<PAGE>
VALUE FUND PROSPECTUS
November 29, 1995
A CLASS SHARES
B CLASS SHARES
C CLASS SHARES
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1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance:
Nationwide 800-523-4640, Philadelphia 215-988-1333
Information on Existing Accounts: (SHAREHOLDERS ONLY)
Nationwide 800-523-1918, Philadelphia 215-988-1241
Dealer Services: (BROKER/DEALERS ONLY)
Nationwide 800-362-7500, Philadelphia 215-988-1050
This Prospectus describes the Value Fund A Class of shares (the "Class A
Shares"), the Value Fund B Class of shares (the "Class B Shares") and the Value
Fund C Class of shares (the "Class C Shares") (collectively, the "Classes") of
Delaware Group Value Fund, Inc. (the "Fund"). The Fund intends to achieve its
objective of capital appreciation by investing primarily in common stocks whose
market values appear low relative to their underlying value or future potential.
Class A Shares may be purchased at the public offering price, which is
equal to the next determined net asset value per share, plus a front-end sales
charge. Class B Shares and Class C Shares may be purchased at a price equal to
the next determined net asset value per share. Class A Shares are subject to a
maximum front-end sales charge of 4.75% and annual 12b-1 Plan expenses of up to
0.30%. Class B Shares are subject to a contingent deferred sales charge ("CDSC")
which may be imposed on redemptions made within six years of purchase and annual
12b-1 Plan expenses of 1.00%, which are assessed against the Class B Shares for
approximately eight years after purchase. See Automatic Conversion of Class B
Shares under Buying Shares. Class C Shares are subject to a CDSC which may be
imposed on redemptions made within twelve months of purchase and annual 12b-1
Plan expenses of 1.00%, which are assessed against the Class C Shares for the
life of the investment. See Summary of Expenses. These alternatives permit an
investor to choose the method of purchasing shares that is most suitable for his
or her needs. In choosing the most suitable class, an investor should consider
the differences among the Classes, including the effect of sales charges and
12b-1 Plan expenses, given the amount of the purchase, the length of time the
investor expects to hold the shares and other circumstances. See Buying Shares.
This Prospectus relates only to the Classes listed above and sets forth
information that you should read and consider before you invest. Please retain
it for future reference. Part B of the Fund's registration statement, dated
November 29, 1995, as it may be amended from time to time, contains additional
information about the Fund and has been filed with the Securities and Exchange
Commission. Part B is incorporated by reference into this Prospectus and is
available, without charge, by writing to Delaware Distributors, L.P. at the
above address or by calling the above numbers. The Fund's financial statements
appear in its Annual Report for the fiscal year ended November 30, 1994, and its
Semi-Annual Report for the six months ended May 31, 1995, which will accompany
any response to requests for Part B.
The Fund also offers the Value Fund Institutional Class. That class is
available for purchase only by certain investors. A prospectus for the Value
Fund Institutional Class can be obtained by writing to Delaware Distributors,
L.P. at the above address or by calling the above number.
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<PAGE>
TABLE OF CONTENTS
Cover Page Retirement Planning
Synopsis Buying Shares
Summary of Expenses Redemption and Exchange
Financial Highlights Dividends and Distributions
Investment Objective and Policy Taxes
Investment Strategy Calculation of Offering Price
Suitability and Certain Risk and Net Asset Value Per Share
Factors Management of the Fund
The Delaware Difference Appendix A--Investment Illustrations
Plans and Services Appendix B--Ratings
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL
FUNDS CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND
ARE NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT
UNION, ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND
ARE NOT BANK OR CREDIT UNION DEPOSITS.
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<PAGE>
SYNOPSIS
Capitalization
The Fund offers four classes of shares: Class A Shares, Class B Shares,
Class C Shares and the Value Fund Institutional Class of shares. The Fund has a
present authorized capitalization of five hundred million shares of capital
stock with a $.01 par value per share. One hundred fifty million shares of that
stock have been allocated to the Class A Shares, one hundred million shares to
the Class B Shares, fifty million shares to the Class C Shares and fifty million
shares to the Value Fund Institutional Class. See Shares under Management of the
Fund.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") is the investment
manager for the Fund. The Manager or its affiliate, Delaware International
Advisers Ltd., also manages the other funds in the Delaware Group. Delaware
Distributors, L.P. (the "Distributor") is the national distributor for the Fund
and for all of the other mutual funds in the Delaware Group. Delaware Service
Company, Inc. (the "Transfer Agent") is the shareholder servicing, dividend
disbursing and transfer agent for the Fund and for all of the other mutual funds
in the Delaware Group. See Management of the Fund.
Sales Charges
The price of the Class A Shares includes a maximum front-end sales
charge of 4.75% of the offering price, which, based on the net asset value per
share of the Class A Shares as of the end of the Fund's most recent fiscal year,
is equivalent to 4.97% of the amount invested. The sales charge is reduced on
certain transactions of at least $100,000 but under $1,000,000. For purchases of
$1,000,000 or more, the front-end sales charge is eliminated. Class A Shares are
subject to annual 12b-1 Plan expenses.
The price of the Class B Shares is equal to the net asset value per
share. Class B Shares are subject to a CDSC of: (i) 4% if shares are redeemed
within two years of purchase; (ii) 3% if shares are redeemed during the third or
fourth year following purchase; (iii) 2% if shares are redeemed during the fifth
year following purchase; and (iv) 1% if shares are redeemed during the sixth
year following purchase. Class B Shares are subject to annual 12b-1 Plan
expenses for approximately eight years after purchase. See Automatic Conversion
of Class B Shares under Buying Shares.
The price of the Class C Shares is equal to the net asset value per
share. Class C Shares are subject to a CDSC of 1% if shares are redeemed within
twelve months of purchase. Class C Shares are subject to annual 12b-1 Plan
expenses for the life of the investment.
See Buying Shares and Distribution (12b-1) and Service under Management
of the Fund.
Purchase Amounts
Generally, the minimum initial investment is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent investments in any Class generally
must be at least $100. Each purchase of Class B Shares is subject to a maximum
purchase limitation of $250,000. For Class C Shares, each purchase must be in an
amount that is less than $1,000,000. An investor may exceed the maximum purchase
limitations for Class B Shares and Class C Shares by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of $100,000 or more of Class A
Shares, which are subject to lower annual 12b-1 Plan expenses than Class B
Shares and Class C Shares and generally are not subject to a CDSC. The minimum
and maximum purchase amounts for retirement plans may vary. See Buying Shares.
Investment Objective
The objective of the Fund is to seek capital appreciation by investing
primarily in common stocks whose market values appear low relative to their
underlying value or future potential. For further details, see Investment
Objective and Policy.
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<PAGE>
Risk Factors and Special Considerations
The Fund may enter into options for hedging purposes to counterbalance
portfolio volatility. While the Fund does not engage in options for speculative
purposes, there are risks that result from use of these instruments by the Fund,
and the investor should review the descriptions of these risks in this
Prospectus. See Investment Strategy under Investment Objective and Policy.
The Fund may invest up to 25% of its net assets in high-yield, higher
risk bonds (commonly known as junk bonds) and other lower rated securities, and,
consequently, greater risks may be involved with an investment in the Fund. See
Risk Factors under Suitability. The Fund does not presently intend to invest
more than 5% of its net assets in securities of this type.
Open-End Investment Company
The Fund, which was organized as a Maryland corporation in 1987, is an
open-end management investment company and its portfolio of assets is
diversified as defined by the Investment Company Act of 1940 (the "1940 Act").
See Shares under Management of the Fund.
Investment Management Fees
The Manager furnishes investment management services to the Fund, subject
to the supervision and direction of the Board of Directors. Under the Investment
Management Agreement, the annual compensation paid to the Manager is equal to
3/4 of 1% of the average daily net assets, less a proportionate share of all
directors' fees paid to the unaffiliated directors by the Fund. See Management
of the Fund.
Redemption and Exchange
Class A Shares of the Fund may be redeemed or exchanged at the net asset
value calculated after receipt of the redemption or exchange request. Neither
the Fund nor the Distributor assesses a charge for redemptions or exchanges of
Class A Shares, except for certain redemptions of shares purchased at net asset
value, which may be subject to a CDSC if such purchases triggered the payment of
a dealer's commission. See Front-End Sales Charge Alternative-Class A Shares
under Buying Shares. Class B and Class C Shares may be redeemed or exchanged at
the net asset value calculated after receipt of the redemption or exchange
request subject, in the case of redemptions, to any applicable CDSC. Neither the
Fund nor the Distributor assesses any charges other than the CDSC for
redemptions or exchanges of Class B or Class C Shares. There are certain
limitations on an investor's ability to exchange shares between the various
classes of shares that are offered. See Redemption and Exchange.
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<PAGE>
(DGVF-ABC)
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to Class A, Class B and Class C Shares follows:
<TABLE>
<CAPTION>
Shareholder Transaction Expenses Class A Shares Class B Shares Class C Shares
-------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of offering 4.75% None None
price)................................................
Maximum Sales Charge Imposed on
Reinvested Dividends (as a percentage of
offering price)....................................... None None None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption proceeds, whichever is lower).............. None* 4.00%* 1.00%*
Redemption Fees........................................ None** None** None**
Annual Operating Expenses
(as a percentage of average daily net assets) Class A Shares Class B Shares Class C Shares
--------------------------------------------- -------------- -------------- --------------
Management Fees......................................... 0.74% 0.74% 0.74%
12b-1 Expenses (including service fees)................. 0.30%+ 1.00%+ 1.00%+
Other Operating Expenses................................ 0.42% 0.42%++ 0.42%++
----- ----- -----
Total Operating Expenses................................ 1.46% 2.16% 2.16%
===== ===== =====
</TABLE>
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in any of the Classes will bear
directly or indirectly.
*With respect to Class A Shares, purchases of $1 million or more may be
made at net asset value; however, if in connection with any such purchase
certain dealer commissions are paid to the financial adviser through whom such
purchase is effected, a contingent deferred sales charge of 1% will be imposed
on certain redemptions within 12 months of purchase ("Limited CDSC"). Class B
Shares are subject to a CDSC of: (i) 4% if shares are redeemed within two years
of purchase; (ii) 3% if shares are redeemed during the third or fourth year
following purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; (iv) 1% if shares are redeemed during the sixth year
following purchase; and (v) 0% thereafter. Class C Shares are subject to a CDSC
of 1% if the shares are redeemed within twelve months of purchase. See
Contingent Deferred Sales Charge for Certain Purchases of Class A Shares Made at
Net Asset Value under Redemption and Exchange; Deferred Sales Charge Alternative
- - Class B Shares and Level Sales Charge Alternative - Class C Shares under
Buying Shares.
**CoreStates Bank, N.A. currently charges $7.50 per redemption for
redemptions payable by wire.
+Class A Shares, Class B Shares and Class C Shares are subject to
separate 12b-1 Plans. Long- term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by rules of the
National Association of Securities Dealers, Inc. (the "NASD"). See Distribution
(12b-1) and Service under Management of the Fund.
++"Other Operating Expenses" for Class B Shares and Class C Shares are
estimates based on the actual expenses incurred by the Class A Shares for the
fiscal year ended November 30, 1994. See Value Fund Institutional Class under
Buying Shares for expense information for that class.
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<PAGE>
The following example illustrates the expenses that an investor would pay
on a $1,000 investment over various time periods, assuming (1) a 5% annual rate
of return, (2) redemption at the end of each time period and (3) with respect to
Class B Shares and Class C Shares, payment of a CDSC at the time of redemption,
if applicable.
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $62(1) $91 $123 $214(1)
Class B Shares $62 $98 $136 $232(2)
Class C Shares $32 $68 $116 $249
An investor would pay the following expenses on the same $1,000 investment, assuming no
redemption at the end of the period:
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $62 $91 $123 $214
Class B Shares $22 $68 $116 $232(2)
Class C Shares $22 $68 $116 $249
</TABLE>
(1) Generally, the Fund does not assess a redemption charge upon redemption of
Class A Shares. Under certain circumstances, however, a Limited CDSC, which
has not been reflected in this calculation, may be imposed on certain
redemptions within twelve months of purchase. See Contingent Deferred Sales
Charge for Certain Purchases of Class A Shares Made at Net Asset Value
under Redemption and Exchange.
(2) At the end of approximately eight years after purchase, Class B Shares will
be automatically converted into Class A Shares. The example above assumes
conversion of Class B Shares at the end of the eighth year. However, the
conversion may occur as late as three months after the eighth anniversary
of purchase, during which time the higher 12b-1 Plan fees payable by Class
B Shares will continue to be assessed. Information for the ninth and tenth
years reflects expenses of the Class A Shares. See Automatic Conversion of
Class B Shares under Buying Shares for a description of the automatic
conversion feature.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
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FINANCIAL HIGHLIGHTS
The following financial highlights from June 24, 1987 through November 30, 1994
for the Class A Shares and September 6, 1994 through November 30, 1994 for the
Class B Shares are derived from the financial statements of Delaware Group Value
Fund, Inc. and have been audited by Ernst & Young LLP, independent auditors. The
data should be read in conjunction with the financial statements, related notes,
and the report of Ernst & Young LLP covering such financial information and
highlights, all of which are incorporated by reference into Part B. Unaudited
financial highlights for the six months ended May 31, 1995 are also provided
below for the Class A Shares and the Class B Shares. The data should be read in
conjunction with the financial statements and related notes for the six months
ended May 31, 1995, all of which are incorporated by reference into Part B.
Further information about the Fund's performance is contained in its Annual
Report to shareholders for the fiscal year ended November 30, 1994, and its
SemiAnnual Report to shareholders for the six months ended May 31, 1995. A copy
of the Fund's Annual Report (including the report of Ernst & Young LLP) and its
Semi-Annual Report may be obtained from the Fund upon request at no charge.
Information regarding Class C Shares has not been included in these tables
because such shares were not offered to the public prior to the date of this
Prospectus.
- --------------------------------------------------------------------------------
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<PAGE>
<TABLE>
<CAPTION>
Class A Shares
Period --------------------------------------------
12/1/94
through Year Ended
5/31/95(2) --------------------------------------------
(Unaudited) 11/30/94 11/30/93 11/30/92 11/30/91
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......................... $19.320 $20.070 $17.750 $15.320 $11.050
Income From Investment Operations
- ---------------------------------
Net Investment Income........................................ 0.159 0.142 0.033 0.060 (0.006)
Net Gains or Losses on Securities
(both realized and unrealized)...................... 1.111 (0.687) 3.147 3.360 4.681
----- ------- ----- ----- -----
Total From Investment Operations......................... 1.270 (0.545) 3.180 3.420 4.675
----- ------- ----- ----- -----
Less Distributions
- ------------------
Dividends (from net investment income)....................... (0.160) (0.035) (0.040) none (0.155)
Distributions (from capital gains)........................... (0.250) (0.170) (0.820) (0.990) (0.250)
Returns of Capital........................................... none none none none none
---- ---- ---- ---- ----
Total Distributions...................................... (0.410) (0.205) (0.860) (0.990) (0.405)
------- ------- ------- ------- -------
Net Asset Value, End of Period............................... $20.180 $19.320 $20.070 $17.750 $15.320
======= ======= ======= ======= =======
Total Return(3).............................................. 6.74% (2.78%) 18.59% 22.99% 43.61%
- ------------
- ---------------------------------------------------------------
Ratios/Supplemental Data
- -------------------------
Net Assets, End of Period (000's omitted).................... $174,360 $179,498 $151,384 $38,792 $12,041
Ratio of Expenses to Average Daily Net Assets................ 1.49% 1.46% 1.64% 1.93% 2.26%
Ratio of Net Investment Income to Average Daily Net Assets... 1.58% 0.75% 0.25% 0.39% (0.07%)
Portfolio Turnover Rate...................................... 28% 14% 32% 68% 99%
<PAGE>
Class A Shares
--------------------------------
Period
Year Ended 6/24/87(1)
-------------------------------- through
11/30/90 11/30/89 11/30/88 11/30/87
-------- -------- -------- ----------
Net Asset Value, Beginning of Period...................... $14.030 $10.440 $7.740 $9.530
Income From Investment Operations
- ---------------------------------
Net Investment Income..................................... 0.149 0.131 0.054 0.058
Net Gains or Losses on Securities
(both realized and unrealized)................... (2.269) 3.529 2.691 (1.848)
------- ----- ----- -------
Total From Investment Operations...................... (2.120) 3.660 2.745 (1.790)
------- ----- ----- -------
Less Distributions
- ------------------
Dividends (from net investment income).................... (0.140) (0.070) (0.045) none
Distributions (from capital gains)........................ (0.720) none none none
Returns of Capital........................................ none none none none
---- ---- ---- ----
Total Distributions................................... (0.860) (0.070) (0.045) none
------- ------- ------- ----
Net Asset Value, End of Period............................ $11.050 $14.030 $10.440 $7.740
======= ======= ======= ======
Total Return(3)........................................... (16.14%) 35.28%(4) 35.57%(4) (18.78%)(4)
- ------------
- -------------------------------------------------------------
Ratios/Supplemental Data
- -------------------------
Net Assets, End of Period (000's omitted).................... $7,746 $11,055 $6,797 $8,780
Ratio of Expenses to Average Daily Net Assets................ 1.79% 1.98%(5) 2.02%(5) 1.50%(5)
Ratio of Net Investment Income to Average Daily Net Assets... 1.12% 1.14%(6) 0.35%(6) 1.74%(6)
Portfolio Turnover Rate...................................... 69% 103% 66% 60%
</TABLE>
(1) Date of initial public offering; ratios and total return have been
annualized.
(2) Ratios have been annualized, but total return has not been annualized.
(3) Does not reflect maximum front-end sales charge that is or was in effect
nor the 1% Limited CDSC that would apply in the event of certain
redemptions within twelve months of purchase. See Contingent Deferred Sales
Charge for Certain Purchases of Class A Shares Made At Net Asset Value.
(4) Total return reflects the expense limitation referenced in Notes 5 and 6.
(5) Ratio of expenses to average daily net assets prior to expense limitation
was 2.16% for 1989, 2.23% for 1988 and 2.26% for 1987.
(6) Ratio of net investment income to average daily net assets prior to expense
limitation was 0.97% for 1989, 0.14% for 1988 and 0.99% for 1987.
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<PAGE>
Class B Shares
------------------------
Period
12/1/94 Period
through 9/6/94(1)
5/31/95(2) through
(Unaudited) 11/30/94
----------- ----------
Net Asset Value, Beginning of Period................ $19.300 $20.280
Income From Investment Operations
- ---------------------------------
Net Investment Income............................... 0.139 0.011
Net Gains or Losses on Securities
(both realized and unrealized)............. 1.071 (0.991)
------- -------
Total From Investment Operations................ 1.210 (0.980)
------- -------
Less Distributions
- ------------------
Dividends (from net investment income).............. (0.150) none
Distributions (from capital gains).................. (0.250) none
Returns of Capital.................................. none none
Total Distributions............................. (0.400) none
------- -------
Net Asset Value, End of Period...................... $20.110 $19.300
======= =======
Total Return(3)..................................... 6.43% (4.83%)
- ------------
- --------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)........... $3,437 $1,455
Ratio of Expenses to Average Daily Net Assets....... 2.19% 2.16%
Ratio of Net Investment Income to Average Daily Net
Assets... ......................................... 0.88% 0.05%
Portfolio Turnover Rate............................. 28% 14%
- ------------
(1) Date of initial public offering; ratios have been annualized, but total
return has not been annualized.
(2) Ratios have been annualized but total return has not been annualized.
(3) Total return does not include any applicable CDSC.
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<PAGE>
INVESTMENT OBJECTIVE AND POLICY
The objective of the Fund is capital appreciation. The Fund's strategy is
to invest primarily in common stocks and issues convertible into common stocks
which, in the opinion of the Manager, have market values that appear low
relative to their underlying value or future earnings and growth potential.
Securities will be purchased that the Manager believes to be undervalued
in relation to asset value or long-term earning power of the companies. The
Manager may also invest in securities of companies where current or anticipated
favorable changes within a company provide an opportunity for capital
appreciation. The Manager's emphasis will be on securities of companies that may
be temporarily out of favor or whose value is not yet recognized by the market.
The Manager will consider the financial strength of the company, the
nature of its management and any developments affecting the security, the
company or the industry. Securities may be out of favor due to a variety of
factors, such as lack of an institutional following, unfavorable developments
affecting the issuer of the securities, such as poor earning reports, dividend
reductions, or cyclical economic or business conditions. Other securities
considered by the Manager would include those of companies where current or
anticipated favorable changes such as a new product or service, technological
breakthrough, management change, projected takeovers, changes in capitalization
or redefinition of future corporate operations provide an opportunity for
capital appreciation. The Manager will also consider securities where trading
patterns suggest that significant positions are being accumulated by officers of
the company, outside investors or the company itself. The Manager feels it may
uncover situations where those who have a vested interest in the company feel
the securities are undervalued and have appreciation potential.
Although the Fund will constantly strive to attain the objective of
capital appreciation, there can be no assurance that it will be attained. If the
Manager believes that market conditions warrant, the Fund may employ options
strategies. Also, on a temporary, defensive basis, the Manager may invest in
fixed income obligations. The objective of the Fund may not be changed without
shareholder approval.
INVESTMENT STRATEGY
While management believes that the Fund's objective may best be attained
by investing in common stocks, the Fund may also invest in other securities
including, but not limited to, convertible securities, warrants, preferred
stocks, bonds and foreign securities. Fixed income securities are expected to
receive only minor emphasis. The Fund may invest without regard to a minimum
grade level where there are favorable changes in a company's earnings or growth
potential or where general economic conditions and/or the interest rate
environment provide an opportunity for appreciation in these securities.
Investment characteristics and certain risks associated with the types of
securities in which the Fund will generally invest are described in this section
of the Prospectus. See Suitability for more specific information and risks
associated with foreign and lower rated securities. The strategies employed are
dependent upon the judgment of the Manager.
In investing for capital appreciation, the Fund may hold securities for
any period of time. The degree of portfolio activity will affect brokerage costs
of the Fund and may affect taxes payable by the Fund's shareholders. See
Portfolio Trading Practices under Management of the Fund.
Should the market warrant a temporary, defensive approach, the Fund may
also invest in fixed income obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, as well as money market
instruments, and corporate bonds rated A or above by Moody's Investors Service,
Inc. ("Moody's") or Standard & Poor's Corporation ("S&P"). (Appendix B to this
Prospectus describes these ratings.)
-9-
<PAGE>
The Fund may write covered call options on individual issues as well as
write call options on stock indices. The Fund may also purchase put options on
individual issues and on stock indices. The Manager will employ these techniques
in an attempt to protect appreciation attained, to offset capital losses and/or
to take advantage of the liquidity available in the option markets. The ability
to hedge effectively using options on stock indices will depend, in part, on the
correlation between the composition of the index and the Fund's portfolio as
well as the price movement of individual securities. The Fund does not currently
intend to write or purchase options on stock indices.
While there is no limit on the amount of the Fund's assets which may be
invested in covered call options, the Fund will not invest more than 2% of its
net assets in put options. The Fund will only use Exchange-traded options.
The Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933. Rule 144A permits many privately
placed and legally restricted securities to be freely traded among certain
institutional buyers such as the Fund. The Fund may invest no more than 10% of
the value of its net assets in illiquid securities.
