<PAGE>
The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, tax-free funds, money market funds,
global and international 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 Delaware Group at 800-523-4640 and shareholders of the
Institutional Class should contact Delaware Group at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Bankers Trust Company
One Bankers Trust Plaza
New York, NY 10006
<PAGE>
---------------------------------------------------------
TREND FUND
---------------------------------------------------------
A CLASS
---------------------------------------------------------
B CLASS
---------------------------------------------------------
C CLASS
---------------------------------------------------------
INSTITUTIONAL CLASS
---------------------------------------------------------
CLASSES OF DELAWARE GROUP
TREND FUND, INC.
---------------------------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
---------------------------------------------------------
AUGUST 29, 1996
(as revised November 15, 1996)
DELAWARE
GROUP
---------
<PAGE>
- -------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
AUGUST 29, 1996
(as revised November 15, 1996)
- -------------------------------------------------------------------------------
DELAWARE GROUP TREND FUND, INC.
- -------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
- -------------------------------------------------------------------------------
For more information about the Trend Fund Institutional Class: 800-828-5052
For Prospectus and Performance of the Trend Fund A Class, the Trend Fund B Class
and the Trend Fund C Class: Nationwide 800-523-4640
Information on Existing Accounts of the Trend Fund A Class, the Trend Fund B
Class and the Trend Fund C Class: (SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY)
Nationwide 800-362-7500
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Cover Page 1
- -------------------------------------------------------------------------------
Investment Objective and Policies 3
- -------------------------------------------------------------------------------
Performance Information
- -------------------------------------------------------------------------------
Trading Practices and Brokerage
- -------------------------------------------------------------------------------
Purchasing Shares
- -------------------------------------------------------------------------------
Investment Plans
- -------------------------------------------------------------------------------
Determining Offering Price and
Net Asset Value
- -------------------------------------------------------------------------------
Redemption and Repurchase
- -------------------------------------------------------------------------------
Dividends and Realized Securities
Profits Distributions
- -------------------------------------------------------------------------------
Taxes
- -------------------------------------------------------------------------------
Investment Management Agreement
- -------------------------------------------------------------------------------
Officers and Directors
- -------------------------------------------------------------------------------
Exchange Privilege
- -------------------------------------------------------------------------------
General Information
- -------------------------------------------------------------------------------
Appendix A - IRA Information
- -------------------------------------------------------------------------------
Appendix B - Performance Overview
- -------------------------------------------------------------------------------
Appendix C - The Company Life Cycle
- -------------------------------------------------------------------------------
Financial Statements
- -------------------------------------------------------------------------------
-1-
<PAGE>
Delaware Group Trend Fund, Inc. (the "Fund") is a
professionally-managed mutual fund. The Fund offers four 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"), the Trend
Fund C Class (the "Class C Shares) (together, the "Fund Classes") and the Trend
Fund Institutional Class (the "Institutional Class").
Class B Shares, Class C 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.
Class A Shares are subject to a maximum front-end sales charge of 4.75% and
annual 12b-1 Plan expenses of up to .30%. Class B Shares are subject to a
contingent deferred sales charge ("CDSC") which may be imposed on redemptions
made within six years of purchase and annual 12b-1 Plan expenses of up to 1%,
which are assessed against Class B Shares for approximately eight years after
purchase. See Automatic Conversion of Class B Shares under Classes of Shares in
the Fund Classes' Prospectus. Class C Shares are subject to a CDSC which may be
imposed on redemptions made within 12 months of purchase and annual 12b-1 Plan
expenses of up to 1%, which are assessed against the Class C Shares for the life
of the investment. 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
Prospectus for the Fund Classes dated August 29, 1996 and the current Prospectus
for the Institutional Class dated August 29, 1996, as they may be amended from
time to time. It should be read in conjunction with the respective Class'
Prospectus. Part B is not itself a prospectus but is, in its entirety,
incorporated by reference into each Class' Prospectus. A Prospectus relating to
the Fund Classes and a Prospectus relating to the Institutional Class may be
obtained by writing or calling your investment dealer or by contacting the
Fund's national distributor, Delaware Distributors, L.P. (the "Distributor"),
1818 Market Street, Philadelphia, PA 19103.
-2-
<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. 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 (the "1940 Act") 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.
-3-
<PAGE>
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: (i) the frequency of trades and trading volume for the
security; (ii) whether at least three dealers are willing to purchase or sell
the security and the number of potential purchasers; (iii) whether at least two
dealers are making a market in the security; and (iv) the nature of the security
and the nature of the marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers, and the mechanics of transfer).
Investing in Rule 144A Securities could have the effect of increasing the level
of 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. 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.
-4-
<PAGE>
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.
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 1940 Act, except for
notes to banks.
-5-
<PAGE>
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
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.
-6-
<PAGE>
PERFORMANCE INFORMATION
From time to time, the Fund may state each Class' total return in
advertisements and other types of literature. Any statement 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, in the case of only Class A Shares,
the maximum front-end sales charge, 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 and Class C Shares.
In presenting performance information for Class A Shares, the Limited
CDSC, applicable only to certain redemptions of those shares, will not be
deducted from any computation of total return. See the Prospectus for the Fund
Classes for a description of the Limited CDSC and the limited instances in which
it applies. All references to a CDSC in this Performance Information section
will apply to Class B Shares or Class C Shares.
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made with respect to Class A Shares and that all distributions
are reinvested at net asset value, and, with respect to Class B Shares and Class
C Shares reflects the deduction of the CDSC that would be applicable upon
complete redemption of such shares. In addition, the Fund may present total
return information that does not reflect the deduction of the maximum front-end
sales charge or any applicable CDSC.
The performance of Class A Shares and the Institutional Class, as shown
below, is the average annual total return quotations through June 30, 1996,
computed as described above. The average annual total return for Class A Shares
at offer reflects the maximum front-end sales charges paid on the purchase of
shares. The average annual total return for the Class A Shares at net asset
value (NAV) does not reflect the payment of the maximum front-end sales charge
of 4.75%. Stock prices fluctuated during the periods covered and past results
-7-
<PAGE>
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 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.
Average Annual Total Return
Class A Class A
Shares(1)(2) Shares(1) Institutional
(At Offer) (At NAV) Class(3)
1 year
ended
6/30/96 29.08% 35.53% 35.88%
3 years
ended
6/30/96 17.33% 19.25% 19.56%
5 years
ended
6/30/96 23.10% 24.29% 24.50%
10 years
ended
6/30/96 14.60% 15.16% 15.25%
15 years
ended
6/30/96 15.58% 15.95% 16.02%
Period
10/3/68(4)
through
6/30/96 9.40% 9.59% 9.63%
(1) Class A Shares began paying 12b-1 payments on June 1, 1992 and performance
prior to that date does not reflect such payments.
(2) Prior to November 29, 1995, the maximum front-end sales charge was 5.75%.
Effective November 29, 1995, the maximum front-end sales charge was reduced
to 4.75% and the above performance numbers are calculated using 4.75% as the
applicable sales charge, and are more favorable than they would have been
had they been calculated using the former front-end charge.
(3) Date of initial public offering was November 23, 1992.
(4) Date of initial public offering of Class A Shares.
-8-
<PAGE>
The performance of Class B Shares, as shown below, is the average
annual total return quotation through June 30, 1996. The average annual total
return for Class B Shares including deferred sales charge reflects the deduction
of the applicable CDSC that would be paid if the shares were redeemed at June
30, 1996. The average annual total return for Class B Shares excluding deferred
sales charge assumes the shares were not redeemed at June 30, 1996 and therefore
does not reflect the deduction of a CDSC.
Average Annual Total Return
Class B Shares Class B Shares
(Including (Excluding
Deferred Deferred
Sales Charge) Sales Charge)
1 year
ended
6/30/96 30.55% 34.55%
Period
9/6/94(1)
through
6/30/96 26.38% 28.19%
(1) Date of initial public offering of Class B Shares.
The performance of Class C Shares, as shown below, is the aggregate
total return quotation through June 30, 1996. The aggregate total return for
Class C Shares including deferred sales charge reflects the deduction of the
applicable CDSC that would be paid if the shares were redeemed at June 30, 1996.
The aggregate total return for Class C Shares excluding deferred sales charge
assumes the shares were not redeemed at June 30, 1996 and therefore does not
reflect the deduction of a CDSC.
Aggregate Total Return
Class C Shares Class C Shares
(Including (Excluding
Deferred Deferred
Sales Charge) Sales Charge)
Period
11/29/95(1)
through
6/30/96 18.66% 19.66%
(1) Date of initial public offering of Class C Shares; total return for this
short of a time period may not be representative of longer-term results.
-9-
<PAGE>
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.
Total return performance for the Classes will be computed by adding all
reinvested income and realized securities profits distributions plus the change
in net asset value during a specific period and dividing by the offering price
at the beginning of the period. It will also reflect the maximum sales charge,
if any, paid for the illustrated investment amount, but not any income taxes
payable by shareholders on the reinvested distributions included in the
calculation. Because securities prices fluctuate, past performance should not be
considered as a representation of the results which may be realized from an
investment in the Fund in the future.
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 for these indices will reflect the reinvestment of all
distributions on a quarterly basis and market price fluctuations. The indices do
not take into account any sales charge or other fees. 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
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.
-10-
<PAGE>
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 nonindustrial 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 following tables present examples, for purposes of illustration
only, of cumulative total return performance for each Class through June 30,
1996. For these purposes, the calculations reflect maximum sales charges, if
any, and assume the reinvestment of any capital gains distributions and income
dividends paid during the indicated periods. The performance does not reflect
any income taxes payable by shareholders on the reinvested distributions
included in the calculations. The performance of the Class B Shares and Class C
Shares is calculated both with the applicable CDSC included and excluded.
Comparative information on the Standard & Poor's 500 Stock Index, the Dow Jones
Industrial Average and the NASDAQ Composite Index is also included.
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 a guarantee of future performance.
-11-
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return
Standard Dow
& Poor's Jones
Class A Institu- 500 Indus- NASDAQ
Shares(1) tional Stock trial Composite
(at Offer) Class(2) Index Average Index
<S> <C> <C> <C> <C> <C>
3 months
ended
6/30/96 12.5% 12.6% 4.5% 1.8% 7.6%
6 months
ended
6/30/96 15.0% 15.1% 10.1% 11.8% 12.6%
9 months
ended
6/30/96 18.6% 18.8% 17.1% 20.7% 14.4%
1 year
ended
6/30/96 29.1% 35.9% 26.0% 27.1% 26.9%
3 years
ended
6/30/96 61.5% 70.9% 61.1% 74.0% 68.3%
5 years
ended
6/30/96 182.6% 199.1% 107.6% 123.6% 149.0%
10 years
ended
6/30/96 290.8% 313.8% 264.8% 312.9% 192.2%
15 years
ended
6/30/96 777.1% 828.4% 782.3% 993.5% 264.8%
Period
10/3/68(3)
through
6/30/96 1,108.8% 1,108.3% N/A 1,862.5% N/A
</TABLE>
(1) Class A Shares began paying 12b-1 payments on June 1, 1992 and performance
prior to that date does not reflect such payments. Prior to November 29,
1995, the maximum front-end sales charge was 5.75%. Effective November 29,
1995, the maximum front-end sales charge was reduced to 4.75%, and the above
performance numbers are calculated using 4.75% as the applicable sales
charge, and are more favorable than they would have been had they been
calculated using the former front-end sales charge.
(2) 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.
(3) Date of initial public offering of Class A Shares.
