; Officers and
Directors; General
Information; Financial
Statements
17 Brokerage Allocation..................................... Trading Practices
and Brokerage
18 Capital Stock and Other Securities....................... Capitalization and
Noncumulative Voting
(under General Information)
19 Purchase, Redemption and Pricing of Securities
Being Offered............................................ Purchasing Shares;
Determining Offering
Price and Net Asset
Value; Redemption and
Repurchase; Exchange Privilege
20 Tax Status............................................... Taxes
21 Underwriters ............................................ Purchasing Shares
22 Calculation of Performance Data.......................... Performance Information
23 Financial Statements..................................... Financial Statements
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET
PART C
<TABLE>
<CAPTION>
Location in
Part C
-----------
<S> <C> <C>
24 Financial Statements and Exhibits......................... Item 24
25 Persons Controlled by or under Common
Control with Registrant................................... Item 25
26 Number of Holders of Securities........................... Item 26
27 Indemnification........................................... Item 27
28 Business and Other Connections of Investment Adviser...... Item 28
29 Principal Underwriters.................................... Item 29
30 Location of Accounts and Records.......................... Item 30
31 Management Services....................................... Item 31
32 Undertakings.............................................. Item 32
</TABLE>
<PAGE>
(DF/DVN-ABC)
The Delaware Group includes -----------------------------------
funds with a wide range of investment
objectives. Stock funds, income funds, DELAWARE FUND
tax-free funds, money market funds, DEVON FUND
global and international funds and
closed-end equity funds give investors -----------------------------------
the ability to create a portfolio that
fits their personal financial goals. A CLASS
For more information, contact your -----------------------------------
financial adviser or call Delaware
Group at 800-523-4640. B CLASS
-----------------------------------
C CLASS
-----------------------------------
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103 P R O S P E C T U S
SHAREHOLDER SERVICING, -----------------------------------
DIVIDEND DISBURSING,
ACCOUNTING SERVICES DECEMBER 30, 1996
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
DELAWARE
GROUP
--------
<PAGE>
(DF/DVN-ABC)
DELAWARE FUND PROSPECTUS
DEVON FUND DECEMBER 30, 1996
A CLASS SHARES
B CLASS SHARES
C CLASS SHARES
--------------------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance: Nationwide 800-523-4640
Information on Existing Accounts: (SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Representatives of Financial Institutions:
Nationwide 800-659-2259
This Prospectus describes the shares of the Delaware Fund series
("Delaware Fund") (formerly Common Stock series) and the Devon Fund series
("Devon Fund") (individually, a "Fund" and collectively, the "Funds") of
Delaware Group Equity Funds I, Inc. ("Equity Funds I, Inc.") (formerly Delaware
Group Delaware Fund, Inc.), a professionally-managed mutual fund of the series
type. Delaware Fund's objective is to seek a balance of capital appreciation,
income and preservation of capital. Devon Fund's objective is to seek current
income and capital appreciation.
Delaware Fund offers Delaware Fund A Class ("Class A Shares"), Delaware
Fund B Class ("Class B Shares") and Delaware Fund C Class ("Class C Shares") and
Devon Fund offers Devon Fund A Class ("Class A Shares"), Devon Fund B Class
("Class B Shares") and Devon Fund C Class ("Class C Shares") (such classes,
individually, a "Class" and collectively, the "Classes").
This Prospectus relates only to the Classes listed above and sets forth
information that you should read and consider before you invest. Please retain
it for future reference. The Funds' Statement of Additional Information ("Part
B" of Equity Funds I, Inc.'s registration statement), dated December 30, 1996,
as it may be amended from time to time, contains additional information about
each Fund and has been filed with the Securities and Exchange Commission. Part B
is incorporated by reference into this Prospectus and is available, without
charge, by writing to Delaware Distributors, L.P. at the above address or by
calling the above numbers. Each Fund's financial statements appear in its Annual
Report, which will accompany any response to requests for Part B.
Delaware Fund also offers Delaware Fund Institutional Class, and Devon
Fund also offers Devon Fund Institutional Class. Those classes are available for
purchase only by certain investors. A prospectus for Delaware Fund Institutional
Class and Devon Fund Institutional Class can be obtained by writing to Delaware
Distributors, L.P. at the above address or by calling the above number.
-1-
<PAGE>
(DF/DVN-ABC)
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Cover Page How to Buy Shares
Synopsis Redemption and Exchange
Summary of Expenses Dividends and Distributions
Financial Highlights Taxes
Investment Objectives and Policies Calculation of Offering Price and
Suitability Net Asset Value Per Share
Investment Strategy Management of the Funds
The Delaware Difference Other Investment Policies and
Plans and Services Risk Considerations
Retirement Planning Appendix A--Investment Illustrations
Classes of Shares Appendix B--Classes Offered
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUNDS ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUNDS ARE NOT BANK
OR CREDIT UNION DEPOSITS.
-2-
<PAGE>
(DF/DVN-ABC)
SYNOPSIS
Investment Objectives
The investment objective of Delaware Fund is to seek a balance of
capital appreciation, income and preservation of capital. The investment
objective of Devon Fund is to seek current income and capital appreciation. For
further details, see Investment Objectives and Policies and Other Investment
Policies and Risk Considerations.
Risk Factors and Special Considerations
Delaware Fund typically invests a portion of its assets in
mortgage-backed and asset-backed securities (commonly considered to be
"derivative securities"), which may present greater risks than other types of
portfolio securities, and the investor should review the descriptions of these
risks in this Prospectus. See Mortgage-Backed Securities and Asset-Backed
Securities under Other Investment Policies and Risk Considerations.
Devon Fund may enter into options and futures transactions for hedging
purposes to counterbalance portfolio volatility. While Devon Fund does not
engage in options and futures for speculative purposes, there are risks that
result from use of these instruments by the Fund, and the investor should review
the descriptions of these risks in this Prospectus. See Futures Contracts and
Options under Other Investment Policies and Risk Considerations.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") furnishes investment
management services to each Fund, subject to the supervision and direction of
Equity Funds I, Inc.'s Board of Directors. The Manager also provides investment
management services to certain of the other funds in the Delaware Group.
Delaware Distributors, L.P. (the "Distributor") is the national distributor for
each Fund and for all of the other mutual funds in the Delaware Group. Delaware
Service Company, Inc. (the "Transfer Agent") is the shareholder servicing,
dividend disbursing, accounting services and transfer agent for each Fund and
for all of the other mutual funds in the Delaware Group. See Summary of Expenses
and Management of the Funds for further information regarding the Manager and
the fees payable under each Fund's Investment Management Agreement.
Sales Charges
The price of each of the Class A Shares includes a maximum front-end
sales charge of 4.75% of the offering price, which, based on the net asset value
per share of the Class A Shares as of the end of Equity Funds I, Inc.'s most
recent fiscal year, is equivalent to 4.99% of the amount invested for Delaware
Fund A Class and 5.00% of the amount invested for Devon Fund A Class. The sales
charge is reduced on certain transactions of at least $100,000 but under
$1,000,000. For purchases of $1,000,000 or more, the front-end sales charge is
eliminated. Class A Shares are subject to annual 12b-1 Plan expenses for the
life of the investment.
The price of each of the Class B Shares is equal to the net asset value
per share. Class B Shares are subject to a contingent deferred sales charge
("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
-3-
<PAGE>
(DF/DVN-ABC)
during the sixth year following purchase. Class B Shares are subject to annual
12b-1 Plan expenses for approximately eight years after purchase. See Deferred
Sales Charge Alternative - Class B Shares and Automatic Conversion of Class B
Shares under Classes of Shares.
The price of the Class C Shares is equal to the net asset value per
share. Class C Shares are subject to a CDSC of 1% if shares are redeemed within
12 months of purchase. Class C Shares are subject to annual 12b-1 Plan expenses
for the life of the investment.
See Classes of Shares and Distribution (12b-1) and Service under
Management of the Funds.
Purchase Amounts
Generally, the minimum initial investment in any Class is $1,000.
Subsequent investments generally must be at least $100.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. An investor may exceed these maximum purchase
limitations for Class B Shares and Class C Shares by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of $100,000 or more in Class A
Shares, and that Class A Shares are subject to lower annual 12b-1 Plan expenses
than Class B and Class C Shares and generally are not subject to a CDSC. The
minimum and maximum purchase amounts for retirement plans may vary. See How to
Buy Shares.
Redemption and Exchange
Class A Shares of each Fund may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange request.
Neither the Funds nor the Distributor assesses a charge for redemptions or
exchanges of Class A Shares, except for certain redemptions of shares purchased
at net asset value, which may be subject to a CDSC if a dealer's commission was
paid in connection with such purchases. See Front-End Sales Charge Alternative -
Class A Shares under Classes of Shares.
Class B Shares and Class C Shares may be redeemed or exchanged at the
net asset value calculated after receipt of the redemption or exchange request
subject, in the case of redemptions, to any applicable CDSC. Neither the Funds
nor the Distributor assesses any charges other than the CDSC for redemptions or
exchanges of Class B or Class C Shares. There are certain limitations on an
investor's ability to exchange shares between the various classes of shares that
are offered. See Redemption and Exchange.
Open-End Investment Company
Equity Funds I, Inc., which was organized as a Maryland corporation on
March 4, 1983, is an open-end management investment company. Each Funds'
portfolio of assets is diversified as defined by the Investment Company Act of
1940 (the "1940 Act"). Equity Funds I, Inc. was previously organized as a
Delaware Corporation in 1937. See Shares under Management of the Funds.
-4-
<PAGE>
(DF/DVN-ABC)
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to each Funds' Class A, Class B and Class C Shares follows:
<TABLE>
<CAPTION>
Delaware Fund Devon Fund
Class A Class B Class C Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares Shares Shares Shares
- -------------------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price)...................... 4.75% None None 4.75% None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as a
percentage of offering price) None None None None None None
Maximum Contingent Deferred
Sales Charge (as a percentage
of original purchase price or
redemption proceeds, as
applicable)............................. None* 4.00%* 1.00%* None* 4.00%* 1.00%*
Redemption Fees............................ None** None** None** None** None** None**
</TABLE>
*Class A purchases of $1 million or more may be made at net asset
value. However, if in connection with any such purchase a dealer commission is
paid to the financial adviser through whom such purchase is effected, a CDSC of
1% will be imposed on certain redemptions within 12 months of purchase ("Limited
CDSC"). Class B Shares are subject to a CDSC of: (i) 4% if shares are redeemed
within two years of purchase; (ii) 3% if shares are redeemed during the third or
fourth year following purchase; (iii) 2% if shares are redeemed during the fifth
year following purchase; (iv) 1% if shares are redeemed during the sixth year
following purchase; and (v) 0% thereafter. Class C Shares are subject to a CDSC
of 1% if shares are redeemed within 12 months of purchase. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange; Deferred Sales Charge Alternative -
Class B Shares and Level Sales Charge Alternative - Class C Shares under Classes
of Shares.
**CoreStates Bank, N.A. currently charges $7.50 per redemption for
redemptions payable by wire.
-5-
<PAGE>
(DF/DVN-ABC)
<TABLE>
<CAPTION>
Annual Operating Expenses Delaware Fund Devon Fund
(as a percentage of average Class A Class B Class C Class A Class B Class C
daily net assets) Shares Shares Shares Shares Share Shares
- --------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Management Fees
(after voluntary waivers in
the case of Devon Fund)....... 0.52% 0.52% 0.52% 0.00%++ 0.00%++ 0.00%++
12b-1 Plan Expenses
(including service fees)......... 0.19%***/+ 1.00%*** 1.00%*** 0.30%*** 1.00%*** 1.00%***
Other Operating Expenses
(after expense limitations
in the case of Devon Fund)....... 0.28% 0.28% 0.28% 0.95%++ 0.95%++ 0.95%++
----- ----- ----- ----- ----- -----
Total Operating Expenses
(after voluntary waivers and
expense limitations in the
case of Devon Fund)........... 0.99% 1.80% 1.80% 1.25%++ 1.95%++ 1.95%++
===== ===== ===== ===== ===== =====
</TABLE>
***Class A Shares, Class B Shares and Class C Shares of each Fund are
subject to separate 12b-1 Plans. Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges permitted by rules of
the National Association of Securities Dealers, Inc. (the "NASD"). See
Distribution (12b- 1) and Service under Management of the Funds.
+The actual 12b-1 Plan expenses to be paid and, consequently, the Total
Operating Expenses of Delaware Fund A Class may vary because of the formula
adopted by the Board of Directors for use in calculating the 12b-1 Plan expenses
for this Class beginning June 1, 1992, but the 12b-1 Plan expenses will not be
more than 0.30% nor less than 0.10%.
++The Manager had elected voluntarily to waive that portion, if any, of
the annual management fees payable by Devon Fund and to reimburse the Fund to
the extent necessary to ensure that the "Total Operating Expenses" of this Fund
did not exceed 0.95% (exclusive of taxes, interest, brokerage commissions,
extraordinary expenses and 12b-1 expenses) during the commencement of the public
offering of the Fund through December 31, 1994. This waiver has been extended
through June 30, 1997. If the voluntary expense waivers were not in effect, it
is estimated that the "Total Operating Expenses," as a percentage of average
daily net assets would be 1.84%, 2.54% and 2.54% for Devon Fund A Class, Devon
Fund B Class and Devon Fund C Class, respectively, reflecting Management Fees of
0.60%
For expense information about Delaware Fund Institutional Class and
Devon Fund Institutional Class of shares, see the separate prospectus relating
to those classes.
-6-
<PAGE>
(DF/DVN-ABC)
The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return, (2) redemption and no redemption at the end of each time period
and (3) for Class B Shares and Class C Shares, payment of a CDSC at the time of
redemption, if applicable.
<TABLE>
<CAPTION>
DELAWARE FUND
Assuming Redemption Assuming No Redemption
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares $57(1) $78 $100 $163 $57 $78 $100 $163
Class B Shares $58 $87 $117 $190(2) $18 $57 $97 $190(2)
Class C Shares $28 $57 $97 $212 $18 $57 $97 $212
DEVON FUND
Assuming Redemption Assuming No Redemption
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
Class A Shares $60(1) $85 $113 $191 $60 $85 $113 $191
Class B Shares $60 $91 $125 $209(2) $20 $61 $105 $209(2)
Class C Shares $30 $61 $105 $227 $20 $61 $105 $227
</TABLE>
(1) Generally, no redemption charge is assessed upon redemption of Class A
Shares. Under certain circumstances, however, a Limited CDSC, which has
not been reflected in this calculation, may be imposed on certain
redemptions within 12 months of purchase. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
(2) At the end of approximately eight years after purchase, Class B Shares
of a Fund will be automatically converted into Class A Shares of that
Fund. The example above assumes conversion of Class B Shares at the end
of the eighth year. However, the conversion may occur as late as three
months after the eighth anniversary of purchase, during which time the
higher 12b-1 Plan fees payable by Class B Shares will continue to be
assessed. Information for the ninth and tenth years reflects expenses
of the Class A Shares. See Automatic Conversion of Class B Shares under
Classes of Shares for a description of the automatic conversion
feature.
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in each Class will
bear directly or indirectly.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
-7-
<PAGE>
(DF/DVN-ABC)
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Funds and Devon Fund of Delaware Group Equity Funds I, Inc. (formerly
known as Delaware Group Delaware Fund, Inc.) and have been audited by Ernst &
Young LLP, independent auditors. The data should be read in conjunction with the
financial statements, related notes, and the reports of Ernst & Young LLP
covering such financial information and highlights, all of which are
incorporated by reference into Part B. Further information about the Funds'
performance is contained in their Annual Reports to shareholders. A copy of each
Fund's Annual Report (including the report of Ernst & Young LLP) may be obtained
from Equity Funds I, Inc. upon request at no charge.
- --------------------------------------------------------------------------------
-8-
<PAGE>
(DF/DVN-ABC)
DF-A-CHT
<TABLE>
<CAPTION>
Delaware Fund
Class A Shares
----------------------------------------------------
Year Ended
10/31/96(1) 10/31/95(1) 10/31/94(1) 10/31/93(1) 10/31/92(1)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......................... $19.940 $18.000 $19.430 $18.720 $18.810
------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Income........................................ 0.706 0.664 0.615 0.631 0.660
Net Gains (Losses) on Securities
(both realized and unrealized).................... 2.349 2.156 (0.285) 1.509 1.490
------- ------- ------- ------- -------
Total From Investment Operations....................... 3.055 2.820 0.330 2.140 2.150
------- ------- ------- ------- -------
Less Distributions
Dividends (from net investment income)....................... (0.655) (0.630) (0.600) (0.660) (0.700)
Distributions (from capital gains)........................... (1.080) (0.250) (1.160) (0.770) (1.540)
Returns of Capital........................................... none none none none none
------- ------- ------- ------- -------
Total Distributions.................................... (1.735) (0.880) (1.760) (1.430) (2.240)
------- ------- ------- ------- -------
Net Asset Value, End of Period............................... $21.260 $19.940 $18.000 $19.430 $18.720
======= ======= ======= ======= =======
Total Return(2).............................................. 16.07% 16.26% 1.80% 11.91% 12.37%
- ------------
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted).................... $490,150 $493,243 $456,074 $507,528 $487,343
Ratio of Expenses to Average Daily Net Assets................ 0.99% 0.97% 0.97% 0.89% 0.79%
Ratio of Net Investment Income to Average Daily Net Assets... 3.39% 3.55% 3.31% 3.27% 3.64%
Portfolio Turnover Rate...................................... 92% 94% 142% 160% 144%
Average Commission Rate Paid................................. $0.060 N/A N/A N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
10/31/91 10/31/90 10/31/89 10/31/88 10/31/87
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......................... $16.190 $17.480 $15.250 $16.850 $23.200
------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Income........................................ 0.757 0.856 0.796 0.551 0.331
Net Gains (Losses) on Securities
(both realized and unrealized).................... 3.033 (1.366) 2.384 2.259 (1.971)
------- ------- ------- ------- -------
Total From Investment Operations....................... 3.790 (0.510) 3.180 2.810 (1.640)
------- ------- ------- ------- -------
Less Distributions
Dividends (from net investment income)....................... (0.880) (0.780) (0.950) (0.320) (0.400)
Distributions (from capital gains)........................... (0.290) none none (4.090) (4.310)
Returns of Capital........................................... none none none none none
------- ------- ------- ------- -------
Total Distributions.................................... (1.170) (0.780) (0.950) (4.410) (4.710)
------- ------- ------- ------- -------
Net Asset Value, End of Period............................... $18.810 $16.190 $17.480 $15.250 $16.850
======= ======= ======= ======= =======
Total Return(2).............................................. 24.32% (3.17%) 21.66% 22.03 (9.14%)
- ------------
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted).................... $453,449 $349,873 $361,625 $328,650 $320,854
Ratio of Expenses to Average Daily Net Assets................ 0.71% 0.75% 0.76% 0.77% 0.73%
Ratio of Net Investment Income to Average Daily Net Assets... 4.29% 4.99% 4.73% 4.01% 1.64%
Portfolio Turnover Rate...................................... 212% 147% 129% 180% 205%
Average Commission Rate Paid................................. N/A N/A N/A N/A N/A
</TABLE>
- --------------
(1) Reflects 12b-1 distribution expenses beginning June 1, 1992.
(2) Does not reflect any maximum sales charge that is or was in effect nor the
1% Limited CDSC that would apply in the event of certain redemptions
within 12 months of purchase. See Contingent Deferred Sales Charge for
Certain Purchases of Class A Shares Made at Net Asset Value.
<PAGE>
(DF/DVN-ABC)
DF-B-CHT
<TABLE>
<CAPTION>
Delaware Fund Delaware Fund
Class B Shares Class C Shares
---------------------------------- ---------------------
Period Period
9/6/94(1) 11/29/95(1)
Year Ended through through
10/31/96 10/31/95 10/31/94 10/31/96
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......................... $19.900 $17.980 $18.340 $20.500
Income From Investment Operations
Net Investment Income........................................ 0.525 0.567 0.070 0.583
Net Gains (Losses) on Securities
(both realized and unrealized).................... 2.350 2.113 (0.280) 1.757
----- ----- ------- -----
Total From Investment Operations....................... 2.875 2.680 (0.210) 2.340
----- ----- ------- -----
Less Distributions
Dividends (from net investment income)....................... (0.495) (0.510) (0.150) (0.580)
Distributions (from capital gains)........................... (1.080) (0.250) none (1.080)
Returns of Capital........................................... none none none none
---- ---- ---- ----
Total Distributions.................................... (1.575) (0.760) (0.150) (1.660)
------- ------- ------- -------
Net Asset Value, End of Period............................... $21.200 $19.900 $17.980 $21.180
======= ======= ======= =======
Total Return(2).............................................. 15.15% 15.36% (1.14%) 12.13%
- ------------
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted).................... $6,872 $3,383 $568 $1,990
Ratio of Expenses to Average Daily Net Assets ............... 1.80% 1.79% 1.81% 1.80%
Ratio of Net Investment Income to Average Daily Net Asset 2.58% 2.73% 2.47% 2.58%
Portfolio Turnover Rate...................................... 92% 94% 142% 92%
Average Commission Rate Paid................................. $0.060 N/A N/A $0.060
</TABLE>
(1) Date of initial public offering; ratios have been annualized but total
return has not been annualized. Total return for this short of a time
period may not be representative of longer term results.
(2) Does not include any CDSC which varies from 1% - 4%, depending upon the
holding period for Delaware Fund B Class and 1% for Delaware Fund C Class
for 12 months from the date of purchase.
<PAGE>
(DF/DVN-ABC)
DVN-A-CHT
<TABLE>
<CAPTION>
Devon Fund
Class A Shares
------------------------------------
Period
12/29/93(1)
Year Ended through
10/31/96 10/31/95 10/31/94
<S> <C> <C> <C>
Net Asset Value, Beginning of Period......................... $12.550 $10.830 $10.000
Income From Investment Operations
Net Investment Income........................................ 0.216 0.207(2) 0.136
Net Gains (Losses) on Securities
(both realized and unrealized).......................... 2.689 2.053 0.784
----- ----- -----
Total From Investment Operations........................ 2.905 2.260 0.920
----- ----- -----
Less Distributions
Dividends (from net investment income)....................... (0.205) (0.220) (0.090)
Distributions (from capital gains)........................... (0.640) (0.320) none
Returns of Capital........................................... none none none
------- ------- -------
Total Distributions..................................... (0.845) (0.540) (0.090)
------- ------- -------
Net Asset Value, End of Period............................... $14.610 $12.550 $10.830
======= ======= =======
Total Return(3).............................................. 24.14% 21.98% 11.09%
- ------------
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted).................... $14,907 $8,846 $4,600
Ratio of Expenses to Average Daily Net Assets................ 1.25% 1.25% 1.25%
Ratio of Expenses to Average Daily Net Assets
Prior to Expense Limitations........................... 1.84% 2.29% 3.26%
Ratio of Net Investment Income to Average Daily Net Assets... 1.67% 1.82% 1.96%
Ratio of Net Investment Income to Average Daily Net Assets
Prior to Expense Limitations........................... 1.08% 0.78% (0.05%)
Portfolio Turnover Rate...................................... 80% 99% 180%
Average Commission Rate Paid................................. $0.060 N/A N/A
</TABLE>
(1) Date of initial sale of Devon Fund A Class. Ratios and total return have
been annualized. Total return for this short of a time period may not be
representative of longer term results.
(2) 1995 per share information was based on the average shares outstanding
method.
(3) Total return does not include any maximum sales charge that is or was in
effect nor the 1% Limited CDSC that would apply in the event of certain
redemptions within 12 months of purchase. See Contingent Deferred Sales
Charge for Certain Purchases of Class A Shares Made at Net Asset Value.
Total return reflects the reflects expense limitation referenced under
Summary of Expenses.
<PAGE>
(DF/DVN-ABC)
DVN-B-CHT
<TABLE>
<CAPTION>
Devon Fund Devon Fund
Class B Shares Class B Shares
------------------------------------ ------------------
Period Period
9/6/94(1) 11/29/95(2)
Year Ended through through
10/31/96 10/31/95 10/31/94 10/31/96
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......................... $12.500 $10.820 $10.900 $13.020
Income From Investment Operations
Net Investment Income........................................ 0.136 0.127(3) 0.027 0.188
Net Gains (Losses) on Securities
(both realized and unrealized).................... 2.664 2.053 (0.077) 2.157
----- ----- ------- -----
Total From Investment Operations....................... 2.800 2.180 (0.050) 2.345
----- ----- ------- -----
Less Distributions
Dividends (from net investment income)....................... (0.120) (0.180) (0.030) (0.195)
Distributions (from capital gains)........................... (0.640) (0.320) none (0.640)
Returns of Capital........................................... none none none none
---- ---- ---- ----
Total Distributions.......................................... (0.760) (0.500) (0.030) (0.835)
------- ------- ------- -------
Net Asset Value, End of Period............................... $14.540 $12.500 $10.820 $14.530
======= ======= ======= =======
Total Return(4).............................................. 23.38% 21.09% (0.46%) 18.94%
- ------------
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted).................... $3,399 $863 $115 $1,056
Ratio of Expenses to Average Daily Net Assets................ 1.95% 1.95% 1.95% 1.95%
Ratio of Expenses to Average Daily Net Assets
Prior to Expense Limitations........................... 2.55% 2.99% 3.96% 2.54%
Ratio of Net Investment Income to Average Daily Net Assets... 0.97% 1.12% 1.26% 0.97%
Ratio of Net Investment Income to Average Daily Net Assets
Prior to Expense Limitations........................... 0.38% 0.08% (0.75%) 0.38%
Portfolio Turnover Rate...................................... 80% 99% 180% 80%
Average Commission Rate Paid................................. $0.060 N/A N/A $0.060
</TABLE>
(1) Date of initial sale of Devon Fund B Class. Ratios have been annualized
but total return has not been annualized. Total return for this short of a
time period may not be representative of longer term results.
(2) Date of initial sale of Devon Fund C Class. Ratios have been annualized
but total return has not been annualized. Total return for this short of a
time period may not be representative of longer term results.
(3) 1995 per share information was based on the average shares outstanding
method.
(4) Total return does not include any CDSC which varies from 1% - 4%,
depending upon the holding period for Devon Fund B Class and 1% for Devon
Fund C Class for 12 months from the date of purchase. Total return
reflects the expense limitation referenced under Summary of Expenses.
<PAGE>
(DF/DVN-ABC)
INVESTMENT OBJECTIVES AND POLICIES
The objective of Delaware Fund is to seek a balance of capital
appreciation, income and preservation of capital.
The objective of Devon Fund is to seek current income and capital
appreciation.
Although each Fund will constantly strive to attain its objective,
there can be no assurance that it will be obtained. The objective of each Fund
cannot be changed without shareholder approval.
SUITABILITY
Each Fund may be suitable for investors interested in long-term capital
appreciation. Delaware Fund may be more suitable for investors wishing to expose
a portion of their assets to fixed-income securities, while Devon Fund may be
more suitable for investors seeking a greater emphasis on common stocks and
securities convertible into common stocks. Investors in each Fund should be
willing to accept the risks associated with investments in equity securities.
Investors in Delaware Fund and, to a lesser extent, investors in Devon Fund
should also be willing to accept the risks associated with investments in
fixed-income securities. Net asset values may fluctuate in response to market
conditions and, as a result, neither Fund is appropriate for a short-term
investor.
Ownership of Fund shares reduces the bookkeeping and administrative
inconveniences connected with direct purchases of the types of securities in
which the Funds invest.
An investor should not consider a purchase of either Fund shares as
equivalent to a complete investment program. The Delaware Group includes a
family of funds, generally available through registered investment dealers,
which may be used together to create a more complete investment program.
INVESTMENT STRATEGY
Delaware Fund - As a "balanced" fund, Delaware Fund will generally
invest at least 25% of its assets in fixed-income securities, including U.S.
government securities and corporate bonds. The remainder of the Fund will be
allocated to equity securities principally, including convertible securities,
and also to cash and cash equivalents. A portion of the Fund's investment in
certain convertible securities may be deemed fixed-income in nature for purposes
of this 25% fixed-income allocation. The Fund may also invest in foreign
securities.
The Fund uses a dividend-oriented valuation strategy to select
individual securities in which it will invest. In seeking capital appreciation,
the Fund invests primarily in common stocks of established companies believed to
have a potential for long-term capital growth. In seeking current income and
preservation of capital, in addition to capital appreciation, the Fund invests
in various types of fixed-income securities, including U.S. government and
government agency securities and corporate bonds. The Fund generally invests in
bonds that are rated in the top four grades by a nationally-recognized rating
agency (e.g., Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Ratings Group ("S&P")) at the time of purchase, or, if unrated, are determined
to be equivalent to the top four grades in the judgment of the Manager. The
fourth grade is considered medium grade and may have some speculative
characteristics. Typically, the maturity of the bonds will range between five
and 30 years. The Fund may invest not more than 5% of its assets in convertible
debentures rated below investment grade.
The Fund will analyze existing and expected economic and market
conditions and seek to identify those market sectors or individual securities
that are expected to benefit from those conditions. Its appraisal of these
-9-
<PAGE>
(DF/DVN-ABC)
economic conditions will determine the types of securities it will hold and the
degree of investment emphasis placed upon capital appreciation and income.
Devon Fund - Devon Fund will seek to achieve its objective by investing
primarily in income-producing common stocks, with a focus on common stocks that
the Manager believes have the potential for above average dividend increases
over time. Under normal circumstances, the Fund will generally invest at least
65% of its total assets in dividend paying common stocks.
In selecting stocks for the Fund, the Manager will focus primarily on
dividend paying common stocks issued by companies with market capitalizations in
excess of $100 million, but is not precluded from purchasing shares of companies
with market capitalizations of less than $100 million. In seeking stocks with
potential for above average dividend increases, the Manager will consider such
factors as the historical growth rate of a dividend, the frequency of prior
dividend increases, the issuing company's potential to generate cash flows, and
the price/earnings multiple of the stock relative to the market. The Manager
will generally avoid stocks that it believes are overvalued and may select
stocks with current dividend yields that are lower than the current yield of the
Standard & Poor's 500 Stock Index ("S&P 500") in exchange for anticipated
dividend growth.
While management believes that the Fund's objective may best be
attained by investing in common stocks, the Fund may also invest in other
securities including, but not limited to, convertible and preferred securities,
rights and warrants to purchase common stock, and various types of fixed-income
securities, such as U.S. government and government agency securities, corporate
debt securities, and bank obligations, and may also engage in futures
transactions. The Fund may invest in foreign securities.
* * *
For additional information about each Fund's investment policies and
certain risks associated with investments in certain types of securities, see
Other Investment Policies and Risk Considerations.
-10-
<PAGE>
(DF/DVN-ABC)
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Group of
funds.
SHAREHOLDER PHONE DIRECTORY
Investor Information Center
800-523-4640
Fund Information; Literature; Price; Yield and Performance
Figures
Shareholder Service Center
800-523-1918
Information on Existing Regular Investment Accounts and
Retirement Plan Accounts; Wire Investments; Wire Liquidations;
Telephone Liquidations and Telephone Exchanges
Delaphone
800-362-FUND
(800-362-3863)
Performance Information
You can call the Investor Information Center at any time for current
performance information. Current yield and total return information may also be
included in advertisements and information given to shareholders.
Yields are computed on an annual basis over a 30-day period.
Shareholder Services
During business hours, you can call the Delaware Group's Shareholder
Service Center. Our representatives can answer any questions about your account,
the Funds, various service features and other funds in the Delaware Group.
Delaphone Service
Delaphone is an account inquiry service for investors with
Touch-Tone(R) phone service. It enables you to get information on your account
faster than the mailed statements and confirmations. Delaphone also provides
current performance information on the Funds, as well as other funds in the
Delaware Group. Delaphone is available seven days a week, 24 hours a day.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling the Shareholder Service Center.
-11-
<PAGE>
(DF/DVN-ABC)
Duplicate Confirmations
If your financial adviser or investment dealer is noted on your
investment application, we will send a duplicate confirmation to him or her.
This makes it easier for your adviser to help you manage your investments.
Tax Information
Each year, Equity Funds I, Inc. will mail to you information on the tax
status of your dividends and distributions.
Dividend Payments
Dividends, capital gains and other distributions are automatically
reinvested in your account, unless you elect to receive them in cash. You may
also elect to have the dividends earned in one fund automatically invested in
another Delaware Group fund with a different investment objective, subject to
certain exceptions and limitations.
For more information, see Additional Methods of Adding to Your
Investment - Dividend Reinvestment Plan under How to Buy Shares or call the
Shareholder Service Center.
MoneyLine Direct Deposit Service
If you elect to have your dividends and distributions paid in cash and
such dividends and distributions are in an amount of $25 or more, you may choose
the MoneyLine Direct Deposit Service and have such payments transferred from
your Fund account to your predesignated bank account. See Dividends and
Distributions. In addition, you may elect to have your Systematic Withdrawal
Plan payments transferred from your Fund account to your predesignated bank
account through this service. See Systematic Withdrawal Plans under Redemption
and Exchange. Your funds will normally be credited to your bank account two
business days after the payment date. There are no fees for this service. You
can initiate the MoneyLine Direct Deposit Service by completing an Authorization
Agreement. If your name and address are not identical to the name and address on
your Fund account, you must have your signature guaranteed.
Right of Accumulation
With respect to Class A Shares, the Right of Accumulation feature
allows you to combine the value of your current holdings of Class A Shares,
Class B Shares and Class C Shares of a Fund with the dollar amount of new
purchases of Class A Shares of a Fund to qualify for a reduced front-end sales
charge on such purchases of Class A Shares. Under the Combined Purchases
Privilege, you may also include certain shares that you own in other funds in
the Delaware Group. See Classes of Shares.
Letter of Intention
The Letter of Intention feature permits you to obtain a reduced
front-end sales charge on purchases of Class A Shares by aggregating certain of
your purchases of Delaware Group fund shares over a 13-month period. See Classes
of Shares and Part B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits you to reinvest proceeds
from a redemption of Class A Shares, within one year of the date of the
redemption, without paying a front-end sales charge. See Part B.
-12-
<PAGE>
(DF/DVN-ABC)
Exchange Privilege
The Exchange Privilege permits shareholders to exchange all or part of
their shares into shares of other funds in the Delaware Group, subject to
certain exceptions and limitations. For additional information on exchanges, see
Investing by Exchange under How to Buy Shares and Redemption and Exchange.
Wealth Builder Option
You may elect to invest in the Funds through regular liquidations of
shares in your accounts in other funds in the Delaware Group. Investments under
this feature are exchanges and are therefore subject to the same conditions and
limitations as other exchanges of Fund shares. See Additional Methods of Adding
to Your Investment - Wealth Builder Option and Investing by Exchange under How
to Buy Shares, and Redemption and Exchange.
Delaware Group Asset Planner
Delaware Group Asset Planner is an asset allocation service that gives
you, working with a professional financial adviser, the ability to more easily
design and maintain investments in a diversified selection of Delaware Group
mutual funds. The Asset Planner service offers a choice of four predesigned
allocation strategies (each with a different risk/reward profile) made up of
separate investments in predetermined percentages of Delaware Group funds. With
the guidance of a financial adviser, you may also tailor an allocation strategy
that meets your personal needs and goals. See How to Buy Shares.
Financial Information about the Funds
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
each Fund's investments and performance. Equity Funds I, Inc.'s fiscal year ends
on October 31.
-13-
<PAGE>
(DF/DVN-ABC)
RETIREMENT PLANNING
An investment in a Fund 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.
Retirement plans may be subject to plan establishment fees, annual
maintenance fees and/or other administrative or trustee fees. Fees are based
upon the number of participants in the plan as well as the services selected.
Additional information about fees is included in retirement plan materials. Fees
are quoted upon request.
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 Delaware Fund Institutional Class or
Devon Fund Institutional Class. For additional information on any of the plans
and Delaware's retirement services, call the Shareholder Service Center or see
Part B.
Individual Retirement Account ("IRA")
Individuals, even if they participate in an employer-sponsored
retirement plan, may establish their own retirement program for investments in
each of the Classes. Contributions to an IRA may be tax-deductible and earnings
are tax-deferred. Under the Tax Reform Act of 1986, the tax deductibility of IRA
contributions is restricted, and in some cases eliminated, for individuals who
participate in certain employer-sponsored retirement plans and whose annual
income exceeds certain limits. Existing IRAs and future contributions up to the
IRA maximums, whether deductible or not, still earn on a tax-deferred basis.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
New SAR/SEP plans may not be established after December 31, 1996.
Employers must have no more than 25 eligible employees to maintain an existing
SEP/IRA that permits salary deferral contributions. An employer may also elect
to make additional contributions to this plan. Class B Shares are not available
for purchase by such plans.
403(b)(7) Deferred Compensation Plan
Permits employees of public school systems or of certain types of
non-profit organizations to enter into a deferred compensation arrangement for
the purchase of shares of each of the Classes.
457 Deferred Compensation Plan
Permits employees of state and local governments and certain other
entities to enter into a deferred compensation arrangement for the purchase of
shares of each of the Classes.
-14-
<PAGE>
(DF/DVN-ABC)
Prototype Profit Sharing or Money Purchase Pension Plan
Offers self-employed individuals, partnerships and corporations a
tax-qualified plan which provides for the investment of contributions in Class A
Shares or Class C Shares. Class B Shares are not available for purchase by such
plans.
Prototype 401(k) Defined Contribution Plan
Permits employers to establish a tax-qualified plan based on salary
deferral contributions for investment in Class A Shares or Class C Shares. Class
B Shares are not available for purchase by such plans.
Allied Plans
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made available
under a joint venture agreement between the Distributor and another institution
through which mutual funds are marketed and which allow investments in Class A
Shares of designated Delaware Group funds ("eligible Delaware Group fund
shares"), as well as shares of designated classes of non-Delaware Group funds
("eligible non-Delaware Group fund shares"). Class B Shares and Class C Shares
are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Group and eligible non-Delaware Group fund shares
held by the Allied Plan may be combined with the dollar amount of new purchases
by that Allied Plan to obtain a reduced front-end sales charge on additional
purchases of eligible Delaware Group fund shares. See Front-End Sales Charge
Alternative - Class A Shares under Classes of Shares.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Group fund shares for other eligible Delaware Group fund shares or for
eligible non-Delaware Group fund shares at net asset value without payment of a
front-end sales charge. However, exchanges of eligible fund shares, both
Delaware Group and non-Delaware Group, which were not subject to a front end
sales charge, will be subject to the applicable sales charge if exchanged for
eligible Delaware Group fund shares to which a sales charge applies. No sales
charge will apply if the eligible fund shares were previously acquired through
the exchange of eligible shares on which a sales charge was already paid or
through the reinvestment of dividends. See Investing by Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Group fund shares under an Allied Plan. In determining a financial adviser's
eligibility for a dealer's commission on net asset value purchases of eligible
Delaware Group fund shares in connection with Allied Plans, all participant
holdings in the Allied Plan will be aggregated. See Front-End Sales Charge
Alternative - Class A Shares under Classes of Shares.
-15-
<PAGE>
(DF/DVN-ABC)
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described under Waiver of Limited Contingent
Deferred Sales Charge - Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Group and non-Delaware Group fund shares. When
eligible Delaware Group fund shares are exchanged into eligible non-Delaware
Group fund shares, the Limited CDSC will be imposed at the time of the exchange,
unless the joint venture agreement specifies that the amount of the Limited CDSC
will be paid by the financial adviser or selling dealer. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
-16-
<PAGE>
(DF/DVN-ABC)
CLASSES OF SHARES
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net
asset value per share, subject to a sales charge which may be imposed, at the
election of the purchaser, at the time of the purchase for Class A Shares
("front-end sales charge alternative"), or on a contingent deferred basis for
Class B Shares ("deferred sales charge alternative") or Class C Shares ("level
sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares, which incur a sales charge when they are
purchased, but generally are not subject to any sales charge when they are
redeemed. Class A Shares are subject to annual 12b-1 Plan expenses of up to a
maximum of 0.30% of average daily net assets of such shares. Certain purchases
of Class A Shares qualify for reduced front-end sales charges. See Front-End
Sales Charge Alternative - Class A Shares, below. See also Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange and Distribution (12b-1) and Service under
Management of the Funds.
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares, which do not incur a front-end sales charge
when they are purchased, but are subject to a contingent deferred sales charge
if they are redeemed within six years of purchase. Class B Shares are subject to
annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service
fees to be paid to the Distributor, dealers or others for providing personal
service and/or maintaining shareholder accounts) of average daily net assets of
such shares for approximately eight years after purchase. Class B Shares permit
all of the investor's dollars to work from the time the investment is made. The
higher 12b-1 Plan expenses paid by Class B Shares will cause such shares to have
a higher expense ratio and to pay lower dividends than Class A Shares. At the
end of approximately eight years after purchase, the Class B Shares will
automatically be converted into Class A Shares and, thereafter, for the
remainder of the life of the investment, the annual 0.30% 12b-1 Plan fee for the
Class A Shares will apply. See Automatic Conversion of Class B Shares, below.
Class C Shares. An investor who elects the level sales charge
alternative acquires Class C Shares, which do not incur a front-end sales charge
when they are purchased, but are subject to a contingent deferred sales charge
if they are redeemed within 12 months of purchase. Class C Shares are subject to
annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service
fees to be paid to the Distributor, dealers or others for providing personal
service and/or maintaining shareholder accounts) of average daily net assets of
such shares for the life of the investment. The higher 12b-1 Plan expenses paid
by Class C Shares will cause such shares to have a higher expense ratio and to
pay lower dividends than Class A Shares. Unlike Class B Shares, Class C Shares
do not convert to another class.
The alternative purchase arrangements described above permit investors
to choose the method of purchasing shares that is most suitable given the amount
of their purchase, the length of time they expect to hold their shares and other
relevant circumstances. Investors should determine whether, given their
particular circumstances, it is more advantageous to purchase Class A Shares and
incur a front-end sales charge, purchase Class B Shares and have the entire
initial purchase amount invested in a Fund with their investment being subject
to a CDSC if they redeem shares within six years of purchase, or purchase Class
-17-
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(DF/DVN-ABC)
C Shares and have the entire initial purchase amount invested in a Fund with
their investment being subject to a CDSC if they redeem shares within 12 months
of purchase. In addition, investors should consider the level of annual 12b-1
Plan expenses applicable to each Class. The higher 12b-1 Plan expenses on Class
B Shares and Class C Shares will be offset to the extent a return is realized on
the additional money initially invested upon the purchase of such shares.
However, there can be no assurance as to the return, if any, that will be
realized on such additional money. In comparing Class B Shares to Class C
Shares, investors should also consider the desirability of an automatic
conversion feature, which is available only for Class B Shares.
Prospective investors should refer to Appendix A--Investment
Illustrations in this Prospectus for an illustration of the potential effect
that each of the purchase options may have on a long-term shareholder's
investment.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Funds, the Distributor and others will be paid, in the
case of the Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of the Class B Shares and the Class C Shares,
from the proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred
upon redemption. Financial advisers may receive different compensation for
selling Class A, Class B and Class C Shares. Investors should understand that
the purpose and function of the respective 12b-1 Plans and the CDSCs applicable
to Class B Shares and Class C Shares are the same as those of the 12b-1 Plan and
the front-end sales charge applicable to Class A Shares in that such fees and
charges are used to finance the distribution of the respective Classes. See
12b-1 Distribution Plans - Class A, Class B and Class C Shares.
Dividends paid on Class A, Class B and Class C Shares, to the extent
any dividends are paid, will be calculated in the same manner, at the same time,
on the same day and will be in the same amount, except that the additional
amount of 12b-1 Plan expenses relating to Class B Shares and Class C Shares will
be borne exclusively by such shares. See Calculation of Offering Price and Net
Asset Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. Equity Funds I, Inc. and the Distributor intend to operate in
compliance with these rules.
Front-End Sales Charge Alternative - Class A Shares
Class A Shares may be purchased at the offering price, which reflects a
maximum front-end sales charge of 4.75%. See Calculation of Offering Price and
Net Asset Value Per Share.
Purchases of $100,000 or more carry a reduced front-end sales charge as
shown in the following table.
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(DF/DVN-ABC)
<TABLE>
<CAPTION>
Delaware Fund A Class and Devon Fund A Class
- ---------------------------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge as % of Commission***
as % of
Offering Offering
Amount of Purchase Price Amount Invested** Price
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Delaware Devon
Fund Fund
Less than $100,000 4.75% 4.99% 5.00% 4.00%
$100,000 but
under $250,000 3.75% 3.90% 3.90% 3.00%
$250,000 but
under $500,000 2.50% 2.59% 2.53% 2.00%
$500,000 but
under $1,000,000* 2.00% 2.02% 2.05% 1.60%
</TABLE>
* There is no front-end sales charge on purchases of Class A Shares of $1
million or more but, under certain limited circumstances, a 1% Limited
CDSC may apply upon redemption of such shares.
** Based upon the net asset value per share of the respective Class A
Shares as of the end of Equity Funds I, Inc.'s most recent fiscal year.
*** Financial institutions or their affiliated brokers may receive an
agency transaction fee in the percentages set forth above.
- --------------------------------------------------------------------------------
A Fund must be notified when a sale takes place which would qualify for
the reduced front-end sales charge on the basis of previous or current
purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by such 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 to dealers up to the full amount of
the front-end sales charge shown above. In addition, certain dealers
who enter into an agreement to provide extra training and information
on Delaware Group products and services and who increase sales of
Delaware Group funds may receive an additional commission of up to
0.15% of the offering price. Dealers who receive 90% or more of the
sales charge may be deemed to be underwriters under the Securities Act
of 1933.
- --------------------------------------------------------------------------------
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(DF/DVN-ABC)
For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers through
whom such purchases are made in accordance with the following schedule:
Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75
Next $2 million up to $5 million 0.50
Amount over $5 million 0.25
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 may be aggregated with those of the Class A Shares
of a Fund. Financial advisers also may be eligible for a dealer's commission in
connection with certain purchases made under a Letter of Intention or pursuant
to an investor's Right of Accumulation. Financial advisers should contact the
Distributor concerning the applicability and calculation of the dealer's
commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Redemptions of Class A Shares purchased at net asset value may result
in the imposition of a Limited CDSC if the dealer's commission described above
was paid in connection with the purchase of those shares. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange.
Combined Purchases Privilege
By combining your holdings of Class A Shares with your holdings of
Class B Shares and/or Class C Shares of a Fund and shares of other funds in the
Delaware Group, except those noted below, you can reduce the front-end sales
charges on any additional purchases of Class A Shares. Shares of Delaware Group
Premium Fund, Inc. beneficially owned in connection with ownership of variable
insurance products may be combined with other Delaware Group fund holdings.
Shares of other funds that do not carry a front-end sales charge or CDSC may not
be included unless they were acquired through an exchange from a Delaware Group
fund that does carry a front-end sales charge or CDSC.
This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under 21 and any trust, fiduciary or
retirement account for the benefit of such family members.
-20-
<PAGE>
(DF/DVN-ABC)
It also permits you to use these combinations under a Letter of
Intention. A Letter of Intention allows you to make purchases over a 13-month
period and qualify the entire purchase for a reduction in front-end sales
charges on Class A Shares.
Combined purchases of $1,000,000 or more, including certain purchases
made at net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may result in the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative Class A Shares, above.
Buying Class A Shares at Net Asset Value
Class A Shares of a Fund may be purchased at net asset value under the
Delaware Group Dividend Reinvestment Plan and, under certain circumstances, the
Exchange Privilege and the 12-Month Reinvestment Privilege. See The Delaware
Difference and Redemption and Exchange for additional information.
Purchases of Class A Shares may be made at net asset value by current
and former officers, directors and employees (and members of their families) of
the Manager, any affiliate, any of the funds in the Delaware Group, certain of
their agents and registered representatives and employees of authorized
investment dealers and by employee benefit plans for such entities. Individual
purchases, including those in retirement accounts, must be for accounts in the
name of the individual or a qualifying family member.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of Delaware Group
funds. In addition, purchases of Class A Shares may be made by financial
institutions investing for the account of their trust customers when they are
not eligible to purchase shares of a Fund's institutional class. Officers,
directors and key employees of institutional clients of the Manager or any of
its affiliates may purchase Class A Shares at net asset value. Moreover,
purchases may be effected at net asset value for the benefit of the clients of
brokers, dealers and registered investment advisers affiliated with a broker or
dealer, if such broker, dealer or investment adviser has entered into an
agreement with the Distributor providing specifically for the purchase of Class
A Shares in connection with special investment products, such as wrap accounts
or similar fee based programs.
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.
A Fund must be notified in advance that an investment qualifies for
purchase at net asset value.
Group Investment Plans
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, Prototype Profit
Sharing, Pension and 401(k) Defined Contribution Plans) may benefit from the
reduced front-end sales charges available on Class A Shares set forth in the
table on page , based on total plan assets. In addition, 403(b)(7) and 457
-21-
<PAGE>
(DF/DVN-ABC)
Retirement Plan Accounts may benefit from a reduced front-end sales charge on
Class A Shares based on the total amount invested by all participants in the
plan by satisfying the following criteria: (i) the employer for which the plan
was established has 250 or more eligible employees and the plan lists only one
broker of record, or (ii) the plan includes employer contributions and the plan
lists only one broker of record. If a company has more than one plan investing
in the Delaware Group of funds, then the total amount invested in all plans will
be aggregated to determine the applicable front-end sales charge reduction on
each purchase, both initial and subsequent, if, at the time of each such
purchase, the company notifies the Fund in which it is investing that it
qualifies for the reduction. Employees participating in such Group Investment
Plans may also combine the investments held in their plan account to determine
the front-end sales charge applicable to purchases in non-retirement Delaware
Group investment accounts if, at the time of each such purchase, they notify the
Fund in which they are investing that they are eligible to combine purchase
amounts held in their plan account.
For additional information on retirement plans, including plan forms,
applications, minimum investments and any applicable account maintenance fees,
contact your investment dealer or the Distributor.
For other retirement plans and special services, see Retirement
Planning.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than 4% of the dollar
amount purchased. In addition, from time to time, upon written notice to all of
its dealers, the Distributor may hold special promotions for specified periods
during which the Distributor may pay additional compensation to dealers or
brokers for selling Class B Shares at the time of purchase. As discussed below,
however, Class B Shares are subject to annual 12b-1 Plan expenses and, if
redeemed within six years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees makes it possible for a Fund to sell
Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class B Shares
described in this Prospectus, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for the Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
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<PAGE>
(DF/DVN-ABC)
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the last business day
of the second full week of March, June, September and December (each, a
"Conversion Date"). If the eighth anniversary after a purchase of Class B Shares
falls on a Conversion Date, an investor's Class B Shares will be converted on
that date. If the eighth anniversary occurs between Conversion Dates, an
investor's Class B Shares will be converted on the next Conversion Date after
such anniversary. Consequently, if a shareholder's eighth anniversary falls on
the day after a Conversion Date, that shareholder will have to hold Class B
Shares for as long as three additional months after the eighth anniversary of
purchase before the shares will automatically convert into Class A Shares.
Class B Shares of a fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of that fund (or, in the case
of Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant
Class) pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class C Shares at the time of
purchase from its own assets in an amount equal to no more than 1% of the dollar
amount purchased. As discussed below, however, Class C Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within 12 months of purchase, a
CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class C Shares as
described in this Prospectus. See Redemption and Exchange.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares redeemed within six years of purchase may be subject to
a CDSC at the rates set forth below and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on redemptions
-23-
<PAGE>
(DF/DVN-ABC)
of shares acquired through reinvestments of dividends or capital gains
distributions. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of the Class B Shares or the
Class C Shares of a Fund, even if those shares are later exchanged for shares of
another Delaware Group fund. In the event of an exchange of the shares, the "net
asset value of such shares at the time of redemption" will be the net asset
value of the shares that were acquired in the exchange.
The following table sets forth the rates of the CDSC for the Class B
Shares of the Funds:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After 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, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. See Automatic Conversion of Class B Shares, above. Investors are
reminded that the Class A Shares into which the Class B Shares will convert are
subject to ongoing annual 12b-1 Plan expenses of up to a maximum of 0.30% of
average daily net assets of such shares.
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares and Class C
Shares. See Waiver of Contingent Deferred Sales Charge - Class B and Class C
Shares under Redemption and Exchange.
Other Payments to Dealers -- Class A, Class B and Class C Shares
From time to time at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Classes exceed certain limits, as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware 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.
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<PAGE>
(DF/DVN-ABC)
Subject to pending amendments to the NASD's Rules of Fair Practice, in
connection with the promotion of Delaware Group fund shares, the Distributor
may, from time to time, pay to participate in dealer-sponsored seminars and
conferences, reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising and may, from time to time,
pay or allow additional promotional incentives to dealers, which shall include
non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and Exchange Commission.
It is likely that the NASD's Rules of Fair Practice will be amended such that
the ability of the Distributor to pay non-cash compensation as described above
will be restricted in some fashion. The Distributor intends to comply with the
NASD's Rules of Fair Practice as they may be amended.
Delaware Fund Institutional Class and Devon Fund Institutional Class
In addition to offering the Class A, Class B and Class C Shares,
Delaware Fund also offers Delaware Fund Institutional Class and Devon Fund also
offers Devon Fund Institutional Class, which are described in a separate
prospectus and are available for purchase only by certain investors. Delaware
Fund Institutional Class and Devon Fund Institutional Class shares generally are
distributed directly by the Distributor and do not have a front-end sales
charge, a CDSC or a Limited CDSC, and are not subject to 12b-1 Plan distribution
expenses. To obtain the prospectus that describes Delaware Fund Institutional
Class and Devon Fund Institutional Class, contact the Distributor by writing to
the address or by calling the telephone number listed on the back of this
Prospectus.
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<PAGE>
(DF/DVN-ABC)
HOW TO BUY SHARES
Purchase Amounts
Generally, the minimum initial purchase is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of shares of any Class
generally must be $100 or more. For purchases under a Uniform Gifts to Minors
Act or Uniform Transfers to Minors Act or through an Automatic Investing Plan,
there is a minimum initial purchase of $250 and a minimum subsequent purchase of
$25. Minimum purchase requirements do not apply to retirement plans other than
IRAs, for which there is a minimum initial purchase of $250, and a minimum
subsequent purchase of $25, regardless of which Class is selected.
There is a maximum purchase limitation of $250,000 on each purchase of
Class B Shares. For Class C Shares, each purchase must be in an amount that is
less than $1,000,000. An investor may exceed these maximum purchase limitations
by making cumulative purchases over a period of time. In doing so, an investor
should keep in mind that reduced front-end sales charges are available on
investments of $100,000 or more in Class A Shares, and that Class A Shares (i)
are subject to lower annual 12b-1 Plan expenses than Class B Shares and Class C
Shares and (ii) generally are not subject to a CDSC. For retirement plans, the
maximum purchase limitations apply only to the initial purchase of Class B
Shares or Class C Shares by the plan.
Investing through Your Investment Dealer
You can make a purchase of shares of the Funds through most investment
dealers who, as part of the service they provide, must transmit orders promptly.
They may charge for this service. If you want a dealer but do not have one, the
Delaware Group can refer you to one.
Investing by Mail
1. Initial Purchases--An Investment Application or, in the case of a retirement
account, an appropriate retirement plan application, must be completed, signed
and sent with a check, payable to the specific Fund and Class selected to
Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to the specific Fund and Class selected. Your check should be
identified with your name(s) and account number. An investment slip (similar to
a deposit slip) is provided at the bottom of transaction confirmations and
dividend statements that you will receive from Equity Funds I, Inc. Use of this
investment slip can help expedite processing of your check when making
additional purchases. Your investment may be delayed if you send additional
purchases by certified mail.
Investing by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 1412893401
(include your name(s) and your account number for the Class in which you are
investing).
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(DF/DVN-ABC)
1. Initial Purchases--Before you invest, telephone the Shareholder Service
Center to get an account number. If you do not call first, processing of your
investment may be delayed. In addition, you must promptly send your Investment
Application or, in the case of a retirement account, an appropriate retirement
plan application, to the specific Fund and Class selected, to Delaware Group at
1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You should advise the
Shareholder Service Center by telephone of each wire you send.
If you want to wire investments to a retirement plan account, call the
Shareholder Service Center for special wiring instructions.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group,
you may write and authorize an exchange of part or all of your investment into
shares of a Fund. If you wish to open an account by exchange, call the
Shareholder Service Center for more information. All exchanges are subject to
the eligibility and minimum purchase requirements set forth in each fund's
prospectus.
Holders of Class A Shares of a Fund may exchange all or part of their
shares for certain of the shares of other funds in the Delaware Group, including
other Class A Shares, but may not exchange their Class A Shares for Class B
Shares or Class C Shares of the Fund or of any other fund in the Delaware Group.
Holders of Class B Shares of a Fund are permitted to exchange all or part of
their Class B Shares only into Class B Shares of other Delaware Group funds.
Similarly, holders of Class C Shares of a Fund are permitted to exchange all or
part of their Class C Shares only into Class C Shares of other Delaware Group
funds. See Appendix B--Classes Offered for a list of Delaware Group funds and
the classes they offer. Class B Shares of a Fund and Class C Shares of a Fund
acquired by exchange will continue to carry the CDSC and, in the case of Class B
Shares, the automatic conversion schedule of the fund from which the exchange is
made. The holding period of Class B Shares of a Fund acquired by exchange will
be added to that of the shares that were exchanged for purposes of determining
the time of the automatic conversion into Class A Shares of that Fund.
Permissible exchanges into Class A Shares of a Fund will be made
without a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of a Fund will be made without the imposition of a CDSC
by the fund from which the exchange is being made at the time of the exchange.
See Allied Plans under Retirement Planning for information on exchanges
by participants in an Allied Plan.
-27-
<PAGE>
(DF/DVN-ABC)
Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if you wish to
use the following services:
1. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly
investments without writing or mailing checks. You may authorize Equity Funds I,
Inc. to transfer a designated amount monthly from your checking account to your
Fund account. Many shareholders use this as an automatic savings plan.
Shareholders should allow a reasonable amount of time for initial purchases and
changes to these plans to become effective.
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.
2. Direct Deposit
You may have your employer or bank make regular investments directly to
your account for you (for example: payroll deduction, pay by phone, annuity
payments). Each Fund also accepts preauthorized recurring government and private
payments by Electronic Fund Transfer, which avoids mail time and check clearing
holds on payments such as social security, federal salaries, Railroad Retirement
benefits, etc.
* * *
Should investments through an automatic investing plan or by direct
deposit be reclaimed or returned for some reason, Equity Funds I, Inc. has the
right to liquidate your shares to reimburse the government or transmitting bank.
If there are insufficient funds in your account, you are obligated to reimburse
the Fund.
3. Wealth Builder Option
You can use our Wealth Builder Option to invest in a Fund through
regular liquidations of shares in your accounts in other funds in the Delaware
Group. You may also elect to invest in other mutual funds in the Delaware Group
through the Wealth Builder Option through regular liquidations of shares in your
Fund account.
Under this automatic exchange program, you can authorize regular
monthly amounts (minimum of $100 per fund) to be liquidated from your account in
one or more funds in the Delaware Group and invested automatically into any
other Delaware Group account that you may specify. If in connection with the
election of the Wealth Builder Option, you wish to open a new account to receive
the automatic investment, such new account must meet the minimum initial
purchase requirements described in the prospectus of the fund that you select.
All investments under this option are exchanges and are therefore subject to the
same conditions and limitations as other exchanges noted above. You can
terminate your participation at any time by written notice to the fund from
which the exchanges are made. See Redemption and Exchange.
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<PAGE>
(DF/DVN-ABC)
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.
4. Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your account. Or, you may invest
your distributions in certain other funds in the Delaware Group, subject to the
exceptions noted below as well as the eligibility and minimum purchase
requirements set forth in each fund's prospectus.
Reinvestments of distributions into Class A Shares of a Fund or of
other Delaware Group funds are made without a front-end sales charge.
Reinvestments of distributions into Class B Shares of a Fund or of other
Delaware Group funds or into Class C Shares of a Fund or of other Delaware Group
funds are also made without any sales charge and will not be subject to a CDSC
if later redeemed. See Automatic Conversion of Class B Shares under Classes of
Shares for information concerning the automatic conversion of Class B Shares
acquired by reinvesting dividends.
Distributions for capital gains and/or dividends for participants in
the following retirement plans are automatically reinvested into the same
Delaware Group Fund: SAR/SEP, SEP/IRA, Profit Sharing, Money Purchase Pension,
401(k), 403 (b)(7), or 457 Plans.
Holders of Class A Shares of a Fund may not reinvest their
distributions into Class B Shares or Class C Shares of any fund in the Delaware
Group, including the Funds. Holders of Class B Shares of a Fund may reinvest
their distributions only into Class B Shares of the funds in the Delaware Group
which offer that class of shares. Similarly, holders of Class C Shares of a Fund
may reinvest their distributions only into Class C Shares of the funds in the
Delaware Group which offer that class of shares. See Appendix B--Classes Offered
for a list of the funds offering those classes of shares. For more information
about reinvestments, call the Shareholder Service Center.
Delaware Group Asset Planner
To invest in Delaware Group funds using the Delaware Group Asset
Planner asset allocation service, you should complete a Delaware Group Asset
Planner Account Registration Form, which is available only from a financial
adviser or investment dealer. As previously described, the Delaware Group Asset
Planner service offers a choice of four predesigned asset allocation strategies
(each with a different risk/reward profile) in predetermined percentages in
Delaware Group funds. Or, with the help of a financial adviser, you may design a
customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Group accounts into the Asset Planner service may be made at net asset value
under the circumstances described under Investing by Exchange, above. The
minimum initial investment per Strategy is $2,000; subsequent investments must
be at least $100. Individual fund minimums do not apply to investments made
using the Asset Planner service. Class A, Class B and Class C Shares are
available through the Asset Planner service. Generally, only shares within the
same class may be used within the same Strategy. However, Class A Shares of a
Fund and of other funds in the Delaware Group may be used in the same Strategy
with consultant class shares that are offered by certain other Delaware Group
funds. See Appendix B--Classes Offered for the funds in the Delaware Group that
offer consultant class shares.
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(DF/DVN-ABC)
An annual maintenance fee, currently $35 per Strategy, is typically due
at the time of initial investment and by September 30th of each subsequent year.
The fee, payable to Delaware Service Company, Inc. to defray extra costs
associated with administering the Asset Planner service, will be deducted
automatically from one of the funds within your Asset Planner account if not
paid by September 30th. However, effective November 1, 1996, the annual fee is
waived until further notice. Investors who utilize the Asset Planner for an IRA
will continue to pay an annual IRA fee of $15 per Social Security number. See
Part B.
Investors will receive a customized quarterly Strategy Report
summarizing all Delaware Group Asset Planner investment performance and account
activity during the prior period. Confirmation statements will be sent following
all transactions other than those involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
Purchase Price and Effective Date
The offering price and net asset value of the Class A, Class B and
Class C Shares are determined as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open.
The effective date of a purchase made through an investment dealer is
the date the order is received by a Fund. The effective date of a direct
purchase is the day your wire, electronic transfer or check is received, unless
it is received after the time the offering price or net asset value of shares is
determined, as noted above. Purchase orders received after such time will be
effective the next business day.