While maintaining oversight, the Board of Directors has delegated to the
Manager the day-to-day function of determining whether or not individual Rule
144A Securities are liquid for purposes of the Fund's 10% limitation on
investments in illiquid assets. The Board has instructed the Manager to consider
the following factors in determining the liquidity of a Rule 144A Security: (i)
the frequency of trades and trading volume for the security; (ii) whether at
least three dealers are willing to purchase or sell the security and the number
of potential purchasers; (iii) whether at least two dealers are making a market
in the security; and (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was previously
determined to be liquid is no longer liquid and, as a result, the Fund's
holdings of illiquid securities exceed the Fund's 10% limit on investment in
such securities, the Manager will determine what action to take to ensure that
the Fund continues to adhere to such limitation.
Call Options
Writing Covered Call Options
A covered call option obligates the Fund to sell one of its securities
for an agreed price up to an agreed date. When the Fund writes a call, it
receives a premium and agrees to sell the callable securities to a purchaser of
a corresponding call during the call period (usually not more than nine months)
at a fixed exercise price regardless of market price changes during the call
period. The advantage is that the Fund receives premium income for the limited
purpose of offsetting the costs of purchasing put options or offsetting any
capital loss or decline in market value of the security. However, if the
Manager's forecast is wrong, the Fund may not fully participate in the market
appreciation if the security's price rises.
Writing a Call Option on Stock Indices
Writing a call option on stock indices is similar to the writing of a
call option on an individual stock. Stock indices used will include, but not be
limited to, the S&P 100 and the S&P Over-The-Counter ("OTC") 250.
Put Options
Purchasing a Put Option
A put option gives the Fund the right to sell one of its securities for
an agreed price up to an agreed date. The advantage is that the Fund can be
-10-
<PAGE>
protected should the market value of the security decline. However, the Fund
must pay a premium for this right which would be lost if the option is not
exercised.
Purchasing a Put Option on Stock Indices
Purchasing a protective put option on stock indices is similar to the
purchase of protective puts on an individual stock. Indices used will include,
but not be limited to, the S&P 100 and the S&P OTC 250.
Closing Transactions
Closing transactions essentially let the Fund offset a put option or
covered call option prior to its exercise or expiration. If the Fund cannot
effect a closing transaction, it may have to hold a security it would otherwise
sell or deliver a security it might want to hold.
Foreign Securities
The Fund may invest up to 25% of its assets in foreign securities.
Foreign markets may be more volatile than U.S. markets. Such investments involve
sovereign risk in addition to the normal risks associated with U.S. securities.
These risks include political risks, foreign taxes and exchange controls and
currency fluctuations. For example, foreign portfolio investments may fluctuate
in value due to changes in currency rates (i.e., the value of foreign
investments would increase with a fall in the value of the dollar, and decrease
with a rise in the value of the dollar) and control regulations apart from
market fluctuations. The Fund may also experience delays in foreign securities
settlement.
The Fund will, from time to time, conduct foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into contracts to purchase
or sell foreign currencies at a future date (i.e., a "forward foreign currency"
contract or "forward" contract). Investors should be aware that there are costs
and risks associated with such currency transactions. The Fund may enter into
forward contracts to "lock in" the price of a security it has agreed to purchase
or sell, in terms of U.S. dollars or other currencies in which the transaction
will be consummated. When the Manager believes that the currency of a particular
foreign country may suffer a decline against the U.S. dollar or against another
currency, the Fund may enter into a forward contract to sell, for a fixed amount
of U.S. dollars or other appropriate currency, the amount of foreign currency
approximating the value of some or all of the Fund's securities denominated in
such foreign currency. It is impossible to predict precisely the market value of
portfolio securities at the expiration of the forward contract. Accordingly, it
may be necessary for the Fund to purchase or sell additional foreign currency on
the spot market (and bear the expense of such purchase or sale) if the market
value of the security is less than or greater than the amount of foreign
currency the Fund is obligated to deliver.
The Fund may incur gains or losses from currency transactions. No type of
foreign currency transaction will eliminate fluctuations in the prices of the
Fund's foreign securities or will prevent losses if the prices of such
securities should decline.
The Fund's Custodian for its foreign securities is Morgan Guaranty Trust
Company of New York, located at 60 Wall Street, New York, New York 10260.
Repurchase Agreements
The Fund may also use repurchase agreements that are at least 100%
collateralized by U.S. Government securities. Repurchase agreements help the
Fund to invest cash on a temporary basis. The Fund may invest cash balances in
joint repurchase agreements with other Delaware Group funds. Under a repurchase
-11-
<PAGE>
agreement, the Fund acquires ownership and possession of a security, and the
seller agrees to buy the security back at a specified time and higher price. If
the seller is unable to repurchase the security, the Fund could experience
delays in liquidating the securities. To minimize this possibility, the Fund
considers the creditworthiness of banks and dealers when entering into
repurchase agreements.
Portfolio Loan Transactions
The Fund may loan up to 25% of its assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other security
transactions.
The major risk to which the Fund would be exposed on a loan transaction
is the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, subject to overall
supervision by the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
* * *
The Fund is permitted under certain circumstances to borrow money.
Investment securities will not be purchased while the Fund has an outstanding
borrowing.
Part B sets forth other more specific investment restrictions.
SUITABILITY
The Fund may be suitable for investors interested in long-term capital
appreciation. Providing current income is not an objective of the Fund. Any
income produced is expected to be minimal. Investors should not consider a
purchase of Fund shares as equivalent to a complete investment program. The
Delaware Group includes a family of funds, generally available through
registered investment dealers, which may be used together to create a more
complete investment program.
Ownership of Fund shares reduces the bookkeeping and administrative
inconvenience that would be involved with direct purchases of the Fund's
portfolio securities.
Net asset value may fluctuate at times in response to market conditions
and, as a result, the Fund is not appropriate for a short-term investor.
Risk Factors
Investors should be willing to accept the risks associated with
investments in domestic and international securities (and currency hedging
transactions in connection with international investing). Investing in
international securities may be speculative and subject the Fund to additional
risks. Investing in a company temporarily out of favor may involve the risk that
the anticipated favorable change may not occur and, as a result, that security
may decline in value or not appreciate as expected.
The Fund may also purchase, at times, lower rated or unrated securities,
including corporate bonds and convertible securities without regard to a grade
minimum, which may be considered speculative and may increase the portfolio's
credit risk. Although the Fund will ordinarily place minor emphasis on fixed
income securities and will not typically purchase bonds or other securities
rated below B by Moody's or S&P (i.e., high-yield, high-risk securities), it may
do so if the Manager believes that capital appreciation is likely. While the
Fund is authorized to invest up to 25% of its net assets in securities rated
below B, it does not presently intend to invest more than 5% of its net assets
in securities of this type. Investing in such lower rated securities may involve
certain risks not typically associated with higher rated securities. Such
securities are considered very speculative and may possibly be in default or
have interest payments in arrears. See High-Yield, High-Risk Securities in Part
B for additional information on the risks associated with such securities. See
Appendix B to this Prospectus for more rating information.
Additional information about the types of securities in which the Fund
will typically invest and related risk factors is included under Investment
Strategy.
-12-
<PAGE>
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Group of
funds.
SHAREHOLDER PHONE DIRECTORY
Investor Information Center
800-523-4640 (Philadelphia 215-988-1333)
Fund Information; Literature; Price,
Yield and Performance Figures
Shareholder Service Center
800-523-1918 (Philadelphia 215-988-1241)
Information on Existing Regular
Investment Accounts and
Retirement Plan Accounts; Wire
Investments; Wire Liquidations;
Telephone Liquidations; Telephone
Exchanges
Delaphone
800-362-FUND
(800-362-3863)
Shareholder Services
During business hours, you can call the Fund's Shareholder Service
Center. Our representatives can answer any questions about your account, the
Fund, various service features and other funds in the Delaware Group.
Performance Information
During business hours, you can call the Investor Information Center to
get current performance information.
Delaphone Service
Delaphone is an account inquiry service for investors with Touch-Tone(R)
phone service. It enables you to get information on your account faster than the
mailed statements and confirmations. Delaphone is available seven days a week,
24 hours a day.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of distributions. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling the Shareholder Service Center.
Duplicate Confirmations
If your investment dealer is noted on your investment application, we
will send your dealer a duplicate confirmation. This makes it easier for your
investment dealer to help you manage your investments.
Tax Information
Each year, the Fund will mail you information on the tax status of your
dividends and distributions.
Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your account. Also, you may invest
your distributions in certain other funds in the Delaware Group, subject to the
exceptions noted below as well as the eligibility and minimum purchase
requirements set forth in each fund's prospectus.
Reinvestments of distributions into Class A Shares of the Fund or of
other Delaware Group funds are made without a front-end sales charge.
Reinvestments of distributions into Class B Shares of the Fund or of other
Delaware Group funds or into Class C Shares of the Fund or of other Delaware
Group funds are also made without any sales charge and will not be subject to a
CDSC if later redeemed. See Automatic Conversion of Class B Shares under Buying
Shares for information concerning the automatic conversion of Class B Shares
acquired by reinvesting dividends.
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<PAGE>
Holders of Class A Shares of the Fund may not reinvest their
distributions into Class B Shares or Class C Shares of any fund in the Delaware
Group, including the Fund. Holders of Class B Shares of the Fund may reinvest
their distributions only into Class B Shares of the funds in the Delaware Group
which offer that class of shares (the "Class B Funds"). Similarly, holders of
Class C Shares of the Fund may reinvest their distributions only into Class C
Shares of the funds in the Delaware Group which offer that class of shares (the
"Class C Funds"). See Class B Funds and Class C Funds under Buying Shares for a
list of the funds offering those classes of shares. For more information about
reinvestments, please call the Shareholder Service Center.
Exchange Privilege
The Exchange Privilege permits shareholders to exchange all or part of
their shares into shares of the other funds in the Delaware Group, subject to
certain exceptions and limitations. For additional information on exchanges, see
Investing by Exchange under How to Buy Shares and Redemption and Exchange.
Wealth Builder Option
You may elect to have amounts in your account automatically invested in
shares of other funds in the Delaware Group. Investments under this feature are
exchanges and are therefore subject to the same conditions and limitations as
other exchanges of Class A, Class B and Class C Shares. See Redemption and
Exchange.
Right of Accumulation
With respect to Class A Shares, the Right of Accumulation feature allows
you to combine the value of your current holdings of Class A Shares, Class B
Shares and Class C Shares of the Fund with the dollar amount of new purchases of
Class A Shares to qualify for a reduced front-end sales charge. Under the
Combined Purchases Privilege, you may also include certain shares that you own
in other funds in the Delaware Group. See Buying Shares.
Letter of Intention
The Letter of Intention feature permits you to obtain a reduced front-end
sales charge on purchases of Class A Shares by aggregating certain of your
purchases of Delaware Group fund shares over a 13-month period. See Buying
Shares and Part B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits you to reinvest proceeds of
Class A Shares within one year of the date of redemption, without a front-end
sales charge. See Part B.
Delaware Group Asset Planner
Delaware Group Asset Planner is an asset allocation service that gives
investors, working with a professional financial adviser, the ability to more
easily design and maintain investments in a diversified selection of Delaware
Group mutual funds. The Asset Planner service offers a choice of four
pre-designed Allocation Strategies (each with a different risk/reward profile)
made up of separate investments in predetermined percentages of Delaware Group
funds. With the guidance of a financial adviser, investors may also tailor a
Strategy that meets their personal needs and goals. See How to Buy Shares under
Buying Shares.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. The Fund's fiscal year ends on November
30.
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<PAGE>
RETIREMENT PLANNING
An investment in the Fund may be suitable for tax-deferred retirement
plans. Among the retirement plans noted below, Class B Shares are available for
investment only by Individual Retirement Accounts, Simplified Employee Pension
Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred Compensation
Plans.
Retirement plans may be subject to plan establishment fees, annual
maintenance fees and/or other administrative or trustee fees. Fees are based
upon the number of participants in the plan as well as the services selected.
Additional information about fees is included in retirement plan materials. Fees
are quoted upon request.
Certain shareholder investment services available to non-retirement plan
shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase the Value Fund Institutional Class. For
additional information on any of the plans and Delaware's retirement services,
call the Shareholder Service Center or see Part B.
Individual Retirement Account ("IRA")
Individuals, even if they participate in an employer-sponsored retirement
plan, may establish their own retirement program for investments in each of the
Classes. Contributions to an IRA may be tax-deductible and earnings are
tax-deferred. Under the Tax Reform Act of 1986, the tax deductibility of IRA
contributions is restricted, and in some cases eliminated, for individuals who
participate in certain employer-sponsored retirement plans and whose annual
income exceeds certain limits. Existing IRAs and future contributions up to the
IRA maximums, whether deductible or not, still earn on a tax-deferred basis.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Offers employers with 25 or fewer eligible employees the ability to
establish a SEP/IRA that permits salary deferral contributions. An employer may
also elect to make additional contributions to this plan. Class B Shares are not
available for purchase by such plans.
403(b)(7) Deferred Compensation Plan
Permits employees of public school systems or of certain types of
non-profit organizations to enter into a deferred compensation arrangement for
the purchase of shares of each of the Classes.
457 Deferred Compensation Plan
Permits employees of state and local governments and certain other
entities to enter into a deferred compensation arrangement for the purchase of
shares of each of the Classes.
Prototype Profit Sharing or Money Purchase Pension Plan
Offers self-employed individuals, partnerships and corporations a
tax-qualified plan which provides for the investment of contributions in Class A
Shares or Class C Shares. Class B Shares are not available for purchase by such
plans.
Prototype 401(k) Defined Contribution Plan
Permits employers to establish a tax- qualified plan based on salary
deferral contributions in Class A Shares or Class C Shares. Class B Shares are
not available for purchase by such plans.
Allied Plans
Class A Shares are available for purchase by participants in 401(k)
Defined Contribution Plans ("Allied Plans") which are made available under a
joint venture agreement between the Distributor and another institution through
which mutual funds are marketed and which allow investments in Class A Shares of
designated Delaware Group funds ("eligible Delaware Group fund shares"), as well
as shares of designated classes of non-Delaware Group funds ("eligible
non-Delaware Group fund shares"). Class B Shares and Class C Shares are not
eligible for purchase by Allied Plans.
-15-
<PAGE>
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Group and eligible non- Delaware Group fund shares
held by a participant under the Allied Plan may be combined with the dollar
amount of new purchases by that participant to obtain a reduced front-end sales
charge on additional purchases of eligible Delaware Group fund shares. See
Front-End Sales Charge Alternative - Class A Shares under Buying Shares.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Group fund shares for other eligible Delaware Group fund shares or for
eligible non-Delaware Group fund shares at net asset value without payment of a
front-end sales charge. However, exchanges of eligible fund shares, both
Delaware Group and non-Delaware Group, which were not subject to a front-end
sales charge, will be subject to the applicable sales charge if exchanged for
eligible Delaware Group fund shares to which a sales charge applies. No sales
charge will apply if the eligible fund shares were previously acquired through
the exchange of eligible shares on which a sales charge was already paid or
through the reinvestment of dividends. See Investing by Exchange.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described below under the heading Waiver of
Limited CDSC-Class A Shares, apply to redemptions by participants in Allied
Plans, except in the case of exchanges between eligible Delaware Group and
non-Delaware Group fund shares. When eligible Delaware Group fund shares are
exchanged into eligible non-Delaware Group fund shares, the Limited CDSC will be
imposed at the time of the exchange, unless the joint venture agreement
specifies that the amount of the CDSC will be paid by the financial adviser or
selling dealer. See Contingent Deferred Sales Charge for Certain Purchases of
Class A Shares Made at Net Asset Value under Redemption and Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Group fund shares under an Allied Plan. In determining a financial adviser's
eligibility for a dealer's commission on net asset value purchases of eligible
Delaware Group fund shares in connection with Allied Plans, all participant
holdings in the Allied Plan will be aggregated. See Front-End Sales Charge
Alternative - Class A Shares under Buying Shares.
-16-
<PAGE>
BUYING SHARES
Purchase Amounts
Generally, the minimum initial purchase is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of shares of any Class
generally must be $100 or more. Class A Shares purchased under the Uniform Gifts
to Minors Act or Uniform Transfers to Minors Act are subject to a minimum
initial purchase of $250 and a minimum subsequent purchase of $25. In addition,
there is a maximum purchase limitation of $250,000 on each purchase of Class B
Shares; for Class C Shares, each purchase must be in an amount that is less than
$1,000,000. An investor may exceed these maximum purchase limitations by making
cumulative purchases over a period of time. In doing so, an investor should keep
in mind that reduced front-end sales charges are available on investments of
$100,000 or more in Class A Shares, and that Class A Shares (i) are subject to
lower annual 12b-1 Plan expenses than Class B Shares and Class C Shares and (ii)
generally are not subject to a CDSC.
For retirement plans, the maximum purchase limitations apply only to the
initial purchase of Class B Shares or Class C Shares by the plan. Minimum
purchase requirements do not apply to retirement plans other than IRAs for which
there is a minimum initial purchase of $250, and a minimum subsequent purchase
of $25, regardless of which class is selected.
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net asset
value per share, subject to a sales charge which may be imposed, at the election
of the purchaser, at the time of the purchase with respect to Class A Shares
("front-end sales charge alternative"), or on a contingent deferred basis with
respect to Class B Shares ("deferred sales charge alternative") or Class C
Shares ("level sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares. Class A Shares incur a sales charge when
they are purchased but generally are not subject to any sales charge when they
are redeemed. Class A Shares are subject to annual 12b-1 Plan expenses of up to
a maximum of .30% of average daily net assets of such shares. See Contingent
Deferred Sales Charge for Certain Purchases of Class A Shares Made at Net Asset
Value and Distribution (12b-1) and Service. Certain purchases of Class A Shares
qualify for reduced front-end sales charges. See Front-End Sales Charge
Alternative - Class A Shares, below.
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares. Class B Shares do not incur a front-end
sales charge when they are purchased, but are subject to a sales charge if they
are redeemed within six years of purchase and are subject to annual 12b-1 Plan
expenses of up to a maximum of 1% (.25% of which are service fees to be paid to
the Distributor, dealers or others for providing personal service and/or
maintaining shareholder accounts) of average daily net assets of such shares for
approximately eight years after purchase. Class B Shares permit all of the
investor's dollars to work from the time the investment is made. The higher
12b-1 Plan expenses paid by Class B Shares will cause such shares to have a
higher expense ratio and to pay lower dividends than those related to the Class
A Shares. At the end of approximately eight years after purchase, the Class B
Shares will automatically be converted into Class A Shares. See Automatic
Conversion of Class B Shares, below.
Class C Shares. An investor who elects the level sales charge alternative
acquires Class C Shares. Class C Shares do not incur a front-end sales charge
when they are purchased, but are subject to a sales charge if they are redeemed
within twelve months of purchase and are subject to annual 12b-1 Plan expenses
of up to a maximum of 1% (.25% of which are service fees to be paid to the
Distributor, dealers or others for providing personal service and/or maintaining
shareholder accounts) of average daily net assets of such shares for the life of
the investment. The higher 12b-1 Plan expenses paid by Class C Shares will cause
such shares to have a higher expense ratio and to pay lower dividends than those
related to the Class A Shares. Unlike Class B Shares, Class C Shares do not
convert to another class.
The alternative purchase arrangements described above permit investors in
the Fund to choose the method of purchasing shares that is most suitable given
the amount of their purchase, the length of time they expect to hold their
shares and other relevant circumstances. Investors should determine whether,
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<PAGE>
given their particular circumstances, it is more advantageous to purchase Class
A Shares and incur a front-end sales charge, purchase Class B Shares and have
the entire initial purchase amount invested in the Fund with their investment
being subject to a CDSC if they redeem shares within six years of purchase, or
purchase Class C Shares and have the entire initial purchase amount invested in
the Fund with their investment being subject to a CDSC if they redeem shares
within twelve months of purchase. In addition, investors should consider the
level of annual 12b-1 Plan expenses to which each of the Classes is subject and,
in comparing Class B Shares to Class C Shares, the desirability of an automatic
conversion feature, which is available only for Class B Shares.
As an illustration, investors who qualify for significantly reduced
front-end sales charges on purchases of Class A Shares, as described below,
might elect the front-end sales charge alternative because similar sales charge
reductions are not available under either the deferred sales charge alternative
or the level sales charge alternative. Moreover, shares acquired under the
front-end sales charge alternative are subject to annual 12b-1 Plan expenses of
up to .30%, whereas Class B Shares acquired under the deferred sales charge
alternative are subject to annual 12b-1 Plan expenses of up to 1% for
approximately eight years after purchase (see Automatic Conversion of Class B
Shares) and Class C Shares acquired under the level sales charge alternative are
subject to annual 12b-1 Plan expenses of up to 1% for the life of the
investment. However, because front-end sales charges are deducted from the
purchase amount at the time of purchase, investors who buy Class A Shares will
not have their full purchase amount invested in the Fund.
Certain other investors might determine it to be more advantageous to
purchase Class B Shares and have all their funds invested initially, although
they would be subject to a CDSC for up to six years after purchase, as well as
annual 12b-1 Plan expenses of up to 1% until the shares are automatically
converted into Class A Shares. Still other investors might determine it to be
more advantageous to purchase Class C Shares and have all of their funds
invested initially, recognizing that they would be subject to a CDSC for just
twelve months after purchase but that Class C Shares do not offer a conversion
feature, so their shares would be subject to annual 12b-1 Plan expenses of up to
1% for the life of the investment. The higher 12b- 1 Plan expenses on Class B
Shares and Class C Shares will be offset to the extent a return is realized on
the additional money initially invested under the deferred sales charge
alternative or the level sales charge alternative. However, there can be no
assurance as to the return, if any, that will be realized on such additional
money.
Prospective investors should refer to Appendix A to this Prospectus for
an illustration of the potential impact on a long-term shareholder's investment
in the Fund under each of the purchase options.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Fund, the Distributor and others will be paid, in the
case of the Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of the Class B Shares and the Class C Shares,
from the proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred
upon redemption. Sales personnel may receive different compensation for selling
Class A, Class B and Class C Shares. INVESTORS SHOULD UNDERSTAND THAT THE
PURPOSE AND FUNCTION OF THE RESPECTIVE 12b-1 PLANS AND THE CDSCs APPLICABLE TO
CLASS B SHARES AND CLASS C SHARES ARE THE SAME AS THOSE OF THE 12b-1 PLAN AND
THE FRONT-END SALES CHARGE APPLICABLE TO CLASS A SHARES IN THAT SUCH FEES AND
CHARGES PROVIDE FOR THE FINANCING OF THE DISTRIBUTION OF THE RESPECTIVE CLASSES.
See 12b-1 Distribution Plans - Class A, Class B and Class C Shares.
Dividends paid by the Fund with respect to the Class A, Class B and Class
C Shares, to the extent any dividends are paid, will be calculated in the same
manner, at the same time, on the same day and will be in the same amount, except
that the additional amount of 12b-1 Plan expenses relating to the Class B Shares
and the Class C Shares will be borne exclusively by such shares. See Calculation
of Offering Price and Net Asset Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. The Fund and the Distributor intend to operate in compliance with these
rules.
