<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-
<PAGE>
(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.
-18-
<PAGE>
(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.
- --------------------------------------------------------------------------------
-19-
<PAGE>
(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.
-22-
<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.
-24-
<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.
-25-
<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).
-26-
<PAGE>
(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.
-28-
<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.
-29-
<PAGE>
(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
-30-
<PAGE>
(DF/DVN-ABC)
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.
-31-
<PAGE>
(DF/DVN-ABC)
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
-32-
<PAGE>
(DF/DVN-ABC)
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.
-33-
<PAGE>
(DF/DVN-ABC)
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
-34-
<PAGE>
(DF/DVN-ABC)
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.
-35-
<PAGE>
(DF/DVN-ABC)
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.
-36-
<PAGE>
(DF/DVN-ABC)
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.
-37-
<PAGE>
(DF/DVN-ABC)
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.
-38-
<PAGE>
(DF/DVN-ABC)
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.
-39-
<PAGE>
(DF/DVN-ABC)
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.
-40-
<PAGE>
(DF/DVN-ABC)
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.
-41-
<PAGE>
(DF/DVN-ABC)
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.
-42-
<PAGE>
(DF/DVN-ABC)
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.
-43-
<PAGE>
(DF/DVN-ABC)
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.
-44-
<PAGE>
(DF/DVN-ABC)
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.
-45-
<PAGE>
(DF/DVN-ABC)
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.
-46-
<PAGE>
(DF/DVN-ABC)
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.
-47-
<PAGE>
(DF/DVN-ABC)
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.
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.
-48-
<PAGE>
(DF/DVN-ABC)
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
-49-
<PAGE>
(DF/DVN-ABC)
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
-50-
<PAGE>
(DF/DVN-ABC)
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.
-51-
<PAGE>
(DF/DVN-ABC)
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>
(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.
(FORMERLY DELAWARE GROUP
DELAWARE FUND, 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
-------
<PAGE>
(SAI-DF/DVN-PART B)
- -------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 30, 1996
- -------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------
TABLE OF CONTENTS
- ---------------------------------------------------------------------
Cover Page 1
- ---------------------------------------------------------------------
Investment Restrictions and Policies 3
- ---------------------------------------------------------------------
Performance Information
- ---------------------------------------------------------------------
Trading Practices and Brokerage
- ---------------------------------------------------------------------
Purchasing Shares
- ---------------------------------------------------------------------
<PAGE>
Investment Plans
- ---------------------------------------------------------------------
Determining Offering Price and Net Asset Value
- ---------------------------------------------------------------------
Redemption and Repurchase
- ---------------------------------------------------------------------
Dividends and Realized Securities
Profits Distributions
- ---------------------------------------------------------------------
Taxes
- ---------------------------------------------------------------------
Investment Management Agreements
- ---------------------------------------------------------------------
Officers and Directors
- ---------------------------------------------------------------------
Exchange Privilege
- ---------------------------------------------------------------------
General Information
- ---------------------------------------------------------------------
Appendix A--Description of Ratings
- ---------------------------------------------------------------------
Appendix B--IRA Information
- ---------------------------------------------------------------------
Appendix C--Performance Overview
- ---------------------------------------------------------------------
Appendix D--The Company Life Cycle
- ---------------------------------------------------------------------
Financial Statements
- ---------------------------------------------------------------------
-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. 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. 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) 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 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.
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).
-70-
<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
-71-
<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.
-72-
<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
