<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 2-28871
File No. 811-1485
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 56 X
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AND
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 56 X
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DELAWARE GROUP EQUITY FUNDS III, INC.
(formerly Delaware Group Trend Fund, Inc.)
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 255-2923
--------------
George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
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(Name and Address of Agent for Service)
Approximate Date of Public Offering: August 29, 1997
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It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
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X on August 29, 1997 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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on (date) pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of Rule 485
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Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Section 24(f)
ofthe Investment Company Act of 1940. Registrant's 24f-2 Notice for its
most recent fiscal year was filed on August 27, 1997.
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 56 to Registration File No. 2-28871 includes
the following:
1. Facing Page
2. Contents Page
3. Cross-Reference Sheet
4. Part A - Prospectuses
5. Part B - Statement of Additional Information
6. Part C - Other Information
7. Signatures
<PAGE>
CROSS-REFERENCE SHEET*
----------------------
PART A
------
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
-------- ----------- ------------
<S> <C> <C> <C>
A Class/ Institutional
B Class/ Class
C Class
1 Cover Page.................................................. Cover Cover
2 Synopsis.................................................... Synopsis; Synopsis;
Summary Summary
of Expenses of Expenses
3 Condensed Financial Information............................. Financial Financial
Highlights Highlights
4 General Description of Registrant .......................... Investment Investment
Objective and Objective and
Policies; Shares; Policies; Shares;
Other Investment Other Investment
Policies and Risk Policies and Risk
Considerations Considerations
5 Management of the Fund ..................................... Management of Management of
the Fund the Fund
6 Capital Stock and Other Securities ......................... The Delaware Dividends and
Difference; Distributions;
Dividends and Taxes; Shares
Distributions;
Taxes; Shares
7 Purchase of Securities Being Offered........................ Cover; Cover;
Classes of Shares; Classes of Shares;
How to Buy How to Buy
Shares; Calculation Shares;
of Offering Price Calculation of
and Net Asset Value Net Asset Value;
Per Share; Per Share;
Management of Management of
the Fund the Fund
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET*
----------------------
PART A
------
<TABLE>
<CAPTION>
<S> <C> <C>
8 Redemption or Repurchase.................................... Classes of Shares; Classes of Shares;
How to Buy How to Buy
Shares; Redemption Shares; Redemption
and Exchange and Exchange
9 Legal Proceedings........................................... None None
</TABLE>
* This filing relates to Registrant's Trend Fund A Class, Trend Fund B Class,
Trend Fund C Class and Trend Fund Institutional Class. Class A Shares, Class B
Shares and Class C Shares are combined in one prospectus, and the
Institutional Class of shares is described in a separate prospectus. The four
classes have a common Statement of Additional Information and Part C.
<PAGE>
CROSS-REFERENCE SHEET
---------------------
PART B
------
<TABLE>
<CAPTION>
Location in Statement
Item No. Description of Additional Information
- -------- ----------- -------------------------
<S> <C> <C>
10 Cover Page...................................................... Cover
11 Table of Contents............................................... Table of Contents
12 General Information and History................................. General Information
13 Investment Objectives and Policies.............................. Investment Objective
and Policies
14 Management of the Registrant.................................... Officers and Directors
15 Control Persons and Principal Holders of Securities............. Officers and Directors
16 Investment Advisory and Other Services.......................... Plans Under Rule 12b-1 for
the Fund Classes (under
Purchasing Shares);
Investment Management
Agreement; Officers and
Directors; General
Information; Financial
Statements
17 Brokerage Allocation............................................ Trading Practices
and Brokerage
18 Capital Stock and Other Securities.............................. Capitalization and
Noncumulative Voting
(under General
Information)
19 Purchase, Redemption and Pricing of Securities
Being Offered................................................. Purchasing Shares;
Determining Offering
Price and Net Asset Value;
Redemption and
Repurchase; Exchange
Privilege
20 Tax Status...................................................... Taxes
21 Underwriters ................................................... Purchasing Shares
22 Calculation of Performance Data................................. Performance Information
23 Financial Statements............................................ Financial Statements
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET
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PART C
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<TABLE>
<CAPTION>
Location in
Part C
------
<S> <C> <C>
24 Financial Statements and Exhibits....................................... Item 24
25 Persons Controlled by or under Common
Control with Registrant............................................... Item 25
26 Number of Holders of Securities......................................... Item 26
27 Indemnification......................................................... Item 27
28 Business and Other Connections of Investment Adviser.................... Item 28
29 Principal Underwriters.................................................. Item 29
30 Location of Accounts and Records........................................ Item 30
31 Management Services..................................................... Item 31
32 Undertakings............................................................ Item 32
</TABLE>
<PAGE>
TREND FUND PROSPECTUS
A CLASS SHARES AUGUST 29, 1997
B CLASS SHARES
C CLASS SHARES
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1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance: Nationwide 800-523-4640
Information on Existing Accounts: (SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Representatives of Financial Institutions: Nationwide 800-659-2265
This Prospectus describes shares of Trend Fund series (the "Fund") of
Delaware Group Equity Funds III, Inc. ("Equity Funds III, Inc."), a
professionally-managed mutual fund of the series type. The Fund's objective is
to achieve capital appreciation by investing primarily in securities of emerging
and other growth-oriented companies.
The Fund offers Trend Fund A Class ("Class A Shares"), Trend Fund B
Class ("Class B Shares") and Trend Fund C Class ("Class C Shares")
(individually, a "Class" and collectively, the "Classes").
This Prospectus relates only to the classes listed above and sets forth
information that you should read and consider before you invest. Please retain
it for future reference. The Fund's Statement of Additional Information ("Part
B" of Equity Funds III, Inc.'s registration statement), dated August 29, 1997,
as it may be amended from time to time, contains additional information about
the Fund and has been filed with the Securities and Exchange Commission. Part B
is incorporated by reference into this Prospectus and is available, without
charge, by writing to Delaware Distributors, L.P. at the above address or by
calling the above numbers. The Fund's financial statements appear in its Annual
Report, which will accompany any response to requests for Part B.
The Fund also offers Trend Fund Institutional Class, which is available
for purchase only by certain investors. A prospectus for Trend Fund
Institutional Class can be obtained by writing to Delaware Distributors, L.P. at
the above address or by calling the above number.
-1-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Cover Page How to Buy Shares
Synopsis Redemption and Exchange
Summary of Expenses Dividends and Distributions
Financial Highlights Taxes
Investment Objective and Policies Calculation of Offering Price and
Suitability and Certain Risk Factors Net Asset Value Per Share
Investment Strategy Management of the Fund
The Delaware Difference Other Investment Policies and
Plans and Services Risk Considerations
Retirement Planning Appendix A - Investment Illustrations
Classes of Shares Appendix B - Classes Offered
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. SHARES OF
THE FUND ARE NOT BANK OR CREDIT UNION DEPOSITS.
-2-
<PAGE>
SYNOPSIS
Investment Objective
The investment objective of the Fund is to seek to achieve capital
appreciation by investing primarily in securities of emerging and other
growth-oriented companies. For further details, see Investment Objective and
Policies and Other Investment Policies and Risk Considerations.
Risk Factors and Special Considerations
The prices of common stocks, especially those of smaller companies,
tend to fluctuate, particularly in the shorter term. Investors should be willing
to accept the risks associated with investments in emerging and growth-oriented
companies, some of the securities of which may be speculative and subject the
Fund to an additional investment risk. See Suitability and Certain Risk Factors
under Investment Objective and Policies.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") furnishes investment
management services to the Fund, subject to the supervision and direction of
Equity Funds III, Inc.'s Board of Directors. The Manager also provides
investment management services to certain of the other funds in the Delaware
Group. Delaware Distributors, L.P. (the "Distributor") is the national
distributor for the Fund and for all of the other mutual funds in the Delaware
Group. Delaware Service Company, Inc. (the "Transfer Agent") is the shareholder
servicing, dividend disbursing, accounting services and transfer agent for the
Fund and for all of the other mutual funds in the Delaware Group. See Summary of
Expenses and Management of the Fund for further information regarding the
Manager and the fees payable under the Fund's Investment Management Agreement.
Sales Charges
The price of Class A Shares includes a maximum front-end sales charge
of 4.75% of the offering price, which, based on the net asset value per share of
Class A Shares as of the end of the Fund's most recent fiscal year, is
equivalent to 4.96% of the amount invested. The front-end sales charge is
reduced on certain transactions of at least $100,000 but under $1,000,000. For
purchases of $1,000,000 or more, the front-end sales charge is eliminated. Class
A Shares are subject to annual 12b-1 Plan expenses for the life of the
investment.
The price of Class B Shares is equal to the net asset value per share.
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 B Shares are subject to annual 12b-1 Plan expenses for
approximately eight years after purchase. See Deferred Sales Charge Alternative
- - Class B Shares and Automatic Conversion of Class B Shares under Classes of
Shares.
The price of Class C Shares is equal to the net asset value per share.
Class C Shares are subject to a CDSC of 1% if shares are redeemed within 12
months of purchase. Class C Shares are subject to annual 12b-1 Plan expenses for
the life of the investment.
See Classes of Shares and Distribution (12b-1) and Service under
Management of the Fund.
-3-
<PAGE>
Purchase Amounts
Generally, the minimum initial investment in any Class is $1,000.
Subsequent investments generally must be at least $100.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. An investor may exceed these maximum purchase
limitations for Class B Shares and Class C Shares by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of $100,000 or more in Class A
Shares, and that Class A Shares are subject to lower annual 12b-1 Plan expenses
than Class B and Class C Shares and generally are not subject to a CDSC. The
minimum and maximum purchase amounts for retirement plans may vary. See How to
Buy Shares.
Redemption and Exchange
Class A Shares of the Fund may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange request.
Neither the Fund nor the Distributor assesses a charge for redemptions or
exchanges of Class A Shares, except for certain redemptions of shares purchased
at net asset value, which may be subject to a CDSC if a dealer's commission was
paid in connection with such purchases. See Front-End Sales Charge Alternative -
Class A Shares under Classes of Shares.
Class B Shares and Class C Shares may be redeemed or exchanged at the
net asset value calculated after receipt of the redemption or exchange request
subject, in the case of redemptions, to any applicable CDSC. Neither the Fund
nor the Distributor assesses any charges other than the CDSC for redemptions or
exchanges of Class B or Class C Shares. There are certain limitations on an
investor's ability to exchange shares between the various classes of shares that
are offered. See Redemption and Exchange.
Open-End Investment Company
Equity Funds III, Inc. is an open-end management investment company.
The Fund's portfolio of assets is diversified as defined by the Investment
Company Act of 1940 (the "1940 Act"). Equity Funds III, Inc. was first organized
as a Delaware corporation in 1966 and was subsequently reorganized as a Maryland
corporation on March 4, 1983. See Shares under Management of the Fund.
-4-
<PAGE>
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to Class A, Class B and Class C Shares follows:
<TABLE>
<CAPTION>
Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares
- -------------------------------------------------- ----------------------- ------------------------ ------------------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of offering 4.75% None None
price)............................................
Maximum Sales Charge Imposed on
Reinvested Dividends (as a percentage
of offering price)................................ None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of original
purchase price or redemption proceeds, None* 4.00%* 1.00%*
whichever is lower)...............................
Redemption Fees................................... None** None** None**
</TABLE>
<TABLE>
<CAPTION>
Annual Operating Expenses (as a Class A Class B Class C
percentage of average daily net Shares Shares Shares
assets)
- -------------------------------------------------- ----------------------- ----------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Management Fees................................... 0.75% 0.75% 0.75%
12b-1 Expenses (including service fees)........... 0.25%***/+ 1.00%+ 1.00%+
Other Operating Expenses...................... 0.34% 0.34% 0.34%
----- ----- -----
Total Operating Expenses..................... 1.34% 2.09% 2.09%
===== ===== =====
</TABLE>
* Class A purchases of $1 million or more may be made at net asset value.
However, if in connection with any such purchase a dealer commission is
paid to the financial adviser through whom such purchase is effected, a
CDSC of 1% will be imposed on certain redemptions within 12 months of
purchase ("Limited CDSC"). Class B Shares are subject to a CDSC of: (i) 4%
if shares are redeemed within two years of purchase; (ii) 3% if shares are
redeemed during the third or fourth year following purchase; (iii) 2% if
shares are redeemed during the fifth year following purchase; (iv) 1% if
shares are redeemed during the sixth year following purchase; and (v) 0%
thereafter. Class C Shares are subject to a CDSC of 1% if the shares are
redeemed within 12 months of purchase. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value
under Redemption and Exchange; Deferred Sales Charge Alternative - Class B
Shares and Level Sales Charge Alternative - Class C Shares under Classes of
Shares.
-5-
<PAGE>
** CoreStates Bank, N.A. currently charges $7.50 per redemption for
redemptions payable by wire.
*** The actual 12b-1 Plan expenses to be paid and, consequently, the Total
Operating Expenses of Class A Shares, may vary because of the formula
adopted by the Board of Directors for use in calculating the 12b-1 Plan
expenses for this Class beginning June 1, 1992, but the 12b-1 Plan expenses
will not be more than 0.30% nor less than 0.10%. See Distribution (12b-1)
and Service under Management of the Fund and Part B.
+ Class A Shares, Class B Shares and Class C Shares are subject to separate
12b-1 Plans. Long- term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by rules of the
National Association of Securities Dealers, Inc. (the "NASD"). See
Distribution (12b-1) and Service under Management of the Fund.
For expense information about Trend Fund Institutional Class, see the
separate prospectus relating to that class.
Investors utilizing the Delaware Group Asset Planner asset allocation
service also typically incur an annual maintenance fee of $35 per Strategy.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an Individual
Retirement Account ("IRA") will pay an annual IRA fee of $15 per Social Security
number. See Delaware Group Asset Planner under How to Buy Shares.
The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return, (2) redemption and no redemption at the end of each time period
and (3) for Class B Shares and Class C Shares, payment of a CDSC at the time of
redemption, if applicable.
<TABLE>
<CAPTION>
Assuming Redemption Assuming No Redemption
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares $61(1) $88 $117 $201 $61 $88 $117 $201
Class B Shares 61 95 132 223(2) 21 65 112 223(2)
Class C Shares 31 65 112 242 21 65 112 242
</TABLE>
(1) Generally, no redemption charge is assessed upon redemption of Class A
Shares. Under certain circumstances, however, a Limited CDSC, which has not
been reflected in this calculation, may be imposed on certain redemptions
within 12 months of purchase. See Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange.
(2) At the end of approximately eight years after purchase, Class B Shares will
be automatically converted into Class A Shares. The example above assumes
conversion of Class B Shares at the end of the eighth year. However, the
conversion may occur as late as three months after the eighth anniversary
of purchase, during which time the higher 12b-1 Plan fees payable by Class
B Shares will continue to be assessed. Information for the ninth and tenth
years reflects expenses of Class A Shares. See Automatic Conversion of
Class B Shares under Classes of Shares for a description of the automatic
conversion feature.
-6-
<PAGE>
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in each Class will
bear directly or indirectly.
-7-
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Trend Fund of Delaware Group Equity Funds III, Inc. (formerly known as Delaware
Group Trend Fund, Inc.) and have been audited by Ernst & Young LLP, independent
auditors. The data should be read in conjunction with the financial statements,
related notes, and the report of Ernst & Young LLP, all of which are
incorporated by reference into Part B. Further information about the Fund's
performance is contained in its Annual Report to shareholders. A copy of the
Fund's Annual Report (including the report of Ernst & Young LLP) may be obtained
from Equity Funds III, Inc. upon request at no charge.
- --------------------------------------------------------------------------------
-8-
<PAGE>
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------------------------------------------------------
Year Ended
6/30/97(1) 6/30/96(1) 6/30/95(1) 6/30/94(1) 6/30/93(1) 6/30/92(1) 6/30/91 6/30/90 6/30/89 6/30/88
--------- ---------- ---------- ---------- ---------- ---------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $18.160 $14.210 $12.210 $13.980 $11.380 $8.920 $9.970 $10.870 $8.130 $9.120
Income From Investment
Operations
- ----------------------
Net Investment Income
(Loss)(2)............. (0.075) (0.127) (0.074) (0.042) (0.004) (0.005) (0.020) 0.146 0.018 (0.066)
Net Gains or Losses
on Securities (both
realized and
unrealized).......... 0.155 4.977 2.864 0.212 3.754 2.625 (0.460) 1.224 3.042 (0.924)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total from Investment
Operations.......... 0.080 4.850 2.790 0.170 3.750 2.620 (0.480) 1.370 3.060 (0.990)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Less Distributions
- ------------------
Dividends from Net
Investment Income...... none none none none none none (0.050) (0.050) none none
Distributions from
Capital Gains.......... (1.510) (0.900) (0.790) (1.940) (1.150) (0.160) (0.520) (2.220) (0.320) none
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total Distributions... (1.510) (0.900) (0.790) (1.940) (1.150) (0.160) (0.570) (2.270) (0.320) none
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Net Asset Value, End of
Period................. $16.730 $18.160 $14.210 $12.210 $13.980 $11.380 $8.920 $9.970 $10.870 $8.130
======= ======= ======= ======= ======= ======= ====== ====== ======= ======
Total Return(3)........ 1.67% 35.53% 24.40% 0.59% 35.24% 29.31% (4.82%) 14.32% 39.27% (10.86%)
- --------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of
Period
(000's omitted) .... $428,309 $497,188 $318,933 $253,964 $219,826 $124,548 $78,631 $88,274 $67,111 $59,879
Ratio of Expenses to
Average Daily Net
Assets.............. 1.34% 1.31% 1.36% 1.37% 1.33% 1.18% 1.29% 1.27% 1.28% 1.20%
Ratio of Net Investment
Income (Loss) to
Average Daily Net
Assets............... (0.47%) (0.79%) (0.58%) (0.72%) (0.61%) (0.43%) (0.24%) 0.82% 0.19% (0.51%)
Portfolio Turnover
Rate................. 115% 90% 64% 67% 75% 76% 67% 80% 48% 63%
Average Commission
Rate Paid............ $0.0594 $0.0557 N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- ------------------------
(1) Reflects 12b-1 distribution expenses beginning June 1, 1992.
(2) 1995, 1996 and 1997 per share information was based on the average shares
outstanding method.
(3) Does not reflect the maximum front-end sales charge that is or was in
effect nor the Limited CDSC that would apply in the event of certain
redemptions within 12 months of purchase. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
-9-
<PAGE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
------------------------------ --------------------------
Period Period
9/6/94(1) Year 11/29/95(2)
Year Ended through Ended through
6/30/97 6/30/96 6/30/95 6/30/97 6/30/96
------- ------- --------- ------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............ $17.920 $14.130 $12.110 $18.090 $15.460
Income From Investment Operations
- ---------------------------------
Net Investment Loss(3).......................... (0.189) (0.248) (0.142) (0.197) (0.253)
Net Gains or Losses on Securities
(both realized and unrealized)....... 0.149 4.938 2.162 0.157 3.233
------- ------- ------- -------- -------
Total from Investment Operations.......... (0.040) 4.690 2.020 (0.040) 2.980
------- ------- ------- -------- -------
Less Distributions
- ------------------
Dividends from Net Investment Income............ none none none none none
Distributions from Capital Gains................ (1.510) (0.900) none (1.510) (0.350)
------- ------- ------- -------- -------
Total Distributions....................... (1.510) (0.900) none (1.510) (0.350)
======= ======= ======= ======== =======
Net Asset Value, End of Period.................. $16.370 $17.920 $14.130 $16.540 $18.090
Total Return(4)................................. 0.96% 34.55 16.68% 0.95% 19.66%
- ------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)....... $55,047 $35,090 $5,175 $11,477 $6,359
Ratio of Expenses to Average Daily Net Assets... 2.09% 2.06% 2.12% 2.09% 2.06%
Ratio of Net Investment Income (Loss) to
Average Daily Net Assets.................. (1.25%) (1.54%) (1.34%) (1.28%) (1.54%)
Portfolio Turnover Rate......................... 115% 90% 64% 115% 90%
Average Commission Rate Paid.................... $0.0594 $0.0557 N/A $0.0594 $0.0557
</TABLE>
- -----------------------
(1) Date of initial public offering; ratios have been annualized but total
return for the limited period between September 6, 1994 and June 30, 1995
has not been annualized.
(2) Date of initial public offering; ratios have been annualized but total
return for the limited period between November 29, 1995 and June 30, 1996
has not been annualized.
(3) 1995, 1996 and 1997 per share information was based on the average shares
outstanding method.
(4) Does not reflect any applicable CDSC. See Contingent Deferred Sales Charge
- Class B Shares and Class C Shares.
-10-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
SUITABILITY AND CERTAIN RISK FACTORS
The Fund may be suitable for investors interested in long-term capital
appreciation. The prices of common stocks, especially those of smaller
companies, tend to fluctuate, particularly in the shorter term. The Fund's net
asset value also may fluctuate in response to the condition of individual
companies and general market and economic conditions and, as a result, the Fund
is not appropriate for short-term investors. Investors should be willing to
accept the risks associated with investments in securities of growth-oriented
and emerging issuers, some of which may be speculative and subject the Fund to
an additional investment risk.
* * *
Ownership of Fund shares reduces the bookkeeping and administrative
inconveniences that would be involved with direct purchases of the types of
securities in which the Fund invests.
Investors should not consider a purchase of Fund shares as equivalent
to a complete investment program. The Delaware Group includes a family of funds,
generally available through registered investment dealers, which may be used
together to create a more complete investment program.
INVESTMENT STRATEGY
The objective of the Fund is long-term capital appreciation. The Fund's
strategy is to invest primarily in the common stocks and securities convertible
into common stocks of emerging and other growth-oriented companies which, in the
opinion of the Manager, are responsive to changes within the marketplace and
have the fundamental characteristics to support growth.
The Fund will seek to identify changing and dominant trends within the
economy, the political arena and our society. The Fund will purchase securities
which it believes will benefit from these trends and which have the fundamentals
to exploit them. The fundamentals include managerial skills, product development
and sales and earnings.
In investing for capital appreciation, the Fund may hold securities for
any period of time. The Fund may also invest in foreign securities.
This Fund is designed primarily for capital appreciation. Providing
current income is not an objective of the Fund. Any income produced is expected
to be minimal. Though income is not an objective of the Fund, should the market
warrant a temporary defensive approach, the Fund may also invest in cash
equivalents, and fixed-income obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities, as well as corporate bonds.
Although the Fund will constantly strive to attain the objective of
long-term capital growth, there can be no assurance that it will be attained.
The objective of the Fund may not be changed without shareholder approval.
For additional information about the Fund's investment policies and
certain risks associated with investments in certain types of securities, see
Other Investment Policies and Risk Considerations. Part B provides more
information concerning the Fund's investment policies, restrictions and risk
factors.
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THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Group of
funds.
SHAREHOLDER PHONE DIRECTORY
Investor Information Center
800-523-4640
Fund Information; Literature; Price; Yield and Performance Figures
Shareholder Service Center
800-523-1918
Information on Existing Regular Investment Accounts and Retirement
Plan Accounts; Wire Investments; Wire Liquidations; Telephone
Liquidations and Telephone Exchanges
Delaphone
800-362-FUND
(800-362-3863)
Performance Information
You can call the Investor Information Center at any time for current
performance information.
Shareholder Services
During business hours, you can call the Delaware Group's Shareholder
Service Center. Our representatives can answer any questions about your account,
the Fund, various service features and other funds in the Delaware Group.
Delaphone Service
Delaphone is an account inquiry service for investors with
Touch-Tone(R) phone service. It enables you to get information on your account
faster than the mailed statements and confirmations. Delaphone also provides
current performance information on the Fund, as well as other funds in the
Delaware Group. Delaphone is available seven days a week, 24 hours a day.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling the Shareholder Service Center.
Duplicate Confirmations
If your financial adviser or investment dealer is noted on your
investment application, we will send a duplicate confirmation to him or her.
This makes it easier for your adviser to help you manage your investments.
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Tax Information
Each year, Equity Funds III, Inc. will mail to you information on the
tax status of your dividends and distributions.
Dividend Payments
Dividends, capital gains and other distributions are automatically
reinvested in your account, unless you elect to receive them in cash. You may
also elect to have the dividends earned in one fund automatically invested in
another Delaware Group fund with a different investment objective, subject to
certain exceptions and limitations.
For more information, see Additional Methods of Adding to Your
Investment - Dividend Reinvestment Plan under How to Buy Shares or call the
Shareholder Service Center.
MoneyLine (sm) Services
Delaware Group offers the following services for fast and convenient
transfer of funds between your personal bank account and your Delaware Group
fund account.
1. MoneyLine (sm) Direct Deposit Service
If you elect to have your dividends and distributions paid in cash and
such dividends and distributions are in an amount of $25 or more, you may choose
the MoneyLine (sm) Direct Deposit Service and have such payments transferred
from your Fund account to your predesignated bank account. See Dividends and
Distributions. In addition, you may elect to have your Systematic Withdrawal
Plan payments transferred from your Fund account to your predesignated bank
account through this service. See Systematic Withdrawal Plans under Redemption
and Exchange. This service is not available for certain retirement plans.
2. MoneyLine (sm) On Demand
You or your investment dealer may request purchases and redemptions of
Fund shares by phone using MoneyLine (sm) On Demand. When you authorize the Fund
to accept such requests from you or your investment dealer, funds will be
withdrawn from (for share purchases) or deposited to (for share redemptions)
your predesignated bank account. Your request will be processed the same day if
you call prior to 4 p.m., Eastern time. There is a $25 minimum and $50,000
maximum limit for MoneyLine (sm) On Demand transactions. This service is not
available for retirement plans, except for purchases of shares by IRAs.
For each MoneyLine (sm) Service, it may take up to four business days
for the transactions to be completed. You can initiate either service by
completing an Account Services form. If your name and address are not identical
to the name and address on your Fund account, you must have your signature
guaranteed. The Fund does not charge a fee for MoneyLine (sm) services; however,
your bank may charge a fee. Please call the Shareholder Service Center for
additional information about these services.
Right of Accumulation
With respect to Class A Shares, the Right of Accumulation feature allows
you to combine the value of your current holdings of Class A Shares, Class B
Shares and Class C Shares of the Fund with the dollar amount of new purchases of
Class A Shares of the Fund to qualify for a reduced front-end sales charge on
such purchases of Class A Shares. Under the Combined Purchases Privilege, you
may also include certain shares that you own in other funds in the Delaware
Group. See Classes of Shares.
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<PAGE>
Letter of Intention
The Letter of Intention feature permits you to obtain a reduced front-end
sales charge on purchases of Class A Shares by aggregating certain of your
purchases of Delaware Group fund shares over a 13-month period. See Classes of
Shares and Part B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits you to reinvest proceeds from a
redemption of Class A Shares, within one year of the date of the redemption,
without paying a front-end sales charge. See Part B.
Exchange Privilege
The Exchange Privilege permits you to exchange all or part of your shares
into shares of the other funds in the Delaware Group, subject to certain
exceptions and limitations. For additional information on exchanges, see
Investing by Exchange under How to Buy Shares, and Redemption and Exchange.
Wealth Builder Option
You may elect to invest in the Fund through regular liquidations of shares
in your accounts in other funds in the Delaware Group. Investments under this
feature are exchanges and are therefore subject to the same conditions and
limitations as other exchanges of Fund shares. See Additional Methods of Adding
to Your Investment - Wealth Builder Option and Investing by Exchange under How
to Buy Shares, and Redemption and Exchange.
Delaware Group Asset Planner
Delaware Group Asset Planner is an asset allocation service that gives you,
when working with a professional financial adviser, the ability to more easily
design and maintain investments in a diversified selection of Delaware Group
mutual funds. The Asset Planner service offers a choice of four predesigned
allocation strategies (each with a different risk/reward profile) made up of
separate investments in predetermined percentages of Delaware Group funds. With
the guidance of a financial adviser, you may also tailor an allocation strategy
that meets your personal needs and goals. See Delaware Group Asset Planner under
How to Buy Shares.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. Equity Funds III, Inc.'s fiscal year
ends on June 30.
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RETIREMENT PLANNING
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, SIMPLE IRAs, Simplified
Employee Pension Plans, Salary Reduction Simplified Employee Pension Plans, 457
Deferred Compensation Plans and 403(b)(7) Deferred Compensation Plans.
Retirement plans may be subject to plan establishment fees, annual
maintenance fees and/or other administrative or trustee fees. Fees are based
upon the number of participants in the plan as well as the services selected.
Additional information about fees is included in retirement plan materials. Fees
are quoted upon request.
Certain shareholder investment services available to non-retirement plan
shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of Trend Fund Institutional
Class. For additional information on any of the plans and Delaware's retirement
services, call the Shareholder Service Center or see Part B.
Individual Retirement Account ("IRA")
Individuals, even if they participate in an employer-sponsored retirement
plan, may establish their own retirement program for investments in each of the
Classes. Contributions to an IRA may be tax-deductible and earnings are
tax-deferred. The tax deductibility of IRA contributions is restricted, and in
some cases eliminated, for individuals who participate in certain
employer-sponsored retirement plans and whose annual income exceeds certain
limits. Existing IRAs and future contributions up to the IRA maximums, whether
deductible or not, still earn on a tax-deferred basis.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31, 1996,
existing plans may be maintained by employers having 25 of fewer employees. An
employer may elect to make additional contributions to such existing plans.
403(b)(7) Deferred Compensation Plan
Permits employees of public school systems or of certain types of
non-profit organizations to enter into a deferred compensation arrangement for
the purchase of shares of each of the Classes.
457 Deferred Compensation Plan
Permits employees of state and local governments and certain other entities
to enter into a deferred compensation arrangement for the purchase of shares of
each of the Classes.
Prototype Profit Sharing or Money Purchase Pension Plan
Offers self-employed individuals, partnerships and corporations a
tax-qualified plan which provides for the investment of contributions in Class A
Shares or Class C Shares. Class B Shares are not available for purchase by such
plans.
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<PAGE>
Prototype 401(k) Defined Contribution Plan
Permits employers to establish a tax-qualified plan based on salary
deferral contributions for investment in Class A or Class C Shares. Class B
Shares are not available for purchase by such plans.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan but
is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that plan sponsors are
limited to 100 employees and, in exchange for mandatory plan sponsor
contributions, discrimination testing is no longer required.
Class B Shares are not available for purchase by such plans.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from Delaware Group funds. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
Allied Plans
Class A Shares are available for purchase by participants in certain 401(k)
Defined Contribution Plans ("Allied Plans") which are made available under a
joint venture agreement between the Distributor and another institution through
which mutual funds are marketed and which allow investments in Class A Shares of
designated Delaware Group funds ("eligible Delaware Group fund shares"), as well
as shares of designated classes of non-Delaware Group funds ("eligible
non-Delaware Group fund shares"). Class B Shares and Class C Shares are not
eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the value
of eligible Delaware Group and eligible non-Delaware Group fund shares held by
the Allied Plan may be combined with the dollar amount of new purchases by that
Allied Plan to obtain a reduced front-end sales charge on additional purchases
of eligible Delaware Group fund shares. See Front-End Sales Charge Alternative -
Class A Shares under Classes of Shares.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Group fund shares for other eligible Delaware Group fund shares or for
eligible non-Delaware Group fund shares at net asset value without payment of a
front-end sales charge. However, exchanges of eligible fund shares, both
Delaware Group and non-Delaware Group, which were not subject to a front-end
sales charge, will be subject to the applicable sales charge if exchanged for
eligible Delaware Group fund shares to which a sales charge applies. No sales
charge will apply if the eligible fund shares were previously acquired through
the exchange of eligible shares on which a sales charge was already paid or
through the reinvestment of dividends. See Investing by Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Group fund shares under an Allied Plan. In determining a financial adviser's
eligibility for a dealer's commission on net asset value purchases of eligible
Delaware Group fund shares in connection with Allied Plans, all participant
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holdings in the Allied Plan will be aggregated. See Front-End Sales Charge
Alternative - Class A Shares under Classes of Shares.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described under Waiver of Limited Contingent
Deferred Sales Charge - Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Group and non-Delaware Group fund shares. When
eligible Delaware Group fund shares are exchanged into eligible non-Delaware
Group fund shares, the Limited CDSC will be imposed at the time of the exchange,
unless the joint venture agreement specifies that the amount of the Limited CDSC
will be paid by the financial adviser or selling dealer. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
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CLASSES OF SHARES
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net asset
value per share, subject to a sales charge which may be imposed, at the election
of the purchaser, at the time of the purchase for Class A Shares ("front-end
sales charge alternative"), or on a contingent deferred basis for Class B Shares
("deferred sales charge alternative") or Class C Shares ("level sales charge
alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares, which incur a sales charge when they are
purchased, but generally are not subject to any sales charge when they are
redeemed. Class A Shares are subject to annual 12b-1 Plan expenses of up to a
maximum of 0.30% of average daily net assets of such shares. Certain purchases
of Class A Shares qualify for reduced front-end sales charges. See Front-End
Sales Charge Alternative - Class A Shares, below. See also Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange and Distribution (12b-1) and Service under
Management of the Fund.
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares, which do not incur a front-end sales charge
when they are purchased, but are subject to a contingent deferred sales charge
if they are redeemed within six years of purchase. Class B Shares are subject to
annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service
fees to be paid to the Distributor, dealers or others for providing personal
service and/or maintaining shareholder accounts) of average daily net assets of
such shares for approximately eight years after purchase. Class B Shares permit
all of the investor's dollars to work from the time the investment is made. The
higher 12b-1 Plan expenses paid by Class B Shares will cause such shares to have
a higher expense ratio and to pay lower dividends than Class A Shares. At the
end of approximately eight years after purchase, Class B Shares will
automatically be converted into Class A Shares, and, thereafter, for the
remainder of the life of the investment, the annual 12b-1 Plan fee of up to
0.30% for Class A Shares will apply. See Automatic Conversion of Class B Shares,
below.
Class C Shares. An investor who elects the level sales charge alternative
acquires Class C Shares, which do not incur a front-end sales charge when they
are purchased, but are subject to a contingent deferred sales charge if they are
redeemed within 12 months of purchase. Class C Shares are subject to annual
12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service fees to
be paid to the Distributor, dealers or others for providing personal service
and/or maintaining shareholder accounts) of average daily net assets of such
shares for the life of the investment. The higher 12b-1 Plan expenses paid by
Class C Shares will cause such shares to have a higher expense ratio and to pay
lower dividends than Class A Shares. Unlike Class B Shares, Class C Shares do
not convert to another class.
The alternative purchase arrangements described above permit investors to
choose the method of purchasing shares that is most suitable given the amount of
their purchase, the length of time they expect to hold their shares and other
relevant circumstances. Investors should determine whether, given their
particular circumstances, it is more advantageous to purchase Class A Shares and
incur a front-end sales charge, purchase Class B Shares and have the entire
initial purchase amount invested in the Fund with their investment being subject
to a CDSC if they redeem shares within six years of purchase, or purchase Class
C Shares and have the entire initial purchase amount invested in the Fund with
their investment being subject to a CDSC if they redeem shares within 12 months
of purchase. In addition,
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investors should consider the level of annual 12b-1 Plan expenses applicable to
each Class. The higher 12b-1 Plan expenses on Class B Shares and Class C Shares
will be offset to the extent a return is realized on the additional money
initially invested upon the purchase of such shares. However, there can be no
assurance as to the return, if any, that will be realized on such additional
money, and the effect of earning a return on such additional money will diminish
over time. In comparing Class B Shares to Class C Shares, investors should
consider the duration of the annual 12b-1 Plan expenses to which each of the
Classes is subject and the desirability of an automatic conversion feature,
which is available only for Class B Shares.
As an illustration, investors who qualify for significantly reduced
front-end sales charges on purchases of Class A Shares, as described below,
might choose the front-end sales charge alternative because similar sales charge
reductions are not available for purchases under either the deferred sales
charge alternative or the level sales charge alternative. Moreover, shares
acquired under the front-end sales charge alternative are subject to annual
12b-1 Plan expenses of up to 0.30%, whereas Class B Shares acquired under the
deferred sales charge alternative are subject to annual 12b-1 Plan expenses of
up to 1% for approximately eight years after purchase (see Automatic Conversion
of Class B Shares, below) and Class C Shares acquired under the level sales
charge alternative are subject to annual 12b-1 Plan expenses of up to 1% for the
life of the investment. However, because front-end sales charges are deducted
from the purchase amount at the time of purchase, investors who buy Class A
Shares would not have their full purchase amount invested in the Fund.
Certain investors might determine it to be more advantageous to purchase
Class B Shares and have all their money invested initially, even though they
would be subject to a CDSC for up to six years after purchase and annual 12b-1
Plan expenses of up to 1% until the shares are automatically converted into
Class A Shares. Still other investors might determine it to be more advantageous
to purchase Class C Shares and have all of their funds invested initially,
recognizing that they would be subject to a CDSC for just 12 months after
purchase, but that Class C Shares do not offer a conversion feature, so their
shares would be subject to annual 12b-1 Plan expenses of up to 1% for the life
of the investment.
Prospective investors should refer to Appendix A--Investment Illustrations
to this Prospectus for an illustration of the potential effect that each of the
purchase options may have on a long-term shareholder's investment.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Fund, the Distributor and others will be paid, in the
case of Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of Class B Shares and Class C Shares, from the
proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Financial advisers may receive different compensation for selling
Class A, Class B and Class C Shares. Investors should understand that the
purpose and function of the respective 12b-1 Plans and the CDSCs applicable to
Class B Shares and Class C Shares are the same as those of the 12b-1 Plan and
the front-end sales charge applicable to Class A Shares in that such fees and
charges are used to finance the distribution of the respective Classes. See
Distribution (12b-1) and Service under Management of the Fund.
Dividends paid on Class A, Class B and Class C Shares, to the extent any
dividends are paid, will be calculated in the same manner, at the same time, on
the same day and will be in the same amount, except that the additional amount
of 12b-1 Plan expenses relating to Class B Shares and Class C Shares
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<PAGE>
will be borne exclusively by such shares. See Calculation of Offering Price
and Net Asset Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. Equity Funds III, Inc. and the Distributor intend to operate in
compliance with these rules.
Front-End Sales Charge Alternative - Class A Shares
Class A Shares may be purchased at the offering price, which reflects a
maximum front-end sales charge of 4.75%. See Calculation of Offering Price and
Net Asset Value Per Share.
Purchases of $100,000 or more carry a reduced front-end sales charge as
shown in the following table.
Trend Fund A Class
- --------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge as % of Commission***
Amount of Purchase Offering Amount as % of
Price Invested** Offering Price
- --------------------------------------------------------------------------------
Less than $100,000 4.75% 4.96% 4.00%
$100,000 but under $250,000 3.75 3.90 3.00
$250,000 but under $500,000 2.50 2.57 2.00
$500,000 but under $1,000,000* 2.00 2.03 1.60
* There is no front-end sales charge on purchases of Class A Shares of
$1,000,000 or more but, under certain limited circumstances, a 1% Limited
CDSC may apply upon redemption of such shares.
** Based on the net asset value per share of Class A Shares as of the end of
Equity Funds III, Inc.'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. In addition, certain dealers who enter
into an agreement to provide extra training and information on Delaware
Group products and services and who increase sales of Delaware Group funds
may receive an additional commission of up to 0.15% of the offering price.
Dealers who receive 90% or more of the sales charge may be deemed to be
underwriters under the Securities Act of 1933.
- --------------------------------------------------------------------------------
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<PAGE>
For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers through
whom such purchases are made in accordance with the following schedule:
Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
------------------ -------------------
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75
Next $2 million up to $5 million 0.50
Amount over $5 million 0.25
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies may be aggregated with those of the Class A Shares
of 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.
Redemptions of Class A Shares purchased at net asset value may result
in the imposition of a Limited CDSC if the dealer's commission described above
was paid in connection with the purchase of those shares. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange.