Front-End Sales Charge Alternative - Class A Shares
The Class A Shares may be purchased at the offering price, which reflects
a maximum front-end sales charge of 4.75%. See Calculation of Offering Price and
Net Asset Value Per Share.
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<PAGE>
(DGVF-ABC)
Purchases of $100,000 or more carry a reduced front-end sales charge as
shown in the following table.
<TABLE>
<CAPTION>
Value Fund A Class
- --------------------------------------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge as % of Concession***
Amount of Purchase Offering Amount as % of
Price Invested** Offering Price
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.75% 4.97% 4.00%
$100,000 but under $250,000 3.75 3.88 3.00
$250,000 but under $500,000 2.50 2.59 2.00
$500,000 but under $1,000,000* 2.00 2.02 1.60
</TABLE>
* There is no front-end sales charge on purchases of Class A Shares of $1
million or more but, under certain limited circumstances, a 1% Limited
CDSC may apply upon redemption of such shares.
** Based on the net asset value per share of the Class A Shares as of the
end of the Fund's most recent fiscal year.
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- --------------------------------------------------------------------------------
The Fund must be notified when a sale takes place which would qualify for the
reduced front-end sales charge on the basis of previous or current purchases.
The reduced front-end sales charge will be granted upon confirmation of the
shareholder's holdings by the Fund. Such reduced front-end sales charges are not
retroactive.
From time to time, upon written notice to all of its dealers, the Distributor
may hold special promotions for specified periods during which the Distributor
may reallow to dealers up to the full amount of the front-end sales charge shown
above. In addition, certain dealers who enter into an agreement to provide extra
training and information on Delaware Group products and services and who
increase sales of Delaware Group funds may receive an additional concession of
up to .15% of the offering price. Dealers who receive 90% or more of the sales
charge may be deemed to be underwriters under the Securities Act of 1933.
- --------------------------------------------------------------------------------
-19-
<PAGE>
For initial purchases of Class A Shares of $1,000,000 or more, a dealer's
commission may be paid by the Distributor to financial advisers through whom
such purchases are made, in accordance with the following schedule:
Dealer's
Commission
(as a percent-
Amount age 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 may be aggregated with those of the Class A Shares
of the Fund. Financial advisers also may be eligible for a dealer's commission
in connection with certain purchases made under a Letter of Intention or
pursuant to an investor's Right of Accumulation. Financial advisers should
contact the Distributor concerning the applicability and calculation of the
dealer's commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for payment
of the dealer's commission, unless 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.
Redemptions of Class A Shares purchased at net asset value may result in
the imposition of a Limited CDSC if the dealer's commission described above was
paid in connection with the purchase of those shares. See Contingent Deferred
Sales Charge for Certain Purchases of Class A Shares Made at Net Asset Value
under Redemption and Exchange.
Combined Purchases Privilege
By combining your holdings of Class A Shares with your holdings of Class
B Shares and/or Class C Shares of the Fund and shares of the other funds in the
Delaware Group, except those noted below, you can reduce the front-end sales
charges on any additional purchases of Class A Shares. Shares of Delaware Group
Premium Fund, Inc. beneficially owned in connection with ownership of variable
insurance products may be combined with other Delaware Group fund holdings.
Shares of other funds that do not carry a front-end sales charge or CDSC may not
be included unless they were acquired through an exchange from a Delaware Group
fund that does carry a front-end sales charge or CDSC.
This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under twenty-one years of age and any trust,
fiduciary or retirement account for the benefit of such family members.
It also permits you to use these combinations under a Letter of
Intention. A Letter of Intention allows you to make purchases over a 13-month
period and qualify the entire purchase for a reduction in front-end sales
charges on Class A Shares.
Combined purchases of $1,000,000 or more, including certain purchases
made at net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may trigger the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative - Class A Shares under Buying
Shares.
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Buying at Net Asset Value
Class A Shares may be purchased at net asset value under the Delaware
Group Dividend Reinvestment Plan and, under certain circumstances, the 12-month
Reinvestment Privilege and the Exchange Privilege. (See The Delaware Difference
and Redemption and Exchange for additional information.)
Purchases of Class A Shares may be made at net asset value by current and
former officers, directors and employees (and members of their immediate
families) of the Manager, any affiliate, any of the funds in the Delaware Group,
certain of their agents and registered representatives and employees of
authorized investment dealers and by employee benefit plans for such entities.
Individual purchases include retirement accounts and must be for accounts in the
name of the individual or a qualifying family member. Purchases of Class A
Shares may 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 CDSC or other
redemption charge. Purchases of Class A Shares also may be made at net asset
value by bank employees who provide services in connection with agreements
between the bank and unaffiliated brokers or dealers concerning sales of Class A
Shares. 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.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Delaware
Group account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset value.
The Fund must be notified in advance that an investment qualifies for
purchase of Class A Shares at net asset value.
Group Investment Plans
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, Prototype Profit Sharing,
Pension and 401(k) Defined Contribution Plans) may benefit from the reduced
front-end sales charges relating to the Class A Shares set forth in the table on
page 16, based on total plan assets. In addition, 403(b)(7) and 457 Retirement
Plan Accounts may benefit from a reduced front-end sales charge on Class A
Shares based on the total amount invested by all participants in the plan by
satisfying the following criteria: (i) the employer for which the plan was
established has 250 or more eligible employees and the plan lists only one
broker of record, or (ii) the plan includes employer contributions and the plan
lists only one broker of record. If a company has more than one plan investing
in the Delaware Group of funds, then the total amount invested in all plans will
be aggregated to determine the applicable front-end sales charge reduction on
each purchase, both initial and subsequent, if, at the time of each such
purchase, the company notifies the Fund that it qualifies for the reduction.
Employees participating in such Group Investment Plans may also combine the
investments held in their plan account to determine the front-end sales charge
applicable to purchases in non-retirement Delaware Group investment accounts if,
at the time of each such purchase, they notify the Fund that they are eligible
to combine purchase amounts held in their plan account.
For additional information on these plans, including plan forms,
applications, minimum investments and any applicable account maintenance fees,
contact your investment dealer or the Distributor.
For other retirement plans and special services, see Retirement Planning.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without the imposition
of a front-end sales charge and, as a result, the Fund will invest the full
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amount of the investor's purchase payment. The Distributor currently anticipates
compensating dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than 4% of the dollar
amount purchased. As discussed below, however, Class B Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within six years of purchase, a
CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees facilitates the ability of the Fund to
sell the Class B Shares without deducting a front-end sales charge at the time
of purchase.
Shareholders of the Fund's Class B Shares exercising the exchange
privilege described below will continue to be subject to the CDSC schedule for
the Fund's Class B Shares described in this Prospectus, even after the exchange.
Such CDSC schedule may be higher than the CDSC schedule relating to the Class B
Shares acquired as a result of the exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Except for shares acquired through a reinvestment of dividends, Class B
Shares held for eight years after purchase are eligible for automatic conversion
into Class A Shares. The Fund will effect conversions of Class B Shares into
Class A Shares only four times in any calendar year, on the last business day of
the second full week of March, June, September and December (each, a "Conversion
Date"). If the eighth anniversary after a purchase of Class B Shares falls on a
Conversion Date, an investor's Class B Shares will be converted on that date. If
the eighth anniversary occurs between Conversion Dates, an investor's Class B
Shares will be converted on the next Conversion Date after such anniversary.
Consequently, if a shareholder's eighth anniversary falls on the day after a
Conversion Date, that shareholder will have to hold Class B Shares for as long
as three additional months after the eighth anniversary after purchase before
the shares will automatically convert into Class A Shares.
Class B Shares of a fund acquired through reinvestment of dividends will
convert to the corresponding Class A Shares of that fund (or, in the case of
Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant Class)
pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute tax-free
exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without the imposition
of a front-end sales charge and, as a result, the Fund will invest the full
amount of the investor's purchase payment. The Distributor currently anticipates
compensating dealers or brokers for selling Class C Shares at the time of
purchase from its own assets in an amount equal to no more than 1% of the dollar
amount purchased. As discussed below, however, Class C Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within twelve months of purchase, a
CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Shareholders of the Fund's Class C Shares who exercise the exchange
privilege described below will continue to be subject to the CDSC schedule for
the Fund's Class C Shares described in this Prospectus. See Redemption and
Exchange.
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Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below and Class C Shares redeemed within twelve
months of purchase may be subject to a CDSC of 1%. CDSCs are charged as a
percentage of the dollar amount subject to the CDSC. The charge will be assessed
on an amount equal to the lesser of the net asset value at the time of purchase
of the shares being redeemed or the net asset value of those shares at the time
of redemption. No CDSC will be imposed on increases in net asset value above the
initial purchase price. In addition, no CDSC will be assessed on redemptions of
shares received through reinvestments of dividends or capital gains
distributions. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of either the Class B Shares
or the Class C Shares of the Fund, even if those shares are later exchanged for
shares of another Delaware Group fund. In the event of an exchange of the
shares, the "net asset value of such shares at the time of redemption" will be
the net asset value of the shares that were acquired in the exchange.
The following table sets forth the rates of the CDSC for the Class B
Shares of the Fund:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
- ------------------------ ------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares of the Fund, the Class B Shares will still be
subject to the annual 12b-1 Plan expenses of up to 1% of average daily net
assets of those shares. See Automatic Conversion of Class B Shares, above.
Investors are reminded that the Class A Shares into which the Class B Shares
will convert are subject to ongoing annual 12b-1 Plan expenses of up to a
maximum of .30% of average daily net assets representing such shares.
In determining whether a CDSC is applicable to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to the Class C Shares, it will be assumed that shares held for more
than twelve months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for
twelve months or less. All investments made during a calendar month, regardless
of what day of the month the investment occurred, will age one month on the last
day of that month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares and Class C
Shares. See Waiver of CDSC - Class B and Class C Shares under Redemption and
Exchange.
12b-1 Distribution Plans-- Class A, Class B and Class C Shares
Under the distribution plans adopted by the Fund in accordance with Rule
12b-1 under the 1940 Act, the Fund is permitted to pay the Distributor annual
distribution fees of up to .30% of the average daily net assets of the Class A
Shares, 1% of the average daily net assets of the Class B Shares and 1% of the
average daily net assets of the Class C Shares. These fees, which are payable
monthly, compensate the Distributor for providing distribution and related
services and bearing certain expenses of each Class. The 12b-1 Plans applicable
to the Class B Shares and the Class C Shares are designed to permit an investor
to purchase Class B Shares or Class C Shares through dealers or brokers without
the assessment of a front-end sales charge while enabling the Distributor to
compensate dealers and brokers for the sale of such shares. For a more detailed
discussion of the 12b-1 Plans relating to the Class A, Class B and Class C
Shares, see Distribution (12b-1) and Service under Management of the Fund.
Other Payments to Dealers -- Class A, Class B and Class C Shares
In addition, from time to time at the discretion of the Distributor, all
registered broker/dealers whose aggregate sales of the Classes exceed certain
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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.
Subject to pending amendments to the NASD's Rules of Fair Practice, in
connection with the promotion of Delaware Group fund shares, the Distributor
may, from time to time, pay to participate in dealer-sponsored seminars and
conferences, reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising and may, from time to time,
pay or allow additional promotional incentives to dealers, which shall include
non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and Exchange Commission.
It is likely that the NASD's Rules of Fair Practice will be amended such that
the ability of the Distributor to pay non-cash compensation as described above
will be restricted in some fashion. The Distributor intends to comply with the
NASD's Rules of Fair Practice as they may be amended. In addition, as noted
above, the Distributor may pay dealers a commission in connection with net asset
value purchases.
Class B Funds and Class C Funds
The following funds currently offer Class B Shares and Class C Shares:
Delaware Group Delchester High-Yield Bond Fund, Inc., Delaware Group Government
Fund, Inc., Limited-Term Government Fund of Delaware Group Limited-Term
Government Funds, Inc., Delaware Group Cash Reserve, Inc., Tax-Free USA Fund,
Tax-Free Insured Fund and Tax-Free USA Intermediate Fund of Delaware Group Tax-
Free Fund, Inc., Delaware Group DelCap Fund, Inc., Delaware Fund and Devon Fund
of Delaware Group Delaware Fund, Inc., Decatur Income Fund and Decatur Total
Return Fund of Delaware Group Decatur Fund, Inc., Delaware Group Trend Fund,
Inc., International Equity Series, Global Bond Series and Global Assets Series
of Delaware Group Global & International Funds, Inc., DMC Tax-Free Income Trust-
Pennsylvania and the Fund.
Value Fund Institutional Class
In addition to offering the Class A, Class B and Class C Shares, the Fund
also offers the Value Fund Institutional Class of shares, which is described in
a separate prospectus relating to that class of shares and is available for
purchase only by certain investors. Value Fund Institutional Class shares
generally are distributed directly by the Distributor and do not have a
front-end sales charge, a CDSC or a Limited CDSC, and are not subject to 12b-1
Plan distribution expenses. To obtain a prospectus which describes the Value
Fund Institutional Class, contact the Distributor by writing to the address or
by calling the telephone number listed on the cover of this Prospectus.
Dividend Orders
You may have the dividends earned in one fund automatically invested in
another Delaware Group fund with a different investment objective. For more
information, see Dividend Reinvestment Plan under The Delaware Difference or
call the Shareholder Service Center.
HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer.
Investing through Your Investment Dealer
You can make a purchase of shares of the Classes through most investment
dealers who, as part of the service they provide, must transmit orders promptly.
They may charge for this service. If you want a dealer but do not have one, we
can refer you to one.
Investing by Mail
1. Initial Purchases--An Investment Application or, in the case of a
retirement account, an appropriate retirement plan application, must be
completed, signed and sent with a check payable to Value Fund A Class, Value
Fund B Class or Value Fund C Class at 1818 Market Street, Philadelphia, PA
19103.
2. Subsequent Purchases--Additional purchases may be made at any time by
mailing a check payable to Value Fund A Class, Value Fund B Class or Value Fund
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C Class. Your check should be identified with your name(s) and account number.
An investment slip (similar to a deposit slip) is provided at the bottom of
transaction confirmations and dividend statements that you will receive from the
Fund. Use of this investment slip can help expedite processing of your check
when making additional purchases. Your investment may be delayed if you send
additional purchases by certified mail.
Investing by Wire
You may purchase shares by requesting your bank to transmit funds by wire
to CoreStates Bank, N.A., ABA #031000011, account number 0114-2596 (include your
name(s) and your account number for the Class in which you are investing).
1. Initial Purchases--Before you invest, telephone the Fund's Shareholder
Service Center to get an account number. If you do not call first, processing of
your investment may be delayed. In addition, you must promptly send your
Investment Application or, in the case of a retirement account, an appropriate
retirement plan application, to Value Fund A Class, Value Fund B Class or Value
Fund C Class at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You should advise the Fund's
Shareholder Service Center by telephone of each wire you send.
If you want to wire investments to a retirement plan account, call the
Shareholder Service Center for special wiring instructions.
Delaware Group Asset Planner
To invest in Delaware Group funds using the Asset Planner service, you
should complete a Delaware Group Asset Planner Account Registration Form, which
is available only from a financial adviser. The sales charge on the investment
is determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. The minimum initial investment
per Strategy is $2,000; subsequent investments must be at least $100. Individual
fund minimums do not apply to investments made using the Asset Planner service.
Class A, Class B and Class C Shares are available for use inside the Asset
Planner service; however, only "like" class shares may be used within the same
Strategy.
An annual maintenance fee, currently $35 per Strategy, is due at the time
of initial investment and by September 30th of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of your Fund accounts if not paid by September 30th. See the Statement of
Additional Information.
Investors will receive a customized quarterly Strategy Report summarizing
all Delaware Group Asset Planner investment performance and account activity
during the prior period. Confirmation statements will be sent following all
transactions other than those involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group,
you may write and authorize an exchange of part or all of your investment into
shares of the Fund. If you wish to open an account by exchange, call the
Shareholder Service Center for more information. All exchanges are subject to
the eligibility and minimum purchase requirements set forth in each fund's
prospectus.
Shareholders of Class A Shares may exchange all or part of their shares
for certain of the shares of other funds in the Delaware Group, including other
Class A Shares, but may not exchange their shares for Class B Shares or Class C
Shares of the Fund or for Class B Shares or Class C Shares of any other fund in
the Delaware Group. Shareholders of Class B Shares of the Fund are permitted to
exchange all or part of their Class B Shares only into the corresponding class
of shares of the Class B Funds. Similarly, shareholders of Class C Shares of the
Fund are permitted to exchange all or part of their Class C Shares only into the
corresponding class of shares of the Class C Funds. Class B Shares of the Fund
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and Class C Shares of the Fund acquired by exchange will continue to carry the
CDSC and, in the case of Class B Shares, the automatic conversion schedule of
the fund from which the exchange is made. The holding period of the Class B
Shares of the Fund acquired by exchange will be added to that of the shares that
were exchanged for purposes of determining the time of the automatic conversion
into Class A Shares of the Fund.
Permissible exchanges into Class A Shares of the Fund will be made
without a front-end sales charge imposed by the Fund, except for exchanges from
funds not subject to a front-end sales charge (unless such shares were acquired
in an exchange from a fund subject to such a charge or such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of the Fund will be made without the imposition of a
CDSC by the fund from which the exchange is being made at the time of the
exchange.
See Allied Plans under Retirement Planning for information on exchanges
by participants in an Allied Plan.
Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if you wish to
use the following services:
1. Direct Deposit
You may have your employer or bank make regular investments directly to
your account for you (for example: payroll deduction, pay by phone, annuity
payments). The Fund also accepts preauthorized recurring government and private
payments by Electronic Fund Transfer, which avoids mail time and check clearing
holds on payments such as social security, federal salaries, Railroad Retirement
benefits, etc.
2. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly
investments without writing or mailing checks. You may authorize the Fund to
transfer a designated amount monthly from your checking account to your Fund
account. Many shareholders use this as an automatic savings plan. Shareholders
should allow a reasonable amount of time for initial purchases and changes to
these plans to become effective.
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.
* * *
Should investments by these two methods be reclaimed or returned for some
reason, the Fund has the right to liquidate your shares to reimburse the
government or transmitting bank. If there are insufficient funds in your
account, you are obligated to reimburse the Fund.
Purchase Price and Effective Date
The offering price and net asset value of the Class A, Class B and Class
C Shares are determined as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The effective date of a purchase made through an investment dealer is the
date the order is received by the Fund. The effective date of a direct purchase
is the day your wire, electronic transfer or check is received, unless it is
received after the time the offering price or net asset value of shares is
determined, as noted above. Purchase orders received after such time will be
effective the next business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a purchase
is canceled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in the Delaware Group. The Fund reserves the right to reject
purchase orders paid by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check drawn on a
foreign financial institution is accepted, you may be subject to additional bank
charges for clearance and currency conversion.
The Fund also reserves the right, following shareholder notification, to
charge a service fee on non-retirement accounts that have remained below the
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minimum stated account balance for a period of three or more consecutive months.
Holders of such accounts may be notified of their insufficient account balance
and advised that they have until the end of the current calendar quarter to
raise their balance to the stated minimum. If the account has not reached the
minimum balance requirement by that time, the Fund will charge a $9 fee for that
quarter and each subsequent calendar quarter until the account is brought up to
the minimum balance. The service fee will be deducted from the account during
the first week of each calendar quarter for the previous quarter, and will be
used to help defray the cost of maintaining low-balance accounts. No fees will
be charged without proper notice and no CDSC will apply to such assessments.
The Fund also reserves the right, upon sixty days' written notice, to
redeem accounts that remain under a Class' minimum initial purchase amount as a
result of redemptions. An investor making the minimum initial investment may be
subject to involuntary redemption without the imposition of a CDSC or Limited
CDSC if he or she redeems any portion of his or her account.
REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways. The
exchange service is useful if your investment requirements change and you want
an easy way to invest in other equity funds, tax-advantaged funds, bond funds or
money market funds. This service is also useful if you are anticipating a major
expenditure and want to move a portion of your investment into a fund that has
the checkwriting feature. Exchanges are subject to the requirements of each fund
and all exchanges of shares from one fund or class to another constitute taxable
events. See Taxes. Further, in order for an exchange to be processed, shares of
the fund being acquired must be registered in the state where the acquiring
shareholder resides. You may want to consult your financial adviser or
investment dealer to discuss which funds in the Delaware Group will best meet
your changing objectives and the consequences of any exchange transaction. You
may also call the Delaware Group directly for fund information.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after we receive your request in good order subject
in the case of a redemption, to any applicable CDSC or Limited CDSC. Redemption
or exchange requests received in good order after the time the offering price
and net asset value of shares are determined, as noted above, will be processed
on the next business day. See Purchase Price and Effective Date under Buying
Shares. A shareholder submitting a redemption request may indicate that he or
she wishes to receive redemption proceeds of a specific dollar amount. In the
case of such a request, and in the case of certain redemptions from retirement
plan accounts, the Fund will redeem the number of shares necessary to deduct the
applicable CDSC in the case of Class B or Class C Shares or, if applicable, the
Limited CDSC in the case of Class A Shares and tender to the shareholder the
requested amount, assuming the shareholder holds enough shares in his or her
account for the redemption to be processed in this manner. Otherwise, the amount
tendered to the shareholder upon redemption will be reduced by the amount of the
applicable CDSC or Limited CDSC.
Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Fund at 800-523-1918 (in Philadelphia, 215-988-1241).
The Fund may suspend, terminate, or amend the terms of the exchange privilege
upon sixty days' written notice to shareholders.
The Fund will honor written redemption requests of shareholders who
recently purchased shares by check, but will not mail the proceeds until it is
reasonably satisfied that the purchase check has cleared, which may take up to
fifteen days from the purchase date. The Fund will not honor telephone
redemptions for shares recently purchased by check unless it is reasonably
satisfied that the purchase check has cleared. You can avoid this potential
delay if you purchase shares by wiring Federal Funds. The Fund reserves the
right to reject a written or telephone redemption request or delay payment of
redemption proceeds if there has been a recent change to the shareholder's
address of record.
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There is no front-end sales charge or fee for exchanges made between
shares of funds which both carry a front-end sales charge. Any applicable
front-end sales charge will apply to exchanges from shares of funds not subject
to a front-end sales charge, except for transfers involving assets that were
previously invested in a fund with a front-end sales charge and/or transfers
involving the reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for Class B shares of other Class B Funds or Class C shares
of other Class C Funds, as applicable (in each case, "New Shares"), will not be
subject to a CDSC that might otherwise be due upon redemption of the Original
Shares. However, such shareholders will continue to be subject to the CDSC and,
in the case of Class B Shares, the automatic conversion schedule of the Original
Shares as described in this Prospectus and any CDSC assessed upon redemption
will be charged by the Series. In an exchange of Class B Shares, the Series'
CDSC schedule may be higher than the CDSC schedule relating to the New Shares
acquired as a result of the exchange. For purposes of computing the CDSC that
may be payable upon a disposition of the New Shares, the period of time that an
investor held the Original Shares is added to the period of time that an
investor held the New Shares. With respect to Class B Shares, the automatic
conversion schedule of the Original Shares may be longer than that of the New
Shares. Consequently, an investment in the New Shares by exchange may subject an
investor to the higher 12b-1 fees applicable to Class B Shares for a longer
period of time than if the investment in New Shares were made directly.