The Conditions of Your Purchase
Each Fund reserves the right to reject any purchase order. If a
purchase is canceled because your check is returned unpaid, you are responsible
for any loss incurred. A Fund can redeem shares from your account(s) to
reimburse itself for any loss, and you may be restricted from making future
purchases in any of the funds in the Delaware Group. Each Fund reserves the
right to reject purchase orders paid by third-party checks or checks that are
not drawn on a domestic branch of a United States financial institution. If a
check drawn on a foreign financial institution is accepted, you may be subject
to additional bank charges for clearance and currency conversion.
Each Fund also reserves the right, following shareholder notification,
to charge a service fee on non- retirement accounts that, as a result of a
redemption, have remained below the minimum stated account balance for a period
of three or more consecutive months. Holders of such accounts may be notified of
their insufficient account balance and advised that they have until the end of
the current calendar quarter to raise their balance to the stated minimum. If
the account has not reached the minimum balance requirement by that time, the
Fund will charge a $9 fee for that quarter and each subsequent
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calendar quarter until the account is brought up to the minimum balance. The
service fee will be deducted from the account during the first week of each
calendar quarter for the previous quarter, and will be used to help defray the
cost of maintaining low-balance accounts. No fees will be charged without proper
notice, and no CDSC will apply to such assessments.
Each Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.
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REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways.
The exchange service is useful if your investment requirements change and you
want an easy way to invest in other equity funds, tax-advantaged funds, bond
funds or money market funds. This service is also useful if you are anticipating
a major expenditure and want to move a portion of your investment into a fund
that has the checkwriting feature. Exchanges are subject to the requirements of
each fund and all exchanges of shares constitute taxable events. See Taxes.
Further, in order for an exchange to be processed, shares of the fund being
acquired must be registered in the state where the acquiring shareholder
resides. You may want to consult your financial adviser or investment dealer to
discuss which funds in the Delaware Group will best meet your changing
objectives, and the consequences of any exchange transaction. You may also call
the Delaware Group directly for fund information.
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.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after a Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
Redemption or exchange requests received in good order after the time the
offering price and net asset value of shares are determined, as noted above,
will be processed on the next business day. See Purchase Price and Effective
Date under How to Buy Shares. A shareholder submitting a redemption request may
indicate that he or she wishes to receive redemption proceeds of a specific
dollar amount. In the case of such a request, and in the case of certain
redemptions from retirement plan accounts, a Fund will redeem the number of
shares necessary to deduct the applicable CDSC in the case of Class B and Class
C Shares, and, if applicable, the Limited CDSC in the case of Class A Shares and
tender to the shareholder the requested amount, assuming the shareholder holds
enough shares in his or her account for the redemption to be processed in this
manner. Otherwise, the amount tendered to the shareholder upon redemption will
be reduced by the amount of the applicable CDSC or Limited CDSC. Redemption
proceeds will be distributed promptly, as described below, but not later than
seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Shareholder Service Center at 800-523-1918. Each Fund
may suspend, terminate, or amend the terms of the exchange privilege upon 60
days' written notice to shareholders.
Each Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. Each Fund will honor redemption requests as to shares for which a check
was tendered as payment, but a Fund will not mail or wire the proceeds until it
is reasonably satisfied that the purchase check has cleared, which may take up
to 15 days from the
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purchase date. You can avoid this potential delay if you purchase shares by
wiring Federal Funds. Each Fund reserves the right to reject a written or
telephone redemption request or delay payment of redemption proceeds if there
has been a recent change to the shareholder's address of record.
There is no front-end sales charge or fee for exchanges made between
shares of funds which both carry a front-end sales charge. Any applicable
front-end sales charge will apply to exchanges from shares of funds not subject
to a front-end sales charge, except for exchanges involving assets that were
previously invested in a fund with a front-end sales charge and/or exchanges
involving the reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Group (in each
case, "New Shares") in a permitted exchange, will not be subject to a CDSC that
might otherwise be due upon redemption of the Original Shares. However, such
shareholders will continue to be subject to the CDSC and, in the case of Class B
Shares, the automatic conversion schedule of the Original Shares as described in
this Prospectus and any CDSC assessed upon redemption will be charged by the
fund from which the Original Shares were exchanged. In an exchange of Class B
Shares from a Fund, the Fund's CDSC schedule may be higher than the CDSC
schedule relating to the New Shares acquired as a result of the exchange. For
purposes of computing the CDSC that may be payable upon a disposition of the New
Shares, the period of time that an investor held the Original Shares is added to
the period of time that an investor held the New Shares. With respect to Class B
Shares, the automatic conversion schedule of the Original Shares may be longer
than that of the New Shares. Consequently, an investment in New Shares by
exchange may subject an investor to the higher 12b-1 fees applicable to Class B
Shares of a Fund for a longer period of time than if the investment in New
Shares were made directly.
Various redemption and exchange methods are outlined below. Except for
the CDSC applicable to certain redemptions of Class B and Class C Shares and the
Limited CDSC applicable to certain redemptions of Class A Shares purchased at
net asset value, there is no fee charged by the Fund or the Distributor for
redeeming or exchanging your shares, but such fees could be charged in the
future. You may have your investment dealer arrange to have your shares redeemed
or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by a Fund or its agent.
Written Redemption
You can write to each Fund at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares. The request must be signed by all
owners of the account or your investment dealer of record. For redemptions of
more than $50,000, or when the proceeds are not sent to the shareholder(s) at
the address of record, the Funds require a signature by all owners of the
account and a signature guarantee for each owner. Each signature guarantee must
be supplied by an eligible guarantor institution. Each Fund reserves the right
to reject a signature guarantee supplied by an eligible institution based on its
creditworthiness. The Funds may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
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Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificate must accompany your request and also be in good order. Certificates
are issued for Class A Shares only if a shareholder submits a specific request.
Certificates are not issued for Class B Shares or Class C Shares.
Written Exchange
You may also write to each Fund (at 1818 Market Street, Philadelphia,
PA 19103) to request an exchange of any or all of your shares into another
mutual fund in the Delaware Group, subject to the same conditions and
limitations as other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
certificates.
The Telephone Redemption - Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in which you have your account
in writing that you do not wish to have such services available with respect to
your account. Each Fund reserves the right to modify, terminate or suspend these
procedures upon 60 days' written notice to shareholders. It may be difficult to
reach the Funds by telephone during periods when market or economic conditions
lead to an unusually large volume of telephone requests.
Neither the Funds nor their Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, each Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds
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will normally be sent the next business day. CoreStates Bank, N.A.'s fee
(currently $7.50) will be deducted from your redemption. If you ask for a check,
it will normally be mailed the next business day after receipt of your
redemption request to your predesignated bank account. There are no separate
fees for this redemption method, but the mail time may delay getting funds into
your bank account. Simply call the Shareholder Service Center prior to the time
the offering price and net asset value are determined, as noted above.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in the Delaware Group under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
Systematic Withdrawal Plans
1. Regular Plans
This plan provides shareholders with a consistent monthly (or
quarterly) payment. This is particularly useful to shareholders living on fixed
incomes, since it can provide them with a stable supplemental amount. With
accounts of at least $5,000, you may elect monthly withdrawals of $25 (quarterly
$75) or more. The Funds do not recommend any particular monthly amount, as each
shareholder's situation and needs vary. Payments are normally made by check. In
the alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine Direct Deposit
Service. Your funds will normally be credited to your bank account two business
days after the payment date. There are no separate fees for this redemption
method. See MoneyLine Direct Deposit Service under The Delaware Difference for
more information about this service.
2. Retirement Plans
For shareholders eligible under the applicable retirement plan to
receive benefits in periodic payments, the Systematic Withdrawal Plan provides
you with maximum flexibility. A number of formulas are available for calculating
your withdrawals depending upon whether the distributions are required or
optional. Withdrawals must be for $25 or more; however, no minimum account
balance is required.
* * *
Shareholders should not purchase additional shares while participating
in a Systematic Withdrawal Plan.
Redemptions of Class A Shares via a Systematic Withdrawal Plan may be
subject to a Limited CDSC if the original purchase was made at net asset value
within the 12 months prior to the withdrawal and a dealer's commission was paid
on that purchase. See Contingent Deferred Sales Charge for Certain Redemptions
of Class A Shares Purchased at Net Asset Value, below.
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The applicable CDSC for Class B Shares and Class C Shares redeemed via
a Systematic Withdrawal Plan will be waived if, on the date that the Plan is
established, the annual amount selected to be withdrawn is less than 12% of the
account balance. If the annual amount selected to be withdrawn exceeds 12% of
the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subject to the applicable
CDSC. Whether a waiver of the CDSC is available or not, the first shares to be
redeemed for each Systematic Withdrawal Plan payment will be those not subject
to a CDSC because they have either satisfied the required holding period or were
acquired through the reinvestment of distributions. The 12% annual limit will be
reset on the date that any Systematic Withdrawal Plan is modified (for example,
a change in the amount selected to be withdrawn or the frequency or date of
withdrawals), based on the balance in the account on that date. See Waiver of
Contingent Deferred Sales Charge - Class B and Class C Shares, below.
For more information on Systematic Withdrawal Plans, call the
Shareholder Service Center.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
A Limited CDSC will be imposed on certain redemptions of Class A Shares
(or shares into which such Class A Shares are exchanged) made within 12 months
of purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission previously described. See
Classes of Shares.
The Limited CDSC will be paid to the Distributor and will be equal to
the lesser of 1% of: (1) the net asset value at the time of purchase of the
Class A Shares being redeemed; or (2) the net asset value of such Class A Shares
at the time of redemption. For purposes of this formula, the "net asset value at
the time of purchase" will be the net asset value at purchase of the Class A
Shares even if those shares are later exchanged for shares of another Delaware
Group fund and, in the event of an exchange of Class A Shares, the "net asset
value of such shares at the time of redemption" will be the net asset value of
the shares acquired in the exchange.
Redemptions of such Class A Shares held for more than 12 months will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Group fund will not trigger the imposition of the Limited CDSC
at the time of such exchange. The period a shareholder owns shares into which
Class A Shares are exchanged will count towards satisfying the 12-month holding
period. The Limited CDSC is assessed if such 12-month period is not satisfied
irrespective of whether the redemption triggering its payment is of the Class A
Shares of a Fund or the Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the investment
occurred, will age one month on the last day of that month and each subsequent
month.
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Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from a Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"), or due to death of a participant in such a plan; (iii)
redemptions pursuant to the direction of a participant or beneficiary of a
retirement plan qualified under section 401(a) or 401(k) of the Code with
respect to that retirement plan; (iv) distributions from a section 403(b)(7)
Plan or an IRA due to death, disability, or attainment of age 59 1/2; (v)
returns of excess contributions to an IRA; (vi) distributions by other employee
benefit plans to pay benefits; (vii) distributions described in (ii), (iv), and
(vi) above pursuant to a Systematic Withdrawal Plan; and (viii) redemptions by
the classes of shareholders who are permitted to purchase shares at net asset
value, regardless of the size of the purchase (see Buying Class A Shares at Net
Asset Value under Classes of Shares).
Waiver of Contingent Deferred Sales Charge - Class B and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from a
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective minimum
account size; (ii) returns of excess contributions to an IRA or 403(b)(7)
Deferred Compensation Plan; (iii) required minimum distributions from an IRA,
403(b)(7) Deferred Compensation Plan or 457 Deferred Compensation Plan; and (iv)
distributions from an account if the redemption results from the death of all
registered owners of the account (in the case of accounts established under the
Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts,
the waiver applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Code) of all registered
owners occurring after the purchase of the shares being redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from a Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, 403(b)(7) Deferred Compensation Plan, Profit
Sharing Plan, Money Purchase Pension Plan or 401(k) Defined Contribution Plan;
(iii) required minimum distributions from an IRA, 403(b)(7) Deferred
Compensation Plan, 457 Deferred Compensation Plan, Profit Sharing Plan, Money
Purchase Pension Plan or 401(k) Defined Contribution Plan; (iv) distributions
from a 403(b)(7) Deferred Compensation Plan, 457 Deferred Compensation Plan,
Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) Deferred Compensation
Plan, 457 Deferred Compensation Plan, Profit Sharing Plan, Money Purchase
Pension Plan or a 401(k) Defined Contribution Plan upon attainment of normal
retirement age under the plan or upon separation from service; (vi)
distributions from an IRA on or after attainment of age 59 1/2; and (vii)
distributions from an account if the redemption results from the death of all
registered owners of the account (in the case of accounts established under the
Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts,
the waiver applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Code) of all registered
owners occurring after the purchase of the shares being redeemed.
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In addition, the CDSC will be waived on Class B and Class C Shares
redeemed in accordance with a Systematic Withdrawal Plan if the annual amount
selected to be withdrawn under the Plan does not exceed 12% of the value of the
account on the date that the Systematic Withdrawal Plan was established or
modified.
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DIVIDENDS AND DISTRIBUTIONS
Each Fund will normally make payments from net investment income on a
quarterly basis.
Payments from net realized securities profits of a Fund, if any, will
be distributed annually in the quarter following the close of the fiscal year.
Each class of a Fund will share proportionately in the investment
income and expenses of that Fund, except that the per share dividends from net
investment income on the Class A Shares, the Class B Shares and the Class C
Shares will vary due to the expenses under the 12b-1 Plan applicable to each
Class. Generally, the dividends per share on Class B Shares and Class C Shares
can be expected to be lower than the dividends per share on Class A Shares
because the expenses under the 12b-1 Plans relating to Class B and Class C
Shares will be higher than the expenses under the 12b-1 Plan relating to Class A
Shares. See Distribution (12b-1) and Service under Management of the Funds.
Both dividends and distributions, if any, are automatically reinvested
in your account at net asset value unless you elect otherwise. Any check in
payment of dividends or other distributions which cannot be delivered by the
United States Post Office or which remains uncashed for a period of more than
one year may be reinvested in your account at the then-current net asset value
and the dividend option may be changed from cash to reinvest. If you elect to
take your dividends and distributions in cash and such dividends and
distributions are in an amount of $25 or more, you may choose the MoneyLine
Direct Deposit Service and have such payments transferred from your Fund account
to your predesignated bank account. See MoneyLine Direct Deposit Service under
The Delaware Difference for more information about this service.
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TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in a Fund.
Each Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, a Fund
will not be subject to federal income tax, or to any excise tax, to the extent
its earnings are distributed as provided in the Code.
Each Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to those investors who are subject
to income taxes as ordinary income, whether received in cash or in additional
shares. For corporate investors, dividends from net investment income will
generally qualify in part for the corporate dividends-received deduction. The
portion of dividends paid by a Fund that so qualifies will be designated each
year in a notice from the Fund to the Fund's shareholders. For the fiscal year
ended October 31, 1996, 32% and 36% of, respectively, Delaware Fund's and Devon
Fund's dividends from net investment income qualified for the corporate
dividends-received deduction.
Distributions paid by a Fund from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who are
subject to income taxes as long-term capital gains, regardless of the length of
time an investor has owned shares in that Fund. The Funds do not seek to realize
any particular amount of capital gains during a year; rather, realized gains are
a by-product of Fund management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year. Also, for
those investors subject to tax, if purchases of shares in a Fund are made
shortly before the record date for a dividend or capital gains distribution, a
portion of the investment will be returned as a taxable distribution.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November, or December to shareholders
of record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Funds and received by the shareholder
on December 31 of the year declared.
The sale of shares of a Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
the Funds and any other fund in the Delaware Group. Any loss incurred on a sale
or exchange of Fund shares that had been held for six months or less will be
treated as a long-term capital loss to the extent of capital gain dividends
received with respect to such shares. All or a portion of the sales charge
incurred in acquiring a Fund's shares will be excluded from the federal tax
basis of any of such shares sold or exchanged within 90 days of their purchase
(for purposes of determining gain or loss upon sale of such shares) if the sale
proceeds are reinvested in that Fund or in another fund in the Delaware Group of
funds and a sales charge that would otherwise apply to the reinvestment is
reduced or eliminated. Any portion of such sales charge excluded from the tax
basis of the shares sold will be added to the tax basis of the shares acquired
in the reinvestment.
The automatic conversion of Class B Shares into Class A Shares at the
end of approximately eight years after purchase will be tax-free for federal tax
purposes. See Automatic Conversion of Class B Shares under Classes of Shares.
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In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. government securities may be exempt from
state personal income taxes. Shares of each Fund are exempt from Pennsylvania
county personal property taxes.
Each year, Equity Funds I, Inc. will mail to you information on the tax
status of each Fund's dividends and distributions. Shareholders will also
receive each year information as to the portion of dividend income, if any, that
is derived from U.S. government securities that are exempt from state income
tax. Of course, shareholders who are not subject to tax on their income would
not be required to pay tax on amounts distributed to them by a Fund.
Equity Funds I, Inc. is required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to shareholders who have not
complied with IRS taxpayer identification regulations. You may avoid this
withholding requirement by certifying on your Investment Application your proper
Taxpayer Identification Number and by certifying that you are not subject to
backup withholding.
See Taxes in Part B for additional information on tax matters relating
to each Fund and its shareholders.
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CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
The net asset value ("NAV") per share is computed by adding the value
of all securities and other assets in the portfolio, deducting any liabilities
(expenses and fees are accrued daily) and dividing by the number of shares
outstanding. Equity securities for which market quotations are available are
priced at market value. Debt securities are priced on the basis of valuations
provided by an independent pricing service using methods approved by Equity
Funds I, Inc.'s Board of Directors. Short-term investments having a maturity of
less than 60 days are valued at amortized cost, which approximates market value.
All other securities are valued at their fair value as determined in good faith
and in a method approved by Equity Funds I, Inc.'s Board of Directors.
Class A Shares are purchased at the offering price per share, while
Class B Shares and Class C Shares are purchased at the NAV per share. The
offering price per share of Class A Shares consists of the NAV per share next
computed after the order is received, plus any applicable front-end sales
charges.
The offering price and NAV are computed as of the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on
days when the Exchange is open.
The net asset values of all outstanding shares of each class of a Fund
will be computed on a pro-rata basis for each outstanding share based on the
proportionate participation in that Fund represented by the value of shares of
that class. All income earned and expenses incurred by a Fund will be borne on a
pro-rata basis by each outstanding share of a class, based on each class'
percentage in that Fund represented by the value of shares of such classes,
except that Delaware Fund Institutional Class and Devon Fund Institutional Class
will not incur any of the expenses under Equity Funds I, Inc.'s 12b-1 Plans and
the Class A, Class B and Class C Shares of each Fund alone will bear the 12b-1
Plan expenses payable under their respective Plans. Due to the specific
distribution expenses and other costs that will be allocable to each class, the
NAV of each class of a Fund will vary.
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MANAGEMENT OF THE FUNDS
Directors
The business and affairs of Equity Funds I, Inc. are managed under the
direction of its Board of Directors. Part B contains additional information
regarding Equity Funds I, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to each Fund.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On October 31, 1996, the Manager and its affiliates
within the Delaware Group, including Delaware International Advisers Ltd., were
managing in the aggregate more than $30 billion in assets in the various
institutional or separately managed (approximately $19,214,690,000) and
investment company (approximately $11,539,873,000) accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now indirect, wholly owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management. In connection with the merger, new
Investment Management Agreements between Equity Funds I, Inc. on behalf of each
Fund and the Manager were executed following shareholder approval.
The Manager manages each Fund's portfolio and makes investment
decisions for the Funds which are implemented by the Funds' Trading Department.
The Manager also administers Equity Funds I, Inc.'s affairs and pays the
salaries of all the directors, officers and employees of Equity Funds I, Inc.
who are affiliated with the Manager. For these services, the Manager is paid an
annual fee equal to: for Delaware Fund, 0.60% on the first $100 million of
average daily net assets of the Fund, 0.525% on the next $150 million, 0.50% on
the next $250 million and 0.475% on the average daily net assets in excess of
$500 million, less the Fund's proportionate share of all directors' fees paid to
the unaffiliated directors by Equity Funds I, Inc.; and, for Devon Fund, 0.60%
on the first $500 million of average daily net assets and 0.50% on the average
daily net assets in excess of $500 million. Investment management fees paid by
Delaware Fund for the fiscal year ended October 31, 1996 were 0.52% of average
daily net assets. Investment management fees earned by Devon Fund for the fiscal
year ended October 31, 1996 were 0.60% of average daily net assets and no fees
were paid by this Fund as a result of the voluntary waiver of fees by the
Manager described under Summary of Expenses.
George H. Burwell and Gary A. Reed have primary responsibility for
making day-to-day investment decisions for Delaware Fund and Mr. Burwell has
such responsibility for Devon Fund. Mr. Burwell, who has been Equity Funds I,
Inc.'s Senior Portfolio Manager for equities since 1992, holds a BA from the
University of Virginia. Prior to joining the Delaware Group in 1992, Mr. Burwell
was a portfolio manager for Midlantic Bank in Edison, New Jersey, where he
managed an equity mutual fund and three commingled funds. Mr. Burwell is a CFA
charterholder.
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Mr. Reed has been Delaware Fund's Senior Portfolio Manager for
fixed-income since April 1995. He holds an AB in Economics from the University
of Chicago and an MA in Economics from Columbia University. He began his career
in 1978 with the Equitable Life Assurance Company in New York City, where he
specialized in credit analysis. Prior to joining the Delaware Group in 1989, Mr.
Reed was Vice President and Manager of the fixed-income department at Irving
Trust Company in New York.
In making investment decisions for the Funds, Mr. Burwell and Mr. Reed
regularly consult with Wayne A. Stork, Richard G. Unruh, Jr. and Paul E. Suckow.
Mr. Stork, Chairman of the Manager and Equity Funds I, Inc.'s Board of
Directors, is a graduate of Brown University and attended New York University's
Graduate School of Business Administration. Mr. Stork joined the Delaware Group
in 1962 and has served in various executive capacities at different times within
the Delaware organization. A graduate of Brown University, Mr. Unruh received
his MBA from the University of Pennsylvania's Wharton School and joined the
Delaware Group in 1982 after 19 years of investment management experience with
Kidder, Peabody & Co. Inc. Mr. Unruh was named an Executive Vice President of
Equity Funds I, Inc. in 1994. He is also a member of the Board of the Manager
and was named an Executive Vice President of the Manager in 1994. He is on the
Board of Directors of Keystone Insurance Company and AAA Mid-Atlantic and is a
former president and current member of the Advisory Council of the Bond Club of
Philadelphia. Mr. Suckow is Delaware Group's Chief Investment Officer for
fixed-income. He is a CFA charterholder and a graduate of Bradley University
with an MBA from Western Illinois University. Mr. Suckow was a fixed-income
portfolio manager at the Delaware Group from 1981 to 1985. He returned to the
Delaware Group in 1993 after eight years with Oppenheimer Management Corporation
where he served as Executive Vice President and Director of Fixed Income.
Portfolio Trading Practices
The Funds normally will not invest for short-term trading purposes.
However, each Fund may sell securities without regard to the length of time they
have been held. The degree of portfolio activity will affect brokerage costs of
a Fund and may affect taxes payable by the Fund's shareholders to the extent
that net capital gains are realized. Given the Funds' investment objectives,
their annual portfolio turnover rates may exceed 100%. A turnover rate of 100%
would occur, for example, if all the investments in a Fund's portfolio at the
beginning of the year were replaced by the end of the year. During the past two
fiscal years, portfolio turnover rates for each Fund were as follows:
October 31,
Fund 1996 1995
---- ---- ----
Delaware Fund 92% 94%
Devon Fund 80% 99%
Each Fund uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
its advisory clients. These services may be used by the Manager in servicing any
of its accounts. Subject to best price and execution, each Fund may consider a
broker/dealer's sales of its shares in placing portfolio orders and may place
orders with broker/dealers that have agreed to defray certain Fund expenses such
as custodian fees.
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Performance Information
From time to time, Delaware Fund and Devon Fund may quote total return
performance of their respective Classes in advertising and other types of
literature.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value and: (i) in
the case of Class A Shares, the impact of the maximum front-end sales charge at
the beginning of each specified period; and (ii) in the case of Class B Shares
and Class C Shares, the deduction of any applicable CDSC at the end of the
relevant period. Each presentation will include the average annual total return
for one-, five- and ten-year or life-of-fund periods, as relevant. Each Fund may
also advertise aggregate and average total return information concerning a Class
over additional periods of time. In addition, each Fund may present total return
information that does not reflect the deduction of the maximum front-end sales
charge or any applicable CDSC. In this case, such total return information would
be more favorable than total return information that includes the deductions of
the maximum front-end sales charge or any applicable CDSC.
Because securities prices fluctuate, investment results of the Classes
will fluctuate over time. Past performance is not a guarantee of future results.
Distribution (12b-1) and Service
The Distributor, Delaware Distributors, L.P., serves as the national
distributor of each Fund's shares under separate Distribution Agreements with
Equity Funds I, Inc. dated April 3, 1995, as amended on November 29, 1995.
Equity Funds I, Inc. has adopted a separate distribution plan under
Rule 12b-1 for each of the Class A Shares, Class B Shares and Class C Shares of
the Funds (the "Plans"). Each Plan permits the Fund to which the Plan relates to
pay the Distributor from the assets of the respective Classes a monthly fee for
the Distributor's services and expenses in distributing and promoting sales of
shares.
These expenses include, among other things, preparing and distributing
advertisements, sales literature, and prospectuses and reports used for sales
purposes, compensating sales and marketing personnel, holding special promotions
for specified periods of time, and paying distribution and maintenance fees to
brokers, dealers and others. In connection with the promotion of shares of the
Classes, the Distributor may, from time to time, pay to participate in
dealer-sponsored seminars and conferences, and reimburse dealers for expenses
incurred in connection with preapproved seminars, conferences and advertising.
The Distributor may pay or allow additional promotional incentives to dealers as
part of preapproved sales contests and/or to dealers who provide extra training
and information concerning a Class and increase sales of the Class. In addition,
each Fund may make payments from the 12b-1 Plan fees of its respective Classes
directly to others, such as banks, who aid in the distribution of Class shares
or provide services in respect of a Class, pursuant to service agreements with
Equity Funds I, Inc.
The 12b-1 Plan expenses relating to each of the Class B Shares and
Class C Shares of the Funds are also used to pay the Distributor for advancing
the commission costs to dealers with respect to the initial sale of such shares.
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The aggregate fees paid by a Fund from the assets of the respective
Classes to the Distributor and others under the Plans may not exceed (i) 0.30%
of a Class A Shares' average daily net assets in any year, and (ii) 1% (0.25% of
which are service fees to be paid by the Fund to the Distributor, dealers and
others, for providing personal service and/or maintaining shareholder accounts)
of each Fund's Class B Shares' and Class C Shares' average daily net assets in
any year. The actual 12b-1 expenses assessed against Delaware Fund A Class may
be less than 0.30%, but may not be less than 0.10%, because of the formula for
calculating the fee adopted by Equity Funds I, Inc.'s Board of Directors. See
Part B. Each Fund's Class A, Class B and Class C Shares will not incur any
distribution expenses beyond these limits, which may not be increased without
shareholder approval.
On September 23, 1993, the Board of Directors set the fee for Devon
Fund A Class at 0.30% of average daily net assets.
While payments pursuant to the Plans may not exceed 0.30% annually with
respect to each Fund's Class A Shares, and 1% annually with respect to each
Fund's Class B Shares and Class C Shares, the Plans do not limit fees to amounts
actually expended by the Distributor. It is therefore possible that the
Distributor may realize a profit in any particular year. However, the
Distributor currently expects that its distribution expenses will likely equal
or exceed payments to it under the Plans. The Distributor may, however, incur
such additional expenses and make additional payments to dealers from its own
resources to promote the distribution of shares of the Classes. The monthly fees
paid to the Distributor under the Plans are subject to the review and approval
of Equity Funds I, Inc.'s unaffiliated directors, who may reduce the fees or
terminate the Plans at any time.
The Plans do not apply to Delaware Fund Institutional Class or Devon
Fund Institutional Class of shares. Those shares are not included in calculating
the Plans' fees, and the Plans are not used to assist in the distribution and
marketing of Delaware Fund Institutional Class or Devon Fund Institutional
Class.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for Delaware Fund
under an Agreement dated June 29, 1988 and for Devon Fund under an Agreement
dated December 29, 1993. The Transfer Agent also provides accounting services to
each Fund pursuant to the terms of a separate Fund Accounting Agreement. The
directors of Equity Funds I, Inc.
annually review service fees paid to the Transfer Agent.
The Distributor and the Transfer Agent are also indirect, wholly owned
subsidiaries of DMH.
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Expenses
Each Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreements and those borne
by the Distributor under the Distribution Agreements. For the fiscal year ended
October 31, 1996, the ratios of expenses to average daily net assets for each
Class of each Fund were as follows:
Class A Class B Class C
Shares Shares Shares
Delaware Fund 0.99% 1.80% 1.80%
Devon Fund 1.25%* 1.95%* 1.95%*
*Reflects the voluntary waiver of fees by the Manager.
The expense ratios of each Class reflects the impact of its 12b-1 Plan.
Shares
Equity Funds I, Inc. is an open-end management investment company. Each
Fund's portfolio of assets is diversified as defined by the 1940 Act. Commonly
known as a mutual fund, Equity Funds I, Inc. was organized as a Maryland
corporation on March 4, 1983 and was previously organized as a Delaware
corporation in 1937. Equity Funds I, Inc. currently offers two series of shares
- - Delaware Fund series and Devon Fund series. Fund shares have a par value of
$1.00, equal voting rights, except as noted below, and are equal in all other
respects. Each Fund will vote separately on any matter which affects only that
Fund. Shares of each Fund have a priority over shares of any other fund of
Equity Funds I, Inc. in the assets and income of that Fund.
Equity Funds I, Inc. shares have noncumulative voting rights which
means that the holders of more than 50% of Equity Funds I, Inc.'s shares voting
for the election of directors can elect 100% of the directors if they choose to
do so. Under Maryland law, Equity Funds I, Inc. is not required, and does not
intend, to hold annual meetings of shareholders unless, under certain
circumstances, it is required to do so under the 1940 Act. Shareholders of 10%
or more of Equity Funds I, Inc.'s outstanding shares may request that a special
meeting be called to consider the removal of a director.
In addition to Class A, Class B and Class C Shares, Delaware Fund and
Devon Fund offer Delaware Fund Institutional Class and Devon Fund Institutional
Class of shares, respectively. Shares of each Class represent proportionate
interests in the assets of the respective Fund and have the same voting and
other rights and preferences as the other classes of that Fund, except that
shares of Delaware Fund Institutional Class and Devon Fund Institutional Class
are not subject to, and may not vote on matters affecting, the Distribution
Plans under Rule 12b-1 relating to the Class A, Class B and Class C Shares.
Similarly, as a general matter, the shareholders of the Class A Shares, Class B
Shares and Class C Shares may vote only on matters affecting the 12b-1 Plan that
relates to the class of shares that they hold. However, the Class B Shares of a
Fund may vote on any proposal to increase materially the fees to be paid by that
Fund under the 12b-1 Plan relating to the Class A Shares.
Effective as of the close of business December 27, 1996, the name of
Delaware Group Delaware Fund, Inc. was changed to Delaware Group Equity Funds I,
Inc. Also effective as of the close of business December 27, 1996, the name of
Common Stock Series was changed to Delaware Fund Series. Effective as of the
close of business on August 28, 1995, the name Dividend Growth Fund was changed
to Devon Fund and the names of Dividend Growth Fund A Class, Dividend Growth
Fund B Class and Dividend Growth Fund Institutional Class were changed to Devon
fund A Class, Devon fund B Class and Devon Fund Institutional Class,
respectively.
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OTHER INVESTMENT POLICIES AND RISK FACTORS
Mortgage-Backed Securities--Each Fund may invest in mortgage-backed
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities or government sponsored corporations. Each Fund also may
invest in securities issued by certain private, non-government corporations,
such as financial institutions, if the securities are fully collateralized at
the time of issuance by securities or certificates issued or guaranteed by the
U.S. government, its agencies or instrumentalities. Two principal types of
mortgage-backed securities are collateralized mortgage obligations (CMOs) and
real estate mortgage investment conduits (REMICs).
CMOs are debt securities issued by U.S. government agencies or by
financial institutions and other mortgage lenders and collateralized by a pool
of mortgages held under an indenture. CMOs are issued in a number of classes or
series with different maturities. The classes or series are retired in sequence
as the underlying mortgages are repaid. Prepayment may shorten the stated
maturity of the obligation and can result in a loss of premium, if any has been
paid. Certain of these securities may have variable or floating interest rates
and others may be stripped (securities which provide only the principal or
interest feature of the underlying security).
REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities.
CMOs and REMICs issued by private entities are not government
securities and are not directly guaranteed by any government agency. They are
secured by the underlying collateral of the private issuer. Certain of these
private-backed securities are 100% collateralized at the time of issuance by
securities issued or guaranteed by the U.S. government, its agencies, or
instrumentalities. Devon Fund currently may invest in privately-issued CMOs and
REMICs only if they are so collateralized and rated at the time of purchase in
the four highest grades by a nationally-recognized rating agency (e.g., BBB or
better by S&P or Baa or better by Moody's).
Delaware Fund may invest its assets in CMOs and REMICs issued by
private entities whether or not the securities are 100% collateralized at the
time of issuance by securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities (securities that are not so collateralized are
called "non-agency mortgage-backed securities"). Non-agency mortgage-backed
securities may comprise of up to 20% of Delaware Fund's assets, but all of these
securities must (i) be rated at the time of purchase in the four top rating
categories by a nationally-recognized statistical rating organization and (ii)
represent interests in whole-loan mortgages, multi-family mortgages, commercial
mortgages or other mortgage collateral supported by a first mortgage lien on
real estate. Non-agency mortgage-backed securities are subject to the interest
rate and repayment risks to which other CMOs and REMICs issued by private
issuers are subject. Non-agency mortgage-backed securities may also be subject
to a greater risk of loss of interest and principal because they are not
collateralized by securities issued or guaranteed by the U.S. government. In
addition, timely information concerning the loans underlying these securities
may not be as readily available and the market for these securities may be less
liquid than the market for other CMOs and REMICs.
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Asset Backed Securities--Delaware Fund and Devon Fund may invest in
securities which are backed by assets such as receivables on home equity and
credit loans, receivables regarding automobile, mobile home and recreational
vehicle loans, wholesale dealer floor plans and leases or other loans or
financial receivables currently available or which may be developed in the
future. All such securities must be rated in one of the four highest rating
categories by a reputable rating agency (e.g., BBB or better by S&P or Baa or
better by Moody's).
Such receivables are securitized in either a pass-through or a
pay-through structure. Pass-through securities provide investors with an income
stream consisting of both principal and interest payments in respect of the
receivables in the underlying pool. Pay-through asset-backed securities are debt
obligations issued usually by a special purpose entity, which are collateralized
by the various receivables and in which the payments on the underlying
receivables provide the funds to pay the debt service on the debt obligations
issued.
The rate of principal payment on asset-backed securities generally
depends on the rate of principal payments received on the underlying assets.
Such rate of payments may be affected by economic and various other factors such
as changes in interest rates or the concentration of collateral in a particular
geographic area. Therefore, the yield may be difficult to predict and actual
yield to maturity may be more or less than the anticipated yield to maturity.
Due to the shorter maturity of the collateral backing such securities, there
tends to be less of a risk of substantial prepayment than with mortgage-backed
securities but the risks of such prepayment does exist. Such asset-backed
securities do, however, involve certain risks not associated with
mortgage-backed securities, including the risk that security interests cannot be
adequately or in many cases ever established, and other risks which may be
peculiar to particular classes of collateral. For example, with respect to
credit card receivables, a number of state and federal consumer credit laws give
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the outstanding balance. In the case of automobile receivables, there
is a risk that the holders may not have either a proper or first security
interest in all of the obligations backing such receivables due to the large
number of vehicles involved in a typical issuance and technical requirements
under state laws. Therefore, recoveries on repossessed collateral may not always
be available to support payments on the securities. For further discussion
concerning the risk of investing in such asset-backed securities, see Part B.
Real Estate Investment Trusts--Each Fund may invest in shares or
convertible bonds issued by real estate investment trusts ("REITS"). REITS
invest primarily in income producing real estate as well as real estate related
loans or interests. A REIT is not taxed on income distributed to shareholders if
it complies with several requirements relating to its organization, ownership,
assets and income, and a requirement that it distribute to its shareholders at
least 95% of its taxable income (other than net capital gains) for each taxable
year. Each Fund anticipates investing only in REITS that invest the majority of
their assets directly in real property and derive their income primarily from
rents, which are known as "equity REITS." Equity REITS can also realize capital
gains by selling properties that have appreciated in value.
Restricted and Illiquid Securities--Each Fund may purchase privately
placed securities the resale of which is restricted under applicable securities
laws. Most of the privately placed securities acquired by the Fund will be
eligible for resale by the Fund without registration pursuant to Rule 144A
("Rule 144A Securities") under the Securities Act of 1933. Rule 144A permits
many privately placed and legally
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restricted securities to be freely traded among certain institutional buyers.
Each Fund may invest not more than 10% of its assets in illiquid securities.
While maintaining oversight, the Board of Directors of Equity Funds I, Inc. has
delegated to the Manager the day-to-day function of determining whether
individual Rule 144A Securities are liquid for purposes of each Fund's 10%
limitation on investments in illiquid securities. Devon Fund currently intends
to limit its investments in restricted securities, excluding Rule 144A
Securities, to not more than 5% of its assets.
The Board has instructed the Manager to consider the following factors
in determining the liquidity of a Rule 144A Security: (i) the frequency of
trades and trading volume for the security; (ii) whether at least three dealers
are willing to purchase or sell the security and the number of potential
purchasers; (iii) whether at least two dealers are making a market in the
security; (iv) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, a
Fund's holdings of illiquid securities exceed the Fund's limit noted above on
investments in such securities, the Manager will determine what action to take
to ensure that the Fund continues to adhere to such limitation.
Convertible Securities--Each Fund may invest in convertible securities,
including corporate debentures, bonds, notes and preferred stocks that may be
converted into or exchanged for common stock. These securities are generally
convertible either at a stated price or a stated rate (that is, for a specific
number of shares of common stock or other security). As with other fixed-income
securities, the price of a convertible security to some extent varies inversely
with interest rates. While providing a fixed-income stream, a convertible
security also affords the investor an opportunity, through its conversion
feature, to participate in the capital appreciation of the common stock into
which it is convertible. Each Fund may invest not more than 5% of its assets in
convertible debentures that are rated below investment grade or are unrated but
are determined by the Manager to be of comparable quality. For a discussion
concerning the risks of investing in such securities, see Part B.
Foreign Securities and ADRs--Each Fund may invest up to 5% of its
assets in foreign securities. Each Fund may also invest without limitation in
sponsored and unsponsored American Depositary Receipts ("ADRs") that are
actively traded in the United States. ADRs are receipts typically issued by a
U.S. bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. "Sponsored" ADRs are issued jointly by the
issuer of the underlying security and a depository, and "unsponsored" ADRs are
issued without the participation of the issuer of the deposited security.
Holders of unsponsored ADRs generally bear all the costs of such facilities and
the depository of an unsponsored ADR facility frequently is under no obligation
to distribute shareholder communications received from the issuer of the
deposited security or to pass through voting rights to the holders of such
receipts in respect of the deposited securities. Therefore, there may not be a
correlation between information concerning the issuer of the security and the
market value of an unsponsored ADR.
Foreign markets may be more volatile than U.S. markets, and investments
in foreign securities involve sovereign risks in addition to the normal risks
associated with U.S. securities. These risks include political risks, foreign
taxes and exchange controls and currency fluctuations. For example, foreign
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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 control regulations apart from market fluctuations. Each Fund
may also experience delays in foreign securities settlement.
Each Fund will, from time to time, conduct foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into contracts to purchase
or sell foreign currencies at a future date (i.e., a "forward foreign currency"
contract or "forward" contract). Investors should be aware that there are costs
and risks associated with such currency transactions.
Equity Funds I, Inc.'s Custodian for its foreign securities is The
Chase Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245.
Repurchase Agreements--In order to invest its short-term cash reserves
or when in a temporary defensive posture, each Fund 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 Fund)
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 a Fund's 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 Fund, if
any, would be the difference between the repurchase price and the market value
of the security. Each Fund 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, each Fund must have collateral of at least 100% of the repurchase
price, including the portion representing such Fund's 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
1940 Act, but the Funds consider repurchase agreements contracts for the
purchase and sale of securities, and each 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 default.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow the
Delaware Group funds jointly to invest cash balances. Each Fund of Equity Funds
I, Inc. 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--Each Fund 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.
The major risk to which a Fund 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, each Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, subject to overall
supervision by 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.
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Futures Contracts--Devon Fund may enter into futures contracts on
stocks and stock indices, and purchase or sell options on stock index futures
and stock indices. These activities will not be entered into for speculative
purposes, but rather for hedging purposes and to facilitate the ability to
quickly deploy into the stock market the Fund's positions in cash, short-term
debt securities and other money market instruments, at times when the Fund's
assets are not fully invested in equity securities. Such positions will
generally be eliminated when it becomes possible to invest in securities that
are appropriate for the Fund.
A futures contract is a bilateral agreement providing for the purchase
and sale of a specified type and amount of a financial instrument, or for the
making and acceptance of a cash settlement, at a stated time in the future for a
fixed price. By its terms, a futures contract provides for a specified
settlement date on which the securities underlying the contract are delivered,
or in the case of securities index futures contracts, the difference between the
price at which the contract was entered into and the contract's closing value is
settled between the purchaser and seller in cash. Futures contracts differ from
options in that they are bilateral agreements, with both the purchaser and the
seller equally obligated to complete the transaction. In addition, futures
contracts call for settlement only on the expiration date, and cannot be
"exercised" at any other time during their term.
The purchase or sale of a futures contract also differs from the
purchase or sale of a security or the purchase of an option in that no purchase
price is paid or received. Instead, an amount of cash or cash equivalents, which
varies but may be as low as 5% or less of the value of the contract, must be
deposited with the broker as "initial margin" as a good faith deposit. This
amount is generally maintained in a segregated account at the custodian bank.
Subsequent payments to and from the broker, referred to as "variation margin,"
are made on a daily basis as the value of the index or instrument underlying the
futures contract fluctuates, making positions in the futures contract more or
less valuable, a process known as "marking to the market."
The Fund may also purchase and write options on the types of futures
contracts in which the Fund may invest, and enter into related closing
transactions. Options on futures are similar to options on securities, as
described below, except that options on futures give the purchaser the right, in
return for the premium paid, to assume a position in a futures contract, rather
than to actually purchase or sell the futures contract, at a specified exercise
price at any time during the period of the option. In the event that an option
written by the Fund is exercised, the Fund will be subject to all the risks
associated with the trading of futures contracts, such as payment of variation
margin deposits. In addition, the writer of an option on a futures contract,
unlike the holder, is subject to initial and variation margin requirements on
the option position.
At any time prior to the expiration of a futures contract, a trader may
elect to close out its position by taking an opposite position on the contract
market on which the position was entered into, subject to the availability of a
secondary market, which will operate to terminate the initial position.
Likewise, a position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to availability of a secondary market, which is the
purchase or sale of an option of the same series (i.e., the same exercise price
and expiration date) as the option previously purchased or sold. The Fund may
realize a profit or a loss when closing out a futures contract or an option on a
futures contract.
-52-
<PAGE>
(DF/DVN-ABC)
To the extent that interest or exchange rates or securities prices move
in an unexpected direction, the Fund may not achieve the anticipated benefits of
investing in futures contracts and options thereon, or may realize a loss. To
the extent that the Fund purchases an option on a futures contract and fails to
exercise the option prior to the exercise date, it will suffer a loss of the
premium paid. Further, the possible lack of a secondary market could prevent the
Fund from closing out its positions relating to futures. See Part B for a
further discussion of this investment technique.
Options--Devon Fund may write covered call options on individual issues
as well as write call options on stock indices. The Fund may also purchase put
options on individual issues and on stock indices. The Manager will employ these
techniques in an attempt to protect appreciation attained, to offset capital
losses and to take advantage of the liquidity available in the option markets.
The ability to hedge effectively using options on stock indices will depend, in
part, on the correlation between the composition of the index and the Fund's
portfolio as well as the price movement of individual securities. The Fund does
not currently intend to write or purchase options on stock indices.
While there is no limit on the amount of the Fund's assets which may be
invested in covered call options, the Fund will not invest more than 2% of its
net assets in put options. The Fund will only use Exchange-traded options.
Call Options
Writing Covered Call Options--A covered call option obligates Devon
Fund to sell one of its securities for an agreed price up to an agreed date.
When the Fund writes a call, it receives a premium and agrees to sell the
callable securities to a purchaser of a corresponding call during the call
period (usually not more than nine months) at a fixed exercise price regardless
of market price changes during the call period. The advantage is that the Fund
receives premium income for the limited purpose of offsetting the costs of
purchasing put options or offsetting any capital loss or decline in market value
of the security. However, if the Manager's forecast is wrong, the Fund may not
fully participate in the market appreciation if the security's price rises.
Writing a Call Option on Stock Indices--Writing a call option on stock
indices is similar to the writing of a call option on an individual stock. Stock
indices used will include, but not be limited to, the S&P 500, the Standard &
Poor's 100 Index ("S&P 100") and the Standard & Poor's Over-The-Counter 250
Index ("S&P OTC 250").
Put Options
Purchasing a Put Option--A put option gives Devon Fund the right to
sell one of its securities for an agreed price up to an agreed date. The
advantage is that the Fund can be protected should the market value of the
security decline. However, the Fund must pay a premium for this right which
would be lost if the option is not exercised. The Fund will, at all times during
which it holds a put option, own the security covered by such option.
Purchasing a Put Option on Stock Indices--Purchasing a protective put
option on stock indices is similar to the purchase of protective puts on an
individual stock. Indices used will include, but not be limited to, the S&P 500,
the S&P 100 and the S&P OTC 250.
-53-
<PAGE>
(DF/DVN-ABC)
Closing Transactions--Closing transactions essentially let the Fund
offset a put option or covered call option prior to its exercise or expiration.
If the Fund cannot effect a closing transaction, it may have to hold a security
it would otherwise sell or deliver a security it might want to hold.
Other Investment Policies--Neither Fund may concentrate investments in
any industry, which means that a Fund may generally not invest more than 25% of
its assets in any one industry.
In pursuing its investment objective, each Fund may hold securities for
any period of time. For temporary, defensive purposes, each Fund may hold a
substantial portion of its assets in cash, cash equivalents or short-term
obligations, including repurchase agreements. Each Fund may also enter into
repurchase agreements to invest excess cash balances.
While each Fund is permitted under certain circumstances to borrow
money, neither Fund normally does so. A Fund will not purchase investment
securities while it has any borrowings outstanding.
Each Fund may purchase securities on a when-issued or delayed delivery
basis. It is the current intention of each Fund not to enter into when-issued
commitments exceeding in the aggregate 5% of the market value of the Fund's
total assets less liabilities other than obligations created by these
commitments.
* * *
Part B provides more information on each Fund's investment restrictions
and policies, and includes Appendix A which describes security ratings.
-54-
<PAGE>
(DF/DVN-ABC)
APPENDIX A--INVESTMENT ILLUSTRATIONS
Illustrations of Hypothetical Returns on Investments Based on Purchase Option
$10,000 Purchase
<TABLE>
<CAPTION>
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
------------------------------------- -------------------------------------
Year Class A Class B Class C Class A Class B Class C
---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,478 10,930 10,930 10,478 10,530 10,830+
2 11,525 11,946 11,946
3 12,678 13,058 13,058
4 13,946 14,272 14,272
5 15,340 15,599 15,599
6 16,874 17,050 17,050
7 18,562 18,636 18,636
8 20,418+ 20,369 20,369
9 22,459 22,405* 22,263
10 24,705 24,646* 24,333
</TABLE>
<TABLE>
<CAPTION>
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
------------------------------------- -------------------------------------
Year Class A Class B Class C Class A Class B Class C
---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,478 10,930 10,930 10,478 10,930 10,930
2 11,525 11,946 11,946 11,525 11,946 11,946
3 12,678 12,758 13,058+ 12,678 13,058 13,058
4 13,946 14,272 14,272
5 15,340 15,399 15,599+
6
7
8
9
10
</TABLE>
*This assumes that Class B Shares were converted to
Class A Shares at the end of the eighth year.
<PAGE>
$250,000 Purchase
<TABLE>
<CAPTION>
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
------------------------------------- -------------------------------------
Year Class A Class B Class C Class A Class B Class C
---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
0 243,750 250,000 250,000 243,750 250,000 250,000
1 268,125 273,250 273,250 268,125 263,250 270,750+
2 294,938 298,662 298,662
3 324,431 326,438 326,438
4 356,874+ 356,797 356,797
5 392,562 389,979 389,979
6 431,818 426,247 426,247
7 475,000 465,888 465,888
8 522,500 509,215 509,215
9 574,750 560,137* 556,572
10 632,225 616,150* 608,333
</TABLE>
<TABLE>
<CAPTION>
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
------------------------------------- -------------------------------------
Year Class A Class B Class C Class A Class B Class C
---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
0 243,750 250,000 250,000 243,750 250,000 250,000
1 268,125 273,250 273,250 268,125 273,250 273,250
2 294,938 298,662 298,662 294,938 298,662 298,662
3 324,431 318,938 326,438+ 324,431 326,438 326,438
4 356,874+ 356,797 356,797
5 392,562 384,979 389,979
6
7
8
9
10
</TABLE>
*This assumes that Class B Shares were converted to
Class A Shares at the end of the eighth year.
Assumes a hypothetical return for Class A of 10% per year, a hypothetical return
for Class B of 9.3% per year for years 1-8 and 10% for years 9-10, and a
hypothetical return for Class C of 9.3% per year. Hypothetical returns may vary
due to the different expense structures for each Class and do not represent
actual performance.
Class A purchase subject to appropriate sales charge breakpoint (4.75% @
$10,000; 3.75% @ $100,000; 2.50% @ $250,000).
Class B purchase assessed appropriate CDSC upon redemption (4%-4%-3%-3%-2%-1% in
years 1-2-3-4-5-6).
Class C purchase assessed 1% CDSC upon redemption in year 1.
Figures marked "+" identify which Class offers the greater return potential
based on investment amount, holding period and the expense structures of each
Class.
<PAGE>
(DF/DVN-ABC)
APPENDIX B--CLASSES OFFERED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Growth of Capital A Class B Class C Class Consultant Class
Trend Fund x x x -
Enterprise Fund x x x -
DelCap Fund x x x -
Value Fund x x x -
U.S. Growth Fund x x x -
Total Return
Devon Fund x x x -
Decatur Total Return Fund x x x -
Decatur Income Fund x x x -
Delaware Fund x x x -
Global Diversification
Emerging Markets Fund x x x -
New Pacific Fund x x x -
International Equity Fund x x x -
World Growth Fund x x x -
Global Assets Fund x x x -
Global Bond Fund x x x -
Current Income
Delchester Fund x x x -
Strategic Income Fund x x x -
Corporate Income Fund x x x -
Federal Bond Fund x x x -
U.S. Government Fund x x x -
Limited-Term Government Fund x x x -
Tax-Free Current Income
Tax-Free Pennsylvania Fund x x x -
Tax-Free USA Fund x x x -
Tax-Free Insured Fund x x x -
Tax-Free USA Intermediate Fund x x x -
Money Market Funds
Delaware Cash Reserve x x x x
U.S. Government Money Fund x - - x
Tax-Free Money Fund x - - x
</TABLE>
<PAGE>
(DF/DVN-IC)
For more information contact Delaware -------------------------------------
Group at 800-828-5052.
DELAWARE FUND INSTITUTIONAL
DEVON FUND INSTITUTIONAL
-------------------------------------
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR P R O S P E C T U S
Delaware Distributors, L.P.
1818 Market Street -------------------------------------
Philadelphia, PA 19103
SHAREHOLDER SERVICING, DECEMBER 30, 1996
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank DELAWARE
4 Chase Metrotech Center GROUP
Brooklyn, NY 11245 --------
<PAGE>
(DF/DVN-IC)
DELAWARE FUND PROSPECTUS
DEVON FUND DECEMBER 30, 1996
INSTITUTIONAL CLASS SHARES
--------------------------------------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For more information about the Delaware Fund Institutional Class and the
Devon Fund Institutional Class call Delaware Group at 800-828-5052.
This Prospectus describes the shares of the Delaware Fund series
("Delaware Fund")(formerly Common Stock series) and the Devon Fund series
("Devon Fund") (individually, a "Fund" and collectively, the "Funds"), of
Delaware Group Equity Funds I, Inc. ("Equity Funds I, Inc.") (formerly Delaware
Group Delaware Fund, Inc.), a professionally-managed mutual fund of the series
type. Delaware Fund's objective is to seek a balance of capital appreciation,
income and preservation of capital. Devon Fund's objective is to seek current
income and capital appreciation.
Delaware Fund offers Delaware Fund Institutional Class and Devon Fund
offers Devon Fund Institutional Class (individually, a "Class" and collectively,
the "Classes").
This Prospectus relates only to the Classes and sets forth information
that you should read and consider before you invest. Please retain it for future
reference. The Funds' Statement of Additional Information ("Part B" of Equity
Funds I, Inc.'s registration statement), dated December 30, 1996, as it may be
amended from time to time, contains additional information about the Funds and
has been filed with the Securities and Exchange Commission. Part B is
incorporated by reference into this Prospectus and is available, without charge,
by writing to Delaware Distributors, L.P. at the above address or by calling the
above number. Each Fund's financial statements appear in its respective Annual
Report, which will accompany any response to requests for Part B.
Delaware Fund also offers Delaware Fund A Class, Delaware Fund B
Class and Delaware Fund C Class, and Devon Fund also offers Devon Fund A Class,
Devon Fund B Class and Devon Fund C Class. Shares of these classes are subject
to sales charges and other expenses, which may affect their performance. A
prospectus for these classes can be obtained by writing to Delaware
Distributors, L.P. at the above address or by calling 800-523-4640.
-1-
<PAGE>
(DF/DVN-IC)
TABLE OF CONTENTS
Cover Page How to Buy Shares
Synopsis Redemption and Exchange
Summary of Expenses Dividends and Distributions
Financial Highlights Taxes
Investment Objectives and Policies Calculation of Net Asset Value Per Share
Suitability Management of the Funds
Investment Strategy Other Investment Policies and
Classes of Shares Risk Considerations
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUNDS ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUNDS ARE NOT BANK
OR CREDIT UNION DEPOSITS.
-2-
<PAGE>
(DF/DVN-IC)
SYNOPSIS
Investment Objective
The investment objective of Delaware Fund is to seek a balance of
capital appreciation, income and preservation of capital. The investment
objective of Devon Fund is to seek current income and capital appreciation. For
further details, see Investment Objectives and Policies and Other Investment
Policies and Risk Considerations.
Risk Factors and Special Considerations
Delaware Fund typically invests a portion of its assets in
mortgaged-backed and asset-backed securities (commonly considered to be
"derivative securities"), which may present greater risks than other types of
portfolio securities, and the investor should review the descriptions of these
risks in this Prospectus. See Mortgaged-Backed Securities and Asset-Backed
Securities under Other Investment Policies and Risk Considerations.
Devon Fund may enter into options and futures transactions for hedging
purposes to counterbalance portfolio volatility. While Devon Fund does not
engage in options and futures for speculative purposes, there are risks that
result from use of these instruments by the Fund, and the investor should review
the descriptions of these risks in this Prospectus. See Futures Contracts and
Options under Other Investment Policies and Risk Considerations.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") furnishes investment
management services to each Fund, subject to the supervision and direction of
Equity Funds I, Inc.'s Board of Directors. The Manager also provides investment
management services to certain other funds in the Delaware Group. Delaware
Distributors, L.P. (the "Distributor") is the national distributor for each Fund
and for all of the other mutual funds in the Delaware Group. Delaware Service
Company, Inc. (the "Transfer Agent") is the shareholder servicing, dividend
disbursing, accounting services and transfer agent for each Fund and for all of
the other mutual funds in the Delaware Group. See Summary of Expenses and
Management of the Funds for further information regarding the Manager and the
fees payable under each Fund's Investment Management Agreement.
Purchase Price
Shares of each Class offered by this Prospectus are available at net
asset value, without a front-end or contingent deferred sales charge and are not
subject to distribution fees under a Rule 12b-1 distribution plan.
See Classes of Shares.
Redemption and Exchange
Shares of each Class are redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request. See Redemption
and Exchange.
Open-End Investment Company
Equity Funds I, Inc. which was organized as a Maryland corporation on
March 4, 1983 is an open-end management investment company. Each Fund's
portfolio of assets is diversified as defined by the Investment Company Act of
1940 (the "1940 Act"). Equity Funds I, Inc. was previously organized as a
Delaware corporation in 1937. See Shares under Management of the Funds.
-3-
<PAGE>
(DF/DVN-IC)
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
Delaware Devon
Fund Fund
Institutional Institutional
Shareholder Transaction Expenses Class Class
-------------------------------- ------------- -------------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)..................................... None None
Maximum Sales Charge Imposed
on Reinvested Dividends
(as a percentage of offering price)..................................... None None
Exchange Fees........................................................... None* None*
</TABLE>
* Exchanges are subject to the requirements of each fund and a front-end sales
charge may apply.
<TABLE>
<CAPTION>
Delaware Devon
Fund Fund
Annual Operating Expenses Institutional Institutional
(as a percentage of average daily net assets) Class Class
--------------------------------------------- ------------- -------------
<S> <C> <C>
Management Fees......................................................... 0.52% 0.00%**
12b-1 Fees.............................................................. None None
Other Operating Expenses................................................ 0.28% 0.95%**
----- -----
Total Operating Expenses........................................... 0.80% 0.95%**
===== =====
</TABLE>
**The Manager had elected voluntarily to waive that portion, if any,
of the annual management fees payable by Devon Fund and to reimburse the Fund to
the extent necessary to ensure that the "Total Operating Expenses" of Devon Fund
Institutional Class did not exceed 0.95% (exclusive of taxes, interest,
brokerage commissions and extraordinary expenses) during the commencement of the
public offering of the Class through December 31, 1994. This waiver has been
extended through. If the voluntary expense waivers were not in effect, it is
estimated that the "Total Operating Expenses," as a percentage of average daily
net assets, would be 1.54% for Devon Fund Institutional Class, reflecting
Management Fees of 0.60%.
For expense information about Delaware Fund A Class, Delaware Fund B
Class, Delaware Fund C Class, Devon Fund A Class, Devon Fund B Class and Devon
Fund C Class, see the separate prospectus relating to those classes.
-5-
<PAGE>
(DF/DVN-IC)
The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return, and (2) redemption at the end of each time period. As noted in
the tables above, Equity Funds I, Inc. charges no redemption fees.
Delaware Fund 1 year 3 years 5 years 10 years
------ ------- ------- --------
Institutional Class $8 $26 $44 $99
Devon Fund 1 year 3 years 5 years 10 years
------ ------- ------- --------
Institutional Class $10 $30 $53 $117
The purpose of the above tables is to assist the investor in understanding the
various costs and expenses that an investor in either Class will bear directly
or indirectly.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Funds and Devon Fund of Delaware Group Equity Funds I Inc. (formerly
known as Delaware Group Delaware Fund, Inc.) and have been audited by Ernst &
Young LLP, independent auditors. The data should be read in conjunction with the
financial statements, related notes, and the reports of Ernst & Young LLP
covering such financial information and highlights, all of which are
incorporated by reference into Part B. Further information about the Funds'
performance is contained in their Annual Reports to shareholders. A copy of each
Fund's Annual Report (including the report of Ernst & Young LLP) may be obtained
from Equity Funds I, Inc. upon request at no charge.
- --------------------------------------------------------------------------------
-6-
<PAGE>
(DF/DVN-IC)
DF-IC-CHT
<TABLE>
<CAPTION>
Delaware Fund Institutional Class
--------------------------------------------------------------------------------
Period
11/9/92(2)
Year Ended through Year Ended
10/31/96(2) 10/31/95(2) 10/31/94(2) 10/31/93 10/31/93(1) 10/31/92(1)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $19.980 $18.030 $19.460 $18.820 $18.720 $18.810
Income From Investment Operations
Net Investment Income............................. 0.727 0.694 0.653 0.632 0.631 0.660
Net Gains (Losses) on Securities
(both realized and unrealized).......... 2.363 2.166 (0.293) 1.438 1.509 1.490
------- ------- ------- ------- ------- -------
Total From Investment Operations 3.090 2.860 0.360 2.070 2.140 2.150
------- ------- ------- ------- ------- -------
Less Distributions
Dividends (from net investment income)............ (0.690) (0.660) (0.630) (0.660) (0.660) (0.700)
Distributions (from capital gains) (1.080) (0.250) (1.160) (0.770) (0.770) (1.540)
Returns of Capital................................ none none none none none none
------- ------- ------- ------- ------- -------
Total Distributions........................... (1.770) (0.910) (1.790) (1.430) (1.430) (2.240)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period.................... $21.300 $19.980 $18.030 $19.460 $19.430 $18.720
======= ======= ======= ======= ======= =======
Total Return...................................... 16.25% 16.50% 1.96% 11.76% 11.91%(3) 12.37%(3)
- ------------
- --------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted) $125,751 $108,747 $93,990 $72,052 $507,528 $487,343
Ratio of Expenses to Average
Daily Net Assets................................ 0.80% 0.79% 0.81% 0.77% 0.89% 0.79%
Ratio of Net Investment
Income to Average Daily Net Assets 3.58% 3.73% 3.47% 3.39% 3.27% 3.64%
Portfolio Turnover Rate........................... 92% 94% 142% 160% 160% 144%
Average Commission Rate Paid ..................... $ 0.060 N/A N/A N/A N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Delaware Fund Institutional Class
----------------------------------------------------------------
10/31/91(1) 10/31/90(1) 10/31/89(1) 10/31/88(1) 10/31/87(1)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.190 $17.480 $15.250 $16.850 $23.200
Income From Investment Operations
Net Investment Income............................. 0.757 0.856 0.796 0.551 0.331
Net Gains (Losses) on Securities
(both realized and unrealized).......... 3.033 (1.366) 2.384 2.259 (1.971)
------- ------- ------- ------- --------
Total From Investment Operations 3.790 (0.510) 3.180 2.810 (1.640)
------- ------- ------- ------- --------
Less Distributions
Dividends (from net investment income)............ (0.880) (0.780) (0.950) (0.320) (0.400)
Distributions (from capital gains) (0.290) none none (4.090) (4.310)
Returns of Capital................................ none none none none none
------- ------- ------- ------- --------
Total Distributions........................... (1.170) (0.780) (0.950) (4.410) (4.710)
------- ------- ------- ------- --------
Net Asset Value, End of Period.................... $18.810 $16.190 $17.480 $15.250 $16.850
======= ======= ======= ======= ========
Total Return...................................... 24.32%(3) (3.17%)(3) 21.66%(3) 22.03%(3) (9.14%)(3)
- ------------
- --------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted) $453,449 $349,873 $361,625 $328,650 $320,854
Ratio of Expenses to Average
Daily Net Assets................................ 0.71% 0.75% 0.76% 0.77% 0.73%
Ratio of Net Investment
Income to Average Daily Net Assets 4.29% 4.99% 4.73% 4.01% 1.64%
Portfolio Turnover Rate........................... 212% 147% 129% 180% 205%
Average Commission Rate Paid ..................... $ 0.060 N/A N/A N/A N/A
</TABLE>
(1) Data are derived from data of Delaware Fund A Class which was subject
to 12b-1 distribution expenses effective June 1, 1992.