Combined Purchases Privilege
By combining your holdings of Class A Shares with your holdings of
Class B Shares and/or Class C Shares of the Fund and shares of other funds in
the Delaware Group, except those noted below, you can reduce the front-end sales
charges on any additional purchases of Class A Shares. Shares of Delaware Group
Premium Fund, Inc. beneficially owned in connection with ownership of variable
insurance products may be combined with other Delaware Group fund holdings.
Assets held in any stable value product available through the Delaware Group may
be combined with other Delaware Group fund holdings. Shares of other funds that
do not carry a front-end sales charge or CDSC may not be included unless they
were acquired through an exchange from a Delaware Group fund that does carry a
front-end sales charge or CDSC.
This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under 21 and any trust, fiduciary or
retirement account for the benefit of such family members.
It also permits you to use these combinations under a Letter of
Intention. A Letter of Intention allows you to make purchases over a 13-month
period and qualify the entire purchase for a reduction in front-end sales
charges on Class A Shares.
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<PAGE>
Combined purchases of $1,000,000 or more, including certain purchases
made at net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may result in the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative - Class A Shares, above.
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under
the Delaware Group Dividend Reinvestment Plan and, under certain circumstances,
the Exchange Privilege and the 12-Month Reinvestment Privilege. See The
Delaware Difference and Redemption and Exchange for additional information.
Purchases of Class A Shares may be made at net asset value by current
and former officers, directors and employees (and members of their families) of
the Manager, any affiliate, any of the funds in the Delaware Group, certain of
their agents and registered representatives and employees of authorized
investment dealers and by employee benefit plans for such entities. Individual
purchases, including those in retirement accounts, must be for accounts in the
name of the individual or a qualifying family member.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of Delaware Group
funds. 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.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase shares of the institutional class
of the Fund; any group retirement plan (excluding defined benefit pension
plans), or such plans of the same employer, for which plan participant records
are maintained on the Delaware Investment & Retirement Services, Inc. ("DIRSI")
proprietary record keeping system that (i) has in excess of $500,000 of plan
assets invested in Class A Shares of Delaware Group funds and any stable value
product available through the Delaware Group, or (ii) is sponsored by an
employer that has at any point after May 1, 1997 had more than 100 employees
while such plan has held Class A Shares of a Delaware Group fund and such
employer has properly represented to DIRSI in writing that it has the requisite
number of employees and has received written confirmation back from DIRSI.
Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase Institutional
Class Shares as a result of a change in distribution arrangements.
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<PAGE>
Investors in Delaware-Voyageur Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A Shares
of any of the funds in the Delaware Group 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.
The Fund must be notified in advance that an investment qualifies for
purchase at net asset value.
Group Investment Plans
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, SIMPLE IRA, SIMPLE
401(k), Profit Sharing, Money Purchase Pension, 401(k) Defined Contribution
Plans, and 403(b)(7) and 457 Deferred Compensation Plans) may benefit from the
reduced front-end sales charges available on Class A Shares based on total plan
assets. In addition, 403(b)(7) and 457 Retirement Plan Accounts may benefit from
a reduced front-end sales charge on Class A Shares based on the total amount
invested by all participants in the plan by satisfying the following criteria:
(i) the employer for which the plan was established has 250 or more eligible
employees and the plan lists only one broker of record, or (ii) the plan
includes employer contributions and the plan lists only one broker of record. If
a company has more than one plan investing in the Delaware Group of funds, then
the total amount invested in all plans will be aggregated to determine the
applicable front-end sales charge reduction on each purchase, both initial and
subsequent, if, at the time of each such purchase, the company notifies the Fund
that it qualifies for the reduction. Employees participating in such Group
Investment Plans may also combine the investments held in their plan account to
determine the front-end sales charge applicable to purchases in non-retirement
Delaware Group investment accounts if, at the time of each such purchase, they
notify the Fund that they are eligible to combine purchase amounts held in their
plan account.
For additional information on retirement plans, including plan forms,
applications, minimum investments and any applicable account maintenance fees,
contact your investment dealer or the Distributor.
For other retirement plans and special services, see Retirement
Planning.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than 4% of the dollar
amount purchased. In addition, from time to time, upon written notice to all of
its dealers, the Distributor may hold special promotions for specified periods
during which the Distributor may pay additional compensation to dealers or
brokers for selling Class B Shares at the time of purchase. As discussed below,
however, Class B Shares are subject to annual 12b-1 Plan expenses and, if
redeemed within six years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale
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of Class B Shares. These payments support the compensation paid to dealers or
brokers for selling Class B Shares. Payments to the Distributor and others under
the Class B 12b-1 Plan may be in an amount equal to no more than 1% annually.
The combination of the CDSC and the proceeds of the 12b-1 Plan fees makes it
possible for the Fund to sell Class B Shares without deducting a front-end sales
charge at the time of purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class B Shares
described in this Prospectus, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for the Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the last business day
of the second full week of March, June, September and December (each, a
"Conversion Date"). If the eighth anniversary after a purchase of Class B Shares
falls on a Conversion Date, an investor's Class B Shares will be converted on
that date. If the eighth anniversary occurs between Conversion Dates, an
investor's Class B Shares will be converted on the next Conversion Date after
such anniversary. Consequently, if a shareholder's eighth anniversary falls on
the day after a Conversion Date, that shareholder will have to hold Class B
Shares for as long as three additional months after the eighth anniversary of
purchase before the shares will automatically convert into Class A Shares.
Class B Shares of a fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of that fund (or, in the case
of Delaware Group Cash Reserve, Inc., Delaware Cash Reserve Consultant Class)
pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the Fund will invest the full amount of the
investor's purchase payment will be invested in Fund shares. The Distributor
currently anticipates compensating dealers or brokers for selling Class C Shares
at the time of purchase from its own assets in an amount equal to no more than
1% of the dollar amount purchased. As discussed below, however, Class C Shares
are subject to annual 12b-1 Plan expenses and, if redeemed within 12 months of
purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class C Shares as
described in this Prospectus. See Redemption and Exchange.
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Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares redeemed within six years of purchase may be subject to
a CDSC at the rates set forth below and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestments of dividends or capital gains distributions. For purposes
of this formula, the "net asset value at the time of purchase" will be the net
asset value at purchase of Class B Shares or Class C Shares of the Fund, even if
those shares are later exchanged for shares of another Delaware Group fund. In
the event of an exchange of the shares, the "net asset value of such shares at
the time of redemption" will be the net asset value of the shares that were
acquired in the exchange.
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The following table sets forth the rates of the CDSC for the Class B
Shares of the Fund:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
------------------------ --------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. See Automatic Conversion of Class B Shares, above. Investors are
reminded that the Class A Shares into which the Class B Shares will convert are
subject to ongoing annual 12b-1 Plan expenses of up to a maximum of 0.30% of
average daily net assets of such shares.
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares and Class C
Shares. See Waiver of Contingent Deferred Sales Charge - Class B Shares and
Class C Shares under Redemption and Exchange.
Other Payments to Dealers -- Class A, Class B and Class C Shares
From time to time at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Classes exceed certain limits, as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
Subject to pending amendments to the NASD's Rules of Fair Practice, in
connection with the promotion of Delaware Group fund shares, the Distributor
may, from time to time, pay to participate in dealer-sponsored seminars and
conferences, reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising and may, from time to time,
pay or allow additional promotional incentives to dealers, which shall include
non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
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preapproved sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and Exchange Commission.
It is likely that the NASD's Rules of Fair Practice will be amended such that
the ability of the Distributor to pay non-cash compensation as described above
will be restricted in some fashion. The Distributor intends to comply with the
NASD's Rules of Fair Practice as they may be amended.
Trend Fund Institutional Class
In addition to offering Class A, Class B and Class C Shares, the Fund
also offers Trend Fund Institutional Class, which is described in a separate
prospectus and is available for purchase only by certain investors. Trend Fund
Institutional Class shares generally are distributed directly by the Distributor
and do not have a front-end sales charge, a CDSC or a Limited CDSC, and are not
subject to 12b-1 Plan distribution expenses. To obtain the prospectus that
describes Trend Fund Institutional Class, contact the Distributor by writing to
the address or by calling the telephone number listed on the back of this
Prospectus.
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HOW TO BUY SHARES
Purchase Amounts
Generally, the minimum initial purchase is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of shares of any Class
generally must be $100 or more. For purchases under the Uniform Gifts to Minors
Act or Uniform Transfers to Minors Act or through an Automatic Investing Plan,
there is a minimum initial purchase of $250 and a minimum subsequent purchase of
$25. Minimum purchase requirements do not apply to retirement plans other than
IRAs, for which there is a minimum initial purchase of $250, and a minimum
subsequent purchase of $25, regardless of which Class is selected.
There is a maximum purchase limitation of $250,000 on each purchase of
Class B Shares. For Class C Shares, each purchase must be in an amount that is
less than $1,000,000. An investor may exceed these maximum purchase limitations
by making cumulative purchases over a period of time. In doing so, an investor
should keep in mind that reduced front-end sales charges are available on
investments of $100,000 or more in Class A Shares, and that Class A Shares (i)
are subject to lower annual 12b-1 Plan expenses than Class B Shares and Class C
Shares and (ii) generally are not subject to a CDSC. For retirement plans, the
maximum purchase limitations apply only to the initial purchase of Class B
Shares or Class C Shares by the plan.
Investing through Your Investment Dealer
You can make a purchase of shares of the Fund through most investment
dealers who, as part of the service they provide, must transmit orders promptly.
They may charge for this service. If you want a dealer but do not have one, the
Delaware Group can refer you to one.
Investing by Mail
1. Initial Purchases--An Investment Application or, in the case of a retirement
account, an appropriate retirement plan application, must be completed, signed
and sent with a check payable to Trend Fund A Class, Trend Fund B Class or Trend
Fund C Class, to Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to the specific Class selected. Your check should be identified
with your name(s) and account number. An investment slip (similar to a deposit
slip) is provided at the bottom of transaction confirmations and dividend
statements that you will receive from Equity Funds III, Inc. Use of this
investment slip can help expedite processing of your check when making
additional purchases. Your investment may be delayed if you send additional
purchases by certified mail.
Investing by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 1412893401
(include your name(s) and your account number for the Class in which you are
investing).
1. Initial Purchases--Before you invest, telephone the Shareholder Service
Center to get an account number. If you do not call first, processing of your
investment may be delayed. In addition, you must promptly send your Investment
Application or, in the case of a retirement account, an appropriate retirement
plan application, for the specific Class selected, to Delaware Group at 1818
Market Street, Philadelphia, PA 19103.
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2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You should advise the
Shareholder Service Center by telephone of each wire you send.
If you want to wire investments to a retirement plan account, call the
Shareholder Service Center for special wiring instructions.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group,
you may write and authorize an exchange of part or all of your investment into
shares of the Fund. If you wish to open an account by exchange, call the
Shareholder Service Center for more information. All exchanges are subject to
the eligibility and minimum purchase requirements set forth in each fund's
prospectus. See Redemption and Exchange for more complete information concerning
your exchange privileges.
Holders of Class A Shares may exchange all or part of their shares for
certain of the shares of other funds in the Delaware Group, including other
Class A Shares, but may not exchange their Class A Shares for Class B Shares or
Class C Shares of the Fund or of any other fund in the Delaware Group. Holders
of Class B Shares of the Fund are permitted to exchange all or part of their
Class B Shares only into Class B Shares of other Delaware Group funds.
Similarly, holders of Class C Shares of the Fund are permitted to exchange all
or part of their Class C Shares only into Class C Shares of other Delaware Group
funds. See Appendix B - Classes Offered for a list of Delaware Group Funds and
the classes they offer. Class B Shares of the Fund and Class C Shares of the
Fund acquired by exchange will continue to carry the CDSC and, in the case of
Class B Shares, the automatic conversion schedule of the fund from which the
exchange is made. The holding period of Class B Shares of the Fund acquired by
exchange will be added to that of the shares that were exchanged for purposes of
determining the time of the automatic conversion into Class A Shares of the
Fund.
Permissible exchanges into Class A Shares of the Fund will be made
without a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of the Fund will be made without the imposition of a
CDSC by the fund from which the exchange is being made at the time of the
exchange.
See Allied Plans under Retirement Planning for information on exchanges
by participants in an Allied Plan.
Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if you wish to
use the following services:
1. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly
investments without writing or mailing checks. You may authorize Equity Funds
III, Inc. to transfer a designated amount monthly from your checking account to
your Fund account. Many shareholders use this as an automatic savings plan.
Shareholders should allow a reasonable amount of time for initial purchases and
changes to these plans to become effective.
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<PAGE>
(DTF-ABC)
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
2. Direct Deposit
You may have your employer or bank make regular investments directly to
your Fund account for you (for example: payroll deduction, pay by phone, annuity
payments). The Fund also accepts preauthorized recurring government and private
payments by Electronic Fund Transfer, which avoids mail time and check clearing
holds on payments such as social security, federal salaries, Railroad Retirement
benefits, etc.
* * *
Should investments through an automatic investing plan or by direct
deposit be reclaimed or returned for some reason, Equity Funds III, Inc. has the
right to liquidate your shares to reimburse the government or transmitting bank.
If there are insufficient funds in your account, you are obligated to reimburse
the Fund.
3. MoneyLine (sm) On Demand
Through the MoneyLine (sm) On Demand service, you or your investment
dealer may call the Fund to request a transfer of funds from your predesignated
bank account to your Fund account. See MoneyLine (sm) Services under The
Delaware Difference for additional information about this service.
4. Wealth Builder Option
You can use our Wealth Builder Option to invest in the Fund through
regular liquidations of shares in your accounts in other funds in the Delaware
Group. You may also elect to invest in other mutual funds in the Delaware Group
through the Wealth Builder Option through regular liquidations of shares in your
Fund account.
Under this automatic exchange program, you can authorize regular
monthly amounts (minimum of $100 per fund) to be liquidated from your account in
one or more funds in the Delaware Group and invested automatically into any
other account in a Delaware Group mutual fund that you may specify. If in
connection with the election of the Wealth Builder Option, you wish to open a
new account to receive the automatic investment, such new account must meet the
minimum initial purchase requirements described in the prospectus of the fund
that you select. All investments under this option are exchanges and are
therefore subject to the same conditions and limitations as other exchanges
noted above. You can terminate your participation in Wealth Builder at any time
by giving written notice to the fund from which exchanges are made. See
Redemption and Exchange.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
5. Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your Fund account. Or, you may
invest your distributions in certain other funds in the Delaware Group, subject
to the exceptions noted below as well as the eligibility and minimum purchase
requirements set forth in each fund's prospectus.
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Reinvestments of distributions into Class A Shares of the Fund or of
other Delaware Group funds are made without a front-end sales charge.
Reinvestments of distributions into Class B Shares of the Fund or of other
Delaware Group funds or into Class C Shares of the Fund or of other Delaware
Group funds are also made without any sales charge and will not be subject to a
CDSC if later redeemed. See Automatic Conversion of Class B Shares under Classes
of Shares for information concerning the automatic conversion of Class B Shares
acquired by reinvesting dividends.
Holders of Class A Shares of the Fund may not reinvest their
distributions into Class B Shares or Class C Shares of any fund in the Delaware
Group, including the Fund. Holders of Class B Shares of the Fund may reinvest
their distributions only into Class B Shares of the funds in the Delaware Group
which offer that class of shares. Similarly, holders of Class C Shares of the
Fund may reinvest their distributions only into Class C Shares of the funds in
the Delaware Group which offer that class of shares. See Appendix B -- Classes
Offered for the funds in the Delaware Group offering those classes of shares.
For more information about reinvestments, call the Shareholder Service Center.
Capital gains and/or dividend distributions to participants in the
following retirement plans are automatically reinvested into the same Delaware
Group fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE IRA,
SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
Delaware Group Asset Planner
To invest in Delaware Group funds using the Delaware Group Asset
Planner asset allocation service, you should complete a Delaware Group Asset
Planner Account Registration Form, which is available only from a financial
adviser or investment dealer. As previously described, the Delaware Group Asset
Planner service offers a choice of four predesigned asset allocation strategies
(each with a different risk/reward profile) in predetermined percentages in
Delaware Group funds. With the help of a financial adviser, you may also design
a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Group accounts into the Asset Planner service may be made at net asset value
under the circumstances described under Investing by Exchange, above. Also see
Buying Class A Shares at Net Asset Value under Classes of Shares. The minimum
initial investment per Strategy is $2,000; subsequent investments must be at
least $100. Individual fund minimums do not apply to investments made using the
Asset Planner service. Class A, Class B and Class C Shares are available through
the Asset Planner service. Generally, only shares within the same class may be
used within the same Strategy. However, Class A Shares of the Fund and of other
funds in the Delaware Group may be used in the same Strategy with consultant
class shares that are offered by certain other Delaware Group funds. See
Appendix B -- Classes Offered for the funds in the Delaware Group that offer
consultant class shares.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30 of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an IRA will continue
to pay an annual IRA fee of $15 per Social Security number. See Part B.
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Investors will receive a customized quarterly Strategy Report
summarizing all Delaware Group Asset Planner investment performance and account
activity during the prior period. Confirmation statements will be sent following
all transactions other than those involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
Purchase Price and Effective Date
The offering price and net asset value of Class A, Class B and Class C
Shares are determined as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The effective date of a purchase is the date the order is received by
the Fund, its agent or designee. The effective date of a direct purchase is the
day your wire, electronic transfer or check is received, unless it is received
after the time the offering price or net asset value of shares is determined, as
noted above. Purchase orders received after such time will be effective the next
business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a purchase
is canceled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in the Delaware Group. The Fund reserves the right to reject
purchase orders paid by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check drawn on a
foreign financial institution is accepted, you may be subject to additional bank
charges for clearance and currency conversion.
The Fund also reserves the right, following shareholder notification,
to charge a service fee on non-retirement accounts that, as a result of a
redemption, have remained below the minimum stated account balance for a period
of three or more consecutive months. Holders of such accounts may be notified of
their insufficient account balance and advised that they have until the end of
the current calendar quarter to raise their balance to the stated minimum. If
the account has not reached the minimum balance requirement by that time, the
Fund will charge a $9 fee for that quarter and each subsequent calendar quarter
until the account is brought up to the minimum balance. The service fee will be
deducted from the account during the first week of each calendar quarter for the
previous quarter, and will be used to help defray the cost of maintaining
low-balance accounts. No fees will be charged without proper notice, and no CDSC
will apply to such assessments.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.
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REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways.
The exchange service is useful if your investment requirements change and you
want an easy way to invest in other equity funds, tax-advantaged funds, bond
funds or money market funds. This service is also useful if you are anticipating
a major expenditure and want to move a portion of your investment into a fund
that has the checkwriting feature. Exchanges are subject to the requirements of
each fund and all exchanges of shares constitute taxable events. See Taxes.
Further, in order for an exchange to be processed, shares of the fund being
acquired must be registered in the state where the acquiring shareholder
resides. You may want to consult your financial adviser or investment dealer to
discuss which funds in the Delaware Group will best meet your changing
objectives, and the consequences of any exchange transaction. You may also call
the Delaware Group directly for fund information.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after the Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
For example, redemption or exchange requests received in good order after the
time the offering price and net asset value of shares are determined will be
processed on the next business day. See Purchase Price and Effective Date under
How to Buy Shares. A shareholder submitting a redemption request may indicate
that he or she wishes to receive redemption proceeds of a specific dollar
amount. In the case of such a request, and in the case of certain redemptions
from retirement plan accounts, the Fund will redeem the number of shares
necessary to deduct the applicable CDSC in the case of Class B and Class C
Shares, and, if applicable, the Limited CDSC in the case of Class A Shares and
tender to the shareholder the requested amount, assuming the shareholder holds
enough shares in his or her account for the redemption to be processed in this
manner. Otherwise, the amount tendered to the shareholder upon redemption will
be reduced by the amount of the applicable CDSC or Limited CDSC. Redemption
proceeds will be distributed promptly, as described below, but not later than
seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a redemption or
an exchange by calling the Shareholder Service Center at 800-523-1918. The Fund
may suspend, terminate, or amend the terms of the exchange privilege upon 60
days' written notice to shareholders.
The Fund will process written and 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, which may take up to 15
days from the purchase date. You can avoid this potential delay if you purchase
shares by wiring Federal Funds. The Fund reserves the right to reject a written
or telephone redemption request or delay payment of redemption proceeds if there
has been a recent change to the shareholder's address of record.
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There is no front-end sales charge or fee for exchanges made between
shares of funds which both carry a front-end sales charge. Any applicable
front-end sales charge will apply to exchanges from shares of funds not subject
to a front-end sales charge, except for exchanges involving assets that were
previously invested in a fund with a front-end sales charge and/or exchanges
involving the reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Group (in each
case, "New Shares") in a permitted exchange, will not be subject to a CDSC that
might otherwise be due upon redemption of the Original Shares. However, such
shareholders will continue to be subject to the CDSC and, in the case of Class B
Shares, the automatic conversion schedule of the Original Shares as described in
this Prospectus and any CDSC assessed upon redemption will be charged by the
fund from which the Original Shares were exchanged. In an exchange of Class B
Shares from the Fund, the Fund's CDSC schedule may be higher than the CDSC
schedule relating to the New Shares acquired as a result of the exchange. For
purposes of computing the CDSC that may be payable upon a disposition of the New
Shares, the period of time that an investor held the Original Shares is added to
the period of time that an investor held the New Shares. With respect to Class B
Shares, the automatic conversion schedule of the Original Shares may be longer
than that of the New Shares. Consequently, an investment in New Shares by
exchange may subject an investor to the higher 12b-1 fees applicable to Class B
Shares of the Fund for a longer period of time than if the investment in New
Shares were made directly.
Various redemption and exchange methods are outlined below. Except for
the CDSC applicable to certain redemptions of Class B and Class C Shares and the
Limited CDSC applicable to certain redemptions of Class A Shares purchased at
net asset value, there is no fee charged by the Fund or the Distributor for
redeeming or exchanging your shares, but such fees could be charged in the
future. You may have your investment dealer arrange to have your shares redeemed
or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund or its agent.
Written Redemption
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103
to redeem some or all of your shares. The request must be signed by all owners
of the account or your investment dealer of record. For redemptions of more than
$50,000, or when the proceeds are not sent to the shareholder(s) at the address
of record, the Fund requires a signature by all owners of the account and a
signature guarantee for each owner. Each signature guarantee must be supplied by
an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificates(s) must accompany your request and also be in good order.
Certificates are issued for Class A Shares only if a shareholder submits a
specific request. Certificates are not issued for Class B Shares or Class C
Shares.
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Written Exchange
You may also write to the Fund (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your shares into another mutual
fund in the Delaware Group, subject to the same conditions and limitations as
other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
certificates.
The Telephone Redemption--Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do not
wish to have such services available with respect to your account. The Fund
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests.
Neither the Fund nor its 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. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day.
CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted from your
redemption proceeds. If you ask for a check, it will normally be mailed the next
business day after receipt of your redemption request to your predesignated bank
account. There are no separate fees for this redemption method, but the mail
time may delay getting funds into your bank account. Simply call the Shareholder
Service Center prior to the time the offering price and net asset value are
determined, as noted above.
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MoneyLine (sm) On Demand
Through the MoneyLine (sm) On Demand service, you or your investment
dealer may call the Fund to request a transfer of funds from your Fund account
to your predesignated bank account. See MoneyLine (sm) Services under The
Delaware Difference for additional information about this service.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in the Delaware Group under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
Systematic Withdrawal Plans
1. Regular Plans
This plan provides shareholders with a consistent monthly (or
quarterly) payment. This is particularly useful to shareholders living on fixed
incomes, since it can provide them with a stable supplemental amount. With
accounts of at least $5,000, you may elect monthly withdrawals of $25 (quarterly
$75) or more. The Fund does not recommend any particular monthly amount, as each
shareholder's situation and needs vary. Payments are normally made by check. In
the alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine (sm) Direct
Deposit Service. Your funds will normally be credited to your bank account up to
four business days after the payment date. There are no separate fees for this
redemption method. See MoneyLine (sm) Services under The Delaware Difference for
more information about this service.
2. Retirement Plans
For shareholders eligible under the applicable retirement plan to
receive benefits in periodic payments, the Systematic Withdrawal Plan provides
you with maximum flexibility. A number of formulas are available for calculating
your withdrawals depending upon whether the distributions are required or
optional. Withdrawals must be for $25 or more; however, no minimum account
balance is required. The MoneyLine (sm) Direct Deposit Service described above
is not available for certain retirement plans.
* * *
Shareholders should not purchase additional shares while participating
in a Systematic Withdrawal Plan.
Redemptions of Class A Shares via a Systematic Withdrawal Plan may be
subject to a Limited CDSC if the original purchase was made at net asset value
within the 12 months prior to the withdrawal and a dealer's commission was paid
on that purchase. See Contingent Deferred Sales Charge for Certain Redemptions
of Class A Shares Purchased at Net Asset Value, below.
The applicable CDSC for Class B Shares and Class C Shares redeemed via
a Systematic Withdrawal Plan will be waived if, on the date that the Plan is
established, the annual amount selected to be withdrawn is less than 12% of the
account balance. If the annual amount selected to be withdrawn exceeds 12% of
the account balance on the date that the Systematic Withdrawal Plan is
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established, all redemptions under the Plan will be subject to the applicable
CDSC. Whether a waiver of the CDSC is available or not, the first shares to be
redeemed for each Systematic Withdrawal Plan payment will be those not subject
to a CDSC because they have either satisfied the required holding period or were
acquired through the reinvestment of distributions. The 12% annual limit will be
reset on the date that any Systematic Withdrawal Plan is modified (for example,
a change in the amount selected to be withdrawn or the frequency or date of
withdrawals), based on the balance in the account on that date. See Waiver of
Contingent Deferred Sales Charge -- Class B and Class C Shares, below.
For more information on Systematic Withdrawal Plans, call the
Shareholder Service Center.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
A Limited CDSC will be imposed on certain redemptions of Class A Shares
(or shares into which such Class A Shares are exchanged) made within 12 months
of purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission previously described. See
Classes of Shares.
The Limited CDSC will be paid to the Distributor and will be equal to
the lesser of 1% of: (1) the net asset value at the time of purchase of the
Class A Shares being redeemed; or (2) the net asset value of such Class A Shares
at the time of redemption. For purposes of this formula, the "net asset value at
the time of purchase" will be the net asset value at purchase of the Class A
Shares even if those shares are later exchanged for shares of another Delaware
Group fund and, in the event of an exchange of Class A Shares, the "net asset
value of such shares at the time of redemption" will be the net asset value of
the shares acquired in the exchange.
Redemptions of such Class A Shares held for more than 12 months will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Group fund will not trigger the imposition of the Limited CDSC
at the time of such exchange. The period a shareholder owns shares into which
Class A Shares are exchanged will count towards satisfying the 12-month holding
period. The Limited CDSC is assessed if such 12-month period is not satisfied
irrespective of whether the redemption triggering its payment is of Class A
Shares of the Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the investment
occurred, will age one month on the last day of that month and each subsequent
month.
Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from the Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"), or due to death of a participant in such a plan; (iii)
redemptions pursuant to the direction of a participant or beneficiary of a
retirement plan qualified under section 401(a) or 401(k) of the Code with
respect to that
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retirement plan; (iv) periodic distributions from an IRA, SIMPLE IRA, or
403(b)(7) or 457 Deferred Compensation Plan due to death, disability, or
attainment of age 59 1/2, and IRA distributions qualifying under Section 72(t)
of the Internal Revenue Code; (v) returns of excess contributions to an IRA;
(vi) distributions by other employee benefit plans to pay benefits; (vii)
distributions described in (ii), (iv), and (vi) above pursuant to a systematic
withdrawal plan; and (viii) redemptions by the classes of shareholders who are
permitted to purchase shares at net asset value, regardless of the size of the
purchase (see Buying Class A Shares at Net Asset Value under Classes of Shares).
Waiver of Contingent Deferred Sales Charge - Class B and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from the
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective minimum
account size; (ii) returns of excess contributions to an IRA, SIMPLE IRA,
SEP/IRA or 403(b)(7) or 457 Deferred Compensation Plans; (iii) periodic
distributions from an IRA, SIMPLE IRA, SEP/IRA, 403(b)(7) or 457 Deferred
Compensation Plan, and IRA distributions qualifying under Section 72(t) of the
Internal Revenue Code; and (iv) distributions from an account if the redemption
results from the death of all registered owners of the account (in the case of
accounts established under the Uniform Gifts to Minors or Uniform Transfers to
Minors Acts or trust accounts, the waiver applies upon the death of all
beneficial owners) or a total and permanent disability (as defined in Section 72
of the Code) of all registered owners occurring after the purchase of the shares
being redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or 401(k)
Defined Contribution Plan; (iii) periodic distributions from a 403(b)(7) or 457
Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan,
Money Purchase Pension Plan, 401(k) Defined Contribution Plans upon attainment
of age 70 1/2, and IRA distributions qualifying under Section 72(t) of the
Internal Revenue Service; (iv) distributions from a 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, or 401(k) Defined Contribution Plan,
under hardship provisions of the plan; (v) distributions from a 403(b)(7) or
457 Deferred Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan
or a 401(k) Defined Contribution Plan upon attainment of normal retirement age
under the plan or upon separation from service; (vi) periodic distributions from
an IRA or SIMPLE IRA on or after attainment of age 59; and (vii) distributions
from an account if the redemption results from the death of all registered
owners of the account (in the case of accounts established under the Uniform
Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts, the
waiver applies upon the death of all beneficial owners) or a total and permanent
disability (as defined in Section 72 of the Code) of all registered owners
occurring after the purchase of the shares being redeemed.
In addition, the CDSC will be waived on Class B and Class C Shares
redeemed in accordance with a Systematic Withdrawal Plan if the annual amount
selected to be withdrawn under the Plan does not exceed 12% of the value of the
account on the date that the Systematic Withdrawal Plan was established or
modified.
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DIVIDENDS AND DISTRIBUTIONS
The Fund will make payments from 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 if necessary to comply with certain requirements of
the Code.
Each class of the Fund will share proportionately in the investment
income and expenses of the Fund, except that the per share dividends from net
investment income on Class A Shares, Class B Shares and Class C Shares will vary
due to the expenses under the 12b-1 Plan applicable to each Class. Generally,
the dividends per share on Class B Shares and Class C Shares can be expected to
be lower than the dividends per share on Class A Shares because the expenses
under the 12b-1 Plans relating to Class B and Class C Shares will be higher than
the expenses under the 12b-1 Plan relating to Class A Shares. See Distribution
(12b-1) and Service under Management of the Fund.
Both dividends and distributions, if any, are automatically reinvested
in your account at net asset value unless you elect otherwise. Any check in
payment of dividends or other distributions which cannot be delivered by the
United States Post Office or which remains uncashed for a period of more than
one year may be reinvested in your account at the then-current net asset value
and the dividend option may be changed from cash to reinvest. If you elect to
take your dividends and distributions in cash and such dividends and
distributions are in an amount of $25 or more, you may choose the MoneyLine (sm)
Direct Deposit Service and have such payments transferred from your Fund account
to your predesignated bank account. This service is not available for certain
retirement plans. See MoneyLine (sm) Services under The Delaware Difference for
more information about this service.
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TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Fund.
The Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, the Fund
will not be subject to federal income tax, or to any excise tax, to the extent
its earnings are distributed as provided in the Code.
The Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to those investors who are subject
to income taxes as ordinary income, whether received in cash or in additional
shares. For corporate investors, dividends from net investment income will
generally qualify in part for the corporate dividends-received deduction. The
portion of dividends paid by the Fund that so qualifies will be designated each
year in a notice from Equity Funds III, Inc. to the Fund's shareholders. For the
fiscal year ended June 30, 1997, none of the Fund's dividends from net
investment income qualified for the dividends-received deduction.
Distributions paid by the Fund from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who are
subject to income taxes as long-term capital gains, regardless of the length of
time an investor has owned shares in the Fund. The Fund does not seek to realize
any particular amount of capital gains during a year; rather, realized gains are
a by-product of Fund management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year. Also, for
those investors subject to tax, if purchases of shares in the Fund are made
shortly before the record date for a dividend or capital gains distribution, a
portion of the investment will be returned as a taxable distribution.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November, or December to shareholders
of record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Fund and received by the shareholder
on December 31 of the year declared.
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
the Fund and any other fund in the Delaware Group. Any loss incurred on a sale
or exchange of the Fund's shares that had been held for six months or less will
be treated as a long-term capital loss to the extent of capital gains dividends
received with respect to such shares. All or a portion of the sales charge
incurred in acquiring Fund shares will be excluded from the federal tax basis of
any of such shares sold or exchanged within 90 days of their purchase (for
purposes of determining gain or loss upon sale of such shares) if the sale
proceeds are reinvested in the Fund or in another fund in the Delaware Group of
funds and a sales charge that would otherwise apply to the reinvestment is
reduced or eliminated. Any portion of such sales charge excluded from the tax
basis of the shares sold will be added to the tax basis of the shares acquired
in the reinvestment.
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The automatic conversion of Class B Shares into Class A Shares at the
end of approximately eight years after purchase will be tax-free for federal tax
purposes. See Automatic Conversion of Class B Shares under Classes of Shares.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. government securities may be exempt from
state personal income taxes. Shares of the Fund are exempt from Pennsylvania
county personal property taxes.
Each year, Equity Funds III, Inc. will mail to you information on the
tax status of the Fund's dividends and distributions. Shareholders will also
receive each year information as to the portion of dividend income, if any, that
is derived from U.S. government securities that are exempt from state income
tax. Of course, shareholders who are not subject to tax on their income would
not be required to pay tax on amounts distributed to them by the Fund.
Equity Funds III, Inc. is required to withhold 31% of taxable
dividends, capital gains distributions, and redemptions paid to shareholders who
have not complied with IRS taxpayer identification regulations. You may avoid
this withholding requirement by certifying on your Investment Application your
proper Taxpayer Identification Number and by certifying that you are not subject
to backup withholding.
See Taxes in Part B for additional information on tax matters relating
to the Fund and its shareholders.
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CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
The net asset value ("NAV") per share is computed by adding the value
of all securities and other assets in the portfolio, deducting any liabilities
(expenses and fees are accrued daily) and dividing by the number of shares
outstanding. Portfolio securities for which market quotations are available are
priced at market value. Short-term investments having a maturity of less than 60
days are valued at amortized cost, which approximates market value. All other
securities are valued at their fair value as determined in good faith and in a
method approved by Equity Funds III, Inc.'s Board of Directors.
Class A Shares are purchased at the offering price per share, while
Class B Shares and Class C Shares are purchased at the NAV per share. The
offering price per share of Class A Shares consists of the NAV per share next
computed after the order is received, plus any applicable front-end sales
charges.
The offering price and NAV are computed as of the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on
days when the Exchange is open.
The net asset values of all outstanding shares of each class of 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 Trend Fund Institutional Class will not incur any of the expenses
under Equity Funds III, Inc.'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
12b-1 Plans. Due to the specific distribution expenses and other costs that will
be allocable to each class, the NAV of each class of the Fund will vary.
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MANAGEMENT OF THE FUND
Directors
The business and affairs of Equity Funds III, Inc. are managed under
the direction of its Board of Directors. Part B contains additional information
regarding Equity Funds III, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On June 30, 1997, the Manager and its affiliates
within the Delaware Group, including Delaware International Advisers Ltd., were
managing in the aggregate more than $37 billion in assets in the various
institutional or separately managed (approximately $22,302,518,000) and
investment company (approximately $15,246,733,000) accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now indirect, wholly owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management. In connection with the merger, a new
Investment Management Agreement between the Fund and the Manager was executed
following shareholder approval.
The Manager manages the Fund's portfolio and makes investment
decisions, which are implemented by the Fund's Trading Department. The Manager
also administers Equity Funds III, Inc.'s affairs and pays the salaries of all
the directors, officers and employees of Equity Funds III, Inc. who are
affiliated with the Manager. For these services, the Manager is paid an annual
fee of 3/4 of 1% of the average daily net assets of the Fund, less all
directors' fees paid to unaffiliated directors of Equity Funds III, Inc. This
fee was paid by the Fund during the last fiscal year. This fee is higher than
that paid by many other funds and may be higher or lower than that paid by funds
with comparable investment objectives. Investment management fees paid by the
Fund for the fiscal year ended June 30, 1997 were 0.75% of its average daily net
assets.
Gerald S. Frey has primary responsibility for making day-to-day
investment decisions for the Fund. Mr. Frey has been Vice President/Senior
Portfolio Manager of the Fund since March 1997 and was Co-Manager from June 1996
to March 1997. Mr. Frey has 20 years' experience in the money management
business and holds a BA in Economics from Bloomsburg University and attended
Wilkes College and New York University. Prior to joining the Delaware Group in
1996, he was a Senior Director with Morgan Grenfell Capital Management in New
York.
In making investment decisions for the Fund, Mr. Frey regularly
consults with Wayne A. Stork, Marshall T. Bassett, William H. Miller, John A.
Heffern and Lori Wachs. Mr. Stork, Chairman of the Manager and Equity Funds III,
Inc.'s Board of Directors, is a graduate of Brown University and attended New
York University's Graduate School of Business Administration. Mr. Stork joined
the Delaware Group in 1962 and has served in various executive capacities at
different times within the Delaware organization. Marshall T. Bassett, Vice
President, joined Delaware in 1997.
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In his most recent position, he served as Vice President in Morgan Stanley Asset
Management's Emerging Growth Group, where he analyzed small growth companies.
Prior to that, he was a trust officer at Sovran Bank and Trust Company. He
received his bachelor's degree and MBA from Duke University. Mr. Miller is a
Vice President/Assistant Portfolio Manager. He holds a BA in Economics from
Trinity College. Prior to joining the Delaware Group in 1995, he worked as a
technology analyst for Janney Montgomery Scott in Philadelphia and he has also
served as an institutional salesman for Rutherford Brown & Catherwood. John A.
Heffern, Vice President, holds a bachelor's degree and an MBA from the
University of North Carolina at Chapel Hill. He joined Delaware in 1997.
Previously, he was a Senior Vice President, Equity Research at NatWest
Securities Corporation's Specialty Finance Services unit. Prior to that, he was
a Principal and Senior Regional Bank Analyst at Alex. Brown & Sons. Ms. Wachs is
an Assistant Vice President. She joined the Delaware Group in 1992 from Goldman
Sachs, where she was an equity analyst for two years. She is a graduate of the
University of Pennsylvania's Wharton School, where she majored in Finance and
Oriental studies.
Portfolio Trading Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length of time they
have been held. The degree of portfolio activity will affect brokerage costs of
the Fund and may affect taxes payable by the Fund's shareholders to the extent
that net capital gains are realized. Given the Fund's investment objective, its
annual portfolio turnover rate may exceed 100%. During the past two fiscal
years, the Fund's portfolio turnover rates were 90% for 1996 and 115% for 1997.
The Fund uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
its advisory clients. These services may be used by the Manager in servicing any
of its accounts. Subject to best price and execution, the Fund may consider a
broker/dealer's sales of shares of funds in the Delaware Group of funds in
placing portfolio orders and may place orders with broker/dealers that have
agreed to defray certain expenses of such funds, such as custodian fees.
Performance Information
From time to time, the Fund may quote total return performance of the
Classes in advertising and other types of literature. Total return will be based
on a hypothetical $1,000 investment, reflecting the reinvestment of all
distributions at net asset value and (i) in the case of Class A Shares, the
impact of the maximum front-end sales charge at the beginning of each specified
period and (ii) in the case of Class B Shares and Class C Shares, the deduction
of any applicable CDSC at the end of the relevant period. Each presentation will
include the average annual total return for one-, five- and ten-year
(or life-of-fund, if applicable) periods. The Fund may also advertise aggregate
and average total return information concerning a Class over additional periods
of time. 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. In this case, such total return information would be more
favorable than total return information that includes deductions of the maximum
front-end sales charge or any applicable CDSC.
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Because stock prices fluctuate, investment results of the Classes will
fluctuate over time. Past performance is not considered a guarantee of future
results.