Various redemption and exchange methods are outlined below. Except for
the CDSC applicable to certain redemptions of Class B and Class C Shares and the
Limited CDSC applicable to certain redemptions of Class A Shares purchased at
net asset value, there is no fee charged by the Series or the Distributor for
redeeming or exchanging your shares, but such fees could be charged in the
future. You may have your investment dealer arrange to have your shares redeemed
or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund or its agent.
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.
Written Redemption
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103
to redeem some or all of your shares. The request must be signed by all owners
of the account or your investment dealer of record. For redemptions of more than
$50,000, or when the proceeds are not sent to the shareholder(s) at the address
of record, the Fund requires a signature by all owners of the account and a
signature guarantee for each owner. Each signature guarantee must be supplied by
an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
Payment is normally mailed the next business day, but no later than seven
days, after receipt of your redemption request. If your Class A Shares are in
certificate form, the certificate must accompany your request and also be in
good order. The Fund issues certificates for Class A Shares only if a
shareholder submits a specific request. The Fund does not issue certificates for
Class B Shares or Class C Shares.
Written Exchange
You may also write to the Fund (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your shares into another mutual
fund in the Delaware Group, subject to the same conditions and limitations as
other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may only
redeem or exchange by written request and you must return your certificates.
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The Telephone Redemption - Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do not
wish to have such services available with respect to your account. The Fund
reserves the right to modify, terminate or suspend these procedures upon sixty
days' written notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests.
Neither the Fund nor 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. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption - Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day, but no more than seven days, after receipt of the request. This service is
only available to individual, joint and individual fiduciary-type accounts.
Telephone Redemption - Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, the Fund requires an Authorization Form with your signature guaranteed.
For your protection, your authorization must be on file. If you request a wire,
your funds will normally be sent the next business day. CoreStates Bank, N.A.'s
fee (currently $7.50) will be deducted from your redemption. If you ask for a
check, it will normally be mailed the next business day, but no later than seven
days, after receipt of your request to your predesignated bank account. Except
for any CDSC which may be applicable to Class B and Class C Shares and the
Limited CDSC which may be applicable to certain Class A Shares, there are no
fees for this redemption method, but the mail time may delay getting funds into
your bank account. Simply call the Fund's Shareholder Service Center prior to
the time the offering price and net asset value are determined, as noted above.
If expedited payment by check or wire could adversely affect the Fund,
the Fund may take up to seven days to pay.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into any fund in the Delaware Group under the same registration, subject
to the same conditions and limitations as other exchanges noted above. As with
the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
Systematic Withdrawal Plans
1. Regular Plans
This plan provides shareholders with a consistent monthly (or quarterly)
payment. This is particularly useful to shareholders living on fixed incomes,
since it can provide them with a stable supplemental amount. With accounts of at
least $5,000, you may elect monthly withdrawals of $25 (quarterly $75) or more.
The Fund does not recommend any particular monthly amount, as each shareholder's
situation and needs vary. Payments are normally made by check. You may elect to
have your payments transferred from your Series account to your predesignated
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bank account through the Delaware Group's MoneyLine service. Your funds will
normally be credited to your bank account two business days after the payment
date. Except for the Limited CDSC which may be applicable to Class A Shares and
the CDSC which may be applicable to Class B Shares and Class C Shares as noted
below, there are no fees for this redemption method. You can initiate the
MoneyLine service by completing an Authorization Agreement. If the name and
address on your bank account are not identical to the name and address on your
Fund account, you must have your signature guaranteed. Please call the
Shareholder Service Center for additional information.
2. Retirement Plans
For shareholders eligible under the applicable retirement plan to receive
benefits in periodic payments, the Fund's Systematic Withdrawal Plan provides
you with maximum flexibility. A number of formulas are available for calculating
your withdrawals, depending upon whether the distributions are required or
optional. Withdrawals must be for $25 or more; however, no minimum account
balance is required. The MoneyLine Service is not available for retirement
plans.
* * *
Shareholders should not purchase Class A Shares while participating in a
Systematic Withdrawal Plan. Also, redemptions of Class A Shares via a Systematic
Withdrawal Plan may be subject to a Limited CDSC if the original purchase was
made at net asset value within the 12 months prior to the withdrawal and a
dealer's commission has been paid on that purchase. See Contingent Deferred
Sales Charge for Certain Purchases of Class A Shares Made at Net Asset Value,
below.
With respect to Class B Shares and Class C Shares redeemed via a
Systematic Withdrawal Plan, any applicable CDSC will be waived if, on the date
that the Plan is established, the annual amount selected to be withdrawn is less
than 12% of the account balance. If the annual amount selected to be withdrawn
exceeds 12% of the account balance on the date that the Systematic Withdrawal
Plan is established, all redemptions under the Plan will be subject to the
applicable CDSC. Whether a waiver of the CDSC is available or not, the first
shares to be redeemed for each Systematic Withdrawal Plan payment will be those
not subject to a CDSC because they have either satisfied the required holding
period or were acquired through the reinvestment of distributions. The 12%
annual limit will be reset on the date that any Systematic Withdrawal Plan is
modified (for example, a change in the amount selected to be withdrawn or the
frequency or date of withdrawals), based on the balance in the account on that
date. See Waiver of CDSC Class B and Class C Shares, below
For more information on Systematic Withdrawal Plans, call the Shareholder
Service Center.
Wealth Builder Option
Shareholders may elect to invest in other mutual funds in the Delaware
Group through our Wealth Builder Option. Under this automatic exchange program,
shareholders can authorize regular monthly amounts (minimum of $100 per fund) to
be liquidated from their Fund account and invested automatically into an account
in one or more funds in the Delaware Group. If, in connection with the Wealth
Builder Option, a shareholder wishes to open a new account in such other fund or
funds to receive the automatic investment, such new account must meet such other
fund's minimum initial purchase requirements. Investments under this option are
exchanges and are therefore subject to the same conditions and limitations as
other exchanges noted above.
Shareholders can use the Wealth Builder Option to invest in the Fund
through regular liquidations of shares in their accounts in other funds in the
Delaware Group, subject to the same conditions and limitations as other
exchanges noted above. Shareholders can terminate their participation at any
time by written notice to the Fund. See Redemption and Exchange.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
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Contingent Deferred Sales Charge for Certain Purchases of Class A Shares
Made at Net Asset Value
A Limited CDSC will be imposed by the Fund upon certain redemptions of
Class A Shares (or shares into which such Class A Shares are exchanged) made
within twelve months of purchase, if such purchases were made at net asset value
and triggered the payment by the Distributor of the dealer's commission
described above. See Buying Shares.
The Limited CDSC will be paid to the Distributor and will be equal to the
lesser of 1% of (1) the net asset value at the time of purchase of the Class A
Shares being redeemed or (2) the net asset value of such Class A Shares at the
time of redemption. For purposes of this formula, the "net asset value at the
time of purchase" will be the net asset value at purchase of the Class A Shares
even if those shares are later exchanged for shares of another Delaware Group
fund and, in the event of an exchange of Class A Shares, the "net asset value of
such shares at the time of redemption" will be the net asset value of the shares
acquired in the exchange.
Redemptions of such Class A Shares held for more than twelve months will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Group fund will not trigger the imposition of the Limited CDSC
at the time of such exchange. The period a shareholder owns shares into which
Class A Shares are exchanged will count towards satisfying the 12-month holding
period. The Fund assesses the Limited CDSC if such 12- month period is not
satisfied irrespective of whether the redemption triggering its payment is of
the Class A Shares of the Fund or the Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed that
shares not subject to the Limited CDSC are the first redeemed followed by other
shares held for the longest period of time. The Limited CDSC will not be imposed
upon shares representing reinvested dividends or capital gains distributions, or
upon amounts representing share appreciation. All investments made during a
calendar month, regardless of what day of the month the investment occurred,
will age one month on the last day of that month and each subsequent month.
Waiver of Limited CDSC - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from the Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue Code of 1986,
as amended ("the Code"), or due to death of a participant in such a plan; (iii)
redemptions pursuant to the direction of a participant or beneficiary of a
retirement plan qualified under section 401(a) or 401(k) of the Code with
respect to that retirement plan; (iv) distributions from a section 403(b)(7)
Plan or an IRA due to death, disability, or attainment of age 59 1/2; (v)
returns of excess contributions to an IRA; (vi) distributions by other employee
benefit plans to pay benefits; (vii) distributions described in (ii), (iv), and
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(vi) above pursuant to a systematic withdrawal plan; and (viii) redemptions by
the classes of shareholders who are permitted to purchase shares at net asset
value, regardless of the size of the purchase (see Buying at Net Asset Value
under Buying Shares).
Waiver of CDSC - Class B and Class C Shares
The CDSC is waived on redemptions of Class B Shares in connection with
the following redemptions: (i) redemptions that result from the Fund's right to
liquidate a shareholder's account if the aggregate net asset value of the shares
held in the account is less than the then-effective minimum account size; (ii)
returns of excess contributions to an IRA or 403(b)(7) Deferred Compensation
Plan; (iii) required minimum distributions from an IRA, 403(b)(7) Deferred
Compensation Plan, or 457 Deferred Compensation Plan; and (iv) distributions
from an account if the redemption results from the death of all registered
owners of the account (in the case of accounts established under the Uniform
Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts, the
waiver applies upon the death of all beneficial owners) or a total and permanent
disability (as defined in Section 72 of the Code) of all registered owners
occurring after the purchase of the shares being redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, 403(b)(7) Deferred Compensation Plan, Profit
Sharing Plan, Money Purchase Pension Plan or 401(k) Defined Contribution Plan;
(iii) required minimum distributions from an IRA, 403(b)(7) Deferred
Compensation Plan, 457 Deferred Compensation Plan, Profit Sharing Plan, Money
Purchase Pension Plan, or 401(k) Defined Contribution Plan; (iv) distributions
from a 403(b)(7) Deferred Compensation Plan, 457 Deferred Compensation Plan,
Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) Deferred Compensation
Plan, 457 Deferred Compensation Plan, Profit Sharing Plan, Money Purchase
Pension Plan or a 401(k) Defined Contribution Plan upon attainment of normal
retirement age under the plan or upon separation from service; (vi)
distributions from an IRA on or after attainment of age 59 1/2; and (vii)
distributions from an account if the redemption results from the death of all
registered owners of the account (in the case of accounts established under the
Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts,
the waiver applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Code) of all registered
owners occurring after the purchase of the shares being redeemed.
In addition, the CDSC will be waived on Class B and Class C Shares
redeemed in accordance with a Systematic Withdrawal Plan if the annual amount
selected to be withdrawn under the Plan does not exceed 12% of the value of the
account on the date that the Systematic Withdrawal Plan was established or
modified.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all of its net capital gains
and net investment income earned during the year. Such payments, if any, will
generally be made once a year during the first quarter following the end of the
Fund's fiscal year. During the fiscal year ended November 30, 1994, a dividend
of $0.035 per Class A share was paid from net investment income and a
distribution of $0.170 per Class A share was paid from realized securities
profits. During the six months ended May 31, 1995, the Class A Shares and the
Class B Shares paid dividends of $0.160 and $0.150 per share from net investment
income, respectively, and each Class paid a capital gain of $0.250 per share
from realized securities profits. Class C Shares were not offered prior to the
date of this Prospectus.
Each of the Classes will share proportionately in the investment income
and expenses of the Fund, except that the per share dividends from net
investment income on the Class A Shares, the Class B Shares and the Class C
Shares will vary due to the expenses under the 12b-1 Plan applicable to each
Class. Generally, the dividends per share on Class B Shares and Class C Shares
can be expected to be lower than the dividends per share on Class A Shares
because the expenses under the 12b-1 Plans relating to Class B and Class C
Shares will be higher than the expenses under the 12b-1 Plan relating to Class A
Shares. See Distribution (12b-1) and Service under Management of the Fund.
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Both dividends and distributions, if any, are automatically reinvested in
your account at net asset value unless you elect otherwise. Any check in payment
of dividends or other distributions which cannot be delivered by the United
States Post Office or which remains uncashed for a period of more than one year
may be reinvested in the shareholder's account at the then-current net asset
value and the dividend option may be changed from cash to reinvest. If you elect
to take your dividends and distributions in cash and such dividends and
distributions are in an amount of $25 or more, you may choose Delaware Group's
MoneyLine service and have such payments transferred from your Fund account to
your predesignated bank account. Your funds will normally be credited to your
bank account two business days after the payment date. There are no fees for the
MoneyLine service. See Systematic Withdrawal Plan for Class A Shares, Class B
Shares and Class C Shares under Redemption and Exchange for information
regarding authorization of this service. This service is not available for
retirement plans. (See The Delaware Difference for more information on
reinvestment options.)
TAXES
The Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, the Fund
will not be subject to federal income tax, or to any excise tax, to the extent
its earnings are distributed as provided in the Code.
The Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to you as ordinary income, whether
received in cash or in additional shares. For corporate investors, dividends
from net investment income will generally qualify in part for the corporate
dividends-received deduction. The portion of dividends paid by the Fund that so
qualifies will be designated each year in a notice to the Fund's shareholders.
For the fiscal year ended November 30, 1994, 53% of the Fund's dividends from
net investment income qualified for the corporate dividends-received deduction.
Distributions paid by the Fund from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who are
subject to income taxes as long-term capital gains, regardless of the length of
time an investor has owned shares in the Fund. The Fund does not seek to realize
any particular amount of capital gains during a year; rather, realized gains are
a byproduct of Fund management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year. Also, for
those investors subject to tax, if purchases of shares in the Fund are made
shortly before the record date for a dividend or capital gains distribution, a
portion of the investment will be returned as a taxable distribution.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November, or December to shareholders
of record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Fund and received by the shareholder
on December 31 of the year declared.
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
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two mutual funds (or two series or portfolios of a mutual fund). Any loss
incurred on sale or exchange of the Fund's shares which had been held for six
months or less will be treated as a long-term capital loss to the extent of
capital gain dividends received with respect to such shares. All or a portion of
the sales charge incurred in acquiring Fund shares will be excluded from the
federal tax basis of any of such shares sold or exchanged within ninety days of
their purchase (for purposes of determining gain or loss upon sale of such
shares) if the sale proceeds are reinvested in the Fund or in another fund in
the Delaware Group of funds and a sales charge that would otherwise apply to the
reinvestment is reduced or eliminated. Any portion of such sales charge excluded
from the tax basis of the shares sold will be added to the tax basis of the
shares acquired in the reinvestment.
The automatic conversion of Class B Shares into Class A Shares at the end
of approximately eight years after purchase will be tax-free for federal tax
purposes. See Automatic Conversion of Class B Shares under Buying Shares.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. Government securities may be exempt from
state personal income taxes. Shares of the Fund are exempt from Pennsylvania
county personal property taxes.
Each year, the Fund will mail to you information on the tax status of the
Fund's dividends and distributions. Shareholders will also receive each year
information as to the portion of dividend income, if any, that is derived from
U.S. Government securities that are exempt from state income tax. Of course,
shareholders who are not subject to tax on their income would not be required to
pay tax on amounts distributed to them by the Fund.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Account Registration Form your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
The tax discussion set forth above is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Fund.
See Accounting and Tax Issues and Distributions and Taxes in Part B for
additional information on tax matters relating to the Fund and its shareholders.
CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
Class A Shares are purchased at the offering price per share, while Class
B Shares and Class C Shares are purchased at the net asset value ("NAV") per
share. The offering price per share of Class A Shares consists of the NAV per
share next computed after the order is received, plus any applicable front-end
sales charges. The offering price and NAV are computed as of the close of
regular trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open.
The NAV per share is computed by adding the value of all securities and
other assets in the portfolio, deducting any liabilities (expenses and fees are
accrued daily) and dividing by the number of shares outstanding. Portfolio
securities for which market quotations are available are priced at market value.
Foreign securities expressed in foreign currency values will be converted into
U.S. dollar values at the mean between the currencies' bid and offered
quotations. Short-term investments having a maturity of less than sixty days are
valued at amortized cost, which approximates market value. All other securities
are valued at their fair value as determined in good faith and in a method
approved by the Fund's Board of Directors.
Each of the Fund's four classes will bear, pro-rata, all of the common
expenses of the Fund. The net asset values of all outstanding shares of each
class of the Fund will be computed on a pro-rata basis for each outstanding
share based on the proportionate participation in the Fund represented by the
value of shares of that class. All income earned and expenses incurred by the
Fund will be borne on a pro-rata basis by each outstanding share of a class,
based on each class' percentage in the Fund represented by the value of shares
of such classes, except that the Value Fund Institutional Class will not incur
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any distribution fees under the Fund's 12b-1 Plans and the Class A, Class B and
Class C Shares alone will bear the 12b-1 Plan expenses payable under their
respective 12b-1 Plans. Due to the specific distribution expenses and other
costs that will be allocable to each class, the net asset value of each class of
the Fund will vary.
MANAGEMENT OF THE FUND
Directors
The business and affairs of the Fund are managed under the direction of
its Board of Directors. Part B contains additional information regarding the
directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On November 30, 1994, the Manager and its affiliate,
Delaware International Advisers Ltd., were supervising in the aggregate more
than $24 billion in assets in the various institutional (approximately
$15,544,258,000) and investment company (approximately $9,237,192,000) accounts.
The Manager is an indirect, wholly-owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly-owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now wholly-owned subsidiaries, and subject to
the ultimate control, of Lincoln National. Lincoln National, with headquarters
in Fort Wayne, Indiana, is a diversified organization with operations in many
aspects of the financial services industry, including insurance and investment
management. In connection with the merger, a new Investment Management Agreement
between the Fund and the Manager was executed following shareholder approval.
The Manager manages the Fund's portfolio and makes investment decisions
which are implemented by the Fund's Trading Department. The Manager also
administers the Fund's affairs and pays the salaries of all the directors,
officers and employees of the Fund who are affiliated with the Manager. For
these services, the Manager is paid an annual fee of 3/4 of 1% of the average
daily net assets of the Fund, less all directors' fees paid to the unaffiliated
directors. The Fund's fee is higher than that paid by many other funds and may
be higher or lower than that paid by funds with comparable investment
objectives. Investment management fees paid by the Fund for the fiscal year
ended November 30, 1994 were 0.74% of average daily net assets.
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Effective August 21, 1995, David C. Dalrymple assumed primary
responsibility for making day-to-day investment decisions for the Fund. Prior to
then, Mr. Dalrymple served as an assistant portfolio manager of Delaware Group
Del Cap Fund, Inc. Mr. Dalrymple holds a BS in Business Administration from
Clarkson College in Potsdam, NY, and an MBA from Cornell Johnson School of
Management in Ithaca, NY. Prior to joining the Delaware Group in 1991, he spent
five years as an assistant portfolio manager for Lord Abbett and Co. in New
York. Mr. Dalrymple is a Chartered Financial Analyst and a member of the
Financial Analysts of Philadelphia.
In making investment decisions for the Fund, Mr. Dalrymple consults with
Wayne A. Stork and Richard G. Unruh, Jr. Mr. Stork, Chairman of the Board of the
Manager and the Fund's Board of Directors, is a graduate of Brown University and
attended New York University's Graduate School of Business Administration. Mr.
Stork joined the Delaware Group in 1962 and has served in various executive
capacities at different times within the Delaware organization. Mr. Unruh is a
graduate of Brown University and received his MBA from the University of
Pennsylvania's Wharton School. He joined the Delaware Group in 1982 after 19
years of investment management experience with Kidder, Peabody & Co. Inc. Mr.
Unruh was named an executive vice president of the Fund in 1994. He is also a
member of the Board of Directors of the Manager and was named an executive vice
president of the Manager in 1994. He is on the Board of Directors of Keystone
Insurance Company and AAA Mid-Atlantic and is a former president and current
member of the Advisory Council of the Bond Club of Philadelphia.
Portfolio Trading Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length of time they
have been held. The degree of portfolio activity will affect brokerage costs of
the Fund and may affect taxes payable by the Fund's shareholders to the extent
that net capital gains are realized. Given the Fund's investment objective, its
annual portfolio turnover rate may exceed 100%. A turnover rate of 100% would
occur if all the investments in the Fund's portfolio at the beginning of the
year were replaced by the end of the year. The turnover rate also may be
affected by cash requirements for redemptions and repurchases of Fund shares.
During the past two fiscal years, the Fund's portfolio turnover rates were 32%
for 1993 and 14% for 1994.
The Fund uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
its advisory clients. These services may be used by the Manager in servicing any
of its accounts. Subject to best price and execution, the Fund may consider a
broker/dealer's sales of Fund shares in placing portfolio orders and may place
orders with broker/dealers that have agreed to defray certain Fund expenses such
as custodian fees.
Performance Information
From time to time, the Fund may quote total return performance of the
Classes in advertising and other types of literature. Total return will be based
on a hypothetical $1,000 investment, reflecting the reinvestment of all
distributions at net asset value and (i) in the case of Class A Shares, the
impact of the maximum front-end sales charge at the beginning of each specified
period and (ii) in the case of Class B Shares and Class C Shares, the deduction
of any applicable CDSC at the end of the relevant period. Each presentation will
include the average annual total return for one-, five- and ten-year periods, as
relevant. The Fund may also advertise aggregate and average total return
information concerning a Class over additional periods of time. In addition, the
Fund may present total return information that does not reflect the deduction of
the maximum front-end sales charge or any applicable CDSC. In this case, such
total return information would be more favorable than total return information
which includes deductions of the maximum front-end sales charge or any
applicable CDSC.
Because securities prices fluctuate, investment results of the Classes
will fluctuate over time and past performance should not be considered as a
representation of future results.
Distribution (12b-1) and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), serves as the national distributor for
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the Fund under a Distribution Agreement dated April 3, 1995, as amended on
November 29, 1995.
The Fund has adopted a separate distribution plan under Rule 12b-1 for
each of the Class A Shares, the Class B Shares and the Class C Shares (the
"Plans"). The Plans permit the Fund to pay the Distributor from the assets of
the respective Classes a monthly fee for its services and expenses in
distributing and promoting sales of shares. These expenses include, among other
things, preparing and distributing advertisements, sales literature, and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, holding special promotions for specified periods of time,
and paying distribution and maintenance fees to brokers, dealers and others. In
connection with the promotion of Class A, Class B and Class C Shares, the
Distributor may, from time to time, pay to participate in dealer-sponsored
seminars and conferences, and reimburse dealers for expenses incurred in
connection with preapproved seminars, conferences and advertising. The
Distributor may pay or allow additional promotional incentives to dealers as
part of preapproved sales contests and/or to dealers who provide extra training
and information concerning a Class and increase sales of the Class. In addition,
the Fund may make payments from the assets of the respective Class directly to
others, such as banks, who aid in the distribution of Class shares or provide
services in respect of a Class, pursuant to service agreements with the Fund.
The 12b-1 Plan expenses relating to each of the Class B Shares and the
Class C Shares are also used to pay the Distributor for advancing the commission
costs to dealers with respect to the initial sale of such shares.
