Supplement Dated August 29, 1995
to the Current Statements of Additional Information
of the Following Delaware Group Funds
Delaware Group Delaware Fund, Inc.,
Delaware Group Trend Fund, Inc.,
Delaware Group Value Fund, Inc.,
Delaware Group Decatur Fund, Inc.,
Delaware Group DelCap Fund, Inc.,
Delaware Group Global & International Funds, Inc.,
Delaware Group Delchester High-Yield Bond Fund, Inc.,
Delaware Group Government Fund, Inc.,
Delaware Group Tax-Free Fund, Inc.,
Delaware Group Limited-Term Government Funds, Inc.,
Delaware Group Tax-Free Money Fund, Inc.,
Delaware Group Cash Reserve, Inc.,
DMC Tax-Free Income Trust - Pennsylvania
The exchange policy of the Fund as stated under
"Redemption and Exchange" is amended as follows with regard
to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on
changing economic and market conditions ("Timing Accounts"):
Right To Refuse Timing Accounts
Effective immediately, the Fund reserves the right to
refuse any new Timing Arrangements as well as any new
purchases (as opposed to exchanges) in Delaware Group funds
from Timing Firms.
Restrictions on Timed Exchanges
Effective 60 days from this notice, Timing Accounts
operating under existing Timing Agreements may only execute
exchanges between the following six Delaware Group funds: 1)
Decatur Income Fund, 2) Decatur Total Return Fund, 3)
Delaware Fund, 4) Limited-Term Government Fund, 5) Tax-Free
USA Fund and 6) Delaware Cash Reserve. No other Delaware
Group funds will be available for Timed Exchanges. Assets
redeemed or exchanged out of Timing Accounts in Delaware
Group funds not listed above may not be reinvested back into
that Timing Account.
In addition, 60 days hence, the Fund will terminate,
except as noted above, all exchanges privileges, including
telephone and written redemption privileges, previously made
available to Timing Firms. At such time, only shareholders
and their authorized brokers of record will be permitted to
make exchanges or redemptions.
---------------------------------
DELCAP FUND
---------------------------------
A CLASS
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B CLASS
---------------------------------
INSTITUTIONAL CLASS
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CLASSES OF DELAWARE GROUP
DELCAP FUND, INC.
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PART B
STATEMENT OF
ADDITIONAL INFORMATION
---------------------------------
NOVEMBER 29, 1994
DELAWARE
GROUP
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The Delaware Group includes 20 different funds with a
wide range of investment objectives. Stock funds, income
funds, tax-free funds, money market funds and closed-end
equity funds give investors the ability to create a portfolio
that fits their personal financial goals. For more
information, shareholders of the Fund Classes should contact
their financial adviser or call the Delaware Group at 800-
523-4640, in Philadelphia 215-988-1333 and shareholders of
the Institutional Class should contact the Delaware Group at
800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, Inc.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Chemical Bank
450 West 33rd Street
New York, NY 10001
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PART B--STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 29, 1994
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DELAWARE GROUP DELCAP FUND, INC.
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1818 Market Street
Philadelphia, PA 19103
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For more information about the
DelCap Fund Institutional Class:
800-828-5052
For Prospectus and Performance
of the DelCap Fund A Class and
the DelCap Fund B Class:
Nationwide 800-523-4640
Philadelphia 988-1333
Information on Existing Accounts
of the DelCap Fund A Class and
the DelCap Fund B Class:
(SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Philadelphia 988-1241
Dealer Services:
(BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Philadelphia 988-1050
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TABLE OF CONTENTS
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Cover Page
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Investment Policies and Portfolio Techniques
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Accounting and Tax Issues
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Performance Information
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Trading Practices and Brokerage
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Purchasing Shares
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Investment Plans
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Determining Offering Price and
Net Asset Value
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Redemption and Repurchase
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Distributions and Taxes
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Investment Management Agreement
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Officers and Directors
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Exchange Privilege
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General Information
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Appendix A -- Description of Ratings
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Appendix B -- IRA Information
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Appendix C
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Financial Statements
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Delaware Group DelCap Fund, Inc. (the "Fund") is a
professionally-managed mutual fund of the series type. This
Statement of Additional Information ("Part B" of the
registration statement) supplements the information contained
in the current Prospectuses of the Fund's Concept I Series
(the "Series"). The Series offers three classes
(individually, a "Class" and collectively, the "Classes") of
shares - DelCap Fund A Class (the "Class A Shares"), DelCap
Fund B Class (the "Class B Shares") (together, the "Fund
Classes") and DelCap Fund Institutional Class (the
"Institutional Class"). Class B Shares and Institutional
Class shares of the Series may be purchased at a price equal
to the next determined net asset value per share. Class A
Shares may be purchased at the public offering price, which
is equal to the next determined net asset value per share,
plus a front-end sales charge. The Class A Shares are
subject to a maximum front-end sales charge of 5.75% and
annual 12b-1 Plan expenses. The Class B Shares are subject
to a contingent deferred sales charge ("CDSC") which may be
imposed on redemptions made within six years of purchase and
12b-1 Plan expenses which are higher than those to which
Class A Shares are subject and are assessed against the Class
B Shares for no longer than approximately eight years after
purchase. See Automatic Conversion of Class B Shares in the
Fund Classes' Prospectus. All references to "shares" in this
Part B refer to all Classes of shares of the Series, except
where noted.
This Part B supplements the information contained in the
current Prospectuses for the Fund Classes and the
Institutional Class dated November 29, 1994, as may be
amended from time to time. It should be read in conjunction
with the respective Class' Prospectus. Part B is not itself
a prospectus but is, in its entirety, incorporated by
reference into each Class' Prospectus. A Prospectus relating
to the Fund Classes and a Prospectus relating to the
Institutional Class may be obtained by writing or calling
your investment dealer or by contacting the Fund's national
distributor, Delaware Distributors, Inc. (the "Distributor"),
1818 Market Street, Philadelphia, PA 19103.
INVESTMENT POLICIES AND PORTFOLIO TECHNIQUES
Investment Restrictions--The Fund has adopted the
following restrictions for the Series which, along with its
investment objective, cannot be changed without approval by
the holders of a "majority" of the Series' outstanding
shares, which is a vote by the holders of the lesser of a)
67% or more of the voting securities present in person or by
proxy at a meeting, if the holders of more than 50% of the
outstanding voting securities are present or represented by
proxy; or b) more than 50% of the outstanding voting
securities. The percentage limitations contained in the
restrictions and policies set forth herein apply at the time
of purchase of securities.
The Series shall not:
1. Invest more than 5% of the market or other fair
value of its assets in the securities of any one issuer
(other than obligations of, or guaranteed by, the U.S.
government, its agencies or instrumentalities).
2. Invest in securities of other investment companies
except as part of a merger, consolidation or other
acquisition.
3. Make loans, except to the extent that purchases of
debt obligations (including repurchase agreements), in
accordance with the Series' investment objective and
policies, are considered loans and except that the Series 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.
4. Purchase or sell real estate, but this shall not
prevent the Series from investing in securities secured by
real estate or interests therein.
5. Purchase more than 10% of the outstanding voting
and nonvoting securities of any issuer, or invest in
companies for the purpose of exercising control or
management.
6. Engage in the underwriting of securities of other
issuers, except that in connection with the disposition of a
security, the Series may be deemed to be an "underwriter" as
that term is defined in the Securities Act of 1933.
7. Make any investment which would cause more than 25%
of the market or other fair value of its total assets to be
invested in the securities of issuers all of which conduct
their principal business activities in the same industry.
This restriction does not apply to obligations issued or
guaranteed by the U.S. government, its agencies or
instrumentalities.
8. Write or purchase puts, calls or combinations
thereof, except that the Series may write covered call
options with respect to any or all parts of its portfolio
securities and purchase put options if the Series owns the
security covered by the put option at the time of purchase,
and that premiums paid on all put options outstanding do not
exceed 2% of its total assets. The Series may sell put
options previously purchased and enter into closing
transactions with respect to covered call and put options.
In addition, the Series may write call options and purchase
put options on stock indices and enter into closing
transactions with respect to such options.
9. Purchase securities on margin, make short sales of
securities or maintain a net short position.
10. 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.
11. Invest in warrants valued at lower of cost or
market exceeding 5% of the Series' net assets. Included in
that amount, but not to exceed 2% of the Series' net assets,
may be warrants not listed on the New York Stock Exchange or
American Stock Exchange.
12. Purchase or retain the securities of any issuer
which has an officer, director or security holder who is a
director or officer of the Fund or of its investment manager
if or so long as the directors and officers of the Fund and
of its investment manager together own beneficially more than
5% of any class of securities of such issuer.
13. Invest in interests in oil, gas or other mineral
exploration or development programs.
14. Invest more than 10% of the Series' total assets in
repurchase agreements maturing in more than seven days and
other illiquid assets.
15. Borrow money in excess of one-third of the value of
its net assets and then only as a temporary measure for
extraordinary purposes or to facilitate redemptions. The
Series has no intention of increasing its net income through
borrowing. Any borrowing will be done from a bank and to the
extent that such borrowing exceeds 5% of the value of the
Series' net assets, asset coverage of at least 300% is
required. In the event that such asset coverage shall at any
time fall below 300%, the Series shall, within three days
thereafter (not including Sunday or holidays) or such longer
period as the Securities and Exchange Commission may
prescribe by rules and regulations, reduce the amount of its
borrowings to such an extent that the asset coverage of such
borrowings shall be at least 300%. The Series will not
pledge more than 10% of its net assets. The Series will not
issue senior securities as defined in the Investment Company
Act of 1940, except for notes to banks. Investment
securities will not normally be purchased while the Series
has an outstanding borrowing.
Although not a fundamental investment restriction, the
Fund currently does not invest its assets in real estate
limited partnerships.
Investment Policies--The application of the Series'
investment policy will be dependent upon the judgment of
Delaware Management Company, Inc. (the "Manager"). In
accordance with the judgment of the Manager, the proportions
of the Series' assets invested in particular industries will
vary from time to time. The securities in which the Series
invests may or may not be listed on a national stock
exchange, but if they are not so listed will generally have
an established over-the-counter market. While management
believes that the investment objective can be achieved by
investing in common stock, the portfolio may be invested in
other securities including, but not limited to, convertible
securities, preferred stocks, bonds, warrants and foreign
securities. In periods during which the Manager feels that
market conditions warrant a more defensive portfolio
positioning, the Series may also invest temporarily in
various types of fixed income obligations.
In addition, from time to time, the Series may also
engage in the following investment techniques:
Repurchase Agreements--While the Series is permitted to
do so, it normally does not invest in repurchase agreements,
except to invest 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 to allow the
Delaware Group funds jointly to invest cash balances. The
Series may invest cash balances in a joint repurchase
agreement in accordance with the terms of the Order and
subject generally to the conditions described below.
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 Series, if any, would be the difference between
the repurchase price and the market value of the security.
The Series 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
Series must have collateral of at least 100% of the
repurchase price, including the portion representing the
Series' yield under such agreements which is monitored on a
daily basis.
Options--The Series may write call options and purchase
put options on a covered basis only, and will not engage in
option writing strategies for speculative purposes.
A. Covered Call Writing--The Series may write covered
call options from time to time on such portion of its
portfolio, without limit, as the Manager determines is
appropriate in seeking to obtain the Series' investment
objective. A call option gives the purchaser of such option
the right to buy, and the writer, in this case the Series,
has the obligation to sell the underlying security at the
exercise price during the option period. The advantage to
the Series of writing covered calls is that the Series
receives a premium which is additional income. However, if
the security rises in value, the Series may not fully
participate in the market appreciation.
During the option period, a covered call option writer
may be assigned an exercise notice by the broker/dealer
through whom such call option was sold requiring the writer
to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the
expiration of the option period or at such earlier time in
which the writer effects a closing purchase transaction. A
closing purchase transaction cannot be effected with respect
to an option once the option writer has received an exercise
notice for such option.
With respect to both options on actual portfolio
securities owned by the Series and options on stock indices,
the Series may enter into closing purchase transactions. A
closing purchase transaction is one in which the Series, when
obligated as a writer of an option, terminates its obligation
by purchasing an option of the same series as the option
previously written.
Closing purchase transactions will ordinarily be
effected to realize a profit on an outstanding call option,
to prevent an underlying security from being called, to
permit the sale of the underlying security or to enable the
Series to write another call option on the underlying
security with either a different exercise price or expiration
date or both. The Series may realize a net gain or loss from
a closing purchase transaction depending upon whether the net
amount of the original premium received on the call option is
more or less than the cost of effecting the closing purchase
transaction. Any loss incurred in a closing purchase
transaction may be partially or entirely offset by the
premium received from a sale of a different call option on
the same underlying security. Such a loss may also be wholly
or partially offset by unrealized appreciation in the market
value of the underlying security. Conversely, a gain
resulting from a closing purchase transaction could be offset
in whole or in part by a decline in the market value of the
underlying security.
If a call option expires unexercised, the Series will
realize a short-term capital gain in the amount of the
premium on the option, less the commission paid. Such a
gain, however, may be offset by depreciation in the market
value of the underlying security during the option period.
If a call option is exercised, the Series will realize a gain
or loss from the sale of the underlying security equal to the
difference between the cost of the underlying security, and
the proceeds of the sale of the security plus the amount of
the premium on the option, less the commission paid.
The market value of a call option generally reflects the
market price of an underlying security. Other principal
factors affecting market value include supply and demand,
interest rates, the price volatility of the underlying
security and the time remaining until the expiration date.
The Series will write call options only on a covered
basis, which means that the Series will own the underlying
security subject to a call option at all times during the
option period. Unless a closing purchase transaction is
effected, the Series would be required to continue to hold a
security which it might otherwise wish to sell, or deliver a
security it would want to hold. Options written by the
Series will normally have expiration dates between one and
nine months from the date written. The exercise price of a
call option may be below, equal to or above the current
market value of the underlying security at the time the
option is written.
B. Purchasing Put Options--The Series may invest up to
2% of its total assets in the purchase of put options. The
Series will, at all times during which it holds a put option,
own the security covered by such option.
The Series intends to purchase put options in order to
protect against a decline in the market value of the
underlying security below the exercise price less the premium
paid for the option ("protective puts"). The ability to
purchase put options will allow the Series to protect
unrealized gain in an appreciated security in its portfolio
without actually selling the security. If the security does
not drop in value, the Series will lose the value of the
premium paid. The Series may sell a put option which it has
previously purchased prior to the sale of the securities
underlying such option. Such sales will result in a net gain
or loss depending on whether the amount received on the sale
is more or less than the premium and other transaction costs
paid on the put option which is sold.
The Series may sell a put option purchased on individual
portfolio securities or stock indices. Additionally, the
Series may enter into closing sale transactions. A closing
sale transaction is one in which the Series, when it is the
holder of an outstanding option, liquidates its position by
selling an option of the same series as the option previously
purchased.
Options on Stock Indices
A stock index assigns relative values to the common
stocks included in the index with the index fluctuating with
changes in the market values of the underlying common stock.
Options on stock indices are similar to options on
stocks but have different delivery requirements. Stock
options provide the right to take or make delivery of the
underlying stock at a specified price. A stock index option
gives the holder the right to receive a cash "exercise
settlement amount" equal to (i) the amount by which the fixed
exercise price of the option exceeds (in the case of a put)
or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by
(ii) a fixed "index multiplier." Receipt of this cash amount
will depend upon the closing level of the stock index upon
which the option is based being greater than (in the case of
a call) or less than (in the case of a put) the exercise
price of the option. The amount of cash received will be
equal to such difference between the closing price of the
index and exercise price of the option expressed in dollars
times a specified multiple. The writer of the option is
obligated, in return for the premium received, to make
delivery of this amount. Gain or loss to the Series on
transactions in stock index options will depend on price
movements in the stock market generally (or in a particular
industry or segment of the market) rather than price
movements of individual securities.
As with stock options, the Series may offset its
position in stock index options prior to expiration by
entering into a closing transaction on an Exchange or it may
let the option expire unexercised.
A stock index fluctuates with changes in the market
values of the stock so included. Some stock index options
are based on a broad market index such as the Standard &
Poor's 500 or the New York Stock Exchange Composite Index, or
a narrower market index such as the Standard & Poor's 100.
