<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 2-10765
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. ____
Post-Effective Amendment No. 110 X
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AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 110
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DELAWARE GROUP EQUITY FUNDS I
(formerly Delaware Group Equity Funds I, Inc.)
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(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 255-1255
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Eric E. Miller, 1818 Market Street, Philadelphia, PA 19103
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(Name and Address of Agent for Service)
Approximate Date of Public Offering: December 28, 1999
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It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[X] on December 28, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
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--- C O N T E N T S ---
This Post-Effective Amendment No. 110 to Registration File No. 2-10765 includes
the following:
1. Facing Page
2. Contents Page
3. Part A - Prospectuses
4. Part B - Statement of Additional Information
5. Part C - Other Information
6. Signatures
7. Exhibits
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DELAWARE(SM)
INVESTMENTS
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Philadelphia o London
Delaware
Balanced Fund
Delaware
Devon Fund
Class A o Class B o Class C
Prospectus December 28, 1999
Total Return Funds
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
(PHOTO OMITTED)
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Table of contents
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Fund profiles page 2
Delaware Balanced Fund 2
Delaware Devon Fund 4
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How we manage the Funds page 6
Our investment strategies 6
The securities we typically invest in 7
The risks of investing in the Funds 9
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Who manages the Funds page 10
Investment manager 10
Portfolio managers 10
Fund administration (Who's who) 11
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About your account page 12
Investing in the Funds 12
Choosing a share class 12
How to reduce your sales charge 14
How to buy shares 15
Retirement plans 16
How to redeem shares 17
Account minimums 18
Special services 19
Dividends, distributions and taxes 20
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Certain management considerations page 21
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Financial highlights page 22
1
<PAGE>
Profile: Delaware Balanced Fund
What is the Fund's goal?
Delaware Balanced Fund seeks a balance of capital appreciation, income and
preservation of capital. Although the Fund will strive to achieve its goal,
there is no assurance that it will.
Who should invest in the Fund
) Investors with long-term
financial goals.
) Investors looking for stocks and bonds combined in a single investment.
) Investors seeking modest
quarterly income.
) Investors seeking a measure of
capital preservation.
Who should not invest in the Fund
) Investors with short-term financial goals.
) Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
What are the Fund's main investment strategies? We invest primarily in common
stocks of established companies we believe have the potential for long-term
capital appreciation. In addition, we invest at least 25% of the Fund's assets
in various types of fixed-income securities, including U.S. government
securities and corporate bonds. Funds with this mix of stocks and bonds are
commonly known as balanced funds.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease according to changes
in the value of the Fund's investments. This Fund will be affected primarily by
declines in stock and bond prices which can be caused by a drop in the stock or
bond market, an adverse change in interest rates or poor performance in specific
industries or companies. For a more complete discussion of risk, please turn to
page 10.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
How has the Delaware Balanced Fund performed?
________________________________________________________________________________
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show how returns for the Fund's Class A shares have varied over
the past ten calendar years, as well as the average annual returns of these
shares for one-, five-, and ten-year or lifetime periods, if applicable. The
Fund's past performance does not necessarily indicate how it will perform in the
future.
The Fund's Class A shares had a calendar year-to-date return of -9.32% as of
September 30, 1999. During the ten years illustrated in this bar chart, Class
A's highest quarterly return was 15.07% for the quarter ended December 31, 1998
and its lowest quarterly return was -9.11% for the quarter ended September 30,
1990.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above or in the bar
chart. If this fee were included, the returns would be less than those shown.
The average annual returns in the table on page 3 do include the sales charge.
Year-by-year total return (Class A)
1989 22.55%
1990 - 0.48%
1991 20.84%
1992 12.67%
1993 9.39%
1994 - 1.35%
1995 25.88%
1996 13.94%
1997 24.47%
1998 17.40%
2
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<TABLE>
<CAPTION>
How has the Fund Performed?
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Average annual returns for periods ending 12/31/98
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CLASS A B C S&P 500 Lehman Brothers
Composite Aggregate
(if redeemed)* (if redeemed)* Stock Index** Bond Index**
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(Inception 3/25/38) (Inception 9/6/94) (Inception 11/29/95)
<S> <C> <C> <C> <C> <C>
1 year 10.65% 11.48% 15.50% 28.74% 8.69%
5 years 14.27% N/A N/A 24.08% 7.27%
10 years or lifetime** 13.75% 16.69% 18.27% 19.20% 9.26%
</TABLE>
The Fund's returns above are compared to the performance of the S&P 500
Composite Stock Index and the Lehman Brothers Aggregate Bond Index. You should
remember that unlike the Fund, the index is unmanaged and doesn't include the
costs of operating a mutual fund, such as the costs of buying, selling and
holding the securities. Neither index is a perfect comparison to Delaware
Balanced Fund since the S&P 500 does not include fixed-income securities and
the Lehman Brothers Aggregate Bond Index does not include stocks.
*If shares were not redeemed, the returns for Class B would be 16.48% and
16.96% for the one-year and lifetime periods, respectively. Returns for
Class C would be 16.50% and 18.27% for the one-year and lifetime periods,
respectively.
**Lifetime returns are shown if the Fund or Class existed for less than 10
years. S&P 500 and Lehman Brothers returns are for 10 years. S&P 500 returns
for Class B and Class C lifetime were 28.46% and 28.19%, respectively. Lehman
Brothers Aggregate Bond Index returns for Class B and Class C shares lifetime
were 9.47% and 7.57%, respectively. Maximum sales charges are included in the
Fund returns above.
<TABLE>
<CAPTION>
What are the Fund's fees and expenses? CLASS A B C
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<S> <C> <C> <C> <C>
Sales charges are fees paid directly from your Maximum sales charge (load) imposed on
investments when you buy or sell shares of the Fund. purchases as a percentage of offering price 5.75% none none
Maximum contingent deferred sales charge
(load) as a percentage of original purchase
price or redemption price, whichever is lower none(1) 5%(2) 1%(3)
Maximum sales charge (load) imposed on
reinvested dividends none none none
Redemption fees none none none
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CLASS A B C
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Annual fund operating expenses are deducted from Management fees 0.63% 0.63% 0.63%
the Fund's assets. Distribution and service (12b-1) fees 0.23%(4) 1.00% 1.00%
Other expenses 0.32% 0.32% 0.32%
Total operating expenses 1.18% 1.95% 1.95%
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<S> <C> <C> <C> <C> <C> <C>
CLASS(6) A B B C C
(if redeemed) (if redeemed)
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This example is intended to help you compare the 1 year $688 $198 $698 $198 $298
cost of investing in the Fund to the cost of
investing in other mutual funds with similar 3 years $928 $612 $912 $612 $612
investment objectives. We show the cumulative
amount of Fund expenses on a hypothetical 5 years $1,187 $1,052 $1,252 $1,052 $1,052
investment of $10,000 with an annual 5% return
over the time shown.5 This is an example only, 10 years $1,924 $2,075 $2,075 $2,275 $2,275
and does not represent future expenses, which may
be greater or less than those shown here.
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</TABLE>
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(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will apply to certain
redemptions. Additional Class A purchase options that involve a contingent
deferred sales charge may be permitted from time to time and will be
disclosed in the prospectus if they are available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Board of Trustees adopted a formula for calculating 12b-1 plan expenses
for Delaware Balanced Fund's Class A that went into effect on June 1, 1992.
Under this formula, 12b-1 plan expenses will not be more than 0.30% or less
than 0.10%.
(5) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
(6) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
3
<PAGE>
Profile: Delaware Devon Fund
What is the Fund's goal?
Delaware Devon Fund seeks current income and capital appreciation. Although
the Fund will strive to achieve its goal, there is no assurance that it will.
Who should invest in the Fund
) Investors with long-term
financial goals.
) Investors seeking long-term capital
appreciation.
) Investors seeking an investment
primarily in common stocks.
Who should not invest in the Fund
) Investors seeking an investment
primarily in fixed-income securities.
) Investors with short-term
financial goals.
) Investors who are unwilling to accept
share prices that may fluctuate,
sometimes significantly over the
short term.
What are the Fund's main investment strategies? We invest primarily in
income-producing common stocks. We focus on common stocks that we believe have
the potential for above-average dividend increases over time.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease according to changes
in the value of the Fund's investments. This Fund will be particularly affected
by changes in stock prices, which tend to fluctuate more than bond prices. Stock
prices may be negatively affected by declines in the stock market or poor
performance in specific industries or companies. For a more complete discussion
of risk, please turn to page 10.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
How has the Delaware Devon Fund performed?
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Year-by-year total return (Class A)
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Class A shares have varied over the
past five calendar years, as well as the average annual returns of these shares
for the one-year, 5-year and lifetime periods, if applicable. The Fund's past
performance is not necessarily an indication of how it will perform in the
future. The returns reflect voluntary expense caps. The returns would be lower
without the voluntary caps. There is no longer a voluntary expense cap in place
for the Fund.
The Fund's Class A shares had a calendar year-to-date return of -12.75% as of
September 30, 1999. During the five years illustrated in this bar chart, Class
A's highest quarterly return was 20.68% for the quarter ended December 31, 1998
and its lowest quarterly return was -8.98% for the quarter ended September 30,
1998.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above.
If this fee were included, the returns would be less than those shown. The
average annual returns shown on page 5 include the sales charge.
1994 5.63%
1995 35.44%
1996 22.90%
1997 34.93%
1998 22.16%
4
<PAGE>
How has the Fund performed? (continued)
<TABLE>
<CAPTION>
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Average annual returns for periods ending 12/31/98
CLASS A B C S&P 500 Composite
(if redeemed)* (if redeemed)* Stock Index**
(Inception 12/29/93) (Inception 9/6/94) (Inception 11/29/95)
<S> <C> <C> <C> <C>
1 year 15.14% 16.29% 20.31% 28.74%
5 years 22.26% N/A N/A 24.08%
Since inception** 22.32% 24.26% 26.34% 19.20%
</TABLE>
The Fund's returns above are compared to the performance of the S&P 500
Index. You should remember that unlike the Fund, the index is unmanaged and
doesn't include the costs of operating a mutual fund, such as the costs of
buying, selling and holding the securities.
* If shares were not redeemed, the returns for Class B would be 21.29% and
24.48% for the one-year and lifetime periods, respectively. Returns for
Class C would be 21.31% and 26.34% for the one-year and lifetime periods,
respectively.
** The S&P 500 return shown is for the A Class lifetime period. S&P 500 returns
for Class B and Class C lifetime were 28.46% and 28.19%, respectively.
Maximum sales charges are included in the Fund returns above.
<TABLE>
<CAPTION>
What are the Fund's fees and expenses? CLASS A B C
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<S> <C> <C> <C> <C>
Sales charges are fees paid directly from your Maximum sales charge (load) imposed on
investments when you buy or sell shares of the Fund. purchases as a percentage of offering price 5.75% none none
Maximum contingent deferred sales charge
(load) as a percentage of original purchase
price or redemption price, whichever is lower none(1) 5%(2) 1%(3)
Maximum sales charge (load) imposed on
reinvested dividends none none none
Redemption fees none none none
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Annual fund operating expenses are deducted from Management fees 0.65% 0.65% 0.65%
the Fund's assets. Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 0.52% 0.52% 0.52%
Total operating expenses 1.47% 2.17% 2.17%
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<S> <C> <C> <C> <C> <C> <C>
CLASS(5) A B B C C
(if redeemed) (if redeemed)
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This example is intended to help you compare the 1 year $716 $220 $720 $220 $320
cost of investing in the Fund to the cost of
investing in other mutual funds with similar 3 years $1,013 $679 $979 $679 $679
investment objectives. We show the cumulative
amount of Fund expenses on a hypothetical 5 years $1,332 $1,164 $1,364 $1,164 $1,164
investment of $10,000 with an annual 5% return
over the time shown.4 This is an example only, 10 years $2,231 $2,326 $2,326 $2,503 $2,503
and does not represent future expenses, which
may be greater or less than those shown here.
</TABLE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will apply to certain
redemptions. Additional Class A purchase options that involve a contingent
deferred sales charge may be permitted from time to time and will be
disclosed in the prospectus if they are available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
(5) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and
tenth years reflects expenses of the Class A shares.
5
<PAGE>
How we manage the Funds
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we believe are the
best investments for the Funds.
Delaware Balanced Fund
Delaware Balanced Fund is a type of total return fund that invests in both
stocks and bonds to pursue a three-pronged investment objective: capital
appreciation, current income and preservation of principal. We blend several
investment strategies to manage this Fund.
We seek capital appreciation by investing primarily in the common stocks of
established companies that we believe have long-term capital growth potential.
We focus on dividend-paying, undervalued stocks.
To seek current income and help preserve capital, we generally invest at least
25% of the Fund's net assets in various types of fixed-income securities,
including U.S. government and government agency securities and corporate bonds.
Each bond in the portfolio will have a maturity between five and 30 years, and
the average maturity of the portfolio will typically be between five and ten
years.
We conduct ongoing analysis of the different markets to determine the
appropriate mix of stocks and bonds for the current economic and investment
environment.
Delaware Devon Fund
Delaware Devon Fund is also a total return fund, but it invests the majority of
its assets in stocks. This Fund has a dual objective of capital appreciation and
current income, but since it invests primarily in stocks, its shareholders
should be comfortable accepting somewhat greater fluctuation of principal than
with Delaware Balanced Fund.
For Delaware Devon Fund, we invest primarily in common stocks that we believe
have the potential for above-average dividend increases over time. Generally, at
least 65% of the Fund's assets will be in dividend-paying stocks.
In selecting stocks for both Delaware Devon Fund and Delaware Balanced Fund, we
consider factors such as how much the stock's dividend has grown in the past,
the frequency of the stock's prior dividend increases, the company's potential
for strong positive cash flow, and the price/earnings ratio of the stock
compared to other stocks in the market. We avoid stocks that we think are
overvalued. We seek stocks that we believe have the potential for above-average
dividend growth.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques.
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Each Fund's investment objective is non-fundamental. This means that the
Board of Trustees may change the objective without obtaining shareholder
approval. If the objective were changed, we would notify shareholders before
the change in the objective became effective.
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<TABLE>
<CAPTION>
How to use
this glossary
<S> <C> <C>
The glossary includes definitions Glossary A-C |Amortized cost Average maturity
of investment terms used throughout |---------------------------------------------------------------------------------
the prospectus. If you would like |Amortized cost is a method used to value a fixed-income An average of when the
to know the meaning of an investment security that starts with the face value of the security individual bonds and
term that is not explained in the and then adds or subtracts from that value depending on other debt securities
text please check the glossary. whether the purchase price was greater or less than the held in a portfolio
value of the security at maturity. The amount greater or will mature.
less than the par value is divided equally over the time
remaining until maturity.
</TABLE>
6
<PAGE>
The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well. Fixed-income
securities generally offer the potential for greater income
payments than stocks, and also may provide capital
appreciation.
<TABLE>
<CAPTION>
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Securities How we use them
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Delaware Balanced Fund Delaware Devon Fund
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<S> <C> <C>
Common stocks: Securities that represent Generally, we invest up to 75% of Generally, 90% to 100% of the Fund's
shares of ownership in a corporation. net assets in dividend-paying assets will be invested in common
Stockholders participate in the corporation's stocks. stocks. Under normal market conditions
profits and losses, proportionate to the we will invest at least 65% of total
number of shares they own. assets in dividend-paying stocks.
Convertible securities: Usually preferred Each Fund may invest in convertible securities; however, we will not invest
stocks or corporate bonds that can be more than 5% of net assets in convertible securities that are rated below
exchanged for a set number of shares of investment grade by an NRSRO or in securities that are unrated but deemed
common stock at a predetermined price. equivalent to non-investment grade.
These securities offer higher appreciation
potential than nonconvertible bonds and
greater income potential than nonconvertible
preferred stocks.
Mortgage-backed securities: Fixed-income There is no limit on government-related There is no limit on government-related
securities that represent pools of mortgages, mortgage-backed securities or on fully mortgage-backed securities; however, the
with investors receiving principal and interest collateralized privately issued Fund typically holds none or only a small
payments as the underlying mortgage loans are mortgage-backed securities. percentage of its net assets in
paid back. Many are issued and guaranteed fixed-income securities.
against default by the U.S. government or its We may invest up to 20% of net assets
agencies or instrumentalities, such as the in mortgage-backed securities issued by We may purchase privately issued
Federal Home Loan Mortgage Corporation, private companies whether or not the obligations only if they are 100%
Fannie Mae and the Government National Mortgage securities are 100% collateralized. collateralized and rated in one of the
Association. Others are issued by private However, these securities must be rated four highest categories by an NRSRO. The
financial institutions, with some fully at the time of purchase in one of the privately issued securities we would
collateralized by certificates issued or four highest categories by an NRSRO. invest in would be either CMOs or REMICs
guaranteed by the government or its agencies or The privately issued securities we (see below).
instrumentalities. invest in are either CMOs or REMICs
(see below).
Collateralized mortgage obligations (CMOs): See mortgage-backed securities above.
Privately issued mortgage-backed bonds whose
underlying value is the mortgages that are
grouped into different pools according to
their maturity.
Real estate mortgage investment conduits See mortgage-backed securities above.
(REMICs): Privately issued mortgage-backed
bonds whose underlying value is a fixed pool
of mortgages secured by an interest in real
property. Like CMOs, REMICs offer different
pools.
Asset-backed securities: Bonds or notes We invest only in asset-backed Delaware Devon Fund doesn't typically
backed by accounts receivables including securities rated in one of the four invest in asset-backed securities. When
home equity, automobile or credit loans. highest categories by an NRSRO. we do, we are allowed to invest only in
asset-backed securities rated in one of
the four highest categories by an NRSRO.
Corporate bonds: Debt obligations issued by Although Delaware Devon Fund is allowed We focus on bonds rated in one of the
a corporation. to invest in corporate bonds, we do four highest categories by an NRSRO
not typically invest in them. (or if unrated, deemed equivalent),
with maturities between five and 30 years.
Repurchase agreements: An agreement between a Typically, we use repurchase agreements as a short-term investment for a
buyer and seller of securities in which the Fund's cash position. In order to enter into these repurchase agreements,
seller agrees to buy the securities back within the Fund must have collateral of at least 102% of the repurchase price.
a specified time at the same price the buyer Neither Fund may have more than 10% of its total assets in repurchase
paid for them, plus an amount equal to an agreements with maturities of over seven days. Each Fund will only enter
agreed upon interest rate. Repurchase into repurchase agreements in which the collateral is comprised of
agreements are often viewed as equivalent to U.S. government securities.
cash.
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bond Bond ratings Capital
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<S> <C> <C>
A debt security, like an IOU, issued by a company, Independent evaluations of The amount of
municipality or government agency. In return for creditworthiness, ranging from money you invest.
lending money to the issuer, a bond buyer generally Aaa/AAA (highest quality) to D
receives fixed periodic interest payments and (lowest quality). Bonds rated Baa/BBB
repayment of the loan amount on a specified maturity or better are considered
date. A bond's price changes prior to maturity and investment grade. See also Nationally
typically is inversely related to current interest recognized statistical rating
rates. Generally, when interest rates rise, bond organization.
prices fall, and when interest rates fall, bond
prices rise.
</TABLE>
7
<PAGE>
How we manage the Funds (continued)
<TABLE>
<CAPTION>
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Securities How we use them
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Delaware Balanced Fund Delaware Devon Fund
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<S> <C> <C>
American Depositary Receipts (ADRs): We may invest without limitation in ADRs.
Certificates issued by a U.S. bank which
represent the bank's holdings of a stated
number of shares of a foreign corporation.
An ADR entitles the holder to all dividends
and capital gains earned by the underlying
foreign shares, and an ADR is bought and
sold the same as U.S. securities.
Restricted securities: Privately placed We may invest without limitation in Rule 144A securities, which are
securities whose resale is restricted privately placed securities that are eligible for resale only among
under securities law. certain institutional buyers without registration.
Delaware Devon Fund must limit its
investments in other restricted
securities to no more than 5% of
total assets.
Interest rate swap and index swap agreements: We may use interest rate swaps to Delaware Devon Fund does not use
In an interest rate swap, a fund receives adjust Delaware Balanced Fund's interest rate swap or index swap
payments from another party based on a sensitivity to interest rates, or to agreements.
floating interest rate in return for making hedge against changes in interest rates.
payments based on a fixed interest rate. An
interest rate swap can also work in reverse, Index swaps may be used to gain exposure
with a fund receiving payments based on a to markets that the Fund invests in or
fixed interest rate and making payments based as a substitute for futures, options or
on a floating interest rate. In an index swap, forward contracts if such contracts
a fund receives gains or incurs losses based are not directly available to the Fund
on the total return of an index, in exchange on favorable terms.
for making fixed or floating interest rate
payments to another party. Interest rate swaps and index swaps will
be considered illiquid securities
(see below).
Illiquid securities: Securities that do not We may invest up to 10% of total assets in illiquid securities.
have a ready market, and cannot be easily
sold within seven days at approximately the
price that the Fund has valued them.
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</TABLE>
The Funds may also invest in other securities including real estate investment
trusts, rights and warrants to purchase common stock, futures contracts,
options, U.S. Treasury securities, Yankee and Euro bonds. Please see the
Statement of Additional Information for additional descriptions on these
securities as well as those listed in the table above.
Lending securities Each Fund may lend up to 25% of its assets to qualified
brokers, dealers and institutional investors for their use in security
transactions.
Purchasing securities on a when-issued or delayed delivery basis Each Fund may
buy or sell securities on a when-issued or delayed delivery basis; that is,
paying for securities before delivery or taking delivery at a later date. Each
Fund will designate cash or securities in amounts sufficient to cover its
obligations, and will value the designated assets daily.
Portfolio turnover Both Funds anticipate that their annual portfolio turnover
will be less than 100%. A turnover rate of 100% would occur if a Fund sold and
replaced securities valued at 100% of its net assets within one year.
<TABLE>
<CAPTION>
C-D Capital Consumer Price
|appreciation Capital gains distributions Commission Compounding Index (CPI)
| ------------------------------------------------------------------------------------------------------------------------------
<S> | <C> <C> <C> <C>
|An increase Payments to mutual fund The fee an investor pays Earnings on an Measurement of
in the value shareholders of profits to a financial adviser investment's U.S. inflation;
of an investment. (realized gains) from the sale for investment advice and previous earnings. represents the
of a fund's portfolio securities. help in buying or selling price of a
Usually paid once a year; may be either mutual funds, stocks, bonds basket of
short-term gains or long-term gains. or other securities. commonly
purchased goods.
</TABLE>
8
<PAGE>
The risks of investing Investing in any mutual fund involves risk, including the
in the Funds risk that you may receive little or no return on your
investment, and the risk that you may lose part or all of
the money you invest. Before you invest in a Fund you
should carefully evaluate the risks. An investment in the
Funds typically provides the best results when held for
a number of years. The following are the chief risks you
assume when investing in the Funds. Please see the
Statement of Additional Information for further
discussion of these risks and the other risks not
discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Balanced Fund Delaware Devon Fund
------------------------------------------------------------------------------------
<S> <C> <C>
Market risk is the risk that all or a majority We maintain a long-term investment approach and focus on stocks we believe
of the securities in a certain market--like can appreciate over an extended time frame regardless of interim market
the stock or bond market--will decline in fluctuations. We do not try to predict overall stock market movements and
value because of factors such as economic do not trade for short-term purposes.
conditions, future expectations or investor
confidence. We may hold a substantial part of each Fund's assets in cash or cash
equivalents as a temporary defensive strategy.
Index swaps are subject to the same market
risks as the investment market or sector that We diversify the Fund's assets among Delaware Devon Fund is not subject to
the index represents. Depending on the actual two major categories of investments risks related to index swaps.
movements of the index and how well the --stocks and bonds--which tend to
portfolio manager forecasts those movements, increase and decline in value in
a fund could experience a higher or lower different economic or investment
return than anticipated. conditions.
In evaluating the use of an index
swap, we carefully consider how market
changes could affect the swap and how
that compares to us investing directly
in the market the swap is intended to
represent.
Industry and security risk is the risk that We limit the amount of each Fund's assets invested in any one industry and in
the value of securities in a particular any individual security. We also follow a rigorous selection process before
industry or the value of an individual stock choosing securities for the portfolio.
or bond will decline because of changing
expectations for the performance of that
industry or for the individual company
issuing the stock or bond.
Interest rate risk is the risk that We do not try to increase return by Delaware Devon Fund does not generally
securities, particularly bonds with longer predicting and aggressively capitalizing hold a significant portion of assets
maturities, will decrease in value if on interest rate moves. Instead, we aim in fixed-income securities, so interest
interest rates rise. to keep the interest rate risk similar rate risk is not a major risk with this
to the Lehman Brothers Aggregate Bond Fund.
Swaps may be particularly sensitive to Index.
interest rate changes. Depending on the
actual movements of interest rates and how We will not invest in swaps with
well the portfolio manager anticipates them, maturities of more than two years.
a fund could experience a higher or lower Each business day we will calculate the
return than anticipated. amount the Fund must pay for swaps it
holds and will segregate cash or other
liquid securities to cover that amount.
Foreign risk is the risk that foreign We typically invest only a small portion of each Fund's portfolio in foreign
securities may be adversely affected by securities. When we do purchase foreign securities, they are often denominated
political instability, changes in currency in U.S. dollars. We also tend to avoid markets where we believe accounting
exchange rates, foreign economic conditions or principles or the regulatory structure are underdeveloped.
inadequate regulatory and accounting standards.
Liquidity risk is the possibility that We limit exposure to illiquid securities. Swap agreements will be treated as
securities cannot be readily sold within illiquid securities, but most swap
seven days at approximately the price that a dealers will be willing to repurchase
fund values them. interest rate swaps.
- ------------------------------------------------------------------------------------------------------------------------------------
Contingent deferred sales
charge (CDSC) Corporate bond Cost basis Depreciation Diversification
- ------------------------------------------------------------------------------------------------------------------------------------
Fee charged by some mutual funds A debt security The original purchase price A decline in an The process of spreading
when shares are redeemed (sold issued by a of an investment, used in investment's value. investments among a number
back to the fund) within a set corporation. determining capital gains of different securities,
number of years; an alternative See Bond. and losses. asset classes or investment
method for investors to styles to reduce the risks
compensate a financial adviser of investing.
for advice and service, rather
than an up-front commission.
</TABLE>
9
<PAGE>
Who manages the Funds
Investment The Funds are managed by Delaware Management Company, a series of
manager Delaware Management Business Trust which is an indirect, wholly
owned subsidiary of Delaware Management Holdings, Inc. Delaware
Management Company makes investment decisions for the Funds, manages
the Funds' business affairs and provides daily administrative
services. For these services, the manager was paid a fee for the
last fiscal year as follows:
Investment Management Fees
Delaware Delaware
Balanced Fund Devon Fund
As a percentage of average daily net assets 0.57% 0.61%*
*Reflects a voluntary waiver during the period.
Portfolio Francis X. Morris and Gary A. Reed have primary responsibility for
managers making day-to-day investment decisions for Delaware Balanced Fund.
Mr. Morris has responsibility for making the day-to-day investment
decisions for Delaware Devon Fund. When making decisions for the
Funds, Mr. Morris regularly consults with Christopher Driver and
Michael S. Morris.
Francis X. Morris, Vice President/Senior Portfolio Manager, holds a
bachelor's degree in finance from Providence College in Rhode Island
and an MBA from Widener University in Pennsylvania. He has been
managing the Funds since March 1999 and institutional equity
portfolios at Delaware Investments since 1997. He has 17 years of
investment management experience. Mr. Morris came to Delaware from
PNC Asset Management where he served as a securities analyst,
portfolio manager and Director of Equity Research. He is a past
president of the Philadelphia Society of Financial Analysts.
Gary A. Reed, Vice President/Senior Portfolio Manager, holds an AB
in Economics from the University of Chicago and an MA in Economics
from Columbia University. He has been Delaware Balanced Fund's
Senior Portfolio Manager for fixed income since April 1995. Before
joining Delaware Investments in 1989, Mr. Reed was Vice President
and Manager of the fixed-income department of the Irving Trust
Company in New York.
Christopher Driver, Assistant Vice President/Equity Analyst for the
Fund, holds a BS in Finance from the University of Delaware. Prior
to joining Delaware Investments in 1998, he was a Research Analyst
in the equity value group at Blackrock, Inc. Prior to Blackrock, he
was a partner at Cashman Farrell & Associates. Mr. Driver is a CFA
charterholder.
Michael S. Morris, Assistant Vice President/Equity Analyst, holds a
BS from Indiana University with a major in finance. Previously he
served as equity analyst at Walnut Asset Management where he covered
a variety of industries. He has also worked at Pilgrim Baxter as a
Senior Research Analyst covering financials and began his career at
The State Teachers Retirement System of Ohio. Mr. Morris is a CFA
Charterholder.
<TABLE>
<CAPTION>
D-1 |Dividend distribution Duration Expense ratio
|------------------------------------------------------------------------------------------------
<S> | <C> <C>
|Payments to mutual A measurement of a A mutual fund's total operating expenses,
fund shareholders of fixed-income expressed as a percentage of its total
dividends passed along investment's price net assets. Operating expenses are the
from the fund's volatility. The larger costs of running a mutual fund, including
portfolio of securities. the number, the management fees, offices, staff, equipment
greater the likely and expenses related to maintaining the
price change for a fund's portfolio of securities and
given change in interest distributing its shares. They are paid
rates. from the fund's assets before any earnings
are distributed to shareholders.
</TABLE>
10
<PAGE>
Who's who? This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
<TABLE>
<CAPTION>
Board of Trustees
<S> <C> <C> <C> <C>
Investment manager Custodian
Delaware Management Company The Funds The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page 10 for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Financial advisors
Shareholders
</TABLE>
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
<PAGE>
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisors Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
<TABLE>
<CAPTION>
Government
Financial adviser Fixed-income securities securities Inflation Investment goal
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial professional With fixed-income securities, Securities issued by the The increase in the cost The objective, such
(e.g., broker, banker, the money you originally invest U.S. government or its of goods and services as long-term capital
accountant, planner or is paid back at a pre-specified agencies. They include over time. U.S. growth or high
insurance agent) who maturity date. These securities, Treasuries as well as inflation is frequently current income, that
analyzes clients' which include government, agency-backed securities measured by changes in a mutual fund
finances and prepares corporate or municipal bonds, such as Fannie Maes. the Consumer Price pursues.
personalized programs as well as money market Index (CPI).
to meet objectives. securities, typically pay
a fixed rate of return (often
referred to as interest).
See Bond.
</TABLE>
11
<PAGE>
About your account
Investing in the Funds
You can choose from a number of share classes for each Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class
CLASS A
o Class A shares have an up-front sales charge of up to 5.75% that you pay when
you buy the shares. The offering price for Class A shares includes the
front-end sales charge.
o If you invest $50,000 or more, your front-end sales charge will be reduced.
o You may qualify for other reduced sales charges, as described in "How to
reduce your sales charge," and under certain circumstances the sales charge
may be waived; please see the Statement of Additional Information.
o Class A shares are also subject to an annual 12b-1 fee no greater than 0.30%
of average daily net assets, which is lower than the 12b-1 fee for Class B
and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge except in the limited circumstances described in the table below.
Class A sales charges
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Sales charge as % Sales charge as % of Dealer's commission as %
Amount of purchase of offering price amount invested of offering price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but
under $100,000 4.75% 5.00% 4.00%
$100,000 but
under $250,000 3.75% 3.90% 3.00%
$250,000 but
under $500,000 2.50% 2.60% 2.00%
$500,000 but
under $1 million 2.00% 2.04% 1.60%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you may have to pay a limited contingent deferred
sales charge of 1% if you redeem these shares within the first year and 0.50% if
you redeem them within the second year.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Sales charge as % Sales charge as % of Dealer's commission as %
Amount of purchase of offering price amount invested of offering price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$1 million up to $5 million none none 1.00%
Next $20 million
Up to $25 million none none 0.50%
Amount over $25 million none none 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
| Lehman Brothers
L-N | Aggregate Bond Index Management fee Market capitalization
|--------------------------------------------------------------------------------------------------------------------------
| An index that measures the The amount paid by a mutual fund The value of a corporation determined by
| performance of about to the investment adviser for multiplying the current market price of a
6,500 U.S. corporate and management services, expressed as share of common stock by the number of
government bonds. an annual percentage of the fund's shares held by shareholders. A corporation
average daily net assets. with one million shares outstanding and
the market price per share of $10 has a
market capitalization of $10 million.
</TABLE>
12
<PAGE>
CLASS B
o Class B shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent deferred
sales charge if you redeem your shares within six years after you buy them.
o If you redeem Class B shares during the first year after you buy them, the
shares will be subject to a contingent deferred sales charge of 5%. The
contingent deferred sales charge is 4% during the second year, 3% during the
third and fourth years, 2% during the fifth year, 1% during the sixth year,
and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately eight years after you buy your Class B shares, they are
subject to annual 12b-1 fees no greater than 1% of average daily net assets,
of which 0.25% are service fees paid to the distributor, dealers or others
for providing services and maintaining accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses and any
dividends paid on these shares are lower than dividends on Class A shares.
o Approximately eight years after you buy them, Class B shares automatically
convert into Class A shares with a 12b-1 fee of no more than 0.30%.
Conversion may occur as late as three months after the eighth anniversary of
purchase, during which time Class B's higher 12b-1 fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
CLASS C
o Class C shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent deferred
sales charge of 1% if you redeem your shares within 12 months after you buy
them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Class C shares are subject to an annual 12b-1 fee which may not be greater
than 1% of average daily net assets, of which 0.25% are service fees paid to
the distributor, dealers or others for providing personal services and
maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses and pay
lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at any one
time. The limitation on maximum purchases varies for retirement plans.