The aggregate fees paid by the Fund from the assets of the respective
Classes to the Distributor and others under the Plans may not exceed .30% of the
Class A Shares' average daily net assets in any year, and 1% (.25% of which are
service fees to be paid by the Fund to the Distributor, dealers and others, for
providing personal service and/or maintaining shareholder accounts) of each of
the Class B Shares' and the Class C Shares' average daily net assets in any
year. The Class A, Class B and Class C Shares will not incur any distribution
expenses beyond these limits, which may not be increased without shareholder
approval. The Distributor may, however, incur additional expenses and make
additional payments to dealers from its own resources to promote the
distribution of shares of the Classes.
The Fund's Plans do not apply to the Value Fund Institutional Class of
shares. Those shares are not included in calculating the Plans' fees, and the
Plans are not used to assist in the distribution and marketing of Value Fund
Institutional Class shares.
While payments pursuant to the Plans may not exceed .30% annually with
respect to the Class A Shares and 1% annually with respect to each of the Class
B Shares and the Class C Shares, the Plans do not limit fees to amounts actually
expended by the Distributor. It is therefore possible that the Distributor may
realize a profit in any particular year. However, the Distributor currently
expects that its distribution expenses will likely equal or exceed payments to
it under the Plans. The monthly fees paid to the Distributor are subject to the
review and approval of the Fund's unaffiliated directors who may reduce the fees
or terminate the Plans at any time.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Fund under
an Agreement dated June 29, 1988. The directors annually review service fees
paid to the Transfer Agent.
The Distributor and the Transfer Agent are also indirect, wholly-owned
subsidiaries of DMH.
Expenses
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under the Distribution Agreement. The Class A Shares' ratio
of expenses to average daily net assets for the fiscal year ended November 30,
1994 was 1.46%. Based on expenses incurred by the Class A Shares during its
fiscal year ended November 30, 1994, the expenses of the Class B Shares are
expected to be 2.16% for the fiscal year ending November 30, 1995. The Fund
anticipates that the expense ratio for Class C Shares will be identical to the
expense ratio for Class B Shares. The ratio of each Class reflects the impact of
its 12b-1 Plan.
-37-
<PAGE>
Shares
The Fund is an open-end management investment company and its portfolio
of assets is diversified as defined by the 1940 Act. Commonly known as a mutual
fund, the Fund was organized as a Maryland corporation on January 16, 1987.
Fund shares have a par value of $.01, equal voting rights, except as
noted below, and are equal in all other respects. All Fund shares have
noncumulative voting rights which means that the holders of more than 50% of the
Fund's shares voting for the election of directors can elect 100% of the
directors if they choose to do so. Under Maryland law, the Fund is not required,
and does not intend, to hold annual meetings of shareholders unless, under
certain circumstances, it is required to do so under the 1940 Act. Shareholders
of 10% or more of the Fund's shares may request that a special meeting be called
to consider the removal of a director.
In addition to Class A Shares, Class B Shares and Class C Shares, the
Fund also offers the Value Fund Institutional Class shares. Shares of each class
represent proportionate interests in (DGVF-ABC) the assets of the Fund and have
the same voting and other rights and preferences as the other classes of the
Fund, except that shares of the Value Fund Institutional Class are not subject
to, and may not vote on matters affecting, the Plans. Similarly, as a general
matter, shareholders of Class A Shares, Class B Shares and Class C Shares may
vote only on matters affecting the Plan that relates to the class of shares that
they hold. However, the Class B Shares may vote on a proposal to increase
materially the fees to be paid by the Fund under the Plan relating to the Class
A Shares.
Prior to September 6, 1994, the Value Fund A Class was known as the Value
Fund class and the Value Fund Institutional Class was known as the Value Fund
(Institutional) class.
-38-
<PAGE>
APPENDIX A
Illustrations of the Potential Impact on Investment Based on Purchase Option
<TABLE>
<CAPTION>
$10,000 Purchase
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
- ------------------------------------- -------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
<C> <C> <C> <C> <C> <C> <C>
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,478 10,930 10,930 10,478 10,530 10,830+
2 11,525 11,946 11,946
3 12,678 13,058 13,058
4 13,946 14,272 14,272
5 15,340 15,599 15,599
6 16,874 17,050 17,050
7 18,562 18,636 18,636
8 20,418+ 20,369 20,369
9 22,459 22,405* 22,263
10 24,705 24,646* 24,333
*This assumes that Class B Shares were converted to Class A shares at the end of the eighth year.
$10,000 Purchase
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
- ---------------------------------------- ----------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- -------- ------- ------- -------
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,478 10,930 10,930 10,478 10,930 10,930
2 11,525 11,946 11,946 11,525 11,946 11,946
3 12,678 12,758 13,058+ 12,678 13,058 13,058
4 13,946 14,272 14,272
5 15,340 15,399 15,599+
6
7
8
9
10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$250,000 Purchase
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
- ----------------------------------------- -------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
<C> <C> <C> <C> <C> <C> <C>
0 243,750 250,000 250,000 243,750 250,000 250,000
1 268,125 273,250 273,250 268,125 263,250 270,750+
2 294,938 298,662 298,662
3 324,431 326,438 326,438
4 356,874+ 356,797 356,797
5 392,562 389,979 389,979
6 431,818 426,247 426,247
7 475,000 465,888 465,888
8 522,500 509,215 509,215
9 574,750 560,137* 556,572
10 632,225 616,150* 608,333
*This assumes that Class B Shares were converted to Class A shares at the end of the eighth year.
$250,000 Purchase
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
- ------- ------------------------------ -----------------------
Year Class A Class B Class C Class A Class B Class C
- ----
0 243,750 250,000 250,000 243,750 250,000 250,000
1 268,125 273,250 273,250 268,125 273,250 273,250
2 294,938 298,662 298,662 294,938 298,662 298,662
3 324,431 318,938 326,438+ 324,431 326,438 326,438
4 356,874+ 356,797 356,797
5 392,562 384,979 389,979
6
7
8
9
10
</TABLE>
Assumes a hypothetical return for Class A of 10% per year, a hypothetical return
for Class B of 9.3% for years 1-8 and 10% for years 9-10, and a hypothetical
return for Class C of 9.3% per year. Hypothetical returns vary due to the
different expense structures for each Class and do not represent actual
performance.
Class A purchase subject to appropriate sales charge breakpoint (4.75% @
$10,000; 3.75% @ $100,000; 2.50% @ $250,000).
Class B purchase assessed appropriate CDSC upon redemption (4%-4%-3%-3%-2%-1% in
years 1-2-3-4-5-6).
Class C purchase assessed 1% CDSC upon redemption in year 1.
Figures marked "+" identify which class offers the greater return potential
based on investment amount and holding period.
-39-
<PAGE>
APPENDIX B -- RATINGS
Bonds
Excerpts from Moody's description of its 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; Ba--judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B--generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small; Caa--are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca--represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings; C--the lowest
rated class of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Excerpts from S&P's description of its 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; BB, B, CCC, CC--regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; C--reserved
for income bonds on which no interest is being paid; D--in default, and payment
of interest and/or repayment of principal is in arrears.
-40-
<PAGE>
The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, tax-free funds, money market funds,
global and international funds and closed-end equity funds give investors the
ability to create a portfolio that fits their personal financial goals. For more
information, contact your financial adviser or call Delaware Group at
800-523-4640.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
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
- ---------------------------------------------------------
VALUE FUND
- ---------------------------------------------------------
A CLASS
- ---------------------------------------------------------
B CLASS
- ---------------------------------------------------------
C CLASS
- ---------------------------------------------------------
P R O S P E C T U S
- ---------------------------------------------------------
November 29, 1995
DELAWARE
GROUP
<PAGE>
November 29, 1995
DELAWARE GROUP VALUE FUND, INC.
Value Fund Institutional Class
Supplement to Prospectus dated January 30, 1995
ADDITIONAL CLASSES
In addition to the Institutional Class, the Delaware Group Value Fund,
Inc. (the "Fund") offers the Value Fund A Class, the Value Fund B Class and the
Value Fund C Class of shares (together, the "Fund Classes"), which are described
in a separate prospectus relating to the Fund Classes. The Fund Classes have
sales charges and other expenses that are different from the Institutional Class
and that may affect the performance of the Fund Classes. For a prospectus
relating to the Fund Classes, write to Delaware Distributors, L.P. at 1818
Market Street, Philadelphia, PA 19103, or call at the following telephone
number: 800-523-4640 (Nationwide).
FINANCIAL HIGHLIGHTS
The following unaudited financial highlights for the Value Fund
Institutional Class (the "Institutional Class") are derived from the unaudited
financial statements of Delaware Group Value Fund, Inc. for the six-month period
ended May 31, 1995. The data should be read in conjunction with the financial
statements and related notes which are incorporated into Part B by reference to
the Fund's Semi-Annual Report for the six months ended May 31, 1995.
<PAGE>
<TABLE>
<CAPTION>
Value Fund Institutional Class
------------------------------
Six Months Ended May 31, 1995
(Unaudited)(1)
<S> <C>
Net Asset Value, Beginning of Period...................... $19.400
Income From Investment Operations
Net Investment Income..................................... 0.170
Net Gains or Losses on Securities
(both realized and unrealized)......................... 1.135
-----
Total From Investment Operations....................... 1.305
-----
Less Distributions
Dividends (from net investment income).................... (0.215)
Distributions (from capital gains)........................ (0.250)
Returns of Capital........................................ none
----
Total Distributions.................................... (0.465)
-------
Net Asset Value, End of Period............................ $20.240
=======
Total Return.............................................. 6.92%
- ------------
- ----------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted)................. $7,364
Ratio of Expenses to Average Daily Net Assets............. 1.19%
Ratio of Net Investment Income to Average Daily Net Assets 1.88%
Portfolio Turnover Rate................................... 28%
</TABLE>
(1) Ratios have been annualized but total return has not been annualized.
MANAGEMENT OF THE FUND
The following supplements the investment manager information under
Management of the Fund:
On March 29, 1995, shareholders of the Fund approved a new Investment
Management Agreement with Delaware Management Company, Inc. ("DMC"), an indirect
wholly-owned subsidiary of Delaware Management Holdings, Inc. ("DMH"). The
approval of the new Investment Management Agreement was subject to the
completion of the merger (the "Merger") between DMH and a wholly-owned
subsidiary of Lincoln National Corporation ("Lincoln National"), which occurred
on April 3, 1995. Accordingly, the previous Investment Management Agreement
-2-
<PAGE>
terminated and the new Investment Management Agreement became effective on that
date.
DMC and its two affiliates, Delaware Service Company, Inc., the Fund's
shareholder servicing, dividend disbursing and transfer agent, and Delaware
Distributors, L.P., the Fund's national distributor, are now wholly-owned
subsidiaries of Lincoln National. Lincoln National, with headquarters in Fort
Wayne, Indiana, is a diversified organization with operations in many aspects of
the financial services industry, including insurance and investment management.
Under the new Investment Management Agreement, DMC will be paid at the
same annual fee rates and on the same terms as it was under the previous
Investment Management Agreement. In addition, the investment approach and
operation of the Fund will remain substantially unchanged.
The following replaces the portfolio manager information under
Management of the Fund:
Effective August 21, 1995, David C. Dalrymple assumed primary
responsibility for making day-to-day investment decisions for the Fund. Prior to
then, Mr. Dalrymple served as an assistant portfolio manager of Delaware Group
DelCap Fund, Inc. Mr. Dalrymple holds a BS in Business Administration from
Clarkson College in Potsdam, NY, and an MBA from Cornell Johnson School of
Management in Ithaca, NY. Prior to joining the Delaware Group in 1991, he spent
five years as an assistant portfolio manager for Lord Abbett and Co. in New
York. Mr. Dalrymple is a Chartered Financial Analyst and a member of the
Financial Analysts of Philadelphia.
In making investment decisions for the Fund, Mr. Dalrymple consults
with Wayne A. Stork and Richard G. Unruh, Jr. Mr. Stork, Chairman of the Board
of DMC and the Fund's Board of Directors, is a graduate of Brown University and
attended New York University's Graduate School of Business Administration. Mr.
Stork joined the Delaware Group in 1962 and has served in various executive
capacities at different times within the Delaware organization. Mr. Unruh is a
graduate of Brown University and received his MBA from the University of
Pennsylvania's Wharton School. He joined the Delaware Group in 1982 and after 19
years of investment management experience with Kidder, Peabody & Co., Inc. Mr.
Unruh was named an executive vice president of the Fund in 1994. He is also a
member of the Board of Directors of DMC and was named an executive vice
president of DMC in 1994. He is on the Board of Directors of Keystone Insurance
Company and AAA Mid-Atlantic and is a former president and current member of the
Advisory Council of the Bond Club of Philadelphia.
-3-
<PAGE>
- -------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
November 29, 1995
- -------------------------------------------------------------------------------
DELAWARE GROUP VALUE FUND, INC.
- -------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
- -------------------------------------------------------------------------------
For more information about the
Value Fund Institutional Class:
800-828-5052
For Prospectus and Performance
of the Value Fund A Class,
the Value Fund B Class and
the Value Fund C Class:
Nationwide 800-523-4640
Philadelphia 215-988-1333
Information on Existing Accounts
of the Value Fund A Class,
the Value Fund B Class and the
Value Fund C Class:
(SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Philadelphia 215-988-1241
Dealer Services:
(BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Philadelphia 215-988-1050
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Cover Page
- -------------------------------------------------------------------------------
Investment Policies and Portfolio Techniques
- -------------------------------------------------------------------------------
Accounting and Tax Issues
- -------------------------------------------------------------------------------
Performance Information
- -------------------------------------------------------------------------------
Trading Practices and Brokerage
- -------------------------------------------------------------------------------
Purchasing Shares
- -------------------------------------------------------------------------------
Investment Plans
- -------------------------------------------------------------------------------
Determining Offering Price and Net Asset Value
- -------------------------------------------------------------------------------
Redemption and Repurchase
- -------------------------------------------------------------------------------
Distributions and Taxes
- -------------------------------------------------------------------------------
Investment Management Agreement
- -------------------------------------------------------------------------------
Officers and Directors
- -------------------------------------------------------------------------------
Exchange Privilege
- -------------------------------------------------------------------------------
General Information
- -------------------------------------------------------------------------------
Appendix A --Description of Ratings
- -------------------------------------------------------------------------------
Appendix B -- IRA Information
- -------------------------------------------------------------------------------
Appendix C
- -------------------------------------------------------------------------------
Financial Statements
- -------------------------------------------------------------------------------
-1-
<PAGE>
Delaware Group Value Fund, Inc. (the "Fund") is a professionally-
managed mutual fund of the series type which currently offers a single
portfolio. The Fund offers four classes (individually, a "Class" and
collectively, the "Classes") of shares -Value Fund A Class (the "Class A
Shares"), Value Fund B Class (the "Class B Shares") and Value Fund C Class (the
"Class C Shares") (together, the "Fund Classes") and Value Fund Institutional
Class (the "Institutional Class"). Class B Shares, Class C Shares and
Institutional Class shares of the Fund may be purchased at a price equal to the
next determined net asset value per share. Class A Shares may be purchased at
the public offering price, which is equal to the next determined net asset value
per share, plus a front-end sales charge. Class A Shares are subject to a
maximum front-end sales charge of 4.75% and annual 12b-1 Plan expenses of up to
0.30%. Class B Shares are subject to a contingent deferred sales charge ("CDSC")
which may be imposed on redemptions made within six years of purchase and annual
12b-1 Plan expenses of up to 1%, which are assessed against Class B Shares for
approximately eight years after purchase. See Automatic Conversion of Class B
Shares under Buying Shares in the Fund Classes' Prospectus. Class C Shares are
subject to a CDSC which may be imposed on redemptions made within twelve months
of purchase and annual 12b-1 Plan expenses of up to 1%, which are assessed
against the Class C Shares for the life of the investment. All references to
"shares" in this Statement of Additional Information ("Part B" of the
registration statement) refer to all Classes of shares of the Fund, except where
noted.
This Part B supplements the information contained in the current
Prospectus for the Fund Classes dated November 29, 1995 and the current
Prospectus for the Institutional Class dated January 30, 1995 and the supplement
thereto dated November 29, 1995, as they may be amended from time to time. It
should be read in conjunction with the respective Class' Prospectus. Part B is
not itself a prospectus but is, in its entirety, incorporated by reference into
each Class' Prospectus. A Prospectus relating to the Fund Classes and a
Prospectus relating to the Institutional Class may be obtained by writing or
calling your investment dealer or by contacting the Fund's national distributor,
Delaware Distributors, L.P. (the "Distributor"), 1818 Market Street,
Philadelphia, PA 19103.
-2-
<PAGE>
INVESTMENT POLICIES AND PORTFOLIO
TECHNIQUES
Investment Restrictions--The Fund has adopted the following
restrictions which, along with its investment objective, cannot be changed
without approval by the holders of a "majority" of the Fund's outstanding
shares, which is a vote by the holders of the lesser of a) 67% or more of the
voting securities present in person or by proxy at a meeting, if the holders of
more than 50% of the outstanding voting securities are present or represented by
proxy or b) more than 50% of the outstanding voting securities. The percentage
limitations contained in the restrictions and policies set forth herein apply at
the time of purchase of securities.
The Fund 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 Fund's investment
objective and policies, are considered loans and except that the Fund may loan
up to 25% of its assets to qualified broker/dealers or institutional investors
for their use relating to short sales or other security transactions.
4. Purchase or sell real estate but this shall not prevent the Fund
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 Fund 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 Fund may write covered call options with respect to any or all parts of its
portfolio securities and purchase put options if the Fund 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 Fund may sell
put options previously purchased and enter into closing transactions with
respect to covered call and put options. In addition, the Fund 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 Fund's net assets. Included in that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York Stock Exchange or
American Stock
Exchange.
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.
-3-
<PAGE>
13. Invest in interests in oil, gas or other mineral exploration or
development programs.
14. Invest more than 10% of the Fund's net 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 Fund 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 Fund's 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 Fund 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 Fund will not pledge more than 10% of its net assets. The
Fund 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 Fund has an outstanding borrowing.
The Fund has a policy, which may not be changed without shareholder
approval, that it will not invest in commodities; however, the Fund reserves the
right to invest in financial futures and options thereon, including stock index
futures, to the extent these instruments are considered commodities.
In addition, 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 Fund's 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 Fund's assets invested in particular industries will vary from time to time.
The securities in which the Fund 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 Fund may also invest temporarily in various types of
fixed income obligations.
In addition, from time to time, the Fund may also engage in the
following investment techniques:
Repurchase Agreements--While the Fund 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 Fund
may invest cash balances in a joint repurchase agreement in accordance with the
terms of the Order and subject generally to the conditions described 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
Fund, if any, would be the difference between the repurchase price and the
market value of the security. The Fund will limit its investments in repurchase
agreements to those which the Manager, under the guidelines of the Board of
Directors, determines to present minimal credit risks and which are of high
quality. In addition, the Fund must have collateral of at least 100% of the
repurchase price, including the portion representing the Fund's yield under such
agreements which is monitored on a daily basis.
-4-
<PAGE>
Portfolio Loan Transactions
The Fund may loan up to 25% of its assets to qualified broker/dealers
or institutional investors for their use relating to short sales or other
security transactions.
It is the understanding of the Manager that the staff of the Securities
and Exchange Commission permits portfolio lending by registered investment
companies if certain conditions are met. These conditions are as follows: 1)
each transaction must have 100% collateral in the form of cash, short-term U.S.
Government securities, or irrevocable letters of credit payable by banks
acceptable to the Fund from the borrower; 2) this collateral must be valued
daily and should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund; 3) the Fund must be
able to terminate the loan after notice, at any time; 4) the Fund must receive
reasonable interest on any loan, and any dividends, interest or other
distributions on the lent securities, and any increase in the market value of
such securities; 5) the Fund may pay reasonable custodian fees in connection
with the loan; 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 Fund would be exposed on a loan transaction
is the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, under the supervision of
the Board of Directors, including the creditworthiness of the borrowing broker,
dealer or institution and then only if the consideration to be received from
such loans would justify the risk. Creditworthiness will be monitored on an
ongoing basis by the Manager.
* * *
Restricted Securities
The Fund may invest in restricted securities, including unregistered
securities eligible for resale without registration pursuant to Rule 144A ("Rule
144A Securities") under the Securities Act of 1933 ("1933 Act"). Rule 144A
Securities may be freely traded among qualified institutional investors without
registration under the 1933 Act.
Investing in Rule 144A Securities could have the effect of increasing
the level of the Fund's illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these securities. After
the purchase of a Rule 144A Security, however, the Board of Directors and the
Manager will continue to monitor the liquidity of that security to ensure that
the Fund has no more than 10% of its net assets in illiquid securities.
Options--The Fund may write call options and purchase put options on a
covered basis only, and will not engage in option writing strategies for
speculative purposes.
A. Covered Call Writing--The Fund may write covered call options, from
time to time, on such portion of its portfolio, without limit, as the Manager
determines is appropriate in seeking to obtain the Fund's investment objective.
A call option gives the purchaser of such option the right to buy, and the
writer, in this case the Fund, has the obligation to sell the underlying
security at the exercise price during the option period. The advantage to the
Fund of writing covered calls is that the Fund receives additional income, in
the form of a premium, which may offset any capital loss or decline in market
value of the security. However, if the security rises in value, the Fund may not
fully participate in the market appreciation.
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During the option period, a covered call option writer may be assigned
an exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.
With respect to both options on actual portfolio securities owned by
the Fund and options on stock indices, the Fund may enter into closing purchase
transactions. A closing purchase transaction is one in which the Fund, when
obligated as a writer of an option, terminates its obligation by purchasing an
option of the same series as the option previously written.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable the
Fund to write another call option on the underlying security with either a
different exercise price or expiration date or both. The Fund may realize a net
gain or loss from a closing purchase transaction depending upon whether the net
amount of the original premium received on the call option is more or less than
the cost of effecting the closing purchase transaction. Any loss incurred in a
closing purchase transaction may be partially or entirely offset by the premium
received from a sale of a different call option on the same underlying security.
Such a loss may also be wholly or partially offset by unrealized appreciation in
the market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
If a call option expires unexercised, the Fund will realize a
short-term capital gain in the amount of the premium on the option, less the
commission paid. Such a gain, however, may be offset by depreciation in the
market value of the underlying security during the option period. If a call
option is exercised, the Fund will realize a gain or loss from the sale of the
underlying security equal to the difference between the cost of the underlying
security, and the proceeds of the sale of the security plus the amount of the
premium on the option, less the commission paid.
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 Fund will write call options only on a covered basis, which means
that the Fund will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, the Fund would be required to continue to hold a security which it
might otherwise wish to sell, or deliver a security it would want to hold.
Options written by the Fund will normally have expiration dates between one and
nine months from the date written. The exercise price of a call option may be
below, equal to or above the current market value of the underlying security at
the time the option is written.
B. Purchasing Put Options--The Fund may invest up to 2% of its total
assets in the purchase of put options. The Fund will, at all times during which
it holds a put option, own the security covered by such option.
The Fund intends to purchase put options in order to protect against a
decline in the market value of the underlying security below the exercise price
less the premium paid for the option ("protective puts"). The ability to
purchase put options will allow the Fund to protect an unrealized gain in an
appreciated security in its portfolio without actually selling the security. If
the security does not drop in value, the Fund will lose the value of the premium
paid. The Fund may sell a put option which it has previously purchased prior to
the sale of the securities underlying such option. Such sales will result in a
net gain or loss depending on whether the amount received on the sale is more or
less than the premium and other transaction costs paid on the put option which
is sold.