-12-
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return
Class B Class B
Shares Shares Standard Dow
(Including (Excluding & Poor's Jones
Deferred Deferred 500 Indus- NASDAQ
Sales Sales Stock trial Composite
Charge) Charge) Index Average Index
<S> <C> <C> <C> <C> <C>
3 months
ended
6/30/96 8.3% 12.3% 4.5% 1.8% 7.6%
6 months
ended
6/30/96 10.6% 14.6% 10.1% 11.8% 12.6%
9 months
ended
6/30/96 13.9% 17.9% 17.1% 20.7% 14.4%
1 year
ended
6/30/96 30.6% 34.6% 26.0% 27.1% 26.9%
Period
9/6/94(1)
through
6/30/96 53.0% 57.0% 47.7% 51.4% 54.8%
</TABLE>
(1) Date of initial public offering of Class B Shares.
<TABLE>
<CAPTION>
Cumulative Total Return
Class C Class C
Shares Shares Standard Dow
(Including (Excluding & Poor's Jones
Deferred Deferred 500 Indus- NASDAQ
Sales Sales Stock trial Composite
Charge) Charge) Index Average Index
<S> <C> <C> <C> <C> <C>
3 months
ended
6/30/96 11.3% 12.3% 4.5% 1.8% 7.6%
6 months
ended
6/30/96 13.6% 14.6% 10.1% 11.8% 12.6%
Period
11/29/95(1)
through
6/30/96 18.7% 19.7% 12.2% 12.9% 11.9%
</TABLE>
(1) Date of initial public offering of Class C Shares; total return for this
short of a time period may not be representative of longer-term results.
For additional performance information, see Appendix B.
-13-
<PAGE>
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 seeking their objectives. The
Distributor may also from time to time cite general or specific information
about the institutional clients of the Manager, including the number of such
clients serviced by the Manager.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly--as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember.
Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. Investors also should consider their financial ability
to continue to purchase shares during periods of low fund share prices. Delaware
Group offers three services -- Automatic Investing Program, Direct Deposit
Program and the Wealth Builder Option -- that can help to keep your regular
investment program on track. See Investing by Electronic Fund Transfer - Direct
Deposit Purchase Plan and Automatic Investing Plan under Investment Plans and
Wealth Builder Option under Investment Plans for a complete description of these
services, including restrictions or limitations.
-14-
<PAGE>
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.
Number
Investment Price Per of Shares
Amount Share Purchased
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $ 5.00 20
Month 4 $100 $10.00 10
------------------------------------------------------------
$400 $37.50 48
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to
represent the actual performance of the Fund.
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 quarterly for 10 years:
8% 10% 12% 14%
Rate of Rate of Rate of Rate of
Return Return Return Return
------ ------ ------ -------
1 Year $10,824 $11,038 $11,255 $11,475
2 Years $11,717 $12,184 $12,668 $13,168
3 Years $12,682 $13,449 $14,258 $15,111
4 Years $13,728 $14,845 $16,047 $17,340
5 Years $14,859 $16,386 $18,061 $19,898
6 Years $16,084 $18,087 $20,328 $22,833
7 Years $17,410 $19,965 $22,879 $26,202
8 Years $18,845 $22,038 $25,751 $30,067
9 Years $20,399 $24,326 $28,983 $34,503
10 Years $22,080 $26,851 $32,620 $39,593
These figures are calculated assuming a fixed constant investment
return and assume no fluctuation in the value of principal. These figures, which
do not reflect payment of applicable taxes, are not intended to be a projection
of investment results and do not reflect the actual performance results of any
of the Classes.
-15-
<PAGE>
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. A number of trades are made on a net basis where the Fund either
buys the securities directly from the dealer or sells them to the dealer. In
these instances, there is no direct commission charged but there is a spread
(the difference between the buy and sell price) which is the equivalent of a
commission. When a commission is paid, 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.
During the fiscal years ended June 30, 1994, 1995 and 1996, the
aggregate dollar amounts of brokerage commissions paid by the Fund were
$188,574, $542,083 and $584,737, 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, 1996, portfolio transactions of
the Fund in the amount of $133,007,818, resulting in brokerage commissions of
$389,816, 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 of its own resources for
services used by the Manager in connection with administrative or other
functions not related to its investment decision-making process. In addition, so
-16-
<PAGE>
long as no fund is disadvantaged, portfolio transactions which generate
commissions or their equivalent are allocated to broker/dealers who provide
daily portfolio pricing services to the Fund and to other funds in the Delaware
Group. Subject to best price and execution, commissions allocated to brokers
providing such pricing services may or may not be generated by the funds
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 64% for 1995 and 90% for 1996.
-17-
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for the Fund's four
classes of shares - Class A Shares, Class B Shares, Class C Shares and the
Institutional Class, and has agreed to use its best efforts to sell shares of
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 the Distributor.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases generally must be at
least $100. The initial and subsequent investment minimums for Class A Shares
will be waived for purchases by officers, directors and employees of any
Delaware Group fund, the Manager or any of the Manager's affiliates if the
purchases are made pursuant to a payroll deduction program. Shares purchased
pursuant to the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act
and shares purchased in connection with an Automatic Investing Plan are subject
to a minimum initial purchase of $250 and a minimum subsequent purchase of $25.
Accounts opened under the Delaware Group Asset Planner service are subject to a
minimum initial investment of $2,000 per Asset Planner Strategy selected. There
are no minimum purchase requirements for the Institutional Class, but certain
eligibility requirements must be satisfied.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. See Investment Plans for purchase limitations
applicable to retirement plans. The Fund will reject any purchase order for more
than $250,000 of Class B Shares and $1,000,000 or more of Class C Shares. An
investor may exceed these limitations by making cumulative purchases over a
period of time. An investor should keep in mind, however, that reduced front-end
sales charges apply to investments of $100,000 or more in Class A Shares, which
are subject to lower annual 12b-1 Plan expenses than Class B Shares and Class C
Shares and generally are not subject to a CDSC.
Selling dealers have the responsibility of transmitting orders
promptly. 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.
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 4.75%; however, lower front-end sales charges
apply for larger purchases. See the table below. Class A Shares are also subject
to annual 12b-1 Plan expenses.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase; (iii) 2%
if shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class B Shares are
also subject to annual 12b-1 Plan expenses which are higher than those to which
Class A Shares are subject and are assessed against the Class B Shares for
approximately eight years after purchase. See Automatic Conversion of Class B
Shares under Classes of Shares in the Fund Classes' Prospectus.
-18-
<PAGE>
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Class C
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment which are equal to those to which Class B Shares are subject.
Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses. See Determining Offering Price and Net Asset Value and
Plans Under Rule 12b-1 for the Fund Classes in this Part B.
Class A Shares, Class B Shares, Class C Shares and Institutional Class
shares represent a proportionate interest in the Fund's assets and will receive
a proportionate interest in the Fund's income, before application, as to the
Class A, Class B and Class C Shares, of any expenses under the Fund's 12b-1
Plans.
Certificates representing shares purchased are not ordinarily issued
unless a shareholder submits a specific request. Certificates are not issued in
the case of Class B Shares or Class C Shares. However, purchases not involving
the issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing shares
purchased by sending a letter to the Transfer Agent requesting the certificate.
No charge is assessed by the Fund for any certificate issued. Investors who hold
certificates representing any of their shares may only redeem those shares by
written request. The investor's certificate(s) must accompany such request.
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A, Class B and Class C
Shares permit investors to choose the method of purchasing shares that is most
suitable for their needs given the amount of their purchase, the length of time
they expect to hold their shares and other relevant circumstances. Investors
should determine whether, given their particular circumstances, it is more
advantageous to purchase Class A Shares and incur a front-end sales charge and
annual 12b-1 Plan expenses of up to a maximum of .30% of the average daily net
assets of Class A Shares or to purchase either Class B or Class C Shares and
have the entire initial purchase amount invested in the Fund with the investment
thereafter subject to a CDSC and annual 12b-1 Plan expenses. Class B Shares are
subject to a CDSC if the shares are redeemed within six years of purchase, and
Class C Shares are subject to a CDSC if the shares are redeemed within 12 months
of purchase. Class B and Class C Shares are each subject to annual 12b-1 Plan
expenses of up to a maximum of 1% (.25% of which are service fees to be paid to
the Distributor, dealers or others for providing personal service and/or
maintaining shareholder accounts) of average daily net assets of the respective
Class. Class B Shares will automatically convert to Class A Shares at the end of
approximately eight years after purchase and, thereafter, be subject to annual
12b-1 Plan expenses of up to a maximum of .30% of average daily net assets of
such shares. Unlike Class B Shares, Class C Shares do not convert to another
class.
-19-
<PAGE>
Class A Shares
Purchases of $100,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the accompanying table, and
may include a series of purchases over a 13-month period under a Letter of
Intention signed by the purchaser. See Special Purchase Features - Class A
Shares, below, for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
<TABLE>
<CAPTION>
Trend Fund A Class
- -------------------------------------------------------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge as % of Commission***
Amount of Purchase Offering Amount as % of
Price Invested** Offering Price
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.75% 4.89% 4.00%
$100,000 but under $250,000 3.75 3.91 3.00
$250,000 but under $500,000 2.50 2.59 2.00
$500,000 but under $1,000,000* 2.00 2.04 1.60
</TABLE>
* There is no front-end sales charge on purchases of $1 million or more
of Class A Shares but, under certain limited circumstances, a 1%
contingent deferred sales charge may apply upon redemption of such
shares. The contingent deferred sales charge ("Limited CDSC") that may
be applicable arises only in the case of certain shares that were
purchased at net asset value and triggered the payment of a dealer's
commission.
** Based on the net asset value per share of Class A Shares as of the end
of the Fund's most recent fiscal year.
*** Financial institutions or their affiliated brokers may receive an
agency transaction fee in the percentages set forth above.
- -------------------------------------------------------------------------------
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 or
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 to dealers up to the full amount of
the front-end sales charge shown above. Dealers who receive 90% or more
of the sales charge may be deemed to be underwriters under the
Securities Act of 1933.
- -------------------------------------------------------------------------------
Certain dealers who enter into an agreement to provide extra training
and information on Delaware Group products and services and who increase sales
of Delaware Group funds may receive an additional commission of up to .15% of
the offering price in connection with sales of Class A Shares. Such dealers must
meet certain requirements in terms of organization and distribution capabilities
and their ability to increase sales. The Distributor should be contacted for
further information on these requirements as well as the basis and circumstances
upon which the additional commission will be paid. Participating dealers may be
deemed to have additional responsibilities under the securities laws.
-20-
<PAGE>
Dealer's Commission
For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers through
whom such purchases are effected in accordance with the following schedule:
Dealer's Commission
-------------------
(as a percentage of
Amount of Purchase amount purchased)
------------------
Up to $2 million 1.00%
Next $1 million up to $3 million .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 Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value under Redemption and
Exchange in the Fund Classes' Prospectus) may be aggregated with those of the
Class A Shares of the Fund. Financial advisers also may be eligible for a
dealer's commission in connection with certain purchases made under a Letter of
Intention or pursuant to an investor's Right of Accumulation. Financial advisers
should contact the Distributor concerning the applicability and calculation of
the dealer's commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B and Class C Shares are purchased without a front-end sales
charge. Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below, and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestment of dividends or capital gains distributions. See Waiver of
Contingent Deferred Sales Charge - Class B and Class C Shares under Redemption
and Exchange in the Prospectus for the Fund Classes for a list of the instances
in which the CDSC is waived.