Indices are also based on an industry or market segment such
as the AMEX Oil and Gas Index or the Computer and Business
Equipment Index. Options on stock indices are currently
traded on the following Exchanges among others: The Chicago
Board Options Exchange, New York Stock Exchange and American
Stock Exchange.
The Series' ability to hedge effectively all or a
portion of its securities through transactions in options on
stock indices depends on the degree to which price movements
in the underlying index correlate with price movements in the
Series' portfolio securities. Since the Series' portfolio
will not duplicate the components of an index, the
correlation will not be exact. Consequently, the Series
bears the risk that the prices of the securities being hedged
will not move in the same amount as the hedging instrument.
It is also possible that there may be a negative correlation
between the index or other securities underlying the hedging
instrument and the hedged securities which would result in a
loss on both such securities and the hedging instrument.
Positions in stock index options may be closed out only
on an Exchange which provides a secondary market. There can
be no assurance that a liquid secondary market will exist for
any particular stock index option. Thus, it may not be
possible to close such an option. The inability to close
options positions could have an adverse impact on the Series'
ability to effectively hedge its securities. The Series will
enter into an option position only if there appears to be a
liquid secondary market for such options.
The Series will not engage in transactions in options on
stock indices for speculative purposes but only to protect
appreciation attained, to offset capital losses and to take
advantage of the liquidity available in the option markets.
Foreign Securities
The Series may invest in securities of foreign
companies. However, the Series will not invest more than 25%
of the value of its total assets, at the time of purchase, in
foreign securities (other than securities of Canadian issuers
registered under the Securities Exchange Act of 1934 or
American Depository Receipts, on which there are no such
limits).
There has been in the past, and there may be again in
the future, an interest equalization tax levied by the United
States in connection with the purchase of foreign securities
such as those purchased by the Series. Payment of such
interest equalization tax, if imposed, would reduce the
Series' rate of return on its investment. Dividends paid by
foreign issuers may be subject to withholding and other
foreign taxes which may decrease the net return on such
investments as compared to dividends paid to the Series by
United States corporations.
Investors should recognize that investing in foreign
corporations involves certain considerations, including those
set forth below, which are not typically associated with
investing in United States corporations. Foreign
corporations are not generally subject to uniform accounting,
auditing and financial standards and requirements comparable
to those applicable to United States corporations. There may
also be less supervision and regulation of foreign stock
exchanges, brokers and listed corporations than exist in the
United States. The Series may be affected either unfavorably
or favorably by fluctuations in the relative rates of
exchange as between the currencies of different nations and
exchange control regulations. Furthermore, there may be the
possibility of expropriation of confiscatory taxation,
political, economic or social instability or diplomatic
developments which could affect assets of the Series held in
foreign countries.
American Depository Receipts
The Series may make foreign investments through the
purchase and sale of sponsored or unsponsored American
Depository Receipts ("ADRs"). ADRs are receipts typically
issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign
corporation. "Sponsored" ADRs are issued jointly by the
issuer of the underlying security and a depository, whereas
"unsponsored" ADRs are issued without participation of the
issuer of the deposited security. Holders of unsponsored
ADRs generally bear all the costs of such facilities and the
depository of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received
from the issuer of the deposited security or to pass through
voting rights to the holders of such receipts in respect of
the deposited securities. Therefore, there may not be a
correlation between information concerning the issuer of the
security and the market value of an unsponsored ADR.
Portfolio Loan Transactions
The Series may loan up to 25% of its assets to qualified
broker/dealers or institutional investors for their use
relating to short sales or other security transactions.
It is the understanding of the Manager that the staff of
the Securities and Exchange Commission permits portfolio
lending by registered investment companies if certain
conditions are met. These conditions are as follows: 1)
each transaction must have 100% collateral in the form of
cash, short-term U.S. government securities, or irrevocable
letters of credit payable by banks acceptable to the Fund
from the borrower; 2) this collateral must be valued daily
and should the market value of the loaned securities
increase, the borrower must furnish additional collateral to
the Series; 3) the Fund must be able to terminate the loan
after notice, at any time; 4) the Series 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
Series may pay reasonable custodian fees in connection with
the loan; and 6) the voting rights on the lent securities may
pass to the borrower; however, if the directors of 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 Series 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 Series 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.
ACCOUNTING AND TAX ISSUES
When the Series writes a call, or purchases a put
option, an amount equal to the premium received or paid by it
is included in the section of the Series' assets and
liabilities as an asset and as an equivalent liability.
In writing a call, the amount of the liability is
subsequently "marked to market" to reflect the current market
value of the option written. The current market value of a
written option is the last sale price on the principal
Exchange on which such option is traded or, in the absence of
a sale, the mean between the last bid and asked prices. If
an option which the Series has written expires on its
stipulated expiration date, the Series reports a realized
gain. If the Series enters into a closing purchase
transaction with respect to an option which the Series has
written, the Series realizes a gain (or loss if the cost of
the closing transaction exceeds the premium received when the
option was sold) without regard to any unrealized gain or
loss on the underlying security, and the liability related to
such option is extinguished. Any such gain or loss is a
short-term capital gain or loss for federal income tax
purposes. If a call option which the Series has written is
exercised, the Series realizes a capital gain or loss (long-
term or short-term, depending on the holding period of the
underlying security) from the sale of the underlying security
and the proceeds from such sale are increased by the premium
originally received.
The premium paid by the Series for the purchase of a put
option is recorded in the section of the Series' assets and
liabilities as an investment and subsequently adjusted daily
to the current market value of the option. For example, if
the current market value of the option exceeds the premium
paid, the excess would be unrealized appreciation and,
conversely, if the premium exceeds the current market value,
such excess would be unrealized depreciation. The current
market value of a purchased option is the last sale price on
the principal Exchange on which such option is traded or, in
the absence of a sale, the mean between the last bid and
asked prices. If an option which the Series has purchased
expires on the stipulated expiration date, the Series
realizes a short-term or long-term capital loss for federal
income tax purposes in the amount of the cost of the option.
If the Series sells the put option, it realizes a short-term
or long-term capital gain or loss, depending on whether the
proceeds from the sale are greater or less than the cost of
the option. If the Series exercises a put option, it
realizes a capital gain or loss (long-term or short-term,
depending on the holding period of the underlying security)
from the sale of the underlying security and the proceeds
from such sale will be decreased by the premium originally
paid. However, since the purchase of a put option is treated
as a short sale for federal income tax purposes, the holding
period of the underlying security will be affected by such a
purchase.
Options on Certain Stock Indices--Accounting for options
on certain stock indices will be in accordance with generally
accepted accounting principles. The amount of any realized
gain or loss on closing out such a position will result in a
realized gain or loss for tax purposes. Such options held by
the Series at the end of each fiscal year will be required to
be "marked to market" for federal income tax purposes. Sixty
percent of any net gain or loss recognized on such deemed
sales or on any actual sales will be treated as long-term
capital gain or loss, and the remainder will be treated as
short-term capital gain or loss.
Other Tax Requirements--The Series has qualified, and
intends to continue to qualify, as a regulated investment
company under Subchapter M of the Internal Revenue Code of
1986, as amended. The Series must meet several requirements
to maintain its status as a regulated investment company.
Among these requirements are that at least 90% of its
investment company taxable income be derived from dividends,
interest, payments with respect to securities loans and gains
from the sale or disposition of securities; that at the close
of each quarter of its taxable year at least 50% of the value
of its assets consist of cash and cash items, government
securities, securities of other regulated investment
companies and, subject to certain diversification
requirements, other securities; and that less than 30% of its
gross income be derived from sales of securities held for
less than three months.
The requirement that not more than 30% of the Fund's
gross income be derived from gains from the sale or other
disposition of securities held for less than three months may
restrict the Series in its ability to write covered call
options on securities which it has held less than three
months, to write options which expire in less than three
months, to sell securities which have been held less than
three months and to effect closing purchase transactions with
respect to options which have been written less than three
months prior to such transactions. Consequently, in order to
avoid realizing a gain within the three-month period, the
Series may be required to defer the closing out of a contract
beyond the time when it might otherwise be advantageous to do
so. The Series may also be restricted in the sale of
purchased put options and the purchase of put options for the
purpose of hedging underlying securities because of the
application of the short sale holding period rules with
respect to such underlying securities. The straddle rules of
Section 1092 may apply. Generally, the straddle provisions
require the deferral of losses to the extent of unrecognized
gains related to the offsetting positions in the straddle.
Excess losses, if any, can be recognized in the year of loss.
Deferred losses will be carried forward and recognized in the
year that unrealized losses exceed unrealized gains.
PERFORMANCE INFORMATION
From time to time, the Series may state each Class'
total return in advertisements and other types of literature.
Any statements of total return performance data for a Class
will be accompanied by information on the average annual
compounded rate of return for that Class over, as relevant,
the most recent one-, five- and ten-year (or life of fund, if
applicable) periods. The Series 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:
P(1+T)/n/ = ERV
Where: P = a hypothetical initial purchase
order of $1,000 from which the
maximum front-end sales charge with
respect to Class A Shares, if any,
is deducted;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical
$1,000 purchase at the end of the
period after the deduction of the
applicable CDSC, if any, with
respect to Class B Shares.
Aggregate total return is calculated in a similar
manner, except that the results are not annualized. Each
calculation assumes the maximum front-end sales charge, if
any, is deducted from the initial $1,000 investment at the
time it is made with respect to Class A Shares, and that all
distributions are reinvested at net asset value, and, with
respect to the Class B Shares, includes the CDSC that would
be applicable upon complete redemption of such shares. In
addition, the Series may present total return information
that does not reflect the decuction of the maximum front-end
sales charge or any applicable CDSC.
The performance of the Class A Shares and the
Institutional Class, as shown below, is the average annual
total return quotations for the one- and five-year periods
ended September 30, 1994, and for the life of the Series,
computed as described above. The average annual total return
for the Class A Shares at offer reflects the maximum front-
end sales charges paid on the purchase of shares. The
average annual total return for Class A Shares at net asset
value (NAV) does not reflect the payment of the maximum
front-end sales charge of 5.75%. Securities prices
fluctuated during the periods covered and past results should
not be considered as representative of future performance.
Pursuant to applicable regulation, total return shown for the
Institutional Class for the periods prior to the commencement
of operations of such Class is calculated by taking the
performance of the Class A Shares and adjusting it to reflect
the elimination of all sales charges. However, for those
periods no adjustment has been made to eliminate the impact
of 12b-1 payments, and performance would have been affected
had such an adjustment been made.
Average Annual Total Return
Class A Class A Institutional
Shares Shares Class**
(at Offer) (at NAV)
1 year
ended
9/30/94 (4.65%) 1.17% 1.48%
5 years
ended
9/30/94 7.15% 8.42% 8.54%
Period
3/27/86*
to 9/30/94 21.90% 22.74% 22.82%
* Date of initial public offering of Class A Shares.
** Date of initial public offering was November 9, 1992.
The performance of the Class B Shares, as shown below,
is the aggregate total return quotation for the period
September 6, 1994 (date of initial public offering) through
September 30, 1994. The aggregate total return for Class B
Shares (Including Deferred Sales Charge) reflects the
deduction of the applicable CDSC that would be paid if the
shares were redeemed at September 30, 1994. The aggregate
total return for Class B Shares (Excluding Deferred Sales
Charge) assumes the shares were not redeemed at September 30,
1994 and therefore does not reflect the deduction of a CDSC.
Aggregate Total Return
Class B Shares Class B Shares
(Including Deferred (Excluding Deferred
Sales Charge) Sales Charge)
Period
9/6/94*
through
9/30/94 (2.49%) 1.51%
* Date of initial public offering of Class B Shares; total
return for this short of a time period may not be
representative of longer-term results.
From time to time, the Series 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 & Poor's 500 Stock Index and the Dow Jones
Industrial Average and other unmanaged indices.
The Standard & Poor's 500 Stock Index and the Dow Jones
Industrial Average are industry-accepted unmanaged indices of
generally-conservative securities used for measuring general
market performance. The total return performance reported
will reflect the reinvestment of all distributions on a
quarterly basis and market price fluctuations. The indices
do not take into account any sales charge or other fees. In
seeking a particular investment objective, the Series'
portfolio primarily includes common stocks considered by the
Manager to be more aggressive than those tracked by these
indices.
Total return performance 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 Series in the
future.
The Series may also state total return performance of
each Class in the form of an average annual return. This
average annual return figure will be computed by taking the
sum of annual returns, then dividing that figure by the
number of years in the overall period indicated. The
computation will reflect the impact of the maximum front-end
or contingent deferred sales charge, if any, paid on the
illustrated investment amount against the first year's
return. From time to time, the Series may quote actual total
return performance in advertising and other types of
literature compared to indices or averages of alternative
financial products available to prospective investors. For
example, the performance comparisons may include the average
return of various bank instruments, some of which may carry
certain return guarantees offered by leading banks and
thrifts as monitored by Bank Rate Monitor, and those of
generally-accepted corporate bond and government security
price indices of various durations prepared by Lehman
Brothers and Salomon Brothers, Inc. These indices are not
managed for any investment goal.
Statistical and performance information and various
indices compiled and maintained by organizations such as the
following may also be used in preparing exhibits comparing
certain industry trends and competitive mutual fund
performance to comparable Series activity and performance and
in illustrating general financial planning principles. From
time to time, certain mutual fund performance ranking
information, calculated and provided by these organizations,
may also be used in the promotion of sales in the Fund. Any
indices used are not managed for any investment goal.
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.
Russell Indexes is an investment analysis service that
provides both current and historical stock performance
information, focusing on the business fundamentals of
those firms issuing the security.
Salomon Brothers and Lehman Brothers are statistical
research firms that maintain databases of international
market, bond market, corporate and government-issued
securities of various maturities. This information, as
well as unmanaged indices compiled and maintained by
these firms, will be used in preparing comparative
illustrations.
Comparative information on the Consumer Price Index and
the CDA Growth Index may also be included. The Consumer
Price Index, as prepared by the U.S. Bureau of Labor
Statistics, is the most commonly used measure of inflation.
It indicates the cost fluctuations of a representative group
of consumer goods. It does not represent a return from an
investment. The CDA Growth Index was developed and is
maintained by CDA Technologies, Inc. The Index is comprised
of 230 separately-managed, growth-oriented equity mutual
funds. It reflects the reinvestment of any dividend and
capital gains distributions paid during a specified period.
The following table is an example, for purposes of
illustration only, of cumulative total return performance for
the Class A Shares and the Institutional Class for the one-,
three- and five- year periods ended September 30, 1994, and
for the life of the Series. Cumulative total return for the
Class B Shares for the period September 6, 1994 (date of
initial public offering) through September 30, 1994 is also
provided below. For these purposes, the calculation assumes
the reinvestment of any realized securities profits
distributions and income dividends paid during the period.
Comparative information on the Standard & Poor's 500 Stock
Index, the Dow Jones Industrial Average and the Nasdaq
Composite Index is also included.
The performance of each Class, as shown below, reflects
maximum sales charges, if any, paid on the purchase of
shares, as applicable, but not any income taxes payable by
shareholders on the reinvested distributions included in the
calculations. The net asset value of a Class fluctuates so
shares, when redeemed, may be worth more or less than the
original investment, and a Class' results should not be
considered as representative of future performance.
Cumulative Total Return
Dow
Institu- Standard Jones
Class A tional & Poor's Indus- Nasdaq
Shares Class** 500 trial Composite
(at Offer)
1 year
ended
9/30/94 (4.65%) 1.48% 3.68% 8.10% 0.20%
3 years
ended
9/30/94 15.97% 23.70% 30.06% 27.39% 45.06%
5 years
ended
9/30/94 41.25% 50.65% 54.74% 42.72% 61.61%
Period
3/27/86*
to
9/30/94 439.76% 475.68% 154.64% 111.33% 103.96%
Standard Dow Jones
Class B Class B & Poor's Indus- Nasdaq
Shares Shares 500 trial Composite
(Including (Excluding
Deferred Deferred
Sales Sales
Charge) Charge)
Period
9/6/94***
through
9/30/94 (2.49%) 1.51% (2.44%) (1.79%) (1.70%)
* Date of initial public offering of Class A Shares.