Each share class of the Funds has adopted a separate 12b-1 plan that allows it
to pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of a Fund's assets on an ongoing basis, over time these
fees will increase the cost of your investment and may cost you more than paying
other types of sales charges.
<TABLE>
<CAPTION>
NASD Regulation, Inc. Nationally recognized statistical rating Net asset
Maturity (NASD) organization (NRSRO) value (NAV)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The length of A self-regulating A company that assesses the credit quality The daily dollar
time until a bond organization, consisting of of bonds, commercial paper, preferred and value of one
issuer must repay brokerage firms (including common stocks and municipal short-term mutual fund share.
the underlying distributors of mutual issues, rating the probability that the Equal to a fund's
loan principal to funds), that is responsible issuer of the debt will meet the scheduled net assets divided
bondholders. for overseeing the actions interest payments and repay the principal. by the number of
of its members. Ratings are published by such companies as shares outstanding.
Moody's Investors Service, Inc. (Moody's),
Standard & Poor's Ratings Group (S&P), Duff
& Phelps, Inc. (Duff), and Fitch IBCA, Inc.
(Fitch).
</TABLE>
13
<PAGE>
About your account (continued)
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Share Class
Program How it works A B C
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Letter of Intent Through a Letter of Intent you X Although the Letter of Intent and Rights
agree to invest a certain amount in of Accumulation do not apply to the
Delaware Investment Funds (except purchase of Class B and C shares, you can
money market funds with no sales combine your purchase of Class A shares
charge) over a 13-month period to with your purchase of B and C shares to
qualify for reduced front-end sales fulfill your Letter of Intent or qualify
charges. for Rights of Accumulation.
Rights of Accumulation You can combine your holdings or X
purchases of all funds in the Delaware
Investments family (except money
market funds with no sales charge) as
well as the holdings and purchases of
your spouse and children under 21 to
qualify for reduced front-end sales
charges.
Reinvestment of redeemed Up to 12 months after you redeem For Class A, you will For Class B, your Not available
shares shares, you can reinvest the proceeds not have to pay an account will be
with no additional sales charge. additional front-end credited with the
charge. contingent deferred
sales charge you
previously paid on
the amount you are
reinvesting. Your
schedule for
contingent deferred
sales charges and
conversion to Class
A will not start
over again; it will
pick up from the
point at which you
redeemed your shares.
SIMPLE IRA, SEP IRA, These investment plans may X There is no reduction in sales charges
SARSEP, Prototype Profit qualify for reduced sales charges for Class B or Class C shares for group
Sharing, Pension, by combining the purchases of all purchases by retirement plans.
401(k), SIMPLE 401(k), members of the group. Members of
403(b)(7), and 457 these groups may also qualify to
Retirement Plans purchase shares without a
front-end sales charge and a
waiver of any contingent deferred
sales charges.
- ------------------------------------------------------------------------------------------------------------------------------------
P-R | Preferred stock Price-to-earnings ratio Principal Prospectus
|---------------------------------------------------------------------------------------------------
| Preferred stock has A measure of a Amount of money you The official
preference over stock's value invest (also called offering document
common stock in the calculated by capital). Also that describes a
payment of dividends dividing the current refers to a bond's mutual fund,
and liquidation of market price of a original face value, containing
assets. Preferred share of stock by due to be repaid at information required
stocks also often its annual earnings maturity. by the SEC, such as
pay dividends at a per share. A stock investment
fixed rate and are selling for $100 per objectives,
sometimes share with annual policies, services
convertible into earnings per share and fees.
common stock. of $5 has a P/E of
20.
</TABLE>
14
<PAGE>
How to buy shares Through your financial adviser
[GRAPHS OMITTED] Your financial adviser can handle all the details of
purchasing shares, including opening an account. Your
adviser may charge a separate fee for this service.
By mail
[GRAPHS OMITTED] Complete an investment slip and mail it with your check,
made payable to the fund and class of shares you wish to
purchase, to Delaware Investments, 1818 Market Street,
Philadelphia, PA 19103-3682. If you are making an
initial purchase by mail, you must include a completed
investment application (or an appropriate retirement
plan application if you are opening a retirement
account) with your check.
By wire
[GRAPHS OMITTED] Ask your bank to wire the amount you want to invest to
First Union Bank, ABA #031201467, Bank Account number
2014 12893 4013. Include your account number and the
name of the fund in which you want to invest. If you are
making an initial purchase by wire, you must call us so
we can assign you an account number.
By exchange
[GRAPHS OMITTED] You can exchange all or part of your investment in one
or more funds in the Delaware Investments family for
shares of other funds in the family. Please keep in
mind, however, that under most circumstances you are
allowed to exchange only between like classes of shares.
To open an account by exchange, call the Shareholder
Service Center at 800.523.1918.
Through automated shareholder services
[GRAPHS OMITTED] You can purchase or exchange shares through Delaphone,
our automated telephone service, or through our web
site, www.delawareinvestments.com. For more information
about how to sign up for these services, call our
Shareholder Service Center at 800.523.1918.
<TABLE>
<CAPTION>
S&P 500 SEC (Securities and
Redeem Risk Composite Stock Index Sales charge Exchange Commission)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
To cash in your Generally defined as The Standard & Charge on the Federal agency
shares by selling variability of Poor's 500 Composite purchase or established by
them back to the value; also credit Stock Index; an redemption of fund Congress to
mutual fund. risk, inflation unmanaged index of shares sold through administer the laws
risk, currency and 500 widely held financial advisers. governing the
interest rate risk. common stocks that May vary with the securities industry,
Different is often used to amount invested. including mutual
investments involve represent Typically used to fund companies.
different types and performance of the compensate advisers
degrees of risk. U.S. stock market. for advice and
service provided.
</TABLE>
15
<PAGE>
About your account (continued)
How to buy shares (continued) Once you have completed an application, you can
open an account with an initial investment of
$1,000 and make additional investments at any
time for as little as $100. If you are buying
shares in an IRA or Roth IRA, under the Uniform
Gifts to Minors Act or the Uniform Transfers to
Minors Act; or through an Automatic Investing
Plan, the minimum purchase is $250, and you can
make additional investments of only $25. The
minimum for an Education IRA is $500. The
minimums vary for retirement plans other than
IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when
we receive your purchase order. If we or an
authorized agent receive your order before the
regular close of trading on the New York Stock
Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing
share price which is based on the Fund's net
asset value. If we receive your order after the
regular close of trading, you will pay the next
business day's price. A business day is any day
that the New York Stock Exchange is open for
business. We reserve the right to reject any
purchase order.
We determine a Fund's net asset value (NAV) per
share at the regular close of trading of the New
York Stock Exchange each business day that the
Exchange is open. We calculate this value by
adding the market value of all the securities and
assets in a Fund's portfolio, deducting all
liabilities, and dividing the resulting number by
the number of shares outstanding. The result is
the net asset value per share. We price
securities and other assets for which market
quotations are available at their market value.
We price fixed-income securities on the basis of
valuations provided to us by an independent
pricing service that uses methods approved by the
board of trustees. Any fixed-income securities
that have a maturity of less than 60 days we
price at amortized cost. For all other
securities, we use methods approved by the board
of trustees that are designed to price securities
at their fair market value.
Retirement plans In addition to being an appropriate investment
for your Individual Retirement Account (IRA),
Roth IRA and Education IRA, shares in a Fund may
be suitable for group retirement plans. You may
establish your IRA account even if you are
already a participant in an employer-sponsored
retirement plan. For more information on how
shares in the Funds can play an important role in
your retirement planning or for details about
group plans, please consult your financial
adviser, or call 800.523.1918.
<TABLE>
<CAPTION>
Statement of Additional
S-V | Share classes Signature guarantee Standard deviation Information (SAI)
|--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Different Certification by a A measure of an The document serving
classifications of bank, brokerage firm investment's as "Part B" of a
shares; mutual fund or other financial volatility; for fund's prospectus
share classes offer institution that a mutual funds, that provides more
a variety of sales customer's signature measures how much a detailed information
charge choices. is valid; signature fund's total return about the fund's
guarantees can be has typically varied organization,
provided by members from its historical investments,
of the STAMP average. policies and risks.
program.
</TABLE>
16
<PAGE>
How to redeem
shares Through your financial adviser
[GRAPH OMITTED] Your financial adviser can handle all the
details of redeeming your shares. Your adviser
may charge a separate fee for this service.
By mail
[GRAPH OMITTED] You can redeem your shares (sell them back to
the fund) by mail by writing to: Delaware
Investments, 1818 Market Street, Philadelphia,
PA 19103-3682. All owners of the account must
sign the request, and for redemptions of more
than $50,000, you must include a signature
guarantee for each owner. Signature guarantees
are also required when redemption proceeds are
going to an address other than the address of
record on an account.
By telephone
[GRAPH OMITTED] You can redeem up to $50,000 of your shares by
telephone. You may have the proceeds sent to you
by check, or, if you redeem at least $1,000 of
shares, you may have the proceeds sent directly
to your bank by wire. Bank information must be
on file before you request a wire redemption.
By wire
[GRAPH OMITTED] You can redeem $1,000 or more of your shares and
have the proceeds deposited directly to your
bank account the next business day after we
receive your request. If you request a wire
deposit, a bank wire fee may be deducted from
your proceeds. Bank information must be on file
before you request a wire redemption.
Through automated shareholder services
[GRAPH OMITTED] You can redeem shares through Delaphone, our
automated telephone service, or through our web
site, www.delawareinvestments.com. For more
information about how to sign up for these
services, call our Shareholder Service Center at
800.523.1918.
<TABLE>
<CAPTION>
Uniform Gift to Minors Act and
Stock Total return Uniform Transfers to Minors Act Volatility
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
An investment that An investment Federal and state The tendency of an
represents a share performance laws that provide a investment to go up
of ownership measurement, simple way to or down in value by
(equity) in a expressed as a transfer property to different
corporation. Stocks percentage, based on a minor with special magnitudes.
are often referred the combined tax advantages. Investments that
to as equities. earnings from generally go up or
dividends, capital down in value in
gains and change in relatively small
price over a given amounts are
period. considered "low
volatility"
investments, whereas
those investments
that generally go up
or down in value in
relatively large
amounts are
considered "high
volatility"
investments.
</TABLE>
17
<PAGE>
About your account (continued)
How to redeem shares
(continued) If you hold your shares in certificates, you must submit
the certificates with your request to sell the shares. We
recommend that you send your certificates by certified
mail.
When you send us a properly completed request to redeem
or exchange shares before the regular close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern
Time), you will receive the net asset value as determined
on the business day we receive your request. We will
deduct any applicable contingent deferred sales charges.
You may also have to pay taxes on the proceeds from your
sale of shares. We will send you a check, normally the
next business day, but no later than seven days after we
receive your request to sell your shares. If you
purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before
we send your redemption proceeds.
If you are required to pay a contingent deferred sales
charge when you redeem your shares, the amount subject to
the fee will be based on the shares' net asset value when
you purchased them or their net asset value when you
redeem them, whichever is less. This arrangement assures
that you will not pay a contingent deferred sales charge
on any increase in the value of your shares. You also
will not pay the charge on any shares acquired by
reinvesting dividends or capital gains. If you exchange
shares of one fund for shares of another, you do not pay
a contingent deferred sales charge at the time of the
exchange. If you later redeem those shares, the purchase
price for purposes of the contingent deferred sales
charge formula will be the price you paid for the
original shares, not the exchange price. The redemption
price for purposes of this formula will be the NAV of the
shares you are actually redeeming.
Account minimums If you redeem shares and your account balance falls below
the required account minimum of $1,000 ($250 for IRAs,
Uniform Gift to Minors Act accounts or accounts with
automatic investing plans, $500 for Education IRAs) for
three or more consecutive months, you will have until the
end of the current calendar quarter to raise the balance
to the minimum. If your account is not at the minimum by
the required time, you will be charged a $9 fee for that
quarter and each quarter after that until your account
reaches the minimum balance. If your account does not
reach the minimum balance, a Fund may redeem your account
after 60 days' written notice to you.
18
<PAGE>
Special services To help make investing with us as easy as possible, and to
help you build your investments, we offer the following
special services.
............................................................
Automatic Investing Plan The Automatic Investing Plan allows you to make
regular monthly or quarterly investments directly from
your checking account.
Direct Deposit With Direct Deposit you can make additional
investments through payroll deductions, recurring
government or private payments such as social security
or direct transfers from your bank account.
Wealth Builder Option With the Wealth Builder Option you can arrange
automatic monthly exchanges between your shares in one
or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular
exchanges (see below) and require a minimum monthly
exchange of $100 per fund.
Dividend Through our Dividend Reinvestment Plan, you can have
Reinvestment Plan your distributions reinvested in your account or the
same share class in another fund in the Delaware
Investments family. The shares that you purchase
through the Dividend Reinvestment Plan are not subject
to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you
may reinvest dividends only into like classes of
shares.
Exchanges You can exchange all or part of your shares for shares
of the same class in another Delaware Investments fund
without paying a sales charge and without paying a
contingent deferred sales charge at the time of the
exchange. However, if you exchange shares from a money
market fund that does not have a sales charge you will
pay any applicable sales charges on your new shares.
When exchanging Class B and Class C shares of one fund
for the same class of shares in other funds, your new
shares will be subject to the same contingent deferred
sales charge as the shares you originally purchased.
The holding period for the CDSC will also remain the
same, with the amount of time you held your original
shares being credited toward the holding period of
your new shares. You don't pay sales charges on shares
that you acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange.
When you exchange shares, you are purchasing shares in
another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before
buying shares through an exchange.
19
<PAGE>
About your account (continued)
Special services
(continued)
..................................................................
MoneyLine(SM) Through our MoneyLineSM On Demand Service, you or your
On Demand Service financial adviser may transfer money between your Fund
account and your predesignated bank account by
telephone request. This service is not available for
retirement plans, except for purchases into IRAs.
MoneyLine has a minimum transfer of $25 and a maximum
transfer of $50,000. Delaware Investments does not
charge a fee for this service; however, your bank may
assess one.
MoneyLine Through our MoneyLine Direct Deposit Service you can
Direct Deposit Service have $25 or more in dividends and distributions
deposited directly to your bank account. Delaware
Investments does not charge a fee for this service;
however, your bank may assess one. This service is not
available for retirement plans.
Systematic Through our Systematic Withdrawal Plan you can arrange
Withdrawal Plan a regular monthly or quarterly payment from your
account made to you or someone you designate. If the
value of your account is $5,000 or more, you can make
withdrawals of at least $25 monthly, or $75 quarterly.
You may also have your withdrawals deposited directly
to your bank account through our MoneyLine Direct
Deposit Service.
Dividends, Dividends, if any, from Delaware Balanced Fund are
distributions paid quarterly. Dividends, if any, from Delaware Devon
and taxes Fund are paid annually. For both funds, any capital
gains are distributed annually. We automatically
reinvest all dividends and any capital gains, unless
you tell us otherwise.
Tax laws are subject to change, so we urge you to
consult your tax adviser about your particular tax
situation and how it might be affected by current tax
law. The tax status of your dividends from these Funds
is the same whether you reinvest your dividends or
receive them in cash. Distributions from a Fund's
long-term capital gains are taxable as capital gains,
while distributions from short-term capital gains and
net investment income are generally taxable as
ordinary income. Any capital gains may be taxable at
different rates depending on the length of time the
Fund held the assets. In addition, you may be subject
to state and local taxes on distributions.
We will send you a statement each year by January 31
detailing the amount and nature of all dividends and
capital gains that you were paid for the prior year.
20
<PAGE>
Certain management considerations
Year 2000 As with other mutual funds, financial and business
organizations and individuals around the world, the Funds
could be adversely affected if the computer systems used by
their service providers do not properly process and calculate
date-related information from and after January 1, 2000. This
is commonly known as the "Year 2000 Problem." Each Fund is
taking steps to obtain satisfactory assurances that its major
service providers are taking steps reasonably designed to
address the Year 2000 Problem on the computer systems that the
service providers use. However, there can be no assurance that
these steps will be sufficient to avoid any adverse impact on
the business of the Funds. The Year 2000 Problem may also
adversely affect the issuers of securities in which the Funds
invest. The portfolio managers and investment professionals of
the Funds consider Year 2000 compliance (including, but not
limited to, any or all of the following: impact on business,
cost of compliance plan review and contingency planning, and
vendor compliance) in the securities selection and investment
process. However, there can be no guarantees that, even with
their due diligence efforts, they will be able to predict the
effect of Year 2000 on any company or the performance of its
securities.
Investments by Delaware Devon Fund accepts investments from the portfolios of
fund of funds Delaware Group Foundation Funds, a fund of funds. From time to
time, the Fund may experience large investments or redemptions
due to allocations or rebalancings by Foundation Funds. While
it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on
portfolio management. For example, the Fund may be required to
sell securities or invest cash at times when it would not
otherwise do so. These transactions could also have tax
consequences if sales of securities result in gains, and could
also increase transactions costs or portfolio turnover. The
manager will monitor transactions by Foundation Funds and will
attempt to minimize any adverse effects on both Delaware Devon
Fund and Foundation Funds as a result of these transactions.
21
<PAGE>
Financial highlights
The Financial highlights tables are intended to help you understand the Funds'
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
Class A
- -------------------------------------------------------------------------------------------------------------------------
Year ended
10/31
Delaware Balanced Fund 1999 1998 1997 1996 1995
.........................................................................................................................
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 22.970 $ 22.950 $ 21.260 $ 19.940 $ 18.000
Income (loss) from investment operations:
Net investment income 0.422(2) 0.510 0.610 0.706 0.664(2)
Net realized and unrealized gain (loss)
on investments (0.257) 2.620 3.680 2.349 2.156
---------- --------- --------- ---------- --------
Total from investment operations 0.165 3.130 4.290 3.055 2.820
---------- --------- --------- ---------- --------
Less dividends and distributions:
Dividends from net investment income (0.495) (0.510) (0.680) (0.655) (0.630)
Distributions from realized gain on investments (1.040) (2.600) (1.920) (1.080) (0.250)
---------- --------- --------- ---------- --------
Total dividends and distributions (1.535) (3.110) (2.600) (1.735) (0.880)
---------- --------- --------- ---------- --------
Net asset value, end of period $ 21.600 $ 22.970 $ 22.950 $ 21.260 $ 19.940
========== ========= ========= ========== ========
Total return(3) 0.44% 14.80% 22.05% 16.07% 16.26%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 562,975 $ 610,332 $ 554,448 $ 490,150 $493,243
Ratio of expenses to average net assets 1.12% 0.98% 0.97% 0.99% 0.97%
Ratio of net investment income to
average net assets 1.85% 2.25% 2.83% 3.39% 3.55%
Portfolio turnover 87% 86% 81% 92% 94%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Date of initial public offering; ratios have been annualized but total
return has not been annualized. Total return for such a short period may not
be representative of longer term results.
(2) Per share information based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
<PAGE>
<TABLE>
<CAPTION>
Net investment Net realized and unrealized Net asset value
How to read the | income gain (loss) on investments (NAV) Total return
Financial highlights |------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
| Net investment A realized gain This is the value of This represents the
income includes occurs when we sell a mutual fund share, rate that an
dividend and an investment at a calculated by investor would have
interest income profit, while a dividing the net earned or lost on an
earned from a fund's realized loss occurs assets by the number investment in a
investments; it is when we sell an of shares fund. In calculating
after expenses have investment at a outstanding. this figure for the
been deducted. loss. When an financial highlights
investment increases table, we include
or decreases in applicable fee
value but we do not waivers, exclude
sell it, we record front-end and
an unrealized gain contingent deferred
or loss. The amount sales charges, and
of realized gain per assume the
share that we pay to shareholder has
shareholders is reinvested all
listed under "Less dividends and
dividends and realized gains.
distributions-Distributions
from realized gain
on investments."
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
- ----------------------------------------------------------- ----------------------------------------------
Year ended Year ended 11/29/95(1)
10/31 10/31 through
1999 1998 1997 1996 1995 1999 1998 1997 10/31/96
........................................................... ..............................................
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 22.950 $22.880 $21.200 $ 19.900 $ 17.980 $22.930 $22.870 $21.180 $20.500
0.246(2) 0.337 0.452 0.525 0.567(2) 0.246(2) 0.335 0.460 0.583(2)
(0.251) 2.608 3.658 2.350 2.113 (0.251) 2.600 3.655 1.757
- ------- -------- -------- -------- -------- ------- ------- ------- -------
(0.005) 2.945 4.110 2.875 2.680 (0.005) 2.935 4.115 2.340
- ------- -------- -------- -------- -------- ------- ------- ------- -------
(0.315) (0.275) (0.510) (0.495) (0.510) (0.315) (0.275) (0.505) (0.580)
(1.040) (2.600) (1.920) (1.080) (0.250) (1.040) (2.600) (1.920) (1.080)
- ------- -------- -------- -------- -------- ------- ------- ------- -------
(1.355) (2.875) (2.430) (1.575) (0.760) (1.355) (2.875) (2.425) (1.660)
- ------- -------- -------- -------- -------- ------- ------- ------- -------
$21.590 $ 22.950 $ 22.880 $ 21.200 $ 19.900 $21.570 $22.930 $22.870 $21.180
======= ======== ======== ======== ======== ======= ======= ======= =======
(0.31%) 13.90% 21.09% 15.15% 15.36% (0.31%) 13.85% 21.07% 12.13%
$67,090 $ 33,884 $ 16,659 $ 6,872 $ 3,383 $21,192 $17,730 $ 8,090 $ 1,990
1.89% 1.77% 1.78% 1.80% 1.79% 1.89% 1.77% 1.78% 1.80%
1.08% 1.46% 2.00% 2.58% 2.73% 1.08% 1.46% 2.00% 2.58%
87% 86% 81% 92% 94% 87% 86% 81% 92%
- ----------------------------------------------------------- ----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
How to read the | Ratio of expenses to Ratio of net investment loss
Financial highlights | Net assets average net assets to average net assets Portfolio turnover
(continued) |-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets represent The expense ratio is We determine this This figure tells
the total value of the percentage of ratio by dividing you the amount of
all the assets in a net assets that a net investment trading activity in
fund's portfolio, fund pays annually income by average a fund's portfolio.
less any for operating net assets. For example, a fund
liabilities, that expenses and with a 50% turnover
are attributable to management fees. has bought and sold
that class of the These expenses half of the value of
fund. include accounting its total investment
and administration portfolio during the
expenses, services stated period.
for shareholders,
and similar
expenses.
</TABLE>
23
<PAGE>
Financial highlights (continued)
<TABLE>
<CAPTION>
Class A
- -----------------------------------------------------------------------------------------------------------------
Year
Ended
10/31
Delaware Devon Fund 1999 1998 1997 1996 1995
.................................................................................................................
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.090 $ 17.860 $14.610 $12.550 $10.830
Income (loss) from investment operations:
Net investment income (loss) 0.047(2) 0.121 0.182 0.216 0.207(2)
Net realized and unrealized gain (loss)
on investments (0.114) 3.249 4.243 2.689 2.053
-------- -------- ------- ------- -------
Total from investment operations (0.067) 3.370 4.425 2.905 2.260
-------- -------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income (0.032) (0.110) (0.210) (0.205) (0.220)
Distributions from realized gain on investments (0.190) (1.030) (0.965) (0.640) (0.320)
Return of capital (0.051) -- -- -- --
-------- -------- ------- ------- -------
Total dividends and distributions (0.273) (1.140) (1.175) (0.845) (0.540)
-------- -------- ------- ------- -------
Net asset value, end of period $ 19.750 $ 20.090 $17.860 $14.610 $12.550
======== ======== ======= ======= =======
Total return(3) (0.42%) 19.60% 32.11% 24.14% 21.98%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $137,034 $120,506 $49,262 $14,907 $ 8,846
Ratio of expenses to average net assets 1.37% 1.30% 1.25% 1.25% 1.25%
Ratio of expenses to average net assets
prior to expense limitation and expenses
paid indirectly 1.45% 1.40% 1.42% 1.84% 2.29%
Ratio of net investment income (loss) to
average net assets 0.22% 0.64% 1.14% 1.67% 1.82%
Ratio of net investment income (loss) to
average net assets prior to expense limitation
and expenses paid indirectly 0.14% 0.54% 0.97% 1.08% 0.78%
Portfolio turnover 82% 39% 64% 80% 99%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Date of initial sale of Delaware Devon Fund Class C; ratios have been
annualized but total return has not been annualized.
(2) Per share information based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge. Total return
reflects expense limits.
24
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
- ----------------------------------------------------------- ----------------------------------------------
Year ended Year ended 11/29/95(1)
10/31 10/31 through
1999 1998 1997 1996 1995 1999 1998 1997 10/31/96
........................................................... ..............................................
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 19.980 $17.800 $14.540 $12.500 $10.820 $19.960 $17.790 $14.530 $13.020
(0.099)(2) (0.003) 0.081 0.136 0.127(2) (0.099)(2) 0.002 0.071 0.188(2)
(0.111) 3.223 4.219 2.664 2.053 (0.111) 3.208 4.229 2.157
- -------- ------- ------- ------- ------- ------- ------- ------- -------
(0.210) 3.220 4.300 2.800 2.180 (0.210) 3.210 4.300 2.345
- -------- ------- ------- ------- ------- ------- ------- ------- -------
0.000 (0.010) (0.075) (0.120) (0.180) 0.000 (0.010) (0.075) (0.195)
(0.190) (1.030) (0.965) (0.640) (0.320) (0.190) (1.030) (0.965) (0.640)
-- -- -- -- -- -- -- -- --
- -------- ------- ------- ------- ------- ------- ------- ------- -------
(0.190) (1.040) (1.040) (0.760) (0.500) (0.190) (1.040) (1.040) (0.835)
- -------- ------- ------- ------- ------- ------- ------- ------- -------
$ 19.580 $19.980 $17.800 $14.540 $12.500 $19.560 $19.960 $17.790 $14.530
======== ======= ======= ======= ======= ======= ======= ======= =======
(1.12%) 18.76% 31.21% 23.38% 21.09% (1.12%) 18.71% 31.24% 18.94%
$131,901 $82,927 $28,757 $ 3,399 $ 863 $31,476 $20,141 $ 5,876 $ 1,056
2.07% 2.00% 1.95% 1.95% 1.95% 2.07% 2.00% 1.95% 1.95%
2.15% 2.10% 2.12% 2.54% 2.99% 2.15% 2.10% 2.12% 2.54%
(0.48%) (0.06%) 0.44% 0.97% 1.12% (0.48%) (0.06%) 0.44% 0.97%
(0.56%) (0.16%) 0.27% 0.38% 0.08% (0.56%) (0.16%) 0.27% 0.38%
82% 39% 64% 80% 99% 82% 39% 64% 80%
- ----------------------------------------------------------- ----------------------------------------------
</TABLE>
25
<PAGE>
Delaware
Balanced Fund
Delaware
Devon Fund
Additional information about the Fund's investments is available in the Funds'
annual and semi-annual reports to shareholders. In the Funds' shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Funds' performance during the report
period. You can find more detailed information about the Funds in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in these funds, you can write to us at 1818 Market Street, Philadelphia, PA
19103-3682, or call toll-free 800.523.1918. You may also obtain additional
information about the Funds from your financial adviser.
You can find reports and other information about the Funds on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Funds, including their
Statement of Additional Information, can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get information on the public reference room by calling the SEC at
1.800.SEC.0330.
Web site
www.delawareinvestments.com
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone redemptions
and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-249
Fund Symbols
Delaware Balanced Fund
CUSIP NASDAQ
----- ------
Class A 246093108 DELFX
Class B 246093504 DELBX
Class C 246093702 DEDCX
Delaware Devon Fund
CUSIP NASDAQ
----- ------
Class A 246093306 DDGAX
Class B 246093603 DEVOX
Class C 246093801 DECVX
DELAWARE(SM)
INVESTMENTS
-----------
Philadelphia * London
P-002 [--] PP 12/99
<PAGE>
DELAWARE(SM)
INVESTMENTS
- -------------------
Philadelphia o London
Delaware
Balanced Fund
Delaware
Devon Fund
Institutional Class
Prospectus December 28, 1999
[Picture of man fishing]
Total Return Funds
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
Table of contents
.................................................................
Fund profiles page 2
Delaware Balanced Fund 2
Delaware Devon Fund 4
.................................................................
How we manage the Funds page 6
Our investment strategies 6
The securities we typically invest in 7
The risks of investing in the Funds 9
.................................................................
Who manages the Funds page 11
Investment manager 11
Portfolio managers 11
Fund administration (Who's who) 12
.................................................................
About your account page 13
Investing in the Funds 13
How to buy shares 14
How to redeem shares 15
Account minimum 16
Exchanges 16
Dividends, distributions and taxes 16
Certain management considerations 17
.................................................................
Financial highlights page 18
1
<PAGE>
Profile: Delaware Balanced Fund
What is the Fund's goal?
Delaware Balanced Fund seeks a balance of capital appreciation, income and
preservation of capital. Although the Fund will strive to achieve its goal,
there is no assurance that it will.
Who should invest in the Fund
o Investors with long-term
financial goals.
o Investors looking for stocks and bonds combined in a single investment.
o Investors seeking modest quarterly income.
o Investors seeking a measure of capital preservation.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
What are the Fund's main investment strategies? We invest primarily in common
stocks of established companies we believe have the potential for long-term
capital appreciation. In addition, we invest at least 25% of the Fund's assets
in various types of fixed-income securities, including U.S. government
securities and corporate bonds. Funds with this mix of stocks and bonds are
commonly known as balanced funds.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease according to changes
in the value of the Fund's investments. This Fund will be affected primarily by
declines in stock and bond prices which can be caused by a drop in the stock or
bond market, an adverse change in interest rates or poor performance in specific
industries or companies. For a more complete discussion of risk, please turn to
page 9.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
How has Delaware Balanced Fund performed?
- --------------------------------------------------------------------------------
Year-by-year Total return (Institutional Class)
30%
1989 25.55% 1994 -1.19% 25
1990 -0.48% 1995 26.15% 15
1991 20.84% 1996 14.14% 10
1992 12.73% 1997 24.77% 5
1993 9.50% 1998 17.58% 0
-5
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show how returns for the Fund's Institutional Class shares have
varied over the past ten calendar years, as well as the average annual returns
for the one-year, five-year and ten-year periods. Delaware Balanced Fund's
Institutional Class commenced operations on November 9, 1992. Return information
for the Class for the periods prior to the time the Class commenced operations
is calculated by taking the performance of Delaware Balanced Fund A Class and
eliminating all sales charges that apply to Class A shares. However, for those
periods, Class A 12b-1 payments were not eliminated, and performance would have
been affected if this adjustment had been made. The Fund's past performance does
not necessarily indicate how it will perform in the future.
The Fund's Institutional Class shares had a calendar year-to-date return of
- -9.15% as of September 30, 1999. During the ten years illustrated in this bar
chart, the Institutional Class' highest quarterly return was 15.10% for the
quarter ended December 31, 1998 and its lowest quarterly return was -9.11% in
the quarter ended September 30, 1990.
2
<PAGE>
How has Delaware Balanced Fund performed? (continued)
- --------------------------------------------------------------------------------
Average annual returns as of 12/31/98
<TABLE>
<CAPTION>
S&P 500 Composite Lehman Brothers
Institutional Class Stock Index Aggregate Bond Index
<S> <C> <C> <C>
1 year 17.58% 28.74% 8.69%
5 years 15.86% 24.08% 7.27%
10 years 14.55% 19.20% 9.26%
The Fund's returns above are compared to the performance of the S&P 500
Composite Stock Index and the Lehman Brothers Aggregate Bond Index. You should
remember that unlike the Fund, the index is unmanaged and doesn't include the
costs of operating a mutual fund, such as the costs of buying, selling and
holding the securities. Neither index is a perfect comparison to Delaware
Balanced Fund since the S&P 500 does not include fixed-income securities and the
Lehman Brothers Aggregate Bond Index does not include stocks.
</TABLE>
<TABLE>
<CAPTION>
What are the Fund's fees and expenses?
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
You do not pay sales charges directly Maximum sales charge (load) imposed on
from your investments when you buy or purchases as a percentage of offering price none
sell shares of the Institutional Class. Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none
Maximum sales charge (load) imposed on
reinvested dividends none
Redemption fees none
Exchange fees(1) none
- ----------------------------------------------------------------------------------------------------------
Annual fund operating expenses are Management fees 0.63%
deducted from the Fund's assets. Distribution and service (12b-1) fees none
Other expenses 0.32%
Total operating expenses 0.95%
- ----------------------------------------------------------------------------------------------------------
This example is intended to help you 1 year $97
compare the cost of investing in the 3 years $303
Fund to the cost of investing in other 5 years $525
mutual funds with similar investment 10 years $1,166
objectives. We show the cumulative
amount of Fund expenses on a
hypothetical investment of $10,000 with
an annual 5% return over the time
shown.(2) This is an example only, and
does not represent future expenses,
which may be greater or less than those
shown here.
</TABLE>
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
3
<PAGE>
Profile: Delaware Devon Fund
What is the Fund's goal?
Delaware Devon Fund seeks current income and capital appreciation. Although
the Fund will strive to achieve its goal, there is no assurance that it will.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking long-term capital appreciation.
o Investors seeking an investment primarily in common stocks.