-21-
<PAGE>
The following table sets forth the rates of the CDSC for Class B Shares
of the Fund:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
------------------------ ------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. At the end of approximately eight years after purchase, the investor's
Class B Shares will be automatically converted into Class A Shares of the Fund.
See Automatic Conversion of Class B Shares under Classes of Shares in the Fund
Classes' Prospectus. Such conversion will constitute a tax-free exchange for
federal income tax purposes. See Taxes in the Prospectus for the Fund Classes.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a
separate plan for each of the Class A Shares, Class B Shares and Class C Shares
of the Fund (the "Plans"). Each Plan permits the Fund to pay for certain
distribution, promotional and related expenses involved in the marketing of only
the Class to which the Plan applies. The Plans do not apply to the Institutional
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 shares
of the Institutional Class. Shareholders of the Institutional Class may not vote
on matters affecting the Plans.
The Plans permit the Fund, pursuant to the Distribution Agreement, to
pay out of the assets of the Class A, Class B and Class C Shares monthly fees to
the Distributor for its services and expenses in distributing and promoting
sales of shares of such classes. These expenses include, among other things,
preparing and distributing advertisements, sales literature and prospectuses and
reports used for sales purposes, compensating sales and marketing personnel, and
paying distribution and maintenance fees to securities brokers and dealers who
enter into agreements with the Distributor. The Plan expenses relating to the
Class B Shares and Class C Shares are also used to pay the Distributor for
advancing the commission costs to dealers with respect to the initial sale of
such shares.
In addition, the Fund may make payments out of the assets of the Class
A, Class B and Class C Shares directly to other unaffiliated parties, such as
banks, who either aid in the distribution of shares of, or provide services to,
such classes.
The maximum aggregate fee payable by the Fund under the Plans, and the
Fund's Distribution Agreement, is on an annual basis up to .30% of the Class A
Shares' average daily net assets for the year, and up to 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 each of the Class B
Shares' and the Class C Shares' average daily net assets for the year. The
Fund's Board of Directors may reduce these amounts at any time.
-22-
<PAGE>
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 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 Class
A, Class B and Class C Shares would be borne by such persons without any
reimbursement from such Fund Classes. Subject to seeking best price and
execution, 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 and the Distribution Agreement, as amended, have 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 1940 Act) of the
Fund and who have no direct or indirect financial interest in the Plans by vote
cast in person at a meeting duly called for the purpose of voting on the Plans
and such Distribution Agreement. Continuation of the Plans and the Distribution
Agreement, as amended, must be approved annually by the Board of Directors in
the same manner as specified above.
Each year, the directors must determine whether continuation of the
Plans is in the best interest of shareholders of, respectively, Class A Shares,
Class B Shares and Class C Shares and that there is a reasonable likelihood of
the Plan relating to a Fund Class providing a benefit to that Class. The Plans
and the Distribution Agreement, as amended, may be terminated at any time
without penalty by a majority of those directors who are not "interested
persons" or by a majority vote of the outstanding voting securities of the
relevant Fund Class. Any amendment materially increasing the percentage payable
under the Plans must likewise be approved by a majority vote of the outstanding
voting securities of the relevant Fund Class, as well as by a majority vote of
those directors who are not "interested persons." With respect to the Class A
Shares' Plan, any material increase in the maximum percentage payable thereunder
must also be approved by a majority of the outstanding voting Class B Shares.
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.
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For the fiscal year ended June 30, 1996, payments from the Class A
Shares pursuant to its Plan amounted to $1,012,054 and such payments were used
for the following purposes: Annual/Semi-Annual Reports - $35,662; Broker Trails
- - $791,172; Commissions to Wholesalers - $83,721; Promotional-Broker Meetings -
$16,769; Promotional-Other - $23,472; Telephone - $4,218; Wholesaler Expenses -
$18,479; and Prospectus Printing $38,561.
For the fiscal year ended June 30, 1996, payments from the Class B
Shares pursuant to its Plan amounted to $158,486 and such payments were used for
the following purposes: Broker Sales Charges - $60,094; Commissions to
Wholesalers - $6,594; Promotional-Broker Meetings - $739; Interest on Broker
Sales Charges - $50,845; and Broker Trails - $40,214.
For the period November 29, 1995 (date of initial public offering)
through June 30, 1996, payments from the Class C Shares pursuant to its Plan
amounted to $12,965 and such payments were used for the following purposes:
Broker Sales Charges - $11,979; and Interest on Broker Sales Charges - $986.
The staff of the Securities and Exchange Commission ("SEC") has
proposed amendments to Rule 12b-1 and other related regulations that could
impact Rule 12b-1 Distribution Plans. The Fund intends to amend the Plans, if
necessary, to comply with any new rules or regulations the SEC may adopt with
respect to Rule 12b-1.
Other Payments to Dealers - Class A, Class B and Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to .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.
Payments to dealers made in connection with seminars, conferences or
contests relating to the promotion of fund shares may be in an amount up to 100%
of the expenses incurred or awards made. The Distributor may also pay a portion
of the expense of preapproved dealer advertisements promoting the sale of
Delaware Group fund shares.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares may be purchased without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the Exchange
Privilege and the 12-Month Reinvestment Privilege.
Current and former officers, directors and employees of the Fund, any
other fund in the Delaware Group, the Manager, or any of the Manager's
affiliates that may in the future be created, legal counsel to the funds and
registered representatives and employees of broker/dealers who have entered into
Dealer's Agreements with the Distributor may purchase Class A Shares and any
such class of shares of any of the funds in the Delaware Group, including any
fund that may be created, at the net asset value per share. Family members of
such persons at their direction, and any employee benefit plan established by
any of the foregoing funds, corporations, counsel or broker/dealers may also
purchase shares at net asset value. Purchases of Class A Shares may also be made
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by clients of registered representatives of an authorized investment dealer at
net asset value within 12 months of a change of the registered representative's
employment, if the purchase is funded by proceeds from an investment where a
front-end sales charge, contingent deferred sales charge or other sales charge
has been assessed. Purchases of Class A Shares may also be made at net asset
value by bank employees who provide services in connection with agreements
between the bank and unaffiliated brokers or dealers concerning sales of shares
of Delaware Group funds. Officers, directors and key employees of institutional
clients of the Manager or any of its affiliates may purchase Class A Shares at
net asset value. Moreover, purchases may be effected at net asset value for the
benefit of the clients of brokers, dealers and registered investment advisers
affiliated with a broker or dealer, if such broker, dealer or investment adviser
has entered into an agreement with the Distributor providing specifically for
the purchase of Class A Shares in connection with special investment products,
such as wrap accounts or similar fee based programs. Such purchasers are
required to sign a letter stating that the purchase is for investment only and
that the securities may not be resold except to the issuer. Such purchasers may
also be required to sign or deliver such other documents as 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
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
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, CDSC or Limited CDSC, other than shares of Delaware Group Premium
Fund, Inc. beneficially owned in connection with the ownership of variable
insurance products, unless they were acquired through an exchange from a
Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC) previously purchased and still held as of the date of their Letter of
Intention toward the completion of such Letter. For purposes of satisfying an
investor's obligation under a Letter of Intention, Class B Shares and Class C
Shares of the Fund and the corresponding classes of shares of other Delaware
Group funds which offer such shares may be aggregated with 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
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
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of plan establishment. The level and any reduction in front-end sales charge
will be based on actual plan participation and the projected investments in
Delaware Group funds that are offered with a front-end sales charge, CDSC or
Limited CDSC for a 13-month period. The Transfer Agent reserves the right to
adjust the signed Letter of Intention based on this acceptance criteria. The
13-month period will begin on the date this Letter of Intention is accepted by
the Transfer Agent. If actual investments exceed the anticipated level and equal
an amount that would qualify the plan for further discounts, any front-end sales
charges will be automatically adjusted. In the event this Letter of Intention is
not fulfilled within the 13-month period, the plan level will be adjusted
(without completing another Letter of Intention) and the employer will be billed
for the difference in front-end sales charges due, based on the plan's assets
under management at that time. Employers may also include the value (at offering
price at the level designated in their Letter of Intention) of all their shares
intended for purchase that are offered with a front-end sales charge, CDSC or
Limited CDSC of any class. Class B Shares and Class C Shares of the Fund and
other Delaware Group funds which offer corresponding classes of shares may also
be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of Class B Shares and/or Class C Shares of the
Fund, as well as shares of any other class of any of the other Delaware Group
funds (except shares of any Delaware Group fund which do not carry a front-end
sales charge, CDSC or Limited CDSC, other than shares of Delaware Group Premium
Fund, Inc. beneficially owned in connection with the ownership of variable
insurance products, unless they were acquired through an exchange from a
Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC).
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of the Fund as
well as shares of any other class of any of the other Delaware Group funds which
offer such classes (except shares of any Delaware Group fund which do not carry
a front-end sales charge, CDSC or Limited CDSC, other than shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange from
a Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC). If, for example, any such purchaser has previously purchased and still
holds Class A Shares and/or shares of any other of the classes described in the
previous sentence with a value of $40,000 and subsequently purchases $60,000 at
offering price of additional shares of Class A Shares, the charge applicable to
the $60,000 purchase would currently be 3.75%. For the purpose of this
calculation, the shares presently held shall be valued at the public offering
price that would have been in effect were the shares purchased simultaneously
with the current purchase. Investors should refer to the table of sales charges
for Class A Shares to determine the applicability of the Right of Accumulation
to their particular circumstances.
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12-Month Reinvestment Privilege
Holders of Class A Shares (and of the Institutional Class holding
shares which were acquired through an exchange from one of the other mutual
funds in the Delaware Group offered with a front-end sales charge) who redeem
such shares 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 shares
of such other funds may be sold, at net asset value without the payment of a
front-end sales charge. This privilege does not extend to Class A Shares where
the redemption of the shares triggered the payment of a Limited CDSC. Persons
investing redemption proceeds from direct investments in mutual funds in the
Delaware Group offered without a front-end sales charge will be required to pay
the applicable sales charge when purchasing Class A Shares. The reinvestment
privilege does not extend to a redemption of either Class B or Class C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is intended to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
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 Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Fund Classes' Prospectus) in connection with the
features described above.
Group Investment Plans
Group Investment Plans which are not eligible to purchase shares of the
Institutional Class may also benefit from the reduced front-end sales charges
for investments in Class A Shares set forth in the table on page 00, based on
total plan assets. If a company has more than one plan investing in the Delaware
Group of funds, then the total amount invested in all plans would be used in
determining the applicable front-end sales charge reduction upon each purchase,
both initial and subsequent, upon notification to the Fund at the time of each
such purchase. Employees participating in such Group Investment Plans may also
combine the investments made in their plan account when determining the
applicable front-end sales charge on purchases to non-retirement Delaware Group
investment accounts if they so notify the Fund in connection with each purchase.
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)
retirement plans introduced by persons not associated with brokers or dealers
that are primarily engaged in the retail securities business and rollover
individual retirement accounts from such plans; (b) tax-exempt employee benefit
plans of the Manager or its affiliates and securities dealer firms with a
selling agreement with the Distributor; (c) institutional advisory accounts of
the Manager or its affiliates and those having client relationships with
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Delaware Investment Advisers, a division of the Manager, or its affiliates and
their corporate sponsors, as well as subsidiaries and related employee benefit
plans and rollover individual retirement accounts from such institutional
advisory accounts; (d) banks, trust companies and similar financial institutions
investing for their own account or for the account of their trust customers for
whom such financial institution is exercising investment discretion in
purchasing shares of the Class; and (e) registered investment advisers investing
on behalf of clients that consist solely of institutions and high net-worth
individuals having at least $1,000,000 entrusted to the adviser for investment
purposes, but only if the adviser is not affiliated or associated with a broker
or dealer and derives compensation for its services exclusively from its clients
for such advisory services.