** Date of initial public offering was November 9, 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.
*** Date of initial public offering of Class B Shares; total
return for this short of a time period may not be
representative of longer-term results.
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 financial
planning. One typical way of addressing these issues is to
compare an individual's goals and the length of time the
individual has to attain these goals to his or her risk
threshold. In addition, the Distributor will provide
information that discusses the Manager's overriding
investment philosophy and how that philosophy impacts the
Fund's, and other Delaware Group funds', investment
disciplines employed in meeting their objectives. The
Distributor may also from time to time cite general or
specific information about the institutional clients of the
Manager, including the number of such clients serviced by the
Manager.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for
additional Fund shares, your investment is given yet another
opportunity to grow. It's called the Power of Compounding
and the following chart illustrates just how powerful it can
be.
COMPOUNDED RETURNS
Results of various assumed fixed rates of return on a
$10,000 investment compounded monthly for 10 years:
9% Rate 11% Rate 13% Rate
of Return of Return of Return
Dec. '85 $10,900 $11,100 $11,300
Dec. '86 $11,881 $12,321 $12,769
Dec. '87 $12,950 $13,676 $14,429
Dec. '88 $14,116 $15,181 $16,305
Dec. '89 $15,386 $16,851 $18,424
Dec. '90 $16,771 $18,704 $20,820
Dec. '91 $18,280 $20,762 $23,526
Dec. '92 $19,926 $23,046 $26,584
Dec. '93 $21,719 $25,581 $30,040
Dec. '94 $23,674 $28,394 $33,946
These figures are calculated assuming a fixed constant
investment return and assume no fluctuation in the value of
principal. These figures do not reflect payment of
applicable taxes, are not intended to be a projection of
investment results and do not reflect the actual performance
results of any of the Classes.
TRADING PRACTICES AND BROKERAGE
The Fund selects brokers or dealers to execute
transactions on behalf of the Series for the purchase or sale
of portfolio securities on the basis of its judgment of their
professional capability to provide the service. The primary
consideration is to have brokers or dealers execute
transactions at best price and execution. Best price and
execution refers to many factors, including the price paid or
received for a security, the commission charged, the
promptness and reliability of execution, the confidentiality
and placement accorded the order and other factors affecting
the overall benefit obtained by the account on the
transaction. The Fund pays reasonably competitive brokerage
commission rates based upon the professional knowledge of its
trading department as to rates paid and charged for similar
transactions throughout the securities industry. In some
instances, the Fund pays a minimal share transaction cost
when the transaction presents no difficulty. A number of
trades are made on a net basis where the Fund either buys
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.
During the fiscal years ended September 30, 1992, 1993
and 1994, the aggregate dollar amounts of brokerage
commissions paid by the Series were $940,922, $1,447,091 and
$1,030,567, 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 September 30, 1994,
portfolio transactions of the Series in the amount of
$307,418,028, resulting in brokerage commissions of $752,832
were directed to brokers for brokerage and research services
provided.
As provided in the Securities Exchange Act of 1934 and
the Series' Investment Management Agreement, higher
commissions are permitted to be paid to broker/dealers who
provide brokerage and research services than to
broker/dealers who do not provide such services if such
higher commissions are deemed reasonable in relation to the
value of the brokerage and research services provided.
Although transactions are directed to broker/dealers who
provide such brokerage and research services, the Fund
believes that the commissions paid to such broker/dealers are
not, in general, higher than commissions that would be paid
to broker/dealers not providing such services and that such
commissions are reasonable in relation to the value of the
brokerage and research services provided. In some instances,
services may be provided to the Manager which constitute in
some part brokerage and research services used by the Manager
in connection with its investment decision-making process and
constitute in some part services used by the Manager in
connection with administrative or other functions not related
to its investment decision-making process. In such cases,
the Manager will make a good faith allocation of brokerage
and research services and will pay out of its own resources
for services used by the Manager in connection with
administrative or other functions not related to its
investment decision-making process. In addition, so long as
no fund is disadvantaged, portfolio transactions which
generate commissions or their equivalent are allocated to
broker/dealers who provide daily portfolio pricing services
to the Fund and to other funds in the Delaware Group.
Subject to best price and execution, commissions allocated to
brokers providing such pricing services may or may not be
generated by the funds receiving the pricing service.
The Manager may place a combined order for two or more
accounts or funds engaged in the purchase or sale of the same
security if, in its judgment, joint execution is in the best
interest of each participant and will result in best price
and execution. Transactions involving commingled orders are
allocated in a manner deemed equitable to each account or
fund. When a combined order is executed in a series of
transactions at different prices, each account participating
in the order may be allocated an average price obtained from
the executing broker. It is believed that the ability of the
accounts to participate in volume transactions will generally
be beneficial to the accounts and funds. Although it is
recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security
that a particular account or fund may obtain, it is the
opinion of the Manager and the Fund's Board of Directors that
the advantages of combined orders outweigh the possible
disadvantages of separate transactions.
Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. (the
"NASD"), and subject to seeking best price and execution, the
Fund may place orders with broker/dealers that have agreed to
defray certain Series expenses such as custodian fees, and
may, at the request of the Distributor, give consideration to
sales of shares of the Series as a factor in the selection of
brokers and dealers to execute Series portfolio transactions.
Portfolio Turnover
Portfolio trading will be undertaken principally to
accomplish the Series' objective in relation to anticipated
movements in the general level of interest rates. The Series
is free to dispose of portfolio securities at any time,
subject to complying with the Internal Revenue Code and the
Investment Company Act of 1940, when changes in circumstances
or conditions make such a move desirable in light of the
investment objective. The Series will not attempt to achieve
or be limited to a predetermined rate of portfolio turnover,
such a turnover always being incidental to transactions
undertaken with a view to achieving the Series' investment
objective.
The degree of portfolio activity may affect brokerage
costs of the Series and taxes payable by the Series'
shareholders. It is anticipated that, given the Series'
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 Series' portfolio at the beginning of the
year were replaced by the end of the year. In investing for
capital appreciation, the Series may hold securities for any
period of time. Portfolio turnover will also be increased if
the Series writes a large number of call options which are
subsequently exercised. To the extent the Series realizes
gains on securities held for less than six months, such gains
are taxable to the shareholder or to the Series at ordinary
income tax rates. The turnover rate also may be affected by
cash requirements from redemptions and repurchases of Series
shares. Total brokerage costs generally increase with higher
portfolio turnover rates.
Under certain market conditions, the Series may
experience a high rate of portfolio turnover which could
exceed 100%. The portfolio turnover rate of the Series 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 Series 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 Series' portfolio turnover rates were 51% and 34%
for 1993 and 1994, respectively.
PURCHASING SHARES
The Distributor serves as the national distributor for
the Series' three classes of shares - the Class A Shares, the
Class B Shares and the Institutional Class, and has agreed to
use its best efforts to sell shares of the Series. See the
Prospectuses for additional information on how to invest.
Shares of the Series are offered on a continuous basis, and
may be purchased through authorized investment dealers or
directly by contacting the Fund or its agent. The minimum
for initial investments with respect to the Class A Shares is
$250 and with respect to the Class B Shares is $1,000. For
any subsequent investment, the investment minimum is $25 with
respect to the Class A Shares and $100 with respect to the
Class B Shares. Class B Shares are also subject to a maximum
purchase limitation of $250,000. The Fund will therefore
reject any order for purchase of more than $250,000 of Class
B Shares. (See Investment Plans for minimums applicable to
each of the Fund's master Retirement Plans.) There are no
minimum purchase requirements for the Institutional Class,
but certain eligibility requirements must be satisfied.
Selling dealers have the responsibility of transmitting
orders promptly. The Fund reserves the right to reject any
order for the purchase of Series shares if in the opinion of
management such rejection is in the Series' best interest.
Certificates representing shares purchased are not
ordinarily issued unless a shareholder submits a specific
request. Certificates are not issued in the case of the
Class B Shares. However, purchases not involving the
issuance of certificates are confirmed to the investor and
credited to the shareholder's account on the books maintained
by Delaware Service Company, Inc. (the "Transfer Agent").
The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued.
An investor that is permitted to obtain a certificate may
receive a certificate representing shares purchased by
sending a letter to the Transfer Agent requesting the
certificate. No charge is made for any certificate issued.
Investors who hold certificates representing any of their
shares may only redeem those shares by written request. The
investor's certificate(s) must accompany such request.
The NASD has adopted amendments to its Rules of Fair
Practice relating to investment company sales charges. The
Fund and the Distributor intend to operate in compliance with
these rules.
Class A Shares are purchased at the offering price which
reflects a maximum front-end sales charge of 5.75%; however,
lower front-end sales charges apply for larger purchases.
See the following table. Class A Shares are also subject to
annual 12b-1 Plan expenses.
Class B Shares are purchased at net asset value and are
subject to a CDSC of: (i) 4% if shares are redeemed within
two years of purchase; (ii) 3% if shares are redeemed during
the third and 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 12b-1
Plan expenses which are higher than those to which Class A
Shares are subject and are assessed against the Class B
Shares for no longer than approximately eight years after
purchase. See Automatic Conversion of Class B Shares in the
Fund Classes' Prospectus, and Determining Offering Price and
Net Asset Value and Plans Under Rule 12b-1 for the Fund
Classes in this Part B.
Institutional Class shares are purchased at the net
asset value per share without the imposition of a front-end
or contingent deferred sales charge or 12b-1 Plan expenses.
Institutional Class shares, Class A Shares and Class B Shares
represent a proportionate interest in the Series' assets and
will receive a proportionate interest in the Series' income,
before application, as to the Class A and Class B Shares, of
any expenses under the Fund's 12b-1 Plans.
Alternative Purchase Arrangements
The alternative purchase arrangements of the Class A and
Class B Shares permit investors to choose the method of
purchasing shares that is most beneficial given the amount of
their purchase, the length of time they expect to hold their
shares and other relevant circumstances. Investors should
determine whether, under their particular circumstances, it
is more advantageous to purchase the Class A Shares and incur
a front-end sales charge and annual 12b-1 Plan expenses of up
to a maximum of .30% of the average daily net assets of the
Class A Shares or to purchase the Class B Shares and have the
entire initial purchase price invested in the Series with the
investment thereafter subject to a CDSC if shares are
redeemed within six years of purchase and annual 12b-1 Plan
expenses of 1% (.25% of which are service fees to be paid by
the Series to the Distributor, dealers or others for
providing personal service and/or maintaining shareholder
accounts) of the average daily net assets of the Class B
Shares for no longer than approximately eight years after
purchase.
Class A Shares
Purchases of $100,000 or more of the Class A Shares at
the offering price carry reduced front-end sales charges as
shown in the accompanying table, and may include a series of
purchases over a 13-month period under a Letter of Intention
signed by a purchaser. See Special Purchase Features - Class
A Shares for more information on ways in which investors can
avail themselves of reduced front-end sales charges and other
purchase features.
Class A Shares
------------------------------------------------------------
Dealer's
Front-End Concession**
Sales Charge as % of as % of
Offering Amount Offering
Amount of Purchase Price Invested Price
------------------------------------------------------------
Less than $100,000 5.75% 6.10% 5.00%
$100,000 but
under $250,000 4.75 4.99 4.00
$250,000 but
under $500,000 3.50 3.63 3.00
$500,000 but
under $1,000,000* 3.00 3.09 2.60
* There is no front-end sales charge on purchases of $1
million or more but, under certain limited
circumstances, a 1% contingent deferred sales charge may
apply. The contingent deferred sales charge ("Limited
CDSC") that may be applicable to purchases of Class A
Shares arises only in the case of certain net asset
value purchases which have triggered the payment of a
dealer's commission.
------------------------------------------------------------
The Fund must be notified when a sale takes place which
would qualify for the reduced front-end sales charge on
the basis of previous purchases and current purchases.
The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by the Fund.
Such reduced front-end sales charges are not
retroactive.
From time to time, upon written notice to all of its
dealers, the Distributor may hold special promotions for
specified periods during which the Distributor may
reallow dealers up to the full front-end sales charge
shown above. Dealers who receive 90% or more of the
sales charge may be deemed to be underwriters under the
Securities Act of 1933.
** Financial institutions or their affiliated brokers may
receive an agency transaction fee in the percentages set
forth above.
------------------------------------------------------------
Certain dealers who enter into an agreement to provide
extra training and information on Delaware Group products and
services and to increase sales of Delaware Group funds may
receive an additional concession of up to .15% of the
offering price in connection with sales of Class A Shares.
Such dealers must meet certain requirements in terms of
organization and distribution capabilities and their ability
to increase sales. The Distributor should be contacted for
further information on these requirements as well as the
basis and circumstances upon which the additional concession
will be paid. Participating dealers may be deemed to have
additional responsibilities under the securities laws.
Dealer's Commission - Class A Shares
For initial purchases of Class A Shares of $1,000,000 or
more made on or after June 1, 1993, a dealer's commission may
be paid by the Distributor to financial advisers through whom
such purchases are effected in accordance with the following
schedule:
Dealer's
Commission
----------
(as a percentage
Amount of amount
of Purchase purchased)
-----------
Up to $2 million 1.00%
Next $1 million up to $3 million .75
Next $2 million up to $5 million .50
Amount over $5 million .25
In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other
Delaware Group funds as to which a Limited CDSC applies (see
Redemption and Repurchase) may be aggregated with those of
the Class A Shares of the Series. Financial advisers should
contact the Distributor concerning the applicability and
calculation of the dealer's commission in the case of
combined purchases. Financial advisers also may be eligible
for a dealer's commission in connection with certain
purchases made under a Letter of Intention or pursuant to an
investor's Right of Accumulation. The Distributor also
should be consulted concerning the availability of and
program for these payments.
An exchange from other Delaware Group funds will not
qualify for payment of the dealer's commission, unless such
exchange is from a Delaware Group fund with assets as to
which a dealer's commission or similar payment has not been
previously paid. The schedule and program for payment of the
dealer's commission are subject to change or termination at
any time by the Distributor in its discretion.
Class B Shares
Class B Shares are purchased without the imposition of a
front-end sales charge at the time of purchase. Class B
Shares redeemed within six years of purchase may be subject
to a CDSC at the rates set forth below, charged as a
percentage of the dollar amount subject thereto. The charge
will be assessed on an amount equal to the lesser of the net
asset value at the time of purchase of the shares being
redeemed or the net asset value of the shares at the time of
redemption. Accordingly, no CDSC will be imposed on
increases in net asset value above the initial purchase
price. In addition, no CDSC will be assessed on redemption
of shares received upon reinvestment of dividends or capital
gains. See the Prospectus for the Fund Classes under Buying
Shares - Contingent Deferred Sales Charge for a list of the
instances in which the CDSC is waived.
The following table sets forth the rates of the CDSC for
the Class B Shares of the Series:
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 of the Series,
the Class B Shares will continue to be subject to annual 12b-
1 Plan expenses of 1% of average daily net assets
representing such shares. At the end of no longer than
approximately eight years after purchase, the investor's
Class B Shares will be automatically converted into Class A
Shares of the Series. See Automatic Conversion of Class B
Shares in the Fund Classes' Prospectus. Such conversion will
constitute a tax-free exchange for federal income tax
purposes. See Taxes in the Prospectus for the Fund Classes.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the Investment Company Act
of 1940, the Fund has adopted a separate plan for each of the
Class A Shares and the Class B Shares of the Series (the
"Plans"). The Plan relating to the Class A Shares permits
the Series to pay for certain distribution, promotional and
related expenses involved in the marketing of only the Class
A Shares. Similarly, the Plan relating to the Class B Shares
permits the Series to pay for certain distribution,
promotional and related expenses involved in the marketing of
only the Class B Shares. The Plans do not apply to the
Institutional Class of shares. Such shares are not included
in calculating the Plans' fees, and the Plans are not used to
assist in the distribution and marketing of the Institutional
Class shares. Shareholders of the Institutional Class may
not vote on matters affecting the Plans.
The Plans permit the Series, pursuant to an Amended and
Restated Distribution Agreement, to pay out of the assets of
the Class A Shares and Class B Shares monthly fees to the
Distributor for its services and expenses in distributing and
promoting sales of shares of such classes. These expenses
include, among other things, preparing and distributing
advertisements, sales literature and prospectuses and reports
used for sales purposes, compensating sales and marketing
personnel, and paying distribution and maintenance fees to
securities brokers and dealers who enter into agreements with
the Distributor. The 12b-1 Plan expenses relating to the
Class B Shares are also used to pay the Distributor for
advancing the commission costs to dealers with respect to the
initial sale of such shares.