(2) Data are derived from Delaware Fund Institutional Class shares, which
commenced operations on November 9, 1992. Ratios and total return have
been annualized.
(3) Does not reflect the maximum sales charge that is or was in effect nor
the 1% limited contingent deferred sales charge that would apply in the
event of certain redemptions within 12 months of purchase for Delaware
Fund A Class.
<PAGE>
(DF/DVN-IC)
DVN-IC-CHT
<TABLE>
<CAPTION>
Devon Fund Institutional Class
--------------------------------------
Period
12/29/93(1)
Year Ended through
10/31/96 10/31/95 10/31/94
<S> <C> <C> <C>
Net Asset Value, Beginning of Period......................... $12.590 $10.860 $10.000
Income From Investment Operations
Net Investment Income........................................ 0.267 0.241(3) 0.201
Net Gains (Losses) on Securities
(both realized and unrealized)...................... 2.693 2.049 0.749
------- -------- -------
Total From Investment Operations......................... 2.960 2.290 0.950
------- -------- -------
Less Distributions
Dividends (from net investment income)....................... (0.240) (0.240) (0.090)
Distributions (from capital gains)........................... (0.640) (0.320) none
Returns of Capital........................................... none none none
------- -------- -------
Total Distributions...................................... (0.880) (0.560) (0.090)
------- -------- -------
Net Asset Value, End of Period............................... $14.670 $12.590 $10.860
======= ======= =======
Total Return................................................. 24.56%(2) 22.26%(2) 11.45%(1)(2)
- ------------
- -------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted) $3,290 $2,870 $2,516
Ratio of Expenses to Average Daily Net Assets................ 0.95% 0.95% 0.95%(1)
Ratio of Expenses to Average Daily Net Assets
prior to Expense Limitation................................ 1.54% 1.99% 2.96%
Ratio of Net Investment Income to Average Daily Net Assets... 1.97% 2.12 2.26%(1)
Ratio of Net Investment Income to Average Daily Net Assets
prior to Expense Limitations............................. 1.38% 1.08% 0.25%
Portfolio Turnover Rate...................................... 80% 99% 180%
Average Commission Rate Paid ................................ $0.060 N/A N/A
</TABLE>
(1) Date of initial sale of Devon Fund Institutional Class. Ratios and total
return have been annualized.
(2) Total return reflects expense limitation referenced under Summary of
Expenses.
(3) 1995 per share information was based on the average shares outstanding
method.
<PAGE>
(DF/DVN-IC)
INVESTMENT OBJECTIVES AND POLICIES
The objective of Delaware Fund is to seek a balance of capital
appreciation, income and preservation of capital.
The objective of Devon Fund is to seek current income and capital
appreciation.
Although each Fund will constantly strive to attain its objective,
there can be no assurance that it will be obtained. The objective of each Fund
cannot be changed without shareholder approval.
SUITABILITY
Each Fund may be suitable for investors interested in long-term capital
appreciation. Delaware Fund may be more suitable for investors wishing to expose
a portion of their assets to fixed-income securities, while Devon Fund may be
more suitable for investors seeking a greater emphasis on common stocks and
securities convertible into common stocks. Investors in each Fund should be
willing to accept the risks associated with investments in equity securities.
Investors in Delaware Fund and, to a lesser extent, investors in Devon Fund
should also be willing to accept the risks associated with investments in
fixed-income securities. Net asset values may fluctuate in response to market
conditions and, as a result, neither Fund is appropriate for a short-term
investor.
Investors should not consider a purchase of either Fund shares as
equivalent to a complete investment program. The Delaware Group includes a
family of funds, generally available through registered investment dealers,
which may be used together to create a more complete investment program.
Ownership of Fund shares can reduce the bookkeeping and administrative
inconveniences that would be connected with direct purchases of the type of
securities in which the Funds invest.
INVESTMENT STRATEGY
Delaware Fund - As a "balanced" fund, Delaware Fund will generally
invest at least 25% of its assets in fixed-income securities, including U.S.
government securities and corporate bonds. The remainder of the Fund will be
allocated to equity securities principally, including convertible securities,
and also to cash and cash equivalents. A portion of the Fund's investment in
certain convertible securities may be deemed fixed-income in nature for purposes
of this 25% fixed-income allocation. The Fund may also invest in foreign
securities.
The Fund uses a dividend-oriented valuation strategy to select
individual securities in which it will invest. In seeking capital appreciation,
the Fund invests primarily in common stocks of established companies believed to
have a potential for long-term capital growth. In seeking current income and
preservation of capital, in addition to capital appreciation, the Fund invests
in various types of fixed-income securities, including U.S. government and
government agency securities and corporate bonds. The Fund generally invests in
bonds that are rated in the top four grades by a nationally-recognized rating
agency (e.g., Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Ratings Group ("S&P")) at the time of purchase, or, if unrated, are determined
to be equivalent to the top four grades in the judgment of the Manager. The
fourth grade is considered medium grade and may have some speculative
characteristics. Typically, the maturity of the bonds will range between five
and 30 years. The Fund may invest not more than 5% of its assets in convertible
debentures rated below investment grade.
-7-
<PAGE>
(DF/DVN-IC)
The Fund will analyze existing and expected economic and market
conditions and seek to identify those market sectors or individual securities
that are expected to benefit from those conditions. Its appraisal of these
economic conditions will determine the types of securities it will hold and the
degree of investment emphasis placed upon capital appreciation and income.
Devon Fund - Devon Fund will seek to achieve its objective by investing
primarily in income-producing common stocks, with a focus on common stocks that
the Manager believes have the potential for above average dividend increases
over time. Under normal circumstances, the Fund will generally invest at least
65% of its total assets in dividend paying common stocks.
In selecting stocks for the Fund, the Manager will focus primarily on
dividend paying common stocks issued by companies with market capitalizations in
excess of $100 million, but is not precluded from purchasing shares of companies
with market capitalizations of less than $100 million. In seeking stocks with
potential for above average dividend increases, the Manager will consider such
factors as the historical growth rate of a dividend, the frequency of prior
dividend increases, the issuing company's potential to generate cash flows, and
the price/earnings multiple of the stock relative to the market. The Manager
will generally avoid stocks that it believes are overvalued and may select
stocks with current dividend yields that are lower than the current yield of the
S&P 500 Stock Index in exchange for anticipated dividend growth.
While management believes that the Fund's objective may best be
attained by investing in common stocks, the Fund may also invest in other
securities including, but not limited to, convertible and preferred securities,
rights and warrants to purchase common stock, and various types of fixed-income
securities, such as U.S. government and government agency securities, corporate
debt securities, and bank obligations, and may also engage in futures
transactions. The Fund may invest in foreign securities.
* * *
For additional information about each Fund's investment policies and
certain risks associated with investments in certain types of securities, see
Other Investment Policies and Risk Considerations.
-8-
<PAGE>
(DF/DVN-IC)
CLASSES OF SHARES
The Distributor serves as the national distributor for each Fund.
Shares of each Class may be purchased directly by contacting a Fund or its agent
or through authorized investment dealers. All purchases of shares of each Class
are at net asset value. There is no front-end or contingent deferred sales
charge.
Investment instructions given on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees considering purchasing shares of a Class as
part of their retirement program should contact their employer for details.
Shares of each Class are 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 accounts from such institutional advisory
accounts; (d) a bank, trust company and similar financial institution investing
for its own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing shares
of the Class, except where the investment is part of a program that requires
payment to the financial institution of a Rule 12b-1 Plan fee; and (e)
registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least $1,000,000
entrusted to the adviser for investment purposes, but only if the adviser is not
affiliated or associated with a broker or dealer and derives compensation for
its services exclusively from its clients for such advisory services.
Delaware Fund A Class, Delaware Fund B Class, Delaware Fund C Class,
Devon Fund A Class, Devon Fund B Class and Devon Fund C Class
In addition to offering Delaware Fund Institutional Class and Devon
Fund Institutional Class and Delaware Fund also offers Delaware Fund A Class,
Delaware Fund B Class, Delaware Fund C Class, and Devon Fund also offers Devon
Fund A Class, Devon Fund B Class and Devon Fund C Class, which are described in
a separate prospectus. Shares of the Delaware Fund A Class, Delaware Fund B
Class, Delaware Fund C Class, Devon Fund A Class, Devon Fund B Class and Devon
Fund C Class may be purchased through authorized investment dealers or directly
by contacting each Fund or its Distributor. Delaware Fund A Class and Devon Fund
A Class carry a front-end sales charge and have annual 12b-1 expenses equal to a
maximum of 0.30%. The maximum front-end sales charge as a percentage of the
offering price is 4.75% and is reduced on certain transactions of $100,000 or
more. Delaware Fund B Class, Delaware Fund C Class, Devon Fund B Class and Devon
Fund C Class have no front-end sales charge, but are subject to annual 12b-1
expenses equal to a maximum of 1%. Shares of Delaware Fund B Class, Delaware
Fund C Class, Devon Fund B Class and Devon Fund C Class and certain shares of
Delaware Fund A Class and Devon Fund A Class may be subject to a contingent
deferred sales charge upon redemption. To obtain a prospectus relating to such
classes contact the Distributor by writing to the address or by calling the
phone numbers listed on the cover of this Prospectus.
-9-
<PAGE>
(DF/DVN-IC)
HOW TO BUY SHARES
Each Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer. In all instances, investors must
qualify to purchase the shares of the Classes.
Investing Directly by Mail
1. Initial Purchases--An Investment Application or, in the case of a retirement
plan account, an appropriate retirement plan application, must be completed,
signed and sent with a check payable to the specific Fund and Class selected, to
Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to the specific Fund and Class selected. Your check should be
identified with your name(s) and account number.
Investing Directly by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 1412893401
(include your name(s) and your account number for the Fund and Class in which
you are investing).
1. Initial Purchases--Before you invest, telephone the Client Services
Department at 800-828-5052 to get an account number. If you do not call first,
it may delay processing your investment. In addition, you must promptly send
your Investment Application or, in the case of a retirement plan account, an
appropriate retirement plan application, to the Fund and Class selected by you,
to Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You must advise your Client
Services Representative by telephone at 800-828-5052 prior to sending your
wire.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group
and you qualify to purchase shares of the Classes, you may write and authorize
an exchange of part or all of your investment into the Funds. However, shares of
Delaware Fund B Class, Delaware Fund C Class, Devon Fund B Class and Devon Fund
C Class and Class B Shares and Class C Shares of the other funds in the Delaware
Group offering such a class of shares may not be exchanged into the Classes. If
you wish to open an account by exchange, call your Client Services
Representative at 800-828-5052 for more information.
Investing through Your Investment Dealer
You can make a purchase of Fund shares through most investment dealers
who, as part of the service they provide, must transmit orders promptly to the
Fund. They may charge for this service.
Purchase Price and Effective Date
The purchase price (net asset value) of each Class is determined as of
the close of regular trading on the New York Stock Exchange (ordinarily, 4 p.m.,
Eastern time) on days when the Exchange is open.
-10-
<PAGE>
(DF/DVN-IC)
The effective date of a purchase made through an investment dealer is
the date the order is received by the Fund. The effective date of a direct
purchase is the day your wire, electronic transfer or check is received, unless
it is received after the time the share price is determined, as noted above.
Purchase orders received after such time will be effective the next business
day.
The Conditions of Your Purchase
Each Fund reserves the right to reject any purchase order. If a
purchase is canceled because your check is returned unpaid, you are responsible
for any loss incurred. A Fund can redeem shares from your account(s) to
reimburse itself for any loss, and you may be restricted from making future
purchases in any of the funds in the Delaware Group. Each Fund reserves the
right to reject purchase orders paid by third-party checks or checks that are
not drawn on a domestic branch of a United States financial institution. If a
check drawn on a foreign financial institution is accepted, you may be subject
to additional bank charges for clearance and currency conversion.
Each Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under $250 as a result of redemptions.
-11-
<PAGE>
(DF/DVN-IC)
REDEMPTION AND EXCHANGE
Redemption and exchange requests made on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees should therefore contact their employer for
details.
Your shares will be redeemed or exchanged based on the net asset value
next determined after a Fund receives your request in good order. Redemption and
exchange requests received in good order after the time the net asset value of
shares is determined, as noted above, will be processed on the next business
day. See Purchase Price and Effective Date under How to Buy Shares. Except as
otherwise noted below, for a redemption request to be in "good order," you must
provide your account number, account registration, and the total number of
shares or dollar amount of the transaction. With regard to exchanges, you must
also provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling a Fund at 800-828-5052. Redemption proceeds will be
distributed promptly, as described below, but not later than seven days after
receipt of a redemption request.
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.
Each Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. Each Fund will honor written redemption requests as to shares for which
a check was tendered as payment, but neither Fund will mail or wire the proceeds
until it is reasonably satisfied that the check has cleared, which may take up
to 15 days from the purchase date. You can avoid this potential delay if you
purchase shares by wiring Federal Funds. Each Fund reserves the right to reject
a written or telephone redemption request or delay payment of redemption
proceeds if there has been a recent change to the shareholder's address of
record.
Shares of a Class may be exchanged into any other Delaware Group mutual
fund provided: (1) the investment satisfies the eligibility and other
requirements set forth in the prospectus of the fund being acquired, including
the payment of any applicable front-end sales charge; and (2) the shares of the
fund being acquired are in a state where that fund is registered. If exchanges
are made into other shares that are eligible for purchase only by those
permitted to purchase shares of the Classes, such exchange will be exchanged at
net asset value. Shares of the Classes may not be exchanged into Class B Shares
or Class C Shares of any of the funds in the Delaware Group. The Fund may
suspend, terminate, or amend the terms of the exchange privilege upon 60 days'
written notice to shareholders.
Various redemption and exchange methods are outlined below. No fee is
charged by the Funds or the Distributor for redeeming or exchanging your shares.
You may also have your investment dealer arrange to have your shares redeemed or
exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by a Fund or its agent.
-12-
<PAGE>
(DF/DVN-IC)
Written Redemption and Exchange
You can write to a Fund at 1818 Market Street, Philadelphia, PA 19103
to redeem some or all of your shares or to request an exchange of any or all
your shares into another mutual fund in the Delaware Group, subject to the same
conditions and limitations as other exchanges noted above. The request must be
signed by all owners of the account or your investment dealer of record.
For redemptions of more than $50,000, or when the proceeds are not sent
to the shareholder(s) at the address of record, each Fund requires a signature
by all owners of the account and may require a signature guarantee. Each
signature guarantee must be supplied by an eligible guarantor institution. Each
Fund reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. A Fund may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. Certificates are issued for shares only if you submit a
specific request. If your shares are in certificate form, the certificate must
accompany your request and also be in good order.
You also may submit your written request for redemption or exchange by
facsimile transmission at the following number: 215-255-8864.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your shares in certificate form, you may redeem or
exchange only by written request and you must return your certificates.
The Telephone Redemption - Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in which you are investing in
writing that you do not wish to have such services available with respect to
your account. Each Fund reserves the right to modify, terminate or suspend these
procedures upon 60 days' written notice to shareholders. It may be difficult to
reach a Fund by telephone during periods when market or economic conditions lead
to an unusually large volume of telephone requests.
Neither the Funds nor their Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, a 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. A written confirmation will be provided
for all purchase, exchange and redemption transactions initiated by telephone.
By exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
-13-
<PAGE>
(DF/DVN-IC)
Telephone Redemption-Check to Your Address of Record
You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request.
Telephone Redemption-Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must submit a written authorization and you may need to have your
signature guaranteed. For your protection, your authorization must be on file.
If you request a wire, your funds will normally be sent the next business day.
If you ask for a check, it will normally be mailed the next business day after
receipt of your redemption request to your predesignated bank account. There are
no fees for this redemption method, but the mail time may delay getting funds
into your bank account. Simply call your Client Services Representative prior to
the time the net asset value is determined, as noted above.
Telephone Exchange
You or your investment dealer of record can exchange shares into any
fund in the Delaware Group under the same registration. As with the written
exchange service, telephone exchanges are subject to the same conditions and
limitations as other exchanges noted above. Telephone exchanges may be subject
to limitations as to amounts or frequency.
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<PAGE>
(DF/DVN-IC)
DIVIDENDS AND DISTRIBUTIONS
Each Fund will normally make payments from net investment income on a
quarterly basis. Payments from net realized securities profits of a Fund, if
any, will be distributed annually in the quarter following the close of the
fiscal year. Both dividends and distributions, if any, are automatically
reinvested in your account at net asset value.
Each class of a Fund will share proportionately in the investment
income and expenses of that Fund, except that the Classes will not incur any
distribution fees under the 12b-1 Plans which apply to Delaware Fund A Class,
Delaware Fund B Class, Delaware Fund C Class, Devon Fund A Class, Devon Fund B
Class and Devon Fund C Class.
-15-
<PAGE>
(DF/DVN-IC)
TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in a Fund.
Each Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Internal Revenue Code
(the "Code"). As such, a Fund will not be subject to federal income tax, or to
any excise tax, to the extent its earnings are distributed as provided in the
Code.
Each Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to those investors who are subject
to income taxes as ordinary income, even though received in additional shares.
For corporate investors, dividends from net investment income will generally
qualify in part for the corporate dividends-received deduction. The portion of
dividends paid by a Fund that so qualifies will be designated each year in a
notice from Equity Funds I, Inc. to each Fund's shareholders. For the fiscal
year ended October 31, 1996, 32% and 36% of, respectively, Delaware Fund's and
Devon Fund's dividends from net investment income qualified for the corporate
dividends-received deduction.
Distributions paid by a Fund from long-term capital gains, received in
additional shares, are taxable to those investors who are subject to income
taxes as long-term capital gains, regardless of the length of time an investor
has owned shares in the Fund. The Funds do not seek to realize any particular
amount of capital gains during a year; rather, realized gains are a by-product
of Fund management activities. Consequently, capital gains distributions may be
expected to vary considerably from year to year. Also, for those investors
subject to tax, if purchases of shares in a Fund are made shortly before the
record date for a dividend or capital gains distribution, a portion of the
investment will be returned as a taxable distribution.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November, or December to shareholders
of record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by a Fund and received by the shareholder on
December 31 of the year declared.
The sale of shares of a Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
a Fund and any other fund in the Delaware Group. Any loss incurred on a sale or
exchange of Fund shares that had been held for six months or less will be
treated as a long-term capital loss to the extent of capital gain dividends
received with respect to such shares.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. government securities may be exempt from
state personal income taxes. Shares of each Fund are exempt from Pennsylvania
county personal property taxes.
-16-
<PAGE>
(DF/DVN-IC)
Each year, Equity Funds I, Inc. will mail you information on the tax
status of each Fund's dividends and distributions. Shareholders will also
receive each year information as to the portion of dividend income, if any, that
is derived from U.S. government securities that are exempt from state income
tax. Of course, shareholders who are not subject to tax on their income would
not be required to pay tax on amounts distributed to them by the Fund.
Each Fund is required to withhold 31% of taxable dividends, capital
gains distributions, and redemptions paid to shareholders who have not complied
with IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Investment Application your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
See Taxes in Part B for additional information on tax matters relating
to each Fund and its shareholders.
-17-
<PAGE>
(DF/DVN-IC)
CALCULATION OF NET ASSET VALUE PER SHARE
The purchase and redemption price of a Class is the net asset value
("NAV") per share of Class shares next computed after the order is received. The
NAV is computed as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The NAV per share is computed by adding the value of all securities and
other assets in the portfolio, deducting any liabilities (expenses and fees are
accrued daily) and dividing by the number of shares outstanding. Portfolio
securities for which market quotations are available are priced at market value.
Debt securities are priced at fair value by an independent pricing service using
methods approved by Equity Funds I, Inc.'s Board of Directors. Short-term
investments having a maturity of less than 60 days are valued at amortized cost,
which approximates market value. All other securities are valued at their fair
value as determined in good faith and in a method approved by Equity Funds I,
Inc.'s Board of Directors.
The net asset values of all outstanding shares of each class of a Fund
will be computed on a pro-rata basis for each outstanding share based on the
proportionate participation in that Fund represented by the value of shares of
that class. All income earned and expenses incurred by each Fund will be borne
on a pro-rata basis by each outstanding share of a class, based on each class'
percentage in a Fund represented by the value of shares of such classes, except
that the Classes will not incur any of the expenses under the Funds' 12b-1 Plans
and Delaware Fund A, B and C Classes and Devon Fund A, B and C 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 a Fund will
vary.
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(DF/DVN-IC)
MANAGEMENT OF THE FUNDS
Directors
The business and affairs of Equity Funds I, Inc. are managed under the
direction of its Board of Directors. Part B contains additional information
regarding Equity Funds I, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to each Fund.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On October 31, 1996, the Manager and its affiliates
within the Delaware Group, including Delaware International Advisers Ltd., were
managing in the aggregate more than $30 billion in assets in the various
institutional or separately managed (approximately $19,214,690,000) and
investment company (approximately $11,539,873,000) accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now indirect, wholly owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management. In connection with the merger, new
Investment Management Agreements between Equity Funds I, Inc. on behalf of each
Fund and the Manager were executed following shareholder approval.
The Manager manages each Fund's portfolio and makes investment
decisions for the Funds which are implemented by each Fund's Trading Department.
The Manager also administers Equity Funds I, Inc.'s affairs and pays the
salaries of all the directors, officers and employees of Equity Funds I, Inc.
who are affiliated with the Manager. For these services, the Manager is paid an
annual fee equal to: for Delaware Fund, 0.60% on the first $100 million of
average daily net assets of the Fund, 0.525% on the next $150 million, 0.50% on
the next $250 million and 0.475% on the average daily net assets in excess of
$500 million, less Delaware Fund's proportionate share of all directors' fees
paid to the unaffiliated directors of Equity Funds I, Inc.; and, for Devon Fund,
0.60% on the first $500 million of average daily net assets and 0.50% on the
average daily net assets in excess of $500 million. Investment management fees
paid by Delaware Fund for the fiscal year ended October 31, 1996 were 0.52% of
average daily net assets. Investment management fees earned by Devon Fund for
the fiscal year ended October 31, 1996 were 0.60% of average daily net assets
and no fees were paid by this Fund as a result of the voluntary waiver of fees
by the Manager as described under Summary of Expenses.
George H. Burwell and Gary A. Reed have primary responsibility for
making day-to-day investment decisions for Delaware Fund and Mr. Burwell has
such responsibility for Devon Fund. Mr. Burwell, who has been Equity Funds I,
Inc.'s Senior Portfolio Manager for equities since 1992, holds a BA from the
University of Virginia. Prior to joining the Delaware Group in 1992, Mr. Burwell
was a portfolio manager for Midlantic Bank in Edison, New Jersey, where he
managed an equity mutual fund and three commingled funds. Mr.
Burwell is a CFA charterholder.
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(DF/DVN-IC)
Mr. Reed has been Delaware Fund's Senior Portfolio Manager for
fixed-income since April 1995. He holds an AB in Economics from the University
of Chicago and an MA in Economics from Columbia University. He began his career
in 1978 with the Equitable Life Assurance Company in New York City, where he
specialized in credit analysis. Prior to joining the Delaware Group in 1989, Mr.
Reed was Vice President and Manager of the fixed-income department at Irving
Trust Company in New York.
In making investment decisions for the Funds, Mr. Burwell and Mr. Reed
regularly consult with Wayne A. Stork, Richard G. Unruh, Jr. and Paul E. Suckow.
Mr. Stork, Chairman of the Manager and Equity Funds I, Inc.'s Board of
Directors, is a graduate of Brown University and attended New York University's
Graduate School of Business Administration. Mr. Stork joined the Delaware Group
in 1962 and has served in various executive capacities at different times within
the Delaware organization. A graduate of Brown University, Mr. Unruh received
his MBA from the University of Pennsylvania's Wharton School and joined the
Delaware Group in 1982 after 19 years of investment management experience with
Kidder, Peabody & Co. Inc. Mr. Unruh was named an Executive Vice President of
Equity Funds I, Inc. in 1994. He is also a member of the Board of the Manager
and was named an Executive Vice President of the Manager in 1994. He is on the
Board of Directors of Keystone Insurance Company and AAA Mid-Atlantic and is a
former president and current member of the Advisory Council of the Bond Club of
Philadelphia. Mr. Suckow is Delaware's Chief Investment Officer for
fixed-income. He is a CFA charterholder and a graduate of Bradley University
with an MBA from Western Illinois University. Mr. Suckow was a fixed-income
portfolio manager at the Delaware Group from 1981 to 1985. He returned to the
Delaware Group in 1993 after eight years with Oppenheimer Management
Corporation, where he served as Executive Vice President and Director of Fixed
Income.
Portfolio Trading Practices
The Funds normally will not invest for short-term trading purposes.
However, each Fund may sell securities without regard to the length of time they
have been held. The degree of portfolio activity will affect brokerage costs of
each Fund and may affect taxes payable by a Fund's shareholders to the extent of
any net realized capital gains. A turnover rate of 100% would occur, for
example, if all the investments in a Fund's portfolio at the beginning of the
year were replaced by the end of the year. For the past two fiscal years, each
Fund's portfolio turnover rates were as follows:
October 31,
Fund 1996 1995
---- ---- ----
Delaware Fund 92% 94%
Devon Fund 80% 99%
Each Fund uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
its advisory clients. These services may be used by the Manager in servicing any
of its accounts. Subject to best price and execution, each Fund may consider a
broker/dealer's sales of Fund shares in placing portfolio orders and may place
orders with broker/dealers that have agreed to defray certain Fund expenses such
as custodian fees.
Performance Information
From time to time, Delaware Fund and Devon Fund may quote total return
performance for their respective Class in advertising and other types of
literature.
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Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value. Each
presentation will include the average annual total return for one-, five- and
ten-year or life-of-fund periods, as relevant. Each Fund may also advertise
aggregate and average total return information concerning a Class over
additional periods of time.
Because securities prices fluctuate, investment results of a Class will
fluctuate over time and past performance should not be considered as a guarantee
of future results.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of distributions. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling your Client Services Representative.
Financial Information about Funds
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
each Fund's investments and performance. Equity Funds I, Inc.'s fiscal year ends
on October 31.
Distribution and Service
The Distributor, Delaware Distributors, L.P. serves as the national
distributor of each Fund's shares under separate Distribution Agreements with
Equity Funds I, Inc. dated April 3, 1995, as amended on November 29, 1995. The
Distributor bears all of the costs of promotion and distribution.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for Delaware Fund
under an Agreement dated June 29, 1988 and for Devon Fund under an Agreement
dated December 29, 1993. The Transfer Agent also provides accounting services to
the Funds pursuant to the terms of a separate Fund Accounting Agreement. The
directors annually review service fees paid to the Transfer Agent. Certain
recordkeeping and other shareholder services that otherwise would be performed
by the Transfer Agent may be performed by certain other entities and the
Transfer Agent may elect to enter into an agreement to pay such other entities
for those services. In addition, participant account maintenance fees may be
assessed for certain recordkeeping services provided as part of retirement plan
and administration service packages. These fees are based on the number of
participants in the plan and the various services selected. Fees will be quoted
upon request and are subject to change.
The Distributor and the Transfer Agent are indirect, wholly owned
subsidiaries of DMH.
Expenses
Each Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreements and those borne
by the Distributor under the Distribution Agreements. For the fiscal year ended
October 31, 1996, the ratio of operating expenses to average daily net assets
for Delaware Fund Institutional Class was 0.80%. For the fiscal year ended
October 31, 1996, the ratio of operating expenses to average daily net assets
for Devon Fund Institutional Class was 0.95%, after voluntary fee waivers and
expense reimbursements by the Manager.
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Shares
Equity Funds I, Inc. is an open-end management investment company. Each
Fund's portfolio of assets is diversified as defined by the 1940 Act. Commonly
known as a mutual fund, Equity Funds I, Inc. was organized as a Maryland
corporation on March 4, 1983. Equity Funds I, Inc. was previously organized as a
Delaware corporation in 1937.
Equity Funds I, Inc. currently offers two series of shares - Delaware
Fund series and Devon Fund series. Fund shares have a par value of $1.00, equal
voting rights, except as noted below, and are equal in all other respects. Each
Fund will vote separately on any matter which affects only that Fund. Shares of
each Fund have a priority over shares of any other fund of Equity Funds I, Inc.
Equity Funds I, Inc.'s shares have noncumulative voting rights which
means that the holders of more than 50% of Equity Funds I, Inc.'s shares voting
for the election of directors can elect 100% of the directors if they choose to
do so. Under Maryland law, Equity Funds I, Inc. is not required, and does not
intend, to hold annual meetings of shareholders unless, under certain
circumstances, it is required to do so under the 1940 Act. Shareholders of 10%
or more of Equity Funds I, Inc.'s outstanding shares may request that a special
meeting be called to consider the removal of a director.
In addition to the Classes, Delaware Fund and Devon Fund also offer
Delaware Fund A Class, Delaware Fund B Class and Delaware Fund C Class, and
Devon Fund A Class, Devon Fund B Class and Devon Fund C Class, respectively.
Shares of each class represent proportionate interests in the assets of the
respective Fund and have the same voting and other rights and preferences as
Delaware Fund Institutional Class and Devon Fund Institutional Class,
respectively, except that shares of the Classes are not subject to, and may not
vote on matters affecting, the Distribution Plans under Rule 12b-1 relating to
Delaware Fund A Class, Delaware Fund B Class, Delaware Fund C Class, Devon Fund
A Class, Devon Fund B Class and Devon Fund C Class.
Effective as of the close of business December 27, 1996, the name of
Delaware Group Delaware Fund, Inc. was changed to Delaware Group Equity Funds I,
Inc. Also effective as of the close of business December 27, 1996, the name of
Common Stock Series was changed to Delaware Fund Series. Effective as of the
close of business August 28, 1995, the name Dividend Growth Fund was changed
to Devon Fund and the names of Dividend Growth Fund A Class, Dividend Growth
Fund B Class and Dividend Growth Fund Institutional Class were changed to Devon
fund A Class, Devon fund B Class and Devon Fund Institutional Class,
respectively.
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OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
Mortgage-Backed Securities--Each Fund may invest in mortgage-backed
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities or government sponsored corporations. Each Fund also may
invest in securities issued by certain private, non-government corporations,
such as financial institutions, if the securities are fully collateralized at
the time of issuance by securities or certificates issued or guaranteed by the
U.S. government, its agencies or instrumentalities. Two principal types of
mortgage-backed securities are collateralized mortgage obligations (CMOs) and
real estate mortgage investment conduits (REMICs).
CMOs are debt securities issued by U.S. government agencies or by
financial institutions and other mortgage lenders and collateralized by a pool
of mortgages held under an indenture. CMOs are issued in a number of classes or
series with different maturities. The classes or series are retired in sequence
as the underlying mortgages are repaid. Prepayment may shorten the stated
maturity of the obligation and can result in a loss of premium, if any has been
paid. Certain of these securities may have variable or floating interest rates
and others may be stripped (securities which provide only the principal or
interest feature of the underlying security).
REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities. For further discussion concerning the risk
of investing in such asset-backed securities, see Part B.
CMOs and REMICs issued by private entities are not government
securities and are not directly guaranteed by any government agency. They are
secured by the underlying collateral of the private issuer. Certain of these
private-backed securities are 100% collateralized at the time of issuance by
securities issued or guaranteed by the U.S. government, its agencies, or
instrumentalities. Devon Fund currently may invest in privately-issued CMOs and
REMICs only if they are so collateralized and rated at the time of purchase in
the four highest grades by a nationally-recognized rating agency (e.g., BBB or
better by S&P or Baa or better by Moody's).
Delaware Fund may invest its assets in CMOs and REMICs issued by
private entities whether or not the securities are 100% collateralized at the
time of issuance by securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities (securities that are not so collateralized are
called "non-agency mortgage-backed securities"). Non-agency mortgage-backed
securities may comprise up to 20% of Delaware Fund's assets, but all of these
securities must (i) be rated at the time of purchase in the four top rating
categories by a nationally-recognized statistical rating organization and (ii)
represent interests in whole-loan mortgages, multi-family mortgages, commercial
mortgages or other mortgage collateral supported by a first mortgage lien on
real estate. Non-agency mortgage-backed securities are subject to the interest
rate and prepayment risks to which other CMOs and REMICs issued by private
issuers are subject. Non-agency mortgage-backed securities may also be subject
to a greater risk of loss of interest and principal because they are not
collateralized by securities issued or guaranteed by the U.S. government. In
addition, timely information concerning the loans underlying these securities
may not be as readily available and the market for these securities may be less
liquid than the market for other CMOs and REMICs.
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(DF/DVN-IC)
Asset-Backed Securities--Delaware Fund and Devon Fund may invest in
securities which are backed by assets such as receivables on home equity and
credit loans, receivables regarding automobile, mobile home and recreational
vehicle loans, wholesale dealer floor plans and leases or other loans or
financial receivables currently available or which may be developed in the
future. All such securities must be rated in one of the four highest rating
categories by a reputable rating agency (e.g., BBB or better by S&P or Baa or
better by Moody's).
Such receivables are securitized in either a pass-through or a
pay-through structure. Pass-through securities provide investors with an income
stream consisting of both principal and interest payments in respect of the
receivables in the underlying pool. Pay-through asset-backed securities are debt
obligations issued usually by a special purpose entity, which are collateralized
by the various receivables and in which the payments on the underlying
receivables provide the funds to pay the debt service on the debt obligations
issued.
The rate of principal payment on asset-backed securities generally
depends on the rate of principal payments received on the underlying assets.
Such rate of payments may be affected by economic and various other factors such
as changes in interest rates or the concentration of collateral in a particular
geographic area. Therefore, the yield may be difficult to predict and actual
yield to maturity may be more or less than the anticipated yield to maturity.
Due to the shorter maturity of the collateral backing such securities, there
tends to be less of a risk of substantial prepayment than with mortgage-backed
securities but the risk of such a prepayment does exist. Such asset-backed
securities do, however, involve certain risks not associated with
mortgage-backed securities, including the risk that security interests cannot be
adequately or in many cases ever established, and other risks which may be
peculiar to particular classes of collateral. For example, with respect to
credit card receivables, a number of state and federal consumer credit laws give
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the outstanding balance. In the case of automobile receivables, there
is a risk that the holders may not have either a proper or first security
interest in all of the obligations backing such receivables due to the large
number of vehicles involved in a typical issuance and technical requirements
under state laws. Therefore, recoveries on repossessed collateral may not always
be available to support payments on the securities.
Real Estate Investment Trusts--Each Fund may invest in shares or
convertible bonds issued by real estate investment trusts ("REITS"). REITS
invest primarily in income producing real estate as well as real estate related
loans or interests. A REIT is not taxed on income distributed to shareholders if
it complies with several requirements relating to its organization, ownership,
assets and income, and a requirement that it distribute to its shareholders at
least 95% of its taxable income (other than net capital gains) for each taxable
year. Each Fund anticipates investing only in REITS that invest the majority of
their assets directly in real property and derive their income primarily from
rents, which are known as "equity REITS." Equity REITS can also realize capital
gains by selling properties that have appreciated in value.
Restricted and Illiquid Securities--Each Fund may purchase privately
placed securities the resale of which is restricted under applicable securities
laws. Most of the privately placed securities acquired by the Fund will be
eligible for resale by the Fund without registration pursuant to Rule 144A
("Rule 144A Securities") under the Securities Act of 1933. Rule 144A permits
many privately placed and legally restricted securities to be freely traded
among certain institutional buyers. Each Fund may invest not more than 10% of
its assets in illiquid securities. While maintaining oversight, the Board of
Directors of Equity Funds I, Inc. has
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(DF/DVN-IC)
delegated to the Manager the day-to-day function of determining whether
individual Rule 144A Securities are liquid for purposes of each Fund's 10%
limitation on investments in illiquid securities. Devon Fund currently intends
to limit its investments in restricted securities, excluding Rule 144A
Securities, to not more than 5% of its assets.
The Board has instructed the Manager to consider the following factors
in determining the liquidity of a Rule 144A Security: (i) the frequency of
trades and trading volume for the security; (ii) whether at least three dealers
are willing to purchase or sell the security and the number of potential
purchasers; (iii) whether at least two dealers are making a market in the
security; (iv) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, the
Fund's holdings of illiquid securities exceed the Fund's limit noted above on
investments in such securities, the Manager will determine what action to take
to ensure that the Fund continues to adhere to such limitation.
Convertible Securities--Each Fund may invest in convertible securities,
including corporate debentures, bonds, notes and preferred stocks that may be
converted into or exchanged for common stock. These securities are generally
convertible either at a stated price or a stated rate (that is, for a specific
number of shares of common stock or other security). As with other fixed-income
securities, the price of a convertible security to some extent varies inversely
with interest rates. While providing a fixed-income stream, a convertible
security also affords the investor an opportunity, through its conversion
feature, to participate in the capital appreciation of the common stock into
which it is convertible. Each Fund may invest not more than 5% of its assets in
convertible debentures that are rated below investment grade or are unrated but
are determined by the Manager to be of comparable quality. For a discussion
concerning the risks of investing in such securities, see Part B.
Foreign Securities and ADRs--Each Fund may invest up to 5% of its
assets in foreign securities. Each Fund may also invest without limitation in
sponsored and unsponsored American Depositary Receipts ("ADRs") that are
actively traded in the United States. ADRs are receipts typically issued by a
U.S. bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. "Sponsored" ADRs are issued jointly by the
issuer of the underlying security and a depository, and "unsponsored" ADRs are
issued without the participation of the issuer of the deposited security.
Holders of unsponsored ADRs generally bear all the costs of such facilities and
the depository of an unsponsored ADR facility frequently is under no obligation
to distribute shareholder communications received from the issuer of the
deposited security or to pass through voting rights to the holders of such
receipts in respect of the deposited securities. Therefore, there may not be a
correlation between information concerning the issuer of the security and the
market value of an unsponsored ADR.
Foreign markets may be more volatile than U.S. markets, and investments
in foreign securities involve sovereign risks in addition to the normal risks
associated with U.S. 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 control regulations apart from market fluctuations.
Each Fund may also experience delays in foreign securities settlement.
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(DF/DVN-IC)
Each Fund will, from time to time, conduct foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into contracts to purchase
or sell foreign currencies at a future date (i.e., a "forward foreign currency"
contract or "forward" contract). Investors should be aware that there are costs
and risks associated with such currency transactions.
Equity Funds I, Inc.'s Custodian for its foreign securities is The
Chase Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245.
Repurchase Agreements--In order to invest its short-term cash reserves
or when in a temporary defensive posture, each Fund 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 Fund)
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 a Fund's 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 Fund, if
any, would be the difference between the repurchase price and the market value
of the security. Each Fund 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, each Fund must have collateral of at least 100% of the repurchase
price, including the portion representing such Fund's 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
1940 Act, but the Funds consider repurchase agreements contracts for the
purchase and sale of securities, and each 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 default.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow the
Delaware Group funds jointly to invest cash balances. Each Fund of Equity Funds
I, Inc. 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--Each Fund 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.
The major risk to which a Fund 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, each Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, subject to overall
supervision by 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.
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(DF/DVN-IC)
Futures Contracts--Devon Fund may enter into futures contracts on
stocks and stock indices, and purchase or sell options on stock index futures
and stock indices. These activities will not be entered into for speculative
purposes, but rather for hedging purposes and to facilitate the ability to
quickly deploy into the stock market the Fund's positions in cash, short-term
debt securities and other money market instruments, at times when the Fund's
assets are not fully invested in equity securities. Such positions will
generally be eliminated when it becomes possible to invest in securities that
are appropriate for the Funds.
A futures contract is a bilateral agreement providing for the purchase
and sale of a specified type and amount of a financial instrument, or for the
making and acceptance of a cash settlement, at a stated time in the future for a
fixed price. By its terms, a futures contract provides for a specified
settlement date on which the securities underlying the contract are delivered,
or in the case of securities index futures contracts, the difference between the
price at which the contract was entered into and the contract's closing value is
settled between the purchaser and seller in cash. Futures contracts differ from
options in that they are bilateral agreements, with both the purchaser and the
seller equally obligated to complete the transaction. In addition, futures
contracts call for settlement only on the expiration date, and cannot be
"exercised" at any other time during their term.
The purchase or sale of a futures contract also differs from the
purchase or sale of a security or the purchase of an option in that no purchase
price is paid or received. Instead, an amount of cash or cash equivalents, which
varies but may be as low as 5% or less of the value of the contract, must be
deposited with the broker as "initial margin" as a good faith deposit. This
amount is generally maintained in a segregated account at the custodian bank.
Subsequent payments to and from the broker, referred to as "variation margin,"
are made on a daily basis as the value of the index or instrument underlying the
futures contract fluctuates, making positions in the futures contract more or
less valuable, a process known as "marking to the market."
The Fund may also purchase and write options on the types of futures
contracts in which the Fund may invest, and enter into related closing
transactions. Options on futures are similar to options on securities, as
described below, except that options on futures give the purchaser the right, in
return for the premium paid, to assume a position in a futures contract, rather
than to actually purchase or sell the futures contract, at a specified exercise
price at any time during the period of the option. In the event that an option
written by the Fund is exercised, the Fund will be subject to all the risks
associated with the trading of futures contracts, such as payment of variation
margin deposits. In addition, the writer of an option on a futures contract,
unlike the holder, is subject to initial and variation margin requirements on
the option position.
At any time prior to the expiration of a futures contract, a trader may
elect to close out its position by taking an opposite position on the contract
market on which the position was entered into, subject to the availability of a
secondary market, which will operate to terminate the initial position.
Likewise, a position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to availability of a secondary market, which is the
purchase or sale of an option of the same series (i.e., the same exercise price
and expiration date) as the option previously purchased or sold. The Fund may
realize a profit or a loss when closing out a futures contract or an option on a
futures contract.
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(DF/DVN-IC)
To the extent that interest or exchange rates or securities prices move
in an unexpected direction, the Fund may not achieve the anticipated benefits of
investing in futures contracts and options thereon, or may realize a loss. To
the extent that the Fund purchases an option on a futures contract and fails to
exercise the option prior to the exercise date, it will suffer a loss of the
premium paid. Further, the possible lack of a secondary market could prevent the
Fund from closing out its positions relating to futures. See Part B for a
further discussion of this investment technique.
Options--Devon Fund may write covered call options on individual issues
as well as write call options on stock indices. The Fund may also purchase put
options on individual issues and on stock indices. The Manager will employ these
techniques in an attempt to protect appreciation attained, to offset capital
losses and to take advantage of the liquidity available in the option markets.
The ability to hedge effectively using options on stock indices will depend, in
part, on the correlation between the composition of the index and the Fund's
portfolio as well as the price movement of individual securities. The Fund does
not currently intend to write or purchase options on stock indices.
While there is no limit on the amount of the Fund's assets which may be
invested in covered call options, the Fund will not invest more than 2% of its
net assets in put options. The Fund will only use Exchange-traded options.
Call Options
Writing Covered Call Options--A covered call option obligates Devon
Fund to sell one of its securities for an agreed price up to an agreed date.
When the Fund writes a call, it receives a premium and agrees to sell the
callable securities to a purchaser of a corresponding call during the call
period (usually not more than nine months) at a fixed exercise price regardless
of market price changes during the call period. The advantage is that the Fund
receives premium income for the limited purpose of offsetting the costs of
purchasing put options or offsetting any capital loss or decline in market value
of the security. However, if the Manager's forecast is wrong, the Fund may not
fully participate in the market appreciation if the security's price rises.
Writing a Call Option on Stock Indices--Writing a call option on stock
indices is similar to the writing of a call option on an individual stock. Stock
indices used will include, but not be limited to, the S&P 500, the Standard &
Poor's 100 Index ("S&P 100") and the Standard & Poor's Over-The-Counter 250
Index ("S&P OTC 250").
Put Options
Purchasing a Put Option--A put option gives Devon Fund the right to
sell one of its securities for an agreed price up to an agreed date. The
advantage is that the Fund can be protected should the market value of the
security decline. However, the Fund must pay a premium for this right which
would be lost if the option is not exercised. The Fund will, at all times during
which it holds a put option, own the security covered by such option.
Purchasing a Put Option on Stock Indices--Purchasing a protective put
option on stock indices is similar to the purchase of protective puts on an
individual stock. Indices used will include, but not be limited to, the S&P 500,
the S&P 100 and the S&P OTC 250.
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(DF/DVN-IC)
Closing Transactions--Closing transactions essentially let the Fund
offset a put option or covered call option prior to its exercise or expiration.
If the Fund cannot effect a closing transaction, it may have to hold a security
it would otherwise sell or deliver a security it might want to hold.
Other Investment Policies--Neither Fund may concentrate investments in
any industry, which means that a Fund may generally not invest more than 25% of
its assets in any one industry.
In pursuing its investment objective, each Fund may hold securities for
any period of time. For temporary, defensive purposes, each Fund may hold a
substantial portion of its assets in cash, cash equivalents or short-term
obligations, including repurchase agreements. Each Fund may also enter into
repurchase agreements to invest excess cash balances.
While each Fund is permitted under certain circumstances to borrow
money, neither Fund normally does so. A Fund will not purchase investment
securities while it has any borrowings outstanding.
Each Fund may purchase securities on a when-issued or delayed delivery
basis. It is the current intention of each Fund not to enter into when-issued
commitments exceeding in the aggregate 5% of the market value of the Fund's
total assets less liabilities other than obligations created by these
commitments.
* * *
Part B provides more information on each Fund's investment restrictions
and policies, and includes Appendix A which describes security ratings.
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(SAI-DF/DVN-PART B)
The Delaware Group includes -----------------------------------
funds with a wide range of DELAWARE FUND
investment objectives. Stock funds, -----------------------------------
income funds, tax-free funds, money A CLASS
market funds, global and -----------------------------------
international funds and closed-end B CLASS
equity funds give investors the -----------------------------------
ability to create a portfolio that C CLASS
fits their personal financial goals. -----------------------------------
For more information, shareholders INSTITUTIONAL CLASS
of the Fund Classes should contact -----------------------------------
their financial adviser or call
Delaware Group at 800-523-4640 and DEVON FUND
shareholders of the Institutional (FORMERLY DIVIDEND GROWTH FUND)
Classes should contact Delaware -----------------------------------
Group at 800-828- 5052.
A CLASS
-----------------------------------
B CLASS
INVESTMENT MANAGER -----------------------------------
Delaware Management Company, Inc.
One Commerce Square C CLASS
Philadelphia, PA 19103
INSTITUTIONAL CLASS
NATIONAL DISTRIBUTOR -----------------------------------
Delaware Distributors, L.P.
1818 Market Street CLASSES OF DELAWARE GROUP
Philadelphia, PA 19103 EQUITY FUNDS I, INC.
SHAREHOLDER SERVICING, -----------------------------------
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL PART B
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square STATEMENT OF
Philadelphia, PA 19103 ADDITIONAL INFORMATION
INDEPENDENT AUDITORS -----------------------------------
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103 DECEMBER 30, 1996
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
DELAWARE
GROUP
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<PAGE>
(SAI-DF/DVN-PART B)
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PART B--STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 30, 1996
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DELAWARE GROUP EQUITY FUNDS I, INC.
- -------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
- -------------------------------------------------------------------------------
For more information about Delaware Fund Institutional Class and Devon Fund
Institutional Class:
800-828-5052
For Prospectus and Performance of Delaware Fund A Class, Delaware Fund B Class,
Delaware Fund C Class, Devon Fund A Class, Devon Fund B Class and Devon Fund C
Class: Nationwide 800-523-4640
Information on Existing Accounts of Delaware Fund A Class, Delaware Fund B
Class, Delaware Fund C CLASS, Devon Fund A Class, Devon Fund B Class and Devon
Fund C Class: (SHAREHOLDERS ONLY) Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY) Nationwide 800-362-7500
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TABLE OF CONTENTS
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Cover Page 1
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Investment Restrictions and Policies 3
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Performance Information
- ---------------------------------------------------------------------
Trading Practices and Brokerage
- ---------------------------------------------------------------------
Purchasing Shares
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<PAGE>
Investment Plans
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Determining Offering Price and Net Asset Value
- ---------------------------------------------------------------------
Redemption and Repurchase
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Dividends and Realized Securities
Profits Distributions
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Taxes
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Investment Management Agreements
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Officers and Directors
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Exchange Privilege
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General Information
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Appendix A--Description of Ratings
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Appendix B--IRA Information
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Appendix C--Performance Overview
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Appendix D--The Company Life Cycle
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Financial Statements
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-1-
<PAGE>
(SAI-DF/DVN-PART B)
Delaware Group Equity Funds I, Inc. ("Equity Funds I, Inc.") (formerly
Delaware Group Delaware Fund, Inc.) is a professionally-managed mutual fund of
the series type presently offering two series of portfolios: Delaware Fund
series ("Delaware Fund") (formerly Common Stock series) and Devon Fund series
("Devon Fund") (individually, a "Fund", and collectively, the "Funds").
The Delaware Fund and the Devon Fund offer, respectively, the Delaware
Fund A Class and the Devon Fund A Class ("Class A Shares"), the Delaware Fund B
Class and the Devon Fund B Class ("Class B Shares"), the Delaware Fund C Class
and the Devon Fund C Class ("Class C Shares") (Class A Shares, Class B Shares
and Class C Shares together referred to as the "Fund Classes"), and the Delaware
Fund Institutional Class and the Devon Fund Institutional Class ("Institutional
Classes"). Effective as of the close of business on August 28, 1995, the name
Dividend Growth Fund was changed to Devon Fund and the names of Dividend Growth
Fund A Class, Dividend Growth Fund B Class and Dividend Growth Fund
Institutional Class were changed to Devon Fund A Class, Devon Fund B Class and
Devon Fund Institutional Class, respectively.
Class B Shares, Class C Shares and Institutional Class shares of a Fund
may be purchased at a price equal to the next determined net asset value per
share. Class A Shares 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. Class A Shares are subject to a maximum front-end sales charge of 4.75%
and annual 12b-1 Plan expenses of up to 0.30%. Class B Shares are subject to a
contingent deferred sales charge ("CDSC") which may be imposed on redemptions
made within six years of purchase and annual 12b-1 Plan expenses of up to 1%,
which are assessed against Class B Shares for approximately eight years after
purchase. See Automatic Conversion of Class B Shares under Classes of Shares in
the Fund Classes' Prospectus. Class C Shares are subject to a CDSC which may be
imposed on redemptions made within 12 months of purchase and annual 12b-1 Plan
expenses of up to 1%, which are assessed against the Class C Shares for the life
of the investment.
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectus for
the Fund Classes dated December 30, 1996 and the current Prospectus for the
Institutional Classes dated December 30, 1996, as they may be amended from time
to time. Part B should be read in conjunction with the respective Class'
Prospectus. Part B is not itself a prospectus but is, in its entirety,
incorporated by reference into each Class' Prospectus. A prospectus relating to
the Fund Classes and a prospectus relating to the Institutional Classes may be
obtained by writing or calling your investment dealer or by contacting each
Fund's national distributor, Delaware Distributors, L.P. (the "Distributor"),
1818 Market Street, Philadelphia, PA 19103.
All references to "shares" in this Part B refer to all Classes of
shares of Equity Funds I, Inc., except where noted.
-2-
<PAGE>
(SAI-DF/DVN-PART B)
INVESTMENT RESTRICTIONS AND POLICIES
Investment Restrictions--Equity Funds I, Inc. has adopted the following
fundamental restrictions for Delaware Fund and Devon Fund which are applied to
each Fund except as noted. Fundamental restrictions may not be amended without
approval of a majority of the outstanding voting securities of a Fund, which is
more than 50% of the outstanding voting securities of that Fund which proposes
to change its fundamental policy, or 67% of the voting securities of that Fund
which proposes to change its fundamental policy present at a shareholder meeting
if the holders of more than 50% of such voting securities are present in person
or represented by proxy, whichever is less. 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. (Equity Funds I, Inc.'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 Equity Funds I, Inc. or an
officer, director or partner of its investment manager if, to the knowledge of
Equity Funds I, Inc., 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 Equity Funds I, Inc. may be
taken by its officers, directors or any of its affiliated persons. Such persons
may buy shares of Equity Funds I, Inc. 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 Equity Funds I, Inc.'s assets or (c) own securities of investment companies
having an aggregate value in excess of 10% of Equity Funds I, Inc.'s assets.
6. Not to act as an underwriter of securities of other issuers, except
that Equity Funds I, Inc. may acquire restricted securities and securities which
are not readily marketable under circumstances where, if such securities are
sold, Equity Funds I, Inc. may be deemed an underwriter for purposes of the
Securities Act of 1933.
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 Equity Funds I, Inc.'s purchase of securities issued by real
estate investment trusts.)
9. Not to sell short any security or property.
-3-
<PAGE>
(SAI-DF/DVN-PART B)
10. Not to deal in commodities, except that Devon Fund 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 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 Equity Funds I, Inc.'s assets, asset
coverage of at least 300% is required. In the event that such asset coverage
shall at any time fall below 300%, Equity Funds I, Inc. 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%. Equity Funds I, Inc. 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 Equity Funds I, Inc. and Equity Funds I, Inc. 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.
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.
Investment Policies--All investment policies of the Funds are
nonfundamental and may be changed without shareholder approval, except those
identified above as fundamental restrictions.
Each Fund has made a commitment that it will not invest in warrants
valued at the lower of cost or market exceeding 5% of such Fund's net assets.
Included within that amount, but not to exceed 2% of each Fund's net assets, may
be warrants not listed on the New York Stock Exchange or American Stock
Exchange.
Neither Fund currently invests its assets in real estate limited
partnerships or oil, gas and other mineral leases. Each Fund currently intends
to limit its investments in real estate investment trusts to not more than 10%
of each such Fund's net assets.
While each Fund is permitted under certain circumstances to borrow
money, neither Fund normally does so. Investment securities will not normally be
purchased by a Fund while it has an outstanding borrowing. Neither Fund may
concentrate investments in any industry, which means that a Fund generally may
not invest more than 25% of its assets in any one industry.
-4-
<PAGE>
(SAI-DF/DVN-PART B)
Mortgage-Backed Securities--In addition to mortgage-backed securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities
or government sponsored corporations, each Fund may also invest its assets in
securities issued by certain private, nongovernment corporations, such as
financial institutions. Certain of these private-backed securities are fully
collateralized at the time of issuance by securities or certificates issued or
guaranteed by the U.S. government, its agencies or instrumentalities. Two
principal types of mortgage-backed securities are collateralized mortgage
obligations (CMOs) and real estate mortgage investment conduits (REMICs).
CMOs are debt securities issued by U.S. government agencies or by
financial institutions and other mortgage lenders and collateralized by a pool
of mortgages held under an indenture. CMOs are issued in a number of classes or
series with different maturities. The classes or series are retired in sequence
as the underlying mortgages are repaid. Prepayment may shorten the stated
maturity of the obligation and can result in a loss of premium, if any has been
paid. Certain of these securities may have variable or floating interest rates
and others may be stripped (securities which provide only the principal or
interest feature of the underlying security).
REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities.
CMOs and REMICs issued by private entities are not government
securities and are not directly guaranteed by any government agency. They are
secured by the underlying collateral of the private issuer. Devon Fund will
invest in such private-backed securities only if they are 100% collateralized at
the time of issuance by securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities. Delaware Fund may invest its assets in CMOs
and REMICs issued by private entities whether or not the securities are 100%
collateralized at the time of issuance by securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities (securities that are not so
collateralized are called "non-agency mortgage-backed securities"). Each Fund
currently invests in privately-issued CMOs and REMICs only if they are rated at
the time of purchase in the four highest grades by a nationally-recognized
rating agency.
Asset-Backed Securities--Each Fund may invest a portion of its assets
in asset-backed securities. The rate of principal payment on asset-backed
securities generally depends on the rate of principal payments received on the
underlying assets. Such rate of payments may be affected by economic and various
other factors such as changes in interest rates or the concentration of
collateral in a particular geographic area. Therefore, the yield may be
difficult to predict and actual yield to maturity may be more or less than the
anticipated yield to maturity. The credit quality of most asset-backed
securities depends primarily on the credit quality of the assets underlying such
securities, how well the entities issuing the securities are insulated from the
credit risk of the originator or affiliated entities, and the amount of credit
support provided to the securities.
Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, such
securities may contain elements of credit support. Such credit support falls
into two categories: (i) liquidity protection, and (ii) protection against
losses resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
due on the underlying pool is timely. Protection against losses resulting from
ultimate default enhances
-5-
<PAGE>
(SAI-DF/DVN-PART B)
the likelihood of payments of the obligations on at least some of the assets in
the pool. Such protection may be provided through guarantees, insurance policies
or letters of credit obtained by the issuer or sponsor from third parties,
through various means of structuring the transaction or through a combination of
such approaches. The Funds will not pay any additional fees for such credit
support, although the existence of credit support may increase the price of a
security.
Examples of credit support arising out of the structure of the
transaction include "senior-subordinated securities" (multiple class securities
with one or more classes subordinate to other classes as to the payment of
principal thereof and interest thereon, with the result that defaults on the
underlying assets are borne first by the holders of the subordinated class),
creation of "reserve funds" (where cash or investments, sometimes funded from a
portion of the payments on the underlying assets, are held in reserve against
future losses) and "over collateralization" (where the scheduled payments on, or
the principal amount of, the underlying assets exceeds that required to make
payments of the securities and pay any servicing or other fees). The degree of
credit support provided for each issue is generally based on historical
information respecting the level of credit information respecting the level of
credit risk associated with the underlying assets. Delinquencies or losses in
excess of those anticipated could adversely affect the return on an investment
in such issue.
Portfolio Loan Transactions--Each Fund 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 Delaware Management Company, Inc. (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 a 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 Fund; 3) the Fund must be able to terminate the loan after notice, at any
time; 4) the Fund 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 Fund 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 Equity Funds
I, Inc. 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 a Fund 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, each Fund 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.
Restricted and Illiquid Securities--Most of the privately placed
securities acquired by a Fund will be eligible for resale by the Fund without
registration pursuant to Rule 144A ("Rule 144A Securities") under the Securities
Act of 1933. While maintaining oversight, the Board of Directors has delegated
to the Manager the day-to-day function of determining whether individual Rule
144A Securities are liquid for purposes of each Fund's 10% limitation on
investments in illiquid securities. The Board has instructed the Manager to
consider the following
-6-
<PAGE>
(SAI-DF/DVN-PART B)
actors in determining the liquidity of a Rule 144A Security: (i) the frequency
of trades and trading volume for the security; (ii) whether at least three
dealers are willing to purchase or sell the security and the number of potential
purchasers; (iii) whether at least two dealers are making a market in the
security; and (iv) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer).
Investing in Rule 144A Securities could have the effect of increasing
the level of a Fund's illiquidity to the extent that qualified institutional
buyers become, for a period of time, uninterested in purchasing these
securities. If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, a
Fund's holdings of illiquid securities exceed the Fund's 10% limit on investment
in such securities, the Manager will determine what action shall be taken to
ensure that the Fund continues to adhere to such limitation.
Convertible Securities--Each Fund may invest in convertible securities,
including corporate debentures, bonds, notes and preferred stocks that may be
converted into or exchanged for common stock. While providing a fixed-income
stream (generally higher in yield than the income derivable from a common stock
but lower than that afforded by a non-convertible debt security), a convertible
security also affords the investor an opportunity, through its conversion
feature, to participate in the capital appreciation of the common stock into
which it is convertible. As the market price of the underlying common stock
declines, convertible securities tend to trade increasingly on a yield basis and
so may not experience market declines to the same extent as the underlying
common stock. When the market price of the underlying common stock increases,
the price of a convertible security tends to rise as a reflection of the value
of the underlying common stock. To obtain such a higher yield, a Fund may be
required to pay for a convertible security an amount in excess of the value of
the underlying common stock. Common stock acquired by a Fund upon conversion of
a convertible security will generally be held for so long as the Manager
anticipates such stock will provide a Fund with opportunities which are
consistent with a Fund's investment objectives and policies.
Each Fund may invest not more than 5% of its assets in convertible
debentures that are rated below investment grade or are unrated but are
determined by the Manager to be of comparable quality. Investing in convertible
debentures that are rated below investment grade or unrated but of comparable
quality entails certain risks, including the risk of loss of principal, which
may be greater than the risks involved in investing in investment grade
convertible debentures. Under rating agency guidelines, lower rated securities
and comparable unrated securities will likely have some quality and protective
characteristics that are outweighed by large uncertainties or major risk
exposures to adverse conditions.
A Fund may have difficulty disposing of such lower rated convertible
debentures because the trading market for such securities may be thinner than
the market for higher rated convertible debentures. To the extent a secondary
trading market for these securities does exist, it generally is not as liquid as
the secondary trading market for higher rated securities. The lack of a liquid
secondary market as well as adverse publicity with respect to these securities,
may have an adverse impact on market price and the Fund's ability to dispose of
particular issues in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for a
Fund to obtain accurate market quotations for purposes of pricing the Fund's
portfolio and calculating its net asset value. The market behavior of
convertible securities in lower rating categories is often more volatile than
that of higher quality securities. Lower quality convertible securities are
judged by Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
Ratings Group ("S&P") to have speculative elements or characteristics; their
future cannot be considered as well assured and earnings and asset protection
may be moderate or poor in comparison to investment grade securities.
-7-
<PAGE>
(SAI-DF/DVN-PART B)
In addition, such lower quality securities face major ongoing
uncertainties or exposure to adverse business, financial or economic conditions,
which could lead to inadequate capacity to meet timely payments. The market
values of securities rated below investment grade tend to be more sensitive to
company specific developments and changes in economic conditions than higher
rated securities. Issuers of these securities are often highly leveraged, so
that their ability to service their debt obligations during an economic downturn
or during sustained periods of rising interest rates may be impaired. In
addition, such issuers may not have more traditional methods of financing
available to them, and may be unable to repay debt at maturity by refinancing.
Foreign Securities--Each Fund may invest in securities of foreign
companies. However, neither Fund will invest more than 5% of the value of its
total assets, at the time of purchase, in foreign securities (other than
securities of Canadian issuers registered under the Securities Exchange Act of
1934 or American Depositary Receipts, on which there are no such limits).
There has been in the past, and there may be again in the future, an
interest equalization tax levied by the United States in connection with the
purchase of foreign securities such as those purchased by a Fund. Payment of
such interest equalization tax, if imposed, would reduce a Fund's rate of return
on its investment. Dividends paid by foreign issuers may be subject to
withholding and other foreign taxes which may decrease the net return on such
investments as compared to dividends paid to a Fund by United States
corporations.
Investors should recognize that investing in foreign corporations
involves certain considerations, including those set forth below, which are not
typically associated with investing in United States corporations. Foreign
corporations are not generally subject to uniform accounting, auditing and
financial standards and requirements comparable to those applicable to United
States corporations. There may also be less supervision and regulation of
foreign stock exchanges, brokers and listed corporations than exist in the
United States. A Fund may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange as between the currencies of
different nations and control regulations. Furthermore, there may be the
possibility of expropriation or confiscatory taxation, political, economic or
social instability or diplomatic developments which could affect assets of
either Fund held in foreign countries.