Shares of the Institutional Class are available for purchase at net
asset value, without the imposition of a front-end sales charge or CDSC and are
not subject to Rule 12b-1 expenses.
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INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares of the respective
Fund Class in which an investor has an account (based on the net asset value in
effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of the Institutional Class
are reinvested in the accounts of the holders of such shares (based on the net
asset value in effect on the reinvestment date). A confirmation of each dividend
payment from net investment income and of distributions from realized securities
profits, if any, will be mailed to shareholders in the first quarter of the
fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the Fund. Such
purchases, which must meet the minimum subsequent purchase requirements set
forth in the Prospectuses and this Part B, are made for Class A Shares at the
public offering price and, for Class B Shares, Class C Shares and the
Institutional 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 initial purchase
requirements and the limitations set forth below, holders of Class A, Class B
and Class C Shares may automatically reinvest dividends and/or distributions in
any of the mutual funds in the Delaware Group, including the 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 the fund in which the investment is
intended to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses. See
also Additional Methods of Adding to Your Investment - Dividend Reinvestment
Plan under How to Buy Shares in the Prospectus for the Fund Classes.
Subject to the following limitations, dividends and/or distributions
from other funds in the Delaware Group may be invested in shares of the Fund,
provided an account has been established. Dividends from Class A Shares may not
be directed to Class B Shares or Class C Shares. Dividends from Class B Shares
may only be directed to other Class B Shares and dividends from Class C Shares
may only be directed to other Class C Shares. See Classes of Shares 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.
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Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for the Fund to
accept for investment in Class A, Class B or Class C Shares, through an agent
bank, preauthorized government or private recurring payments. This method of
investment assures the timely credit to the shareholder's account of payments
such as social security, veterans' pension or compensation benefits, federal
salaries, Railroad Retirement benefits, private payroll checks, dividends, and
disability or pension fund benefits. It also eliminates lost, stolen and delayed
checks.
Automatic Investing Plan--Shareholders of Class A, Class B and Class C
Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into their Fund
account. This type of investment will be handled in either of the following
ways. (1) If the shareholder's bank is a member of the National Automated
Clearing House Association ("NACHA"), the amount of the investment will be
electronically deducted from his or her account by Electronic Fund Transfer
("EFT"). The shareholder's checking account will reflect a debit each month at a
specified date although no check is required to initiate the transaction. (2) If
the shareholder's bank is not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such Plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to 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.
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<PAGE>
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Group. Shareholders of the Fund Classes may also elect to
invest in one or more of the other mutual funds in the Delaware Group through
the Wealth Builder Option. See Wealth Builder Option and Redemption and Exchange
in the Prospectus for the Fund Classes.
Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual funds in the Delaware
Group, subject to the conditions and limitations set forth in the Fund Classes'
Prospectus. The investment will be made on the 20th day of each month (or, if
the fund selected is not open that day, the next business day) at the public
offering price or net asset value, as applicable, of the fund selected on the
date of investment. No investment will be made for any month if the value of the
shareholder's account is less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges. Shareholders can terminate their participation at any time by written
notice to 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.
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 and Class
C Shares. See Waiver of Contingent Deferred Sales Charge - Class B and Class C
Shares under Redemption and Exchange in the Prospectus for the Fund Classes for
a list of the instances in which the CDSC is waived.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000 for retirement plans. Each purchase of Class C Shares
must be in an amount that is less than $1,000,000 for such plans. The maximum
purchase limitations apply only to the initial purchase of shares by the
retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans other than Individual Retirement Accounts
("IRAs"), for which there is a minimum initial purchase of $250 and a minimum
subsequent purchase of $25 regardless of which Class is selected. Retirement
plans may be subject to plan establishment fees, annual maintenance fees and/or
other administrative or trustee fees. Fees are based upon the number of
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participants in the plan as well as the services selected. Additional
information about fees is included in retirement plan materials. Fees are quoted
upon request. Annual maintenance fees may be shared by Delaware Management Trust
Company, the Transfer Agent, other affiliates of the Manager and others that
provide services to such Plans.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Class. 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.
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 and Class C
Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
by making contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year or elects to be treated
as having no compensation for the year. Investments in each of the Fund Classes
are permissible.
The Tax Reform Act of 1986 (the "Act") restructured, and in some cases
eliminated, the tax deductibility of IRA contributions. Under the Act, the full
deduction for IRAs ($2,000 for each working spouse and $2,250 for one-income
couples) was retained for all taxpayers who are not covered by an
employer-sponsored retirement plan. Even if a taxpayer (or his or her spouse) is
covered by an employer-sponsored retirement plan, the full deduction is still
available if the taxpayer's adjusted gross income is below $25,000 ($40,000 for
taxpayers filing joint returns). A partial deduction is allowed for married
couples with incomes between $40,000 and $50,000, and for single individuals
with incomes between $25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross income before IRA
deductions exceeds $50,000 ($35,000 for singles) and who are active participants
in an employer-sponsored retirement plan. Taxpayers who are not allowed
deductions on IRA contributions still can make nondeductible IRA contributions
of as much as $2,000 for each working spouse ($2,250 for one-income couples),
and defer taxes on interest or other earnings from the IRAs. Special rules apply
for determining the deductibility of contributions made by married individuals
filing separate returns.
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<PAGE>
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 Class A Shares qualify for purchase at net asset value but may, under certain
circumstances, be subject to a Limited CDSC. See Purchasing Shares for
information on reduced front-end sales charges applicable to Class A Shares.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. See Alternative Purchase Arrangements - Class B Shares and Class C
Shares under Classes of Shares, Contingent Deferred Sales Charge - Class B
Shares and Class C Shares under Classes of Shares; and Waiver of Contingent
Deferred Sales Charge - Class B and Class C Shares under Redemption and Exchange
in the Fund Classes' Prospectus concerning the applicability of a CDSC upon
redemption.
See Appendix A--IRA Information for additional IRA information.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Fund Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Employers with 25 or fewer eligible employees can establish this plan
which permits employer contributions and salary deferral contributions in Class
A Shares and Class C Shares only.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of 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 and Class C Shares or certain other funds in the Delaware Group.
Purchases under the plan may be combined for purposes of computing the reduced
front-end sales charge applicable to Class A Shares as set forth in the table on
page 00.
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase any of
the Fund Classes in conjunction with such an arrangement. Applicable front-end
sales charges with respect to Class A Shares for such purchases are set forth in
the table on page 00.
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<PAGE>
Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of any of the Fund Classes. Although investors
may use their own plan, there is available a Delaware Group 457 Deferred
Compensation Plan. Interested investors should contact the Distributor or their
investment dealers to obtain further information. Applicable front-end sales
charges for such purchases of Class A Shares are set forth in the table on page
00.
-34-
<PAGE>
DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering
price next calculated after receipt of the order by the Fund or its agent.
Orders for purchases of Class B Shares, Class C Shares and the Institutional
Class are effected at the net asset value per share next calculated after
receipt of the order by the Fund or its agent. Selling dealers have the
responsibility of transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable sales charges. Offering price and net asset value
are computed as of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is open. The New
York Stock Exchange is scheduled to be open Monday through Friday throughout the
year except for New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. When the New York Stock
Exchange is closed, the Fund will generally be closed, pricing calculations will
not be made and purchase and redemption orders will not be processed.
An example showing how to calculate the net asset value per share and,
in the case of Class A Shares, the offering price per share, 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 of the Fund 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 Class A, Class B and Class C Shares alone will bear the
12b-1 Plan expenses payable under their respective Plans. Due to the specific
distribution expenses and other costs that will be allocable to each Class, the
net asset value of each Class of the Fund will vary.
-35-
<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 at 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. Certificates are issued for Class
A Shares and Institutional Class shares only if a shareholder specifically
requests them. Certificates are not issued for Class B Shares or Class C Shares.
If stock certificates have been issued for shares being redeemed, they must
accompany the written request. For redemptions of $50,000 or less paid to the
shareholder at the address of record, the request must be signed by all owners
of the shares or the investment dealer of record, but a signature guarantee is
not required. When the redemption is for more than $50,000, or if payment is
made to someone else or to another address, signatures of all record owners are
required and a signature guarantee may be required. Each signature guarantee
must be supplied by an eligible guarantor institution. 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 CDSC or Limited CDSC. This is
computed and effective at the time the offering price and net asset value are
determined. See Determining Offering Price and Net Asset Value. The Fund and the
Distributor end their business days at 5 p.m., Eastern time. This offer is
discretionary and may be completely withdrawn without further notice by the
Distributor.
Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to the applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Prospectus for the Fund Classes. Class B Shares
are subject to a CDSC of: (i) 4% if shares are redeemed within two years of
purchase; (ii) 3% if shares are redeemed during the third or fourth year
following purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; and (iv) 1% if shares are redeemed during the sixth year
following purchase. Class C Shares are subject to a CDSC of 1% if shares are
redeemed within 12 months following purchase. See Contingent Deferred Sales
Charge - Class B Shares and Class C Shares under Classes of Shares in the
Prospectus for the Fund Classes. Except for the applicable CDSC or Limited CDSC,
and with respect to the expedited payment by wire described below for which
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.
-36-
<PAGE>
Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order; provided, however, that each commitment to mail or wire
redemption proceeds by a certain time, as described below, is modified by the
qualifications described in the next paragraph.
The Fund will process written or telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor redemption requests as to shares for which a check
was tendered as payment, but the Fund will not mail or wire the proceeds until
it is reasonably satisfied that the check has cleared. This potential delay can
be avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund 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 1940 Act 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.
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
Before the Fund involuntarily redeems shares from an account that,
under the circumstances noted in the relevant Prospectus, has remained below the
minimum amounts required by the Fund's Prospectuses and sends the proceeds to
the shareholder, the shareholder will be notified in writing that the value of
the shares in the account is less than the minimum required and will be allowed
60 days from the date of notice to make an additional investment to meet the
required minimum. See The Conditions of Your Purchase under How to Buy Shares in
the Prospectuses. Any redemption in an inactive account established with a
minimum investment may trigger mandatory redemption. No CDSC or Limited CDSC
will apply to the redemptions described in this paragraph.
Effective November 29, 1995, the minimum initial investment in Class A
Shares was increased from $250 to $1,000. Class A accounts that were established
prior to November 29, 1995 and maintain a balance in excess of $250 will not
-37-
<PAGE>
presently be subject to the $9 quarterly service fee that may be assessed
against accounts with balances below the stated minimum nor subject to
involuntary redemption.
* * *
The Fund has made available certain redemption privileges, as described
below. The Fund reserves the right to suspend or terminate these expedited
payment procedures upon 60 days' written notice to shareholders.
Expedited Telephone Redemptions
Shareholders of the Fund Classes or their investment dealers of record
wishing to redeem any amount of shares of $50,000 or less for which certificates
have not been issued may call the Shareholder Service Center at 800-523-1918 or,
in the case of shareholders of the Institutional Class, their Client Services
Representative at 800-828-5052 prior to the time the offering price and net
asset value are determined, as noted above, and have the proceeds mailed to them
at the record address. Checks payable to the shareholder(s) of record will
normally be mailed the next business day, but no later than seven days, after
the receipt of the redemption request. This option is only available to
individual, joint and individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can be transferred
to your predesignated bank account by wire or by check by calling the phone
numbers listed above. An authorization form must have been completed by the
shareholder and filed with the Fund before the request is received. Payment will
be made by wire or check to the bank account designated on the authorization
form as follows:
1. Payment by Wire: Request that Federal Funds be wired to the bank
account designated on the authorization form. Redemption proceeds will normally
be wired on the next business day following receipt of the redemption request.
