The Delaware Group includes 20 different
funds with a wide range of investment
objectives. Stock funds, income funds,
tax-free funds, money market funds and
closed-end equity funds give investors the
ability to create a portfolio that fits their
personal financial goals. For more information,
shareholders of the Fund Classes should contact
their financial adviser or call the Delaware
Group at 800-523-4640, in Philadelphia
215-988-1333 and shareholders of the
Institutional Class should contact the
Delaware Group at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, Inc.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Chemical Bank
450 West 33rd Street
New York, NY 10001
<PAGE>
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TREND FUND
- -----------------------------------
A CLASS
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B CLASS
- -----------------------------------
INSTITUTIONAL CLASS
- -----------------------------------
CLASSES OF DELAWARE GROUP
- -----------------------------------
TREND FUND, INC.
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PART B
STATEMENT OF
ADDITIONAL INFORMATION
- -----------------------------------
SEPTEMBER 6, 1994
DELAWARE
GROUP
========
<PAGE>
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PART B--STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 6, 1994
- -------------------------------------------------------------------
DELAWARE GROUP
- -------------------------------------------------------------------
TREND FUND, INC.
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1818 MARKET STREET
PHILADELPHIA, PA 19103
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FOR MORE INFORMATION ABOUT THE TREND FUND
INSTITUTIONAL CLASS: 800-828-5052
FOR PROSPECTUS AND PERFORMANCE OF THE TREND FUND
A CLASS AND THE TREND FUND B CLASS:
NATIONWIDE 800-523-4640
PHILADELPHIA 988-1333
INFORMATION ON EXISTING ACCOUNTS OF THE TREND FUND
A CLASS AND THE TREND FUND B CLASS:
(SHAREHOLDERS ONLY)
NATIONWIDE 800-523-1918
PHILADELPHIA 988-1241
DEALER SERVICES:
(BROKER/DEALERS ONLY)
NATIONWIDE 800-362-7500
PHILADELPHIA 988-1050
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TABLE OF CONTENTS
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COVER PAGE 1
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INVESTMENT OBJECTIVE AND POLICIES 2
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PERFORMANCE INFORMATION 4
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TRADING PRACTICES AND BROKERAGE 6
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PURCHASING SHARES 7
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INVESTMENT PLANS 13
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DETERMINING OFFERING PRICE AND
NET ASSET VALUE 15
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REDEMPTION AND REPURCHASE 16
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DIVIDENDS AND REALIZED SECURITIES PROFITS
DISTRIBUTIONS 19
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TAXES 19
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INVESTMENT MANAGEMENT AGREEMENT 20
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OFFICERS AND DIRECTORS 21
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EXCHANGE PRIVILEGE 24
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GENERAL INFORMATION 26
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APPENDIX A--IRA INFORMATION 27
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APPENDIX B 31
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APPENDIX C 32
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FINANCIAL STATEMENTS 33
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<PAGE>
Delaware Group Trend Fund, Inc. (the "Fund") is a professionally-managed
mutual fund. The Fund offers three classes (individually, a "Class" and
collectively, the "Classes") of shares -- the Trend Fund A Class (the "Class A
Shares"), the Trend Fund B Class (the "Class B Shares") (Class A Shares and
Class B Shares together, referred to as "Fund Classes") and the Trend Fund
Institutional Class (the "Institutional Class"). Class B Shares and
Institutional Class shares may be purchased at a price equal to the next
determined net asset value per share. Class A Shares may be purchased at the
public offering price, which is equal to the next determined net asset value per
share, plus a front-end sales charge. The Class A Shares are subject to a
maximum front-end sales charge of 5.75% and annual 12b-1 Plan expenses. The
Class B Shares are subject to a contingent deferred sales charge ("CDSC") which
may be imposed on redemptions made within six years of purchase and 12b-1 Plan
expenses which are higher than those to which Class A Shares are subject and are
assessed against the Class B Shares for no longer than approximately eight years
after purchase. See AUTOMATIC CONVERSION OF CLASS B SHARES in the Fund Classes'
PROSPECTUS. All references to "shares" in this STATEMENT OF ADDITIONAL
INFORMATION ("PART B" of the registration statement) refer to all Classes of
shares of the Fund, except where noted.
This PART B supplements the information contained in the current PROSPECTUSES
for the Fund Classes and the Institutional Class dated September 6, 1994, as may
be amended from time to time. It should be read in conjunction with the
respective Class' PROSPECTUS. PART B is not itself a prospectus but is, in its
entirety, incorporated by reference into each Class' PROSPECTUS. A PROSPECTUS
relating to the Fund Classes and a PROSPECTUS relating to the Institutional
Class may be obtained by writing or calling your investment dealer or by
contacting the Fund's national distributor, Delaware Distributors, Inc. (the
"Distributor"), 1818 Market Street, Philadelphia, PA 19103.
1
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The objective of the Fund, which is a fundamental policy and cannot be
changed without shareholder approval, is capital appreciation. The strategy
is to invest primarily in the common stocks and securities convertible into
common stocks of emerging and other growth-oriented companies that, in the
judgment of Delaware Management Company, Inc. (the "Manager"), are responsive
to changes within the marketplace and have the fundamental characteristics to
support growth. Income will not be a significant investment factor except so
far as future dividend growth may affect market appraisal of a security.
Purchases and sales of portfolio securities will be based upon management's
judgment of economic and market trends in addition to fundamental investment
analysis. The Fund will seek to identify changing and dominant trends
affecting securities values which it believes will offer the opportunities
for growth of capital, such as trends in the overall economic environment
(including social, political, monetary and technological trends); trends
within a company and its industry reflected by, for example, improving
managerial skills, new product development and sales and earnings trends; and
trends in market prices of various types of categories of investments. Since
the production of income is not an objective of the Fund, any income earned
and paid to shareholders will likely be minimal. An investor should not
consider a purchase of Fund shares as equivalent to a complete investment
program.
Although the Fund will constantly strive to attain the objective of capital
appreciation, of course there can be no assurance that it will be attained. It
also should be borne in mind that investing in securities believed to have a
potential for capital appreciation may involve exposure to a greater risk than
securities which do not have growth characteristics, and that the shares of the
Fund will fluctuate in value. Investing for this objective, the Fund usually
will invest in common stocks or securities convertible into common stocks of
emerging and other growth-oriented companies, some of which may be of a
speculative nature and subject the Fund to an additional risk. However, from
time to time, the Fund may, in its judgment, depending upon prevailing
circumstances, and for defensive purposes without limit as to the proportion of
assets invested, hold varying proportions of cash, U.S. government securities,
nonconvertible securities and straight debt securities.
In investing for capital appreciation, the Fund may hold securities for any
period of time. See PORTFOLIO TURNOVER under TRADING PRACTICES AND BROKERAGE.
While the Fund is permitted to do so, it normally does not invest in
repurchase agreements, except to invest excess cash balances. A repurchase
agreement is a short-term investment by which the purchaser 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.
<PAGE>
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. The Fund will limit
its investments in repurchase agreements to those which the Manager under the
guidelines of the Board of Directors determines to present minimal credit
risks and which are of high quality. In addition, the Fund must have
collateral of at least 100% of the repurchase price, including the portion
representing the Fund's yield under such agreements which is monitored on a
daily basis.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the Investment Company Act
of 1940 to allow the Delaware Group funds jointly to invest cash balances.
The Fund may invest cash balances in a joint repurchase agreement in
accordance with the terms of the Order and subject generally to the conditions
described above.
While the Fund is permitted under certain circumstances to borrow money and
invest in investment company securities, it does not normally do so.
Investment securities will not normally be purchased while the Fund has an
outstanding borrowing.
The Fund may purchase privately placed securities which may be resold only
in privately negotiated transactions, in accordance with an exemption from
registration under applicable securities laws or after registration. The
registration process may involve delays which could result in the Fund
obtaining a less favorable price on resale. In addition, to the extent that
there is no established trading market for restricted securities, it will be
more difficult for the Fund to obtain precise valuations for such securities
in its portfolio. As a result, judgment may play a greater role in valuing
such securities than is normally the case.
Certain of the privately placed securities acquired by the Fund will be
eligible for resale pursuant to Rule 144A under the Securities Act of 1933
("Rule 144A Securities"). The Fund's Board of Directors has instructed the
Manager to consider the following factors in determining the liquidity of
Rule 144A Securities: (1) the frequency of trades and trading volume for the
security; (ii) whether at least three dealers are willing to purchase or sell
the security and the number of potential purchasers; (iii) whether
at least two dealers are making a market in the security; (iv) the nature of
the security and the nature of the marketplace trades (e.g., the time needed
to dispose of the security, the method of soliciting offers, and the
mechanics of transfer). Investing in Rule 144A Securities could have the
effect of increasing the level of the Fund's illiquidity to the extent that
qualified institutional buyers become, for a period of time, uninterested in
purchasing these securities.
Although it is not a matter of fundamental policy, the Fund may invest not
more than 5% of its assets in foreign securities. Foreign markets may be more
volatile than U.S. markets. Such investments involve sovereign risk in addition
to the normal risks associated with American securities. These risks include
political risks, foreign taxes and exchange controls and currency fluctuations.
2
<PAGE>
For example, foreign portfolio investments may fluctuate in value due to changes
in currency rates (i.e., the value of foreign investments would increase with a
fall in the value of the dollar, and decrease with a rise in the value of the
dollar) and control regulations apart from market fluctuations. The Fund may
also experience delays in foreign securities settlement.
PORTFOLIO LOAN TRANSACTIONS
The 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 the Manager that the staff of the Securities and
Exchange Commission permits portfolio lending by registered investment companies
if certain conditions are met. These conditions are as follows: 1) each
transaction must have 100% collateral in the form of cash, short-term U.S.
government securities, or irrevocable letters of credit payable by banks
acceptable to the Fund from the borrower; 2) this collateral must be valued
daily and should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the 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; 6) the voting rights on the lent securities may pass to the
borrower; however, if the directors of the Fund know that a material event will
occur affecting an investment loan, they must either terminate the loan in order
to vote the proxy or enter into an alternative arrangement with the borrower to
enable the directors to vote the proxy.
The major risk to which the Fund would be exposed on a loan transaction is
the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, under the supervision
of the Board of Directors, including the creditworthiness of the borrowing
broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
INVESTMENT RESTRICTIONS
The Fund has the following investment restrictions which may not be amended
without approval of a majority of the outstanding voting securities, which is
the lesser of a) 67% or more of the voting securities present in person or by
proxy at a meeting if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy; or b) more than 50% of the
outstanding voting securities. The percentage limitations contained in the
restrictions and policies set forth herein apply at the time of purchase of
securities.
1. Not to invest more than 5% of the value of its assets in securities of
any one company (except U.S. government bonds) or purchase more than 10% of
the voting or nonvoting securities of any one company.
<PAGE>
2. Not to acquire control of any company.
3. Not to purchase or retain securities of any company which has an
officer or director who is an officer or director of the Fund, or an officer,
director or partner of its investment manager if, to the knowledge of the
Fund, one or more of such persons own beneficially more than 1/2 of 1% of the
shares of the company, and in the aggregate more than 5% thereof.
4. Not to invest in securities of other investment companies except at
customary brokerage commissions rates or in connection with mergers,
consolidations or offers of exchange.
5. Not to purchase any security issued by any other investment company if
after such purchase it would:
(a) own more than 3% of the voting stock of such company, (b) own securities
of such company having a value in excess of 5% of the Fund's assets or (c)
own securities of investment companies having an aggregate value in excess
of 10% of the Fund's assets.
6. Not to make any investment in real estate unless necessary for office
space or the protection of investments already made. (This restriction does
not preclude the Fund's purchase of securities issued by real estate
investment trusts.) Any investment in real estate together with any
investment in illiquid assets cannot exceed 10% of the value of the Fund's
assets.
7. Not to sell short any security or property.
8. Not to deal in commodities.
9. Not to borrow money in excess of 10% of the value of its assets, and
then only as a temporary measure for extraordinary or emergency purposes. Any
borrowing will be done from a bank and to the extent that such borrowing
exceeds 5% of the value of the Fund's assets, asset coverage of at least 300%
is required. In the event that such asset coverage shall at any time fall
below 300%, the Fund shall, within three days thereafter (not including
Sunday and holidays) or such longer period as the Securities and Exchange
Commission may prescribe by rules and regulations, reduce the amount of its
borrowings to an extent that the asset coverage of such borrowings shall be
at least 300%. The Fund shall not issue senior securities as defined in the
Investment Company Act of 1940, except for notes to banks.
10. Not to make loans. However, the purchase of a portion of an issue of
publicly distributed bonds, debentures or other securities, whether or not
the purchase was made upon the original issuance of the securities, and the
entry into "repurchase agreements" are not to be considered the making of a
loan by the Fund and the 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.
11. 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.
12. Not to act as an underwriter of securities of other issuers.
13. No long or short positions on shares of the Fund may be taken by its
officers, directors or any of its affiliated persons. Such persons may buy
3
<PAGE>
shares of the Fund for investment purposes, however, as described under
PURCHASING SHARES.
14. Not to invest more than 25% of its assets in any one particular
industry.
Although it is not a matter of fundamental policy, the Fund has also made a
commitment that it will not invest in warrants valued at the lower of cost or
market exceeding 5% of the Fund's net assets. Included within that amount,
but not to exceed 2% of the Fund's net assets, may be warrants not listed on
the New York Stock Exchange or American Stock Exchange. In addition, although
not a fundamental investment restriction, the Fund currently does not invest
its assets in real estate limited partnerships or oil, gas and other mineral
leases.
PERFORMANCE INFORMATION
From time to time, the Fund may state each Class' total return in
advertisements and other types of literature. Any statements of total return
performance data for a Class will be accompanied by information on the
average annual compounded rate of return for that Class over, as relevant,
the most recent one-, five- and ten-year periods. The Fund may also advertise
aggregate and average total return information of each Class over additional
periods of time.
The average annual total rate of return for each Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used
for the actual computations:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order
of $1,000 from which the maximum
front-end sales charge with respect to
Class A Shares, if any, is deducted;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical
$1,000 purchase at the end of the period
after the deduction of the applicable
CDSC, if any, with respect to Class B
Shares.
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes the maximum front-end
sales charge, if any, is deducted from the initial $1,000 investment at the
time it is made with respect to Class A Shares and that all distributions
are reinvested at net asset value, and, with respect to the Class B Shares,
includes the CDSC that would be applicable upon complete redemption of such
shares.
The performance of the Class A Shares and the Institutional Class, as shown
below, is the average annual total return quotations for the one-, five- and
ten-year periods ended June 30, 1994, computed as described above. The
average annual total return for the Class A Shares reflects the maximum
front-end sales charges paid on the purchase of shares. Stock prices
<PAGE>
fluctuated during the periods covered and past results should not be considered
as representative of future performance. Pursuant to applicable regulation,
total return shown for the Institutional Class for the periods prior to the
commencement of operations of such Class is calculated by taking the performance
of the Class A Shares and adjusting it to reflect the elimination of all sales
charges. 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. Class B Shares of the Fund were not offered prior to
the date of this PART B.
AVERAGE ANNUAL TOTAL RETURN
CLASS A INSTITUTIONAL
SHARES* CLASS**
1 year ended 6/30/94 -5.18% 0.83%
5 years ended 6/30/94 12.52% 13.93%
10 years ended 6/30/94 14.43% 15.13%
*Class AShares began paying 12b-1 payments on June 1, 1992 and performance
prior to that date does not reflect such payments.
**Date of initial public offering was November 23, 1992.
From time to time, the Fund may also quote each Class' actual total return
performance, dividend results and other performance information in
advertising and other types of literature and may compare that information
to, or may separately illustrate similar information reported by the Standard
and Poor's 500 Stock Index and the Dow Jones Industrial Average and other
unmanaged indices.
The Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average
are industry-accepted unmanaged indices of generally-conservative securities
used for measuring general market performance. The total return performance
reported will reflect the reinvestment of all distributions on a quarterly
basis and market price fluctuations. The indices do not take into account any
sales charge or other fees. In seeking a particular investment objective, the
Fund's portfolio primarily includes common stocks considered by the Manager
to be more aggressive than those tracked by these indices.