Who should not invest in the Fund
o Investors seeking an investment primarily in fixed-income securities.
o Investors with short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
What are the Fund's main investment strategies? We invest primarily in
income-producing common stocks. We focus on common stocks that we believe have
the potential for above-average dividend increases over time.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease according to changes
in the value of the Fund's investments. This Fund will be particularly affected
by changes in stock prices, which tend to fluctuate more than bond prices. Stock
prices may be negatively affected by declines in the stock market or poor
performance in specific industries or companies. For a more complete discussion
of risk, please turn to page 9.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
How has Delaware Devon Fund performed?
- --------------------------------------------------------------------------------
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Institutional Class shares have varied
over the past five calendar years, as well as the average annual returns for
one-and five-year and lifetime periods. The Fund's past performance is not
necessarily an indication of how it will perform in the future. The returns
reflect voluntary expense caps. The returns would be lower without the voluntary
caps. There is no longer a voluntary expense cap in place for the Fund.
Year-by-year Total return (Institutional Class)
1994 5.93%
1995 35.96%
1996 23.20%
1997 35.33%
1998 22.52%
The Fund's Institutional Class shares had a calendar year-to-date return of
- -12.52% as of September 30, 1999. During the five years illustrated in this bar
chart, the Institutional Class' highest quarterly return was 20.73% for the
quarter ended December 31, 1998 and its lowest quarterly return was -8.90% for
the quarter ended September 30, 1998.
4
<PAGE>
How has Delaware Devon Fund performed? (continued)
- --------------------------------------------------------------------------------
Average annual returns as of 12/31/98
S&P 500 Composite
Institutional Class Stock Index
1 year 22.52% 28.74%
5 years 24.09% 24.08%
Since inception (12/29/93) 24.14% 24.08%
The Fund's returns above are compared to the performance of the S&P 500
Composite Stock Index. You should remember that unlike the Fund, the index is
unmanaged and doesn't include the costs of operating a mutual fund, such as the
costs of buying, selling and holding the securities.
<TABLE>
<CAPTION>
<S> <C> <C>
What are the Fund's fees and expenses?
- -------------------------------------------------------------------------------------------------------------------
You do not pay sales charges directly Maximum sales charge (load) imposed on
from your investments when you buy or sell purchases as a percentage of offering price none
shares of the Institutional Class. Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none
Maximum sales charge (load) imposed on
reinvested dividends none
Redemption fees none
Exchange fees(1) none
- -------------------------------------------------------------------------------------------------------------------
Management fees 0.65%
Annual fund operating expenses are deducted Distribution and service (12b-1) fees none
from the Fund's assets. Other expenses 0.52%
Total operating expenses 1.17%
- -------------------------------------------------------------------------------------------------------------------
This example is intended to help you 1 year $119
compare the cost of investing in the 3 years $372
Fund to the cost of investing in other 5 years $644
mutual funds with similar investment 10 years $1,420
objectives. We show the cumulative
amount of Fund expenses on a
hypothetical investment of $10,000 with
an annual 5% return over the time
shown.(2) This is an example only, and
does not represent future expenses,
which may be greater or less than those
shown here.
</TABLE>
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods
we show.
5
<PAGE>
How we manage the Funds
- --------------------------------------------------------------------------------
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we believe are the
best investments for the Funds.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques.
Delaware Balanced Fund
Delaware Balanced Fund is a type of total return fund that invests in both
stocks and bonds to pursue a three-pronged investment objective: capital
appreciation, current income and preservation of principal. We blend several
investment strategies to manage this Fund.
We seek capital appreciation by investing primarily in the common stocks of
established companies that we believe have long-term capital growth potential.
We focus on dividend-paying, undervalued stocks.
To seek current income and help preserve capital, we generally invest at least
25% of the Fund's net assets in various types of fixed-income securities,
including U.S. government and government agency securities and corporate bonds.
Each bond in the portfolio will have a maturity between five and 30 years, and
the average maturity of the portfolio will typically be between five and ten
years.
We conduct ongoing analysis of the different markets to determine the
appropriate mix of stocks and bonds for the current economic and investment
environment.
Delaware Devon Fund
Delaware Devon Fund is also a total return fund, but it invests the majority of
its assets in stocks. This Fund has a dual objective of capital appreciation and
current income, but since it invests primarily in stocks, its shareholders
should be comfortable accepting somewhat greater fluctuation of principal than
with Delaware Balanced Fund.
For Delaware Devon Fund, we invest primarily in common stocks that we believe
have the potential for above-average dividend increases over time. Generally, at
least 65% of the Fund's assets will be in dividend-paying stocks.
In selecting stocks for both Delaware Devon Fund and Delaware Balanced Fund, we
consider factors such as how much the stock's dividend has grown in the past,
the frequency of the stock's prior dividend increases, the company's potential
for strong positive cash flow, and the price/earnings ratio of the stock
compared to other stocks in the market. We avoid stocks that we think are
overvalued. We seek stocks that we believe have the potential for above-average
dividend growth.
- --------------------------------------------------------------------------------
Each Fund's investment objective is non-fundamental. This means that the Board
of Trustees may change the objective without obtaining shareholder approval. If
the objective were changed, we would notify shareholders before the change in
the objective became effective.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
How to use
this glossary
<S> <C> <C>
The glossary includes Glossary A-C |Amortized cost Average maturity
definitions of investment | -----------------------------------------------------------------------------------
terms used throughout the Amortized cost is a method used to value a fixed-income An average of when the
prospectus. If you would like security that starts with the face value of the security individual bonds and other
to know the meaning of an and then adds or subtracts from that value debt securities held in a
investment term that is depending on whether the purchase price was greater portfolio will mature.
not explained in the text please or less than the value of the security at maturity.
check the glossary. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
</TABLE>
6
<PAGE>
The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well. Fixed-income
securities generally offer the potential for greater
income payments than stocks, and also may provide capital
appreciation.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Balanced Fund Delaware Devon Fund
<S> <C> <C>
Common stocks: Securities Generally, we invest up to Generally, 90% to 100% of the
that represent shares of 75% of net assets in Fund's assets will be
ownership in a corporation. dividend-paying stocks. invested in common stocks.
Stockholders participate in Under normal market
the corporation's profits and conditions we will invest at
losses, proportionate to the least 65% of total assets in
number of shares they own. dividend-paying stocks.
- ------------------------------------------------------------------------------------------------------------------------------------
Convertible securities: Each Fund may invest in convertible securities; however, we will not invest
Usually preferred stocks or more than 5% of net assets in convertible securities that are rated below
corporate bonds that can be investment grade by an NRSRO or in securities that are unrated but deemed
exchanged for a set number of equivalent to non-investment grade.
shares of common stock at a
predetermined price. These
securities offer higher
appreciation potential than
nonconvertible bonds and
greater income potential than
nonconvertible preferred
stocks.
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities: There is no limit on There is no limit on
Fixed-income securities that government-related government-related
represent pools of mortgages, mortgage-backed securities or mortgage-backed securities;
with investors receiving on fully collateralized however, the Fund typically
principal and interest privately issued holds none or only a small
payments as the underlying mortgage-backed securities. percentage of its net assets
mortgage loans are paid back. in fixed-income securities.
Many are issued and We may invest up to 20% of
guaranteed against default by net assets in mortgage-backed We may purchase privately
the U.S. government or its securities issued by private issued obligations only if
agencies or companies whether or not the they are 100% collateralized
instrumentalities, such as securities are 100% and rated in one of the four
the Federal Home Loan collateralized. However, highest categories by an
Mortgage Corporation, Fannie these securities must be NRSRO. The privately issued
Mae and the Government rated at the time of purchase securities we would invest in
National Mortgage in one of the four highest would be either CMOs or
Association. Others are categories by an NRSRO. The REMICs (see below).
issued by private financial privately issued securities
institutions, with some fully we invest in are either CMOs
collateralized by or REMICs (see below).
certificates issued or
guaranteed by the governmen
or its agencies or
instrumentalities.
- ------------------------------------------------------------------------------------------------------------------------------------
Collateralized mortgage See mortgage-backed securities above.
obligations (CMOs): Privately
issued mortgage-backed bonds
whose underlying value is the
mortgages that are grouped
into different pools
according to their maturity.
- ------------------------------------------------------------------------------------------------------------------------------------
Real estate mortgage See mortgage-backed securities above.
investment conduits (REMICs):
Privately issued
mortgage-backed bonds whose
underlying value is a fixed
pool of mortgages secured by
an interest in real property.
Like CMOs, REMICs offer
different pools.
- ------------------------------------------------------------------------------------------------------------------------------------
Asset-backed securities: We invest only in Delaware Devon Fund doesn't
Bonds or notes backed by asset-backed securities rated typically invest in
accounts receivables in one of the four highest asset-backed securities. When
including home equity, categories by an NRSRO. we do, we are allowed to
automobile or credit loans. invest only in asset-backed
securities rated in one of
the four highest categories
by an NRSRO.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bond Bond ratings Capital
- --------------------------------------------------------------------------------
<S> <C> <C>
A debt security, like an IOU, Independent evaluations of The amount of
issued by a company, creditworthiness, ranging money you
municipality or government from Aaa/AAA (highest invest.
agency. In return for lending quality) to D (lowest
money to the issuer, a bond quality). Bonds rated Baa/BBB
buyer generally receives or better are considered
fixed periodic interest investment grade. See also
payments and repayment of the Nationally recognized
loan amount on a specified statistical rating
maturity date. A bond's price organization.
changes prior to maturity and
typically is inversely
related to current interest
rates. Generally, when
interest rates rise, bond
prices fall, and when
interest rates fall, bond
prices rise.
</TABLE>
7
<PAGE>
How we manage the Funds (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Balanced Fund Delaware Devon Fund
<S> <C> <C>
Corporate bonds: Debt We focus on bonds rated in one Although Delaware Devon Fund
obligations issued by a of the four highest categories is allowed to invest in
corporation. by an NRSRO (or if unrated, corporate bonds, we do not
deemed equivalent), with typically invest in them.
maturities between five and 30
years.
- ------------------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An Typically, we use repurchase agreements as a short-term investment for a
agreement between a buyer and Fund's cash position. In order to enter into these repurchase agreements, the
seller of securities in which Fund must have collateral of at least 102% of the repurchase price. Neither Fund
the seller agrees to buy the may have more than 10% of its total assets in repurchase agreements with
securities back within a maturities of over seven days. Each Fund will only enter into repurchase
specified time at the same agreements in which the collateral is comprised of U.S. government securities.
price the buyer paid for them,
plus an amount equal to an
agreed upon interest rate.
Repurchase agreements are
often viewed as equivalent to
cash.
- ------------------------------------------------------------------------------------------------------------------------------------
American Depositary Receipts We may invest without limitation in ADRs.
(ADRs): Certificates issued by
a U.S. bank which represent
the bank's holdings of a
stated number of shares of a
foreign corporation. An ADR
entitles the holder to all
dividends and capital gains
earned by the underlying
foreign shares, and an ADR is
bought and sold the same as
U.S. securities.
- ------------------------------------------------------------------------------------------------------------------------------------
Restricted securities: We may invest without limitation in Rule 144A Securities, which are privately
Privately placed securities placed securities that are eligible for resale only among certain institutional
whose resale is restricted buyers without registration.
under securities law.
Delaware Devon Fund must limit
its investments in other
restricted securities to no
more than 5% of total assets.
- ------------------------------------------------------------------------------------------------------------------------------------
Interest rate swap and index We may use interest rate swaps Delaware Devon Fund does not
swap agreements: In an to adjust Delaware Balanced use interest rate swap or
interest rate swap, a fund Fund's sensitivity to interest index swap agreements.
receives payments from another rates, or to hedge against
party based on a floating changes in interest rates.
interest rate in return for
making payments based on a Index swaps may be used to
fixed interest rate. An gain exposure to markets that
interest rate swap can also the Fund invests in or as a
work in reverse, with a fund substitute for futures,
receiving payments based on a options or forward contracts
fixed interest rate and making if such contracts are not
payments based on a floating directly available to the Fund
interest rate. In an index on favorable terms.
swap, a fund receives gains or
incurs losses based on the Interest rate swaps and index
total return of an index, in swaps will be considered
exchange for making fixed or illiquid securities (see
floating interest rate below).
payments to another party.
- ------------------------------------------------------------------------------------------------------------------------------------
Illiquid securities: We may invest up to 10% of total assets in illiquid securities.
Securities that do not have a
ready market, and cannot be
easily sold within seven days
at approximately the price
that the Fund has valued them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The Funds may also invest in other securities including real estate investment
trusts, rights and warrants to purchase common stock, futures contracts,
options, U.S. Treasury securities, Yankee and Euro bonds. Please see the
Statement of Additional Information for additional descriptions on these
securities as well as those listed in the table above.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
C-D | Capital appreciation Capital gains distributions Compounding Consumer Price Index (CPI)
| --------------------------------------------------------------------------------------------------------------------------
An increase in the value of Payments to mutual fund Earnings on an investment's Measurement of U.S. inflation;
an investment. shareholders of profits previous earnings. represents the price of a
(realized gains) from the sale basket of commonly purchased
of a fund's portfolio goods.
securities. Usually paid once
a year; may be either
short-term gains or long-term
gains.
</TABLE>
8
<PAGE>
Lending securities Each Fund may lend up to 25% of its assets to qualified
brokers, dealers and institutional investors for their use in security
transactions.
Purchasing securities on a when-issued or delayed delivery basis Each Fund may
buy or sell securities on a when-issued or delayed delivery basis; that is,
paying for securities before delivery or taking delivery at a later date. Each
Fund will designate cash or securities in amounts sufficient to cover its
obligations, and will value the designated assets daily.
Portfolio turnover Both Funds anticipate that their annual portfolio turnover
will be less than 100%. A turnover rate of 100% would occur if a Fund sold and
replaced securities valued at 100% of its net assets within one year.
The risks of investing Investing in any mutual fund involves risk, including
in the Funds the risk that you may receive little or no return on
your investment, and the risk that you may lose part or
all of the money you invest. Before you invest in a
Fund you should carefully evaluate the risks. An
investment in the Funds typically provides the best
results when held for a number of years. The following
are the chief risks you assume when investing in the
Funds. Please see the Statement of Additional
Information for further discussion of these risks and
the other risks not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Balanced Fund Delaware Devon Fund
<S> <C> <C>
Market risk is the risk that We maintain a long-term investment approach and focus on stocks we believe
all or a majority of the can appreciate over an extended time frame regardless of interim market
securities in a certain fluctuations. We do not try to predict overall stock market movements and do not
market--like the stock or bond trade for short-term purposes.
market--will decline in value
because of factors such as We may hold a substantial part of each Fund's assets in cash or cash
economic conditions, future equivalents as a temporary defensive strategy.
expectations or investor
confidence.
Index swaps are subject to the We diversify the Fund's assets Delaware Devon Fund is not
same market risks as the among two major categories of subject to risks related to
investment market or sector investments--stocks and index swaps.
that the index represents. bonds--which tend to increase
Depending on the actual and decline in value in
movements of the index and how different economic or
well the portfolio manager investment conditions.
forecasts those movements, a
fund could experience a higher In evaluating the use of an
or lower return than index swap, we carefully
anticipated. consider how market changes
could affect the swap and how
that compares to us investing
directly in the market the
swap is intended to represent.
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate bond Cost basis Depreciation Diversification Dividend distribution
- ------------------------------------------------------------------------------------------------------------------------------------
A debt security The original A decline in an The process of Payments to mutual
issued by a purchase price of an investment's value. spreading fund shareholders of
corporation. See investment, used in investments among a dividends passed
Bond. determining capital number of different along from the
gains and losses. securities, asset fund's portfolio of
classes or securities.
investment styles to
reduce the risks of
investing.
</TABLE>
9
<PAGE>
How we manage the Funds (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Balanced Fund Delaware Devon Fund
<S> <C> <C>
Industry and security risk is We limit the amount of each Fund's assets invested in any one industry and in
the risk that the value of any individual security. We also follow a rigorous selection process before
securities in a particular choosing securities for the portfolio.
industry or the value of an
individual stock or bond will
decline because of changing
expectations for the
performance of that industry
or for the individual company
issuing the stock or bond.
- ------------------------------------------------------------------------------------------------------------------------------------
Interest rate risk is the risk We do not try to increase Delaware Devon Fund does not
that securities, particularly return by predicting and generally hold a significant
bonds with longer maturities, aggressively capitalizing on portion of assets in
will decrease in value if interest rate moves. Instead, fixed-income securities, so
interest rates rise. we aim to keep the interest interest rate risk is not a
rate risk similar to the major risk with this Fund.
Swaps may be particularly Lehman Brothers Aggregate Bond
sensitive to interest rate Index.
changes. Depending on the
actual movements of interest We will not invest in swaps
rates and how well the with maturities of more than
portfolio manager anticipates two years. Each business day
them, a fund could experience we will calculate the amount
a higher or lower return than the Fund must pay for swaps it
anticipated. holds and will segregate cash
or other liquid securities to
cover that amount.
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign risk is the risk that We typically invest only a small portion of each Fund's portfolio in foreign
foreign securities may be securities. When we do purchase foreign securities, they are often denominated
adversely affected by in U.S. dollars. We also tend to avoid markets where we believe accounting
political instability, changes principles or the regulatory structure are underdeveloped.
in currency exchange rates,
foreign economic conditions or
inadequate regulatory and
accounting standards.
- ------------------------------------------------------------------------------------------------------------------------------------
Liquidity risk is the We limit exposure to illiquid securities.
possibility that securities
cannot be readily sold within Swap agreements will be
seven days at approximately treated as illiquid
the price that a fund values securities, but most swap
them. dealers will be willing to
repurchase interest rate
swaps.
- ------------------------------------------------------------------------------------------------------------------------------------
D-L | Duration Expense ratio Financial adviser
|------------------------------------------------------------------
A measurement of a A mutual fund's Financial
fixed-income total operating professional (e.g.,
investment's price expenses, expressed broker, banker,
volatility. The as a percentage of accountant, planner
larger the number, its total net or insurance agent)
the greater the assets. Operating who analyzes
likely price change expenses are the clients' finances
for a given change costs of running a and prepares
in interest rates. mutual fund, personalized
including management programs to meet
fees, offices, objectives.
staff, equipment and
expenses related to
maintaining the
fund's portfolio of
securities and
distributing its
shares. They are
paid from the fund's
assets before any
earnings are
distributed to
shareholders.
</TABLE>
10
<PAGE>
Who manages the Funds
Investment The Funds are managed by Delaware Management Company, a series of
manager Delaware Management Business Trust which is an indirect, wholly
owned subsidiary of Delaware Management Holdings, Inc. Delaware
Management Company makes investment decisions for the Funds,
manages the Funds' business affairs and provides daily
administrative services. For these services, the manager was paid a
fee for the last fiscal year as follows:
Investment management fees
Delaware Delaware
Balanced Fund Devon Fund
- -------------------------------------------------------------------------------
As a percentage of average daily net assets 0.57% 0.61%*
- -------------------------------------------------------------------------------
*Reflects a waiver of fees by the manager.
Portfolio Francis X. Morris and Gary A. Reed have primary responsibility for
managers making day-to-day investment decisions for Delaware Balanced Fund.
Mr. Morris has responsibility for making the day-to-day investment
decisions for Delaware Devon Fund. When making decisions for the
Funds, Mr. Morris regularly consults with Christopher Driver and
Michael S. Morris.
Francis X. Morris, Vice President/Senior Portfolio Manager, holds a
bachelor's degree in finance from Providence College in Rhode
Island and an MBA from Widener University in Pennsylvania. He has
been managing the Funds since March 1999 and institutional equity
portfolios at Delaware Investments since 1997. He has 17 years of
investment management experience. Mr. Morris came to Delaware from
PNC Asset Management where he served as a securities analyst,
portfolio manager and Director of Equity Research. He is a past
president of the Philadelphia Society of Financial Analysts.
Gary A. Reed, Vice President/Senior Portfolio Manager, holds an AB
in Economics from the University of Chicago and an MA in Economics
from Columbia University. He has been Delaware Balanced Fund's
Senior Portfolio Manager for fixed income since April 1995. Before
joining Delaware Investments in 1989, Mr. Reed was Vice President
and Manager of the fixed-income department of the Irving Trust
Company in New York.
Christopher Driver, Assistant Vice President/Equity Analyst, holds
a BS in Finance from the University of Delaware. Prior to joining
Delaware Investments in 1998, he was a Research Analyst in the
equity value group at Blackrock, Inc. Prior to Blackrock, he was a
partner at Cashman Farrell & Associates. Mr. Driver is a CFA
charterholder.
Michael S. Morris, Assistant Vice President/Equity Analyst, holds a
BS from Indiana University with a major in finance. Previously he
served as equity analyst at Walnut Asset Management where he
covered a variety of industries. He has also worked at Pilgrim
Baxter as a Senior Research Analyst covering financials and began
his career at The State Teachers Retirement System of Ohio. Mr
Morris is a CFA Charterholder.
<TABLE>
<CAPTION>
Investment Lehman Brothers
Fixed-income securities Government securities Inflation goal Aggregate Bond Index
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
With fixed-income securities, Securities issued by the The increase in the The objective, An index that
the money you originally invest U.S. government or its cost of goods and such as long-term measures the
is paid back at a pre-specified agencies. They include services over time. capital growth or performance of about
maturity date. These securities, Treasuries as well as U.S. inflation is high current income, 6,500 U.S. corporate
which include government, agency-backed securities frequently measured that a mutual fund and government bonds.
corporate or municipal bonds, such as Fannie Maes. by changes in the pursues.
as well as money market Consumer Price Index
securities, typically pay a (CPI).
fixed rate of return (often
referred to as interest).
See Bond.
</TABLE>
11
--
<PAGE>
Who manages the Funds (continued)
Who's who? This diagram shows the various organizations involved with
managing, administering, and servicing the Delaware
Investments funds.
<TABLE>
<S> <C> <C> <C>
Board of Trustees
Investment manager Custodian
Delaware Management Company The Funds The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page 11 for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Shareholders
</TABLE>
<TABLE>
<S> <C>
Board of Trustees A mutual fund is governed by a Board of Custodian Mutual funds are legally required to protect their
Trustees which has oversight responsibility for the portfolio securities and most funds place them with a
management of the fund's business affairs. Trustees qualified bank custodian who segregates fund securities from
establish procedures and oversee and review the performance other bank assets.
of the investment manager, the distributor and others that
perform services for the fund. At least 40% of the Board of Distributor Most mutual funds continuously offer new shares
Trustees must be independent of the fund's investment to the public through distributors who are regulated as
manager and distributor. These independent fund trustees, in broker-dealers and are subject to NASD Regulation, Inc.
particular, are advocates for shareholder interests. (NASD) rules governing mutual fund sales practices.
Investment manager An investment manager is a company Service agent Mutual fund companies employ service agents
responsible for selecting portfolio investments consistent (sometimes called transfer agents) to maintain records of
with the objective and policies stated in the mutual fund's shareholder accounts, calculate and disburse dividends and
prospectus. The investment manager places portfolio orders capital gains and prepare and mail shareholder statements
with broker/dealers and is responsible for obtaining the and tax information, among other functions. Many service
best overall execution of those orders. A written contract agents also provide customer service to shareholders.
between a mutual fund and its investment manager specifies
the services the manager performs. Most management contracts Shareholders Like shareholders of other companies, mutual
provide for the manager to receive an annual fee based on a fund shareholders have specific voting rights, including the
percentage of the fund's average daily net assets. The right to elect trustees. Material changes in the terms of a
manager is subject to numerous legal restrictions, fund's management contract must be approved by a shareholder
especially regarding transactions between itself and the vote, and funds seeking to change fundamental investment
funds it advises. objectives or policies must also seek shareholder approval.
Portfolio managers Portfolio managers are employed by the
investment manager to make investment decisions for
individual portfolios on a day-to-day basis.
</TABLE>
M-N
<TABLE>
<CAPTION>
Management fee Market capitalization Maturity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The amount paid by a mutual fund to The value of a corporation determined by multiplying the The length of time until
the investment adviser for management current market price of a share of common stock by the a bond issuer must repay
services, expressed as an annual one million shares outstanding and the market price per the underlying loan
percentage of the fund's average share number of shares held by shareholders. A corporation principal to bondholders.
daily net assets. with of $10 has a market capitalization of $10 million.
</TABLE>
12
- --
<PAGE>
About your account
Investing in Institutional Class shares are available for purchase only by
the Funds the following:
o 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;
o tax-exempt employee benefit plans of the manager or its
affiliates and securities dealer firms with a selling
agreement with the distributor;
o institutional advisory accounts of the manager, or its
affiliates and those having client relationships with
Delaware Investment Advisers, an affiliate 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;
o a bank, trust company and similar financial institution
investing for its own account or for the account of its trust
customers for whom such financial institution is exercising
investment discretion in purchasing shares of the Class,
except where the investment is part of a program that
requires payment to the financial institution of a Rule 12b-1
Plan fee; and
o 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.
<TABLE>
<CAPTION>
NASD Regulation, Inc. Nationally recognized statistical rating organization
(NASD) (NRSRO) Net asset value (NAV)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
A self-regulating A company that assesses the credit quality of bonds, The daily dollar value of
organization, consisting commercial paper, preferred and common stocks and municipal one mutual fund share.
of brokerage firms short-term issues, rating the probability that the issuer Equal to a fund's net
(including distributors of the debt will meet the scheduled interest payments and repay assets divided by the
of mutual funds), that is the principal. Ratings are published by such companies as Moody's number of shares
responsible for overseeing Investors Service, Inc. (Moody's), Standard & Poor's Ratings outstanding.
the actions of its members. Group (S&P), Duff & Phelps, Inc. (Duff), and Fitch IBCA, Inc.
(Fitch).
</TABLE>
13
--
<PAGE>
About your account (continued)
How to buy shares
[GRAPHIC OF ENVELOPE]
By mail
Complete an investment slip and mail it with your
check, made payable to the fund and class of shares
you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you
are making an initial purchase by mail, you must
include a completed investment application (or an
appropriate retirement plan application if you are
opening a retirement account) with your check.
[GRAPHIC OF JAGGED WIRE]
By wire
Ask your bank to wire the amount you want to invest
to First Union Bank, ABA #031201467, Bank Account
number 2014128934013. Include your account number and
the name of the fund in which you want to invest. If
you are making an initial purchase by wire, you must
call us at 800.510.4015 so we can assign you an
account number.
[GRAPHIC OF EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in
one or more funds in the Delaware Investments family
for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your
shares for Class B or Class C shares. To open an
account by exchange, call your Client Services
Representative at 800.510.4015.
[GRAPHIC OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of
purchasing shares, including opening an account. Your
adviser may charge a separate fee for this service.
The price you pay for shares will depend on when we receive
your purchase order. If we or an authorized agent receive your
order before the regular close of trading on the New York
Stock Exchange (normally 4:00 p.m. Eastern Time) on a business
day, you will pay that day's closing share price which is
based on the Fund's net asset value. If we receive your order
after the close of trading, you will pay the next business
day's price. A business day is any day that the New York Stock
Exchange is open for business. We reserve the right to reject
any purchase order.
P-S
<TABLE>
<CAPTION>
Preferred stock Price-to-earnings ratio Principal
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Preferred stock has preference over A measure of a stock's value calculated by Amount of money you invest (also
common stock in the payment of dividing the current market price of a share called capital). Also refers to a
dividends and liquidation of assets. of stock by its annual earnings per share. A bond's original face value, due to be
Preferred stocks also often pay stock selling for $100 per share with annual repaid at maturity.
dividends at a fixed rate and are earnings per share of $5 has a P/E of 20.
sometimes convertible into common
stock.
</TABLE>
14
- --
<PAGE>
How to buy shares We determine the funds net asset value (NAV) per share at the
(continued) close of trading of the New York Stock Exchange each business
day that the Exchange is open. We calculate this value by
adding the market value of all the securities and assets in
the Fund's portfolio, deducting all liabilities, and dividing
the resulting number by the number of shares outstanding. The
result is the net asset value per share. We price securities
and other assets for which market quotations are available at
their market value. We price fixed-income securities on the
basis of valuations provided to us by an independent pricing
service that uses methods approved by the board of trustees.
Any fixed-income securities that have a maturity of less than
60 days we price at amortized cost. For all other securities,
we use methods approved by the board of trustees that are
designed to price securities at their fair market value.
How to redeem
shares
[GRAPHIC OF ENVELOPE]
By mail
You can redeem your shares (sell them back to the
fund) by mail by writing to: Delaware Investments,
1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for
redemptions of more than $50,000, you must include a
signature guarantee for each owner. You can also fax
your written request to 215.255.8864. Signature
guarantees are also required when redemption proceeds
are going to an address other than the address of
record on an account.
[GRAPHIC OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by
telephone. You may have the proceeds sent to you by
check, or, if you redeem at least $1,000 of shares,
you may have the proceeds sent directly to your bank
by wire. Bank information must be on file before you
request a wire redemption.
[GRAPHIC OF JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have
the proceeds deposited directly to your bank account
the next business day after we receive your request.
Bank information must be on file before you request a
wire redemption.
[GRAPHIC OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of
redeeming your shares. Your adviser may charge a
separate fee for this service.
<TABLE>
<CAPTION>
S&P 500 Composite Stock
Prospectus Redeem Risk Index Sales charge
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The official offering document To cash in your Generally defined as The Standard & Poor's 500 Charge on the
that describes a mutual fund, shares by selling variability of value; Composite Stock Index; an purchase or
containing information required them back to the also credit risk, unmanaged index of 500 widely redemption of fund
by the SEC, such as investment mutual fund. inflation risk, currency held common stocks that is shares sold through
objectives, policies, services and interest rate risk. often used to represent financial advisers.
and fees. Different investments performance of the U.S. stock May vary with the
involve different types market. amount invested.
and degrees of risk. Typically used to
compensate
financial advisers
for advice and
service provided.
</TABLE>
15
--
<PAGE>
About your account (continued)
How to redeem If you hold your shares in certificates, you must submit the
shares certificates with your request to sell the shares. We
(continued) recommend that you send your certificates by certified mail.
When you send us a properly completed request to redeem or
exchange shares before the regular close of trading on the
New York Stock Exchange (normally 4:00 p.m. Eastern Time),
you will receive the net asset value as determined on the
business day we receive your request. You may have to pay
taxes on the proceeds from your sale of shares. We will send
you a check, normally the next business day, but no later
than seven days after we receive your request to sell your
shares. If you purchased your shares by check, we will wait
until your check has cleared, which can take up to 15 days,
before we send your redemption proceeds.
Account minimum If you redeem shares and your account balance falls below
$250, a Fund may redeem your account after 60 days' written
notice to you.
Exchanges You can exchange all or part of your shares for shares of the
same class in another Delaware Investments fund. If you
exchange shares to a fund that has a sales charge you will
pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through
the reinvestment of dividends. You may have to pay taxes on
your exchange. When you exchange shares, you are purchasing
shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying
shares through an exchange. You may not exchange your shares
for Class B and Class C shares of the funds in the Delaware
Investments family.
Dividends, Dividends, if any, from Delaware Balanced Fund are paid
distributions quarterly. Dividends, if any, from Delaware Devon Fund are
and taxes paid annually. For both Funds, any capital gains are
distributed annually. We automatically reinvest all dividends
and any capital gains.
Tax laws are subject to change, so we urge you to consult
your tax adviser about your particular tax situation and how
it might be affected by current tax law. The tax status of
your dividends from these Funds is the same whether you
reinvest your dividends or receive them in cash.
Distributions from a Fund's long-term capital gains are
taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable
as ordinary income. Any capital gains may be taxable at
different rates depending on the length of time the Fund held
the assets. In addition, you may be subject to state and
local taxes on distributions.
We will send you a statement each year by January 31
detailing the amount and nature of all dividends and capital
gains that you were paid for the prior year.
S-V
<TABLE>
<CAPTION>
SEC (Securities and
Exchange Commission) Share classes Signature guarantee Standard deviation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal agency established by Different Certification by a bank, brokerage firm A measure of an
Congress to administer the laws classifications of or other financial institution that a investment's volatility;
governing the securities industry, shares; mutual fund customer's signature is valid; signature for mutual funds, measures
including mutual fund companies. share classes offer a guarantees can be provided by members of how much a fund's total
variety of sales charge the STAMP program. return has typically
choices. varied from its historical
average.
</TABLE>
16
- --
<PAGE>
Certain management considerations
Year 2000 As with other mutual funds, financial and business
organizations and individuals around the world, the Funds
could be adversely affected if the computer systems used by
their service providers do not properly process and calculate
date-related information from and after January 1, 2000. This
is commonly known as the "Year 2000 Problem." Each Fund is
taking steps to obtain satisfactory assurances that its major
service providers are taking steps reasonably designed to
address the Year 2000 Problem on the computer systems that
the service providers use. However, there can be no assurance
that these steps will be sufficient to avoid any adverse
impact on the business of the Funds. The Year 2000 Problem
may also adversely affect the issuers of securities in which
the Funds invest. The portfolio managers and investment
professionals of the Funds consider Year 2000 compliance
(including, but not limited to, any or all of the following:
impact on business, cost of compliance plan review and
contingency planning, and vendor compliance) in the
securities selection and investment process. However, there
can be no guarantees that, even with their due diligence
efforts, they will be able to predict the effect of Year 2000
on any company or the performance of its securities.
Investments by Delaware Devon Fund accepts investments from the portfolios
fund of funds of Delaware Group Foundation Funds, a fund of funds. From
time to time, the Fund may experience large investments or
redemptions due to allocations or rebalancings by Foundation
Funds. While it is impossible to predict the overall impact
of these transactions over time, there could be adverse
effects on portfolio management. For example, the Fund may be
required to sell securities or invest cash at times when it
would not otherwise do so. These transactions could also have
tax consequences if sales of securities result in gains, and
could also increase transactions costs or portfolio turnover.