There is a $7.50 wiring fee (subject to change) charged by CoreStates Bank, N.A.
which will be deducted from the withdrawal proceeds each time the shareholder
requests a redemption. If the proceeds are wired to the shareholder's account at
a bank which is not a member of the Federal Reserve System, there could be a
delay in the crediting of the funds to the shareholder's bank account.
2. Payment by Check: Request a check be mailed to the bank account
designated on the authorization form. Redemption proceeds will normally be
mailed the next business day, but no later than seven days, from the date of the
telephone request. This procedure will take longer than the Payment by Wire
option (1 above) because of the extra time necessary for the mailing and
clearing of the check after the bank receives it.
Redemption Requirements: In order to change the name of the bank and
the account number it will be necessary to send a written request to the 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.
If expedited payment under these procedures could adversely affect the
Fund, the Fund may take up to seven days to pay the shareholder.
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<PAGE>
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 Plans
Shareholders of Class A, Class B and Class C Shares who own or purchase
$5,000 or more of shares at the offering price, or net asset value, as
applicable, for which certificates have not been issued may establish a
Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or quarterly
withdrawals of $75 or more, although the 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.
Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend) and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the Class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital, and the share
balance may in time be depleted, particularly in a declining market.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares through a periodic investment program in a fund managed by the Manager
must be terminated before a Systematic Withdrawal Plan with respect to such
shares can take effect, except if the shareholder is a participant in one of our
retirement plans or is investing in Delaware Group funds which do not carry a
sales charge. Redemptions of Class A Shares pursuant to a Systematic Withdrawal
Plan may be subject to a Limited CDSC if the purchase was made at net asset
value and a dealer's commission has been paid on that purchase. Redemptions of
Class B Shares or Class C Shares pursuant to a Systematic Withdrawal Plan may be
subject to a CDSC, unless the annual amount selected to be withdrawn is less
than 12% of the account balance on the date that the Systematic Withdrawal Plan
was established. See Waiver of Contingent Deferred Sales Charge - Class B and
Class C Shares and Waiver of Limited CDSC - Class A Shares under Redemption and
Exchange in the Prospectus for the Fund Classes. Shareholders should consult
their financial advisers to determine whether a Systematic Withdrawal Plan would
be suitable for them.
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<PAGE>
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 for the Institutional
Class.
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<PAGE>
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 of 1986, as amended (the "Code").
All dividends and any capital gains distributions will be automatically
reinvested for the shareholder in additional shares of the same Class at net
asset value 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 Class A Shares, Class B
Shares and Class C 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 United States Post Office or which remains uncashed for a
period of more than one year may be reinvested in the shareholder's account at
the then-current net asset value and the dividend option may be changed from
cash to reinvest. 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 United States 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.
-41-
<PAGE>
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 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 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 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.
For the fiscal year ended June 30, 1996, none of the Fund's dividends from net
investment income qualified for the dividends-received deduction.
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
$158,784,916 as of June 30, 1996.
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.
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<PAGE>
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. On June 30, 1996, the Manager and its affiliates
within the Delaware Group, including Delaware International Advisers Ltd., were
supervising in the aggregate more than $29 billion in assets in various
institutional or separately managed (approximately $18,046,856,000) and
investment company (approximately $11,109,449,000) accounts.
The Investment Management Agreement for the Fund is dated April 3, 1995
and was approved by shareholders on March 29, 1995. The Agreement has an initial
term of two years and may be renewed each year only so long as such renewal and
continuance are specifically approved at least annually by the Board of
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 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. 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. On June 30, 1996, the total net assets of
the Fund were $689,332,167. Investment management fees paid by the Fund during
the past three fiscal years were $2,006,549 for 1994, $2,300,627 for 1995 and
$3,826,146 for 1996.
Except for those expenses borne by the Manager under the Investment
Management Agreement and the Distributor under the 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.
For the fiscal year ended June 30, 1996, the ratios of expenses to average daily
net assets for the Class A Shares, Class B Shares and the Institutional Class
were 1.31%, 2.06% and 1.06%, respectively. The ratios for the Class A and Class
B Shares reflect the impact of their 12b-1 Plans. The Fund anticipates that the
ratio of expenses to average daily net assets of Class C Shares will be
approximately equal to that of the Class B Shares.
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,
1996, no reimbursement was necessary or paid.
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<PAGE>
Distribution and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor of Fund shares under
a Distribution Agreement dated April 3, 1995, as amended on November 29, 1995.
The Distributor is an affiliate of the Manager and bears all of the costs of
promotion and distribution, except for payments by the Fund on behalf of Class A
Shares, Class B Shares and Class C Shares under their respective 12b-1 Plans.
Prior to January 3, 1995, Delaware Distributors, Inc. ("DDI") served as the
national distributor of the Fund's shares. On that date, Delaware Distributors,
L.P., a newly formed limited partnership, succeeded to the business of DDI. All
officers and employees of DDI became officers and employees of Delaware
Distributors, L.P. DDI is the corporate general partner of Delaware
Distributors, L.P. and both DDI and Delaware Distributors, L.P. are indirect,
wholly owned subsidiaries of Delaware Management Holdings, Inc.
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
the Fund's shareholder servicing, dividend disbursing and transfer agent
pursuant to a Shareholders Services Agreement dated June 29, 1988. The Transfer
Agent also provides accounting services to the Fund pursuant to the terms of a
separate agreement. The Transfer Agent is also an indirect, wholly owned
subsidiary of Delaware Management Holdings, Inc.
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<PAGE>
OFFICERS AND DIRECTORS
The business and affairs of the Fund are managed under the direction of
its Board of Directors.
Certain officers and directors of the Fund hold identical positions in
each of the other funds in the Delaware Group. On July 31, 1996, the Fund's
officers and directors owned approximately 1% of the outstanding shares of the
Class A Shares and less than 1% of the outstanding shares of the Class B Shares,
Class C Shares and the Institutional Class.
As of July 31, 1996, management believes the following accounts held 5%
or more of the outstanding shares of a Class:
<TABLE>
<CAPTION>
Class Name of Address of Account Share Amount Percentage
- ----- -------------------------- ------------ ----------
<S> <C> <C> <C>
Class A Shares Merrill Lynch Pierce Fenner & Smith
Mutual Fund Operations
P.O. Box 41621
Jacksonville, FL 32203 2,725,865 10.30%
Class B Shares Merrill Lynch Pierce Fenner & Smith
Mutual Fund Operations
4800 Deer Lake Dr. East, 3rd Fl.
Jacksonville, FL 32246 287,942 14.06%
Class C Shares Merrill Lynch Pierce Fenner & Smith
Mutual Fund Operations
4800 Deer Lake Dr. East, 3rd Fl.
Jacksonville, FL 32246 104,918 28.60%
Prudential Securities Inc.
FBO Joseph B Mufale
IRA Rollover dtd 10/21/93
5541 Golden Hts.
Fayetteville, NY 13066 31,110 8.48%
</TABLE>
-45-
<PAGE>
<TABLE>
Class Name of Address of Account Share Amount Percentage
- ----- -------------------------- ------------ ----------
<S> <C> <C> <C>
Institutional Class Iceberg & Co.
By State Street Bank & Trust Co.
TRST Glaxo Inc. Retirement Plan
P.O. Box 1992
Boston, MA 02105 2,434,127 31.74%
Fidelity Management Trust Co.
FBO Delta Family Care Savings Plan
Financial Operations
Stock Trading Location KW1C
100 Magellan 1st Fl.
Covington, KY 41015 1,159,995 15.13%
Trustees for Harrah's
Entertainment Savings and
Retirement Plan
1023 Cherry Road
Memphis, TN 38117 1,053,589 13.74%
Woodstock
c/o Wood County Trust Company
181 2nd Street South
P.O. Box 8000
Wisconsin Rapids, WI 54495 743,927 9.70%
Merrill Lynch Trust Co.
TRST Qualified Retirement Plans
265 Davidson Avenue 3rd Fl.
Somerset, NJ 08873 531,223 6.93%
Bank of New York
TRST First Hospital Corp.
Retirement Plan
1 Wall Street
New York, NY 10005 440,749 5.75%
</TABLE>
DMH Corp., Delaware Management Company, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware International Holdings Ltd., Founders
Holdings, Inc., Delaware International Advisers Ltd., Delaware Capital
Management, Inc. and Delaware Investment & Retirement Services, Inc. are direct
or indirect, wholly owned subsidiaries of Delaware Management Holdings, Inc.
("DMH"). On April 3, 1995, a merger between DMH and a wholly owned subsidiary of
Lincoln National Corporation ("Lincoln National") was completed. In connection
with the merger, a new Investment Management Agreement between the Fund and the
Manager was executed following shareholder approval. DMH and the Manager are now
indirect, wholly owned subsidiaries, and subject to the ultimate control, of
-46-
<PAGE>
Lincoln National. Lincoln National, with headquarters in Fort Wayne, Indiana, is
a diversified organization with operations in many aspects of the financial
services industry, including insurance and investment management.
Directors and principal officers of the Fund are noted below along with
their ages and their business experience for the past five years. Unless
otherwise noted, the address of each officer and director is One Commerce
Square, Philadelphia, PA 19103.
*Wayne A. Stork (59)
Chairman, President, Chief Executive Officer, Director and/or Trustee
of the Fund, 16 other investment companies in the Delaware
Group (which excludes Delaware Pooled Trust, Inc.), Delaware
Management Holdings, Inc., DMH Corp., Delaware International
Holdings Ltd. and Founders Holdings, Inc.
Chairman and Director of Delaware Pooled Trust, Inc., Delaware
Distributors, Inc., Delaware Capital Management, Inc. and
Delaware Investment & Retirement Services, Inc.
Chairman, President, Chief Executive Officer, Chief Investment Officer
and Director of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware
International Advisers Ltd.
Director of Delaware Service Company, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware
organization.
Winthrop S. Jessup (51)
Executive Vice President of the Fund, 16 other investment companies in
the Delaware Group (which excludes Delaware Pooled Trust,
Inc.) and Delaware Management Holdings, Inc.
President and Chief Executive Officer of Delaware Pooled Trust, Inc.
President and Director of Delaware Capital Management, Inc.
Executive Vice President and Director of DMH Corp., Delaware Management
Company, Inc., Delaware International Holdings Ltd. and
Founders Holdings, Inc.
Vice Chairman and Director of Delaware Distributors, Inc.
Vice Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc., Delaware International
Advisers Ltd., Delaware Management Trust Company and Delaware
Investment & Retirement Services, Inc.
During the past five years, Mr. Jessup has served in various
executive capacities at different times within the Delaware
organization.
Richard G. Unruh, Jr. (57)
Executive Vice President of the Fund and each of the other 17
investment companies in the Delaware Group.
Executive Vice President and Director of Delaware Management Company,
Inc.
Senior Vice President of Delaware Management Holdings, Inc. and
Delaware Capital Managment, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware
organization.
- -----------------------
*Director affiliated with the Funds' investment manager and considered an
"interested person" as defined in the 1940 Act.
-47-
<PAGE>
Paul E. Suckow (49)
Executive Vice President/Chief Investment Officer, Fixed Income of the
Fund, each of the other 17 investment companies in the
Delaware Group and Delaware Management Company, Inc.