Comparative information on the Consumer Price Index and the CDA Growth
Index may also be included. The Consumer Price Index, as prepared by the U.S.
Bureau of Labor Statistics, is the most commonly used measure of inflation.
It indicates the cost fluctuations of a representative group of consumer
goods. It does not represent a return from an investment. The CDA Growth
Index was developed and is maintained by CDA Technologies, Inc. The Index is
comprised of 230 separately-managed, growth-oriented equity mutual funds. It
reflects the reinvestment of any dividend and capital gains distributions
paid during a specified period.
Statistical and performance information and various indices compiled and
maintained by organizations such as the following may also be used in
preparing exhibits comparing certain industry trends and competitive mutual fund
performance to comparable Fund activity and performance and in illustrating
general financial planning principles. From time to time, certain mutual fund
4
<PAGE>
performance ranking information, calculated and provided by these organizations,
may also be used in the promotion of sales in the Fund. Any indices used are not
managed for any investment goal.
CDA TECHNOLOGIES, INC., LIPPER ANALYTICAL SERVICES, INC. and
MORNINGSTAR, INC. are performance evaluation services that maintain
statistical performance databases, as reported by a diverse universe of
independently-managed mutual funds.
IBBOTSON ASSOCIATES, INC. is a consulting firm that provides a variety
of historical data including total return, capital appreciation and income
on the stock market as well as other investment asset classes, and
inflation. With their permission, this information will be used primarily
for comparative purposes and to illustrate general financial planning
principles.
INTERACTIVE DATA CORPORATION is a statistical access service that
maintains a database of various international industry indicators, such as
historical and current price/earning information, individual equity and
fixed income price and return information.
COMPUSTAT INDUSTRIAL DATABASES, a service of Standard & Poor's, may
also be used in preparing performance and historical stock and bond market
exhibits. This firm maintains fundamental databases that provide
financial, statistical and market information covering more than 7,000
industrial and non-industrial companies.
SALOMON BROTHERS and LEHMAN BROTHERS are statistical research firms
that maintain databases of international market, bond market, corporate
and government-issued securities of various maturities. This information,
as well as unmanaged indices compiled and maintained by these firms, will
be used in preparing comparative illustrations.
The Fund may also state total return performance for each Class in the form
of an average annual return. This average annual return figure will be
computed by taking the sum of a class' annual returns, then dividing that
figure by the number of years in the overall period indicated.
The computation will reflect the impact of the maximum front-end or
contingent deferred sales charge, if any, paid on the illustrated investment
amount against the first year's return. From time to time, the Fund may quote
actual total return performance for each class in advertising and other types
of literature compared to indices or averages of alternative financial
products available to prospective investors. For example, the performance
comparisons may include the average return of various bank instruments, some
of which may carry certain return guarantees offered by leading banks and
thrifts as monitored by BANK RATE MONITOR, and those of generally-accepted
corporate bond and government security price indices of various durations
prepared by Lehman Brothers and Salomon Brothers, Inc. These indices are not
managed for any investment goal.
The following table is an example, for the purposes of illustration only,
of cumulative total return performance for the Class A Shares and the
<PAGE>
Institutional Class for the one-, three-, five- and ten-year periods ended
June 30, 1994. Class B Shares of the Fund were not offered prior to the date
of this PART B. For these purposes, the calculations assume the reinvestment
of any capital gains distributions and income dividends paid during the
indicated periods. Comparative information on the Standard & Poor's 500 Stock
Index, the Dow Jones Industrial Average and the Nasdaq Composite Index is
also included.
The performance of the Class A Shares and the Institutional Class, as shown
below, reflect maximum front-end sales charges, if any, paid on the purchase of
shares, as applicable, but not any income taxes payable by shareholders on the
reinvested distributions included in the calculations. The net asset value of a
Class fluctuates so shares, when redeemed, may be worth more or less than the
original investment, and a Class' results should not be considered as
representative of future performance.
CUMULATIVE TOTAL RETURN
STANDARD
CLASS A INSTITUTIONAL & POOR'S DOW JONES NASDAQ
SHARES* CLASS** 500 INDUSTRIAL COMPOSITE
1 year ended
6/30/94 -5.2% 0.8% 1.4% 6.0% 0.3%
3 years ended
6/30/94 65.9% 76.5% 30.6% 36.2% 48.3%
5 years ended
6/30/94 80.5% 92.0% 63.3% 74.9% 62.2%
10 years ended
6/30/94 285.0% 309.3% 307.8% 360.5% 194.6%
*Class A Shares began paying 12b-1 payments on June 1, 1992 and
performance prior to that date does not reflect such payments.
**Date of initial public offering was November 23, 1992. Pursuant to
applicable regulation, total return shown for the Institutional Class
for the periods prior to the commencement of operations of such Class is
calculated by taking the performance of the Class A Shares and adjusting
it to reflect the elimination of all sales charges. 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.
For additional performance information, see APPENDIX B.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Fund and other mutual funds in the
Delaware Group, will provide general information about investment
alternatives and scenarios that will allow investors to assess their personal
goals. This information will include general material about investing as well
as materials reinforcing various industry-accepted principles of prudent and
responsible personal financial planning. One typical way of addressing these
issues is to compare an individual's goals and the length of time the
individual has to attain these goals to his or her risk threshold. In
addition, the Distributor will provide information that discusses the
Manager's overriding investment philosophy and how that philosophy impacts
the Fund's, and other Delaware Group funds', investment disciplines employed
in meeting their objectives. The Distributor may also from time to time cite
general or specific information about the institutional clients of the
Manager, including the number of such clients serviced by the Manager.
5
<PAGE>
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Fund shares,
your investment is given yet another opportunity to grow. It's called the
Power of Compounding and the following chart illustrates just how powerful it
can be.
COMPOUNDED RETURNS
Results of various assumed fixed rates of return on a $10,000 investment
compounded monthly for 10 years:
9% Rate of Return 11% Rate of Return 13% Rate of Return
----------------- ------------------ ------------------
Dec. '85 $10,938 $11,157 $11,380
Dec. '86 11,964 12,448 12,951
Dec. '87 13,086 13,889 14,739
Dec. '88 14,314 15,496 16,773
Dec. '89 15,657 17,289 19,089
Dec. '90 17,126 19,289 21,723
Dec. '91 18,732 21,522 24,722
Dec. '92 20,489 24,012 28,134
Dec. '93 22,411 26,791 31,017
Dec. '94 24,514 29,891 36,437
These figures are calculated assuming a fixed constant investment return
and assume no fluctuation in the value of principal. These figures do not
reflect payment of applicable taxes, are not intended to be a projection of
investment results and do not reflect the actual performance results of any
of the classes.
TRADING PRACTICES AND
BROKERAGE
The Fund selects brokers or dealers to execute transactions for the purchase
or sale of portfolio securities on the basis of its judgment of their
professional capability to provide the service. The primary consideration is to
have brokers or dealers execute transactions at best price and execution. Best
price and execution refers to many factors, including the price paid or received
for a security, the commission charged, the promptness and reliability of
execution, the confidentiality and placement accorded the order and other
factors affecting the overall benefit obtained by the account on the
transaction. The Fund pays reasonably competitive brokerage commission rates
based upon the professional knowledge of its trading department as to rates paid
and charged for similar transactions throughout the securities industry. In
some instances, the Fund pays a minimal share transaction cost when the
transaction presents no difficulty. A number of trades are made on a net basis
where the Fund either buys the securities directly from the dealer or sells them
<PAGE>
to the dealer. In these instances, there is no direct commission charged but
there is a spread (the difference between the buy and sell price) which is the
equivalent of a commission.
During the fiscal years ended June 30, 1992, 1993 and 1994, the aggregate
dollar amounts of brokerage commissions paid by the Fund were $109,865,
$205,614 and $188,574, 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 June 30, 1994, portfolio transactions of the
Fund in the amount of $36,488,512, resulting in brokerage commissions of
$133,770, were directed to brokers for brokerage and research services
provided.
As provided in the Securities Exchange Act of 1934 and the Fund's
Investment Management Agreement, higher commissions are permitted to be paid
to broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services if such higher commissions
are deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, the Fund believes that the
commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services
and that such commissions are reasonable in relation to the value of the
brokerage and research services provided. In some instances, services may be
provided to the Manager which constitute in some part brokerage and research
services used by the Manager in connection with its investment
decision-making process and constitute in some part services used by the
Manager in connection with administrative or other functions not related to
its investment decision-making process. In such cases, the Manager will make
a good faith allocation of brokerage and research services and will pay out
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
6
<PAGE>
the Fund and to other funds in the Delaware Group. Subject to best price and
execution, commissions allocated to brokers providing such pricing services
may or may not be generated by the funds receiving the pricing service.
The Manager may place a combined order for two or more accounts or funds
engaged in the purchase or sale of the same security if, in its judgment,
joint execution is in the best interest of each participant and will result
in best price and execution. Transactions involving commingled orders are
allocated in a manner deemed equitable to each account or fund. When a
combined order is executed in a series of transactions at different prices,
each account participating in the order may be allocated an average price
obtained from the executing broker. It is believed that the ability of the
accounts to participate in volume transactions will generally be beneficial
to the accounts and funds. Although it is recognized that, in some cases, the
joint execution of orders could adversely affect the price or volume of the
security that a particular account or fund may obtain, it is the opinion of
the Manager and the Fund's Board of Directors that the advantages of combined
orders outweigh the possible disadvantages of separate transactions.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Fund may place orders with broker/dealers that have agreed to
defray certain Fund expenses such as custodian fees, and may, at the request
of the Distributor, give consideration to sales of shares of the Fund as a
factor in the selection of brokers and dealers to execute Fund portfolio
transactions.
PORTFOLIO TURNOVER
In investing for capital appreciation, the Fund may hold securities for any
period of time. It is anticipated that, given the Fund's investment
objective, its annual portfolio turnover rate will be higher than that of
many other investment companies. A turnover rate of 100% would occur, for
example, if all the investments in the Fund's portfolio at the beginning of
the year were replaced by the end of the year. The degree of portfolio
activity will affect brokerage costs of the Fund and may affect taxes payable
by the Fund's shareholders. Total brokerage costs generally increase with
higher portfolio turnover rates. To the extent the Fund realizes gains on
securities held for less than six months, such gains are taxable to the
shareholder or to the Fund at ordinary income tax rates. The turnover rate
also may be affected by cash requirements from redemptions and repurchases of
Fund shares.
The portfolio turnover rate of the 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, the Fund's portfolio turnover rates were
75% for 1993 and 67% for 1994.
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for the Fund's three
classes of shares--the Class A Shares, the Class B Shares and the Institutional
Class, and has agreed to use its best efforts to sell shares of the Fund. See
the PROSPECTUSES for information on how to invest. Shares of the Fund are
offered on a continuous basis, and may be purchased through authorized
investment dealers or directly by contacting the Fund or its agent. The minimum
for initial investments with respect to the Class A Shares is $250 and with
respect to the Class B Shares is $1,000. For any subsequent investment, the
investment minimum is $25 with respect to the Class A Shares and $100 with
respect to the Class B Shares. Class B Shares are also subject to a maximum
purchase limitation of $250,000. The Fund will therefore reject any order for
purchase of more than $250,000 of Class B Shares. (See INVESTMENT PLANS for
minimums applicable to each of the Fund's master Retirement Plans.) There are no
minimum purchase requirements for the Institutional Class, but certain
eligibility requirements must be satisfied. Selling dealers have the
responsibility of transmitting orders promptly. The Fund reserves the right to
reject any order for the purchase of its shares if in the opinion of management
such rejection is in the Fund's best interest.
Certificates representing shares purchased are not ordinarily issued unless
a shareholder submits a specific request. Certificates are not issued in the
case of the Class B Shares. However, purchases not involving the issuance of
certificates are confirmed to the investor and credited to the shareholder's
account on the books maintained by Delaware Service Company, Inc. (the
"Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that
is permitted to obtain a certificate may receive a certificate representing
shares purchased by sending a letter to the Transfer Agent requesting the
certificate. No charge is made for any certificate issued. Investors who hold
certificates representing any of their shares may only redeem those shares by
written request. The investor's certificate(s) must accompany such request.
The NASD has adopted amendments to its Rules of Fair Practice relating to
investment company sales charges. The Fund and the Distributor intend to
operate in compliance with these rules.
Class A Shares are purchased at the offering price which reflects a maximum
front-end sales charge of 5.75%; however, lower front-end sales charges apply
for larger purchases. See the following table. Class A Shares are also
subject to annual 12b-1 Plan expenses.
Class B Shares are purchased at net asset value and are subject to a CDSC of
(i) 4% if shares are redeemed within two years of purchase; (ii) 3% if shares
are redeemed in the third and fourth year of purchase; (iii) 2% if shares are
redeemed in the fifth year of purchase; and (iv) 1% if shares are redeemed in
the sixth year of purchase. Class B Shares are also subject to 12b-1 Plan
7
<PAGE>
expenses which are higher than those to which Class A Shares are subject and are
assessed against the Class B Shares for no longer than approximately eight years
after purchase. See AUTOMATIC CONVERSION OF CLASS B SHARES in the Fund Classes'
PROS PECTUS, and DETERMINING OFFERING PRICE AND NET ASSET VALUE and PLANS UNDER
RULE 12B-1 FOR THE FUND CLASSES in this PART B.
Institutional Class shares are purchased at the net asset value per share
without the imposition of a front-end or contingent deferred sales charge or
12b-1 Plan expenses. Institutional Class shares, Class A Shares and Class B
Shares represent a proportionate interest in the Fund's assets and will
receive a proportionate interest in the Fund's income, before application, as
to the Class A and Class B Shares, of any expenses under the Fund's 12b-1
Plans.
ALTERNATIVE PURCHASE ARRANGEMENTS
The alternative purchase arrangements of the Class A and Class B Shares permit
investors to choose the method of purchasing shares that is most beneficial
given the amount of their purchase, the length of time they expect to hold their
shares and other relevant circumstances. Investors should determine whether,
under their particular circumstances, it is more advantageous to purchase the
Class A Shares and incur a front-end sales charge and annual 12b-1 Plan expenses
of up to a maximum of .30% of the average daily net assets of the Class A Shares
or to purchase the Class B Shares and have the entire initial purchase price
invested in the Fund with the investment thereafter subject to a CDSC if shares
are redeemed within six years of purchase and annual 12b-1 Plan expenses of 1%
(.25% of which are service fees to be paid by the Fund to the Distributor,
dealers or others for providing personal service and/or maintaining shareholder
accounts) of the average daily net assets of the Class B Shares for no longer
than approximately eight years after purchase.
CLASS A SHARES
Purchases of $100,000 or more of the Class A Shares at the offering price
carry reduced front-end sales charges as shown in the accompanying table, and
may include a series of purchases over a 13-month period under a Letter of
Intention signed by a purchaser. See SPECIAL PURCHASE FEATURES--CLASS A SHARES
for more information on ways in which investors can avail themselves of
reduced front-end sales charges and other purchase features.
<PAGE>
Class A Shares
- ------------------------------------------------------------------------------
| Front-End Sales Charge | Dealer's
| as % of | Concession**
Amount of Purchase | Offering | Amount | as % of
| Price | Invested | Offering Price
- -------------------------------|--------------|------------|------------------
Less than $100,000 | 5.75% | 6.10% | 5.00%
$100,000 but under $250,000 | 4.75 | 4.99 | 4.00
$250,000 but under $500,000 | 3.50 | 3.63 | 3.00
$500,000 but under $1,000,000* | 3.00 | 3.09 | 2.60
*There is no front-end sales charge on purchases of $1 million or more
but, under certain limited circumstances, a 1% contingent deferred
sales charge may apply. The contingent deferred sales charge ("Limited
CDSC") that may be applicable to purchases of Class A Shares arises
only in the case of certain net asset value purchases which have triggered
the payment of a dealer's commission.
- ------------------------------------------------------------------------------
The Fund must be notified when a sale takes place which would qualify
for the reduced front-end sales charge on the basis of previous purchases and
current purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by the Fund. Such reduced
front-end sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which
the Distributor may reallow dealers up to the full front-end sales charge
shown above. Dealers who receive 90% or more of the sales charge may be
deemed to be underwriters under the Securities Act of 1933.
**Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- ------------------------------------------------------------------------------
Certain dealers who enter into an agreement to provide
extra training and information on Delaware Group products and services and to
increase sales of Delaware Group funds may receive an additional concession
of up to .15% of the offering price in connection with sales of Class A
Shares. Such dealers must meet certain requirements in terms of organization
and distribution capabilities and their ability to increase sales. The
Distributor should be contacted for further information on these requirements
as well as the basis and circumstances upon which the additional concession
will be paid. Participating dealers may be deemed to have additional
responsibilities under the securities laws.
DEALER'S COMMISSION--CLASS A SHARES
For initial purchases of Class A Shares of $1,000,000 or more made on or
after June 1, 1993, a dealer's commission may be paid by the Distributor to
financial advisers through whom such purchases are effected in accordance
with the following schedule:
8
<PAGE>
DEALER'S COMMISSION
-------------------
AMOUNT OF PURCHASE (as a percentage of
------------------ amount purchased)
Up to $2 million 1.00%
Next $1 million up to $3 million .75
Next $2 million up to $5 million .50
Amount over $5 million .25
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies (see REDEMPTION AND REPURCHASE) may be
aggregated with those of the Class A Shares of the Fund. Financial advisers
should contact the Distributor concerning the applicability and calculation
of the dealer's commission in the case of combined purchases. Financial
advisers also may be eligible for a dealer's commission in connection with
certain purchases made under a Letter of Intention or pursuant to an
investor's Right of Accumulation. The Distributor also should be consulted
concerning the availability of and program for these payments.
An exchange from other Delaware Group funds will not qualify for payment of
the dealer's commission, unless such exchange is from a Delaware Group fund
with assets as to which a dealer's commission or similar payment has not been
previously paid. The schedule and program for payment of the dealer's
commission are subject to change or termination at any time by the
Distributor in its discretion.
CLASS B SHARES
Class B Shares are purchased without the imposition of a front-end sales
charge at the time of purchase. Class B Shares redeemed within six years of
purchase may be subject to a CDSC at the rates set forth below, charged
as a percentage of the dollar amount subject thereto. The charge will be
assessed on an amount equal to the lesser of the net asset value at the time
of purchase of the shares being redeemed or the net asset value of the shares
at the time of redemption. Accordingly, no CDSC will be imposed on increases
in net asset value above the initial purchase price. In addition, no CDSC
will be assessed on redemption of shares received upon reinvestment of
dividends or capital gains. See the PROSPECTUS for the Fund Classes under
BUYING SHARES--CONTINGENT DEFERRED SALES CHARGE for a list of the instances in
which the CDSC is waived.
The following table sets forth the rates of the CDSC for the Class B Shares
of the Fund:
CONTINGENT DEFERRED
SALES CHARGE
(AS A PERCENTAGE OF
YEAR AFTER DOLLAR AMOUNT
PURCHASE MADE SUBJECT TO CHARGE)
--------------- --------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares of the Fund, the Class B Shares will
continue to be subject to annual 12b-1 Plan expenses of 1% of average daily
<PAGE>
net assets representing such shares. At the end of no longer than
approximately eight years after purchase, the investor's Class B Shares will
be automatically converted into Class A Shares of the Fund. See AUTOMATIC
CONVERSION OF CLASS B SHARES in the Fund Classes' PROSPECTUS. Such conversion
will constitute a tax-free exchange for federal income tax purposes. See TAXES
in the PROSPECTUS for the Fund Classes.
PLANS UNDER RULE 12B-1 FOR THE FUND CLASSES
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund
has adopted a separate plan for each of the Class A Shares and the Class B
Shares of the Fund (the "Plans"). The Plan relating to the Class A Shares
permits the Fund to pay for certain distribution, promotional and related
expenses involved in the marketing of only the Class A Shares. Similarly, the
Plan relating to the Class B Shares permits the Fund to pay for certain
distribution, promotional and related expenses involved in the marketing of
only the Class B Shares. The Plans do not apply to the Institutional Class of
shares. Such shares are not included in calculating the Plans' fees, and the
Plans are not used to assist in the distribution and marketing of the
Institutional Class shares. Shareholders of the Institutional Class may not
vote on matters affecting the Plans.
The Plans permit the Fund, pursuant to an Amended and Restated Distribution
Agreement, to pay out of the assets of the Class A Shares and Class B Shares
monthly fees to the Distributor for its services and expenses in distributing
and promoting sales of shares of such classes. These expenses include, among
other things, preparing and distributing advertisements, sales literature and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, and paying distribution and maintenance fees to
securities brokers and dealers who enter into agreements with the
Distributor. The 12b-1 Plan expenses relating to the Class B Shares are also
used to pay the Distributor for advancing the commission costs to dealers
with respect to the initial sale of such shares.
In addition, the Fund may make payments out of the assets of the Class A
Shares and the Class B Shares directly to other unaffiliated parties, such as
banks, who either aid in the distribution of shares of the Fund Classes or
provide services to such classes.
The maximum aggregate fee payable by the Fund under the Plans, and the
agreements relating to distribution, is on an annual basis (i) .30% of the
Class A Shares' average daily net assets for the year; and (ii) 1% (.25% of
which are service fees to be paid to the Distributor, dealers and others for
providing personal service and/or maintaining shareholder accounts) of the
Class B Shares' average daily net assets for the year. The Fund's Board of
Directors may reduce these amounts at any time.
Effective June 1, 1992, the Board of Directors has determined that the
annual fee, payable on a monthly basis, for the Class A Shares, under its
Plan, will be equal to the sum of: (i) the amount obtained by multiplying
.30% by the average daily net assets represented by shares of the Class A
9
<PAGE>
Shares that were acquired by shareholders on or after June 1, 1992, and (ii)
the amount obtained by multiplying .10% by the average daily net assets
represented by shares of the Class A Shares that were acquired before June 1,
1992. While this is the method for calculating the 12b-1 fees to be paid by
the Class A Shares, the fee is a Class expense so that all shareholders of
that Class, regardless of when they purchased their shares, will bear 12b-1
expenses at the same per share rate. As Class A Shares are sold on or after
June 1, 1992, the initial rate of at least .10% will increase over time.
Thus, as the proportion of Class A Shares purchased on or after June 1, 1992
to Class A Shares outstanding prior to June 1, 1992 increases, the expenses
attributable to payments under the Plan will also increase (but will not
exceed .30% of average daily net assets). While this describes the current
formula for calculating the fees which will be payable under the Plan, the
Plan permits the Fund to pay a full .30% on all Class A Shares assets at any
time.
All of the distribution expenses incurred by the Distributor and others,
such as broker/dealers, in excess of the amount paid on behalf of the Class A
and Class B Shares will be borne by such persons without any reimbursement
from such classes. Subject to seeking best price and execution, the Fund may,
from time to time, buy or sell portfolio securities from or to firms which
receive payments under the Plans.
From time to time, the Distributor may pay additional amounts from its own
resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans, the Amended and Restated Distribution Agreement and the form of
dealer's and services agreements relating thereto have all been approved by
the Board of Directors of the Fund, including a majority of the directors who
are not "interested persons" (as defined in the Investment Company Act of
1940) of the Fund and who have no direct or indirect financial interest in
the Plans or any related agreements, by vote cast in person at a meeting duly
called for the purpose of voting on the Plans and such Agreements.
Continuation of the Plans, the Amended and Restated Distribution Agreement
and the form of dealer's and services agreements must be approved annually by
the Board of Directors in the same manner as specified above.
Each year, the directors must determine whether continuation of the Plans is
in the best interest of shareholders of, respectively, the Class A Shares and
the Class B Shares and that there is a reasonable likelihood of the Plan
relating to a Fund Class providing a benefit to that Class. The Plans, the
Amended and Restated Distribution Agreement and the dealer's and services
agreements with any broker/dealers or others relating to a Fund Class may be
terminated at any time without penalty by a majority of those directors who are
not "interested persons" or by a majority vote of the outstanding voting
securities of the relevant Fund Class. Any amendment materially increasing the
percentage payable under the Plans must likewise be approved by a majority vote
of the outstanding voting securities of the relevant Fund Class, as well as by a
<PAGE>
majority vote of those directors who are not "interested persons." Also, any
other material amendment to the Plans must be approved by a majority vote of the
directors including a majority of the noninterested directors of the Fund having
no interest in the Plans. In addition, in order for the Plans to remain
effective, the selection and nomination of directors who are not "interested
persons" of the Fund must be effected by the directors who themselves are not
"interested persons" and who have no direct or indirect financial interest in
the Plans. Persons authorized to make payments under the Plans must provide
written reports at least quarterly to the Board of Directors for their review.
For the fiscal year ended June 30, 1994, payments from the Class A Shares
to the Distributor pursuant to its Plan amounted to $560,720. Class B Shares
of the Fund were not offered prior to the date of this PART B.
OTHER PAYMENTS TO DEALERS--CLASS A AND CLASS B SHARES
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional
payment of up to .25% of the dollar amount of such sales. The Distributor may
also provide additional promotional incentives or payments to dealers that
sell shares of the Delaware Group of funds. In some instances, these
incentives or payments may be offered only to certain dealers who maintain,
have sold or may sell certain amounts of shares.
In connection with the sale of Delaware Group fund shares, the Distributor
may, at its own expense, pay to participate in or reimburse dealers with whom
it has a selling agreement for expenses incurred in connection with seminars
and conferences sponsored by such dealers and may pay or allow additional
promotional incentives, which may include non-cash concessions, in the form
of sales contests to dealers who sell shares of the funds. Such seminars and
conferences and the terms of such sales contests must be preapproved by the
Distributor. Payment may be up to 100% of the expenses incurred or awards
made in connection with seminars, conferences or contests relating to the
promotion of fund shares. The Distributor may also pay a portion of the
expense of preapproved dealer advertisements promoting the sale of Delaware
Group fund shares.
SPECIAL PURCHASE FEATURES--CLASS A SHARES
BUYING AT NET ASSET VALUE
The Class A Shares may be purchased without a front-end sales charge under
the DIVIDEND REINVESTMENT PLAN and, under certain circumstances, the 12-MONTH
REINVESTMENT PRIVILEGE and the EXCHANGE PRIVILEGE.
Officers, directors and employees (including former officers and directors and
former employees who had been employed for at least ten years) of the Fund, any
other fund in the Delaware Group, the Manager, any affiliate, any fund or
affiliate that may in the future be created, legal counsel to the funds and
registered representatives and employees of broker/dealers who have entered
into Dealer's Agreements with the Distributor may purchase Class A Shares and
10
<PAGE>
any such class of shares of any of the funds in the Delaware Group, including
any fund that may be created, at the net asset value per share. Spouses,
parents, brothers, sisters and children (regardless of age) of such persons at
their direction, and any employee benefit plan established by any of the
foregoing funds, corporations, counsel or broker/dealers may also purchase
shares at net asset value. In addition, purchases of Class A Shares may be made
at net asset value by persons establishing rollover IRA accounts with assets
distributed from accounts advised by the Manager or its affiliates. Purchases of
Class A Shares may also be made by clients of registered representatives of an
authorized investment dealer at net asset value within six months of a change of
the registered representative's employment, if the purchase is funded by
proceeds from an investment where a front-end sales charge has been assessed and
the redemption of the investment did not result in the imposition of a
contingent deferred sales charge or other redemption charges. Moreover,
purchases may be effected at net asset value for the benefit of the clients of
brokers, dealers and registered investment advisers affiliated with a broker or
dealer, if such broker, dealer or investment adviser has entered into an
agreement with the Distributor providing specifically for the purchase of Class
A Shares in connection with special investment products, such as wrap accounts
or similar fee based programs. Such purchasers are required to sign a letter
stating that the purchase is for investment only and that the securities may not
be resold except to the issuer. Such purchasers may also be required to sign or
deliver such other documents as the Fund may reasonably require to establish
eligibility for purchase at net asset value. The Fund must be notified in
advance that the trade qualifies for purchase at net asset value.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from
such accounts will be made at net asset value. Loan repayments made to a
Delaware Group account in connection with loans originated from accounts
previously maintained by another investment firm will also be invested at net
asset value.
LETTER OF INTENTION
The reduced front-end sales charges described above with respect to the Class
A Shares are also applicable to the aggregate amount of purchases made by any
such purchaser previously enumerated within a 13-month period pursuant to a
written Letter of Intention provided by the Distributor and signed by the
purchaser, and not legally binding on the signer or the Fund, which provides for
the holding in escrow by the Transfer Agent, of 5% of the total amount of the
Class A Shares intended to be purchased until such purchase is completed within
the 13-month period. A Letter of Intention may be dated to include shares
purchased up to 90 days prior to the date the Letter is signed. The 13-month
period begins on the date of the earliest purchase. If the intended investment
is not completed, except as noted below, the purchaser will be asked to pay an
amount equal to the difference between the front-end sales charge on the Class A
<PAGE>
Shares purchased at the reduced rate and the front-end sales charge otherwise
applicable to the total shares purchased. If such payment is not made within 20
days following the expiration of the 13-month period, the Transfer Agent will
surrender an appropriate number of the escrowed shares for redemption in order
to realize the difference. Such purchasers may include the value (at offering
price at the level designated in their Letter of Intention) of all their shares
of the Fund and of any class of any of the other mutual funds in the Delaware
Group (except shares of any Delaware Group fund which do not carry a front-end
sales charge or contingent deferred sales charge, other than shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange from
shares which do) previously purchased and still held as of the date of their
Letter of Intention toward the completion of such Letter. For purposes of
satisfying an investor's obligation under a Letter of Intention, Class B Shares
of the Fund and the corresponding class of shares of other Delaware Group funds
which offer such shares may be aggregated with the Class A Shares of the Fund
and the corresponding class of shares of the other Delaware Group funds.
Employers offering a Delaware Group Retirement Plan may also complete a Letter
of Intention to obtain a reduced front-end sales charge on investments of the
Class A Shares made by the Plan. The aggregate investment level of the Letter of
Intention will be determined and accepted by the Transfer Agent at the point of
Plan establishment. The level and any reduction in front-end sales charge will
be based on actual Plan participation and the projected investments in Delaware
Group funds that are offered with a front-end sales charge or contingent
deferred sales charge for a 13-month period. The Transfer Agent reserves the
right to adjust the signed Letter of Intention based on this acceptance
criteria. The 13-month period will begin on the date this Letter of Intention is
accepted by the Transfer Agent. If actual investments exceed the anticipated
level and equal an amount that would qualify the Plan for further discounts, any
front-end sales charges will be automatically adjusted. In the event this Letter
of Intention is not fulfilled within the 13-month period, the Plan level will be
adjusted (without completing another Letter of Intention) and the employer will
be billed for the difference in front-end sales charges due, based on the Plan's
assets under management at that time. Employers may also include the value (at
offering price at the level designated in their Letter of Intention) of all
their shares intended for purchase that are offered with a front-end sales
charge or contingent deferred sales charge of any class. Class B Shares of the
Fund and other Delaware Group funds which offer a corresponding class of shares
may also be aggregated for this purpose.
COMBINED PURCHASES PRIVILEGE
In determining the availability of the reduced front-end sales charge
previously set forth with respect to the Class A Shares, purchasers may
combine the total amount of any combination of the Fund Classes of the Fund
11
<PAGE>
as well as any other class of any of the other Delaware Group funds (except
shares of any Delaware Group fund which do not carry a front-end sales charge
or contingent deferred sales charge, other than shares of Delaware Group
Premium Fund, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange
from shares which do).
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under the
age 21; or a trustee or other fiduciary of trust estates or fiduciary
accounts for the benefit of such family members (including certain employee
benefit programs).