The manager will monitor transactions by Foundation Funds and
will attempt to minimize any adverse effects on both Delaware
Devon Fund and Foundation Funds as a result of these
transactions.
<TABLE>
<CAPTION>
Statement of Additional
Information (SAI) Stock Total return Volatility
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The document serving as "Part B" of An investment that An investment performance The tendency of an investment to go
a fund's prospectus that provides represents a share of measurement, expressed as a up or down in value by different
more detailed information about the ownership (equity) in a percentage, based on the magnitudes. Investments that
fund's organization, investments, corporation. Stocks are combined earnings from generally go up or down in value in
policies and risks. often referred to as dividends, capital gains and "high volatility" investments.
equities. change in price over a given
period.
</TABLE>
17
--
<PAGE>
Financial highlights
The Financial highlights tables are intended to help you understand the Funds'
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Funds' financial statements, is included in the
Funds' annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
Institutional Class
Year ended
10/31
Delaware Balanced Fund 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $23.000 $23.000 $21.300 $19.980 $18.030
Income from investment operations:
Net investment income 0.480(1) 0.585 0.659 0.727 0.694(1)
Net realized and unrealized gain (loss)
on investments (0.265) 2.595 3.681 2.363 2.166
------- ------- ------- ------- -------
Total from investment operations 0.215 3.180 4.340 3.090 2.860
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income (0.545) (0.580) (0.720) (0.690) (0.660)
Dividends from realized gain on investments (1.040) (2.600) (1.920) (1.080) (0.250)
------- ------- ------- ------- -------
Total dividends and distributions (1.585) (3.180) (2.640) (1.770) (0.910)
------- ------- ------- ------- -------
Net asset value, end of period $21.630 $23.000 $23.000 $21.300 $19.980
======= ======= ======= ======= =======
Total return(2) 0.70% 15.03% 22.29% 16.25% 16.50%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $83,042 $300,656 $153,176 $125,751 $108,747
Ratio of expenses to average net assets 0.89% 0.77% 0.78% 0.80% 0.79%
Ratio of net investment income to
average net assets 2.08% 2.46% 3.00% 3.58% 3.73%
Portfolio turnover 87% 86% 81% 92% 94%
</TABLE>
(1) Per share information is based on the average shares outstanding method.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes the reinvestment of distributions at net asset
value.
How to read the
Financial highlights
<TABLE>
<CAPTION>
Net realized and unrealized Net asset value
Net investment loss gain on investments (NAV) Total return
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment loss includes A realized gain occurs when we sell This is the value of a mutual fund This represents the rate
dividend and interest income an investment at a profit, while a share, calculated by dividing the that an investor would
earned from a fund's realized loss occurs when we sell an net assets by the number of shares have earned or lost on
investments; it is after investment at a loss. When an outstanding. an investment in a Fund.
expenses have been deducted. investment increases or decreases in In calculating this
value but we do not sell it, we figure for the financial
record an unrealized gain or loss. highlights table, we
The amount of realized gain per share include applicable fee
that we pay to shareholders is listed waivers and assume the
under "Less dividends and shareholder has
distributions-Distributions from reinvested all dividends
realized gain on investments." and realized gains.
</TABLE>
18
- --
<PAGE>
<TABLE>
<CAPTION>
Institutional Class
Year ended
10/31
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Delaware Devon Fund
Net asset value, beginning of period $20.140 $17.930 $14.670 $12.590 $10.860
Income (loss) from investment operations:
Net investment income 0.109(1) 0.134 0.211 0.267 0.241(1)
Net realized and unrealized gain (loss)
on investments (0.109) 3.281 4.284 2.693 2.049
------- ------- ------- ------- -------
Total from investment operations (0.000) 3.415 4.495 2.960 2.290
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income (0.057) (0.175) (0.270) (0.240) (0.240)
Dividends from realized gain on investments (0.190) (1.030) (0.965) (0.640) (0.320)
Return of capital (0.083) -- -- -- --
------- ------- ------- ------- -------
Total dividends and distributions (0.330) (1.205) (1.235) (0.880) (0.560)
------- ------- ------- ------- -------
Net asset value, end of period $19.810 $20.140 $17.930 $14.670 $12.590
======= ======= ======= ======= =======
Total return(2) (0.09%) 19.89% 32.57% 24.56% 22.26%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $21,815 $10,482 $5,749 $3,290 $2,870
Ratio of expenses to average net assets 1.07% 1.00% 0.95% 0.95% 0.95%
Ratio of expenses to average net assets
prior to expense limitation and expenses
paid indirectly 1.15% 1.10% 1.12% 1.54% 1.99%
Ratio of net investment income to
average net assets 0.52% 0.94% 1.44% 1.97% 2.12%
Ratio of net investment income to average
net assets prior to expense limitation and
expenses paid indirectly 0.44% 0.84% 1.27% 1.38% 1.08%
Portfolio turnover 82% 39% 64% 80% 99%
</TABLE>
(1) Per share information based on the average shares outstanding method.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes the reinvestment of distributions at net asset
value. Total return reflects expense limits.
How to read the
Financial highlights
(continued)
<TABLE>
<CAPTION>
Ratio of expenses to Ratio of net investment loss
Net assets average net assets to average net assets Portfolio turnover rate
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets represent The expense ratio is We determine this This figure tells
the total value of the percentage of ratio by dividing you the amount of
all the assets in a net assets that a net investment trading activity in
fund's portfolio, fund pays annually income by average a fund's portfolio.
less any for operating net assets. For example, a fund
liabilities, that expenses and with a 50% turnover
are attributable to management fees. has bought and sold
that class of the These expenses half of the value of
fund. include accounting its total investment
and administration portfolio during the
expenses, services stated period.
for shareholders,
and similar
expenses.
</TABLE>
19
------
<PAGE>
DELAWARE (sm)
INVESTMENTS
- ---------------------
Philadelphia o London
This page intentionally left blank
<PAGE>
Delaware
Balanced Fund
Delaware
Devon Fund
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In the Funds' shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Funds' performance during the report
period. You can find more detailed information about the Funds in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in these funds, you can write to us at 1818 Market Street, Philadelphia, PA
19103-3682, or call toll-free 800.523.1918. You may also obtain additional
information about the Funds from your financial adviser.
You can find reports and other information about the Funds on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Funds, including their
Statement of Additional Information, can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get information on the public reference room by calling the SEC at
1.800.SEC.0330.
Web site
www.delawareinvestments.com
E-mail
[email protected]
Client Services Representative
800.510.4015
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-249
Fund Symbols
Delaware Balanced Fund
CUSIP NASDAQ
Institutional Class 246093207 DEICX
Delaware Devon Fund
CUSIP NASDAQ
Institutional Class 246093405 DEIVX
DELAWARE (sm)
INVESTMENTS
- ---------------------
Philadelphia o London
P-042 [--] PP 12/99
<PAGE>
Delaware Investments includes funds with a wide range of investment objectives.
Stock funds, income funds, national and state-specific tax-exempt funds, money
market funds, global and international funds and closed-end funds give investors
the ability to create a portfolio that fits their personal financial goals. For
more information, shareholders of the Fund Classes should contact their
financial adviser or call Delaware Investments at 800-523-1918 and shareholders
of the Institutional Classes should contact Delaware Investments at
800-510-4015.
INVESTMENT MANAGER
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
<PAGE>
- -----------------------------------------------
DELAWARE GROUP EQUITY FUNDS I
DELAWARE BALANCED FUND
A CLASS
B CLASS
C CLASS
INSTITUTIONAL CLASS
DELAWARE DEVON FUND
A CLASS
B CLASS
C CLASS
INSTITUTIONAL CLASS
- -----------------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
December 28, 1999
DELAWARE
INVESTMENTS
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
December 28, 1999
DELAWARE GROUP EQUITY FUNDS I
DELAWARE BALANCED FUND
DELAWARE DEVON FUND
1818 Market Street
Philadelphia, PA 19103
For more information about Delaware Balanced Fund Institutional
Class and Delaware Devon Fund Institutional Class:
800-510-4015
For Prospectus, Performance and Information on Existing Accounts of
Class A Shares, Class B Shares and Class C Shares:
Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY) Nationwide 800-362-7500
Delaware Group Equity Funds I ("Equity Funds I") is a
professionally-managed mutual fund of the series type which currently offers two
series of shares: Delaware Balanced Fund series ("Delaware Balanced Fund") and
Delaware Devon Fund series ("Delaware Devon Fund") (individually, a "Fund", and
collectively, the "Funds"). Each Fund also offers Class A, B, C and
Institutional Class Shares. All references to "shares" in this Part B refer to
all Classes of shares of Equity Funds I, except where noted.
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 28, 1999 and the current Prospectus for the
Institutional Classes dated December 28, 1999, 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"), at
the above address or by calling the above phone numbers. The Funds' financial
statements, the notes relating thereto, the financial highlights and the report
of independent auditors are incorporated by reference from the Annual Report
into this Part B. The Annual Report will accompany any request for Part B. The
Annual Report can be obtained, without charge, by calling 800-523-1918.
TABLE OF CONTENTS
Cover Page 1
Investment Policies 2
Performance Information 18
Trading Practices and Brokerage
Purchasing Shares
Investment Plans
Determining Offering Price and Net Asset Value
Redemption and Exchange
Dividends and Realized Securities Profits Distributions
Taxes
Investment Management Agreement
Officers and Trustees
General Information
Financial Statements
Appendix A--Investment Objectives of the Funds in The
Delaware Investments Family
<PAGE>
INVESTMENT POLICIES
Fundamental Restrictions - Each Fund has adopted the following restrictions
which cannot be changed without approval by the holders of a "majority" of a
Fund's outstanding shares, which is a vote by the holders of the lesser of a)
67% or more of the voting securities present in person or by proxy at a meeting,
if the holders of more than 50% of the outstanding voting securities are present
or represented by proxy; or b) more than 50% of the outstanding voting
securities. The percentage limitations contained in the restrictions and
policies set forth herein apply at the time of purchase of securities.
Each Fund shall not:
1. Make investments that will result in the concentration (as that term
may be defined in the Investment Company Act of 1940 ("1940 Act"), any rule or
order thereunder, or U.S. Securities and Exchange Commission ("SEC") staff
interpretation thereof) of its investments in the securities of issuers
primarily engaged in the same industry, provided that this restriction does not
limit the Fund from investing in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or in tax-exempt securities or
certificates of deposit.
2. Borrow money or issue senior securities, except as the 1940 Act, any
rule or order thereunder, or SEC staff interpretation thereof, may permit.
3. Underwrite the securities of other issuers, except that the Fund may
engage in transactions involving the acquisition, disposition or resale of its
portfolio securities, under circumstances where it may be considered to be an
underwriter under the Securities Act of 1933 (the "1933 Act").
4. Purchase or sell real estate, unless acquired as a result of
ownership of securities or other instruments and provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
5. Purchase or sell physical commodities, unless acquired as a result
of ownership of securities or other instruments and provided that this
restriction does not prevent the Fund from engaging in transactions involving
futures contracts and options thereon or investing in securities that are
secured by physical commodities.
6. Make loans, provided that this restriction does not prevent the Fund
from purchasing debt obligations, entering into repurchase agreements, loaning
its assets to broker/dealers or institutional investors and investing in loans,
including assignments and participation interests.
Non-fundamental Restrictions - In addition to the fundamental policies and
investment restrictions described above, and the various general investment
policies described in the prospectus, each Fund will be subject to the following
investment restrictions, which are considered non-fundamental and may be changed
by the Board of Trustees without shareholder approval.
1. The Fund is permitted to invest in other investment companies,
including open-end, closed-end or unregistered investment companies, either
within the percentage limits set forth in the 1940 Act, any rule or order
thereunder, or SEC staff interpretation thereof, or without regard to percentage
limits in connection with a merger, reorganization, consolidation or other
similar transaction. However, the Fund may not operate as a "fund of funds"
which invests primarily in the shares of other investment companies as permitted
by Section 12(d)(1)(F) or (G) of the 1940 Act, if its own shares are utilized as
investments by such a "fund of funds."
5
<PAGE>
2. The Fund may not invest more than 15% of its net assets in
securities which it cannot sell or dispose of in the ordinary course of business
within seven days at approximately the value at which the Fund has valued the
investment.
The following are additional non-fundamental investment restrictions:
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'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 trustee who is an officer or trustee of Equity Funds I or an officer,
trustee or partner of its investment manager if, to the knowledge of Equity
Funds I, 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 may be taken
by its officers, trustees or any of its affiliated persons. Such persons may buy
shares of Equity Funds I 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's assets or (c) own securities of investment companies having
an aggregate value in excess of 10% of Equity Funds I's assets.
6. Not to act as an underwriter of securities of other issuers, except
that Equity Funds I may acquire restricted securities and securities which are
not readily marketable under circumstances where, if such securities are sold,
Equity Funds I may be deemed an underwriter for purposes of the Securities Act
of 1933 (the "1933 Act").
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's purchase of securities issued by real estate
investment trusts.)
9. Not to sell short any security or property.
10. Not to deal in commodities, except that Delaware 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.
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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'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 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 shall not issue senior
securities as defined in the Investment Company Act of 1940 (the "1940 Act"),
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 and Equity Funds I 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.
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).
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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. Delaware 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 Balanced 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 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.
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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 (the "Manager")
that the staff of the Securities and Exchange Commission (the "SEC") 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 trustees of Equity Funds I
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 trustees to vote the
proxy.
The major risk to which a Fund would be exposed on a portfolio 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 Trustees, 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 1933 Act. While maintaining oversight, the
Board of Trustees 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 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; 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.
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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 Trustees. A repurchase agreement is a short-term
investment in which the purchaser (i.e., a 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 Trustees 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 Investments family have obtained an exemption
from the joint-transaction prohibitions of Section 17(d) of the 1940 Act to
allow the Delaware Investments funds jointly to invest cash balances. Each Fund
of Equity Funds I 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.
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.
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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.
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 (the "1934 Act") 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.
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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
Delaware 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.
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.
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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 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.
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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
Delaware 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.
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.
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<PAGE>
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.
Delaware 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--Delaware 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 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.
15
<PAGE>
As with stock options, Delaware 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 Stock Index ("S&P 500") or the New York Stock Exchange
Composite Index, or a narrower market index such as the Standard & Poor's 100
Index ("S&P 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. Delaware 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.
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 secure 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.
16
<PAGE>
Interest Rate and Index Swaps
Delaware Balanced Fund may invest in interest rate and index swaps to
the extent consistent with their respective investment objectives and
strategies. The Fund will only invest in swaps in which all the reference rates
are related to or derived from instruments or markets in which the Fund is
otherwise eligible to invest, and subject to the investment limitations on the
instruments to which the purchased reference rate relates.
Swaps are agreements to exchange payment streams over a period of time
with another party, called a counterparty. Each payment stream is based on a
specified rate, which could be a fixed or variable interest rate, the rate of
return on an index, or some other reference rate. The payment streams are
calculated with reference to a hypothetical principal amount, called the
notional principal or the notional amount. For example, in an interest rate swap
one party may agree to pay a fixed interest rate to a counterparty and to
receive in return variable interest rate payments from the counterparty. The
amount that each party pays is calculated by multiplying the fixed and variable
rates, respectively, by the notional amount. The payment streams may thus be
thought of as interest payments on the notional amount. The notional amount does
not actually change hands at any point in the swap transaction; it is used only
to calculate the value of the payment streams.
When two counterparties each wish to swap interest rate payments, they
typically each enter into a separate interest rate swap contract with a
broker/dealer intermediary, who is the counterparty in both transactions, rather
than entering into a swap contract with each other directly. The broker/dealer
intermediary enters into numerous transactions of this sort, and attempts to
mange its portfolio of swaps so as to match and offset its payment receipts and
obligations.
17
<PAGE>
The typical minimum notional amount is $5 million. Variable interest
rates are usually set by reference to the London Inter-Bank Offered Rate
(LIBOR). The typical maximum term of an interest rate swap agreement ranges from
one to twelve years. Index swaps tend to be shorter term, often for one year.
The Manager presently intends to purchase swaps with maturities of six to twelve
months, and in no event greater than two years.
The Fund may also engage in index swaps, also called total return
swaps. In an index swap, the Fund may enter into a contract with a counterparty
in which the counterparty will make payments to the Fund based on the positive
returns of an index, such as a corporate bond index, in return for the Fund
paying to the counterparty a fixed or variable interest rate, as well as paying
to the counterparty any negative returns on the index. In a sense, the Fund is
purchasing exposure to an index in the amount of the notional principal in
return for making interest rate payments on the notional principal. As with
interest rate swaps, the notional principal does not actually change hands at
any point in the transaction. The counterparty, typically an investment bank,
manages its obligations to make total return payments by maintaining an
inventory of the fixed income securities that are included in the index.
Swap transactions provide several benefits to the Fund. Interest rate
swaps may be used as a duration management tool. Duration is a measure of a
bond's interest-rate sensitivity, expressed in terms of years because it is
related to the length of time remaining on the life of a bond. In general, the
longer a bond's duration, the more sensitive the bond's price will be to changes
in interest rates. The average duration of a fund is the weighted average of the
durations of the fund's fixed income securities.
If the Fund wished to shorten the duration of certain of its assets,
longer term assets could be sold and shorter term assets acquired, but these
transactions have potential tax and return differential consequences. By using
an interest rate swap, the Fund could agree to make semi-annual fixed rate
payments and receive semi-annual floating rate LIBOR payments adjusted every six
months. The duration of the floating rate payments received by the fund will now
be six months. In effect, the Fund has reduced the duration of the notional
amount invested from a longer term to six months over the life of the swap
agreement.
The Fund may also use swaps to gain exposure to specific markets. For
example, suppose bond dealers have particularly low inventories of corporate
bonds, making it difficult for a fixed income fund to increase its exposure to
the corporate bond segment of the market. It is generally not possible to
purchase exchange-traded options on a corporate bond index. The Fund could
replicate exposure to the corporate bond market, however, by engaging in an
index swap in which the Fund gains exposure to a corporate bond index in return
for paying a LIBOR-based floating interest rate.
Other uses of swaps could help permit the Fund to preserve a return or
spread on a particular investment or portion of its portfolio or to protect
against an increase in the price of securities the Fund anticipates purchasing
at a later date. Interest rate swaps may also be considered as a substitute for
interest rate futures in many cases where the hedging horizon is longer than the
maturity of the typical futures contract, and may be considered to provide more
liquidity than similar forward contracts, particularly long-term forward
contracts.
18
<PAGE>
The primary risk of swap transactions is the creditworthiness of the
counterparty, since the integrity of the transaction depends on the willingness
and ability of the counterparty to maintain the agreed upon payment stream. This
risk is often referred to as counterparty risk. If there is a default by a
counterparty in a swap transaction, the Fund's potential loss is the net amount
of payments the Fund is contractually entitled to receive for one payment period
(if any - the Fund could be in a net payment position), not the entire notional
amount, which does not change hands in a swap transaction. Swaps do not involve
the delivery of securities or other underlying assets or principal as collateral
for the transaction. The Fund will have contractual remedies pursuant to the
swap agreement but, as with any contractual remedy, there is no guarantee that
the Fund would be successful in pursuing them -- the counterparty may be
judgement proof due to insolvency, for example. The Fund thus assume the risk
that they will be delayed or prevented from obtaining payments owed to them. The
standard industry swap agreements do, however, permit the Fund to terminate a
swap agreement (and thus avoid making additional payments) in the event that a
counterparty fails to make a timely payment to the Fund.
In response to this counterparty risk, several securities firms have
established separately capitalized subsidiaries that have a higher credit
rating, permitting them to enter into swap transactions as a dealer. The Fund
will not be permitted to enter into any swap transaction unless, at the time of
entering into such transaction, the unsecured long-term debt of the actual
counterparty, combined with any credit enhancements, is rated at least A by S&P
or Moody's or is determined to be of equivalent credit quality by the Manager.
In addition, the Manager will closely monitor the ongoing creditworthiness of
swap counterparties in order to minimize the risk of swaps.
In addition to counterparty risk, the use of swaps also involves risks
similar to those associated with ordinary portfolio security transactions. If
the portfolio manager is incorrect in his or her forecast of market values or
interest rates, the investment performance of the Fund which has entered into a
swap transaction could be less favorable than it would have been if this
investment technique were not used. It is important to note, however, that there
is no upper limit on the amount the Fund might theoretically be required to pay
in a swap transaction.
In order to ensure that the Fund will only engage in swap transactions
to the extent consistent with its investment objectives and strategies, the Fund
will only engage in a swap transaction if all of the reference rates used in the
swap are related to or derived from securities, instruments or markets that are
otherwise eligible investments for the Fund. Similarly, the extent to which the
Fund may invest in a swap, as measured by the notional amount, will be subject
to the same limitations as the eligible investments to which the purchased
reference rate relates.
The Fund will, consistent with industry practice, segregate and
mark-to-market daily cash or other liquid assets having an aggregate market
value at least equal to the net amount of the excess, if any, of the Fund's
payment obligations over its entitled payments with respect to each swap
contract. To the extent that the Fund is obligated by a swap to pay a fixed or
variable interest rate, the Fund may segregate securities that are expected to
generate income sufficient to meet the Fund's net payment obligations. For
example, if the Fund holds interest rate swaps and is required to make payments
based on variable interest rates, it will have to make increased payments if
interest rates rise, which will not be necessarily be offset by the fixed-rate
payments it is entitled to receive under the swap agreement.
There is not a well developed secondary market for interest rate or
index swaps. Most interest rate swaps are nonetheless relatively liquid because
they can be sold back to the counterparty/dealer relatively quickly at a
determinable price. Most index swaps, on the other hand, are considered to be
illiquid because the counterparty/dealer will typically not unwind an index swap
prior to its termination (and, not surprisingly, index swaps tend to have much
shorter terms). The Fund will therefore treat all swaps as subject to their
limitation on illiquid investments. For purposes of calculating these percentage
limitations, the Fund will refer to the notional amount of the swap.
Swaps will be priced using fair value pricing. The income provided by a
swap should be qualifying income for purposes of Subchapter M of the Internal
Revenue Code. Swaps should not otherwise result in any significant
diversification or valuation issues under Subchapter M.
19
<PAGE>
Concentration
In applying a Fund's fundamental policy concerning concentration that
is described above, it is a matter of non-fundamental policy that: (i) utility
companies will be divided according to their services, for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry; (ii) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and (iii) asset
backed securities will be classified according to the underlying assets securing
such securities.
20
<PAGE>
PERFORMANCE INFORMATION
From time to time, each Fund may state its Classes' total return and
yield in advertisements and other types of literature. Any statements of total
return or yield performance data for a Class will be accompanied by information
on the average annual compounded rate of return for that Class over the most
recent one-, five- and ten-year or life- of-fund periods, as applicable. Each
Fund may also advertise aggregate and average total return information for its
Classes over additional periods of time. Each Fund may also advertise yield
information for its Classes for various 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.
21
<PAGE>
Each Fund may also state total return performance of its Classes in the
form of an average total return. This average annual return 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.
The performance of each Class of each Fund, as shown below, is the
average annual total return quotations through October 31, 1999. The average
annual total return for Class A Shares at offer reflects the maximum front-end
sales charge of 5.75% 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 Balanced Fund Institutional Class for the periods prior to
the commencement of operations of such Class is calculated by taking the
performance of Delaware Balanced 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. The performance of Class B and
Class C Shares, as shown below, is the average annual total return quotation
through October 31, 1999. The average annual total return including deferred
sales charge reflects the deduction of the applicable CDSC that would be paid if
the shares were redeemed at October 31, 1999. The average annual total return
for excluding deferred sales charge assumes the shares were not redeemed at
October 31, 1999 and therefore does not reflect the deduction of a CDSC.
Securities prices fluctuated during the periods covered and past results should
not be considered as representative of future performance.
On June 14, 1988, Delaware Balanced Fund's investment objective was
changed from growth with income to a balance of capital appreciation, income and
preservation of capital.
22
<PAGE>
Average Annual Total Return
Delaware Balanced Fund
<TABLE>
<CAPTION>
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
Delaware Delaware Delaware Delaware Delaware Delaware Delaware
Balanced Fund Balanced Fund Balanced Fund Balanced Fund Balanced Balanced Fund Balanced
Class A Class A Institutional Class B Shares Fund Class C Fund
Shares(1)(2) Shares(1) Class (Including Class B Shares Class C
(at Offer) (at NAV) Deferred Sales Shares (Including Shares
Charge)(3) (Excluding Deferred (Excluding
Deferred Sales Charge) Deferred
Sales Sales Charge)
Charge)
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year ended -5.33% 0.44% 0.70% -5.01% -0.31% -1.25% -0.31%
10/31/99
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
3 years ended 9.87% 12.06% 12.31% 10.38% 11.19% 11.18% 11.18%
10/31/99
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
5 years ended 12.34% 13.69% 13.92% 12.55% 12.80% N/A N/A
10/31/99
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
10 years ended 10.68% 11.33% N/A N/A N/A N/A N/A
10/31/99
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
15 years ended 12.29% 12.73% N/A N/A N/A N/A N/A
10/31/99
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
Life of Fund(4)
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
</TABLE>
(1) Delaware Balanced 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 2, 1998, the maximum front-end sales charge was 4.75%.
Effective November 2, 1998, the maximum front-end sales charge was
increased to 5.75% and the above performance numbers are calculated using
5.75% as the applicable sales charge.
(3) Effective November 2, 1998, the CDSC schedule for Class B Shares increased
as follows: (i) 5% if shares are redeemed within one year of purchase (ii)
4% if shares are redeemed with two years of purchase; (iii) 3% if shares
are redeemed during the third or fourth year following purchase; (iv) 2% if
shares are redeemed during the fifth year following purchase; (v) 1% if
shares are redeemed during the sixth year following purchase; and (v) 0%
thereafter. The above figures have been calculated using this new schedule.
(4) Date of initial public offering of Delaware Balanced Fund A Class was April
25, 1938; date of initial public offering of Delaware Balanced Fund
Institutional Class shares was November 9, 1992; date of initial public
offering of Delaware Balanced Fund Class B Shares was September 6, 1994;
date of initial public offering of Delaware Balanced Fund Class C Shares
was November 29, 1995.
23
<PAGE>
Average Annual Total Return
Delaware Devon Fund (1)
<TABLE>
<CAPTION>
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------- --------------
Delaware Delaware Delaware Delaware Delaware Delaware Delaware
Devon Fund Devon Fund Devon Fund Devon Fund Devon Fund Devon Fund Devon Fund
Class A Class A Institutional Class B Class B Class C Class C
Shares Shares Class Shares Shares Shares Shares
(at Offer)(2) (at NAV) (Including (Excluding (Including (Excluding
Deferred Deferred Deferred Deferred
Sales Sales Charge) Sales Charge) Sales Charge)
Charge)(3)
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year ended -6.16% -0.42% -0.09% -6.02% -1.12% -2.10% -1.12%
10/31/99
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------- --------------
3 years ended 14.04% 16.31% 16.67% 14.47% 15.50% 15.49% 15.49%
10/31/99
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------- --------------
5 years ended 17.57% 18.96% 19.32% 17.94% 18.15% N/A N/A
10/31/99
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------- --------------
Life of Fund 16.61% 17.80% 18.15% 17.36% 17.46% 16.69% 16.69%
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------- --------------
</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 2, 1998, the maximum front-end sales charge was 4.75%.
Effective November 2, 1998, the maximum front-end sales charge was
increased to 5.75% and the above performance numbers are calculated using
5.75% as the applicable sales charge.
(3) Effective November 2, 1998, the CDSC schedule for Class B Shares increased
as follows: (i) 5% if shares are redeemed within one year of purchase (ii)
4% if shares are redeemed with two years of purchase; (iii) 3% if shares
are redeemed during the third or fourth year following purchase; (iv) 2% if
shares are redeemed during the fifth year following purchase; (v) 1% if
shares are redeemed during the sixth year following purchase; and (v) 0%
thereafter. The above figures have been calculated using this new schedule.
(4) Date of initial public offering of Delaware Devon Fund A Class was December
29, 1993; date of initial public offering of Delaware Devon Fund
Institutional Class shares was December 29, 1993; date of initial public
offering of Delaware Devon Fund Class B Shares was September 6, 1994; date
of initial public offering of Delaware Devon Fund Class C Shares was
November 29, 1995.
Total return performance for the Classes will be computed by adding all
reinvested income and realized securities profits distributions plus the change
in net asset value during a specific period and dividing by the offering price
at the beginning of the period. It will also reflect, as applicable, the maximum
sales charge, or CDSC, paid with respect to the illustrated investment amount,
but not any income taxes payable by shareholders on the reinvested distributions
included in the calculation. Because securities prices fluctuate, past
performance should not be considered as a representation of the results which
may be realized from an investment in the Fund in the future.
From time to time, each Fund may also quote its Class' actual total
return performance, dividend results and other performance information in
advertising and other types of literature. This information may be compared to
that of other mutual funds with similar investment objectives and to stock, bond
and other relevant indices or to rankings prepared by independent services or
other financial or industry publications that monitor the performance of mutual
funds. For example, the performance of the Fund (or Fund Class) may be compared
to data prepared by Lipper Analytical Services, Inc., Morningstar, Inc. or to
the S&P 500 Index or the Dow Jones Industrial Average.
24
<PAGE>
Lipper Analytical Services, Inc. maintains statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds. Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare a Fund's
performance to another fund in appropriate categories over specific time periods
also may be quoted in advertising and other types of literature. The S&P 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 Russell 2000 Index TR is a total return weighted index which is
comprised of 2,000 of the smallest stocks (on the basis of capitalization) in
the Russell 3000 Index and is calculated on a monthly basis. The NASDAQ
Composite Index is a market capitalization price only index that tracks the
performance of domestic common stocks traded on the regular NASDAQ market as
well as National Market System traded foreign common stocks and American
Depository Receipts. The total return performance reported for these indices
will reflect the reinvestment of all distributions on a quarterly basis and
market price fluctuations. The indices do not take into account any sales charge
or other fees. A direct investment in an unmanaged index is not possible.
In addition, the performance of multiple indices compiled and
maintained by statistical research firms, such as Salomon Brothers and Lehman
Brothers 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.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides
historical returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the Consumer Price Index), and combinations
of various capital markets. The performance of these capital markets is based on
the returns of different indices. A Fund may use the performance of these
capital markets in order to demonstrate general risk-versus-reward investment
scenarios. Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to those
of the Fund. A Fund may also compare performance to that of other compilations
or indices that may be developed and made available in the future.
25
<PAGE>
Each Fund may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that describe
general principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting, questionnaires designed to help create a personal
financial profile, worksheets used to project savings needs based on assumed
rates of inflation and hypothetical rates of return and action plans offering
investment alternatives), investment management techniques, policies or
investment suitability of the Fund (such as value investing, market timing,
dollar cost averaging, asset allocation, constant ratio transfer, automatic
account rebalancing, the advantages and disadvantages of investing in
tax-deferred and taxable investments), economic and political conditions, the
relationship between sectors of the economy and the economy as a whole, the
effects of inflation and historical performance of various asset classes,
including but not limited to, stocks, bonds and Treasury bills. From time to
time advertisements, sales literature, communications to shareholders or other
materials may summarize the substance of information contained in shareholder
reports (including the investment composition of a Fund), as well as the views
as to current market, economic, trade and interest rate trends, legislative,
regulatory and monetary developments, investment strategies and related matters
believed to be of relevance to the Fund. In addition, selected indices may be
used to illustrate historic performance of selected asset classes. A Fund may
also include in advertisements, sales literature, communications to shareholders
or other materials, charts, graphs or drawings which illustrate the potential
risks and rewards of investment in various investment vehicles, including but
not limited to, stocks, bonds, treasury bills and shares of the Fund. In
addition, advertisements, sales literature, communications to shareholders or
other materials may include a discussion of certain attributes or benefits to be
derived by an investment in the Fund and/or other mutual funds, shareholder
profiles and hypothetical investor scenarios, timely information on financial
management, tax and retirement planning (such as information on Roth IRAs and
Education IRAs) and investment alternative to certificates of deposit and other
financial instruments. Such sales literature, communications to shareholders or
other materials may include symbols, headlines or other material which highlight
or summarize the information discussed in more detail therein.
Materials may refer to the CUSIP numbers of the Funds and may
illustrate how to find the listings of the Funds in newspapers and periodicals.
Materials may also include discussions of other funds, products, and services.
Each Fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, each Fund may compare these measures to
those of other funds. Measures of volatility seek to compare the historical
share price fluctuations or total returns to those of a benchmark. Measures of
benchmark correlation indicate how valid a comparative benchmark may be.
Measures of volatility and correlation may be calculated using averages of
historical data. A Fund may advertise its current interest rate sensitivity,
duration, weighted average maturity or similar maturity characteristics.
Advertisements and sales materials relating to the Funds may include information
regarding the background and experience of its portfolio managers.
The following tables present examples, for purposes of illustration
only, of cumulative total return performance for each Class of each Fund through
October 31, 1999. For these purposes, the calculations assume the reinvestment
of any capital gains distributions and income dividends paid during the
indicated periods. 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 Balanced
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.