In addition, the Series may make payments out of the
assets of the Class A Shares and the Class B Shares directly
to other unaffiliated parties, such as banks, who either aid
in the distribution of shares of the Fund Classes or provide
services to such classes.
The maximum aggregate fee payable by the Series under
the Plans, and the agreements relating to distribution, is on
an annual basis .30% of the Class A Shares' average daily net
assets for the year, and 1% (.25% of which are service fees
to be paid to the Distributor, dealers and others for
providing personal service and/or maintaining shareholder
accounts) of the Class B Shares' average daily net assets for
the year. The Fund's Board of Directors may reduce these
amounts at any time.
All of the distribution expenses incurred by the
Distributor and others, such as broker/dealers, in excess of
the amount paid on behalf of the Class A and Class B Shares
will be borne by such persons without any reimbursement from
such classes. Subject to seeking best price and execution,
the Series may, from time to time, buy or sell portfolio
securities from or to firms which receive payments under the
Plans.
From time to time, the Distributor may pay additional
amounts from its own resources to dealers for aid in
distribution or for aid in providing administrative services
to shareholders.
The Plans, the Amended and Restated Distribution
Agreement and the form of dealer's and services agreements
relating thereto have all been approved by the Board of
Directors of the Fund, including a majority of the directors
who are not "interested persons" (as defined in the
Investment Company Act of 1940) of the Fund and who have no
direct or indirect financial interest in the Plans or any
related agreements, by vote cast in person or at a meeting
duly called for the purpose of voting on the Plans and such
Agreements. Continuation of the Plans, the Amended and
Restated Distribution Agreement and the form of dealer's and
services agreements must be approved annually by the Board of
Directors in the same manner as specified above.
Each year, the directors must determine whether
continuation of the Plans is in the best interest of
shareholders of, respectively, the Class A Shares and the
Class B Shares and that there is a reasonable likelihood of
the Plan relating to a Fund Class providing a benefit to that
Class. The Plans, the Amended and Restated Distribution
Agreement and the dealer's and services agreements with any
broker/dealers or others relating to a Fund Class may be
terminated at any time without penalty by a majority of those
directors who are not "interested persons" or by a majority
vote of the outstanding voting securities of the relevant
Fund Class. Any amendment materially increasing the maximum
percentage payable under the Plans must likewise be approved
by a majority vote of the outstanding voting securities of
the relevant Fund Class, as well as by a majority vote of
those directors who are not "interested persons." Also, any
other material amendment to the Plans must be approved by a
majority vote of the directors including a majority of the
noninterested directors of the Fund having no interest in the
Plans. In addition, in order for the Plans to remain
effective, the selection and nomination of directors who are
not "interested persons" of the Fund must be effected by the
directors who themselves are not "interested persons" and who
have no direct or indirect financial interest in the Plans.
Persons authorized to make payments under the Plans must
provide written reports at least quarterly to the Board of
Directors for their review.
For the fiscal year ended September 30, 1994, payments
from the Class A Shares to the Distributor pursuant to its
Plan amounted to $2,889,192. For the period September 6,
1994 (date of initial public offering) through September 30,
1994, payments from the Class B Shares to the Distributor
pursuant to its Plan amounted to $61.
Other Payments to Dealers - Class A and Class B Shares
From time to time, at the discretion of the Distributor,
all registered broker/dealers whose aggregate sales of Fund
Classes exceed certain limits as set by the Distributor, may
receive from the Distributor an additional payment of up to
.25% of the dollar amount of such sales. The Distributor may
also provide additional promotional incentives or payments to
dealers that sell shares of the Delaware Group of funds. In
some instances, these incentives or payments may be offered
only to certain dealers who maintain, have sold or may sell
certain amounts of shares.
In connection with the sale of Delaware Group fund
shares, the Distributor may, at its own expense, pay to
participate in or reimburse dealers with whom it has a
selling agreement for expenses incurred in connection with
seminars and conferences sponsored by such dealers and may
pay or allow additional promotional incentives, which 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, in the form of sales
contests to dealers who sell shares of the funds. Such
seminars and conferences and the terms of such sales contests
must be preapproved by the Distributor. Payment may be up to
100% of the expenses incurred or awards made in connection
with seminars, conferences or contests relating to the
promotion of fund shares. The Distributor may also pay a
portion of the expense of preapproved dealer advertisements
promoting the sale of Delaware Group fund shares.
Special Purchase Features - Class A Shares
Buying at Net Asset Value
The Class A Shares may be purchased without a front-end
sales charge under the Dividend Reinvestment Plan and, under
certain circumstances, the 12-Month Reinvestment Privilege
and the Exchange Privilege.
Officers, directors and employees (including former
officers and directors and former employees who had been
employed for at least ten years) of the Fund, any other fund
in the Delaware Group, the Manager, any affiliate, any fund
or affiliate that may in the future be created, legal counsel
to the funds and registered representatives and employees of
broker/dealers who have entered into Dealer's Agreements with
the Distributor may purchase Class A Shares and any such
class of shares of any of the funds in the Delaware Group,
including any fund that may be created, at the net asset
value per share. Spouses, parents, brothers, sisters and
children (regardless of age) of such persons at their
direction, and any employee benefit plan established by any
of the foregoing funds, corporations, counsel or
broker/dealers may also purchase shares at net asset value.
Purchases of Class A Shares may also be made by clients of
registered representatives of an authorized investment dealer
at net asset value within six months of a change of the
registered representative's employment, if the purchase is
funded by proceeds from an investment where a front-end sales
charge has been assessed and the redemption of the investment
did not result in the imposition of a contingent deferred
sales charge or other redemption charges. Purchase of Class
A Shares also may be made at net asset value by bank
employees that provide services in connection with agreements
between the bank and unaffiliated brokers or dealers
concerning sales of Class A Shares. Also, officers,
directors and key employees of institutional clients of the
Manager, or any of its affiliates, may purchase Class A
Shares at net asset value. Moreover, purchases may be
effected at net asset value for the benefit of the clients of
brokers, dealers and registered investment advisers
affiliated with a broker or dealer, if such broker, dealer or
investment adviser has entered into an agreement with the
Distributor providing specifically for the purchase of Class
A Shares in connection with special investment products, such
as wrap accounts or similar fee based programs. Such
purchasers are required to sign a letter stating that the
purchase is for investment only and that the securities may
not be resold except to the issuer. Such purchasers may also
be required to sign or deliver such other documents as the
Fund may reasonably require to establish eligibility for
purchase at net asset value. The Fund must be notified in
advance that the trade qualifies for purchase at net asset
value.
Investments in Class A Shares made by plan level and/or
participant retirement accounts that are for the purpose of
repaying a loan taken from such accounts will be made at net
asset value. Loan repayments made to a Delaware Group
account in connection with loans originated from accounts
previously maintained by another investment firm will also be
invested at net asset value.
Class A Shares may be deposited at net asset value,
without payment of a sales charge with respect to sales of
units of a unit investment trust ("Trust"), organized and
sponsored by Prudential Securities Incorporated dealers,
whose portfolio consists of Class A Shares and stripped
United States Treasury issued notes or bonds bearing no
current interest ("Treasury Obligations"). Unit holders of
the Trust may elect to invest cash distributions from the
Trust in Class A Shares at net asset value, including: (a)
distributions of any dividend income or other income received
by the Trust; (b) distributions of any net capital gains
received in respect of Class A Shares and proceeds of the
sale of Class A Shares not used to redeem units of the Trust;
and (c) proceeds from the maturity of the Treasury
Obligations at the termination date of the Trust.
Letter of Intention
The reduced front-end sales charges described above with
respect to the Class A Shares are also applicable to the
aggregate amount of purchases made by any such purchaser
previously enumerated within a 13-month period pursuant to a
written Letter of Intention provided by the Distributor and
signed by the purchaser, and not legally binding on the
signer or the Fund, which provides for the holding in escrow
by the Transfer Agent, of 5% of the total amount of Class A
Shares intended to be purchased until such purchase is
completed within the 13-month period. A Letter of Intention
may be dated to include shares purchased up to 90 days prior
to the date the Letter is signed. The 13-month period begins
on the date of the earliest purchase. If the intended
investment is not completed, except as noted below, the
purchaser will be asked to pay an amount equal to the
difference between the front-end sales charge on the Class A
Shares purchased at the reduced rate and the front-end sales
charge otherwise applicable to the total shares purchased.
If such payment is not made within 20 days following the
expiration of the 13-month period, the Transfer Agent will
surrender an appropriate number of the escrowed shares for
redemption in order to realize the difference. Such
purchasers may include the value (at offering price at the
level designated in their Letter of Intention) of all their
shares of the Fund and of any class of any of the other
mutual funds in the Delaware Group (except shares of any
Delaware Group fund which do not carry a front-end sales
charge or contingent deferred sales charge, other than shares
of Delaware Group Premium Fund, Inc. beneficially owned in
connection with the ownership of variable insurance products,
unless they were acquired through an exchange from shares
which do) previously purchased and still held as of the date
of their Letter of Intention toward the completion of such
Letter. For purposes of satisfying an investor's obligation
under a Letter of Intention, Class B Shares of the Series and
the corresponding class of shares of other Delaware Group
funds which offer such shares may be aggregated with the
Class A Shares of the Series and the corresponding class of
shares of the other Delaware Group funds.
Employers offering a Delaware Group Retirement Plan may
also complete a Letter of Intention to obtain a reduced
front-end sales charge on investments of the Class A Shares
made by the Plan. The aggregate investment level of the
Letter of Intention will be determined and accepted by the
Transfer Agent at the point of Plan establishment. The level
and any reduction in front-end sales charge will be based on
actual Plan participation and the projected investments in
Delaware Group funds that are offered with a front-end sales
charge or contingent deferred sales charge for a 13-month
period. The Transfer Agent reserves the right to adjust the
signed Letter of Intention based on this acceptance criteria.
The 13-month period will begin on the date this Letter of
Intention is accepted by the Transfer Agent. If actual
investments exceed the anticipated level and equal an amount
that would qualify the Plan for further discounts, any front-
end sales charges will be automatically adjusted. In the
event this Letter of Intention is not fulfilled within the
13-month period, the Plan level will be adjusted (without
completing another Letter of Intention) and the employer will
be billed for the difference in front-end sales charges due,
based on the Plan's assets under management at that time.
Employers may also include the value (at offering price at
the level designated in their Letter of Intention) of all
their shares intended for purchase that are offered with a
front-end sales charge or contingent deferred sales charge of
any class. Class B Shares of the Series and other Delaware
Group funds which offer a corresponding class of shares may
also be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end
sales charge previously set forth with respect to the Class A
Shares, purchasers may combine the total amount of any
combination of the Fund Classes of the Series as well as any
other class of any of the other Delaware Group funds (except
shares of any Delaware Group fund which do not carry a front-
end sales charge or contingent deferred sales charge, other
than shares of Delaware Group Premium Fund, Inc. beneficially
owned in connection with the ownership of variable insurance
products, unless they were acquired through an exchange from
shares which do).
The privilege also extends to all purchases made at one
time by an individual; or an individual, his or her spouse
and their children under the age 21; or a trustee or other
fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee
benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end
sales charge with respect to the Class A Shares, purchasers
may also combine any subsequent purchases of the Fund Classes
of the Series as well as any other class of any of the other
Delaware Group funds which offer such classes (except shares
of any Delaware Group fund which do not carry a front-end
sales charge or contingent deferred sales charge, other than
shares of Delaware Group Premium Fund, Inc. beneficially
owned in connection with the ownership of variable insurance
products, unless they were acquired through an exchange from
shares which do). If, for example, any such purchaser has
previously purchased and still holds Class A Shares and/or
shares of any other of the classes described in the previous
sentence with a value of $40,000 and subsequently purchases
$60,000 at offering price of additional shares of the Class A
Shares, the charge applicable to the $60,000 purchase would
currently be 4.75%. For the purpose of this calculation, the
shares presently held shall be valued at the public offering
price that would have been in effect were the shares
purchased simultaneously with the current purchase.
Investors should refer to the table of sales charges for
Class A Shares to determine the applicability of the Right of
Accumulation to their particular circumstances.
12-Month Reinvestment Privilege
Shareholders of the Class A Shares (and of the
Institutional Class holding shares which were acquired
through an exchange of one of the other mutual funds in the
Delaware Group offered with a front-end sales charge) who
redeem such shares of the Fund have one year from the date of
redemption to reinvest all or part of their redemption
proceeds in Class A Shares of the Series or in Class A Shares
of any of the other funds in the Delaware Group, subject to
applicable eligibility and minimum purchase requirements, in
states where their shares may be sold, at net asset value
without the payment of a front-end sales charge. This
privilege does not extend to Class A Shares where the
redemption of the shares triggered the payment of a Limited
CDSC. Persons investing redemption proceeds from direct
investments in mutual funds in the Delaware Group offered
without a front-end sales charge will be required to pay the
applicable sales charge when purchasing Class A Shares. The
reinvestment privilege does not extend to redemption of Class
B Shares.
Any such reinvestment cannot exceed the redemption
proceeds (plus any amount necessary to purchase a full
share). The reinvestment will be made at the net asset value
next determined after receipt of remittance. A redemption
and reinvestment could have income tax consequences. It is
recommended that a tax adviser be consulted with respect to
such transactions. Any reinvestment directed to a fund in
which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares.
Consequently, an investor should obtain and read carefully
the prospectus for the fund in which the investment is
proposed to be made before investing or sending money. The
prospectus contains more complete information about the fund,
including charges and expenses.
Investors should consult their financial advisers or the
Transfer Agent, which also serves as the Fund's shareholder
servicing agent, about the applicability of the Limited CDSC
(see Contingent Deferred Sales Charge for Certain Purchases
of Class A Shares Made at Net Asset Value under Redemption
and Exchange in the Fund Classes' Prospectus) in connection
with the features described above.
Group Investment Plans
Group Investment Plans which are not eligible to
purchase shares of the Institutional Class (e.g., SEP/IRA,
SAR/SEP, Prototype Profit Sharing, Pension and 401(k) Defined
Contribution Plans with fewer than 1,000 eligible employees)
may also benefit from the reduced front-end sales charges for
investments in Class A Shares set forth in the table on page
_____, based on total plan assets. If a company has more
than one plan investing in the Delaware Group of funds, then
the total amount invested in all plans would be used in
determining the applicable front-end sales charge reduction.
Employees participating in such Group Investment Plans may
also combine the investments made in their plan account when
determining the applicable front-end sales charge on
purchases to non-retirement Delaware Group investment
accounts. For other Retirement Plans and special services,
see Retirement Plans for the Fund Classes under Investment
Plans.
DelCap 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) banks, trust companies and similar
financial institutions investing for their own account or for
the account of their trust customers for whom such financial
institution is exercising investment discretion in purchasing
shares of the class; and (e) registered investment advisers
investing on behalf of clients that consist solely of
institutions and high net-worth individuals having at least
$1,000,000 entrusted to the adviser for investment purposes,
but only if the adviser is not affiliated or associated with
a broker or dealer and derives compensation for its services
exclusively from its clients for such advisory services.
Shares of the Institutional Class are available for
purchase at net asset value, without the imposition of a
front-end or contingent deferred sales charge and are not
subject to Rule 12b-1 expenses.
INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing,
dividends from net investment income and distributions from
realized securities profits, if any, will be automatically
reinvested in additional shares of the respective Fund Class
in which an investor has an account (based on the net asset
value in effect on the reinvestment date) and will be
credited to the shareholder's account on that date. All
dividends and distributions of the Institutional Class are
reinvested in the account of the holders of such shares
(based on the net asset value of the Fund in effect on the
reinvestment date). A confirmation of each dividend payment
from net investment income and of distributions from realized
securities profits, if any, will be mailed to shareholders in
the first quarter of the fiscal year.