Each Fund will, from time to time, conduct foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into contracts to purchase
or sell foreign currencies at a future date (i.e., a "forward foreign currency"
contract or "forward" contract). Investors should be aware that there are costs
and risks associated with such currency transactions. Each Fund may enter into
forward contracts to "lock in" the price of a security it has agreed to purchase
or sell, in terms of U.S. dollars or other currencies in which the transaction
will be consummated. When the Manager believes that the currency of a particular
foreign country may suffer a decline against the U.S. dollar or against another
currency, each Fund may enter into a forward contract to sell, for a fixed
amount of U.S. dollars or other appropriate currency, the amount of foreign
currency approximating the value of some or all of a Fund's securities
denominated in such foreign currency. It is impossible to predict precisely the
market value of portfolio securities at the expiration of the forward contract.
Accordingly, it may be necessary for a Fund to purchase or sell additional
foreign currency on the spot market (and bear the expense of such purchase or
sale) if the market value of the security is less than or greater than the
amount of foreign currency the Fund is obligated to deliver.
-8-
<PAGE>
(SAI-DF/DVN-PART B)
Each Fund may incur gains or losses from currency transactions. No type
of foreign currency transaction will eliminate fluctuations in the prices of a
Fund's foreign securities or will prevent loss if the prices of such securities
should decline.
Futures Contracts and Options on Futures Contracts--Devon Fund may
enter into futures contracts on stocks and stock indices, purchase and sell
options on such futures, and enter into closing transactions with respect to
those activities. The Fund currently intends to limit such investments to the
extent that not more than 5% of its assets are required as futures contract
margin deposits and premiums on options and only to the extent that obligations
under such contracts and transactions represent not more than 20% of the Fund's
assets. A futures contract may be purchased and sold only on an exchange, known
as a "contract market," designated by the Commodity Futures Trading Commission
for the trading of such contract, and only through a registered futures
commission merchant which is a member of such contract market. A commission must
be paid on each completed purchase and sale transaction.
When the Fund enters into a futures transaction, it must deliver to the
futures commission merchant selected by the Fund an amount referred to as
"initial margin." This amount is maintained by the futures commission merchant
in an account at the Fund's custodian bank. Thereafter, a "variation margin" may
be paid by the Fund to, or drawn by the Fund from, such account in accordance
with controls set for such accounts, depending upon changes in the price of the
underlying securities subject to the futures contract.
Although futures contracts by their terms generally call for the actual
delivery or acquisition of underlying securities or the cash value of the index,
in most cases the contractual obligation is fulfilled before the date of the
contract without having to make or take such delivery. The contractual
obligation is offset by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take, as the case may be, delivery of the securities
or cash value of the index underlying the contractual obligations. At the time
such transaction is effected, a final determination of variation margin is made
and any loss experienced by the Fund must be paid to the contract market
clearing house while any profit due to the Fund must be delivered to it.
Positions taken in futures markets are not normally held to maturity,
but instead liquidated through offsetting transactions which may result in a
profit or a loss. While the Fund's futures contracts on securities will usually
be liquidated in this manner, the Fund may instead make or take delivery of the
underlying securities whenever it appears economically advantageous to do so.
The clearing house associated with the market on which futures on the securities
are traded guarantees that, if still open, the sale or purchase will be
performed on settlement date.
The Fund may enter into such futures contracts to protect against the
adverse affects of fluctuations in security prices or interest rates without
actually buying or selling the securities. For example, if interest rates are
expected to increase, the Fund might enter into futures contracts for the sale
of debt securities. Such a sale would have much the same effect as selling an
equivalent value of the debt securities in the portfolio owned by the Fund. If
interest rates did increase, the value of the debt securities in the portfolio
would decline, but the value of the futures contracts to the Fund would increase
at approximately the same rate, thereby keeping the net asset value of the Fund
from declining as much as it otherwise would have. Similarly, when it is
expected that interest rates may decline, futures contracts may be purchased to
hedge in anticipation of subsequent purchases of securities at higher prices.
-9-
<PAGE>
(SAI-DF/DVN-PART B)
Since the fluctuations in the value of futures contracts should be similar to
those of debt securities, the Fund could take advantage of the anticipated rise
in value of debt securities without actually buying them until the market had
stabilized. At that time, the futures contracts could be liquidated and the Fund
could then buy debt securities on the cash market.
With respect to options on futures contracts, when the Fund is not
fully invested, it may purchase a call option on a futures contract to hedge
against a market advance due to declining interest rates. The purchase of a call
option on a futures contract is similar in some respects to the purchase of a
call option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based, or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities.
The writing of a call option on a futures contract constitutes a
partial hedge against the declining price of the security which is deliverable
upon exercise of the futures contract. If the futures price at the expiration of
the option is below the exercise price, the Fund will retain the full amount of
the option premium which provides a partial hedge against any decline that may
have occurred in the Fund's portfolio holdings. The writing of a put option on a
futures contract constitutes a partial hedge against the increasing price of the
security which is deliverable upon exercise of the futures contract. If the
futures price at the expiration of the option is higher than the exercise price,
the Fund will retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities which the Fund
intends to purchase.
Call and put options on stock index futures are similar to options on
securities except that, rather than the right to purchase or sell stock at a
specified price, options on a stock index future give the holder the right to
receive cash. Upon exercise of the option, the delivery of the futures position
by the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the futures contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement will
be made entirely in cash equal to the difference between the exercise price of
the option and the closing price of the futures contract on the expiration date.
If a put or call option the Fund has written is exercised, the Fund
will incur a loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between changes in the value of
its portfolio securities and changes in the value of its futures positions, the
Fund's losses from existing options on futures may, to some extent, be reduced
or increased by changes in the value of portfolio securities. The purchase of a
put option on a futures contract is similar in some respects to the purchase of
protective puts on portfolio securities. For example, the Fund will purchase a
put option on a futures contract to hedge the Fund's portfolio against the risk
of rising interest rates.
To the extent that interest rates move in an unexpected direction, the
Fund may not achieve the anticipated benefits of futures contracts or options on
futures contracts or may realize a loss. For example, if the Fund is hedged
against the possibility of an increase in interest rates which would adversely
affect the price of securities held in its portfolio and interest rates decrease
instead, the Fund will lose part or all of the benefit of the increased value of
its securities which it has because it will have offsetting losses in its
futures position. In addition, in such situations, if
-10-
<PAGE>
(SAI-DF/DVN-PART B)
the Fund had insufficient cash, it may be required to sell securities from its
portfolio to meet daily variation margin requirements. Such sales of securities
may, but will not necessarily, be at increased prices which reflect the rising
market. The Fund may be required to sell securities at a time when it may be
disadvantageous to do so.
Further, with respect to options on futures contracts, the Fund may
seek to close out an option position by writing or buying an offsetting position
covering the same securities or contracts and have the same exercise price and
expiration date. The ability to establish and close out positions on options
will be subject to the maintenance of a liquid secondary market, which cannot be
assured.
Options--Devon Fund 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 Fund may write covered call options from
time to time on such portion of its portfolio, without limit, as the Manager
determines is appropriate in seeking to obtain the investment objective. A call
option gives the purchaser of such option the right to buy, and the writer, in
this case the Fund, has the obligation to sell the underlying security at the
exercise price during the option period. The advantage to the Fund of writing
covered calls is that the Fund 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 Fund 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 Fund and options on stock indices, the Fund may enter into closing purchase
transactions. A closing purchase transaction is one in which the Fund, 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
Fund to write another call option on the underlying security with either a
different exercise price or expiration date or both. The Fund may realize a 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.
-11-
<PAGE>
(SAI-DF/DVN-PART B)
If a call option expires unexercised, the Fund 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 Fund 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.
Devon Fund will write call options only on a covered basis, which means
that the Fund 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 Fund 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 Fund 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--Devon Fund may invest up to 2% of its total
assets in the purchase of put options. The Fund will, at all times during which
it holds a put option, own the security covered by such option.
The Fund 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 Fund to protect unrealized gain in an
appreciated security in its portfolio without actually selling the security. If
the security does not drop in value, the Fund will lose the value of the premium
paid. The Fund 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 Fund may sell a put option purchased on individual portfolio
securities or stock indices. Additionally, the Fund may enter into closing sale
transactions. A closing sale transaction is one in which the Fund, 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
-12-
<PAGE>
(SAI-DF/DVN-PART B)
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 Fund 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, Devon Fund 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
Fund's 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 Fund 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 movements
in the price of a particular stock. Since the Fund's portfolio will not
duplicate the components of an index, the correlation will not be exact.
Consequently, the Fund 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 Fund 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 Fund's ability to effectively
hedge its securities. Devon Fund will enter into an option position only if
there appears to be a liquid secondary market for such options.
The Fund 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.
-13-
<PAGE>
(SAI-DF/DVN-PART B)
When-Issued and Delayed Delivery Securities--Each Fund may purchase
securities on a when-issued or delayed delivery basis. In such transactions,
instruments are purchased with payment and delivery taking place in the future
in order to securer what is considered to be an advantageous yield or price at
the time of the transaction. Delivery of and payment for these securities may
take as long as a month or more after the date of the purchase commitment. A
Fund will maintain with its custodian a separate account with a segregated
portfolio of securities in an amount at least equal to these commitments. The
payment obligation and the interest rates that will be received are each fixed
at the time a Fund enters into the commitment and no interest accrues to the
Fund until settlement. Thus, it is possible that the market value at the time of
settlement could be higher or lower than the purchase price if the general level
of interest rates has changed. It is a current policy of each Fund not to enter
into when-issued commitments exceeding in the aggregate 5% of the market value
of such Fund's total assets less liabilities other than the obligations created
by these commitments.
-14-
<PAGE>
(SAI-DF/DVN-PART B)
PERFORMANCE INFORMATION
From time to time, each Fund may state its Classes' 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. Each
Fund may also advertise aggregate and average total return information for its
Classes 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, in the case of only Class A Shares,
the maximum front-end sales charge is deducted;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical $1,000
purchase at the end of the period after the
deduction of the applicable CDSC, if any, with
respect to Class B Shares and Class C Shares.
In presenting performance information for Class A Shares, the Limited
CDSC, applicable to only certain redemptions of those shares, will not be
deducted from any computations of total return. See the Prospectus for the Fund
Classes for a description of the Limited CDSC and the limited instances in which
it applies. All references to a CDSC in this Performance Information section
will apply to Class B Shares or Class C Shares.
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made with respect to Class A Shares, and that all
distributions are reinvested at net asset value, and, with respect to Class B
Shares and Class C Shares, reflects the deduction of the CDSC that would be
applicable upon complete redemption of such shares. In addition, each Fund may
present total return information that does not reflect the deduction of the
maximum front-end sales charge or any applicable CDSC.
The performance of Class A Shares and the Institutional Class of
Delaware Fund and Devon Fund, as shown below, is the average annual total return
quotations through October 31, 1996. The average annual total return for Class A
Shares at offer reflects the maximum front-end sales charge of 4.75% paid on the
purchase of shares. The average annual total return for Class A Shares at net
asset value (NAV) does not reflect the payment of any front-end sales charge.
Pursuant to applicable regulation, total return shown for Delaware Fund
Institutional Class for the periods prior to the commencement of operations of
such Class is calculated by taking the performance of Delaware Fund A Class and
adjusting it to reflect the elimination of all sales charges. However, for those
periods, no adjustment has been made to eliminate the impact of 12b-1 payments,
and performance would have been affected had such an adjustment been made.
-15-
<PAGE>
(SAI-DF/DVN-PART B)
Securities prices fluctuated during the periods covered and past
results should not be considered as representative of future performance. On
June 14, 1988, Delaware Fund's investment objective was changed from growth with
income to a balance of capital appreciation, income and preservation of capital.
Average Annual Total Return
<TABLE>
<CAPTION>
Delaware Fund Delaware Fund Delaware Fund
Class A Shares(1)(2) Class A Shares(1) Institutional
(at Offer) (at NAV) Class(3)
<S> <C> <C> <C>
1 year ended
10/31/96 10.58% 16.07% 16.25%
3 years ended
10/31/96 9.38% 11.17% 11.35%
5 years ended
10/31/96 10.47% 11.55% 11.70%
10 years ended
10/31/96 10.33% 10.86% 10.94%
15 years ended
10/31/96 13.87% 14.23% 14.28%
Period 4/25/38(4)
through 10/31/96 11.09% 11.18% 11.20%
</TABLE>
(1) Delaware Fund A Class began paying 12b-1 payments on June 1, 1992 and
performance prior to that date does not reflect such payments.
(2) Prior to November 29, 1995, the maximum front-end sales charge was 5.75%.
Effective November 29, 1995, the maximum front-end sales charge was reduced
to 4.75% and the above performance numbers are calculated using 4.75% as
the applicable sales charge, and are more favorable than they would have
been had they been calculated using 5.75%.
(3) Date of initial public offering was November 9, 1992.
(4) Date of initial public offering for Delaware Fund.
Average Annual Total Return(1)
<TABLE>
<CAPTION>
Devon Fund Devon Fund Devon Fund
Class A Shares Class A Shares Institutional
(at Offer)(2) (at NAV) Class
<S> <C> <C> <C>
1 year ended
10/31/96 18.21% 24.14% 24.56%
Period 12/29/93(3)
through 10/31/96 17.35% 19.38% 19.74%
</TABLE>
(1) Certain expenses of this Fund have been waived and reimbursed by the
Manager. In the absence of such waiver and reimbursement, performance would
have been affected negatively.
(2) Prior to November 29, 1995, the maximum front-end sales charge was 5.75%.
Effective November 29, 1995, the maximum front-end sales charge was reduced
to 4.75% and the above performance numbers are calculated using 4.75% as
the applicable sales charge, and are more favorable than they would have
been had they been calculated using 5.75%.
(3) Date of initial public offering.
-16-
<PAGE>
(SAI-DF/DVN-PART B)
The performance of Delaware Fund B Class and Devon Fund B Class, as shown
below, is the average annual total return quotation through October 31, 1996.
The average annual total return for Class B Shares including deferred sales
charge reflects the deduction of the applicable CDSC that would be paid if the
shares were redeemed at October 31, 1996. The average annual total return for
Class B Shares excluding deferred sales charge assumes the shares were not
redeemed at October 31, 1996 and therefore does not reflect the deduction of a
CDSC.
Average Annual Total Return
Delaware Fund Delaware Fund
Class B Shares Class B Shares
(Including Deferred (Excluding Deferred
Sales Charge) Sales Charge)
1 year ended
10/31/96 11.15% 15.15%
Period 9/6/94(1)
through 10/31/96 12.28% 13.49%
(1) Date of initial public offering.
Average Annual Total Return(1)
Devon Fund Devon Fund
Class B Shares Class B Shares
(Including Deferred (Excluding Deferred
Sales Charge) Sales Charge)
1 year ended
10/31/96 19.38% 23.38%
Period 9/6/94(2)
through 10/31/96 19.10% 20.24%
(1) Certain expenses of this Fund have been waived and reimbursed by the
Manager. In the absence of such waiver and reimbursement, performance
would have been affected negatively.
(2) Date of initial public offering.
-17-
<PAGE>
(SAI-DF/DVN-PART B)
The performance of Delaware Fund C Class and Devon Fund C Class, as shown
below, is the aggregate total return quotation through October 31, 1996. The
aggregate total return for Class C Shares including deferred sales charge
reflects the deduction of the applicable CDSC that would be paid if the shares
were redeemed at October 31, 1996. The aggregate total return for Class C Shares
excluding deferred sales charge assumes the shares were not redeemed at October
31, 1996 and therefore does not reflect the deduction of a CDSC.
Aggregate Total Return
Delaware Fund Delaware Fund
Class C Shares Class C Shares
(Including Deferred (Excluding Deferred
Sales Charge) Sales Charge)
Period 11/29/95(1)
through 10/31/96 11.13% 12.13%
(1) Date of initial public offering; total return for this short of a time
period may not be representative of longer term results.
Aggregate Total Return(1)
Devon Fund Devon Fund
Class C Shares Class C Shares
(Including Deferred (Excluding Deferred
Sales Charge) Sales Charge)
Period 11/29/95(2)
through 10/31/96 17.94% 18.94%
(1) Certain expenses of this Fund have been waived and reimbursed by the
Manager.In the absence of such waiver and reimbursement, performance would
have been affected negatively.
(2) Date of initial public offering; total return for this short of a time
period may not be representative of longer term results.
From time to time, each Fund may also quote its Classes' actual total
return performance, dividend results and other performance information, in
advertising and other types of literature 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 generally-conservative securities
used for measuring general 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.
-18-
<PAGE>
(SAI-DF/DVN-PART B)
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 reflect the maximum sales charge, if
any, paid for the illustrated investment amount, but will not reflect 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 either Fund in the future.
Each Fund may also state total return performance of its Classes in the
form of an average annual return. This average annual return figure will be
computed by taking the sum of annual returns, then dividing that figure by the
number of years in the overall period indicated. The computation will reflect
the impact of the maximum front-end sales charge or CDSC, if any, paid on the
illustrated investment amount against the first year's return. The performance
of Class B Shares and Class C Shares may also be computed without taking into
account any applicable CDSC. From time to time, each Fund may quote actual total
return performance 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.
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 activity and performance of the Funds 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 each Fund. 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.
-19-
<PAGE>
(SAI-DF/DVN-PART B)
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. In addition, the performance
of multiple indices compiled and maintained by these firms may be combined
to create a blended performance result for comparative performances.
Generally, the indices selected will be representative of the types of
securities in which the Funds may invest and the assumptions that were used
in calculating the blended performance will be described.
Comparative information on the Consumer Price Index and the CDA
Balanced Fund 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. The CDA
Balanced Fund Index was developed and is maintained by CDA Technologies, Inc.
The Index is comprised of 64 separately-managed, balanced mutual funds. It
reflects the reinvestment of any dividend and capital gains distributions paid
during a specified period.
The following tables are examples, for purposes of illustration only,
of cumulative total return performance for the Class A Shares, the Class B
Shares, the Class C Shares and the Institutional Class of Delaware Fund and
Devon Fund through October 31, 1996. For these purposes, the calculations assume
the reinvestment of any capital gains distributions and income dividends paid
during the indicated periods. Comparative information on the Dow Jones
Industrial Average and the Standard & Poor's 500 Stock Index is also included.
The performance of each Class, as shown below, does not reflect any
income taxes payable by shareholders on the reinvested distributions included in
the calculations. The performance of Class A Shares reflects the maximum
front-end sales charge paid on the purchase of shares but may also be shown
without reflecting the impact of any front-end sales charge. The performance of
Class B Shares and Class C Shares is calculated both with the applicable CDSC
included and excluded. On June 14, 1988, Delaware Fund's investment objective
was changed from growth with income to a balance of capital appreciation, income
and preservation of capital. The net asset values of each Fund fluctuate so
shares, when redeemed, may be worth more or less than the original investment
and each Fund's results should not be considered as representative of future
performance.
-20-
<PAGE>
(SAI-DF/DVN-PART B)
<TABLE>
<CAPTION>
Cumulative Total Return
Delaware Fund Delaware Fund
Class A Shares(1) Institutional Dow Jones Standard &
(at Offer) Class(2) Industrial(3) Poor's 500(3)
<S> <C> <C> <C> <C>
3 months ended
10/31/96 1.68% 6.79% 9.62% 10.83%
6 months ended
10/31/96 2.47%(4) 7.67% 9.47% 9.08%
9 months ended
10/31/96 2.46% 7.73% 13.61% 12.79%
1 year ended
10/31/96 10.58% 16.25% 29.70% 24.10%
3 years ended
10/31/96 30.85% 38.08% 76.96% 62.97%
5 years ended
10/31/96 64.52% 73.90% 124.98% 105.98%
10 years ended
10/31/96 167.15% 182.37% N/A 292.78%
15 years ended
10/31/96 601.30% 640.99% N/A 887.91%
Period 4/25/38(5)
through 10/31/96 47,030.50% 49,685.93% N/A N/A
</TABLE>
(1) Delaware Fund A Class began paying 12b-1 payments on June 1, 1992 and
performance prior to that date does not reflect such payments. Prior to
November 29, 1995, the maximum front-end sales charge was 5.75%. Effective
November 29, 1995, the maximum front-end sales charge was reduced to 4.75%
and the above performance numbers are calculated using 4.75% as the
applicable sales charge, and are more favorable than they would have been
had they been calculated using 5.75%.
(2) Date of initial public offering of Delaware Fund Institutional Class was
November 9, 1992. Pursuant to applicable regulation, total return shown for
Delaware Fund Institutional Class for the periods prior to the commencement
of operations of such Class is calculated by taking the performance of
Delaware Fund A Class and adjusting it to reflect the elimination of all
sales charges. However, for those periods no adjustment has been made to
eliminate the impact of 12b-1 payments, and performance would have been
affected had such an adjustment been made.
(3) Source--Lipper Analytical Services, Inc.
(4) For the six months ended October 31, 1996, cumulative total return for
Delaware Fund A Class at net asset value was 7.58%.
(5) Date of initial public offering of Delaware Fund.
-21-
<PAGE>
(SAI-DF/DVN-PART B)
<TABLE>
<CAPTION>
Cumulative Total Return
Delaware Fund Delaware Fund
Class B Shares Class B Shares
(Including (Excluding
Deferred Deferred Dow Jones Standard &
Sales Charge) Sales Charge) Industrial(1) Poor's 500(1)
<S> <C> <C> <C> <C>
3 months ended
10/31/96 2.51% 6.51% 9.62% 10.83%
6 months ended
10/31/96 3.13% 7.13% 9.47% 9.08%
9 months ended
10/31/96 2.92% 6.92% 13.61% 12.79%
1 year ended
10/31/96 11.15% 15.15% 29.70% 24.10%
Period 9/6/94(2)
through 10/31/96 28.32% 31.32% 62.33% 56.51%
</TABLE>
(1) Source--Lipper Analytical Services, Inc.
(2) Date of initial public offering.
<TABLE>
<CAPTION>
Cumulative Total Return
Delaware Fund Delaware Fund
Class C Shares Class C Shares
(Including (Excluding
Deferred Deferred Dow Jones Standard &
Sales Charge) Sales Charge) Industrial(1) Poor's 500(1)
<S> <C> <C> <C> <C>
3 months ended
10/31/96 5.56% 6.56% 9.62% 10.83%
6 months ended
10/31/96 6.18% 7.18% 9.47% 9.08%
9 months ended
10/31/96 5.97% 6.97% 13.61% 12.79%
Period 11/29/95(2)
through 10/31/96 11.13% 12.13% 21.08% 18.86%
</TABLE>
(1) Source--Lipper Analytical Services, Inc.
(2) Date of initial public offering; total return for this short of a time
period may not be representative of longer term results.
-22-
<PAGE>
(SAI-DF/DVN-PART B)
<TABLE>
<CAPTION>
Cumulative Total Return
Devon Fund Devon Fund
Class A Shares(1)(2) Institutional Dow Jones Standard &
(at Offer) Class(1) Industrial(3) Poor's 500(3)
<S> <C> <C> <C> <C>
3 months ended
10/31/96 5.21% 10.56% 9.62% 10.83%
6 months ended
10/31/96 5.59%(4) 11.05% 9.47% 9.08%
9 months ended
10/31/96 7.53% 13.09% 13.61% 12.79%
1 year ended
10/31/96 18.21% 24.56% 29.70% 24.10%
Period 12/29/93(5)
through 10/31/96 57.56% 66.83% 72.42% 62.58%
</TABLE>
(1) Certain expenses of this Fund have been waived and reimbursed by the
Manager. In the absence of such waiver and reimbursement, performance would
have been affected negatively.
(2) Prior to November 29, 1995, the maximum front-end sales charge was 5.75%.
Effective November 29, 1995, the maximum front-end sales charge was reduced
to 4.75% and the above performance numbers are calculated using 4.75% as
the applicable sales charge and are more favorable than they would have
been had they been calculated using 5.75%.
(3) Source--Lipper Analytical Services, Inc.
(4) For the six months ended October 31, 1996, cumulative total return for
Devon Fund A Class at net asset value was 10.85%.
(5) Date of initial public offering.
-23-
<PAGE>
(SAI-DF/DVN-PART B)
<TABLE>
<CAPTION>
Cumulative Total Return
Devon Fund Devon Fund
Class B Shares Class B Shares
(Including (Excluding
Deferred Deferred Dow Jones Standard &
Sales Charge)(1) Sales Charge)(1) Industrial(2) Poor's 500(2)
<S> <C> <C> <C> <C>
3 months ended
10/31/96 6.22% 10.22% 9.62% 10.83%
6 months ended
10/31/96 6.54% 10.54% 9.47% 9.08%
9 months ended
10/31/96 8.32% 12.32% 13.61% 12.79%
1 year ended
10/31/96 19.38% 23.38% 29.70% 24.10%
Period 9/6/94(3)
through 10/31/96 45.72% 48.72% 62.33% 56.51%
</TABLE>
(1) Certain expenses of this Fund have been waived and reimbursed by the
Manager. In the absence of such waiver and reimbursement, performance would
have been affected negatively.
(2) Source--Lipper Analytical Services, Inc.
(3) Date of initial public offering.
-24-
<PAGE>
(SAI-DF/DVN-PART B)
<TABLE>
<CAPTION>
Cumulative Total Return
Devon Fund Devon Fund
Class C Shares Class C Shares
(Including (Excluding
Deferred Deferred Dow Jones Standard &
Sales Charge)(1) Sales Charge)(1) Industrial(2) Poor's 500(2)
<S> <C> <C> <C> <C>
3 months ended
10/31/96 9.31% 10.31% 9.62% 10.83%
6 months ended
10/31/96 9.55% 10.55% 9.47% 9.08%
9 months ended
10/31/96 11.33% 12.33% 13.61% 12.79%
Period 11/29/95(3)
through 10/31/96 17.94% 18.94% 21.08% 18.86%
</TABLE>
(1) Certain expenses of this Fund have been waived and reimbursed by the
Manager. In the absence of such waiver and reimbursement, performance would
have been affected negatively.
(2) Source--Lipper Analytical Services, Inc.
(3) Date of initial public offering; total return for this short of a time
period may not be representative of longer term results.
For additional performance information, see Appendix C.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for each Fund and the 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
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 a Fund's, and other Delaware Group funds',
investment disciplines employed in seeking their objectives. The Distributor may
also from time to time cite general or specific information about the
institutional clients of the Manager, including the number of such clients
serviced by the Manager.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly--as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember.
-25-
<PAGE>
(SAI-DF/DVN-PART B)
Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. You also should consider your financial ability to
continue to purchase shares during periods of low fund share prices. Delaware
Group offers three services -- Automatic Investing Program, Direct Deposit
Program and the Wealth Builder Option -- that can help to keep your regular
investment program on track. See Investing by Electronic Fund Transfer - Direct
Deposit Purchase Plan and Automatic Investing Plan under Investment Plans and
Wealth Builder Option under Investment Plans for a complete description of these
services, including restrictions or limitations.
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.
Number
Investment Price Per of Shares
Amount Share Purchased
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $5.00 20
Month 4 $100 $10.00 10
---------------------------------------------------
$400 $37.50 48
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to
represent the actual performance of either Fund.
-26-
<PAGE>
(SAI-DF/DVN-PART B)
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Fund
shares, your investment is given yet another opportunity to grow. It's called
the Power of Compounding and the following chart illustrates just how powerful
it can be.
COMPOUNDED RETURNS
Results at various assumed fixed rates of return on a $10,000
investment compounded quarterly for 10 years:
8% Rate 10% Rate 12% Rate 14% Rate
of Return of Return of Return of Return
--------- --------- --------- ---------
1 year $10,824 $11,038 $11,255 $11,475
2 years $11,717 $12,184 $12,668 $13,168
3 years $12,682 $13,449 $14,258 $15,111
4 years $13,728 $14,845 $16,047 $17,340
5 years $14,859 $16,386 $18,061 $19,898
6 years $16,084 $18,087 $20,328 $22,833
7 years $17,410 $19,965 $22,879 $26,202
8 years $18,845 $22,038 $25,751 $30,067
9 years $20,399 $24,326 $28,983 $34,503
10 years $22,080 $26,851 $32,620 $39,593
These figures are calculated assuming a fixed constant investment
return and assume no fluctuation in the value of principal. These figures, which
do not reflect payment of applicable taxes or sales charges, are not intended to
be a projection of investment results and do not reflect the actual performance
results of any of the Classes.
-27-
<PAGE>
(SAI-DF/DVN-PART B)
TRADING PRACTICES AND BROKERAGE
Equity Funds I, Inc. selects brokers or dealers to execute transactions
on behalf of each Fund 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. A number of trades are made on a net basis where
a 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. When a commission is paid, a Fund pays reasonably competitive
brokerage commission rates based upon the professional knowledge of Equity Funds
I, Inc.'s trading department as to rates paid and charged for similar
transactions throughout the securities industry. In some instances, a Fund pays
a minimal share transaction cost when the transaction presents no difficulty.
During the fiscal years ended October 31, 1994, 1995 and 1996, the
aggregate dollar amounts of brokerage commissions paid by Delaware Fund were
$1,026,737, $918,750 and $651,024, respectively. For the period from December
29, 1993 (date of initial public offering) through October 31, 1994, the
aggregate dollar amount of brokerage commissions paid by Devon Fund was $25,927
and for the fiscal years ended October 31, 1995 and 1996, such payments by Devon
Fund were $29,982 and $36,082, 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 October 31, 1996, portfolio transactions
of Delaware Fund in the amount of $290,590,946, resulting in brokerage
commissions of $361,664, were directed to brokers for brokerage and research
services provided. During the same period, portfolio transactions of Devon Fund
in the amount of $13,372,075, resulting in brokerage commissions of $20,016,
were directed to brokers for brokerage and research services provided.
As provided in the Securities Exchange Act of 1934 and each Fund's
Investment Management Agreement, higher commissions are permitted to be paid to
broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, Equity Funds I, Inc. 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
-28-
<PAGE>
(SAI-DF/DVN-PART B)
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 a 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
receiving the pricing service.
The Manager may place a combined order for two or more accounts or
funds engaged in the purchase or sale of the same security if, in its judgment,
joint execution is in the best interest of each participant and will result in
best price and execution. Transactions involving commingled orders are allocated
in a manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager and Equity Funds I,
Inc.'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, a Fund may place orders with broker/dealers that have agreed to
defray certain Fund expenses such as custodian fees, and may, at the request of
the Distributor, give consideration to sales of Fund shares as a factor in the
selection of brokers and dealers to execute Fund portfolio transactions.
Portfolio Turnover
Management frequently transfers investments between securities, or
types of securities, in carrying out its investment policy. As a result, a Fund
may, at times, buy and sell more investment securities and thereby incur greater
brokerage commissions than funds which do not frequently transfer investments.
The rate of portfolio turnover is not a limiting factor when management deems it
desirable to purchase or sell securities.
The degree of portfolio activity may affect taxes payable by a Fund's
shareholders to the extent of any net realized capital gains. A turnover rate of
100% would occur, for example, if all the investments in a Fund's portfolio at
the beginning of the year were replaced by the end of the year. The turnover
rate also may be affected by cash requirements from redemptions and repurchases
of Fund shares.
During the past two fiscal years, Delaware Fund's portfolio turnover
rates were approximately 94% for 1995 and 92% for 1996. During the past two
fiscal years, Devon Fund's portfolio turnover rates were approximately 99% for
1995 and 80% for 1996.
-29-
<PAGE>
(SAI-DF/DVN-PART B)
Should it become necessary to sell investments for monies with which to
redeem shares, the Board of Directors, in its discretion, may deduct from the
net asset value the brokerage commissions and other costs incurred to determine
the redemption price. However, Equity Funds I, Inc. has never redeemed or
repurchased shares other than at net asset value.
-30-
<PAGE>
(SAI-DF/DVN-PART B)
PURCHASING SHARES
The Distributor serves as the national distributor for each Fund's four
classes of shares - Class A Shares, Class B Shares, Class C Shares and the
Institutional Class, and has agreed to use its best efforts to sell shares of
each Fund. See the Prospectuses for information on how to invest. Shares of each
Fund are offered on a continuous basis and may be purchased through authorized
investment dealers or directly by contacting Equity Funds I, Inc. or the
Distributor.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases generally must be at
least $100. The initial and subsequent investment minimums for Class A Shares
will be waived for purchases by officers, directors and employees of any
Delaware Group fund, the Manager or any of the Manager's affiliates if the
purchases are made pursuant to a payroll deduction program. Shares purchased
pursuant to the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act
and shares purchased in connection with an Automatic Investing Plan are subject
to a minimum initial purchase of $250 and a minimum subsequent purchase of $25.
Accounts opened under the Delaware Group Asset Planner service are subject to a
minimum initial investment of $2,000 per Asset Planner Strategy selected. There
are no minimum purchase requirements for the Institutional Classes, but certain
eligibility requirements must be satisfied.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. See Investment Plans for purchase limitations
applicable to retirement plans. Equity Funds I, Inc. will reject any purchase
order for more than $250,000 of Class B Shares and $1,000,000 or more of Class C
Shares. An investor may exceed these limitations by making cumulative purchases
over a period of time. In doing so, an investor should keep in mind, however,
that reduced front-end sales charges apply to investments of $100,000 or more in
Class A Shares, and that Class A Shares are subject to lower annual 12b-1 Plan
expenses than Class B Shares and Class C Shares and generally are not subject to
a CDSC.
Selling dealers have the responsibility of transmitting orders
promptly. Equity Funds I, Inc. reserves the right to reject any order for the
purchase of its shares of either Fund if in the opinion of management such
rejection is in such Fund's best interest.
The NASD has adopted amendments to its Rules of Fair Practice relating
to investment company sales charges. Equity Funds I, Inc. and the Distributor
intend to operate in compliance with these rules.
Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 4.75%; 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 annual 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
approximately eight years after purchase. See Automatic Conversion of Class B
Shares under Classes of Shares in the Fund Classes' Prospectus.
-31-
<PAGE>
(SAI-DF/DVN-PART B)
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Class C
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment which are equal to those to which Class B Shares are subject.
Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses. See Determining Offering Price and Net Asset Value and
Plans Under Rule 12b-1 for the Fund Classes in this Part B.
Class A Shares, Class B Shares, Class C Shares and Institutional Class
shares represent a proportionate interest in a Fund's assets and will receive a
proportionate interest in that Fund's income, before application, as to the
Class A, Class B and Class C Shares, of any expenses under that Fund's 12b-1
Plans.
Certificates representing shares purchased are not ordinarily issued
unless, in the case of Class A Shares or Institutional Class shares, a
shareholder submits a specific request. Certificates are not issued in the case
of Class B Shares or Class C Shares. 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 assessed by Equity Funds I, Inc. 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.
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A, Class B and Class C
Shares permit investors to choose the method of purchasing shares that is most
suitable for their needs given the amount of their purchase, the length of time
they expect to hold their shares and other relevant circumstances. Investors
should determine whether, given their particular circumstances, it is more
advantageous to purchase Class A Shares and incur a front-end sales charge and
annual 12b-1 Plan expenses of up to a maximum of 0.30% of the average daily net
assets of Class A Shares, or to purchase either Class B or Class C Shares and
have the entire initial purchase amount invested in the Fund with the investment
thereafter subject to a CDSC and annual 12b-1 Plan expenses. Class B Shares are
subject to a CDSC if the shares are redeemed within six years of purchase, and
Class C Shares are subject to a CDSC if the shares are redeemed within 12 months
of purchase. Class B and Class C Shares are each subject to annual 12b-1 Plan
expenses of up to a maximum of 1% (0.25% of which are service fees to be paid to
the Distributor, dealers or others for providing personal service and/or
maintaining shareholder accounts) of average daily net assets of the respective
Class. Class B Shares will automatically convert to Class A Shares at the end of
approximately eight years after purchase and, thereafter, be subject to annual
12b-1 Plan expenses of up to a maximum of 0.30% of average daily net assets of
such shares. Unlike Class B Shares, Class C Shares do not convert to another
Class.
Class A Shares - Delaware Fund and Devon Fund
Purchases of $100,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges 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, below for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
-32-
<PAGE>
(SAI-DF/DVN-PART B)
<TABLE>
<CAPTION>
Delaware Fund
Devon Fund
Class A Shares
- ---------------------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge as % of Commission***
Amount of Purchase Offering Amount as % of
Price Invested** Offering Price
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Delaware Devon
Fund Fund
Less than $100,000 4.75% 4.99% 5.00% 4.00%
$100,000 but under $250,000 3.75 3.90 3.90 3.00
$250,000 but under $500,000 2.50 2.59 2.53 2.00
$500,000 but under $1,000,000* 1.00 2.02 2.05 1.60
</TABLE>
* There is no front-end sales charge on purchases of $1 million or more of
Class A Shares but, under certain limited circumstances, a 1% contingent
deferred sales charge may apply upon redemption of such shares. The
contingent deferred sales charge ("Limited CDSC") that may be applicable
arises only in the case of certain shares that were purchased at net asset
value and triggered the payment of a dealer's commission.
** Based on the net asset value per share of Class A Shares as of the end of
Equity Funds I, Inc.'s most recent fiscal year.
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- -------------------------------------------------------------------------------
A Fund must be notified when a sale takes place which would qualify for the
reduced front-end sales charge on the basis of previous or current
purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by such 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 to dealers up to the full amount of the
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.
- -------------------------------------------------------------------------------
-33-
<PAGE>
(SAI-DF/DVN-PART B)
Certain dealers who enter into an agreement to provide extra training
and information on Delaware Group products and services and who increase sales
of Delaware Group funds may receive an additional commission of up to 0.15% of
the offering price in connection with sales of Class A Shares. Such dealers must
meet certain requirements in terms of organization and distribution capabilities
and their ability to increase sales. The Distributor should be contacted for
further information on these requirements as well as the basis and circumstances
upon which the additional commission will be paid. Participating dealers may be
deemed to have additional responsibilities under the securities laws.
Dealer's Commission
For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers through
whom such purchases are effected in accordance with the following schedule:
Dealer's Commission
-------------------
(as a percentage of
Amount of Purchase amount purchased)
------------------
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75
Next $2 million up to $5 million 0.50
Amount over $5 million 0.25
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 Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value under Redemption and
Exchange in the Fund Classes' Prospectus) may be aggregated with those of the
Class A Shares of a Fund. Financial advisers also may be eligible for a dealer's
commission in connection with certain purchases made under a Letter of Intention
or pursuant to an investor's Right of Accumulation. Financial advisers should
contact the Distributor concerning the applicability and calculation of the
dealer's commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B and Class C Shares are purchased without a front-end sales
charge. Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below, and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestment of dividends or capital gains distributions. See Waiver of
Contingent Deferred Sales Charge--Class B and Class C Shares under Redemption
and Exchange in the Prospectus for the Fund Classes for a list of the instances
in which the CDSC is waived.
-34-
<PAGE>
(SAI-DF/DVN-PART B)
The following table sets forth the rates of the CDSC for Class B Shares
of each Fund:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After 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, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. At the end of approximately eight years after purchase, the investor's
Class B Shares will be automatically converted into Class A Shares of the same
Fund. See Automatic Conversion of Class B Shares under Classes of Shares in the
Fund Classes' Prospectus. Such conversion will constitute a tax-free exchange
for federal income tax purposes. See Taxes 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
"1940 Act"), Equity Funds I, Inc. has adopted a separate plan for each of the
Class A Shares, the Class B Shares and the Class C Shares of each Fund (the
"Plans"). Each Plan permits a Fund to pay for certain distribution, promotional
and related expenses involved in the marketing of only the class to which the
Plan applies. The Plans do not apply to the Institutional Classes of shares.
Such shares are not included in calculating the Plans' fees, and the Plans are
not used to assist in the distribution and marketing of shares of the
Institutional Classes. Shareholders of the Institutional Classes may not vote on
matters affecting the Plans.
The Plans permit a Fund, pursuant to its Distribution Agreement, to pay
out of the assets of the Class A Shares, Class B Shares and Class C Shares
monthly fees to the Distributor for its services and expenses in distributing
and promoting sales of shares of such classes. These expenses include, among
other things, preparing and distributing advertisements, sales literature and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, and paying distribution and maintenance fees to securities
brokers and dealers who enter into agreements with the Distributor. The Plan
expenses relating to Class B and Class C Shares are also used to pay the
Distributor for advancing the commission costs to dealers with respect to the
initial sale of such shares.
In addition, each Fund may make payments out of the assets of the Class
A, Class B and Class C Shares directly to other unaffiliated parties, such as
banks, who either aid in the distribution of shares of, or provide services to,
such classes.
-35-
<PAGE>
(SAI-DF/DVN-PART B)
The maximum aggregate fee payable by a Fund under the Plans, and a
Fund's Distribution Agreement, is on an annual basis, up to 0.30% of a Class A
Shares' average daily net assets for the year, and up to 1% (0.25% of which are
service fees to be paid to the Distributor, dealers and others for providing
personal service and/or maintaining shareholder accounts) of each of the Class B
Shares' and the Class C Shares' average daily net assets for the year.
Equity Funds I, Inc.'s Board of Directors may reduce these amounts at any time.
Effective June 1, 1992, the Board of Directors has determined that the
annual fee, payable on a monthly basis, for Delaware Fund A Class under its Plan
will be equal to the sum of: (i) the amount obtained by multiplying 0.30% by the
average daily net assets represented by shares of Delaware Fund A Class that
were acquired by shareholders on or after June 1, 1992; and (ii) the amount
obtained by multiplying 0.10% by the average daily net assets represented by
shares of Delaware Fund A Class that were acquired before June 1, 1992. While
this is the method for calculating the 12b-1 fees to be paid by Delaware Fund A
Class, the fee is a Class expense so that all shareholders of that Class,
regardless of when they purchased their shares, will bear 12b-1 expenses at the
same per share rate. As Delaware Fund A Class shares are sold on or after June
1, 1992, the initial rate of at least 0.10% will increase over time. Thus, as
the proportion of Delaware Fund A Class shares purchased on or after June 1,
1992 to Delaware Fund A Class shares outstanding prior to June 1, 1992
increases, the expenses attributable to payments under the Plan will also
increase (but will not exceed 0.30% 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 Fund to pay a full 0.30% on all Delaware
Fund A Class assets at any time.
On September 23, 1993, the Board of Directors set the fee for Devon
Fund A Class at 0.30% of average daily net assets.
All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf of Class
A, Class B and Class C Shares would be borne by such persons without any
reimbursement from such Fund Classes. Subject to seeking best price and
execution, a Fund may, from time to time, buy or sell portfolio securities from
or to firms which receive payments under the Plans.
From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans and the Distribution Agreements, as amended, have all been
approved by the Board of Directors of Equity Funds I, Inc., including a majority
of the directors who are not "interested persons" (as defined in the 1940 Act)
of Equity Funds I, Inc. and who have no direct or indirect financial interest in
the Plans by vote cast in person at a meeting duly called for the purpose of
voting on the Plans and such Agreements. Continuation of the Plans and the
Distribution Agreements, as amended, must be approved annually by the Board of
Directors in the same manner as specified above.
Each year, the directors must determine whether continuation of the
Plans is in the best interest of shareholders of, respectively, Class A Shares,
Class B Shares and Class C Shares and that there is a reasonable likelihood of
the Plan relating to a Fund Class providing a benefit to that Class. The Plans
and the Distribution Agreement, as amended, may be terminated with respect to a
class at any item 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 maximum
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". With respect
to the Class A Share Plan, any material increase in the maximum percentage
payable thereunder must also be approved by a majority of the outstanding voting
securities of the Class B Shares. Also, any other amendment to the Plans must be
approved by a majority vote of the directors including a majority of the non
"interested directors" of Equity Funds I, Inc. having no interest in the Plans.
In addition, in order for the Plans to remain effective, the selection and
nomination of directors who are not "interested persons" of Equity Funds I, Inc.
must be effected by the directors who themselves are not "interested persons"
and who have no direct or indirect financial interest in the Plans. Persons
authorized to make payments under the Plans must provide written reports at
least quarterly to the Board of Directors for their review.
-36-
<PAGE>
(SAI-DF/DVN-PART B)
For the fiscal year ended October 31, 1996, payments from the Class A
Shares and Class B Shares of Delaware Fund amounted to $920,432 and $50,183,
respectively. For the period November 29, 1995 (date of initial public offering)
through October 31, 1996, payments from the Class C Shares of Delaware Fund
amounted to $8,830. Such amounts were used for the following purposes:
<TABLE>
<CAPTION>
Delaware Fund Delaware Fund Delaware Fund
A Class B Class C Class
------------- ------------- -------------
<S> <C> <C> <C>
Advertising --- --- ---
Annual/Semi-Annual Reports $45,333 --- ---
Broker Trails $612,036 $12,314 ---
Broker Sales Charges --- $18,399 $8,206
Dealer Service Expenses $41,468 --- ---
Interest on Broker Sales Charges --- $16,729 $624
Commissions to Wholesalers $35,642 $2,382 ---
Promotional-Broker Meetings $30,156 $359 ---
Promotional-Other $8,748 --- ---
Prospectus Printing $44,037 --- ---
Telephone $12,745 --- ---
Wholesaler Expenses $90,267 --- ---
Other --- --- ---
</TABLE>
For the fiscal year ended October 31, 1996, payments from the Class A
Shares and Class B Shares of Devon Fund amounted to $35,319 and $18,350,
respectively. For the period November 29, 1995 (date of initial public offering)
through October 31, 1996, payments from the Class C Shares of Devon Fund
amounted to $4,061. Such amounts were used for the following purposes:
<TABLE>
<CAPTION>
Devon Fund Devon Fund Devon Fund
A Class B Class C Class
---------- ---------- ----------
<S> <C> <C> <C>
Advertising --- --- ---
Annual/Semi-Annual Reports $1,169 --- ---
Broker Trails $24,895 $4,642 ---
Broker Sales Charges --- $7,269 $3,860
Dealer Service Expenses --- --- ---
Interest on Broker Sales Charges --- $5,577 $201
Commissions to Wholesalers $1,769 $708 ---
Promotional-Broker Meetings $394 $151 ---
Promotional-Other $5,197 --- ---
Prospectus Printing $1,570 --- ---
Telephone $53 $3 ---
Wholesaler Expenses $272 --- ---
Other --- --- ---
</TABLE>
-37-
<PAGE>
(SAI-DF/DVN-PART B)
Other Payments to Dealers - Class A, Class B and Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware 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.
Payment to dealers made in connection with seminars, conferences or
contests relating to the promotion of Fund shares may be in an amount up to 100%
of the expenses incurred or awards made. 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 Class A Shares at Net Asset Value
Class A Shares may be purchased without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the Exchange
Privilege and the 12-Month Reinvestment Privilege.
Current and former officers, directors and employees of Equity Funds I,
Inc., any other fund in the Delaware Group, the Manager or any of the Manager's
affiliates 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. Family members 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 12
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, contingent deferred sales charge or other sales charge has been
assessed. Purchases of Class A Shares may also be made at net asset value by
bank employees who provide services in connection with agreements between the
bank and unaffiliated brokers or dealers concerning sales of shares of Delaware
Group funds. Officers, directors and key employees of institutional clients of
the Manager or any of its affiliates may purchase Class A Shares at net asset
value. Moreover, purchases may be effected at net asset value for the benefit of
the clients of brokers, dealers and registered investment advisers affiliated
with a broker or dealer, if such broker, dealer or investment adviser has
entered into an agreement with the Distributor providing specifically for the
purchase of Class A Shares in connection with special investment products, such
as wrap accounts or similar fee based programs. Such purchasers are required to
sign a letter stating that the purchase is for investment only and that the
securities may not be resold except to the issuer. Such purchasers may also be
required to sign or deliver such other documents as Equity Funds I, Inc. may
reasonably require to establish eligibility 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.
-38-
<PAGE>
(SAI-DF/DVN-PART B)
The Funds must be notified in advance that the trade qualifies for
purchase at net asset value.
Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made
within a 13-month period pursuant to a written Letter of Intention provided by
the Distributor and signed by the purchaser, and not legally binding on the
signer or Equity Funds I, Inc. which provides for the holding in escrow by the
Transfer Agent, of 5% of the total amount of the 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 Funds
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,
CDSC or Limited CDSC other than shares of Delaware Group Premium Fund, Inc.
beneficially owned in connection with the ownership of variable insurance
products, unless they were acquired through an exchange from a Delaware Group
fund which carried a front-end sales charge, CDSC or Limited CDSC) previously
purchased and still held as of the date of their Letter of Intention toward the
completion of such Letter.
Employers offering a Delaware Group retirement plan may also complete a
Letter of Intention to obtain a reduced front-end sales charge on investments of
Class A Shares made by the plan. The aggregate investment level of the Letter of
Intention will be determined and accepted by the Transfer Agent at the point of
plan establishment. The level and any reduction in front-end sales charge will
be based on actual plan participation and the projected investments in Delaware
Group funds that are offered with a front-end sales charge, CDSC or Limited CDSC
for a 13-month period. The Transfer Agent reserves the right to adjust the
signed Letter of Intention based on this acceptance criteria. The 13-month
period will begin on the date this Letter of Intention is accepted by the
Transfer Agent. If actual investments exceed the anticipated level and equal an
amount that would qualify the plan for further discounts, any front-end sales
charges will be automatically adjusted. In the event this Letter of Intention is
not fulfilled within the 13-month period, the plan level will be adjusted
(without completing another Letter of Intention) and the employer will be billed
for the difference in front-end sales charges due, based on the plan's assets
under management at that time. Employers may also include the value (at offering
price at the level designated in their Letter of Intention) of all their shares
intended for purchase that are offered with a front-end sales charge, CDSC or
Limited CDSC of any class. Class B Shares and Class C Shares of a Fund and other
Delaware Group funds which offer corresponding classes of shares may also be
aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of the Class A Shares, Class B Shares and/or
Class C Shares of the Funds, as well as shares of any other class of any of the
other Delaware Group funds (except shares of any Delaware Group fund which do
not carry a front-end sales charge, CDSC or Limited CDSC, other than shares of
Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Group fund which carried a front-end sales charge, CDSC
or Limited CDSC).
-39-
<PAGE>
(SAI-DF/DVN-PART B)
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to the Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of a Fund, as
well as shares of any other class of any of the other Delaware Group funds which
offer such classes (except shares of any Delaware Group fund which do not carry
a front-end sales charge, CDSC or Limited CDSC, other than shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange from
a Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC). If, for example, any such purchaser has previously purchased and still
holds Class A Shares and/or shares of any other of the classes described in the
previous sentence with a value of $40,000 and subsequently purchases $60,000 at
offering price of additional shares of Class A Shares, the charge applicable to
the $60,000 purchase would currently be 3.75%. For the purpose of this
calculation, the shares presently held shall be valued at the public offering
price that would have been in effect were the shares purchased simultaneously
with the current purchase. Investors should refer to the table of sales charges
for Class A Shares to determine the applicability of the Right of Accumulation
to their particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares of a Fund (and of the Institutional Classes
holding shares which were acquired through an exchange from one of the other
mutual funds in the Delaware Group offered with a front-end sales charge) who
redeem such shares have one year from the date of redemption to reinvest all or
part of their redemption proceeds in Class A Shares of that Fund or in Class A
Shares of any of the other funds in the Delaware Group, subject to applicable
eligibility and minimum purchase requirements, in states where shares of such
other funds may be sold, at net asset value without the payment of a front-end
sales charge. This privilege does not extend to Class A Shares where the
redemption of the shares triggered the payment of a Limited CDSC. Persons
investing redemption proceeds from direct investments in mutual funds in the
Delaware 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 a redemption of either Class B Shares or Class C
Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is intended to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
-40-
<PAGE>
(SAI-DF/DVN-PART B)
Investors should consult their financial advisers or the Transfer
Agent, which also serves as the Funds' shareholder servicing agent, about the
applicability of the Limited CDSC (see Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in 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 Classes may also benefit from the reduced front-end sales charges
for investments in Class A Shares set forth in the table on page 00, based on
total plan assets. If a company has more than one plan investing in the Delaware
Group of funds, then the total amount invested in all plans would be used in
determining the applicable front-end sales charge reduction upon each purchase,
both initial and subsequent, upon notification to the Fund in which the
investment is being made at the time of each such purchase. Employees
participating in such Group Investment Plans may also combine the investments
made in their plan account when determining the applicable front-end sales
charge on purchases to non- retirement Delaware Group investment accounts if
they so notify the Fund in which they are investing in connection with each
purchase. For other retirement plans and special services, see Retirement Plans
for the Fund Classes under Investment Plans.
The Institutional Classes
The Institutional Class of each Fund is available for purchase only by:
(a) retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans; (b) tax-exempt employee
benefit plans of the Manager or its affiliates and securities dealer firms with
a selling agreement with the Distributor; (c) institutional advisory accounts of
the Manager or its affiliates and those having client relationships with
Delaware Investment Advisers, 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 accounts from such institutional
advisory accounts; (d) banks, trust companies and similar financial institutions
investing for their own account or for the accounts 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 Classes are available for purchase at net
asset value, without the imposition of a front-end or contingent deferred sales
charge and are not subject to Rule 12b-1 expenses.
-41-
<PAGE>
(SAI-DF/DVN-PART B)
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
Classes are reinvested in the accounts of the holders of such shares (based on
the net asset value in effect on the reinvestment date). A confirmation of each
dividend payment from net investment income will be mailed to shareholders
quarterly. A confirmation of any distributions from realized securities profits
will be mailed to shareholders in the first quarter of the fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the specific
Fund and Class in which shares are being purchased. Such purchases, which must
meet the minimum subsequent purchase requirements set forth in the Prospectuses
and this Part B, are made for Class A Shares at the public offering price, and
for Class B Shares, Class C Shares and the Institutional Classes at the net
asset value, at the end of the day of receipt. A reinvestment plan may be
terminated at any time. This plan does not assure a profit nor protect against
depreciation in a declining market.
Reinvestment of Dividends in Other Delaware Group Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A, Class B
and Class C Shares may automatically reinvest dividends and/or distributions in
any of the mutual funds in the Delaware Group, including the Funds, in states
where their shares may be sold. Such investments will be at net asset value at
the close of business on the reinvestment date without any front-end sales
charge or service fee. The shareholder must notify the Transfer Agent in writing
and must have established an account in the fund into which the dividends and/or
distributions are to be invested. Any reinvestment directed to a fund in which
the investor does not then have an account will be treated like all other
initial purchases of a fund's shares. Consequently, an investor should obtain
and read carefully the prospectus for the fund in which the investment is
intended to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses. See
also Additional Methods of Adding to Your Investment - Dividend Reinvestment
Plan under How to Buy Shares 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 Funds,
provided an account has been established. Dividends from Class A Shares may not
be directed to Class B Shares or Class C Shares. Dividends from Class B Shares
may only be directed to other Class B Shares and dividends from Class C Shares
may only be directed to other Class C Shares. See Appendix B--Classes Offered in
the Fund Classes' Prospectus for the funds in the Delaware Group that are
eligible for investment by holders of Fund 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.
-42-
<PAGE>
(SAI-DF/DVN-PART B)
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for either Fund to
accept for investment in Class A, Class B or Class C Shares, through an agent
bank, preauthorized government or private recurring payments. This method of
investment assures the timely credit to the shareholder's account of payments
such as social security, veterans' pension or compensation benefits, federal
salaries, Railroad Retirement benefits, private payroll checks, dividends, and
disability or pension fund benefits. It also eliminates lost, stolen and delayed
checks.
Automatic Investing Plan--Shareholders of Class A, Class B and Class C
Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into their Fund
account. This type of investment will be handled in either of the following
ways. (1) If the shareholder's bank is a member of the National Automated
Clearing House Association ("NACHA"), the amount of the investment will be
electronically deducted from his or her account by Electronic Fund Transfer
("EFT"). The shareholder's checking account will reflect a debit each month at a
specified date although no check is required to initiate the transaction. (2) If
the shareholder's bank is not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to a Fund from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
a Fund may liquidate sufficient shares from a shareholder's account to reimburse
the government or the private source. In the event there are insufficient shares
in the shareholder's account, the shareholder is expected to reimburse the Fund.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer,
to make investments directly to their Fund accounts. Either Fund will accept
these investments, such as bank-by-phone, annuity payments and payroll
allotments, by mail directly from the third party. Investors should contact
their employers or financial institutions who in turn should contact Equity
Funds I, Inc. for proper instructions.
-43-
<PAGE>
(SAI-DF/DVN-PART B)
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Group. Shareholders of the Fund Classes may elect to
invest in one or more of the other mutual funds in the Delaware Group through
the Wealth Builder Option. See Wealth Builder Option and Redemption and Exchange
in the Prospectus for the Fund Classes.
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. The investment will be made on the 20th day of each month (or, if
the fund selected is not open that day, the next business day) at the public
offering price or net asset value, as applicable, of the fund selected on the
date of investment. No investment will be made for any month if the value of the
shareholder's account is less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges. Shareholders can terminate their participation at any time by written
notice to their 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 Classes.
Retirement Plans for the Fund Classes
An investment in either Fund 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 and Class C Shares. See Waiver of Contingent Deferred Sales Charge -
Class B and Class C Shares under Redemption and Exchange in the Prospectus for
the Fund Classes for a list of the instances in which the CDSC is waived.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000 for retirement plans. Each purchase of Class C Shares
must be in an amount that is less than $1,000,000 for such plans. The maximum
purchase limitations apply only to the initial purchase of shares by the
retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans other than Individual Retirement Accounts, for
which there is a minimum initial purchase of $250 and a minimum subsequent
purchase of $25 regardless of which Class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide services
to such plans.
-44-
<PAGE>
(SAI-DF/DVN-PART B)
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 Classes.
See The Institutional Classes above. For additional information on any of the
plans and Delaware's retirement services, call the Shareholder Service Center
telephone number.
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships and corporations. These plans can be maintained as Section 401(k),
profit sharing or money purchase pension plans. Contributions may be invested
only in Class A and Class C Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
and make contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year or, for years prior to
1997, elects to be treated as having no compensation for the year. Investments
in each of the Fund Classes are permissible.
An individual can contribute up to $2,000 to his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayers adjusted
gross income and whether the taxpayer or his or her spouse is an active
participant in an employer-sponsored retirement plan. Even if a taxpayer (or his
or her spouse) is an active participant in an employer-sponsored retirement
plan, the full $2,000 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. No deductions are available 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 for years prior to 1997), 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.
Effective for tax years beginning after 1996, one-income couples can
contribute up to $2,000 to each spouse's IRA provided the combined compensation
of both spouses is at least equal to the total contributions for both spouses.
If the working spouse is an active participant in an employer-sponsored
retirement plan and earns over $40,000, the maximum deduction limit is reduced
in the same way that the limit is reduced for contributions to a non-spousal
IRA.
-45-
<PAGE>
(SAI-DF/DVN-PART B)
A company or association may establish a Group IRA for employees or
members who want to purchase shares of a Fund. Purchases of $1 million or more
of Class A Shares qualify for purchase at net asset value but may, under certain
circumstances, be subject to a Limited CDSC. See Purchasing Shares for
information on 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 Alternative Purchase Arrangements - Class B Shares and Class C
Shares under Classes of Shares, Contingent Deferred Sales Charge - Class B
Shares and Class C Shares under Classes of Shares, and Waiver of Contingent
Deferred Sales Charge - Class B and Class C Shares under Redemption and Exchange
in the Fund Classes' Prospectuses concerning the applicability of a CDSC upon
redemption.
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks.
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 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")
New SAR/SEP plans may not be established after December 31, 1996. In
addition, employers must have 25 or fewer eligible employees to maintain an
existing SEP/IRA that permits salary deferral contributions. SAR/SEP plans may
only invest in Class A Shares and Class C Shares.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. SAR/SEP plans may only investPlan
documents are available to enable employers to establish a plan. An employer may
also elect to make profit sharing contributions and/or matching contributions
with investments in only Class A Shares and Class C Shares or certain other
funds in the Delaware 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 00.
-46-
<PAGE>
(SAI-DF/DVN-PART B)
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 any 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 00.
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 any 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
00.
-47-
<PAGE>
(SAI-DF/DVN-PART B)
DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering
price next calculated by the Fund in which shares are being purchased after
receipt of the order by the Fund or its agent. Orders for purchases of Class B
Shares, Class C Shares and the Institutional Classes are effected at the net
asset value per share next calculated after receipt of the order by the Fund in
which shares are being purchased or its agent. Selling dealers have the
responsibility of transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable sales charges. Offering price and net asset value
are computed as of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is open. The New
York Stock Exchange is scheduled to be open Monday through Friday throughout the
year except for 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 Funds will generally be closed, pricing calculations
will not be made and purchase and redemption orders will not be processed.
An example showing how to calculate the net asset value per share and,
in the case of Class A Shares, the offering price per share, is included in each
Fund's financial statements which are incorporated by reference into this Part
B.
Each Fund's net asset value per share is computed by adding the value
of all securities and other assets in the portfolio, deducting any liabilities
and dividing by the number of shares outstanding. Expenses and fees are accrued
daily. In determining a Fund's total net assets, portfolio securities listed or
traded on a national securities exchange, except for bonds, are valued at the
last sale price on the exchange upon which such securities are primarily traded.
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. Prices
provided by a pricing service take into account appropriate factors such as
institutional trading in similar groups of securities, yield, quality, coupon
rate, maturity, type of issue, trading characteristics and other market data. If
no quotations are available, all other securities and assets are valued at fair
value as determined in good faith and in a method approved by the Board of
Directors.
Each Class of a Fund will bear, pro-rata, all of the common expenses of
that Fund. The net asset values of all outstanding shares of each Class of a
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in that Fund represented by the value of shares
of that Class. All income earned and expenses incurred by a Fund, will be borne
on a pro-rata basis by each outstanding share of a Class, based on each Class'
percentage in that Fund represented by the value of shares of such Classes,
except that the Institutional Classes will not incur any of the expenses under
Equity Funds I, Inc.'s 12b-1 Plans and the Class A, Class B and Class C Shares
alone will bear the 12b-1 Plan expenses payable under their respective Plans.
Due to the specific distribution expenses and other costs that will be allocable
to each Class, the net asset value of each Class of a Fund will vary.
-48-
<PAGE>
(SAI-DF/DVN-PART B)
REDEMPTION AND REPURCHASE
Any shareholder may require a Fund to redeem shares by sending a
written request, signed by the record owner or owners exactly as the shares are
registered, to the Fund, at 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. Certificates are issued for Class
A Shares and Institutional Class shares only if a shareholder specifically
requests them. Certificates are not issued for Class B Shares or Class C 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 request must be signed by all owners
of the shares or the investment dealer of record, but a signature guarantee is
not required. When the redemption is for more than $50,000, or if payment is
made to someone else or to another address, signatures of all record owners are
required and a signature guarantee may be required. Each signature guarantee
must be supplied by an eligible guarantor institution. Each Fund reserves the
right to reject a signature guarantee supplied by an eligible institution based
on its creditworthiness. The Funds may request further documentation from
corporations, retirement plans, executors, administrators, trustees or
guardians.
In addition to redemption of Fund shares, the Distributor, acting as
agent of the Funds, offers to repurchase Fund shares from broker/dealers acting
on behalf of shareholders. The redemption or repurchase price, which may be more
or less than the shareholder's cost, is the net asset value per share next
determined after receipt of the request in good order by the respective Fund or
its agent, less any applicable CDSC or Limited CDSC. This is computed and
effective at the time the offering price and net asset value are determined. See
Determining Offering Price and Net Asset Value. The Funds and the Distributor
end their business days at 5 p.m., Eastern time. This offer is discretionary and
may be completely withdrawn without further notice by the Distributor.
Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to the applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Prospectus for the Fund Classes. 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. Class C Shares are subject to a CDSC of 1% if shares are
redeemed within 12 months following purchase. See Contingent Deferred Sales
Charge - Class B Shares and Class C Shares under Classes of Shares in the
Prospectus for the Fund Classes. Except for the applicable CDSC or Limited CDSC
and, with respect to the expedited payment by wire described below for which, in
the case of the Fund Classes, there is currently a $7.50 bank wiring cost,
neither the Funds nor the Distributor charges a fee for redemptions or
repurchases, but such fees could be charged at any time in the future.
-49-
<PAGE>
(SAI-DF/DVN-PART B)
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; provided, however, that each commitment to mail or wire
redemption proceeds by a certain time, as described below, is modified by the
qualifications described in the next paragraph.
Each Fund will process written or telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already been
settled. A Fund will honor the redemption requests as to shares for which a
check was tendered as payment, but a Fund will not mail or wire the proceeds
until it is reasonably satisfied that the check has cleared. 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 involved will automatically redeem from the shareholder's account the
shares purchased by the check plus any dividends earned thereon. Shareholders
may be responsible for any losses to a Fund or to the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by a Fund of securities owned by it is not reasonably practical,
or it is not reasonably practical for a Fund fairly to value its assets, or in
the event that the Securities and Exchange Commission has provided for such
suspension for the protection of shareholders, a Fund may postpone payment or
suspend the right of redemption or repurchase. In such case, the shareholder may
withdraw the request for redemption or leave it standing as a request for
redemption at the net asset value next determined after the suspension has been
terminated.
Payment for shares redeemed or repurchased may be made either in cash
or kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, Equity Funds
I, Inc. has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which each Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of such Fund during any 90-day period for
any one shareholder.
The value of a Fund's investments is subject to changing market prices.
Thus, a shareholder reselling shares to a Fund may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
Small Accounts
Before a Fund involuntarily redeems shares from an account that, under
the circumstances noted in the relevant Prospectus, has remained below the
minimum amounts required by the Funds' Prospectuses 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 the minimum required and will be allowed
60 days from the date of notice to make an additional investment to meet the
required minimum. See The Conditions of Your Purchase under How to Buy Shares in
the Prospectuses. Any redemption in an inactive account established with a
minimum investment may trigger mandatory redemption. No CDSC or Limited CDSC
will apply to the redemptions described in this paragraph.
-50-
<PAGE>
(SAI-DF/DVN-PART B)
Effective November 29, 1995, the minimum initial investment in Class A
Shares was increased from $250 to $1,000. Class A accounts that were established
prior to November 29, 1995 and maintain a balance in excess of $250 will not
presently be subject to the $9 quarterly service fee that may be assessed
against accounts with balances below the stated minimum nor subject to
involuntary redemption.
* * *
Each Fund has made available certain redemption privileges, as
described below. The Funds reserve the right to suspend or terminate these
expedited payment procedures upon 60 days' written notice to shareholders.
Expedited Telephone Redemptions
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 Shareholder Service Center at 800- 523-1918
or, in the case of shareholders of the Institutional Classes, 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 address of record. Checks payable to the shareholder(s) of record
will normally be mailed the next business day, but no later than seven days,
after the receipt of the redemption request. This option is only available to
individual, joint and individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can be transferred
to your predesignated bank account by wire or by check by calling the phone
numbers listed above. An authorization form must have been completed by the
shareholder and filed with the relevant 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 from Class A Shares, Class B Shares and Class C Shares. If
the proceeds are wired to the shareholder's account at a bank which is not a
member of the Federal Reserve System, there could be a delay in the crediting of
the funds to the shareholder's bank account.
2. Payment by Check: Request a check be mailed to the bank account
designated on the authorization form. Redemption proceeds will normally be
mailed the next business day, but no later than seven days, from the date of the
telephone request. This procedure will take longer than the Payment by Wire
option (1 above) because of the extra time necessary for the mailing and
clearing of the check after the bank receives it.
Redemption Requirements: In order to change the name of the bank and
the account number it will be necessary to send a written request to the
relevant Fund and a signature guarantee may be required. Each signature
guarantee must be supplied by an eligible guarantor institution. The Funds
reserve the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness.
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.
-51-
<PAGE>
(SAI-DF/DVN-PART B)
If expedited payment under these procedures could adversely affect a
Fund, such Fund may take up to seven days to pay the shareholder.
Neither the Funds nor the Funds' Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, each Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by
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 Plans
Shareholders of Class A, Class B and Class C Shares who own or purchase
$5,000 or more of shares at the offering price, or net asset value, as
applicable, for which certificates have not been issued may establish a
Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or quarterly
withdrawals of $75 or more, although the Funds do not recommend any specific
amount of withdrawal. This $5,000 minimum does not apply for a Fund's prototype
retirement plans. Shares purchased with the initial investment and through
reinvestment of cash dividends and realized securities profits distributions
will be credited to the shareholder's account and sufficient full and fractional
shares will be redeemed at the net asset value calculated on the third business
day preceding the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend), and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the Class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital, and the share
balance may in time be depleted, particularly in a declining market.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares through a periodic investment program in a fund managed by the Manager
must be terminated before a Systematic Withdrawal Plan with respect to such
shares can take effect, except if the shareholder is a participant in one of our
retirement plans or is investing in Delaware Group funds which do not carry a
sales charge. Redemptions of Class A Shares pursuant to a Systematic Withdrawal
Plan may be subject to a Limited CDSC if the purchase was made at net asset
value and a dealer's commission has been paid on that purchase. Redemptions of
Class B Shares or Class C Shares pursuant to a Systematic Withdrawal Plan may be
subject to a CDSC, unless the annual amount selected to be withdrawn is less
than 12% of the account
-52-
<PAGE>
(SAI-DF/DVN-PART B)
balance on the date that the Systematic Withdrawal Plan was established. See
Waiver of Contingent Deferred Sales Charge - Class B and Class C Shares and
Waiver of Limited Contingent Deferred Sales Charge - Class A Shares under
Redemption and Exchange in the Prospectus for the Fund Classes. Shareholders
should consult with their financial advisers to determine whether a Systematic
Withdrawal Plan would be suitable for them.
An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The Funds reserve the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
The Systematic Withdrawal Plan is not available for the Institutional
Classes.
-53-
<PAGE>
(SAI-DF/DVN-PART B)
DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
Each Fund will normally make payments from net investment income on a
quarterly basis. Any payments from net realized securities profits will be made
during the first quarter of the next fiscal year.
Each Class of shares of each Fund will share proportionately in the
investment income and expenses of that Fund, except that Class A Shares, Class B
Shares and Class C Shares alone will incur distribution fees under their
respective 12b-1 Plans.
Dividends are automatically reinvested in additional shares at the net
asset value of the ex-dividend date unless, in the case of shareholders in the
Fund Classes, an election to receive dividends in cash has been made. 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. Any check in
payment of dividends or other distributions which cannot be delivered by the
United States Post Office or which remains uncashed for a period of more than
one year may be reinvested in the shareholder's account at the then-current net
asset value and the dividend option may be changed from cash to reinvest. Each
Fund may deduct from a shareholder's account the costs of that Fund's effort to
locate a shareholder if a shareholder's mail is returned by the Post Office or
such Fund is otherwise unable to locate the shareholder or verify the
shareholder's mailing address. These costs may include a percentage of the
account when a search company charges a percentage fee in exchange for their
location services.
-54-
<PAGE>
(SAI-DF/DVN-PART B)
TAXES
It is the policy of each Fund to pay out substantially all net
investment income and net realized gains to relieve it of federal income tax
liability on that portion of its income paid to shareholders under the Internal
Revenue Code. Each Fund has met these requirements in previous years and intends
to meet them this year. Each Fund is treated as a separate tax entity, and any
capital gains and losses for each Fund are calculated separately.
Distributions representing net investment income or short-term capital
gains are taxable as ordinary income to shareholders. The tax status of
dividends and distributions paid to shareholders will not be affected by whether
they are paid in cash or in additional shares. A portion of these distributions
may be eligible for the dividends-received deduction for corporations. For the
fiscal year ended October 31, 1996, 32% and 36% of dividends paid from net
investment income of Delaware Fund and Devon Fund, respectively, were eligible
for this deduction. The portion of dividends paid by a Fund that so qualifies
will be designated each year in a notice to that Fund's shareholders, and cannot
exceed the gross amount of dividends received by such Fund from domestic (U.S.)
corporations that would have qualified for the dividends-received deduction in
the hands of that Fund if such Fund 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.
Shareholders will be notified annually by each Fund as to the federal
income tax status of dividends and distributions.
Distributions may also be subject to state and local taxes;
shareholders are advised to consult with their tax advisers in this regard.
Prior to purchasing shares, you should carefully consider the impact of
dividends or realized securities profits distributions which have been declared
but not paid. Any such dividends or realized securities profits paid shortly
after a purchase of shares by an investor will have the effect of reducing the
per share net asset value of such shares by the amount of the dividends or
realized securities profits distributions. All or a portion of such dividends or
realized securities profits distributions, although in effect a return of
capital, are subject to taxes which may be at ordinary income tax rates. The
purchase of shares just prior to the ex-dividend date has an adverse effect for
income tax purposes.
Net long-term gain from the sale of securities when realized and
distributed (actually or constructively) is taxable as capital gain, and these
gains are currently taxed at long-term capital gain rates. If the net asset
value of shares were reduced below a shareholder's cost by distribution of gain
realized on sale of securities, such distribution would be a return of
investment though taxable as stated above. The portfolio securities of Delaware
Fund and Devon Fund had a net unrealized appreciation for tax purposes of
$71,998,612 and $3,133,463, respectively, as of October 31, 1996.
-55-
<PAGE>
(SAI-DF/DVN-PART B)
INVESTMENT MANAGEMENT AGREEMENTS
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to each Fund, subject to the
supervision and direction of Equity Funds I, Inc.'s Board of Directors.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On October 31, 1996, the Manager and its affiliates
within the Delaware Group, including Delaware International Advisers Ltd., were
managing in the aggregate more than $30 billion in assets in the various
institutional or separately managed (approximately $19,214,690,000) and
investment company (approximately $11,539,873,000) accounts.
Each Fund's Investment Management Agreement is dated April 3, 1995 and
was approved by shareholders on March 29, 1995. Each Agreement has an initial
term of two years and 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
Fund to which the Agreement relates, and only if the terms of and the renewal
thereof have been approved by the vote of a majority of the directors of Equity
Funds I, Inc. who are not parties thereto or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. Each Agreement is terminable without penalty on 60 days' notice by the
directors of Equity Funds I, Inc. or by the Manager. Each Agreement will
terminate automatically in the event of its assignment.
The annual compensation paid by each Fund for investment management
services is equal to: for Delaware Fund, 0.60% on the first $100 million of
average daily net assets of the Fund, 0.525% on the next $150 million, 0.50% on
the next $250 million and 0.475% on the average daily net assets in excess of
$500 million, less the Fund's proportionate share of all directors' fees paid to
the unaffiliated directors by Delaware Fund; and, for Devon Fund, 0.60% on the
first $500 million of average daily net assets and 0.50% on the average daily
net assets in excess of $500 million. On October 31, 1996, the total net assets
of Delaware Fund were $624,762,856 and the total net assets of Devon Fund were
$22,651,842. Under the general supervision of the Board of Directors, the
Manager makes all investment decisions which are implemented by each Fund. The
Manager pays the salaries of all directors, officers and employees who are
affiliated with both the Manager and Equity Funds I, Inc. The investment
management fees paid by Delaware Fund for the fiscal years ended October 31,
1994, 1995 and 1996 were $2,913,609, $2,953,762 and $3,164,486, respectively.
Investment management fees incurred by Devon Fund during the period December 29,
1993 (date of initial public offering) through October 31, 1994 were $29,901,
and for the fiscal years ended October 31, 1995 and 1996 were $57,382 and
$103,041, respectively. However, no fees were paid by Devon Fund during these
years as a result of the waiver described below.
-56-
<PAGE>
(SAI-DF/DVN-PART B)
Except for those expenses borne by the Manager under the Investment
Management Agreements and the Distributor under the Distribution Agreements,
each Fund is responsible for all of its own expenses. Among others, these
include the Funds' proportionate share of rent and certain other administrative
expenses; the investment management fees; transfer and dividend disbursing agent
fees and costs; custodian expenses; federal and state securities registration
fees; proxy costs; and the costs of preparing prospectuses and reports sent to
shareholders. The ratios of expenses to average daily net assets for each Class
of each Fund were as follows:
<TABLE>
<CAPTION>
Institutional
Class A Shares Class B Shares Class C Shares Class
<S> <C> <C> <C> <C>
Delaware Fund 0.99% 1.80% 1.80% 0.80%
Devon Fund 1.25% 1.95% 1.95% 0.95%
</TABLE>
The ratios for the Class A Shares, Class B Shares and Class C Shares of each
Fund reflect the impact of their respective 12b-1 Plans. The ratios for each
Class of Devon Fund reflects the waiver of fees noted below.
In connection with Devon Fund, the Manager had elected voluntarily to
waive that portion, if any, of the annual management fees payable by Devon Fund
and to reimburse the Fund to the extent necessary to ensure that the Total
Operating Expenses of the Fund did not exceed 0.95% (exclusive of taxes,
interest, brokerage commissions, extraordinary expenses and 12b-1 expenses)
through December 31, 1994. This waiver and reimbursement applicable to each
Class of Devon Fund has been extended through June 30, 1997.
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 each Fund's shares
under separate Distribution Agreements dated April 3, 1995, as amended on
November 29, 1995. The Distributor is an affiliate of the Manager and bears all
of the costs of promotion and distribution, except for payments by each Fund on
behalf of the Class A Shares, Class B Shares and Class C Shares under their
respective 12b-1 Plans. Prior to January 3, 1995, Delaware Distributors, Inc.
("DDI") served as the national distributor of each Fund's 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
each Funds' shareholder servicing, dividend disbursing and transfer agent of
Delaware Fund shares pursuant to a Shareholders Services Agreement dated June
29, 1988 and of Devon Fund shares pursuant to a Shareholders Services Agreement
dated December 29, 1993. The Transfer Agent also provides accounting services to
the Funds pursuant to the terms of a separate Fund Accounting Agreement. The
Transfer Agent is also an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc.
-57-
<PAGE>
(SAI-DF/DVN-PART B)
OFFICERS AND DIRECTORS
The business and affairs of Equity Funds I, Inc. are managed under the
direction of its Board of Directors.
Certain officers and directors of Equity Funds I, Inc. hold identical
positions in each of the other funds in the Delaware Group. As of November 30,
1996, Equity Funds I, Inc.'s officers and directors owned less than 1% of the
outstanding shares of Delaware Fund A Class, Delaware Fund B Class, Delaware
Fund C Class and Delaware Fund Institutional Class. As of the same date, the
Fund's officers and directors held less than 1% of the outstanding shares of
Devon Fund A Class, Devon Fund B Class and Devon Fund C Class and 0.00% of the
outstanding shares of Devon Fund Institutional Class.
As of December 2, 1996, management believes the following accounts held
5% or more of the outstanding shares of the Class A Shares, Class B Shares,
Class C Shares and the Institutional Class of each Fund:
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Delaware Fund B Class Merrill Lynch, Pierce, Fenner & Smith, Inc.
For the Sole Benefit of its Customers
Attention: Fund Administration
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246 20,973(1) 5.77%
Delaware Fund C Class Timothy Foley, Gerard Foley,
Eileen McCrudden, Co-Trustees
Marital Deduction TR Paragraph
4 U W DTD 1-14-94 John B. Foley
P.O. Box 3206
Maple Glen, PA 19002 8,257 7.52%
Delaware Fund C Class Donaldson Lufkin Jenrette
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303 6,957(1) 6.34%
Delaware Fund C Class Merrill Lynch, Pierce, Fenner & Smith, Inc.
For the Sole Benefit of its Customers
Attention: Fund Administration
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246 6,582(1) 5.99%
</TABLE>
(1) Equity Funds I, Inc. believes that these shares are held of record
for the benefit of others.
-58-
<PAGE>
(SAI-DF/DVN-PART B)
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Delaware Fund
Institutional Class Price Waterhouse LLP Savings Plan
1410 North Westshore Boulevard
P.O. Box 30004
Tampa, FL 33630 3,620,673 60.98%
Delaware Fund
Institutional Class South Trust Bank of Alabama
Trust Thompson Tractor
Attention: Angela McNac
P.O. Box 2554
Birmingham, AL 35290 581,406 9.79%
Delaware Fund
Institutional Class Federated Life Insurance Company
Separate Sub-Account A
Attention: Tom Koch
121 E. Park Square
Owatonna, MN 55060 425,707 7.17%
Delaware Fund
Institutional Class Meg & Co.
c/o US National Bank Trust Dept.
P.O. Box 520
Johnstown, PA 15907 312,946 5.27%
Devon Fund A Class National City Bank
FBO McKeesport Health Care Trust
U/A DTD 12-10-91
Attention: Mutual Funds P10510009
P.O. Box 94777
Cleveland, OH 44101 65,264 5.99%
Devon Fund B Class Merrill Lynch, Inc.
Mutual Fund Operations
Attention: Book Entry
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246 17,228(1) 6.75%
</TABLE>
(1) Equity Funds I, Inc. believes that these shares are held of record for
the benefit of others.
-59-
<PAGE>
(SAI-DF/DVN-PART B)
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Devon Fund C Class Merrill Lynch, Pierce, Fenner & Smith, Inc.
For the Sole Benefit of its Customers
Attention: Fund Administration
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246 16,722(1) 20.06%
Devon Fund C Class Donaldson Lufkin Jenrette
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303 7,785(1) 9.34%
Devon Fund C Class DMTC Custodian for the IRA of
John M. Peterson
2209 Diamond Street
Sellersville, PA 18960 4,886 5.86%
Devon Fund
Institutional Class Delaware Management Company
Employee Profit Sharing Trust
1818 Market Street
Philadelphia, PA 19103 173,258(2) 77.35%
Devon Fund
Institutional Class Delaware Management Company
Employee Profit Sharing Trust
For the Benefit of Wayne A. Stork
1818 Market Street
Philadelphia, PA 19103 56,861 25.39%
Devon Fund
Institutional Class WCSEL PC Pension Plan
2200 Clarendon Boulevard
13th Floor
Arlington, VA 22201 43,927(1) 19.61%
Devon Fund WCSEL PC Pension Plan
Institutional Class For the Benefit of Martin D. Walsh
2200 Clarendon Boulevard
13th Floor
Arlington, VA 22201 16,102 7.19%
Devon Fund WCSEL PC Pension Plan
Institutional Class For the Benefit of Thomas J. Colucci
2200 Clarendon Boulevard
13th Floor
Arlington, VA 22201 13,547 6.05%
</TABLE>
(1) Equity Funds I, Inc. believes that these shares are held of record for
the benefit of others.
(2) Shares held of record by Delaware Management Company Employee Profit
Sharing Trust are held for the benefit of others.
-60-
<PAGE>
(SAI-DF/DVN-PART B)
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., Delaware Capital
Management, Inc. and Delaware Investment & Retirement Services Inc. are direct
or indirect, wholly owned subsidiaries of Delaware Management Holdings, Inc
("DMH"). On April 3, 1995, a merger between DMH and a wholly owned subsidiary of
Lincoln National Corporation ("Lincoln National") was completed. In connection
with the merger, new Investment Management Agreements between Equity Funds I,
Inc. and the Manager on behalf of each Fund were executed following shareholder
approval. DMH and the Manager are now indirect, wholly owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management.
Directors and principal officers of Equity Funds I, Inc. are noted
below along with their ages and their business experience for the past five
years. Unless otherwise noted, the address of each officer and director is One
Commerce Square, Philadelphia, PA 19103.
*Wayne A. Stork (59)
Chairman, President, Chief Executive Officer, Director and/or Trustee
of Equity Funds I, Inc., 16 other investment companies in the
Delaware Group (which excludes Delaware Pooled Trust, Inc.),
Delaware Management Holdings, Inc., DMH Corp., Delaware
International Holdings Ltd. and Founders Holdings, Inc.
Chairman and Director of Delaware Pooled Trust, Inc., Delaware
Distributors, Inc., Delaware Capital Management, Inc. and
Delaware Investment & Retirement Services, Inc.
Chairman, President, Chief Executive Officer, Chief Investment Officer
and Director of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware
International Advisers Ltd. Director of Delaware Service
Company, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware
organization.
Winthrop S. Jessup (51)
Executive Vice President of Equity Funds I, Inc., 16 other investment
companies in the Delaware Group (which excludes Delaware
Pooled Trust, Inc.) and Delaware Management Holdings, Inc.
President and Chief Executive Officer of Delaware Pooled Trust, Inc.
President and Director of Delaware Capital Management, Inc.
Executive Vice President and Director of DMH Corp., Delaware Management
Company, Inc., Delaware International Holdings Ltd. and
Founders Holdings, Inc.
Vice Chairman and Director of Delaware Distributors, Inc.
Vice Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc., Delaware International
Advisers Ltd., Delaware Management Trust Company and Delaware
Investment & Retirement Services, Inc.
During the past five years, Mr. Jessup has served in various
executive capacities at different times within the Delaware
organization.
- ---------------------
*Director affiliated with Equity Funds I, Inc.'s investment manager and
considered an "interested person" as defined in the 1940 Act.
-61-
<PAGE>
(SAI-DF/DVN-PART B)
Richard G. Unruh, Jr. (57)
Executive Vice President of Equity Funds I, Inc. and each of the other
17 investment companies in the Delaware Group.
Executive Vice President and Director of Delaware Management Company,
Inc.
Senior Vice President of Delaware Management Holdings, Inc. and
Delaware Capital Management, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware
organization.
Paul E. Suckow (49)
Executive Vice President/Chief Investment Officer, Fixed Income of
Equity Funds I, Inc., each of the other 17 investment
companies in the Delaware Group and Delaware Management
Company, Inc.
Executive Vice President/Chief Investment Officer/Fixed Income and
Director of Founders Holdings, Inc.
Senior Vice President/Chief Investment Officer, Fixed Income of
Delaware Management Holdings, Inc.
Director of Founders CBO Corporation.
Senior Vice President of Delaware Capital Management, Inc.
Director, HYPPCO Finance Company Ltd.
Before returning to the Delaware Group in 1993, Mr. Suckow was
Executive Vice President and Director of Fixed Income for
Oppenheimer Management Corporation, New York, NY from 1985 to
1992. Prior to that, Mr. Suckow was a fixed-income portfolio
manager for the Delaware Group.
Walter P. Babich (69)
Director and/or Trustee of Equity Funds I, Inc. and each of the other
17 investment companies 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.
Anthony D. Knerr (58)
Director and/or Trustee of Equity Funds I, Inc. and each of the other
17 investment companies in the Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Founder and Managing Director, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance
and Treasurer of Columbia University, New York. From 1987 to
1989, he was also a lecturer in English at the University. In
addition, Mr. Knerr was Chairman of The Publishing Group,
Inc., New York, from 1988 to 1990. Mr. Knerr founded The
Publishing Group, Inc. in 1988.
-62-
<PAGE>
(SAI-DF/DVN-PART B)
Ann R. Leven (56)
Director and/or Trustee of Equity Funds I, Inc. and each of the other
17 investment companies 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 1992, she was Adjunct Professor of Columbia Business
School.
W. Thacher Longstreth (76)
Director and/or Trustee of Equity Funds I, Inc. and each of the other
17 investment companies in the Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
Charles E. Peck (71)
Director and/or Trustee of Equity Funds I, Inc. and each of the other
17 investment companies in the Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive
Officer of The Ryland Group, Inc., Columbia, MD.
David K. Downes (56)
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer of Equity Funds I, Inc., each of the other 17
investment companies in the Delaware Group and Delaware
Management Company, Inc.
Chairman and Director of Delaware Management Trust Company.
Chief Executive Officer and Director of Delaware Investment &
Retirement Services, Inc.
Executive 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.
Senior Vice President/Chief Financial Officer/Treasurer of Delaware
Capital Management, Inc.
Senior Vice President/Chief Financial Officer 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.
-63-
<PAGE>
(SAI-DF/DVN-PART B)
George M. Chamberlain, Jr. (49)
Senior Vice President and Secretary of Equity Funds I, Inc., each of
the other 17 investment companies in the Delaware Group,
Delaware Management Holdings, Inc. and Delaware Distributors,
L.P.
Executive Vice President, Secretary and Director of Delaware Management
Trust Company.
Senior Vice President, Secretary and Director of DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Founders Holdings, Inc.,
Delaware Investment & Retirement Services, Inc. and Delaware
Capital Management, Inc.
Secretary and Director of Delaware International Holdings Ltd.
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.
George H. Burwell (35)
Vice President/Senior Portfolio Manager of Equity Funds I, Inc. of
seven other investment companies in the Delaware Group and of
Delaware Management Company, Inc.
Before joining the Delaware Group in 1992, Mr. Burwell was a
portfolio manager for Midlantic Bank, New Jersey. In addition,
he was a security analyst for Balis & Zorn, New York and for
First Fidelity Bank, New Jersey.
Gary A. Reed (42)
Vice President/Senior Portfolio Manager of Equity Funds I, Inc. of
nine other investment companies in the Delaware Group, of
Delaware Management Company, Inc. and Delaware Capital
Management, Inc.
During the past five years, Mr. Reed has served in such capacities
within the Delaware organization.
Joseph H. Hastings (47)
Vice President/Corporate Controller of Equity Funds I, Inc., each
of the other 17 investment companies 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.,
Delaware Capital Management, Inc., Founders Holdings, Inc. and
Delaware International Holdings Ltd.
Chief Financial Officer/Treasurer of Delaware Investment &
Retirement Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company.
Assistant Treasurer of Founders CBO Corporation.
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.
-64-
<PAGE>
(SAI-DF/DVN-PART B)
Michael P. Bishof (34)
Vice President/Treasurer of Equity Funds I, Inc., each of the other
17 investment companies in the Delaware Group, Delaware
Management Company, Inc., Delaware Distributors, Inc.,
Delaware Distributors, L.P., Delaware Service Company, Inc.
and Founders Holdings, Inc.
Vice President/Manager of Investment Accounting of Delaware
International Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation.
Before joining the Delaware Group in 1995, Mr. Bishof was a Vice
President for Bankers Trust, New York, NY from 1994 to 1995, a
Vice President for CS First Boston Investment Management, New
York, NY from 1993 to 1994 and an Assistant Vice President for
Equitable Capital Management Corporation, New York, NY from
1987 to 1993.
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from the
Fund and the total compensation received from all Delaware Group funds for the
fiscal year ended October 31, 1996 and an estimate of annual benefits to be
received upon retirement under the Delaware Group Retirement Plan for
Directors/Trustees as of October 31, 1996.
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits
Accrued Estimated Total
Aggregate as Part of Annual Compensation
Compensation Equity Benefits from all 17
from Equity Funds I, Inc. Upon Delaware
Name Funds I, Inc. Expenses Retirement* Group Funds
- ---------------------- -------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
W. Thacher Longstreth $2,782 None $30,000 $44,102
Ann R. Leven $3,348 None $30,000 $52,238
Walter P. Babich $3,063 None $30,000 $48,102
Anthony D. Knerr $3,278 None $30,000 $51,238
Charles E. Peck $2,998 None $30,000 $47,238
</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 each fund in the Delaware Group 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 each fund at the time of such person's retirement. If an
eligible director retired as of October 31, 1996, he or she would be
entitled to annual payments totaling $30,000, 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.
-65-
<PAGE>
(SAI-DF/DVN-PART B)
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. Each 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 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 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 relevant Fund receives written notice from the
shareholder to the contrary.
Shareholders or their investment dealers of record may contact the
Shareholder Service Center at 800-523- 1918 or, in the case of shareholders of
the Institutional Classes, their Client Services Representative at 800-828-5052,
to effect an exchange. The shareholder's current Fund account number must be
identified, as well as the registration of the account, the share or dollar
amount to be exchanged and the fund into which the exchange is to be made.
Requests received on any day after the time the offering price and net asset
value are determined will be processed the following day. See 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.
-66-
<PAGE>
(SAI-DF/DVN-PART B)
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 each 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 Funds' Prospectuses, neither the Funds nor the
Transfer Agent is responsible for any shareholder loss incurred in acting upon
written or telephone instructions for redemption or exchange of Fund shares
which are reasonably believed to be genuine.
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Funds will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Group funds from Timing Firms. A Fund reserves the right to temporarily or
permanently terminate the exchange privilege or reject any specific purchase
order for any person whose transactions seem to follow a timing pattern who: (i)
makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, or (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1/4 of 1% of the Fund's net assets. Accounts
under common ownership or control, including accounts administered so as to
redeem or purchase shares based upon certain predetermined market indicators,
will be aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Group funds: (1) Decatur
Income Fund, (2) Decatur Total Return Fund, (3) Delaware Fund, (4) Limited-Term
Government Fund, (5) Tax-Free USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund and (8) Tax-Free Pennsylvania Fund. No other Delaware Group
funds are 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. Each Fund reserves the right to apply these same
restrictions to the account(s) of any person whose transactions seem to follow a
time pattern (as described above).
Each Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if a
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
* * *
-67-
<PAGE>
(SAI-DF/DVN-PART B)
Following is a summary of the investment objectives of the other
Delaware Group funds:
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 Income Fund seeks the highest possible current income by
investing primarily in common stocks that provide the potential for income and
capital appreciation without undue risk to principal. Decatur Total Return Fund
seeks long-term growth by investing primarily in securities that provide the
potential for income and capital appreciation without undue risk to principal.
Delchester Fund seeks as high a current income as possible by investing
principally in high yield, high risk corporate bonds, and also in U.S.
government securities and commercial paper. Strategic Income Fund seeks to
provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities.
U.S. Government Fund seeks high current income by investing primarily
in long-term debt obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities.
Limited-Term Government Fund seeks high, stable income by investing
primarily in a portfolio of short-and intermediate-term securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities and
instruments secured by such securities. U.S. Government Money Fund seeks maximum
current income with preservation of principal and maintenance of liquidity by
investing only in short-term securities issued or guaranteed as to principal and
interest by the U.S. government, its agencies or instrumentalities, and
repurchase agreements collateralized by such securities, while maintaining a
stable net asset value.
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.
-68-
<PAGE>
(SAI-DF/DVN-PART B)
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.
International Equity Fund seeks to achieve long-term growth without
undue risk to principal by investing primarily in international securities that
provide the potential for capital appreciation and income. Global Bond Fund
seeks to achieve current income consistent with the preservation of principal by
investing primarily in global fixed-income securities that may also provide the
potential for capital appreciation. Global Assets Fund seeks to achieve
long-term total return by investing in global securities which will provide
higher current income than a portfolio comprised exclusively of equity
securities, along with the potential for capital growth. Emerging Markets Fund
seeks long-term capital appreciation by investing primarily in equity securities
of issuers located or operating in emerging countries.
Enterprise Fund seeks to provide maximum appreciation of capital by
investing in medium-sized companies which have a dominant position within their
industry, are undervalued, or have potential for growth in earnings. U.S. Growth
Fund seeks to maximize capital appreciation by investing in companies of all
sizes which have low dividend yields, strong balance sheets and high expected
earnings growth rates relative to their industry. World Growth Fund seeks to
maximize total return (capital appreciation and income), principally through
investments in an internationally diversified portfolio of equity securities.
New Pacific Fund seeks long-term capital appreciation by investing primarily in
companies which are domiciled in or have their principal business activities in
the Pacific Basin. Federal Bond Fund seeks to maximize current income consistent
with preservation of capital. The fund attempts to achieve this objective by
investing primarily in securities issued by the U.S. government, its agencies
and instrumentalities. Corporate Income Fund seeks to provide high current
income consistent with preservation of capital. The fund attempts to achieve
this objective primarily by investing in a diversified portfolio of investment
grade fixed-income securities issued by U.S. corporations.
Delaware Group Premium Fund, Inc. offers ten funds 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.
-69-
<PAGE>
(SAI-DF/DVN-PART B)
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 marketplace and to have
fundamental characteristics to support growth. Income is not an objective.
Global Bond Series seeks to achieve current income consistent with the
preservation of principal by investing primarily in global fixed-income
securities that may also provide the potential for capital appreciation.
For more complete information about any of the Delaware Group 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).
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<PAGE>
(SAI-DF/DVN-PART B)
GENERAL INFORMATION
The Manager is the investment manager of the Funds. The Manager also
provides investment management services to certain of the other funds in the
Delaware Group. The Manager, through a separate division, also manages private
investment accounts. While investment decisions of the Funds are made
independently from those of the other funds and accounts, investment decisions
for such other funds and accounts may be made at the same time as investment
decisions for the Funds.
The Manager, or its affiliate Delaware International Advisers Ltd.,
also manages the investment options for Delaware Medallion(sm) III Variable
Annuity. Medallion is issued by Allmerica Financial Life Insurance and Annuity
Company (First Allmerica Financial Life Insurance Company in New York and
Hawaii). Delaware Medallion offers ten different investment series ranging from
domestic equity funds, international equity and bond funds and domestic fixed
income funds. Each investment series available through Medallion utilizes an
investment strategy and discipline the same as or similar to one of the Delaware
Group mutual funds available outside the annuity. See Delaware Group Premium
Fund, Inc., above.
Access persons and advisory persons of the Delaware Group of funds, as
those terms are defined in SEC Rule 17j-1 under the 1940 Act, who provide
services to the Manager, Delaware International Advisers Ltd. or their
affiliates, are permitted to engage in personal securities transactions subject
to the exceptions set forth in Rule 17j-1 and the following general restrictions
and procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance is received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions may only be closed-out at a profit after a 60-day holding
period has elapsed; and (5) the Compliance Officer must be informed periodically
of all securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.
The Distributor acts as national distributor for each Fund and for the
other mutual funds in the Delaware Group. As previously described, prior to
January 3, 1995, DDI served as the national distributor for each Fund. The
Distributor and, in its capacity as such, DDI received net commissions from each
Fund on behalf of Class A Shares, after reallowances to dealers, as follows:
Delaware Fund
Class A Shares
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers to Distributor
--------- ------------ ---------- --------------
10/31/96 $393,463 $329,065 $64,398
10/31/95 545,446 471,630 73,816
10/31/94 892,170 772,047 120,123
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<PAGE>
(SAI-DF/DVN-PART B)
Devon Fund
Class A Shares
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers to Distributor
--------- ------------ ---------- --------------
10/31/96 $104,547 $87,806 $16,741
10/31/95 79,219 68,054 11,165
10/31/94* 90,136 78,370 11,766
*Date of initial public offering was December 29, 1993.
The Distributor and, in its capacity as such, DDI received in the
aggregate Limited CDSC payments with respect to Class A Shares of each Fund as
follows:
Limited CDSC Payments
Fiscal
Year
Ended Delaware Fund A Class Devon Fund A Class
--------- --------------------- ------------------
10/31/96 --- ---
10/31/95 --- ---
10/31/94* --- $1,938
*Date of initial public offering of Devon Fund A Class was December 29, 1993.
The Distributor and, in its capacity as such, DDI received in the
aggregate CDSC payments with respect to Class B Shares of each Fund as follows:
CDSC Payments
Fiscal
Year
Ended Delaware Fund B Class Devon Fund B Class
--------- --------------------- ------------------
10/31/96 $13,943 $512
10/31/95 789 ---
10/31/94* --- ---
*Date of initial public offering was September 6, 1994.
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<PAGE>
(SAI-DF/DVN-PART B)
The Distributor received CDSC payments with respect to Class C Shares
of each Fund as follows:
CDSC Payments
Fiscal
Year
Ended Delaware Fund C Class Devon Fund C Class
--------- --------------------- ------------------
10/31/96* $127 $98
*Date of initial public offering was November 29, 1995.
Effective as of January 3, 1995, all such payments described above have
been paid to the Distributor.
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for each Fund and for the
other mutual funds in the Delaware Group. The Transfer Agent is paid a fee by
each Fund for providing these services consisting of an annual per account
charge of $5.50 plus transaction charges for particular services according to a
schedule. Compensation is fixed each year and approved by the Board of
Directors, including a majority of the disinterested directors. The Transfer
Agent also provides accounting services to each Fund. Those services include
performing all functions related to calculating each Fund's net asset value and
providing all financial reporting services, regulatory compliance testing and
the related accounting services. For its services, the Transfer Agent is paid a
fee based on total assets of all funds in the Delaware Group for which it
provides such accounting services. Such fee is equal to 0.25% multiplied by the
total amount of assets in the complex for which the Transfer Agent furnishes
accounting services, where such aggregate complex assets are $10 billion or
less, and 0.20% of assets if such aggregate complex assets exceed $10 billion.
The fees are charged to each fund, including each Fund, on an aggregate pro-rata
basis. The asset-based fee payable to the Transfer Agent is subject to a minimum
fee calculated by determining the total number of investment portfolios and
associated classes.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of Equity Funds I, Inc.'s
advisory relationship with the Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause Equity Funds I, Inc. to
delete the words "Delaware Group" from Equity Funds I, Inc.'s name.
The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn,
NY 11245 is custodian of each Fund's securities and cash. As custodian for a
Fund, Chase maintains a separate account or accounts for the Fund; receives,
holds and releases portfolio securities on account of the Fund; receives and
disburses money on behalf of the Fund; and collects and receives income and
other payments and distributions on account of the Fund's portfolio securities.
The legality of the issuance of the shares offered hereby, registered
pursuant to Rule 24f-2 under the 1940 Act, has been passed upon for Equity Funds
I, Inc. by Stradley, Ronon, Stevens & Young, LLP, Philadelphia, Pennsylvania. In
the opinion of counsel, shares of the Fund are exempt from Pennsylvania personal
property taxes and qualify as an authorized investment for trustees in
Pennsylvania if such an investment is otherwise appropriate.
-73-
<PAGE>
(SAI-DF/DVN-PART B)
Capitalization
Equity Funds I, Inc. has a present authorized capitalization of five
hundred million shares of capital stock with a $1 par value per share. Each Fund
currently offers two series of shares, which offer four classes of shares. The
Board of Directors has allocated one hundred million shares to Delaware Fund A
Class, twenty-five million shares to Delaware Fund B Class, twenty-five million
shares to Delaware Fund C Class, fifty million shares to Delaware Fund
Institutional Class, fifty million shares to Devon Fund A Class, twenty-five
million shares to Devon Fund B Class, twenty-five million to Devon Fund C Class,
and twenty-five million shares to Devon Fund Institutional Class.
Each Class of each Fund represents a proportionate interest in the
assets of that Fund, and each has the same voting and other rights and
preferences as the other classes except that shares of an Institutional Class
may not vote on any matter affecting the Fund Classes' Plans under Rule 12b-1.
Similarly, as a general matter, shareholders of Class A Shares, Class B Shares
and Class C Shares of each Fund may vote only on matters affecting the 12b-1
Plan that relates to the class of shares they hold. However, Class B Shares of
each Fund may vote on any proposal to increase materially the fees to be paid by
a Fund under the Rule 12b-1 Plan relating to Class A Shares. General expenses of
a Fund 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 that Fund's Class A, Class
B and Class C Shares will be allocated solely to those classes. While shares of
Equity Funds I, Inc. have equal voting rights on matters affecting both Funds,
each Fund would vote separately on any matter which it is directly affected by,
such as any change in its own investment objective and policy or action to
dissolve the Fund and as otherwise prescribed by the 1940 Act. Shares of each
Fund have a priority in that Fund's assets, and in gains on and income from the
portfolio of that Fund.
Prior to November 9, 1992, Equity Funds I, Inc. offered only one
series, now known as Delaware Fund and one class of shares, Delaware Fund A
Class. Beginning November 9, 1992, Delaware Fund began offering Delaware Fund
Institutional Class. Beginning December 29, 1993, Equity Funds I, Inc. offered
Devon Fund which offered Devon Fund A Class and Devon Fund Institutional Class.
The Class B Shares for each Fund were not offered prior to September 6, 1994,
and beginning as of November 29, 1995, each Fund began offering the Class C
Shares.
Effective as of the close of business December 27, 1996, the name of
Delaware Group Delaware Fund, Inc. was changed to Delaware Group Equity Funds I,
Inc. Also effective as of the close of business December 27, 1996, the name of
Common Stock series was changed to Delaware Fund series.
Prior to September 6, 1994, Delaware Fund A Class was known as Delaware
Fund class and Delaware Fund Institutional Class was known as Delaware Fund
(Institutional) class, and, prior to the same date, Dividend Growth Fund A Class
was known as Dividend Growth Fund class and the Dividend Growth Fund
Institutional Class was known as Dividend Growth Fund (Institutional) class.
Effective as of the close of business on August 28, 1995, the name Dividend
Growth Fund was changed to Devon Fund and the names of Dividend Growth Fund A
Class, Dividend Growth Fund B Class and Dividend Growth Fund Institutional Class
were changed to Devon Fund A Class, Devon Fund B Class and Devon Fund
Institutional Class, respectively.
-74-
<PAGE>
(SAI-DF/DVN-PART B)
All shares have no preemptive rights, are fully transferable and, when
issued, are fully paid and nonassessable and, except as described above, have
equal voting rights.
Noncumulative Voting
Equity Funds I, Inc. shares have noncumulative voting rights which
means that the holders of more than 50% of the shares of Equity Funds I, Inc.
voting for the election of directors can elect all the directors if they choose
to do so, and, in such event, the holders of the remaining shares will not be
able to elect any directors.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the Securities and Exchange
Commission.
-75-
<PAGE>
(SAI-DF/DVN-PART B)
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Equity Funds
I, Inc. and, in its capacity as such, audits the financial statements contained
in each Fund's Annual Report. Delaware Group Equity Funds I, Inc. - Delaware
Fund's and Delaware Group Equity Funds I, Inc. - Devon Fund's Statements of Net
Assets, Statements of Operations, Statements of Changes in Net Assets, and Notes
to Financial Statements, as well as the reports of Ernst & Young LLP,
independent auditors, for the fiscal year ended October 31, 1996, are included
in each Fund's Annual Report to shareholders. The financial statements, the
notes relating thereto and the reports of Ernst & Young LLP listed above are
incorporated by reference from the Annual Reports into this Part B.
-76-
<PAGE>
(SAI-DF/DVN-PART B)
APPENDIX A--DESCRIPTION OF RATINGS
Commercial Paper
Excerpts from S&P's description of its two highest commercial paper
ratings: A-1--judged to be the highest investment grade category possessing the
highest relative strength; A-2--investment grade category possessing less
relative strength than the highest rating.
Excerpts from Moody's description of its two highest commercial paper
ratings: P-1--the highest grade possessing greatest relative strength;
P-2--second highest grade possessing less relative strength than the highest
grade.
Bonds
Excerpts from Moody's description of its bond ratings: Aaa--judged to
be the best quality. They carry the smallest degree of investment risk;
Aa--judged to be of high quality by all standards; A--possess favorable
attributes and are considered "upper medium" grade obligations; Baa--considered
as medium grade obligations. Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time; Ba--judged to
have speculative elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B--generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small; Caa--are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca--represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings; C--the lowest
rated class of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Excerpts from S&P's description of its bond ratings: AAA--highest grade
obligations. They possess the ultimate degree of protection as to principal and
interest; AA--also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in a small degree; A--strong ability to
pay interest and repay principal although more susceptible to changes in
circumstances; BBB--regarded as having an adequate capacity to pay interest and
repay principal; BB, B, CCC, CC--regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; C--reserved
for income bonds on which no interest is being paid; D--in default, and payment
of interest and/or repayment of principal is in arrears.
-77-
<PAGE>
(SAI-DF/DVN-PART B)
APPENDIX B--IRA INFORMATION
An individual can contribute up to $2,000 to his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayers adjusted
gross income and whether the taxpayer or his or her spouse is an active
participant in an employer-sponsored retirement plan. Even if a taxpayer (or his
or her spouse) is an active participant in an employer-sponsored retirement
plan, the full $2,000 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. No deductions are available 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 for years prior to 1997), 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.
Effective for tax years beginning after 1996, one-income couples can
contribute up to $2,000 to each spouse's IRA provided the combined compensation
of both spouses is at least equal to the total contributions for both spouses.
If the working spouse is an active participant in an employer-sponsored
retirement plan and earns over $40,000, the maximum deduction limit is reduced
in the same way that the limit is reduced for contributions to a non- spousal
IRA.
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 upfront 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.
-78-
<PAGE>
(SAI-DF/DVN-PART B)
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, such as either Fund, 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-$24,000
--------------- Joint $0-$40,100
<TABLE>
<CAPTION>
How Much You
End of Cumulative How Much You Have With Full
Year Investment Amount Have Without IRA 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 $24,001-$58,150
--------------- Joint $40,101-$96,900
<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%]
-79-
<PAGE>
(SAI-DF/DVN-PART B)
31% Tax Bracket Single $58,151-$121,300
------------------ Joint $96,901-$147,700
<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%]
36% Tax Bracket* Single $121,301-$263,750
--------------- Joint $147,701-$263,750
<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%]
-80-
<PAGE>
(SAI-DF/DVN-PART B)
39.6% Tax Bracket* Single over $263,750
----------------- Joint over $263,750
<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%]
- ------------------------------------------
* 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 $263,750. The above tables do not reflect
the personal exemption phaseout nor the limitations of itemized
deductions that may apply.
-81-
<PAGE>
(SAI-DF/DVN-PART B)
<TABLE>
<CAPTION>
$2,000 SINGLE INVESTMENT AT A RETURN OF 10% COMPOUNDED QUARTERLY
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 34,720 57,831 103,956
$2,000 INVESTED ANNUALLY AT A RETURN OF 10% COMPOUNDED QUARTERLY
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- ----------------------------------------------------------------------------------------------------------------------------
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 $263,750. The above tables do not reflect
the personal exemption phaseout nor the limitations of itemized
deductions that may apply.
-82-
<PAGE>
(SAI-DF/DVN-PART B)
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 $ 31,828 $ 36,018
30 years 259,288 397,466
The statistical exhibits above are for illustration purposes only and
do not reflect the actual Fund performance either in the past or in the future.
-83-
<PAGE>
(SAI-DF/DVN-PART B)
SAI-DF-CHT
APPENDIX C--PERFORMANCE OVERVIEW
Delaware Fund Performance Overview
The following table illustrates the total return on one share invested in
Delaware Fund A Class(1) during the 10-year period ended October 31, 1996. 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.
Delaware Fund A Class
<TABLE>
<CAPTION>
Cumula-
tive net
asset PERCENTAGE CHANGES DURING YEAR
Net Asset value at -------------------------------------------------
Maximum Value Distributions year-end Delaware Fund
offering ---------------- --------------------- with all -------------------------------------------------
Year price at Begin- From From distribu- Maximum Offering Price Net Asset Value
ended begin- ning End invest- realized tion to Net Asset Value to Net Asset Value
Oct ning of of of ment securi- rein- -------------------- -----------------------
31 year(2) year year income ties profits vested Annual Cumulative(3) Annual Cumulative(4)
----- -------- ------ ---- ------- ------------ ------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 $24.36 $23.20 $16.85 $0.40 $ 4.31 $21.08 -13.5% -13.5% -9.14% -9.1%
1988 17.69 16.85 15.25 0.32 4.09 25.72 16.2 5.6 22.03 10.9
1989 16.01 15.25 17.48 0.95 --- 31.30 15.9 28.5 21.68 34.9
1990 18.35 17.48 16.19 0.78 --- 30.31 -7.8 24.4 -3.17 30.6
1991 17.00 16.19 18.81 0.88 0.29 37.67 18.4 54.7 24.30 62.4
1992 19.75 18.81 18.72 0.70 1.54 42.34 7.0 73.8 12.38 82.5
1993 19.65 18.72 19.43 0.66 0.77 47.38 6.6 94.5 11.91 104.2
1994 20.40 19.43 18.00 0.60 1.16 48.23 3.0 98.0 1.79 107.9
1995 18.90 18.00 19.94 0.63 0.25 56.08 10.8 130.2 16.28 141.7
1996 20.93 19.94 21.26 0.66 1.08 65.09 10.6 167.2 16.07 180.6
------ ------
Total Distributions $6.58 $13.49
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
---------------------------------------------------------------------
Lipper
Balanced
Year Standard & Dow Jones Consumer Average
ended Poor's 500(5) Industrial(5) Price Index(5) Index(5)
Oct -------------------- -------------------- -------------------- -------------------
31 Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative
----- ------ ---------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1987 6.4% 6.4% 9.6% 9.6% 4.5% 4.5% 2.6% 2.5%
1988 14.8 22.1 12.0 22.7 4.3 9.0 13.2 16.1
1989 26.4 54.3 28.3 57.4 4.5 13.9 16.9 35.7
1990 -7.5 42.7 -4.1 51.0 6.3 21.1 -3.8 30.5
1991 33.4 90.4 30.0 96.2 2.9 24.6 28.2 67.3
1992 10.0 109.4 8.4 112.6 3.2 28.6 8.8 81.9
1993 14.9 140.6 17.4 149.6 2.8 32.1 15.6 110.3
1994 3.9 149.9 9.2 172.5 2.6 35.5 -0.7 108.9
1995 26.4 215.8 25.0 240.5 2.8 39.4 18.0 146.5
1996 24.1 291.9 29.7 341.7 3.0 43.6 21.1 198.4
</TABLE>
- ----------------------
(1) Delaware Fund A Class began paying 12b-1 payments on June 1, 1992 and
performance prior to that date does not reflect such payments.
(2) Reflects a maximum sales charge of 4.75% of total investment. There are
reduced sales charges for investments of $100,000 or more.
(3) Reflects an offering price of $24.36 on October 31, 1986
(4) Reflects a net asset value of $23.20 on October 31, 1986.
(5) Source: Lipper Analytical Services, Inc.
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.
Lipper Analytical Services, Inc. is a performance evaluation service that
maintains statistical performance databases, as reported by a diverse
universe of independently-managed mutual funds.
-84-
<PAGE>
(SAI-DF/DVN-PART B)
SAI-DF-CHT
APPENDIX C--PERFORMANCE OVERVIEW
Delaware Fund Performance Overview
The following table illustrates the total return on one share invested in
Delaware Fund B Class during the period September 6, 1994 (date of initial
public offering) through October 31, 1996. 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.
Delaware Fund B Class
<TABLE>
<CAPTION>
Cumula-
tive net
asset PERCENTAGE CHANGES DURING YEAR
Net Asset value at -------------------------------------------------
Maximum Value Distributions year-end Delaware Fund
offering ---------------- --------------------- with all -------------------------------------------------
Year price at Begin- From From distribu- Returns Including Returns Excluding
ended begin- ning End invest- realized tion CDSC CDSC
Oct ning of of of ment securi- rein- -------------------- -----------------------
31 period period period income ties profits vested Annual Cumulative(1) Annual Cumulative(1)
----- -------- ------ ------ ------- ------------ ------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 $18.34 $18.34 $17.98 $0.15 --- $18.13 - -5.1% - -1.1%
1995 17.98 17.98 19.90 0.51 $0.25 20.92 11.4% 10.1 15.36% 14.1
1996 19.90 19.90 21.20 0.50 1.08 24.08 11.5 28.3 15.15 31.3
------ ------
Total Distributions $1.16 $1.33
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
---------------------------------------------------------------------
Lipper
Balanced
Year Standard & Dow Jones Consumer Average
ended Poor's 500(2) Industrial(2) Price Index(2) Index(2)
Oct -------------------- -------------------- -------------------- -----------------
31 Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative
----- ------ ---------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994 - 0.5% - 0.7% - 0.3% - -1.6%
1995 26.4% 27.1 25.0% 25.8 2.8% 3.2 18.0% 16.1
1996 24.1 57.7 29.7 63.2 3.0 6.3 21.1 40.6
</TABLE>
- --------------------------
(1) Reflects a net asset value of $18.84 on September 2, 1994.
(2) Source: Lipper Analytical Services, Inc.
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.
Lipper Analytical Services, Inc. is a performance evaluation service that
maintains statistical performance databases, as reported by a diverse
universe of independently-managed mutual funds.
-85-
<PAGE>
(SAI-DF/DVN-PART B)
SAI-DF-CHT
APPENDIX C--PERFORMANCE OVERVIEW
Delaware Fund Performance Overview
The following table illustrates the total return on one share invested in
Delaware Fund C Class during the period November 29, 1995 (date of initial
public offering) through October 31, 1996. 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.
Delaware Fund C Class
<TABLE>
<CAPTION>
Cumula-
tive net
asset PERCENTAGE CHANGES DURING YEAR
Net Asset value at -------------------------------------------------
Maximum Value Distributions year-end Delaware Fund
offering ---------------- --------------------- with all -------------------------------------------------
Year price at Begin- From From distribu- Returns Including Returns Excluding
ended begin- ning End invest- realized tion CDSC CDSC
Oct ning of of of ment securi- rein- -------------------- -----------------------
31 period period period income ties profits vested Annual Cumulative(1) Annual Cumulative(1)
----- -------- ------ ------ ------- ------------ ------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $20.05 $20.05 $21.18 $0.58 $1.08 $20.56 - 11.1% - 12.1%
----- -----
0.58 1.08
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
---------------------------------------------------------------------
Lipper
Balanced
Year Standard & Dow Jones Consumer Average
ended Poor's 500(2) Industrial(2) Price Index(2) Index(2)
Oct -------------------- -------------------- -------------------- -----------------
31 Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative
----- ------ ---------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 - 18.9% - 21.1% - 3.1% - 16.2%
</TABLE>
- -------------------
(1) Reflects a net asset value of $20.05 on November 28, 1995.
(2) Source: Lipper Analytical Services, Inc.
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.
Lipper Analytical Services, Inc. is a performance evaluation service that
maintains statistical performance databases, as reported by a diverse
universe of independently-managed mutual funds.
-86-
<PAGE>
(SAI-DF/DVN-PART B)
SAI-DF-CHT
APPENDIX C--PERFORMANCE OVERVIEW
Delaware Fund Performance Overview
The following table illustrates the total return on one share invested in
Delaware Fund Institutional Class(1) during the 10-year period ended October 31,
1996. 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.
Delaware Fund Institutional Class
<TABLE>
<CAPTION>
Cumula-
tive net
asset PERCENTAGE CHANGES DURING YEAR
Net Asset value at ------------------------------------------------
Value Distributions year-end Delaware Fund
---------------- --------------------- with all --------------------
Year Begin- From From distribu- Net Asset Value Standard &
ended ning End invest- realized tion to Net Asset Value Poor's 500(3)
Oct of of ment securi- rein- -------------------- -----------------------
31 year year income ties profits vested Annual Cumulative(2) Annual Cumulative
----- ------ ---- ------- ------------ ------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 $23.20 $16.85 $0.40 $ 4.31 $21.08 -9.14% -9.1% 6.4% 6.4%
1988 16.85 15.25 0.32 4.09 25.72 22.03 10.9 14.8 22.1
1989 15.25 17.48 0.95 --- 31.30 21.68 34.9 26.4 54.3
1990 17.48 16.19 0.78 --- 37.67 -3.17 30.6 -7.5 42.7
1991 16.19 18.81 0.88 0.29 30.31 24.30 62.4 33.4 90.4
1992 18.81 18.72 0.70 1.54 37.67 12.38 82.5 10.0 109.4
1993 18.72 19.46 0.66 0.77 42.34 12.10 104.6 14.9 140.6
1994 19.46 18.03 0.63 1.16 48.39 1.96 108.6 3.9 149.9
1995 18.03 19.98 0.66 0.25 56.37 16.50 143.0 26.4 215.8
1996 19.98 21.30 0.69 1.08 65.53 16.25 182.5 24.1 291.9
------ ------
Total Distributions $6.67 $13.49
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
-------------------------------------------------------------------
Lipper
Balanced
Year Dow Jones Consumer Average
ended Industrial(3) Price Index(3) Index(3)
Oct -------------------- -------------------- --------------------
31 Annual Cumulative Annual Cumulative Annual Cumulative
----- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
1987 9.6% 9.6% 4.5% 4.5% 2.6% 2.5%
1988 12.0 22.7 4.3 9.0 13.2 16.1
1989 28.3 57.4 4.5 13.9 16.9 35.7
1990 -4.1 51.0 6.3 21.1 -3.8 30.5
1991 30.0 96.2 2.9 24.6 28.2 67.3
1992 8.4 112.6 3.2 28.6 8.8 81.9
1993 17.4 146.6 2.8 32.1 15.6 110.3
1994 9.2 172.5 2.6 35.3 -0.7 108.9
1995 25.0 240.5 2.8 39.4 18.0 146.5
1996 29.7 341.7 3.0 43.6 21.1 198.4
</TABLE>
- --------------------------
(1) Performance for Delaware Fund Institutional Class for periods prior to
November 9, 1992 (date of initial public offering) is calculated by taking
the performance of Delaware Fund A Class and adjusting it to reflect the
elimination of all sales charges. However, for those periods, no adjustment
has been made to eliminate the impact of 12b-1 payments applicable to
Delaware Fund A Class beginning June 1, 1992, and performance would have
been affected had such an adjustment been made.
(2) Reflects a net asset value of $23.20 on October 31, 1986.
(3) Source: Lipper Analytical Services, Inc.
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.
Lipper Analytical Services, Inc. is a performance evaluation service that
maintains statistical performance databases, as reported by a diverse
universe of independently-managed mutual funds.
-87-
<PAGE>
(SAI-DF/DVN-PART B)
SAI-DVN-CHT
APPENDIX C--PERFORMANCE OVERVIEW
Devon Fund Performance Overview
The following table illustrates the total return on one share invested in
Devon Fund A Class during the period December 29, 1993 (date of initial public
offering) through October 31, 1996. 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.
Devon Fund A Class
<TABLE>
<CAPTION>
Cumula-
tive net
asset PERCENTAGE CHANGES DURING YEAR
Net Asset value at -------------------------------------------------
Maximum Value Distributions year-end Devon Fund
offering ---------------- --------------------- with all -------------------------------------------------
Year price at Begin- From From distribu- Maximum Offering Price Net Asset Value
ended begin- ning End invest- realized tion to Net Asset Value to Net Asset Value
Oct ning of of of ment securi- rein- -------------------- -----------------------
31 year(1) year year income ties profits vested Annual Cumulative(2) Annual Cumulative(3)
----- -------- ------ ---- ------- ------------ ------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 $10.50 $10.00 $10.83 $0.09 --- $10.93 - 4.1% - 9.3%
1995 11.37 10.83 12.55 0.22 $0.32 13.33 16.2% 27.0 22.0 33.3
1996 13.18 12.55 14.61 0.21 0.64 16.59 18.2 56.7 24.1 65.5
------ ------
Total Distributions $0.52 $0.96
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
---------------------------------------------------------------------
Lipper
Balanced
Year Standard & Dow Jones Consumer Average
ended Poor's 500(4) Industrial(4) Price Index(4) Index(4)
Oct -------------------- -------------------- -------------------- -------------------
31 Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative
----- ------ ---------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994 - 2.7% - 5.4% - 2.5% - 2.4%
1995 26.4% 29.8 25.0% 31.7 2.8% 5.4 20.2% 23.1
1996 24.1 61.1 29.7 70.8 3.0 8.5 21.4 49.4
</TABLE>
(1) Reflects a maximum sales charge of 4.75%. There are reduced sales
charges for investment of $100,000 or more.
(2) Reflects an offering price of $10.50 on December 28, 1993.
(3) Reflects a net asset value of $10.00 on December 28, 1993.
(4) Source: Lipper Analytical Services, Inc.
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.
Lipper Analytical Services, Inc. is a performance evaluation service that
maintains statistical performance databases, as reported by a diverse
universe of independently-managed mutual funds.
-88-
<PAGE>
(SAI-DF/DVN-PART B)
SAI-DVN-CHT
APPENDIX C--PERFORMANCE OVERVIEW
Devon Fund Performance Overview
The following table illustrates the total return on one share invested in
Devon Fund B Class during the period September 6, 1994 (date of initial public
offering) through October 31, 1996. 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.
Devon Fund B Class
<TABLE>
<CAPTION>
Cumula-
tive net
asset PERCENTAGE CHANGES DURING YEAR
Net Asset value at -------------------------------------------------
Maximum Value Distributions year-end Devon Fund
offering ---------------- --------------------- with all -------------------------------------------------
Year price at Begin- From From distribu- Returns Including Returns Excluding
ended begin- ning End invest- realized tion CDSC CDSC
Oct ning of of of ment securi- rein- -------------------- -----------------------
31 period period period income ties profits vested Annual Cumulative(1) Annual Cumulative(1)
----- -------- ------ ------- ------- ------------ ------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 $10.90 $10.90 $10.82 $0.03 --- $ 9.95 - -4.4% - -0.5%
1995 10.82 10.82 12.50 0.18 $0.32 12.05 17.1% 14.2 21.1% 20.5
1996 12.50 12.50 14.54 0.12 0.64 14.87 19.4 45.7 23.4 48.7
----- -----
Total Distributions $0.33 $0.96
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
---------------------------------------------------------------------
Lipper
Balanced
Year Standard & Dow Jones Consumer Average
ended Poor's 500(2) Industrial(2) Price Index(2) Index(2)
Oct -------------------- -------------------- -------------------- -----------------
31 Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative
----- ------ ---------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994 - 0.5% - 0.7% - 0.3% - -1.6%
1995 26.4% 27.1 25.0% 25.8 2.8% 3.2 20.2% 18.3
1996 24.1 57.7 29.7 63.2 3.0 6.3 21.4 43.6
</TABLE>
- -----------------------
(1) Reflects a net asset value of $10.90 on September 2, 1994.
(2) Source: Lipper Analytical Services, Inc.
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.
Lipper Analytical Services, Inc. is a performance evaluation service that
maintains statistical performance databases, as reported by a diverse
universe of independently-managed mutual funds.
-89-
<PAGE>
(SAI-DF/DVN-PART B)
SAI-DVN-CHT
APPENDIX C--PERFORMANCE OVERVIEW
Devon Fund Performance Overview
The following table illustrates the total return on one share invested in
Devon Fund C Class during the period November 29, 1995 (date of initial public
offering) through October 31, 1996. 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.
Devon Fund C Class
<TABLE>
<CAPTION>
Cumula-
tive net
asset PERCENTAGE CHANGES DURING YEAR
Net Asset value at -------------------------------------------------
Maximum Value Distributions year-end Devon Fund
offering ---------------- --------------------- with all -------------------------------------------------
Year price at Begin- From From distribu- Returns Including Returns Excluding
ended begin- ning End invest- realized tion CDSC CDSC
Oct ning of of of ment securi- rein- -------------------- -----------------------
31 period period period income ties profits vested Annual Cumulative(1) Annual Cumulative(1)
----- -------- ------ ------ ------- ------------ ------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $13.02 $13.02 $14.53 $0.20 $0.64 $12.96 - 17.9% - 18.9%
----- -----
0/20 0.64
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
---------------------------------------------------------------------
Lipper
Balanced
Year Standard & Dow Jones Consumer Average
ended Poor's 500(2) Industrial(2) Price Index(2) Index(2)
Oct -------------------- -------------------- -------------------- -----------------
31 Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative
----- ------ ---------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 - 18.9% - 21.1% - 3.1% - 16.4%
</TABLE>
- --------------------------
(1) Reflects a net asset value of $00.00 on November 29, 1995.