26
<PAGE>
Cumulative Total Return
Delaware Balanced Fund
<TABLE>
<CAPTION>
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
Delaware Delaware Delaware Delaware Delaware Delaware Delaware
Balanced Fund Balanced Fund Balanced Fund Balanced Fund Balanced Balanced Fund Balanced
Class A Class A Institutional Class B Shares Fund Class C Fund
Shares(1)(2) Shares(1) Class (Including Class B Shares Class C
(at Offer) (at NAV) Deferred Sales Shares (Including Shares
Charge)(3) (Excluding Deferred (Excluding
Deferred Sales Charge) Deferred
Sales Sales Charge)
Charge)
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
3 months ended -10.43% -4.98% -4.89% -9.87% -5.14% -6.09% -5.15%
10/31/99
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
6 months ended -11.82% -6.46% -6.36% -11.46% -6.84% -11.46% -6.84%
10/31/99
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
9 months ended -11.95% -6.59% -6.42% -11.72% -7.12% -8.04% -7.12%
10/31/99
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
1 year ended -5.33% 0.44% 0.70% -5.01% -0.31% -1.25% -0.31%
10/31/99
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
3 years ended 32.62% 40.73% 41.66% 34.49% 37.49% 37.41% 37.41%
10/31/99
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
5 years ended 78.97% 89.91% 91.84% 80.36% 82.63% N/A N/A
10/31/99
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
10 years ended 175.75% 192.63% N/A N/A N/A N/A N/A
10/31/99
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
15 years ended 468.62% 503.21% N/A N/A N/A N/A N/A
10/31/99
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
Life of Fund(4) 65,474.60% 69,498.05% 70,428.89% 79.54% 80.54% 54.09% 54.09%
- ----------------- -------------- -------------- -------------- ---------------- ------------ --------------- --------------
</TABLE>
(1) Delaware Balanced 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 2, 1998, the maximum front-end sales charge was 4.75%.
Effective November 2, 1998, the maximum front-end sales charge was
increased to 5.75% and the above performance numbers are calculated using
5.75% as the applicable sales charge.
(3) Effective November 2, 1998, the CDSC schedule for Class B Shares increased
as follows: (i) 5% if shares are redeemed within one year of purchase (ii)
4% if shares are redeemed with two years of purchase; (iii) 3% if shares
are redeemed during the third or fourth year following purchase; (iv) 2% if
shares are redeemed during the fifth year following purchase; (v) 1% if
shares are redeemed during the sixth year following purchase; and (v) 0%
thereafter. The above figures have been calculated using this new schedule.
(4) Date of initial public offering of Delaware Balanced Fund A Class was April
25, 1938; date of initial public offering of Delaware Balanced Fund
Institutional Class shares was November 9, 1992; date of initial public
offering of Delaware Balanced Fund Class B Shares was September 6, 1994;
date of initial public offering of Delaware Balanced Fund Class C Shares
was November 29, 1995.
27
<PAGE>
Cumulative Total Return
Delaware Devon Fund (1)
<TABLE>
<CAPTION>
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------- --------------
Delaware Delaware Delaware Delaware Delaware Delaware Delaware
Devon Fund Devon Fund Devon Fund Devon Fund Devon Fund Devon Fund Devon Fund
Class A Class A Institutional Class B Class B Class C Class C
Shares Shares Class Shares Shares Shares Shares
(at Offer)(2) (at NAV) (Including (Excluding (Including (Excluding
Deferred Deferred Deferred Deferred
Sales Sales Charge) Sales Charge) Sales Charge)
Charge)(3)
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
3 months ended -12.60% -7.27% -7.19% -12.09% -7.47% -8.40% 7.47%
10/31/99
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------- --------------
6 months ended -13.78% -8.51% -8.38% -13.40% -8.85% -9.77% 8.85%
10/31/99
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------- --------------
9 months ended -13.77% -8.51% -8.28% -13.52% -8.97% -9.89% 8.98%
10/31/99
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------- --------------
1 year ended -6.16% -0.42% -0.09% -6.02% -1.12% -2.10% 1.12%
10/31/99
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------- --------------
3 years ended 48.32% 57.35% 58.80% 51.08% 54.08% 54.04% 54.04%
10/31/99
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------- --------------
5 years ended 124.60% 138.28% 141.84% 128.19% 130.19% N/A N/A
10/31/99
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------- --------------
Life of Fund(4) 145.35% 160.32% 164.93% 128.14% 129.14% 83.23% 83.23%
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------- --------------
</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 2, 1998, the maximum front-end sales charge was 4.75%.
Effective November 2, 1998, the maximum front-end sales charge was
increased to 5.75% and the above performance numbers are calculated using
5.75% as the applicable sales charge.
(3) Effective November 2, 1998, the CDSC schedule for Class B Shares increased
as follows: (i) 5% if shares are redeemed within one year of purchase (ii)
4% if shares are redeemed with two years of purchase; (iii) 3% if shares
are redeemed during the third or fourth year following purchase; (iv) 2% if
shares are redeemed during the fifth year following purchase; (v) 1% if
shares are redeemed during the sixth year following purchase; and (v) 0%
thereafter. The above figures have been calculated using this new schedule.
(4) Date of initial public offering of Delaware Devon Fund A Class was December
29, 1993; date of initial public offering of Delaware Devon Fund
Institutional Class shares was December 29, 1993; date of initial public
offering of Delaware Devon Fund Class B Shares was September 6, 1994; date
of initial public offering of Delaware Devon Fund Class C Shares was
November 29, 1995.
28
<PAGE>
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 Investments family, will provide general information about investment
alternatives and scenarios that will allow investors to assess their personal
goals. This information will include general material about investing as well as
materials reinforcing various industry-accepted principles of prudent and
responsible 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
Investments funds', investment disciplines employed in seeking their objectives.
The Distributor may also from time to time cite general or specific information
about the institutional clients of the Manager, including the number of such
clients serviced by the Manager.
Dollar-Cost Averaging
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.
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 high fund share prices. Delaware
Investments offers three services -- Automatic Investing Program, Direct Deposit
Program and the Wealth Builder Option -- that can help to keep your regular
investment program on track. See Investing by Electronic Fund Transfer - Direct
Deposit Purchase Plan and Automatic Investing Plan under Investment Plans and
Wealth Builder Option under Investment Plans for a complete description of these
services, including restrictions or limitations.
29
<PAGE>
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 10
Month 4 $100 $10.00 20
------------------------------------ ----------------------- ----------
$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 any stock or bond fund in the Delaware
Investments family.
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. Each Fund may include illustrations showing the power
of compounding in advertisements and other types of literature.
30
<PAGE>
TRADING PRACTICES AND BROKERAGE
Brokers or dealers are selected 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
execution. Best 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'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, 1997, 1998 and 1999, the
aggregate dollar amounts of brokerage commissions paid by Delaware Balanced Fund
were $718,048, $817,901 and $1,488,777, respectively. For the fiscal years ended
October 31, 1997, 1998 and 1999, the aggregate dollar amounts of brokerage
commissions paid by Delaware Devon Fund were $157,621, $292,437 and $875,370,
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, 1999, portfolio transactions
of Delaware Balanced Fund in the amount of $344,071,909, resulting in brokerage
commissions of $770,635, were directed to brokers for brokerage and research
services provided. During the same period, portfolio transactions of Delaware
Devon Fund in the amount of $233,629,225, resulting in brokerage commissions of
$366,858, were directed to brokers for brokerage and research services provided.
As provided in the 1934 Act 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, the Funds believe that the commissions paid to such
broker/dealers are not, in general, higher than commissions that would be paid
to broker/dealers not providing such services and that such commissions are
reasonable in relation to the value of the brokerage and research services
provided. In some instances, services may be provided to the Manager which
constitute in some part brokerage and research services used by the Manager in
connection with its investment decision-making process and constitute in some
part services used by the Manager in connection with administrative or other
functions not related to its investment decision-making process. In such cases,
the Manager will make a good faith allocation of brokerage and research services
and will pay out of its own resources for services used by the Manager in
connection with administrative or other functions not related to its investment
decision-making process. In addition, so long as no fund is disadvantaged,
portfolio transactions which generate commissions or their equivalent are
allocated to broker/dealers who provide daily portfolio pricing services to a
Fund and to other funds in the Delaware Investments family. Subject to best
execution, commissions allocated to brokers providing such pricing services may
or may not be generated by the funds receiving the pricing service.
31
<PAGE>
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 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's Board of Trustees that the advantages of combined orders outweigh the
possible disadvantages of separate transactions.
Consistent with the Conduct Rules of the NADD Regulation, Inc. (the
"NASD"), and subject to seeking best execution, a Fund may place orders with
broker/dealers that have agreed to defray certain expenses of the funds in the
Delaware Investments family of funds such as custodian fees, and may, at the
request of the Distributor, give consideration to sales of shares of such funds
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.
The portfolio turnover of each Fund is calculated by dividing the
lesser of purchases or sales of portfolio securities for the particular fiscal
year by the monthly average of the value of the portfolio securities owned by
the Fund during the particular fiscal year, exclusive of securities whose
maturities at the time of acquisition are one year or less.
During the past two fiscal years, Delaware Balanced Fund's portfolio
turnover rates were approximately 86% for 1998 and 87% for 1999. During the past
two fiscal years, Delaware Devon Fund's portfolio turnover rates were
approximately 39% for 1998 and 82% for 1999.
Should it become necessary to sell investments for monies with which to
redeem shares, the Board of Trustees, 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 has never redeemed or repurchased
shares other than at net asset value.
32
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for each Fund's
shares 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 or the Distributor.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of such Classes
generally must be at least $100. The initial and subsequent investment minimums
for Class A Shares will be waived for purchases by officers, trustees and
employees of any Delaware Investments 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 Investments 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 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 $50,000 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 are responsible for transmitting orders promptly.
Equity Funds I 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. 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 Investments family.
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
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 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.
33
<PAGE>
The NASD has adopted amendments to its Conduct Rules, as amended,
relating to investment company sales charges. Equity Funds I and the Distributor
intend to operate in compliance with these rules.
Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 5.75%; however, lower front-end sales charges
apply for larger purchases. See the table in the Fund Classes' Prospectus. Class
A Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 5% if shares are redeemed within one year of purchase; (ii) 4% if
shares are redeemed within two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if shares
are redeemed during the fifth year following purchase; and (v) 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 Class B Shares for approximately
eight years after purchase. See Automatic Conversion of Class B Shares, below.
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 Plans Under Rule 12b-1 for the Fund Classes under
Purchasing Shares, and Determining Offering Price and Net Asset Value 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 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 or in the case of any retirement plan
account including self-directed IRAs. However, purchases not involving the
issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing full
share denominations purchased by sending a letter signed by each owner of the
account to the Transfer Agent requesting the certificate. No charge is assessed
by Equity Funds I for any certificate issued. A shareholder may be subject to
fees for replacement of a lost or stolen certificate, under certain conditions,
including the cost of obtaining a bond covering the lost or stolen certificate.
Please contact a Fund for further information. Investors who hold certificates
representing any of their shares may only redeem those shares by written
request. The investor's certificate(s) must accompany such request.
34
<PAGE>
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A Shares, Class B Shares
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.
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 addition, the effect of any return earned on such additional money
will diminish over time. In comparing Class B Shares to Class C Shares,
investors should also consider the duration of the annual 12b-1 Plan expenses to
which each of the classes is subject and the desirability of an automatic
conversion feature, which is available only for Class B Shares.
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 Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of Class B Shares and 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 Shares, Class B Shares 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 Plans Under Rule 12b-1 for the Fund Classes.
Dividends, if any, paid on Class A Shares, Class B Shares and Class C
Shares will be calculated in the same manner, at the same time and 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 Determining Offering Price and Net Asset Value.
Class A Shares - Delaware Balanced Fund and Delaware Devon Fund Purchases of
$50,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the table in the Fund Classes'
Prospectus, 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.
35
<PAGE>
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.
In addition, certain dealers who enter into an agreement to provide extra
training and information on Delaware Investments products and services and who
increase sales of Delaware Investments 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. Dealers who receive 90% or more of
the sales charge may be deemed to be underwriters under the 1933 Act.
Dealer's Commission
As described in the Prospectus, 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.
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other Delaware Investments
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) 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 Investments 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
Shares 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 above, 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. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of Class B Shares or Class C
Shares of a Fund, even if those shares are later exchanged for shares of another
Delaware Investments 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. See Waiver of Contingent
Deferred Sales Charge--Class B Shares and Class C Shares under Redemption and
Exchange for the Fund Classes for a list of the instances in which the CDSC is
waived.
36
<PAGE>
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. Investors are reminded that the
Class A Shares into which 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.
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 compensates
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 5% 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 Class B Shares
described in this Part B, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
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.
37
<PAGE>
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 compensates
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, 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 Class C Shares as
described in this Part B. See Redemption and Exchange.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Equity Funds I has adopted a
separate plan for each of Class A Shares, Class B Shares and 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 of shares to which the Plan applies. The Plans do not apply to
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 Institutional Classes. Shareholders of 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 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, 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 The
Plan expenses relating to Class B Shares 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.
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 average
daily net assets of Class A Shares, 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 Class C Shares' average daily net assets for the year. Equity Funds I's
Board of Trustees may reduce these amounts at any time.
38
<PAGE>
Effective June 1, 1992, Equity Funds I's Board of Trustees has
determined that the annual fee, payable on a monthly basis, for Delaware
Balanced 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 Balanced 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 Balanced 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 Balanced 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 Balanced 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 Balanced Fund A Class shares purchased on or after June 1, 1992 to
Delaware Balanced 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
Balanced Fund A Class assets at any time.
On September 23, 1993, Equity Funds I's Board of Trustees set the fee
for Delaware 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 Class A Shares, and 1% annually with respect to each of the 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's
unaffiliated trustees, who may reduce the fees or terminate the Plans at any
time.
All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf of Class
A Shares, Class B Shares and Class C Shares would be borne by such persons
without any reimbursement from such Fund Classes. Subject to seeking best
execution, a Fund may, from time to time, buy or sell portfolio securities from
or to firms which receive payments under the Plans.
39
<PAGE>
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 Trustees of Equity Funds I, including a majority of the
trustees who are not "interested persons" (as defined in the 1940 Act) of Equity
Funds I 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 Trustees in
the same manner as specified above.
Each year, the trustees 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 of each Fund and that there is a reasonable
likelihood of the Plan relating to a Class providing a benefit to that Class.
The Plans and the Distribution Agreements, as amended, may be terminated with
respect to a Class at any time without penalty by a majority of those trustees
who are not "interested persons" or by a majority vote of the relevant Class'
outstanding voting securities. Any amendment materially increasing the
percentage payable under the Plans must likewise be approved by a majority vote
of the relevant Class' outstanding voting securities, as well as by a majority
vote of those trustees who are not "interested persons." With respect to each
Class A Shares' Plan, any material increase in the maximum percentage payable
thereunder must also be approved by a majority of the outstanding voting
securities of the respective Fund's B Class. Also, any other material amendment
to the Plans must be approved by a majority vote of the trustees including a
majority of the noninterested trustees of Equity Funds I having no interest in
the Plans. In addition, in order for the Plans to remain effective, the
selection and nomination of trustees who are not "interested persons" of Equity
Funds I must be effected by the trustees 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 Trustees for their review.
40
<PAGE>
For the fiscal year ended October 31, 1999, payments from the Class A
Shares, Class B Shares and Class C Shares of Delaware Balanced Fund pursuant to
their respective 12b-1 Plans amounted to $1,450,780, $532,429 and $225,677,
respectively. Such amounts were used for the following purposes:
<TABLE>
<CAPTION>
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Delaware Balanced Fund A Delaware Balanced Fund B Delaware Balanced Fund C
Class Class Class
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Advertising $8,396 --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Annual/Semi-Annual Reports $30,365 --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Broker Trails $977,756 $132,739 $98,149
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Broker Sales Charges --- $192,931 $110,371
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Dealer Service Expenses --- --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Interest on Broker Sales Charges --- $179,769 $4,372
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Commissions to Wholesalers $106,759 $26,990 $12,785
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Promotional-Broker Meetings $21,237 --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Promotional-Other $150,855 --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Prospectus Printing $72,646 --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Telephone --- --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Wholesaler Expenses $82,866 --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Other --- --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
</TABLE>
For the fiscal year ended October 31, 1999, payments from the Class A
Shares, Class B Shares and Class C Shares of Delaware Devon Fund pursuant to
their respective 12b-1 Plans amounted to $458,534, $1,347,353 and $303,541,
respectively. Such amounts were used for the following purposes:
<TABLE>
<CAPTION>
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Delaware Devon Fund A Class Delaware Devon Fund B Delaware Devon Fund C
Class Class
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Advertising --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Annual/Semi-Annual Reports --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Broker Trails $373,975 $321,430 $100,446
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Broker Sales Charges --- $518,106 $171,478
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Dealer Service Expenses --- --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Interest on Broker Sales Charges --- $442,674 $8,348
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Commissions to Wholesalers $84,559 $65,143 $23,269
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Promotional-Broker Meetings --- --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Promotional-Other --- --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Prospectus Printing --- --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Telephone --- --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Wholesaler Expenses --- --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
Other --- --- ---
- ------------------------------------------ ---------------------------- --------------------------- ---------------------------
</TABLE>
41
<PAGE>
Other Payments to Dealers - Class A Shares, Class B Shares 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 Investments family 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. The Distributor may also pay a
portion of the expense of preapproved dealer advertisements promoting the sale
of Delaware Investments fund shares.
Subject to pending amendments to the NASD's Conduct Rules, in
connection with the promotion of Delaware Investments 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 Conduct Rules 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
Conduct Rules as they may be amended.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under
the Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment Privilege.
Purchases of Class A Shares may be made at net asset value by current
and former officers, trustees and employees (and members of their families) of
the Manager, any affiliate, any of the funds in the Delaware Investments family,
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. Class A
Shares may also be purchased at net asset value by current and former officers,
trustees and employees (and members of their families) of the Dougherty
Financial Group LLC.
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 funds in the
Delaware Investments family. Officers, trustees 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. Investors may be charged a fee when effecting transactions in Class A
Shares through a broker or agent that offers these special investment products.
42
<PAGE>
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase shares of the Institutional Class
of a Fund; any group retirement plan (excluding defined benefit pension plans),
or such plans of the same employer, for which plan participant records are
maintained on the Retirement Financial Services, Inc. (formerly known as
Delaware Investment & Retirement Services, Inc.) proprietary record keeping
system that (i) has in excess of $500,000 of plan assets invested in Class A
Shares of funds in the Delaware Investments family and any stable value account
available to investment advisory clients of the Manager or its affiliates; or
(ii) is sponsored by an employer that has at any point after May 1, 1997 had
more than 100 employees while such plan has held Class A Shares of a fund in the
Delaware Investments family and such employer has properly represented to, and
received written confirmation back from, Retirement Financial Services, Inc. in
writing that it has the requisite number of employees. See Group Investment
Plans for information regarding the applicability of the Limited CDSC.
Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase Institutional
Class Shares or purchase interests in a collective trust as a result of a change
in distribution arrangements.
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 fund account
in connection with loans originated from accounts previously maintained by
another investment firm will also be invested at net asset value.
Equity Funds I must be notified in advance that the trade qualifies for
purchase at net asset value.
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 Investments funds ("eligible Delaware Investments
fund shares"), as well as shares of designated classes of non-Delaware
Investments funds ("eligible non-Delaware Investments 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 Investments and eligible non-Delaware Investments
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 Investments fund shares. See Combined
Purchases Privilege, below.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments fund
shares or for eligible non-Delaware Investments fund shares at net asset value
without payment of a front-end sales charge. However, exchanges of eligible fund
shares, both Delaware Investments and non-Delaware Investments, which were not
subject to a front end sales charge, will be subject to the applicable sales
charge if exchanged for eligible Delaware Investments 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.
43
<PAGE>
A dealer's commission may be payable on purchases of eligible Delaware
Investments 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 Investments fund shares in connection with Allied Plans, all
participant holdings in the Allied Plan will be aggregated. See Class A Shares -
Delaware Balanced Fund and Delaware Devon Fund
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 Investments and non-Delaware Investments fund shares.
When eligible Delaware Investments fund shares are exchanged into eligible
non-Delaware Investments 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.
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 which provides for the holding in escrow by the
Transfer Agent, of 5% of the total amount of Class A Shares intended to be
purchased until such purchase is completed within the 13-month period. A Letter
of Intention may be dated to include shares purchased up to 90 days prior to the
date the Letter is signed. The 13-month period begins on the date of the
earliest purchase. If the intended investment is not completed, except as noted
below, the purchaser will be asked to pay an amount equal to the difference
between the front-end sales charge on 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 Delaware Investments (except shares of any
Delaware Investments 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 Investments 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 Investments 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 Investments 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 Investments funds which offer
corresponding classes of shares may also be aggregated for this purpose.
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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 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 Investments funds (except shares of any Delaware Investments 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 Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). In addition, assets held by investment advisory
clients of the Manager or its affiliates in a stable value account may be
combined with other Delaware Investments fund holdings.
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 Investments funds
which offer such classes (except shares of any Delaware Investments 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 Investments 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 $10,000 at offering price of additional shares of Class A
Shares, the charge applicable to the $10,000 purchase would currently be 4.75%.
For the purpose of this calculation, the shares presently held shall be valued
at the public offering price that would have been in effect were the shares
purchased simultaneously with the current purchase. Investors should refer to
the table of sales charges for Class A Shares to determine the applicability of
the Right of Accumulation to their particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares and Class B Shares of a Fund (and of the
Institutional Class holding shares which were acquired through an exchange from
one of the other mutual funds in the Delaware Investments family 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 the same
Class of the Fund or in the same Class of any of the other funds in the Delaware
Investments family. In the case of Class A Shares, the reinvestment will not be
assessed a front-end sales charge and in the case of Class B Shares, the amount
of the CDSC previously charged on the redemption will be reimbursed by the
Distributor. The reinvestment will be subject to applicable eligibility and
minimum purchase requirements and must be in states where shares of such other
funds may be sold. This reinvestment 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 Investments family, 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 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. In the case of
Class B Shares, the time that the previous investment was held will be included
in determining any applicable CDSC due upon redemptions as well as the automatic
conversion into Class A Shares.
A redemption and reinvestment of Class B Shares could have income tax
consequences. Shareholders will receive from the Distributor the amount of the
CDSC paid at the time of redemption as part of the reinvested shares, which may
be treated as a capital gain to the shareholder for tax purposes. 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 the 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.
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Investors should consult their financial advisers or the Transfer
Agent, which also serves as each Fund's shareholder servicing agent, about the
applicability of the Class A Limited CDSC 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
Investments family 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 Investments investment accounts
if they so notify the Fund in which they are investing in connection with each
purchase. See Retirement Plans for the Fund Classes under Investment Plans for
information about Retirement Plans.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from a fund in the Delaware Investments family.
See Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange.
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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, an affiliate of the Manager, or its other
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 of the financial institution of a Rule
12b-1 Plan fee; and (e) registered investment advisers investing on behalf of
clients that consist solely of institutions and high net-worth individuals
having at least $1,000,000 entrusted to the adviser for investment purposes, but
only if the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services.
Shares of 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.
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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 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 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 Investments Family of Funds Subject
to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A Shares,
Class B Shares and Class C Shares may automatically reinvest dividends and/or
distributions in any of the mutual funds in the Delaware Investments, 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.
Subject to the following limitations, dividends and/or distributions
from other funds in Delaware Investments 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.
Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the same Delaware
Investments fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Investments family, 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. See Redemption and Exchange for more complete
information concerning your exchange privileges.
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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 Investments
family, 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 Investments family. 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 Investments 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 Investments funds. 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.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for either Fund to
accept for investment in Class A Shares, Class B Shares 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 Shares, Class B
Shares 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, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
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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 for proper instructions.
MoneyLine (SM) On Demand
You or your investment dealer may request purchases of Fund shares by
phone using MoneyLine (SM) On Demand. When you authorize a Fund to accept such
requests from you or your investment dealer, funds will be withdrawn from (for
share purchases) your predesignated bank account. Your request will be processed
the same day if you call prior to 4 p.m., Eastern time. There is a $25 minimum
and $50,000 maximum limit for MoneyLine (SM) On Demand transactions.
It may take up to four business days for the transactions to be
completed. You can initiate this service by completing an Account Services form.
If your name and address are not identical to the name and address on your Fund
account, you must have your signature guaranteed. The Funds do not charge a fee
for this service; however, your bank may charge a fee.
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 Investments family. Shareholders of the Fund Classes may
elect to invest in one or more of the other mutual funds in Delaware Investments
family through the Wealth Builder Option. 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.
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
Investments family, 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 in Wealth Builder at
any time by giving written notice to the fund from which exchanges are made.
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This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Classes.
Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete an Asset Planner Account Registration
Form, which is available only from a financial adviser or investment dealer.
Effective September 1, 1997, the Asset Planner Service is only available to
financial advisers or investment dealers who have previously used this service.
The Asset Planner service offers a choice of four predesigned asset allocation
strategies (each with a different risk/reward profile) in predetermined
percentages in Delaware Investments funds. With the help of a financial adviser,
you may also design a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Investments accounts into the Asset Planner service may be made at net asset
value under the circumstances described under Investing by Exchange. Also see
Buying Class A Shares at Net Asset Value. 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 Investments family may be used in the same Strategy with consultant
class shares that are offered by certain other Delaware Investments funds.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30 of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an IRA will continue
to pay an annual IRA fee of $15 per Social Security number. Investors will
receive a customized quarterly Strategy Report summarizing all Asset Planner
investment performance and account activity during the prior period.
Confirmation statements will be sent following all transactions other than those
involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
Retirement Plans for the Fund Classes
An investment in the Funds may be suitable for tax-deferred retirement
plans. Delaware Investments offers a full spectrum of retirement plans,
including the 401(k) Defined Contribution Plan, Individual Retirement Account
("IRA") and the new Roth IRA and Education IRA.
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Among the retirement plans that Delaware Investments offers, Class B
Shares are available only by Individual Retirement Accounts, SIMPLE IRAs, Roth
IRAs, Education IRAs, Simplified Employee Pension Plans, Salary Reduction
Simplified Employee Pension Plans, and 403(b)(7) and 457 Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares and Class
C Shares. See Waiver of Contingent Deferred Sales Charge - Class B Shares 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.
Purchases of Class B Shares are subject to a maximum purchase
limitation of $250,000 for retirement plans. Purchases of Class C Shares must be
in an amount that is less than $1,000,000 for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans other than Individual Retirement Accounts, for
which there is a minimum initial purchase of $250 and a minimum subsequent
purchase of $25, regardless of which Class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide services
to such Plans.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Class
shares. See 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, corporations and other eligible forms of organizations. These
plans can be maintained as Section 401(k), profit sharing or money purchase
pension plans. Contributions may be invested only in Class A Shares and Class C
Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
and make contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year; however, participation
may be restricted based on certain income limits.
IRA Disclosures
The Taxpayer Relief Act of 1997 provides new opportunities for
investors. Individuals have five types of tax-favored IRA accounts that can be
utilized depending on the individual's circumstances. A new Roth IRA and
Education IRA are available in addition to the existing deductible IRA and
non-deductible IRA.
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Deductible and Non-deductible IRAs
An individual can contribute up to $2,000 in his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income ("AGI") and whether the taxpayer is an active participant
in an employer sponsored retirement plan. Even if a taxpayer is an active
participant in an employer sponsored retirement plan, the full $2,000 is still
available if the taxpayer's AGI is below $30,000 ($50,000 for taxpayers filing
joint returns) for years beginning after December 31, 1997. A partial deduction
is allowed for married couples with income between $50,000 and $60,000, and for
single individuals with incomes between $30,000 and $40,000. These income
phase-out limits reach $80,000-$100,000 in 2007 for joint filers and
$50,000-$60,000 in 2005 for single filers. No deductions are available for
contributions to IRAs by taxpayers whose AGI after IRA deductions exceeds the
maximum income limit established for each year and who are active participants
in an employer sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA contributions still can
make non-deductible IRA contributions of as much as $2,000 for each working
spouse and defer taxes on interest or other earnings from the IRAs.
Under the new law, a married individual is not considered an active
participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant if the couple's combined AGI is
below $150,000. The maximum deductible IRA contribution for a married individual
who is not an active participant, but whose spouse is, is phased out for
combined AGI between $150,000 and $160,000.
Conduit (Rollover) IRAs
Certain individuals who have received or are about to receive eligible
rollover distributions from an employer-sponsored retirement plan or another IRA
may rollover the distribution tax-free to a Conduit IRA. The rollover of the
eligible distribution must be completed by the 60th day after receipt of the
distribution; however, if the rollover is in the form of a direct
trustee-to-trustee transfer without going through the distributee's hand, the
60-day limit does not apply.
A distribution qualifies as an "eligible rollover distribution" if it
is made from a qualified retirement plan, a 403(b) plan or another IRA and does
not constitute one of the following:
(1) Substantially equal periodic payments over the employee's life or
life expectancy or the joint lives or life expectancies of the employee and
his/her designated beneficiary;
(2) Substantially equal installment payments for a period certain of 10
or more years;
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(3) A distribution, all of which represents a required minimum
distribution after attaining age 70 1/2;
(4) A distribution due to a Qualified Domestic Relations Order to an
alternate payee who is not the spouse (or former spouse) of the employee; and
(5) A distribution of after-tax contributions which is not includable
in income.
Roth IRAs
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $2,000 per year can be made to a new Roth IRA. As a
result of the Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Act"), the $2,000 annual limit will not be reduced by any contributions to
a deductible or nondeductible IRA for the same year. The maximum contribution
that can be made to a Roth IRA is phased out for single filers with AGI between
$95,000 and $110,000, and for couples filing jointly with AGI between $150,000
and $160,000. Qualified distributions from a Roth IRA would be exempt from
federal taxes. Qualified distributions are distributions (1) made after the
five-taxable year period beginning with the first taxable year for which a
contribution was made to a Roth IRA and (2) that are (a) made on or after the
date on which the individual attains age 59 1/2, (b) made to a beneficiary on or
after the death of the individual, (c) attributed to the individual being
disabled, or (d) for a qualified special purpose (e.g., first time homebuyer
expenses).
Distributions that are not qualified distributions would always be
tax-free if the taxpayer is withdrawing contributions, not accumulated earnings.
Taxpayers with AGI of $100,000 or less are eligible to convert an
existing IRA (deductible, nondeductible and conduit) to a Roth IRA. Earnings and
contributions from a deductible IRA are subject to a tax upon conversion;
however, no 10% excise tax for early withdrawal would apply. If the conversion
is done prior to January 1, 1999, then the income from the conversion can be
included in income ratably over a four-year period beginning with the year of
conversion.
Education IRAs
For taxable years beginning after December 31, 1997, an Education IRA
has been created exclusively for the purpose of paying qualified higher
education expenses. Taxpayers can make non-deductible contributions up to $500
per year per beneficiary. The $500 annual limit is in addition to the $2,000
annual contribution limit applicable to IRAs and Roth IRAs. Eligible
contributions must be in cash and made prior to the date the beneficiary reaches
age 18. Similar to the Roth IRA, earnings would accumulate tax-free. There is no
requirement that the contributor be related to the beneficiary, and there is no
limit on the number of beneficiaries for whom one contributor can establish
Education IRAs. In addition, multiple Education IRAs can be created for the same
beneficiaries, however, the contribution limit of all contributions for a single
beneficiary cannot exceed $500 annually.
This $500 annual contribution limit for Education IRAs is phased out
ratably for single contributors with modified AGI between $95,000 and $110,000,
and for couples filing jointly with modified AGI of between $150,000 and
$160,000. Individuals with modified AGI above the phase-out range are not
allowed to make contributions to an Education IRA established on behalf of any
other individual.
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Distributions from an Education IRA are excludable from gross income to
the extent that the distribution does not exceed qualified higher education
expenses incurred by the beneficiary during the year the distribution is made
regardless of whether the beneficiary is enrolled at an eligible educational
institution on a full-time, half-time, or less than half-time basis.
Any balance remaining in an Education IRA at the time a beneficiary
becomes 30 years old must be distributed, and the earnings portion of such a
distribution will be includable in gross income of the beneficiary and subject
to an additional 10% penalty tax if the distribution is not for qualified higher
education expenses. Tax-free (and penalty-free) transfers and rollovers of
account balances from one Education IRA benefiting one beneficiary to another
Education IRA benefiting a different beneficiary (as well as redesignations of
the named beneficiary) is permitted, provided that the new beneficiary is a
member of the family of the old beneficiary and that the transfer or rollover is
made before the time the old beneficiary reaches age 30 and the new beneficiary
reaches age 18.
A company or association may establish a Group IRA or Group Roth IRA
for employees or members who want to purchase shares of the Fund.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. For information concerning the applicability of a CDSC upon
redemption of Class B Shares and Class C Shares, see Contingent Deferred Sales
Charge - Class B Shares and Class C Shares.
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks. In addition, effective January 1, 1998, the new law allows for premature
distribution without a 10% penalty if (i) the amounts are used to pay qualified
higher education expenses (including graduate level courses) of the taxpayer,
the taxpayer's spouse or any child or grandchild of the taxpayer or the
taxpayer's spouse, or (ii) used to pay acquisition costs of a principle
residence for the purchase of a first-time home by the taxpayer, taxpayer's
spouse or any child or grandchild of the taxpayer or the taxpayer's spouse. A
qualified first-time homebuyer is someone who has had no ownership interest in a
residence during the past two years. The aggregate amount of distribution for
first-time home purchases cannot exceed a lifetime cap of $10,000.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
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Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may continue to be maintained by employers having 25 or
fewer employees. An employer may elect to make additional contributions to such
existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Effective January 1, 1997,
non-governmental tax-exempt organizations may establish 401(k) plans. Plan
documents are available to enable employers to establish a plan. An employer may
also elect to make profit sharing contributions and/or matching contributions
with investments in only Class A Shares and Class C Shares or certain other
funds in the Delaware Investments family. 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 the Prospectus for the Fund Classes.