RIGHT OF ACCUMULATION
In determining the availability of the reduced front-end sales charge with
respect to the Class A Shares, purchasers may also combine any subsequent
purchases of the Fund Classes of the Fund as well as any other class of any
of the other Delaware Group funds which offer such classes (except shares of
any Delaware Group fund which do not carry a front-end sales charge or
contingent deferred sales charge, other than shares of Delaware Group Premium
Fund, Inc. beneficially owned in connection with the ownership of variable
insurance products, unless they were acquired through an exchange from shares
which do). If, for example, any such purchaser has previously purchased and
still holds Class A Shares and/or shares of any other of the classes
described in the previous sentence with a value of $40,000 and subsequently
purchases $60,000 at offering price of additional shares of the Class A
Shares, the charge applicable to the $60,000 purchase would currently be
4.75%. For the purpose of this calculation, the shares presently held shall be
valued at the public offering price that would have been in effect were the
shares purchased simultaneously with the current purchase. Investors should
refer to the table of sales charges for Class A Shares to determine the
applicability of the Right of Accumulation to their particular circumstances.
12-MONTH REINVESTMENT PRIVILEGE
Shareholders of the Class A Shares (and of the Institutional Class holding
shares which were acquired through an exchange of one of the other mutual
funds in the Delaware Group offered with a front-end sales charge) who redeem
such shares of the Fund have one year from the date of redemption to reinvest
all or part of their redemption proceeds in Class A Shares of the Fund or in
Class A Shares of any of the other funds in the Delaware Group, subject to
applicable eligibility and minimum purchase requirements, in states where
their shares may be sold, at net asset value without the payment of a
front-end sales charge. This privilege does not extend to Class A Shares
where the redemption of the shares triggered the payment of a Limited CDSC.
Persons investing redemption proceeds from direct investments in mutual funds
in the Delaware Group offered without a front-end sales charge will be
required to pay the applicable sales charge when purchasing Class A Shares.
The reinvestment privilege does not extend to redemption of Class B Shares.
<PAGE>
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at
the net asset value next determined after receipt of remittance. A redemption
and reinvestment could have income tax consequences. It is recommended that a
tax adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will
be treated like all other initial purchases of a fund's shares. Consequently,
an investor should obtain and read carefully the prospectus for the fund in
which the investment is proposed to be made before investing or sending
money. The prospectus contains more complete information about the fund,
including charges and expenses.
Investors should consult their financial advisers or the Transfer Agent,
which also serves as the Fund's shareholder servicing agent, about the
applicability of the Limited CDSC (see CONTINGENT DEFERRED SALES CHARGE FOR
CERTAIN PURCHASES OF CLASS A SHARES MADE AT NET ASSET VALUE under REDEMPTION
AND EXCHANGE in the Fund Classes' PROSPECTUS) in connection with the features
described above.
GROUP INVESTMENT PLANS
Group Investment Plans which are not eligible to purchase shares of the
Institutional Class (e.g., SEP/IRA, SAR/SEP, Prototype Profit Sharing,
Pension and 401(k) Defined Contribution Plans with fewer than 1,000 eligible
employees) may also benefit from the reduced front-end sales charges for
investments in Class A Shares set forth in the table on page 8, based on
total plan assets. If a company has more than one plan investing in the
Delaware Group of funds, then the total amount invested in all plans would be
used in determining the applicable front-end sales charge reduction.
Employees participating in such Group Investment Plans may also combine the
investments made in their plan account when determining the applicable
front-end sales charge on purchases to non-retirement Delaware Group
investment accounts. For other Retirement Plans and special services, see
RETIREMENT PLANS FOR THE FUND CLASSES under INVESTMENT PLANS.
TREND FUND INSTITUTIONAL CLASS
The Institutional Class is available for purchase only by: (a) defined
contribution retirement plans with 1,000 or more eligible employees; (b)
tax-exempt employee benefit plans of the Manager or its affiliates and
securities dealer firms with a selling agreement with the Distributor; (c)
institutional advisory accounts of the Manager or its affiliates and those
having client relationships with Delaware Investment Advisers, a division of the
Manager, or its affiliates and their corporate sponsors, as well as subsidiaries
and related employee benefit plans; and (d) 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.
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<PAGE>
Shares of the Institutional Class are available for purchase at net asset
value, without the imposition of a front-end or contingent deferred sales
charge and are not subject to Rule 12b-1 expenses.
INVESTMENT PLANS
REINVESTMENT PLAN/OPEN ACCOUNT
Unless otherwise designated by shareholders in writing, dividends from net
investment income and distributions from realized securities profits, if any,
will be automatically reinvested in additional shares of the respective Fund
Class in which an investor has an account (based on the net asset value in
effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of the Institutional
Class are reinvested in the account of the holders of such shares (based on
the net asset value of the Fund in effect on the reinvestment date). A
confirmation of each dividend payment from net investment income and of
distributions from realized securities profits, if any, will be mailed to
shareholders in the first quarter of the fiscal year. A confirmation of any
distributions paid near the end of the calendar year to comply with certain
requirements of the Internal Revenue Code will normally be mailed to
shareholders at or promptly following the time that such payment is made.
Under the Reinvestment Plan/Open Account, shareholders may purchase and add
full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the Fund for
$25 or more with respect to the Class A Shares and $100 or more with respect
to the Class B Shares; no minimum applies to the Institutional Class. Such
purchases are made for the Class A Shares at the public offering price, and
for the Class B Shares and Institutional Class at the net asset value, at the
end of the day of receipt. A reinvestment plan may be terminated at any time.
This plan does not assure a profit nor protect against depreciation in a
declining market.
REINVESTMENT OF DIVIDENDS IN OTHER
DELAWARE GROUP FUNDS
Subject to applicable eligibility and minimum purchase requirements and the
limitations set forth below, shareholders of the Class A Shares and Class B
Shares may automatically reinvest dividends and/or distributions from the
Fund in any of the other mutual funds in the Delaware Group, including the
Fund, 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
<PAGE>
the fund in which the investment is proposed to be made before investing or
sending money. The prospectus contains more complete information about the fund,
including charges and expenses. See also DIVIDEND REINVESTMENT PLAN in the
PROSPECTUS for the Fund Classes.
Subject to the following limitations, dividends and/or distributions from
other funds in the Delaware Group may be invested in shares of the Fund,
provided an account has been established. Dividends from the Class A Shares
may not be directed to the Class B Shares of another fund in the Delaware
Group. Dividends from the Class B Shares may only be directed to the Class B
Shares of another fund in the Delaware Group that offers such class of
shares. See CLASS B FUNDS in the Fund Classes' PROSPECTUS for the funds in
the Delaware Group that are eligible for investment by holders of Fund
shares.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
INVESTING BY ELECTRONIC FUND TRANSFER
DIRECT DEPOSIT PURCHASE PLAN--Investors of the Class A Shares and Class B
Shares may arrange for the Fund to accept for investment, through an agent
bank, preauthorized government or private recurring payments. This method of
investment assures the timely credit to the shareholder's account of payments
such as social security, veterans' pension or compensation benefits, federal
salaries, Railroad Retirement benefits, private payroll checks, dividends,
and disability or pension fund benefits. It also eliminates lost, stolen and
delayed checks.
AUTOMATIC INVESTING PLAN--Shareholders of the Class A Shares and Class B
Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into the Class.
This type of investment will be handled in either of the two ways noted
below. (1) If the shareholder's bank is a member of the National Automated
Clearing House Association ("NACHA"), the amount of the investment will be
electronically deducted from his or her account by Electronic Fund Transfer
("EFT"). The shareholder's checking account will reflect a debit each month
at a specified date although no check is required to initiate the
transaction. (2) If the shareholder's bank is not a member of NACHA,
deductions will be made by preauthorized checks, known as Depository Transfer
Checks ("DTC"). Should the shareholder's bank become a member of NACHA in the
future, his or her investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
* * *
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<PAGE>
Investments under the Direct Deposit Purchase Plan and the Automatic
Investing Plan must be for $25 or more with respect to the Class A Shares and
$100 or more with respect to the Class B Shares. An investor wishing to take
advantage of either service must complete an authorization form. Either
service can be discontinued by the shareholder at any time without penalty by
giving written notice.
Payments to the 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, the Fund may liquidate sufficient shares from a
shareholder's account to reimburse the government or the private source. In
the event there are insufficient shares in the shareholder's account, the
shareholder is expected to reimburse the Fund.
DIRECT DEPOSIT PURCHASES BY MAIL
Shareholders may authorize a third party, such as a bank or employer, to
make investments directly to their Fund accounts. The Fund will accept these
investments, such as bank-by-phone, annuity payments and payroll allotments,
by mail directly from the third party. Investors should contact their
employers or financial institutions who in turn should contact the Fund for
proper instructions.
RETIREMENT PLANS FOR THE FUND CLASSES
An investment in the Fund may be suitable for tax-deferred Retirement
Plans. Among the Retirement Plans noted below, Class B Shares are available
for investment only by Individual Retirement Accounts, Simplified Employee
Pension Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred
Compensation Plans. The CDSC may be waived on certain redemptions of Class B
Shares. See the PROSPECTUS for the Fund Classes under BUYING
SHARES--CONTINGENT DEFERRED SALES CHARGE for a list of the instances in which
the CDSC is waived.
The minimum initial investment for each of the Retirement Plans described
below is $250; subsequent investments must be at least $25. Many of the
Retirement Plans described below are subject to one-time fees, as well as annual
maintenance fees. Prototype Profit Sharing and Money Purchase Pension Plans are
each subject to a one-time fee of $200 per plan, or $300 for paired plans. No
such fee is charged for owner-only plans if the Delaware Group does not provide
a Summary Plan Description. In addition, these plans are subject to an annual
maintenance fee of $30 per participant account. Each of the other Retirement
Plans described below (other than 401(k) Defined Contribution Plans) is subject
to an annual maintenance fee of $15 for each participant's account, even in
years when no contributions are made, regardless of the number of funds
selected. Annual maintenance fees for 401(k) Defined Contribution Plans are
based on the number of participants in the Plan and the services selected by the
employer. Fees are quoted upon request. Annual maintenance fees may be shared by
<PAGE>
Delaware Management Trust Company, the Transfer Agent, other affiliates of the
Manager and others that provide services to such Plans. Fees are subject to
change.
Certain shareholder investment services available to non-retirement plan
shareholders may not be available to Retirement Plan shareholders. Certain
Retirement Plans may qualify to purchase shares of the Institutional Class.
See TREND FUND INSTITUTIONAL CLASS above. For additional information on any
of the Plans and Delaware's retirement services, call the Shareholder Service
Center telephone number.
With respect to the annual maintenance fees per account referred to above,
"account" shall mean any account or group of accounts within a Plan type
identified by a common tax identification number between or among them.
Shareholders are responsible for notifying the Fund when more than one
account is maintained under a single tax identification number.
IT IS ADVISABLE FOR AN INVESTOR CONSIDERING ANY ONE OF THE RETIREMENT PLANS
DESCRIBED BELOW TO CONSULT WITH AN ATTORNEY, ACCOUNTANT OR A QUALIFIED
RETIREMENT PLAN CONSULTANT. FOR FURTHER DETAILS, INCLUDING APPLICATIONS FOR ANY
OF THESE PLANS, CONTACT YOUR INVESTMENT DEALER OR THE DISTRIBUTOR.
Taxable distributions from the Retirement Plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the special
application forms required for the Plans described below.
PROTOTYPE PROFIT SHARING OR MONEY PURCHASE PENSION PLANS
Prototype Plans are available for self-employed individuals, partnerships
and corporations which replace the former Keogh and corporate retirement
plans. These Plans contain profit sharing or money purchase pension plan
provisions. Contributions may be invested only in Class A Shares.
INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
A document is available for an individual who wants to establish an
INDIVIDUAL RETIREMENT ACCOUNT ("IRA") by making contributions which may be
tax-deductible, even if the individual is already participating in an
employer-sponsored retirement plan. Even if contributions are not deductible
for tax purposes, as indicated below, earnings will be tax-deferred. In
addition, an individual may make contributions on behalf of a spouse who is
not employed. Investments in each of the Fund Classes are permissible.
The Tax Reform Act of 1986 (the "Act") restructured, and in some cases
eliminated, the tax deductibility of IRA contributions. Under the Act, the full
deduction for IRAs ($2,000 for each working spouse and $2,250 for one-income
couples) was retained for all taxpayers who are not covered by an
employer-sponsored retirement plan. Even if a taxpayer (or his or her spouse) is
covered by an employer-sponsored retirement plan, the full deduction is still
available if the taxpayer's adjusted gross income is below $25,000 ($40,000 for
taxpayers filing joint returns). A partial deduction is allowed for married
couples with incomes between $40,000 and $50,000, and for single individuals
14
<PAGE>
with incomes between $25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross income before IRA
deductions exceeds $50,000 ($35,000 for singles) and who are active participants
in an employer-sponsored retirement plan. Taxpayers who were not allowed
deductions on IRA contributions still can make nondeductible IRA contributions
of as much as $2,000 for each working spouse ($2,250 for one-income couples),
and defer taxes on interest or other earnings from the IRAs.
A company or association may establish a Group IRA for employees or members
who want to purchase shares of the Fund. Purchases of $1 million or more of
the Class A Shares qualify for purchase at net asset value but may, under
certain circumstances, be subject to a Limited CDSC. See PURCHASING SHARES
concerning reduced front-end sales charges applicable to Class A Shares.
Investments generally must be held in the IRA until age 59 1/2 in order to
avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. See CLASS B SHARES under ALTERNATIVE PURCHASE ARRANGEMENTS
concerning the applicability of a CDSC upon redemption.
See APPENDIX A for additional IRA information.
SIMPLIFIED EMPLOYEE PENSION PLAN ("SEP/IRA")
A SEP/IRA may be established on a group basis by an employer who wishes to
sponsor a tax-sheltered retirement program by making IRA contributions on
behalf of all eligible employees. Each of the Fund Classes is available for
investment by a SEP/IRA.
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLAN ("SAR/SEP")
Employers with 25 or fewer eligible employees can establish this plan which
permits employer contributions and salary deferral contributions in Class A
Shares only.
<PAGE>
PROTOTYPE 401(K) DEFINED CONTRIBUTION PLAN
Section 401(k) of the Internal Revenue Code of 1986 (the "Code") permits
employers to establish qualified plans based on salary deferral
contributions. Plan documents are available to enable employers to establish
a plan. An employer may also elect to make profit sharing contributions
and/or matching contributions with investments in only Class A Shares or
certain other funds in the Delaware Group. Purchases under the Plan may be
combined for purposes of computing the reduced front-end sales charge
applicable to Class A Shares as set forth in the table on page 8.
DEFERRED COMPENSATION PLAN FOR PUBLIC SCHOOLS AND NON-PROFIT ORGANIZATIONS
("403(B)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial
account to fund deferred compensation arrangements for their employees. A
custodial account agreement is available for those employers who wish to
purchase either of the Fund Classes in conjunction with such an arrangement.
Applicable front-end sales charges with respect to Class A Shares for such
purchases are set forth in the table on page 8.
DEFERRED COMPENSATION PLAN FOR STATE AND LOCAL GOVERNMENT EMPLOYEES ("457")
Section 457 of the Code permits state and local governments, their agencies
and certain other entities to establish a deferred compensation plan for
their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of either of the Fund Classes. Although
investors may use their own plan, there is available a Delaware Group 457
Deferred Compensation Plan. Interested investors should contact the
Distributor or their investment dealers to obtain further information.
Applicable front-end sales charges for such purchases of Class A Shares are
set forth in the table on page 8.
DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering price
next calculated by the Fund after receipt of the order by the Fund or its
agent. Orders for purchases of Class B Shares and the Institutional Class are
effected at the net asset value next calculated after receipt of the order by
the Fund or its agent. Selling dealers have the responsibility of
transmitting orders promptly.
The offering price for the Class A Shares consists of the net asset value
per share plus any applicable 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 such
15
<PAGE>
exchange is open. The New York Stock Exchange is scheduled to be open Monday
through Friday throughout the year except for New Year's Day, Washington's
Birthday, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. When the New York Stock Exchange is closed, the
Fund will generally be closed, pricing calculations will not be made and
purchase and redemption orders will not be processed. An example showing how
to calculate the offering price per share of the Class A Shares is included
in the Fund's financial statements which are incorporated by reference into
this PART B.
The Fund's net asset value per share is computed by adding the value of all
the securities and other assets in the portfolio, deducting any liabilities
and dividing by the number of shares outstanding. Expenses and fees are
accrued daily. In determining the Fund's total net assets, portfolio
securities primarily listed or traded on a national securities exchange,
except for bonds, are valued at the last sale price on that exchange.