Executive Vice President/Chief Investment Officer, Fixed Income and
Director of Founders Holdings, Inc.
Senior Vice President/Chief Investment Officer, Fixed Income of
Delaware Management Holdings, Inc.
Senior Vice President of Delaware Capital Managment, Inc.
Director of Founders CBO Corporation.
Director of HYPPCO Finance Company Ltd.
Before returning to the Delaware Group in 1993, Mr. Suckow was
Executive Vice President and Director of Fixed Income for
Oppenheimer Management Corporation, New York, NY from 1985 to
1992. Prior to that, Mr. Suckow was a fixed-income portfolio
manager for the Delaware Group.
Walter P. Babich (69)
Director and/or Trustee of the Fund and each of the other 17 investment
companies in the Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and
from 1988 to 1991, he was a partner of I&L Investors.
Anthony D. Knerr (57)
Director and/or Trustee of the Fund and each of the other 17 investment
companies in the Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Founder and Managing Director, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance
and Treasurer of Columbia University, New York. From 1987 to
1989, he was also a lecturer in English at the University. In
addition, Mr. Knerr was Chairman of The Publishing Group,
Inc., New York, from 1988 to 1990. Mr. Knerr founded The
Publishing Group, Inc. in 1988.
Ann R. Leven (56)
Director and/or Trustee of the Fund and each of the other 17 investment
companies in the Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer
of the Smithsonian Institution, Washington, DC, and from 1975
to 1992, she was Adjunct Professor of Columbia Business
School.
W. Thacher Longstreth (76)
Director and/or Trustee of the Fund and each of the other 17 investment
companies in the Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
-48-
<PAGE>
Charles E. Peck (70)
Director and/or Trustee of the Fund and each of the other 17 investment
companies in the Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive
Officer of The Ryland Group, Inc., Columbia, MD.
David K. Downes (56)
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer of the Fund, each of the other 17 investment companies
in the Delaware Group and Delaware Management Company, Inc.
Chairman and Director of Delaware Management Trust Company.
Chief Executive Officer and Director of Delaware Investment &
Retirement Services, Inc.
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer/Treasurer of Delaware Management Holdings, Inc.
Senior Vice President/Chief Financial Officer/Treasurer and Director
of DMH Corp.
Senior Vice President/Chief Administrative Officer and Director of
Delaware Distributors, Inc.
Senior Vice President/Chief Administrative Officer of Delaware
Distributors, L.P.
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer and Director of Delaware Service Company, Inc.
Chief Financial Officer and Director of Delaware International
Holdings Ltd.
Senior Vice President/Chief Financial Officer/Treasurer of Delaware
Capital Management, Inc.
Senior Vice President/Chief Financial Officer and Director of Founders
Holdings, Inc.
Director of Delaware International Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes was Chief
Administrative Officer, Chief Financial Officer and Treasurer
of Equitable Capital Management Corporation, New York, from
December 1985 through August 1992, Executive Vice President
from December 1985 through March 1992 and Vice Chairman from
March 1992 through August 1992.
George M. Chamberlain, Jr. (49)
Senior Vice President and Secretary of the Fund, each of the other 17
investment companies in the Delaware Group, Delaware
Management Holdings, Inc. and Delaware Distributors, L.P.
Executive Vice President, Secretary and Director of Delaware
Management Trust Company.
Senior Vice President, Secretary and Director of DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Founders Holdings, Inc.,
Delaware Investment & Retirement Services, Inc. and Delaware
Capital Management, Inc.
Secretary and Director of Delaware International Holdings Ltd.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served in various
capacities at different times within the Delaware
organization.
Edward N. Antoian (40)
Vice President/Senior Portfolio Manager of the Fund, of seven other
investment companies in the Delaware Group and of Delaware
Management Company, Inc.
During the past five years, Mr. Antoian has served in such capacities
within the Delaware organization.
-49-
<PAGE>
Gerald S. Frey (50)
Vice President/Senior Portfolio Manager of the Fund, of seven other
investment companies in the Delaware Group and of Delaware
Management Company, Inc.
Before joining the Delaware Group in 1996, Mr. Frey was a Senior
Director with Morgan Grenfell Capital Management, New York, NY
from 1986 to 1995.
Joseph H. Hastings (46)
Vice President/Corporate Controller of the Fund, each of the other
17 investment companies in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware Management
Company, Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware
Capital Management, Inc., Founders Holdings, Inc. and Delaware
International Holdings Ltd.
Chief Financial Officer/Treasurer of Delaware Investment & Retirement
Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company.
Assistant Treasurer of Founders CBO Corporation.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings was Chief
Financial Officer for Prudential Residential Services, L.P.,
New York, NY from 1989 to 1992. Prior to that, Mr. Hastings
served as Controller and Treasurer for Fine Homes
International, L.P., Stamford, CT from 1987 to 1989.
Michael P. Bishof (34)
Vice President/Treasurer of the Fund, each of the other 17
investment companies in the Delaware Group, Delaware
Management Company, Inc., Delaware Distributors, Inc.,
Delaware Distributors, L.P., Delaware Service Company, Inc.
and Founders Holdings, Inc.
Vice President/Manager of Investment Accounting of Delaware
International Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation.
Before joining the Delaware Group in 1995, Mr. Bishof was a Vice
President for Bankers Trust, New York, NY from 1994 to 1995, a
Vice President for CS First Boston Investment Management, New
York, NY from 1993 to 1994 and an Assistant Vice President for
Equitable Capital Management Corporation, New York, NY from
1987 to 1993.
-50-
<PAGE>
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from the
Fund and the total compensation received from all Delaware Group funds for the
fiscal year ended June 30, 1996 and an estimate of annual benefits to be
received upon retirement under the Delaware Group Retirement Plan for
Directors/Trustees as of June 30, 1996.
<TABLE>
<CAPTION>
Pension or
Retirement Estimated Total
Benefits Annual Compensation
Aggregate Accrued Benefits from all 17
Compensation as Part of Upon Delaware
Name from Fund Fund Expenses Retirement* Group Funds
<S> <C> <C> <C> <C>
W. Thacher Longstreth $2,073 None $30,000 $50,951
Ann R. Leven $2,392 None $30,000 $59,087
Walter P. Babich $2,229 None $30,000 $55,951
Anthony D. Knerr $2,359 None $30,000 $58,087
Charles E. Peck $2,231 None $30,000 $54,087
</TABLE>
* Under the terms of the Delaware Group Retirement Plan for Directors/Trustees,
each disinterested director who, at the time of his or her retirement from the
Board, has attained the age of seventy years and served on the Board for at
least five continuous years, is entitled to receive payments from each fund in
the Delaware Group for a period equal to the lesser of the number of years
that such person served as a director or the remainder of such person's life.
The amount of such payments will be equal, on an annual basis, to the amount
of the annual retainer that is paid to directors of each fund at the time of
such person's retirement. If an eligible director retired as of June 30, 1996,
he or she would be entitled to annual payments totaling $30,000, in the
aggregate, from all of the funds in the Delaware Group, based on the number of
funds in the Delaware Group as of that date.
-51-
<PAGE>
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 may modify, terminate or suspend the exchange privilege
upon 60 days' notice to shareholders.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses. A shareholder requesting an exchange will be sent a current prospectus
and an authorization form for any of the other mutual funds in the Delaware
Group. Exchange instructions must be signed by the record owner(s) exactly as
the shares are registered.
An exchange constitutes, for tax purposes, the sale of one fund and the
purchase of another. The sale may involve either a capital gain or loss to the
shareholder for federal income tax purposes.
In addition, investment advisers and dealers may make exchanges between
funds in the Delaware Group on behalf of their clients by telephone or other
expedited means. This service may be discontinued or revised at any time by the
Transfer Agent. Such exchange requests may be rejected if it is determined that
a particular request or the total requests at any time could have an adverse
effect on any of the funds. Requests for expedited exchanges may be submitted
with a properly completed exchange authorization form, as described above.
Telephone Exchange Privilege
Shareholders owning shares for which certificates have not been issued
or their investment dealers of record may exchange shares by telephone for
shares in other mutual funds in the Delaware Group. This service is
automatically provided unless the Fund receives written notice from the
shareholder to the contrary.
Shareholders or their investment dealers of record may contact the
Shareholder Service Center at 800-523-1918 or, in the case of shareholders of
the Institutional 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.
-52-
<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.
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Fund will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Group funds from Timing Firms. The Fund reserves the right to temporarily or
permanently terminate the exchange privilege or reject any specific purchase
order for any person whose transactions seem to follow a timing pattern who: (i)
makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, or (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1/4 of 1% of the Fund's net assets. Accounts
under common ownership or control, including accounts administered so as to
redeem or purchase shares based upon certain predetermined market indicators,
will be aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Group funds: (1) Decatur
Income Fund, (2) Decatur Total Return Fund, (3) Delaware Fund, (4) Limited-Term
Government Fund, (5) Tax-Free USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund and (8) Tax-Free Pennsylvania Fund. No other Delaware Group
funds are available for timed exchanges. Assets redeemed or exchanged out of
Timing Accounts in Delaware Group funds not listed above may not be reinvested
back into that Timing Account. The Fund reserves the right to apply these same
restrictions to the account(s) of any person whose transactions seem to follow a
timing pattern (as described above).
The Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if the
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to the Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
* * *
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. Devon Fund
seeks current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks the Manager
believes have the potential for above average dividend increases over time.
-53-
<PAGE>
Value Fund seeks capital appreciation by investing primarily in common
stocks whose market values appear low relative to their underlying value or
future potential.
DelCap Fund seeks long-term capital growth by investing in common
stocks and securities convertible into common stocks of companies that have a
demonstrated history of growth and have the potential to support continued
growth.
Decatur Income Fund seeks the highest possible current income by
investing primarily in common stocks that provide the potential for income and
capital appreciation without undue risk to principal. Decatur Total Return Fund
seeks long-term growth by investing primarily in securities that provide the
potential for income and capital appreciation without undue risk to principal.
Delchester Fund seeks as high a current income as possible by investing
principally in high yield, high risk corporate bonds, and also in U.S.
government securities and commercial paper. Strategic Income Fund seeks to
provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high-yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities.
U.S. Government Fund seeks high current income by investing primarily
in long-term debt obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities.
Limited-Term Government Fund seeks high, stable income by investing
primarily in a portfolio of short- and intermediate-term securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities and
instruments secured by such securities. U.S. Government Money Fund seeks maximum
current income with preservation of principal and maintenance of liquidity by
investing only in short-term securities issued or guaranteed as to principal and
interest by the U.S. government, its agencies or instrumentalities, and
repurchase agreements collateralized by such securities, while maintaining a
stable net asset value.
Delaware Cash Reserve seeks the highest level of income consistent with
the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
Tax-Free USA Fund seeks high current income exempt from federal income
tax by investing in municipal bonds of geographically-diverse issuers. Tax-Free
Insured Fund invests in these same types of securities but with an emphasis on
municipal bonds protected by insurance guaranteeing principal and interest are
paid when due. Tax-Free USA Intermediate Fund seeks a high level of current
interest income exempt from federal income tax, consistent with the preservation
of capital by investing primarily in municipal bonds.
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.