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)") Section 403(b)(7) of the Code permits public school
systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase shares
of any of the Classes in conjunction with such an arrangement. 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 the Prospectus for
the Fund Classes.
Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of the Fund. Although investors may use their
own plan, there is available a Delaware Investments 457 Deferred Compensation
Plan. Interested investors should contact the Distributor or their investment
dealers to obtain further information. 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 in the Prospectus for the Fund Classes.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis. A SIMPLE IRA is available only to plan sponsors with 100 or
fewer employees.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available
only to plan sponsors 100 or fewer employees and, in exchange for mandatory plan
sponsor contributions, discrimination testing is no longer required. Class B
Shares are not available for purchase by such plans.
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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. See Distribution and Service
under Investment Management Agreements. 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 days when the following holidays are observed: New Year's Day,
Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. When the New York Stock
Exchange is closed, the 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.
For valuation purposes, foreign currencies and foreign securities denominated in
foreign currency values will be converted into U.S. dollars values at the mean
between the bid and offered quotations of such currencies against U.S. dollars
based on rates in effect that day. 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 Trustees. 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 Trustees.
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 Institutional Classes will not incur any of the expenses under
Equity Funds I's 12b-1 Plans and Class A Shares, Class B Shares 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.
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REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways.
The exchange service is useful if your investment requirements change and you
want an easy way to invest in other equity funds, tax-advantaged funds, bond
funds or money market funds. This service is also useful if you are anticipating
a major expenditure and want to move a portion of your investment into a fund
that has the checkwriting feature. Exchanges are subject to the requirements of
each fund and all exchanges of shares constitute taxable events. 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
Delaware Investments will best meet your changing objectives, and the
consequences of any exchange transaction. You may also call the Delaware
Investments directly for fund information.
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.
For example, redemption or exchange requests received in good order after the
time the offering price and net asset value of shares are determined 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 Shares 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 in which you want to invest 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.
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,
its agent, or certain authorized persons, subject to 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.
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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.
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 by the Fund or certain other authorized persons (see Distribution
and Service under Investment Management Agreements); 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 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 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.
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 SEC 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 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.
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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, below.
Class B Shares are subject to a CDSC of: (i) 5% if shares are redeemed within
the first year of purchase; (ii) 4% if shares are redeemed during the second
year following purchase; (iii) 3% if shares are redeemed during the third or
fourth year following purchase; (iv) 2% if shares are redeemed during the fifth
year following purchase; and (v) 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 Purchasing Shares. 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.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Investments (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 Part B 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.
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. A signature guarantee can be
obtained from a commercial bank, a trust company or a member of a Securities
Transfer Association Medallion Program ("STAMP"). 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.
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(s) 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 Delaware Investments, subject to the same conditions and
limitations as other exchanges noted above.
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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. Telephone instructions received by the
Fund Classes 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 will normally be sent the next business day. 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. First Union National Bank's fee
(currently $7.50) will be deducted from Fund Class redemption proceeds. 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 Delaware Investments 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.
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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 Investments family. 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.
MoneyLine (SM) On Demand
You or your investment dealer may request redemptions of Fund shares by
phone using MoneyLine (SM) On Demand. When you authorize a Fund to accept such
requests from you or your investment dealer, funds will be deposited to (for
share redemptions) your predesignated bank account. Your request will be
processed the same day if you call prior to 4 p.m., Eastern time. There is a $25
minimum and $50,000 maximum limit for MoneyLine (SM) On Demand transactions. See
MoneyLine (SM) On Demand under Investment Plans.
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
Investments 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 Investments funds: (1)
Delaware Decatur Equity Income Fund, (2) Delaware Growth and Income Fund, (3)
Delaware Small Cap Value Fund, (4) Delaware Limited-Term Government Fund, (5)
Delaware Trend Fund, (6) Delaware Cash Reserve Fund, (7) Delaware Delchester
Fund and (8) Delaware Tax-Free Pennsylvania Fund. No other Delaware Investments
funds are available for timed exchanges. Assets redeemed or exchanged out of
Timing Accounts in Delaware Investments 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.
Systematic Withdrawal Plans
Shareholders of Class A Shares, Class B Shares 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 is particularly useful to shareholders
living on fixed incomes, since it can provide them with a stable supplemental
amount. 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.
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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.
Shareholders should not purchase additional shares while participating in a
Systematic Withdrawal Plan.
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 Investments 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. The
applicable Limited CDSC for Class A Shares and CDSC for Class B and C Shares
redeemed via a Systematic Withdrawal Plan will be waived if the annual amount
withdrawn in each year is less than 12% of the account balance on the date that
the Plan is established. If the annual amount withdrawn in any year exceeds 12%
of the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subjected to the applicable
contingent deferred sales charge, including an assessment for previously
redeemed amounts under the Plan. Whether a waiver of the contingent deferred
sales charge is available or not, the first shares to be redeemed for each
Systematic Withdrawal Plan payment will be those not subject to a contingent
deferred sales charge because they have either satisfied the required holding
period or were acquired through the reinvestment of distributions. See Waiver of
Contingent Deferred Sales Charges, below.
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. Each Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
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Systematic Withdrawal Plan 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 (SM) Direct
Deposit Service. Your funds will normally be credited to your bank account up to
four business days after the payment date. There are no separate fees for this
redemption method. It may take up to four business days for the transactions to
be completed. You can initiate this service by completing an Account Services
form. If your name and address are not identical to the name and address on your
Fund account, you must have your signature guaranteed. The Funds do not charge a
fee for any this service; however, your bank may charge a fee. This service is
not available for retirement plans.
The Systematic Withdrawal Plan is not available for the Institutional
Classes.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value For purchases of $1,000,000 or more made
on or after July 1, 1998, a
Limited CDSC will be imposed on certain redemptions of Class A Shares (or shares
into which such Class A Shares are exchanged) according to the following
schedule: (1) 1.00% if shares are redeemed during the first year after the
purchase; and (2) 0.50% if such shares are redeemed during the second year after
the purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission described above.
The Limited CDSC will be paid to the Distributor and will be assessed
on an amount equal to the lesser 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 Investments 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 two years will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Investments 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 two-year
holding period. The Limited CDSC is assessed if such two year period is not
satisfied irrespective of whether the redemption triggering its payment is of
Class A Shares of a Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the investment
occurred, will age one month on the last day of that month and each subsequent
month.
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Waivers of Contingent Deferred Sales Charges
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) periodic distributions from an IRA, SIMPLE
IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to death, disability, or
attainment of age 59 1/2, and IRA distributions qualifying under Section 72(t)
of the Internal Revenue Code; (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; (viii) distributions form an account if the redemption results
from a death of a registered owner, or a registered joint owner, 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 disability (as defined in Section 72
of the Code) of all registered owners occurring after the purchase of the shares
being redeemed; and (ix) 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 Purchasing Shares).
Waiver of Contingent Deferred Sales Charge - Class B Shares 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, SIMPLE IRA,
SEP/IRA, or 403(b)(7) or 457 Deferred Compensation Plan; (iii) periodic
distributions from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, or 403(b)(7) or 457
Deferred Compensation Plan due to death, disability or attainment of age 59 1/2,
and IRA distributions qualifying under Section 72(t) of the Internal Revenue
Code; and (iv) distributions from an account if the redemption results from the
death of a registered owner, or a registered joint owner, 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, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution plan; (iii) periodic distributions from a 403(b)(7) or 457
Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan,
Money Purchase Plan, 401(k) Defined Contribution Plan upon attainment of age 70
1/2, and IRA distributions qualifying under Section 72(t) of the Internal
Revenue Code; (iv) distributions from a 403(b)(7) or 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) or 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) periodic distributions from an IRA or
SIMPLE IRA on or after attainment of age 59 1/2; and (vii) distributions from an
account if the redemption results from the death of a registered owner, or a
registered joint owner, of the account (in the case of accounts established
under the Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust
accounts, the waiver applies upon the death of all beneficial owners) or a total
and permanent disability (as defined in Section 72 of the Code) of all
registered owners occurring after the purchase of the shares being redeemed.
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* * *
In addition, the CDSC will be waived on Class A Shares, Class B Shares
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.
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. 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 (SM)
Direct Deposit Service and have such payments transferred from your Fund account
to your predesignated bank account. See Systematic Withdrawal Plans above.
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.
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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 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, 1999, 53.72% and 100% of dividends paid from net
investment income of Delaware Balanced Fund and Delaware 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.
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.
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.
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
Balanced Fund and Delaware Devon Fund had a net unrealized appreciation for tax
purposes of $57,768,946 and $18,139,455 respectively, as of October 31, 1999.
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Under the 1997 Act, as revised by the 1998 Act and the Omnibus
Consolidated and Emergency Supplemental Appropriations Act, a Fund is required
to track its sales of portfolio securities and to report its capital gain
distributions to you according to the following categories of holding periods:
Long-term capital gains": gains on securities sold after December 31,
1997 and held for more than 12 months as capital assets in the hands of
the holder are taxed at the 20% rate when distributed to shareholders
(15% for individual investors in the 15% tax bracket).
"Short -term capital gains": Gains on securities sold by a Fund that do
not meet the long-term holdings period are considered short term
capital gains and are taxable as ordinary income.
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
five-year gains are net gains on securities held for more than 5 years
which are sold after December 31, 2000. For individual who are subject
to tax at higher rate brackets, qualified five-year gains are net gains
on securities which are purchased after December 31, 2000 and are held
for more than five years. Taxpayers subject to tax at a higher rate
brackets may also make an election for shares held on January 1, 2001
to recognize gain on their shares in order to qualify such shares as
qualified five-year property. These gains will be taxable to individual
investors at a maximum rate of 18% for investors in the 28% or higher
federal income tax brackets, and at a maximum rate of 8% for investors
in the 15% federal income tax bracket when sold after the five-year
holding period.
Any loss incurred on the redemption or exchange of shares held for six
months or less will be disallowed to the extent of any exempt-interest dividends
distributed to you with respect to your Fund shares and any remaining loss will
be treated as a long-term capital loss to the extent of any long-term capital
gains distributed to you by the Fund on those shares.
All or a portion of any loss that you realize upon the redemption of
your Fund shares will be disallowed to the extent that you buy other shares in
the Fund (through reinvestment of dividends or otherwise) within 30 days before
or after your share redemption. Any loss disallowed under these rules will be
added to your tax basis in the new shares you buy.
If you redeem some or all of yours shares in a Fund, and then reinvest
the sales proceeds in such Fund or in another Delaware Investments fund within
90 days of buying the original shares, the sales charge that would otherwise
apply to your reinvestment may be reduced or eliminated. The IRS will require
you to report gain or loss on the redemption of your original shares in a Fund.
In doing so, all or a portion of the sales charge that you paid for your
original shares in a Fund will be excluded from your tax basis in the shares
sold (for the purpose of determining gain or loss upon the sale of such shares).
The portion of the sales charge excluded will equal the amount that the sales
charge is reduced on your reinvestment. Any portion of the sales charge excluded
from your tax basis in the shares sold will be added to the tax basis of the
shares you acquire from your reinvestment.
Shareholders will be notified annually by Equity Funds I as to the
federal income tax status of dividends and distributions paid by 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 and it satisfies certain
other requirements relating to the sources of its income and diversification of
its assets.
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In order to qualify as a regulated investment company for federal
income tax purposes, the Funds must meet certain specific requirements,
including:
(i) A Fund must maintain a diversified portfolio of securities, wherein
no security (other than U.S. government securities and securities of other
regulated investment companies) can exceed 25% of a Fund's total assets, and,
with respect to 50% of a Fund's total assets, no investment (other than cash and
cash items, U.S. government securities and securities of other regulated
investment companies) can exceed 5% of a Fund's total assets;
(ii) A Fund must derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or disposition of stock and securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies;
(iii) A Fund must distribute to its shareholders at least 90% of its
net investment income and net tax-exempt income for each of its fiscal years,
and
(iv) A Fund must realize less than 30% of its gross income for each
fiscal year from gains from the sale of securities and certain other assets that
have been held by a Fund for less than three months ("short-short income"). The
Taxpayer Relief Act of 1997 (the "1997 Act") repealed the 30% short-short income
test for tax years of regulated investment companies beginning after August 5,
1997; however, this rule may have continuing effect in some states for purposes
of classifying a Fund as a regulated investment company.
The Code requires a Fund to distribute at least 98% of its taxable
ordinary income earned during the calendar year and 98% of its capital gain net
income earned during the 12 month period ending October 31 (in addition to
amounts from the prior year that were neither distributed nor taxed to a Fund)
to you by December 31 of each year in order to avoid federal excise taxes. Each
Fund intends as a matter of policy to declare and pay sufficient dividends in
December or January (which are treated by you as received in December) but does
not guarantee and can give no assurances that its distributions will be
sufficient to eliminate all such taxes.
The straddle rules of Section 1092 may apply. Generally, the straddle
provisions require the deferral of losses to the extent of unrecognized gains
related to the offsetting positions in the straddle. Excess losses, if any, can
be recognized in the year of loss. Deferred losses will be carried forward and
recognized in the year that unrealized losses exceed unrealized gains.
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, a Fund must recognize gain (but not loss) on any constructive sale
of an appreciated financial position in stock, a partnership interest or certain
debt instruments. A Fund will generally be treated as making a constructive sale
when it: 1) enters into a short sale on the same or substantially identical
property; 2) enters into an offsetting notional principal contract; or 3) enters
into a futures or forward contract to deliver the same or substantially
identical property. Other transactions (including certain financial instruments
called collars) will be treated as constructive sales as provided in Treasury
regulations to be published. There are also certain exceptions that apply for
transactions that are closed before the end of the 30th day after the close of
the taxable year.
Investment in Foreign Currencies and Foreign Securities--The Funds are
authorized to invest certain limited amounts in foreign securities. Such
investments, if made, will have the following additional tax consequences to
each Fund:
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Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time a Fund accrues income
(including dividends), or accrues expenses which are denominated in a foreign
currency, and the time a Fund actually collects such income or pays such
expenses generally are treated as ordinary income or loss. Similarly, on the
disposition of debt securities denominated in a foreign currency and on the
disposition of certain options, futures, forward contracts, gain or loss
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of its disposition are
also treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "Section 988" gains or losses, may increase or decrease the amount
of a Fund's net investment company taxable income, which, in turn, will affect
the amount of income to be distributed to you by a Fund.
If a Fund's Section 988 losses exceed a Fund's other net investment
company taxable income during a taxable year, a Fund generally will not be able
to make ordinary dividend distributions to you for that year, or distributions
made before the losses were realized will be recharacterized as return of
capital distributions of federal income tax purposes, rather than as an ordinary
dividend or capital gain distribution. If a distribution is treated as a return
of capital, your tax basis in your Fund shares will be reduced by a like amount
(to the extent of such basis), and any excess of the distribution over your tax
basis in your Fund shares will be treated as capital gain to you.
The 1997 Act generally requires that foreign income be translated into
U.S. dollars at the average exchange rate for the tax year in which the
transactions are conducted. Certain exceptions apply to taxes paid more than two
years after the taxable year to which they relate. This new law may require a
Fund to track and record adjustments to foreign taxes paid on foreign securities
in which it invests. Under a Fund's current reporting procedure, foreign
security transactions are recorded generally at the time of each transaction
using the foreign currency spot rate available for the date of each transaction.
Under the new law, a Fund will be required to record a fiscal year end (and at
calendar year end for excise tax purposes) an adjustment that reflects the
difference between the spot rates recorded for each transaction and the year-end
average exchange rate for all of a Fund's foreign securities transactions. There
is a possibility that the mutual fund industry will be given relief from this
new provision, in which case no year-end adjustments will be required.
The Funds may be subject to foreign withholding taxes on income from
certain of its foreign securities. If more than 50% of the total assets of a
Fund at the end of its fiscal year are invested in securities of foreign
corporations, a Fund may elect to pass-through to you your pro rata share of
foreign taxes paid by a Fund. If this election is made, you will be: (i)
required to include in your gross income your pro rata share of foreign source
income (including any foreign taxes paid by a Fund); and (ii) entitled to either
deduct your share of such foreign taxes in computing your taxable income or to
claim a credit for such taxes against your U.S. income tax, subject to certain
limitations under the Code. You will be informed by a Fund at the end of each
calendar year regarding the availability of any such foreign tax credits and the
amount of foreign source income (including any foreign taxes paid by a Fund). If
a Fund elects to pass-through to you the foreign income taxes that it has paid,
you will be informed at the end of the calendar year of the amount of foreign
taxes paid and foreign source income that must be included on your federal
income tax return. If a Fund invests 50% or less of its total assets in
securities of foreign corporations, it will not be entitled to pass-through to
you your pro-rata shares of foreign taxes paid by a Fund. In this case, these
taxes will be taken as a deduction by a Fund, and the income reported to you
will be the net amount after these deductions. The 1997 Act also simplifies the
procedures by which investors in funds that invest in foreign securities can
claim tax credits on their individual income tax returns for the foreign taxes
paid by a Fund. These provisions will allow investors who pay foreign taxes of
$300 or less on a single return or $600 or less on a joint return during any
year (all of which must be reported on IRS Form 1099-DIV from a Fund to the
investor) to claim a tax credit against their U.S. federal income tax for the
amount of foreign taxes paid by a Fund. This process will allow you, if you
qualify, to bypass the burdensome and detailed reporting requirements on the
foreign tax credit schedule (Form 1116) and report your foreign taxes paid
directly on page 2 of Form 1040. You should note that this simplified procedure
was not available until calendar year 1998.
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Investment in Passive Foreign Investment Company securities--The Funds
may invest in shares of foreign corporations which may be classified under the
Code as passive foreign investment companies ("PFICs"). In general, a foreign
corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. If a Fund receives an "excess distribution" with respect
to PFIC stock, that Fund itself may be subject to U.S. federal income tax on a
portion of the distribution, whether or not the corresponding income is
distributed by a Fund to you. In general, under the PFIC rules, an excess
distribution is treated as having been realized ratably over the period during
which a Fund held the PFIC shares. A Fund itself will be subject to tax on the
portion, if any, of an excess distribution that is so allocated to prior Fund
taxable years, and an interest factor will be added to the tax, as if the tax
had been payable in such prior taxable years. In this case, you would not be
permitted to claim a credit on your own tax return for the tax paid by a Fund.
Certain distributions from a PFIC as well as gain from the sale of PFIC shares
are treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
distribution might have been classified as capital gain. This may have the
effect of increasing Fund distributions to you that are treated as ordinary
dividends rather than long-term capital gain dividends.
A Fund may be eligible to elect alternative tax treatment with respect
to PFIC shares. Under an election that currently is available in some
circumstances, a Fund generally would be required to include in its gross income
its share of the earnings of a PFIC on a current basis, regardless of whether
distributions are received from the PFIC during such period. If this election
were made, the special rules, discussed above, relating to the taxation of
excess distributions, would not apply. In addition, the 1997 Act provides for
another election that would involve marking-to-market a Fund's PFIC shares at
the end of each taxable year (and on certain other dates as prescribed in the
Code), with the result that unrealized gains would be treated as though they
were realized. A Fund would also be allowed an ordinary deduction for the
excess, if any, of the adjusted basis of its investment in the PFIC stock over
its fair market value at the end of the taxable year. This deduction would be
limited to the amount of any net mark-to-market gains previously included with
respect to that particular PFIC security. If a Fund were to make this second
PFIC election, tax at that Fund's level under the PFIC rules would generally be
eliminated.
The application of the PFIC rules may affect, among other things, the
amount of tax payable by a Fund (if any), the amounts distributable to you by a
Fund, the time at which these distributions must be made, and whether these
distributions will be classified as ordinary income or capital gain
distributions to you.
You should be aware that it is not always possible at the time shares
of a foreign corporation are acquired to ascertain that the foreign corporation
is a PFIC, and that there is always a possibility that a foreign corporation
will become a PFIC after a Fund acquires shares in that corporation. While a
Fund will generally seek to avoid investing in PFIC shares to avoid the tax
consequences detailed above, there are no guarantees that it will do so and it
reserves the right to make such investments as a matter of its fundamental
investment policy.
Most foreign exchange gains are classified as ordinary income which
will be taxable to you as such when distributed. Similarly, you should be aware
that any foreign exchange losses realized by a Fund, including any losses
realized on the sale of foreign debt securities, are generally treated as
ordinary losses for federal income tax purposes. This treatment could increase
or reduce a Fund's income available for distribution to you, and may cause some
or all of a Fund's previously distributed income to be classified as a return of
capital.
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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's Board of Trustees.
The Manager and its predecessors have been managing the funds in the
Delaware Investments family since 1938. On October 31, 1999, the Manager and its
affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $45 billion in assets in
the various institutional or separately managed (approximately $26,735,250,000)
and investment company (approximately $18,524,660,000) accounts.
The Investment Management Agreement for the Funds is dated December 28,
1999 and was approved by the initial shareholder on that date. The 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 Trustees 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 trustees of Equity
Funds I who are not parties thereto or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
The Agreement is terminable without penalty on 60 days' notice by the trustees
of Equity Funds I or by the Manager. The Agreement will terminate automatically
in the event of its assignment.
The fee payable by each Fund under the Agreement is equal to the
following amount:
Management Fee Schedule
(as a percentage of
average daily net assets)
Annual Rate
0.65% on first $500 million
0.60% on next $500 million
0.55% on next $1,500 million
0.50% on assets in excess of
$2,500 million
On October 31, 1999, the total net assets of Delaware Balanced Fund
were $734,299,158 and the total net assets of Delaware Devon Fund were
$322,225,670. Under the general supervision of the Board of Trustees, the
Manager makes all investment decisions which are implemented by each Fund. The
Manager pays the salaries of all trustees, officers and employees who are
affiliated with both the Manager and Equity Funds I. The investment management
fees paid by Delaware Balanced Fund for the fiscal years ended October 31, 1997,
1998 and 1999 were $3,492,255, $4,178,981 and $5,368,105, respectively.
Investment management fees incurred by Delaware Devon Fund for the fiscal years
ended October 31, 1997, 1998 and 1999 and were $310,229, $951,036 and
$2,124,651, respectively.
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.
72
<PAGE>
From January 1, 1999 through June 30, 1999, the Manager elected
voluntarily to waive that portion, if any, of the annual management fees payable
by Delaware Devon Fund and to pay the Fund to the extent necessary to ensure
that the Total Operating Expenses of this Fund do not exceed 1.00% (exclusive of
taxes, interest, brokerage commissions, extraordinary expenses and 12b-1
expenses). From commencement of the Fund's operations through December 31, 1998,
the Manager voluntarily waived that portion, if any, of the annual management
fees payable by the Fund and paid the Fund's expenses to the extent necessary to
ensure that Total Operating Expenses of the Fund (excluding 12b-1 expenses) did
not exceed 0.95%.
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 December 30, 1999. 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 Class A Shares,
Class B Shares and Class C Shares under their respective 12b-1 Plans. The
Distributor is an 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
pursuant to a Shareholders Services Agreement dated December 30, 1999. 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.
The trustees annually review fees paid to the Distributor and the
Transfer Agent.
Each Fund has authorized one or more brokers to accept on its behalf
purchase and redemption orders in addition to the Transfer Agent. Such brokers
are authorized to designate other intermediaries to accept purchase and
redemption orders on the behalf of the Fund. For purposes of pricing, the Fund
will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Investors may be charged a fee when effecting transactions through a
broker or agent.
73
<PAGE>
OFFICERS AND TRUSTEES
The business and affairs of Equity Funds I are managed under the
direction of its Board of Trustees.
Certain officers and trustees of Equity Funds I hold identical
positions in each of the other funds in Delaware Investments. As of November 30,
1999, Equity Funds I's officers and trustees owned less than 1% of the
outstanding shares of Delaware Balanced Fund A Class, Delaware Balanced Fund B
Class, Delaware Balanced Fund C Class and Delaware Balanced Fund Institutional
Class. As of the same date, the Fund's officers and trustees held less than 1%
of the outstanding shares of Delaware Devon Fund A Class, Delaware Devon Fund B
Class, Delaware Devon Fund C Class and Delaware Devon Fund Institutional Class.
As of November 30, 1999, management believes the following accounts
held of record 5% or more of the outstanding shares of Class A Shares, Class B
Shares, Class C Shares and the Institutional Class of each Fund. Management does
not have knowledge of beneficial owners.
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Delaware Balanced Fund Merrill Lynch, Pierce, Fenner & Smith, Inc., 74,212.470 8.44%
C Class Attention: Fund Administration
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246
Delaware Balanced Fund Federated Life Insurance Company 1,248,427.490 32.44%
Institutional Class Separate Sub-Account A
Attention: Debbie Miller
P.O Box 328
Owatonna, MN 55060-0328
South Trust Bank of Alabama 707,972.830 18.40%
Trust Thompson Tractor
Attention: Michelle Quick
P.O. Box 830804
Birmingham, AL 35283-0804
Meg and Co. 488,169.050 12.68%
c/o U.S. National Bank Trust Dept.
P.O. Box 520
Johnstown, PA 15907-0520
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
RS DMTC 457 Deferred Comp Plan 215,760.000 5.60%
PGW 457 Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
Delaware Balanced Fund RS DMTC 457 Deferred Comp Plan 215,760.000 5.60%
Institutional Class PGW 457 Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
Norwest Bank Colorado NA Cust 200,707.050 5.21%
County of Milwaukee
Deferred Compensation Plan
Great West Life Recordkeeper
8515 E. Orchard Rd.
Englewood, CO 80111-5037
Delaware Devon Fund Merrill Lynch, Inc. 437,109.580 6.77%
B Class Mutual Fund Operations
Attention: Book Entry
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246
Delaware Devon Fund Merrill Lynch, Pierce, Fenner & Smith, Inc. 175,522.350 11.67%
C Class For the Sole Benefit of its Customers
Attention: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246
Delaware Devon Fund RS 401(k) Plan 312,151.220 29.24%
Institutional Class Waterfield Group 401(k) Plan
Attn: Retirement Plans
1818 Market St.
Philadelphia, PA 19103-3638
RS DMTC 401(k) Plan 227,914.910 21.34%
Strick Corporation
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
RS DMC Employee Profit Sharing Plan 216,900.730 20.31%
Delaware Management Company
Employee Profit Sharing Trust
c/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103-3682
Delaware Devon Fund RS DMTC 401(k) Plan 127,615.610 11.95%
Institutional Class Royal Appliance 401(k) Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
RS DMTC P/S Plan 54,278.930 5.08%
Columbia Diagnostics Inc. P/S
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
</TABLE>
DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Management Company, Inc., Delaware Investment Advisers (a series of Delaware
Management Business Trust), Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Management Trust Company,
Delaware International Holdings Ltd., Founders Holdings, Inc., Delaware
International Advisers Ltd., Delaware Capital Management, Inc. and Retirement
Financial Services, Inc. are direct or indirect, wholly owned subsidiaries of
Delaware Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between
DMH and a wholly owned subsidiary of Lincoln National Corporation ("Lincoln
National") was completed. DMH and the Manager are now indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National. Lincoln
National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management.
76
<PAGE>
Trustees and principal officers of Equity Funds I 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 trustee is One Commerce Square,
Philadelphia, PA 19103.
<TABLE>
<CAPTION>
- ------------------------------------------- --------------------------------------------------------------------------------
Trustee and/or Officer Business Experience
- ------------------------------------------- --------------------------------------------------------------------------------
<S> <C>
*Wayne A. Stork (62) Chairman, Trustee/Director of Equity Funds I and each of the other 32
investment companies in the Delaware Investments family.
Chairman and Director of Delaware Management Holdings, Inc.
Director of Delaware International Advisers Ltd.
Prior to January 1, 1999, Mr. Stork was Director of Delaware Capital
Management, Inc.; Chairman, President and Chief Executive Officer and
Trustee/Director of DMH Corp., Delaware Distributors, Inc. and Founders
Holdings, Inc.; Chairman, President, Chief Executive Officer, Chief
Investment Officer and Trustee/Director of Delaware Management Company, Inc.
and Delaware Management Business Trust; Chairman, President, Chief Executive
Officer and Chief Investment Officer of Delaware Management Company (a
series of Delaware Management Business Trust); Chairman, Chief Executive
Officer and Chief Investment Officer of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Chairman and Chief Executive
Officer of Delaware International Advisers Ltd.; Chairman, Chief Executive
Officer and Director of Delaware International Holdings Ltd.; Chief
Executive Officer of Delaware Management Holdings, Inc.; President and Chief
Executive Officer of Delvoy, Inc.; Chairman of Delaware Distributors, L.P.;
Director of Delaware Service Company, Inc. and Retirement Financial
Services, Inc.
In addition, during the five years prior to January 1, 1999, Mr. Stork has
served in various executive capacities at different times within the
Delaware organization.
</TABLE>
- ----------------------
* Trustee affiliated with Equity Funds I's investment manager and considered an
"interested person" as defined in the 1940 Act.
- --------------------------------------------------------------------------------
77
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------- --------------------------------------------------------------------------------
Trustee and/or Officer Business Experience
- ------------------------------------------- --------------------------------------------------------------------------------
<S> <C>
*David K. Downes (60) President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer and Trustee/Director of Equity Funds I and each of the other 32
investment companies in the Delaware Investments family.
President and Director of Delaware Management Company, Inc.
President of Delaware Management Company (a series of Delaware Management
Business Trust)
President, Chief Executive Officer and Director of Delaware Capital
Management, Inc.
Chairman, President, Chief Executive Officer and Director of Delaware
Service Company, Inc.
President, Chief Operating Officer, Chief Financial Officer and Director of
Delaware International Holdings Ltd.
Chairman and Director of Delaware Management Trust Company and Retirement
Financial Services, Inc.
Executive Vice President, Chief Operating Officer, Chief Financial Officer
of Delaware Management Holdings, Inc., Founders CBO Corporation, Delaware
Investment Advisers (a series of Delaware Management Business Trust) and
Delaware Distributors, L.P.
Executive Vice President, Chief Operating Officer, Chief Financial Officer
and Director of DMH Corp., Delaware Distributors, Inc., Founders Holdings,
Inc. and Delvoy, Inc.
Executive Vice President and Trustee of Delaware Management Business Trust
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Downes has served in various executive
capacities at different times within the Delaware organization.
</TABLE>
- ----------------------
* Trustee affiliated with Equity Funds I's investment manager and considered an
"interested person" as defined in the 1940 Act.
- --------------------------------------------------------------------------------
78
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------- --------------------------------------------------------------------------------
Trustee and/or Officer Business Experience
- ------------------------------------------- --------------------------------------------------------------------------------
<S> <C>
Walter P. Babich (72) Trustee/Director Equity Funds I and each of the other 32 investment companies
in the Delaware Investments family
460 North Gulph Road, King of Prussia, PA 19406
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from
1988 to 1991, he was a partner of I&L Investors.
- ------------------------------------------- --------------------------------------------------------------------------------
John H. Durham (62) Trustee/Director of Equity Funds I and 18 other investment companies in the
Delaware Investments family
Private Investor.
P.O. Box 819, Gwynedd Valley, PA 19437
Mr. Durham served as Chairman of the Board of each fund in the Delaware
Investments family from 1986 to 1991; President of each fund from 1977 to
1990; and Chief Executive Officer of each fund from 1984 to 1990. Prior to
1992, with respect to Delaware Management Holdings, Inc., Delaware
Management Company, Delaware Distributors, Inc. and Delaware Service
Company, Inc., Mr. Durham served as a director and in various executive
capacities at different times. He was also a Partner of Complete Care
Services from 1995 to 1999.
- ------------------------------------------- --------------------------------------------------------------------------------
Anthony D. Knerr (61) Trustee/Director of Equity Funds I and each of the 32 other investment
companies in the Delaware Investments family.
500 Fifth Avenue, New York, NY 10110
Founder and Managing Director, Anthony Knerr & Associates
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to 1989, he was also a
lecturer in English at the University. In addition, Mr. Knerr was Chairman
of The Publishing Group, Inc., New York, from 1988 to 1990. Mr. Knerr
founded The Publishing Group, Inc. in 1988.
- ------------------------------------------- --------------------------------------------------------------------------------
Ann R. Leven (59) Trustee/Director of Equity Funds I and each of the other 32 other investment
companies in the Delaware Investments family
785 Park Avenue, New York, NY 10021
Treasurer, National Gallery of Art
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of the
Smithsonian Institution, Washington, DC, and from 1975 to 1992, she was
Adjunct Professor of Columbia Business School.
- ------------------------------------------- --------------------------------------------------------------------------------
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------- --------------------------------------------------------------------------------
Trustee and/or Officer Business Experience
- ------------------------------------------- --------------------------------------------------------------------------------
<S> <C>
Thomas F. Madison (63) Trustee/Director of Equity Funds I and each of the other 32 investment
companies in the Delaware Investments family
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402
President and Chief Executive Officer, MLM Partners, Inc.
Mr. Madison has also been Chairman of the Board of Communications Holdings,
Inc. since 1996. From February to September 1994, Mr. Madison served as Vice
Chairman--Office of the CEO of The Minnesota Mutual Life Insurance Company
and from 1988 to 1993, he was President of U.S. WEST
Communications--Markets.
- ------------------------------------------- --------------------------------------------------------------------------------
Charles E. Peck (74) Trustee/Director of Equity Funds I and each of the other 32 investment
companies in the Delaware Investments family
P.O. Box 1102, Columbia, MD 21044
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer of The
Ryland Group, Inc., Columbia, MD.
- ------------------------------------------- --------------------------------------------------------------------------------
Janet L. Yeomans (51) Trustee/Director of Equity Funds I and 32 other investment companies in the
Delaware Investments family.