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 Series for $25 or
more with respect to the Class A Shares and $100 or more with
respect to the Class B Shares; no minimum applies to the
Institutional Class. Such purchases are made for the Class A
Shares at the public offering price and, for the Class B
Shares and Institutional Class at the net asset value at the
end of the day of receipt. A reinvestment plan may be
terminated at any time. This plan does not assure a profit
nor protect against depreciation in a declining market.
Reinvestment of Dividends in Other Delaware Group Funds
Subject to applicable eligibility and minimum purchase
requirements, and the limitations set forth below,
shareholders of the Class A Shares and Class B Shares may
automatically reinvest dividends and/or distributions from
the Series in any of the other mutual funds in the Delaware
Group, including the Series, 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 proposed to be made before investing or sending money.
The prospectus contains more complete information about the
fund, including charges and expenses. See also Dividend
Reinvestment Plan in the Prospectus for the Fund Classes.
Subject to the following limitations, dividends and/or
distributions from other funds in the Delaware Group may be
invested in shares of the Series, provided an account has
been established. Dividends from the Class A Shares may not
be directed to the Class B Shares of another fund in the
Delaware Group. Dividends from the Class B Shares may only
be directed to the Class B Shares of another fund in the
Delaware Group that offers such class of shares. See Class B
Funds in the Fund Classes' Prospectus for the funds in the
Delaware Group that are eligible for investment by holders of
Series shares.
This option is not available to participants in the
following plans: SAR/SEP, SEP/IRA, Profit Sharing and Money
Purchase Pension Plans, 401(k) Defined Contribution Plans,
403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors of the Class A
Shares and Class B Shares may arrange for the Series to
accept for investment, through an agent bank, preauthorized
government or private recurring payments. This method of
investment assures the timely credit to the shareholder's
account of payments such as social security, veterans'
pension or compensation benefits, federal salaries, Railroad
Retirement benefits, private payroll checks, dividends, and
disability or pension fund benefits. It also eliminates
lost, stolen and delayed checks.
Automatic Investing Plan--Shareholders of the Class A
Shares and Class B Shares may make automatic investments by
authorizing, in advance, monthly payments directly from their
checking account for deposit into the Class. This type of
investment will be handled in either of the two ways noted
below. (1) If the shareholder's bank is a member of the
National Automated Clearing House Association ("NACHA"), the
amount of the investment will be electronically deducted from
his or her account by Electronic Fund Transfer ("EFT"). The
shareholder's checking account will reflect a debit each
month at a specified date although no check is required to
initiate the transaction. (2) If the shareholder's bank is
not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks.
Should the shareholder's bank become a member of NACHA in the
future, his or her investments would be handled
electronically through EFT.
This option is not available to participants in the
following plans: SAR/SEP, SEP/IRA, Profit Sharing and Money
Purchase Pension Plans, 401(k) Defined Contribution Plans,
403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans.
* * *
Investments under the Direct Deposit Purchase Plan and
the Automatic Investing Plan must be for $25 or more with
respect to the Class A Shares and $100 or more with respect
to the Class B Shares. An investor wishing to take advantage
of either service must complete an authorization form.
Either service can be discontinued by the shareholder at any
time without penalty by giving written notice.
Payments to the Series 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 Series.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank
or employer, to make investments directly to their Series
accounts. The Series will accept these investments, such as
bank-by-phone, annuity payments and payroll allotments, by
mail directly from the third party. Investors should contact
their employers or financial institutions who in turn should
contact the Fund for proper instructions.
Retirement Plans for the Fund Classes
An investment in the Series may be suitable for tax-
deferred Retirement Plans. Among the Retirement Plans noted
below, Class B Shares are available for investment only by
Individual Retirement Accounts, Simplified Employee Pension
Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred
Compensation Plans. The CDSC may be waived on certain
redemptions of Class B Shares. See the Prospectus for the
Fund Classes under Buying Shares - Contingent Deferred Sales
Charge for a list of the instances in which the CDSC is
waived.
The minimum initial investment for each of the
Retirement Plans described below is $250; subsequent
investments must be at least $25. Many of the Retirement
Plans described below are subject to one-time fees, as well
as annual maintenance fees. Prototype Profit Sharing and
Money Purchase Pension Plans are each subject to a one-time
fee of $200 per plan, or $300 for paired plans. No such fee
is charged for owner-only plans if the Delaware Group does
not provide a Summary Plan Description. In addition, these
plans are subject to an annual maintenance fee of $30 per
participant account. Each of the other Retirement Plans
described below (other than 401(k) Defined Contribution
Plans) is subject to an annual maintenance fee of $15 for
each participant's account, even in years when no
contributions are made, regardless of the number of funds
selected. Annual maintenance fees for 401(k) Defined
Contribution Plans are based on the number of participants in
the Plan and the services selected by the employer. Fees are
quoted upon request. Annual maintenance fees may be shared
by Delaware Management Trust Company, the Transfer Agent,
other affiliates of the Manager and others that provide
services to such Plans. Fees are subject to change.
Certain shareholder investment services available to
non-retirement plan shareholders may not be available to
Retirement Plan shareholders. Certain Retirement Plans may
qualify to purchase shares of the Institutional Class. See
DelCap Fund Institutional Class above. For additional
information on any of the Plans and Delaware's retirement
services, call the Shareholder Service Center telephone
number.
With respect to the annual maintenance fees per account
referred to above, "account" shall mean any account or group
of accounts within a Plan type identified by a common tax
identification number between or among them. Shareholders
are responsible for notifying the Fund when more than one
account is maintained under a single tax identification
number.
It is advisable for an investor considering any one of
the Retirement Plans described below to consult with an
attorney, accountant or a qualified retirement plan
consultant. For further details, including applications for
any of these Plans, contact your investment dealer or the
Distributor.
Taxable distributions from the Retirement Plans
described below may be subject to withholding.
Please contact your investment dealer or the Distributor
for the special application forms required for the Plans
described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed
individuals, partnerships and corporations which replace the
former Keogh and corporate retirement plans. These Plans
contain profit sharing or money purchase pension plan
provisions. Contributions may be invested only in Class A
Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to
establish an Individual Retirement Account ("IRA") by making
contributions which may be tax-deductible, even if the
individual is already participating in an employer-sponsored
retirement plan. Even if contributions are not deductible
for tax purposes, as indicated below, earnings will be tax-
deferred. In addition, an individual may make contributions
on behalf of a spouse who is not employed. Investments in
each of the Fund Classes are permissible.
The Tax Reform Act of 1986 (the "Act") restructured, and
in some cases eliminated, the tax deductibility of IRA
contributions. Under the Act, the full deduction for IRAs
($2,000 for each working spouse and $2,250 for one-income
couples) was retained for all taxpayers who are not covered
by an employer-sponsored retirement plan. Even if a taxpayer
(or his or her spouse) is covered by an employer-sponsored
retirement plan, the full deduction is still available if the
taxpayer's adjusted gross income is below $25,000 ($40,000
for taxpayers filing joint returns). A partial deduction is
allowed for married couples with incomes between $40,000 and
$50,000, and for single individuals with incomes between
$25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross
income before IRA deductions exceeds $50,000 ($35,000 for
singles) and who are active participants in an employer-
sponsored retirement plan. Taxpayers who were not allowed
deductions on IRA contributions still can make nondeductible
IRA contributions of as much as $2,000 for each working
spouse ($2,250 for one-income couples), and defer taxes on
interest or other earnings from the IRAs.
A company or association may establish a Group IRA for
employees or members who want to purchase shares of the Fund.
Purchases of $1 million or more of the Class A Shares qualify
for purchase at net asset value but may, under certain
circumstances, be subject to a Limited CDSC. See Purchasing
Shares concerning reduced front-end sales charges applicable
to Class A Shares.
Investments generally must be held in the IRA until age
59 1/2 in order to avoid premature distribution penalties,
but distributions generally must commence no later than April
1 of the calendar year following the year in which the
participant reaches age 70 1/2. Individuals are entitled to
revoke the account, for any reason and without penalty, by
mailing written notice of revocation to Delaware Management
Trust Company within seven days after the receipt of the IRA
Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established
more than seven days after receipt of the IRA Disclosure
Statement, the account may not be revoked. Distributions
from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary
income in the year received. Excess contributions removed
after the tax filing deadline, plus extensions, for the year
in which the excess contributions were made are subject to a
6% excise tax on the amount of excess. Premature
distributions (distributions made before age 59 1/2, except
for death, disability and certain other limited
circumstances) will be subject to a 10% excise tax on the
amount prematurely distributed, in addition to the income tax
resulting from the distribution. See Class B Shares under
Alternative Purchase Arrangements concerning the
applicability of a CDSC upon redemption.
See Appendix B for additional IRA information.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established on a group basis by an
employer who wishes to sponsor a tax-sheltered retirement
program by making IRA contributions on behalf of all eligible
employees. Each of the Fund Classes is available for
investment by a SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Employers with 25 or fewer eligible employees can
establish this plan which permits employer contributions and
salary deferral contributions in Class A Shares only.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Internal Revenue Code of 1986 (the
"Code") permits employers to establish qualified plans based
on salary deferral contributions. Plan documents are
available to enable employers to establish a plan. An
employer may also elect to make profit sharing contributions
and/or matching contributions with investments in only Class
A Shares or certain other funds in the Delaware Group.
Purchases under the Plan may be combined for purposes of
computing the reduced front-end sales charge applicable to
Class A Shares as set forth in the table on page _____.
Deferred Compensation Plan for Public Schools and Non-Profit
Organizations ("403(b)(7)")
Section 403(b)(7) of the Code permits public school
systems and certain non-profit organizations to use mutual
fund shares held in a custodial account to fund deferred
compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish
to purchase either of the Fund Classes in conjunction with
such an arrangement. Applicable front-end sales charges with
respect to Class A Shares for such purchases are set forth in
the table on page _____.
Deferred Compensation Plan for State and Local Government
Employees ("457")
Section 457 of the Code permits state and local
governments, their agencies and certain other entities to
establish a deferred compensation plan for their employees
who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly
state) taxes thereon. Such plans may invest in shares of
either of the Fund Classes. Although investors may use their
own plan, there is available a Delaware Group 457 Deferred
Compensation Plan. Interested investors should contact the
Distributor or their investment dealers to obtain further
information. Applicable front-end sales charges for such
purchases of Class A Shares are set forth in the table on
page _____.
DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at
the offering price next calculated by the Fund after receipt
of the order by the Fund or its agent. Orders for purchases
of Class B Shares and the Institutional Class are effected at
the net asset value, next calculated after receipt of the
order by the Fund or its agent. Selling dealers have the
responsibility of transmitting orders promptly.
The offering price for the Class A Shares consists of
the net asset value per share plus any applicable sales
charges. Offering price and net asset value are computed as
of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when such
exchange is open. The New York Stock Exchange is scheduled
to be open Monday through Friday throughout the year except
for New Year's Day, Washington's Birthday, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. When the New York Stock Exchange is closed, the
Fund will generally be closed, pricing calculations will not
be made and purchase and redemption orders will not be
processed. An example showing how to calculate the offering
price per share of the Class A Shares is included in the
Series' financial statements which are incorporated by
reference into this Part B.
The Series' net asset value per share is computed by
adding the value of all the securities and other assets in
the Series' portfolio, deducting any liabilities of the
Series, and dividing by the number of Series shares
outstanding. Expenses and fees are accrued daily. In
determining the Series' total net assets, portfolio
securities primarily listed or traded on a national or
foreign securities exchange, except for bonds, are valued at
the last sale price on that exchange. Options are valued at
the last reported sale price or, if no sales are reported, at
the mean between bid and asked prices. For valuation
purposes, foreign securities initially expressed in foreign
currency values will be converted into U.S. dollar values at
the mean between the bid and offered quotations of such
currencies against U.S. dollars as last quoted by any
recognized dealer. Securities not traded on a particular
day, over-the-counter securities, and government and agency
securities are valued at the mean value between bid and asked
prices. Money market instruments having a maturity of less
than 60 days are valued at amortized cost. Debt securities
(other than short-term obligations) are valued on the basis
of valuations provided by a pricing service when such prices
are believed to reflect the fair value of such securities.
Use of a pricing service has been approved by the Board of
Directors. Prices provided by a pricing service take into
account appropriate factors such as institutional trading in
similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other
market data. Subject to the foregoing, securities for which
market quotations are not readily available and other assets
are valued at fair value as determined in good faith and in a
method approved by the Board of Directors.
Each Class will bear, pro-rata, all of the common
expenses of the Series. The net asset values of all
outstanding shares of each Class of the Series will be
computed on a pro-rata basis for each outstanding share based
on the proportionate participation in the Series represented
by the value of shares of that Class. All income earned and
expenses incurred by the Series will be borne on a pro-rata
basis by each outstanding share of a Class, based on each
Class' percentage in the Fund represented by the value of
shares of such Classes, except that the Institutional Class
will not incur any of the expenses under the Fund's 12b-1
Plans and shares of the Fund Classes alone will bear the 12b-
1 Plan fees payable under their respective Plans. Due to the
specific distribution expenses and other costs that will be
allocable to each Class, the net asset value of and dividends
paid to each Class of the Series will vary.
REDEMPTION AND REPURCHASE
Any shareholder may require the Fund to redeem Series
shares by sending a written request, signed by the record
owner or owners exactly as the shares are registered, to the
Fund, 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described
below are available when stock certificates have not been
issued. The Fund does not issue certificates for Class A
Shares or Institutional Class shares, unless a shareholder
specifically requests them. The Fund does not issue
certificates for Class B Shares. If stock certificates have
been issued for shares being redeemed, they must accompany
the written request. For redemptions of $50,000 or less paid
to the shareholder at the address of record, the Fund
requires a request signed by all owners of the shares or the
investment dealer of record, but does not require signature
guarantees. When the redemption is for more than $50,000, or
if payment is made to someone else or to another address,
signatures of all record owners are required and a signature
guarantee may be required. Each signature guarantee must be
supplied by an eligible guarantor institution. The Fund
reserves the right to reject a signature guarantee supplied
by an eligible institution based on its creditworthiness.
The Fund may request further documentation from corporations,
retirement plans, executors, administrators, trustees or
guardians.
In addition to redemption of Series shares by the Fund,
the Distributor, acting as agent of the Fund, offers to
repurchase Series shares from broker/dealers acting on behalf
of shareholders. The redemption or repurchase price, which
may be more or less than the shareholder's cost, is the net
asset value per share next determined after receipt of the
request in good order by the Fund or its agent, less any
applicable contingent deferred sales charge. This is
computed and effective at the time the offering price and net
asset value are determined. See Determining Offering Price
and Net Asset Value. The Fund and the Distributor end their
business day at 5 p.m., Eastern time. This offer is
discretionary and may be completely withdrawn without further
notice by the Distributor.
Orders for the repurchase of Series shares which are
submitted to the Distributor prior to the close of its
business day will be executed at the net asset value per
share computed that day (less any applicable contingent
deferred sales charge), if the repurchase order was received
by the broker/dealer from the shareholder prior to the time
the offering price and net asset value are determined on such
day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such
repurchase is then settled as an ordinary transaction with
the broker/dealer (who may make a charge to the shareholder
for this service) delivering the shares repurchased.
Certain redemptions of Class A Shares purchased at net
asset value may result in the imposition of a Limited CDSC.
See Contingent Deferred Sales Charge for Certain Purchases of
Class A Shares Made at Net Asset Value under Redemption and
Exchange in the Prospectus for the Fund Classes. The Class B
Shares are subject to a CDSC of: (i) 4% if shares are
redeemed within two years of purchase; (ii) 3% if shares are
redeemed during the third and 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. See Contingent Deferred
Sales Charge under Buying Shares in the Prospectus for the
Fund Classes. Except for such contingent deferred sales
charges and, with respect to the expedited payment by wire
described below, for which there is currently a $7.50 bank
wiring cost, neither the Fund nor the Distributor charges a
fee for redemptions or repurchases, but such fees could be
charged at any time in the future.
Payment for shares redeemed will ordinarily be mailed
the next business day, but in no case later than seven days,
after receipt of a redemption request in good order.
If a shareholder who recently purchased shares by check
seeks to redeem all or a portion of those shares in a written
request, the Fund will honor the redemption request but will
not mail the proceeds until it is reasonably satisfied of the
collection of the investment check. This potential delay can
be avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a
check which is subsequently returned unpaid for insufficient
funds or for any other reason, the Fund will automatically
redeem from the shareholder's account the Series shares
purchased by the check plus any dividends earned thereon.