Securities not traded on a particular day, over-the-counter securities and
government and agency securities are valued at the mean value between bid and
asked prices. Money market instruments having a maturity of less than 60 days
are valued at amortized cost. Debt securities (other than short-term
obligations) are valued on the basis of valuations provided by a pricing
service when such prices are believed to reflect the fair value of such
securities. Use of a pricing service has been approved by the Board of
Directors. Prices provided by a pricing service take into account appropriate
factors such as institutional trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics and
other market data. Subject to the foregoing, securities for which market
quotations are not readily available and other assets are valued at fair
value as determined in good faith and in a method approved by the Board of
Directors.
Each Class will bear, pro-rata, all of the common expenses of the Fund. The
net asset values of all outstanding shares of each Class of the Fund will be
computed on a pro-rata basis for each outstanding share based on the
proportionate participation in the Fund represented by the value of shares of
that Class. All income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share of a Class, based on each
Class' percentage in the Fund represented by the value of shares of such
Classes, except that the Institutional Class will not incur any of the
expenses under the Fund's 12b-1 Plans and shares of the Fund Classes alone
will bear the 12b-1 Plan fees payable under their respective Plans. Due to
the specific distribution expenses and other costs that will be allocable to
each Class, the net asset value of and dividends paid to each Class of the
Fund will vary.
<PAGE>
REDEMPTION AND
REPURCHASE
Any shareholder may require the Fund to redeem shares by sending a WRITTEN
REQUEST, signed by the record owner or owners exactly as the shares are
registered, to the Fund, 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. The Fund does not issue
certificates for Class A Shares or Institutional Class shares, unless a
shareholder specifically requests them. The Fund does not issue certificates
for Class B Shares. If stock certificates have been issued for shares being
redeemed, they must accompany the written request. For redemptions of $50,000
or less paid to the shareholder at the address of record, the Fund requires a
request signed by all owners of the shares or the investment dealer of
record, but does not require signature guarantees. When the redemption is for
more than $50,000, or if payment is made to someone else or to another
address, signatures of all record owners are required and a signature
guarantee may be required. Each signature guarantee must be supplied by an
eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may request further documentation from
corporations, retirement plans, executors, administrators, trustees or
guardians.
In addition to redemption of shares by the Fund, the Distributor, acting as
agent of the Fund, 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 Fund
or its agent, less any applicable contingent deferred sales charge. This is
computed and effective at the time the offering price and net asset value are
determined. See DETERMINING OFFERING PRICE AND NET ASSET VALUE. The Fund and
the Distributor end their business day at 5 p.m., Eastern time. This offer is
discretionary and may be completely withdrawn without further notice by the
Distributor.
Orders for the repurchase of 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 (less any applicable contingent
deferred sales charge), if the repurchase order was received by the
broker/dealer from the shareholder prior to the time the offering price and
net asset value are determined on such day. The selling dealer has the
responsibility of transmitting orders to the Distributor promptly. Such
repurchase is then settled as an ordinary transaction with the broker/dealer
(who may make a charge to the shareholder for this service) delivering the
shares repurchased.
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<PAGE>
Certain redemptions of Class A Shares purchased at net asset value may result
in the imposition of a Limited CDSC. See CONTINGENT DEFERRED SALES CHARGE FOR
CERTAIN PURCHASES OF CLASS A SHARES MADE AT NET ASSET VALUE under REDEMPTION AND
EXCHANGE in the PROSPECTUS for the Fund Classes. The Class B Shares are subject
to a CDSC of (i) 4% if shares are redeemed within two years of purchase; (ii) 3%
if shares are redeemed in the third and fourth year of purchase; (iii) 2% if
shares are redeemed in the fifth year of purchase; and (iv) 1% if shares are
redeemed in the sixth year of purchase. See CONTINGENT DEFERRED SALES CHARGE
under BUYING SHARES in the PROSPECTUS for the Fund Classes. Except for such
contingent deferred sales charges and, with respect to the expedited payment by
wire described below, for which there is currently a $7.50 bank wiring cost,
neither the Fund nor the Distributor charges a fee for redemptions or
repurchases, but such fees could be charged at any time in the future.
Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption
request in good order.
If a shareholder who recently purchased shares by check seeks to redeem all
or a portion of those shares in a written request, the Fund will honor the
redemption request but will not mail the proceeds until it is reasonably
satisfied of the collection of the investment check. This potential delay can
be avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason,
the Fund will automatically redeem from the shareholder's account the shares
purchased by the check plus any dividends earned thereon. Shareholders may
be responsible for any losses to the Fund or to the Distributor.
In case of a suspension of the determination of the net asset value because
the New York Stock Exchange is closed for other than weekends or holidays, or
trading thereon is restricted or an emergency exists as a result of which
disposal by the Fund of securities owned by it is not reasonably practical,
or it is not reasonably practical for the Fund fairly to value its assets, or
in the event that the Securities and Exchange Commission has provided for
such suspension for the protection of shareholders, the 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 in either cash or
kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in DETERMINING OFFERING
PRICE AND NET ASSET VALUE. Subsequent sale by an investor receiving a
distribution in kind could result in the payment of brokerage commissions.
However, the Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act of 1940 pursuant to which the Fund is obligated to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the net
asset value of the Fund during any 90-day period for any one shareholder.
<PAGE>
The value of the Fund's investments is subject to changing market prices.
Thus, a shareholder reselling shares to the Fund may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
SMALL ACCOUNTS
Due to the relatively higher costs of maintaining small accounts, the Fund
reserves the right to redeem shares in any of its accounts at the
then-current net asset value if the total investment in the Fund has a value
of less than $250 as a result of redemptions. As a consequence, an investor
who makes only the minimum investment in a Class will be subject to
involuntary redemption if any portion of the investment is redeemed. Before
the Fund redeems such shares and sends the proceeds to the shareholder, the
shareholder will be notified in writing that the value of the shares in the
account is less than $250 and will be allowed 60 days from that date of
notice to make an additional investment to meet the required minimum of $250.
Any redemption in an inactive account established with a minimum investment
may trigger mandatory redemption. No contingent deferred sales charge will
apply to the redemptions described in this paragraph of the Class A and the
Class B Shares.
EXPEDITED TELEPHONE REDEMPTIONS
The Fund has available certain redemption privileges, as described below.
The Fund reserves the right to suspend or terminate the expedited payment
procedures upon 60 days' written notice to shareholders.
Shareholders of the Fund Classes or their investment dealers of record
wishing to redeem any amount of shares of $50,000 or less for which
certificates have not been issued may call the Fund at 800-523-1918 (in
Philadelphia, 988-1241) or, in the case of shareholders of the Institutional
Class, their Client Services Representative at 800-828-5052 prior to the time
the offering price and net asset value are determined, as noted above, and
have the proceeds mailed to them at the record address. Checks payable to the
shareholder(s) of record will normally be mailed the next business day, but
no more than seven days, after receipt of the redemption request. This option
is only available to individual, joint and individual fiduciary-type
accounts.
In addition, redemption proceeds of $1,000 or more can be transferred to
your predesignated bank account by wire or by check by calling the Fund, as
described above. An authorization form must have been completed by the
shareholder and filed with the Fund BEFORE the request is received. Payment
will be made by wire or check to the bank account designated on the
authorization form as follows:
1. PAYMENT BY WIRE: Request that Federal Funds be wired to the bank account
designated on the authorization form. Redemption proceeds will normally be
wired on the next business day following receipt of the redemption request.
There is a $7.50 wiring fee (subject to change) charged by CoreStates Bank,
N.A. which will be deducted from the withdrawal proceeds each time the
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<PAGE>
shareholder requests a redemption. If the proceeds are wired to the
shareholder's account at a bank which is not a member of the Federal Reserve
System, there could be a delay in the crediting of the funds to the
shareholder's bank account.
2. PAYMENT BY CHECK: Request a check be mailed to the bank account
designated on the authorization form. Redemption proceeds will normally be
mailed the next business day, but no more than seven days, from the date of
the telephone request. This procedure will take longer than the PAYMENT BY
WIRE option (1 above) because of the extra time necessary for the mailing and
clearing of the check after the bank receives it.
REDEMPTION REQUIREMENTS: In order to change the name of the bank and the
account number it will be necessary to send a written request to the Fund and
a signature guarantee may be required. Each signature guarantee must be
supplied by an eligible guarantor institution. The Fund reserves the right to
reject a signature guarantee supplied by an eligible institution based on its
creditworthiness.
To reduce the shareholder's risk of attempted fraudulent use of the
telephone redemption procedure, payment will be made only to the bank account
designated on the authorization form.
The Fund will not honor telephone redemptions for Fund shares recently
purchased by check unless it is reasonably satisfied that the purchase check
has cleared.
If expedited payment under these procedures could adversely affect the Fund,
the Fund may take up to seven days to pay the shareholder.
Neither the Fund nor the Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption or
exchange of Fund shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by
shareholders of the Fund Classes are generally tape recorded. A written
confirmation will be provided for all purchase, exchange and redemption
transactions initiated by telephone.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders of the Class A Shares who own or purchase $5,000 or more of
shares at the offering price for which certificates have not been issued may
establish a Systematic Withdrawal Plan for monthly withdrawals of $25 or
more, or quarterly withdrawals of $75 or more, although the Fund does not
recommend any specific amount of withdrawal. This $5,000 minimum does not
apply for the Fund's prototype Retirement Plans. Shares purchased with the
initial investment and through reinvestment of cash dividends and realized
securities profits distributions will be credited to the shareholder's
account and sufficient full and fractional shares will be redeemed at the net
asset value calculated on the third business day preceding the mailing date.
<PAGE>
Checks are dated the 20th of the month (unless such date falls on a holiday
or a Sunday) and mailed on or about the 19th of every month. Both ordinary
income dividends and realized securities profits distributions will be
automatically reinvested in additional shares of the class at net asset
value. This plan is not recommended for all investors and should be started
only after careful consideration of its operation and effect upon the
investor's savings and investment program. To the extent that withdrawal
payments from the plan exceed any dividends and/or realized securities
profits distributions paid on shares held under the plan, the withdrawal
payments will represent a return of capital, and the share balance may in
time be depleted, particularly in a declining market.
The sale of shares for withdrawal payments constitutes a taxable event and
a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
Retirement Plans may have adverse tax consequences.
Withdrawals under this plan by the holders of Class A Shares or any similar
plan of any other investment company charging a front-end sales charge made
concurrently with the purchases of the Class A Shares of this or the shares of
any other investment company will ordinarily be disadvantageous to the
shareholder because of the payment of duplicative sales charges. Shareholders
should not purchase Class A Shares while participating in a Systematic
Withdrawal Plan and a periodic investment program in a fund managed by the
Manager must be terminated before a Systematic Withdrawal Plan can take effect,
except if the shareholder is a participant in one of our Retirement Plans or is
investing in Delaware Group funds which do not carry a sales charge. Also,
redemptions pursuant to a Systematic Withdrawal Plan may be subject to a Limited
CDSC if the purchase was made at net asset value and a dealer's commission has
been paid on that purchase.
An investor wishing to start a Systematic Withdrawal Plan must complete an
authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied
by an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the
Transfer Agent at any time by giving written notice.
The Systematic Withdrawal Plan is not available with respect to the Class B
Shares or the Institutional Class.
WEALTH BUILDER OPTION
Shareholders of the Fund Classes may elect to invest in one or more of the
other mutual funds in the Delaware Group through our Wealth Builder Option.
Under this automatic exchange program, shareholders can authorize regular
monthly investments (minimum of $100 per fund) to be liquidated from their
account and invested automatically into other mutual funds in the Delaware
Group, subject to the conditions and limitations set forth in the Fund
18
<PAGE>
Classes' PROSPECTUS. See WEALTH BUILDER OPTION and REDEMPTION AND EXCHANGE in
the PROSPECTUS for the Fund Classes.
The investment will be made on the 20th day of each month (or, if the fund
selected is not open that day, the next business day) at the public offering
price or net asset value, as applicable, of the fund selected on the date of
investment. No investment will be made for any month if the value of the
shareholder's account is less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the
fund into which investments are made could fluctuate. Since this program
involves continuous investment regardless of such fluctuating value,
investors selecting this option should consider their financial ability to
continue to participate in the program through periods of low fund share
prices. This program involves automatic exchanges between two or more fund
accounts and is treated as a purchase of shares of the fund into which
investments are made through the program. See EXCHANGE PRIVILEGE for a brief
summary of the tax consequences of exchanges.
Shareholders can also use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other
mutual funds in the Delaware Group, subject to the conditions and limitations
described in the Fund Classes' PROSPECTUS. Shareholders can terminate their
participation at any time by written notice to the Fund.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans. This option also is not available to
shareholders of the Institutional Class.
DIVIDENDS AND REALIZED
SECURITIES PROFITS
DISTRIBUTIONS
The Fund will make payments from its net investment income and net realized
securities profits, if any, twice a year. The first payment would be made
during the first quarter of the next fiscal year. The second payment would be
made near the end of the calendar year to comply with certain requirements of
the Internal Revenue Code. During the fiscal year ended June 30, 1994,
distributions totaling $1.94 per share of the Class A Shares and
Institutional Class were paid from realized securities profits. On August 5,
1994, a distribution of $0.79 per share of the Class A Shares and the
Institutional Class was paid from realized securities profits to shareholders
of record July 28, 1994. Class B Shares of the Fund were not offered prior to
the date of this PART B.
All dividends and any capital gains distributions will be automatically
reinvested for the shareholder in additional shares at net asset value
<PAGE>
unless, in the case of shareholders in the Fund Classes, the shareholder
requests in writing that such dividends and/or distributions be paid in cash.
Dividend payments of $1.00 or less will be automatically reinvested,
notwithstanding a shareholder's election to receive dividends in cash. If
such a shareholder's dividends increase to greater than $1.00, the shareholder
would have to file a new election in order to begin receiving dividends in
cash again.
Each Class of shares of the Fund will share proportionately in the
investment income and expenses of the Fund, except that the Class A Shares
and the Class B Shares alone will incur distribution fees under their
respective 12b-1 Plans.
Any check in payment of dividends or other distributions which cannot be
delivered by the Post Office or which remains uncashed for a period of more
than one year may be reinvested in the shareholder's account at the
then-current net asset value and the dividend option may be changed from cash
to reinvest. The Fund may deduct from a shareholder's account the costs of
the Fund's effort to locate a shareholder if a shareholder's mail is returned
by the Post Office or the Fund is otherwise unable to locate the shareholder
or verify the shareholder's mailing address. These costs may include a
percentage of the account when a search company charges a percentage fee in
exchange for their location services.
TAXES
It is the Fund's policy to pay out substantially all net investment income and
net realized gains to shareholders to relieve the Fund of federal income tax
liability on that portion of its income paid to shareholders under Subchapter M
of the Internal Revenue Code. The Fund has met these requirements in previous
years and intends to meet them this year. Such distributions are taxable as
ordinary income or capital gain to those shareholders who are liable for federal
income tax. The Fund also intends to meet the calendar year distribution
requirements imposed by the Internal Revenue Code to avoid the imposition of a
4% excise tax.
Distributions may also be subject to state and local taxes; shareholders
are advised to consult with their tax advisers in this regard. Shares of the
Fund will be exempt from Pennsylvania personal property taxes.
Dividends representing net investment income or short-term capital gains are
taxable to shareholders as ordinary income. Distributions of long-term capital
gains, if any, are taxable as long-term capital gain regardless of the length of
time an investor has held such shares, and these gains are currently taxed at
long-term capital gain rates. The tax status of dividends and distributions 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. The portion of dividends paid by the Fund that so
qualifies will be designated each year in a notice mailed to the Fund's
19
<PAGE>
shareholders, and cannot exceed the gross amount of dividends received by the
Fund from domestic (U.S.) corporations that would have qualified for the
dividends-received deduction in the hands of the Fund if the 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. Advice as to the tax status of each
year's dividends and distributions, when paid, will be mailed annually.
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 Fund's portfolio
securities had an unrealized appreciation for tax purposes of $12,756,977 as of
June 30, 1994.