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The Fund may sell a put option purchased on individual portfolio
securities or stock indices. Additionally, the Fund may enter into closing sale
transactions. A closing sale transaction is one in which the Fund, when it is
the holder of an outstanding option, liquidates its position by selling an
option of the same series as the option previously purchased.
Options on Stock Indices
A stock index assigns relative values to the common stocks included in
the index with the index fluctuating with changes in the market values of the
underlying common stock.
Options on stock indices are similar to options on stocks but have
different delivery requirements. Stock options provide the right to take or make
delivery of the underlying stock at a specified price. A stock index option
gives the holder the right to receive a cash "exercise settlement amount" equal
to (i) the amount by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by (ii) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
The amount of cash received will be equal to such difference between the closing
price of the index and exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Gain or loss to the Fund on
transactions in stock index options will depend on price movements in the stock
market generally (or in a particular industry or segment of the market) rather
than price movements of individual securities.
As with stock options, the Fund may offset its position in stock index
options prior to expiration by entering into a closing transaction on an
Exchange or it may let the option expire unexercised.
A stock index fluctuates with changes in the market values of the stock
so included. Some stock index options are based on a broad market index such as
the Standard & Poor's 500 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 effectiveness of purchasing or writing stock index options as a
hedging technique will depend upon the extent to which price movements in the
Fund's portfolio correlate with price movements of the stock index selected.
Because the value of an index option depends upon movements in the level of the
index rather than the price of a particular stock, whether the Fund will realize
a gain or loss from the purchase or writing of options on an index depends upon
movements in the level of stock prices in the stock market generally or, in the
case of certain indices, in an industry or market segment, rather than movements
in the price of a particular stock. Since the Fund's portfolio will not
duplicate the components of an index, the correlation will not be exact.
Consequently, the Fund bears the risk that the prices of the securities being
hedged will not move in the same amount as the hedging instrument.
-7-
<PAGE>
It is also possible that there may be a negative correlation between
the index or other securities underlying the hedging instrument and the hedged
securities which would result in a loss on both such securities and the hedging
instrument. Accordingly, successful use by the Fund of options on stock indices
will be subject to the Manager's ability to predict correctly movements in the
direction of the stock market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the price of
individual stocks.
Positions in stock index options may be closed out only on an Exchange
which provides a secondary market. There can be no assurance that a liquid
secondary market will exist for any particular stock index option. Thus, it may
not be possible to close such an option. The inability to close options
positions could have an adverse impact on the Fund's ability to effectively
hedge its securities. The Fund will enter into an option position only if there
appears to be a liquid secondary market for such options.
The Fund will not engage in transactions in options on stock indices
for speculative purposes but only to protect appreciation attained, to offset
capital losses and to take advantage of the liquidity available in the option
markets.
Foreign Securities
The Fund may invest in securities of foreign companies. However, the
Fund 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 Fund. Payment of
such interest equalization tax, if imposed, would reduce the Fund's rate of
return on its investment. Dividends paid by foreign issuers may be subject to
withholding and other foreign taxes which may decrease the net return on such
investments as compared to dividends paid to the Fund by United States
corporations.
Investors should recognize that investing in foreign corporations
involves certain considerations, including those set forth below, which are not
typically associated with investing in United States corporations. Foreign
corporations are not generally subject to uniform accounting, auditing and
financial standards and requirements comparable to those applicable to United
States corporations. There may also be less supervision and regulation of
foreign stock exchanges, brokers and listed corporations than exist in the
United States. The Fund may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange as between the currencies of
different nations and control regulations. Furthermore, there may be the
possibility of expropriation or confiscatory taxation, political, economic or
social instability or diplomatic developments which could affect assets of the
Fund held in foreign countries.
The Fund will, from time to time, conduct foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into contracts to purchase
or sell foreign currencies at a future date (i.e., a "forward foreign currency"
contract or "forward" contract). Investors should be aware that there are costs
and risks associated with such currency transactions. The Fund may enter into
forward contracts to "lock in" the price of a security it has agreed to purchase
or sell, in terms of U.S. dollars or other currencies in which the transaction
will be consummated. When the Manager believes that the currency of a particular
foreign country may suffer a decline against the U.S. dollar or against another
currency, the Fund may enter into a forward contract to sell, for a fixed amount
of U.S. dollars or other appropriate currency, the amount of foreign currency
approximating the value of some or all of the Fund's securities denominated in
such foreign currency. It is impossible to predict precisely the market value of
portfolio securities at the expiration of the forward contract. Accordingly, it
may be necessary for the Fund to purchase or sell additional foreign currency on
the spot market (and bear the expense of such purchase or sale) if the market
value of the security is less than or greater than the amount of foreign
currency the Fund is obligated to deliver.
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<PAGE>
The Fund may incur gains or losses from currency transactions. No type
of foreign currency transaction will eliminate fluctuations in the prices of the
Fund's foreign securities or will prevent loss if the prices of such securities
should decline.
The Fund's Custodian for its foreign securities is Morgan Guaranty
Trust Company of New York, located at 60 Wall Street, New York, New York 10260.
High-Yield, High-Risk Securities
Investing in so-called "high-yield" or "high-risk" securities entails
certain risks, including the risk of loss of principal, which may be greater
than the risks involved in investment grade securities, and which should be
considered by investors contemplating an investment in the Fund. Such securities
are sometimes issued by companies whose earnings at the time of issuance are
less than the projected debt service on the high-yield securities.
The risks include the following:
A. Youth and Volatility of the High- Yield Market--Although the market
for high-yield securities has been in existence for many years, including
periods of economic downturns, the high-yield market grew rapidly during the
long economic expansion which took place in the United States during the 1980s.
During that economic expansion, the use of high-yield debt securities to fund
highly leveraged corporate acquisitions and restructurings increased
dramatically. As a result, the high-yield market grew substantially during that
economic expansion. Although experts disagree on the impact recessionary periods
have had and will have on the high-yield market, some analysts believe a
protracted economic downturn would severely disrupt the market for high-yield
securities, would adversely affect the value of outstanding bonds and would
adversely affect the ability of high-yield issuers to repay principal and
interest. Those analysts cite volatility experienced in the high-yield market in
the past as evidence for their position. It is likely that protracted periods of
economic uncertainty would result in increased volatility in the market prices
of high-yield securities, an increase in the number of high-yield bond defaults
and corresponding volatility in the Fund's net asset value.
Although the Fund will not ordinarily purchase securities rated below B
by Moody's and S&P, it may do so if the Manager believes that capital
appreciation is likely. The Fund will not invest more than 25% of its assets in
such securities.
B. Liquidity and Valuation--The secondary market for high-yield
securities is currently dominated by institutional investors, including mutual
funds and certain financial institutions. There is generally no established
retail secondary market for high-yield securities. As a result, the secondary
market for high-yield securities is more limited and less liquid than other
secondary securities markets. The high-yield secondary market is particularly
susceptible to liquidity problems when the institutions which dominate it
temporarily cease buying bonds for regulatory, financial or other reasons, such
as the savings and loan crisis. A less liquid secondary market may have an
adverse effect on the Fund's ability to dispose of particular issues, when
necessary, to meet the Fund's liquidity needs or in response to a specific
economic event, such as the deterioration in the creditworthiness of the issuer.
In addition, a less liquid secondary market makes it more difficult for the Fund
to obtain precise valuations of the high-yield securities in its portfolio.
During periods involving such liquidity problems, judgment plays a greater role
in valuing high-yield securities than is normally the case. The secondary market
for high-yield securities is also generally considered to be more likely to be
disrupted by adverse publicity and investor perceptions than the more
established secondary securities markets. The Fund's privately placed high-yield
securities are particularly susceptible to the liquidity and valuation risks
outlined above.
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<PAGE>
C. Legislative and Regulatory Action and Proposals--There are a variety
of legislative actions which have been taken or which are considered from time
to time by the United States Congress which could adversely affect the market
for high-yield bonds. For example, Congressional legislation limited the
deductibility of interest paid on certain high-yield bonds used to finance
corporate acquisitions. Also, Congressional legislation has, with some
exceptions, generally prohibited federally-insured savings and loan institutions
from investing in high-yield securities. Regulatory actions have also affected
the high-yield market. For example, many insurance companies have restricted or
eliminated their purchases of high-yield bonds as a result of, among other
factors, actions taken by the National Association of Insurance Commissioners.
If similar legislative and regulatory actions are taken in the future, they
could result in further tightening of the secondary market for high-yield
issues, could reduce the number of new high-yield securities being issued.
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<PAGE>
ACCOUNTING AND TAX ISSUES
When the Fund 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 Fund's
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 Fund has written
expires on its stipulated expiration date, the Fund reports a realized gain. If
the Fund enters into a closing purchase transaction with respect to an option
which the Fund has written, the Fund 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 Fund has written is exercised, the Fund 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 Fund for the purchase of a put option is
recorded in the section of the Fund's 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 Fund has
purchased expires on the stipulated expiration date, the Fund 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 Fund 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
Fund 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 capital gain or loss for tax purposes. Such
options held by the Fund 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 Fund 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"). The Fund 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, payment 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
consists 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.
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<PAGE>
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 Fund 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 Fund may be required to defer the closing out of a
contract beyond the time when it might otherwise be advantageous to do so. The
Fund 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 following year, subject to the same limitation.
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PERFORMANCE INFORMATION*
From time to time, the Fund may state each Class' total return in
advertisements and other types of literature. Any statements of total return
performance data for a Class will be accompanied by information on its average
annual compounded total rate of return for that Class over, as relevant, the
most recent one-, five- and ten-year (or life of fund, if applicable) periods.
The Fund may also advertise aggregate and average total return information of
each Class over additional periods of time. The 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.
Average annual total rate of return for a 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, in the case
of only Class A Shares, the
maximum front-end sales charge is
deducted;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical $1,000 purchase at
the end of the period after the deduction of the applicable
CDSC, if any, with respect to Class B Shares and Class C
Shares.
*In the case of Class A Shares, the Limited CDSC applicable to only
certain redemptions of these shares will not be deducted from any computation of
total return. See the Prospectus for the Fund Classes for a description of the
Limited CDSC and the limited instances in which it applies. All references to
contingent deferred sales charges or a CDSC in this Performance Information
section will apply to Class B Shares or Class C Shares.
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made with respect to Class A Shares, and that all
distributions are reinvested at net asset value, and, with respect to Class B
Shares and Class C Shares, reflects the deduction of the CDSC that would be
applicable upon complete redemption of such shares. In addition, the Fund may
present total return information that does not reflect the deduction of the
maximum front-end sales charge or any applicable CDSC.
The performance of Class A Shares and the Institutional Class, as shown
below, is the average annual total return quotations for the one-, three- and
five-year periods ended May 31, 1995 and for the life of the Fund, computed as
described above. The average annual total return for Class A Shares at offer
reflects the maximum front-end sales charges paid on the purchase of shares. The
average annual total return for Class A Shares at net asset value (NAV) does not
reflect the payment of the maximum front-end sales charge of 4.75%. 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 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.
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<PAGE>
Average Annual Total Return
Class A Class A Institu
Shares Shares tional
(at Offer)(1) (at NAV) Class(2)
1 year
ended
5/31/95 (2.82%) 2.04% 2.38%
3 years
ended
5/31/95 8.65% 10.43% 10.72%
5 years
ended
5/31/95 11.87% 12.96% 13.14%
Period
6/24/87(3)
through
5/31/95 12.71% 13.41% 13.52%
(1) Effective November 29, 1995, the maximum front-end sales charge was
reduced from 5.75% to 4.75%. The above performance figures are calculated
using 4.75% as the applicable sales charge for all time periods, and are
more favorable than they would have been had they been calculated using
the former front-end sales charge.
(2) Date of initial public offering was November 9, 1992.
(3) Date of initial public offering of Class A Shares.
The performance of Class B Shares, as shown below, is the aggregate
total return quotation for the period September 6, 1994 (date of initial public
offering) through May 31, 1995. 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 May 31, 1995. The aggregate
total return for Class B Shares excluding deferred sales charge assumes the
shares were not redeemed at May 31, 1995 and therefore does not reflect the
deduction of a CDSC.
Aggregate Total Return
Class B Shares Class B Shares
(Including (Excluding
Deferred Sales Deferred Sales
Charge) Charge)
Period
9/6/94(1)
through
5/31/95 (2.68%) 1.28%
(1) 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.
Information regarding the performance of Class C Shares is not shown
because such shares were not offered to the public prior to the date of this
Part B.
From time to time, the Fund may also quote each Class' actual total
return performance, dividend results and other performance information in
advertising and other types of literature and may compare that information to,
or may separately illustrate similar information reported by, the Standard &
Poor's 500 Stock Index, the Dow Jones Industrial Average, the Russell 2000 Index
TR, the NASDAQ Composite Index 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 Russell 2000 Index
TR is a total return weighted index which is comprised of 2000 of the smallest
stocks (on the basis of capitalization) in the Russell 3000 Index and is
calculated on a monthly basis. The NASDAQ Composite Index is a market
capitalization price only index that tracks the performance of domestic common
stocks traded on the regular NASDAQ market as well as National Market System
traded foreign common stocks and American Depository Receipts. The total return
performance reported for these indices will reflect the reinvestment of all
distributions on a quarterly basis and market price fluctuations. The indices do
not take into account any sales charge or other fees. In seeking a particular
investment objective, the Fund's portfolio primarily includes common stocks
considered by the Manager to be more aggressive than those tracked by these
indices.
Total return performance of each Class will be computed by adding all
reinvested income and realized securities profits distributions plus the change
in net asset value during a specific period and dividing by the offering price
at the beginning of the period. It will not reflect any income taxes payable by
shareholders on the reinvested distributions included in the calculation.
Because securities prices fluctuate, past performance should not be considered
as a representation of the results which may be realized from an investment in
the Fund in the future.
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<PAGE>
The Fund may also state each Class' total return performance 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 Fund may also quote actual total return
performance for each Class in advertising and other types of literature compared
to indices or averages of alternative financial products available to
prospective investors. For example, the performance comparisons may include the
average return of various bank instruments, some of which may carry certain
return guarantees offered by leading banks and thrifts as monitored by Bank Rate
Monitor, and those of generally-accepted corporate bond and government security
price indices of various durations prepared by Lehman Brothers and Salomon
Brothers, Inc. These indices are not managed for any investment goal.
Comparative information on the Consumer Price Index may also be
included. The Consumer Price Index, as prepared by the U.S. Bureau of Labor
Statistics, is the most commonly used measure of inflation. It indicates the
cost fluctuations of a representative group of consumer goods. It does not
represent a return from an investment.
Statistical and performance information and various indices compiled
and maintained by organizations such as the following may also be used in
preparing exhibits comparing certain industry trends and competitive mutual fund
performance to comparable Fund activity and performance and in illustrating
general financial planning principles. From time to time, certain mutual fund
performance ranking information, calculated and provided by these organizations,
may also be used in the promotion of sales of 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.
-15-
<PAGE>
Salomon Brothers and Lehman Brothers are statistical research firms
that maintain databases of international market, bond market, corporate
and government-issued securities of various maturities. This
information, as well as unmanaged indices compiled and maintained by
these firms, will be used in preparing comparative illustrations.
The following tables are examples, for purposes of illustration only,
of cumulative total return performance for (a) Class A Shares and the
Institutional Class for the three-, six- and nine-month periods ended May 31,
1995, for the one-, three- and five-year periods ended May 31, 1995, and for the
life of the Fund; and (b) Class B Shares for the three- and six-month periods
ended May 31, 1995 and for the life of the Class. For these purposes, the
calculations assume 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. Information regarding
the performance of Class C Shares is not shown because such shares were not
offered to the public prior to the date of this Part B.
Cumulative Total Return
Dow
Class A Institu- Standard Jones NASDAQ
Shares(1) tional & Poor's Indus- Com-
(at Offer) Class(2) 500(4) trial(4) posite(4)
3 months
ended
5/31/95 0.40% 5.42% 10.19% 12.07% 8.93%
6 months
ended
5/31/95 1.69% 6.92% 19.16% 21.05% 15.23%
9 months
ended
5/31/95 (3.32%) 1.73% 14.50% 16.48% 12.93%
1 year
ended
5/31/95 (2.82%) 2.38% 20.16% 22.17% 17.60%
3 years
ended
5/31/95 28.27% 35.75% 39.78% 43.22% 47.71%
5 years
ended
5/31/95 75.19% 85.37% 71.69% 80.86% 88.37%
Period
6/24/87(3)
through
5/31/95 158.50% 173.67% 123.58% 139.59% 102.35%
(1) Effective November 29, 1995, the maximum front-end sales charge was
reduced from 5.75% to 4.75%. The above performance figures are calculated
using 4.75% as the applicable sales charge for all periods, and are more
favorable than they would have been had they been calculated using the
former sales charge.
(2) 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 Class A Shares and adjusting it to
reflect the elimination of all sales charges. However, for those periods
no adjustment has been made to eliminate the impact of 12b-1 payments, and
performance would have been affected had such an adjustment been made.
(3) Date of initial public offering of Class A Shares.
(4) Source: Interactive Data Corp.
-16-
<PAGE>
Class B Class B
Shares Shares
(Including (Excluding Dow
Deferred Deferred Standard Jones NASDAQ
Sales Sales & Poor's Indus- Com-
Charge) Charge) 500(2) trial(2) posite(2)
3 months
ended
5/31/95 1.23% 5.23% 10.19% 12.07% 8.93%
6 months
ended
5/31/95 2.43% 6.43% 19.16% 21.05% 15.23%
Period
9/6/94(1)
through
5/31/95 (2.68%) 1.28% 14.50% 16.48% 12.93%
(1) 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.
(2) Source: Interactive Data Corp.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Fund and other mutual funds in the Delaware
Group, will provide general information about investment alternatives and
scenarios that will allow investors to assess their personal goals. This
information will include general material about investing as well as materials
reinforcing various industry-accepted principles of prudent and responsible
personal financial planning. One typical way of addressing these issues is to
compare an individual's goals and the length of time the individual has to
attain these goals to his or her risk threshold. In addition, the Distributor
will provide information that discusses the Manager's overriding investment
philosophy and how that philosophy impacts the Fund's, and other Delaware Group
funds', investment disciplines employed in seeking their objectives. The
Distributor may also from time to time cite general or specific information
about the institutional clients of the Manager, including the number of such
clients serviced by the Manager.
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 at various assumed fixed rates of return on a $10,000
investment compounded quarterly for 10 years:
8% Rate 10% Rate 12% Rate 14% Rate
of Return of Return of Return of Return
12-'85 $10,824 $11,038 $11,255 $11,475
12-'86 $11,717 $12,184 $12,668 $13,168
12-'87 $12,682 $13,449 $14,258 $15,111
12-'88 $13,728 $14,845 $16,047 $17,340
12-'89 $14,859 $16,386 $18,061 $19,898
12-'90 $16,084 $18,087 $20,328 $22,833
12-'91 $17,410 $19,965 $22,879 $26,202
12-'92 $18,845 $22,038 $25,751 $30,067
12-'93 $20,399 $24,325 $28,983 $34,503
12-'94 $22,080 $26,851 $32,620 $39,593
These figures are calculated assuming a fixed constant investment
return and assume no fluctuation in the value of principal. These figures, which
do not reflect payment of applicable taxes, are not intended to be a projection
of investment results and do not reflect the actual performance results of any
of the Classes.
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<PAGE>
TRADING PRACTICES AND BROKERAGE
The Fund selects brokers or dealers to execute transactions for the
purchase or sale of portfolio securities on the basis of its judgment of their
professional capability to provide the service. The primary consideration is to
have brokers or dealers execute transactions at best price and execution. Best
price and execution refers to many factors, including the price paid or received
for a security, the commission charged, the promptness and reliability of
execution, the confidentiality and placement accorded the order and other
factors affecting the overall benefit obtained by the account on the
transaction. A number of trades are made on a net basis where the Fund either
buys the securities directly from the dealer or sells them to the dealer. In
these instances, there is no direct commission charged but there is a spread
(the difference between the buy and sell price) which is the equivalent of a
commission. When a commission is paid, the Fund pays reasonably competitive
brokerage commission rates based upon the professional knowledge of its trading
department as to rates paid and charged for similar transactions throughout the
securities industry. In some instances, the Fund pays a minimal share
transaction cost when the transaction presents no difficulty.
During the fiscal years ended November 30, 1992, 1993 and 1994, the
aggregate dollar amounts of brokerage commissions paid by the Fund were $34,101,
$252,502 and $89,843, respectively. The aggregate dollar amount of brokerage
commissions paid for 1993 was higher due to the large number of purchases made
to the Fund during that year.
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 November 30, 1994, portfolio transactions
of the Fund in the amount of $10,928,720, resulting in brokerage commissions of
$40,072, were directed to brokers for brokerage and research services provided.
As provided in the Securities Exchange Act of 1934 and the Fund's
Investment Management Agreement, higher commissions are permitted to be paid to
broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, the Fund believes that the
commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In some instances, services may be provided to
the Manager which constitute in some part brokerage and research services used
by the Manager in connection with its investment decision-making process and
constitute in some part services used by the Manager in connection with
administrative or other functions not related to its investment decision-making
process. In such cases, the Manager will make a good faith allocation of
brokerage and research services and will pay out of its own resources for
services used by the Manager in connection with administrative or other
functions not related to its investment decision-making process. In addition, so
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.
-18-
<PAGE>
The Manager may place a combined order for two or more accounts or
funds engaged in the purchase or sale of the same security if, in its judgment,
joint execution is in the best interest of each participant and will result in
best price and execution. Transactions involving commingled orders are allocated
in a manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager and the Fund's
Board of Directors that the advantages of combined orders outweigh the possible
disadvantages of separate transactions.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Fund may place orders with broker/dealers that have agreed to
defray certain Fund expenses such as custodian fees, and may, at the request of
the Distributor, give consideration to sales of its shares as a factor in the
selection of brokers and dealers to execute Fund portfolio transactions.
Portfolio Turnover
Portfolio trading will be undertaken principally to accomplish the
Fund's objective in relation to anticipated movements in the general level of
interest rates. The Fund is free to dispose of portfolio securities at any time,
subject to complying with the 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 Fund 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 Fund's
investment objective.
Under certain market conditions, the Fund may experience a high rate of
portfolio turnover which could exceed 100%. The portfolio turnover rate of the
Fund is calculated by dividing the lesser of purchases or sales of portfolio
securities for the particular fiscal year by the monthly average of the value of
the portfolio securities owned by the Fund during the particular fiscal year,
exclusive of securities whose maturities at the time of acquisition are one year
or less.
The degree of portfolio activity may affect brokerage costs of the Fund
and taxes payable by the Fund's shareholders to the extent of any net realized
capital gains. A turnover rate of 100% would occur, for example, if all the
investments in the Fund's portfolio at the beginning of the year were replaced
by the end of the year. In investing for capital appreciation, the Fund may hold
securities for any period of time. Portfolio turnover will also be increased if
the Fund writes a large number of call options which are subsequently exercised.
The turnover rate also may be affected by cash requirements from redemptions and
repurchases of Fund shares. Total brokerage costs generally increase with higher
portfolio turnover rates.