(2) Source: Lipper Analytical Services, Inc.
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.
Lipper Analytical Services, Inc. is a performance evaluation service that
maintains statistical performance databases, as reported by a diverse
universe of independently-managed mutual funds.
-90-
<PAGE>
(SAI-DF/DVN-PART B)
SAI-DVN-CHT
APPENDIX C--PERFORMANCE OVERVIEW
Devon Fund Performance Overview
The following table illustrates the total return on one share invested in
Devon Fund Institutional Class during the period December 29, 1993 (date of
initial public offering) through October 31, 1996. 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.
Devon Fund Institutional Class
<TABLE>
<CAPTION>
Cumula-
tive net
asset PERCENTAGE CHANGES DURING YEAR
Net Asset value at ------------------------------------------------
Value Distributions year-end Devon Fund
---------------- --------------------- with all --------------------
Year Begin- From From distribu- Net Asset Value Standard &
ended ning End invest- realized tion to Net Asset Value Poor's 500(2)
Oct of of ment securi- rein- -------------------- -----------------------
31 period period income ties profits vested Annual Cumulative(1) Annual Cumulative
----- ------ ------ ------- ------------ ------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 $10.00 $10.86 $0.09 --- $10.96 - 9.6% - 2.7%
1995 10.86 12.59 0.24 $0.32 13.39 22.3% 33.9 26.4% 29.8
1996 12.59 14.67 0.24 0.64 16.68 24.6 66.8 24.1 61.1
----- -----
Total Distributions $0.57 $0.96
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
---------------------------------------------------------------------
Lipper
Balanced
Year Dow Jones Consumer Average
ended Industrial(2) Price Index(2) Index(2)
Oct -------------------- -------------------- -------------------
31 Annual Cumulative Annual Cumulative Annual Cumulative
----- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
1994 - 5.4% - 2.5% - 2.4%
1995 25.0% 31.7 2.8% 5.4 20.2% 23.1
1996 29.7 70.8 3.0 8.5 21.4 49.4
</TABLE>
- -----------------------------
(1) Reflects a net asset value of $10.00 on December 28, 1993.
(2) Source: Lipper Analytical Services, Inc.
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.
Lipper Analytical Services, Inc. is a performance evaluation service that
maintains statistical performance databases, as reported by a diverse
universe of independently-managed mutual funds.
-91-
<PAGE>
(SAI-DF/DVN-PART B)
APPENDIX D--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.
Hypothetical Corporate Life Cycle
[Chart appears 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.
-92
<PAGE>
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A - Financial Highlights
*Part B - Statements of Net Assets
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Accountant's Reports
* The financial statements and Accountant's Reports
listed above are incorporated by reference into
Part B from the Registrant's Annual Reports for
Delaware Fund and Devon Fund for the fiscal year
ended October 31, 1996.
(b) Exhibits:
(1) Articles of Incorporation.
(a) Articles of Incorporation, as amended
and supplemented to date, incorporated
into this filing by reference to
Post-Effective Amendment No. 102 filed
November 22, 1995.
(b) Executed Articles Supplementary
(November 28, 1995) incorporated into
this filing by reference to
Post-Effective Amendment No. 103 filed
December 29, 1995.
(c) Form of Articles of Amendment
(December 1996) attached as Exhibit.
(2) By-Laws. By-Laws, as amended to date,
incorporated into this filing by reference to
Post-Effective Amendment No. 102 filed November
22, 1995.
(3) Voting Trust Agreement. Inapplicable.
<PAGE>
Part C - Other Information
(Continued)
(4) Copies of All Instruments Defining the Rights
of Holders.
(a) Articles of Incorporation, Articles of
Amendment and Articles Supplementary.
(i) Article Second of Articles
Supplementary (September 6,
1994), Article Fifth of
Articles Supplementary
(November 30, 1993), Article
Second of Articles
Supplementary (May 22, 1992),
Article Fifth of Articles of
Incorporation (March 4, 1983)
and Article Eleventh of
Articles of Amendment (May 2,
1985) incorporated into this
filing by reference to
Post-Effective Amendment No.
102 filed November 22, 1995.
(ii) Executed Articles Third and
Fourth of Articles
Supplementary (November 28,
1995) incorporated into this
filing by reference to
Post-Effective Amendment No.
103 filed December 29, 1995.
(b) By-Laws. Article II, Article III, as
amended, and Article XIII, which was
subsequently redesignated as Article
XIV, incorporated into this filing by
reference to Post-Effective Amendment
No. 102 filed November 22, 1995.
(5) Investment Management Agreements.
(a) Investment Management Agreement (April
3, 1995) between Delaware Management
Company, Inc. and the Registrant on
behalf of Delaware Fund incorporated
into this filing by reference to
Post-Effective Amendment No. 102 filed
November 22, 1995.
(b) Investment Management Agreement (April
3, 1995) between Delaware Management
Company, Inc. and the Registrant on
behalf of Devon Fund incorporated into
this filing by reference to
Post-Effective Amendment No. 102 filed
November 22, 1995.
(6) (a) Distribution Agreements.
(i) Executed Distribution Agreement
(April 3, 1995) between
Delaware Distributors, L.P. and
the Registrant on behalf of
Delaware Fund incorporated into
this filing by reference to
Post- Effective Amendment No.
103 filed December 29, 1995.
(ii) Executed Distribution Agreement
(April 3, 1995) between
Delaware Distributors, L.P. and
the Registrant on behalf of
Devon Fund incorporated into
this filing by reference to
Post-Effective Amendment No.
103 filed December 29, 1995.
<PAGE>
Part C - Other Information
(Continued)
(iii) Executed Amendment No. 1 to
Distribution Agreement
(November 29, 1995) between
Delaware Distributors, L.P. and
the Registrant on behalf of
Delaware Fund incorporated into
this filing by reference to
Post-Effective Amendment No.
103 filed December 29, 1995.
(iv) Executed Amendment No. 1 to
Distribution Agreement
(November 29, 1995) between
Delaware Distributors, L.P. and
the Registrant on behalf of
Devon Fund incorporated into
this filing by reference to
Post-Effective Amendment No.
103 filed December 29, 1995.
(b) Administration and Service Agreement.
Form of Administration and Service
Agreement (as amended November 1995)
incorporated into this filing by
reference to Post-Effective Amendment
No. 102 filed November 22, 1995.
(c) Dealer's Agreement. Dealer's Agreement
(as amended November 1995)
incorporated into this filing by
reference to Post-Effective Amendment
No. 102 filed November 22, 1995.
(d) Mutual Fund Agreement for the Delaware
Group of Funds (November 1995)
(Module) incorporated into this filing
by reference to Post- Effective
Amendment No. 103 filed December 29,
1995.
(7) Bonus, Profit Sharing, Pension Contracts.
(a) Amended and Restated Profit Sharing
Plan (November 17, 1994) incorporated
into this filing by reference to
Post-Effective Amendment No. 102 filed
November 22, 1995.
(b) Amendment to Profit Sharing Plan
(December 21, 1995) included as
Module.
<PAGE>
Part C - Other Information
(Continued)
(8) Custodian Agreements.
(a) Executed Custodian Agreement (May 1,
1996) between The Chase Manhattan Bank
and the Registrant on behalf of
Delaware Fund and Devon Fund included
as Module.
(b) Form of Securities Lending Agreement
between The Chase Manhattan Bank and
the Registrant on behalf of Delaware
Fund and Devon Fund attached as
Exhibit.
(9) Other Material Contracts.
(a) Executed Shareholders Services
Agreement (June 29, 1988) between
Delaware Service Company, Inc. and the
Registrant on behalf of Delaware Fund
attached as Exhibit.
(b) Executed Shareholders Services
Agreement (December 29, 1993) between
Delaware Service Company, Inc. and the
Registrant on behalf of Devon Fund
attached as Exhibit.
(c) Executed Delaware Group of Funds Fund
Accounting Agreement (August 19, 1996)
between Delaware Service Company, Inc.
and the Registrant on behalf of
Delaware Fund and Devon Fund attached
as Exhibit.
(d) Executed Amendment No. 1 (September
30, 1996) to Delaware Group of Funds
Fund Accounting Agreement attached as
Exhibit.
(e) Executed Amendment No. 2 (November 29,
1996) to Delaware Group of Funds Fund
Accounting Agreement attached as
Exhibit.
(10) Opinion of Counsel. To be filed with letter
relating to Rule 24f-2 on or about December 30,
1996.
(11) Consent of Auditors. Attached as Exhibit.
(12-13) Inapplicable.
(14) Model Plans. Incorporated into this filing by
reference to Post-Effective Amendment No. 97
filed October 28, 1993 and Post-Effective
Amendment No. 102 filed November 22, 1995.
<PAGE>
Part C - Other Information
(Continued)
**(15) Plans under Rule 12b-1.
(a) Executed Plan under Rule 12b-1
(November 29, 1995) for Delaware Fund A
Class incorporated into this filing by
reference to Post-Effective Amendment
No. 103 filed December 29, 1995.
(b) Executed Plan under Rule 12b-1
(November 29, 1995) for Delaware Fund B
Class incorporated into this filing by
reference to Post-Effective Amendment
No. 103 filed December 29, 1995.
(c) Executed Plan under Rule 12b-1
(November 29, 1995) for Delaware Fund C
Class incorporated into this filing by
reference to Post-Effective Amendment
No. 103 filed December 29, 1995.
(d) Executed Plan under Rule 12b-1
(November 29, 1995) for Devon Fund A
Class incorporated into this filing by
reference to Post-Effective Amendment
No. 103 filed December 29, 1995.
(e) Executed Plan under Rule 12b-1
(November 29, 1995) for Devon Fund B
Class incorporated into this filing by
reference to Post-Effective Amendment
No. 103 filed December 29, 1995.
(f) Executed Plan under Rule 12b-1
(November 29, 1995) for Devon Fund C
Class incorporated into this filing by
reference to Post-Effective Amendment
No. 103 filed December 29, 1995.
(16) Schedules of Computation for each Performance
Quotation.
(a) Incorporated into this filing by
reference to Post-Effective Amendment
No. 102 filed November 22, 1995 and
Post-Effective Amendment No. 103 filed
December 29, 1995.
(b) Schedules of Computation for each
Performance Quotation not previously
electronically filed attached as
Exhibit.
(17) Financial Data Schedules. Attached as Exhibit.
<PAGE>
Part C - Other Information
(Continued)
(18) Plan under Rule 18f-3.
(a) Plan under Rule 18f-3 (November 1995)
incorporated into this filing by
reference to Post-Effective Amendment
No. 103 filed December 29, 1995.
(b) Amended Appendix A (September 30,
1996) to Plan under Rule 18f-3
attached as Exhibit.
(c) Amended Appendix A (November 29, 1996)
to Plan under Rule 18f-3 attached as
Exhibit.
(19) Other: Directors' Power of Attorney.
Incorporated into this filing by
reference to Post-Effective Amendment
No. 102 filed November 22, 1995.
**Relates to the Class A, B and C Shares of each Fund of the Registrant.
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
Delaware Group Delaware Fund, Inc.'s
Delaware Fund series:
Delaware Fund A Class
Common Stock Par Value 24,454 Accounts as of
$1.00 Per Share November 30, 1996
Delaware Fund B Class
Common Stock Par Value 599 Accounts as of
$1.00 Per Share November 30, 1996
Delaware Fund C Class
Common Stock Par Value 98 Accounts as of
$1.00 Per Share November 30, 1996
Delaware Fund Institutional Class
Common Stock Par Value 55 Accounts as of
$1.00 Per Share November 30, 1996
<PAGE>
Part C - Other Information
(Continued)
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
Delaware Group Delaware Fund, Inc.'s
Devon Fund series:
Devon Fund A Class
Common Stock Par Value 1,786 Accounts as of
$1.00 Per Share November 30, 1996
Devon Fund B Class
Common Stock Par Value 381 Accounts as of
$1.00 Per Share November 30, 1996
Devon Fund C Class
Common Stock Par Value 106 Accounts as of
$1.00 Per Share November 30, 1996
Devon Fund Institutional Class
Common Stock Par Value 8 Accounts as of
$1.00 Per Share November 30, 1996
Item 27. Indemnification. Incorporated into this filing by reference
to Post-Effective Amendment No. 78 filed October 26, 1983 and
Post-Effective Amendment No. 102 filed November 22, 1995.
Item 28. Business and Other Connections of Investment Adviser.
Delaware Management Company, Inc. (the "Manager") serves as
investment manager to the Registrant and also serves as investment manager to
certain of the other funds in the Delaware Group (Delaware Group Trend Fund,
Inc., Delaware Group Equity Funds IV, Inc., Delaware Group Equity Funds V, Inc.,
Delaware Group Decatur Fund, Inc., Delaware Group Income Funds, Inc., Delaware
Group Government Fund, Inc., Delaware Group Limited-Term Government Funds, Inc.,
Delaware Group Cash Reserve, Inc., Delaware Group Tax-Free Fund, Inc., DMC
Tax-Free Income Trust-Pennsylvania, Delaware Group Tax-Free Money Fund, Inc.,
Delaware Group Premium Fund, Inc., Delaware Group Global & International Funds,
Inc., Delaware Group Adviser Funds, Inc., Delaware Pooled Trust, Inc., Delaware
Group Dividend and Income Fund, Inc. and Delaware Group Global Dividend and
Income Fund, Inc.) and provides investment advisory services to institutional
accounts, primarily retirement plans and endowment funds. In addition, certain
directors of the Manager also serve as directors/trustees of the other Delaware
Group funds, and certain officers are also officers of these other funds. A
company indirectly owned by the Manager's parent company acts as principal
underwriter to the mutual funds in the Delaware Group (see Item 29 below) and
another such company acts as the shareholder servicing, dividend disbursing,
accounting services and transfer agent for all of the mutual funds in the
Delaware Group.
<PAGE>
Part C - Other Information
(Continued)
The following persons serving as directors or officers of the
Manager have held the following positions during the past two years:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Wayne A. Stork Chairman of the Board, President, Chief Executive Officer, Chief Investment
Officer and Director of Delaware Management Company, Inc.; President, Chief
Executive Officer, Chairman of the Board and Director of the Registrant and,
with the exception of Delaware Pooled Trust, Inc., each of the other funds in
the Delaware Group, Delaware Management Holdings, Inc., DMH Corp.,
Delaware International Holdings Ltd. and Founders Holdings, Inc.; Chairman of
the Board and Director of Delaware Pooled Trust, Inc., Delaware Distributors,
Inc., Delaware Capital Management, Inc. and Delaware Investment &
Retirement Services, Inc.; Chairman, Chief Executive Officer and Director of
Delaware International Advisers Ltd.; and Director of Delaware Service
Company, Inc.
Winthrop S. Jessup Executive Vice President and Director of Delaware Management Company,
Inc., DMH Corp., Delaware International Holdings Ltd. and Founders
Holdings, Inc.; Executive Vice President of the Registrant and, with the
exception of Delaware Pooled Trust, Inc., each of the other funds in the
Delaware Group and Delaware Management Holdings, Inc.; President and Chief
Executive Officer of Delaware Pooled Trust, Inc.; Vice Chairman of Delaware
Distributors, L.P.; Vice Chairman and Director of Delaware Distributors, Inc.;
Director of Delaware Service Company, Inc., Delaware Management Trust
Company, Delaware International Advisers Ltd. and Delaware Investment &
Retirement Services, Inc.; and President and Director of Delaware Capital
Management, Inc.
Richard G. Unruh, Jr. Executive Vice President and Director of Delaware Management Company,
Inc.; Executive Vice President of the Registrant and each of the other funds in
the Delaware Group; Senior Vice President of Delaware Management Holdings,
Inc. and Delaware Capital Management, Inc; and Director of Delaware
International Advisers Ltd.
Board of Directors, Chairman of Finance Committee, Keystone
Insurance Company since 1989, 2040 Market Street, Philadelphia,
PA; Board of Directors, Chairman of Finance Committee, Mid
Atlantic, Inc. since 1989, 2040 Market Street, Philadelphia, PA
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Paul E. Suckow Executive Vice President/Chief Investment Officer, Fixed Income of Delaware
Management Company, Inc., the Registrant and each of the other funds in the
Delaware Group; Executive Vice President/Chief Investment Officer and
Director of Founders Holdings, Inc.; Senior Vice President/Chief Investment
Officer, Fixed Income of Delaware Management Holdings, Inc.; Senior Vice
President of Delaware Capital Management, Inc.; and Director of Founders CBO
Corporation
Director, HYPPCO Finance Company Ltd.
David K. Downes Senior Vice President, Chief Administrative Officer and Chief Financial Officer
of Delaware Management Company, Inc., the Registrant and each of the other
funds in the Delaware Group; Chairman and Director of Delaware Management
Trust Company; Executive Vice President and Chief Operating Officer, Chief
Administrative Officer, Chief Financial Officer and Treasurer of Delaware
Management Holdings, Inc.; Senior Vice President, Chief Financial Officer,
Treasurer and Director of DMH Corp.; Senior Vice President and Chief
Administrative Officer of Delaware Distributors, L.P.; Senior Vice President,
Chief Administrative Officer and Director of Delaware Distributors, Inc.; 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.; Senior Vice President, Chief Financial
Officer and Treasurer of Delaware Capital Management, Inc.; Senior Vice
President, Chief Financial Officer and Director of Founders Holdings, Inc.; Chief
Executive Officer and Director of Delaware Investment & Retirement Services,
Inc.; and Director of Delaware International Advisers Ltd.
Chief Executive Officer, Chief Financial Officer and Treasurer of Forewarn, Inc.
since 1992, 8 Clayton Place, Newtown Square, PA
George M. Chamberlain, Jr. Senior Vice President, Secretary and Director of Delaware Management
Company, Inc., DMH Corp., Delaware Distributors, Inc., Delaware Service
Company, Inc., Founders Holdings, Inc., Delaware Capital Management, Inc.
and Delaware Investment & Retirement Services, Inc.; Senior Vice President and
Secretary of the Registrant, each of the other funds in the Delaware Group,
Delaware Distributors, L.P. and Delaware Management Holdings, Inc.;
Executive Vice President, Secretary and Director of Delaware Management
Trust Company; Secretary and Director of Delaware International Holdings Ltd.;
and Director of Delaware International Advisers Ltd.
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Richard J. Flannery Managing Director/Corporate Tax & Affairs of Delaware Management
Company, Inc., Delaware Management Holdings, Inc., DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company, Inc.,
Delaware Management Trust Company, Founders CBO Corporation, Delaware
Capital Management, Inc. and Delaware Investment & Retirement Services, Inc.;
Vice President of the Registrant and each of the other funds in the Delaware
Group; Managing Director/Corporate Tax & Affairs and Director of Founders
Holdings, Inc.; Managing Director and Director of Delaware International
Holdings Ltd.; and Director of Delaware International Advisers Ltd.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd., Elverton,
PA; Director and Member of Executive Committee of Stonewall Links, Inc. since
1991, Bulltown Rd., Elverton, PA
Michael P. Bishof(1) Vice President and Treasurer of Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware Group, Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company, Inc.
and Founders Holdings, Inc.; Assistant Treasurer of Founders CBO Corporation;
and Vice President and Manager of Investment Accounting of Delaware
International Holdings Ltd.
Eric E. Miller Vice President and Assistant Secretary of Delaware Management Company, Inc.,
the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P., Delaware
Distributors Inc., Delaware Service Company, Inc., Delaware Management Trust
Company, Founders Holdings, Inc., Delaware Capital Management, Inc. and
Delaware Investment & Retirement Services, Inc.
Richelle S. Maestro Vice President and Assistant Secretary of Delaware Management Company, Inc.,
the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., DMH Corp., Delaware Management
Trust Company, Delaware Capital Management, Inc., Delaware Investment &
Retirement Services, Inc. and Founders Holdings, Inc.; Secretary of Founders
CBO Corporation; and Assistant Secretary of Delaware International Holdings
Ltd.
General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Ln.,
Philadelphia, PA
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Joseph H. Hastings Vice President/Corporate Controller of Delaware Management Company, Inc.,
the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware Capital
Management, Inc., Founders Holdings, Inc. and Delaware International Holdings
Ltd.; Executive Vice President, Chief Financial Officer and Treasurer of
Delaware Management Trust Company; Chief Financial Officer and Treasurer of
Delaware Investment & Retirement Services, Inc.; and Assistant Treasurer of
Founders CBO Corporation
Bruce A. Ulmer Vice President/Director of Internal Audit of Delaware Management Company,
Inc., the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp. and Delaware Management Trust
Company; and Vice President/Internal Audit of Delaware Investment &
Retirement Services, Inc.
Steven T. Lampe(2) Vice President/Taxation of Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware Management
Trust Company, Founders Holdings, Inc., Founders CBO Corporation, Delaware
Capital Management, Inc. and Delaware Investment & Retirement Services, Inc.
Lisa O. Brinkley Vice President/Compliance of Delaware Management Company, Inc.,
the Registrant, each of the other funds in the Delaware Group,
DMH Corp., Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Management Trust
Company, Delaware Capital Management, Inc. and Delaware
Investment & Retirement Services, Inc.
Rosemary E. Milner Vice President/Legal of Delaware Management Company, Inc., the Registrant,
each of the other funds in the Delaware Group, Delaware Distributors, L.P. and
Delaware Distributors, Inc.
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ ------------------------------------------------
<S> <C>
Douglas L. Anderson Vice President/Operations of Delaware Management Company, Inc., Delaware
Investment and Retirement Services, Inc. and Delaware Service Company, Inc.;
and Vice President/Operations and Director of Delaware Management Trust
Company
Michael T. Taggart Vice President/Facilities Management and Administrative Services of Delaware
Management Company, Inc.
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., each of the tax-exempt funds, the fixed income funds and the
closed-end funds in the Delaware Group; Vice President of Founders
Holdings, Inc.; and Treasurer, Assistant Secretary and Director of
Founders CBO Corporation
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., the Registrant and each of the tax-exempt funds and the fixed income
funds in the Delaware Group and Delaware Capital Management, Inc.
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., each of the tax-exempt funds, the fixed income funds and the
closed-end funds in the Delaware Group; Vice President of Founders
Holdings, Inc.; and President and Director of Founders CBO Corporation.
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., each of the tax-exempt funds and the fixed income funds in the
Delaware Group and Delaware Capital Management, Inc.
Roger A. Early Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., each of the tax-exempt funds and the fixed income funds in the
Delaware Group
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Edward N. Antoian Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., the Registrant and each of the equity funds in the Delaware Group
and Delaware Capital Management, Inc.
General Partner of Zeke Investment Partners since 1991, 569 Canterbury Lane,
Berwyn, PA
George H. Burwell Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., the Registrant and each of the equity funds in the Delaware Group
John B. Fields Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., the Registrant, each of the equity funds in the Delaware Group and
Delaware Capital Management, Inc.
David C. Dalrymple Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., the Registrant and each of the equity funds in the Delaware Group
Gerald S. Frey(3) Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., the Registrant and each of the equity funds in the Delaware Group
Faye P. Staples(4) Vice President/Human Resources of Delaware Management Company, Inc.,
Delaware Distributors, L.P. and Delaware Distributors, Inc.; and Vice
President/Director of Human Resources of Delaware Service Company, Inc.
</TABLE>
- -------------
1 VICE PRESIDENT/GLOBAL INVESTMENT MANAGEMENT OPERATIONS, Bankers Trust and
VICE PRESIDENT, CS First Boston Investment Management prior to June 1995.
2 TAX MANAGER, Price Waterhouse prior to October 1995.
3 SENIOR DIRECTOR, Morgan Grenfell Capital Management prior to June 1996.
4 VICE PRESIDENT/HUMAN RESOURCES, Nova Care prior to September 1995.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Part C - Other Information
(Continued)
Item 29. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal underwriter
for all the mutual funds in the Delaware Group.
(b) Information with respect to each director, officer or partner
of principal underwriter:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
Delaware Management
Company, Inc. Limited Partner Investment Manager
Delaware Capital
Management, Inc. Limited Partner None
Winthrop S. Jessup Vice Chairman Executive Vice President
Bruce Barton President and Chief None
Executive Officer
David K. Downes Senior Vice President and Senior Vice President/Chief
Chief Administrative Officer Administrative Officer/Chief
Financial Officer
George M. Chamberlain, Jr. Senior Vice President/ Senior Vice President/
Secretary Secretary
J. Lee Cook Senior Vice President/ None
Eastern Sales Division
Thomas E. Sawyer Senior Vice President/ None
Western Sales Division
Stephen H. Slack Senior Vice President/ None
Wholesaler
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
William F. Hostler Senior Vice President/ None
Marketing Services
Dana B. Hall Senior Vice President/ None
Key Accounts
J. Chris Meyer Senior Vice President/ None
Product Development
Richard J. Flannery Managing Director/Corporate Vice President
& Tax Affairs
Eric E. Miller Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Michael P. Bishof Vice President/Treasurer Vice President/Treasurer
Steven T. Lampe Vice President/Taxation Vice President/Taxation
Joseph H. Hastings Vice President/ Vice President/
Corporate Controller Corporate Controller
Lisa O. Brinkley Vice President/ Vice President/
Compliance Compliance
Rosemary E. Milner Vice President/Legal Vice President/Legal
Susan J. Black Vice President/ None
Manager Key Accounts
Daniel H. Carlson Vice President/ None
Marketing Manager
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Diane M. Anderson Vice President/ None
Retirement Services
Denise F. Guerriere Vice President/Client Services None
Julia R. Vander Els Vice President/ None
Client Services
Jerome J. Alrutz Vice President/ None
Client Services
Joanne A. Mettenheimer Vice President/ None
National Accounts
Christopher H. Price Vice President/Annuity None
Marketing & Administration
Steven J. DeAngelis Vice President/ None
Product Development
Susan T. Friestedt Vice President/ None
Customer Service
Dinah J. Huntoon Vice President/ None
Product Management
Soohee Zebedee Vice President/Fixed Income None
Product Management
Ellen M. Krott Vice President/ None
Communications
Holly W. Riemel Vice President/ None
Telemarketing
Frank Albanese Vice President/Wholesaler None
Terrence L. Bussard Vice President/Wholesaler None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
William S. Carroll Vice President/Wholesaler None
William S. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Thomas C. Gallagher Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
William M. Kimbrough Vice President/Wholesaler None
Mac McAuliffe Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
Henry W. Orvin Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
Elizabeth Roman Vice President/Wholesaler None
Michael W. Rose Vice President/Wholesaler None
Edward B. Sheridan Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
Faye P. Staples Vice President/Human Resources None
John Wells Vice President/Marketing None
Technology
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Not Applicable.
<PAGE>
Item 30. Location of Accounts and Records.
All accounts and records are maintained in Philadelphia at 1818
Market Street, Philadelphia, PA 19103 or One Commerce Square,
Philadelphia, PA 19103.
Item 31. Management Services. None.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
(d) The Registrant hereby undertakes to promptly call a meeting
of shareholders for the purpose of voting upon the question
of removal of any director when requested in writing to do so
by the record holders of not less than 10% of the outstanding
shares.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia and Commonwealth of Pennsylvania on
this 19th day of December, 1996.
DELAWARE GROUP DELAWARE FUND, INC.
(to be renamed Delaware Group Equity Funds I, Inc.)
By /s/ Wayne A. Stork
------------------------
Wayne A. Stork
Chairman of the Board, President,
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Wayne A. Stork
- ------------------------------------- Chairman of the Board, President,
Wayne A. Stork Chief Executive Officer and Director December 19, 1996
/s/ David K. Downes
- ------------------------------------ Senior Vice President/Chief Financial Officer/
David K. Downes Chief Administrative Officer (Principal
Financial Officer and Principal
Accounting Officer) December 19, 1996
/s/ Walter P. Babich *
- ------------------------------------- Director December 19, 1996
Walter P. Babich
/s/ Anthony D. Knerr *
- ------------------------------------- Director December 19, 1996
Anthony D. Knerr
/s Ann R. Leven *
- ------------------------------------- Director December 19, 1996
Ann R. Leven
/s/ W. Thacher Longstreth *
- ------------------------------------- Director December 19, 1996
W. Thacher Longstreth
/s/ Charles E. Peck *
- ------------------------------------- Director December 19, 1996
Charles E. Peck
</TABLE>
*By /s/ Wayne A. Stork
------------------------------
Wayne A. Stork
as Attorney-in-Fact for
each of the persons indicated
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
EX-99.B1C Form of Articles of Amendment (December 1996)
EX-99.B7B Amendment to Profit Sharing Plan (December 21, 1995)
(Module Name
AMEND_PROF_SHAR)
EX-99.B8A Executed Custodian Agreement (May 1, 1996) between The Chase Manhattan Bank
(Module Name and the Registrant on behalf of Delaware Fund and Devon Fund
CHASE_CUST_AGR)
EX-99.B8B Form of Securities Lending Agreement between The Chase Manhattan
Bank and the Registrant on behalf of Delaware Fund and Devon Fund
EX-99.B9A Executed Shareholders Services Agreement (June 29, 1988) between Delaware
Service Company, Inc. and the Registrant on behalf of Delaware Fund
EX-99.B9B Executed Shareholders Services Agreement (December 29, 1993) between Delaware
Service Company, Inc. and the Registrant on behalf of Devon Fund
EX-99.B9C Executed Delaware Group of Funds Fund Accounting Agreement (August 19, 1996)
between Delaware Service Company, Inc. and the Registrant on behalf of Delaware
Fund and Devon Fund
EX-99.B9D Executed Amendment No. 1 (September 30, 1996) to Delaware Group of Funds Fund
Accounting Agreement
EX-99.B9E Executed Amendment No. 2 (November 29, 1996) to Delaware Group of Funds Fund
Accounting Agreement
EX-99.B11 Consent of Auditors
EX-99.B16B Schedules of Computation
EX-27 Financial Data Schedules
EX-99.B18B Amended Appendix A (September 30, 1996) to Plan under Rule 18f-3
EX-99.B18C Amended Appendix A (November 29, 1996) to Plan under Rule 18f-3
</TABLE>
<PAGE>
AMENDMENT NO. 2 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund
Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund
Delaware Group Equity Funds IV, Inc.
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc.
Retirement Income Fund (New)
Value Fund
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
1
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Delaware Group Government Fund, Inc.
Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Emerging Growth Series
Equity/Income Series
Global Bond Series (New)
Growth Series
High Yield Series
International Equity Series
Money Market Series
Multiple Strategy Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Trend Fund, Inc.
2
<PAGE>
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
DMC Tax-Free Income Trust - Pennsylvania
3
<PAGE>
Dated as of: November 29, 1996
DELAWARE SERVICE COMPANY, INC.
By: /s/David K. Downes
-----------------------------------
David K. Downes
Senior Vice President/
Chief Administrative Officer/
Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL
FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT
FUNDS, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
By: /s/Wayne A. Stork
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
By: /s/Wayne A. Stork
Wayne A. Stork
Chairman
4
AMENDMENT NO. 1
TO THE
SECOND AMENDMENT AND RESTATEMENT OF THE
PROFIT SHARING PLAN OF
DELAWARE GROUP DELAWARE FUND, INC.
EFFECTIVE APRIL 1, 1989
This Amendment is made this 21st day of December, 1995, by Delaware
Group Delaware fund, Inc. (the "Employer").
WITNESSETH:
-----------
WHEREAS, the Employer adopted the second amendment and restatement of
the Profit Sharing Plan of Delaware Management Company, Inc. (the "Plan"),
effective April 1, 1989; and
WHEREAS, the Employer desires to clarify the provisions of the Plan
pertaining to the crediting of service for vesting purposes.
NOW THEREFORE, Section 2.28 of the Plan is hereby amended as follows:
"2.28 "Year of Service" shall mean the completion by an Employee of
1,000 or more Hours of Service during his initial Eligibility
Computation Period and during any Plan Year, beginning with the Plan
Year which commences after the Employee first performs an Hour of
Service. However, for the period from October 1, 1988 through March 31,
1990, an Employee shall be given credit for a Year of Service if he
completes 1,000 Hours of Service during the period October 1, 1988 to
September 30, 1989 and shall be given credit for an additional Year of
Service if he completes 1,000 Hours of Service during the period April
1, 1989 to March 31, 1990. For purposes of determining a Participant's
nonforfeitable right to his Employer Contribution Account, Years of
Service shall include an Employee's prior service with Delaware
Management Company, Inc. or any other Entity required to be aggregated
with Delaware Management Company, Inc. under Sections 414(b) or (c) of
the Code."
IN WITNESS WHEREOF, the Employer has caused this Amendment to be
executed by its duly authorized officers and its corporate seal to be impressed
hereon the date first written above.
ATTEST: DELAWARE GROUP DELAWARE FUND, INC.
/s/ George M. Chamberlain, Jr. By: /s/ Wayne A. Stork
- ------------------------------- -------------------------
Senior Vice President/Secretary Chairman
CHASE
GLOBAL CUSTODY AGREEMENT
AGREEMENT, effective May 1, 1996, between THE CHASE MANHATTAN BANK, N.A.
(the "Bank") and those registered investment companies listed on Schedule A
hereto (each a Customer ) on behalf of certain of their respective series,
as listed on Schedule A (individually and collectively the Series ).
1. Customer Accounts.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer on behalf of each
Series ("Custody Account") for any and all stocks, shares, bonds, debentures,
notes, mortgages or other obligations for the payment of money, bullion, coin
and any certificates, receipts, warrants or other instruments representing
rights to receive, purchase or subscribe for the same or evidencing or
representing any other rights or interests therein and other similar property
whether certificated or uncertificated as may be received by the Bank or its
Subcustodian (as defined in Section 3) for the account of the Customer
("Securities"); and
(b) A deposit account in the name of the Customer on behalf of each
Series ("Deposit Account") for any and all cash in any currency received by
the Bank or its Subcustodian for the account of the Customer, which cash
shall not be subject to withdrawal by draft or check.
The Customer warrants its authority to: 1) deposit the cash and
Securities ("Assets") received in the Accounts and 2) give Instructions (as
defined in Section 11) concerning the Accounts. Such Instructions shall
specifically indicate to which Series such Assets belong or, if such Assets
belong to more than one Series, shall allocate such Assets to the appropriate
Series. The Bank may deliver securities of the same class in place of those
deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional
Accounts under the terms of this Agreement.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable to
the Bank:
(a) Securities will be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
To the extent available and permissible under applicable law and
regulation, Cash held pursuant to Instructions shall be held in interest
bearing accounts. If interest bearing accounts are not available, such cash
may be held in non-interest bearing accounts. The Bank is authorized to
maintain cash balances on deposit for the Customer with itself or one of its
affiliates. Interest bearing accounts shall bear interest at such reasonable
rates of interest as may from time to time be paid on such accounts by the
Bank or its affiliates.
(iii) For each Series that is exclusively a domestic Series, the following
additional provisions shall apply:
(x) In the event that during a given calendar month a Series has maintained
an average daily cash balance greater than zero, the Bank shall provide an
earnings credit against custody fees otherwise owing hereunder by such Series
during such calendar month in an amount equal to the product of (A) 75% of
the 90 day U.S. government Treasury bill rate as quoted in the Wall Street
Journal for the last Business Day (being a day on which the Bank is open
for the transaction of all its ordinary business) of such calendar month, (B)
the average daily cash balance for such month, and (C) the number of days in
such calendar month divided by 365.
(y) In the event that during a given calendar month a Series has maintained
an average daily cash balance less than or equal to zero, the Bank shall be
paid interest on such amount by such Series in an amount equal to the product
of (A) the Overnight Fed Funds Rate (as defined below) plus 25 basis points
for the last Business Day of such calendar month, (B) the average daily cash
balance for such month, and (C) the number of days in such calendar month
divided by 365.
(z) For purposes of (y) above, the term Overnight Fed Funds Rate shall mean
the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers,
as published by the Federal Reserve Bank of New York (with the rate for the
last Business Day of a given calendar month being the rate so published on
the Business Day immediately following such Day), or, if such rate is note so
published, the average quotations, for the last Business Day of a given
calendar month, of such transactions received by the Bank from three Federal
funds brokers of recognized standing selected by the Bank.
If the Customer wishes to have any of its Assets held in the custody of
an institution other than the established Subcustodians as defined in Section
3 (or their securities depositories), such arrangement must be authorized by
a written agreement, signed by the Bank and the Customer.
3. Subcustodians and Securities Depositories.
The Bank may act under this Agreement through the subcustodians listed
in Schedule B of this Agreement with which the Bank has entered into
subcustodial agreements ("Subcustodians"). The Customer authorizes the Bank
to hold Assets in the Accounts in accounts which the Bank has established
with one or more of its branches or Subcustodians. The Bank and
Subcustodians are authorized to hold any of the Securities in their account
with any securities depository in which they participate.
The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule B. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such Subcustodian.
Upon receipt of Instructions, the Bank shall cease using any
Subcustodian with respect to the customer, and arrange for delivery of
Securities held with such Subcustodian to another entity as designated by the
Customer; provided that, the Bank shall have no responsibility for the
performance of such other entity.
4. Use of Subcustodian.
(a) The Bank will identify the Assets on its books as belonging to the
Customer.
(b) A Subcustodian will hold such Assets together with assets belonging
to other customers of the Bank in accounts identified on such Subcustodian's
books as special custody accounts for the exclusive benefit of customers of
the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject
only to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only
to the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding
its customer's assets shall provide that: (i) such assets will not be subject
to any right, charge, security interest, lien or claim of any kind in favor
of such Subcustodian except for safe custody or administration, (ii) the
beneficial ownership of such assets will be freely transferable without the
payment of money or value other than for safe custody or administration;
(iii) adequate records will be maintained identifying the assets held
pursuant to such agreement as belonging to the customers of the Bank; (iv)
subject to applicable law, Subcustodian shall permit independent public
accountants for Bank and customers of the Bank reasonable access to
Subcustodian s books and records as they pertain to the subcustody account in
connection with such accountants' examination of the books and records of
such account; and (v) the Bank will receive periodic reports with respect to
the safekeeping of assets in the subcustody account, including advices and/or
notifications of any transfers to or from such subcustody account. The
foregoing shall not apply to the extent of any special agreement or
arrangement made by the Customer with any particular Subcustodian.
(e) Upon request of the Customer, the Bank shall deliver to the Customer
annually a report stating: (i) the identity of each Subcustodian then acting
on behalf of the Bank and the name and address of the governmental agency or
other regulatory authority that supervises or regulates such Subcustodian;
(ii) the countries in which each Subcustodian is located; and (iii) as long
as Securities and Exchange Commission ("SEC") Rule 17f-5 under the Investment
Company Act of 1940, as amended ("1940 Act"), requires the Customer s Board
of Directors/Trustees directly to approve its foreign custody arrangements,
such other information relating to such Subcustodians as may reasonably be
requested by the Customer to ensure compliance with Rule 17f-5. As long as
Rule 17f-5 requires the Customer s Board of Directors/Trustees directly to
approve its foreign custody arrangements, the Bank shall also furnish
annually to the Customer information concerning such Subcustodians similar in
kind and scope as that furnished to the Customer in connection with the
initial approval hereof. The Bank shall timely advise the Customer of any
material adverse change in the facts or circumstances upon which such
information is based where such changes would affect the eligibility of the
Subcustodian under Rule 17f-5 as soon as practicable after it becomes aware
of any such material adverse change in the normal course of its custodial
activities.
5. Deposit Account Transactions
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required
by the Bank.
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, the Bank, in its
discretion, may advance the Customer such excess amount which shall be deemed
a loan payable on demand, bearing interest at the rate customarily charged by
the Bank on similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or at
any time prior to actual collection and reconciliation to the Deposit
Account, with interest, dividends, redemptions or any other amount due, the
Customer will promptly return any such amount upon oral or written
notification: (i) that such amount has not been received in the ordinary
course of business or (ii) that such amount was incorrectly credited. If the
Customer does not promptly return any amount upon such notification, the Bank
shall be entitled, upon oral or written notification to the Customer, to
reverse such credit by debiting the Deposit Account for the amount previously
credited. The Bank or its Subcustodian shall have no duty or obligation to
institute legal proceedings, file a claim or a proof of claim in any
insolvency proceeding or take any other action with respect to the collection
of such amount, but may act for the Customer upon Instructions after
consultation with the Customer.
6. Custody Account Transactions.
(a) Securities will be transferred, exchanged or delivered by the Bank
or its Subcustodian upon receipt by the Bank of Instructions which include
all information required by the Bank. Settlement and payment for Securities
received for, and delivery of Securities out of, the Custody Account may be
made in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without limitation, delivery of
Securities to a purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery. Delivery of
Securities out of the Custody Account may also be made in any manner
specifically required by Instructions acceptable to the Bank.
(b) The Bank shall credit or debit the Accounts on a contractual
settlement date with cash or Securities with respect to any sale, exchange or
purchase of Securities in those countries set forth in Appendix A hereto;
provided that, the Bank may amend Appendix A from time to time in its sole
discretion and shall advise the Customer of such amendments. Otherwise,
transactions will be credited or debited to the Accounts on the date cash or
Securities are actually received by the Bank and reconciled to the Account.
(i) The Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by the Bank in its discretion, after the contractual
settlement date for the related transaction; provided that, the Bank shall
give Customer prior notification of any such reversal. Where the foregoing
notification is oral, the Bank shall promptly provide written confirmation of
the same (which confirmation may be electronic).
(ii) If any Securities delivered pursuant to this Section 6 are returned
by the recipient thereof, the Bank may reverse the credits and debits of the
particular transaction at any time.
7. Actions of the Bank.
The Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items
which call for payment upon presentation, to the extent that the Bank or
Subcustodian is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian, subject to applicable SEC rules and regulations under the Act.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any
transfers of Assets to or from the Accounts. Such statements, advices or
notifications shall indicate the identity of the entity having custody of the
Assets. Unless the Customer advises the Bank orally and then promptly sends
the Bank a written exception or objection to any Bank statement within 180
days of receipt, the Customer shall be deemed to have approved such
statement.
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of the
Customer. Subject to the standard of care in Section 12 hereof, the Bank shall
have no liability for any loss occasioned by delay in the actual receipt of
notice by the Bank or by its Subcustodians of any payment, redemption or other
transaction regarding Securities in the Custody Account in respect of which
the Bank has agreed to take any action under this Agreement.
8. Corporate Actions; Proxies; Tax Reclaims.
a. Corporate Actions. Whenever the Bank receives information
concerning the Securities which requires discretionary action by the
beneficial owner of the Securities (other than a proxy), such as subscription
rights, bonus issues, stock repurchase plans and rights offerings, or legal
notices or other material intended to be transmitted to securities holders
("Corporate Actions"), the Bank will give the Customer written notice (which
may be electronic) of such Corporate Actions to the extent that the Bank's
central corporate actions department has actual knowledge of a Corporate
Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank will endeavor to obtain
Instructions from the Customer or its Authorized Person (as defined in Section
10 hereof), but if Instructions are not received in time for the Bank to take
timely action, or actual notice of such Corporate Action was received too
late to seek Instructions, the Bank is authorized to sell such rights
entitlement or fractional interest and to credit the Deposit Account with the
proceeds or take any other action it deems, in good faith, to be appropriate
in which case it shall be held harmless for any such action.
b. Proxy Voting. With respect to domestic U.S. and Canadian Securities
(the latter if held in DTC), the Bank will send to the Customer or the
Authorized Person (as defined in Section 10) for a Custody Account, such proxies
(signed in blank, if issued in the name of the Bank's nominee or the nominee
of a central depository) and communications with respect to Securities in the
Custody Account as call for voting or relate to legal proceedings within a
reasonable time after sufficient copies are received by the Bank for
forwarding to its customers. In addition, the Bank will follow coupon
payments, redemptions, exchanges or similar matters with respect to
Securities in the Custody Account and advise the Customer or the Authorized
Person for such Account of rights issued, tender offers or any other
discretionary rights with respect to such Securities, in each case, of which
the Bank has received notice from the issuer of the Securities, or as to
which notice is published in publications routinely utilized by the Bank for
this purpose.
With respect to Securities other than the foregoing, proxy voting
services shall be provided in accordance with separate proxy voting agreement
annexed hereto a Appendix B.
The foregoing proxy voting services may be provided by Bank, in whole or
in part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank), provided that the Bank shall be liable for the
performance of any such third parties to the same extent as the Bank would
have been if it performed such services itself..
c. Tax Reclaims. (i) Subject to the provisions hereof, the Bank will
apply for a reduction of withholding tax and any refund of any tax paid or
tax credits which apply in each applicable market in respect of income
payments on Securities for the benefit of the Customer which the Bank
believes may be available to such Customer. Where such reports are available,
the Bank shall periodically report to Customer concerning the making of
applications for a reduction of withholding tax and refund of any tax paid or
tax credits which apply in each applicable market in respect of income
payments on Securities for the benefit of the Customer.
(ii) The provision of tax reclaim services by the Bank is conditional
upon the Bank receiving from the beneficial owner of Securities (A) a
declaration of its identity and place of residence and (B) certain other
documentation (pro forma copies of which are available from the Bank). The
Bank shall use reasonable means to advise the Customer of the declarations,
documentation and information which the Customer is to provide to the Bank in
order for the Bank to provide the tax reclaim services described herein. The
Customer acknowledges that, if the Bank does not receive such declarations,
documentation and information, additional United Kingdom taxation will be
deducted from all income received in respect of Securities issued outside the
United Kingdom and that U.S. non-resident alien tax or U.S. backup
withholding tax will be deducted from U.S. source income. The Customer shall
provide to the Bank such documentation and information as it may require in
connection with taxation, and warrants that, when given, this information
shall be true and correct in every respect, not misleading in any way, and
contain all material information. The Customer undertakes to notify the Bank
immediately if any such information requires updating or amendment.
(iii) Subject to subsection (vii) hereof, the Bank shall not be liable
to the Customer or any third party for any tax, fines or penalties payable by
the Bank or the Customer, and shall be indemnified accordingly, whether these
result from the inaccurate completion of documents by the Customer or any
third party, or as a result of the provision to the Bank or any third party
of inaccurate or misleading information or the withholding of material
information by the Customer or any other third party, or as a result of any
delay of any revenue authority or any other matter beyond the control of the
Bank.
(iv) The Customer confirms that the Bank is authorized to deduct from
any cash received or credited to the Cash Account any taxes or levies
required by any revenue or governmental authority for whatever reason in
respect of the Securities or Cash Accounts.
(v) The Bank shall perform tax reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified to the
Customer from time to time and the Bank may, by notification in writing, at
its absolute discretion, supplement or amend the markets in which the tax
reclaim services are offered. Other than as expressly provided in this sub-
clause, the Bank shall have no responsibility with regard to the Customer's
tax position or status in any jurisdiction. Except as provided in Section
8(c)(ii) and pursuant to Instructions, the Bank shall take no action in the
servicing of the Customer s Securities which, in and of itself, creates a
taxable nexus for the Customer in any jurisdiction other than with respect to
interest, dividends and capital gains that may otherwise be subject to tax by
such jurisdiction with respect to a foreign investor not otherwise engaged in
a trade or business in such jurisdiction in a given taxable year. Bank shall
not be liable for any tax liability caused, directly or indirectly, by
Customer's actions or status in any jurisdiction.
(vi) In connection with obtaining tax relief, the Customer confirms
that the Bank is authorized to disclose any information requested by any
revenue authority or any governmental body in relation to the Customer or the
Securities and/or Cash held for the Customer. This provision does not
authorize any other voluntary disclosure to any revenue authority or any
governmental body without the prior written consent of Customer.
(vii) Tax reclaim services may be provided by the Bank or, in whole or
in part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank); provided that the Bank shall be liable for the
performance of any such third party to the same extent as the Bank would have
been if it performed such services itself.
9. Nominees.
Securities which are ordinarily held in registered form may be
registered in a nominee name of the Bank, Subcustodian or securities
depository, as the case may be. The Bank may without notice to the Customer
cause any such Securities to cease to be registered in the name of any such
nominee and to be registered in the name of the Customer. In the event that
any Securities registered in a nominee name are called for partial redemption
by the issuer, the Bank may allot the called portion to the respective
beneficial holders of such class of security in any manner the Bank deems to
be fair and equitable. The Customer agrees to hold the Bank, Subcustodians,
and their respective nominees harmless from any liability arising directly or
indirectly from their status as a mere record holder of Securities in the
Custody Account.
10. Authorized Persons.
As used in this Agreement, the term "Authorized Person" means employees
or agents including investment managers as have been designated by written
notice from the Customer or its designated agent to act on behalf of the
Customer under this Agreement. Such persons shall continue to be Authorized
Persons until such time as the Bank receives Instructions from the Customer
or its designated agent that any such employee or agent is no longer an
Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information
system acceptable to the Bank which the Bank reasonably believes in good
faith to have been given by Authorized Persons or which are transmitted with
proper testing or authentication pursuant to terms and conditions which the
Bank may specify. Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until canceled or superseded. For
purposes hereof, reasonableness shall mean compliance with applicable
procedures.
Any Instructions delivered to the Bank by telephone (including cash
transfer instructions as described below) shall promptly thereafter be
confirmed in writing by any two Authorized Persons (which confirmation may
bear the facsimile signature of such Persons), but the Customer will hold the
Bank harmless for the failure of such Authorized Persons to send such
confirmation in writing, the failure of such confirmation to conform to the
telephone instructions received or the Bank's failure to produce such
confirmation at any subsequent time; provided that, where the Bank receives
a telephone Instruction from an Authorized Person requiring the transfer of
cash, prior to executing such Instruction the Bank will, to confirm such
Instruction, call back any one of the individuals on a list of persons
authorized to confirm such oral transfer Instructions (which Person shall be
a person other than the initiator of the transfer Instruction) and the Bank
shall not execute the Instruction until it has received such confirmation.
Either party may electronically record any Instructions given by telephone,
and any other telephone discussions with respect to the Custody Account. The
Customer shall be responsible for safeguarding any testkeys, identification
codes or other security devices which the Bank shall make available to the
Customer or its Authorized Persons.
12. Standard of Care; Liabilities.
(a) The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement or expressly contained in
Instructions which are consistent with the provisions of this Agreement as
follows:
(i) The Bank will use reasonable care with respect to its obligations
under this Agreement and the safekeeping of Assets. The Bank shall be liable
to the Customer for any loss which shall occur as the result of the failure
of a Subcustodian to exercise reasonable care with respect to the safekeeping
of such Assets to the same extent that the Bank would be liable to the
Customer if the Bank were holding such Assets in New York. In the event that
Securities are lost by reason of the failure of the Bank or its Subcustodian
to use reasonable care, the Bank shall be liable to the Customer based on the
market value of the property which is the subject of the loss on the date it
is replaced by the Bank and without reference to any special conditions or
circumstances, it being understood that for purposes of measuring damages
hereunder, the value of Securities which are sold by the Customer prior to
the replacement thereof shall be equal to the sale price thereof less the
expenses of such sale incurred by the Customer. The Bank shall act with
reasonable promptness in making such replacements. In no event shall the
Bank be liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Bank
has been advised of the likelihood of such loss or damage and regardless of
the form of action. Subject to the Bank's obligations pursuant to Section 4(e)
hereof, the Bank will not be responsible for the insolvency of any
Subcustodian which is not a branch or affiliate of Bank.
(ii) The Bank will not be responsible for any act, omission, default or
the solvency of any broker or agent which it or a Subcustodian appoints
unless such appointment was made negligently or in bad faith.
(iii) (a) The Bank shall be indemnified by, and without liability to
the Customer for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise pursuant to this Agreement if such act or omission
was in good faith, without negligence. In performing its obligations under
this Agreement, the Bank may rely on the genuineness of any Customer document
which it reasonably believes in good faith to have been validly executed.
(b) The Bank shall hold Customer harmless from, and shall indemnify Customer
for, any loss, liability, claim or expense incurred by Customer (including,
but not limited to, Customer's reasonable legal fees) to the extent that such
loss, liability, claim or expense arises from the negligence or willful mis-
conduct on the part of the Bank or a Subcustodian; provided that, in no event
shall the Bank be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits),
even if the Bank has been advised of the likelihood of such loss or damage
and regardless of the form of action. Subject to the Bank's obligations
pursuant to Section 4(e) hereof, the Bank will not be responsible for the
insolvency of any Subcustodian which is not a branch or affiliate of Bank.
(iv) The Customer agrees to pay for and hold the Bank harmless from any
liability or loss resulting from the imposition or assessment of any taxes or
other governmental charges, and any related expenses with respect to income
from or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act, upon the advice of
counsel (who may be counsel for the Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
(vi) The Bank need not maintain any insurance for the benefit of the
Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable
for any loss which results from: 1) the general risk of investing, or 2)
investing or holding Assets in a particular country including, but not
limited to, losses resulting from nationalization, expropriation or other
governmental actions; regulation of the banking or securities industry;
currency restrictions, devaluations or fluctuations; and market conditions
which prevent the orderly execution of securities transactions or affect the
value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear
fusion, fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty
or responsibility to:
(i) question Instructions or make any suggestions to the Customer or an
Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or
the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other than a
Security.
(iv) except as may be otherwise provided in any securities lending
agreement between the Customer and the Bank, evaluate or report to the
Customer or an Authorized Person regarding the financial condition of any
broker, agent or other party to which Securities are delivered or payments
are made pursuant to this Agreement;
(v) except for trades settled at DTC where the broker provides to the
Bank the trade confirmation and the Customer provides for the Bank to receive
the trade instruction, review or reconcile trade confirmations received from
brokers. The Customer or its Authorized Persons (as defined in Section 10)
issuing Instructions shall bear any responsibility to review such
confirmations against Instructions issued to and statements issued by the
Bank.
(c) The Customer authorizes the Bank to act, hereunder, in its capacity
as a custodian notwithstanding that the Bank or any of its divisions or
affiliates may have a material interest in a transaction, or circumstances
are such that the Bank may have a potential conflict of duty or interest
including the fact that the Bank or any of its affiliates may provide
brokerage services to other customers, act as financial advisor to the issuer
of Securities, act as a lender to the issuer of Securities, act in the same
transaction as agent for more than one customer, have a material interest in
the issue of Securities, or earn profits from any of the activities listed
herein.
13. Fees and Expenses.
The Customer agrees to pay the Bank for its services under this
Agreement such amount as may be agreed upon in writing ("Fee Schedule"),
together with the Bank's reasonable out-of-pocket or incidental expenses (as
further defined in the Fee Schedule), including, but not limited to, legal
fees. The Bank shall have a lien on and is authorized to charge any Accounts
of the Customer for any amount owing to the Bank under any provision of this
Agreement.
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration of
the Customer's trading and investment activity, the Bank is authorized to
enter into spot or forward foreign exchange contracts with the Customer or an
Authorized Person for the Customer and may also provide foreign exchange
through its subsidiaries, affiliates or Subcustodians. Instructions,
including standing instructions, may be issued with respect to such contracts
but the Bank may establish rules or limitations concerning any foreign
exchange facility made available. In all cases where the Bank, its
subsidiaries, affiliates or Subcustodians enter into a foreign exchange
contract related to Accounts, the terms and conditions of the then current
foreign exchange contract of the Bank, its subsidiary, affiliate or
Subcustodian and, to the extent not inconsistent, this Agreement shall apply
to such transaction.
(b) Certification of Residency, etc. The Customer certifies that it is
a resident of the United States and agrees to notify the Bank of any changes
in residency. The Bank may rely upon this certification or the certification
of such other facts as may be required to administer the Bank's obligations
under this Agreement. The Customer will indemnify the Bank against all
losses, liability, claims or demands arising directly or indirectly from any
such certifications.
(c) Access to Records. Applicable accounts, books and records of the
Bank shall be open to inspection and audit at all reasonable times during
normal business hours upon reasonable advance notice by Customer s
independent public accountants and by employees of Customer designated to the
Bank. All such materials shall, to the extent applicable, be maintained and
preserved in conformity with the Act and the rules and regulations
thereunder, including without limitation, SEC Rules 31a-1 and 31a-2. Subject
to restrictions under applicable law, the Bank shall also obtain an
undertaking to permit the Customer's independent public accountants
reasonable access to the records of any Subcustodian which has physical
possession of any Assets as may be required in connection with the
examination of the Customer's books and records.
(d) Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and
the Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that the
Assets deposited in the Accounts are Mutual Fund assets subject to certain
Securities and Exchange Commission ("SEC") rules and regulations.
This Agreement consists exclusively of this document together with
Schedules A and B, Appendices 1 and 2, Exhibits I - _______ and the following
Rider(s) [Check applicable rider(s)]:
X MUTUAL FUND
----
X SPECIAL TERMS AND CONDITIONS
----
There are no other provisions of this Agreement, and this Agreement
supersedes any other agreements, whether written or oral, between the
parties. Any amendment to this Agreement must be in writing, executed by
both parties.
(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or unenforceable in any respect on the
basis of any particular circumstances or in any jurisdiction, the validity,
legality and enforceability of such provision or provisions under other
circumstances or in other jurisdictions and of the remaining provisions will
not in any way be affected or impaired.
(g) Waiver. Except as otherwise provided in this Agreement, no failure
or delay on the part of either party in exercising any power or right under
this Agreement operates as a waiver, nor does any single or partial exercise
of any power or right preclude any other or further exercise, or the exercise
of any other power or right. No waiver by a party of any provision of this
Agreement, or waiver of any breach or default, is effective unless in writing
and signed by the party against whom the waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses
or such other addresses as may subsequently be given to the other party in
writing:
Bank: The Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Custody Division
or telex:
-------------------------------------
Customer: Delaware Group of Funds
1818 Market St.
Philadelphia, PA 19103
att: Messrs. Bishof and O Conner
or telex:
--------------------------------------
(i) Termination. This Agreement may be terminated by the Customer or
the Bank by giving sixty (60) days written notice to the other, provided that
such notice to the Bank shall specify the names of the persons to whom the
Bank shall deliver the Assets in the Accounts. If notice of termination is
given by the Bank, the Customer shall, within sixty (60) days following
receipt of the notice, deliver to the Bank Instructions specifying the names
of the persons to whom the Bank shall deliver the Assets. In either case the
Bank will deliver the Assets to the persons so specified, after deducting any
amounts which the Bank determines in good faith to be owed to it under
Section 13. If within sixty (60) days following receipt of a notice of
termination by the Bank, the Bank does not receive Instructions from the
Customer specifying the names of the persons to whom the Bank shall deliver
the Assets, the Bank, at its election, may deliver the Assets to a bank or
trust company doing business in the State of New York to be held and disposed
of pursuant to the provisions of this Agreement, or to Authorized Persons, or
may continue to hold the Assets until Instructions are provided to the Bank;
provided that, where the Bank is the terminating party and the Bank had not
notified the Customer that termination was for breach of this Agreement by
the Customer, such 60 day period shall be extended for an additional period
as requested by Customer of up to 120 days.
Termination as to One or More Series. This Agreement may be terminated
as to one or more Series (but less than all the Series) by delivery of an
amended Schedule A deleting such Series, in which case termination as to the
deleted Series shall take effect sixty (60) days after the date of such
delivery. The execution and delivery of an amended Schedule A which deletes
one or more Series, shall constitute a termination hereof only with respect
to such deleted Series, shall be governed by the preceding provisions of
Section 14 as to the identification of a successor custodian and the delivery
of the Assets of the Series so deleted to such successor custodian, and shall
not affect the obligations of the Bank and the Customer hereunder with
respect to the other Series set forth in Schedule A, as amended from time to
time.
(j) Several Obligations of the Series. With respect to any obligations
of the Customer on behalf of the Series and their related Accounts arising
hereunder, the Custodian shall look for payment or satisfaction of any such
obligation solely to the assets and property of the Series and such Accounts
to which such obligation relates as though the Customer had separately
contracted with the Custodian by separate written instrument with respect to
each Series and its Accounts.
CUSTOMER
By: /s/ Michael P. Bishof
---------------------
Title Vice President and Treasurer
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Rosemary M. Stidmon
-----------------------
Title Vice President
STATE OF Pennsylvania)
: ss.
COUNTY OF Philadelphia)
On this 9th day of July, 1996, before me personally came Michael P. Bishof,
to me known, who being by me duly sworn, did depose and say that he resides
in Blue Bell, PA at 110 Spyglass Drive; that he is Vice President/Treasurer
of Delaware Group of Funds, the entity described in and which executed the
foregoing instrument; that he knows the seal of said entity, that the seal
affixed to said instrument is such seal, that it was so affixed by order of
said entity, and that he signed his name thereto by like order.
/s/ Maritza H. Cruzado
-----------------------
Maritza H. Cruzado
Notary
Sworn to before me this 9th
day of July, 1996.
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 24th day of May, 1996, before me personally came Rosemary
Stidmon, to me known, who being by me duly sworn, did depose and say that she
resides in New Providence, NJ at 31 Sagamore Drive; that she is a Vice
President of THE CHASE MANHATTAN BANK, (National Association), the
corporation described in and which executed the foregoing instrument; that
she knows the seal of said corporation, that the seal affixed to said
instrument is such corporate seal, that it was so affixed by order of the
Board of Directors of said corporation, and that she signed her name thereto
by like order.
Sworn to before me this 24th
day of May, 1996.
/s/ Laiyee Ng
- -------------
Laiyee Ng
Notary
Schedule A
Delaware Pooled Trust, Inc. - Global Fixed Income Portfolio
Delaware Pooled Trust, Inc. - International Equity Portfolio
Delaware Pooled Trust, Inc. - Labor Select International Equity Portfolio
Delaware Pooled Trust, Inc. - Real Estate Investment Trust Portfolio
Delaware Pooled Trust, Inc. - High Yield Portfolio
Delaware Pooled Trust, Inc. - International Fixed Income Portfolio
Delaware Pooled Trust, Inc. - Defensive Equity Utility Portfolio
Delaware Group Global & International Funds, Inc. - International Equity Fund
Delaware Group Global & International Funds, Inc. - Global Assets Fund
Delaware Group Global & International Funds, Inc. - Global Bond Fund
Delaware Group Global & International Funds, Inc. - Emerging Markets Fund
Delaware Group Premium Fund, Inc. - International Equity Series
Delaware Group Premium Fund, Inc. - Equity Income Series
Delaware Group Premium Fund, Inc. - High Yield Series
Delaware Group Premium Fund, Inc. - Capital Reserves Series
Delaware Group Premium Fund, Inc. - Money Market Series
Delaware Group Premium Fund, Inc. - Growth Series
Delaware Group Premium Fund, Inc. - Multiple Strategy Series
Delaware Group Premium Fund, Inc. - Value Series
Delaware Group Premium Fund, Inc. - Emerging Growth Series
Delaware Group Premium Fund, Inc. - Global Bond Series
Delaware Group Delchester High-Yield Bond Fund, Inc.
Delaware Group Delaware Fund, Inc. - Delaware Fund
Delaware Group Delaware Fund, Inc. - Devon Fund
Delaware Group Value Fund, Inc.
Delaware Group DelCap Fund, Inc.
Delaware Group Dividend & Income Fund, Inc.