Distribution (12b-1) and Service
The Distributor, Delaware Distributors, L.P., serves as the national
distributor for the Fund's shares under a Distribution Agreement with Equity
Funds III, Inc. dated April 3, 1995, as amended on November 29, 1995.
Equity Funds III, Inc. has adopted a separate distribution plan under
Rule 12b-1 for each of the Class A Shares, Class B Shares and Class C Shares
(the "Plans"). The Plans permit the Fund to pay the Distributor from the assets
of the respective Classes a monthly fee for the Distributor's services and
expenses in distributing and promoting sales of shares.
These expenses include, among other things, preparing and distributing
advertisements, sales literature, and prospectuses and reports used for sales
purposes, compensating sales and marketing personnel, holding special promotions
for specified periods of time, and paying distribution and maintenance fees to
brokers, dealers and others. In connection with the promotion of shares of the
Classes, the Distributor may, from time to time, pay to participate in
dealer-sponsored seminars and conferences, and reimburse dealers for expenses
incurred in connection with preapproved seminars, conferences and advertising.
The Distributor may pay or allow additional promotional incentives to dealers as
part of preapproved sales contests and/or to dealers who provide extra training
and information concerning a Class and who increase sales of the Class. In
addition, the Fund may make payments from the 12b-1 Plan fees of its respective
Classes directly to others, such as banks, who aid in the distribution of Class
shares or provide services in respect of a Class, pursuant to service agreements
with Equity Funds III, Inc.
The 12b-1 Plan expenses relating to each of the Class B Shares and
Class C Shares of the Fund are also used to pay the Distributor for advancing
the commission costs to dealers with respect to the initial sale of such shares.
The aggregate fees paid by the Fund from the assets of the respective
Classes to the Distributor and others under the Plans may not exceed (i) 0.30%
of the Class A Shares' average daily net assets in any year, and (ii) 1% (0.25%
of which are service fees to be paid to the Distributor, dealers or others, for
providing personal service and/or maintaining shareholder accounts) of each of
the Class B Shares' and Class C Shares' average daily net assets in any year.
The actual 12b-1 Plan expenses assessed against Class A Shares may be less than
0.30%, but may not be less than 0.10%, because of the formula for calculating
the fee adopted by Equity Funds III, Inc.'s Board of Directors. See Part B. The
Fund's Class A, Class B and Class C Shares will not incur any distribution
expenses beyond these limits, which may not be increased without shareholder
approval.
While payments pursuant to the Plans may not exceed 0.30% annually with
respect to Class A Shares and 1% annually with respect to each of the Class B
Shares and Class C Shares, the Plans do not limit fees to amounts actually
expended by the Distributor. It is therefore possible that the Distributor may
realize a profit in any particular year. However, the Distributor currently
expects that its distribution expenses will likely equal or exceed payments to
it under the Plans. The Distributor may incur such additional expenses and make
additional payments to dealers from its own resources to promote the
distribution of shares of the Classes. The monthly fees paid to the Distributor
under the
-45-
<PAGE>
Plans are subject to the review and approval of Equity Funds III, Inc.'s
unaffiliated directors who may reduce the fees or terminate the Plans at any
time.
The Plans do not apply to Trend Fund Institutional Class. Those shares
are not included in calculating the Plans' fees, and the Plans are not used to
assist in the distribution and marketing of Trend Fund Institutional Class.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Fund under
an agreement dated as of June 29, 1988. The Transfer Agent also provides
accounting services to the Fund pursuant to the terms of a separate Fund
Accounting Agreement. The directors of Equity Funds III, Inc. annually review
service fees paid to the Transfer Agent.
The Distributor and the Transfer Agent are also indirect, wholly owned
subsidiaries of DMH.
Expenses
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under the Distribution Agreement. For the fiscal year ended
June 30, 1997, the ratios of expenses to average daily net assets for Class A
Shares, Class B Shares and Class C Shares were 1.34%, 2.09% and 2.09%,
respectively. The expense ratio of each Class reflects the impact of its 12b-1
Plan.
Shares
Equity Funds III, Inc. is an open-end management investment company.
The Fund's portfolio of assets is diversified as defined by the 1940 Act.
Commonly known as a mutual fund, Equity Funds III, Inc. was organized as a
Maryland corporation on March 4, 1983 and was previously organized as a Delaware
corporation in 1966.
Fund shares have a par value of $.50, equal voting rights, except as
noted below, and are equal in all other respects. Equity Funds III, Inc. shares
have noncumulative voting rights which means that the holders of more than 50%
of Equity Funds III, Inc.'s shares voting for the election of directors can
elect 100% of the directors if they choose to do so. Under Maryland law, Equity
Funds III, Inc. is not required, and does not intend, to hold annual meetings of
shareholders unless, under certain circumstances, it is required to do so under
the 1940 Act. Shareholders of 10% or more of Equity Funds III, Inc.'s
outstanding shares may request that a special meeting be called to consider the
removal of a director.
In addition to Class A Shares, Class B Shares and Class C Shares, the
Fund also offers Trend Fund Institutional Class. Shares of each class represent
proportionate interests in the assets of the Fund and have the same voting and
other rights and preferences as the other classes of the Fund, except that
shares of Trend Fund Institutional Class are not subject to, and may not vote on
matters affecting, the Distribution Plans under Rule 12b-1 relating to Class A,
Class B and Class C Shares. 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 Plan relating to Class A Shares.
Effective as of August 29, 1997, the name of Delaware Group Trend Fund,
Inc. was changed to Delaware Group Equity Funds III, Inc.
-46-
<PAGE>
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
Restricted and Illiquid Securities
The Fund may purchase privately placed securities the resale of which
is restricted under applicable securities laws. Such securities may offer a
higher return than comparably registered securities but involve some additional
risk as they can be resold only in privately negotiated transactions, in
accordance with an exemption from the registration requirements under applicable
securities laws or after registration. The Fund will not purchase illiquid
assets, including such restricted securities, if more than 10% of the value of
its assets would then consist of illiquid securities.
Certain of the privately placed securities acquired by the Fund will be
eligible for resale by the Fund pursuant to Rule 144A under the Securities Act
of 1933 ("Rule 144A Securities"). Rule 144A permits many privately placed or
legally restricted securities to be freely traded without restriction among
certain institutional buyers such as the Fund.
While maintaining oversight, the Board of Directors of the Fund has
delegated to the Manager the day-to-day function of determining whether or not
individual Rule 144A Securities are liquid for purposes of the Fund's 10%
limitation on investments in illiquid securities. The Board has instructed the
Manager to consider the following factors in determining the liquidity of a Rule
144A Security: (i) the frequency of trades and trading volume for the security;
(ii) whether at least three dealers are willing to purchase or sell the security
and the number of potential purchasers; (iii) whether at least two dealers are
making a market in the security; and (iv) the nature of the security and the
nature of the marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, the
Fund's holdings of illiquid securities exceed the Fund's 10% limit on
investments in such securities, the Manager will determine what action to take
to ensure that the Fund continues to adhere to such limitation.
Repurchase Agreements
The Fund may invest in repurchase agreements, but will not normally do
so except to invest excess cash balances. In a repurchase agreement, the Fund
purchases a security and simultaneously agrees to sell it back to the seller at
a set (generally higher) price. Delays or losses could result if the other party
to the repurchase agreement defaults or becomes insolvent.
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.
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, subject to overall
supervision by the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
-47-
<PAGE>
Borrowings
Although the Fund is permitted under certain circumstances to borrow
money, it does not normally do so. The Fund will not purchase new securities
while any borrowings are outstanding.
-48-
<PAGE>
APPENDIX A - INVESTMENT ILLUSTRATIONS
Illustrations of Hypothetical Returns
on Investment Based on Purchase Option
$10,000 Purchase
<TABLE>
<CAPTION>
Scenario 1 Scenario 2 Scenario 3 Scenario 4
No Redemption Redeem 1st Year Redeem 3rd Year Redeem 5th Year
--------------------------- -------------------------- ------------------------- ----------------------------
Year Class A Class B Class C Class A Class B Class C Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 9,525 10,000 10,000 9,525 10,000 10,000 9,525 10,000 10,000 9,525 10,000 10,000
1 10,478 10,930 10,930 10,478 10,530 10,830+ 10,478 10,930 10,930 10,478 10,930 10,930
2 11,525 11,946 11,946 11,525 11,946 11,946 11,525 11,946 11,946
3 12,678 13,058 13,058 12,678 12,758 13,058+ 12,678 13,058 13,058
4 13,946 14,272 14,272 13,946 14,272 14,272
5 15,340 15,599 15,599 15,340 15,399 15,599+
6 16,874 17,050 17,050
7 18,562 18,636 18,636
8 20,418+ 20,369 20,369
9 22,459 22,405* 22,263
10 24,705 24,646* 24,333
</TABLE>
* This assumes that Class B Shares were converted to Class A Shares at the
end of the eighth year.
$250,000 Purchase
<TABLE>
<CAPTION>
Scenario 1 Scenario 2 Scenario 3 Scenario 4
No Redemption Redeem 1st Year Redeem 3rd Year Redeem 5th Year
--------------------------- --------------------------- ---------------------------- ---------------------------
Year Class A Class B Class C Class A Class B Class C Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 243,750 250,000 250,000 243,750 250,000 250,000 243,750 250,000 250,000 243,750 250,000 250,000
1 268,125 273,250 273,250 268,125 263,250 270,750+ 268,125 273,250 273,250 268,125 273,250 273,250
2 294,938 298,662 298,662 294,938 298,662 298,662 294,938 298,662 298,662
3 324,431 326,438 326,438 324,431 318,938 326,438+ 324,431 326,438 326,438
4 356,874+ 356,797 356,797 356,874+ 356,797 356,797
5 392,562 389,979 389,979 392,562 384,979 389,979
6 431,818 426,247 426,247
7 475,000 465,888 465,888
8 522,500 509,215 509,215
9 574,750 560,137* 556,572
10 632,225 616,150* 608,333
</TABLE>
* This assumes that Class B Shares were converted to Class A Shares at the
end of the eighth year.
Assumes a hypothetical return for Class A of 10% per year, a hypothetical return
for Class B of 9.3% for years 1-8 and 10% for years 9-10, and a hypothetical
return for Class C of 9.3% per year. Hypothetical returns vary due to the
different expense structures for each Class and do not represent actual
performance.
Class A purchase subject to appropriate sales charge breakpoint (4.75% @
$10,000; 3.75% @ $100,000; 2.50% @ $250,000).
Class B purchase assessed appropriate CDSC upon redemption (4%-4%-3%-3%-2%-1% in
years 1-2-3-4-5-6).
Class C purchase assessed 1% CDSC upon redemption in year 1.
Figures marked "+" identify which Class offers the greater return potential
based on investment amount, the holding period and the expense structure of each
Class.
-50-
<PAGE>
APPENDIX B -- CLASSES OFFERED
<TABLE>
<CAPTION>
Growth of Capital A Class B Class C Class Consultant Class
------- ------- ------- ----------------
<S> <C> <C> <C> <C>
Aggressive Growth Fund x x x -
Trend Fund x x x -
Enterprise Fund x x x -
DelCap Fund x x x -
SmallCap Value Fund x x x -
U.S. Growth Fund x x x -
Growth Stock Fund x x x -
Tax-Efficient Equity Fund x x x -
Total Return
Blue Chip Fund x x x -
Quantum Fund x x x -
Devon Fund x x x -
Decatur Total Return Fund x x x -
Decatur Income Fund x x x -
Delaware Fund x x x -
International Diversification
Emerging Markets Fund x x x -
New Pacific Fund x x x -
World Growth Fund x x x -
International Equity Fund x x x -
Global Assets Fund x x x -
Global Bond Fund x x x -
Current Income
Delchester Fund x x x -
Strategic Income Fund x x x -
Corporate Income Fund x x x -
Federal Bond Fund x x x -
U.S. Government Fund x x x -
Delaware-Voyageur US Government
Securities Fund x x x -
Limited-Term Government Fund x x x -
</TABLE>
(Not Part of Prospectus)
-51-
<PAGE>
APPENDIX B--CLASSES OFFERED - (CON'T)
<TABLE>
<CAPTION>
Tax-Free Income A Class B Class C Class Consultant Class
------- ------- ------- ----------------
<S> <C> <C> <C> <C>
National High Yield Municipal Bond Fund x x x -
Tax-Free USA Fund x x x -
Tax-Free Insured Fund x x x -
Tax-Free USA Intermediate Fund x x x -
Delaware-Voyageur Tax-Free Arizona Insured Fund x x x -
Delaware-Voyageur Tax-Free Arizona Fund x x x -
Delaware-Voyageur Tax-Free California Insured Fund x x x -
Delaware-Voyageur Tax-Free California Fund x x x -
Delaware-Voyageur Tax-Free Colorado Fund x x x -
Delaware-Voyageur Tax-Free Florida Insured Fund x x x -
Delaware-Voyageur Tax-Free Florida Intermediate Fund x x x -
Delaware-Voyageur Tax-Free Florida Fund x x x -
Delaware-Voyageur Tax-Free Idaho Fund x x x -
Delaware-Voyageur Tax-Free Iowa Fund x x x -
Delaware-Voyageur Tax-Free Kansas Fund x x x -
Delaware-Voyageur Minnesota High Yield Municipal Bond Fund x x x -
Delaware-Voyageur Minnesota Insured Fund x x x -
Delaware-Voyageur Tax-Free Minnesota Intermediate Fund x x x -
Delaware-Voyageur Tax-Free Minnesota Fund x x x -
Delaware-Voyageur Tax-Free Missouri Insured Fund x x x -
Delaware-Voyageur Tax-Free New Mexico Fund x x x -
Delaware-Voyageur Tax-Free New York Fund x x x -
Delaware-Voyageur Tax-Free North Dakota Fund x x x -
Delaware-Voyageur Tax-Free Oregon Insured Fund x x x -
Tax-Free Pennsylvania Fund x x x -
Delaware-Voyageur Tax-Free Utah Fund x x x -
Delaware-Voyageur Tax-Free Washington Insured Fund x x x -
Delaware-Voyageur Tax-Free Wisconsin Fund x x x -
Money Market Funds
Delaware Cash Reserve x x x x
U.S. Government Money Fund x - - x
Tax-Free Money Fund x - - x
</TABLE>
(Not Part of Prospectus)
-52-
<PAGE>
The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, national and state-specific 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, contact your
financial adviser or call Delaware Group at 800-523-4640.
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
- ---------------------------------------------------------
TREND FUND
- ---------------------------------------------------------
A CLASS
- ---------------------------------------------------------
B CLASS
- ---------------------------------------------------------
C CLASS
- ---------------------------------------------------------
P R O S P E C T U S
- ---------------------------------------------------------
AUGUST 29, 1997
DELAWARE
GROUP
<PAGE>
PROSPECTUS
TREND FUND INSTITUTIONAL AUGUST 29, 1997
CLASS SHARES
-----------------------------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For more information about Trend Fund Institutional Class
call Delaware Group at 800-828-5052.
This Prospectus describes shares of Trend Fund series (the "Fund") of
Delaware Group Equity Funds III, Inc. ("Equity Funds III, Inc."), a
professionally-managed mutual fund of the series type. The Fund's investment
objective is to achieve capital appreciation by investing primarily in
securities of emerging and other growth-oriented companies.
The Fund offers Trend Fund Institutional Class (the "Class") of shares.
This Prospectus relates only to the Class and sets forth information
that you should read and consider before you invest. Please retain it for future
reference. The Fund's Statement of Additional Information ("Part B" of Equity
Funds III, Inc.'s registration statement), dated August 29, 1997, as it may be
amended from time to time, contains additional information about the Fund and
has been filed with the Securities and Exchange Commission. Part B is
incorporated by reference into this Prospectus and is available, without charge,
by writing to Delaware Distributors, L.P. at the above address or by calling the
above number. The Fund's financial statements appear in its Annual Report, which
will accompany any response to requests for Part B.
The Fund also offers Trend Fund A Class, Trend Fund B Class and Trend
Fund C Class. Shares of these classes are subject to sales charges and other
expenses, which may effect their performance. A prospectus for these classes can
be obtained by writing to Delaware Distributors, L.P. at the above address or
by calling 800-523-4640.
-1-
<PAGE>
TABLE OF CONTENTS
Cover Page Redemption and Exchange
Synopsis Dividends and Distributions
Summary of Expenses Taxes
Financial Highlights Calculation of Net Asset Value
Investment Objective and Policies Per Share
Suitability and Certain Risk Factors Management of the Fund
Investment Strategy Other Investment Policies
Classes of Shares and Risk Considerations
How to Buy Shares
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. SHARES OF
THE FUND ARE NOT BANK OR CREDIT UNION DEPOSITS.
-2-
<PAGE>
SYNOPSIS
Investment Objective
The investment objective of the Fund is to seek to achieve capital
appreciation by investing primarily in securities of emerging and other
growth-oriented companies. For further details, see Investment Objective and
Policies and Other Investment Policies and Risk Considerations.
Risk Factors and Special Considerations
The prices of common stocks, especially those of smaller companies, tend to
fluctuate, particularly in the shorter term. Investors should be willing to
accept the risks associated with investments in emerging and growth-oriented
companies, some of the securities of which may be speculative and subject the
Fund to an additional investment risk. See Suitability and Certain Risk Factors
under Investment Objective and Policies.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") furnishes investment
management services to the Fund, subject to the supervision and direction of
Equity Funds III, Inc.'s Board of Directors. The Manager also provides
investment management services to certain of the other funds in the Delaware
Group. Delaware Distributors, L.P. (the "Distributor") is the national
distributor for the Fund and for all of the other mutual funds in the Delaware
Group. Delaware Service Company, Inc. (the "Transfer Agent") is the shareholder
servicing, dividend disbursing, accounting services and transfer agent for the
Fund and for all of the other mutual funds in the Delaware Group.
See Summary of Expenses and Management of the Fund for further information
regarding the Manager and the fees payable under the Fund's Investment
Management Agreement.
Purchase Price
Shares of the Class offered by this Prospectus are available at net asset
value, without a front-end or contingent deferred sales charge and are not
subject to distribution fees under a Rule 12b-1 distribution plan. See Classes
of Shares.
Redemption and Exchange
Shares of the Class are redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request. See Redemption
and Exchange.
Open-End Investment Company
Equity Funds III, Inc. is an open-end management investment company. The
Fund's portfolio of assets is diversified as defined by the Investment Company
Act of 1940 (the "1940 Act"). Equity Funds III, Inc. was first organized as a
Delaware corporation in 1966 and was subsequently reorganized as a Maryland
corporation on March 4, 1983. See Shares under Management of the Fund.
-3-
<PAGE>
SUMMARY OF EXPENSES
Shareholder Transaction Expenses
------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................ None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)................................ None
Exchange Fees...................................................... None*
Annual Operating Expenses
(as a percentage of average daily net assets)
------------------------------------------------------------------------------
Management Fees.................................................... 0.75%
12b-1 Fees......................................................... None
Other Operating Expenses........................................... 0.33%
-----
Total Operating Expenses...................................... 1.08%
=====
*Exchanges are subject to the requirements of each fund and a front-end
sales charge may apply.
For expense information about Class A Shares, Class B Shares and Class C
Shares, see the separate prospectus relating to those classes.
The following example illustrates the expenses that an investor would pay on
a $1,000 investment over various time periods, assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period. As noted in the tables
above, the Fund charges no redemption fees.
1 year 3 years 5 years 10 years
------ ------- ------- --------
$11 $34 $60 $132
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in the Class will bear directly or
indirectly.
-4-
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Trend Fund of Delaware Group Equity Funds III, Inc. (formerly known as Delaware
Group Trend Fund, Inc.) and have been audited by Ernst & Young LLP, independent
auditors. The data should be read in conjunction with the financial statements,
related notes, and the report of Ernst & Young LLP, all of which are
incorporated by reference into Part B. Further information about the Fund's
performance is contained in its Annual Report to shareholders. A copy of the
Fund's Annual Report (including the report of Ernst & Young LLP) may be obtained
from Equity Funds III, Inc. upon request at no charge.
- --------------------------------------------------------------------------------
-5-
<PAGE>
<TABLE>
<CAPTION>
Period
11/23/92(1)
Year Ended through Year Ended
6/30/97 6/30/96(1) 6/30/95(1) 6/30/94(1) 6/30/93 6/30/93(2)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.........................$18.330 $14.300 $12.250 $13.990 $12.760 $11.380
Income From Investment Operations
- ---------------------------------
Net Investment Income (Loss)(3).............................. (0.034) (0.087) (0.044) (0.002) (0.035) (0.004)
Net Gains or Losses on Securities
(both realized and unrealized)..................... 0.164 5.017 2.884 0.202 1.615 3.754
------- ------- ------- ------- ------- -------
Total From Investment Operations......................... 0.130 4.930 2.840 0.200 1.580 3.750
------- ------- ------- ------- ------- -------
Less Distributions
- ------------------
Dividends (from net investment income)....................... none none none none none none
Distributions (from capital gains)........................... (1.510) (0.900) (0.790) (1.940) (0.350) (1.150)
------- ------- ------- ------- ------- -------
Total Distributions...................................... (1.510) (0.900) (0.790) (1.940) (0.350) (1.150)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period...............................$16.950 $18.330 $14.300 $12.250 $13.990 $13.980
======= ======= ======= ======= ======= =======
Total Return................................................. 1.94% 35.88% 24.74% 0.83% 21.69% 35.24%(4)
- ------------
- ------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)....................$120,319 $150,695 $55,437 $13,499 $2,237 $219,826
Ratio of Expenses to Average Daily Net Assets................ 1.08% 1.06% 1.12% 1.15% 1.21% 1.33%
Ratio of Net Investment Income (Loss) to Average
Daily Net Assets................................... (0.21%) (0.54%) (0.34%) (0.50%) (0.49%) (0.61%)
Portfolio Turnover Rate...................................... 115% 90% 64% 67% 75% 75%
Average Commission Rate Paid................................. $0.0594 $0.0557 N/A N/A N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended
6/30/92(2) 6/30/91(2) 6/30/90(2) 6/30/89(2) 6/30/88(2)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......................... $8.920 $9.970 $10.870 $8.130 $9.120
Income From Investment Operations
- ---------------------------------
Net Investment Income (Loss)(3).............................. (0.005) (0.020) 0.146 0.018 (0.066)
Net Gains or Losses on Securities
(both realized and unrealized)..................... 2.625 (0.460) 1.224 3.042 (0.924)
----- ------ ------ ------- ------
Total From Investment Operations......................... 2.620 (0.480) 1.370 3.060 (0.990)
----- ------ ------ ------- ------
Less Distributions
- ------------------
Dividends (from net investment income)....................... none (0.050) (0.050) none none
Distributions (from capital gains)........................... (0.160) (0.520) (2.220) (0.320) none
----- ------ ------ ------- ------
Total Distributions...................................... (0.160) (0.570) (2.270) (0.320) none
----- ------ ------ ------- ------
Net Asset Value, End of Period............................... $11.380 $8.920 $9.970 $10.870 $8.130
======= ====== ====== ======= ======
Total Return................................................. 29.31%(4) (4.82%)(4) 14.32%(4) 39.27%(4) (10.86%)(4)
- ------------
- ------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)....................$124,548 $78,631 $88,274 $67,111 $59,879
Ratio of Expenses to Average Daily Net Assets................ 1.18% 1.29% 1.27% 1.28% 1.20%
Ratio of Net Investment Income (Loss) to Average
Daily Net Assets............................................ (0.43%) (0.24%) 0.82% 0.19% (0.51%)
Portfolio Turnover Rate...................................... 76% 67% 80% 48% 63%
Average Commission Rate Paid................................. N/A N/A N/A N/A N/A
</TABLE>
- -----------------------------
(1) Data are derived from Trend Fund Institutional Class (until September 6,
1994, referred to as Trend Fund (Institutional) class), which commenced
operations on November 23, 1992. Ratios and total return for the period
November 23, 1992 through June 30, 1993 have been annualized.
(2) Data are derived from data of Trend Fund A Class (until September 6, 1994,
referred to as Trend Fund class) which was subject to 12b-1 distribution
expenses effective June 1, 1992.
(3) 1995, 1996 and 1997 per share information was based on the average shares
outstanding method.
(4) Does not reflect the maximum front-end sales charge that is or was in effect
for Trend Fund A Class.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
SUITABILITY AND CERTAIN RISK FACTORS
The Fund may be suitable for investors interested in long-term capital
appreciation. The prices of common stocks, especially those of smaller
companies, tend to fluctuate, particularly in the shorter term. The Fund's net
asset value also may fluctuate in response to the condition of individual
companies and general market and economic conditions and, as a result, the Fund
is not appropriate for short-term investors. Investors should be willing to
accept the risks associated with investments in securities of growth-oriented
and emerging issuers, some of which may be speculative and subject the Fund to
an additional investment risk.
* * *
Ownership of Fund shares can reduce the bookkeeping and administrative
inconveniences that would be connected with direct purchases of the types of
securities in which the Fund invests.
Investors should not consider a purchase of Fund shares as equivalent
to a complete investment program. The Delaware Group includes a family of funds,
generally available through registered investment dealers, which may be used
together to create a more complete investment program.
INVESTMENT STRATEGY
The objective of the Fund is long-term capital appreciation. The Fund's
strategy is to invest primarily in the common stocks and securities convertible
into common stocks of emerging and other growth-oriented companies which, in the
opinion of the Manager, are responsive to changes within the marketplace and
have the fundamental characteristics to support growth.
The Fund will seek to identify changing and dominant trends within the
economy, the political arena and our society. The Fund will purchase securities
which it believes will benefit from these trends and which have the fundamentals
to exploit them. The fundamentals include managerial skills, product development
and sales and earnings.
In investing for capital appreciation, the Fund may hold securities for
any period of time. The Fund may also invest in foreign securities.
This Fund is designed primarily for capital appreciation. Providing
current income is not an objective of the Fund. Any income produced is expected
to be minimal. Though income is not an objective of the Fund, should the market
warrant a temporary defensive approach, the Fund may also invest in cash
equivalents, and fixed-income obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities, as well as corporate bonds.
Although the Fund will constantly strive to attain the objective of
long-term capital growth, there can be no assurance that it will be attained.
The objective of the Fund may not be changed without shareholder approval.
For additional information about the Fund's investment policies and
certain risks associated with investments in certain types of securities, see
Other Investment Policies and Risk Considerations. Part B provides more
information concerning the Fund's investment policies, restrictions and risk
factors.
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CLASSES OF SHARES
The Distributor serves as the national distributor for the Fund. Shares
of the Class may be purchased directly by contacting the Fund or its agent or
through authorized investment dealers. All purchases of shares of the Class are
at net asset value. There is no front-end or contingent deferred sales charge.
Investment instructions given on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees considering purchasing shares of the Class
as part of their retirement program should contact their employer for details.
Shares of the Class are available for purchase only by: (a) retirement
plans introduced by persons not associated with brokers or dealers that are
primarily engaged in the retail securities business and rollover individual
retirement accounts from such plans; (b) tax-exempt employee benefit plans of
the Manager, or its affiliates and securities dealer firms with a selling
agreement with the Distributor; (c) institutional advisory accounts of the
Manager, or its affiliates and those having client relationships with Delaware
Investment Advisers, a division of the Manager, or its affiliates and their
corporate sponsors, as well as subsidiaries and related employee benefit plans
and rollover individual retirement accounts from such institutional advisory
accounts; (d) a bank, trust company and similar financial institution investing
for its own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing shares
of the Class, except where the investment is part of a program that requires
payment to the financial institution of a Rule 12b-1 Plan fee; and (e)
registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least $1,000,000
entrusted to the adviser for investment purposes, but only if the adviser is not
affiliated or associated with a broker or dealer and derives compensation for
its services exclusively from its clients for such advisory services.
Trend Fund A Class, Trend Fund B Class and Trend Fund C Class
In addition to offering Trend Fund Institutional Class, the Fund also
offers Trend Fund A Class, Trend Fund B Class and Trend Fund C Class, which are
described in a separate prospectus. Shares of Trend Fund A Class, Trend Fund B
Class and Trend Fund C Class may be purchased through authorized investment
dealers or directly by contacting the Fund or the Distributor. Trend Fund A
Class carries a front-end sales charge and has annual 12b-1 expenses equal to a
maximum of 0.30%. The maximum front-end sales charge as a percentage of the
offering price is 4.75% and is reduced on certain transactions of $100,000 or
more. Trend Fund B Class and Trend Fund C Class have no front-end sales charge
but are subject to annual 12b-1 expenses equal to a maximum of 1%. Shares of
Trend Fund B Class and Trend Fund C Class and certain shares of Trend Fund A
Class may be subject to a contingent deferred sales charge upon redemption. To
obtain a prospectus relating to such classes, contact the Distributor by writing
to the address or by calling the phone numbers listed on the cover of this
Prospectus.
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HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer. In all instances, investors must
qualify to purchase shares of the Class.
Investing Directly by Mail
1. Initial Purchases--An Investment Application, or in the case of a retirement
account, an appropriate retirement plan application, must be completed, signed
and sent with a check payable to Trend Fund Institutional Class, to Delaware
Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to Trend Fund Institutional Class. Your check should be
identified with your name(s) and account number.
Investing Directly by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 1412893401
(include your name(s) and your account number).
1. Initial Purchases--Before you invest, telephone the Fund's Client Services
Department at 800- 828-5052 to get an account number. If you do not call first,
it may delay processing your investment. In addition, you must promptly send
your Investment Application, or in the case of a retirement account, an
appropriate retirement plan application, for Trend Fund Institutional Class, to
Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You must advise your Client
Services Representative by telephone at 800-828-5052 prior to sending your wire.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group
and you qualify to purchase shares of the Class, you may write and authorize an
exchange of part or all of your investment into the Fund. However, shares of
Trend Fund B Class and Trend Fund C Class and Class B Shares and Class C Shares
of the other funds in the Delaware Group offering such a class of shares may not
be exchanged into the Class. If you wish to open an account by exchange, call
your Client Services Representative at 800-828-5052 for more information. See
Redemption and Exchange for more complete information concerning your exchange
privileges.
Investing through Your Investment Dealer
You can make a purchase of Fund shares through most investment dealers
who, as part of the service they provide, must transmit orders promptly to the
Fund. They may charge for this service.
Purchase Price and Effective Date
The purchase price (net asset value) is determined as of the close of
regular trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open.
The effective date of a purchase is the date the order is received by
the Fund, its agent or designee. The effective date of a direct purchase is the
day your wire, electronic transfer or check is
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<PAGE>
received, unless it is received after the time the share price is determined, as
noted above. Purchase orders received after such time will be effective the next
business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a purchase
is canceled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in the Delaware Group. The Fund reserves the right to reject
purchase orders paid by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check drawn on a
foreign financial institution is accepted, you may be subject to additional bank
charges for clearance and currency conversion.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under $250 as a result of redemptions.
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REDEMPTION AND EXCHANGE
Redemption and exchange requests made on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees should therefore contact their employer for
details.
Your shares will be redeemed or exchanged based on the net asset value
next determined after the Fund receives your request in good order. For example,
redemption and exchange requests received in good order after the time the net
asset value of shares is determined will be processed on the next business day.
See Purchase Price and Effective Date under How to Buy Shares. Except as
otherwise noted below, for a redemption request to be in "good order," you must
provide your account number, account registration, and the total number of
shares or dollar amount of the transaction. With regard to exchanges, you must
also provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Fund at 800-828-5052. Redemption proceeds will be
distributed promptly, as described below, but not later than seven days after
receipt of a redemption request.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
The Fund will process written and 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, which may take up to 15
days from the purchase date. You can avoid this potential delay if you purchase
shares by wiring Federal Funds. The Fund reserves the right to reject a written
or telephone redemption request or delay payment of redemption proceeds if there
has been a recent change to the shareholder's address of record.
Shares of the Class may be exchanged into any other Delaware Group
mutual fund, provided: (1) the investment satisfies the eligibility and other
requirements set forth in the prospectus of the fund being acquired, including
the payment of any applicable front-end sales charge; and (2) the shares of the
fund being acquired are in a state where that fund is registered. If exchanges
are made into other shares that are eligible for purchase only by those
permitted to purchase shares of the Class, such exchange will be exchanged at
net asset value. Shares of the Class may not be exchanged into Class B Shares or
Class C Shares of the funds in the Delaware Group. The Fund may suspend,
terminate or amend the terms of the exchange privilege upon 60 days' written
notice to shareholders.
Various redemption and exchange methods are outlined below. No fee is
charged by the Fund or the Distributor for redeeming or exchanging your shares,
although, in the case of an exchange, a sales charge may apply. You may also
have your investment dealer arrange to have your shares redeemed or exchanged.
Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund or its agent.
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Written Redemption and Exchange
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103
to redeem some or all of your shares or to request an exchange of any or all of
your shares into another mutual fund in the Delaware Group, subject to the same
conditions and limitations as other exchanges noted above. The request must be
signed by all owners of the account or your investment dealer of record.
For redemptions of more than $50,000, or when the proceeds are not sent
to the shareholder(s) at the address of record, the Fund requires a signature by
all owners of the account and may require a signature guarantee. Each signature
guarantee must be supplied by an eligible guarantor institution. The Fund
reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Fund may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. Certificates are issued for shares only if you submit a
specific request. If your shares are in certificate form, the certificate must
accompany your request and also be in good order.
You also may submit your written request for redemption or exchange by
facsimile transmission at the following number: 215-255-8864.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your shares in certificate form, you may redeem or
exchange only by written request and you must return your certificates.
The Telephone Redemption--Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do not
wish to have such services available with respect to your account. The Fund
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests.
Neither the Fund nor its 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. A written confirmation will be provided
for all purchase, exchange and redemption transactions initiated by telephone.
By exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption-Check to Your Address of Record
You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your record address. Checks will be payable to
the shareholder(s) of record. Payment is normally mailed the next business day
after receipt of the redemption request.
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<PAGE>
Telephone Redemption-Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must submit a written authorization and you may need to have your
signature guaranteed. For your protection, your authorization must be on file.
If you request a wire, your funds will normally be sent the next business day.
If you ask for a check, it will normally be mailed the next business day after
receipt of your redemption request to your predesignated bank account.
Redemption proceeds will be wired or mailed to your bank provided that purchase
orders for shares being redeemed have settled and checks tendered as payment for
shares being redeemed have cleared. There are no fees for this redemption
method, but the mail time may delay getting funds into your bank account. Simply
call your Client Services Representative prior to the time the net asset value
is determined, as noted above.
Telephone Exchange
You or your investment dealer of record can exchange shares into any
fund in the Delaware Group under the same registration. As with the written
exchange service, telephone exchanges are subject to the same conditions and
limitations as other exchanges noted above. Telephone exchanges may be subject
to limitations as to amounts or frequency.
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DIVIDENDS AND DISTRIBUTIONS
The Fund will make payments from 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 if necessary to comply with certain requirements of
the Internal Revenue Code (the "Code"). Both dividends and distributions, if
any, are automatically reinvested in your account at net asset value.
Each class of the Fund will share proportionately in the investment
income and expenses of the Fund, except that the Class will not incur any
distribution fee under the 12b-1 Plans which apply to Trend Fund A Class, Trend
Fund B Class and Trend Fund C Class.
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TAXES
The tax discussion set forth below is included for general information
only. Investors should contact their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Fund.
The Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, the Fund
will not be subject to federal income tax, or to any excise tax, to the extent
its earnings are distributed as provided in the Code.
The Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to those investors who are subject
to income taxes as ordinary income, even though received in additional shares.
For corporate investors, dividends from net investment income will generally
qualify in part for the corporate dividends-received deduction. The portion of
dividends paid by the Fund that so qualifies will be designated each year in a
notice from Equity Funds III, Inc. to the Fund's shareholders. For the fiscal
year ended June 30, 1997, none of the Fund's dividends from net investment
income qualified for the dividends-received deduction.
Distributions paid by the Fund from long-term capital gains, received
in additional shares, are taxable to those investors who are subject to income
taxes as long-term capital gains, regardless of the length of time an investor
has owned shares in the Fund. The Fund does not seek to realize any particular
amount of capital gains during a year; rather, realized gains are a by-product
of Fund management activities. Consequently, capital gains distributions may be
expected to vary considerably from year to year. Also, for those investors
subject to tax, if purchases of shares in the Fund are made shortly before the
record date for a dividend or capital gains distribution, a portion of the
investment will be returned as a taxable distribution.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November, or December to shareholders
of record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Fund and received by the shareholder
on December 31 of the year declared.
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
the Fund and any other fund in the Delaware Group. Any loss incurred on a sale
or exchange of the Fund's shares that had been held for six months or less will
be treated as a long-term capital loss to the extent of capital gain dividends
received with respect to such shares.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. government securities may be exempt from
state personal income taxes. Shares of the Fund are exempt from Pennsylvania
county personal property taxes.
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<PAGE>
Each year, Equity Funds III, Inc. will mail to you information on the
tax status of the Fund's dividends and distributions. Shareholders will also
receive each year information as to the portion of dividend income, if any, that
is derived from U.S. government securities that are exempt from state income
tax. Of course, shareholders who are not subject to tax on their income would
not be required to pay tax on amounts distributed to them by the Fund.
Equity Funds III, Inc. is required to withhold 31% of taxable
dividends, capital gains distributions, and redemptions paid to shareholders who
have not complied with IRS taxpayer identification regulations. You may avoid
this withholding requirement by certifying on your Investment Application your
proper Taxpayer Identification Number and by certifying that you are not subject
to backup withholding.
See Taxes in Part B for additional information on tax matters relating
to the Fund and its shareholders.
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CALCULATION OF NET ASSET VALUE PER SHARE
The purchase and redemption price of the Class is the net asset value
("NAV") per share of Class shares next computed after the order is received. The
NAV is computed as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The NAV per share is computed by adding the value of all securities and
other assets in the portfolio, deducting any liabilities (expenses and fees are
accrued daily) and dividing by the number of shares outstanding. Portfolio
securities for which market quotations are available are priced at market value.
Short-term investments having a maturity of less than 60 days are valued at
amortized cost, which approximates market value. All other securities are valued
at their fair value as determined in good faith and in a method approved by
Equity Funds III, Inc.'s Board of Directors.
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 Class will not incur any of the expenses under Equity Funds III,
Inc.'s 12b-1 Plans and Trend Fund A, B and C Classes alone will bear the 12b-1
Plan fees payable under their respective Plans. Due to the specific distribution
expenses and other costs that will be allocable to each class, the net asset
value of and dividends paid to each class of the Fund will vary.
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MANAGEMENT OF THE FUND
Directors
The business and affairs of Equity Funds III, Inc. are managed under
the direction of its Board of Directors. Part B contains additional information
regarding Equity Funds III, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On June 30, 1997, the Manager and its affiliates
within the Delaware Group, including Delaware International Advisers Ltd., were
managing in the aggregate more than $37 billion in assets in the various
institutional or separately managed (approximately $22,302,518,000) and
investment company (approximately $15,246,733,000) accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now indirect, wholly owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management. In connection with the merger, a new
Investment Management Agreement between the Fund and the Manager was executed
following shareholder approval.
The Manager manages the Fund's portfolio and makes investment
decisions, which are implemented by the Fund's Trading Department. The Manager
also administers Equity Funds III, Inc.'s affairs and pays the salaries of all
the directors, officers and employees of Equity Funds III, Inc. who are
affiliated with the Manager. For these services, the Manager is paid an annual
fee of 3/4 of 1% of the average daily net assets of the Fund, less all
directors' fees paid to unaffiliated directors of Equity Funds III Inc. This fee
was paid by the Fund during the last fiscal year. This fee is higher than that
paid by many other funds. The fee may be higher or lower than that paid by funds
with comparable investment objectives. Investment management fees paid by the
Fund for the fiscal year ended June 30, 1997 were 0.75% of average daily net
assets.