Prior to purchasing shares of the Fund, 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
distributions 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.
INVESTMENT MANAGEMENT
AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to the Fund, subject to the
supervision and direction of the Fund's Board of Directors.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. The aggregate assets of these funds on June 30, 1994
were approximately $9,540,710,000. Investment advisory services are also
provided to institutional accounts with assets on June 30, 1994 of
approximately $16,301,004,000.
The Investment Management Agreement for the Fund, dated June 29, 1988, was
approved by shareholders on June 14, 1988, and renewed for a period of an
additional year by the Board of Directors at a meeting held on February 17,
1994.
The Agreement may be renewed each year only so long as such renewal and
continuance are specifically approved at least annually by the Board of
Directors or by vote of a majority of the outstanding voting securities of
the Fund, and only if the terms and the renewal thereof have been approved by
the vote of a majority of the directors of the Fund who are not parties
thereto or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. The Agreement is
terminable without penalty on 60 days' notice by the directors of the Fund or
<PAGE>
by the Manager. The Agreement will terminate automatically in the event of
its assignment.
The compensation paid by the Fund for investment management services is
equal to 1/16 of 1% per month (3/4 of 1% per year) of the Fund's average
daily net assets, less all directors' fees paid to the unaffiliated directors
of the Fund. This fee is higher than that paid by funds with comparable
investment objectives. On June 30, 1994, the total net assets of the Fund
were $267,463,038. Under the general supervision of the Board of Directors,
the Manager makes all investment decisions which are implemented by the Fund.
The Manager pays the salaries of all directors, officers and employees who
are affiliated with both the Manager and the Fund. Investment management fees
paid by the Fund during the past three fiscal years were $783,719 for 1992,
$1,249,159 for 1993 and $2,006,549 for 1994.
Except for those expenses borne by the Manager under the Investment
Management Agreement and the Distributor under the Amended and Restated
Distribution Agreement, the Fund is responsible for all of its own expenses.
Among others, these include the Fund's proportionate share of rent and
certain other administrative expenses; the investment management fees;
transfer and dividend disbursing agent fees and costs; custodian expenses;
federal and state securities registration fees; proxy costs; and the costs of
preparing prospectuses and reports sent to shareholders. The ratio of
expenses to average daily net assets for the Class A Shares for the fiscal
year ended June 30, 1994 was 1.37%, which reflects the impact of its 12b-1
Plan. The ratio of expenses to average daily net assets for the Institutional
Class was 1.15% for the fiscal year ended June 30, 1994. Class B Shares of
the Fund were not offered prior to the date of this PART B but, based on
expenses incurred by the Class A Shares during its last fiscal year, the
expenses of the Class B Shares are expected to be 2.15%.
By California regulation, the Manager is required to waive certain fees and
reimburse the Fund for certain expenses to the extent that the Fund's annual
operating expenses, exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, exceed specified percentages of net assets. At present,
the most restrictive limit is 2 1/2% of the first $30 million of average daily
net assets, 2% of the next $70 million of average daily net assets and 1 1/2% of
any additional average daily net assets. For the fiscal year ended June 30,
1994, no reimbursement was necessary or paid.
DISTRIBUTION AND SERVICE
The Distributor, located at 1818 Market Street, Philadelphia, PA 19103, serves
as the national distributor of Fund shares under an Amended and Restated
Distribution Agreement dated as of September 6, 1994. The Distributor is an
affiliate of the Manager and bears all of the costs of promotion and
distribution, except for payments by the Fund on behalf of the Class A Shares
and Class B Shares under their respective 12b-1 Plans. The Transfer Agent,
another affiliate of the Manager located at 1818 Market Street, Philadelphia, PA
19103, serves as the Fund's shareholder servicing, dividend disbursing and
20
<PAGE>
transfer agent pursuant to a Shareholders Services Agreement dated June 29,
1988.
The Distributor, the Manager and the Transfer Agent are all indirect,
wholly-owned subsidiaries of Delaware Management Holdings, Inc.
OFFICERS AND DIRECTORS
The business and affairs of the Fund are managed under the direction of its
Board of Directors.
Certain officers and directors of the Fund hold identical positions in each
of the other funds in the Delaware Group. On July 31, 1994, the Fund's
officers and directors owned less than 1% of the Fund's shares outstanding.
As of July 31, 1994, the Fund believes Merrill Lynch, Pierce, Fenner and Smith
Inc., Mutual Fund Operations, P.O. Box 41621, Jacksonville, FL 32203 held of
record 2,187,822 shares (9.71%) of the outstanding shares of the Class A Shares.
The Fund believes the following shareholders held of record 5% or more of the
outstanding shares of the Insititutional Class as of July 31, 1994: Woodstock
c/o Wood County Trust Company, 181 2nd Street South, P.O. Box 8000, Wisconsin
Rapids, WI 54495--434,856 shares (27.32%); Bank of New York, Trust First
Hospital Corp. Retirement Plan, 1 Wall Street, Master Trust/Custodian, New York,
NY 10286--294,631 shares (18.51%); Delaware Management Company Employee Profit
Sharing Trust, 1818 Market Street, Philadelphia, PA 19103--195,424 shares
(12.28%); and Janney Montgomery Scott & Company Inc., Profit Sharing and Savings
Plan, 1801 Market Street, Philadelphia, PA 19103--187,367 (11.77%). Shares held
of record by Delaware Management Company Employee Profit Sharing Plan were
beneficially owned by others. Based on information supplied to the Fund, the
Fund believes that all of the shares held of record by Janney Montgomery Scott &
Company Inc. were beneficially owned by others.
DMH Corp., Delaware Management Company, Inc., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware Management Trust Company, Delaware
International Holdings Ltd., Founders Holdings, Inc., Delaware International
Advisers Ltd. and Delaware Investment Counselors, Inc. are direct or
indirect, wholly-owned subsidiaries of Delaware Management Holdings, Inc.
("DMH"). By reason of its percentage ownership of DMH common stock and
through a Voting Trust Agreement with certain other DMH shareholders, Legend
Capital Group, L.P. ("Legend") controls DMH and its direct and indirect,
wholly-owned subsidiaries. As General Partners of Legend, Leonard M. Harlan
and John K. Castle have the ability to direct the voting of more than a
majority of the shares of DMH and thereby control DMH and its direct and
indirect, wholly-owned subsidiaries.
For the fiscal year ended June 30, 1994, directors and certain officers of
the Fund were paid an aggregate remuneration of $29,039.
<PAGE>
Directors and principal officers of the Fund and their business experience
for the past five years follow. Unless otherwise noted, the address of each
officer and director is One Commerce Square, Philadelphia, PA 19103.
*WAYNE A. STORK
CHAIRMAN, DIRECTOR AND/OR TRUSTEE of the Fund and each
of the other Funds in the Delaware Group.
CHAIRMAN, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
of Delaware International Holdings Ltd.
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND DIRECTOR of Delaware
Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware International
Advisers Ltd. and Founders Holdings, Inc.
CHAIRMAN AND DIRECTOR of Delaware Management Trust
Company.
DIRECTOR of Delaware Distributors, Inc., Delaware
Service Company, Inc. and Delaware Investment
Counselors, Inc.
During the past five years, Mr. Stork has served in various
executive capacities at different times within the
Delaware organization.
*BRIAN F. WRUBLE
PRESIDENT, CHIEF EXECUTIVE OFFICER, DIRECTOR AND/OR TRUSTEE of
the Fund and each of the other Funds in the Delaware
Group (other than Delaware Pooled Trust, Inc.).
DIRECTOR of Delaware Pooled Trust, Inc., Delaware
International Advisers Ltd. and Delaware Investment
Counselors, Inc.
PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR of Delaware
Management Holdings, Inc., DMH Corp. and
Delaware Management Company, Inc.
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND DIRECTOR of Delaware
Service Company, Inc.
CHAIRMAN AND DIRECTOR of Delaware Distributors, Inc.
PRESIDENT AND DIRECTOR of Founders Holdings, Inc.
Before joining the Delaware Group in 1992, Mr. Wruble
was Chairman, President and Chief Executive Officer
of Equitable Capital Management Corporation and
Executive Vice President and Chief Investment
Officer of Equitable Life Assurance Society of the
United States. Mr. Wruble has previously held
executive positions with Smith Barney, Harris Upham
and H.C. Wainwright & Co.
- ----------
*Director affiliated with the investment manager of the Fund and considered an
"interested person" as defined in the Investment Company Act of 1940.
21
<PAGE>
WINTHROP S. JESSUP
EXECUTIVE VICE PRESIDENT of the Fund and each of the other
Funds in the Delaware Group (other than Delaware
Pooled Trust, Inc.).
PRESIDENT AND CHIEF EXECUTIVE OFFICER of Delaware Pooled
Trust, Inc.
PRESIDENT AND DIRECTOR of Delaware Investment
Counselors, Inc.
EXECUTIVE VICE PRESIDENT AND DIRECTOR of Delaware Manage-
ment Holdings, Inc., DMH Corp., Delaware Manage-
ment Company, Inc., Delaware Management Trust
Company, Delaware International Holdings Ltd. and
Founders Holdings, Inc.
VICE CHAIRMAN AND DIRECTOR of Delaware Distributors, Inc.
DIRECTOR of Delaware Service Company, Inc. and Delaware
International Advisers Ltd.
During the past five years, Mr. Jessup has served in various
executive capacities at different times within the
Delaware organization.
WALTER P. BABICH
DIRECTOR AND/OR TRUSTEE of the Fund and each of the other
Funds in the Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
BOARD CHAIRMAN, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin &
Leighton and from 1988 to 1991, he was a partner of
I&L Investors.
*JOHN K. CASTLE
DIRECTOR AND/OR TRUSTEE of the Fund, each of the other
Funds in the Delaware Group and Delaware Manage-
ment Holdings, Inc.
150 East 58th Street, New York, NY 10155.
GENERAL PARTNER, Legend Capital Group, L.P.
CHAIRMAN, Castle Harlan, Inc., a private merchant bank
in New York City.
CHAIRMAN, Castle Harlan GP, Inc.
PRESIDENT AND CHIEF EXECUTIVE OFFICER, Branford Castle,
Inc., an investment holding company.
CHAIRMAN, Castle Connolly Medical Ltd.
DIRECTOR, Sealed Air Corp.
DIRECTOR, UNC, Inc.
DIRECTOR, Quantum Restaurant Group, Inc.
DIRECTOR, INDSPEC Chemical Corporation.
TRUSTEE, New York Medical College.
Immediately prior to forming Branford Castle, Inc. in
1986, Mr. Castle was President and Chief Executive
Officer and a director of Donaldson, Lufkin & Jenrette,
which he joined in 1965. Mr. Castle also served as
Chairman of the Board of the New York Medical
College for 11 years and has served as a director of the
Equitable Life Assurance Society of the United States
and as a member of the Corporation of the Massachu-
setts Institute of Technology.
<PAGE>
JOHN J. CONNOLLY, ED.D.
DIRECTOR AND/OR TRUSTEE of the Fund and each of the other
Funds in the Delaware Group.
150 East 58th Street, New York, NY 10155.
PRESIDENT AND CHIEF EXECUTIVE OFFICER, Castle Connolly
Medical Ltd.
PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR, Health-
Excel Management, Inc.
CHAIRMAN, Bedford Partners, Ltd.
From 1981 to 1992, Dr. Connolly was President and
Chief Executive Officer of New York Medical
College, New York.
*JOHN H. DURHAM
DIRECTOR AND/OR TRUSTEE of the Fund and each of the other
Funds in the Delaware Group.
CONSULTANT.
120 Gibraltar Road, Horsham, PA 19044.
Mr. Durham served as Chairman of the Board of each
Fund in the Delaware Group from 1986 to 1991;
President of each Fund in the Delaware Group from
1977 to 1990; and Chief Executive Officer of each
Fund in the Delaware Group from 1984 to 1990. Prior
to 1992, with respect to Delaware Management
Holdings, Inc., Delaware Management Company,
Inc., Delaware Distributors, Inc. and Delaware Service
Company, Inc., Mr. Durham served as a director and
in various executive capacities at different times.
*LEONARD M. HARLAN
DIRECTOR AND/OR TRUSTEE of the Fund, each of the other
Funds in the Delaware Group and Delaware Manage-
ment Holdings, Inc.
150 East 58th Street, New York, NY 10155.
GENERAL PARTNER, Legend Capital Group, L.P.
PRESIDENT, Castle Harlan, Inc., a private merchant bank
in New York City.
PRESIDENT, Castle Harlan GP, Inc.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, The Harlan
Company, Inc.
DIRECTOR, Long John Silver's Restaurants, Inc.
DIRECTOR, The Ryland Group, Inc.
DIRECTOR, Smarte Carte Corporation.
DIRECTOR, MAG Aerospace Industries, Inc.
TRUSTEE, North Country School/CTT.
TRUSTEE, New York City Citizens Budget Commission.
MEMBER, Visiting Committee of the Harvard Business
School.
- ----------
*Director affiliated with the investment manager of the Fund and considered an
"interested person" as defined in the Investment Company Act of 1940.
22
<PAGE>
ANTHONY D. KNERR
DIRECTOR AND/OR TRUSTEE of the Fund and each of the other
Funds in the Delaware Group.
500 Fifth Avenue, New York, NY 10110.
CONSULTANT, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice
President/Finance and Treasurer of Columbia
University, New York. From 1987 to 1989, he was
also a lecturer in English at the University. In
addition, Mr. Knerr was Chairman of The Publishing
Group, Inc., New York, from 1988 to 1990 and
President from 1990 to 1991. Mr. Knerr founded
The Publishing Group, Inc. in 1988.
ANN R. LEVEN
DIRECTOR AND/OR TRUSTEE of the Fund and each of the other
Funds in the Delaware Group.
785 Park Avenue, New York, NY 10021.
DEPUTY TREASURER, National Gallery of Art.
ADJUNCT PROFESSOR, Columbia Business School.
From 1984 to 1990, Ms. Leven was Treasurer and Chief
Fiscal Officer of the Smithsonian Institution,
Washington, DC.
W. THACHER LONGSTRETH
DIRECTOR AND/OR TRUSTEE of the Fund and each of the other
Funds in the Delaware Group.
1617 John F. Kennedy Boulevard, Philadelphia, PA 19103.
VICE CHAIRMAN, Packquisition Corp., a financial printing,
commercial printing and information processing firm.
PHILADELPHIA CITY COUNCILMAN.
CHARLES E. PECK
DIRECTOR AND/OR TRUSTEE of the Fund and each of the other
Funds in the Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
RETIRED.
From 1981 to 1990, Mr. Peck was Chairman and Chief
Executive Officer of The Ryland Group, Inc.,
Columbia, MD.
<PAGE>
DAVID K. DOWNES
SENIOR VICE PRESIDENT/CHIEF ADMINISTRATIVE OFFICER/CHIEF
FINANCIAL OFFICER of the Fund, each of the other Funds
in the Delaware Group and Delaware Management
Company, Inc.
PRESIDENT/CHIEF EXECUTIVE OFFICER AND DIRECTOR of Delaware
Management Trust Company.
SENIOR VICE PRESIDENT/CHIEF ADMINISTRATIVE OFFICER/CHIEF
FINANCIAL OFFICER/TREASURER of Delaware Management
Holdings, Inc.
SENIOR VICE PRESIDENT/CHIEF FINANCIAL OFFICER/TREASURER
AND DIRECTOR of DMH Corp.
SENIOR VICE PRESIDENT/CHIEF ADMINISTRATIVE OFFICER AND DIRECTOR
of Delaware Distributors, Inc.
SENIOR VICE PRESIDENT/CHIEF ADMINISTRATIVE OFFICER/CHIEF
FINANCIAL OFFICER AND DIRECTOR of Delaware Service
Company, Inc.
CHIEF FINANCIAL OFFICER AND DIRECTOR of Delaware
International Holdings Ltd.
CHIEF FINANCIAL OFFICER/CHIEF OPERATING OFFICER of Delaware
Investment Counselors, Inc.
SENIOR VICE PRESIDENT AND DIRECTOR of Founders Holdings, Inc.