Building 220-13W-37, St. Paul, MN 55144
Vice President and Treasurer, 3M Corporation.
From 1987-1994, Ms. Yeomans was Director of Benefit Funds and Financial
Markets for the 3M Corporation; Manager of Benefit Fund Investments for the
3M Corporation, 1985-1987; Manager of Pension Funds for the 3M Corporation,
1983-1985; Consultant--Investment Technology Group of Chase Econometrics,
1982-1983; Consultant for Data Resources, 1980-1982; Programmer for the
Federal Reserve Bank of Chicago, 1970-1974.
- ------------------------------------------- --------------------------------------------------------------------------------
</TABLE>
80
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------- --------------------------------------------------------------------------------
Trustee and/or Officer Business Experience
- ------------------------------------------- --------------------------------------------------------------------------------
<S> <C>
Richard G. Unruh, Jr. (60) Executive Vice President and Chief Investment Officer, Equity of the Fund,
each of the other 32 investment companies in the Delaware Investments family
Chief Executive Officer/Chief Investment Officer of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
Executive Vice President of Delaware Management Holdings, Inc. and Delaware
Capital Management, Inc.
Executive Vice President/Chief Investment Officer of Delaware Management
Company (a series of Delaware Management Business Trust)
Executive Vice President and Trustee of Delaware Management Business Trust
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.
- ------------------------------------------- --------------------------------------------------------------------------------
H. Thomas McMeekin (46) Executive Vice President and Chief Investment Officer, Fixed Income of Equity
Funds I and each of the other 32 investment companies in the Delaware
Investments family.
Director of Delaware Management Holdings, Inc. and Founders CBO Corporation.
Executive Vice President/Chief Investment Officer, DMC-Fixed Income of
Delaware Management Company (a series of Delaware Management Business Trust)
Executive Vice President/Chief Investment Officer, DIA-Fixed Income of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Management Business Trust and Delaware
Capital Management, Inc.
Mr. McMeekin joined Delaware Investments in 1999. During the past five years,
he has also served in various executive capacities for Lincoln National
Corporation.
- ------------------------------------------- --------------------------------------------------------------------------------
</TABLE>
81
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------- --------------------------------------------------------------------------------
Trustee and/or Officer Business Experience
- ------------------------------------------- --------------------------------------------------------------------------------
<S> <C>
Richard J. Flannery (42) Executive Vice President/General Counsel of Equity Funds I and each of the
other 32 investment companies in the Delaware Investments family, Delaware
Management Holdings, Inc., Delaware Distributors, L.P., Delaware Management
Company (a series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Founders CBO
Corporation.
Executive Vice President/General Counsel and Director of Delaware
International Holdings Ltd., Founders Holdings, Inc., Delvoy, Inc., DMH
Corp., Delaware Management Company, Inc., Delaware Service Company, Inc.,
Delaware Capital Management, Inc., Retirement Financial Services, Inc.,
Delaware Distributors, Inc. and Delaware Management Trust Company.
Executive Vice President and Trustee of Delaware Management Business Trust.
Director of Delaware International Advisers Ltd.
Director of HYPPCO Finance Company Ltd.
During the past five years, Mr. Flannery has served in various executive
capacities at different times within the Delaware organization.
- ------------------------------------------- --------------------------------------------------------------------------------
Eric E. Miller (46) Senior Vice President/Deputy General Counsel and Secretary of Equity Funds I
and each of the other 32 investment companies in Delaware Investments.
Senior Vice President/Deputy General Counsel and Assistant Secretary of
Delaware Management Holdings, Inc., DMH Corp., Delvoy, Inc., Delaware
Management Company, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business
Trust), Delaware Service Company, Inc., Delaware Capital Management, Inc.,
Retirement Financial Services, Inc., Delaware Distributors, Inc., Delaware
Distributors, L.P. and Founders Holdings, Inc.
During the past five years, Mr. Miller has served in various executive
capacities at different times within Delaware Investments.
- ------------------------------------------- --------------------------------------------------------------------------------
Joseph H. Hastings (50) Senior Vice President/Corporate Controller of Equity Funds I and each of the
other 32 investment companies in the Delaware Investments family and Delaware
Investment Advisers (a series of Delaware Management Business Trust)
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delvoy , Inc., Delaware Management
Company, Inc., Delaware Management Business Trust, Delaware Management
Company (a series of Delaware Management Business Trust), Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company,
Inc., Delaware Capital Management, Inc., Delaware International Holdings
Ltd., Founders Holdings, Inc. and Delaware Management Business Trust
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company
Senior Vice President/Assistant Treasurer of Founders CBO Corporation
Chief Financial Officer of Retirement Financial Services, Inc.
During the past five years, Mr. Hastings has served in various executive
capacities at different times within the Delaware organization.
- ------------------------------------------- --------------------------------------------------------------------------------
</TABLE>
82
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------- --------------------------------------------------------------------------------
Trustee and/or Officer Business Experience
- ------------------------------------------- --------------------------------------------------------------------------------
<S> <C>
Michael P. Bishof (37) Senior Vice President and Treasurer of Equity Funds I and each of the other
32 investment companies in the Delaware Investments family.
Senior Vice President/Investment Accounting of Delaware Management Company
(a series of Delaware Management Business Trust), Delaware Service Company,
Inc. and Delaware Capital Management, Inc. and Founders Holdings, Inc.
Senior Vice President and Treasurer/ Investment Accounting of Delaware
Distributors, L.P. and Delaware Investment Advisers (a series of Delaware
Management Business Trust)
Senior Vice President/Manager of Investment Accounting of Delaware
International Holdings, Inc.
Senior Vice President and Assistant Treasurer of Founders CBO Corporation
Before joining Delaware Investments in 1995, Mr. Bishof was a Vice President
for Bankers Trust, New York, NY from 1994 to 1995, a Vice President for CS
First Boston Investment Management, New York, NY from 1993 to 1994 and an
Assistant Vice President for Equitable Capital Management Corporation, New
York, NY from 1987 to 1993.
- ------------------------------------------- --------------------------------------------------------------------------------
Gary A. Reed (45) Vice President/Senior Portfolio Manager of Equity Funds I, 23 other
investment companies in the Delaware Investments family, Delaware Management
Company (a series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust). and Delaware
Capital Management, Inc.
During the past five years, Mr. Reed has served in such capacities within
the Delaware organization.
- ------------------------------------------- -------------------------------------------------------------------------------
</TABLE>
83
<PAGE>
The following is a compensation table listing for each trustee entitled
to receive compensation, the aggregate compensation received from Equity Funds I
and the total compensation received from all investment companies in the
Delaware Investments family for which he or she serves as a trustee or trustee
for the fiscal year ended October 31, 1999 and an estimate of annual benefits to
be received upon retirement under the Delaware Investments Retirement Plan for
Directors/Trustees as of October 31, 1999. Only the independent trustees of
Equity Funds I receive compensation from the Funds.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Pension or
Retirement Benefits
Aggregate Accrued Estimated Annual Total Compensation from
Compensation from as Part of Benefits the Investment Companies
Name(3) Equity Funds I Fund Expenses Upon Retirement(1) in Delaware Investments(2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Walter P. Babich $3,259 None $38,000 $58,608
- ----------------------------------------------------------------------------------------------------------------------
John H. Durham $3,156 None $32,180 $42,975
- ----------------------------------------------------------------------------------------------------------------------
Anthony D. Knerr $3,590 None $38,000 $65,085
- ----------------------------------------------------------------------------------------------------------------------
Ann R. Leven $3,658 None $38,000 $66,084
- ----------------------------------------------------------------------------------------------------------------------
Thomas F. Madison $3,590 None $38,000 $65,085
- ----------------------------------------------------------------------------------------------------------------------
Charles E. Peck $3,487 None $38,000 $63,418
- ----------------------------------------------------------------------------------------------------------------------
Janet L. Yeomans(4) $2,044 None $38,000 $37,881
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested trustee/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 investment company in the Delaware Investments family for
which he or she serves as a trustee/director for a period equal to the
lesser of the number of years that such person served as a trustee/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 trustees/directors of each investment company at the time of such
person's retirement. If an eligible trustee/director retired as of October
31, 1999, he or she would be entitled to annual payments totaling the amount
noted above, in the aggregate, from all of the investment companies in the
Delaware Investments family for which he or she served as trustee/director,
based on the number of investment companies in the Delaware Investments
family as of that date.
(2) Each independent trustee/director (other than John H. Durham) currently
receives a total annual retainer fee of $38,000 for serving as a
trustee/director for all 33 investment companies in Delaware Investments,
plus $3,143 for each Board Meeting attended. John H. Durham currently
receives a total annual retainer fee of $32,180 for serving as a
trustee/director for 19 investment companies in Delaware Investments, plus
$1,810 for each Board Meeting attended. Ann R. Leven, Charles E. Peck,
Anthony D. Knerr and Thomas F. Madison serve on Equity Funds I's audit
committee; Ms. Leven is the chairperson. Members of the audit committee
currently receive additional annual compensation of $5,000 from all
investment companies, in the aggregate, with the exception of the
chairperson, who receives $6,000.
(3) W. Thacher Longstreth served as an independent trustee of Equity Funds I
during its last fiscal year for the period November 1, 1998 through March
17, 1999, the date on which he retired. For this period, Mr. Longstreth
received $1,302 from Equity Funds I and $25,345 for all investment companies
in the Delaware Investments family.
(4) Janet L. Yeomans joined the Boards of all investment companies in the
Delaware Investments family in March 1999 for some funds and in April 1999
for other funds.
84
<PAGE>
GENERAL INFORMATION
Equity Funds I is an open-end management investment company. Each
Funds' portfolio of assets is diversified as defined by the 1940 Act. Equity
Funds I was first organized as a Delaware corporation in 1937 and subsequently
reorganized as a Maryland corporation on March 4, 1983 and as a Delaware
business trust on December 30, 1999.
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 Investments family. An affiliate of the Manager 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.
Delaware or Delaware International also manages the investment options
for Delaware-Lincoln Choice Plus and Delaware Medallion (SM) IV Variable
Annuities. Choice Plus is issued and distributed by Lincoln National Life
Insurance Company. Choice Plus offers a variety of different investment styles
managed by leading money managers. 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 various investment
series ranging from domestic equity funds, international equity and bond funds
and domestic fixed income funds. Each investment series available through Choice
Plus and Medallion utilizes an investment strategy and discipline the same as or
similar to one of the Delaware Investments mutual funds available outside the
annuity. See Delaware Group Premium Fund, Inc., in Appendix B.
Access persons and advisory persons of the funds in the Delaware
Investments family, as those terms are defined in SEC Rule 17j-1 under the 1940
Act, who provide services to the Manager, Delaware International Advisers Ltd.
or their affiliates, are permitted to engage in personal securities transactions
subject to the exceptions set forth in Rule 17j-1 and the following general
restrictions and procedures: (1) certain blackout periods apply to personal
securities transactions of those persons; (2) transactions must receive advance
clearance and must be completed on the same day as the clearance is received;
(3) certain persons are prohibited from investing in initial public offerings of
securities and other restrictions apply to investments in private placements of
securities; (4) opening positions by certain covered persons in certain
securities 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.
85
<PAGE>
The Distributor acts as national distributor for each Fund and for the
other mutual funds in the Delaware Investments family. The Distributor received
net commissions from each Fund on behalf of Class A Shares, after reallowances
to dealers, as follows:
<TABLE>
<CAPTION>
Delaware Balanced Fund
Class A Shares
-----------------------------------------------------------------------------------
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers to Distributor
----- ----------- ---------- --------------
<S> <C> <C> <C>
10/31/99 $1,052,557 $905,390 $147,167
10/31/98 697,061 583,281 113,780
10/31/97 558,308 464,226 94,082
Delaware Devon Fund
Class A Shares
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers to Distributor
----- ----------- ---------- --------------
10/31/99 $1,546,356 $1,332,483 $213,873
10/31/98 1,244,866 1,035,968 208,898
10/31/97 531,475 440,937 90,538
</TABLE>
86
<PAGE>
The Distributor received in the aggregate Limited CDSC payments with
respect to Class A Shares of each Fund as follows:
<TABLE>
<CAPTION>
Limited CDSC Payments
Fiscal Year Ended Delaware Balanced Fund A Class Delaware Devon Fund A Class
----------------- ------------------------------- ---------------------------
<S> <C> <C>
10/31/99 $0 $0
10/31/98 $832 $1,108
10/31/97 $85,849 $0
</TABLE>
The Distributor received in the aggregate CDSC payments with respect to
Class B Shares of each Fund as follows:
<TABLE>
<CAPTION>
CDSC Payments
Fiscal Year Ended Delaware Balanced Fund B Class Delaware Devon Fund B Class
----------------- ------------------------------ ---------------------------
<S> <C> <C>
10/31/99 $141,686 $403,070
10/31/98 $68,259 $81,772
10/31/97 $32,664 $10,367
</TABLE>
The Distributor received in the aggregate CDSC payments with respect to
Class C Shares of each Fund as follows:
<TABLE>
<CAPTION>
CDSC Payments
Fiscal Year Ended Delaware Balanced Fund C Class Delaware Devon Fund C Class
----------------- ------------------------------ ---------------------------
<S> <C> <C>
10/31/99 $11,276 $15,863
10/31/98 $2,608 $3,673
10/31/97 $2,595 $669
</TABLE>
87
<PAGE>
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 Investments family. 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 Trustees, including a majority of the disinterested trustees. 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
Investments family for which it provides such accounting services. Such fee is
equal to 0.25% multiplied by the total amount of assets in the complex for which
the Transfer Agent furnishes accounting services, where such aggregate complex
assets are $10 billion or less, and 0.20% of assets if such aggregate complex
assets exceed $10 billion. The fees are charged to each fund, including 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's advisory
relationship with the Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause Equity Funds I to delete
the words "Delaware Group" from Equity Funds I'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.
Capitalization
Equity Funds I has a present unlimited authorized number of shares of
beneficial interest with no par value allocated to each Class.
Each Fund currently offers four classes of shares. 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 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.
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Prior to November 9, 1992, Equity Funds I offered only one series, now
known as Delaware Balanced Fund and one class of shares, Delaware Balanced Fund
A Class. Beginning November 9, 1992, Delaware Balanced Fund began offering
Delaware Balanced Fund Institutional Class. Beginning December 29, 1993, Equity
Funds I offered Delaware Devon Fund which offered Delaware Devon Fund A Class
and Delaware Devon Fund Institutional Class. 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 Class C Shares.
Effective as of the close of business December 27, 1996, the name of
Delaware Group Delaware Balanced Fund, Inc. was changed to Delaware Group Equity
Funds I Also effective as of the close of business December 27, 1996, the name
of Common Stock series was changed to Delaware Balanced Fund series.
Prior to September 6, 1994, Delaware Balanced Fund A Class was known as
Delaware Balanced Fund class and Delaware Balanced Fund Institutional Class was
known as Delaware Balanced 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 Delaware 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 Delaware Devon Fund A Class,
Delaware Devon Fund B Class and Delaware Devon Fund Institutional Class,
respectively.
Effective as of the close of business December 29, 1999, the name of
Delaware Fund and its Classes, changed to Delaware Balanced Fund.
Effective as of August 16, 1999, the name of Devon Fund and its Classes
changed to Delaware Devon Fund.
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 shares have noncumulative voting rights which means that
the holders of more than 50% of the shares of Equity Funds I voting for the
election of trustees can elect all the trustees if they choose to do so, and, in
such event, the holders of the remaining shares will not be able to elect any
trustees.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC.
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FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Equity Funds I
and, in its capacity as such, audits the annual financial statements of each of
the Funds. The Funds' Statements of Net Assets, Statements of Operations,
Statements of Changes in Net Assets, Financial Highlights, and Notes to
Financial Statements, as well as the reports of Ernst & Young LLP, independent
auditors, for the fiscal year ended October 31, 1999, are included in the Funds'
Annual Reports to shareholders. The financial statements, the notes relating
thereto, the financial highlights and the reports of Ernst & Young LLP listed
above are incorporated by reference from the Annual Reports into this Part B.
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APPENDIX A--INVESTMENT OBJECTIVES OF THE FUNDS IN THE DELAWARE INVESTMENTS
FAMILY
Following is a summary of the investment objectives of the funds in the
Delaware Investments family:
Delaware Balanced Fund seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. Delaware Devon
Fund seeks current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks the Manager
believes have the potential for above average dividend increases over time.
Delaware Trend Fund seeks long-term growth by investing in common
stocks issued by emerging growth companies exhibiting strong capital
appreciation potential.
Delaware Small Cap Value Fund seeks capital appreciation by investing
primarily in common stocks whose market values appear low relative to their
underlying value or future potential.
Delaware 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.
Delaware Decatur Equity 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. Delaware Growth
and Income Fund seeks long-term growth by investing primarily in securities that
provide the potential for income and capital appreciation without undue risk to
principal. Delaware Blue Chip Fund seeks to achieve long-term capital
appreciation. Current income is a secondary objective. It seeks to achieve these
objectives by investing primarily in equity securities and any securities that
are convertible into equity securities. Delaware Social Awareness Fund seeks to
achieve long-term capital appreciation. It seeks to achieve this objective by
investing primarily in equity securities of medium- to large-sized companies
expected to grow over time that meet the Fund's "Social Criteria" strategy.
Delaware 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. Delaware 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. Delaware High-Yield Opportunities Fund seeks to provide
investors with total return and, as a secondary objective, high current income.
Delaware Corporate Bond Fund seeks to provide investors with total return by
investing primarily in corporate bonds. Delaware Extended Duration Bond Fund
seeks to provide investors with total return by investing primarily in corporate
bonds.
Delaware 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.
Delaware American Government Bond 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.
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Delaware Cash Reserve Fund 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.
REIT Fund seeks to achieve maximum long-term total return with capital
appreciation as a secondary objective. It seeks to achieve its objectives by
investing in securities of companies primarily engaged in the real estate
industry.
Delaware Tax-Free USA Fund seeks high current income exempt from
federal income tax by investing in municipal bonds of geographically-diverse
issuers. Delaware 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. Delaware 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.
Delaware 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.
Delaware Tax-Free New Jersey Fund seeks a high level of current
interest income exempt from federal income tax and New Jersey state and local
taxes, consistent with preservation of capital. Delaware Tax-Free Ohio Fund
seeks a high level of current interest income exempt from federal income tax and
Ohio state and local taxes, consistent with preservation of capital. Delaware
Tax-Free Pennsylvania Fund seeks a high level of current interest income exempt
from federal income tax and Pennsylvania state and local taxes, consistent with
the preservation of capital.
Delaware Foundation Funds are "fund of funds" which invest in other
funds in the Delaware Investments family (referred to as "Underlying Funds").
Delaware Foundation Funds Income Portfolio seeks a combination of current income
and preservation of capital with capital appreciation by investing primarily in
a mix of fixed income and domestic equity securities, including fixed income and
domestic equity Underlying Funds. Delaware Foundation Funds Balanced Portfolio
seeks capital appreciation with current income as a secondary objective by
investing primarily in domestic equity and fixed income securities, including
domestic equity and fixed income Underlying Funds. Delaware Foundation Funds
Growth Portfolio seeks long term capital growth by investing primarily in equity
securities, including equity Underlying Funds, and, to a lesser extent, in fixed
income securities, including fixed-income Underlying Funds.
Delaware 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.
Delaware 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.
Delaware Global Equity Fund seeks to achieve long-term total return by investing
in global securities that provide the potential for capital appreciation and
income. Delaware Emerging Markets Fund seeks long-term capital appreciation by
investing primarily in equity securities of issuers located or operating in
emerging countries.
Delaware 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. Delaware Overseas Equity Fund seeks to maximize total return (capital
appreciation and income), principally through investments in an internationally
diversified portfolio of equity securities. Delaware 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.
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Delaware Group Premium Fund, Inc. offers various funds available
exclusively as funding vehicles for certain insurance company separate accounts.
Growth and 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. Delchester Series seeks as high a
current income as possible by investing in rated and unrated corporate bonds,
U.S. government securities and commercial paper. Capital Reserves Series seeks a
high stable level of current income while minimizing fluctuations in principal
by investing in a diversified portfolio of short- and intermediate-term
securities. Cash Reserve Series seeks the highest level of income consistent
with preservation of capital and liquidity through investments in short-term
money market instruments. DelCap Series seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. Delaware Balanced Series seeks a balance of
capital appreciation, income and preservation of capital. It uses a
dividend-oriented valuation strategy to select securities issued by established
companies that are believed to demonstrate potential for income and capital
growth. International Equity Series seeks long-term growth without undue risk to
principal by investing primarily in equity securities of foreign issuers that
provide the potential for capital appreciation and income. Small Cap Value
Series seeks capital appreciation by investing primarily in small-cap common
stocks whose market values appear low relative to their underlying value or
future earnings and growth potential. Emphasis will also be placed on securities
of companies that may be temporarily out of favor or whose value is not yet
recognized by the market. Trend Series seeks long-term capital appreciation by
investing primarily in small-cap common stocks and convertible securities of
emerging and other growth-oriented companies. These securities will have been
judged to be responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. Global Bond
Series seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. Strategic Income Series seeks
high current income and total return by using a multi-sector investment
approach, investing primarily in three sectors of the fixed-income securities
markets: high-yield, higher risk securities; investment grade fixed-income
securities; and foreign government and other foreign fixed-income securities.
Devon Series seeks current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on common stocks that
the investment manager believes have the potential for above-average dividend
increases over time. Emerging Markets Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of issuers located or
operating in emerging countries. Convertible Securities Series seeks a high
level of total return on its assets through a combination of capital
appreciation and current income by investing primarily in convertible
securities. Social Awareness Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series' "Social
Criteria" strategy. REIT Series seeks to achieve maximum long-term total return,
with capital appreciation as a secondary objective, by investing in securities
of companies primarily engaged in the real estate industry. Aggressive Growth
Series seeks long-term capital appreciation. The Series attempts to achieve its
investment objective by investing primarily in equity securities of companies
which the manager believes have the potential for high earnings growth.
Delaware U.S. Government Securities Fund seeks to provide a high level
of current income consistent with the prudent investment risk by investing in
U.S. Treasury bills, notes, bonds, and other obligations issued or
unconditionally guaranteed by the full faith and credit of the U.S. Treasury,
and repurchase agreements fully secured by such obligations.
Delaware Tax-Free Arizona Insured Fund seeks to provide a high level of
current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware Minnesota Insured
Fund seeks to provide a high level of current income exempt from federal income
tax and the Minnesota personal income tax, consistent with the preservation of
capital.
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Delaware Tax-Free Minnesota Intermediate Fund seeks to provide a high
level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.
Delaware Tax-Free California Insured Fund seeks to provide a high level
of current income exempt from federal income tax and the California personal
income tax, consistent with the preservation of capital. Delaware Tax-Free
Florida Insured Fund seeks to provide a high level of current income exempt from
federal income tax, consistent with the preservation of capital. The Fund will
seek to select investments that will enable its shares to be exempt from the
Florida intangible personal property tax. Delaware Tax-Free Florida Fund seeks
to provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital. The Fund will seek to select
investments that will enable its shares to be exempt from the Florida intangible
personal property tax. Delaware Tax-Free Kansas Fund seeks to provide a high
level of current income exempt from federal income tax, the Kansas personal
income tax and the Kansas intangible personal property tax, consistent with the
preservation of capital. Delaware Tax-Free Missouri Insured Fund seeks to
provide a high level of current income exempt from federal income tax and the
Missouri personal income tax, consistent with the preservation of capital.
Delaware Tax-Free New Mexico Fund seeks to provide a high level of current
income exempt from federal income tax and the New Mexico personal income tax,
consistent with the preservation of capital. Delaware Tax-Free Oregon Insured
Fund seeks to provide a high level of current income exempt from federal income
tax and the Oregon personal income tax, consistent with the preservation of
capital.
Delaware Tax-Free Arizona Fund seeks to provide a high level of current
income exempt from federal income tax and the Arizona personal income tax,
consistent with the preservation of capital. Delaware Tax-Free California Fund
seeks to provide a high level of current income exempt from federal income tax
and the California personal income tax, consistent with the preservation of
capital. Delaware Tax-Free Iowa Fund seeks to provide a high level of current
income exempt from federal income tax and the Iowa personal income tax,
consistent with the preservation of capital. Delaware Tax-Free Idaho Fund seeks
to provide a high level of current income exempt from federal income tax and the
Idaho personal income tax, consistent with the preservation of capital. Delaware
Minnesota High-Yield Municipal Bond Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax primarily through investment in medium and lower grade municipal
obligations. Delaware National High-Yield Municipal Fund seeks to provide a high
level of income exempt from federal income tax, primarily through investment in
medium and lower grade municipal obligations. Delaware Tax-Free New York Fund
seeks to provide a high level of current income exempt from federal income tax
and the personal income tax of the state of New York and the city of New York,
consistent with the preservation of capital. Delaware Tax-Free Wisconsin Fund
seeks to provide a high level of current income exempt from federal income tax
and the Wisconsin personal income tax, consistent with the preservation of
capital.
Delaware Tax-Free Colorado Fund seeks to provide a high level of
current income exempt from federal income tax and the Colorado personal income
tax, consistent with the preservation of capital.
Delaware Tax-Free Minnesota Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax, consistent with the preservation of capital. Delaware Tax-Free North Dakota
Fund seeks to provide a high level of current income exempt from federal income
tax and the North Dakota personal income tax, consistent with the preservation
of capital.
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Delaware Select Growth Fund seeks long-term capital appreciation, which
the Fund attempts to achieve by investing primarily in equity securities
believed to have the potential for high earnings growth. Although the Fund, in
seeking its objective, may receive current income from dividends and interest,
income is only an incidental consideration in the selection of the Fund's
investments. Delaware Growth Stock Fund has an objective of long-term capital
appreciation. The Fund seeks to achieve its objective from equity securities
diversified among individual companies and industries. Delaware Tax-Efficient
Equity Fund seeks to obtain for taxable investors a high total return on an
after-tax basis. The Fund will attempt to achieve this objective by seeking to
provide a high long-term after-tax total return through managing its portfolio
in a manner that will defer the realization of accrued capital gains and
minimize dividend income.
For more complete information about any of the funds in the Delaware
Investments family, including charges and expenses, you can obtain a prospectus
from the Distributor. Read it carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the information
contained in the Portfolio's prospectus(es).
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PART C
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Other Information
-----------------
Item 23. Exhibits
--------
(a) Agreement and Declaration of Trust.
(1) Agreement and Declaration of Trust (December 17,
1998) incorporated into this filing by reference
to Post-Effective Amendment No. 109 filed
October 29, 1999.
(2) Certificate of Trust (December 17, 1998)
incorporated into this filing by reference to
Post-Effective Amendment No. 109 filed October
29, 1999.
(b) By-Laws. By-Laws (December 17, 1998) incorporated into
this filing by reference to Post-Effective Amendment No.
109 filed October 29, 1999.
(c) Copies of All Instruments Defining the Rights of
Holders.
(1) Agreement and Declaration of Trust. Articles
III, V and VI of Agreement and Declaration of
Trust incorporated into this filing by reference
to Post-Effective Amendment No. 109 filed
October 29, 1999 as Exhibit (a)(1).
(2) By-Laws. Article II of By-Laws incorporated into
this filing by reference to Post-Effective
Amendment No. 109 filed October 29, 1999 as
Exhibit (b).
(d) Investment Management Agreements.
(1) Form of Investment Management Agreement
(December 1999) between Delaware Management
Company and the Registrant incorporated into
this filing by reference to Post-Effective
Amendment No. 109 filed October 29, 1999.
(e) (1) Distribution Agreements.
(i) Form of Distribution Agreement (December
1999) between Delaware Distributors,
L.P. and the Registrant on behalf of
Delaware Balanced Fund incorporated into
this filing by reference to
Post-Effective Amendment No. 103 filed
December 29, 1995.
(ii) Form of Distribution Agreement (December
1999) between Delaware Distributors,
L.P. and the Registrant on behalf of
Delaware Devon Fund incorporated into
this filing by reference to
Post-Effective Amendment No. 103 filed
December 29, 1995.
(iii) Form of Executed Amendment No. 1 to
Distribution Agreement (December 1999)
between Delaware Distributors, L.P. and
the Registrant on behalf of Delaware
Balanced Fund incorporated into this
filing by reference to Post-Effective
Amendment No. 103 filed December 29,
1995.
(iv) Form of Executed Amendment No. 1 to
Distribution Agreement (December 1999)
between Delaware Distributors, L.P. and
the Registrant on behalf of Devon Fund
incorporated into this filing by
reference to Post-Effective Amendment
No. 103 filed December 29, 1995.
<PAGE>
(2) Administration and Service Agreement. Form of
Administration and Service Agreement (as amended
November 1995) (Module) incorporated into this
filing by reference to Post-Effective Amendment
No. 102 filed November 22, 1995.
(3) Dealer's Agreement. Dealer's Agreement (as
amended November 1995) (Module) incorporated
into this filing by reference to Post-Effective
Amendment No. 102 filed November 22, 1995.
(4) Mutual Fund Agreement for the Delaware Group of
Funds (November 1995) (Module) incorporated into
this filing by reference to Post-Effective
Amendment No. 103 filed December 29, 1995.
(f) Inapplicable.
(g) Custodian Agreements.
(1) Form of Custodian Agreement (December 1999)
between The Chase Manhattan Bank and the
Registrant on behalf of Delaware Balanced Fund
and Delaware Devon Fund (Module) incorporated
into this filing by reference to Post-Effective
Amendment No. 104 filed December 24, 1996.
(i) Form of Amendment (December 1999) to
Custodian Agreement between The Chase
Manhattan Bank and the Registrant on behalf
of Delaware Balanced Fund and Delaware
Devon Fund incorporated into this filing by
reference to Post-Effective Amendment No.
105 filed December 23, 1997.
(2) Form of Securities Lending Agreement between The
Chase Manhattan Bank and the Registrant on
behalf of Delaware Balanced Fund and Delaware
Devon Fund incorporated into this filing by
reference to Post-Effective Amendment No. 104
filed December 24, 1996.
(h) Other Material Contracts.
(1) Form of Shareholders Services Agreement
(December 1999) between Delaware Service
Company, Inc. and the Registrant on behalf of
Delaware Balanced Fund incorporated into this
filing by reference to Post-Effective Amendment
No. 104 filed December 24, 1996.
(2) Form of Shareholders Services Agreement
(December 1999) between Delaware Service
Company, Inc. and the Registrant on behalf of
Delaware Devon Fund incorporated into this
filing by reference to Post-Effective Amendment
No. 104 filed December 24, 1996.
(3) Form of Delaware Group of Funds Fund Accounting
Agreement (August 19, 1996) between Delaware
Service Company, Inc. and the Registrant on
behalf of Delaware Balanced Fund and Delaware
Devon Fund incorporated into this filing by
reference to Post-Effective Amendment No. 104
filed December 24, 1996.
(i) Legal Opinion. Incorporated into this filing by
reference to Post-Effective Amendment No. 109 filed
October 29, 1999.
(j) Consent and Report of Independent Auditors. Attached as
Exhibit.
(k) Inapplicable.
(l) Inapplicable.
<PAGE>
(m) Plans under Rule 12b-1.
(1) Form of Plan under Rule 12b-1 (December 1999)
for Delaware Balanced Fund A incorporated into
this filing by reference to Post-Effective
Amendment No. 103 filed December 29, 1995.
(2) Form of Plan under Rule 12b-1 (December 1999)
for Delaware Balanced Fund B Class incorporated
into this filing by reference to Post-Effective
Amendment No. 103 filed December 29, 1995.
(3) Form of Plan under Rule 12b-1 (December 1999)
for Delaware Balanced Fund C Class incorporated
into this filing by reference to Post-Effective
Amendment No. 103 filed December 29, 1995.
(4) Form of Plan under Rule 12b-1 (December 1999)
for Delaware Devon Fund A Class incorporated
into this filing by reference to Post-Effective
Amendment No. 103 filed December 29, 1995.
(5) Form of Plan under Rule 12b-1 (December 1999)
for Delaware Devon Fund B Class incorporated
into this filing by reference to Post-Effective
Amendment No. 103 filed December 29, 1995.
(6) Form of Plan under Rule 12b-1 (December 1999)
for Delaware Devon Fund C Class incorporated
into this filing by reference to Post-Effective
Amendment No. 103 filed December 29, 1995.
(n) Plan under Rule 18f-3.
(1) Form of Plan under Rule 18f-3 (September 18, 1997)
incorporated into this filing by reference to
Post-Effective Amendment No. 105 filed December
23, 1997.
(o) Other: Trustees' Power of Attorney. Incorporated into
this filing by reference to Post-Effective Amendment No.
109 filed October 29, 1999.
Item 24. Persons Controlled by or under Common Control with Registrant.
None.
Item 25. Indemnification. Article VI of the By-Laws incorporated into
this filing by reference to Post-Effective Amendment No. 109
filed October 29, 1999 as Exhibit (b).
<PAGE>
Item 26. Business and Other Connections of Investment Adviser.