Gerald S. Frey has primary responsibility for making day-to-day
investment decisions for the Fund. Mr. Frey has been Vice President/Senior
Portfolio Manager of the Fund since March 1997 and was Co-Manager from June 1996
to March 1997. Mr. Frey has 20 years' experience in the money management
business and holds a BA in Economics from Bloomsburg University and attended
Wilkes College and New York University. Prior to joining the Delaware Group in
1996, he was a Senior Director with Morgan Grenfell Capital Management in New
York.
In making investment decisions for the Fund, Mr. Frey regularly
consults with Wayne A. Stork, Marshall T. Bassett, William H. Miller, John A.
Heffern and Lori Wachs. Mr. Stork, Chairman of the Manager and Equity Funds III,
Inc.'s Board of Directors, is a graduate of Brown University and attended New
York University's Graduate School of Business Administration. Mr. Stork joined
the Delaware Group in 1962 and has served in various executive capacities at
different times within the Delaware organization. Marshall T.
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Bassett, Vice President, joined Delaware in 1997. In his most recent position,
he served as Vice President in Morgan Stanley Asset Management's Emerging Growth
Group, where he analyzed small growth companies. Prior to that, he was a trust
officer at Sovran Bank and Trust Company. He received his bachelor's degree and
MBA from Duke University. Mr. Miller is a Vice President/Assistant Portfolio
Manager. He holds a BA in Economics from Trinity College. Prior to joining the
Delaware Group in 1995, he worked as a technology analyst for Janney Montgomery
Scott in Philadelphia and he has also served as an institutional salesman for
Rutherford Brown & Catherwood. John A. Heffern, Vice President, holds a
bachelor's degree and an MBA from the University of North Carolina at Chapel
Hill. He joined Delaware in 1997. Previously, he was a Senior Vice President,
Equity Research at NatWest Securities Corporation's Specialty Finance Services
unit. Prior to that, he was a Principal and Senior Regional Bank Analyst at
Alex. Brown & Sons. Ms. Wachs is an Assistant Vice President. She joined the
Delaware Group in 1992 from Goldman Sachs, where she was an equity analyst for
two years. She is a graduate of the University of Pennsylvania's Wharton School,
where she majored in Finance and Oriental studies.
Portfolio Trading Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length of time they
have been held. The degree of portfolio activity will affect brokerage costs of
the Fund and may affect taxes payable by the Fund's shareholders. Given the
Fund's investment objective, its annual portfolio turnover rate may exceed 100%.
For the past two fiscal years, the Fund's portfolio turnover rates were 90% for
1996 and 115% for 1997.
The Fund uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
its advisory clients. These services may be used by the Manager in servicing any
of its accounts. Subject to best price and execution, the Fund may consider a
broker/dealer's sales of shares of funds in the Delaware Group of funds in
placing portfolio orders and may place orders with broker/dealers that have
agreed to defray certain expenses of such funds, such as custodian fees.
Performance Information
From time to time, the Fund may quote total return performance of the
Class in advertising and other types of literature.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value. Each
presentation will include the average annual total return for one-, five- and
ten-year periods. The Fund may also advertise aggregate and average total return
information concerning the Class over additional periods of time.
Because stock prices fluctuate, investment results of the Class will
fluctuate over time and past performance should not be considered a guarantee of
future results.
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Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling your Client Services Representative.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. Equity Funds III, Inc.'s fiscal year
ends on June 30.
Distribution and Service
The Distributor, Delaware Distributors, L.P., serves as the national
distributor for the Fund's shares under a separate Distribution Agreement with
Equity Funds III, Inc. dated April 3, 1995, as amended on November 29, 1995. The
Distributor bears all of the costs of promotion and distribution.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Fund under
an agreement dated as of June 29, 1988. The Transfer Agent also provides
accounting services to the Fund pursuant to the terms of a separate Fund
Accounting Agreement. The directors of Equity Funds III, Inc. annually review
service fees paid to the Transfer Agent. Certain recordkeeping services and
other shareholder services that otherwise would be performed by the Transfer
Agent may be performed by certain other entities and the Transfer Agent may
elect to enter into an agreement to pay such other entities for those services.
In addition, participant account maintenance fees may be assessed for certain
recordkeeping services provided as part of retirement plan and administration
service packages. These fees are based on the number of participants in the plan
and the various services selected. Fees will be quoted upon request and are
subject to change.
The Distributor and the Transfer Agent are also indirect, wholly owned
subsidiaries of DMH.
Expenses
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under the Distribution Agreement. For the fiscal year ended
June 30, 1997, the ratio of operating expenses to average daily net assets for
the Class was 1.08%.
Shares
Equity Funds III, Inc. is an open-end management investment company.
The Fund's portfolio of assets is diversified as defined by the 1940 Act.
Commonly known as a mutual fund, Equity Funds III, Inc. was organized as a
Maryland corporation on March 4, 1983. Equity Funds III, Inc. was previously
organized as a Delaware corporation organized in 1966. Fund shares have a par
value of $.50, equal voting rights, except as noted below, and are equal in all
other respects.
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Equity Funds III, Inc. shares have noncumulative voting rights which
means that the holders of more than 50% of Equity Funds III, Inc.'s shares
voting for the election of directors can elect 100% of the directors if they
choose to do so. Under Maryland law, Equity Funds III, Inc. is not required, and
does not intend, to hold annual meetings of shareholders unless, under certain
circumstances, it is required to do so under the 1940 Act. Shareholders of 10%
or more of Equity Funds III, Inc.'s outstanding shares may request that a
special meeting be called to consider the removal of a director.
In addition to the Class, the Fund also offers Trend Fund A Class,
Trend Fund B Class and Trend Fund C Class of shares which represent
proportionate interests in the assets of the Fund and have the same voting and
other rights and preferences as the Class, except that shares of the Class are
not subject to, and may not vote on matters affecting, the Distribution Plans
under Rule 12b-1 relating to Trend Fund A Class, Trend Fund B Class and Trend
Fund C Class.
Effective as of August 29, 1997, the name of Delaware Group Trend Fund,
Inc. was changed to Delaware Group Equity Funds III, Inc.
-20-
<PAGE>
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
Restricted and Illiquid Securities
The Fund may purchase privately placed securities the resale of which
is restricted under applicable securities laws. Such securities may offer a
higher return than comparably registered securities but involve some additional
risk as they can be resold only in privately negotiated transactions, in
accordance with an exemption from the registration requirements under applicable
securities laws or after registration. The Fund will not purchase illiquid
assets, including such restricted securities, if more than 10% of the value of
its assets would then consist of illiquid securities.
Certain of the privately placed securities acquired by the Fund will be
eligible for resale by the Fund pursuant to Rule 144A under the Securities Act
of 1933 ("Rule 144A Securities"). Rule 144A permits many privately placed or
legally restricted securities to be freely traded without restriction among
certain institutional buyers such as the Fund.
While maintaining oversight, the Board of Directors of the Fund has
delegated to the Manager the day-to-day function of determining whether or not
individual Rule 144A Securities are liquid for purposes of the Fund's 10%
limitation on investments in illiquid securities. The Board has instructed the
Manager to consider the following factors in determining the liquidity of a Rule
144A Security: (i) the frequency of trades and trading volume for the security;
(ii) whether at least three dealers are willing to purchase or sell the security
and the number of potential purchasers; (iii) whether at least two dealers are
making a market in the security; and (iv) the nature of the security and the
nature of the marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, the
Fund's holdings of illiquid securities exceed the Fund's 10% limit on
investments in such securities, the Manager will determine what action to take
to ensure that the Fund continues to adhere to such limitation.
Repurchase Agreements
The Fund may invest in repurchase agreements, but will not normally do
so except to invest excess cash balances. In a repurchase agreement, the Fund
purchases a security and simultaneously agrees to sell it back to the seller at
a set (generally higher) price. Delays or losses could result if the other party
to the repurchase agreement defaults or becomes insolvent.
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.
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, subject to overall
supervision by the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
-21-
<PAGE>
Borrowings
Although the Fund is permitted under certain circumstances to borrow
money, it does not normally do so. The Fund will not purchase new securities
while any borrowings are outstanding.
-22-
<PAGE>
------------------------------
TREND FUND INSTITUTIONAL
------------------------------
For more information, 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 PROSPECTUS
Philadelphia, PA 19103
------------------------------
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING, AUGUST 29, 1997
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
DELAWARE
GROUP
-----
<PAGE>
- --------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
AUGUST 29, 1997
- --------------------------------------------------------------------------------
DELAWARE GROUP EQUITY FUNDS III, INC.
(formerly Delaware Group Trend Fund, Inc.)
- --------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
- --------------------------------------------------------------------------------
For more information about Trend Fund Institutional Class: 800-828-5052
For Prospectus and Performance of Trend Fund A Class, Trend Fund B Class and
Trend Fund C Class: Nationwide 800-523-4640
Information on Existing Accounts of Trend Fund A Class, Trend Fund B Class and
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 Equity Funds III, Inc. ("Equity Funds III, Inc.")
(formerly Delaware Group Trend Fund, Inc.) is a professionally-managed mutual
fund of the series type which currently offers shares of Trend Fund series (the
"Fund"). This Statement of Additional Information ("Part B" of the registration
statement) describes the Fund's four classes (individually, a "Class" and
collectively, the "Classes") of shares - Trend Fund A Class (the "Class A
Shares"), Trend Fund B Class (the "Class B Shares"), Trend Fund C Class (the
"Class C Shares") (together, the "Fund Classes") and Trend Fund Institutional
Class (the "Institutional Class").
Class B Shares, Class C Shares and Institutional Class shares of the
Fund may be purchased at a price equal to the next determined net asset value
per share. Class A Shares may be purchased at the public offering price, which
is equal to the next determined net asset value per share, plus a front-end
sales charge. Class A Shares are subject to a maximum front-end sales charge of
4.75% and annual 12b-1 Plan expenses of up to 0.30%. Class B Shares are subject
to a contingent deferred sales charge ("CDSC") which may be imposed on
redemptions made within six years of purchase and annual 12b-1 Plan expenses of
up to 1%, which are assessed against Class B Shares for approximately eight
years after purchase. See Automatic Conversion of Class B Shares under Classes
of Shares in the Fund Classes' Prospectus. Class C Shares are subject to a CDSC
which may be imposed on redemptions made within 12 months of purchase and annual
12b-1 Plan expenses of up to 1%, which are assessed against the Class C Shares
for the life of the investment.
This Part B supplements the information contained in the current
Prospectus for the Fund Classes dated August 29, 1997 and the current Prospectus
for the Institutional Class dated August 29, 1997, 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.
All references to "shares" in this Part B refer to all Classes of
shares of Equity Funds III, Inc., except where noted.
-2-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment 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.
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.
The Fund shall not:
1. 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. Acquire control of any company.
3. 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.
-3-
<PAGE>
4. Invest in securities of other investment companies except at
customary brokerage commissions rates or in connection with mergers,
consolidations or offers of exchange.
5. 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. 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. Sell short any security or property.
8. Deal in commodities.
9. 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.
10. 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. 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. Act as an underwriter of securities of other issuers.
13. Permit long or short positions on shares of the Fund to 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. 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.
-4-
<PAGE>
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. While the Fund is permitted to
do so, it normally does not invest in repurchase agreements, except to invest
excess cash balances.
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.
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"). Equity Funds III, Inc.'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.
-5-
<PAGE>
It is the understanding of the Manager that the staff of the Securities
and Exchange Commission permits portfolio lending by registered investment
companies if certain conditions are met. These conditions are as follows: 1)
each transaction must have 100% collateral in the form of cash, short-term U.S.
government securities, or irrevocable letters of credit payable by banks
acceptable to the Fund from the borrower; 2) this collateral must be valued
daily and should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund; 3) the Fund must be
able to terminate the loan after notice, at any time; 4) the Fund must receive
reasonable interest on any loan, and any dividends, interest or other
distributions on the lent securities, and any increase in the market value of
such securities; 5) the Fund may pay reasonable custodian fees in connection
with the loan; 6) the voting rights on the lent securities may pass to the
borrower; however, if the directors of the Fund know that a material event will
occur affecting an investment loan, they must either terminate the loan in order
to vote the proxy or enter into an alternative arrangement with the borrower to
enable the directors to vote the proxy.
The major risk to which the Fund would be exposed on a loan transaction
is the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, under the supervision of
the Board of Directors, including the creditworthiness of the borrowing broker,
dealer or institution and then only if the consideration to be received from
such loans would justify the risk. Creditworthiness will be monitored on an
ongoing basis by the Manager.
-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 (or life-of-fund, if applicable) 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.
Total return performance for each Class will be computed by adding all
reinvested income and realized securities profits distributions plus the change
in net asset value during a specific period and dividing by the offering price
at the beginning of the period. It will not reflect any income taxes payable by
shareholders on the reinvested distributions included in the calculation.
Because securities prices fluctuate, past performance should not be considered
as a representative of the results which may be realized from an investment in
the Fund in the future.
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, 1997,
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
6/30/97 (3.16%) 1.67% 1.94%
3 years
ended
6/30/97 17.77% 19.70% 20.00%
5 years
ended
6/30/97 17.30% 18.45% 18.72%
10 years
ended
6/30/97 14.53% 15.09% 15.21%
15 years
ended
6/30/97 16.13% 16.51% 16.59%
Period
10/3/68(4)
through
6/30/97 9.12% 9.31% 9.35%
(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 of Institutional Class shares was November
23, 1992.
(4) Date of initial public offering of Class A Shares.
The performance of Class B Shares, as shown below, is the average
annual total return quotation through June 30, 1997. The average annual total
return for Class B Shares including deferred sales charge reflects the deduction
-8-
<PAGE>
of the applicable CDSC that would be paid if the shares were redeemed at June
30, 1997. The average annual total return for Class B Shares excluding deferred
sales charge assumes the shares were not redeemed at June 30, 1997 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
6/30/97 (2.70%) 0.96%
Period
9/6/94(1)
through
6/30/97 16.97% 17.77%
(1) Date of initial public offering of Class B Shares.
The performance of Class C Shares, as shown below, is the average
annual total return quotation through June 30, 1997. The average annual 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, 1997. The average annual total return for Class C Shares excluding deferred
sales charge assumes the shares were not redeemed at June 30, 1997 and therefore
does not reflect the deduction of a CDSC.
Average Annual Total Return
Class C Shares Class C Shares
(Including (Excluding
Deferred Deferred
Sales Charge) Sales Charge)
1 year
ended
6/30/97 0.03% 0.95%
Period
11/29/95(1)
through
6/30/97 12.63% 12.63%
(1) Date of initial public offering of Class C Shares.
From time to time, the Fund may quote actual total return performance
of its Class in advertising and other types of literature compared to indices or
averages of alternative financial products available to prospective investors.
-9-
<PAGE>
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 ("S&P 500") Stock Index and the Dow Jones Industrial Average and
other unmanaged indices.
The S&P 500 Stock Index and the Dow Jones Industrial Average are
industry-accepted unmanaged indices of generally-conservative securities used
for measuring general market performance. The 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 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.
Statistical and performance information and various indices compiled
and maintained by organizations such as the following may also be used in
preparing exhibits comparing certain industry trends and competitive mutual fund
performance to comparable activity and performance of the Fund 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 of 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 non-industrial companies.
Salomon Brothers and Lehman Brothers are statistical research firms
that maintain databases of international market, bond market, corporate
and government-issued securities of various maturities. This
information, as well as unmanaged indices compiled and maintained by
these firms, will be used in preparing comparative illustrations.
The following tables present examples, for purposes of illustration
only, of cumulative total return performance for each Class through June 30,
1997. 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 Class A Shares reflects the
maximum front-end sales charge paid on the purchase of shares but may also be
shown without reflecting the impact of any front-end sales charge. The
performance of Class B Shares and Class C Shares is calculated both with the
applicable CDSC included and excluded. Comparative information on the S&P 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
Class A Institu- & Poor's Dow Jones NASDAQ
Shares(1) tional 500 Stock Industrial Composite
(at Offer) Class(2) Index(3) Average(3) Index(3)
<S> <C> <C> <C> <C> <C>
3 months
ended
6/30/97 7.03% 12.40% 17.44% 17.08% 18.04%
6 months
ended
6/30/97 0.66%(5) 5.87% 20.60% 20.12% 11.70%
9 months
ended
6/30/97 (1.76%) 3.35% 30.64% 32.40% 17.54%
1 year
ended
6/30/97 (3.16%) 1.94% 34.68% 38.54% 34.68%
3 years
ended
6/30/97 63.34% 72.79% 113.83% 127.49% 113.83%
5 years
ended
6/30/97 122.19% 135.80% 146.33% 163.26% 146.33%
10 years
ended
6/30/97 288.41% 311.91% 291.72% 332.84% 239.57%
15 years
ended
6/30/97 842.46% 900.39% 1240.27% 1515.31% 741.84%
Period
10/3/68(3)
through
6/30/97 1129.73% 1205.19% 2471.52% 2618.96% 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 of Institutional Class shares 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) Source: Lipper Analytical
(4) Date of initial public offering of Class A Shares.
(5) For the six months ended June 30, 1997, cumulative total return for
Trend Fund A Class at net asset value was 5.68%.
-12-
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return
Class B Class B
Shares Shares
(Including (Excluding Standard
Deferred Deferred & Poor's Dow Jones NASDAQ
Sales Sales 500 Stock Industrial Composite
Charge) Charge) Index (2) Average (2) Index(2)
<S> <C> <C> <C> <C> <C>
3 months
ended
6/30/97 8.20% 12.20% 17.44% 17.08% 18.04%
6 months
ended
6/30/97 1.34% 5.34% 20.60% 20.12% 11.70%
9 months
ended
6/30/97 (1.43%) 2.57% 30.64% 32.40% 17.54%
1 year
ended
6/30/97 (2.70%) 0.96% 34.68% 38.54% 34.68%
Period
9/6/94(1)
through
6/30/97 55.90% 58.50% 98.90% 1090.74% 88.35%
</TABLE>
(1) Date of initial public offering of Class B Shares.
(2) Source: Lipper Analytical
-13-
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return
Class C Class C
Shares Shares
(Including (Excluding Standard
Deferred Deferred & Poor's Dow Jones NASDAQ
Sales Sales 500 Stock Industrial Composite
Charge) Charge) Index (2) Average (2) Index(2)
<S> <C> <C> <C> <C> <C>
3 months
ended
6/30/97 11.14% 12.14% 17.44% 17.08% 18.04%
6 months
ended
6/30/97 4.35% 5.35% 20.60% 20.12% 11.70%
9 months
ended
6/30/97 1.54% 2.54% 30.64% 32.40% 17.54%
1 year
ended
6/30/97 0.03% 0.95% 34.68% 38.54% 34.68%
Period
11/29/95(1)
through
6/30/97 20.79% 20.79% 51.12% 56.45% 36.15%
</TABLE>
(1) Date of initial public offering of Class C Shares.
(2) Source: Lipper Analytical
For additional performance information, see Appendix B.
-14-
<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 high 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 and Wealth Builder
Option under Investment Plans for a complete description of these services,
including restrictions or limitations.
-15-
<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 any stock or bond fund in the Delaware Group
of funds.
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 or sales charges, are not intended to
be a projection of investment results and do not reflect the actual performance
results of any of the Classes.
-16-
<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, 1995, 1996 and 1997, the
aggregate dollar amounts of brokerage commissions paid by the Fund were
$542,083, $584,737 and $928,343, 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, 1997, portfolio transactions of
the Fund in the amount of $90,442,770, resulting in brokerage commissions of
$252,420, were directed to brokers for brokerage and research services provided.
As provided in the Securities Exchange Act of 1934 (the "1934 Act") 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
-17-
<PAGE>
functions not related to its investment decision-making process. In addition, so
long as no fund is disadvantaged, portfolio transactions which generate
commissions or their equivalent are allocated to broker/dealers who provide
daily portfolio pricing services to 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 Equity Funds
III, Inc.'s Board of Directors that the advantages of combined orders outweigh
the possible disadvantages of separate transactions.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Fund may place orders with broker/dealers that have agreed to
defray certain expenses of the funds in the Delaware Group of funds such as
custodian fees, and may, at the request of the Distributor, give consideration
to sales of shares of such funds as a factor in the selection of brokers and
dealers to execute Fund portfolio transactions.
Portfolio Turnover
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 90% for 1996 and 115% for 1997.
-18-
<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 additional 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 Equity Funds
III, Inc. or the Distributor.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of such classes
generally must be at least $100. The initial and subsequent investment minimums
for Class A Shares will be waived for purchases by officers, 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. Equity Funds III, Inc. will reject any purchase
order for more than $250,000 of Class B Shares and $1,000,000 or more of Class C
Shares. An investor may exceed these limitations by making cumulative purchases
over a period of time. 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 are responsible for transmitting orders promptly.
Equity Funds III, Inc. 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 Rules of Fair Practice, as amended, relating to
investment company sales charges. Equity Funds III, Inc. and the Distributor
intend to operate in compliance with these rules.
Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 4.75%; however, lower front-end sales charges
apply for larger purchases. See the table below. Class A Shares are also subject
to annual 12b-1 Plan expenses.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase; (iii) 2%
if shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class B Shares are
also subject to annual 12b-1 Plan expenses which are higher than those to which
Class A Shares are subject and are assessed against 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 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.
-19-
<PAGE>
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 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 or in the case of any retirement
plan account including self-directed IRAs. However, purchases not involving the
issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing full
share denominations purchased by sending a letter signed by each owner of the
account to the Transfer Agent requesting the certificate. No charge is assessed
by Equity Funds III, Inc. for any certificate issued. A shareholder may be
subject to fees for replacement of a lost or stolen certificate, under certain
conditions, including the cost of obtaining a bond covering the lost or stolen
certificate. Please contact the Fund for further information. Investors who hold
certificates representing any of their shares may only redeem those shares by
written request. The investor's certificate(s) must accompany such request.
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A, Class B and Class C
Shares permit investors to choose the method of purchasing shares that is most
suitable for their needs given the amount of their purchase, the length of time
they expect to hold their shares and other relevant circumstances. Investors
should determine whether, given their particular circumstances, it is more
advantageous to purchase Class A Shares and incur a front-end sales charge and
annual 12b-1 Plan expenses of up to a maximum of 0.30% of the average daily net
assets of Class A Shares or to purchase either Class B or Class C Shares and
have the entire initial purchase amount invested in the Fund with the investment
thereafter subject to a CDSC and annual 12b-1 Plan expenses. Class B Shares are
subject to a CDSC if the shares are redeemed within six years of purchase, and
Class C Shares are subject to a CDSC if the shares are redeemed within 12 months
of purchase. Class B and Class C Shares are each subject to annual 12b-1 Plan
expenses of up to a maximum of 1% (0.25% of which are service fees to be paid to
the Distributor, dealers or others for providing personal service and/or
maintaining shareholder accounts) of average daily net assets of the respective
Class. Class B Shares will automatically convert to Class A Shares at the end of
approximately eight years after purchase and, thereafter, be subject to annual
12b-1 Plan expenses of up to a maximum of 0.30% of average daily net assets of
such shares. Unlike Class B Shares, Class C Shares do not convert to another
class.
-20-
<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.
Trend Fund A Class
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge as a % of Commission***
Amount of Purchase Offering Amount as a % of
Price Invested** Offering Price
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.75% 4.96% 4.00%
$100,000 but under $250,000 3.75 3.90 3.00
$250,000 but under $500,000 2.50 2.57 2.00
$500,000 but under $1,000,000* 2.00 2.03 1.60
</TABLE>
* There is no front-end sales charge on purchases of $1 million or more
of Class A Shares but, under certain limited circumstances, a 1%
contingent deferred sales charge may apply upon redemption of such
shares. The contingent deferred sales charge ("Limited CDSC") that may
be applicable arises only in the case of certain shares that were
purchased at net asset value and triggered the payment of a dealer's
commission.
** Based on the net asset value per share of Class A Shares as of the end
of Equity Funds III, Inc.'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 charges shown above. Dealers who receive 90% or more of
the sales charge may be deemed to be underwriters under the Securities Act
of 1933 (the "1933 Act").
- -------------------------------------------------------------------------------
Certain dealers who enter into an agreement to provide extra training
and information on Delaware Group products and services and who increase sales
of Delaware Group funds may receive an additional commission of up to 0.15% of
the offering price in connection with sales of Class A Shares. Such dealers must
meet certain requirements in terms of organization and distribution capabilities
and their ability to increase sales. The Distributor should be contacted for
further information on these requirements as well as the basis and circumstances
upon which the additional commission will be paid. Participating dealers may be
deemed to have additional responsibilities under the securities laws.
-21-
<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 0.75
Next $2 million up to $5 million 0.50
Amount over $5 million 0.25
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies (see Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value under Redemption and
Exchange in the Fund Classes' Prospectus) may be aggregated with those of 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 Shares and Class C Shares are purchased without a front-end
sales charge. Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth 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.
-22-
<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, Equity Funds III, Inc. 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 of shares to which the Plan applies. The Plans do not apply to
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 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 0.30% of the Class A
Shares' average daily net assets for the year, and up to 1% (0.25% of which are
service fees to be paid to the Distributor, dealers and others for providing
personal service and/or maintaining shareholder accounts) of each of the Class B
Shares' and Class C Shares' average daily net assets for the year. Equity Funds
III, Inc.'s Board of Directors may reduce these amounts at any time.
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<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 0.30% by the
average daily net assets represented by Class A Shares that were acquired by
shareholders on or after June 1, 1992, and (ii) the amount obtained by
multiplying 0.10% by the average daily net assets represented by 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 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 0.10% 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
0.30% of average daily net assets). While this describes the current formula for
calculating the fees which will be payable under the Plan, such Plan permits the
Fund to pay a full 0.30% on all of the Fund's 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 Equity Funds III, Inc., including a
majority of the directors who are not "interested persons" (as defined in the
1940 Act) of Equity Funds III, Inc. and who have no direct or indirect financial
interest in the Plans by vote cast in person at a meeting duly called for the
purpose of voting on the Plans and such 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 securities Class B
Shares of the Fund. 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 Equity Funds III, Inc. having no interest in the
Plans. In addition, in order for the Plans to remain effective, the selection
and nomination of directors who are not "interested persons" of Equity Funds
III, Inc. must be effected by the directors who themselves are not "interested
persons" and who have no direct or indirect financial interest in the Plans.
Persons authorized to make payments under the Plans must provide written reports
at least quarterly to the Board of Directors for their review.
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<PAGE>
For the fiscal year ended June 30, 1997, payments from Trend Fund A
Class, Trend Fund B Class and Trend Fund C Class amounted to $1,209,554,
$465,644 and $95,096, respectively. Such payments were used for the
following purposes:
<TABLE>
<CAPTION>
Trend Fund Trend Fund Trend Fund
A Class B Class C Class
------- ------- -------
<S> <C> <C> <C>
Advertising $ 259 ----- -----
Annual/Semi-Annual Reports $ 6,498 ----- -----
Broker Trails $958,423 $105,495 -----
Broker Sales Charges ----- $175,374 $ 83,274
Dealer Service Expenses $ 6,736 $ 2,132 $ 794
Interest on Broker Sales Charges ----- $150,576 $ 4,731
Commissions to Wholesalers $ 76,719 $ 18,682 $ 3,456
Promotional-Broker Meetings $ 29,773 $ 5,724 $ 1,024
Promotional-Other $101,146 ----- -----
Prospectus Printing $ 13,964 ----- -----
Telephone $ 2,655 $ 90 $ 217
Wholesaler Expenses $ 13,381 $ 7,571 $ 2,400
Other ----- ----- -----
</TABLE>
Other Payments to Dealers - Class A, Class B and Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares. The Distributor may also pay a portion of the
expense of preapproved dealer advertisements promoting the sale of Delaware
Group fund shares.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares may be purchased without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the Exchange
Privilege and the 12-Month Reinvestment Privilege.
Current and former officers, directors and employees of Equity Funds
III, Inc., any other fund in the Delaware Group, the Manager, the Manager's
affiliates, 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 other
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. Class A Shares may also be purchased at net asset value by current and
former officers, directors and employees (and members of their families) of the
Dougherty Financial Group LLC. Purchases of Class A Shares may also be made by
clients of registered representatives of an authorized investment dealer at net
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<PAGE>
asset value within 12 months of a change of the registered representative's
employment, if the purchase is funded by proceeds from an investment where a
front-end sales charge, contingent deferred sales charge or other sales charge
has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of Delaware Group
funds. In addition, purchases of Class A Shares may be made by financial
institutions investing for the account of their trust customers which are not
eligible to purchase shares of the Fund's Institutional Class. Officers,
directors and key employees of institutional clients of the Manager or any of
its affiliates may purchase Class A Shares at net asset value. Moreover,
purchases may be effected at net asset value for the benefit of the clients of
brokers, dealers and registered investment advisers affiliated with a broker or
dealer, if such broker, dealer or investment adviser has entered into an
agreement with the Distributor providing specifically for the purchase of Class
A Shares in connection with special investment products, such as wrap accounts
or similar fee based programs. Such purchasers are required to sign a letter
stating that the purchase is for investment only and that the securities may not
be resold except to the issuer. Such purchasers may also be required to sign or
deliver such other documents as the Fund may reasonably require to establish
eligibility for purchase at net asset value.
Investors in Delaware-Voyageur Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A Shares
of any of the Funds in the Delaware Group at net asset value.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase shares of the institutional class
of the Fund; any group retirement plan (excluding defined benefit pension
plans), or such plans of the same employer, for which plan participant records
are maintained on the Delaware Investment & Retirement Services, Inc. ("DIRSI")
proprietary record keeping system that (i) has in excess of $500,000 of plan
assets invested in Class A Shares of Delaware Group funds and any stable value
product available through the Delaware Group, or (ii) is sponsored by an
employer that has at any point after May 1, 1997 had more than 100 employees
while such plan has held Class A Shares of a Delaware Group fund and such
employer has properly represented to DIRSI in writing that it has the requisite
number of employees and has received written confirmation back from DIRSI.
Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase Institutional
Class Shares as a result of a change in the distribution arrangements.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Delaware
Group account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset value.
The Fund must be notified in advance that the trade qualifies for
purchase at net asset value.
Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made 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 Equity Funds III, Inc.,
which provides for the holding in escrow by the Transfer Agent of 5% of the
total amount of Class A Shares intended to be purchased until such purchase is
completed within the 13-month period. A Letter of Intention may be dated to
include shares purchased up to 90 days prior to the date the Letter is signed.
The 13-month period begins on the date of the earliest purchase. If the intended
investment is not completed, except as noted below, the purchaser will be asked
to pay an amount equal to the difference between the front-end sales charge on
Class A Shares purchased at the reduced rate and the front-end sales charge
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<PAGE>
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 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
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<PAGE>
a Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC). If, for example, any such purchaser has previously purchased and still
holds Class A Shares and/or shares of any other of the classes described in the
previous sentence with a value of $40,000 and subsequently purchases $60,000 at
offering price of additional shares of Class A Shares, the charge applicable to
the $60,000 purchase would currently be 3.75%. For the purpose of this
calculation, the shares presently held shall be valued at the public offering
price that would have been in effect were the shares purchased simultaneously
with the current purchase. Investors should refer to the table of sales charges
for Class A Shares to determine the applicability of the Right of Accumulation
to their particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares (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.
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<PAGE>
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
Delaware Investment Advisers, a division of the Manager, or its affiliates and
their corporate sponsors, as well as subsidiaries and related employee benefit
plans and rollover individual retirement accounts from such institutional
advisory accounts; (d) a bank, trust company and similar financial institution
investing for its own account or for the account of its trust customers for whom
such financial institution is exercising investment discretion in purchasing
shares of the Class, except where the investment is part of a program that
requires payment to the financial institution of a Rule 12b-1 fee; and (e)
registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least $1,000,000
entrusted to the adviser for investment purposes, but only if the adviser is not
affiliated or associated with a broker or dealer and derives compensation for
its services exclusively from its clients for such advisory services.
Shares of the Institutional 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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<PAGE>
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 Institutional
Class shares 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 Appendix B - Classes Offered
in the Fund Classes' Prospectus for the funds in the Delaware Group that are
eligible for investment by holders of Fund shares.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
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
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<PAGE>
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, or 403(b)(7) or 457 Deferred Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such Plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
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 Equity Funds III, Inc. for
proper instructions.
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'
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<PAGE>
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 giving
written notice to the fund from which exchanges are made.
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, or 403(b)(7) 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, SIMPLE IRAs, Simplified
Employee Pension Plans, Salary Reduction Simplified Employee Pension Plans, and
457 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.
Purchases of Class B Shares are subject to a maximum purchase
limitation of $250,000 for retirement plans. Purchases of Class C Shares must be
in an amount that is less than $1,000,000 for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans other than Individual Retirement Accounts, for
which there is a minimum initial purchase of $250 and a minimum subsequent
purchase of $25, regardless of which Class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide services
to such Plans.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Class. 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.
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Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the Plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships and corporations. These plans can be maintained as Section 401(k),
profit sharing or money purchase pension 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, for years prior to
1997, elects to be treated as having no compensation for the year. Investments
in each of the Fund Classes are permissible.
An individual can contribute up to $2,000 to his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income and whether the taxpayer or his or her spouse is an active
participant in an employer-sponsored retirement plan. Even if a taxpayer (or his
or her spouse) is an active participant in an employer-sponsored retirement
plan, the full $2,000 deduction is still available if the taxpayer's adjusted
gross income is below $25,000 ($40,000 for taxpayers filing joint returns). A
partial deduction is allowed for married couples with incomes between $40,000
and $50,000, and for single individuals with incomes between $25,000 and
$35,000. No deductions are available for contributions to IRAs by taxpayers
whose adjusted gross income before IRA deductions exceeds $50,000 ($35,000 for
singles) and who are active participants in an employer-sponsored retirement
plan. Taxpayers who are not allowed deductions on IRA contributions still can
make nondeductible IRA contributions of as much as $2,000 for each working
spouse ($2,250 for one-income couples for years prior to 1997), and defer taxes
on interest or other earnings from the IRAs. Special rules apply for determining
the deductibility of contributions made by married individuals filing separate
returns.
Effective for tax years beginning after 1996, one-income couples can
contribute up to $2,000 to each spouse's IRA provided the combined compensation
of both spouses is at least equal to the total contributions for both spouses.
If the working spouse is an active participant in an employer-sponsored
retirement plan and earns over $40,000, the maximum deduction limit is reduced
in the same way that the limit is reduced for contributions to a non-spousal
IRA.
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.
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<PAGE>
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.
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks.
See Appendix A--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")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may be maintained by employers having 25 of fewer
employees. An employer may elect to make additional contributions to such
existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. 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.
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.
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<PAGE>
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that plan sponsors are
limited to 100 employees and, in exchange for mandatory plan sponsor
contributions, discrimination testing is no longer required. Class B Shares are
not available for purchase by such plans.
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<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, its agent or its
designee. Orders for purchases of Class B Shares, Class C Shares and
Institutional Class shares are effected at the net asset value per share next
calculated after receipt of the order by the Fund, its agent or its designee.
Selling dealers are responsible for 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, Martin Luther King, Jr.'s Birthday, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. When the New York Stock Exchange is closed, the 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.
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<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, subject to 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, in
the case of the Fund Classes, there is currently a $7.50 bank wiring cost,
neither the Fund nor the Distributor charges a fee for redemptions or
repurchases, but such fees could be charged at any time in the future.
Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order; 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.
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<PAGE>
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, Equity Funds
III, Inc. 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
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.
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<PAGE>
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 from Class A Shares, Class B Shares and Class C Shares. If
the proceeds are wired to the shareholder's account at a bank which is not a
member of the Federal Reserve System, there could be a delay in the crediting of
the funds to the shareholder's bank account.
2. Payment by Check: Request a check be mailed to the bank account
designated on the authorization form. Redemption proceeds will normally be
mailed the next business day, but no later than seven days, from the date of the
telephone request. This procedure will take longer than the Payment by Wire
option (1 above) because of the extra time necessary for the mailing and
clearing of the check after the bank receives it.
Redemption Requirements: In order to change the name of the bank and
the account number it will be necessary to send a written request to the 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.
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.
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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.
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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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.
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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, 1997, 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
$120,941,579 as of June 30, 1997.
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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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 Equity Funds III, Inc.'s Board of Directors.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On June 30, 1997, the Manager and its affiliates
within the Delaware Group, including Delaware International Advisers Ltd., were
managing in the aggregate more than $37 billion in assets in various
institutional or separately managed (approximately $22,302,518,000) and
investment company (approximately $15,246,733,000) 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 Equity Funds III, Inc. who are not
parties thereto or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval. The Agreement is
terminable without penalty on 60 days' notice by the directors of Equity Funds
III, Inc. 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. On June 30, 1997, the total net assets of the Fund were
$615,152,292. Investment management fees paid by the Fund during the past three
fiscal years were $2,300,627 for 1995, $3,826,146 for 1996 and $4,865,223 for
1997. 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.
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, 1997, the ratios of expenses to average daily
net assets for Class A Shares, Class B Shares, Class C Shares and Institutional
Class shares were 1.34%, 2.09%, 2.09% and 1.08%, respectively. The ratios for
Class A , Class B and Class C Shares reflect the impact of their 12b-1 Plans.
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,
1997, no reimbursement was necessary or paid.
-43-
<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 Fund Accounting Agreement. The Transfer Agent is also an indirect,
wholly owned subsidiary of Delaware Management Holdings, Inc.
-44-
<PAGE>
OFFICERS AND DIRECTORS
The business and affairs of Equity Funds III, Inc. are managed under
the direction of its Board of Directors.
Certain officers and directors of Equity Funds III, Inc. hold identical
positions in each of the other funds in the Delaware Group. On July 31, 1997,
Equity Funds III, Inc.'s officers and directors owned less than 1% of the
outstanding shares of Class A Shares, Class B Shares, Class C Shares and the
Institutional Class.
As of July 31, 1997, 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
Attn: Fund Administration
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246 1,855,001 6.44%
Class B Shares Merrill Lynch, Pierce, Fenner & Smith
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246 430,866 11.59%
Class C Shares Merrill Lynch, Pierce, Fenner & Smith
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246 173,383 23.48%
</TABLE>
-45-
<PAGE>
<TABLE>
<CAPTION>
Class Name and 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 1,824,509 24.65%
Trustees for Harrah's Entertainment, Inc.
Savings and Retirement Plan
1023 Cherry Road
Memphis, TN 38117 1,178,138 15.92%
Fidelity Investments - Institutional Operations
CO FIICO as Agent
For Certain Employee Benefit Plans
100 Magellan 1st Floor
Covington, KY 41015 1,077,245 14.56%
Bank of New York
TRST First Hospital Corp.
Retirement Plan
Attn: Greg Tyrka
1 Wall Street
New York, NY 10005 399,357 5.40%
</TABLE>
-46-
<PAGE>
DMH Corp., Delaware Voyageur Holdings, Inc., Delaware Management
Company, Inc., Delaware Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware Management Trust Company, Delaware
International Holdings Ltd., Founders Holdings, Inc., Delaware International
Advisers Ltd., Delaware Capital Management, Inc. and Delaware Investment &
Retirement Services, Inc. are direct or indirect, wholly owned subsidiaries of
Delaware Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between
DMH and a wholly owned subsidiary of Lincoln National Corporation ("Lincoln
National") was completed. In connection with the merger, new Investment
Management Agreements between Equity Funds III, Inc. and the Manager. DMH and
the Manager are now indirect, wholly owned subsidiaries, and subject to the
ultimate control, of Lincoln National. Lincoln National, with headquarters in
Fort Wayne, Indiana, is a diversified organization with operations in many
aspects of the financial services industry, including insurance and investment
management.
Certain officers and directors of Equity Funds III, Inc. hold identical
positions in each of the other funds in the Delaware Group. Directors and
principal officers of Equity Funds III, Inc. are noted below along with their
ages and their business experience for the past five years. Unless otherwise
noted, the address of each officer and director is One Commerce Square,
Philadelphia, PA 19103.