Delaware Group Advisor Funds, Inc. - Enterprise Fund
Delaware Group Advisor Funds, Inc. - U.S. Growth Fund
Delaware Group Advisor Funds, Inc. - World Growth Fund
Delaware Group Advisor Funds, Inc. - New Pacific Fund
Delaware Group Advisor Funds, Inc. - Federal Bond Fund
Delaware Group Advisor Funds, Inc. - Corporate Income Fund
March, 1996 Schedule B
SUB-CUSTODIANS EMPLOYED BY
THE CHASE MANHATTAN BANK, N.A. LONDON, GLOBAL CUSTODY
<TABLE>
<CAPTION>
<S> <C> <C>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
ARGENTINA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Arenales 707, 5th Floor Buenos Aires
De Mayo 130/140
1061Buenos Aires
ARGENTINA
AUSTRALIA The Chase Manhattan Bank The Chase Manhattan Bank
Australia Limited Australia Limited
36th Floor Sydney
World Trade Centre
Jamison Street
Sydney
New South Wales 2000
AUSTRALIA
AUSTRIA Creditanstalt - Bankverein Credit Lyonnais
Schottengasse 6 Vienna
A - 1011, Vienna
AUSTRIA
BANGLADESH Standard Chartered Bank Standard Chartered Bank
18-20 Motijheel C.A. Dhaka
Box 536,
Dhaka-1000
BANGLADESH
BELGIUM Generale Bank Credit Lyonnais Bank
3 Montagne Du Parc Brussels
1000 Bruxelles
BELGIUM
BOTSWANA Barclays Bank of Botswana Limited Barclays Bank of Botswana
Barclays House Gaborone
Khama Crescent
Gaborone
BOTSWANA
BRAZIL Banco Chase Manhattan, S.A. Banco Chase Manhattan S.A.
Chase Manhattan Center Sao Paulo
Rua Verbo Divino, 1400
Sao Paulo, SP 04719-002
BRAZIL
CANADA The Royal Bank of Canada Royal Bank of Canada
Royal Bank Plaza Toronto
Toronto
Ontario M5J 2J5
CANADA
Canada Trust Royal Bank of Canada
Canada Trust Tower Toronto
BCE Place
161 Bay at Front
Toronto
Ontario M5J 2T2
CANADA
CHILE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Agustinas 1235 Santiago
Casilla 9192
Santiago
CHILE
COLOMBIA Cititrust Colombia S.A. Cititrust Colombia S.A.
Sociedad Fiduciaria Sociedad Fiduciaria
Carrera 9a No 99-02 Santafe de Bogota
Santafe de Bogota, DC
COLOMBIA
CZECH REPUBLIC
Ceskoslovenska Obchodni Banka, A.S. Komercni Banka, A.S.,
Na Prikope 14 Praha
115 20 Praha 1
CZECH REPUBLIC
DENMARK Den Danske Bank Den Danske Bank
2 Holmens Kanala DK 1091 Copenhagen
Copenhagen
DENMARK
EGYPT National Bank of Egypt National Bank of Egypt
24 Sherif Street Cairo
Cairo
EGYPT
EUROBONDS Cedel S.A. ECU:Lloyds Bank PLC
67 Boulevard Grande Duchesse Charlotte International Banking Division
LUXEMBOURG London
A/c The Chase Manhattan Bank, N.A. For all other currencies: see
London relevant country
A/c No. 17817
EURO CDS First Chicago Clearing Centre ECU:Lloyds Bank PLC
27 Leadenhall Street Banking Division London
London EC3A 1AA For all other currencies: see
UNITED KINGDOM relevant country
FINLAND Merita Bank KOP Merita Bank KOP
Aleksis Kiven 3-5 Helsinki
00500 Helsinki
FINLAND
FRANCE Banque Paribas Societe Generale
Ref 256 Paris
BP 141
3, Rue D'Antin
75078 Paris
Cedex 02
FRANCE
GERMANY Chase Bank A.G. Chase Bank A.G.
Alexanderstrasse 59 Frankfurt
Postfach 90 01 09
60441 Frankfurt/Main
GERMANY
GHANA Barclays Bank of Ghana Barclays Bank
Barclays House Accra
High Street
Accra
GHANA
GREECE Barclays Bank Plc National Bank of Greece S.A.
1 Kolokotroni Street Athens
10562 Athens A/c Chase Manhattan Bank, N.A.,
GREECE London
A/c No. 040/7/921578-68
HONG KONG The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
40/F One Exchange Square Hong Kong
8, Connaught Place
Central, Hong Kong
HONG KONG
HUNGARY Citibank Budapest Rt. Citibank Budapest Rt.
Vaci Utca 19-21 Budapest
1052 Budapest V
HUNGARY
INDIA The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
52/60 Mahatma Gandhi Road Bombay
Bombay 400 001
INDIA
Deutsche Bank AG, Bombay Branch Deutsche Bank
Securities & Custody Services Bombay
Kodak House
222 D.N. Road, Fort
Bombay 400 001
INDIA
INDONESIA The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
Banking Corporation Limited Jakarta
World Trade Center
J1. Jend Sudirman Kav. 29-31
Jakarta 10023
INDONESIA
IRELAND Bank of Ireland Allied Irish Bank
International Financial Services Centre Dublin
1 Harbourmaster Place
Dublin 1
IRELAND
ISRAEL Bank Leumi Le-Israel B.M. Bank Leumi Le-Israel B.M.
19 Herzl Street Tel Aviv
61000 Tel Aviv
ISRAEL
ITALY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Piazza Meda 1 Milan
20121 Milan
ITALY
JAPAN The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1-3 Marunouchi 1-Chome Tokyo
Chiyoda-Ku
Tokyo 100
JAPAN
JORDAN Arab Bank Limited Arab Bank Limited
P O Box 950544-5 Amman
Amman
Shmeisani
JORDAN
KENYA Barclays Bank of Kenya Barclays Bank of Kenya
Third Floor Nairobi
Queensway House
Nairobi
Kenya
LUXEMBOURG
Banque Generale du Luxembourg S.A. Banque Generale du Luxembourg
50 Avenue J.F. Kennedy S.A.
L-2951 LUXEMBOURG Luxembourg
MALAYSIA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Pernas International Kuala Lumpur
Jalan Sultan Ismail
50250, Kuala Lumpur
MALAYSIA
MAURITIUS Hongkong and Shanghai Banking The Hongkong and Shanghai Banking
Corporation Ltd Corporation Ltd.
Curepipe Road Curepipe
Curepipe
MAURITIUS
MEXICO The Chase Manhattan Bank, S.A. No correspondent Bank
(Equities)Montes Urales no. 470, 4th Floor
Col. Lomas de Chapultepec
11000 Mexico D.F.
(Government Banco Nacional de Mexico, No correspondent Bank
Bonds) Avenida Juarez No. 104 - 11 Piso
06040 Mexico D.F.
MEXICO
MOROCCO Banque Commerciale du Maroc Banque Commerciale du Maroc
2 Boulevard Moulay Youssef Casablanca
Casablanca 20000
MOROCCO
NETHERLANDS
ABN AMRO N.V. Generale Bank
Securities Centre Nederland N.V.
P O Box 3200 Rotterdam
4800 De Breda
NETHERLANDS
NEW ZEALAND
National Nominees Limited National Bank of New Zealand
Level 2 BNZ Tower Wellington
125 Queen Street
Auckland
NEW ZEALAND
NORWAY Den Norske Bank Den Norske Bank
Kirkegaten 21 Oslo
Oslo 1
NORWAY
PAKISTAN Citibank N.A. Citibank N.A.
I.I. Chundrigar Road Karachi
AWT Plaza
Karachi
PAKISTAN
Deutsche Bank Deutsche Bank
Unitowers Karachi
I.I. Chundrigar Road
Karachi
PAKISTAN
PERU Citibank, N.A. Citibank N.A.
Camino Real 457 Lima
CC Torre Real - 5th Floor
San Isidro, Lima 27
PERU
PHILIPPINES
The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
Hong Kong Bank Centre 3/F Manila
San Miguel Avenue
Ortigas Commercial Centre
Pasig Metro Manila
PHILIPPINES
POLAND Bank Polska Kasa Opieki S.A. Bank Polska Kasa Opieki S.A.
Curtis Plaza Warsaw
Woloska 18
02-675 Warsaw
POLAND
For Mutual Funds:
Bank Handlowy W. Warsawie. S.A. Bank Polska Kasa Opieki S.A.
Custody Dept. Warsaw
Capital Markets Centre
Ul, Nowy Swiat 6/12
00-920 Warsaw
POLAND
PORTUGAL Banco Espirito Santo & Comercial Banco Nacional Ultra Marino
de Lisboa Lisbon
Servico de Gestaode Titulos
R. Mouzinho da Silveira, 36 r/c
1200 Lisbon
PORTUGAL
SHANGHAI The Hongkong and Shanghai Citibank
(CHINA) Banking Corporation Limited New York
Shanghai Branch
Corporate Banking Centre
Unit 504, 5/F Shanghai Centre
1376 Nanjing Xi Lu
Shanghai
THE PEOPLE'S REPUBLIC OF CHINA
SHENZHEN The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
(CHINA) Banking Corporation Limited Hong Kong
1st Floor
Central Plaza Hotel
No.1 Chun Feng Lu
Shenzhen
THE PEOPLE'S REPUBLIC OF CHINA
SINGAPORE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Shell Tower Singapore
50 Raffles Place
Singapore 0104
SINGAPORE
SLOVAK REPUBLIC
Ceskoslovenska Obchodni Banka, A.S. Ceskoslovenska Obchodni Banka
Michalska 18 Slovak Republic
815 63 Bratislava
SLOVAK REPUBLIC
SOUTH AFRICA
Standard Bank of South Africa Standard Bank of South Africa
Standard Bank Chambers South Africa
46 Marshall Street
Johannesburg 2001
SOUTH AFRICA
SOUTH KOREA
The Hongkong & Shanghai The Hongkong & Shanghai
Banking Corporation Limited Banking Corporation Limited
6/F Kyobo Building Seoul
#1 Chongro, 1-ka Chongro-Ku,
Seoul
SOUTH KOREA
SPAIN The Chase Manhattan Bank, N.A. Banco Bilbao Vizcaya,
Calle Peonias 2 Madrid
7th Floor
La Piovera
28042 Madrid
SPAIN
SRI LANKA The Hongkong & Shanghai The Hongkong & Shangai
Banking Corporation Limited Banking Corporation Limited
Unit #02-02 West Block, Colombo
World Trade Center
Colombo 1,
SRI LANKA
SWEDEN Skandinaviska Enskilda Banken Svenska Handelsbanken
Kungstradgardsgatan 8 Stockholm
Stockholm S-106 40
SWEDEN
SWITZERLAND
Union Bank of Switzerland Union Bank of Switzerland
45 Bahnhofstrasse Zurich
8021 Zurich
SWITZERLAND
TAIWAN The Chase Manhattan Bank, N.A. No correspondent Bank
115 Min Sheng East Road - Sec 3,
9th Floor
Taipei
TAIWAN
Republic of China
THAILAND The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Bubhajit Building Bangkok
20 North Sathorn Road
Silom, Bangrak
Bangkok 10500
THAILAND
TUNISIA Banque Internationale Arabe de Tunisie Banque Internationale Arabe de
70-72 Avenue Habib Bourguiba Tunisie, Tunisia
P.O. Box 520
1080 Tunis Cedex
Tunisia
TURKEY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Emirhan Cad. No: 145 Istanbul
Atakule, A Blok Kat:11
80700-Dikilitas/Besiktas
Istanbul
Turkey
U.K. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Woolgate House London
Coleman Street
London EC2P 2HD
UNITED KINGDOM
URUGUAY The First National Bank of Boston The First National Bank of Boston
Zabala 1463 Montevideo
Montevideo
URUGUAY
U.S.A. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza New York
New York
NY 10081
U.S.A.
VENEZUELA Citibank N.A. Citibank N.A.
Carmelitas a Altagracia Caracas
Edificio Citibank
Caracas 1010
VENEZUELA
ZAMBIA Barclays Bank of Zambia Barclays Bank of Zambia
Kafue House Lusaka
Cairo Road
P.O.Box 31936
Lusaka
ZAMBIA
ZIMBABWE Barclays Bank of Zimbabwe Barclays Bank of Zimbabwe
Ground Floor Harare
Tanganyika House
Corner of 3rd Street & Union Avenue
Harare
ZIMBABWE
</TABLE>
<PAGE>
SECURITIES LENDING AGREEMENT ("Lending Agreement"), dated as of
____________, 1996 between ___________________ ("Lender"), having its principal
place of business at _________________ , and The Chase Manhattan Bank, N.A.
("Chase"), having its principal place of business at One Chase Manhattan Plaza,
New York, New York 10081.
It is hereby agreed as follows:
Section 1 - Definitions
Unless the context clearly requires otherwise, the following words
shall have the meanings set forth below when used herein:
a. "Account" shall mean the securities account established and
maintained by Chase on behalf of Lender pursuant to, as the case may be, a
separate custody agreement or a separate directed trust agreement ("Agreement")
between Chase and Lender, which Agreement provides, inter alia, for the
safekeeping of Securities received by Chase from time to time on behalf of
Lender.
b. "Agreement" shall have the meaning assigned thereto in Section 1(a)
hereof.
c. "Authorized Investment" shall mean any type of instrument, security,
participation or other property in which Cash Collateral may be invested or
reinvested, as described in Section 5(f) hereof and Appendix 4 hereto (and as
such Appendix may be amended from time to time by written agreement of the
parties).
d. "Authorized Person" shall mean, except to the extent that Chase is
advised to the contrary by Proper Instruction, any person who is authorized to
give instructions to Chase pursuant to the Agreement and any mandates given to
Chase in connection with such Agreement. An Authorized Person shall continue to
be so until such time as Chase receives Proper Instructions that nay such person
is no longer an Authorized Person.
e. "Borrower" shall mean an entity listed on Appendix 1 hereto, other
than an entity which Chase shall have been instructed to delete from list
pursuant to Written Instructions and as such Appendix may be amended in
accordance with Section 4(b) hereof.
f. "Business Day" shall have the meaning assigned thereto in the
applicable MSLA.
g. "Buy-in" shall have the meaning assigned thereto in Section 7(c)
hereof.
<PAGE>
h. "Cash Collateral" shall mean fed funds, New York Clearing House
Association funds and such non-U.S. currencies as may be pledged by a Borrower
in connection with a particular Loan.
i. "Collateral" shall have the meaning assigned thereto in the
applicable MSLA, together with Cash Collateral.
j. "Collateral Account" shall mean, as the case may be, an account
maintained by Chase with itself, with any Depository or with any Triparty
Institution and designated as a Collateral Account for the purpose of holding
any one or more of Collateral, Authorized Investments, and Proceeds in
connection with Loans hereunder.
k. "Collateral Amount" shall have the meaning assigned thereto in
Section 5(c) hereof.
l. "Collateral Criterion" shall have the meaning assigned thereto in
Section 5(c) hereof.
m. "Depository" shall mean: (1) the Depository Trust Company, the
Participants' Trust Company and any other securities depository or clearing
agency (and each of their respective successors and nominees) registered with
the U.S. Securities and Exchange Commission or registered with or regulated by
the applicable foreign equivalent thereof or otherwise able to act as a
securities depository or clearing agency, (ii) any transnational depository,
(iii) the Federal Reserve book-entry system for the receiving and delivering of
U.S. Government Securities, and (iv) any other national system for the receiving
and delivering of that country's government securities.
n. "Difference" shall have the meaning assigned thereto in Section 7(c)
hereof.
o. "Distributions" shall have the meaning assigned thereto in Section
3(b)(v) hereof.
p. "Dollars" shall have the meaning assigned thereto in Section 7(b)
hereof.
q. "Due Date" shall have the meaning assigned thereto in Section 7(b)
hereof.
r. "Insolvency Event" shall have the meaning assigned thereto in
Section 7(b) hereof.
s. "Letter of Credit" shall have the meaning assigned thereto in the
applicable MSLA and be issued by a bank listed on Appendix 2 hereto (as such
list may be amended by Chase from time to time on notice to Lender), other than
a bank deleted from such list pursuant to Written Instruction.
<PAGE>
t. "Loan" shall mean a loan of Securities hereunder and under the
applicable MSLA.
u. "Loan Fee" shall mean the amount payable by a Borrower to Chase
pursuant to the applicable MSLA in connection with Loans collateralized other
than by Cash Collateral.
v. "Market Value" shall have the meaning assigned thereto in the
applicable MSLA.
w. "MSLA" shall mean a master securities lending agreement between
Chase and a Borrower, pursuant to which Chase as agent lends securities on
behalf of its customers (including Lender) from time to time. A copy of Chase's
standard form of MSLA, including the international addendum thereto, is annexed
as Appendix 3.
x. "Net Assets" shall have the meaning assigned thereto in Section 8
hereof.
y. "Net Realized Income" shall have the meaning thereto in Section 8
hereof.
z. "Oral Instructions" shall have the meaning assigned thereto in
Section 10 hereof.
aa. "Proceeds" shall mean interest, dividends and other payments and
Distributions received by Chase in connection with Authorized Investments.
bb. "Proper Instructions" shall mean Oral Instructions and Written
Instructions.
cc. "Rebate" shall mean the amount payable by Chase on behalf of Lender
to a Borrower in connection with Loans collateralized by Cash Collateral.
dd. "Return Date" shall have the meaning assigned thereto in Section
7(c) hereof.
ee. "Securities" shall mean government securities (including U.S.
Government Securities), equity securities, bonds, debentures, other corporate
debt securities, notes, mortgages or other obligations, and any certificates,
warrants or other instruments representing rights to receive, purchase, or
subscribe for the same, or evidencing or representing any other rights or
interests therein and held pursuant to the Agreement.
ff. "Term Loan" shall have the meaning assigned thereto in Section 5(i)
hereof.
<PAGE>
gg. "Triparty Institution" shall mean a financial institution with
which Chase shall have previously entered a triparty agreement among itself,
such Triparty Institution and a particular Borrower providing, among other
things, for the holding of Collateral in a Collateral Account at such Triparty
Institution in Chase's name on behalf of Chase's lending customers and for the
substitution of Collateral; provided, however, that any substituted Collateral
shall meet the then standards for acceptable Collateral set by Chase.
hh. "U.S. Government Security" shall mean book-entry securities issued
by the U.S. Treasury defined in Subpart 0 of Treasury Department Circular No.
300 and any successor provisions) and any other securities issued or fully
guaranteed by the United States government or any agency, instrumentality or
establishment of the U.S. government, including, without limitation, securities
commonly known as "Ginnie Maes," Sally Maes," "Fannie Maes" and "Freddie Maes".
ii. "Written Instructions" shall have the meaning assigned thereto in
Section 10 hereof.
Section 2 - Appointment, Authority
(a) Appointment. Lender hereby appoints Chase as its agent to lend
Securities in the Account on Lender's behalf on a fully disclosed basis to
Borrowers from time to time in accordance with the terms hereof and on such
terms and conditions and at such times as Chase shall determine and Chase may
exercise all rights and powers provided under any MSLA as may be incidental
thereto, and Chase hereby accepts appointment as such agent and agrees to so
act.
(b) Authority. Lender hereby authorizes and empowers Chase to execute
in Lender's name on its behalf and at its risk all agreements and documents as
may be necessary to carry out any of the powers herein granted to Chase. Lender
grants Chase the authority set forth herein notwithstanding its awareness that
Chase, in its individual capacity or acting in a fiduciary capacity for other
accounts, may have transactions with the same institutions to which Chase may be
lending Securities hereunder, which transactions may give rise to actual or
potential conflict of interest situations. Chase shall not be bound to: (i)
account to Lender for any sum received or profit made by Chase for its own
account or the account of any other person or (ii) disclose or refuse to
disclose any information or take any other action if the same would or might in
Chase's judgment, made in good faith, constitute a breach of any law or
regulation or be otherwise actionable with respect to Chase; provided that, in
circumstances mentioned in (ii) above, Chase shall promptly inform Lender of the
relevant facts (except where doing so would, or might in Chase's judgment, made
in good faith, constitute a breach of any law or regulation or be otherwise
actionable as aforesaid).
<PAGE>
Section 3 - Representation and Warranties
(a) Representations of each party. Each party hereto represents and
warrants to the other that: (i) it has the power to execute and deliver this
Lending Agreement, to enter into the transactions contemplated hereby, and to
perform its obligations hereunder; (ii) it has taken all necessary action to
authorize such execution, delivery, and performance; (iii) this Lending
Agreement constitutes a legal, valid, and binding obligation enforceable against
it; and (iv) the execution, delivery, and performance by it of this Lending
Agreement shall at all times comply with all applicable laws and regulations.
(b) Representations of Lender. Lender represents and warrants to Chase
that: (i) this Lending Agreement is, and each Loan shall be, legally and validly
entered into, and does not and shall not violate any statute, regulation, rule,
order or judgment binding on Lender, or any provision of Lender's charter or
by-laws, or any agreement binding on Lender or affecting its property, and is
enforceable against Lender in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency or similar laws, or by equitable
principles relating to or limiting creditors' rights generally; (ii) the person
executing this Lending Agreement and all Authorized Persons acting on behalf of
Lender has and have been duly and properly authorized to do so; (iii) it is
lending Securities as principal and shall not transfer, assign or encumber its
interest in, or rights with respect to, any Securities available for Loan
hereunder; (iv) it is the beneficial owner of all Securities or otherwise has
the right to lend Securities; and (v) it is entitled to receive all interest,
dividends and other distributions ("Distributions") made by the issuer with
respect thereto. Lender shall promptly identify to Chase by notice, which notice
may be oral, any Securities that are no longer subject to the representations
contained in (b).
Section 4 - Borrowers
(a) MSLA. Lender hereby acknowledges receipt of the form of MSLA and
authorizes Chase to lend Securities in the Account to Borrowers thereunder
pursuant to an agreement substantially in the form thereof.
(b) Borrowers. Securities may be lent to any Borrower selected by Chase
in Chase's sole discretion, in accordance with the terms hereof. In that
connection, Appendix 1 may be amended from time to time by Chase on notice to
Lender.
<PAGE>
Section 5 - Loans
(a) Securities to be lent, Lending opportunities, Loan initiation. All
Securities of Lender held by Chase that are issued, settled or traded in the
markets that have been approved by Chase from time to time for purposes of
Chase's discretionary securities lending program shall be subject to the terms
hereof. Chase shall seek to assure that Lender receives a fair allocation of
lending opportunities vis-a-vis other lenders, taking into account the demand
for and availability of Securities, types of Collateral, eligibility of
Borrowers, limitations on investments of Cash Collateral, tax treatment, and
similar commercial factors. From time to time, Chase may lend to Borrowers
Securities held in the Account (except Securities that are no longer subject to
the representations set forth in Section 3) and shall deliver such Securities
against receipt of Collateral in accordance with the applicable MSLA. Chase
shall have the right to decline to make any Loans to any Borrower and to
discontinue lending to any Borrower in its sole discretion and without notice to
Lender.
(b) Receipt of Collateral, Collateral substitution. For each Loan,
Chase shall receive and hold Letters of Credit received as Collateral and Chase
or a Triparty Institution shall receive and hold all other Collateral required
by the applicable MSLA in a Collateral Account, and Chase is hereby authorized
and directed, without obtaining any further approval from Lender, to invest and
reinvest all or substantially all Cash Collateral. Chase shall credit, or where
applicable shall have a Triparty Institution credit, all Collateral, Authorized
Investments and Proceeds to a Collateral Account and Chase shall not mark its
books and records to identify Lender's interest therein, it being understood,
however, that all monies credited to a Collateral Account may for purposes of
investment be commingled with cash collateral held for other lenders of
securities on whose behalf Chase may act. Chase may, in its sole discretion,
liquidate any Authorized Investment and credit the net proceeds in a Collateral
Account. Chase shall accept substitutions of Collateral in accordance with the
applicable MSLA and shall credit, or where applicable shall have a Triparty
Institution credit, all such substitutions to a Collateral Account.
(c) Mark to market procedures. (i) Chase shall require initial
Collateral for a Loan in an amount determined by applying the then applicable
"Collateral Criterion" (as defined below) to the Market Value of the Security
that is the subject of the Loan. The Collateral Criterion with respect to a
given Security shall be an amount equal to the then applicable percentage
(currently 102% for securities issued in the U.S. and 105% for securities issued
outside of the U.S.) of the Market Value of the Security (plus accrued interest,
if any, with respect to debt securities) which is the subject of a Loan as
determined as of the close of trading on the preceding Business Day. (ii) Each
Business Day Chase shall determine if the Market Value of all Collateral
received by Chase from a given Borrower in connection with all loans to such
Borrower from all lenders is at least equal to the aggregate amount ("Collateral
Amount") determined by applying the applicable Collateral Criterion to each
security on loan to such Borrower from all lenders. (iii) In accordance with
general market practice, the Market Value of certain securities (including,
without limitation, U.S. Government Securities) whether on Loan or received as
Collateral, may be determined on a same day basis by reference to recognized
pricing services.
<PAGE>
(d) Demand for additional Collateral. If the determination made in
Section 5(c)(ii) above demonstrates that the Market Value of all Collateral
received from a given Borrower is not at least equal to the Collateral Amount,
Chase shall demand additional Collateral from such Borrower in accordance with
the applicable MSLA so as to meet the Collateral Amount by making specific
Loans; provided that, Chase may from time to time establish de minimis
guidelines pursuant to which a mark would not be made even where the aggregate
Collateral Amount has not been met.
(e) Changes in procedures applicable to Collateral. The Collateral
procedures set forth in Sections 5(b)-(d) above reflect Chase's current practice
and may be changed by Chase from time to time based on general market conditions
(including volatility of Securities on Loan and of securities Collateral), the
Market Value of Securities on Loan to a given Borrower, and in accordance with
general market practice and regulatory requirements. Chase shall notify Lender
of material revisions to the foregoing procedures.
(f) Investment of Cash Collateral. (i) Chase is hereby authorized to
invest and reinvest cash Collateral in accordance with the investment guidelines
(and the interpretations, procedures and definitions included therewith) annexed
hereto as Appendix 4. (ii) Authorized Investments are made for the account of,
and at the sole risk of, Lender. In that connection, Lender shall pay to Chase
on demand in cash an amount equal to any deficiency in the amount of Collateral
available for return to a Borrower pursuant to an applicable MSLA.
(g) Lender's rights with respect to Securities on Loan; Distribution
and voting rights. (i) An amount equal to the amount of all Distributions paid
with respect to Securities on Loan that Lender would have received had such
Securities not been on Loan shall be credited to Lender's account on the date
such Distributions are delivered by Borrower to Chase. Any non-cash Distribution
on Securities on Loan which is in the nature of a stock split or a stock
dividend, shall be added to the Loan (and shall be considered to constitute
Securities on Loan) as of the date such non-cash Distribution is received by the
Borrower and shall be subject to the provisions of this Lending Agreement;
provided that the Lender may, by giving chase ten (10) Business Days' notice
prior to the date of such non-cash Distribution (or such different amount of
time as Chase may from time to time require on advice to Lender), direct Chase
to request that the Borrower deliver such non-cash Distribution to Chase
pursuant to the applicable MSLA, in which case Chase shall credit such non-cash
Distribution to Lender's account on the date it is delivered to Chase. Without
regard to the reference to "delivered" in the foregoing, the "AutoCredit"
provisions of the Agreement shall apply where a Borrower fails to make a
Distribution payment to Chase, the effect of which would be for Chase to credit
Lender's account with Distributions on the payable date. (ii) During the term of
any Loan, Chase will permit the Securities on Loan to be transferred into the
name of and be voted by the Borrower or others. Lender shall not be entitled to
participate in any dividend reinvestment program or to vote proxies with respect
to Securities that are eligible for Loan (whether or not actually on Loan) as of
the applicable record date for such Securities.
(h) Advances, overdrafts and indebtedness, Security Interest. Chase
may, in its sole discretion, advance funds on behalf of Lender in order to pay
to Borrowers any Rebates or to
<PAGE>
return to Borrowers Cash Collateral to which they are entitled pursuant to the
applicable MSLA. Lender shall repay Chase on demand the amount of any advance or
any other amount owned by Lender hereunder plus accrued interest at a rate per
annum not to exceed the rate customarily charged by Chase for such loans at the
time such loan is made and shall otherwise be on such terms and conditions as
Chase customarily makes such loans available. In order to secure repayment of
any advance or other indebtedness of Lender to Chase arising hereunder, Chase
shall have a continuing lien and security interest in and to all assets now or
hereafter held in the Account and any Collateral Account (to which Lender is
entitled hereunder) and any other property at any time held by it for the
benefit of Lender or in which Lender may have an interest which is then in
Chase's possession or control or in the possession or control of any third party
acting on Chase's behalf. In this regard, Chase shall be entitled to all the
rights and remedies of a pledgee under common law and a secured party under the
New York Uniform Commercial Code and/or any other applicable laws and/or
regulations as then in effect.
(i) Termination of a Loan. (i) Loans shall generally be terminable on
demand. With the prior approval of Lender, however, Loans may be made on the
basis of a reasonably anticipated termination date ("Term Loan") and without
providing for the right of substitution of equivalent Securities. Termination of
a Term Loan prior to its anticipated termination date by either Lender or
Borrower may result in the terminating party having to pay non-terminating party
damages based on the cost of obtaining a replacement loan. (ii) Chase shall
terminate any Loan of Securities to a Borrower as soon as practicable after (a)
receipt by Chase of a notice of termination of the respective MSLA; (b) receipt
by Chase of Written Instructions directing it to terminate a Loan; (c) receipt
by Chase of Written Instructions instructing it to delete from Appendix 2 the
Borrower to whom such Loans was made; (d) receipt by Chase of Written
Instructions advising that the Security subject to a Loan is no longer subject
to the representation contained in Section 3 hereof; (e) receipt by Chase of
notice advising that an Event of Default (as defined in the applicable MSLA) has
occurred and is continuing beyond any applicable grace period; (f) whenever
Chase, in its sole discretion, elects to terminate such Loan other than a Term
Loan; or (g) termination of this Lending Agreement. (iii) If Securities which
are the subject of a Loan being terminated are to be sold by Lender, Written
Instructions shall in no event be given to Chase later than the trade date
established by Lender for such sale or such earlier date of which Chase may
advise Lender from time to time with respect to particular markets. Chase shall
not be liable for any failure of a Borrower to return Securities on Loans in a
time fashion.
(j) Recordkeeping and Reports. Chase shall establish and maintain such
records as are reasonably necessary to account for Loans that are made and the
income derived therefrom. Chase shall provide Lender with a monthly statement
describing the Loans made during the preceding month, and the income derived
from Loans, during the period covered by such statement. A party shall comply
with the reasonable requests of the other party for information necessary to the
requester's performance of its duties hereunder.
Section 6 - Default by Borrower
(1) Chase may assume (unless it has actual knowledge to the contrary)
that any representations made by a Borrower in connection with any Loan are
true, that no event which is
<PAGE>
or may become an Event of Default (as defined in the applicable MSLA) has
occurred and that a Borrower has complied with its obligations under the
applicable MSLA. Subject to Sections 7(b)-(d), Chase shall have no
responsibility for the accuracy or completeness of any information supplied, or
for any breach of any obligation, by any Borrower under or in connection with
any MSLA or Loan. Chase shall not be liable as a result of taking or omitting to
take any action provided that Chase shall have carried out its responsibilities
hereunder in good faith. (ii) If any Borrower with respect to any Loan affected
pursuant hereto and pursuant to the applicable MSLA fails to return any loaned
Securities when due thereunder for reasons other than relating to the solvency
of the Borrower, Chase shall then take whatever action its deems appropriate in
accordance with general market practice and Chase's reasonable judgment,
including, but no necessarily limited to, claiming compensation from such
Borrower on behalf of Lender in the event a trade executed by Lender fails on
account of such Borrower's failure timely to have returned Securities on Loan
or, where Chase deems it necessary, such other action as may be permitted by the
applicable MSLA, including collecting any applicable MSLA fails to return any
Securities on Loan when due thereunder for reasons relating to the solvency of
the Borrower, Chase shall take such action as its deems appropriate in
accordance with Chase's reasonable judgment under the applicable MSLA.
Section 7 - Standard of Care, Liabilities, Indemnification
(a) Standard of care, Liabilities. Except as provided in paragraphs (b)
and (c) hereof, Chase shall be liable for any costs, expenses, damages,
liabilities or claims (including attorneys' and accountants' fees) incurred by
Lender, except those costs, expenses, damages, liabilities and claims arising
out of the negligence, bad faith or willful misconduct of Chase. Chase shall
have no obligation hereunder for: (i) costs, expenses, damages, liabilities or
claims (including attorneys' and accountants' fees), which are sustained or
incurred by Lender by reason of any action or inaction by any pricing service,
any Depository or a Triparty Institution or their respective successors or
nominees; and (ii) any failure to perform any obligation due to any matters
beyond the control of Chase. In no event shall Chase be liable for indirect or
consequential damages or lost profits or loss of business, arising hereunder or
in connection herewith, even if previously informed of the possibility of such
damages and regardless of the form of action.
Except for any costs or expenses incurred by Chase in performing its
obligations pursuant to paragraphs (b) and (c) hereof any ordinary operating
expenses incurred by Chase in providing services hereunder, Lender shall
indemnify Chase and hold it harmless from and against any and all costs,
expenses, damages, liabilities or claims, including reasonable fees and expenses
of counsel, which Chase may sustain or incur or which may be asserted against
Chase by reason of or as a result of any action taken or omitted by Chase in
connection with operating under this Lending Agreement or enforcing Lender's
rights under the applicable MSLA, other than those costs, expenses, damages,
liabilities or claims arising out of the negligence, bad faith or willful
misconduct of Chase. The foregoing indemnity shall be a continuing obligation of
the Lender, its successors and assigns, notwithstanding the termination of any
Loans hereunder or of this Lending Agreement. Chase may charge any amounts to
which it is entitled hereunder against the Account, and Lender shall be entitled
to an accounting of all amounts so charged. Actions taken or omitted in reliance
upon Proper Instructions, or upon any information, order, indenture, stock
<PAGE>
certificate, power of attorney, assignment, affidavit or other instrument
reasonably believed by Chase, in good faith, to be genuine or bearing the
signature of a person or persons believed, in good faith, to be authorized to
sign, countersign or execute the same, shall be conclusively presumed to have
been taken or omitted in good faith.
(b) Indemnification of Lender in respect to Distributions. If the
Borrower in respect of any Loan effected pursuant hereto and pursuant to the
applicable MSLA fails, as a result of its bankruptcy, insolvency,
reorganization, liquidation, receivership or similar event (each an "Insolvency
Event"), to remit to Chase for Lender's account any Distributions on or with
respect to Securities on Loan when due (the "Due Date") in accordance with such
MSLA and such Due Date occurs at least one day prior to an Insolvency Event then
Chase shall at its expense (subject to paragraph (d) hereof) and within one (1)
Business Day of the Due Date, undertake the following: (i) with respect to
Distributions in the form of cash, Chase shall credit Lender's account with the
full amount of such Distributions and (ii) with respect to Distributions in the
form of securities, Chase shall, at its option, either purchase replacement
securities (of an equal amount of the same issue, class, type or series as the
Distributions) on the principal market in which such securities are traded or
credit Lender's account with the market value in United States dollars
("Dollars") of such Distributions on the Due Date as determined by Chase in good
faith. Market value shall be determined by Chase in accordance with the
applicable MSLA, including the computation of Dollar equivalents where
Securities on Loan and/or Collateral (and Proceeds) are denominated in a
currency other than Dollars.
(c) Indemnification of Lender in respect of Securities. If the Borrower
in respect of any Loan effected pursuant hereto and pursuant to the applicable
MSLA fails to return any Securities on Loan to Chase for Lender's account when
due thereunder (the "Return Date") which is the date of default, then Chase
shall, at its expense (subject to paragraph (d) hereof) and within one (1)
Business Day of the Return Date, credit Lender's account in Dollars with the
difference ("Difference") (where a positive number), if any, between (x) the
market value of such lent Securities on the Return Date (including, in the case
of debt Securities, accrued but unpaid interest), and (y) in the case of Loans
collateralized by (i) Cash Collateral, the greater of (A) the Market Value of
the Cash Collateral on the date of initial pledge as adjusted for any subsequent
marks-to-market through the Return Date and (B) the Market Value of Cash
Collateral investments on the Return Date, (ii) non-Cash Collateral comprising
securities Collateral, the greater of the Market Value of such Collateral on the
(A) Business Day immediately preceding the Return Date and (B) Return Date, or
(iii) non-Cash Collateral comprising Letter of Credit Collateral, the Market
Value of the Letter of Credit Collateral on the date of initial pledge as
adjusted for any subsequent marks-to-market through the Return Date. Market
Value shall be determined by Chase in accordance with the applicable MSLA,
including the computation of Dollar equivalents where Securities on Loan and/or
Collateral (and Proceeds) are denominated in a currency other than Dollars.
Where Cash Collateral and non-Cash Collateral have each been allocated to a Loan
as of the Return Date, the Difference payable by Chase shall be computed in
accordance with the foregoing as if there had been two Loans in effect on the
Return Date, one collateralized by Cash Collateral and the other collateralized
by non-Cash Collateral. In lieu of paying Lender the Difference, Chase may, at
its sole option and expense, purchase for Lender's
<PAGE>
account ("Buy-in") replacement securities of the same issue, type, class, and
series as that of the Securities on Loan.
(d) Subrogation. If Chase makes a payment or a purchase pursuant to
Section 7(b) or effects a Buy-in pursuant to Section 7(c), or if Chase effects a
Difference payment pursuant to Section 7(c) on account of a failure to return
Securities on Loan not arising from an Insolvency Event, Chase shall, to the
extent of such payment, purchase, Difference payment or Buy-in, be subrogated
to, and Lender shall assign and be deemed to have assigned to Chase, all of its
rights in, to and against the Borrower (and any guarantor thereof) in respect of
such Loan, any Collateral pledged by the Borrower in respect of such Loan, and
all proceeds of such Collateral. In the event that Lender receives or is
credited with any payment, benefit or value from or on behalf of the Borrower in
respect of rights to which Chase is subrogated as provided herein, Lender shall
promptly remit or pay to Chase the same (or its Dollar equivalent) but only to
the extent that Lender has been paid all amounts owed to it by Borrower.
Section 8 - Chase Compensation
(a) In connection with each Loan hereunder, Lender shall pay to Chase a
fee equal to ___% of (i) earnings (less any Rebate paid by Chase to a Borrower)
derived from Authorized Investments in connection with Loans collateralized by
cash, and (ii) any Securities Loan Fee paid or payable by the Borrower on Loans
not collateralized by cash. (b) The fee payable to Chase for services performed
pursuant to Section 5(f) hereof shall be equal to one tenth of the one percent
(0.1%) of the Fund's average daily Assets (with "Fund" being as defined in
Appendix 4 hereto). All securities in the Fund shall be valued based on their
amortized cost. Fees shall be accrued and charged daily against the Fund's yield
or assets, as appropriate, and shall be payable monthly in arrears on the first
business day of the month following the month in which earned. (c) Chase is
authorized, on a monthly basis, to charge all the foregoing fees (together with
reasonable expenses incurred by Chase hereunder) and any other amounts owed by
Lender hereunder against the Account and/or a Collateral Account.
Section 9 - Taxes
Lender shall be responsible for all filings, tax returns and reports on
any Loans undertaken by Chase on Lender's behalf which are to be made to any
authority whether governmental or otherwise and for the payment of all unpaid
calls, taxes (including, without limitations, any value added tax), imposts,
levies or duties due on any principal or interest, or any other liability or
payments arising out of or in connection with any Securities or any Collateral,
and in so far as Chase is under obligation (whether of a governmental nature or
otherwise) to pay the same on Lender's behalf Chase may do so out of any monies
or assets held by it pursuant to the terms of the Agreement or hereunder.
Section 10 - Instructions
(a)(i) Written Instructions. "Written Instructions" shall mean written
communications actually received by Chase from an Authorized Person or from a
person reasonably believed by
<PAGE>
Chase to be an Authorized Person by letter, memorandum, telegram, cable, telex,
telecopy facsimile, computer, video (CRT) terminal or other on-line system, or
any other method reasonably acceptable to Chase and whereby Chase is able to
verify with a reasonable degree of certainty the identity of the sender of such
communications or with communications are transmitted with proper testing or
authentication pursuant to terms and conditions which Chase may specify. (ii)
Oral Instructions. "Oral Instructions" shall mean oral communications actually
received by Chase from an Authorized Person or from a person reasonably believed
by Chase to be an Authorized Person. Oral Instructions shall promptly thereafter
be confirmed in writing by an Authorized Person (which confirmation may bear the
facsimile signature of such Person), but Lender will hold Chase harmless for the
failure of an Authorized Person to send such confirmation in writing, the
failure of such confirmation to conform to the Oral Instructions received, or
Chase's failure to produce such confirmation at any subsequent time. Lender
shall be responsible for safeguarding any testkeys, identification codes or
other security devices which Chase may make available to Lender or its
Authorized Persons.
(b) Unless otherwise expressly provided, all Proper Instructions shall
continue in full force and effect until canceled or superseded.
Section 11 - Pricing Services
Chase may use any pricing service referred to in an applicable MSLA and
any other recognized pricing service (including itself and any of its
affiliates) in order to perform its valuation responsibilities with respect to
Securities, Collateral and Authorized Investments, and Lender shall hold Chase
harmless from and against any loss or damage suffered or incurred as a result of
errors or omissions of any such pricing service.
Section 12 - Termination
This Lending Agreement may be terminated at any time by either party
upon delivery to the other party of notice specifying the date of such
termination, which shall be not less than 30 days after the date of receipt of
such notice. Notwithstanding any such notice, this Lending Agreement shall
continue in full force and effect with respect to all Loans outstanding on the
termination date, which Loans shall, however, be terminated as soon as
reasonably practicable.
Section 13 - Miscellaneous
(a) Legal proceedings. Chase may refrain from bringing any legal action
or proceeding arising out of or in connection with any Loan until it shall have
received such security as it may require for all costs, expenses (including
legal fees) and liabilities which it will or may expend or incur in relation
thereto.
(b) Integration, Lending Agreement to Govern. This Lending Agreement
and the Agreement contain the complete agreement of the parties with respect to
the subject matter hereof and supersede and replace any previously made
proposals, representations, warranties or
<PAGE>
agreements with respect thereto by the parties. In the event of any conflict
between this Lending Agreement, and the Agreement, this Lending Agreement shall
govern.
(c) Notice. Unless expressly provided herein to the contrary, notices
hereunder shall be in writing, and delivered by telecopier, overnight express
mail, first-class postage prepaid, delivered personally or by receipt courier
service. All such notices which are mailed shall be deemed delivered upon
receipt. Notices shall be addresses as follows (or to such other address as a
party may from time to time designate on notice duly given in accordance with
this paragraph): notices to Chase shall be addressed to it at 2 Chase Manhattan
Plaza, 19th Floor, New York, New York 10081, Attention: Securities Lending
Division; notices to be given to Lender shall be addressed
to it at its offices at _________________________ Attention: .
(d) Amendments, Waiver. This Lending Agreement may be modified only by
a written amendment signed by both parties, and no waiver of any provisions
hereof shall be effective unless expressed in a writing signed by the party to
be charged.
(e) Government Law, Consent to Jurisdiction, Waiver of Immunity. This
Lending Agreement shall be construed in accordance with laws of the State of New
York, without regard to the conflict of laws principles thereof. Chase and
Lender each hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and Lender hereby waives any claim of forum non conveniens to the
extent that it may lawfully do so. To the extent that in any jurisdiction Lender
may now or hereafter be entitled to claim, for itself or its assets, immunity
from suit, execution, attachment (before or after judgment) or other legal
process, Lender irrevocably shall not claim, and it hereby waives, such
immunity.
<PAGE>
(f) Counterparts, Headings. This Lending Agreement may be executed in
several counterparts, each one of which shall constitute an original, and all
collectively shall constitute but one instrument. The headings of the sections
hereof are included for convenience of reference only and do not form part of
this Lending Agreement.
(g) Severability. Any provisions of this Lending Agreement which may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceably in any jurisdiction
shall not invalidate or render unenforceable such provisions in any other
jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Lending Agreement as
of the date first above-written.
[Insert name of LENDER] THE CHASE MANHATTAN BANK, N.A.
By: By:
Title: Title:
<PAGE>
DELAWARE GROUP DELAWARE FUND, INC.
SHAREHOLDERS SERVICES AGREEMENT
THIS AGREEMENT, made as of this 29th day of June, 1988 by and between
DELAWARE GROUP DELAWARE FUND, INC. ("Fund"), a Maryland Corporation, and
DELEWARE SERVICE COMPANY, INC. ("DSC"), a Delaware Corporation, each having its
principal office and place of business at Ten Penn Center Plaza, Philadelphia,
Pennsylvania 19103.
W I T N E S S E T H:
WHEREAS, the Investment Management Agreement between Fund and Delaware
Management Company, Inc. provides that Fund shall conduct its own business and
affairs and shall bear the expenses and salaries necessary and incidental
thereto including, but not in limitation of the foregoing, the costs incurred
in: the maintenance of its corporate existence; the maintenance of its own
books, records and procedures; dealing with its own shareholders; the payment of
dividends; transfer of stock, including issuance and redemption of shares;
reports and notices to shareholders; calling and holding of shareholder
meetings; miscellaneous office expenses; brokerage commissions; legal and
accounting fees; taxes; and federal and state registration fees; and
WHEREAS, the predecessor to DSC previously served as the Shareholder
Services Agent for the Fund and the Fund has designated DSC to act as
Shareholder Services Agent for Fund as of the date of this Agreement; and
WHEREAS, Fund and DSC desire to have a written agreement concerning the
performance of the foregoing services and providing compensation therefor;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:
I. APPOINTMENT AS AGENT
Section 1.1 Fund hereby appoints DSC its Shareholder Services Agent to
provide as agent for the Fund services as Transfer Agent, Dividend Disbursing
Agent and Shareholder Servicing Agent and DSC hereby accepts such appointment
and agrees to provide Fund, as its agent, the services described
herein.
<PAGE>
Section 1.2 Fund shall pay DSC and DSC shall accept, for the services
provided hereunder, the compensation provided for in Section VIII hereof. Fund
also shall reimburse DSC for expenses incurred or advanced by it for the Fund in
connection with its services hereunder.
II. DOCUMENTATION
Section 2.1 Fund represents that it has provided or made available to
DSC (or has given DSC an opportunity to examine) copies of, and, DSC represents
that it has received from Fund (or is otherwise familiar with), the following
documents:
A. The Articles of Incorporation or other
document evidencing Fund's form of organization and any current amendments
thereto.
B. The By-Laws of Fund;
C. Any resolution or other action of Fund or
the Board of Directors of Fund establishing or affecting the rights, privileges
or other status of any class or series of shares of Fund, or altering or
abolishing any such class or series;
D. A certified copy of a resolution of the
Board of Directors of Fund appointing DSC as Shareholder Services Agent and
authorizing the execution of this Agreement;
E. The form of share certificates of Fund in
the form approved by the Board of Directors of Fund;
F. A copy of Fund's currently effective
prospectus and Statement of Additional Information under the Securities act of
1933;
G. Copies of all account application forms
and other documents relating to shareholder accounts in Fund.
H. Copies of documents relating to Plans of
Fund for the purchase, sale or repurchase of its shares, including periodic
payment or withdrawal plans, reinvestment plans or retirement plans;
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<PAGE>
I. Any opinion of counsel to Fund relating
to the authorization and validity of the shares of Fund issued or proposed to be
issued under the law of the State of Fund's organization, including the status
thereof under any applicable securities laws;
J. A certified copy of any resolution of the
Board of Directors of Fund authorizing any person to give instructions to DSC
under this Agreement, (with a specimen signature of such person if not already
provided), setting forth the scope of such authority; and
K. Any amendment, revocation or other
document altering, adding, qualifying or repealing any document or authority
called for under this Section 2.1.
Section 2.2 Fund and DSC may consult as to forms or documents that may
be required in performing services hereunder.
Section 2.3 Fund shall provide or make available to DSC a certified
copy of any resolution of the shareholders or the Board of Directors of Fund
providing for a dividend, capital gains distribution, distribution of capital,
stock dividend, stock split or other similar action affecting the authorization
or issuance of shares of Fund or the payment of dividends.
Section 2.4 In the case of any recapitalization or other capital
adjustment requiring a change in the form of stock or share certificate or the
books recording the same, Fund shall deliver or make available to DSC:
A. A certified copy of any document
authorizing or effecting such change;
B. Written instructions from an authorized
officer implementing such change; and
C. An opinion of counsel to Fund as to the
validity of such action, if requested by DSC.
Section 2.5 Fund warrants the following:
A. Fund is, or will be, a properly
registered investment company under the Investment Company Act of 1940 and any
and all shares which it issues will be properly registered and lawfully issued
under applicable federal and state laws.
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<PAGE>
B. The provisions of this contract do not
violate the terms of any instrument by which the Fund is bound; nor do they
violate any law or regulation of any body having jurisdiction over the Fund or
its property.
Section 2.6 DSC warrants the following:
A. DSC is and will be properly registered as
a transfer agent under the Securities Exchange Act of 1934 and is duly
authorized to serve, and may lawfully serve as such.
B. The provisions of this contract do not
violate the terms of any instrument by which the Fund is bound; nor do they
violate any law or regulation of any body having jurisdiction over DSC or its
property.
III. SHARE CERTIFICATES
Section 3.1 Fund shall furnish or authorize DSC to obtain, at Fund's
expense, a sufficient supply of blank stock certificates, and from time to time
will replenish such supply upon the request of DSC. Fund agrees to indemnify and
exonerate, save and hold DSC harmless, from and against any and all claims or
demands that may be asserted against DSC concerning the genuineness of any stock
certificate supplied to DSC pursuant to this section.
Section 3.2 DSC shall safeguard, and shall account to Fund, upon its
demand for, all such share certificates: (A) as issued, showing to whom issued,
or (B) as unissued, establishing the safekeeping, cancellation or destruction
thereof.
Section 3.3 Fund shall promptly inform DSC in writing of any change in
the officers authorized to sign share certificates or in the form thereof. If an
officer whose manual or fascimile signature is affixed to any blank share
certificate shall die, resign or be removed prior to the issuance of such
certificate, DSC may nevertheless issue such certificate notwithstanding such
death, resignation or removal, and the Fund shall with respect thereto, promptly
provide to DSC any approval, adoption or ratification as may be required by DSC.
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<PAGE>
IV. TRANSFER AGENT
Section 4.1 As Transfer Agent, DSC shall issue, redeem and transfer
Fund shares, and, in connection therewith but not in limitation thereof, it
shall:
A. Upon receipt of authority to issue
shares, determine the total shares to be issued and issue such shares by
crediting shares to accounts created and maintained in the registration forms
provided; as applicable, prepare, issue and deliver stock certificates.
B. Upon proper transfer authorization,
transfer shares by debiting transferor-shareholder accounts and crediting such
shares to accounts created and/or maintained for transferee-shareholders; if
applicable, issue and/or cancel stock certificates.
C. Upon proper redemption authorization,
determine the total shares to be redeemed and redeemed; determine the total
redemption payments to be made and made; redeem shares by debting shareholder
accounts; as applicable receive and cancel stock certificates for shares
redeemed; and remit or cause to be remitted the redemption proceeds to
shareholders.
D. Create and maintain accounts; reconcile
and control cash due and paid, shares issued and to be issued, cash to be
remitted and remitted and shares debted and credited to accounts; provide such
notices, instructions or authorizations as Fund may require.
Section 4.2 DSC shall not be required to issue, transfer or redeem Fund
shares upon receipt of it from Fund, or from any federal or state regulatory
agency or authority, written notice that the issuance, transfer or redemption of
Fund shares has been suspended or discontinued.
V. DIVIDEND DISBURSING AGENT
Section 5.1 As Dividend Disbursing Agent, DSC shall disburse and cause
to be disbursed to Fund shareholders Fund dividends, capital gains distributions
or any payments from other sources as directed by Fund. In connection therewith,
but not in limitation thereof, DSC shall:
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<PAGE>
A. Calculate the total disbursement due and
payable and the disbursement to each shareholder as to shares owned, in
accordance with Fund's authorization.
B. Calculate the total disbursements for
each shareholder, as aforesaid, to be disbursed in cash; prepare and mail check
therefor.
C. Calculate the total disbursement for each
shareholder, as aforesaid, for which Fund shares are to be issued, and
authorized and instruct the issuance of Fund shares therefor in accordance with
Section IV hereof.
D. Prepare and mail or deliver such forms
and notices pertaining to disbursements as required by the federal or state
authority.
E. Create and maintain records, reconcile
and control disbursements to be made and made, both as to cash and shares, as
aforesaid; provide such notices, instruction or authorization as Fund may
require.
Section 5.2 DSC shall not be required to make any disbursement upon the
receipt from Fund, or from any federal or state agency or authority, written
notice that such disbursement shall not be made.
VI. SHAREHOLDER SERVICING AGENT
Section 6.1 As Shareholder Servicing Agent, DSC shall provide those
services ancillary to but in implementation of the services provided under
Sections I through V hereof, and those generally defined and accepted as
Shareholder Services. In connection therewith, but not in limitation thereof,
DSC shall:
A. Except where instructed in writing by the
Fund not to do so, and where in compliance with applicable law, accept orders on
behalf of the Fund; receive and process investments and applications; remit to
Fund or its custodian payments for shares acquired and to be issued; and direct
the issuance of shares in accordance with Section IV hereof.
B. Receive, record and respond to
communications of shareholders and their agents.
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<PAGE>
C. As instructed by Fund, prepare and mail
shareholder account information, mail Fund shareholder reports and Fund
prospectuses.
D. Prepare and mail Fund proxies and
material for Fund shareholder meetings, receive and process proxies from
shareholders, and deliver such proxies as directed by Fund.
E. Administer investment plans offered by
Fund to investors and Fund shareholders, including Retirement Plans, including
activities not otherwise provided in Section I through V of this Agreement.
VII. PERFORMANCE OF DUTIES
Section 7.1 The parties hereto intend that Fund shareholders and their
shareholdings shall be confidential, and any information relating thereto shall
be released by DSC only to those persons or authorities who DSC has reason to
believe are authorized to receive such information; or, as instructed by Fund.
Section 7.2 DSC may, in performing this Agreement, require Fund or
Fund's distributor to provide it with an adequate number of copies of
prospectuses, reports or other documents required to be furnished to investors
or shareholders.
Section 7.3 DSC may request or receive instructions from Fund and may
at Fund's expense, consult with counsel for the Fund or its own counsel, with
respect to any matter arising in connection with the performance of its duties
hereunder, and shall not be liable for any action taken or omitted by it in good
faith in accordance with such instructions or opinions of counsel.
Section 7.4 DSC shall maintain reasonable insurance coverage for errors
and omissions and reasonable bond coverage for fraud.
Section 7.5 Upon notice thereof to Fund DSC may employ others to
provide services to DSC in its performance of this Agreement.
-7-
<PAGE>
Section 7.6 Personnel and facilities of DSC used to perform services
hereunder may be used to perform similar services to other Funds of the Delaware
Group and to others, and, may be used to perform other services for Fund, the
other Funds of the Delaware Group and others.
Section 7.7 DSC shall provide its services as transfer agent hereunder
in accordance with Section 17 of the Securities Exchange Act of 1934, and the
rules and regulations thereunder. Further, the parties intend that the
processes, procedures, safeguards and controls employed should be those
generally applied and accepted for the type services provided hereunder by other
institutions providing the same or similar services, and, those which should
provide efficient, safe and economical services so as to promote promptness and
accuracy and to maintain the integrity of Fund's records.
Section 7.8 Fund and DSC may, from time to time, set forth in writing
Guidelines For Selective Procedures to be applicable to the services hereunder.
VIII. COMPENSATION
Section 8.1 Fund and DSC acknowledge that because DSC has common
ownership and close management ties with Fund's investment advisor and Fund's
distributor and serves the other Funds of the Delaware Group, DSC having been
originally established to provide the services hereunder for Fund and the other
Funds of the Delaware Group, advantages and benefits to Fund in the employment
of DSC hereunder can be available which may not generally be available to it
from others providing similar services.
Section 8.2 Fund and DSC further acknowledge that the compensation by
Fund to DSC is intended to induce DSC to provide services under this agreement
of a nature and quality which the Board of Directors of Fund, including a
majority who are not parties to this agreement or interested person of the
parties hereto, has determined after due consideration to be necessary for the
conduct of the business of the Fund in the best interests of Fund and its
shareholders.
Section 8.3 Compensation by Fund to DSC hereunder shall be determined
in accordance with Schedule A hereto as it shall be amended from time to time as
provided for herein and which is incorporated herein as a part hereof.
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<PAGE>
Section 8.4 Compensation as provided in Schedule A shall be reviewed
and approved in the manner set forth in Section 10.1 hereof by the Board of
Directors of Fund at least annually and may be reviewed and approved more
frequently at the request of either party. The Board may request and DSC shall
provide such information as the Board may reasonably require to evaluate the
basis of and approve the compensation.
IX. STANDARD OF CARE
Section 9.1 Fund acknowledges that DSC shall not be liable for, and in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of the performance of its duties under this contract, agrees to
indemnify DSC against, any claim, or deficiency arising from the performance of
DSC's duties hereunder, including DSC's costs, counsel fees and expenses
incurred in investigating or defending any such claim or any administrative or
other proceeding, and acknowledges that any risk of loss or damage arising from
the conduct of the Fund's affairs in accordance herewith or in accordance with
Guidelines or instructions given hereunder, shall be borne by Fund.
X. CONTRACTUAL STATUS
Section 10.1 This Agreement shall be executed and become effective on
the date first written above if approved by a vote of the Board of Directors,
including an affirmative vote of a majority of the non-interested members of the
Board, cast in person at a meeting called for the purpose of voting on such
approval. It shall continue in effect for an indeterminate period, and is
subject to termination on sixty (60) days notice by either party unless earlier
terminated or amended by agreement among the parties. Compensation under this
Agreement shall require approval by a majority vote of the Board of Directors of
Fund, including an affirmative vote of the majority of the non-interested
members of the Board cast in person at a meeting called for the purpose of
voting such approval.
Section 10.2 This Agreement may not be assigned without the approval of
Fund.
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<PAGE>
Section 10.3 This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania.
DELAWARE SERVICE COMPANY, INC.
/s/ Joseph J. Daniero
----------------------------
Joseph J. Daniero
ATTEST: /s/ George M. Chamberlain
---------------------------
George M. Chamberlain
DELAWARE GROUP DELAWARE FUND, INC.
/s/ Wayne A. Stork
-----------------------------
Wayne A. Stork
ATTEST: /s/ Stephen C. Beach
---------------------------
Stephen C. Beach
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<PAGE>
SCHEDULE A
COMPENSATION
1. DSC will determine and report to the Fund, at least annually, the
compensation for services to be provided to the Fund for DSC's
forthcoming fiscal year or period.
2. In determining such compensation, DSC will fix and report a fee to be
charged per account and/or per transaction, as may be applicable, for
services provided. DSC will bill, and the Fund will pay, such
compensation monthly.
3. For the period commencing October 1, 1984, the charge
will be at the annual rate of $9.50 per account.
<PAGE>
SCHEDULE A
COMPENSATION
1. DSC will determine and report to the Fund, at least annually, the
compensation for services to be Provided to the Fund for DSC's
forthcoming fiscal year or period.
2. In determining such compensation, DSC will fix and report a fee to be
charged per account and/or per transaction, as may be applicable, for
services provided. DSC will bill, and the Fund will pay, such
compensation monthly.
3. The fee will consist of an annual per account charge
coupled with a series of transaction charges. These are
as follows:
A. ANNUAL CHARGE
Daily Dividend Funds $9.00 per annum
Other Funds $4.20 per annum
B. TRANSACTION CHARGE
TRANSACTION CHARGE
----------- ------
1. Dividend Payment $ 0.35
2. New Account 5.75
3. Purchase:
a. Wire 6.00
b. Money Market Automated 1.50
c. Other 2.25
4. Transfer 2.25
5. Certificate Issuance 2.00
6. Liquidation:
a. Wire 12.25
b. Draft .50
c. Money Market Regular 2.50
d. Daily Dividend Regular 6.00
7. Exchanges 7.00
<PAGE>
DELAWARE GROUP DELAWARE FUND, INC.
DIVIDEND GROWTH FUND SERIES
SHAREHOLDERS SERVICES AGREEMENT
THIS AGREEMENT, made this 29th day of December, 1993 by and between
DELAWARE GROUP DELAWARE FUND, INC. (the "Fund"), a Maryland Corporation, for the
DIVIDEND GROWTH FUND SERIES (the "Series"), and DELAWARE SERVICE COMPANY, INC.
("DSC"), a Delaware Corporation, each having its principal office and place of
business at 1818 Market Street, Philadelphia, Pennsylvania 19103.
W I T N E S S E T H:
WHEREAS, the Investment Management Agreement for the Series between the
Fund and Delaware Management Company, Inc. provides that the Fund shall conduct
its own business and affairs and shall bear the expenses and salaries necessary
and incidental thereto including, but not in limitation of the foregoing, the
costs incurred in: the maintenance of its corporate existence; the maintenance
of its own books, records and procedures; dealing with its own shareholders; the
payment of dividends; transfer of stock, including issuance and redemption of
shares; reports and notices to stockholders; calling and holding of stockholder
meetings; miscellaneous office expenses; brokerage commissions; legal and
accounting fees; taxes; and federal and state registration fees; and
WHEREAS, DSC serves as the Shareholder Services Agent for the other
series of the Fund and the Fund has designated DSC to act as Shareholder
Services Agent for this Series as of the date of this Agreement; and
WHEREAS, the Fund and DSC desire to have a written agreement concerning
the performance of the foregoing services and providing compensation therefor;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:
I. APPOINTMENT AS AGENT
1.1 The Fund hereby appoints DSC Shareholder Services Agent for the
Series to provide as agent for the Fund services as Transfer Agent, Dividend
Disbursing Agent and
<PAGE>
Shareholder Servicing Agent and DSC hereby accepts such appointment and agrees
to provide the Fund, as its agent, the services described herein.
1.2 The Fund shall pay DSC and DSC shall accept, for the services
provided hereunder, the compensation provided for in Section VIII hereof. The
Fund also shall reimburse DSC for expenses incurred or advanced by it for the
Fund in connection with its services hereunder.
II. DOCUMENTATION
2.1 The Fund represents that it has provided or made available to DSC
(or has given DSC an opportunity to examine) copies of, and DSC represents that
it has received from the Fund (or is otherwise familiar with), the following
documents:
(a) The Articles of Incorporation or other
documents evidencing the Fund's form of organization and any
current amendments or supplements thereto;
(b) The By-Laws of the Fund;
(c) Any resolution or other action of the Fund or the Board of
Directors of the Fund establishing or affecting the rights, privileges or other
status of each class or series of shares of the Fund, or altering or abolishing
each such class or series;
(d) A certified copy of a resolution of the Board of Directors
of the Fund appointing DSC as Shareholder Services Agent for the Series and
authorizing the execution of this Agreement;
(e) The form of share certificates of the Series in the form
approved by the Board of Directors of the Fund;
(f) A copy of the Fund's currently effective Prospectus(es)
and Statement of Additional Information under the Securities Act of 1933, if
effective;
(g) Copies of all account application forms and other
documents relating to stockholder accounts in the Series;
<PAGE>
(h) Copies of documents relating to Plans of the Fund for the
purchase, sale or repurchase of its shares, including periodic payment or
withdrawal plans, reinvestment plans or retirement plans;
(i) Any opinion of counsel to the Fund relating to the
authorization and validity of the shares of the Series issued or proposed to be
issued under the law of the State of the Fund's organization, including the
status thereof under any applicable securities laws;
(j) A certified copy of any resolution of the Board of
Directors of the Fund authorizing any person to give instructions to DSC under
this Agreement (with a specimen signature of such person if not already
provided), setting forth the scope of such authority; and
(k) Any amendment, revocation or other documents altering,
adding, qualifying or repeating any document or authority called for under this
Section 2.1.