DIRECTOR of Delaware International Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes
was Chief Administrative Officer, Chief Financial
Officer and Treasurer of Equitable Capital Manage-
ment Corporation, New York, from December 1985
through August 1992, Executive Vice President from
December 1985 through March 1992, and Vice
Chairman from March 1992 through August 1992.
GEORGE M. CHAMBERLAIN, JR.
SENIOR VICE PRESIDENT AND SECRETARY of the Fund, each of
the other Funds in the Delaware Group and Delaware
Management Holdings, Inc.
CORPORATE VICE PRESIDENT, SECRETARY AND DIRECTOR of Founders
Holdings, Inc.
SENIOR VICE PRESIDENT/SECRETARY AND DIRECTOR of DMH Corp.,
Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Service Company, Inc.
and Delaware Management Trust Company.
SECRETARY AND DIRECTOR of Delaware International Hold-
ings Ltd.
SECRETARY of Delaware Investment Counselors, Inc.
DIRECTOR of Delaware International Advisers Ltd.
ATTORNEY.
During the past five years, Mr. Chamberlain has served
in various capacities at different times within the
Delaware organization.
EDWARD N. ANTOIAN
VICE PRESIDENT/SENIOR PORTFOLIO MANAGER of the Fund, of the
other equity funds in the Delaware Group and of
Delaware Management Company, Inc.
23
<PAGE>
JOSEPH H. HASTINGS
VICE PRESIDENT/CORPORATE CONTROLLER of the Fund, each of
the other Funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors,
Inc., Delaware Service Company, Inc. and Founders
Holdings, Inc.
VICE PRESIDENT/CORPORATE CONTROLLER/TREASURER of Delaware
Management Trust Company.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings
was Chief Financial Officer for Prudential Residential
Services, L.P., New York, NY. Prior to that, Mr. Hastings
served as Controller and Treasurer for Fine Homes
International, L.P., Stamford, CT.
EUGENE J. CICHANOWSKY
VICE PRESIDENT/CORPORATE TAX of the Fund, each of the other
Funds in the Delaware Group (other than Delaware
Pooled Trust, Inc.), Delaware Management Holdings,
Inc., DMHCorp., Delaware Management Company,
Inc., Delaware Distributors, Inc., Delaware Service
Company, Inc., Founders Holdings, Inc. and Delaware
Management Trust Company.
VICE PRESIDENT of Delaware Pooled Trust, Inc.
1818 Market Street, Philadelphia, PA 19103.
During the past five years, Mr. Cichanowsky has served
in various capacities at different times within the
Delaware organization.
JOSEPH A. FINELLI
VICE PRESIDENT/TREASURER of the Fund, each of the other
Funds in the Delaware Group and Delaware Service
Company, Inc.
VICE PRESIDENT/TREASURER/CHIEF FINANCIAL OFFICER of Founders
Holdings, Inc.
VICE PRESIDENT/CHIEF FINANCIAL OFFICER of Delaware
Distributors, Inc.
VICE PRESIDENT/ASSISTANT TREASURER of Delaware Manage-
ment Company, Inc.
VICE PRESIDENT of Delaware International Holdings Ltd.
1818 Market Street, Philadelphia, PA 19103.
During the past five years, Mr. Finelli has served in
various capacities at different times within the
Delaware organization.
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the Classes and for
shareholders of classes of other funds in the Delaware Group are set forth in
the relevant prospectuses for such classes. The following supplements that
information. The Fund reserves the right to reject exchange requests at any
time. The Fund may modify, terminate or suspend the exchange privilege upon 60
days' notice to shareholders.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and
carefully read that fund's prospectus before buying shares in an exchange.
<PAGE>
The prospectus contains more complete information about the fund, including
charges and expenses. A shareholder requesting an exchange will be sent a
current prospectus and an authorization form for any of the other mutual
funds in the Delaware Group. Exchange instructions must be signed by the
record owner(s) exactly as the shares are registered.
An exchange constitutes, for tax purposes, the sale of one fund and the
purchase of another. The sale may involve either a capital gain or loss to
the shareholder for federal income tax purposes.
In addition, investment advisers and dealers may make exchanges between
funds in the Delaware Group on behalf of their clients by telephone or other
expedited means. This service may be discontinued or revised at any time by
the Transfer Agent. Such exchange requests may be rejected if it is
determined that a particular request or the total requests at any time could
have an adverse effect on any of the funds. Requests for expedited exchanges
may be submitted with a properly completed exchange authorization form, as
described above.
TELEPHONE EXCHANGE PRIVILEGE
Shareholders owning shares for which certificates have not been issued or
their investment dealers of record may exchange shares by telephone for
shares in other mutual funds in the Delaware Group. This service is
automatically provided unless the Fund receives written notice from the
shareholder to the contrary.
Shareholders or their investment dealers of record may contact the Transfer
Agent at 800-523-1918 (in Philadelphia, 988-1241) or, in the case of
shareholders of the Institutional Class, their Client Services Representative
at 800-828-5052, to effect an exchange. The shareholder's current Fund
account number must be identified, as well as the registration of the
account, the share or dollar amount to be exchanged and the fund into which
the exchange is to be made. Requests received on any day after the time the
offering price and net asset value are determined will be processed the
following day. See DETERMINING OFFERING PRICE AND NET ASSET VALUE. Any new
account established through the exchange will automatically carry the same
registration, shareholder information and dividend option as the account from
which the shares were exchanged. The exchange requirements of the fund into
which the exchange is being made, such as sales charges, eligibility and
investment minimums, must be met. (See the prospectus of the fund desired or
inquire by calling the Transfer Agent or, as relevant, your Client Services
Representative.) Certain funds are not available for Retirement Plans.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of
the funds in the Delaware Group. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and the Fund
reserve the right to record exchange instructions received by telephone and
to reject exchange requests at any time in the future.
24
<PAGE>
As described in the Fund's prospectuses, neither the Fund nor the Transfer
Agent is responsible for any shareholder loss incurred in acting upon written
or telephone instructions for redemption or exchange of Fund shares which are
reasonably believed to be genuine.
Following is a summary of the investment objectives of the other Delaware
Group funds:
DELAWARE FUND seeks long-term growth by a balance of capital appreciation,
income and preservation of capital. It uses a dividend-oriented valuation
strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. DIVIDEND
GROWTH FUND seeks current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on common stocks
the Manager believes have the potential for above average dividend increases
over time.
VALUE FUND seeks capital appreciation by investing primarily in common
stocks whose market values appear low relative to their underlying value or
future potential.
DELCAP FUND seeks long-term capital growth by investing in common stocks
and securities convertible into common stocks of companies that have a
demonstrated history of growth and have the potential to support continued
growth.
DECATUR INCOME FUND seeks the highest possible current income by investing
primarily in common stocks that provide the potential for income and capital
appreciation without undue risk to principal. DECATUR TOTAL RETURN FUND seeks
long-term growth by investing primarily in
securities that provide the potential for income and capital appreciation
without undue risk to principal.
DELCHESTER FUND seeks as high a current income as possible by investing
principally in corporate bonds, and also in U.S. government securities and
commercial paper.
U.S. GOVERNMENT FUND seeks high current income by investing in long-term
U.S. government debt obligations.
TREASURY RESERVES INTERMEDIATE FUND seeks high, stable income by investing
primarily in a portfolio of short- and intermediate-term securities issued or
guaranteed by the U.S. government, its agencies and instrumentalities. U.S.
GOVERNMENT MONEY FUND seeks maximum current income with preservation of
principal and maintenance of liquidity by investing only in short-term
securities issued or guaranteed as to principal and interest by the U.S.
government, its agencies or instrumentalities, and repurchase agreements
collateralized by such securities, while maintaining a stable net asset
value.
DELAWARE CASH RESERVE seeks the highest level of income consistent with the
preservation of capital and liquidity through investments in short-term money
market instruments, while maintaining a stable net asset value.
TAX-FREE USA FUND seeks high current income exempt from federal income tax by
investing in municipal bonds of geographically-diverse issuers. TAX-FREE INSURED
FUND invests in these same types of securities but with an emphasis on municipal
bonds protected by insurance guaranteeing principal and interest are paid when
due. TAX-FREE USA INTERMEDIATE FUND seeks a high level of current interest
income exempt from federal income tax, consistent with the preservation of
capital by investing primarily in municipal bonds.
<PAGE>
TAX-FREE MONEY FUND seeks high current income, exempt from federal income
tax, by investing in short-term municipal obligations, while maintaining a
stable net asset value.
TAX-FREE PENNSYLVANIA FUND seeks a high level of current interest income
exempt from federal and, to the extent possible, certain Pennsylvania state
and local taxes, consistent with the preservation of capital.
INTERNATIONAL EQUITY FUND seeks to achieve long-term growth without undue
risk to principal by investing primarily in international securities that
provide the potential for capital appreciation and income. GLOBAL INCOME FUND
seeks to achieve current income consistent with the preservation of principal
by investing primarily in global fixed income securities that may also
provide the potential for capital appreciation. GLOBAL TOTAL RETURN FUND
seeks to achieve long-term total return by investing in global securities
which will provide higher current income than a portfolio comprised
exclusively of equity securities, along with the potential for capital
growth.
DELAWARE GROUP PREMIUM FUND offers nine series available exclusively as
funding vehicles for certain insurance company separate accounts. EQUITY/INCOME
SERIES seeks the highest possible total rate of return by selecting issues that
exhibit the potential for capital appreciation while providing higher than
average dividend income. HIGH YIELD SERIES seeks as high a current income as
possible by investing in rated and unrated corporate bonds, U.S. government
securities and commercial paper. CAPITAL RESERVES SERIES seeks a high stable
level of current income while minimizing fluctuations in principal by investing
in a diversified portfolio of short- and intermediate-term securities. MONEY
MARKET SERIES seeks the highest level of income consistent with preservation of
capital and liquidity through investments in short-term money market
instruments. GROWTH SERIES seeks long-term capital appreciation by investing its
assets in a diversified portfolio of securities exhibiting the potential for
significant growth. MULTIPLE STRATEGY SERIES seeks a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. INTERNATIONAL
EQUITY SERIES seeks long-term growth without undue risk to principal by
investing primarily in equity securities of foreign issuers that provide the
potential for capital appreciation and income. VALUE SERIES seeks capital
appreciation by investing in small- to mid-cap common stocks whose market value
appears low relative to their underlying value or future earnings and growth
potential. Emphasis will also be placed on securities of companies that may be
temporarily out of favor or whose value is not yet recognized by the market.
EMERGING GROWTH SERIES seeks long-term capital appreciation by investing
primarily in small-cap common stocks and convertible securities of emerging and
other growth-oriented companies. These securities will have been judged to be
responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective.
25
<PAGE>
For more complete information about any of these funds, including charges
and expenses, you can obtain a prospectus from the Distributor. Read it
carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the information
contained in each Fund's prospectus(es).
GENERAL INFORMATION
The Manager is the investment manager of the Fund. The Manager or its
affiliate, Delaware International Advisers Ltd., manages the other funds in
the Delaware Group. The Manager, through a separate division, also manages
private investment accounts. While investment decisions of the Fund are made
independently from those of the other funds and accounts, they may make
investment decisions at the same time.
The Distributor acts as national distributor for the Fund and for the other
mutual funds in the Delaware Group. The Distributor received net commissions
from the Fund, after reallowances to dealers, as follows:
FISCAL YEAR AMOUNTS REALLOWED NET COMMISSION
ENDING TO DEALERS TO DISTRIBUTOR
- ------------- ----------------- --------------
June 30, 1994 $2,618,113 $400,983
June 30, 1993 2,403,272 218,280
June 30, 1992 866,423 169,718
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for the Fund and for the
other mutual funds in the Delaware Group. The Transfer Agent is paid a fee by
the Fund for providing these services consisting of an annual per account
charge of $5.50 plus transaction charges for particular services according to
a schedule. Compensation is fixed each year and approved by the Board of
Directors, including a majority of the disinterested directors.
The Manager and its affiliates own the name "Delaware Group." Under certain
circumstances, including the termination of the Fund's advisory relationship
with the Manager or its distribution relationship with the Distributor, the
Manager and its affiliates could cause the Fund to delete the words "Delaware
Group" from the Fund's name.
Chemical Bank, 450 West 33rd Street, New York, NY 10001, is custodian of
the Fund's securities and cash. As custodian for the Fund, Chemical Bank
maintains a separate account or accounts for the Fund; receives, holds and
<PAGE>
releases portfolio securities on account of the Fund; receives and disburses
money on behalf of the Fund; and collects and receives income and other
payments and distributions on account of the Fund's portfolio securities.
The legality of the issuance of the shares offered hereby, pursuant to
registration under the Investment Company Act Rule 24f-2, has been passed
upon for the Fund by Messrs. Stradley, Ronon, Stevens & Young, Philadelphia,
Pennsylvania.
CAPITALIZATION
The Fund has a present authorized capitalization of one hundred million
shares of capital stock with a $.50 par value per share. The Fund offers
three classes of shares, each representing a proportionate interest in the
assets of the Fund, and each having the same voting and other rights and
preferences as the other classes of the Fund, except that shares of the
Institutional Class may not vote on any matter affecting the Fund Classes'
Distribution Plans under Rule 12b-1. Similarly, the shareholders of the Class
A Shares may not vote on matters affecting the Fund's Plan under Rule 12b-1
relating to the Class B Shares, and the shareholders of the Class B Shares
may not vote on matters affecting the Fund's Plan under Rule 12b-1 relating
to the Class A Shares. General expenses of the Fund will be allocated on a
pro-rata basis to the classes according to asset size, except that expenses
of the Rule 12b-1 Plans of the Class A and Class B Shares will be allocated
solely to those classes. The Board of Directors has allocated thirty-five
million shares to the Trend Fund A Class, twenty-five million shares to the
Trend Fund B Class and twenty-five million shares to the Trend Fund
Institutional Class.
Shares have no preemptive rights, are fully transferable and, when issued,
are fully paid and nonassessable.
Prior to September 6, 1994, the Trend Fund A Class was known as the Trend
Fund class and the Trend Fund Institutional Class was known as the Trend Fund
(Institutional) class. The Class B Shares of the Fund were not offered prior
to the date of this PART B.
NONCUMULATIVE VOTING
THESE SHARES HAVE NONCUMULATIVE VOTING RIGHTS WHICH MEANS THAT THE HOLDERS OF
MORE THAN 50% OF THE SHARES OF THE FUND VOTING FOR THE ELECTION OF DIRECTORS CAN
ELECT ALL THE DIRECTORS IF THEY CHOOSE TO DO SO, AND, IN SUCH EVENT, THE HOLDERS
OF THE REMAINING SHARES WILL NOT BE ABLE TO ELECT ANY DIRECTORS.
THIS PART B DOES NOT INCLUDE ALL OF THE INFORMATION CONTAINED IN THE
REGISTRATION STATEMENT WHICH IS ON FILE WITH THE SECURITIES AND EXCHANGE
COMMISSION.
26
<PAGE>
APPENDIX A IRA INFORMATION
The Tax Reform Act of 1986 restructured, and in some cases eliminated, the tax
deductibility of IRA contributions. Under the Act, the full deduction for IRAs
($2,000 for each working spouse and $2,250 for one-income couples) was retained
for all taxpayers who are not covered by an employer-sponsored retirement plan.
Even if a taxpayer (or his or her spouse) is covered by an employer-sponsored
retirement plan, the full deduction is still available if the taxpayer's
adjusted gross income is below $25,000 ($40,000 for taxpayers filing joint
returns). A partial deduction is allowed for married couples with incomes
between $40,000 and $50,000, and for single individuals with incomes between
$25,000 and $35,000. The Act does not permit deductions for contributions to
IRAs by taxpayers whose adjusted gross income before IRA deductions exceeds
$50,000 ($35,000 for singles) and who are active participants in an
employer-sponsored retirement plan. Taxpayers who were not allowed deductions on
IRA contributions still can make nondeductible IRA contributions of as much as
$2,000 for each working spouse ($2,250 for one-income couples), and defer taxes
on interest or other earnings from the IRAs.
As illustrated in the following tables, maintaining an Individual
Retirement Account remains a valuable opportunity.