-54-
<PAGE>
International Equity Fund seeks to achieve long-term growth without
undue risk to principal by investing primarily in international securities that
provide the potential for capital appreciation and income. Global Bond Fund
seeks to achieve current income consistent with the preservation of principal by
investing primarily in global fixed-income securities that may also provide the
potential for capital appreciation. Global Assets Fund seeks to achieve
long-term total return by investing in global securities which will provide
higher current income than a portfolio comprised exclusively of equity
securities, along with the potential for capital growth. Emerging Markets Fund
seeks long-term capital appreciation by investing primarily in equity securities
of issuers located or operating in emerging countries.
Enterprise Fund seeks to provide maximum appreciation of capital by
investing in medium-sized companies which have a dominant position within their
industry, are undervalued, or have potential for growth in earnings. U.S. Growth
Fund seeks to maximize capital appreciation by investing in companies of all
sizes which have low dividend yields, strong balance sheets and high expected
earnings growth rates relative to their industry. World Growth Fund seeks to
maximize total return (capital appreciation and income), principally through
investments in an internationally diversified portfolio of equity securities.
New Pacific Fund seeks long-term capital appreciation by investing primarily in
companies which are domiciled in or have their principal business activities in
the Pacific Basin. Federal Bond Fund seeks to maximize current income consistent
with preservation of capital. The fund attempts to achieve this objective by
investing primarily in securities issued by the U.S. government, its agencies
and instrumentalities. Corporate Income Fund seeks to provide high current
income consistent with preservation of capital. The fund attempts to achieve
this objective primarily by investing in a diversified portfolio of investment
grade fixed-income securities issued by U.S. corporations.
Delaware Group Premium Fund offers ten funds available exclusively as
funding vehicles for certain insurance company separate accounts. Equity/Income
Series seeks the highest possible total rate of return by selecting issues that
exhibit the potential for capital appreciation while providing higher than
average dividend income. High Yield Series seeks as high a current income as
possible by investing in rated and unrated corporate bonds, U.S. government
securities and commercial paper. Capital Reserves Series seeks a high stable
level of current income while minimizing fluctuations in principal by investing
in a diversified portfolio of short- and intermediate-term securities. Money
Market Series seeks the highest level of income consistent with preservation of
capital and liquidity through investments in short-term money market
instruments. Growth Series seeks long-term capital appreciation by investing its
assets in a diversified portfolio of securities exhibiting the potential for
significant growth. Multiple Strategy Series seeks a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. International
Equity Series seeks long-term growth without undue risk to principal by
investing primarily in equity securities of foreign issuers that provide the
potential for capital appreciation and income. Value Series seeks capital
appreciation by investing in small- to mid-cap common stocks whose market values
appear low relative to their underlying value or future earnings and growth
potential. Emphasis will also be placed on securities of companies that may be
temporarily out of favor or whose value is not yet recognized by the market.
Emerging Growth Series seeks long-term capital appreciation by investing
primarily in small-cap common stocks and convertible securities of emerging and
other growth-oriented companies. These securities will have been judged to be
responsive to changes in the marketplace and to have fundamental characteristics
to support growth. Income is not an objective. Global Bond Series seeks to
achieve current income consistent with the preservation of principal by
investing primarily in global fixed-income securities that may also provide the
potential for capital appreciation.
-55-
<PAGE>
For more complete information about any of the Delaware Group funds,
including charges and expenses, you can obtain a prospectus from the
Distributor. Read it carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the
information contained in each fund's prospectus(es).
-56-
<PAGE>
GENERAL INFORMATION
The Manager is the investment manager of the Fund. The Manager also
provides investment management services to certain of the other funds in the
Delaware Group. The Manager, through a separate division, also manages private
investment accounts. While investment decisions of the Fund are made
independently from those of the other funds and accounts, investment decisions
for such other funds and accounts may be made at the same time as investment
decisions for the Fund.
Access persons and advisory persons of the Delaware Group of funds, as
those terms are defined in SEC Rule 17j-1 under the 1940 Act, who provide
services to the Manager, Delaware International Advisers Ltd. or their
affiliates, are permitted to engage in personal securities transactions subject
to the exceptions set forth in Rule 17j-1 and the following general restrictions
and procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance is received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions may only be closed-out at a profit after a 60-day holding
period has elapsed; and (5) the Compliance Officer must be informed periodically
of all securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.
The Distributor acts as national distributor for the Fund and for the
other mutual funds in the Delaware Group. As previously described, prior to
January 3, 1995, DDI served as the national distributor for the Fund. The
Distributor and, in its capacity as such, DDI received net commissions from the
Fund on behalf of the Class A Shares, after reallowances to dealers, as follows:
Total
Amount Net
of Under- Amounts Commission
writing Reallowed to
Fiscal Year Ended Commission to Dealers DDLP/DDI
----------------- ---------- ---------- --------
June 30, 1996 $2,101,990 $1,779,727 $322,263
June 30, 1995 1,202,397 1,042,162 160,235
June 30, 1994 3,019,096 2,618,113 400,983
The Distributor and, in its capacity as such, DDI received in the
aggregate Limited CDSC payments with respect to Class A Shares as follows:
Fiscal Year Ended Limited CDSC Payments
----------------- ---------------------
June 30, 1996 $11,000
June 30, 1995 11,335
June 30, 1994 - 0 -
-57-
<PAGE>
The Distributor and, in its capacity as such, DDI received in the
aggregate CDSC payments with respect to Class B Shares as follows:
Fiscal Year Ended CDSC Payments
----------------- -------------
June 30, 1996 $29,086
June 30, 1995* 3,720
*Date of initial public offering was September 6, 1994.
The Distributor received CDSC payments with respect to Class C Shares
as follows:
Fiscal Year Ended CDSC Payments
----------------- -------------
June 30, 1996* $480
*Date of initial public offering was November 29, 1995.
Effective as of January 3, 1995, all such payments described above have
been paid to the Distributor.
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for 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 Transfer Agent also
provides accounting services to the Fund. Those services include performing all
functions related to calculating the Fund's net asset value and providing all
financial reporting services, regulatory compliance testing and other related
accounting services. For its services, the Transfer Agent is paid a fee based on
total assets of all funds in the Delaware Group for which it provides such
accounting services. Such fee is equal to .25% multiplied by the total amount of
assets in the complex for which the Transfer Agent furnishes accounting
services, where such aggregate complex assets are $10 billion or less, and .20%
of assets if such aggregate complex assets exceed $10 billion. The fees are
charged to each fund, including the Fund, on an aggregate pro-rata basis. The
asset-based fee payable to the Transfer Agent is subject to a minimum fee
calculated by determining the total number of investment portfolios and
associated classes.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of 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.
Bankers Trust Company, One Bankers Trust Plaza, New York, NY 10006, is
custodian of the Fund's securities and cash. As custodian for the Fund, Bankers
Trust Company maintains a separate account or accounts for the Fund; receives,
holds and releases portfolio securities on account of the Fund; receives and
disburses money on behalf of the Fund; and collects and receives income and
other payments and distributions on account of the Fund's portfolio securities.
-58-
<PAGE>
The legality of the issuance of the shares offered hereby, registered
pursuant to Rule 24f-2 under the 1940 Act, has been passed upon for the Fund by
Stradley, Ronon, Stevens & Young, LLP, 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 Board of Directors
has allocated fifty million shares to the Class A Shares, twenty-five million
shares to the Class B Shares, twenty-five million shares to the Class C Shares
and twenty-five million shares to the Institutional Class. Each Class represents
a proportionate interest in the assets of the Fund, and each has 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 that affects the
Fund Classes' Distribution Plans under Rule 12b-1. Similarly, as a general
matter, shareholders of Class A Shares, Class B Shares and Class C Shares may
vote only on matters affecting the 12b-1 Plan that relates to the class of
shares that they hold. However, Class B Shares may vote on any proposal to
increase materially the fees to be paid by the Fund under the Rule 12b-1 Plan
relating to 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 Plans of Class A, Class B and Class C Shares will be allocated solely to
those classes.
Shares do not have 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.
Noncumulative Voting
Fund 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.
-59-
<PAGE>
APPENDIX A--IRA INFORMATION
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
with incomes between $25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross income before IRA
deductions exceeds $50,000 ($35,000 for singles) and who are active participants
in an employer-sponsored retirement plan. Taxpayers who were not allowed
deductions on IRA contributions still can make nondeductible IRA contributions
of as much as $2,000 for each working spouse ($2,250 for one-income couples),
and defer taxes on interest or other earnings from the IRAs. Special rules apply
for determining the deductibility of contributions made by married individuals
filing separate returns.
As illustrated in the following tables, maintaining an IRA 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.
-60-
<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-$24,000
--------------- Joint -- $0-$40,100
How Much You
End of Cumulative How Much You Have With Full
Year Investment Amount Have Without IRA 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 -- $24,001-$58,150
--------------- Joint -- $40,101-$96,900
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,544 $ 1,584 $ 2,200
5 10,000 8,913 9,670 13,431
10 20,000 21,531 25,245 35,062
15 30,000 39,394 50,328 69,899
20 40,000 64,683 90,724 126,005
25 50,000 100,485 155,782 216,364
30 60,000 151,171 260,559 361,887
35 70,000 222,927 429,303 596,254
40 80,000 324,512 701,067 973,704
</TABLE>
[Without IRA--investment of $1,440 ($2,000 less 28%) earning 7.2% (10% less28%)]
[With IRA--No Deduction--investment of $1,440 ($2,000 less 28%) earning 10%]
-61-
<PAGE>
31% Tax Bracket Single -- $58,151-$121,300
--------------- Joint -- $96,901-$147,700
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,475 $ 1,518 $ 2,200
5 10,000 8,467 9,268 13,431
10 20,000 20,286 24,193 35,062
15 30,000 36,787 48,231 69,899
20 40,000 59,821 86,943 126,005
25 50,000 91,978 149,291 216,364
30 60,000 136,868 249,702 361,887
35 70,000 199,536 411,415 596,254
40 80,000 287,021 671,855 973,704
</TABLE>
[Without IRA--investment of $1,380 ($2,000 less 31%) earning 6.9% (10% less
31%)]
[With IRA--No Deduction--investment of $1,380 ($2,000 less 31%) earning 10%]
36% Tax Bracket* Single -- $121,301-$263,750
--------------- Joint -- $147,701-$263,750
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,362 $ 1,408 $ 2,200
5 10,000 7,739 8,596 13,431
10 20,000 18,292 22,440 35,062
15 30,000 32,683 44,736 69,899
20 40,000 52,308 80,643 126,005
25 50,000 79,069 138,473 216,364
30 60,000 115,562 231,608 361,887
35 70,000 165,327 381,602 596,254
40 80,000 233,190 623,170 973,704
</TABLE>
[Without IRA--investment of $1,280 ($2,000 less 36%) earning 6.4% (10% less
36%)]
[With IRA--No Deduction--investment of $1,280 ($2,000 less 36%) earning 10%]
-62-
<PAGE>
39.6% Tax Bracket* Single -- over $263,750
----------------- Joint -- over $263,750
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,281 $ 1,329 $ 2,200
5 10,000 7,227 8,112 13,431
10 20,000 16,916 21,178 35,062
15 30,000 29,907 42,219 69,899
20 40,000 47,324 76,107 126,005
25 50,000 70,677 130,684 216,364
30 60,000 101,986 218,580 361,887
35 70,000 143,965 360,137 596,254
40 80,000 200,249 588,117 973,704
</TABLE>
[Without IRA--investment of $1,208 ($2,000 less 39.6%) earning 6.04% (10% less
39.6%)]
[With IRA--No Deduction--investment of $1,208 ($2,000 less 39.6%) earning 10%]
* For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate.