*Wayne A. Stork (60)
Chairman, President, Chief Executive Officer, Director and/or Trustee
of Equity Funds III, Inc., each of the other 32 investment
companies in the Delaware Group, Delaware Management
Holdings, Inc., DMH Corp., Delaware International Holdings
Ltd. and Founders Holdings, Inc.
Chairman and Director of Delaware Distributors, Inc. and Delaware
Capital Management, 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. and Delaware Investment &
Retirement Services, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware
organization.
Richard G. Unruh, Jr. (57)
Executive Vice President of Equity Funds III, Inc., each of the other
32 investment companies in the Delaware Group, Delaware
Management Holdings, Inc. and Delaware Capital Management, Inc.
Executive Vice President and Director of Delaware Management Company,
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 Equity Funds III, Inc.'s investment manager and
considered an "interested person" as defined in the 1940 Act.
-47-
<PAGE>
Paul E. Suckow (50)
Executive Vice President/Chief Investment Officer, Fixed Income of
Equity Funds III, Inc., each of the other 32 investment
companies in the Delaware Group, Delaware Management Company,
Inc. and Delaware Management Holdings, Inc.
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Capital Management, 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 Equity Funds III, Inc. and each of the other
32 investment companies in the Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and
from 1988 to 1991, he was a partner of I&L Investors.
Anthony D. Knerr (58)
Director and/or Trustee of Equity Funds III, Inc. and each of the other
32 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 Equity Funds III, Inc. and each of the other
32 investment companies in the Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of
the Smithsonian Institution, Washington, DC, and from 1975 to
1992, she was Adjunct Professor of Columbia Business School.
W. Thacher Longstreth (76)
Director and/or Trustee of Equity Funds III, Inc. and each of the other
32 investment companies in the Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
-48-
<PAGE>
Thomas F. Madison (61)
Director and/or Trustee of Equity Funds III, Inc. and each of the 32
other investment companies in the Delaware Group.
President and Chief Executive Officer, MLM Partners, Inc.
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402.
Mr. Madison has also been Chairman of the Board of Communications
Holdings, Inc. since 1996. From February to September 1994,
Mr. Madison served as Vice Chairman--Office of the CEO of The
Minnesota Mutual Life Insurance Company and from 1988 to
1993, he was President of U.S. WEST Communications--Markets.
* Jeffrey J. Nick (44)
Director and/or Trustee of Equity Funds III, Inc. and 32 other
investment companies in the Delaware Group.
President, Chief Executive Officer and Director of Lincoln National
Investment Companies, Inc. From 1992 to 1996, Mr. Nick was
Managing Director of Lincoln National UK plc and from 1989 to
1992, he was Senior Vice President responsible for corporate
planning and development for Lincoln National Corporation.
Charles E. Peck (71)
Director and/or Trustee of Equity Funds III, Inc. and each of the other
32 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.
- ----------
* Director affiliated with Equity Funds III, Inc.'s investment manager and
considered an "interested person" as defined in the 1940 Act.
-49-
<PAGE>
David K. Downes (57)
Executive Vice President/Chief Operating Officer/Chief Financial
Officer of Equity Funds III, Inc., each of the other 32
investment companies in the Delaware Group, Delaware
Management Holdings, Inc., Founders CBO Corporation, Delaware
Capital Management, Inc. and Delaware Distributors, L.P.
Executive Vice President, Chief Operating Officer, Chief Financial
Officer and Director of Delaware Management Company, Inc.,
DMH Corp., Delaware Distributors, Inc., Founders Holdings,
Inc. and Delaware International Holdings Ltd.
Chairman, Chief Executive Officer and Director of Delaware Investment &
Retirement Services, Inc.
Chairman and Director of Delaware Management Trust Company
President/Chief Executive Officer/Chief Financial Officer and Director
of Delaware Service Company, 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. (50)
Senior Vice President, Secretary and General Counsel of Equity Funds
III, Inc. and each of the other 32 investment companies in
the Delaware Group, Delaware Management Holdings, Inc. and
Delaware Distributors, L.P.
Executive Vice President, Secretary, General Counsel and Director of
Delaware Management Trust Company.
Senior Vice President, Secretary, General Counsel 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.
Gerald S. Frey (51)
Vice President/Senior Portfolio Manager of Equity Funds III, Inc., 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 1986-1995.
-50-
<PAGE>
Joseph H. Hastings (47)
Senior Vice President/Corporate Controller of Equity Funds III, Inc.,
each of the other 32 investment companies in the Delaware
Group and Founders Holdings, Inc.
Senior Vice President/Corporate Controller/Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management
Company, Inc., Delaware Distributors, L.P., Delaware Service
Company, Inc., Delaware International Holdings Ltd., Delaware
Distributors, Inc. and Delaware Capital Management, Inc.
Chief Financial Officer/Treasurer of Delaware Investment & Retirement
Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company.
Senior Vice President/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 (35)
Senior Vice President/Treasurer of Equity Funds III, Inc., each of the
other 32 investment companies in the Delaware Group, Delaware
Distributors, Inc. and Founders Holdings, Inc.
Senior Vice President and Manager of Investment Accounting of Delaware
International Holdings, Inc.
Senior Vice President/Investment Accounting of Delaware Management
Company, Inc. and Delaware Service Company Inc.
Senior Vice President and Treasurer/Manager of Investment Accounting of
Delaware Distributors, L.P.
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.
-51-
<PAGE>
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from
Equity Funds III, Inc. and the total compensation received from all Delaware
Group funds for the fiscal year ended June 30, 1997 and an estimate of annual
benefits to be received upon retirement under the Delaware Group Retirement Plan
for Directors/Trustees as of June 30, 1997.
<TABLE>
<CAPTION>
Pension or
Retirement Estimated
Benefits Annual Total Compensation
Aggregate Accrued Benefits from all 33
Compensation as Part of Upon Delaware Group
Name from Fund Fund Expenses Retirement* Investment Companies
<S> <C> <C> <C> <C>
W. Thacher Longstreth $2,859 None $30,000 $52,932
Ann R. Leven $3,143 None $30,000 $57,890
Walter P. Babich $3,087 None $30,000 $56,890
Anthony D. Knerr $3,087 None $30,000 $56,890
Charles E. Peck $2,768 None $30,000 $49,745
Thomas F. Madison** $343 None $30,000 $8,770
</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.
** Thomas F. Madison joined Equity Funds III, Inc.'s Board of Directors on April
30, 1997.
-52-
<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.
-53-
<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.
SmallCap Value Fund seeks capital appreciation by investing primarily
in common stocks whose market values appear low relative to their underlying
value or future potential.
-54-
<PAGE>
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.
Blue Chip Fund seeks to achieve long-term capital appreciation. Current income
is a secondary objective. It seeks to achieve these objectives by investing
primarily in equity securities and any securities that are convertible into
equity securities. Quantum Fund seeks to achieve long-term capital appreciation.
It seeks to achieve this objective by investing primarily in equity securities
of medium- to large-sized companies expected to grow over time that meet the
Fund's "Social Criteria" strategy.
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.
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
-55-
<PAGE>
seeks to achieve current income consistent with the preservation of principal by
investing primarily in global fixed-income securities that may also provide the
potential for capital appreciation. Global Assets Fund seeks to achieve
long-term total return by investing in global securities which will provide
higher current income than a portfolio comprised exclusively of equity
securities, along with the potential for capital growth. Emerging Markets Fund
seeks long-term capital appreciation by investing primarily in equity securities
of issuers located or operating in emerging countries.
Enterprise Fund seeks to provide maximum appreciation of capital by
investing in medium-sized companies which have a dominant position within their
industry, are undervalued, or have potential for growth in earnings. U.S. Growth
Fund seeks to maximize capital appreciation by investing in companies of all
sizes which have low dividend yields, strong balance sheets and high expected
earnings growth rates relative to their industry. World Growth Fund seeks to
maximize total return (capital appreciation and income), principally through
investments in an internationally diversified portfolio of equity securities.
New Pacific Fund seeks long-term capital appreciation by investing primarily in
companies which are domiciled in or have their principal business activities in
the Pacific Basin. Federal Bond Fund seeks to maximize current income consistent
with preservation of capital. The fund attempts to achieve this objective by
investing primarily in securities issued by the U.S. government, its agencies
and instrumentalities. Corporate Income Fund seeks to provide high current
income consistent with preservation of capital. The fund attempts to achieve
this objective primarily by investing in a diversified portfolio of investment
grade fixed-income securities issued by U.S. corporations.
Delaware Group Premium Fund, Inc. offers 15 funds available exclusively
as funding vehicles for certain insurance company separate accounts. Decatur
Total Return Series seeks the highest possible total rate of return by selecting
issues that exhibit the potential for capital appreciation while providing
higher than average dividend income. Delchester Series seeks as high a current
income as possible by investing in rated and unrated corporate bonds, U.S.
government securities and commercial paper. Capital Reserves Series seeks a high
stable level of current income while minimizing fluctuations in principal by
investing in a diversified portfolio of short- and intermediate-term securities.
Cash Reserve Series seeks the highest level of income consistent with
preservation of capital and liquidity through investments in short-term money
market instruments. DelCap Series seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. Delaware 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.
Trend Series seeks long-term capital appreciation by investing primarily in
small-cap common stocks and convertible securities of emerging and other
growth-oriented companies. These securities will have been judged to be
responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. Global Bond
Series seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. Strategic Income Series seeks
high current income and total return by using a multi-sector investment
approach, investing primarily in three sectors of the fixed-income securities
markets: high-yield, higher risk securities; investment grade fixed-income
securities; and foreign government and other foreign fixed-income securities.
Devon Series seeks current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on common stocks that
the investment manager believes have the potential for above-average dividend
increases over time. Emerging Markets Series seeks to achieve long-term capital
-56-
<PAGE>
appreciation by investing primarily in equity securities of issuers located or
operating in emerging countries. Convertible Securities Series seeks a high
level of total return on its assets through a combination of capital
appreciation and current income by investing primarily in convertible
securities. Quantum Series seeks to achieve long-term capital appreciation by
investing primarily in equity securities of medium to large-sized companies
expected to grow over time that meet the Series' "Social Criteria" strategy.
Delaware-Voyageur US Government Securities Fund seeks to provide a high
level of current income consistent with the prudent investment risk by investing
in U.S. Treasury bills, notes, bonds, and other obligations issued or
unconditionally guaranteed by the full faith and credit of the U.S. Treasury,
and repurchase agreements fully secured by such obligations.
Delaware-Voyageur Tax-Free Arizona Insured Fund seeks to provide a high
level of current income exempt from federal income tax and the Arizona personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Minnesota Insured Fund seeks to provide a high level of current income exempt
from federal income tax and the Minnesota personal income tax, consistent with
the preservation of capital.
Delaware-Voyageur Tax-Free Minnesota Intermediate Fund seeks to provide
a high level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.
Delaware-Voyageur Tax-Free California Insured Fund seeks to provide a
high level of current income exempt from federal income tax and the California
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Florida Insured Fund seeks to provide a high level of
current income exempt from federal income tax, consistent with the preservation
of capital. The Fund will seek to select investments that will enable its shares
to be exempt from the Florida intangible personal property tax.
Delaware-Voyageur Tax-Free Florida Fund seeks to provide a high level of current
income exempt from federal income tax, consistent with the preservation of
capital. The Fund will seek to select investments that will enable its shares to
be exempt from the Florida intangible personal property tax. Delaware-Voyageur
Tax-Free Kansas Fund seeks to provide a high level of current income exempt from
federal income tax, the Kansas personal income tax and the Kansas Intangible
personal property tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Missouri Insured Fund seeks to provide a high level
of current income exempt from federal income tax and the Missouri personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free New Mexico Fund seeks to provide a high level of current income exempt
from federal income tax and the New Mexico personal income tax, consistent with
the preservation of capital. Delaware-Voyageur Tax-Free Oregon Insured Fund
seeks to provide a high level of current income exempt from federal income tax
and the Oregon personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Utah Fund seeks to provide a high level of current
income exempt from federal income tax, consistent with the preservation of
capital. Delaware-Voyageur Tax-Free Washington Insured Fund seeks to provide a
high level of current income exempt from federal income tax, consistent with the
preservation of capital.
Delaware-Voyageur Tax-Free Florida Intermediate Fund seeks to provide a
high level of current income exempt from federal income tax, consistent with the
preservation of capital. The Fund will seek to select investments that will
enable its shares to be exempt from the Florida intangible personal property
tax. The Fund seeks to reduce market risk by maintaining an average weighted
maturity from five to ten years.
-57-
<PAGE>
Delaware-Voyageur Tax-Free Arizona Fund seeks to provide a high level
of current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware- Voyageur Tax-Free
California Fund seeks to provide a high level of current income exempt from
federal income tax and the California personal income tax, consistent with the
preservation of capital. Delaware-Voyageur Tax- Free Iowa Fund seeks to provide
a high level of current income exempt from federal income tax and the Iowa
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Idaho Fund seeks to provide a high level of current
income exempt from federal income tax and the Idaho personal income tax,
consistent with the preservation of capital. Delaware-Voyageur Minnesota High
Yield Municipal Bond Fund seeks to provide a high level of current income exempt
from federal income tax and the Minnesota personal income tax primarily through
investment in medium and lower grade municipal obligations. National High Yield
Municipal Fund seeks to provide a high level of income exempt from federal
income tax, primarily through investment in medium and lower grade municipal
obligations. Delaware-Voyageur Tax-Free New York Fund seeks to provide a high
level of current income exempt from federal income tax and the personal income
tax of the state of New York and the city of New York, consistent with the
preservation of capital. Delaware-Voyageur Tax- Free Wisconsin Fund seeks to
provide a high level of current income exempt from federal income tax and the
Wisconsin personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Colorado Fund seeks to provide a high level
of current income exempt from federal income tax and the Colorado personal
income tax, consistent with the preservation of capital.
Aggressive Growth Fund seeks long-term capital appreciation, which the
Fund attempts to achieve by investing primarily in equity securities believed to
have the potential for high earnings growth. Although the Fund, in seeking its
objective, may receive current income from dividends and interest, income is
only an incidental consideration in the selection of the Fund's investments.
Growth Stock Fund has an objective of long-term capital appreciation. The Fund
seeks to achieve its objective from equity securities diversified among
individual companies and industries. Tax-Efficient Equity Fund seeks to obtain
for taxable investors a high total return on an after-tax basis. The Fund will
attempt to achieve this objective by seeking to provide a high long-term
after-tax total return through managing its portfolio in a manner that will
defer the realization of accrued capital gains and minimize dividend income.
Delaware-Voyageur Tax-Free Minnesota Fund seeks to provide a high level
of current income exempt from federal income tax and the Minnesota personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free North Dakota Fund seeks to provide a high level of current income
exempt from federal income tax and the North Dakota personal income tax,
consistent with the preservation of capital.
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).
-58-
<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.
Delaware International, or its affiliate Delaware also manages the
investment options for Delaware Medallion(sm) III Variable Annuity. Medallion is
issued by Allmerica Financial Life Insurance and Annuity Company (First
Allmerica Financial Life Insurance Company in New York and Hawaii). Delaware
Medallion offers fifteen different investment series ranging from domestic
equity funds, international equity and bond funds and domestic fixed income
funds. Each investment series available through Medallion utilizes an investment
strategy and discipline the same as or similar to one of the Delaware Group
mutual funds available outside the annuity. See Delaware Group Premium Fund,
Inc., above.
Access persons and advisory persons of the Delaware Group of funds, as
those terms are defined in SEC Rule 17j-1 under the 1940 Act, who provide
services to the Manager, Delaware International Advisers Ltd. or their
affiliates, are permitted to engage in personal securities transactions subject
to the exceptions set forth in Rule 17j-1 and the following general restrictions
and procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance is received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions may only be closed-out at a profit after a 60-day holding
period has elapsed; and (5) the Compliance Officer must be informed periodically
of all securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.
The Distributor acts as national distributor for 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 ("DDLP") (for all periods after January 3, 1995) and, in its
capacity as such, DDI (prior to January 3, 1995) 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, 1997 $1,602,046 $1,336,246 $265,831
June 30, 1996 2,101,990 1,779,727 322,263
June 30, 1995 1,202,397 1,042,162 160,235
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<PAGE>
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, 1997 $10,416
June 30, 1996 11,000
June 30, 1995 11,335
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, 1997 $175,785
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, 1997 $14,972
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 0.25% multiplied by the total amount
of assets in the complex for which the Transfer Agent furnishes accounting
services, where such aggregate complex assets are $10 billion or less, and 0.20%
of assets if such aggregate complex assets exceed $10 billion. The fees are
charged to each fund, including 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.
-60-
<PAGE>
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of Equity Funds III, Inc.'s
advisory relationship with the Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause Equity Funds III, Inc.
to delete the words "Delaware Group" from Equity Funds III, Inc.'s name.
Bankers Trust Company ("Bankers"), One Bankers Trust Plaza, New York,
NY 10006, is custodian of the Fund's securities and cash. As custodian for the
Fund, Bankers maintains a separate account or accounts for the Fund; receives,
holds and releases portfolio securities on account of the Fund; receives and
disburses money on behalf of the Fund; and collects and receives income and
other payments and distributions on account of the Fund's portfolio securities.
The legality of the issuance of the shares offered hereby, registered
pursuant to Rule 24f-2 under the 1940 Act, has been passed upon for Equity Funds
III, Inc. by Stradley, Ronon, Stevens & Young, LLP, Philadelphia, Pennsylvania.
Capitalization
Equity Funds III, Inc. 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 Class A Shares,
twenty-five million shares to Class B Shares, twenty-five million shares to
Class C Shares and twenty-five million shares to Institutional Class shares.
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.
All shares have no preemptive rights, are fully transferable and, when
issued, are fully paid and nonassessable and, except as described above, have
equal voting rights.
Prior to September 6, 1994, Trend Fund A Class was known as Trend Fund
class and Trend Fund Institutional Class was known as Trend Fund (Institutional)
class.
Effective as of August 29, 1997, the name of Delaware Group Trend Fund,
Inc. was changed to Delaware Group Equity Funds III, Inc.
Noncumulative Voting
Equity Funds III, Inc. shares have noncumulative voting rights which
means that the holders of more than 50% of the shares of Equity Funds III, Inc.
voting for the election of directors can elect all the directors if they choose
to do so, and, in such event, the holders of the remaining shares will not be
able to elect any directors.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC.
-61-
<PAGE>
APPENDIX A--IRA INFORMATION
An individual can contribute up to $2,000 to his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income and whether the taxpayer or his or her spouse is an active
participant in an employer-sponsored retirement plan. Even if a taxpayer (or his
or her spouse) is an active participant in an employer-sponsored retirement
plan, the full $2,000 deduction is still available if the taxpayer's adjusted
gross income is below $25,000 ($40,000 for taxpayers filing joint returns). A
partial deduction is allowed for married couples with incomes between $40,000
and $50,000, and for single individuals with incomes between $25,000 and
$35,000. No deductions are available for contributions to IRAs by taxpayers
whose adjusted gross income before IRA deductions exceeds $50,000 ($35,000 for
singles) and who are active participants in an employer-sponsored retirement
plan. Taxpayers who were not allowed deductions on IRA contributions still can
make nondeductible IRA contributions of as much as $2,000 for each working
spouse ($2,250 for one-income couples for years prior to 1997), and defer taxes
on interest or other earnings from the IRAs. Special rules apply for determining
the deductibility of contributions made by married individuals filing separate
returns.
Effective tax years beginning after 1996, one-income couples can
contribute up to $2,000 to each spouse's IRA provided the combined compensation
of both spouses is at least equal to the total contributions for both spouses.
If the working spouse is an active participant in an employer-sponsored
retirement plan and earns over $40,000, the maximum deduction limit is reduced
in the same way that the limit is reduced for contributions to a non-spousal
IRA.
As illustrated in the following tables, maintaining an 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.
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.
-62-
<PAGE>
$2,000 Invested Annually Assuming a 10% Annualized Return
15% Tax Bracket Single - $0-$24,650
--------------- Joint - $0-$41,200
<TABLE>
<CAPTION>
How Much You
End of Cumulative How Much You Have With Full
Year Investment Amount Have Without IRA IRA Deduction
<S> <C> <C> <C>
1 $ 2,000 $ 1,844 $ 2,200
5 10,000 10,929 13,431
10 20,000 27,363 35,062
15 30,000 52,074 69,899
20 40,000 89,231 126,005
25 50,000 145,103 216,364
30 60,000 229,114 361,887
35 70,000 355,438 596,254
40 80,000 545,386 973,704
[Without IRA--investment of $1,700 ($2,000 less 15%) earning 8.5% (10% less 15%)]
</TABLE>
28% Tax Bracket Single - $24,651-$59,750
--------------- Joint - $41,201-$99,600
<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
[Without IRA--investment of $1,440 ($2,000 less 28%) earning 7.2% (10% less 28%)]
[With IRA--No Deduction--investment of $1,440 ($2,000 less 28%) earning 10%]
</TABLE>
-63-
<PAGE>
31% Tax Bracket Single - $59,751-$124,650
--------------- Joint - $99,601-$151,750
<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 $ 1,475 $ 1,518 $ 2,200
5 10,000 8,467 9,268 13,431
10 20,000 20,286 24,193 35,062
15 30,000 36,787 48,231 69,899
20 40,000 59,821 86,943 126,005
25 50,000 91,978 149,291 216,364
30 60,000 136,868 249,702 361,887
35 70,000 199,536 411,415 596,254
40 80,000 287,021 671,855 973,704
[Without IRA--investment of $1,380 ($2,000 less 31%) earning 6.9% (10% less 31%)]
[With IRA--No Deduction--investment of $1,380 ($2,000 less 31%) earning 10%]
</TABLE>
36% Tax Bracket* Single - $124,651-$271,050
--------------- Joint - $151,751-$271,050
<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
[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%]
</TABLE>
-64-
<PAGE>
39.6% Tax Bracket* Single - over $271,050
----------------- Joint - over $271,050
<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
[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%]
</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 $271,050. The above tables do not reflect the
personal exemption phaseout nor the limitations of itemized deductions that
may apply.
-65-
<PAGE>
<TABLE>
<CAPTION>
$2,000 SINGLE INVESTMENT AT A RETURN OF 10% COMPOUNDED ANNUALLY
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>
<TABLE>
<CAPTION>
$2,000 INVESTED ANNUALLY AT A RETURN OF 10% COMPOUNDED ANNUALLY
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 $271,050. The above tables do not reflect the
personal exemption phaseout nor the limitations of itemized deductions that
may apply.
-66-
<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 Fund performance either in the past or in the future.
-67-
<PAGE>
APPENDIX B - PERFORMANCE OVERVIEW
Trend Fund A Class Performance Overview
The following table illustrates the total return on one share invested in
Trend Fund A Class during the 10-year period ended June 30, 1997.(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
Net Asset value at
Maximum Value Distributions year-end
offering ------------------- ------------------------ with all
Year price at Begin- From From distribu-
ended begin- ning End invest- realized tions
June ning of of of ment securi- rein-
30 year(2) year year income ties profits vested
-- ------- ---- ---- ------ ------------ ------
<S> <C> <C> <C> <C> <C> <C>
1988 9.57 9.12 8.13 0.000 0.000 $ 8.13
1989 8.54 8.13 10.87 0.000 0.320 11.32
1990 11.41 10.87 9.97 0.050 2.220 12.94
1991 10.47 9.97 8.92 0.050 0.520 12.32
1992 9.36 8.92 11.38 0.000 0.160 15.93
1993 11.95 11.38 13.98 0.000 1.150 21.53
1994 14.68 13.98 12.21 0.000 1.940 21.66
1995 12.82 12.21 14.21 0.000 0.790 26.95
1996 14.92 14.21 18.16 0.000 0.900 36.51
1997 19.07 18.16 16.73 0.000 1.510 37.14
----- ------
Total Distributions $0.100 $8.000
</TABLE>
RESTUBBED TABLE CONTINUED ON NEXT PAGE.
<PAGE>
RESTUBBED TABLE
Trend Fund A Class
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
-----------------------------------------------------------------------------------------------
Trend Fund
-------------------
Year Maximum Offering Price Net Asset Value Standard & Dow Jones Consumer
ended to Net Asset Value to Net Asset Value Poor's 500(5) Industrial(5) Price Index(5)
June ------------------ ------------------ ------------- ------------ -------------
30 Annual Cumulative(3) Annual Cumulative(4) Annual Cumulative Annual Cumulative Annual Cumulative
-- ------ ------------- ------ ------------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 -15.1% -15.1% -10.9% -10.9% -6.9% -6.9% -8.3% -8.3% 3.9% 3.9%
1989 32.7 18.2 39.3 24.1 20.5 12.2 18.7 8.8 5.2 9.3
1990 8.9 35.1 14.3 41.9 16.5 30.7 22.7 33.6 4.7 14.4
1991 -9.3 28.6 -4.8 35.1 7.4 40.4 4.6 39.7 4.7 19.8
1992 23.2 66.3 29.3 74.6 13.4 59.2 17.7 64.4 3.1 23.5
1993 28.8 124.9 35.2 136.1 13.4 80.5 9.2 79.6 3.0 27.2
1994 -4.2 126.2 0.6 137.5 1.4 83.0 5.9 90.1 2.5 30.4
1995 18.5 181.4 24.4 195.5 26.1 130.8 29.2 145.7 3.0 34.4
1996 29.1 281.3 35.5 300.4 26.0 190.8 27.1 212.2 2.8 38.1
1997 -3.1 287.9 1.7 307.3 34.7 291.7 38.5 332.6 2.3 41.3
</TABLE>
(1) All figures prior to May 9, 1986 are adjusted for a 2-for-1 stock split paid
on that date. 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
Trend Fund B Class during the period September 6, 1994 (date of initial public
offering) through June 30, 1997. 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
Net Asset value at
Maximum Value Distributions year-end
offering ------------------- ------------------------ with all
Year price at Begin- From From distribu-
ended begin- ning End invest- realized tions
June ning of of of ment securi- rein-
30 year year(2) year income ties profits vested
-- ------- ---- ---- ------ ------------ ------
<S> <C> <C> <C> <C> <C> <C>
1995(1) $ 12.11 $12.11 $14.13 $0.000 $0.000 $14.13
1996 14.13 14.13 17.92 0.000 0.900 16.30
1997 17.92 17.92 16.37 0.000 1.510 12.23
----- -----
Total Distributions $0.000 $2.410
</TABLE>
Trend Fund B Class
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
--------------------------------------------------------------------------------------------------------------------
Trend Fund
--------------------------------------------
Year Returns Including Returns Excluding Standard & Dow Jones Consumer
ended CDSC CDSC Poor's 500(3) Industrial(3) Price Index(3)
June --------------- ------------------ ------------- ------------ -------------
30 Annual Cumulative(2) Annual Cumulative(2) Annual Cumulative Annual Cumulative Annual Cumulative
-- ------ ------------- ------ ------------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995(1) 12.7% 12.7% 16.7% 16.7% 18.3% 18.3% 19.9% 19.9% 2.4% 2.4%
1996 30.6 30.6 34.6 34.6 26.0 26.0 27.1 27.1 2.8 2.8
1997 17.0 17.8 1.0 1.0 34.7 69.7 38.5 76.0 2.3 5.1
</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
Trend Fund C Class during the period November 29, 1995 (date of initial public
offering) through June 30, 1997. 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
Net Asset value at
Maximum Value Distributions year-end
offering ------------------- ------------------------ with all
Year price at Begin- From From distribu-
ended begin- ning End invest- realized tions
June ning of of of ment securi- rein-
30 year year(2) year income ties profits vested
-- ------- ---- ---- ------ ------------ ------
<S> <C> <C> <C> <C> <C> <C>
1996(1) $ 15.46 $ 15.46 $ 18.09 $ 0.000 $ 0.350 $ 18.51
1997 15.46 15.46 16.54 0.000 1.510 15.61
----- -----
Total Distributions $ 0.000 $ 1.860
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
--------------------------------------------------------------------------------------------------------------------
Trend Fund
--------------------------------------------
Year Returns Including Returns Excluding Standard & Dow Jones Consumer
ended CDSC(1) CDSC(1) Poor's 500(3) Industrial(3) Price Index(3)
June --------------- ------------------ ------------- ------------ -------------
30 Annual Cumulative(2) Annual Cumulative(2) Annual Cumulative Annual Cumulative Annual Cumulative
-- ------ ------------- ------ ------------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996(1) 18.7% 18.7% 19.7% 19.7% 12.2% 12.2% 12.9% 12.9% 2.0% 2.0%
1997 12.6 12.6 1.0 1.0 34.7 51.1 38.5 56.4 2.3 4.4
</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,
1997. 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
Net Asset value at
Maximum Value Distributions year-end
offering ------------------- ------------------------ with all
Year price at Begin- From From distribu-
ended begin- ning End invest- realized tions
June ning of of of ment securi- rein-
30 year year year income ties profits vested
-- ------- ---- ---- ------ ------------ ------
<S> <C> <C> <C> <C> <C> <C>
1988 9.12 9.12 8.13 0.000 0.000 $ 8.13
1989 8.13 8.13 10.87 0.000 0.320 11.32
1990 10.87 10.87 9.97 0.050 2.220 12.94
1991 9.97 9.97 8.92 0.050 0.520 12.32
1992 8.92 8.92 11.38 0.000 0.160 15.93
1993 11.38 11.38 13.99 0.000 1.150 21.53
1994 13.99 13.99 12.25 0.000 1.940 21.70
1995 12.25 12.25 14.30 0.000 0.790 27.06
1996 14.30 14.30 18.33 0.000 0.900 36.78
1997 18.33 16.33 16.95 0.000 1.510 37.49
----- -----
Total Distributions $0.100 $9.510
</TABLE>
RESTUBBED TABLE CONTINUED ON NEXT PAGE
<PAGE>
RESTUBBED TABLE
Trend Fund Institutional Class
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING YEAR
-----------------------------------------------------------------------------------------------
Trend Fund
-------------------
Year Maximum Offering to Net Asset Value Standard & Dow Jones Consumer
ended Net Asset Value to Net Asset Value Poor's 500(3) Industrial(3) Price Index(3)
June --------------- ------------------ ------------- ------------ -------------
30 Annual Cumulative Annual Cumulative(2) Annual Cumulative Annual Cumulative Annual Cumulative
-- ------ ------------- ------ ------------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 -18.5% -18.5% -10.90% -10.9% -6.9% -6.9% -8.3% -8.3% 3.9% 7.7%
1989 27.5 13.6 39.30 24.1 20.5 12.2 18.7 8.8 5.2 13.3
1990 4.6 29.8 14.30 41.9 16.5 30.7 22.7 33.6 4.7 18.7
1991 -12.9 23.6 -4.80 35.1 7.4 40.4 4.6 39.7 4.7 24.3
1992 18.3 59.8 29.30 74.6 13.4 59.2 17.7 64.4 3.1 28.1
1993 23.7 116.0 35.20 136.1 13.6 80.8 9.2 79.6 3.0 31.9
1994 -7.8 117.8 0.80 138.0 1.4 83.4 5.9 90.1 2.5 35.2
1995 14.1 171.5 24.70 196.8 26.1 131.2 29.2 145.7 3.0 39.4
1996 24.3 269.0 35.90 303.3 26.0 191.3 27.1 212.2 2.8 43.2
1997 -6.7 276.4 1.94 311.1 34.7 292.4 38.5 332.5 0.0 00.0
</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.
-68-
<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Delaware Group
Equity Funds III, Inc. and, in its capacity as such, audits the annual financial
statements of the Fund. 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, 1997 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.
-69-
<PAGE>
The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, national and state-specific 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>
- ------------------------------------------------------------------------
DELAWARE GROUP EQUITY FUNDS III, INC.
(formerly Delaware Group Trend Fund, Inc.)
- ------------------------------------------------------------------------
TREND FUND
- ------------------------------------------------------------------------
A CLASS
- ------------------------------------------------------------------------
B CLASS
- ------------------------------------------------------------------------
C CLASS
- ------------------------------------------------------------------------
INSTITUTIONAL CLASS
- ------------------------------------------------------------------------
CLASSES OF DELAWARE GROUP
EQUITY FUNDS III, INC.
- ------------------------------------------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
- ------------------------------------------------------------------------
AUGUST 29, 1997
DELAWARE
GROUP
---------
<PAGE>
PART C
------
Other Information
-----------------
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
Part A - Financial Highlights
*Part B - Statement of Net Assets
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Accountant's Report
* The financial statements and Accountant's Report listed
above are incorporated into Part B by reference to the
Registrant's Annual Report for the fiscal year ended June 30, 1997.
(b) Exhibits:
(1) Articles of Incorporation.
-------------------------
(a) Articles of Incorporation, as amended and supplemented
through August 30, 1995, incorporated into this filing by
reference to Post-Effective Amendment No. 53 filed
August 30, 1995.
(b) Executed Articles Supplementary (November 28, 1995)
incorporated into this filing by reference to
Post-Effective Amendment No. 55 filed August 28, 1996.
(c) Executed Articles of Amendment (August 27, 1997) attached
as Exhibit.
(2) By-Laws. By-Laws, as amended through August 30, 1995,
incorporated into this filing by reference to Post- Effective
Amendment No. 53 filed August 30, 1995.
(3) Voting Trust Agreement. Inapplicable.
<PAGE>
PART C - Other Information
(Continued)
(4) Copies of All Instruments Defining the Rights of Holders.
--------------------------------------------------------
(a) Articles of Incorporation, Articles of Amendment and
Articles Supplementary.
(i) Incorporated into this filing by reference to Post-
Effective Amendment No. 53 filed August 30, 1995.
(ii) Executed Articles Supplementary (November 28, 1995)
incorporated into this filing by reference to Post-
Effective Amendment No. 55 filed August 28, 1996.
(iii) Executed Articles of Amendment (August 27, 1997)
attached as Exhibit 24(b)(1)(c).
(b) By-Laws. Incorporated into this filing by reference to
Post-Effective Amendment No. 53 filed August 30, 1995.
(5) Investment Management Agreement. Investment Management
Agreement between Delaware Management Company, Inc. and the
Registrant dated April 3, 1995 incorporated into this filing by
reference to Post-Effective Amendment No. 53 filed August 30,
1995.
(6) (a) Distribution Agreement.
----------------------
(i) Executed Distribution Agreement (April 3, 1995)
incorporated into this filing by reference to Post-
Effective Amendment No. 55 filed August 28, 1996.
(ii) Executed Amendment No. 1 to Distribution Agreement
(November 29, 1995) incorporated into this filing by
reference to Post-Effective Amendment No. 55 filed
August 28, 1996.
(b) Administration and Service Agreement. Form of
Administration and Service Agreement (as amended November
1995) incorporated into this filing by reference to Post-
Effective Amendment No. 54 filed November 20, 1995.
(c) Dealer's Agreement. Dealer's Agreement (as amended November
1995) incorporated into this filing by reference to Post-
Effective Amendment No. 54 filed November 20, 1995.
(d) Mutual Fund Agreement for the Delaware Group of Funds (as
amended November 1995) (Module) incorporated into this
filing by reference to Post-Effective Amendment No. 55
filed August 28, 1996.
<PAGE>
PART C - Other Information
(Continued)
(7) Bonus, Profit Sharing, Pension Contracts.
----------------------------------------
(a) Amended and Restated Profit Sharing Plan (November 17,
1994) incorporated into this filing by reference to Post-
Effective Amendment No. 53 filed August 30, 1995.
(b) Amendment to Profit Sharing Plan (December 21, 1995)
(Module) incorporated into this filing by reference to
Post-Effective Amendment No. 55 filed August 28, 1996.
(8) Custodian Agreement.
-------------------
(a) Executed Custodian Agreement (June 1, 1996) between the
Registrant and Bankers Trust Company attached as Exhibit.
(b) Form of Securities Lending Agreement (1996) between the
Registrant and Bankers Trust Company incorporated into this
filing by reference to Post-Effective Amendment No. 55
filed August 28, 1996.
(9) Other Material Contracts.
------------------------
(a) Shareholders Services Agreement (June 29, 1988)
incorporated into this filing by reference to Post-
Effective Amendment No. 55 filed August 28, 1996.
(b) Executed Delaware Group of Funds Fund Accounting Agreement
(August 19, 1996) between the Registrant and Delaware
Service Company, Inc. attached as Exhibit.
(i) Executed Amendment No. 1 (September 30, 1996) to
Schedule A to Delaware Group of Funds Fund Accounting
Agreement attached as Exhibit.
(ii) Executed Amendment No. 2 (November 29, 1996) to
Schedule A to Delaware Group of Funds Fund Accounting
Agreement attached as Exhibit.
(iii) Executed Amendment No. 3 (December 27, 1996) to
Schedule A to Delaware Group of Funds Fund Accounting
Agreement attached as Exhibit.
(iv) Executed Amendment No. 4 (February 24, 1997) to
Schedule A to Delaware Group of Funds Fund Accounting
Agreement attached as Exhibit.
<PAGE>
PART C - Other Information
(Continued)
(a) Executed Amendment No. 4A (April 14, 1997) to
Schedule A to Delaware Group of Funds Fund
Accounting Agreement attached as Exhibit.
(v) Executed Amendment No. 5 (May 1, 1997) to Schedule A
to Delaware Group of Funds Fund Accounting Agreement
attached as Exhibit.
(vi) Executed Amendment No. 6 (July 21, 1997) to Schedule A
to Delaware Group of Funds Fund Accounting Agreement
attached as Exhibit.
(10) Opinion of Counsel. Filed with letter relating to Rule 24f-2
on August 27, 1997.
(11) Consent of Auditors. Attached as Exhibit.
(12-13) Inapplicable.
(14) Model Plans. Incorporated into this filing by reference to
Post-Effective Amendment No. 53 filed August 30, 1995.
**(15) Plans under Rule 12b-1.
----------------------
(a) Plan under Rule 12b-1 for Class A (November 29, 1995)
incorporated into this filing by reference to Post-
Effective Amendment No. 55 filed August 28, 1996.
(b) Plan under Rule 12b-1 for Class B (November 29, 1995)
incorporated into this filing by reference to Post-
Effective Amendment No. 55 filed August 28, 1996.
(c) Plan under Rule 12b-1 for Class C (November 29, 1995)
incorporated into this filing by reference to Post-
Effective Amendment No. 55 filed August 28, 1996.
(16) Schedules of Computation for each Performance Quotation.
-------------------------------------------------------
(a) Incorporated into this filing by reference to Post-
Effective Amendment No. 53 filed August 30, 1995.
(b) Schedules of Computation for each Performance Quotation
for periods not previously electronically filed attached
as Exhibit.
(17) Financial Data Schedules. Attached as Exhibit.
------------------------
** Relates only to Trend Fund A Class, Trend Fund B Class and Trend Fund C
Class.
<PAGE>
PART C - Other Information
(Continued)
(18) Plan under Rule 18f-3.
---------------------
(a) Plan under Rule 18f-3 (as amended May 1, 1996)
incorporated into this filing by reference to Post-
Effective Amendment No. 55 filed August 28, 1996.
(b) Form of Amended Appendix A (1997) to Plan under Rule 18f-3
attached as Exhibit.
(19) Other: Directors' Power of Attorney.
----------------------------
(a) Incorporated into this filing by reference to Post-
effective Amendment No. 53 filed August 30, 1995.
(b) Power of Attorney for Thomas F. Madison and Jeffrey J.
Nick attached as Exhibit.
Item 25. Persons Controlled by or under Common Control with Registrant. None.
-------------------------------------------------------------
Item 26. Number of Holders of Securities.
-------------------------------
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
Delaware Group Trend Fund, Inc.'s:
Trend Fund A Class
Common Stock Par Value 34,006 Accounts as of
$.50 Per Share July 31, 1997
Trend Fund B Class
Common Stock Par Value 6,046 Accounts as of
$.50 Per Share July 31, 1997
Trend Fund C Class
Common Stock Par Value 846 Accounts as of
$.50 Per Share July 31, 1997
Trend Fund Institutional Class
Common Stock Par Value 70 Accounts as of
$.50 Per Share July 31, 1997
<PAGE>
PART C - Other Information
(Continued)
Item 27. Indemnification. Incorporated into this filing by reference to Post-
Effective Amendment No. 31 filed June 27, 1983 and Article VII of the
By-Laws incorporated into this filing by reference to Post-Effective
Amendment No. 53 filed August 30, 1995.