During the fiscal years ended November 30, 1993 and 1994, the Fund's
portfolio turnover rates were 32% and 14%, respectively.
-19-
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for the Fund's four
classes of shares - Class A Shares, Class B Shares, Class C Shares and the
Institutional Class, and has agreed to use its best efforts to sell shares of
the Fund. See the Prospectuses for additional information on how to invest.
Shares of the Fund are offered on a continuous basis, and may be purchased
through authorized investment dealers or directly by contacting the Fund or its
agent.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases generally must be at
least $100 for Class A Shares, Class B Shares and Class C Shares. The minimum
initial and subsequent investment for Class A Shares will be waived for
purchases by officers, directors and employees of any Delaware Group fund, the
Manager or any of the Manager's affiliates if the purchases are made pursuant to
a payroll deduction program. Class A Shares purchased pursuant to the Uniform
Gifts to Minors Act or the Uniform Transfers to Minors Act and Class A Shares
purchased in connection with an Automatic Investing Plan are subject to a
minimum initial purchase of $250 and a minimum subsequent purchase of $25.
Accounts opened under the Delaware Group Asset Planner service are subject to a
minimum initial investment of $2,000 per Asset Planner strategy selected. There
are no minimum purchase requirements for the Institutional Class, but certain
eligibility requirements must be satisfied.
There is a maximum purchase limitation of $250,000 with respect to each
purchase of Class B Shares; for Class C Shares, each purchase must be in an
amount that is less than $1,000,000. (See Investment Plans for purchase
limitations applicable to each of the Fund's master retirement plans.) The Fund
will reject any order for purchase of more than $250,000 of Class B Shares and
$1,000,000 or more for Class C Shares. An investor may exceed these limitations
by making cumulative purchases over a period of time. An investor should keep in
mind, however, that reduced front-end sales charges apply to investments of
$100,000 or more in Class A Shares, which are subject to a lower annual 12b-1
Plan expense charge than Class B Shares and Class C Shares and generally are not
subject to a CDSC.
Selling dealers have the responsibility of transmitting orders
promptly. The Fund reserves the right to reject any order for the purchase of
its shares if in the opinion of management such rejection is in the Fund's best
interest.
The NASD has adopted amendments to its Rules of Fair Practice relating
to investment company sales charges. The Fund and the Distributor intend to
operate in compliance with these rules.
Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 4.75%; however, lower front-end sales charges
apply for larger purchases. See the table below. Class A Shares are also subject
to annual 12b-1 Plan expenses.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase; (iii) 2%
if shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class B Shares are
also subject to annual 12b-1 Plan expenses which are higher than those to which
Class A Shares are subject and are assessed against Class B Shares for
approximately eight years after purchase. See Automatic Conversion of Class B
Shares in the Fund Classes' Prospectus.
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within twelve months following purchase. Class
C Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment which are equal to those to which Class B Shares are subject.
Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses. See Determining Offering Price and Net Asset Value and
Plans Under Rule 12b-1 for the Fund Classes in this Part B.
Institutional Class shares, Class A Shares, Class B Shares and Class C
Shares represent a proportionate interest in the Fund's assets and will receive
a proportionate interest in the Fund's income, before application, as to the
Class A, Class B and Class C Shares, of any expenses under the Fund's 12b-1
Plans.
Certificates representing shares purchased are not ordinarily issued
unless a shareholder submits a specific request. Certificates are not issued in
the case of Class B Shares. 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.
-20-
<PAGE>
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A, Class B and Class C
Shares permit investors to choose the method of purchasing shares that is most
suitable for their needs given the amount of their purchase, the length of time
they expect to hold their shares and other relevant circumstances. Investors
should determine whether, under their particular circumstances, it is more
advantageous to purchase Class A Shares and incur a front-end sales charge and
annual 12b-1 Plan expenses of up to a maximum of .30% of the average daily net
assets of Class A Shares or to purchase either Class B or Class C Shares and
have the entire initial purchase amount invested in the Fund with the investment
thereafter subject to a CDSC and annual 12b-1 Plan expenses. Class B Shares are
subject to a CDSC if the shares are redeemed within six years of purchase, and
Class C Shares are subject to a CDSC if the shares are redeemed within twelve
months of purchase. Class B and Class C Shares are each subject to annual 12b-1
Plan expenses of up to a maximum of 1% (.25% of which are service fees to be
paid by the Fund to the Distributor, dealers or others for providing personal
service and/or maintaining shareholder accounts) of average daily net assets of
the respective Class. Class B Shares will automatically convert to Class A
Shares at the end of approximately eight years after purchase and, thereafter,
be subject to annual 12b-1 Plan expenses of up to a maximum of .30% of average
daily net assets of such shares. Unlike Class B Shares, Class C Shares do not
convert to another class.
Class A Shares
Purchases of $100,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the accompanying table, and
may include a series of purchases over a 13-month period under a Letter of
Intention signed by the purchaser. See Special Purchase Features - Class A
Shares, below for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
Class A Shares
- -------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge as % of Concession***
Amount of Purchase Offering Amount as % of
Price Invested** Offering Price
- -------------------------------------------------------------------------------
Less than $100,000 4.75% 4.97% 4.00%
$100,000 but under $250,000 3.75 3.88 3.00
$250,000 but under $500,000 2.50 2.59 2.00
$500,000 but under $1,000,000* 2.00 2.02 1.60
* There is no front-end sales charge on purchases of $1 million or more of
Class A Shares but, under certain limited circumstances, a 1% contingent
deferred sales charge may apply upon redemption of such shares. The
contingent deferred sales charge ("Limited CDSC") that may be applicable
arises only in the case of certain net asset value purchases which have
triggered the payment of a dealer's commission.
** Based upon the net asset value per share of Class A Shares as of the end
of the Fund's most recent fiscal year.
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
-21-
<PAGE>
- -------------------------------------------------------------------------------
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 or
current purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by the Fund. Such reduced
front-end sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which
the Distributor may reallow to dealers up to the full amount of the
front-end sales charge shown above. Dealers who receive 90% or more of the
sales charge may be deemed to be underwriters under the Securities Act of
1933.
Certain dealers who enter into an agreement to provide extra training
and information on Delaware Group products and services and who increase sales
of Delaware Group funds may receive an additional 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.
-22-
<PAGE>
Dealer's Commission
For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers through
whom such purchases are effected in accordance with the following schedule:
Dealer's
Commission
-------------
(as a percent-
Amount age 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 Class A Shares of the Fund. Financial advisers also may be
eligible for a dealer's commission in connection with certain purchases made
under a Letter of Intention or pursuant to an investor's Right of Accumulation.
Financial advisers should contact the Distributor concerning the applicability
and calculation of the dealer's commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for
payment of the dealer's commission, unless 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.
Contingent Deferred Sales Charge - Class B Shares
and Class C Shares
Class B and Class C Shares are purchased without the imposition of a
front-end sales charge. Class B Shares redeemed within six years of purchase may
be subject to a CDSC at the rates set forth below and Class C Shares redeemed
within twelve months of purchase may be subject to a CDSC of 1%. CDSC fees are
charged as a percentage of the dollar amount subject to the CDSC. The charge
will be assessed on an amount equal to the lesser of the net asset value at the
time of purchase of the shares being redeemed or the net asset value of those
shares at the time of redemption. No CDSC will be imposed on increases in net
asset value above the initial purchase price. In addition, no CDSC will be
assessed on redemption of shares received through the reinvestment of dividends
or capital gains distributions. See the Prospectus for the Fund Classes under
Redemption and Exchange - Waiver of CDSC - Class B and Class Shares for a list
of the instances in which the CDSC is waived.
The following table sets forth the rates of the CDSC for Class B Shares
of the Fund:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
- ------------------------- --------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
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<PAGE>
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares of the Fund, Class B Shares will still be
subject to the annual 12b-1 Plan expenses of up to 1% of average daily net
assets of those shares. At the end of approximately eight years after purchase,
the investor's Class B Shares will be automatically converted into Class A
Shares of the Fund. See Automatic Conversion of Class B Shares under Buying
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, the Class B Shares
and the Class C Shares of the Fund (the "Plans"). Each Plan permits the Fund to
pay for certain distribution, promotional and related expenses involved in the
marketing of only the Class to which the Plan applies. The Plans do not apply to
the Institutional Class of shares. Such shares are not included in calculating
the Plans' fees, and the Plans are not used to assist in the distribution and
marketing of the Institutional Class shares. Shareholders of the Institutional
Class may not vote on matters affecting the Plans.
The Plans permit the Fund, pursuant to the Distribution Agreement, to pay
out of the assets of the Class A Shares, the Class B Shares and the Class C
Shares monthly fees to the Distributor for its services and expenses in
distributing and promoting sales of shares of such classes. These expenses
include, among other things, preparing and distributing advertisements, sales
literature and prospectuses and reports used for sales purposes, compensating
sales and marketing personnel, and paying distribution and maintenance fees to
securities brokers and dealers who enter into agreements with the Distributor.
The Plan expenses relating to Class B and Class C Shares are also used to pay
the Distributor for advancing the commission costs to dealers with respect to
the initial sale of such shares.
In addition, the Fund may make payments out of the assets of the Class A,
Class B and Class C Shares directly to other unaffiliated parties, such as
banks, who either aid in the distribution of shares of, or provide services to,
such classes.
The maximum aggregate fee payable by the Fund under the Plans, and the
Fund's Distribution Agreement, is on an annual basis, .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 each of the Class B Shares'
and the Class C Shares' average daily net assets for the year. The Fund's Board
of Directors may reduce these amounts at any time.
All of the distribution expenses incurred by the Distributor and others,
such as broker/dealers, in excess of the amount paid on behalf of Class A, Class
B and Class C Shares would be borne by such persons without any reimbursement
from such classes. Subject to seeking best price and execution, the Fund may,
from time to time, buy or sell portfolio securities from or to firms which
receive payments under the Plans.
From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans and the Distribution Agreement, as amended, have 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, by vote cast in person at a meeting duly called for the purpose of
voting on the Plans and such Agreements. Continuation of the Plans and the
Distribution Agreement, as amended, must be approved annually by the Board of
Directors in the same manner as specified above.
-24-
<PAGE>
Each year, the directors must determine whether continuation of the Plans
is in the best interest of shareholders of, respectively, Class A Shares, Class
B Shares and Class C Shares and that there is a reasonable likelihood of the
Plan relating to a Fund Class providing a benefit to that Class. The Plans and
the Distribution Agreement, as amended, may be terminated with respect to a
Class at any time without penalty by a majority of those directors who are not
"interested persons" or by a majority vote of the outstanding voting securities
of the relevant Fund Class. Any amendment materially increasing the percentage
payable under the Plans must likewise be approved by a majority vote of the
outstanding voting securities of the relevant Fund Class, as well as by a
majority vote of those directors who are not "interested persons." With respect
to the Class A Shares Plan, any material increase in the maximum percentage
payable thereunder must also be approved by a majority of the outstanding Class
B Shares. Also, any other material amendment to the Plans must be approved by a
majority vote of the directors including a majority of the noninterested
directors of the Fund having no interest in the Plans. In addition, in order for
the Plans to remain effective, the selection and nomination of directors who are
not "interested persons" of the Fund must be effected by the directors who
themselves are not "interested persons" and who have no direct or indirect
financial interest in the Plans. Persons authorized to make payments under the
Plans must provide written reports at least quarterly to the Board of Directors
for their review.
For the fiscal year ended November 30, 1994, payments from the Class A
Shares pursuant to its Plan amounted to $521,464 and such amount was used for
the following purposes: $472 - Advertising; $9,823 - Annual/Semi-Annual Reports;
$418,973 Broker Trails; $71,987 - Commission to Wholesalers; $458 - Dealer
Service Expenses; $6,027 - Promotional-Other; $4,217 - Promotional- Broker
Meetings; $7,355 - Prospectus Printing; and $2,152 - Wholesaler Expenses. For
the period September 6, 1994 (date of initial public offering) through November
30, 1994, payments from the Class B Shares pursuant to its Plan amounted to
$1,703 and such amount was used for the following purposes: $570 - Broker Sales
Charges; $405 Broker Trails; $88 - Commission to Wholesalers; $620 - Interest on
Broker Sales Charges; $7 Telephone; and $13 - Promotional-Broker Meetings.
The staff of the Securities and Exchange Commission ("SEC") has proposed
amendments to Rule 12b-1 and other related regulations that could impact Rule
12b-1 Distribution Plans. The Fund intends to amend the Plans, if necessary, to
comply with any new rules or regulations the SEC may adopt with respect to Rule
12b-1.
Other Payments to Dealers - Class A, Class B and
Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to .25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
Payments to dealers made in connection with seminars, conferences or
contests relating to the promotion of fund shares may be in an amount up to 100%
of the expenses incurred or awards made.
The Distributor may also pay a portion of the expense of preapproved
dealer advertisements promoting the sale of Delaware Group fund shares.
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Special Purchase Features - Class A Shares
Buying at Net Asset Value
Class A Shares may be reinvested without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the 12-Month
Reinvestment Privilege and the Exchange Privilege.
Current and former officers, directors and employees of the Fund, any
other fund in the Delaware Group, the Manager or any of the Manager's current
affiliates and those 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. Purchases of Class A Shares also may be made at net asset
value by bank employees who provide services in connection with agreements
between the bank and unaffiliated brokers or dealers concerning sales of Class A
Shares. Officers, directors and key employees of institutional clients of the
Manager, or any of its affiliates, may purchase Class A Shares at net asset
value. Moreover, purchases may be effected at net asset value for the benefit of
the clients of brokers, dealers and registered investment advisers affiliated
with a broker or dealer, if such broker, dealer or investment adviser has
entered into an agreement with the Distributor providing specifically for the
purchase of Class A Shares in connection with special investment products, such
as wrap accounts or similar fee based programs. Such purchasers are required to
sign a letter stating that the purchase is for investment only and that the
securities may not be resold except to the issuer. Such purchasers may also be
required to sign or deliver such other documents as the Fund may reasonably
require to establish eligibility for purchase at net asset value. The Fund must
be notified in advance that the trade qualifies for purchase at net asset value.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Delaware
Group account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset value.
Letter of Intention
The reduced front-end sales charges described above with respect to Class
A Shares are also applicable to the aggregate amount of purchases made by any
such purchaser previously enumerated within a 13-month period pursuant to a
written Letter of Intention provided by the Distributor and signed by the
purchaser, and not legally binding on the signer or the Fund, which provides for
the holding in escrow by the Transfer Agent of 5% of the total amount of the
Class A Shares intended to be purchased until such purchase is completed within
the 13-month period. A Letter of Intention may be dated to include shares
purchased up to 90 days prior to the date the Letter is signed. The 13-month
period begins on the date of the earliest purchase. If the intended investment
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is not completed, except as noted below, the purchaser will be asked to pay an
amount equal to the difference between the front-end sales charge on Class A
Shares purchased at the reduced rate and the front-end sales charge otherwise
applicable to the total shares purchased. If such payment is not made within 20
days following the expiration of the 13-month period, the Transfer Agent will
surrender an appropriate number of the escrowed shares for redemption in order
to realize the difference. Such purchasers may include the value (at offering
price at the level designated in their Letter of Intention) of all their shares
of the Fund and of any class of any of the other mutual funds in the Delaware
Group (except shares of any Delaware Group fund which do not carry a front-end
sales charge, CDSC or Limited CDSC, other than shares of Delaware Group Premium
Fund, Inc. beneficially owned in connection with the ownership of variable
insurance products, unless they were acquired through an exchange from a
Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC) previously purchased and still held as of the date of their Letter of
Intention toward the completion of such Letter. For purposes of satisfying an
investor's obligation under a Letter of Intention, Class B Shares and Class C
Shares of the Fund and the corresponding classes of shares of other Delaware
Group funds which offer such shares may be aggregated with Class A Shares of the
Fund and the corresponding class of shares of the other Delaware Group funds.
Employers offering a Delaware Group retirement plan may also complete a
Letter of Intention to obtain a reduced front-end sales charge on investments in
Class A Shares made by the Plan. The aggregate investment level of the Letter of
Intention will be determined and accepted by the Transfer Agent at the point of
plan establishment. The level and any reduction in front-end sales charge will
be based on actual plan participation and the projected investments in Delaware
Group funds that are offered with a front-end sales charge, CDSC or Limited CDSC
for a 13-month period. The Transfer Agent reserves the right to adjust the
signed Letter of Intention based on this acceptance criteria. The 13-month
period will begin on the date this Letter of Intention is accepted by the
Transfer Agent. If actual investments exceed the anticipated level and equal an
amount that would qualify the plan for further discounts, any front-end sales
charges will be automatically adjusted. In the event this Letter of Intention is
not fulfilled within the 13- month period, the plan level will be adjusted
(without completing another Letter of Intention) and the employer will be billed
for the difference in front-end sales charges due, based on the plan's assets
under management at that time. Employers may also include the value (at offering
price at the level designated in their Letter of Intention) of all their shares
intended for purchase that are offered with a front-end sales charge, CDSC or
Limited CDSC of any class. Class B Shares and Class C Shares of the Fund and
other Delaware Group funds which offer corresponding classes of shares may also
be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of the Class A Shares, Class B Shares and/or
Class C Shares of the Fund, as well as shares of any other class of any of the
other Delaware Group funds (except shares of any Delaware Group fund which do
not carry a front-end sales charge, CDSC or Limited CDSC, other than shares of
Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Group fund which carried a front-end sales charge, CDSC
or Limited CDSC).
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 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).
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<PAGE>
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of the Fund, as
well as shares of any other class of any of the other Delaware Group funds which
offer such classes (except shares of any Delaware Group fund which do not carry
a front-end sales charge, CDSC or Limited CDSC, other than shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange from
a Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC). If, for example, any such purchaser has previously purchased and still
holds Class A Shares and/or shares of any other of the classes described in the
previous sentence with a value of $40,000 and subsequently purchases $60,000 at
offering price of additional shares of Class A Shares, the charge applicable to
the $60,000 purchase would currently be 3.75%. For the purpose of this
calculation, the shares presently held shall be valued at the public offering
price that would have been in effect were the shares purchased simultaneously
with the current purchase. Investors should refer to the table of sales charges
for Class A Shares to determine the applicability of the Right of Accumulation
to their particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares (and of the
Institutional Class holding shares which were acquired through an exchange of
one of the other mutual funds in the Delaware Group offered with a front-end
sales charge) who redeem such shares of the Fund have one year from the date of
redemption to reinvest all or part of their redemption proceeds in Class A
Shares of the Fund or in Class A Shares of any of the other funds in the
Delaware Group, subject to applicable eligibility and minimum purchase
requirements, in states where shares of such other funds may be sold, at net
asset value without the payment of a front-end sales charge. This privilege does
not extend to Class A Shares where the redemption of the shares triggered the
payment of a Limited CDSC. Persons investing redemption proceeds from direct
investments in mutual funds in the Delaware Group offered without a front-end
sales charge will be required to pay the applicable sales charge when purchasing
Class A Shares. The reinvestment privilege does not extend to a redemption of
either Class B or Class C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is 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 that are not eligible to purchase shares of the
Institutional Class may also benefit from the reduced front-end sales charges
for investments in Class A Shares set forth in the table on page , based on
total plan assets. If a company has more than one plan investing in the Delaware
Group of funds, then the total amount invested in all plans would be used in
determining the applicable front-end sales charge reduction upon each purchase,
both initial and subsequent, upon notification to the Fund at the time of each
such purchase. Employees participating in such Group Investment Plans may also
combine the investments made in their plan account when determining the
applicable front-end sales charge on purchases to non-retirement Delaware Group
investment accounts if they so notify the Fund in connection with each purchase.
For other retirement plans and special services, see Retirement Plans for the
Fund Classes under Investment Plans.
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<PAGE>
Value 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.
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<PAGE>
INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares of the respective
Fund Class in which an investor has an account (based on the net asset value in
effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of the Institutional Class
are reinvested in the 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 Fund. Such
purchases, which must meet the minimum subsequent purchase requirements set
forth in the Prospectuses and this Part B, are made for Class A Shares at the
public offering price and, for Class B Shares, Class C Shares and the
Institutional Class at the net asset value, at the end of the day of receipt. A
reinvestment plan may be terminated at any time. This plan does not assure a
profit nor protect against depreciation in a declining market.
Reinvestment of Dividends in Other Delaware
Group Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A, Class B
and Class C Shares may automatically reinvest dividends and/or distributions
from the Fund in any of the other mutual funds in the Delaware Group, including
the Fund, in states where their shares may be sold. Such investments will be at
net asset value at the close of business on the reinvestment date without any
front-end sales charge or service fee. Nor will such investments be subject to a
CDSC or Limited CDSC. 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.
Subject to the following limitations, dividends and/or distributions from
other funds in the Delaware Group may be invested in shares of the Fund,
provided an account has been established. Dividends from Class A Shares may not
be directed to Class B Shares or Class C Shares of another fund in the Delaware
Group. Dividends from Class B Shares may only be directed to Class B Shares of
another fund in the Delaware Group that offers such class of shares. Dividends
from Class C Shares may only be directed to Class C Shares of another fund in
the Delaware Group that offers such class of shares. See Class B Funds and Class
C Funds under Buying Shares in the Fund Classes' Prospectus for the funds in the
Delaware Group that are eligible for investment by holders of Fund shares.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for the Fund to
accept for investment in Class A, Class B or Class C Shares, through an agent
bank, preauthorized government or private recurring payments. This method of
investment assures the timely credit to the shareholder's account of payments
such as social security, veterans' pension or compensation benefits, federal
salaries, Railroad Retirement benefits, private payroll checks, dividends, and
disability or pension fund benefits. It also eliminates lost, stolen and delayed
checks.
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<PAGE>
Automatic Investing Plan--Shareholders of Class A, Class B and Class C
Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into their Fund
account. This type of investment will be handled in either of the 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 for Class A Shares and $100 or more for
Class B and Class C Shares. An investor wishing to take advantage of either
service must complete an authorization form. Either service can be discontinued
by the shareholder at any time without penalty by giving written notice.
Payments to the Fund from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
the Fund may liquidate sufficient shares from a shareholder's account to
reimburse the government or the private source. In the event there are
insufficient shares in the shareholder's account, the shareholder is expected to
reimburse the Fund.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer, to
make investments directly to their Fund accounts. The Fund will accept these
investments, such as bank-by-phone, annuity payments and payroll allotments, by
mail directly from the third party. Investors should contact their employers or
financial institutions who in turn should contact the Fund for proper
instructions.
Retirement Plans for the Fund Classes
An investment in the Fund may be suitable
for tax-deferred retirement plans. Among the retirement plans noted below, Class
B Shares are available for investment only by Individual Retirement Accounts,
Simplified Employee Pension Plans, 457 Deferred Compensation Plans and 403(b)(7)
Deferred Compensation Plans. The CDSC may be waived on certain redemptions of
Class B Shares and Class C Shares. See the Prospectus for the Fund Classes under
Redemption and Exchange - Waiver of CDSC - Class B and Class Shares for a list
of the instances in which the CDSC is waived.
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<PAGE>
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000 for retirement plans. Each purchase of Class C Shares
must be in an amount that is less than $1,000,000 for such plans. The maximum
purchase limitations apply only to the initial purchase of shares by the
retirement plan.