Shareholders may be responsible for any losses to the Series
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 Series of securities owned by it is not
reasonably practical, or it is not reasonably practical for
the Series 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 Series may
postpone payment or suspend the right of redemption or
repurchase. In such case, the shareholder may withdraw the
request for redemption or leave it standing as a request for
redemption at the net asset value next determined after the
suspension has been terminated.
Payment for shares redeemed or repurchased may be made
either in cash or kind, or partly in cash and partly in kind.
Any portfolio securities paid or distributed in kind would be
valued as described in Determining Offering Price and Net
Asset Value. Subsequent sale by an investor receiving a
distribution in kind could result in the payment of brokerage
commissions. However, the Fund has elected to be governed by
Rule 18f-1 under the Investment Company Act of 1940 pursuant
to which the Fund is obligated to redeem Series shares solely
in cash up to the lesser of $250,000 or 1% of the net asset
value of the Series during any 90-day period for any one
shareholder.
The value of the Series' investments is subject to
changing market prices. Thus, a shareholder reselling shares
to the Series may sustain either a gain or loss, depending
upon the price paid and the price received for such shares.
Small Accounts
Due to the relatively higher cost of maintaining small
accounts, the Fund reserves the right to redeem Series shares
in any of its accounts at the then-current net asset value if
the total investment in the Series has a value of less than
$250 as a result of redemptions. As a consequence, an
investor who makes only the minimum investment in a Class
will be subject to involuntary redemption if any portion of
the investment is redeemed. Before the Fund redeems such
shares and sends the proceeds to the shareholder, the
shareholder will be notified in writing that the value of the
shares in the account is less than $250 and will be allowed
60 days from that date of notice to make an additional
investment to meet the required minimum of $250. Any
redemption in an inactive account established with a minimum
investment may trigger mandatory redemption. No contingent
deferred sales charge will apply to the redemptions described
in this paragraph of the Class A and the Class B Shares.
Expedited Telephone Redemptions
The Fund has available certain redemption privileges, as
described below. The Fund reserves the right to suspend or
terminate these expedited payment procedures upon 60 days'
written notice to shareholders.
Shareholders of the Fund Classes or their investment
dealers of record wishing to redeem any amount of shares of
$50,000 or less for which certificates have not been issued
may call the Fund at 800-523-1918 (in Philadelphia, 988-1241)
or in the case of shareholders of the Institutional Class,
their Client Services Representative at 800-828-5052 prior to
the time the offering price and net asset value are
determined, as noted above, and have the proceeds mailed to
them at the record address. Checks payable to the
shareholder(s) of record will normally be mailed the next
business day, but no more than seven days, after receipt of
the redemption request. This option is only available to
individual, joint and individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can
be transferred to your predesignated bank account by wire or
by check by calling the Fund, as described above. An
authorization form must have been completed by the
shareholder and filed with the Fund before the request is
received. Payment will be made by wire or check to the bank
account designated on the authorization form as follows:
1. Payment by Wire: Request that Federal Funds be
wired to the bank account designated on the authorization
form. Redemption proceeds will normally be wired on the next
business day following receipt of the redemption request.
There is a $7.50 wiring fee (subject to change) charged by
CoreStates Bank, N.A. which will be deducted from the
withdrawal proceeds each time the shareholder requests a
redemption. If the proceeds are wired to the shareholder's
account at a bank which is not a member of the Federal
Reserve System, there could be a delay in the crediting of
the funds to the shareholder's bank account.
2. Payment by Check: Request a check be mailed to the
bank account designated on the authorization form.
Redemption proceeds will normally be mailed the next business
day, but no more than seven days, from the date of the
telephone request. This procedure will take longer than the
Payment by Wire option (1 above) because of the extra time
necessary for the mailing and clearing of the check after the
bank receives it.
Redemption Requirements: In order to change the name of
the bank and the account number it will be necessary to send
a written request to the Fund and a signature guarantee may
be required. Each signature guarantee must be supplied by an
eligible guarantor institution. The Fund reserves the right
to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness.
To reduce the shareholder's risk of attempted fraudulent
use of the telephone redemption procedure, payment will be
made only to the bank account designated on the authorization
form.
The Fund will not honor telephone redemptions for Series
shares recently purchased by check unless it is reasonably
satisfied that the purchase check has cleared.
If expedited payment under these procedures could
adversely affect the Series, 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 Series
shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions
communicated by telephone are genuine (including verification
of a form of personal identification) as, if it does not, the
Fund or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent transactions. Telephone
instructions received by shareholders of the Fund Classes are
generally tape recorded. A written confirmation will be
provided for all purchase, exchange and redemption
transactions initiated by telephone.
Systematic Withdrawal Plan
Shareholders of the Class A Shares who own or purchase
$5,000 or more of shares at the offering price for which
certificates have not been issued may establish a Systematic
Withdrawal Plan for monthly withdrawals of $25 or more, or
quarterly withdrawals of $75 or more, although the Series
does not recommend any specific amount of withdrawal. This
$5,000 minimum does not apply for the Series' 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 the 20th of the month (unless such date
falls on a holiday or a Sunday) and mailed on or about the
19th of every month. Both ordinary income dividends and
realized securities profits distributions will be
automatically reinvested in additional shares of the Class at
net asset value. This plan is not recommended for all
investors and should be started only after careful
consideration of its operation and effect upon the investor's
savings and investment program. To the extent that
withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held
under the plan, the withdrawal payments will represent a
return of capital, and the share balance may in time be
depleted, particularly in a declining market.
The sale of shares for withdrawal payments constitutes a
taxable event and a shareholder may incur a capital gain or
loss for federal income tax purposes. This gain or loss may
be long-term or short-term depending on the holding period
for the specific shares liquidated. Premature withdrawals
from Retirement Plans may have adverse tax consequences.
Withdrawals under this plan by the holders of Class A
Shares or any similar plan of any other investment company
charging a front-end sales charge made concurrently with the
purchases of the Class A Shares of this or the shares of any
other investment company will ordinarily be disadvantageous
to the shareholder because of the payment of duplicative
sales charges. Shareholders should not purchase Class A
Shares while participating in a Systematic Withdrawal Plan
and a periodic investment program in a fund managed by the
Manager must be terminated before a Systematic Withdrawal
Plan can take effect, except if the shareholder is a
participant in one of our Retirement Plans or is investing in
Delaware Group funds which do not carry a sales charge.
Also, redemptions pursuant to a Systematic Withdrawal Plan
may be subject to a Limited CDSC if the purchase was made at
net asset value and a dealer's commission has been paid on
that purchase.
An investor wishing to start a Systematic Withdrawal
Plan must complete an authorization form. If the recipient
of Systematic Withdrawal Plan payments is other than the
registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee
must be supplied by an eligible guarantor institution. The
Fund reserves the right to reject a signature guarantee
supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the
shareholder or the Transfer Agent at any time by giving
written notice.
The Systematic Withdrawal Plan is not available with
respect to the Class B Shares or the Institutional Class.
Wealth Builder Option
Shareholders of the Fund Classes may elect to invest in
one or more of the other mutual funds in the Delaware Group
through our Wealth Builder Option. Under this automatic
exchange program, shareholders can authorize regular monthly
investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual
funds in the Delaware Group, subject to the conditions and
limitations set forth in the Fund Classes' Prospectus. See
Wealth Builder Option and Redemption and Exchange in the
Prospectus for the Fund Classes.
The investment will be made on the 20th day of each
month (or, if the fund selected is not open that day, the
next business day) at the public offering price or net asset
value, as applicable, of the fund selected on the date of
investment. No investment will be made for any month if the
value of the shareholder's account is less than the amount
specified for investment.
Periodic investment through the Wealth Builder Option
does not insure profits or protect against losses in a
declining market. The price of the fund into which
investments are made could fluctuate. Since this program
involves continuous investment regardless of such fluctuating
value, investors selecting this option should consider their
financial ability to continue to participate in the program
through periods of low fund share prices. This program
involves automatic exchanges between two or more fund
accounts and is treated as a purchase of shares of the fund
into which investments are made through the program. See
Exchange Privilege for a brief summary of the tax
consequences of exchanges.
Shareholders can also use the Wealth Builder Option to
invest in the Fund Classes through regular liquidations of
shares in their accounts in other mutual funds in the
Delaware Group, subject to the conditions and limitations
described in the Fund Classes' Prospectus. Shareholders can
terminate their participation at any time by written notice
to the Fund.
This option is not available to participants in the
following plans: SAR/SEP, SEP/IRA, Profit Sharing and Money
Purchase Pension Plans, 401(k) Defined Contribution Plans,
403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans. This option also is not available to
shareholders of the Institutional Class.
DISTRIBUTIONS AND TAXES
The Series has qualified, and intends to continue to
qualify, as a regulated investment company under Subchapter M
of the Internal Revenue Code of 1986, as amended, (the
"Code"). As such, the Series will not be subject to federal
income tax on net investment income and net realized capital
gains which are distributed to shareholders.
The Series intends to pay out all of its net investment
income and net realized capital gains. The Fund also intends
to meet the calendar year distribution requirements imposed
by the Code to avoid the imposition of any excise tax. All
dividends and any capital gains distributions will be
automatically credited to the shareholder's account in
additional shares of the same class of the Series 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 Series will share
proportionately in the investment income and expenses of the
Series, except that the Class A Shares and the Class B Shares
alone will incur distribution fees under their respective
12b-1 Plans.
Any check in payment of dividends or other distributions
which cannot be delivered by the Post Office or which remains
uncashed for a period of more than one year may be reinvested
in the shareholder's account at the then-current net asset
value and the dividend option may be changed from cash to
reinvest. The Series may deduct from a shareholder's account
the costs of the Series' effort to locate a shareholder if a
shareholder's mail is returned by the Post Office or the
Series 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.
Persons not subject to tax will not be required to pay
taxes on distributions.
Dividends from investment income and short-term capital
gains distributions are treated by shareholders as ordinary
income for federal income tax purposes. Distributions of
long-term capital gains, if any, are taxable to shareholders
as long-term capital gains, 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 paid to shareholders
will not be affected by whether they are paid in cash or in
additional shares. Under the Tax Reform Act of 1986, if the
Fund were to add another series, the Internal Revenue Service
would treat each Series as a single tax entity and capital
gains for each Series would be calculated separately.
Because of the Series' investment policy, only a small
portion of the Series' dividends may qualify for the
dividends-received deduction for corporations provided in the
Tax Reform Act of 1986. The portion of dividends paid by the
Series that so qualifies will be designated each year in a
notice mailed to the Series' shareholders, and cannot exceed
the gross amount of dividends received by the Series from
domestic (U.S.) corporations that would have qualified for
the dividends-received deduction in the hands of the Series
if the Series was a regular corporation. The availability of
the dividends-received deduction is subject to certain
holding period and debt financing restrictions imposed under
the Code on the corporation claiming the deduction.
Shareholders will be notified annually by the Fund as to
the federal income tax status of dividends and distributions
paid by the Series.
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 Series will be exempt
from Pennsylvania county personal property taxes.
See also Other Tax Requirements under Accounting and Tax
Issues in this Part B.
During the fiscal year ended September 30, 1994,
distributions totaling $0.820 per share of the Class A Shares
and the Institutional Class were paid from realized
securities profits. The Class B Shares commenced operations
on September 6, 1994.
INVESTMENT MANAGEMENT AGREEMENT
The Manager, located at One Commerce Square,
Philadelphia, PA 19103, furnishes investment management
services to the Series, subject to the supervision and
direction of the Fund's Board of Directors.
The Manager and its predecessors have been managing the
funds in the Delaware Group since 1938. The aggregate assets
of these funds on September 30, 1994 were approximately
$9,569,289,000. Investment advisory services are also
provided to institutional accounts with assets on September
30, 1994 of approximately $16,650,361,000.
The Investment Management Agreement for the Series,
dated June 29, 1988 was approved by shareholders on June 14,
1988 and renewed for a period of an additional year by the
Board of Directors at a meeting held on February 17, 1994.
The Agreement may be renewed each year only so long as
such renewal and continuance are specifically approved at
least annually by the Board of Directors or by vote of a
majority of the outstanding voting securities of the Series,
and only if the terms of the renewal thereof have been
approved by the vote of a majority of the directors of the
Fund who are not parties thereto or interested persons of any
such party, cast in person at a meeting called for the
purpose of voting on such approval. The Agreement is
terminable without penalty on 60 days' notice by the
directors of the Fund or by the Manager. The Agreement will
terminate automatically in the event of its assignment.
The compensation paid by the Series for investment
management services is equal to 1/16 of 1% per month (the
equivalent of 3/4 of 1% per year) of the Series' average
daily net assets during the month, less all directors' fees
paid to the unaffiliated directors by the Series. This fee
may be higher than that paid by some other funds. On
September 30, 1994, the total net assets of the Series were
$1,001,200,399. 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. The
investment management fees paid by the Series for the fiscal
years ended September 30, 1992, 1993 and 1994 were
$6,425,826, $8,349,752 and $7,925,137, respectively.
Except for those expenses borne by the Manager under the
Investment Management Agreement and the Distributor under the
Amended and Restated Distribution Agreement, the Series is
responsible for all of its own expenses. Among others, these
include the Series' proportionate share of rent and certain
other administrative expenses; the investment management
fees; transfer and dividend disbursing agent fees and costs;
custodian expenses; federal and state securities registration
fees; proxy costs; and the costs of preparing prospectuses
and reports sent to shareholders. The ratio of expenses to
average daily net assets for the Class A Shares for the
fiscal year ended September 30, 1994 was 1.35%, which
reflects the impact of its 12b-1 Plan. The ratio of expenses
to average daily net assets for the Institutional Class was
1.05% for the fiscal year ended September 30, 1994. The
ratio of expenses to average daily net assets for the Class B
Shares is expected to be 2.05%, based on expenses incurred by
the Class A Shares during the fiscal year ended September 30,
1994.
By California regulation, the Manager is required to
waive certain fees and reimburse the Series for certain
expenses to the extent that the Series' operating expenses,
exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, exceed 2 1/2% of its 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 September 30, 1994, no such reimbursement was necessary
or paid.
Distribution and Service
The Distributor, located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor of
Series shares under an Amended and Restated Distribution
Agreement dated as of September 6, 1994. The Distributor is
an affiliate of the Manager and bears all of the costs of
promotion and distribution, except for payments by the Series
on behalf of the Class A Shares and Class B Shares under
their respective 12b-1 Plans. The Transfer Agent, another
affiliate of the Manager located at 1818 Market Street,
Philadelphia, PA 19103, serves as the shareholder servicing,
dividend disbursing and transfer agent for the Series
pursuant to a Shareholders Services Agreement dated June 29,
1988.
The Distributor, the Manager and the Transfer Agent are
all indirect, wholly-owned subsidiaries of Delaware
Management Holdings, Inc.
OFFICERS AND DIRECTORS
The business and affairs of the Fund are managed under
the direction of its Board of Directors.
Certain officers and directors of the Fund hold
identical positions in each of the other funds in the
Delaware Group. On October 31, 1994, the Fund's officers and
directors owned less than 1% of the Series' shares
outstanding.
As of October 31, 1994, the Fund believes Merrill Lynch,
Pierce, Fenner & Smith Inc., Mutual Fund Operations, P.O. Box
41621, Jacksonville, FL 32203 held of record 7,046,368 shares
(20.53%) of the outstanding shares of the Class A Shares.
As of the same date, the Fund believes Boston Safe Agent
for Mellon Bank, 1 Cabot Road, Medford, MA 02155 held of
record 2,451,604 shares (56.34%) of the outstanding shares of
the Institutional Class. The above includes State of
California Deferred Compensation Plan 457 -- 2,060,593 shares
(47.35%) and State of California Thrift Plan 401(k) --
391,011 shares (8.99%). In addition, PWH Savings, 1410 North
Westshore Blvd., P.O. Box 30004, Tampa, FL 33630 held of
record 835,145 shares (19.19%) and Janney Montgomery Scott &
Co. Inc., 1801 Market Street, Philadelphia, PA 19103 held of
record 385,940 shares (8.87%) of the outstanding shares of
the Institutional Class. Based on information supplied to
the Fund, the Fund believes that all of the shares held of
record by Janney Montgomery Scott & Co. Inc. were
beneficially owned by others.