Item 28. Business and Other Connections of Investment Adviser.
----------------------------------------------------
Delaware Management Company, Inc. (the "Manager") serves as investment
manager to the Registrant and also serves as investment manager or sub-adviser
to certain of the other funds in the Delaware Group (Delaware Group Equity Funds
I, Inc., Delaware Group Equity Funds II, Inc., Delaware Group Equity Funds IV,
Inc., Delaware Group Equity Funds V, Inc., Delaware Group Government Fund, Inc.,
Delaware Group Limited-Term Government Funds, Inc., Delaware Group Cash Reserve,
Inc., Delaware Group Tax-Free Fund, Inc., DMC Tax-Free Income
Trust-Pennsylvania, Delaware Group Tax-Free Money Fund, Inc., Delaware Group
Premium Fund, Inc., Delaware Group Global & International Funds, Inc., Delaware
Pooled Trust, Inc., Delaware Group Adviser Funds, Inc., Delaware Group Dividend
and Income Fund, Inc., Delaware Group Global Dividend and Income Fund, Inc.,
Voyageur Tax-Free Funds, Inc., Voyageur Intermediate Tax-Free Funds, Inc.,
Voyageur Insured Funds, Inc., Voyageur Funds, Inc., Voyageur Investment Trust,
Voyageur Investment Trust II, Voyageur Mutual Funds, Inc., Voyageur Mutual Funds
II, Inc., Voyageur Mutual Funds III, Inc., Voyageur Arizona Municipal Income
Fund, Inc., Voyageur Colorado Insured Municipal Income Fund, Inc., Voyageur
Florida Insured Municipal Income Fund, Voyageur Minnesota Municipal Fund, Inc.,
Voyageur Minnesota Municipal Fund II, Inc. and Voyageur Minnesota Municipal Fund
III, Inc.) and provides investment advisory services to institutional accounts,
primarily retirement plans and endowment funds. In addition, certain directors
of the Manager also serve as directors/trustees of the other Delaware Group
funds, and certain officers are also officers of these other funds. A company
owned by the Manager's parent company acts as principal underwriter to the
mutual funds in the Delaware Group (see Item 29 below) and another such company
acts as the shareholder services, dividend disbursing, accounting servicing and
transfer agent for all of the mutual funds in the Delaware Group.
The following persons serving as directors or officers of the Manager
have held the following positions during the past two years:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Wayne A.Stork Chairman of the Board, President, Chief Executive Officer, Chief Investment
Officer and Director of Delaware Management Company, Inc.; Chairman of the
Board, President, Chief Executive Officer and Director of the Registrant, each
of the other funds in the Delaware Group, Delaware Management Holdings,
Inc., DMH Corp., Delaware International Holdings Ltd. and Founders Holdings,
Inc.; Chairman of the Board and Director of Delaware Distributors, Inc. and
Delaware Capital Management, Inc.; Director of Delaware Service Company,
Inc. and Delaware Investment & Retirement Services, Inc.; and Chairman, Chief
Executive Officer and Director of Delaware International Advisers Ltd.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Richard G. Unruh, Jr. Executive Vice President and Director of Delaware Management Company,
Inc.; Executive Vice President of the Registrant, each of the other funds in the
Delaware Group, Delaware Management Holdings, Inc. and Delaware Capital
Management, Inc.; and Director of Delaware International Advisers Ltd.
Board of Directors, Chairman of Finance Committee, Keystone Insurance Company
since 1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Chairman
of Finance Committee, AAA Mid Atlantic, Inc. since 1989, 2040 Market Street,
Philadelphia, PA; Board of Directors, Metron, Inc. since 1995, 11911 Freedom
Drive, Reston, VA
Paul E. Suckow Executive Vice President/Chief Investment Officer, Fixed Income of Delaware
Management Company, Inc., the Registrant, each of the other funds in the
Delaware Group and Delaware Management Holdings, Inc.; Executive Vice
President and Director of Founders Holdings, Inc.; Executive Vice President of
Delaware Capital Management, Inc.; and Director of Founders CBO
Corporation
Director, HYPPCO Finance Company Ltd.
David K. Downes Executive Vice President, Chief Operating Officer, Chief Financial Officer and
Director of Delaware Management Company, Inc., DMH Corp, Delaware
Distributors, Inc., Founders Holdings, Inc.and Delaware International Holdings
Ltd.; Executive Vice President, Chief Operating Officer and Chief Financial
Officer of the Registrant and each of the other funds in the Delaware Group,
Delaware Management Holdings, Inc., Founders CBO Corporation, Delaware
Capital Management, Inc. and Delaware Distributors, L.P.; President, Chief
Executive Officer, Chief Financial Officer and Director of Delaware Service
Company, Inc.; Chairman, Chief Executive Officer and Director of Delaware
Investment & Retirement Services, Inc.; Chairman and Director of Delaware
Management Trust Company; and Director of Delaware International Advisers
Ltd.
Chief Executive Officer and Director of Forewarn, Inc. since 1993, 8 Clayton
Place, Newtown Square, PA
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ ------------------------------------------------
<S> <C>
George M. Chamberlain, Jr. Senior Vice President, Secretary, General Counsel and Director of Delaware
Management Company, Inc., DMH Corp., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Founders Holdings, Inc., Delaware Capital
Management, Inc. and Delaware Investment & Retirement Services, Inc.; Senior
Vice President, Secretary and General Counsel of the Registrant and each of the
other funds in the Delaware Group, Delaware Distributors, L.P. and Delaware
Management Holdings, Inc.; Executive Vice President, Secretary, General
Counsel and Director of Delaware Management Trust Company; Secretary and
Director of Delaware International Holdings Ltd.; and Director of Delaware
International Advisers Ltd.
Richard J. Flannery Senior Vice President/Corporate and International Affairs of the Registrant,
each of the other funds in the Delaware Group, Delaware Management
Holdings, Inc., DMH Corp., Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Distributors, L.P., Delaware Management Trust
Company, Delaware Capital Management, Inc., Delaware Service Company,
Inc. and Delaware Investment & Retirement Services, Inc.; Senior Vice
President/Corporate and International Affairs and Director of Founders
Holdings, Inc. and Delaware International Holdings Ltd.; Senior Vice President
of Founders CBO Corporation; and Director of Delaware International Advisers
Ltd.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd., Elverton,
PA; Director and Member of Executive Committee of Stonewall Links, Inc.
since 1991, Bulltown Rd., Elverton, PA
Michael P. Bishof(1) Senior Vice President and Treasurer of the Registrant, each of the other funds in
the Delaware Group, Delaware Distributors, Inc. and Founders Holdings, Inc.;
Senior Vice President/Investment Accounting of Delaware Management
Company, Inc. and Delaware Service Company, Inc.; Senior Vice President and
Treasurer/Manager,Investment Accounting of Delaware Distributors, L.P.;
Assistant Treasurer of Founders CBO Corporation; and Senior Vice President
and Manager of Investment Accounting of Delaware International Holdings Ltd.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Joseph H. Hastings Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management Company,
Inc., Delaware Distributors, Inc., Delaware Distributors, L.P., Delaware Service
Company, Inc. and Delaware International Holdings, Inc.; Senior Vice
President/Corporate Controller of the Registrant, each of the other funds in the
Delaware Group and Founders Holdings, Inc.; Executive Vice President, Chief
Financial Officer and Treasurer of Delaware Management Trust Company; Chief
Financial Officer and Treasurer of Delaware Investment & Retirement Services,
Inc.; and Senior Vice President/Assistant Treasurer of Founders CBO
Corporation
Michael T. Taggart Senior Vice President/Facilities Management and Administrative Services of
Delaware Management Company, Inc.
Douglas L. Anderson Senior Vice President/Operations of Delaware Management Company, Inc.,
Delaware Investment and Retirement Services, Inc. and Delaware Service
Company, Inc.; Senior Vice President/Operations and Director of Delaware
Management Trust Company
James L. Shields Senior Vice President/Chief Information Officer of Delaware Management
Company, Inc., Delaware Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.
Eric E. Miller Vice President, Assistant Secretary and Deputy General Counsel of the
Registrant, each of the other funds in the Delaware Group, Delaware
Management Company, Inc., Delaware Management Holdings, Inc., DMH
Corp., Delaware Distributors, L.P., Delaware Distributors Inc., Delaware
Service Company, Inc., Delaware Management Trust Company, Founders
Holdings, Inc., Delaware Capital Management, Inc. and Delaware Investment &
Retirement Services, Inc.
Richelle S. Maestro Vice President and Assistant Secretary of Delaware Management Company,
Inc., the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., DMH Corp., Delaware Management
Trust Company, Delaware Capital Management, Inc., Delaware Investment &
Retirement Services, Inc. and Founders Holdings, Inc.; Secretary of Founders
CBO Corporation; and Assistant Secretary of Delaware International Holdings
Ltd.
Partner of Tri-R Associates since 1989, 10001 Sandmeyer Lane, Philadelphia,
PA
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Richard Salus(1) Vice President/Assistant Controller of Delaware Management Company, Inc.
and Delaware Management Trust Company
Bruce A. Ulmer Vice President/Director of LNC Internal Audit of Delaware
Management Company, Inc., the Registrant, each of the other funds in the
Delaware Group, Delaware Management Holdings, Inc., DMH Corp., Delaware
Management Trust Company and Delaware Investment & Retirement Services, Inc.
Steven T. Lampe(2) Vice President/Taxation of Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Founders Holdings, Inc., Founders CBO
Corporation, Delaware Capital Management, Inc. and Delaware Investment &
Retirement Services, Inc.
Christopher Adams(3) Vice President/Strategic Planning of Delaware Management Company, Inc. and
Delaware Service Company, Inc.
Susan L. Hanson Vice President/Strategic Planning of Delaware Management Company, Inc. and
Delaware Service Company, Inc.
Dennis J. Mara(4) Vice President/Acquisitions of Delaware Management Company, Inc.
Scott Metzger Vice President/Business Development of Delaware Management Company, Inc.
and Delaware Service Company, Inc.
Lisa O. Brinkley Vice President/Compliance of Delaware Management Company, Inc., the Registrant,
each of the other funds in the Delaware Group, DMH Corp., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware Capital Management, Inc. and Delaware
Investment & Retirement Services, Inc.
Rosemary E. Milner Vice President/Legal Registrations of Delaware Management Company, Inc.,
the Registrant, each of the other funds in the Delaware Group, Delaware
Distributors, L.P. and Delaware Distributors, Inc.
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
the Registrant, each of the tax-exempt funds, the fixed income funds and the
closed-end funds in the Delaware Group; Vice President of Founders Holdings,
Inc.; and Treasurer, Assistant Secretary and Director of Founders CBO
Corporation
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ ------------------------------------------------
<S> <C>
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
each of the tax-exempt funds, the fixed income funds and the closed-end funds in
the Delaware Group; Vice President of Founders Holdings, Inc.; and President and
Director of Founders CBO Corporation.
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
each of the tax-exempt funds and the fixed income funds in the Delaware Group
and Delaware Capital Management, Inc.
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
each of the tax-exempt funds and the fixed income funds in the Delaware Group
and Delaware Capital Management, Inc.
Roger A. Early Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
each of the tax-exempt funds and the fixed income funds in the Delaware Group
Mitchell L. Conery(5) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
each of the tax-exempt and fixed income funds in the Delaware Group
George H. Burwell Vice President/Senior Portfolio Manager of Delaware Management Company, Inc. and
each of the equity funds in the Delaware Group
John B. Fields Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
each of the equity funds in the Delaware Group and Delaware Capital Management,
Inc.
Gerald S. Frey(6) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
the Registrant and each of the equity funds in the Delaware Group
Christopher Beck Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc. and each of the equity funds in the Delaware Group
Elizabeth H. Howell(7) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.
Andrew M. McCullagh, Jr.(8) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Paul Grillo Vice President/Portfolio Manager of Delaware Management Company, Inc., each of
the tax-exempt and fixed income funds in the Delaware Group
William H. Miller Vice President/Assistant Portfolio Manager of Delaware Management
Company, Inc.
</TABLE>
(1) SENIOR MANAGER, Ernst & Young LLP prior to December 1996.
(2) TAX MANAGER, Price Waterhouse LLP prior to October 1995.
(3) SENIOR ASSOCIATE, FAS, Coopers & Lybrand LLP prior to October 1995.
(4) CORPORATE CONTROLLER, IIS prior to July 1997 and DIRECTOR, FINANCIAL
PLANNING, Decision One prior to March 1996.
(5) INVESTMENT OFFICER, Travelers Insurance prior to January 1997.
(6) SENIOR DIRECTOR, Morgan Grenfell Capital Management prior to June 1996.
(7) SENIOR PORTFOLIO MANAGER, Voyageur Fund Managers, Inc. prior to May 1997.
(8) SENIOR VICE PRESIDENT/SENIOR PORTFOLIO MANAGER, Voyageur Asset Manager LLC
prior to April 1997.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
Item 29. Principal Underwriters.
----------------------
(a) Delaware Distributors, L.P. serves as principal underwriter for all
the mutual funds in the Delaware Group.
(b) Information with respect to each director, officer or partner of
principal underwriter:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
Delaware Management
Company, Inc. Limited Partner Investment Manager
Delaware Capital
Management, Inc. Limited Partner None
Bruce D. Barton President and Chief Executive None
Officer
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
David K. Downes Senior Vice President, Executive Vice President/
Chief Administrative Officer Chief Operating Officer/
and Chief Financial Officer Chief Financial Officer
George M. Chamberlain, Jr. Senior Vice President/Secretary/ Senior Vice President/
General Counsel Secretary/General Counsel
Terrence P. Cunningham Senior Vice President/ None
Financial Institutions
Thomas E. Sawyer Senior Vice President/ None
National Sales Director
Dana B. Hall Senior Vice President/ None
Key Accounts
Mac McAuliffe Senior Vice President/Sales None
Manager, Western Division
William F. Hostler Senior Vice President/ None
Marketing Services
J. Chris Meyer Senior Vice President/ None
Director Product Management
Stephen H. Slack Senior Vice President/Wholesaler None
William M. Kimbrough Senior Vice President/Wholesaler None
Daniel J. Brooks Senior Vice President/Wholesaler None
Richard J. Flannery Senior Vice President/Corporate Senior Vice President/
and International Affairs Corporate and International
Affairs
Bradley L. Kolstoe Senior Vice President/ None
Western Division Sales Manager
Henry W. Orvin Senior Vice President/Eastern None
Division Sales Manager - Wire/
Regional Channel
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------------- ----------------------
<S> <C> <C>
Michael P. Bishof Senior Vice President and Treasurer/ Senior Vice President/
Manager, Investment Accounting Treasurer
Eric E. Miller Vice President/Assistant Vice President/Assistant
Secretary/Deputy General Secretary/Deputy General
Counsel Counsel
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Steven T. Lampe Vice President/Taxation Vice President/Taxation
Joseph H. Hastings Vice President/ Senior Vice President/
Corporate Controller/ Corporate Controller
Treasurer
Lisa O. Brinkley Vice President/Compliance Vice President/Compliance
Rosemary E. Milner Vice President/Legal Registrations Vice President/Legal
Registrations
Daniel H. Carlson Vice President/Strategic Marketing None
Diane M. Anderson Vice President/Plan Record None
Keeping and Administration
Anthony J. Scalia Vice President/Defined Contribution None
Sales, Southwest Territory
Courtney S. West Vice President/Defined Contribution None
Sales, Northeast Territory
Denise F. Guerriere Vice President/Client Services None
Gordon E. Searles Vice President/Client Services None
Julia R. Vander Els Vice President/Participant Services None
Jerome J. Alrutz Vice President/Retail Sales None
Joanne A. Mettenheimer Vice President/New Business None
Development
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
Scott Metzger Vice President/Business Vice President/Business
Development Development
Stephen C. Hall Vice President/Institutional Sales None
Gregory J. McMillan Vice President/ None
National Accounts
Christopher H. Price Vice President/Manager, None
Insurance
Stephen J. DeAngelis Vice President/Product None
Development
Zina DeVassal Vice President/Financial None
Institutions
Andrew W. Whitaker Vice President/Financial None
Institutions
Jesse Emery Vice President/Marketing None
Communications
Darryl S. Grayson Vice President, Broker/Dealer None
Internal Sales
Susan T. Friestedt Vice President/Client Services None
Dinah J. Huntoon Vice President/Product None
Manager Equity
Soohee Lee Vice President/Fixed Income None
Product Management
Michael J. Woods Vice President/UIT Product None
Management
Ellen M. Krott Vice President/Marketing None
Dale L. Kurtz Vice President/Marketing Support None
Holly W. Reimel Vice President/Manager, None
Key Accounts
</TABLE>
* Business address of each is 1818 Market Street, Philadelaphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
David P. Anderson Vice President/Wholesaler None
Lee D. Beck Vice President/Wholesaler None
Gabrielle Bercze Vice President/Wholesaler None
Terrence L. Bussard Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William L. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Thomas C. Gallagher Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Ronald A. Haimowitz Vice President/Wholesaler None
Christopher L. Johnston Vice President/Wholesaler None
Michael P. Jordan Vice President/Wholesaler None
Jeffrey A. Keinert Vice President/Wholesaler None
Thomas P. Kennett Vice President/ Wholesaler None
Debbie A. Marler Vice President/Wholesaler None
Nathan W. Medin Vice President/Wholesaler None
Roger J. Miller Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
Stephen C. Nell Vice President/Wholesaler None
Julia A. Nye Vice President/Wholesaler None
Joseph T. Owczarek Vice President/Wholesaler None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
Marey Ellen Pernice-Fadden Vice President/Wholesaler None
Mark A. Pletts Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
Laura E. Roman Vice President/Wholesaler None
Linda Schulz Vice President/Wholesaler None
Edward B. Sheridan Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Julia A. Stanton Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
Edward J. Wagner Vice President/Wholesaler None
Wayne W. Wagner Vice President/Wholesaler None
John A. Wells Vice President/Marketing None
Technology
Scott Whitehouse Vice President/Wholesaler None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Not Applicable.
Item 30. Location of Accounts and Records.
--------------------------------
All accounts and records are maintained in Philadelphia at 1818 Market
Street, Philadelphia, PA 19103 or One Commerce Square, Philadelphia, PA
19103.
<PAGE>
PART C - Other Information
(Continued)
Item 31. Management Services. None.
-------------------
Item 32. Undertakings.
------------
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
(d) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of removal
of any director when requested in writing to do so by the record
holders of not less than 10% of the outstanding shares.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia, Commonwealth of Pennsylvania on this
27th day of August, 1997.
DELAWARE GROUP EQUITY FUNDS III, INC.
(formerly Delaware Group Trend Fund, Inc.)
By /S/ Wayne A. Stork
--------------------
Wayne A. Stork
Chairman of the Board, President,
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------------------- ------------------------------------ -----------------
<S> <C> <C>
Chairman of the Board, President,
/s/ Wayne A. Stork Chief Executive Officer and Director August 27, 1997
- ----------------------------------------
Wayne A. Stork
Executive Vice President/Chief Operating
Officer/Chief Financial Officer
/s/ David K. Downes (Principal Financial Officer and Principal August 27, 1997
- ---------------------------------------- Accounting Officer)
David K. Downes
/s/Walter P. Babich * Director August 27, 1997
- ----------------------------------------
Walter P. Babich
/s/Anthony D. Knerr * Director August 27, 1997
- ----------------------------------------
Anthony D. Knerr
/s/Ann R. Leven * Director August 27, 1997
- ----------------------------------------
Ann R. Leven
/s/W. Thacher Longstreth * Director August 27, 1997
- ----------------------------------------
W. Thacher Longstreth
/s/Thomas F. Madison * Director August 27, 1997
- ----------------------------------------
Thomas F. Madison
/s/Jeffrey J. Nick * Director August 27, 1997
- ----------------------------------------
Jeffrey J. Nick
/s/Charles E. Peck * Director August 27, 1997
- ----------------------------------------
Charles E. Peck
*By /s/ Wayne A. Stork
--------------------
Wayne A. Stork
as Attorney-in-Fact for
each of the persons indicated
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ---------- -------
<S> <C>
EX-99.B1C Articles of Amendment (August 27, 1997)
EX-99.B8A Executed Custodian Agreement (June 1, 1996) between the Registrant and
Bankers Trust Company
EX-99.B9B Delaware Group of Funds Fund Accounting Agreement (August 19, 1996)
MODULE NAME between the Registrant and Delaware Service Company, Inc.
(FUND_ACCT_AGT)
EX-99.B9BI Amendment No. 1 (September 30, 1996) to Schedule A to Delaware Group
of Funds Fund Accounting Agreement
EX-99.B9BII Amendment No. 2 (November 29, 1996) to Schedule A to Delaware Group of
Funds Fund Accounting Agreement
EX-99.B9BIII Amendment No. 3 (December 27, 1996) to Schedule A to Delaware Group of
Funds Fund Accounting Agreement
EX-99.B9BIV Amendment No. 4 (February 24, 1997) to Schedule A to Delaware Group of
Funds Fund Accounting Agreement
EX-99.B9BIVA Amendment No. 4A (April 14, 1997) to Schedule A to Delaware Group of
Funds Fund Accounting Agreement
EX-99.B9BV Amendment No. 5 (May 1, 1997) to Schedule A to Delaware Group of Funds
Fund Accounting Agreement
EX-99.B9BVI Amendment No. 6 (July 21, 1997) to Schedule A to Delaware Group of Funds
Fund Accounting Agreement
EX-99.B11 Consent of Auditors
EX-99.B16 Schedules of Computation for each Performance Quotation for periods not
previously electronically filed
EX-27 Financial Data Schedules
EX-99.B18B Amended Appendix A (1997) to Plan under Rule 18f-3
EX-99.B19B Power of Attorney for Thomas F. Madison and Jeffrey J. Nick
</TABLE>
<PAGE>
DELAWARE GROUP TREND FUND, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
DELAWARE GROUP TREND FUND, INC., a Maryland corporation having
its principal office in Baltimore, Maryland (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland, that:
ONE: The Corporation is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended.
TWO: The first sentence of ARTICLE SECOND of the Articles of
Incorporation, as amended and supplemented, is hereby amended to read as
follows:
SECOND: The name of the corporation is Delaware Group
Equity Funds III, Inc.
THREE: The Articles of Incorporation of the Corporation, as
amended and supplemented, are further amended by changing the name of the Common
Stock series of the Corporation to the Trend Fund series of the Corporation, and
by deleting the old name of such series from the Articles of Incorporation, as
amended and supplemented to date, and inserting in lieu thereof, the new name of
such series as changed hereby.
FOUR: The amendments to the Articles of Incorporation of the
Corporation as set forth above have been duly approved by a majority of the
entire Board of Directors of the Corporation as required by law and are limited
to changes permitted by Section 2-605(a)(4) of the Maryland General Corporation
Law to be made without action by the stockholders of the Corporation.
FIVE: The amendments to the Articles of Incorporation of the
Corporation as set forth above do not change the preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption of the shares that are the
subject of the name changes.
SIX: These Articles of Amendment shall become effective at
5:00 p.m. on August 28, 1997.
-1-
<PAGE>
IN WITNESS WHEREOF, DELAWARE GROUP TREND FUND, INC. has caused
these Articles of Amendment to be signed in its name and on its behalf by its
Senior Vice President and attested by its Assistant Secretary on this 27TH day
of August, 1997.
DELAWARE GROUP TREND FUND, INC.
By: /s/ George M. Chamberlain, Jr.
-------------------------------
George M. Chamberlain, Jr.
Senior Vice President
ATTEST:
/s/ Eric E. Miller
- ----------------------------
Eric E. Miller
Assistant Secretary
-2-
<PAGE>
THE UNDERSIGNED, Senior Vice President of DELAWARE GROUP TREND
FUND, INC., who executed on behalf of said Corporation the foregoing Articles of
Amendment, of which this certificate is made a part, hereby acknowledges, in the
name and on behalf of said Corporation, the foregoing Articles of Amendment to
be the corporate act of said Corporation and further certifies that, to the best
of his knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.
/s/ George M. Chamberlain, Jr.
------------------------------
George M. Chamberlain, Jr.
Senior Vice President
-3-
<PAGE>
Mutual Fund/Business Trust/Series
CUSTODIAN AGREEMENT
AGREEMENT dated as of June 1, 1996 between BANKERS TRUST COMPANY (the
"Custodian") and those registered investment companies listed on Exhibit A
hereto, as such Exhibit shall be amended from time to time (each, a "Customer").
WHEREAS, the Customer may be organized with one or more series of shares, each
of which shall represent an interest in a separate portfolio of Securities and
Cash (each as hereinafter defined) (all such existing and additional series now
or hereafter listed on Exhibit A being hereafter referred to individually as a
"Portfolio" and collectively, as the "Portfolios"); and
WHEREAS, the Customer desires to appoint the Custodian as custodian on behalf of
the Portfolios under the terms and conditions set forth in this Agreement, and
the Custodian has agreed to so act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:
1. Employment of Custodian. The Customer hereby employs the Custodian as
custodian of all assets of each Portfolio which are delivered to and accepted by
the Custodian or any Subcustodian (as that term is defined in Section 4) (the
"Property") pursuant to the terms and conditions set forth herein. Without
limitation, such Property shall include stocks and other equity interests of
every type, evidences of indebtedness, other instruments representing same or
rights or obligations to receive, purchase, deliver or sell same and other
non-cash investment property of a Portfolio which is acceptable for deposit
("Securities") and cash from any source and in any currency ("Cash"). The
Custodian shall not be responsible for any property of a Portfolio held or
received by the Customer or others and not delivered to the Custodian or any
Subcustodian.
2. Maintenance of Securities and Cash at Custodian and Subcustodian Locations.
Pursuant to Instructions (as hereinafter defined in Section 14), the Customer
shall direct the Custodian to (a) settle Securities transactions and maintain
Cash in the country or other jurisdiction in which the principal trading market
for such Securities is located, where such Securities are to be presented for
payment or where such Securities are acquired and (b) maintain cash and cash
equivalents in such countries in amounts reasonably necessary to effect the
Customer's transactions in such Securities. Instructions to settle Securities
transactions (or Customer's transactions on behalf of a Portfolio) in any
country shall be deemed to authorize the holding of such Securities and Cash in
that country.
3. Custody Account. The Custodian agrees to establish and maintain one or more
separate custody accounts on its books each in the name of, as appropriate, the
Customer or the Customer on behalf of a Portfolio (each, an "Account") for any
and all Property from time to time received and accepted by the Custodian or any
Subcustodian for the account of such Portfolio. Upon delivery by the Customer to
the Custodian of any Property belonging to a Portfolio, the Customer shall, by
Instructions, specifically indicate to which Portfolio such Property belongs or
if such Property belongs
<PAGE>
to more than one Portfolio shall allocate such Property to the appropriate
Portfolio. The Custodian shall allocate such Property to the Accounts in
accordance with the Instructions; provided that the Custodian shall have the
right, in its sole discretion, to refuse to accept any Property that is not in
proper form for deposit for any reason. The Customer on behalf of each
Portfolio, acknowledges its responsibility as a principal for all of its
obligations to the Custodian arising under or in connection with this Agreement,
warrants its authority to deposit in the appropriate Account any Property
received therefor by the Custodian or a Subcustodian and to give, and authorize
others to give, Instructions relative thereto. The Custodian may deliver
Securities of the same class in place of those deposited in the Account;
provided, however, the Securities so delivered shall be subject to the same
restrictions on transfer (if any) and shall be of the same market value as the
Securities that are the subject of the Instructions, unless the prevailing
market practice in a market causes the Custodian and the Subcustodian, in the
exercise of reasonable care, to be unable to obtain delivery of Securities which
meet the requirements described in this proviso, in which case, the Custodian
shall provide the Customer prompt written notice of delivery of Securities not
meeting such requirements.
The Custodian shall hold, keep safe and protect as custodian for each
Account, on behalf of the Customer, all Property in such Account. All
transactions, including, but not limited to, foreign exchange transactions,
involving the Property shall be executed or settled solely in accordance with
Instructions (which shall specifically reference the Account for which such
transaction is being settled) pursuant to the terms of this Agreement, except
that until the Custodian receives Instructions to the contrary, the Custodian
will:
(a) collect all interest and dividends and all other income and
payments, whether paid in cash or in kind, on the Property, as
the same become payable and credit the same to the appropriate
Account, and provide prompt notice of any such actions;
(b) present for payment all Securities held in an Account which
are called, redeemed or retired or otherwise become payable
and all coupons and other income items which call for payment
upon presentation to the extent that the Custodian or
Subcustodian is actually aware of such opportunities and hold
the Cash received in such Account pursuant to this Agreement,
and provide prompt notice of any such actions;
(c) (i) exchange Securities where the exchange is purely
ministerial (including, without limitation, the exchange of
temporary securities for those in definitive form and the
exchange of warrants, or other documents of entitlement to
securities, for the Securities themselves) and (ii) when
notification of a tender or exchange offer (other than
ministerial exchanges described in (i) above) is received for
an Account, take all reasonable steps under the circumstances
to obtain Instructions, provided that if such Instructions are
not received in time for the Custodian to take timely action,
no action shall be taken with respect thereto;
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<PAGE>
(d) whenever notification of a rights entitlement or a fractional
interest resulting from a rights issue, stock dividend or
stock split is received for an Account and such rights
entitlement or fractional interest bears an expiration date,
if after taking all reasonable steps under the circumstances
to obtain Instructions such Instructions are not received in
time for the Custodian to take timely action or if actual
notice of such actions was received too late for Custodian
reasonably to seek Instructions, sell in the discretion of the
Custodian (which sale the Customer hereby authorizes the
Custodian to make) such rights entitlement or fractional
interest and credit the Account with the net proceeds of such
sale;
(e) execute in the Customer's name for an Account, whenever the
Custodian deems it appropriate, such ownership and other
certificates as may be required to obtain the payment of
income from the Property in such Account;
(f) pay for each Account, any and all taxes and levies in the
nature of taxes imposed on interest, dividends or other
similar income on the Property in such Account by any
governmental authority. In the event there is insufficient
Cash available in such Account to pay such taxes and levies,
the Custodian shall promptly notify the Customer of the amount
of the shortfall and the Customer, at its option, may deposit
additional Cash in such Account or take steps to have
sufficient Cash available. The Customer agrees, when and if
requested by the Custodian and required in connection with the
payment of any such taxes to cooperate with the Custodian in
furnishing information, executing documents or otherwise; and
(g) appoint brokers and agents for any of the ministerial
transactions involving the Securities described in (a) - (f),
including, without limitation, affiliates of the Custodian or
any Subcustodian.
4. Subcustodians and Securities Systems. The Customer authorizes and instructs
the Custodian to hold the Property in each Account in custody accounts which
have been established by the Custodian with (a) one of its U.S. branches or
another U.S. bank or trust company or branch thereof located in the U.S. which
is itself qualified under the Investment Company Act of 1940, as amended ("1940
Act"), to act as custodian (individually, a "U.S. Subcustodian"), or a U.S.
securities depository or clearing agency or system in which the Custodian or a
U.S. Subcustodian participates (individually, a "U.S. Securities System") or (b)
one of its non-U.S. branches or majority-owned non-U.S. subsidiaries, a
non-U.S. branch or majority-owned subsidiary of a U.S. bank or a non-U.S. bank
or trust company, acting as custodian (individually, a "non-U.S. Subcustodian";
U.S. Subcustodians and non-U.S. Subcustodians, collectively, "Subcustodians"),
or a non-U.S. depository or clearing agency or system in which the Custodian or
any Subcustodian participates (individually, a "non-U.S. Securities System";
U.S. Securities System and non-U.S. Securities System, collectively, "Securities
System"), provided that in each case in which a U.S. Subcustodian or U.S.
Securities System is
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<PAGE>
employed, Instructions approving the employment of each such Subcustodian or
Securities System shall have been received by Custodian; provided further that
in each case in which a non-U.S. Subcustodian or non-U.S. Securities System is
employed, (a) such Subcustodian or Securities System either is (i) a "qualified
U.S. bank" as defined by Rule 17f-5 under the 1940 Act as such Rule may be
amended from time to time ("Rule 17f-5") or (ii) an "eligible foreign custodian"
within the meaning of Rule 17f-5 or such Subcustodian or Securities System is
the subject of an order granted by the U.S. Securities and Exchange Commission
("SEC") exempting such agent or the subcustody arrangements thereto from all or
part of the provisions of Rule 17f-5 and (b) Instructions approving in advance
the employment of such non-U.S. Subcustodian, and the agreement between the
Custodian and such non-U.S. Subcustodian, shall have been received by Custodian;
it being understood that the Custodian shall have no liability or responsibility
for determining whether the approval of any Subcustodian or Securities System
has been proper under the 1940 Act or any rule or regulation thereunder.
Upon receipt of Instructions, the Custodian agrees to cease the
employment of any previously approved Subcustodian or Securities System with
respect to the Customer, and if desirable and practicable, appoint a replacement
subcustodian or securities system in accordance with the provisions of this
Section. In addition, the Custodian may, at any time in its discretion, upon
written notification to the Customer, terminate the employment of any
Subcustodian or Securities System.
Upon request of the Customer, the Custodian shall deliver to the
Customer annually a certificate stating: (a) the identity of each non-U.S.
Subcustodian and non-U.S. Securities System then acting on behalf of the
Custodian and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such non-U.S Subcustodian and
non-U.S. Securities System; (b) the countries in which each non-U.S.
Subcustodian or non-U.S. Securities System is located; and (c) so long as Rule
17f-5 requires the Customer's Board of Directors or Trustees to directly approve
its foreign custody arrangements, such other information relating to such
non-U.S. Subcustodians and non-U.S. Securities Systems as may reasonably be
requested by the Customer to ensure compliance with Rule 17f-5. So long as Rule
17f-5 requires the Customer's Board of Directors or Trustees to directly approve
its foreign custody arrangements, the Custodian also shall furnish annually to
the Customer information concerning such non-U.S. Subcustodians and non-U.S.
Securities Systems similar in kind and scope as that furnished to the Customer
in connection with the initial approval of this Agreement. Custodian agrees to
promptly notify the Customer if, in the normal course of its custodial
activities, the Custodian becomes aware of any material adverse changes in the
facts or circumstances upon which such information is based or has reason to
believe that any non-U.S. Subcustodian or non-U.S. Securities System has ceased
to be a qualified U.S. bank or an eligible foreign custodian each within the
meaning of Rule 17f-5 or has ceased to be subject to an exemptive order from the
SEC. Any selection of and form of contract with a Subcustodian shall be subject
to approval by the Customer that such selection and contract are consistent with
the requirements of Rule 17f-5 (and Rule 17f-4, if applicable) under the 1940
Act, and the Custodian warrants that such arrangement shall comply with Section
5 of this Agreement.
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<PAGE>
5. Use of Subcustodian. With respect to Property in an Account which is
maintained by the Custodian in the custody of a Subcustodian employed pursuant
to Section 4:
(a) The Custodian will identify on its books as belonging to the
Customer on behalf of a Portfolio, any Property held by such
Subcustodian.
(b) Any Property in the Account held by a Subcustodian will be
subject only to the instructions of the Custodian or its
agents.
(c) Property deposited with a Subcustodian will be maintained in
an account holding only assets for customers of the Custodian.
(d) Any agreement the Custodian shall enter into with a non-U.S.
Subcustodian with respect to the holding of Property shall
require that (i) the Account will be adequately indemnified or
its losses adequately insured in the event of loss; (ii) so
long as and to the extent that Rule 17f-5 requires, the
Property is not subject to any right, charge, security
interest, lien or claim of any kind in favor of such
Subcustodian or its creditors except a claim for payment in
accordance with such agreement for their safe custody or
administration, (iii) so long as and to the extent that Rule
17f-5 requires, beneficial ownership of such Property be
freely transferable without the payment of money or value
other than for safe custody or administration, (iv) adequate
records will be maintained identifying the Property held
pursuant to such Agreement as belonging to the Custodian, on
behalf of its customers and (v) officers of or auditors
employed by, or other representatives of or designated by, the
Custodian, including the independent public accountants of or
designated by, the Customer be given access to the books and
records of such Subcustodian relating to its actions under its
agreement pertaining to any Property held by it thereunder or
confirmation of or pertinent information contained in such
books and records be furnished to such persons designated by
the Custodian.
6. Use of Securities System. With respect to Property in the Account(s) which
are maintained by the Custodian or any Subcustodian in the custody of a
Securities System employed pursuant to Section 4:
(a) The Custodian shall, and the Subcustodian will be required by
its agreement with the Custodian to, identify on its books
such Property as being held for the account of the Custodian
or Subcustodian for its customers.
(b) Any Property held in a Securities System for the account of
the Custodian or a Subcustodian will be subject only to the
instructions of the Custodian or such Subcustodian, as the
case may be.
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<PAGE>
(c) Property deposited with a Securities System will be maintained
in an account holding only assets for customers of the
Custodian or Subcustodian, as the case may be, unless
precluded by applicable law, rule, or regulation.
(d) The Custodian shall provide the Customer with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and procedures
for safeguarding securities deposited in the Securities
System.
7. Agents. Except for holding of Property pursuant to Section 4 hereof, the
Custodian may at any time or times in its sole discretion, upon advance written
notification to Customer, appoint (or remove) any other U.S. bank or trust
company which is itself qualified under the 1940 Act to act as custodian, as its
agent to carry out such of the provisions of this Agreement as the Custodian may
from time to time direct; provided, however, that the appointment of any agent
shall not, under any circumstances, relieve the Custodian of its
responsibilities or liabilities hereunder.
8. Records, Ownership of Property, Statements, Opinions of Independent Certified
Public Accountants.
(a) The ownership of the Property whether Securities, Cash and/or other
property, and whether held by the Custodian or a Subcustodian or in a Securities
System as authorized herein, shall be clearly recorded on the Custodian's books
as belonging to the appropriate Account and not for the Custodian's own
interest. Where certificates are legended or otherwise not fungible with
publicly traded certificates (and in other cases where the Custodian and the
Customer may agree), the Customer reserves the right to instruct the Custodian
as to the name only in which such Securities shall be registered and the
Custodian, to the extent reasonably practicable, shall comply with such
Instructions; provided, however if Custodian reasonably determines that
compliance with such Instructions is not reasonably practicable or otherwise may
conflict with applicable law, rule or regulation, Custodian shall promptly
notify Customer and shall comply with reasonable alternatives as to which the
parties may agree. The Custodian shall keep accurate and detailed accounts of
all investments, receipts, disbursements and other transactions for each
Account. All accounts, books and records of the Custodian relating thereto shall
be open to inspection and audit at all reasonable times during normal business
hours by any person designated by the Customer. All such books, records and
accounts shall be maintained and preserved in the form reasonably requested by
the Customer and in accordance with the 1940 Act and the Rules and Regulations
thereunder, including, without limitation, Section 31 thereof and Rule 31a-1 and
31a-2 thereunder. All books, records and accounts pertaining to the Customer and
the Accounts, which are in the possession of the Custodian, shall be the
property of the Customer and such materials or (unless the delivery of original
materials is required pursuant to applicable law) legible copies thereof in a
format acceptable to the Customer, shall be surrendered promptly upon request.
The Custodian will supply to the Customer from time
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<PAGE>
to time, as mutually agreed upon, a statement in respect to any Property in an
Account held by the Custodian or by a Subcustodian. In the absence of the filing
in writing with the Custodian by the Customer of exceptions or objections to any
such statement within one hundred eighty (180) days of the mailing thereof, the
Customer shall be deemed to have approved such statement and in such case or
upon written approval of the Customer of any such statement, such statement
shall be presumed to be for all purposes correct with respect to all information
set forth therein, absent manifest errors or omissions.