In addition, a 10% surtax (not applicable to capital gains) applies to
certain high-income taxpayers. It is computed by applying a 39.6% rate to
taxable income in excess of $263,750. The above tables do not reflect the
personal exemption phaseout nor the limitations of itemized deductions that
may apply.
-63-
<PAGE>
$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 $263,750. The above tables do not reflect the
personal exemption phaseout nor the limitations of itemized deductions that
may apply.
-64-
<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
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.
-65-
<PAGE>
APPENDIX B - PERFORMANCE OVERVIEW
Trend Fund A Class Performance Overview
The following table illustrates the total return on one share invested in
the Trend Fund A Class during the 10-year period ended June 30, 1996.(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.
Trend Fund A Class
<TABLE>
<CAPTION>
Cumula-
tive net
asset PERCENTAGE CHANGES DURING YEAR
Net Asset value at -----------------------------------------------------
Maximum Value Distributions year-end Trend Fund
offering ------------- ---------------- with all --------------------------------------------------
Year price at Begin- From From distribu- Maximum Offering Price Net Asset Value
ended begin- ning End invest- realized tions to Net Asset Value to Net Asset Value
June ning of of of ment securi- rein- -----------------------------------------------------
30 year(2) year year income ties profits vested Annual Cumulative(3) Annual Cumulative(4)
- -------- ---------- ------ ----- ------ ------------ --------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 $9.35 $8.91 $9.12 $0.000 $0.000 $9.12 -2.5% -2.5% 2.4% 2.4%
1988 9.57 9.12 8.13 0.000 0.000 8.13 -15.1 -13.1 10.9 -8.8
1989 8.54 8.13 10.87 0.000 0.320 11.32 32.7 21.1 39.3 27.1
1990 11.41 10.87 9.97 0.050 2.220 12.94 8.9 38.4 14.3 45.3
1991 10.47 9.97 8.92 0.050 0.520 12.32 -9.3 31.7 -4.8 38.3
1992 9.36 8.92 11.38 0.000 0.160 15.93 23.2 70.3 29.3 78.8
1993 11.95 11.38 13.98 0.000 1.150 21.54 28.8 130.3 35.2 141.8
1994 14.68 13.98 12.21 0.000 1.940 21.67 -4.2 131.7 0.6 143.2
1995 12.82 12.21 14.21 0.000 0.790 26.96 18.5 188.2 24.4 202.6
1996 14.92 14.21 18.16 0.000 0.900 36.53 29.1 290.5 35.5 310.0
------ ------
Total Distributions $0.100 $8.000
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
---------------------------------------------------------------------
Year Standard & Dow Jones Consumer
ended Poor's 500(5) Industrial(5) Price Index(5)
June ---------------------------------------------------------------------
30 Annual Cumulative Annual Cumulative Annual Cumulative
- ------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
1987 25.2% 25.2% 32.2% 32.2% 3.7% 3.7%
1988 -6.9 16.6 -8.3 21.2 3.9 7.7
1989 20.5 40.5 18.7 43.9 5.2 13.3
1990 16.5 63.6 22.7 76.6 4.7 18.7
1991 7.4 75.7 4.6 84.7 4.7 24.3
1992 13.4 99.3 17.7 117.4 3.1 28.1
1993 13.4 126.0 9.2 137.4 3.0 31.9
1994 1.4 129.2 5.9 151.4 2.5 35.2
1995 26.1 189.0 29.2 224.8 3.0 39.4
1996 26.0 264.1 27.1 312.8 2.8 43.2
</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 4.75% of total investment. There are
reduced sales charges for investments of $100,000 or more.
(3) Reflects an offering price of $9.35 on June 30, 1986.
(4) Reflects a net asset value of $8.91 on June 30, 1986.
(5) Source: Lipper Analytical.
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.
<PAGE>
APPENDIX B - PERFORMANCE OVERVIEW
Trend Fund B Class Performance Overview
The following table illustrates the total return on one share invested in
the Trend Fund B Class during the period September 6, 1994 (date of initial
public offering) through June 30, 1996. The results reflect the reinvestment of
all dividends and realized securities profits distributions at the net asset
value reported at the time of distribution. No adjustment has been made for any
income taxes payable by shareholders on income dividends or realized securities
profits distributions accepted in shares.
Trend Fund B Class
<TABLE>
<CAPTION>
Cumula-
tive net
asset PERCENTAGE CHANGES DURING YEAR
Net Asset value at -----------------------------------------------------
Maximum Value Distributions year-end Trend Fund
offering ------------- ---------------- with all --------------------------------------------------
Period price at Begin- From From distribu- Returns Including Returns Excluding
ended begin- ning End invest- realized tions CDSC CDCS
June ning of of of ment securi- rein- -----------------------------------------------------
30 year year year income ties profits vested Annual Cumulative(2) Annual Cumulative(4)
- -------- ---------- ------ ----- ------ ------------ --------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995(1) $12.11 $12.11 $14.13 $0.000 $0.000 $14.13 12.7% 12.7% 16.7% 16.7%
1996 14.13 14.13 17.92 0.000 0.900 16.30 30.6 30.6 34.6 34.6
------ ------
Total Distributions $0.000 $0.900
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
---------------------------------------------------------------------
Year Standard & Dow Jones Consumer
ended Poor's 500(3) Industrial(3) Price Index(3)
June ---------------------------------------------------------------------
30 Annual Cumulative Annual Cumulative Annual Cumulative
- ------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
1995(1) 18.3% 18.3% 19.9% 19.9% 2.4% 2.4%
1996 26.0 26.0 27.1 27.1 2.8 2.8
</TABLE>
- ----------
(1) Total return for the period September 6, 1994 (date of initial public
offering) through June 30, 1995 is on an aggregate basis. Total return for
this short of a time period may not be representative of longer-term
results.
(2) Reflects a net asset value of $12.11 on September 2, 1994.
(3) Source: Lipper Analytical.
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.
<PAGE>
APPENDIX B - PERFORMANCE OVERVIEW
Trend Fund C Class Performance Overview
The following table illustrates the total return on one share invested in
the Trend Fund C Class during the period November 29, 1995 (date of initial
public offering) through June 30, 1996. The results reflect the reinvestment of
all dividends and realized securities profits distributions at the net asset
value reported at the time of distribution. No adjustment has been made for any
income taxes payable by shareholders on income dividends or realized securities
profits distributions accepted in shares.
Trend Fund C Class
<TABLE>
<CAPTION>
Cumula-
tive net
asset PERCENTAGE CHANGES DURING YEAR
Net Asset value at -----------------------------------------------------
Maximum Value Distributions year-end Trend Fund
offering ------------- ---------------- with all --------------------------------------------------
Period price at Begin- From From distribu- Returns Including Returns Excluding
ended begin- ning End invest- realized tions CDSC(1) CDCS(1)
June ning of of of ment securi- rein- -----------------------------------------------------
30 year year(2) year income ties profits vested Annual Cumulative(2) Annual Cumulative(4)
- -------- ---------- ------ ----- ------ ------------ --------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996(1) $15.46 $15.46 $18.09 $0.000 $0.350 $10.67 18.7% 18.7% 19.7% 19.7%
------ ------
Total Distributions $0.000 $0.350
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
---------------------------------------------------------------------
Year Standard & Dow Jones Consumer
ended Poor's 500(3) Industrial(3) Price Index(3)
June ---------------------------------------------------------------------
30 Annual Cumulative Annual Cumulative Annual Cumulative
- ------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
1996(1) 12.2% 12.2% 12.9% 12.9% 2.0% 2.0%
</TABLE>
- ----------
(1) Total return is on an aggregate basis. Total return for this short of a
time period may not be representative of longer-term results.
(2) Reflects a net asset value of $15.46 on November 28, 1995.
(3) Source: Lipper Analytical.
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.
<PAGE>
APPENDIX B - PERFORMANCE OVERVIEW
Trend Fund Institutional Class Performance Overview
The following table illustrates the total return on one share invested in
the Trend Fund Institutional Class(1) during the 10-year period ended June 30,
1996. The results reflect the reinvestment of all dividends and realized
securities profits distributions at the net asset value reported at the time of
distribution. No adjustment has been made for any income taxes payable by
shareholders on income dividends or realized securities profits distributions
accepted in shares.
Trend Fund Institutional Class
<TABLE>
<CAPTION>
Cumula-
tive net
asset PERCENTAGE CHANGES DURING YEAR
Net Asset value at ---------------------------------------------------
Maximum Value Distributions year-end Trend Fund
offering ------------- ---------------- with all ---------------------------------------------------
Year price at Begin- From From distribu- Net Asset Value Standard &
ended begin- ning End invest- realized tions to Net Asset Value Poor's 500(3)
June ning of of of ment securi- rein- ---------------------------------------------------
30 year year year income ties profits vested Annual Cumulative(2) Annual Cumulative(4)
- -------- ---------- ------ ----- ------ ------------ --------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 $8.91 $8.91 $9.12 $0.000 $0.000 $9.12 2.4% 2.4% 25.2% 25.2%
1988 9.12 9.12 8.13 0.000 0.000 8.13 -10.9 -8.8 -6.9 16.6
1989 8.13 8.13 10.87 0.000 0.320 11.32 39.3 27.1 20.5 40.5
1990 10.87 10.87 9.97 0.050 2.220 12.94 14.3 45.3 16.5 63.6
1991 9.97 9.97 8.92 0.050 0.520 12.32 -4.8 38.3 7.4 75.7
1992 8.92 8.92 11.38 0.000 0.160 15.93 29.3 78.8 13.4 99.3
1993 11.38 11.38 13.99 0.000 1.150 21.54 35.2 141.8 13.6 126.4
1994 13.99 13.99 12.25 0.000 1.940 21.71 0.8 143.7 1.4 129.6
1995 12.25 12.25 14.30 0.000 0.790 27.08 24.7 203.9 26.1 189.5
1996 14.30 14.30 18.33 0.000 0.900 36.80 35.9 313.0 26.0 264.7
------ ------
Total Distributions $0.100 $8.000
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
----------------------------------------------
Year Dow Jones Consumer
ended Industrial(3) Price Index(3)
June ----------------------------------------------
30 Annual Cumulative Annual Cumulative
- -------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C>
1987 32.2% 32.2% 3.7% 3.7%
1988 -8.3 21.2 3.9 7.7
1989 18.7 43.9 5.2 13.3
1990 22.7 76.6 4.7 18.7
1991 4.6 84.7 4.7 24.3
1992 17.7 117.4 3.1 28.1
1993 9.2 137.4 3.0 31.9
1994 5.9 151.4 2.5 35.2
1995 29.2 224.8 3.0 39.4
1996 27.1 312.8 2.8 43.2
</TABLE>
- ----------
(1) Performance for Trend Fund Institutional Class for periods prior to
November 23, 1992 (date of initial public offering) is calculated by taking
the performance of the Trend Fund A Class and adjusting it to reflect the
elimination of all sales charges.
(2) Reflects a net asset value of $8.91 on June 30, 1986.
(3) Source: Lipper Analytical.
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.
<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.
Hypothetical Corporate Life Cycle
[Chart appears here]
Hypothetical Corporate Life Cycle Chart shows in a line illustration,
the stages that a typical company would go through, beginning with the emerging
state where sales growth continues at a steep pace to the mature phase where
growth levels off to the cyclical stage where sales show more definitive highs
and lows.
The above chart illustrates the path traditionally followed by
companies that successfully survive the growth sequence.
-66-
<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for the Fund and,
in its capacity as such, audits the financial statements contained in the Fund's
Annual Report. 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, 1996 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.
-67-