As of the same date, the Fund also believes the
following shareholders held of record 5% or more of the
outstanding shares of the Class B Shares of the Series:
Smith Barney, Inc., 388 Greenwich Street, New York, NY 10013
held 4,658 shares (23.32%). The above includes Smith Barney,
Inc., 00180107792--1,960 shares (9.80%) and Smith Barney,
Inc., 00148165372--1,263 shares (6.18%); Donaldson, Lufkin &
Jenrette Securities Corporation, Inc., P.O. Box 2052, Jersey
City, NJ 07303 held 3,403 shares (17.02%). The above
includes Donaldson, Lufkin & Jenrette Securities Corporation,
Inc.--2,488 shares (12.44%); Merrill Lynch, Pierce, Fenner &
Smith Inc., Mutual Fund Operations, 4800 Deer Lake Drive
East, 3rd Fl., Jacksonville, FL 32246 held 1,170 shares
(5.85%); and Robert L. Mc Dowell and Norma J. Mc Dowell, 3061
N.W. 112th Avenue, Coral Springs, FL 33065 held 1,006 shares
(5.03%).
DMH Corp., Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware International Holdings
Ltd., Founders Holdings, Inc., Delaware International
Advisers Ltd. and Delaware Investment Counselors, Inc. are
direct or indirect, wholly-owned subsidiaries of Delaware
Management Holdings, Inc. ("DMH"). By reason of its
percentage ownership of DMH common stock and through a Voting
Trust Agreement with certain other DMH shareholders, Legend
Capital Group, L.P. ("Legend") controls DMH and its direct
and indirect, wholly-owned subsidiaries. As General Partners
of Legend, Leonard M. Harlan and John K. Castle have the
ability to direct the voting of more than a majority of the
shares of DMH and thereby control DMH and its direct and
indirect, wholly-owned subsidiaries.
For the fiscal year ended September 30, 1994, directors
and certain officers of the Fund were paid an aggregate
remuneration of $90,150.
Directors and principal officers of the Fund and their
business experience for the past five years follow. Unless
otherwise noted, the address of each officer and director is
One Commerce Square, Philadelphia, PA 19103.
*Wayne A. Stork
Chairman, Director and/or Trustee of the Fund and each
of the other Funds in the Delaware Group.
Chairman, Chief Executive Officer, Chief Investment
Officer and Director of Delaware Management
Company, Inc.
Chairman, Chief Executive Officer and Director of
Delaware Management Holdings, Inc., DMH Corp.,
Delaware International Advisers Ltd. and Founders
Holdings, Inc.
President, Chairman, Chief Executive Officer and
Director of Delaware International Holdings Ltd.
Chairman and Director of Delaware Management Trust
Company.
Director of Delaware Distributors, Inc., Delaware
Service Company, Inc. and Delaware Investment
Counselors, Inc.
During the past five years, Mr. Stork has served in
various executive capacities at different times
within the Delaware organization.
*Brian F. Wruble
President, Chief Executive Officer, Director and/or
Trustee of the Fund and each of the other Funds in
the Delaware Group (other than Delaware Pooled
Trust, Inc.).
Director of Delaware Pooled Trust, Inc., Delaware
International Advisers Ltd. and Delaware Investment
Counselors, Inc.
President, Chief Operating Officer and Director of
Delaware Management Holdings, Inc., DMH Corp. and
Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of
Delaware Service Company, Inc.
Chairman and Director of Delaware Distributors, Inc.
President of Founders Holdings, Inc.
Before joining the Delaware Group in 1992, Mr. Wruble
was Chairman, President and Chief Executive
Officer of Equitable Capital Management Corporation
and Executive Vice President and Chief Investment
Officer of Equitable Life Assurance Society of the
United States. Mr. Wruble has previously held
executive positions with Smith Barney, Harris Upham
and H.C. Wainwright & Co.
-----------------------
* Director affiliated with the investment manager of the
Fund and considered an "interested person" as defined in
the Investment Company Act of 1940.
Winthrop S. Jessup
Executive Vice President of the Fund and each of the
other Funds in the Delaware Group (other than
Delaware Pooled Trust, Inc.).
President and Chief Executive Officer of Delaware Pooled
Trust, Inc.
President and Director of Delaware Investment
Counselors, Inc.
Executive Vice President and Director of Delaware
Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Management Trust
Company, Delaware International Holdings Ltd. and
Founders Holdings, Inc.
Vice Chairman and Director of Delaware Distributors,
Inc.
Director of Delaware Service Company, Inc. and Delaware
International Advisers Ltd.
During the past five years, Mr. Jessup has served in
various executive capacities at different times
within the Delaware organization.
Richard G. Unruh, Jr.
Executive Vice President of the Fund and each of the
other Funds in the Delaware Group.
Executive Vice President and Director of Delaware
Management Company, Inc.
Senior Vice President of Delaware Management Holdings,
Inc.
During the past five years, Mr. Unruh has served in
various executive capacities at different times
within the Delaware organization.
Walter P. Babich
Director and/or Trustee of the Fund and each of the
other Funds in the Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of
Irwin & Leighton and from 1988 to 1991, he was a
partner of I&L Investors.
*John K. Castle
Director and/or Trustee of the Fund, each of the other
Funds in the Delaware Group and Delaware
Management Holdings, Inc.
150 East 58th Street, New York, NY 10155.
General Partner, Legend Capital Group, L.P.
Chairman, Castle Harlan, Inc., a private merchant bank
in New York City.
Chairman, Castle Harlan GP, Inc.
President and Chief Executive Officer, Branford Castle,
Inc., an investment holding company.
Chairman, Castle Connolly Medical Ltd.
Director, Sealed Air Corp.
Director, UNC, Inc.
Director, Quantum Restaurant Group, Inc.
Director, INDSPEC Chemical Corporation.
Trustee, New York Medical College.
Immediately prior to forming Branford Castle, Inc. in
1986, Mr. Castle was President and Chief
Executive Officer and a director of Donaldson,
Lufkin & Jenrette, which he joined in 1965.
Mr. Castle also served as Chairman of the Board of
the New York Medical College for 11 years and has
served as a director of the Equitable Life
Assurance Society of the United States and as a
member of the Corporation of the Massachusetts
Institute of Technology.
John J. Connolly, Ed.D.
Director and/or Trustee of the Fund and each of the
other Funds in the Delaware Group.
150 East 58th Street, New York, NY 10155.
President and Chief Executive Officer, Castle Connolly
Medical Ltd.
President, Chief Executive Officer and Director,
Health-Excel Management, Inc.
Chairman, Bedford Partners, Ltd.
From 1981 to 1992, Dr. Connolly was President and Chief
Executive Officer of New York Medical College, New
York.
-----------------------
* Director affiliated with the investment manager of the
Fund and considered an "interested person" as defined in
the Investment Company Act of 1940.
John H. Durham
Director and/or Trustee of the Fund and each of the
other Funds in the Delaware Group.
Consultant.
120 Gibraltar Road, Horsham, PA 19044.
Mr. Durham served as Chairman of the Board of each Fund
in the Delaware Group from 1986 to 1991;
President of each Fund in the Delaware Group from
1977 to 1990; and Chief Executive Officer of each
Fund in the Delaware Group from 1984 to 1990.
Prior to 1992, with respect to Delaware Management
Holdings, Inc., Delaware Management Company, Inc.,
Delaware Distributors, Inc. and Delaware Service
Company, Inc., Mr. Durham served as a director and
in various executive capacities at different times.
*Leonard M. Harlan
Director and/or Trustee of the Fund, each of the other
Funds in the Delaware Group and Delaware
Management Holdings, Inc.
150 East 58th Street, New York, NY 10155.
General Partner, Legend Capital Group, L.P.
President, Castle Harlan, Inc., a private merchant bank
in New York City.
President, Castle Harlan GP, Inc.
Chairman and Chief Executive Officer, The Harlan
Company, Inc.
Director, Long John Silver's Restaurants, Inc.
Director, The Ryland Group, Inc.
Director, Smarte Carte Corporation.
Director, MAG Aerospace Industries, Inc.
Trustee, North Country School/CTT.
Trustee, New York City Citizens Budget Commission.
Member, Visiting Committee of the Harvard Business
School.
-----------------------
* Director affiliated with the investment manager of the
Fund and considered an "interested person" as defined in
the Investment Company Act of 1940.
Anthony D. Knerr
Director and/or Trustee of the Fund and each of the
other Funds in the Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Consultant, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice
President/Finance and Treasurer of Columbia
University, New York. From 1987 to 1989, he was
also a lecturer in English at the University. In
addition, Mr. Knerr was Chairman of The Publishing
Group, Inc., New York, from 1988 to 1990 and
President from 1990 to 1991. Mr. Knerr founded The
Publishing Group, Inc. in 1988.
Ann R. Leven
Director and/or Trustee of the Fund and each of the
other Funds in the Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
Adjunct Professor, Columbia Business School.
From 1984 to 1990, Ms. Leven was Treasurer and Chief
Fiscal Officer of the Smithsonian Institution,
Washington, DC.
W. Thacher Longstreth
Director and/or Trustee of the Fund and each of the
other Funds in the Delaware Group.
1617 John F. Kennedy Boulevard, Philadelphia, PA 19103.
Vice Chairman, Packquisition Corp., a financial
printing, commercial printing and information
processing firm.
Philadelphia City Councilman.
Charles E. Peck
Director and/or Trustee of the Fund and each of the
other Funds in the Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Retired.
From 1981 to 1990, Mr. Peck was Chairman and Chief
Executive Officer of The Ryland Group, Inc.,
Columbia, MD.
David K. Downes
Senior Vice President/Chief Administrative Officer/Chief
Financial Officer of the Fund, each of the
other Funds in the Delaware Group and Delaware
Management Company, Inc.
President/Chief Executive Officer and Director of
Delaware Management Trust Company.
Senior Vice President/Chief Administrative Officer/Chief
Financial Officer/Treasurer of Delaware
Management Holdings, Inc.
Senior Vice President/Chief Financial Officer/Treasurer
and Director of DMH Corp.
Senior Vice President/Chief Administrative Officer and
Director of Delaware Distributors, Inc.
Senior Vice President/Chief Administrative Officer/Chief
Financial Officer and Director of Delaware Service
Company, Inc.
Chief Financial Officer and Director of Delaware
International Holdings Ltd.
Chief Financial Officer/Chief Operating Officer of
Delaware Investment Counselors, Inc.
Senior Vice President and Director of Founders Holdings,
Inc.
Director of Delaware International Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes
was Chief Administrative Officer, Chief
Financial Officer and Treasurer of Equitable
Capital 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.
Senior Vice President and Secretary of the Fund, each
of the other Funds in the Delaware Group and
Delaware Management Holdings, Inc.
Corporate Vice President, Secretary and Director of
Founders Holdings, Inc.
Senior Vice President, Secretary and Director of DMH
Corp., Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Service Company, Inc.
and Delaware Management Trust Company.
Secretary and Director of Delaware International
Holdings Ltd.
Secretary of Delaware Investment Counselors, Inc.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served
in various capacities at different times within the
Delaware organization.
Edward N. Antoian
Vice President/Senior Portfolio Manager of the Fund, of
the other equity funds in the Delaware Group and of
Delaware Management Company, Inc.
During the past five years, Mr. Antoian has served in
such capacity within the Delaware organization.
Joseph H. Hastings
Vice President/Corporate Controller of the Fund, each of
the other Funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors,
Inc., Delaware Service Company, Inc. and Founders
Holdings, Inc.
Vice President/Corporate Controller/Treasurer of
Delaware Management Trust Company.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings
was Chief Financial Officer for Prudential
Residential Services, L.P., New York, NY. Prior to
that, Mr. Hastings served as Controller and
Treasurer for Fine Homes International, L.P.,
Stamford, CT.
Eugene J. Cichanowsky
Vice President/Corporate Tax of the Fund, each of the
other Funds in the Delaware Group (other than
Delaware Pooled Trust, Inc.), Delaware Management
Holdings, Inc., DMH Corp., Delaware Management
Company, Inc., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Founders Holdings,
Inc. and Delaware Management Trust Company.
Vice President of Delaware Pooled Trust, Inc.
1818 Market Street, Philadelphia, PA 19103.
During the past five years, Mr. Cichanowsky has served
in various capacities at different times within the
Delaware organization.
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of
the Classes and for shareholders of classes of other funds in
the Delaware Group are set forth in the relevant prospectuses
for such classes. The following supplements that
information. The Fund reserves the right to reject exchange
requests at any time. The Fund may modify, terminate or
suspend the exchange privilege upon 60 days' notice to
shareholders.
All exchanges involve a purchase of shares of the fund
into which the exchange is made. As with any purchase, an
investor should obtain and carefully read that fund's
prospectus before buying shares in an exchange. 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 or series and the purchase of another. The sale may
involve either a capital gain or loss to the shareholder for
federal income tax purposes.
In addition, investment advisers and dealers may make
exchanges between funds in the Delaware Group on behalf of
their clients by telephone or other expedited means. This
service may be discontinued or revised at any time by the
Transfer Agent. Such exchange requests may be rejected if it
is determined that a particular request or the total requests
at any time could have an adverse effect on any of the funds.
Requests for expedited exchanges may be submitted with a
properly completed exchange authorization form, as described
above.
Telephone Exchange Privilege
Shareholders owning shares for which certificates have
not been issued or their investment dealers of record may
exchange shares by telephone for shares in other mutual funds
in the Delaware Group. This service is automatically
provided unless the Fund receives written notice from the
shareholder to the contrary.
Shareholders or their investment dealers of record may
contact the Transfer Agent at 800-523-1918 (in Philadelphia,
988-1241) or, in the case of shareholders of the
Institutional Class their Client Services Representative at
800-828-5052, to effect an exchange. The shareholder's
current Series 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.
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 Series shares
which are reasonably believed to be genuine.
Following is a summary of the investment objectives of
the other Delaware Group funds:
Delaware Fund seeks long-term growth by a balance of
capital appreciation, income and preservation of capital. It
uses a dividend-oriented valuation strategy to select
securities issued by established companies that are believed
to demonstrate potential for income and capital growth.
Dividend Growth Fund seeks current income and capital
appreciation by investing primarily in income-producing
common stocks, with a focus on common stocks the Manager
believes have the potential for above average dividend
increases over time.
Trend Fund seeks long-term growth by investing in common
stock issued by emerging growth companies exhibiting strong
capital appreciation potential.
Value Fund seeks capital appreciation by investing
primarily in common stocks whose market values appear low
relative to their underlying value or future potential.
Decatur Income Fund seeks the highest possible current
income by investing primarily in common stocks that provide
the potential for income and capital appreciation without
undue risk to principal. Decatur Total Return Fund seeks
long-term growth by investing primarily in securities that
provide the potential for income and capital appreciation
without undue risk to principal.
Delchester Fund seeks as high a current income as
possible by investing principally in corporate bonds, and
also in U.S. government securities and commercial paper.
U.S. Government Fund seeks high current income by
investing in long-term U.S. government debt obligations.
Treasury Reserves Intermediate Fund seeks high, stable
income by investing primarily in a portfolio of short- and
intermediate-term securities issued or guaranteed by the U.S.
government, its agencies and instrumentalities. U.S.
Government Money Fund seeks maximum current income with
preservation of principal and maintenance of liquidity by
investing only in short-term securities issued or guaranteed
as to principal and interest by the U.S. government, its
agencies or instrumentalities, and repurchase agreements
collateralized by such securities, while maintaining a stable
net asset value.
Delaware Cash Reserve seeks the highest level of income
consistent with the preservation of capital and liquidity
through investments in short-term money market instruments,
while maintaining a stable net asset value.
Tax-Free USA Fund seeks high current income exempt from
federal income tax by investing in municipal bonds of
geographically-diverse issuers. Tax-Free Insured Fund
invests in these same types of securities but with an
emphasis on municipal bonds protected by insurance
guaranteeing principal and interest are paid when due. Tax-
Free USA Intermediate Fund seeks a high level of current
interest income exempt from federal income tax, consistent
with the preservation of capital by investing primarily in
municipal bonds.