2.2 The Fund and DSC may consult as to forms or documents that may be
required in performing services hereunder.
2.3 The Fund shall provide or make available to DSC a certified copy of
any resolution of the stockholders or the Board of Directors of the Fund
providing for a dividend,, capital gains distribution, distribution of capital,
stock dividend, stock split or other similar action affecting the authorization
or issuance of shares of the Fund or the payment of dividends.
2.4 In the case of any recapitalization or other capital adjustment
requiring a change in the form of stock certificate or the books recording the
same, the Fund shall deliver or make available to DSC:
(a) A certified copy of any document authorizing or effecting
such change;
(b) Written instructions from an authorized officer
implementing such change; and
(c) An opinion of counsel to the Fund as to the validity of
such action, if requested by DSC.
<PAGE>
2.5 The Fund warrants the following:
(a) The Fund is, or will be, a properly registered investment
company under the Investment Company Act of 1940 and any and all Series' shares
which it issues will be properly registered and lawfully issued under applicable
federal and state laws.
(b) The provisions of this contract do not violate the terms
of any instrument by which the Fund is bound; nor do they violate any law or
regulation of any body having jurisdiction over the Fund or its property.
2.6 DSC warrants the following:
(a) DSC is and will be properly registered as a transfer agent
under the Securities Exchange Act of 1934 and is duly authorized to serve, and
may lawfully serve as such.
(b) The provisions of this contract do not violate the terms
of any instrument by which DSC is bound; nor do they violate any law or
regulation of any body having jurisdiction over DSC or its property.
III. STOCK CERTIFICATES
3.1 The Fund shall furnish or authorize DSC to obtain, at the Fund's
expense, a sufficient supply of blank stock certificates for the Series, and
from time to time will replenish such supply upon the request of DSC. The Fund
agrees to indemnify and exonerate, save and hold DSC harmless, from and against
any and all claims or demands that may be asserted against DSC concerning the
genuineness of any stock certificate supplied to DSC pursuant to this Section.
3.2 DSC shall safeguard, and shall account to the Fund, upon its demand
for, all such stock certificates: (a) as issued, showing to whom issued, or (b)
as unissued,. establishing the safekeeping, cancellation or destruction thereof.
3.3 The Fund shall promptly inform DSC in writing of any change in the
officers authorized to sign stock certificates or in the form thereof. If an
officer whose manual or facsimile signature is affixed to any blank share
certificate shall die, resign or be removed prior to the issuance of such
certificate, DSC may nevertheless issue such
<PAGE>
certificate notwithstanding such death, resignation or removal, and the Fund
shall with respect thereto promptly provide to DSC any approval, adoption or
ratification as may be required by DSC.
IV. TRANSFER AGENT
4.1 As Transfer Agent for the Series, DSC shall issue, redeem and
transfer shares of the Series, and, in connection therewith but not in
limitation thereof, it shall:
(a) Upon receipt of authority to issue shares, determine the
total shares to be issued and issue such shares by crediting shares to accounts
created and maintained in the registration forms provided; as applicable,
prepare, issue and deliver stock certificates.
(b) Upon proper transfer authorization, transfer shares by
debiting transferor-stockholder accounts and crediting such shares to accounts
created and/or maintained for transferee-stockholders; if applicable, issue
and/or cancel stock certificates.
(c) Upon proper redemption authorization, determine the total
shares redeemed and to be redeemed; determine the total redemption payments made
and to be made; redeem shares by debiting stockholder accounts; as applicable
receive and cancel stock certificates for shares redeemed; and remit or cause to
be remitted the redemption proceeds to stockholders.
(d) Create and maintain accounts; reconcile and control cash
due and paid, shares issued and to be issued, cash remitted and to be remitted
and shares debited and credited to accounts; provide such notices, instructions
or authorizations as the Fund may require.
4.2 DSC shall not be required to issue, transfer or redeem Series'
shares upon receipt by DSC from the Fund, or from any federal or state
regulatory agency or authority, of written notice that the issuance, transfer or
redemption of Series' shares has been suspended or discontinued.
V. DIVIDEND DISBURSING AGENT
5.1 As Dividend Disbursing Agent for the Series, DSC shall disburse and
cause to be disbursed to Series'
<PAGE>
stockholders Series' dividends, capital gains distributions or any payments from
other sources as directed by the Fund. In connection therewith, but not in
limitation thereof, DSC shall:
(a) Calculate the total disbursement due and payable and the
disbursement to each stockholder as to shares owned, in accordance with the
Fund's authorization.
(b) Calculate the total disbursements for each stockholder, as
aforesaid, to be disbursed in cash; prepare and mail checks therefor.
(c) Calculate the total disbursement for each stockholder, as
aforesaid, for which Series' shares are to be issued and authorized and instruct
the issuance of Series' shares therefor in accordance with Section IV hereof.
(d) Prepare and mail or deliver such forms and notices
pertaining to disbursements as required by federal or state authority.
(e) Create and maintain records, reconcile and control
disbursements to be made and made, both as to cash and shares, as aforesaid;
provide such notices, instruction or authorization as the Fund may require.
5.2 DSC shall not be required to make any disbursement upon the receipt
by DSC from the Fund, or from any federal or state agency or authority, of
written notice that such disbursement shall not be made.
VI. SHAREHOLDER SERVICING AGENT
6.1 As Shareholder Servicing Agent for the Series, DSC shall provide
those services ancillary to but in implementation of the services provided under
Sections I through V hereof, and those generally defined and accepted as
shareholder services. In connection therewith, but not in limitation thereof,
DSC shall:
(a) Except where instructed in writing by the Fund not to do
so, and where in compliance with applicable law, accept orders relating to the
Series on behalf of the Fund; receive and process investments and applications;
remit to the Fund or its custodian payments for shares acquired and to be
issued; and direct the issuance of shares in accordance with Section IV hereof.
<PAGE>
(b) Receive, record and respond to communications of
stockholders and their agents.
(c) As instructed by the Fund, prepare and mail stockholder
account information, mail Series stockholder reports and Series prospectuses.
(d) Prepare and mail proxies and material for Fund stockholder
meetings, receive and process proxies from stockholders, and deliver such
proxies as directed by the Fund.
(e) Administer investment plans offered by the Fund to
investors and Series stockholders, including retirement plans, including
activities not otherwise provided in Section I through V of this Agreement.
VII. PERFORMANCE OF DUTIES
7.1 The parties hereto intend that Series stockholders and their
stockholdings shall be confidential, and any information relating thereto shall
be released by DSC only to those persons or authorities who DSC has reason to
believe are authorized to receive such information; or, as instructed by the
Fund.
7.2 DSC may, in performing this Agreement, require the Fund or the
Fund's distributor to provide it with an adequate number of copies of
prospectuses, reports or other documents required to be furnished to investors
or stockholders.
7.3 DSC may request or receive instructions from the Fund and may, at
the Fund's expense, consult with counsel for the Fund or its own counsel with
respect to any matter arising in connection with the performance of its duties
hereunder, and shall not be liable for any action taken or omitted by it in good
faith in accordance with such instructions or opinions of counsel.
7.4 DSC shall maintain reasonable insurance coverage for errors and
omissions and reasonable bond coverage for fraud.
7.5 Upon notice thereof to the Fund, DSC may employ others to provide
services to DSC in its performance of this Agreement.
<PAGE>
7.6 Personnel and facilities of DSC used to perform services hereunder
may be used to perform similar services to other funds of the Delaware Group and
to others, and may be used to perform other services for the Fund, the other
funds of the Delaware Group and others.
7.7 DSC shall provide its services as transfer agent hereunder in
accordance with Section 17 of the Securities Exchange Act of 1934, and the rules
and regulations thereunder. Further, the parties intend that the processes,
procedures, safeguards and controls employed should be those generally applied
and accepted for the type services provided hereunder by other institutions
providing the same or similar services, and, those which should provide
efficient, safe and economical services so as to promote promptness and accuracy
and to maintain the integrity of the Fund's records.
7.8 The Fund and DSC may, from time to time, set forth in writing
Guidelines For Selective Procedures to be applicable to the services hereunder.
VIII. COMPENSATION
8.1 The Fund and DSC acknowledge that because DSC has common ownership
and close management ties with the Fund's investment advisor and the Fund's
distributor and serves other funds in the Delaware Group (DSC having been
originally established to provide the services hereunder for the funds of the
Delaware Group), advantages and benefits to the Fund in the employment of DSC
hereunder can be available which may not generally be available to it from
others providing similar services.
8.2 The Fund and DSC further acknowledge that the compensation by the
Fund to DSC is intended to induce DSC to provide services under this Agreement
of a nature and quality which the Board of Directors of the Fund, including a
majority who are not parties to this Agreement or interested person of the
parties hereto, has determined after due consideration to be necessary for the
conduct of the business of the Fund, in the best interests of the Fund, the
Series and its stockholders.
8.3 Compensation by the Fund to DSC hereunder shall be determined in
accordance with Schedule A hereto as it shall be amended from time to time as
provided for herein and which is incorporated herein as a part hereof.
<PAGE>
8.4 Compensation as provided in Schedule A shall be reviewed and
approved in the manner set forth in Section 10.1 hereof by the Board of
Directors of the Fund at least annually and may be reviewed and approved more
frequently at the request of either party. The Board may request, and DSC shall
provide, such information as the Board may reasonably require to evaluate the
basis of and approve the compensation.
IX. STANDARD OF CARE
9.1 The Fund acknowledges that DSC shall not be liable for, and in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of the performance of its duties under this Agreement, agrees to
indemnify from the assets of the Series DSC against, any claim or deficiency
arising from the performance of DSC's duties hereunder, including DSC's costs,
counsel fees and expenses incurred in investigating or defending any such claim
or any administrative or other proceedings and acknowledges that any risk of
loss or damage arising from the conduct of the Fund's affairs in accordance
herewith or in accordance with Guidelines or instructions given hereunder, shall
be borne by the Fund from the assets of the Series.
X. CONTRACTUAL STATUS
10.1 This Agreement shall be executed and become effective on the date
first written above if approved by a vote of the Board of Directors of the Fund,
including an affirmative vote of a majority of the non-interested members of the
Board, cast in person at a meeting called for the purpose of voting on such
approval. It shall continue in effect for an indeterminate period, and is
subject to termination on sixty (60) days notice by either party unless earlier
terminated or amended by agreement among the parties. Compensation under this
Agreement shall require approval by a majority vote of the Board of Directors of
the Fund, including an affirmative vote of the majority of the non- interested
members of the Board cast in person at a meeting called for the purpose of
voting on such approval.
10.2 This Agreement may not be assigned without the approval of the
Fund.
<PAGE>
10.3 This Agreement shall be governed by the laws of the Commonwealth
of Pennsylvania.
DELAWARE SERVICE COMPANY, INC.
By: /s/David K. Scheuring
----------------------------
Name: David K. Scheuring
Title: President
Attest: /s/ Eric E. Miller
---------------------------
Name: Eric E. Miller
Title: Vice President/
Assistant Secretary
DELAWARE GROUP DELAWARE FUND, INC.
for the DIVIDEND GROWTH
FUND SERIES
By: /s/ Wayne A. Stork
----------------------------
Name: Wayne A. Stork
Title: Chairman
Attest: /s/ Richard J. Flannery
---------------------------
Name: Richard J. Flannery
Title: Vice President/
Assistant Secretary
<PAGE>
SCHEDULE A
COMPENSATION
1. Delaware Service Company (DSC) will determine and report to the Fund,
at least annually, the compensation for services to be provided to the
Fund for DSC's forthcoming fiscal year or period.
2. In determining such compensation, DSC will fix and report a fee to be
charged per account and/or per transaction, as may be applicable, for
services provided. DSC will bill, and the Fund will pay, such
compensation monthly.
3. For the period commencing April 1, 1993, the charge will consist of two
charges for all the Funds in the Delaware Group except the Premium Fund
and the Delaware Pooled Trust, an annual charge and a per transaction
charge.
These are as follows:
A. ANNUAL CHARGE
Daily Dividend Funds $11.00 per annum
Other Funds 5.50 per annum
Large Retirement Plan
Automated Account 6.00 per annum
B. TRANSACTION CHARGE
TRANSACTION CHARGE
----------- ------
1. Dividend Payment $ 0.25
2. New Account 6.00
3. Purchase:
a. Wire 8.00
b. Automated 1.50
c. Other 2.60
4. Transfer 8.00
5. Certificate Issuance 4.00
<PAGE>
6. Liquidation:
a. Wire 12.25
b. Draft .75
c. Money Market Regular 4.50
d. Other Regular 4.50
7. Exchanges 10.00
4. For the period commencing April 1, 1993, Delaware Service Company's
compensation for providing services to the Delaware Group Premium Fund,
Inc. will be $50,000 annually. DSC will bill, and the Delaware Group
Premium Fund, Inc. ("Fund") will pay, such compensation monthly
allocated among the current Series of the Fund based on the relative
percentage of assets of each Series at the time of billing and adjusted
appropriately to reflect the length of time a particular series is in
operation during any billing period.
5. For the period commencing April 1, 1993, Delaware Service Company's
compensation for providing services to the Delaware Pooled Trust, will
be $25,000 annually. DSC will bill, and the Delaware Pooled Trust
("Fund") will pay, such compensation monthly allocated among the
current Portfolio of the Fund based on the relative percentage of
assets of each Portfolio at the time of billing and adjusted
appropriately to reflect the length of time a particular portfolio is
in operation during any billing period.
<PAGE>
DELAWARE GROUP OF FUNDS
FUND ACCOUNTING AGREEMENT
THIS AGREEMENT, made as of this 19th day of August, 1996 by and between
the registered investment companies in the Delaware Group listed on Schedule A,
which Schedule may be amended from time to time as provided in Section 8 hereof
(each corporation or common law or business trust, hereinafter referred to as a
"Company," and all such entities collectively hereinafter referred to as, the
"Companies"), on behalf of the portfolio(s) of securities of such Companies
listed on Schedule A, which Schedule may be amended from time to time (when used
in this Agreement in the context of a Company that offers only a single
portfolio/series of shares, the term "Portfolio" shall be a reference to such
Company, and when used in the context of a Company that offers multiple
portfolios/series of shares, shall be a reference to each portfolio/series of
such Company) and DELAWARE SERVICE COMPANY, INC. ("DSC"), a Delaware
corporation, having its principal office and place of business at 1818 Market
Street, Philadelphia, Pennsylvania 19103.
W I T N E S S E T H:
WHEREAS, the Investment Management Agreements between the Companies
with respect to each Portfolio and either Delaware Management Company, Inc. or
its U.K. affiliate, Delaware
<PAGE>
International Advisers Ltd., provide, in part, that each Portfolio shall conduct
its business and affairs and shall bear the expenses necessary and incidental
thereto including, but not in limitation of the foregoing, the costs incurred
with respect to accounting services; and
WHEREAS, the services to be provided under this agreement
previously were provided by employees of the Companies; and
WHEREAS, the Companies and DSC desire to have a written agreement
concerning the performance of accounting services for each Portfolio and
providing compensation therefor;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:
I. APPOINTMENT AS AGENT
Section 1.1 The Companies hereby appoint DSC the accounting
agent ("Accounting Agent") for all of the classes of each Portfolio, to provide
such accounting services as are set forth herein and DSC hereby accepts such
appointment and agrees to provide the Companies, as their agent, the services
described herein.
Section 1.2 The Companies shall pay DSC and DSC shall accept,
for the services provided hereunder, the compensation provided for in Section VI
hereof. The Companies
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<PAGE>
also shall reimburse DSC for expenses incurred or advanced by it for the
Companies in connection with its services hereunder.
II. DOCUMENTATION
Section 2.1 Each Company represents that it has provided or
made available to DSC (or has given DSC an opportunity to examine) copies of,
and, DSC represents that it has received from the Companies (or is otherwise
familiar with), the following documents:
A. The Articles of Incorporation or
Agreement and Declaration of Trust or other document, as relevant, evidencing
each Company's form of organization and any current amendments thereto;
B. The By-Laws or Procedural
Guidelines of each Company;
C. Any resolution or other action of
each Company or the Board of Directors or Trustees of each Company establishing
or affecting the rights, privileges or other status of any class of shares of a
Portfolio, or altering or abolishing any such class;
D. A certified copy of a resolution
of the Board of Directors or Trustees of each Company appointing DSC as
Accounting Agent for each Portfolio and authorizing the execution of this
Agreement or an amendment to Schedule A of this Agreement;
-3-
<PAGE>
E. A copy of each Company's
currently effective prospectus[es] and Statement[s] of Additional Information
under the Securities Act of 1933, if effective;
F. A certified copy of any
resolution of the Board of Directors or Trustees of each Company authorizing any
person to give instructions to DSC under this Agreement (with a specimen
signature of such person if not already provided), setting forth the scope of
such authority; and
G. Any amendment, revocation or
other document altering, adding, qualifying or repealing any document or
authority called for under this Section 2.1.
Section 2.2 Each Company and DSC may consult as to forms or
documents that may be required in performing services hereunder.
Section 2.3 Each Company warrants the following:
A. The Company is, or will be, a
properly registered investment company under the Investment Company Act of 1940
(the "1940 Act") and any and all shares of a Portfolio which it issues will be
properly registered and lawfully issued under applicable federal and state laws.
B. The provisions of this contract
do not violate the terms of any instrument by which the Company or the Company
on behalf of a Portfolio is bound; nor do they violate any law or regulation of
any body having jurisdiction over the Company or its property.
Section 2.4 DSC warrants the following:
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<PAGE>
A. The provisions of this contract
do not violate the terms of any instrument by which DSC is bound; nor do they
violate any law or regulation of any body having jurisdiction over DSC or its
property.
III. SERVICES TO BE PROVIDED BY DSC
Section 3.1 Daily Net Asset Value ("NAV") Calculation. As
Accounting Agent for each Portfolio of the Companies, DSC will perform all
functions necessary to provide daily Portfolio NAV calculations, including:
A. Maintaining each Portfolio's
securities portfolio history by:
1. recording portfolio
purchases and sales;
2. recording corporate
actions and capital changes relating to portfolio securities;
3. accruing interest,
dividends and expenses; and
4. maintaining the income
history for securities purchased by a Portfolio.
B. Determining distributions to
Portfolio shareholders;
C. Recording and reconciling
shareholder activity including:
1. recording subscription,
liquidations and dividend reinvestments;
-5-
<PAGE>
2. recording settlements
of shareholder activity; and
3. reconciling Portfolio
shares outstanding to the records maintained by DSC, as transfer agent of the
Portfolio.
D. Valuing a Portfolio's securities
portfolio which includes determining the NAVs for all classes of the Portfolio;
E. Disseminating Portfolio NAVs and
dividends to interested parties (including the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), the Investment Company
Institute ("ICI"), Morningstar, and Lipper Analytical Services, Inc.
("Lipper")); and
F. Resolving pricing and/or custody
discrepancies.
Section 3.2 Financial Reporting. As Accounting Agent, DSC
shall perform financial reporting services for each Portfolio, which shall
include:
A. The preparation of semi-annual
and annual reports for shareholders which involves the performance of the
following functions:
1. preparing all
statements of net assets, statements of operations and statements of changes in
net assets for the Portfolio;
-6-
<PAGE>
2. preparing footnotes to
financial statements for the Portfolio;
3. preparing workpapers
for each Company's annual audit by its independent public accountants; and
4. coordinating the annual
audit by each Company's independent public accountants.
B. Reporting to the ICI in response
to requests for monthly and other periodic information;
C. Performing statistical reporting,
which includes daily, monthly, quarterly and annual reports for Lipper,
Weisenberger and other third party reporting agencies; and
D. Furnishing financial information
for any additional required SEC reporting, such as the preparation of financial
information for each Company's reporting on Form N-SAR, the furnishing of
financial information for each Company's prospectus[es] and statement[s] of
additional information, and the financial information required for each
Company's annual Rule 24f-2 notice filing;
Section 3.3 Compliance Testing. DSC will monitor, test and
prepare and maintain supporting schedules which evidence compliance with the
definitional and distribution requirements under the Internal Revenue Code of
1986, as amended ("IRC"), including the following:
-7-
<PAGE>
A. The requirement to be registered
at all times during the taxable year under the 1940 Act (IRC Section 851(a));
B. The annual ninety percent gross
income test (IRC Section 851(b)(2));
C. The short/short (thirty percent)
gross income test (IRC Section 851(b)(3));
D. The quarterly IRC industry
diversification tests (IRC Sections 851(b)(4) and 817(h)); and
E. The 90% distribution requirements
(IRC Section 852(a)).
Section 3.4 Other Services. In addition to the above, DSC, in
its capacity as Accounting Agent for the Company, will perform the following
services:
A. The calculation of required
Portfolio monthly yields and total return calculations in accordance with the
prescribed rules of the U.S. Securities and Exchange Commission;
B. Providing the financial
information necessary for the preparation of all federal and state tax returns
and ancillary schedules, including:
1. year-end excise tax
distributions; and
2. compliance with
Subchapter M and Section 4982 of the IRC;
-8-
<PAGE>
C. Performing special tax reporting
to shareholders, including the preparation of reports which reflect income
earned by each Portfolio by state, exempt income and distributions that qualify
for the corporate dividends received deduction;
D. The preparation of expense and
budget figures for each Portfolio, including the maintenance of detailed records
pertaining to expense accruals and payments and adjusting reports to reflect
accrual adjustments;
E. The preparation of reports for
Board of Directors' or Trustees' meetings;
F. Coordination of the custody
relationships;
G. Facilitating security
settlements;
H. Performance of required foreign
security accounting functions;
I. Performance of daily cash
reconciliations for each Portfolio;
J. Providing identified reports to
portfolio managers including:
1. providing portfolio
holdings and security valuation reports;
2. preparing cash
forecasts and reconciliations as mutually agreed upon; and
3. preparing income
projections.
-9-
<PAGE>
IV. PERFORMANCE OF DUTIES
Section 4.1 DSC may request or receive instructions from a
Company and may, at a Portfolio's expense, consult with counsel for the Company
or its own counsel, with respect to any matter arising in connection with the
performance of its duties hereunder, and shall not be liable for any action
taken or omitted by it in good faith in accordance with such instructions or
opinions of counsel.
Section 4.2 DSC shall maintain reasonable insurance coverage
for errors and omissions and reasonable bond coverage for fraud.
Section 4.3 Upon notice thereof to a Company, DSC may employ
others to provide services to DSC in its performance of this Agreement.
Section 4.4 Personnel and facilities of DSC used to perform
services hereunder may be used to perform similar services to all Companies of
the Delaware Group and their Portfolios and to others, and may be used to
perform other services for all of the Companies of the Delaware Group and
others.
Section 4.5 The Companies and DSC may, from time to time, set
forth in writing at the Companies' expense certain guidelines to be applicable
to the services hereunder.
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<PAGE>
V. ACCOUNTS AND RECORDS
Section 5.1 The parties hereto agree and acknowledge that the
accounts and records maintained by DSC with respect to a Portfolio shall be the
property of such Portfolio, and shall be made available to the relevant Company
promptly upon request and shall be maintained for the periods prescribed in Rule
31a-2 under the Investment Company Act of 1940 or such longer period as shall be
agreed to by the parties hereto, at such Portfolio's expense.
VI. COMPENSATION
Section 6.1 The Companies and DSC acknowledge that the
compensation to be paid hereunder to DSC is intended to induce DSC to provide
services under this Agreement of a nature and quality which the Boards of
Directors or Trustees of the Companies, including a majority who are not parties
to this Agreement or interested person of the parties hereto, have determined
after due consideration to be necessary for the conduct of the business of a
Portfolio in the best interests of a Portfolio and its shareholders.
Section 6.2 Compensation by a Portfolio hereunder shall be
determined in accordance with Schedule B hereto as it shall be amended from time
to time as provided for herein and which is incorporated herein as a part
hereof.
Section 6.3 Compensation as provided in Schedule B shall be
reviewed and approved for each Portfolio in the manner
-11-
<PAGE>
set forth in Section 8.1 hereof by the Boards of Directors or Trustees of the
Companies at least annually and may be reviewed and approved more frequently at
the request of either party. The Boards may request and DSC shall provide such
information as the Boards may reasonably require to evaluate the basis of and
approve the compensation.
VII. STANDARD OF CARE
Section 7.1 The Companies on behalf of each Portfolio
acknowledge that DSC shall not be liable for, and in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
performance of its duties under this contract, agree to indemnify DSC against,
any claim or deficiency arising from the performance of DSC's duties hereunder,
including DSC's costs, counsel fees and expenses incurred in investigating or
defending any such claim or any administrative or other proceeding, and
acknowledge that any risk of loss or damage arising from the conduct of a
Portfolio's affairs in accordance herewith or in accordance with guidelines or
instructions given hereunder, shall be borne by the Portfolio. The
indemnification provided for in this Section 7.1 shall be made Portfolio by
Portfolio so that DSC is only entitled to indemnification from a Company on
behalf of a Portfolio for actions arising from the performance of DSC's duties
as to that Portfolio.
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<PAGE>
VIII. CONTRACTUAL STATUS
Section 8.1 This Agreement shall be executed and become
effective as to a Company with regard to a Portfolio listed on Schedule A as of
the date first written above if approved by a vote of such Company's Board of
Directors or Trustees, including an affirmative vote of a majority of the non-
interested members of the Board of such Company, cast in person at a meeting
called for the purpose of voting on such approval. It shall continue in effect
for an indeterminate period, and is subject to termination as to a Company on
behalf of a Portfolio or DSC, as the case may be, on sixty (60) days notice by
either that Company or DSC, unless earlier terminated or amended by agreement
among the parties. A Company shall be permitted to terminate this Agreement as
to a Portfolio on sixty (60) days notice to DSC. Compensation under this
Agreement by a Portfolio shall require approval by a majority vote of the Board
of Directors or Trustees of such Portfolio's Company, including an affirmative
vote of the majority of the non-interested members of such Board cast in person
at a meeting called for the purpose of voting such approval.
Section 8.2 This Agreement shall become effective as to any
Company or Portfolio not included on Schedule A as of the date first written
above, but desiring to participate in this Agreement, on such date as an amended
Schedule A adding such new Company or Portfolio to such Schedule is executed by
DSC and such new Company or a Company on behalf of a new Portfolio following
-13-
<PAGE>
approval by the Company or by the Company on behalf of a new Portfolio desiring
to be included in this Agreement in accordance with the method specified in
Section 8.1. Any such amended Schedule A shall not affect the validity of this
Agreement as between DSC and the other Companies which have executed this
Agreement or any subsequent amendment to Schedule A of this Agreement.
Section 8.3 This Agreement may not be assigned by DSC without
the approval of all of the Companies.
Section 8.4 This Agreement shall be governed by the laws of
the Commonwealth of Pennsylvania.
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
--------------------------------
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT
FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP DELCHESTER HIGH-YIELD
BOND FUND, INC.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
DELAWARE GROUP VALUE FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL
FUNDS, INC.
-14-
<PAGE>
DELAWARE GROUP DELCAP FUND, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
By: /s/ Wayne A. Stork
--------------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
By: /s/ Wayne A. Stork
--------------------------------
Wayne A. Stork, Chairman
-15-
<PAGE>
SCHEDULE A
COMPANIES AND PORTFOLIOS COMPRISING THE DELAWARE GROUP*
Delaware Group Cash Reserve, Inc.
Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund
Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund
Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Trend Fund, Inc.
Delaware Group Delchester High-Yield Bond Fund, Inc.
- --------
* Except as otherwise noted, all Portfolios included on this Schedule A are
Existing Portfolios for purposes of the compensation described on Schedule B to
that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
Portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
-16-
<PAGE>
DMC Tax-Free Income Trust - Pennsylvania
Delaware Group Value Fund, Inc.
Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund (New)
Delaware Group DelCap Fund, Inc.
Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New) The
Defensive Equity Utility Portfolio (New) The Labor Select
International Equity Portfolio The Real Estate Investment
Trust Portfolio The Fixed Income Portfolio The Limited-Term
Maturity Portfolio (New) The Global Fixed Income Portfolio The
International Fixed Income Portfolio (New) The High-Yield Bond
Portfolio (New)
Delaware Group Premium Fund, Inc.
Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series (New)
Delaware Group Government Fund, Inc.
-17-
<PAGE>
Delaware Group Adviser Funds, Inc.
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
Dated as of: August 19, 1996
-18-
<PAGE>
SCHEDULE B
COMPENSATION
Fee Schedule for The Delaware Group of Funds
Part 1 -- Fees for Existing Portfolios
Existing Portfolios are those so designated on Schedule A to the Fund Accounting
Agreement between Delaware Service Company, Inc. and the Delaware Group of Funds
dated as of August 19, 1996 ("Agreement").
Annual Asset Based Fees
First $10 Billion of Aggregate
Complex Net Assets 2.5 Basis Points
Aggregate Complex Net Assets
over $10 Billion 2.0 Basis Points
Annual asset based fees will be charged at a rate of 2.5 basis points for the
first $10 Billion of Aggregate Complex Net Assets. Aggregate Complex Net Assets
over $10 Billion will be charged at a rate of 2.0 basis points. These fees will
be charged to a Portfolio on an aggregated pro rated basis.
Annual Minimum Fees
Domestic Equity Portfolio $35,000
Domestic Fixed Income Portfolio $45,000
International Series Portfolio $70,000
Per Class of Share Fee $ 4,000
There is an annual minimum fee that will be charged only if the annual asset
based fee is less than the calculation for the minimum fee. This fee is based on
the type and the number of classes per Portfolio. For an equity Portfolio
$35,000 will be charged; for a fixed income Portfolio $45,000 will be charged,
and for an international Portfolio $70,000 will be charged. For each class of
shares, $4,000 will be charged, such amount to be prorated over a period of less
than a year for any classes added after April 30, 1996. A total of all minimum
fees will be compared to the total asset based fee to determine which fee is
higher and, subsequently, will be used to bill the Companies.
Part 2 -- Fees for New Portfolios
For each Portfolio designated as a New Portfolio on Schedule A to the Agreement,
there will be a fee of 2.0 basis points, providing that the Delaware complex net
assets are above $10 Billion (the
-19-
<PAGE>
rate would be 2.5 basis points if under $10 Billion and then 2.0 basis points
once the net assets cross $10 Billion), or an annual minimum fee calculated in
the manner described above, whichever is higher. This new fee would be added to
the total of Existing Portfolio fees and then pro rated. Fees shall not be
charged for New Portfolios included on Schedule A until such Portfolios shall
have commenced operations.
Dated as of: August 19, 1996
-20-
<PAGE>
AMENDMENT NO. 1 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Cash Reserve, Inc.
Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund
Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Trend Fund, Inc.
Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund (New)
DMC Tax-Free Income Trust - Pennsylvania
*Except as otherwise noted, all Portfolios included on this Schedule A are
Existing Portfolios for purposes of the compensation described on Schedule B to
that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>
Delaware Group Value Fund, Inc.
Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund (New)
Delaware Group DelCap Fund, Inc.
Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio (New)
The Global Fixed Income Portfolio
The International Fixed Income Portfolio (New)
The High-Yield Bond Portfolio (New)
Delaware Group Premium Fund, Inc.
Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series (New)
Delaware Group Government Fund, Inc.
-2-
<PAGE>
Delaware Group Adviser Funds, Inc.
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
Dated as of: September 30, 1996
DELAWARE SERVICE COMPANY, INC.
By:/s/ David K. Downes
-------------------
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY
FUND,INC.
DELAWARE GROUP LIMITED-TERM
GOVERNMENT FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DMC TAX-FREE INCOME TRUST -
PENNSYLVANIA
DELAWARE GROUP VALUE FUND, INC.
DELAWARE GROUP GLOBAL &
INTERNATIONAL FUNDS, INC.
DELAWARE GROUP DELCAP FUND, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
By: /s/ Wayne A. Stork
------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
By: /s/ Wayne A. Stork
------------------------
Wayne A. Stork
Chairman
-3-
DELAWARE GROUP DELAWARE FUND, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
DELAWARE GROUP DELAWARE FUND, INC., a Maryland corporation
having its principal office in Baltimore, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended.
SECOND: The first sentence of ARTICLE SECOND of the Articles
of Incorporation, as amended and supplemented, is hereby amended to read as
follows:
SECOND: The name of the corporation is Delaware
Group Equity Funds I, Inc.
THIRD: The Articles of Incorporation of the Corporation, as
amended and supplemented, are further amended by changing the name of the
Corporation's Common Stock Series (the "Series"), to the Delaware Fund series,
and by deleting the old series name from the Articles of Incorporation, as
amended and supplemented to date, and inserting in lieu thereof the new series
name as changed hereby.
FOURTH: The Articles of Incorporation of the Corporation, as
amended and supplemented, are further amended by changing the name of the
Delaware Fund class of shares of the Series to the Delaware Fund A Class of
shares; by changing the name of the Delaware Fund (Institutional) class of
shares of the Series to the Delaware Fund Institutional Class of shares; and by
deleting the old names of such classes from the Articles of Incorporation, as
amended and supplemented to date, and inserting in lieu thereof, the new names
of such classes as changed hereby.
The name of the other two classes of Common
Stock of the Series, the Delaware Fund B Class and the Delaware
Fund C Class, shall remain unchanged.
FIFTH: The amendments to the Articles of Incorporation of the
Corporation as set forth above have been duly approved by a majority of the
entire Board of Directors of the Corporation as required by law and are limited
to changes permitted by Section 2-605(a)(4) of the Maryland General Corporation
Law to be made without action by the stockholders of the Corporation.
-1-
<PAGE>
SIXTH: The amendments to the Articles of Incorporation of the
Corporation as set forth above do not change the preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption of the shares that are the
subject of the name changes.
SEVENTH: These Articles of Amendment shall become effective at
5:00 P.M. on December 27, 1996.
IN WITNESS WHEREOF, DELAWARE GROUP DELAWARE FUND, INC. has
caused these Articles of Amendment to be signed in its name and on its behalf by
its Senior Vice President and attested by its Assistant Secretary on December
___, 1996.
DELAWARE GROUP DELAWARE FUND, INC.
By:________________________________
George M. Chamberlain, Jr.
Senior Vice President
Attest:
____________________________
Eric E. Miller
Assistant Secretary
-2-
<PAGE>
THE UNDERSIGNED, Senior Vice President of DELAWARE GROUP
DELAWARE FUND, INC., who executed on behalf of said Corporation the foregoing
Articles of Amendment, of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of said Corporation, the foregoing
Articles of Amendment to be the corporate act of said Corporation and further
certifies that, to the best of his knowledge, information and belief, the
matters and facts set forth therein with respect to the approval thereof are
true in all material respects, under the penalties of perjury.
______________________________
George M. Chamberlain, Jr.
Senior Vice President
-3-
<PAGE>
Consent of Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses of Delaware Group Equity Funds I, Inc. -
Delaware Fund and Delaware Group Equity Funds I, Inc. - Devon Fund (formerly
Delaware Group Delaware Fund, Inc. - Delaware Fund and Delaware Group Delaware
Fund, Inc. - Devon Fund respectively) and "Financial Statements" in the
Statement of Additional Information of Delaware Group Equity Funds I, Inc.
(formerly Delaware Group Delaware Fund, Inc.) and to the incorporation by
reference in this Post-Effective Amendment No. 104 to the Registration Statement
(Form N-1A No.2-10765), of Delaware Group Equity Funds I, Inc. (formerly
Delaware Group Delaware Fund, Inc.) of our reports dated December 16, 1996,
included in the 1996 Annual Reports to Shareholders of the Delaware Group Equity
Funds I, Inc. - Delaware Fund and Delaware Group Equity Funds I, Inc. - Devon
Fund (formerly Delaware Group Delaware Fund, Inc. - Delaware Fund and Delaware
Group Delaware Fund, Inc. - Devon Fund respectively).
Philadelphia, Pennsylvania
December 20, 1996
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Delaware Fund, Inc. - Devon Fund
We have audited the accompanying statement of net assets of Delaware Group
Delaware Fund, Inc. - Devon Fund as of October 31, 1996, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each period from December 29, 1993 (date of initial public
offering) to October 31, 1996. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Delaware Fund, Inc. - Devon Fund at October 31, 1996, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each period from December 29, 1993 (date of initial public offering) to October
31, 1996, in conformity with generally accepted accounting principles.
Philadelphia, Pennsylvania
December 16, 1996
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Delaware Fund, Inc. - Delaware Fund
We have audited the accompanying statement of net assets of Delaware Group
Delaware Fund, Inc. - Delaware Fund as of October 31, 1996, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Delaware Fund, Inc. - Delaware Fund at October 31, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
Philadelphia, Pennsylvania
December 16, 1996
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
<PAGE>
DELAWARE GROUP DELAWARE FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $20.00
Initial Shares 50.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 50.000 $0.120 0.289 50.289
- --------------------------------------------------------------------------------
Ending Shares 50.289
Ending NAV x $21.19
----------
$1,065.62
Less CDSC $10.00
----------
Investment Return $1,055.62
Total Return Performance
- ------------------------
Investment Return $1,055.62
Less Initial Investment $1,000.00
---------
$55.62/$1,000.00 x 100
Total Return: 5.56%
<PAGE>
DELAWARE GROUP DELAWARE FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $20.00
Initial Shares 50.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 50.000 $0.120 0.289 50.289
- --------------------------------------------------------------------------------
Ending Shares 50.289
Ending NAV x $21.19
----------
Investment Return $1,065.62
Total Return Performance
- ------------------------
Investment Return $1,065.62
Less Initial Investment $1,000.00
---------
$65.62/$1,000.00 x 100
Total Return: 6.56%
<PAGE>
DELAWARE GROUP DELAWARE FUND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $20.00
Initial Shares 50.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 50.000 $0.240 0.582 50.582
- --------------------------------------------------------------------------------
Ending Shares 50.582
Ending NAV x $21.19
----------
$1,071.83
Less CDSC $10.00
----------
Investment Return $1,061.83
Total Return Performance
- ------------------------
Investment Return $1,061.83
Less Initial Investment $1,000.00
---------
$61.83/$1,000.00 x 100
Total Return: 6.18%
<PAGE>
DELAWARE GROUP DELAWARE FUND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $20.00
Initial Shares 50.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 50.000 $0.240 0.582 50.582
- --------------------------------------------------------------------------------
Ending Shares 50.582
Ending NAV x $21.19
----------
Investment Return $1,071.83
Total Return Performance
- ------------------------
Investment Return $1,071.83
Less Initial Investment $1,000.00
---------
$71.83/$1,000.00 x 100
Total Return: 7.18%
<PAGE>
DELAWARE GROUP DELAWARE FUND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $20.16
Initial Shares 49.603
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 49.603 $0.360 0.880 50.483
- --------------------------------------------------------------------------------
Ending Shares 50.483
Ending NAV x $21.19
---------
$1,069.73
Less CDSC $10.00
----------
Investment Return $1,059.73
Total Return Performance
- ------------------------
Investment Return $1,059.73
Less Initial Investment $1,000.00
---------
$59.73/$1,000.00 x 100
Total Return: 5.97%
<PAGE>
DELAWARE GROUP DELAWARE FUND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $20.16
Initial Shares 49.603
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 49.603 $0.360 0.880 50.483
- --------------------------------------------------------------------------------
Ending Shares 50.483
Ending NAV x $21.19
---------
Investment Return $1,069.73
Total Return Performance
- ------------------------
Investment Return $1,069.73
Less Initial Investment $1,000.00
---------
$69.73/$1,000.00 x 100
Total Return: 6.97%
<PAGE>
DELAWARE GROUP DELAWARE FUND C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $20.50
Initial Shares 48.780
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 48.780 $1.660 4.138 52.918
- --------------------------------------------------------------------------------
Ending Shares 52.918
Ending NAV x $21.19
---------
$1,121.33
Less CDSC $10.00
----------
Investment Return $1,111.33
Total Return Performance
- ------------------------
Investment Return $1,111.33
Less Initial Investment $1,000.00
---------
$111.33/$1,000.00 x 100
Total Return: 11.13%
<PAGE>
DELAWARE GROUP DELAWARE FUND C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $20.50
Initial Shares 48.780
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 48.780 $1.660 4.138 52.918
- --------------------------------------------------------------------------------
Ending Shares 52.918
Ending NAV x $21.19
---------
Investment Return $1,121.33
Total Return Performance
- ------------------------
Investment Return $1,121.33
Less Initial Investment $1,000.00
---------
$121.33/$1,000.00 x 100
Total Return: 12.13%
<PAGE>
DELAWARE GROUP DEVON FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.20
Initial Shares 75.758
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 75.758 $0.030 0.160 75.918
- --------------------------------------------------------------------------------
Ending Shares 75.918
Ending NAV x $14.53
---------
$1,103.09
Less CDSC $10.00
----------
Investment Return $1,093.09
Total Return Performance
- ------------------------
Investment Return $1,093.09
Less Initial Investment $1,000.00
---------
$93.09/$1,000.00 x 100
Total Return: 9.31%
<PAGE>
DELAWARE GROUP DEVON FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.20
Initial Shares 75.758
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 75.758 $0.030 0.160 75.918
- --------------------------------------------------------------------------------
Ending Shares 75.918
Ending NAV x $14.53
---------
Investment Return $1,103.09
Total Return Performance
- ------------------------
Investment Return $1,103.09
Less Initial Investment $1,000.00
---------
$103.09/$1,000.00 x 100
Total Return: 10.31%
<PAGE>
DELAWARE GROUP DEVON FUND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.20
Initial Shares 75.758
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 75.758 $0.060 0.324 76.082
- --------------------------------------------------------------------------------
Ending Shares 76.082
Ending NAV x $14.53
---------
$1,105.47
Less CDSC $10.00
----------
Investment Return $1,095.47
Total Return Performance
- ------------------------
Investment Return $1,095.47
Less Initial Investment $1,000.00
---------
$95.47/$1,000.00 x 100
Total Return: 9.55%
<PAGE>
DELAWARE GROUP DEVON FUND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.20
Initial Shares 75.758
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 75.758 $0.060 0.324 76.082
- --------------------------------------------------------------------------------
Ending Shares 76.082
Ending NAV x $14.53
---------
Investment Return $1,105.47
Total Return Performance
- ------------------------
Investment Return $1,105.47
Less Initial Investment $1,000.00
---------
$105.47/$1,000.00 x 100
Total Return: 10.55%
<PAGE>
DELAWARE GROUP DEVON FUND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.20
Initial Shares 76.805
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 76.805 $0.090 0.507 77.312
- --------------------------------------------------------------------------------
Ending Shares 77.312
Ending NAV x $14.53
---------
$1,123.34
Less CDSC $10.00
----------
Investment Return $1,113.34
Total Return Performance
- ------------------------
Investment Return $1,113.34
Less Initial Investment $1,000.00
---------
$113.34/$1,000.00 x 100
Total Return: 11.33%
<PAGE>
DELAWARE GROUP DEVON FUND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.02
Initial Shares 76.805
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 76.805 $0.090 0.507 77.312
- --------------------------------------------------------------------------------
Ending Shares 77.312
Ending NAV x $14.53
---------
Investment Return $1,123.34
Total Return Performance
- ------------------------
Investment Return $1,123.34
Less Initial Investment $1,000.00
---------
$123.34/$1,000.00 x 100
Total Return: 12.33%
<PAGE>
DELAWARE GROUP DEVON FUND C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.02
Initial Shares 76.805
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 76.805 $0.835 5.056 81.861
- --------------------------------------------------------------------------------
Ending Shares 81.861
Ending NAV x $14.53
---------
$1,189.44
Less CDSC $10.00
----------
Investment Return $1,179.44
Total Return Performance
- ------------------------
Investment Return $1,179.44
Less Initial Investment $1,000.00
---------
$179.44/$1,000.00 x 100
Total Return: 17.94%
<PAGE>
DELAWARE GROUP DEVON FUND C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $13.02
Initial Shares 76.805
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 76.805 $0.835 5.056 81.861
- --------------------------------------------------------------------------------
Ending Shares 81.861
Ending NAV x $14.53
---------
Investment Return $1,189.44
Total Return Performance
- ------------------------
Investment Return $1,189.44
Less Initial Investment $1,000.00
---------
$189.44/$1,000.00 x 100
Total Return: 18.94%
<TABLE> <S> <C>
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<CIK> 0000027801
<NAME> DELAWARE GROUP DELAWARE FUND, INC.
<SERIES>
<NUMBER> 011
<NAME> DELAWARE FUND FUND A CLASS
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<PERIOD-END> OCT-31-1996
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<TOTAL-ASSETS> 630,000,719
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<SENIOR-EQUITY> 29,380,347
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<DIVIDEND-INCOME> 10,345,222
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<DISTRIBUTIONS-OF-GAINS> 26,400,790
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<NUMBER-OF-SHARES-SOLD> 1,080,212
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<SHARES-REINVESTED> 1,633,576
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<ACCUMULATED-GAINS-PRIOR> 32,326,768
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<OVERDIST-NET-GAINS-PRIOR> 0
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<EXPENSE-RATIO> 0.99
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</TABLE>
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<NAME> DELAWARE GROUP DELAWARE FUND, INC.
<SERIES>
<NUMBER> 012
<NAME> DELAWARE FUND SERIES B CLASS
<S> <C>
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<PERIOD-END> OCT-31-1996
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<INVESTMENTS-AT-VALUE> 616,831,944
<RECEIVABLES> 13,162,950
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<OTHER-ITEMS-ASSETS> 473
<TOTAL-ASSETS> 630,000,719
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<OTHER-ITEMS-LIABILITIES> 1,844,683
<TOTAL-LIABILITIES> 5,237,863
<SENIOR-EQUITY> 29,380,347
<PAID-IN-CAPITAL-COMMON> 461,655,377
<SHARES-COMMON-STOCK> 324,181
<SHARES-COMMON-PRIOR> 170,037
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 56,216,990
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 72,630,379
<NET-ASSETS> 6,872,291
<DIVIDEND-INCOME> 10,345,222
<INTEREST-INCOME> 16,572,891
<OTHER-INCOME> 0
<EXPENSES-NET> 5,902,608
<NET-INVESTMENT-INCOME> 21,015,505
<REALIZED-GAINS-CURRENT> 56,652,521
<APPREC-INCREASE-CURRENT> 14,064,318
<NET-CHANGE-FROM-OPS> 91,732,344
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 124,247
<DISTRIBUTIONS-OF-GAINS> 191,178
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 201,616
<NUMBER-OF-SHARES-REDEEMED> 62,659
<SHARES-REINVESTED> 15,187
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<GROSS-ADVISORY-FEES> 3,164,486
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,902,608
<AVERAGE-NET-ASSETS> 5,030,902
<PER-SHARE-NAV-BEGIN> 19.900
<PER-SHARE-NII> 0.525
<PER-SHARE-GAIN-APPREC> 2.350
<PER-SHARE-DIVIDEND> 0.495
<PER-SHARE-DISTRIBUTIONS> 1.080
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.200
<EXPENSE-RATIO> 1.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000027801
<NAME> DELAWARE GROUP DELAWARE FUND, INC.
<SERIES>
<NUMBER> 013
<NAME> DELAWARE FUND SERIES C CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 544,201,565
<INVESTMENTS-AT-VALUE> 616,831,944
<RECEIVABLES> 13,162,950
<ASSETS-OTHER> 5,352
<OTHER-ITEMS-ASSETS> 473
<TOTAL-ASSETS> 630,000,719
<PAYABLE-FOR-SECURITIES> 3,393,180
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,844,683
<TOTAL-LIABILITIES> 5,237,863
<SENIOR-EQUITY> 29,380,347
<PAID-IN-CAPITAL-COMMON> 461,655,377
<SHARES-COMMON-STOCK> 93,924
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 4,879,763
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 56,216,990
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 72,630,379
<NET-ASSETS> 1,989,702
<DIVIDEND-INCOME> 10,345,222
<INTEREST-INCOME> 16,572,891
<OTHER-INCOME> 0
<EXPENSES-NET> 5,902,608
<NET-INVESTMENT-INCOME> 21,015,505
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<APPREC-INCREASE-CURRENT> 14,064,318
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 23,243
<DISTRIBUTIONS-OF-GAINS> 270
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 103,606
<NUMBER-OF-SHARES-REDEEMED> 10,742
<SHARES-REINVESTED> 1,060
<NET-CHANGE-IN-ASSETS> 19,390,041
<ACCUMULATED-NII-PRIOR> 3,693,199
<ACCUMULATED-GAINS-PRIOR> 32,326,768
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,164,486
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,902,608
<AVERAGE-NET-ASSETS> 972,389
<PER-SHARE-NAV-BEGIN> 20.500
<PER-SHARE-NII> 0.583
<PER-SHARE-GAIN-APPREC> 1.757
<PER-SHARE-DIVIDEND> 0.580
<PER-SHARE-DISTRIBUTIONS> 1.080
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.180
<EXPENSE-RATIO> 1.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000027801
<NAME> DELAWARE GROUP DELAWARE FUND, INC.
<SERIES>
<NUMBER> 014
<NAME> DELAWARE FUND SERIES INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 544,201,565
<INVESTMENTS-AT-VALUE> 616,831,944
<RECEIVABLES> 13,162,950
<ASSETS-OTHER> 5,352
<OTHER-ITEMS-ASSETS> 473
<TOTAL-ASSETS> 630,000,719
<PAYABLE-FOR-SECURITIES> 3,393,180
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<TOTAL-LIABILITIES> 5,237,863
<SENIOR-EQUITY> 29,380,347
<PAID-IN-CAPITAL-COMMON> 461,655,377
<SHARES-COMMON-STOCK> 5,904,013
<SHARES-COMMON-PRIOR> 5,443,950
<ACCUMULATED-NII-CURRENT> 4,879,763
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 56,216,990
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 72,630,379
<NET-ASSETS> 125,750,716
<DIVIDEND-INCOME> 10,345,222
<INTEREST-INCOME> 16,572,891
<OTHER-INCOME> 0
<EXPENSES-NET> 5,902,608
<NET-INVESTMENT-INCOME> 21,015,505
<REALIZED-GAINS-CURRENT> 56,652,521
<APPREC-INCREASE-CURRENT> 14,064,318
<NET-CHANGE-FROM-OPS> 91,732,344
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,004,834
<DISTRIBUTIONS-OF-GAINS> 6,170,061
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,580,497
<NUMBER-OF-SHARES-REDEEMED> 1,629,980
<SHARES-REINVESTED> 509,546
<NET-CHANGE-IN-ASSETS> 19,390,041
<ACCUMULATED-NII-PRIOR> 3,693,199
<ACCUMULATED-GAINS-PRIOR> 32,326,768
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,164,486
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,902,608
<AVERAGE-NET-ASSETS> 118,311,393
<PER-SHARE-NAV-BEGIN> 19.980
<PER-SHARE-NII> 0.727
<PER-SHARE-GAIN-APPREC> 2.363
<PER-SHARE-DIVIDEND> 0.690
<PER-SHARE-DISTRIBUTIONS> 1.080
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.300
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000027801
<NAME> DELAWARE GROUP DELAWARE FUND, INC.
<SERIES>
<NUMBER> 021
<NAME> DEVON FUND SERIES A CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 19,272,410
<INVESTMENTS-AT-VALUE> 22,415,975
<RECEIVABLES> 498,771
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 771
<TOTAL-ASSETS> 22,915,517
<PAYABLE-FOR-SECURITIES> 155,945
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 107,730
<TOTAL-LIABILITIES> 263,675
<SENIOR-EQUITY> 1,550,990
<PAID-IN-CAPITAL-COMMON> 16,222,357
<SHARES-COMMON-STOCK> 1,020,347
<SHARES-COMMON-PRIOR> 705,003
<ACCUMULATED-NII-CURRENT> 72,096
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,662,834
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,143,565
<NET-ASSETS> 14,907,212
<DIVIDEND-INCOME> 401,985
<INTEREST-INCOME> 95,784
<OTHER-INCOME> 0
<EXPENSES-NET> 220,477
<NET-INVESTMENT-INCOME> 277,292
<REALIZED-GAINS-CURRENT> 1,659,549
<APPREC-INCREASE-CURRENT> 1,747,047
<NET-CHANGE-FROM-OPS> 3,683,888
<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> 463,434
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 481,037
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<NET-CHANGE-IN-ASSETS> 10,072,653
<ACCUMULATED-NII-PRIOR> 46,731
<ACCUMULATED-GAINS-PRIOR> 668,765
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 103,041
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 321,066
<AVERAGE-NET-ASSETS> 11,773,635
<PER-SHARE-NAV-BEGIN> 12.550
<PER-SHARE-NII> 0.216
<PER-SHARE-GAIN-APPREC> 2.689
<PER-SHARE-DIVIDEND> 0.205
<PER-SHARE-DISTRIBUTIONS> 0.640
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.610
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000027801
<NAME> DELAWARE GROUP DELAWARE FUND, INC.
<SERIES>
<NUMBER> 022
<NAME> DEVON FUND SERIES B CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 19,272,410
<INVESTMENTS-AT-VALUE> 22,415,975
<RECEIVABLES> 498,771
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<OTHER-ITEMS-ASSETS> 771
<TOTAL-ASSETS> 22,915,517
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 107,730
<TOTAL-LIABILITIES> 263,675
<SENIOR-EQUITY> 1,550,990
<PAID-IN-CAPITAL-COMMON> 16,222,357
<SHARES-COMMON-STOCK> 233,773
<SHARES-COMMON-PRIOR> 69,084
<ACCUMULATED-NII-CURRENT> 72,096
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,662,834
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,143,565
<NET-ASSETS> 3,399,456
<DIVIDEND-INCOME> 401,985
<INTEREST-INCOME> 95,784
<OTHER-INCOME> 0
<EXPENSES-NET> 220,477
<NET-INVESTMENT-INCOME> 277,292
<REALIZED-GAINS-CURRENT> 1,659,549
<APPREC-INCREASE-CURRENT> 1,747,047
<NET-CHANGE-FROM-OPS> 3,683,888
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 16,956
<DISTRIBUTIONS-OF-GAINS> 50,076
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 167,538
<NUMBER-OF-SHARES-REDEEMED> 7,814
<SHARES-REINVESTED> 4,965
<NET-CHANGE-IN-ASSETS> 10,072,653
<ACCUMULATED-NII-PRIOR> 46,731
<ACCUMULATED-GAINS-PRIOR> 668,765
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 103,041
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 321,066
<AVERAGE-NET-ASSETS> 1,847,420
<PER-SHARE-NAV-BEGIN> 12.500
<PER-SHARE-NII> 0.136
<PER-SHARE-GAIN-APPREC> 2.664
<PER-SHARE-DIVIDEND> 0.120
<PER-SHARE-DISTRIBUTIONS> 0.640
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<PER-SHARE-NAV-END> 14.540
<EXPENSE-RATIO> 1.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000027801
<NAME> DELAWARE GROUP DELAWARE FUND, INC.
<SERIES>
<NUMBER> 023
<NAME> DEVON FUND SERIES C CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
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<PAID-IN-CAPITAL-COMMON> 16,222,357
<SHARES-COMMON-STOCK> 72,657
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<OVERDISTRIBUTION-NII> 0
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<NET-ASSETS> 1,055,503
<DIVIDEND-INCOME> 401,985
<INTEREST-INCOME> 95,784
<OTHER-INCOME> 0
<EXPENSES-NET> 220,477
<NET-INVESTMENT-INCOME> 277,292
<REALIZED-GAINS-CURRENT> 1,659,549
<APPREC-INCREASE-CURRENT> 1,747,047
<NET-CHANGE-FROM-OPS> 3,683,888
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,999
<DISTRIBUTIONS-OF-GAINS> 367
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 117,220
<NUMBER-OF-SHARES-REDEEMED> 44,875
<SHARES-REINVESTED> 312
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<ACCUMULATED-GAINS-PRIOR> 668,765
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 321,066
<AVERAGE-NET-ASSETS> 448,263
<PER-SHARE-NAV-BEGIN> 13.020
<PER-SHARE-NII> 0.188
<PER-SHARE-GAIN-APPREC> 2.157
<PER-SHARE-DIVIDEND> 0.195
<PER-SHARE-DISTRIBUTIONS> 0.640
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.530
<EXPENSE-RATIO> 1.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000027801
<NAME> DELAWARE GROUP DELAWARE FUND, INC.
<SERIES>
<NUMBER> 024
<NAME> DEVON FUND SERIES INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 19,272,410
<INVESTMENTS-AT-VALUE> 22,415,975
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<OTHER-ITEMS-ASSETS> 771
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<TOTAL-LIABILITIES> 263,675
<SENIOR-EQUITY> 1,550,990
<PAID-IN-CAPITAL-COMMON> 16,222,357
<SHARES-COMMON-STOCK> 224,213
<SHARES-COMMON-PRIOR> 227,910
<ACCUMULATED-NII-CURRENT> 72,096
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,662,834
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,143,565
<NET-ASSETS> 3,289,671
<DIVIDEND-INCOME> 401,985
<INTEREST-INCOME> 95,784
<OTHER-INCOME> 0
<EXPENSES-NET> 220,477
<NET-INVESTMENT-INCOME> 277,292
<REALIZED-GAINS-CURRENT> 1,659,549
<APPREC-INCREASE-CURRENT> 1,747,047
<NET-CHANGE-FROM-OPS> 3,683,888
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 56,556
<DISTRIBUTIONS-OF-GAINS> 151,603
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 63,036
<NUMBER-OF-SHARES-REDEEMED> 82,931
<SHARES-REINVESTED> 16,198
<NET-CHANGE-IN-ASSETS> 10,072,653
<ACCUMULATED-NII-PRIOR> 46,731
<ACCUMULATED-GAINS-PRIOR> 668,765
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 103,041
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 321,066
<AVERAGE-NET-ASSETS> 3,148,303
<PER-SHARE-NAV-BEGIN> 12.590
<PER-SHARE-NII> 0.267
<PER-SHARE-GAIN-APPREC> 2.693
<PER-SHARE-DIVIDEND> 0.240
<PER-SHARE-DISTRIBUTIONS> 0.640
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.670
<EXPENSE-RATIO> 0.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
APPENDIX A
List of Funds and Their Classes
1. Delaware Group Delaware Fund, Inc.
Delaware Fund
Delaware Fund A Class
Delaware Fund B Class
Delaware Fund C Class
Delaware Fund Institutional Class
Devon Fund
Devon Fund A Class
Devon Fund B Class
Devon Fund C Class
Devon Fund Institutional Class
2. Delaware Group Trend Fund, Inc.
Trend Fund A Class
Trend Fund B Class
Trend Fund C Class
Trend Fund Institutional Class
3. Delaware Group Value Fund, Inc.
Value Fund A Class
Value Fund B Class
Value Fund C Class
Value Fund Institutional Class
4. Delaware Group DelCap Fund, Inc.
DelCap Fund A Class
DelCap Fund B Class
DelCap Fund C Class
DelCap Fund Institutional Class
5. Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Income Fund A Class
Decatur Income Fund B Class
Decatur Income Fund C Class
<PAGE>
Decatur Income Fund Institutional Class
Decatur Total Return Fund
Decatur Total Return Fund A Class
Decatur Total Return Fund B Class
Decatur Total Return Fund C Class
Decatur Total Return Fund Institutional Class
6. Delaware Group Global & International Funds, Inc.
International Equity Series
International Equity Fund A Class
International Equity Fund B Class
International Equity Fund C Class
International Equity Fund Institutional Class
Global Bond Series
Global Bond Fund A Class
Global Bond Fund B Class
Global Bond Fund C Class
Global Bond Fund Institutional Class
Global Assets Series
Global Assets Fund A Class
Global Assets Fund B Class
Global Assets Fund C Class
Global Assets Fund Institutional Class
-2-
<PAGE>
Emerging Markets Series (Added May 1, 1996)
Emerging Markets Fund A Class
Emerging Markets Fund B Class
Emerging Markets Fund C Class
Emerging Markets Fund Institutional Class
7. Delaware Group Income Funds, Inc.
Strategic Income Fund (Added September 30, 1996)
Strategic Income Fund A Class
Strategic Income Fund B Class
Strategic Income Fund C Class
Strategic Income Fund Institutional Class
-3-
<PAGE>
APPENDIX A
List of Funds and Their Classes
1. Delaware Group Delaware Fund, Inc.
Delaware Fund
Delaware Fund A Class
Delaware Fund B Class
Delaware Fund C Class
Delaware Fund Institutional Class
Devon Fund
Devon Fund A Class
Devon Fund B Class
Devon Fund C Class
Devon Fund Institutional Class
2. Delaware Group Trend Fund, Inc.
Trend Fund A Class
Trend Fund B Class
Trend Fund C Class
Trend Fund Institutional Class
3. Delaware Group Equity Funds IV, Inc.
DelCap Fund
DelCap Fund A Class
DelCap Fund B Class
DelCap Fund C Class
DelCap Fund Institutional Class
Capital Appreciation Fund (Added November 29, 1996)
Capital Appreciation Fund A Class
Capital Appreciation Fund B Class
Capital Appreciation Fund C Class
Capital Appreciation Fund Institutional Class
4. Delaware Group Equity Funds V, Inc.
Value Fund
Value Fund A Class
Value Fund B Class
Value Fund C Class
Value Fund Institutional Class
<PAGE>
Retirement Income Fund (Added November 29, 1996)
Retirement Income Fund A Class
Retirement Income Fund B Class
Retirement Income Fund C Class
Retirement Income Fund Institutional Class
5. Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Income Fund A Class
Decatur Income Fund B Class
Decatur Income Fund C Class
Decatur Income Fund Institutional Class
Decatur Total Return Fund
Decatur Total Return Fund A Class
Decatur Total Return Fund B Class
Decatur Total Return Fund C Class
Decatur Total Return Fund Institutional Class
6. Delaware Group Global & International Funds, Inc.
International Equity Series
International Equity Fund A Class
International Equity Fund B Class
International Equity Fund C Class
International Equity Fund Institutional Class
Global Bond Series
Global Bond Fund A Class
Global Bond Fund B Class
Global Bond Fund C Class
Global Bond Fund Institutional Class
Global Assets Series
Global Assets Fund A Class
Global Assets Fund B Class
Global Assets Fund C Class
Global Assets Fund Institutional Class
<PAGE>
Emerging Markets Series (Added May 1, 1996)
Emerging Markets Fund A Class
Emerging Markets Fund B Class
Emerging Markets Fund C Class
Emerging Markets Fund Institutional Class
7. Delaware Group Income Funds, Inc.
Strategic Income Fund (Added September 30, 1996)
Strategic Income Fund A Class
Strategic Income Fund B Class
Strategic Income Fund C Class
Strategic Income Fund Institutional Class