For many, an IRA will continue to offer both an up-front tax break with its
tax deduction each year and the real benefit that comes with tax-deferred
compounding. For others, losing the tax deduction will impact their taxable
income status each year. Over the long term, however, being able to defer
taxes on earnings still provides an impressive investment opportunity--a way
to have money grow faster due to tax-deferred compounding.
27
<PAGE>
Even if your IRA contribution is no longer deductible, the benefits of
saving on a tax-deferred basis can be substantial. The following tables
illustrate the benefits of tax-deferred versus taxable compounding. Each
reflects a constant 10% rate of return, compounded annually, with the
reinvestment of all proceeds. The tables do not take into account any sales
charges or fees. Of course, earnings accumulated in your IRA will be subject
to tax upon withdrawal. If you choose a mutual fund with a fluctuating net
asset value, like the Fund, your bottom line at retirement could be lower--it
could also be much higher.
$2,000 INVESTED ANNUALLY ASSUMING A 10% ANNUALIZED RETURN
15% Tax Bracket Single -- $0 - $22,750
--------------- Joint -- $0 - $38,000
HOW MUCH YOU
END OF CUMULATIVE HOW MUCH YOU HAVE WITH FULL IRA
YEAR INVESTMENT AMOUNT HAVE WITHOUT IRA DEDUCTION
------ ----------------- ---------------- -------------------
1 $ 2,000 $ 1,844 $ 2,200
5 10,000 10,929 13,431
10 20,000 27,363 35,062
15 30,000 52,074 69,899
20 40,000 89,231 126,005
25 50,000 145,103 216,364
30 60,000 229,114 361,887
35 70,000 355,438 596,254
40 80,000 545,386 973,704
[Without IRA--investment of $1,700 ($2,000 less 15%) earning 8.5%
(10% less 15%)]
28% Tax Bracket Single -- $22,751 - $55,100
--------------- Joint -- $38,001 - $91,850
END OF CUMULATIVE HOW MUCH YOU HOW MUCH YOU HAVE WITH FULL IRA
YEAR INVESTMENT AMOUNT HAVE WITHOUT IRA NO DEDUCTION DEDUCTION
------ ----------------- ---------------- ------------ ---------
1 $ 2,000 $ 1,544 $ 1,584 $ 2,200
5 10,000 8,913 9,670 13,431
10 20,000 21,531 25,245 35,062
15 30,000 39,394 50,328 69,899
20 40,000 64,683 90,724 126,005
25 50,000 100,485 155,782 216,364
30 60,000 151,171 260,559 361,887
35 70,000 222,927 429,303 596,254
40 80,000 324,512 701,067 973,704
[Without IRA--investment of $1,440 ($2,000 less 28%) earning 7.2%
(10% less 28%)]
[With IRA--No Deduction--investment of $1,440 ($2,000 less 28%) earning 10%]
31% Tax Bracket Single -- $55,101 - $115,000
--------------- Joint -- $91,851 - $140,000
END OF CUMULATIVE HOW MUCH YOU HOW MUCH YOU HAVE WITH FULL IRA
YEAR INVESTMENT AMOUNT HAVE WITHOUT IRA NO DEDUCTION DEDUCTION
------ ----------------- ---------------- ------------ ---------
1 $ 2,000 $ 1,475 $ 1,518 $ 2,200
5 10,000 8,467 9,268 13,431
10 20,000 20,286 24,193 35,062
15 30,000 36,787 48,231 69,899
20 40,000 59,821 86,943 126,005
25 50,000 91,978 149,291 216,364
30 60,000 136,868 249,702 361,887
35 70,000 199,536 411,415 596,254
40 80,000 287,021 671,855 973,704
[Without IRA--investment of $1,380 ($2,000 less 31%) earning 6.9%
(10% less 31%)]
[With IRA--No Deduction--investment of $1,380 ($2,000 less 31%) earning 10%]
28
<PAGE>
36% Tax Bracket* Single -- $115,001 - $250,000
---------------- Joint -- $140,001 - $250,000
END OF CUMULATIVE HOW MUCH YOU HOW MUCH YOU HAVE WITH FULL IRA
YEAR INVESTMENT AMOUNT HAVE WITHOUT IRA NO DEDUCTION DEDUCTION
------ ----------------- ---------------- ------------ ---------
1 $ 2,000 $ 1,362 $ 1,408 $ 2,200
5 10,000 7,739 8,596 13,431
10 20,000 18,292 22,440 35,062
15 30,000 32,683 44,736 69,899
20 40,000 52,308 80,643 126,005
25 50,000 79,069 138,473 216,364
30 60,000 115,562 231,608 361,887
35 70,000 165,327 381,602 596,254
40 80,000 233,190 623,170 973,704
[Without IRA--investment of $1,280 ($2,000 less 36%) earning 6.4%
(10% less 36%)]
[With IRA--No Deduction--investment of $1,280 ($2,000 less 36%) earning 10%]
39.6% Tax Bracket* Single -- over $250,000
------------------ Joint -- over $250,000
END OF CUMULATIVE HOW MUCH YOU HOW MUCH YOU HAVE WITH FULL IRA
YEAR INVESTMENT AMOUNT HAVE WITHOUT IRA NO DEDUCTION DEDUCTION
------ ----------------- ---------------- ------------ ---------
1 $ 2,000 $ 1,281 $ 1,329 $ 2,200
5 10,000 7,227 8,112 13,431
10 20,000 16,916 21,178 35,062
15 30,000 29,907 42,219 69,899
20 40,000 47,324 76,107 126,005
25 50,000 70,677 130,684 216,364
30 60,000 101,986 218,580 361,887
35 70,000 143,965 360,137 596,254
40 80,000 200,249 588,117 973,704
[Without IRA--investment of $1,208 ($2,000 less 39.6%) earning 6.04% (10%
less 39.6%)]
[With IRA--No Deduction--investment of $1,208 ($2,000 less 39.6%) earning 10%]
$2,000 SINGLE INVESTMENT AT A RETURN OF 10% COMPOUNDED ANNUALLY
<TABLE>
<CAPTION>
TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
----- --------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
10 $ 3,595 $ 3,719 $ 3,898 $ 4,008 $ 4,522 $ 5,187
15 4,820 5,072 5,441 5,675 6,799 8,354
20 6,463 6,916 7,596 8,034 10,224 13,455
30 11,618 12,861 14,803 16,102 23,117 34,899
40 20,884 23,916 28,849 32,272 52,266 90,519
</TABLE>
$2,000 INVESTED ANNUALLY AT A RETURN OF 10% COMPOUNDED ANNUALLY
<TABLE>
<CAPTION>
TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
----- --------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
10 $ 28,006 $ 28,581 $ 29,400 $ 29,904 $ 32,192 $ 35,062
15 49,514 51,067 53,314 54,714 61,264 69,899
20 78,351 81,731 86,697 89,838 104,978 126,005
30 168,852 180,566 198,360 209,960 269,546 361,887
40 331,537 364,360 415,973 450,711 641,631 973,704
</TABLE>
*For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate. In
addition, a 10% surtax (not applicable to capital gains) applies to certain
high-income taxpayers. It is computed by applying a 39.6% rate to taxable
income in excess of $250,000. The above tables do not reflect the personal
exemption phaseout nor the limitations of itemized deductions that may apply.
29
<PAGE>
THE VALUE OF STARTING YOUR IRA EARLY
The following illustrates how much more you would have contributing $2,000
each January--the earliest opportunity--compared to contributing on April
15th of the following year--the latest, for each tax year.
After 5 years $3,528 more
10 years $6,113
20 years $17,228
30 years $47,295
Compounded returns for the longest period of time is the key. The above
illustration assumes a 10% rate of return and the reinvestment of all
proceeds.
AND IT PAYS TO SHOP AROUND. If you get just 2% more per year, it can make a
big difference when you retire. A constant 8% versus 10% return, both
compounded annually, illustrates the point. This chart is based on a yearly
investment of $2,000 on January 1. After 30 years the difference can mean as
much as 50% more!
8% Return 10% Return
10 Years $ 31,291 $ 35,062
20 Years 98,846 126,005
30 Years 244,692 361,887
The statistical exhibits above are for illustration purposes only and do not
reflect the actual performance for the Fund either in the past or in the
future.
30
<PAGE>
APPENDIX B
DELAWARE GROUP TREND FUND PERFORMANCE OVERVIEW
The following table illustrates the total return on one share invested in
Trend Fund A Class during the 10-year period ending June 30, 1994.(1) The
results reflect the reinvestment of all dividends and realized securities
profits distributions at the net asset value reported at the time of
distribution. No adjustment has been made for any income taxes payable by
shareholders on income dividends or realized securities profits distributions
accepted in shares.
<TABLE>
<CAPTION>
Cumula-
tive net
asset
value at
Maximum Net Asset Distributions year-end
offering Value ------------------- with all
Year price at ------------------- From From distribu-
ended begin- Begin- invest- realized tions
June ning of ning of End of ment securi- rein-
30 year(2) year year income ties profits vested
- ---- ------ ------ ------ -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
1985 $ 5.84 $ 5.50 $ 6.43 $ 0.082 -- $ 6.53
1986 6.82 6.43 8.91 0.128 -- 9.23
1987 9.45 8.91 9.12 -- -- 9.44
1988 9.68 9.12 8.13 -- -- 8.42
1989 8.63 8.13 10.87 -- $0.320 11.72
1990 11.53 10.87 9.97 0.050 2.220 13.40
1991 10.58 9.97 8.92 0.050 0.520 12.76
1992 9.46 8.92 11.38 -- 0.160 16.50
1993 12.07 11.38 13.98 -- 1.150 23.31
1994 14.83 13.98 12.21 -- 1.940 22.44
------ ------
TOTAL DISTRIBUTIONS $0.310 $6.310
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
-------------------------------------------------------------------------------------------------------------------
Delaware Group Trend Fund
------------------------------------------
Year Maximum Offering Price Net Asset Value Standard & Dow Jones Consumer
ended to Net Asset Value to Net Asset Value Poor's 500(5) Industrial(5) Price Index (5)
June -------------------------------------------------------------------------------------------------------------------
30 Annual Cumulative(3) Annual Cumulative(4) Annual Cumultive Annual Cumulative Annual Cumulative
- ---- ------ ------------- ------ ------------- ------ --------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1985 11.8% 11.8% 18.7% 18.7% 31.0% 31.0% 24.0% 24.0% 3.7% 3.7%
1986 33.2 58.1 41.4 67.7 35.9 78.0 47.8 83.2 1.7 5.5
1987 -3.5 61.8 2.4 71.7 25.2 122.7 32.2 142.2 3.7 9.4
1988 -16.0 44.3 -10.9 53.1 -6.9 107.3 -8.3 122.1 3.9 13.6
1989 31.3 100.9 39.3 113.2 20.5 149.8 18.7 163.6 5.2 19.5
1990 7.7 129.7 14.3 143.7 16.5 190.9 22.7 223.5 4.7 25.2
1991 -10.3 118.6 -4.8 131.9 7.4 212.3 4.6 238.5 4.7 31.0
1992 21.9 182.7 29.3 199.9 13.4 254.2 17.7 298.4 3.1 35.1
1993 27.5 282.3 35.2 305.6 13.6 302.4 9.2 335.1 3.0 39.2
1994 -5.2 285.0 0.6 308.1 1.4 307.8 5.9 360.5 3.6 42.7
</TABLE>
- --------
(1) All figures prior to May 9, 1986 are adjusted for a 2-for-1 stock split paid
on that date. The Trend Fund A Class began paying 12b-1 payments on June 1,
1992 and performance prior to that date does not reflect such payments.
(2) Reflects a maximum sales charge of 5.75% of total investment. There are
reduced sales charges for investments of $100,000 or more.
(3) Reflects an offering price of $5.84 on June 30, 1984.
(4) Reflects a net asset value of $5.50 on June 30, 1984.
(5) Source: CDA Investment Technologies, Inc.
This period was one of generally rising common stock prices but also covers
several years of declining prices. The results illustrated should not be
considered as representative of dividend income or capital gain or loss which
may be realized from an investment in the Fund today.
The Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average
are industry-accepted unmanaged indices of generally-conservative securities
used for measuring general market performance. The performance illustrated
for these indices reflects the reinvestment of all distributions on a quarterly
basis and market price fluctuations. The indices do not take into account any
sales charge or other fees. In seeking a particular investment objective, the
Fund's portfolio primarily includes aggressive growth common stocks, which
differ from those in the indices.
The Consumer Price Index, as prepared by the U.S. Bureau of Labor
Statistics, is the most commonly used measure of inflation. It indicates the
cost fluctuations of a representative group of consumer goods. It does not
represent a return from an investment.
31
<PAGE>
APPENDIX C
THE COMPANY LIFE CYCLE
Traditional business theory contends that a typical company progresses
through basically four stages of
development, keyed closely to a firm's sales.
1. EMERGING GROWTH--a period of experimentation in which the company builds
awareness of a new product or firm.
2. ACCELERATED DEVELOPMENT--a period of rapid growth with potentially high
profitability and acceptance of the product.
3. MATURING PHASE--a period of diminished real growth due to dependence on
replacement or sustained product demand.
4. CYCLICAL STAGE--a period in which a company faces a potential saturation
of demand for its product. At this point, a firm either diversifies or becomes
obsolete.
(CHART GOES HERE)
Hypothetical Corporate Life Cycle Chart shows in a line illustration, the
stages that a typical company would go through, beginning with the emerging
state where sales growth continues at a steep pace to the mature phase where
growth levels off to the cyclical stage where sales show more definitive highs
and lows.
The above chart illustrates the path traditionally
followed by companies that successfully survive the growth sequence.
32
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FINANCIAL STATEMENTS
The Fund's STATEMENT OF NET ASSETS, STATEMENT OF OPERATIONS, STATEMENT OF
CHANGES IN NET ASSETS and NOTES TO FINANCIAL STATEMENTS, as well as the report
of Ernst & Young LLP, independent auditors, for the fiscal year ended June 30,
1994 are included in the Fund's ANNUAL REPORT to shareholders. The financial
statements, the notes relating thereto and the report of Ernst & Young LLP
listed above are incorporated by reference from the ANNUAL REPORT into this
PART B.
33
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Supplement Dated August 29, 1995
to the Current Statements of Additional Information
of the Following Delaware Group Funds
Delaware Group Delaware Fund, Inc.,
Delaware Group Trend Fund, Inc.,
Delaware Group Value Fund, Inc.,
Delaware Group Decatur Fund, Inc.,
Delaware Group DelCap Fund, Inc.,
Delaware Group Global & International Funds, Inc.,
Delaware Group Delchester High-Yield Bond Fund, Inc.,
Delaware Group Government Fund, Inc.,
Delaware Group Tax-Free Fund, Inc.,
Delaware Group Limited-Term Government Funds, Inc.,
Delaware Group Tax-Free Money Fund, Inc.,
Delaware Group Cash Reserve, Inc.,
DMC Tax-Freee Income Trust-Pennsylvania
The exchange policy of the Fund as stated under "Redemption and
Exchange" is amended as follows with regard to accounts that are administered by
market timing services ("Timing Firms") to purchase or redeem shares based on
changing economic and market conditions ("Timing Accounts"):
Right To Refuse Timing Accounts
Effective immediately, the Fund reserves the right to refuse any new
Timing Arrangements as well as any new purchases (as opposed to exchanges) in
Delaware Group funds from Timing Firms.
Restrictions on Timed Exchanges
Effective 60 days from this notice, Timing Accounts operating under
existing Timing Agreements may only execute exchanges between the following six
Delaware Group funds: 1) Decatur Income Fund, 2) Decatur Total Return Fund, 3)
Delaware Fund, 4) Limited-Term Government Fund, 5) Tax-Free USA Fund and 6)
Delaware Cash Reserve. No other Delaware Group funds will be available for Timed
Exchanges. Assets redeemed or exchanged out of Timing Accounts in Delaware Group
funds not listed above may not be reinvested back into that Timing Account.
In addition, 60 days hence, the Fund will terminate, except as noted
above, all exchanges privileges, including telephone and written redemption
privileges, previously made available to Timing Firms. At such time, only
shareholders and their authorized brokers of record will be permitted to make
exchanges or redemptions.