(b) The Custodian shall take all reasonable action as the Customer may
request to obtain from year to year favorable opinions from the Customer's
independent certified public accountants with respect to the Custodian's
activities hereunder in connection with the preparation of the Customer's Form
N-1A and the Customer's Form N-SAR or other periodic reports to the SEC and with
respect to any other requirements of the SEC.
(c) At the request of the Customer, the Custodian shall deliver to the
Customer a written report prepared by the Custodian's independent certified
public accountants with respect to the services provided by the Custodian under
this Agreement, including, without limitation, the Custodian's accounting
system, internal accounting control and procedures for safeguarding Cash and
Securities, including Cash and Securities deposited and/or maintained in a
Securities System or with a Subcustodian. Such report shall be of sufficient
scope and in sufficient detail as may reasonably be required by the Customer and
as may reasonably be obtained by the Custodian.
(d) The Customer may elect to participate in any of the electronic
on-line service and communications systems offered by the Custodian which can
provide the Customer, on a daily basis, with the ability to view on-line or to
print on hard copy various reports of Account activity and of Securities and/or
Cash being held in any Account. To the extent that such service shall include
market values of Securities in an Account, the Customer hereby acknowledges that
the Custodian now obtains and may in the future obtain information on such
values from outside sources that the Custodian considers to be reliable and the
Customer agrees that the Custodian (i) does not verify or represent or warrant
either the reliability of such service nor the accuracy or completeness of any
such information furnished or obtained by or through such service and (ii) shall
be without liability in selecting such service or furnishing any information
derived therefrom. To the extent that such service shall provide access to
information concerning (i) all transactions involving the delivery in and out of
Custodian of Cash and/or Securities; (ii) payments of principal and interest or
dividends; (iii) pending transactions and fails; (iv) schedules of Custodian
holdings, Custodian shall comply with the standards for reports furnished in
accordance with Section 8(a) above.
9. Holding of Securities, Nominees, etc. Securities in an Account which are held
by the Custodian or any Subcustodian may be held by such entity in the name of
the Customer, on behalf of a Portfolio, in the Custodian's or Subcustodian's
name, in the name of the Custodian's or Subcustodian's nominee, or in bearer
form. Securities that are held by a Subcustodian or which are
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<PAGE>
eligible for deposit in a Securities System as provided above may be maintained
with the Subcustodian or the Securities System in an account for the Custodian's
or Subcustodian's customers, unless prohibited by law, rule, or regulation. So
long as and to the extent that Rule 17f-5 shall permit, the Custodian or
Subcustodian, as the case may be, may combine certificates representing
Securities held in an Account with certificates of the same issue held by it as
fiduciary or as a custodian. In the event that any Securities in the name of the
Custodian or its nominee or held by a Subcustodian and registered in the name of
such Subcustodian or its nominee are called for partial redemption by the issuer
of such Security, the Custodian may, subject to the rules or regulations
pertaining to allocation of any Securities System in which such Securities have
been deposited, allot, or cause to be allotted, the called portion of the
respective beneficial holders of such class of security in any manner the
Custodian deems to be fair and equitable and shall provide Customer prompt
notice of any such action.
10. Proxies, etc. With respect to any proxies, notices, reports or other
communications relative to any of the Securities in any Account, the Custodian
shall perform such services and only such services relative thereto as are (i)
set forth in Section 3 of this Agreement, (ii) described in Exhibit B attached
hereto (as such service therein described may be in effect from time to time)
(the "Proxy Service") and (iii) as may otherwise be agreed upon between the
Custodian and the Customer. The liability and responsibility of the Custodian in
connection with the Proxy Service referred to in (ii) of the immediately
preceding sentence and in connection with any additional services which the
Custodian and the Customer may agree upon as provided in (iii) of the
immediately preceding sentence shall be as set forth in the description of the
Proxy Service and as may be agreed upon by the Custodian and the Customer in
connection with the furnishing of any such additional service and shall not be
affected by any other term of this Agreement. Neither the Custodian nor its
nominees or agents shall vote upon or in respect of any of the Securities in an
Account, execute any form of proxy to vote thereon, or give any consent or take
any action (except as provided in Section 3) with respect thereto except upon
the receipt of Instructions relative thereto.
11. Segregated Account. To assist the Customer in complying with the
requirements of the 1940 Act and the rules and regulations thereunder, the
Custodian shall, upon receipt of Instructions, establish and maintain a
segregated account or accounts on its books for and on behalf of a Portfolio.
The Custodian shall hold in such segregated accounts for the Account of a
Portfolio, Securities so designated by Customer.
12. Settlement Procedures.
(a) Securities will be transferred, exchanged or delivered by the
Custodian or a Subcustodian upon receipt by the Custodian of Instructions which
include all information required by the Custodian. Settlement and payment for
Securities received for an Account and delivery of Securities out of such
Account may be effected in accordance with the customary or established
securities trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction
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<PAGE>
occurs, including, without limitation, delivering Securities to the purchaser
thereof or to a dealer therefor (or an agent for such purchaser or dealer)
against a receipt with the expectation of receiving later payment for such
Securities from such purchaser or dealer, as such practices and procedures may
be modified or supplemented in accordance with the standard operating procedures
of the Custodian in effect from time to time for that jurisdiction or market. So
long as and to the extent that the Custodian has exercised reasonable care, the
Custodian shall not be liable for any loss which results from effecting
transactions in accordance with the customary or established securities trading
or securities processing practices and procedures in the applicable jurisdiction
or market.
(b) With respect to Accounts containing Securities maintained outside
the United States, the Custodian shall credit or debit such Accounts on a
contractual settlement date with Cash or Securities with respect to any sale,
exchange or purchase of Securities.
(i) The Custodian may reverse credits or debits made to
the Accounts in its discretion if the related
transaction fails to settle within a reasonable
period, determined by the Custodian in its
discretion, after the contractual settlement date for
the related transaction; provided that, the Custodian
shall give Customer prior notification of any such
reversal. Where the foregoing notification is oral,
the Custodian shall promptly provide written
notification of the same (which confirmation may be
electronic).
(ii) If any Securirites delivered pursuant to this Section
12(b) are returned by the recipient thereof, the
Custodian may, after receiving advance approval from
the Customer, which approval shall not be
unreasonably withheld, reverse the credits and debits
of the particular transaction at any time.
(c) Without affecting the obligations of the Custodian under Section
12(b) and except as otherwise may be agreed upon by the parties hereto, the
Custodian shall not be required to comply with Instructions to settle the
purchase of any Securities for the Account unless there is sufficient Cash in
the Account at the time or to settle the sale of any Securities in the Account
unless such Securities are in deliverable form. Notwithstanding the foregoing,
if the purchase price of such securities exceeds the amount of Cash in the
Account at the time of settlement of such purchase, the Custodian may, in its
sole discretion, but in no way shall have any obligation to, permit an overdraft
in the Account in the amount of the difference solely for the purpose of
facilitating the settlement of such purchase of securities for prompt delivery
for the Account. The Customer agrees to immediately repay the amount of any such
overdraft in the ordinary course of business, exclusively out of the Property in
the Account that has engaged in the transaction that gives rise to such
overdraft and further agrees to indemnify and hold the Custodian harmless from
and against Custodian's actual losses, damages, costs and expenses, including
the charges for such overdraft as set forth in Exhibit C hereof exclusively out
of such Property, provided however, that Customer shall not be liable for any
consequential or special damages. The Customer agrees that it will not use the
Account to
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<PAGE>
facilitate the purchase of securities if at the time Customer places the
purchase order it knows there will not be sufficient funds in the Account at the
time of settlement (which funds shall not include the proceeds of the sale of
the purchased securities).
13. Permitted Transactions. The Customer agrees that it will cause transactions
to be made pursuant to this Agreement only upon Instructions in accordance with
Section 14 and only for the purposes listed below.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise
become payable.
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan of merger, consolidation,
reorganization, recapitalization or readjustment.
(d) Upon conversion of Securities pursuant to their terms into other
securities.
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities.
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts borrowed.
(h) In connection with any loans or repurchase agreements, but only
against receipt of collateral as specified in Instructions which shall reflect
any restrictions applicable to the Customer.
(i) For the purpose of redeeming shares of the capital stock of the
Customer against delivery of the shares to be redeemed to the Custodian, a
Subcustodian or the Customer's transfer agent.
(j) For the purpose of redeeming in kind shares of the Customer against
delivery of the shares to be redeemed to the Custodian, a Subcustodian or the
Customer's transfer agent.
(k) For delivery in accordance with the provisions of any agreement
among the Customer, on behalf of a Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc., relating to compliance with
the rules of The Options Clearing Corporation, the Commodities Futures Trading
Commission and of any registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Customer.
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<PAGE>
(l) In the case of covered call options, the issuance of a depository
pledge receipt or similar notice of custody or for release of Securities to
designated brokers under such covered call options, provided, however, that such
Securities shall be released only upon payment to the Custodian of monies for
the premium due and a receipt for the Securities which are to be held in escrow.
Upon exercise of the option, or at expiration, the Custodian will receive the
Securities previously deposited from broker. The Custodian will act strictly in
accordance with Instructions in the delivery of Securities to be held in escrow
and will have no responsibility or liability for any such Securities which are
not returned promptly when due other than to make proper request for such
return.
(m) For spot or forward foreign exchange transactions to facilitate
security trading or receipt of income from Securities related transactions.
(n) In connection with the establishment of a segregated account in
accordance with Section 11 hereof.
(o) Upon the termination of this Agreement as set forth in Section 20
hereof.
(p) For the purpose of paying distributions to shareholders of the
capital stock of the Customer.
(q) In connection with transactions under master repurchase agreements
and master accounts and the delivery of inital and variation margin for futures
contracts.
(r) For other proper purposes as may be specified in Instructions.
The Customer agrees that the Custodian shall have no obligation to
verify the purpose for which a transaction is being effected; provided that if
the Custodian has actual knowledge that the transaction is for an improper
purpose, it shall notify the Customer.
14. Instructions. The term "Instructions" means instructions from the Customer
in respect of any of the Custodian's duties hereunder which have been received
by the Custodian at its address set forth in Section 21 below (i) in writing
(including, without limitation, facsimile transmission) or by tested telex
signed or given by such one or more person or persons as the Customer shall have
from time to time authorized in writing to give the particular class of
Instructions in question and whose name and (if applicable) signature and office
address have been filed with the Custodian, or (ii) which have been transmitted
electronically through an electronic on-line service and communications system
offered by the Custodian or other electronic instruction system acceptable to
the Custodian, or (iii) a telephonic or oral communication by one or more
persons as the Customer shall have from time to time authorized to give the
particular class of Instructions in question and whose name has been filed
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with the Custodian; or (iv) upon receipt of such other form of instructions as
the Customer may from time to time authorize in writing and which the Custodian
has agreed in writing to accept. Instructions in the form of oral communications
shall be confirmed by the Customer by tested telex or writing (including,
without limitation, facsimile transmission) in the manner set forth in clause
(i) above, but the lack of such confirmation shall in no way affect any action
taken by the Custodian in reliance upon such oral instructions prior to the
Custodian's receipt of such confirmation. Instructions may relate to specific
transactions or to types or classes of transactions, and may be in the form of
standing instructions, such as the Instructions communicated in the letter to
Sandy Gross dated November 14, 1996 concerning confirmation of wire transfers
sent to the Custodian by facsimile transmission, the terms of which letter are
incorporated herein by reference.
The Custodian shall have the right to assume in the absence of notice
to the contrary from the Customer that any person whose name is on file with the
Custodian pursuant to this Section has been authorized by the Customer to give
the Instructions in question and that such authorization has not been revoked.
The Custodian may act upon and conclusively rely on, without any liability to
the Customer or any other person or entity for any losses resulting therefrom,
any Instructions reasonably believed by it in good faith to be furnished by the
proper person or persons as provided above.
15. Standard of Care. The Custodian shall be responsible for the performance of
only such duties as are set forth herein or contained in Instructions given to
the Custodian which are not contrary to the provisions of this Agreement. The
Custodian shall comply with all applicable provisions and requirements of the
1940 Act, the Securities Act of 1933 (the "1933 Act"), the 1934 Act, and any
laws, rules, and regulations or governmental authorities having jurisdiction
with respect to the provisions which directly apply to the services provided to
the Customer hereunder. The Custodian will use reasonable care with respect to
the safekeeping of Property in each Account and, except as otherwise expressly
provided herein, in carrying out its obligations under this Agreement. So long
as and to the extent that it has exercised reasonable care, the Custodian shall
not be responsible for the title, validity or genuineness of any Property or
other property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement and shall be held harmless in acting upon, and may
conclusively rely on, without liability for any loss resulting therefrom, any
notice, request, consent, certificate or other instrument reasonably believed by
it to be genuine and to be signed or furnished by the proper party or parties,
including, without limitation, Instructions, and shall be indemnified by the
Customer for any losses, damages, costs and expenses (including, without
limitation, the reasonable fees and expenses of counsel) incurred by the
Custodian and arising out of action taken or omitted with reasonable care by the
Custodian hereunder or under any Instructions, such indemnification to be
provided exclusively from the Property in the Account as to which Custodian
shall have acted (or failed to act) when it incurred such losses, damages, costs
and expenses. The Custodian shall be liable to the Customer for any act or
omission to act of any Subcustodian to the same extent as if the Custodian
committed such act itself. With respect to a Securities System, the Custodian
shall only be responsible or liable for losses arising from employment of such
Securities System caused by the Custodian's own failure to exercise reasonable
care. In the event of any loss
- 12 -
<PAGE>
or damage to the Customer or, if the Customer shall incur costs and expenses
(including, without limitation, fees and expenses of counsel) by reason of the
failure of the Custodian or a Subcustodian to utilize reasonable care, the
Custodian shall be liable to the Customer to the extent of the Customer's actual
losses, damages, costs and expenses (including reasonable fees and expenses of
counsel) by reason of such failure without reference to any special conditions
or circumstances. In no event shall either the Custodian or the Customer be
liable for any consequential or special damages of such other party. The
Custodian shall be entitled to rely, and may act, on advice of counsel (who may
be counsel for the Customer) on all matters and shall be without liability for
any action reasonably taken or omitted pursuant to such advice.
In the event the Customer subscribes to an electronic on-line service
and communications system offered by the Custodian, the Customer shall be fully
responsible for the security of the Customer's connecting terminal, access
thereto and the proper and authorized use thereof and the initiation and
application of continuing effective safeguards with respect thereto and agrees
to defend and indemnify the Custodian and hold the Custodian harmless from and
against any and all losses, damages, costs and expenses (including the
reasonable fees and expenses of counsel) incurred by the Custodian as a result
of any improper or unauthorized use of such terminal by the Customer or by any
others.
All collections of funds or other property paid or distributed in
respect of Securities in an Account, including funds involved in third-party
foreign exchange transactions, shall be made at the risk of the Customer.
Subject to the exercise of reasonable care, the Custodian shall have no
liability for any loss occasioned by delay in the actual receipt of notice by
the Custodian or by a Subcustodian of any payment, redemption or other
transaction regarding Securities in each Account in respect of which the
Custodian has agreed to take action as provided in Section 3 hereof. The
Custodian shall not be liable for any loss resulting from, or caused by, or
resulting from acts of governmental authorities (whether de jure or de facto),
including, without limitation, nationalization, expropriation, and the
imposition of currency restrictions; devaluations of or fluctuations in the
value of currencies; changes in laws and regulations applicable to the banking
or securities industry; market conditions that prevent the orderly execution of
securities transactions or affect the value of Property; acts of war, terrorism,
insurrection or revolution; strikes or work stoppages; the inability of a local
clearing and settlement system to settle transactions for reasons beyond the
control of the Custodian; hurricane, cyclone, earthquake, volcanic eruption,
nuclear fusion, fission or radioactivity, or other acts of God.
Upon receipt by the Custodian of notice from a subcustodian, or
otherwise upon the Custodian becoming aware in the ordinary course of its
custodial activities, of any of the events (other than any of such events which
are acts of God) referred to in the immediately preceding paragraph, the
Custodian will as soon as practicable notify the Customer. The Customer may
discuss with the Custodian reasonable steps to safeguard the Property, and the
Custodian shall use reasonable efforts
- 13 -
<PAGE>
to take such steps as may be agreed between the Customer and the Custodian;
provided that should the Custodian in good faith determine that the taking of
any such steps would result in the incurrence by the Custodian of costs,
expenses and liabilities, the Custodian need not take any such steps until the
Customer shall have furnished to the Custodian reasonable security or indemnity
for such costs, expenses and liabilities.
The Custodian shall, throughout the term of this Agreement, effect and
maintain insurance cover in respect of such risks with such insurers and on such
terms as it deems appropriate and necessary to protect the Property. Nothing in
this Section 15 shall prohibit the Custodian from selfinsuring all or any part
of the risks relating to the performance of this Agreement as it in its sole
discretion deems appropriate, but only as long as Property could be protected to
the same extent as it would were such insurance maintained with a third party
insurer unaffiliated with Custodian; and if Custodian knows or has reason to
know that the Property is not so protected, Custodian shall promptly notify
Customer and shall be obligated to obtain appropriate and necessary insurance
from an unaffiliated third party insurer. The Custodian shall furnish to the
Customer upon request certification as to the effectiveness and amounts of such
insurance.
The Custodian maintains business line and technology resources business
continuity plans which are monitored internally and externally to ensure that
the plans are regularly updated and tested and comply with firmwide standards.
Upon request, Custodian shall provide written assurance to the Customer of the
continued maintenance of reasonable arrangements for the emergency use of
electronic data processing equipment to the extent appropriate.
The Custodian shall have no liability in respect of any loss, damage or
expense suffered by the Customer, insofar as such loss, damage or expense arises
from the performance of the Custodian's duties hereunder by reason of the
Custodian's reasonable reliance upon records that were maintained for the
Customer by entities other than the Custodian prior to the Custodian's
employment under this Agreement.
The provisions of this Section shall survive termination of this
Agreement.
16. Investment Limitations and Legal or Contractual Restrictions or Regulations.
Provided that the Custodian exercises reasonable care to comply with
Instructions generally, and more particularly in connection with the purchase,
sale or exchange of Securities made by or for the Customer in any country, the
Custodian shall not be liable to the Customer and the Customer agrees to
indemnify the Custodian and its nominees, for any loss, damage or expense
suffered or incurred by the Custodian or its nominees arising out of any
violation of any investment restriction or other restriction or limitation
applicable to the Customer or any Portfolio pursuant to any contract or any law
or regulation. The provisions of this Section shall survive termination of this
Agreement.
17. Fees and Expenses. The Customer agrees to pay to the Custodian such
compensation for its
- 14 -
<PAGE>
services pursuant to this Agreement as may be mutually agreed upon in writing
from time to time and the Custodian's reasonable out-of-pocket or incidental
expenses in connection with the performance of this Agreement, including (but
without limitation) reasonable legal fees as described herein and/or deemed
necessary in the judgment of the Custodian to keep safe or protect the Property
in the Account. The initial fee schedule is attached hereto as Exhibit C. The
Customer hereby agrees to hold the Custodian harmless from any liability or loss
which is not due to the Custodian's or a Subcustodian's lack of reasonable care
resulting from any taxes or other governmental charges, and any expense related
thereto, which may be imposed, or assessed with respect to any Property in an
Account and also agrees to hold the Custodian, its Subcustodians, and their
respective nominees harmless from any liability as a record holder of Property
in such Account. The Custodian is authorized to charge the applicable Account
for such items, including but not limited to amounts payable pursuant to
indemnities granted by the Customer under this Agreement; provided that
Custodian shall give Customer notification prior to effecting any such charge.
The provisions of this Section shall survive the termination of this Agreement.
18. Tax Reclaims. With respect to withholding taxes deducted and which may be
deducted from any income received from any Property in an Account, the Custodian
shall perform such services with respect thereto as are described in Exhibit D
attached hereto and shall in connection therewith be subject to the standard of
care set forth in such Exhibit D. Such standard of care shall not be affected by
any other term of this Agreement.
19. Amendment, Modifications, etc. No provision of this Agreement may be
amended, modified or waived except in a writing signed by the parties hereto. No
waiver of any provision hereto shall be deemed a continuing waiver unless it is
so designated. No failure or delay on the part of either party in exercising any
power or right under this Agreement operates as a waiver, nor does any single or
partial exercise of any power or right preclude any other or further exercise
thereof or the exercise of any other power or right.
20. Termination.
(a) Termination of Entire Agreement. This Agreement may be terminated
by the Customer or the Custodian by sixty (60) days' written notice to the
other; provided that notice by the Customer shall specify the names of the
persons to whom the Custodian shall deliver the Securities in each Account and
to whom the Cash in such Account shall be paid. If notice of termination is
given by the Custodian, the Customer shall, within sixty (60) days following the
giving of such notice, deliver to the Custodian a written notice specifying the
names of the persons to whom the Custodian shall deliver the Securities in each
Account and to whom the Cash in such Account shall be paid. In either case, the
Custodian will deliver such Securities and Cash to the persons so specified,
after deducting therefrom any amounts which the Custodian determines to be owed
to it under Section 17. In addition, the Custodian may in its discretion
withhold from such delivery such Cash and Securities as may be necessary to
settle transactions pending at the time of such delivery. If within sixty (60)
- 15 -
<PAGE>
days following the giving of a notice of termination by the Custodian, the
Custodian does not receive from the Customer a written notice specifying the
names of the persons to whom the Custodian shall deliver the Securities in each
Account and to whom the Cash in such Account shall be paid, the Custodian, at
its election, may upon advance written notice to Customer deliver such
Securities and pay such Cash to a bank or trust company which is qualified as an
eligible foreign custodian under Rule 17f-5 of the 1940 Act and doing business
in the State of New York to be held and disposed of pursuant to the provisions
of this Agreement, or may continue to hold such Securities and Cash until a
written notice as aforesaid is delivered to the Custodian, provided that the
Custodian's obligations shall be limited to safekeeping and the duties outlined
in this subsection 20(a); provided that where the Custodian is the terminating
party and the Custodian had not notified the Customer that termination is for
breach of this Agreement by Customer, such sixty (60) day period shall be
extended for an additional period as requested by Customer of up to ninety (90)
additional days.
(b) Termination as to One or More Portfolios. This Agreement may be
terminated by the Customer or the Custodian as to one or more Portfolios (but
less than all of the Portfolios) by delivery of an amended Exhibit A deleting
such Portfolios, in which case termination as to such deleted Portfolios shall
take effect sixty (60) days after the date of such delivery, or such earlier
time as mutually agreed. The execution and delivery of an amended Exhibit A
which deletes one or more Portfolios shall constitute a termination of this
Agreement only with respect to such deleted Portfolio(s), shall be governed by
the preceding provisions of Section 20 as to the identification of a successor
custodian and the delivery of Cash and Securities of the Portfolio(s) so deleted
to such successor custodian, and shall not affect the obligations of the
Custodian and the Customer hereunder with respect to the other Portfolios set
forth in Exhibit A, as amended from time to time.
21. Notices. Except as otherwise provided in this Agreement, all requests,
demands or other communications between the parties or notices in connection
herewith (a) shall be in writing, hand delivered or sent by telex, telegram,
cable, facsimile or other means of electronic communication agreed upon by the
parties hereto addressed, if to the Customer, to:
Delaware Group of Funds
1818 Market Street, 7th Floor
Philadelphia, PA 19103
Attention: Michael P. Bishof
Phone: (215) 255-2852
Fax: (215) 255-1645
if to the Custodian, to:
Bankers Trust Company
16 Wall Street, 4th Floor
New York, NY 10005
- 16 -
<PAGE>
Attention: Vicky Platt
Phone: (212) 618-2645
Fax: (212) 618-2193
or in either case to such other address as shall have been furnished to the
receiving party pursuant to the provisions hereof and (b) shall be deemed
effective when received, or, in the case of a telex, when sent to the proper
number and acknowledged by a proper answerback.
22. Several Obligations of the Portfolios. With respect to any obligations of
the Customer on behalf of each Portfolio and each of its related Accounts
arising out of this Agreement, the Custodian shall look for payment or
satisfaction of any obligation solely to the assets and property of the
Portfolio and such Accounts to which such obligation relates as though the
Customer had separately contracted with the Custodian by separate written
instrument with respect to each Portfolio and its related Accounts.
23. Representations and Warranties.
(a) The Customer hereby represents and warrants to the Custodian that:
(i) the employment of the Custodian and the allocation of fees,
expenses and other charges to any Account as herein provided, is not prohibited
by law or any governing documents or contracts to which the Customer is subject;
(ii) the terms of this Agreement do not violate any obligation by which
the Customer is bound, whether arising by contract, operation of law or
otherwise;
(iii) this Agreement has been duly authorized by appropriate action and
when executed and delivered will be binding upon the Customer and each Portfolio
in accordance with its terms; and
(iv) the Customer will deliver to the Custodian such evidence of such
authorization as the Custodian may reasonably require, whether by way of a
certified resolution or otherwise.
(b) The Custodian hereby represents and warrants to the Customer that:
(i) the terms of this Agreement do not violate any obligation by which
the Custodian is bound, whether arising by contract, operation of law or
otherwise;
(ii) this Agreement has been duly authorized by appropriate action and
when executed and delivered will be binding upon the Custodian in accordance
with its terms;
- 17 -
<PAGE>
(iii) the Custodian will deliver to the Customer such evidence of such
authorization as the Customer may reasonably require, whether by way of a
certified resolution or otherwise; and
(iv) Custodian is qualified as a custodian under Sections 17(f) and
26(a) of the 1940 Act and warrants that it will remain so qualified or upon
ceasing to be so qualified shall promptly notify the Customer in writing.
24. Governing Law and Successors and Assigns. This Agreement shall be governed
by the law of the State of New York and shall not be assignable by either party,
but shall bind the successors in interest of the Customer and the Custodian.
25. Publicity. Unless material is produced in accordance with applicable law,
Customer shall furnish to Custodian at its office referred to in Section 21
above, prior to any distribution thereof, copies of any material prepared for
distribution to any persons who are not parties hereto that refer in any way to
the Custodian. Customer shall not distribute or permit the distribution of such
materials if Custodian reasonably objects in writing within ten (10) business
days of receipt thereof (or such other time as may be mutually agreed) after
receipt thereof. The provisions of this Section shall survive the termination of
this Agreement.
26. Representative Capacity and Binding Obligation. A copy of the Articles of
Incorporation/Declaration of Trust of the Customer is on file with The Secretary
of the State of Maryland or in the Trust's offices, and notice is hereby given
that this Agreement is not executed on behalf of the Directors or Trustees of
the Customer as individuals, and the obligations of this Agreement are not
binding upon any of the Directors or Trustees, officers or shareholders of the
Customer individually but are binding only upon the assets and property of the
Portfolios.
The Custodian agrees that no shareholder, trustee, director or officer
of the Customer may be held personally liable or responsible for any obligations
of the Customer arising out of this Agreement.
27. Submission to Jurisdiction. Any suit, action or proceeding arising out of
this Agreement may be instituted in any State or Federal court sitting in the
City of New York, State of New York, United States of America, and the Customer
irrevocably submits to the non-exclusive jurisdiction of any such court in any
such suit, action or proceeding and waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of venue of
any such suit, action or proceeding brought in such a court and any claim that
such suit, action or proceeding was brought in an inconvenient forum.
Notwithstanding the foregoing, this Section shall not limit any party from
instituting suit in the competent court of any other jurisdiction.
28. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original. This Agreement shall become effective
when one or more counterparts have been signed and delivered by each of the
parties hereto.
- 18 -
<PAGE>
29. Confidentiality. The parties hereto agree that each shall treat
confidentially the terms and conditions of this Agreement and all information
provided by each party to the other regarding its business and operations. All
confidential information provided by a party hereto shall be used by any other
party hereto solely for the purpose of rendering services pursuant to this
Agreement and, except as may be required in carrying out this Agreement, shall
not be disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is publicly
available when provided or thereafter becomes publicly available other than
through a breach of this Agreement, or that is required or requested to be
disclosed by any bank or other regulatory examiner of the Custodian, Customer,
or any Subcustodian, any auditor of the parties hereto, by judicial or
administrative process or otherwise by applicable law or regulation.
30. Severability. If any provision of this Agreement is determined to be invalid
or unenforceable, such determination shall not affect the validity or
enforceability of any other provision of this Agreement.
31. Headings. The headings of the paragraphs hereof are included for convenience
of reference only and do not form a part of this Agreement.
DELAWARE GROUP OF FUNDS on
behalf of each Customer and
Portfolio listed on Exhibit A hereto
By: /s/ David K. Downes
---------------------------
Name: David K. Downes
Title: Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
BANKERS TRUST COMPANY
By: /s/ Richard M. Quintal
--------------------------
Name: Richard M. Quintal
Title: Managing Director
- 19 -
<PAGE>
EXHIBIT A
To Custodian Agreement dated as of June 1, 1996 between Bankers Trust Company
and Delaware Group of Funds.
LIST OF PORTFOLIOS
The following is a list of Portfolios referred to in the first WHEREAS clause of
the above-referenced Custodian Agreement. Terms used herein as defined terms
unless otherwise defined shall have the meanings ascribed to them in the
above-referenced Custodian Agreement.
Customers: Portfolios
- ---------- ----------
Delaware Group Trend Fund, Inc.
Delaware Group Decatur Fund, Inc. Decatur Income Fund Series
Decatur Total Return Fund Series
Delaware Group Government Government Income Series Fund, Inc.
Delaware Group Limited-Term U.S. Government Money Series
Government Funds, Inc. Limited Term Government Fund Series
Delaware Cash Reserve, Inc.
Delaware Group Tax-Free
Money Fund, Inc.
Delaware Group Tax-Free Fund, Inc. Tax Free USA Fund Series
Tax-Free Insured Fund Series
Tax-Free USA Intermediate Fund Series
Delaware Pooled Trust, Inc. The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The Fixed Income Portfolio
The Limited Term Maturity Portfolio
The Defensive Equity Small/ Mid-Cap
Portfolio
<PAGE>
Delaware Group Income Funds, Inc Strategic Income Fund Series
Delaware Group Global Dividend and
Income Fund, Inc.
Dated as of: April 1, 1997
DELAWARE GROUP OF FUNDS, on
behalf of each Customer and
Portfolio listed on this
Exhibit A to the Custodian
Agreement
By: /s/David K. Downes
------------------------
Name: David K. Downes
Title: Senior Vice President/Chief
Administrative Officer/
Chief Financial Officer
BANKERS TRUST COMPANY
By: /s/ Richard M. Quintal
-----------------------
Name: Richard M. Quintal
Title: Managing Director
<PAGE>
EXHIBIT B
To Custodian Agreement dated as of June 1, 1996 between Bankers Trust Company
and Delaware Group of Funds.
PROXY SERVICE
The following is a description of the Proxy Service referred to in Section 10 of
the above referenced Custodian Agreement. Terms used herein as defined terms
shall have the meanings ascribed to them therein unless otherwise defined below.
The Custodian provides a service, described below, for the transmission of
corporate communications in connection with shareholder meetings relating to
Securities held in Argentina, Australia, Austria, Canada, Denmark, Finland,
France, Germany, Greece, Hong Kong, Indonesia, Ireland, Italy, Japan, Korea,
Malaysia, Mexico, Netherlands, New Zealand, Pakistan, Poland, Singapore, South
Africa, Spain, Sri Lanka, Sweden, United Kingdom, United States, and Venezuela.
For the United States and Canada, the term "corporate communications" means the
proxy statements or meeting agenda, proxy cards, annual reports and any other
meeting materials received by the Custodian. For countries other than the United
States and Canada, the term "corporate communications" means the meeting agenda
only and does not include any meeting circulars, proxy statements or any other
corporate communications furnished by the issuer in connection with such
meeting. Non-meeting related corporate communications are not included in the
transmission service to be provided by the Custodian except upon request as
provided below.
The Custodian's process for transmitting and translating meeting agendas will be
as follows:
1) If the meeting agenda is not provided by the issuer in the
English language, and if the language of such agenda is in the
official language of the country in which the related security
is held, the Custodian will as soon as practicable after
receipt of the original meeting agenda by a Subcustodian
provide an English translation prepared by that Subcustodian;
provided, however, under no circumstances (unless
impracticable) shall a translation received by the Custodian
be supplied to Customer later than the day on which action is
required, at a time which shall enable action timely to be
taken.
2) If an English translation of the meeting agenda is furnished,
the local language agenda will not be furnished unless
requested.
Translations will be free translations and neither the Custodian nor any
Subcustodian will be liable or held responsible for the accuracy thereof or any
direct or indirect consequences arising
<PAGE>
- 2 -
therefrom, including without limitation arising out of any action taken or
omitted to be taken based thereon.
If requested, the Custodian will, on a reasonable efforts basis, endeavor to
obtain any additional corporate communication such as annual or interim reports,
proxy statements, meeting circulars, or local language agendas, and provide them
in the form obtained.
Timing in the voting process is important and, in that regard, upon receipt by
the Custodian of notice from a Subcustodian, the Custodian will provide a notice
to the Customer indicating the deadline for receipt of its instructions to
enable the voting process to take place effectively and efficiently. As voting
procedures will vary from market to market, attention to any required procedures
will be very important. Upon timely receipt of voting instructions, the
Custodian will promptly forward such instructions to the applicable
Subcustodian. If voting instructions are not timely received, the Custodian
shall have no liability or obligation to take any action.
For Securities held in markets other than those set forth in the first
paragraph, the Custodian will not furnish the material described above or seek
voting instructions. However, if requested to exercise voting rights at a
specific meeting, the Custodian will endeavor to do so on a reasonable efforts
basis without any assurance that such rights will be so exercised at such
meeting.
If the Custodian or any Subcustodian incurs extraordinary expenses in exercising
voting rights related to any Securities pursuant to appropriate instructions or
direction (e.g., by way of illustration only and not by way of limitation,
physical presence is required at a meeting and/or travel expenses are incurred),
upon receipt of Instructions to do so, such expenses will be reimbursed out of
the Account containing such Securities unless other arrangements have been made
for such reimbursement.
It is the intent of the Custodian to expand the Proxy Service to include
jurisdictions which are not currently included as set forth in the second
paragraph hereof. The Custodian will notify the Customer as to the inclusion of
additional countries or deletion of existing countries after their inclusion or
deletion and this Exhibit B will be deemed to be automatically amended to
include or delete such countries as the case may be.
<PAGE>
- 3 -
Dated June 1, 1996
DELAWARE GROUP OF FUNDS, on behalf of
each Customer and Portfolio listed on
Exhibit A to the Custodian Agreement
By: /s/ David K. Downes
---------------------------
Name: David K. Downes
Title: Senior Vice President/Chief
Administrative Office/Chief
Financial Officer
BANKERS TRUST COMPANY
By: /s/ Richard M. Quintal
-----------------------
Name: Richard M. Quintal
Title: Managing Director
<PAGE>
EXHIBIT C
To Custodian Agreement dated as of June 1, 1996 between Bankers Trust
Company and Delaware Group of Funds.
CUSTODY FEE SCHEDULE
Monthly Account Maintenance: No Charge
(including segregated accounts)
Regional Annual Asset and Per Transaction Fees:
TIER I International
<TABLE>
<CAPTION>
ANNUAL ASSET FEE RECEIVE AND DELIVER
COUNTRY IN BASIS POINTS TRANSACTION FEES
- ------- --------------- ----------------
<S> <C> <C>
Australia 3.0 $50.00
Austria 5.0 $50.00
Belgium 4.0 $50.00
Canada 1.5 $50.00
Cedel 2.0 $25.00
Denmark 4.0 $50.00
Euroclear 2.0 $25.00
Finland 10.0 $75.00
France 4.0 $50.00
Germany 2.0 $30.00
Greece 35.0 $120.00
Hong Kong 5.0 $35.00
Indonesia 8.0 $35.00
Ireland 5.0 $50.00
Italy 3.0 $50.00
Japan 2.5 $50.00
Korea 15.0 $50.00
Malaysia 7.0 $50.00
Mexico 5.0 $50.00
Netherlands 4.0 $45.00
New Zealand 4.0 $50.00
Norway 5.0 $50.00
Philippines 8.0 $30.00
Singapore 7.0 $50.00
South Africa 5.0 $50.00
Spain 6.0 $50.00
Sweden 4.0 $50.00
Switzerland 3.0 $60.00
United Kingdom 1.5 $20.00
</TABLE>
<PAGE>
TIER II United States
Annual Asset Fee: 0.25 BASIS POINTS
Transaction Fees:
o DTC-Automated (as defined below) $3.00
o DTC Manual (as defined below) $10.00
o PTC Automated $6.00
o PTC Manual $10.00
o FED Automated $6.00
o FED Manual $10.00
o Physical Automated $15.00
o Physical Manual $19.00
o P&I Payments $2.00
o Redemptions $10.00
o Reorganizations Included in safekeeping charge
o Outgoing Wires $8.00
o Incoming Wires No Charge
o Internal Cash Transfers No Charge
NOTES
1. Fees for investments in countries not listed will be negotiated separately.
2. There is no cost associated with the inward transition of assets, but the
client is responsible for all re-registration charges and stamp duty; i.e.
Spain and Indonesia.
3. The above fees are inclusive of the provision of Globe*View and or Polaris
software, but client is responsible for the provision of a suitable PC,
printer and modem and all associated line charges.
4. Above pricing excludes out-of-pocket (e.g. postage and insurance, transfer
agent fees).
5. Earnings Credits and Overdraft Charges with respect to Accounts containing
Property maintained within the United States:
<PAGE>
For each month during which the Custodian holds Property for a
Customer, there shall be an adjustment to the custody fees noted above,
calculated as follows:
(a) the closing cash balances on the days of a month during which
Property is maintained in an Account ("Closing Cash Balance"), other than those
days on which the Closing Cash Balance is an overdraft position in excess of
$1,000,000 ("Excluded Days"), shall be aggregated and that sum shall be divided
by the number of days whose Closing Cash Balances are so added ("Average Monthly
Balance"). If such Average Monthly Balance is more than zero, the Average
Monthly Balance will be multiplied by that number which is the product of
multiplying the Overnight Federal Funds Rate (defined below), minus .50%, by a
fraction, the denominator of which shall be 365 and the numerator of which shall
be the number of days (other than Excluded Days) on which there is a Closing
Cash Balance in that month. If such Average Monthly Balance is less than zero,
the Average Monthly Balance shall be multiplied by that number which is the
product of multiplying the Overnight Federal Funds Rate (defined below), plus
1.00%, by a fraction, the denominator of which shall be 365 and the numerator of
which shall be the number of days (other than Excluded Days) on which there is a
Closing Cash Balance in that month. If the Average Monthly Balance for a
particular month is more than zero, the amount calculated pursuant to this
paragraph (a) shall be deducted from an Account's custody fee for the relevant
month. If the Average Monthly Balance for a particular month is less than zero,
the amount calculated shall be added to such custody fee for such month.
(b) for an Excluded Day, the amount of the closing overdraft position
for such day shall be multiplied by the fraction, the numerator of which shall
be the Overnight Federal Funds Rate, plus 1.00% and the denominator of which
shall be 365. The amount so calculated will be added to the custody fee payable
by the Account for the relevant month.
(c) for purposes of paragraphs (a) and (b)above, the term "Overnight
Federal Funds Rate" shall mean, for any month, the average of daily Federal
funds rates for a given month; in turn, the daily Federal funds rate shall mean,
for any day, the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the business day next succeeding such day.
6. Earnings Credits earned in a calendar year are valid for only that year and
the immediately succeeding calendar quarter. Any accumulation not used up by the
end of the 1st quarter of the immediately following year will be forfeited.
7. Earnings Credit and Overdraft Rates with respect to Accounts containing
Property maintained
<PAGE>
in foreign markets, where applicable, will vary by market. As part of the
monthly reporting package, the Custodian provides a Statement of Earnings that
details by currency account the daily balance maintained and the interest or
debit rate earned on that particular day. The net negative (or positive)
interest is accrued and reflected at the bottom the statement; this amount is
credited on the third business day following the month end.