Tax-Free Money Fund seeks high current income, exempt
from federal income tax, by investing in short-term municipal
obligations, while maintaining a stable net asset value.
Tax-Free Pennsylvania Fund seeks a high level of current
interest income exempt from federal and, to the extent
possible, certain Pennsylvania state and local taxes,
consistent with the preservation of capital.
International Equity Fund seeks to achieve long-term
growth without undue risk to principal by investing primarily
in international securities that provide the potential for
capital appreciation and income. Global Income Fund seeks to
achieve current income consistent with the preservation of
principal by investing primarily in global fixed income
securities that may also provide the potential for capital
appreciation. Global Total Return Fund seeks to achieve
long-term total return by investing in global securities
which will provide higher current income than a portfolio
comprised exclusively of equity securities, along with the
potential for capital growth.
Delaware Group Premium Fund offers nine series available
exclusively as funding vehicles for certain insurance company
separate accounts. Equity/Income Series seeks the highest
possible total rate of return by selecting issues that
exhibit the potential for capital appreciation while
providing higher than average dividend income. High Yield
Series seeks as high a current income as possible by
investing in rated and unrated corporate bonds, U.S.
government securities and commercial paper. Capital Reserves
Series seeks a high stable level of current income while
minimizing fluctuations in principal by investing in a
diversified portfolio of short- and intermediate-term
securities. Money Market Series seeks the highest level of
income consistent with preservation of capital and liquidity
through investments in short-term money market instruments.
Growth Series seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities
exhibiting the potential for significant growth. Multiple
Strategy Series seeks a balance of capital appreciation,
income and preservation of capital. It uses a dividend-
oriented valuation strategy to select securities issued by
established companies that are believed to demonstrate
potential for income and capital growth. International
Equity Series seeks long-term growth without undue risk to
principal by investing primarily in equity securities of
foreign issuers that provide the potential for capital
appreciation and income. Value Series seeks capital
appreciation by investing in small- to mid-cap common stocks
whose market value appears low relative to their underlying
value or future earnings and growth potential. Emphasis will
also be placed on securities of companies that may be
temporarily out of favor or whose value is not yet recognized
by the market. Emerging Growth Series seeks long-term
capital appreciation by investing primarily in small-cap
common stocks and convertible securities of emerging and
other growth-oriented companies. These securities will have
been judged to be responsive to changes in the market place
and to have fundamental characteristics to support growth.
Income is not an objective.
For more complete information about any of these funds,
including charges and expenses, you can obtain a prospectus
from the Distributor. Read it carefully before you invest or
forward funds.
Each of the summaries above is qualified in its entirety
by the information contained in each Fund's prospectus(es).
GENERAL INFORMATION
The Manager is the investment manager of the Fund. The
Manager or its affiliate, Delaware International Advisers
Ltd., manages the other funds in the Delaware Group. The
Manager, through a separate division, also manages private
investment accounts. While investment decisions of the Fund
are made independently from those of the other funds and
accounts, they may make investment decisions at the same
time.
The Distributor acts as national distributor for the
Fund and for the other mutual funds in the Delaware Group.
The Distributor received net commissions from the Fund on
behalf of the Class A Shares of the Series after reallowances
to dealers, as follows:
Fiscal Amounts Net
Year Reallowed Commission
Ending to Dealers to Distributor
------ ---------- --------------
9/30/94 $ 2,472,670 $ 216,257
9/30/93 6,131,984 544,124
9/30/92 21,844,634 3,229,274
During the fiscal year ended September 30, 1994, the
Distributor received Limited CDSC payments in the amount of
$7,500 with respect to the Class A Shares.
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 Series 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 unaffiliated directors.
The Manager and its affiliates own the name "Delaware
Group." Under certain circumstances, including the
termination of the Fund's advisory relationship with the
Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause the
Fund to delete the words "Delaware Group" from the Fund's
name.
Chemical Bank, 450 West 33rd Street, New York, NY 10001,
is custodian of the Fund's securities and cash. As custodian
for the Fund, Chemical Bank maintains a separate account or
accounts for the Fund; receives, holds and 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.
Morgan Guaranty Trust Company of New York, located at
60 Wall Street, New York, New York 10260, provides similar
services with respect to the Fund's investments in foreign
securities.
The legality of the issuance of the shares offered
hereby, pursuant to registration under the Investment Company
Act Rule 24f-2, has been passed upon for the Fund by Messrs.
Stradley, Ronon, Stevens & Young, Philadelphia, Pennsylvania.
Capitalization
The Fund has a present authorized capitalization of five
hundred million shares of capital stock with a $.01 par value
per share. Prior to November 9, 1992, the Series offered
only one class of shares, the class currently designated the
DelCap Fund A Class. Beginning November 9, 1992, the Series
began offering the DelCap Fund Institutional Class and
beginning September 6, 1994, the Series began offering the
DelCap Fund B Class. Each Class represents a proportionate
interest in the assets of the Series, and each have the same
voting and other rights and preferences as the other classes,
except that shares of the Institutional Class may not vote on
any matter affecting the Fund's Distribution Plans under Rule
12b-1. Similarly, the shareholders of the Class A Shares may
not vote on matters affecting the Fund's Plan under Rule 12b-
1 relating to the Class B Shares, and the shareholders of the
Class B Shares may not vote on matters affecting the Fund's
Plan under Rule 12b-1 relating to the Class A Shares.
General expenses of the Fund will be allocated on a pro-rata
basis to the classes according to asset size, except that
expenses of the Rule 12b-1 Plans of the Class A Shares and
Class B Shares will be allocated solely to those classes.
The Board of Directors has allocated one hundred million
shares to the Class A Shares, one hundred fifty million
shares to the Class B Shares and fifty million shares to the
Institutional Class. While shares of the Series have equal
voting rights on matters affecting the entire Fund, the
Series would vote separately on any matter which affects only
this Series, such as any change in its own investment
objective and policy or action to dissolve the Series and as
otherwise prescribed by the Investment Company Act of 1940.
Shares of the Series have a priority in the Series' assets,
and in gains on and income from the portfolio of the Series.
Shares have no preemptive rights, are fully transferable and,
when issued, are fully paid and nonassessable.
Prior to September 6, 1994, the DelCap Fund A Class was
known as the DelCap Fund class and the DelCap Fund
Institutional Class was known as the DelCap Fund
(Institutional) class.
Noncumulative Voting
These shares have noncumulative voting rights which
means that the holders of more than 50% of the shares of the
Fund voting for the election of directors can elect all the
directors if they choose to do so, and, in such event, the
holders of the remaining shares will not be able to elect any
directors.
This Part B does not include all of the information
contained in the Registration Statement which is on file with
the Securities and Exchange Commission.
APPENDIX A--DESCRIPTION OF RATINGS
Bonds
Excerpts from Moody's Investors Service, Inc.'s
description of its four highest bond ratings: Aaa--judged to
be the best quality. They carry the smallest degree of
investment risk; Aa--judged to be of high quality by all
standards; A--possess favorable attributes and are considered
"upper medium" grade obligations; Baa--considered as medium
grade obligations. Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time.
Excerpts from Standard & Poor's Corporation's
description of its four highest bond ratings: AAA--highest
grade obligations. They possess the ultimate degree of
protection as to principal and interest; AA--also qualify as
high grade obligations, and in the majority of instances
differ from AAA issues only in a small degree; A--strong
ability to pay interest and repay principal although more
susceptible to changes in circumstances; BBB--regarded as
having an adequate capacity to pay interest and repay
principal.
APPENDIX B--IRA INFORMATION
The Tax Reform Act of 1986 restructured, and in some cases
eliminated, the tax deductibility of IRA contributions.
Under the Act, the full deduction for IRAs ($2,000 for each
working spouse and $2,250 for one-income couples) was
retained for all taxpayers who are not covered by an
employer-sponsored retirement plan. Even if a taxpayer (or
his or her spouse) is covered by an employer-sponsored
retirement plan, the full deduction is still available if the
taxpayer's adjusted gross income is below $25,000 ($40,000
for taxpayers filing joint returns). A partial deduction is
allowed for married couples with incomes between $40,000 and
$50,000, and for single individuals with incomes between
$25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross
income before IRA deductions exceeds $50,000 ($35,000 for
singles) and who are active participants in an employer-
sponsored retirement plan. Taxpayers who were not allowed
deductions on IRA contributions still can make nondeductible
IRA contributions of as much as $2,000 for each working
spouse ($2,250 for one-income couples), and defer taxes on
interest or other earnings from the IRAs.
As illustrated in the following tables, maintaining an
Individual Retirement Account remains a valuable opportunity.
For many, an IRA will continue to offer both an up-front tax
break with its tax deduction each year and the real benefit
that comes with tax-deferred compounding. For others, losing
the tax deduction will impact their taxable income status
each year. Over the long term, however, being able to defer
taxes on earnings still provides an impressive investment
opportunity--a way to have money grow faster due to tax-
deferred compounding.
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 Series, your bottom line at
retirement could be lower--it could also be much higher.
$2,000 Invested Annually Assuming a 10% Annualized Return
15% Tax Bracket Single -- $0 - $22,750
--------------- Joint -- $0 - $38,000
How Much
Cumulative How Much You Have
End of Investment You Have With Full
Year Amount Without IRA IRA Deduction
1 $ 2,000 $ 1,844 $ 2,200
5 10,000 10,929 13,431
10 20,000 27,363 35,062
15 30,000 52,074 69,899
20 40,000 89,231 126,005
25 50,000 145,103 216,364
30 60,000 229,114 361,887
35 70,000 355,438 596,254
40 80,000 545,386 973,704
[Without IRA--investment of $1,700 ($2,000 less 15%) earning
8.5% (10% less 15%)]
28% Tax Bracket Single -- $22,751 - $55,100
--------------- Joint -- $38,001 - $91,850
How Much How Much You Have
Cumulative You Have With Full IRA
End of Investment Without No
Year Amount IRA Deduction Deduction
1 $ 2,000 $ 1,544 $ 1,584 $ 2,200
5 10,000 8,913 9,670 13,431
10 20,000 21,531 25,245 35,062
15 30,000 39,394 50,328 69,899
20 40,000 64,683 90,724 126,005
25 50,000 100,485 155,782 216,364
30 60,000 151,171 260,559 361,887
35 70,000 222,927 429,303 596,254
40 80,000 324,512 701,067 973,704
[Without IRA--investment of $1,440 ($2,000 less 28%) earning
7.2% (10% less 28%)]
[With IRA--No Deduction--investment of $1,440 ($2,000 less
28%) earning 10%]
31% Tax Bracket Single -- $55,101 - $115,000
--------------- Joint -- $91,851 - $140,000
How Much How Much You Have
Cumulative You Have With Full IRA
End of Investment Without No
Year Amount IRA Deduction Deduction
1 $ 2,000 $ 1,475 $ 1,518 $ 2,200
5 10,000 8,467 9,268 13,431
10 20,000 20,286 24,193 35,062
15 30,000 36,787 48,231 69,899
20 40,000 59,821 86,943 126,005
25 50,000 91,978 149,291 216,364
30 60,000 136,868 249,702 361,887
35 70,000 199,536 411,415 596,254
40 80,000 287,021 671,855 973,704
[Without IRA--investment of $1,380 ($2,000 less 31%) earning
6.9% (10% less 31%)]
[With IRA--No Deduction--investment of $1,380 ($2,000 less
31%) earning 10%]
36% Tax Bracket* Single -- $115,001 - $250,000
--------------- Joint -- $140,001 - $250,000
How Much How Much You Have
Cumulative You Have With Full IRA
End of Investment Without No
Year Amount IRA Deduction Deduction
1 $ 2,000 $ 1,362 $ 1,408 $ 2,200
5 10,000 7,739 8,596 13,431
10 20,000 18,292 22,440 35,062
15 30,000 32,683 44,736 69,899
20 40,000 52,308 80,643 126,005
25 50,000 79,069 138,473 216,364
30 60,000 115,562 231,608 361,887
35 70,000 165,327 381,602 596,254
40 80,000 233,190 623,170 973,704
[Without IRA--investment of $1,280 ($2,000 less 36%) earning
6.4% (10% less 36%)]
[With IRA--No Deduction--investment of $1,280 ($2,000 less
36%) earning 10%]
39.6% Tax Bracket* Single -- over $250,000
----------------- Joint -- over $250,000
How Much How Much You Have
Cumulative You Have With Full IRA
End of Investment Without No
Year Amount IRA Deduction Deduction
1 $ 2,000 $ 1,281 $ 1,329 $ 2,200
5 10,000 7,227 8,112 13,431
10 20,000 16,916 21,178 35,062
15 30,000 29,907 42,219 69,899
20 40,000 47,324 76,107 126,005
25 50,000 70,677 130,684 216,364
30 60,000 101,986 218,580 361,887
35 70,000 143,965 360,137 596,254
40 80,000 200,249 588,117 973,704
[Without IRA--investment of $1,208 ($2,000 less 39.6%)
earning 6.04% (10% less 39.6%)]
[With IRA--No Deduction--investment of $1,208 ($2,000 less
39.6%) earning 10%]
* For tax years beginning after 1992, a 36% tax rate
applies to all taxable income in excess of the maximum
dollar amounts subject to the 31% tax rate. In
addition, a 10% surtax (not applicable to capital gains)
applies to certain high-income taxpayers. It is
computed by applying a 39.6% rate to taxable income in
excess of $250,000. The above tables do not reflect the
personal exemption phaseout nor the limitations of
itemized deductions that may apply.
$2,000 SINGLE INVESTMENT AT A RETURN OF 10%
COMPOUNDED ANNUALLY
TAXABLE-- TAXABLE-- TAXABLE--
YEARS 39.6%* 36%* 31%
------------------------------------------------------------
10 $ 3,595 $ 3,719 $ 3,898
15 4,820 5,072 5,441
20 6,463 6,916 7,596
30 11,618 12,861 14,803
40 20,884 23,916 28,849
TAXABLE-- TAXABLE-- TAX
YEARS 28% 15% DEFERRED
------------------------------------------------------------
10 $ 4,008 $ 4,522 $ 5,187
15 5,675 6,799 8,354
20 8,034 10,224 13,455
30 16,102 23,117 34,899
40 32,272 52,266 90,519
$2,000 INVESTED ANNUALLY AT A RETURN OF 10%
COMPOUNDED ANNUALLY
TAXABLE-- TAXABLE-- TAXABLE--
YEARS 39.6%* 36%* 31%
------------------------------------------------------------
10 $ 28,006 $ 28,581 $ 29,400
15 49,514 51,067 53,314
20 78,351 81,731 86,697
30 168,852 180,566 198,360
40 331,537 364,360 415,973
TAXABLE-- TAXABLE-- TAX
YEARS 28% 15% DEFERRED
------------------------------------------------------------
10 $ 29,904 $ 32,192 $ 35,062
15 54,714 61,264 69,899
20 89,838 104,978 126,005
30 209,960 269,546 361,887
40 450,711 641,631 973,704
* For tax years beginning after 1992, a 36% tax rate
applies to all taxable income in excess of the maximum
dollar amounts subject to the 31% tax rate. In
addition, a 10% surtax (not applicable to capital gains)
applies to certain high-income taxpayers. It is
computed by applying a 39.6% rate to taxable income in
excess of $250,000. The above tables do not reflect the
personal exemption phaseout nor the limitations of
itemized deductions that may apply.
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, compounded annually,
illustrates the point. This chart is based on a yearly
investment of $2,000 on January 1. After 30 years the
difference can mean as much as 50% more!
8% Return 10% Return
10 Years $ 31,291 $ 35,062
20 Years 98,846 126,005
30 Years 244,692 361,887
The statistical exhibits above are for illustration
purposes only and do not reflect the actual performance for
the Series either in the past or in the future.
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.
The Series concentrates on seeking and actively managing
the potentials held by firms entering phase 2 of this
development cycle. The following illustration of a firm's
hypothetical development is intended to graphically depict
the full development cycle.
Hypothetical Corporate Life Cycle
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.
FINANCIAL STATEMENTS
The Series' 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
September 30, 1994 are included in the Series' 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.