(a) Delaware Management Company (the "Manager"), a series of
Delaware Management Business Trust, serves as investment manager to the
Registrant and also serves as investment manager or sub-adviser to certain of
the other funds in the Delaware Investments family (Delaware Group Equity Funds
II, Delaware Group Equity Funds III, Delaware Group Equity Funds IV, Delaware
Group Equity Funds V, Delaware Group Government Fund, Delaware Group Income
Funds, Delaware Group Limited-Term Government Funds, Delaware Group Cash
Reserve, Delaware Group Tax-Free Fund, Delaware Group State Tax-Free Income
Trust, Delaware Group Tax-Free Money Fund, Delaware Group Premium Fund, Delaware
Group Global & International Funds, Delaware Pooled Trust, Delaware Group
Adviser Funds, Delaware Group Dividend and Income Fund, Delaware Group Global
Dividend and Income Fund, Delaware Group Foundation Funds, Voyageur Intermediate
Tax-Free Funds, Voyageur Tax-Free Funds, Voyageur Funds, Voyageur Insured Funds,
Voyageur Investment Trust, Voyageur Investment Trust II, Voyageur Mutual Funds,
Voyageur Mutual Funds II, Voyageur Mutual Funds III, Voyageur Arizona Municipal
Income Fund, Inc., Voyageur Colorado Insured Municipal Income Fund, Inc.,
Voyageur Florida Insured Municipal Income Fund, Inc., Voyageur Minnesota
Municipal Fund, Inc., Voyageur Minnesota Municipal Fund II, Inc., and Voyageur
Minnesota Municipal Fund III, Inc.). In addition, certain officers of the
Manager also serve as trustees of the other funds in the Delaware Investments
family, and certain officers are also officers of these other funds. A company
indirectly owned by the Manager's indirect parent company acts as principal
underwriter to the mutual funds in the Delaware Investments family (see Item 27
below) and another such company acts as the shareholder services, dividend
disbursing, accounting servicing and transfer agent for all of the mutual funds
in the Delaware Investments family.
<PAGE>
The following persons serving as directors or officers of the Manager
have held the following positions during the past two years:
<TABLE>
<CAPTION>
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Positions and Offices with Delaware Management Company and its affiliates and
Name and Principal Business Address* other Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
David K. Downes President of Delaware Management Company (a series of Delaware Management
Business Trust); Executive Vice President, Chief Operating Officer and Chief
Financial Officer of Delaware Management Holdings, Inc.; Executive Vice
President, Chief Operating Officer, Chief Financial Officer and Director of DMH
Corp.; Executive Vice President, Chief Operating Officer, Chief Financial Officer
and Director of Delvoy, Inc.; President and Director of Delaware Management
Company, Inc, Execcutive Vice President, Chief Operating Officer, Chief Financial
Officer and Trustee of Delaware Management Business Trust; Executive Vice
President, Chief Operating Officer and Chief Financial Officer of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Chairman,
President, Chief Executive Officer and Director of Delaware Service Company,
Inc.; President, Chief Executive Officer and Director of Delaware Capital
Management, Inc.; Chairman and Director of Retirement Financial Services, Inc.;
Chairman and Director of Delaware Management Trust Company; Executive Vice
President, Chief Operating Officer, Chief Financial Officer and Director of
Delaware Distributors, Inc.; Executive Vice President, Chief Operating Officer
and Chief Financial Officer of Delaware Distributors, L.P.; President, Chief
Operating Officer, Chief Financial Officer and Director of Delaware International
Holdings Ltd.; Director of Delaware International Advisers Ltd.; Executive Vice
President, Chief Operating Officer, Chief Financial Officer and Director of
Founders Holdings, Inc.; Executive Vice President, Chief Operating Officer and
Chief Financial Officer of Founders CBO Corporation; President, Chief Executive
Officer, Chief Operating Officer, Chief Financial Officer and Trustee/Director
of each fund in the Delaware Investments family.
Chief Executive Officer and Director of Forewarn, Inc. since
1993, 8 Clayton Place, Newtown Square, PA
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates and
Name and Principal Business Address* other Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Richard J. Flannery Executive Vice President and General Counsel of Delaware Management Company (a
series of Delaware Management Business Trust); Executive Vice President and
General Counsel of Delaware Management Holdings, Inc.; Executive Vice President,
General Counsel and Director of DMH Corp.; Executive Vice President, General
Counsel and Director of Delvoy, Inc.; Executive Vice President, General Counsel
and Director of Delaware Management Company, Inc.; Executive Vice President,
General Counsel and Trustee of Delaware Management Business Trust; Executive
Vice President and General Counsel of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Executive Vice President, General Counsel
and Director of Delaware Service Company, Inc.; Executive Vice President, General
Counsel and Director of Delaware Capital Management, Inc.; Executive Vice
President, General Counsel and Director of Retirement Financial Services, Inc.;
Executive Vice President, General Counsel and Director of Delaware Management
Trust Company; Executive Vice President, General Counsel and Director of Delaware
Distributors, Inc.; Executive Vice President and General Counsel of Delaware
Distributors, L.P.; Executive Vice President, General Counsel and Director of
Delaware International Holdings Ltd.; Director of Delaware International Advisers
Ltd.; Executive Vice President, General Counsel and Director of Founders
Holdings, Inc.; Executive Vice President and General Counsel of Founders CBO
Corporation; Executive Vice President and General Counsel of each fund in the
Delaware Investments family.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd., Elverton, PA;
Director and Member of Executive Committee of Stonewall Links, Inc. since 1991,
Bulltown Rd., Elverton, PA
- ------------------------------------------------------------------------------------------------------------------------------------
Richard G. Unruh Executive Vice President, Chief Investment Officer, DMC-Equity of Delaware
Management Company (a series of Delaware Management Business Trust); Executive
Vice President of Delaware Management Holdings, Inc.; Executive Vice President
and Trustee of Delaware Management Business Trust; Chief Executive Office, Chief
Investment Officer, DIA-Equity of Delaware Investment Advisers (a series of
Delaware Management Business Trust; Executive Vice President of Delaware Capital
Management, Inc.; Director of Delaware Investment Advisers Ltd.; Executive Vice
President, Chief Investment Officer, Equity of each fund in the Delaware
Investments family.
Board of Directors, Chairman of Finance Committee, Keystone Insurance Company
since 1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Chairman of
Finance Committee, AAA Mid Atlantic, Inc. since 1989, 2040 Market Street,
Philadelphia, PA; Board of Directors, Metron, Inc. since 1995, 11911 Freedom
Drive, Reston, VA
- ------------------------------------------------------------------------------------------------------------------------------------
H. Thomas McMeekin(1) Executive Vice President of Delaware Management Business Trust; Executive Vice
President/Chief Investment Officer DMC-Fixed Income of Delaware Management
Company (a series of Delaware Management Business Trust); Executive Vice
President of Delaware Capital Management, Inc.; Executive Vice President and
Director of Delaware Management Holdings, Inc.; Executive Vice President and
Chief Investment Officer, Fixed Income of each Fund in the Delaware Investment
family.
- -----------------------------------------------------------------------------------------------------------------------------------
William E. Dodge(2) Executive Vice President of Delaware Management Company (a series of Delaware
Management Trust Company); Executive Vice President of Delaware Management
Business Trust; President of Delaware Investment Advisers (a series of Delaware
Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates and
Name and Principal Business Address* other Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Douglas L. Anderson Senior Vice President/Operations of Delaware Management Company (a series of
Delaware Management Business Trust; Senior Vice President/Operations of Delaware
Service Company, Inc.; Senior Vice President/Operations of Retirement Financial
Services, Inc.; Senior Vice President/Operations of Delaware Management Trust
Company.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert J. DiBraccio Senior Vice President/Head of Equity Trading of Delaware Management Company (a
series of Delaware Management Business Trust); Senior Vice President/Head of
Equity Trading of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Senior Vice President/Head of Equity Trading of Delaware Capital
Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
John B. Fields Senior Vice President/Senior Portfolio Manager of Delaware Management Company
(a series of Delaware Management Business Trust); Trustee of Delaware Management
Business Trust; Senior Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Senior Vice
President/Senior Portfolio Manager of Delaware Capital Management, Inc.; Senior
Vice President/Senior Portfolio Manager of each fund in the Delaware Investments
family.
- -----------------------------------------------------------------------------------------------------------------------------------
Michael Bishof Senior Vice President/Investment Accounting of Delaware Management Company (a
series of Delaware Management Business Trust), Delaware Service Company, Inc. and
Delaware Capital Management, Inc. and Founders Holdings, Inc.; Senior Vice
President and Treasurer of the Registrant and each of the other investment
companies in the Delaware Investments family; Senior Vice President and
Treasurer/Investment Accounting of Delaware Distributors, L.P. and Delaware
Investment Advisers (a series of Delaware Management Business Trust); Senior Vice
President/Manager of Investment Accounting of Delaware International Holdings,
Inc.; Senior Vice President and Assistant Treasurer of Founders CBO Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
Susan L. Hanson Senior Vice President/Global Marketing and Client Services of Delaware Management
Company (a series of Delaware Management Business Trust); Senior Vice
President/Global Marketing and Client Services of Delaware Investment Advisers (a
series of Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph H. Hastings Senior Vice President/Treasurer/Corporate Controller of Delaware Management
Company (a series of Delaware Management Business Trust); Senior Vice
President/Treasurer/Corporate Controller of Delaware Management Holdings, Inc.;
Senior Vice President/Treasurer/Corporate Controller of DMH Corp; Senior Vice
President/Treasurer/Corporate Controller of Delvoy, Inc.; Senior Vice
President/Treasurer/Corporate Controller of Delaware Management Company, Inc.;
Senior Vice President/Treasurer/Corporate Controller of Delaware Management
Business Trust; Senior Vice President/Treasurer/Corporate Controller of Delaware
Service Company, Inc.; Senior Vice President/Treasurer/Corporate Controller of
Delaware Capital Management, Inc.; Chief Financial Officer of Retirement
Financial Services, Inc.; Executive Vice President/Treasurer/Chief Financial
Officer of Delaware Management Trust Company; Senior Vice President/Treasurer/
Corporate Controller of Delaware Distributors, L.P.; Senior Vice President/
Treasurer/Corporate Controller of Delaware International Holdings; Senior Vice
President/Treasurer/Corporate Controller of Founders Holdings, Inc.; Senior Vice
President/ Assistant Treasurer Founders CBO Corporation; Senior Vice President/
Corporate Controller of each fund in the Delaware Investments family
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates and
Name and Principal Business Address* other Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Joanne O. Hutcheson Senior Vice President/Human Resources of Delaware Management Company (a series
of Delaware Management Business Trust); Senior Vice President/Human Resources of
Delaware Management Holdings, Inc.; Senior Vice President/Human Resources of DMH
Corp.; Senior Vice President/Human Resources of Delvoy, Inc.; Senior Vice
President/Human Resources of Delaware Management Company, Inc.; Senior Vice
President/Human Resources of Delaware Management Business Trust; Senior Vice
President/Human Resources of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Senior Vice President/Human Resources of Delaware
Service Company, Inc.; Senior Vice President/Human Resources of Delaware
Capital Management, Inc.; Senior Vice President/Human Resources of Delaware
Retirement Financial Services, Inc.; Senior Vice President/Human Resources of
Delaware Management Trust Company; Senior Vice President/Human Resources of
Delaware Distributors, Inc.; Senior Vice President/Human Resources of Delaware
Distributors, L.P.; Senior Vice President/Human Resources of each fund in the
Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Richelle S. Maestro Senior Vice President, Deputy General Counsel and Secretary of Delaware
Management Company (a series of Delaware Management Business Trust); Senior Vice
President, Deputy General Counsel and Secretary of Delaware Management
Holdings, Inc.; Senior Vice President, Deputy General Counsel and Secretary
of DMH Corp.; Senior Vice President, Deputy General Counsel and Secretary of
Delaware Management Business Trust; Senior Vice President, Deputy General
Counsel and Secretary of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Senior Vice President, Deputy General Counsel and
Secretary of Retirement Financial Services, Inc.; Senior Vice President,
Deputy General Counsel and Secretary of Delaware Distributors, Inc.; Senior
Vice President, Deputy General Counsel and Assistant Secretary of Delaware
Distributors, L.P.; Senior Vice President, Secretary and Deputy General
Counsel of Delaware Management Trust Company; Senior Vice President,
Secretary and Deputy General Counsel of Delaware International Holdings Ltd.;
Senior Vice President, Secretary and Deputy General Counsel of Delvoy, Inc.;
Senior Vice President, Secretary and Deputy General Counsel of Delaware
Management Company, Inc.; Senior Vice President, Secretary and Deputy General
Counsel of Delaware Service Company, Inc.; Senior Vice President, Secretary
and Deputy General Counsel of Delaware Capital Management, Inc.; Secretary of
Founders CBO Corporation; Senior Vice President, Deputy General Counsel and
Secretary of Founders Holdings, Inc.; Senior Vice President, Deputy General
Counsel and Assistant Secretary of each fund in the Delaware Investments
family.
General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Lane,
Philadelphia, PA.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates and
Name and Principal Business Address* other Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Eric E. Miller Senior Vice President, Deputy General Counsel and Assistant Secretary of Delaware
Management Company (a series of Delaware Management Business Trust); Senior Vice
President, Deputy General Counsel and Assistant Secretary of Delaware Management
Holdings, Inc.; Senior Vice President, Deputy General Counsel and Assistant
Secretary of DMH Corp.; Senior Vice President, Deputy General Counsel and
Assistant Secretary of Delvoy, Inc.; Senior Vice President, Deputy General
Counsel and Assistant Secretary of Delaware Management Company, Inc.; Senior Vice
President, Deputy General Counsel and Assistant Secretary of Delaware Management
Business Trust; Senior Vice President, Deputy General Counsel and Assistant
Secretary of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Senior Vice President, Deputy General Counsel and Assistant
Secretary of Delaware Service Company, Inc.; Senior Vice President, Deputy
General Counsel and Assistant Secretary of Delaware Capital Management, Inc.;
Senior Vice President, Deputy General Counsel and Assistant Secretary of
Retirement Financial Services, Inc.; Senior Vice President, Deputy General
Counsel and Assistant Secretary of Delaware Distributors, Inc.; Senior Vice
President, Deputy General Counsel and Assistant Secretary of Delaware
Distributors, L.P.; Senior Vice President, Deputy General Counsel and Assistant
Secretary of Founders Holdings, Inc.; Senior Vice President, Deputy General
Counsel and Secretary of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
James L. Shields Senior Vice President, Chief Information Officer of Delaware Management Company
(a series of Delaware Management Business Trust); Senior Vice President, Chief
Information Officer of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Senior Vice President, Chief Information Officer of
Delaware Service Company, Inc.; Senior Vice President, Chief Information Officer
of Delaware Capital Management Company, Inc.; Senior Vice President, Chief
Information Officer of Retirement Financial Services, Inc.; Senior Vice
President, Chief Information Officer of Delaware Distributors, L.P.
- ------------------------------------------------------------------------------------------------------------------------------------
Gary T. Abrams Vice President/Equity Trading of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Equity Trading of Delaware
Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher S. Adams Vice President/Business Manager, Equity of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Business Manager, Equity
of Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
Robert L. Arnold Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager of Delaware Capital Management, Inc., Vice
President/Portfolio Manager of each fund in the Delaware Investments family.
- -----------------------------------------------------------------------------------------------------------------------------------
Marshall T. Bassett Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates and
Name and Principal Business Address* other Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Christopher S. Beck Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager
of Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of each fund in the Delaware Investments
family.
Trustee of New Castle County Pension Board since October 1992, Wilmington DE.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard E. Beister Vice President/Trading Operations of Delaware Management Company (a series of
Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley Vice President/Compliance Director of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Compliance Director of
Delaware Management Holdings, Inc.; Vice President/Compliance Director of DMH
Corp.; Vice President/Compliance Director of Delvoy, Inc.; Vice
President/Compliance Director of Delaware Management Company, Inc.; Vice
President/Compliance Director of Delaware Management Business Trust; Vice
President/Compliance Director of Delaware Investment Advisers (a series of
Delaware Management Business Trust);Vice President/Compliance Director of
Delaware Service Company, Inc.; Vice President/Compliance Director of Delaware
Capital Management, Inc.; Vice President/Compliance Director of Retirement
Financial Services, Inc.; Vice President/Compliance Director/Assistant Secretary
of Delaware Management Business Trust; Vice President/Compliance Director of
Delaware Distributors, Inc.; Vice President/Compliance Director of Delaware
Distributors, L.P.; Vice President/Compliance Director of each fund in the
Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
MaryEllen M. Carrozza Vice President/Client Services of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Client Services of Delaware
Investment Advisers (a series of Delaware Management Business Trust);Vice
President/Client Services of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen R. Cianci Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Mitchell L. Conery Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager
of Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Timothy G. Connors Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager
of Delaware Investment Advisers (a series of Delaware Management Business Trust).
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager
of Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of Delaware Capital Management, Inc.;
Vice President/Senior Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates and
Name and Principal Business Address* other Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
George E. Deming Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager
of Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
James P. Dokas Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/ Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael J. Dugan Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager
of Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Roger A. Early Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager
of Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Joel A. Ettinger Vice President/Taxation of Delaware Management Company (a series of Delaware
Management Business Trust);Vice President/Taxation of Delaware Management
Holdings, Inc.; Vice President/Taxation of DMH Corp.; Vice President/Taxation of
Delvoy, Inc.; Vice President/Taxation of Delaware Management Company, Inc.; Vice
President/Taxation of Delaware Management Business Trust; Vice President/Taxation
of Delaware Investment Advisers (a series of Delaware Management Delaware Service
Company, Inc.; Vice President/Taxation of Delaware Capital Management, Inc.; Vice
President/Taxation of Retirement Financial Services, Inc.; Vice
President/Taxation of Delaware Distributors, Inc.; Vice President/Taxation of
Delaware Distributors, L.P.; Vice President/Taxation of Founders Holdings, Inc.;
Vice President/Taxation of Founders CBO Corporation; Vice President/Taxation of
each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph Fiorilla Vice President/Performance Analyst of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Performance Analyst of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- -----------------------------------------------------------------------------------------------------------------------------------
Gerald S. Frey Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager
of Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
James A. Furgele Vice President/Investment Accounting of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Investment Accounting of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Investment Accounting of Delaware Service Company, Inc.; Vice
President/Investment Accounting of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates and
Name and Principal Business Address* other Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Stuart M. George Vice President/Equity Trading of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Equity Trading of Delaware
Investment Advisers (a series of Delaware Management Business Trust).
- ------------------------------------------------------------------------------------------------------------------------------------
Paul Grillo Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Brian T. Hannon Vice President of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
John A. Heffern Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Elizabeth H. Howell Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager
of Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey W. Hynoski Vice President/Analyst of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Analyst of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Analyst
of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Cynthia Isom Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Karina J. Ivstan Vice President/Strategic Planning of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Strategic Planning of
Delaware Management Holdings, Inc.; Vice President/Strategic Planning of Delaware
Management Business Trust; Vice President/Strategic Planning of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Strategic Planning of Delaware Service Company, Inc.; Vice President/
Strategic Planning of Delaware Capital Management, Inc.; Vice President/Strategic
Planning of Retirement Financial Services, Inc.; Vice President/Strategic
Planning of Delaware Management Trust Company; Vice President/Strategic of
Delaware Distributors, L.P.; Vice President/Strategic Planning of each fund in
the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Audrey E. Kohart Vice President/Assistant Controller/Corporate Accounting of Delaware Management
Company (a series of Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
Steven T. Lampe Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/ Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates and
Name and Principal Business Address* other Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Philip Y. Lin Vice President, Associate General Counsel and Assistant Secretary of Delaware
Management Company (a series of Delaware Management Business Trust); Vice
President, Associate General Counsel and Assistant Secretary of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President, Associate General Counsel and Assistant Secretary of Delaware Service
Company, Inc.; Vice President, Associate General Counsel and Assistant Secretary
of Delaware Capital Management, Inc.; Vice President, Associate General Counsel
and Assistant Secretary of Retirement Financial Services, Inc.; Vice President,
Associate General Counsel and Assistant Secretary of Delaware Management Trust
Company; Vice President, Associate General Counsel and Assistant Secretary of
Delaware Distributors, L.P.; Vice President, Associate General Counsel and
Assistant Secretary of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael D. Mabry Vice President, Associate General Counsel and Assistant Secretary of Delaware
Management Company (a series of Delaware Management Business Trust); Vice
President, Associate General Counsel and Assistant Secretary of Delaware
Investment Advisers (a series of Delaware Management Business Trust);Vice
President, Associate General Counsel and Assistant Secretary of Delaware Service
Company, Inc.; Vice President, Associate General Counsel and Assistant Secretary
of Delaware Capital Management, Inc.; Vice President, Associate General Counsel
and Assistant Secretary of Retirement Financial Services, Inc.; Vice President,
Associate General Counsel and Assistant Secretary of Delaware Distributors, L.P.;
Vice President, Associate General Counsel and Assistant Secretary of each fund in
the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager
of Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of Founders Holdings, Inc., President and
Director of Founders CBO Corporation; Vice President/Senior Portfolio Manager of
each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Andrew M. McCullagh, Jr. Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager
of Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Francis X. Morris Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager
of Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager
of Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of Founders Holdings, Inc., Treasurer,
Assistant Secretary and Director of Founders CBO Corporation; Vice
President/Senior Portfolio Manager of each fund in the Delaware Investment
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert A. Norton, Jr. Vice President/Research Analyst of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Research Analyst of Delaware
Investment Advisers (a series of Delaware Management Business Trust).
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates and
Name and Principal Business Address* other Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
David P. O'Connor Vice President, Associate General Counsel and Assistant Secretary of Delaware
Management Company (a series of Delaware Management Business Trust); Vice
President, Associate General Counsel and Assistant Secretary of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President, Associate General Counsel and Assistant Secretary of Delaware Service
Company, Inc.; Vice President, Associate General Counsel and Assistant Secretary
of Delaware Capital Management, Inc.; Vice President, Associate General Counsel
and Assistant Secretary of Retirement Financial Services, Inc.; Vice President,
Associate General Counsel and Assistant Secretary of Delaware Distributors, L.P.;
Vice President, Associate General Counsel and Assistant Secretary of each fund in
the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Portfolio Manager
of Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Senior Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard Salus Vice President/Assistant Controller of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Assistant Controller of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Vice President/Assistant Controller of Delaware Management Trust Company; Vice
President/Assistant Controller of Delaware International Holdings Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard D. Siedel Vice President/Assistant Controller/Manager Payroll of Delaware Management
Company (a series of Delaware Management Business Trust).
- ------------------------------------------------------------------------------------------------------------------------------------
Michael T. Taggart Vice President/Facilities and Administration Services of Delaware Management
Company (a series of Delaware Management Business Trust);Vice
President/Facilities and Administration Services of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Vice President/Facilities and
Administration Services of Delaware Service Company, Inc.; Vice
President/Facilities and Administration Services of Delaware Distributors, L.P.
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas J. Trotman Vice President/Senior Corporate Bond Analyst of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior Corporate
Bond Analyst of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Vice President/Portfolio Manager of each fund in the Delaware
Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Lori P. Wachs Vice President/Assistant Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust);Vice President/Assistant Portfolio
Manager of Delaware Investment Advisers (a series of Delaware Management Business
Trust);Vice President/Assistant Portfolio Manager of each fund in the Delaware
Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Business Address is 1818 Market Street, Philadelphia, PA 19103.
- --------------------------------------------------------------------------------
1 PRESIDENT AND DIRECTOR, Lincoln Investment Management, Inc. 1987 to present.
EXECUTIVE VICE PRESIDENT/CHIEF INVESTMENT OFFICER of Lincoln National
Corporation 1992 to present.
2 PRESIDENT, DIRECTOR OF MARKETING AND SENIOR PORTFOLIO MANAGER, Marvin & Palmer
Associates, Wilmington, DE 1996-1998.
- --------------------------------------------------------------------------------
<PAGE>
Item 27. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal underwriter for all
the mutual funds in the Delaware Investments family.
(b) Information with respect to each director, officer or partner of
principal underwriter:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Investment Advisers Limited Partner None
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Capital Management, Inc. Limited Partner None
- ------------------------------------------------------------------------------------------------------------------------------------
Bruce D. Barton President and Chief Executive Officer None
- ------------------------------------------------------------------------------------------------------------------------------------
David K. Downes Executive Vice President/Chief Operating President and Chief Executive
Officer/Chief Financial Officer Officer/Chief Financial Officer/Chief
Operating Officer and Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Richard J. Flannery Executive Vice President/General Counsel Executive Vice President/General
Counsel
- ------------------------------------------------------------------------------------------------------------------------------------
Diane M. Anderson Senior Vice President/Retirement Operations None
- ------------------------------------------------------------------------------------------------------------------------------------
Michael P. Bishof Senior Vice President/Treasurer/ Senior Vice President/Treasurer
Investment Accounting
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel J. Brooks III Senior Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Terrence P. Cunningham Senior Vice President/National Sales None
Director, Financial Institutions
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph H. Hastings Senior Vice President/Treasurer/ Senior Vice President/Corporate
Corporate Controller Controller
- ------------------------------------------------------------------------------------------------------------------------------------
Joanne O. Hutcheson Senior Vice President/Human Resources Senior Vice President/Human Resources
- ------------------------------------------------------------------------------------------------------------------------------------
Bradley L. Kolstoe Senior Vice President/Western Division None
Sales, IPI Channel
- ------------------------------------------------------------------------------------------------------------------------------------
Richelle S. Maestro Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Mac Macaulliffe Senior Vice President/Divisional Sales None
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
J. Chris Meyer Senior Vice President/Director, Product None
Management
- ------------------------------------------------------------------------------------------------------------------------------------
Eric E. Miller Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/Assistant Secretary Counsel/Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen C. Nell Senior Vice President/National Retirement None
Sales
- ------------------------------------------------------------------------------------------------------------------------------------
Henry W. Orvin Senior Vice President/Eastern Division Sales None
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher H. Price Senior Vice President/Channel Manager None
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas E. Sawyer Senior Vice President/Director, National None
Sales
- ------------------------------------------------------------------------------------------------------------------------------------
James L. Shields Senior Vice President/Chief Information None
Officer
- ------------------------------------------------------------------------------------------------------------------------------------
Richard P. Allen Vice President/Wholesaler, Midwest None
- ------------------------------------------------------------------------------------------------------------------------------------
David P. Anderson, Jr. Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey H. Arcy Vice President/Wholesaler, None
South East Region
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick A. Bearss Vice President/Wholesaler - Midwest None
- ------------------------------------------------------------------------------------------------------------------------------------
Gabriella Bercze Vice President/Wholesaler, Financial None
Institution
- ------------------------------------------------------------------------------------------------------------------------------------
Larry D. Bridwell Vice President/Financial Institutions None
Wholesaler
- ------------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley Vice President/Compliance Director Vice President/Compliance Director
- ------------------------------------------------------------------------------------------------------------------------------------
Terrance L. Bussard Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel H. Carlson Vice President/Marketing Services None
- ------------------------------------------------------------------------------------------------------------------------------------
Larry Carr Vice President/VA Sales Manager None
- ------------------------------------------------------------------------------------------------------------------------------------
William S. Carroll Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Matthew Coldren Vice President/National Accounts None
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick A Connelly Vice President/RIA Sales None
- ------------------------------------------------------------------------------------------------------------------------------------
Jessie V. Emery Vice President/Marketing Communications None
- ------------------------------------------------------------------------------------------------------------------------------------
Joel A. Ettinger Vice President/Taxation Vice President/Taxation
- ------------------------------------------------------------------------------------------------------------------------------------
Edward A. Foley Vice President/Marketing Communications None
- ------------------------------------------------------------------------------------------------------------------------------------
Susan T. Friestedt Vice President/Retirement Services None
- ------------------------------------------------------------------------------------------------------------------------------------
Douglas R. Glennon Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Darryl S. Grayson Vice President/Director, Internal Sales None
- ------------------------------------------------------------------------------------------------------------------------------------
Rhonda J. Guido Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Haimowitz Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Edward J. Hecker Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
John R. Herron Vice President/VA Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Steven N. Horton Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Dinah J. Huntoon Vice President/Product Manager, Equities None
- ------------------------------------------------------------------------------------------------------------------------------------
Karina J. Istvan Vice President/Strategic Planning Vice President/Strategic Planning
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher L. Johnston Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Michael J. Jordan Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Carolyn Kelly Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Richard M. Koerner Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Ellen M. Krott Vice President/Marketing None
- ------------------------------------------------------------------------------------------------------------------------------------
John Leboeuf Vice President/VA Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
SooHee Lee Vice President/Fixed Income & International None
Product Management
- ------------------------------------------------------------------------------------------------------------------------------------
Philip Y. Lin Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
John R. Logan Vice President/Wholesaler, Financial None
Institutions
- ------------------------------------------------------------------------------------------------------------------------------------
Michael D. Mabry Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Theodore T. Malone Vice President/IPI Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Debbie Marler Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Gregory J. McMillan Vice President/National Accounts None
- ------------------------------------------------------------------------------------------------------------------------------------
Nathan W. Medin Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Scott L. Metzger Vice President/Business Development None
- ------------------------------------------------------------------------------------------------------------------------------------
Jamie L. Meyer Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Roger J. Miller Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher W. Moore Vice President/VA Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Andrew F. Morris Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick L. Murphy Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Scott E. Naughton Vice President/IPI Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Julie Nusbaum Vice President/Wholesaler, Financial None
Institutions
- ------------------------------------------------------------------------------------------------------------------------------------
Julie A. Nye Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel J. O'Brien Vice President/Insurance Products None
- ------------------------------------------------------------------------------------------------------------------------------------
David P. O'Connor Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph T. Owczarek Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Otis S. Page Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Mary Ellen Pernice-Fadden Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Mark A. Pletts Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Erik R. Preus Vice President/Wrap Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Philip G. Rickards Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Laura E. Roman Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Robert A. Rosso Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Richard Salus Vice President/Assistant Controller None
- ------------------------------------------------------------------------------------------------------------------------------------
Linda D. Shulz Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Gordon E. Searles Vice President/Client Services None
- ------------------------------------------------------------------------------------------------------------------------------------
James R. Searles Vice President/VA Sales Manager None
- ------------------------------------------------------------------------------------------------------------------------------------
Catherine A. Seklecki Vice President/Retirement Sales None
- ------------------------------------------------------------------------------------------------------------------------------------
John C. Shalloe Vice President/Wrap Fee Wholesaler, None
Western Region
- ------------------------------------------------------------------------------------------------------------------------------------
Edward B. Sheridan Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Kimberly Spangler Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Robert E. Stansbury Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Stephanie R. Szabo Vice President/Retirement Marketing None
- ------------------------------------------------------------------------------------------------------------------------------------
Michael T. Taggart Vice President/Facilities and Administration None
Services
- ------------------------------------------------------------------------------------------------------------------------------------
Julia R. Vander-Els Vice President/Retirement Plan None
Communications
- ------------------------------------------------------------------------------------------------------------------------------------
Wayne W. Wagner Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
John A. Wells Vice President/Marketing Technology None
- ------------------------------------------------------------------------------------------------------------------------------------
Courtney S. West Vice President/Institutional Sales None
- ------------------------------------------------------------------------------------------------------------------------------------
Andrew J. Whitaker Vice President/Wholesaler, Financial None
Institutions
- ------------------------------------------------------------------------------------------------------------------------------------
Scott Whitehouse Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Theodore V. Wood Vice President/Technical Systems Officer None
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Inapplicable.
Item 28. Location of Accounts and Records.
All accounts and records are maintained in Philadelphia at 1818
Market Street, Philadelphia, PA 19103 or One Commerce Square,
Philadelphia, PA 19103.
Item 29. Management Services. None.
Item 30. Undertakings. Not Applicable.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia, Commonwealth of Pennsylvania on this
28th day of December, 1999.
DELAWARE GROUP EQUITY FUNDS I
By /s/ David K. Downes
-------------------
David K. Downes
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------------------- ----------------------------------------- ----------------------
<S> <C> <C>
/s/ David K. Downes * President/Chief Executive Officer/ December 28, 1999
- --------------------------------------- Chief Operating Officer/Chief Financial
David K. Downes Officer and Trustee(Principal Executive
Officer, Principal Financial Officer and
Principal Accounting Officer)
/s/ Wayne A. Stork * Trustee December 28, 1999
- ---------------------------------------
Wayne A. Stork
/s/Walter P. Babich * Trustee December 28, 1999
- ---------------------------------------
Walter P. Babich
/s/Anthony D. Knerr * Trustee December 28, 1999
- ---------------------------------------
Anthony D. Knerr
/s/Ann R. Leven * Trustee December 28, 1999
- ---------------------------------------
Ann R. Leven
/s/Thomas F. Madison * Trustee December 28, 1999
- ---------------------------------------
Thomas F. Madison
/s/Charles E. Peck * Trustee December 28, 1999
- ---------------------------------------
Charles E. Peck
/s/John H. Durham * Trustee December 28, 1999
- ---------------------------------------
John H. Durham
/s/Janet L. Yeomans * Trustee December 28, 1999
- ---------------------------------------
Janet L. Yeomans
*By /s/David K. Downes
David K. Downes
as Attorney-in-Fact for
each of the persons indicated
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit
EX-99.J Consent and Report of Independent Auditors
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 110 to the Registration Statement (Form N-1A) (No.
2-10765) of Delaware Group Equity Funds I, of our reports dated December 3,
1999, included in the 1999 Annual Reports to shareholders.
/s/ Ernst & Young LLP
------------------------------
Ernst &Young LLP
Philadelphia, Pennsylvania
December 27, 1999
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Equity Funds I, Inc. - Delaware Balanced Fund
We have audited the accompanying statement of net assets of Delaware Balanced
Fund (the "Fund") as of October 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1999, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Balanced Fund at October 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and its financial highlights for each of the periods
indicated therein, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
------------------------------
Ernst &Young LLP
Philadelphia, Pennsylvania
December 3, 1999
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Equity Funds I, Inc. - Delaware Devon Fund
We have audited the accompanying statement of net assets of Delaware Devon Fund
(the "Fund") as of October 31, 1999, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1999, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Devon Fund at October 31, 1999, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and its financial highlights for each of the periods
indicated therein, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
------------------------------
Ernst &Young LLP
Philadelphia, Pennsylvania
December 3, 1999