8. A manual transaction is an instruction, which is sent to Bankers Trust
outside of Globe*View, Polaris or CPU transmissions, i.e. facsimile.
9. Transactional fees will be incurred in the Master Repo account. Account
maintenance and asset fees will be waived for the Master Repo Account.
10. New pricing is effective June 1, 1996 and will not be modified before June
1, 1999.
11. Fees for FX trades executed with BTCo. will be waived. Third party FX fees
are $50.00 per transaction.
12. Fees are billed monthly.
13. "DTC-Automated" shall mean those trades which are settled automatically at
DTC or through Polaris or another sucessor electronic system without manual
intervention of an employee of the Custodian; and "DTC-Manual" shall mean those
trades which are settled through Polaris or another sucessor electronic system
with the manual intervention of an employee of the Custodian.
DELAWARE GROUP OF FUNDS,
on behalf of each Customer and Portfolio
listed on Exhibit A to the Custodian Agreement BANKERS TRUST COMPANY
ACCEPTED BY: PREPARED BY:
By: /s/ David K. Downes By: /s/ Richard M. Quintal
--------------------------- ----------------------
Name: David K. Downes Name: Richard M. Quintal
Title: Senior Vice President/Chief Title Managing Director
Administrative Officer/Chief
Financial Officer
(DATE) June 1, 1996 (DATE) June 1, 1996
Except as set forth above, this Exhibit C shall be amended upon delivery by the
Custodian of a new Exhibit C to the Customer and acceptance thereof by the
Customer and shall be effective as of the date of acceptance by the Customer or
a date agreed upon between the Custodian and the Customer.
<PAGE>
EXHIBIT D
To Custodian Agreement dated as of June 1, 1996 between Bankers Trust Company
and Delaware Group of Funds.
TAX RECLAIMS
Pursuant to Section 18 of the above referred to Custodian Agreement, the
Custodian shall perform the following services with respect to withholding taxes
imposed or which may be imposed on income from Property in the Account. Defined
terms shall, unless otherwise noted, have the meanings ascribed to them in the
above referenced Custodian Agreement.
(a) When withholding tax has been deducted with respect to income from
any Property in an Account, the Custodian will post the tax reclaim in the
relevant currency to the Account on the earlier of the date of receipt of the
tax reclaim payment or the Contractual Reclaim Posting Date (as defined in the
columnar heading below) in accordance with the following schedule (subject to
the provisions of paragraphs (b) and (c) below):
Market Contractual Reclaim Posting Date
- ------ --------------------------------
(unless otherwise noted in
paragraph (b), the number of days
subsequent to the receipt by
Custodian of the dividend/interest
payment from which tax has been
withheld)
Austria 110
Belgium 270
Denmark 100
France 270
Germany 170
Italy 90
Spain 260
Switzerland 250
UK 100
This service shall be provided by the Custodian with regard to other countries
in which Customer may invest as the Custodian and Customer shall mutually agree.
In the event of a change in tax laws, regulations, or treaties, or the
re-interpretation by a relevant governmental authority of any
<PAGE>
of the foregoing, which change causes a material modification to the tax reclaim
process in such market, the Custodian and the Customer shall enter into good
faith negotiations to modify this Exhibit D as appropriate.
(b) In instances where a tax reclaim payment has not been received and
the Custodian's obligation is therefore to post a reclaim on a particular
Contractual Reclaim Posting Date, that obligation is conditioned upon the
Custodian's receipt from the Customer of all necessary documentation completed
accurately as to all material terms within a reasonable time prior to such
Contractual Reclaim Posting Date. If a Customer fails to so deliver the
necessary documentation to Custodian within such time, the day from which the
Contractual Reclaim Posting Date is measured shall be the date on which such
documentation is supplied to Custodian, not the date on which the
dividend/interest payment from which the tax is withheld is paid to Custodian.
The two previous sentences notwithstanding, if Customer's failure to deliver
such documentation within such time results from Custodian's failure to: (i)
notify Customer of any deadlines for delivery of documentation; (ii) deliver all
necessary documentation to Customer within a reasonable time prior to the date
on which the completed documentation must be delivered to Custodian or (iii)
promptly notify Customer of any deficiency in the required documentation
provided to Custodian, the Contractual Reclaim Posting Date shall be measured
from the date the Custodian receives the dividend/interest payment from which
the tax has been withheld.
(c) The Custodian shall not be obligated to post tax reclaims with
regard to a particular country, if (i) the government of such country ceases to
honor tax reclaims generally or (ii) imposes regulatory changes, delays or
currency restrictions which materially adversely affect or preclude the payment
of tax reclaims or (iii) the tax authority in such country from which a reclaim
is being sought declares a claim to be invalid or after appropriate and timely
inquiry by the Custodian, otherwise fails to confirm the validity of a claim
within a reasonable period of time. If the tax reclaim has been posted
previously to the Account, the Custodian shall have the right following advance
notice to the Customer to reverse any such credits (provided that with respect
to the events referred to in clause (ii) above, the Custodian's right to reverse
such credits shall be subject to approval by the Customer, which approval shall
not unreasonably be withheld); and the Customer, exclusively out of the Property
held in such Account, agrees to hold the Custodian harmless from Custodian's
actual losses, damages, costs and expenses (including the reasonable fees and
expenses of counsel) arising therefrom, except that in no event shall Customer
be liable for consequential or special damages of the Custodian. If,
notwithstanding the circumstances described in this paragraph (c), Custodian
actually receives a tax reclaim payment, Custodian shall promptly post such tax
reclaim in the relevant currency to the Account.
(d) The Custodian will provide fully detailed advices/vouchers to
support reclaims submitted to the local authorities by the Custodian or its
designee. In all cases of withholding, the
<PAGE>
Custodian will provide full details to the Customer. If exemption from
withholding at the source can be obtained in the future, the Custodian will
notify the Customer and advise what documentation, if any, is required to obtain
the exemption. Upon receipt of such documentation from the Customer, the
Custodian will file for exemption on the Customer's behalf and notify the
Customer when it has been obtained.
(e) In connection with providing the foregoing service, the Custodian
shall be entitled to apply categorical treatment of the Customer according to
the Customer's nationality, the particulars of its organization and other
relevant details that shall be supplied by the Customer. It shall be the duty of
the Customer to inform the Custodian of any change in the organization, domicile
or other material fact previously communicated to Custodian in writing
concerning tax treatment of the Customer and further to inform the Custodian if
the Customer is or becomes the beneficiary of any special ruling or treatment
not applicable to the general nationality and category or entity of which the
Customer is a part under general laws and treaty provisions. The Custodian may
reasonably rely on any such information provided by the Customer.
(f) In connection with providing the foregoing service, the Custodian
may, at its own expense, consult and reasonably rely on the advice of counsel or
other professional tax advisers in such jurisdictions. So long as the Custodian
shall have used reasonable care in selecting such advisers, the Custodian is
entitled to reasonably rely, and may act, on advice received from counsel or
other professional tax advisers and shall be without liability to the Customer
for any action reasonably taken or omitted pursuant to information contained in
such advice.
(g) Subject to the provisions set forth above, the Custodian shall
perform the services provided in this Exhibit D in accordance with the standard
of care described in Section 15 of the Custodian Agreement.
<PAGE>
Dated as of: June 1, 1996
DELAWARE GROUP OF FUNDS, on
behalf of each Customer and
Portfolio listed on Exhibit
A to the Custodian Agreement
By: /s/ David K. Downes
-------------------
Name: David K. Downes
Title: Senior Vice President/Chief Administrative
Officer/Chief Financial Officer
BANKERS TRUST COMPANY
By: /s/ Richard M. Quintal
----------------------
Name: Richard M. Quintal
Title: Managing Director
<PAGE>
<PAGE>
PROPOSED AGREEMENT
SUBJECT TO BOARD APPROVAL
DELAWARE GROUP OF FUNDS
FUND ACCOUNTING AGREEMENT
THIS AGREEMENT, made as of this 19th day of August, 1996 by and between
the registered investment companies in the Delaware Group listed on Schedule A,
which Schedule may be amended from time to time as provided in Section 8 hereof
(each corporation or common law or business trust, hereinafter referred to as a
"Company," and all such entities collectively hereinafter referred to as, the
"Companies"), on behalf of the portfolio(s) of securities of such Companies
listed on Schedule A, which Schedule may be amended from time to time (when used
in this Agreement in the context of a Company that offers only a single
portfolio/series of shares, the term "Portfolio" shall be a reference to such
Company, and when used in the context of a Company that offers multiple
portfolios/series of shares, shall be a reference to each portfolio/series of
such Company) and DELAWARE SERVICE COMPANY, INC. ("DSC"), a Delaware
corporation, having its principal office and place of business at 1818 Market
Street, Philadelphia, Pennsylvania 19103.
W I T N E S S E T H:
WHEREAS, the Investment Management Agreements between the
Companies with respect to each Portfolio and either Delaware
Management Company, Inc. or its U.K. affiliate, Delaware
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<PAGE>
International Advisers Ltd., provide, in part, that each Portfolio shall conduct
its business and affairs and shall bear the expenses necessary and incidental
thereto including, but not in limitation of the foregoing, the costs incurred
with respect to accounting services; and
WHEREAS, the services to be provided under this agreement
previously were provided by employees of the Companies; and
WHEREAS, the Companies and DSC desire to have a written agreement
concerning the performance of accounting services for each Portfolio and
providing compensation therefor;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:
I. APPOINTMENT AS AGENT
Section 1.1 The Companies hereby appoint DSC the accounting
agent ("Accounting Agent") for all of the classes of each Portfolio, to provide
such accounting services as are set forth herein and DSC hereby accepts such
appointment and agrees to provide the Companies, as their agent, the services
described herein.
Section 1.2 The Companies shall pay DSC and DSC shall accept,
for the services provided hereunder, the compensation provided for in Section VI
hereof. The Companies
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<PAGE>
also shall reimburse DSC for expenses incurred or advanced by it for the
Companies in connection with its services hereunder.
II. DOCUMENTATION
Section 2.1 Each Company represents that it has provided or
made available to DSC (or has given DSC an opportunity to examine) copies of,
and, DSC represents that it has received from the Companies (or is otherwise
familiar with), the following documents:
A. The Articles of Incorporation or Agreement and
Declaration of Trust or other document, as relevant, evidencing each Company's
form of organization and any current amendments thereto;
B. The By-Laws or Procedural Guidelines of each
Company;
C. Any resolution or other action of each Company or
the Board of Directors or Trustees of each Company establishing or affecting the
rights, privileges or other status of any class of shares of a Portfolio, or
altering or abolishing any such class;
D. A certified copy of a resolution of the Board of
Directors or Trustees of each Company appointing DSC as Accounting Agent for
each Portfolio and authorizing the execution of this Agreement or an amendment
to Schedule A of this Agreement;
-4-
<PAGE>
E. A copy of each Company's currently effective
prospectus[es] and Statement[s] of Additional Information under the Securities
Act of 1933, if effective;
F. A certified copy of any resolution of the Board of
Directors or Trustees of each Company authorizing any person to give
instructions to DSC under this Agreement (with a specimen signature of such
person if not already provided), setting forth the scope of such authority; and
G. Any amendment, revocation or other document
altering, adding, qualifying or repealing any document or authority called for
under this Section 2.1.
Section 2.2 Each Company and DSC may consult as to forms or
documents that may be required in performing services hereunder.
Section 2.3 Each Company warrants the following:
A. The Company is, or will be, a properly registered
investment company under the Investment Company Act of 1940 (the "1940 Act") and
any and all shares of a Portfolio which it issues will be properly registered
and lawfully issued under applicable federal and state laws.
B. The provisions of this contract do not violate the
terms of any instrument by which the Company or the Company on behalf of a
Portfolio is bound; nor do they violate any law or regulation of any body having
jurisdiction over the Company or its property.
Section 2.4 DSC warrants the following:
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<PAGE>
A. The provisions of this contract do not violate the
terms of any instrument by which DSC is bound; nor do they violate any law or
regulation of any body having jurisdiction over DSC or its property.
III. SERVICES TO BE PROVIDED BY DSC
Section 3.1 Daily Net Asset Value ("NAV") Calculation. As
Accounting Agent for each Portfolio of the Companies, DSC will perform all
functions necessary to provide daily Portfolio NAV calculations, including:
A. Maintaining each Portfolio's securities portfolio
history by:
1. recording portfolio purchases and sales;
2. recording corporate actions and capital
changes relating to portfolio securities;
3. accruing interest, dividends and
expenses; and
4. maintaining the income history for
securities purchased by a Portfolio.
B. Determining distributions to Portfolio
shareholders;
C. Recording and reconciling shareholder activity
including:
1. recording subscription, liquidations and
dividend reinvestments;
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<PAGE>
2. recording settlements of shareholder
activity; and
3. reconciling Portfolio shares outstanding
to the records maintained by DSC, as transfer agent of the Portfolio.
D. Valuing a Portfolio's securities portfolio which
includes determining the NAVs for all classes of the Portfolio;
E. Disseminating Portfolio NAVs and dividends to
interested parties (including the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), the Investment Company Institute ("ICI"),
Morningstar, and Lipper Analytical Services, Inc. ("Lipper")); and
F. Resolving pricing and/or custody discrepancies.
Section 3.2 Financial Reporting. As Accounting Agent, DSC
shall perform financial reporting services for each Portfolio, which shall
include:
A. The preparation of semi-annual and annual reports
for shareholders which involves the performance of the following functions:
1. preparing all statements of net assets,
statements of operations and statements of changes in net assets for the
Portfolio;
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<PAGE>
2. preparing footnotes to financial
statements for the Portfolio;
3. preparing workpapers for each Company's
annual audit by its independent public accountants; and
4. coordinating the annual audit by each
Company's independent public accountants.
B. Reporting to the ICI in response to requests for
monthly and other periodic information;
C. Performing statistical reporting, which includes
daily, monthly, quarterly and annual reports for Lipper, Weisenberger and other
third party reporting agencies; and
D. Furnishing financial information for any
additional required SEC reporting, such as the preparation of financial
information for each Company's reporting on Form N-SAR, the furnishing of
financial information for each Company's prospectus[es] and statement[s] of
additional information, and the financial information required for each
Company's annual Rule 24f-2 notice filing;
Section 3.3 Compliance Testing. DSC will monitor, test and
prepare and maintain supporting schedules which evidence compliance with the
definitional and distribution requirements under the Internal Revenue Code of
1986, as amended ("IRC"), including the following:
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<PAGE>
A. The requirement to be registered at all times
during the taxable year under the 1940 Act (IRC ss.851(a));
B. The annual ninety percent gross income test (IRC
ss.851(b)(2));
C. The short/short (thirty percent) gross income test
(IRC ss.851(b)(3));
D. The quarterly IRC industry diversification tests
(IRC ss.ss.851(b)(4) and 817(h)); and
E. The 90% distribution requirements (IRC ss.852(a)).
Section 3.4 Other Services. In addition to the above, DSC, in
its capacity as Accounting Agent for the Company, will perform the following
services:
A. The calculation of required Portfolio monthly
yields and total return calculations in accordance with the prescribed rules of
the U.S. Securities and Exchange Commission;
B. Providing the financial information necessary for
the preparation of all federal and state tax returns and ancillary schedules,
including:
1. year-end excise tax distributions; and
2. compliance with Subchapter M and Section
4982 of the IRC;
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<PAGE>
C. Performing special tax reporting to shareholders,
including the preparation of reports which reflect income earned by each
Portfolio by state, exempt income and distributions that qualify for the
corporate dividends received deduction;
D. The preparation of expense and budget figures for
each Portfolio, including the maintenance of detailed records pertaining to
expense accruals and payments and adjusting reports to reflect accrual
adjustments;
E. The preparation of reports for Board of Directors'
or Trustees' meetings;
F. Coordination of the custody relationships;
G. Facilitating security settlements;
H. Performance of required foreign security
accounting functions;
I. Performance of daily cash reconciliations for each
Portfolio;
J. Providing identified reports to portfolio managers
including:
1. providing portfolio holdings and security
valuation reports;
2. preparing cash forecasts and
reconciliations as mutually agreed upon; and
3. preparing income projections.
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<PAGE>
IV. PERFORMANCE OF DUTIES
Section 4.1 DSC may request or receive instructions from a
Company and may, at a Portfolio's expense, consult with counsel for the Company
or its own counsel, with respect to any matter arising in connection with the
performance of its duties hereunder, and shall not be liable for any action
taken or omitted by it in good faith in accordance with such instructions or
opinions of counsel.
Section 4.2 DSC shall maintain reasonable insurance coverage
for errors and omissions and reasonable bond coverage for fraud.
Section 4.3 Upon notice thereof to a Company, DSC may employ
others to provide services to DSC in its performance of this Agreement.
Section 4.4 Personnel and facilities of DSC used to perform
services hereunder may be used to perform similar services to all Companies of
the Delaware Group and their Portfolios and to others, and may be used to
perform other services for all of the Companies of the Delaware Group and
others.
Section 4.5 The Companies and DSC may, from time to time, set
forth in writing at the Companies' expense certain guidelines to be applicable
to the services hereunder.
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<PAGE>
V. ACCOUNTS AND RECORDS
Section 5.1 The parties hereto agree and acknowledge that the
accounts and records maintained by DSC with respect to a Portfolio shall be the
property of such Portfolio, and shall be made available to the relevant Company
promptly upon request and shall be maintained for the periods prescribed in Rule
31a-2 under the Investment Company Act of 1940 or such longer period as shall be
agreed to by the parties hereto, at such Portfolio's expense.
VI. COMPENSATION
Section 6.1 The Companies and DSC acknowledge that the
compensation to be paid hereunder to DSC is intended to induce DSC to provide
services under this Agreement of a nature and quality which the Boards of
Directors or Trustees of the Companies, including a majority who are not parties
to this Agreement or interested person of the parties hereto, have determined
after due consideration to be necessary for the conduct of the business of a
Portfolio in the best interests of a Portfolio and its shareholders.
Section 6.2 Compensation by a Portfolio hereunder shall be
determined in accordance with Schedule B hereto as it shall be amended from time
to time as provided for herein and which is incorporated herein as a part
hereof.
Section 6.3 Compensation as provided in Schedule B shall be
reviewed and approved for each Portfolio in the manner
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<PAGE>
set forth in Section 8.1 hereof by the Boards of Directors or Trustees of the
Companies at least annually and may be reviewed and approved more frequently at
the request of either party. The Boards may request and DSC shall provide such
information as the Boards may reasonably require to evaluate the basis of and
approve the compensation.
VII. STANDARD OF CARE
Section 7.1 The Companies on behalf of each Portfolio
acknowledge that DSC shall not be liable for, and in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
performance of its duties under this contract, agree to indemnify DSC against,
any claim or deficiency arising from the performance of DSC's duties hereunder,
including DSC's costs, counsel fees and expenses incurred in investigating or
defending any such claim or any administrative or other proceeding, and
acknowledge that any risk of loss or damage arising from the conduct of a
Portfolio's affairs in accordance herewith or in accordance with guidelines or
instructions given hereunder, shall be borne by the Portfolio. The
indemnification provided for in this Section 7.1 shall be made Portfolio by
Portfolio so that DSC is only entitled to indemnification from a Company on
behalf of a Portfolio for actions arising from the performance of DSC's duties
as to that Portfolio.
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<PAGE>
VIII. CONTRACTUAL STATUS
Section 8.1 This Agreement shall be executed and become
effective as to a Company with regard to a Portfolio listed on Schedule A as of
the date first written above if approved by a vote of such Company's Board of
Directors or Trustees, including an affirmative vote of a majority of the non-
interested members of the Board of such Company, cast in person at a meeting
called for the purpose of voting on such approval. It shall continue in effect
for an indeterminate period, and is subject to termination as to a Company on
behalf of a Portfolio or DSC, as the case may be, on sixty (60) days notice by
either that Company or DSC, unless earlier terminated or amended by agreement
among the parties. A Company shall be permitted to terminate this Agreement as
to a Portfolio on sixty (60) days notice to DSC. Compensation under this
Agreement by a Portfolio shall require approval by a majority vote of the Board
of Directors or Trustees of such Portfolio's Company, including an affirmative
vote of the majority of the non-interested members of such Board cast in person
at a meeting called for the purpose of voting such approval.
Section 8.2 This Agreement shall become effective as to any
Company or Portfolio not included on Schedule A as of the date first written
above, but desiring to participate in this Agreement, on such date as an amended
Schedule A adding such new Company or Portfolio to such Schedule is executed by
DSC and such new Company or a Company on behalf of a new Portfolio following
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<PAGE>
approval by the Company or by the Company on behalf of a new Portfolio desiring
to be included in this Agreement in accordance with the method specified in
Section 8.1. Any such amended Schedule A shall not affect the validity of this
Agreement as between DSC and the other Companies which have executed this
Agreement or any subsequent amendment to Schedule A of this Agreement.
Section 8.3 This Agreement may not be assigned by DSC without
the approval of all of the Companies.
Section 8.4 This Agreement shall be governed by the laws of
the Commonwealth of Pennsylvania.
DELAWARE SERVICE COMPANY, INC.
/s/ David K. Downes
By:_____________________________________
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT
FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP DELCHESTER HIGH-YIELD
BOND FUND, INC.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
DELAWARE GROUP VALUE FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL
FUNDS, INC.
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<PAGE>
DELAWARE GROUP DELCAP FUND, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
/s/Wayne A. Stork
By:_____________________________________
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
/s/ Wayne A. Stork
By:_____________________________________
Wayne A. Stork, Chairman
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<PAGE>
SCHEDULE A
COMPANIES AND PORTFOLIOS COMPRISING THE DELAWARE GROUP*
Delaware Group Cash Reserve, Inc.
Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund
Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund
Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Trend Fund, Inc.
Delaware Group Delchester High-Yield Bond Fund, Inc.
- --------
* Except as otherwise noted, all Portfolios included on this Schedule A are
Existing Portfolios for purposes of the compensation described on Schedule B to
that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
Portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
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<PAGE>
DMC Tax-Free Income Trust - Pennsylvania
Delaware Group Value Fund, Inc.
Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund (New)
Delaware Group DelCap Fund, Inc.
Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio (New)
The Global Fixed Income Portfolio
The International Fixed Income Portfolio (New)
The High-Yield Bond Portfolio (New)
Delaware Group Premium Fund, Inc.
Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series (New)
Delaware Group Government Fund, Inc.
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<PAGE>
Delaware Group Adviser Funds, Inc.
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
Dated as of: August 19, 1996
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<PAGE>
SCHEDULE B
COMPENSATION
Fee Schedule for The Delaware Group of Funds
Part 1 -- Fees for Existing Portfolios
Existing Portfolios are those so designated on Schedule A to the Fund Accounting
Agreement between Delaware Service Company, Inc. and the Delaware Group of Funds
dated as of August 19, 1996 ("Agreement").
Annual Asset Based Fees
First $10 Billion of Aggregate
Complex Net Assets 2.5 Basis Points
Aggregate Complex Net Assets
over $10 Billion 2.0 Basis Points
Annual asset based fees will be charged at a rate of 2.5 basis points for the
first $10 Billion of Aggregate Complex Net Assets. Aggregate Complex Net Assets
over $10 Billion will be charged at a rate of 2.0 basis points. These fees will
be charged to a Portfolio on an aggregated pro rated basis.
Annual Minimum Fees
Domestic Equity Portfolio $35,000
Domestic Fixed Income Portfolio $45,000
International Series Portfolio $70,000
Per Class of Share Fee $ 4,000
There is an annual minimum fee that will be charged only if the annual asset
based fee is less than the calculation for the minimum fee. This fee is based on
the type and the number of classes per Portfolio. For an equity Portfolio
$35,000 will be charged; for a fixed income Portfolio $45,000 will be charged,
and for an international Portfolio $70,000 will be charged. For each class of
shares, $4,000 will be charged, such amount to be prorated over a period of less
than a year for any classes added after April 30, 1996. A total of all minimum
fees will be compared to the total asset based fee to determine which fee is
higher and, subsequently, will be used to bill the Companies.
Part 2 -- Fees for New Portfolios
For each Portfolio designated as a New Portfolio on Schedule A to the Agreement,
there will be a fee of 2.0 basis points, providing that the Delaware complex net
assets are above $10 Billion (the
<PAGE>
rate would be 2.5 basis points if under $10 Billion and then 2.0 basis points
once the net assets cross $10 Billion), or an annual minimum fee calculated in
the manner described above, whichever is higher. This new fee would be added to
the total of Existing Portfolio fees and then pro rated. Fees shall not be
charged for New Portfolios included on Schedule A until such Portfolios shall
have commenced operations.
Dated as of: August 19, 1996
-21-
<PAGE>
AMENDMENT NO. 1 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Cash Reserve, Inc.
Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund
Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Trend Fund, Inc.
Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund (New)
DMC Tax-Free Income Trust - Pennsylvania
*Except as otherwise noted, all Portfolios included on this Schedule A are
Existing Portfolios for purposes of the compensation described on Schedule B to
that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>
Delaware Group Value Fund, Inc.
Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund (New)
Delaware Group DelCap Fund, Inc.
Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio (New)
The Global Fixed Income Portfolio
The International Fixed Income Portfolio (New)
The High-Yield Bond Portfolio (New)
Delaware Group Premium Fund, Inc.
Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series (New)
Delaware Group Government Fund, Inc.
<PAGE>
Delaware Group Adviser Funds, Inc.
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
Dated as of: September 30, 1996
DELAWARE SERVICE COMPANY, INC.
By:/s/ David K. Downes
---------------------------------
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY
FUND,INC.
DELAWARE GROUP LIMITED-TERM
GOVERNMENT FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DMC TAX-FREE INCOME TRUST -
PENNSYLVANIA
DELAWARE GROUP VALUE FUND, INC.
DELAWARE GROUP GLOBAL &
INTERNATIONAL FUNDS, INC.
DELAWARE GROUP DELCAP FUND, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
By: /s/ Wayne A. Stork
--------------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
By: /s/Wayne A. Stork
--------------------------------
Wayne A. Stork
Chairman
-3-
<PAGE>
AMENDMENT NO. 2 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund
Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund
Delaware Group Equity Funds IV, Inc.
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc.
Retirement Income Fund (New)
Value Fund
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
1
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Delaware Group Government Fund, Inc.
Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Emerging Growth Series
Equity/Income Series
Global Bond Series (New)
Growth Series
High Yield Series
International Equity Series
Money Market Series
Multiple Strategy Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Trend Fund, Inc.
2
<PAGE>
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term aturity Portfolio (New)
The Real Estate Investment Trust Portfolio
DMC Tax-Free Income Trust - Pennsylvania
3
<PAGE>
Dated as of: November 29, 1996
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
------------------------------------
David K. Downes
Senior Vice President/
Chief Administrative Officer/
Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL
FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT
FUNDS, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
By: /s/ Wayne A. Stork
--------------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
By: /s/ Wayne A. Stork
--------------------------------
Wayne A. Stork
Chairman
4
<PAGE>
AMENDMENT NO.3 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Cash Reserve, Inc.
Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund
Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Trend Fund, Inc.
Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund (New)
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
1
<PAGE>
DMC Tax-Free Income Trust - Pennsylvania
Delaware Group Value Fund, Inc.
Value Fund
Retirement Income Fund (New)
Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund (New)
Delaware Group Equity Funds IV, Inc.
DelCap Fund
Multi-Cap Equity Fund (New)
Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio (New)
The Global Fixed Income Portfolio
The International Fixed Income Portfolio (New)
The High-Yield Bond Portfolio (New)
Delaware Group Premium Fund, Inc.
Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series (New)
Delaware Group Government Fund, Inc.
2
<PAGE>
Delaware Group Adviser Funds, Inc.
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
Dated as of: December 27, 1996
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
---------------------------
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND,INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT
FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
DELAWARE GROUP VALUE FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL
FUNDS, INC.
DELAWARE GROUP DELCAP FUND, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
By: /s/ Wayne A. Stork
-------------------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
By: /s/Wayne A. Stork
-------------------------------------
Wayne A. Stork
Chairman
3
<PAGE>
AMENDMENT NO. 4 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds II, Inc.
Decatur Income Fund
Decatur Total Return Fund
Blue Chip Fund (New)
Quantum Fund (New)
Delaware Group Equity Funds I, Inc.
Delaware Fund
Devon Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Trend Fund, Inc.
Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund
High-Yield Opportunities Fund (New)
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement. DMC Tax-Free Income Trust - Pennsylvania
1
<PAGE>
Delaware Group Equity Funds V, Inc.
Value Fund
Retirement Income Fund
Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund
Delaware Group Equity Funds IV, Inc.
DelCap Fund
Capital Appreciation Fund
Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio
The Defensive Equity Utility Portfolio
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio
The Global Fixed Income Portfolio
The International Fixed Income Portfolio
The High-Yield Bond Portfolio
Delaware Group Premium Fund, Inc.
Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series
Delaware Group Government Fund, Inc.
2
<PAGE>
Delaware Group Adviser Funds, Inc.
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
Dated as of: FEBRUARY 24, 1997
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
-----------------------------------
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND,INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
By: /s/ Wayne A. Stork
-------------------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
By: /s/ Wayne A. Stork
-------------------------------------
Wayne A. Stork
Chairman
3
<PAGE>
AMENDMENT NO. 4A
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)
- --------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
1
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Decatur Total Return Series
Delaware Series
Delchester Series
DelCap Series
Global Bond Series (New)
International Equity Series
Trend Series
Value Series
2
<PAGE>
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Trend Fund, Inc.
DMC Tax-Free Income Trust - Pennsylvania (doing business as Tax-Free
Pennsylvania Fund)
Dated as of: April 14, 1997
--------------
3
<PAGE>
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
----------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
By: /s/ Wayne A. Stork
----------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
By: /s/ Wayne A. Stork
----------------------
Wayne A. Stork
President and
Chief Executive Officer
4
<PAGE>
AMENDMENT NO. 5
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
1
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series
2
<PAGE>
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Trend Fund, Inc.
DMC Tax-Free Income Trust-Pennsylvania (doing business as Tax-Free Pennsylvania
Fund)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax-Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
Dated as of May 1, 1997
4
<PAGE>
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED -TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/ Wayne A. Stork
------------------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
5
<PAGE>
AMENDMENT NO. 6
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
1
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
2
<PAGE>
Trend Series
Value Series
Delaware Group State Tax-Free Income Trust
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Tax-Free Pennsylvania Fund
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Trend Fund, Inc.
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
Dated as of July 21, 1997
4
<PAGE>
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED -TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/ Wayne A. Stork
------------------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
5
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 56 to the Registration Statement (Form N-1A)
(No. 2-28871) of Delaware Group Equity Funds III, Inc. of our report dated
August 1, 1997, included in the 1997 Annual Report to Shareholders of Delaware
Group Trend Fund, Inc.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
August 27, 1997
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Trend Fund, Inc.
We have audited the accompanying statement of net assets of Delaware Group Trend
Fund, Inc. (the "Fund") as of June 30, 1997, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of June 30, 1997, by correspondence with the Fund's
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Trend Fund, Inc. at June 30, 1997, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the periods
indicated therein, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
August 1, 1997
<PAGE>
AT NAV
Delaware Group Equity Funds III, Inc. - Trend Fund
C Class
Cumulative Total Return Performance
ONE YEAR ENDED 6/30/97
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning NAV $18.09
Initial Shares 55.279
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 55.279 $1.510 5.753 61.032
- --------------------------------------------------------------------------------
Ending Shares 61.032
Ending NAV x $16.54
---------
Investment Return $1,009.47
Total Return Performance
- ------------------------
Investment Return $1,009.47
Less Initial Investment $1,000.00
---------
$9.47 / $1,000.00 x 100
Total Return: 0.95%
<PAGE>
Including CDSC
Delaware Group Equity Funds III, Inc. - Trend Fund
C Class
Cumulative Total Return Performance
ONE YEAR ENDED 6/30/97
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning NAV $18.09
Initial Shares 55.279
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 55.279 $1.510 5.753 61.032
- --------------------------------------------------------------------------------
Ending Shares 61.032
Ending NAV x $16.54
---------
Investment Return $1,009.47
Less CDSC $9.14
---------
Investment Return $1,000.33
Total Return Performance
- ------------------------
Investment Return $1,000.33
Less Initial Investment $1,000.00
---------
$0.33 / $1,000.00 x 100
Total Return: 0.03%
<PAGE>
Delaware Group Equity Funds III, Inc. - Trend Fund
C Class
Cumulative Total Return Performance
NINE MONTHS ENDED 6/30/97
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning NAV $16.13
Initial Shares 61.996
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 61.996 $0.000 0.000 61.996
- --------------------------------------------------------------------------------
Ending Shares 61.996
Ending NAV x $16.54
---------
Investment Return $1,025.41
Total Return Performance
- ------------------------
Investment Return $1,025.41
Less Initial Investment $1,000.00
---------
$25.41 / $1,000.00 x 100
Total Return: 2.54%
<PAGE>
Delaware Group Equity Funds III, Inc. - Trend Fund
C Class
Cumulative Total Return Performance
NINE MONTHS ENDED 6/30/97
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning NAV $16.13
Initial Shares 61.996
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 61.996 $0.000 0.000 61.996
- --------------------------------------------------------------------------------
Ending Shares 61.996
Ending NAV x $16.54
---------
$1,025.41
Less CDSC $10.00
---------
Investment Return $1,015.41
Total Return Performance
- ------------------------
Investment Return $1,015.41
Less Initial Investment $1,000.00
---------
$15.41 / $1,000.00 x 100
Total Return: 1.54%
<PAGE>
Delaware Group Equity Funds III, Inc. - Trend Fund
C Class
Average Total Return Performance
ONE YEAR ENDED 6/30/97
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning NAV $18.09
Initial Shares 55.279
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 55.279 $1.510 5.753 61.032
- --------------------------------------------------------------------------------
Ending Shares 61.032
Ending NAV x $16.54
---------
Investment Return $1,009.47
Total Return Performance
- ------------------------
Investment Return $1,009.47
Less Initial Investment $1,000.00
---------
$9.47 / $1,000.00 x 100
Total Return: 0.95%
<PAGE>
Delaware Group Equity Funds III, Inc. - Trend Fund
C Class
Average Total Return Performance
ONE YEAR ENDED 6/30/97
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning NAV $18.09
Initial Shares 55.279
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 55.279 $1.510 5.753 61.032
- --------------------------------------------------------------------------------
Ending Shares 61.032
Ending NAV x $16.54
---------
$1,009.47
Less CDSC $9.14
---------
Investment Return $1,000.33
Total Return Performance
- ------------------------
Investment Return $1,000.33
Less Initial Investment $1,000.00
---------
$0.33 / $1,000.00 x 100
Total Return: 0.03%
<PAGE>
APPENDIX A
(As revised July 17, 1997)
List of Funds and Their Classes
1. Delaware Group Equity Funds I, Inc.
Delaware Fund
Delaware Fund A Class
Delaware Fund B Class
Delaware Fund C Class
Delaware Fund Institutional Class
Devon Fund
Devon Fund A Class
Devon Fund B Class
Devon Fund C Class
Devon Fund Institutional Class
2. Delaware Group Equity Funds III, Inc.
Trend Fund A Class
Trend Fund B Class
Trend Fund C Class
Trend Fund Institutional Class
3. Delaware Group Equity Funds V, Inc.
Small Cap Value Fund
Small Cap Value Fund A Class
Small Cap Value Fund B Class
Small Cap Value Fund C Class
Small Cap Value Fund Institutional Class
Retirement Income Fund (Added November 29, 1996)
Retirement Income Fund A Class
Retirement Income Fund B Class
Retirement Income Fund C Class
Retirement Income Fund Institutional Class
4. Delaware Group Equity Funds IV, Inc.
DelCap Fund
DelCap Fund A Class
DelCap Fund B Class
DelCap Fund C Class
DelCap Fund Institutional Class
<PAGE>
Capital Appreciation Fund (Added November 29, 1996)
Capital Appreciation Fund A Class
Capital Appreciation Fund B Class
Capital Appreciation Fund C Class
Capital Appreciation Fund Institutional Class
5. Delaware Group Equity Funds II, Inc.
Decatur Income Fund
Decatur Income Fund A Class
Decatur Income Fund B Class
Decatur Income Fund C Class
Decatur Income Fund Institutional Class
Decatur Total Return Fund
Decatur Total Return Fund A Class
Decatur Total Return Fund B Class
Decatur Total Return Fund C Class
Decatur Total Return Fund Institutional Class
Blue Chip Fund (Added February 21, 1997)
Blue Chip Fund A Class
Blue Chip Fund B Class
Blue Chip Fund C Class
Blue Chip Fund Institutional Class
Quantum Fund (Added February 21, 1997)
Quantum Fund A Class
Quantum Fund B Class
Quantum Fund C Class
Quantum Fund Institutional Class
6. Delaware Group Global & International Funds, Inc.
International Equity Fund
International Equity Fund A Class
International Equity Fund B Class
International Equity Fund C Class
International Equity Fund Institutional Class
Global Bond Fund
Global Bond Fund A Class
Global Bond Fund B Class
Global Bond Fund C Class
Global Bond Fund Institutional Class
<PAGE>
Global Assets Fund
Global Assets Fund A Class
Global Assets Fund B Class
Global Assets Fund C Class
Global Assets Fund Institutional Class
Emerging Markets Fund (Added May 1, 1996)
Emerging Markets Fund A Class
Emerging Markets Fund B Class
Emerging Markets Fund C Class
Emerging Markets Fund Institutional Class
International Small Cap Fund (Added July 21, 1997)
International Small Cap Fund A Class
International Small Cap Fund B Class
International Small Cap Fund C Class
International Small Cap Fund Institutional Class
Global Equity Fund (Added July 21, 1997)
Global Equity Fund A Class
Global Equity Fund B Class
Global Equity Fund C Class
Global Equity Fund Institutional Class
7. Delaware Group Income Funds, Inc.
Strategic Income Fund (Added September 30, 1996)
Strategic Income Fund A Class
Strategic Income Fund B Class
Strategic Income Fund C Class
Strategic Income Fund Institutional Class
8. Voyageur Mutual Funds III, Inc.
Tax-Efficient Equity Fund (Series E)(Added July 1, 1997)*
Tax-Efficient Equity Fund A Class
Tax-Efficient Equity Fund B Class
Tax-Efficient Equity Fund C Class
Tax-Efficient Equity Fund Institutional Class
* The Institutional Class was added on August 28, 1997.
<PAGE>
POWER OF ATTORNEY
The undersigned, a member of the Boards of Directors/Trustees of the
Delaware Group Funds listed on Exhibit A to this Power of Attorney, hereby
constitutes and appoints Wayne A. Stork, W. Thacher Longstreth and Walter P.
Babich and any one of them acting singly, his true and lawful attorneys-in-fact,
in his name, place, and stead, to execute and cause to be filed with the
Securities and Exchange Commission and other federal or state government agency
or body, such registration statements, and any and all amendments thereto as
either of such designees may deem to be appropriate under the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all other
applicable federal and state securities laws.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this
1st day of May, 1997.
/s/Thomas F. Madison
- ---------------------
Thomas F. Madison
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE GROUP FUNDS
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
VOYAGEUR TAX FREE FUNDS, INC.
VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC.
VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC.
VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC.
<PAGE>
POWER OF ATTORNEY
The undersigned, a member of the Boards of Directors/Trustees of the
Delaware Group Funds listed on Exhibit A to this Power of Attorney, hereby
constitutes and appoints Wayne A. Stork, W. Thacher Longstreth and Walter P.
Babich and any one of them acting singly, his true and lawful attorneys-in-fact,
in his name, place, and stead, to execute and cause to be filed with the
Securities and Exchange Commission and other federal or state government agency
or body, such registration statements, and any and all amendments thereto as
either of such designees may deem to be appropriate under the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all other
applicable federal and state securities laws.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this
1st day of May, 1997.
/s/Jeffrey J. Nick
- -------------------
Jeffrey J. Nick
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE GROUP FUNDS
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
VOYAGEUR TAX FREE FUNDS, INC.
VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC.
VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC.
VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC.