Minimum investment limitations generally applicable to other investors do
not apply to retirement plans, other than Individual Retirement Accounts
("IRAs") for which there is a minimum initial purchase of $250, and a minimum
subsequent purchase of $25, regardless of which class is selected. Retirement
plans may be subject to plan establishment fees, annual maintenance fees and/or
other administrative or trustee fees. Fees are based upon the number of
participants in the plan as well as the services selected. Additional
information about fees is included in retirement plan materials. Fees are quoted
upon request. Annual maintenance fees may be shared by Delaware Management Trust
Company, the Transfer Agent, other affiliates of the Manager and others that
provide services to such plans.
Certain shareholder investment services available to non-retirement plan
shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Class. See
Value Fund Institutional Class above. For additional information on any of the
plans and Delaware's retirement services, call the Shareholder Service Center
telephone number.
A maximum purchase limitation of $250,000 with respect to Class B Shares
(if available) and up to, but not including, $1,000,000 with respect to Class C
Shares is imposed on the initial purchase of such shares by a retirement plan.
The maximum purchase limitations apply only to the initial purchase of shares by
the retirement plan. Minimum investment limitations do not apply to retirement
plans other than Individual Retirement Accounts ("IRAs") for which there is a
minimum initial purchase of $250, and a minimum subsequent purchase of $25
regardless of which class is selected. Retirement plans may be subject to plan
establishment fees, annual maintenance fees and/or other administrative or
trustee fees. Fees are based upon the number of participants in the plan as well
as the services selected. Additional information about fees is included in
retirement plan materials. Fees are quoted upon request. Annual maintenance fees
may be shared by Delaware Management Trust Company, the Transfer Agent, other
affiliates of the Manager and others that provide services to such Plans.
Certain shareholder investment services available to non-retirement plan
shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Class. See
Value Fund Institutional Class above. For additional information on any of the
Plans and Delaware's retirement services, call the Shareholder Service Center
telephone number. It is advisable for an investor considering any one of the
retirement plans described below to consult with an attorney, accountant or a
qualified retirement plan consultant. For further details, including
applications for any of these Plans, contact your investment dealer or the
Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the special
application forms required for the plans described below.
Prototype Profit Sharing or Money Purchase
Pension Plans
Prototype plans are available for self-employed individuals, partnerships
and corporations which replace the former Keogh and corporate retirement plans.
These plans contain profit sharing or money purchase pension plan provisions.
Contributions for plans of this type may be invested only in Class A and Class C
Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
by making contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year or elects to be treated
as having no compensation for the year. Investments in each of the Fund Classes
are permissible.
The Tax Reform Act of 1986 (the "Act") restructured, and in some cases
eliminated, the tax deductibility of IRA contributions. Under the Act, the full
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deduction for IRAs ($2,000 for each working spouse and $2,250 for one-income
couples) was retained for all taxpayers who are not covered by an
employer-sponsored retirement plan. Even if a taxpayer (or his or her spouse) is
covered by an employer-sponsored retirement plan, the full deduction is still
available if the taxpayer's adjusted gross income is below $25,000 ($40,000 for
taxpayers filing joint returns). A partial deduction is allowed for married
couples with incomes between $40,000 and $50,000, and for single individuals
with incomes between $25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross income before IRA
deductions exceeds $50,000 ($35,000 for singles) and who are active participants
in an employer-sponsored retirement plan. Taxpayers who are not allowed
deductions on IRA contributions still can make nondeductible IRA contributions
of as much as $2,000 for each working spouse ($2,250 for one-income couples),
and defer taxes on interest or other earnings from the IRAs. Special rules apply
for determining the deductibility of contributions made by married individuals
filing separate returns.
A company or association may establish a Group IRA for employees or
members who want to purchase shares of the Fund. Purchases of $1 million or more
of Class A Shares qualify for purchase at net asset value but may, under certain
circumstances, be subject to a Limited CDSC. See Purchasing Shares 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 and Class C Shares under Alternative Purchase
Arrangements, Contingent Deferred Sales Charge - Class B Shares and Class C
Shares, and Waiver of CDSC - Class B and Class C Shares in the Fund Classes'
Prospectus 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 by an
employer who wishes to sponsor a tax-sheltered retirement program by making
contributions on behalf of all eligible employees. Each of the Fund Classes is
available for investment by a SEP/IRA.
Salary Reduction Simplified Employee Pension
Plan ("SAR/SEP")
Employers with 25 or fewer eligible employees can establish this plan
which permits employer contributions and salary deferral contributions in Class
A Shares and Class C Shares only.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified plans
based on salary deferral contributions. Plan documents are available to enable
employers to establish a plan. An employer may also elect to make profit sharing
contributions and/or matching contributions with investments in only Class A
Shares and Class C Shares or certain other funds in the Delaware Group.
Purchases under the plan may be combined for purposes of computing the reduced
front-end sales charge applicable to Class A Shares as set forth in the table on
page __.
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Deferred Compensation Plan for Public Schools
and Non-Profit Organizations ("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase any of
the Fund Classes in conjunction with such an arrangement. Applicable front-end
sales charges with respect to Class A Shares for such purchases are set forth in
the table on page ___.
Deferred Compensation Plan for State and Local
Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of any of the Fund Classes. Although investors
may use their own plan, there is available a Delaware Group 457 Deferred
Compensation Plan. Interested investors should contact the Distributor or their
investment dealers to obtain further information. Applicable front-end sales
charges for such purchases of Class A Shares are set forth in the table on
page ___.
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DETERMINING OFFERING PRICE AND NET
ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering price
next calculated by the Fund after receipt of the order by the Fund or its agent.
Orders for purchases of Class B Shares, Class C Shares and the Institutional
Class are effected at the net asset value per share next calculated after
receipt of the order by the Fund or its agent. Selling dealers have the
responsibility of transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value per
share plus any applicable sales charges. Offering price and net asset value are
computed as of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is open. The New
York Stock Exchange is scheduled to be open Monday through Friday throughout the
year except for New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. When the New York Stock
Exchange is closed, the Fund will generally be closed, pricing calculations will
not be made and purchase and redemption orders will not be processed.
An example showing how to calculate the net asset value per share and, in
the case of Class A Shares, the offering price per share, is included in the
Fund's financial statements which are incorporated by reference into this Part
B.
The Fund's net asset value per share is computed by adding the value of
all the securities and other assets in the portfolio, deducting any liabilities
and dividing by the number of shares outstanding. Expenses and fees are accrued
daily. In determining the Fund's total net assets, portfolio securities
primarily listed or traded on a national or foreign securities exchange, except
for bonds, are valued at the last sales price on that exchange. Options are
valued at the last reported sales 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 of the Fund will bear, pro-rata, all of the common expenses of
the Fund. The net asset values of all outstanding shares of each Class of the
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Fund represented by the value of shares
of that Class. All income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share of a Class, based on each Class'
percentage in the Fund represented by the value of shares of such Classes,
except that the Institutional Class will not incur any of the expenses under the
Fund's 12b-1 Plans and the Class A, Class B and Class C Shares alone will bear
the 12b-1 Plan expenses payable under their respective Plans. Due to the
specific distribution expenses and other costs that will be allocable to each
Class, the net asset value of each Class of the Fund will vary.
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REDEMPTION AND REPURCHASE
Any shareholder may require the Fund to redeem shares by sending a
written request, signed by the record owner or owners exactly as the shares are
registered, to the Fund, 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. The Fund does not issue
certificates for Class A Shares or Institutional Class shares, unless a
shareholder specifically requests them. The Fund does not issue certificates for
Class B Shares or Class C Shares. If stock certificates have been issued for
shares being redeemed, they must accompany the written request. For redemptions
of $50,000 or less paid to the shareholder at the address of record, the Fund
requires a request signed by all owners of the shares or the investment dealer
of record, but does not require signature guarantees. When the redemption is for
more than $50,000, or if payment is made to someone else or to another address,
signatures of all record owners are required and a signature guarantee may be
required. Each signature guarantee must be supplied by an eligible guarantor
institution. The Fund reserves the right to reject a signature guarantee
supplied by an eligible institution based on its creditworthiness. The Fund may
request further documentation from corporations, retirement plans, executors,
administrators, trustees or guardians.
In addition to redemption of shares by the Fund, the Distributor, acting
as agent of the Fund, offers to repurchase Fund shares from broker/dealers
acting on behalf of shareholders. The redemption or repurchase price, which may
be more or less than the shareholder's cost, is the net asset value per share
next determined after receipt of the request in good order by the Fund or its
agent, subject to any applicable CDSC or Limited CDSC. This is computed and
effective at the time the offering price and net asset value are determined. See
Determining Offering Price and Net Asset Value. The Fund and the Distributor end
their business day at 5 p.m., Eastern time. This offer is discretionary and may
be completely withdrawn without further notice by the Distributor.
Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to any applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Purchases of Class A Shares Made at Net Asset Value under Redemption
and Exchange in the Prospectus for the Fund Classes. Class B Shares are subject
to a CDSC of: (i) 4% if shares are redeemed within two years of purchase; (ii)
3% if shares are redeemed during the third or fourth year following purchase;
(iii) 2% if shares are redeemed during the fifth year following purchase; and
(iv) 1% if shares are redeemed during the sixth year following purchase. Class C
Shares are subject to a CDSC of 1% if shares are redeemed within twelve months
following purchase. See Contingent Deferred Sales Charge Class B Shares and
Class C Shares under Buying Shares in the Prospectus for the Fund Classes.
Except for the applicable CDSC or Limited CDSC and, with respect to the
expedited payment by wire described below, for which there is currently a $7.50
bank wiring cost, neither the Fund nor the Distributor charges a fee for
redemptions or repurchases, but such fees could be charged at any time in the
future.
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.
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If a shareholder who recently purchased shares by check seeks to redeem
all or a portion of those shares in a written request, the Fund will honor the
redemption request but will not mail the proceeds until it is reasonably
satisfied of the collection of the investment check. This potential delay can be
avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund will automatically redeem from the shareholder's account the shares
purchased by the check plus any dividends earned thereon. Shareholders may be
responsible for any losses to the Fund or to the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by the Fund of securities owned by it is not reasonably
practical, or it is not reasonably practical for the Fund fairly to value its
assets, or in the event that the Securities and Exchange Commission has provided
for such suspension for the protection of shareholders, the Fund may postpone
payment or suspend the right of redemption or repurchase. In such case, the
shareholder may withdraw the request for redemption or leave it standing as a
request for redemption at the net asset value next determined after the
suspension has been terminated.
Payment for shares redeemed or repurchased may be made 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 shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of the Fund during any
90-day period for any one shareholder.
The value of the Fund's investments is subject to changing market prices.
Thus, a shareholder reselling shares to the Fund may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
Small Accounts
Before the Fund involuntarily redeems shares from an account that, under
the circumstances listed in the relevant Prospectus, has remained below the
minimum amounts required by the Fund's Prospectuses and sends the proceeds to
the shareholder, the shareholder will be notified in writing that the value of
the shares in the account is less than the minimum required and will be allowed
60 days from the date of notice to make an additional investment to meet the
required minimum. See The Conditions of Your Purchase under Buying Shares in the
Fund's Prospectuses. Any redemption in an inactive account established with a
minimum investment may trigger mandatory redemption. No CDSC or Limited CDSC
will apply to the redemptions described in this paragraph.
Effective November 29, 1995, the minimum initial investment in Class A
Shares was increased from $250 to $1,000. Class A accounts that were established
before November 29, 1995 and maintain a balance in excess of $250 will not
presently be subject to the $9 quarterly service fee that may be assessed on
accounts with balances below the stated minimum, nor subject to involuntary
redemption.
* * *
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.
Expedited Telephone Redemptions
Shareholders of the Fund Classes or their
investment dealers of record wishing to redeem any amount of shares of $50,000
or less for which certificates have not been issued may call the Fund at
800-523-1918 (in Philadelphia, 215-988-1241) 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 later than seven days, after the receipt of the redemption
request. This option is only available to individual, joint and individual
fiduciary-type accounts.
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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 later than seven days, from the date of the
telephone request. This procedure will take longer than the Payment by Wire
option (1 above) because of the extra time necessary for the mailing and
clearing of the check after the bank receives it.
Redemption Requirements: In order to change the name of the bank and the
account number it will be necessary to send a written request to the Fund and a
signature guarantee may be required. Each signature guarantee must be supplied
by an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness.
To reduce the shareholder's risk of attempted fraudulent use of the
telephone redemption procedure, payment will be made only to the bank account
designated on the authorization form.
The Fund will not honor telephone redemptions for shares recently
purchased by check unless it is reasonably satisfied that the purchase check has
cleared.
If expedited payment under these procedures could adversely affect the
Fund, the Fund may take up to seven days to pay the shareholder.
Neither the Fund nor the Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by
shareholders of the Fund Classes are generally tape recorded. A written
confirmation will be provided for all purchase, exchange and redemption
transactions initiated by telephone.
Systematic Withdrawal Plan
Shareholders of Class A Shares, Class B Shares and Class C Shares who own
or purchase $5,000 or more of shares at the offering price, or net asset value,
as applicable, for which certificates have not been issued may establish a
Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or quarterly
withdrawals of $75 or more, although the Fund does not recommend any specific
amount of withdrawal. This $5,000 minimum does not apply for the Fund's
prototype retirement plans. Shares purchased with the initial investment and
through reinvestment of cash dividends and realized securities profits
distributions will be credited to the shareholder's account and sufficient full
and fractional shares will be redeemed at the net asset value calculated on the
third business day preceding the mailing date.
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Checks are dated either the 1st or 15th of the month, as selected by the
shareholder, (unless such date falls on a holiday or a weekend) and are normally
mailed within two business days. Both ordinary income dividends and realized
securities profits distributions will be automatically reinvested in additional
shares of the Class at net asset value. This plan is not recommended for all
investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital, and the share
balance may in time be depleted, particularly in a declining market.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
Withdrawals under this plan 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 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 of Class A Shares pursuant to a Systematic Withdrawal Plan may be
subject to a Limited CDSC if the purchase was made at net asset value and a
dealer's commission has been paid on that purchase. Redemptions of Class B
Shares or Class C Shares pursuant to a Systematic Withdrawal Plan may be subject
to a CDSC, unless the annual amount selected to be withdrawn is less than 12% of
the account balance on the date that the Systematic Withdrawal Plan was
established. See Waiver of CDSC - Class B and Class C Shares and Waiver of
Limited CDSC - Class A Shares under Redemption and Exchange in the Prospectus
for the Fund Classes.
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
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.
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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.
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DISTRIBUTIONS AND TAXES
The Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, the Fund
will not be subject to federal income tax on net investment income and net
realized capital gains which are distributed to shareholders.
Each Class of shares of the Fund will share proportionately in the
investment income and expenses of the Fund, except that Class A Shares, Class B
Shares and Class C Shares alone will incur distribution fees under their
respective 12b-1 Plans.
The Fund intends to pay out substantially all of its net investment
income and net realized capital gains. Such payments, if any, will be made once
a year during the first quarter of the following fiscal year. 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 Fund 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.
Any check in payment of dividends or other distributions which cannot be
delivered by the Post Office or which remains uncashed for a period of more than
one year may be reinvested in the shareholder's account at the then-current net
asset value and the dividend option may be changed from cash to reinvest. The
Fund may deduct from a shareholder's account the costs of the Fund's effort to
locate a shareholder if a shareholder's mail is returned by the Post Office or
the Fund is otherwise unable to locate the shareholder or verify the
shareholder's mailing address. These costs may include a percentage of the
account when a search company charges a percentage fee in exchange for their
location services. During the fiscal year ended November 30, 1994, a dividend of
$0.035 and $0.080 per share of the Class A Shares and the Institutional Class,
respectively, was paid from net investment income and a distribution of $0.170
per share of the Class A Shares and the Institutional Class was paid from
realized securities profits. Dividends of $0.160, $0.150 and $0.215 per share
were paid from the net investment income of the Class A Shares, the Class B
Shares and the Institutional Class, respectively, and a capital gain of $0.250
per share of each such Class was paid from realized securities profits on
January 5, 1995 to shareholders of record as of December 27, 1994. 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.
A portion of the Fund's dividends may qualify for the dividends-received
deduction for corporations provided in the federal income tax law. The portion
of dividends paid by the Fund that so qualifies will be designated each year in
a notice to the Fund's shareholders, and cannot exceed the gross amount of
dividends received by the Fund from domestic (U.S.) corporations that would have
qualified for the dividends-received deduction in the hands of the Fund if the
Fund was a regular corporation. The availability of the dividends-received
deduction is subject to certain holding period and debt financing restrictions
imposed under the Code on the corporation claiming the deduction. For the fiscal
year ended November 30, 1994, 53% of the Fund's dividends from net investment
income was eligible for this deduction.
Shareholders will be notified annually by the Fund as to the federal
income tax status of dividends and distributions.
Distributions may also be subject to state and local taxes;
shareholders are advised to consult with their tax advisers in this regard.
Shares of the Fund will be exempt from Pennsylvania county personal property
taxes.
See also Other Tax Requirements under Accounting and Tax Issues in this
Part B.
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INVESTMENT MANAGEMENT AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to the Fund, subject to the supervision
and direction of 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 November 30,
1994 were approximately $9,237,192,000. Investment advisory services are also
provided to institutional accounts with assets on November 30, 1994 of
approximately $15,544,258,000.
The Investment Management Agreement for the Fund is dated April 3, 1995,
and was approved by shareholders on March 29, 1995.
The Agreement has an initial term of two years and may be renewed each
year only so long as such renewal and continuance are specifically approved at
least annually by the Board of Directors or by vote of a majority of the
outstanding voting securities of the Fund, and only if the terms and the renewal
thereof have been approved by vote of a majority of the directors of the Fund
who are not parties thereto or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval. The
Agreement is terminable without penalty on 60 days' notice by the directors of
the Fund or by the Manager. The Agreement will terminate automatically in the
event of its assignment.
The compensation paid by the Fund for investment management services is
equal to 1/16 of 1% per month (the equivalent of 3/4 of 1% per year) of the
Fund's average daily net assets, less all directors' fees paid to the
unaffiliated directors by the Fund. This fee is higher than that paid by many
other funds; it may be higher or lower than that paid by funds with comparative
investment objectives. On November 30, 1994, the total net assets of the Fund
were $187,338,333. Under the general supervision of the Board of Directors, the
Manager makes all investment decisions which are implemented by the Fund. The
Manager pays the salaries of all directors, officers and employees who are
affiliated with both the Manager and the Fund. Investment management fees paid
by the Fund for the fiscal years ended November 30, 1992, 1993 and 1994 amounted
to $181,460, $724,137, and $1,341,214, respectively.
Except for those expenses borne by the Manager under the Investment
Management Agreement and the Distributor under the Distribution Agreement, the
Fund is responsible for all of its own expenses. Among others, these include the
Fund's proportionate share of rent and certain other administrative expenses;
the investment management fees; transfer and dividend disbursing agent fees and
costs; custodian expenses; federal and state securities registration fees; proxy
costs; and the costs of preparing prospectuses and reports sent to shareholders.
The ratio of expenses to average daily net assets of Class A Shares for the
fiscal year ended November 30, 1994 was 1.46%, which reflects the impact of its
12b-1 Plan. The ratio of expenses to average daily net assets for the
Institutional Class was 1.16% for the fiscal year ended November 30, 1994. Based
on expenses incurred by Class A Shares during the Fund's fiscal year ended
November 30, 1994, the ratio of expenses to average daily net assets of Class B
Shares is expected to be 2.16% for the fiscal year ending November 30, 1995. The
ratio of expenses to average daily net assets of Class B Shares reflects the
impact of its 12b-1 Plan. The Fund anticipates that the ratio of expenses to
average daily net assets of Class C Shares will be identical to that of the
Class B Shares.
By California regulation, the Manager is required to waive certain fees
and reimburse the Fund for certain expenses to the extent that the Fund's annual
operating expenses, exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, exceed 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 November 30,
1994, no such reimbursement was necessary or paid.
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Distribution and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor of Fund shares under
a Distribution Agreement dated April 3, 1995, as amended on November 29, 1995.
The Distributor is an affiliate of the Manager and bears all of the costs of
promotion and distribution, except for payments by the Fund on behalf of Class A
Shares, Class B Shares and Class C Shares under their respective 12b-1 Plans.
Prior to January 3, 1995, Delaware Distributors, Inc. ("DDI") served as the
national distributor of the Fund's shares. On that date Delaware Distributors,
L.P., a newly formed limited partnership, succeeded to the business of DDI. All
officers and employees of DDI became officers and employees of Delaware
Distributors, L.P. DDI is the corporate general partner of Delaware
Distributors, L.P. and both DDI and Delaware Distributors, L.P. are indirect,
wholly-owned subsidiaries of Delaware Management Holdings, Inc.
The Transfer Agent, Delaware Service Company, Inc., another affiliate of
the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as the
Fund's shareholder servicing, dividend disbursing and transfer agent pursuant to
a Shareholders Services Agreement dated June 29, 1988. The Transfer Agent is
also an indirect, wholly-owned subsidiary of Delaware Management Holdings, Inc.
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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, 1995, the Fund's
officers and directors owned less than 1% of the outstanding shares of Class A
and Class B and approximately 5.54% of the outstanding shares of the
Institutional Class.
As of October 31, 1995, the Fund believes the following accounts held
5% or more of the outstanding shares of the Class A Shares, Institutional Class
and Class B Shares: Merrill, Lynch, Pierce, Fenner & Smith Inc., Mutual Fund
Operations, P.O. Box 41621, Jacksonville, FL 32203 held of record for the
benefit of others 806,233 shares (10.20%) of the outstanding shares of the Class
A Shares. Delaware Management Company, Inc., Employee Profit Sharing Trust, 1818
Market Street, Philadelphia, PA 19103 held 72,698 shares (26.07%); Windermere
Retirement Plan, 5424 Sand Point Way N.E., Seattle, WA 98105 held 69,857 shares
(25.00%); Bank of New York, Cust. Equity League Pension Trust Fund, Amivest
Corp. Discretionary Investment Manager, 52 Williams Street 5th Fl., New York,
NY, 10005 held 56,626 shares (20.27%); Bank of New York, Cust. Local 144,
Hospital Welfare Fund, Acct. 71751, Amivest Discretionary Acct., One Wall
Street, 7th Fl., New York, NY 10286 held 17,686 shares (6.33%); and Bank of New
York, Cust. Annuity Fund of Local One IATSE, Discretionary Investment Manager
717103, One Wall Street, 7th Fl., New York, NY, 10286 held 14,785 shares (5.29%)
of the outstanding shares of the Institutional Class. Shares held by Delaware
Management Company, Inc., Employee Profit Sharing Trust are beneficially owned
by the participants in the plan. Merrill, Lynch, Pierce, Fenner & Smith Inc.,
Mutual Fund Operations, Attention Book Entry, 4800 Deer Lake Drive East, 3rd
Fl., Jacksonville, FL 32246 held of record for the benefit of others 18,986
shares (8.42%) of the outstanding shares of the Class B Shares.
DMH Corp., Delaware Management Company, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware International Holdings Ltd., Founders
Holdings, Inc., Delaware International Advisers Ltd. and Delaware Investment
Counselors, Inc. are direct or indirect, wholly-owned subsidiaries of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly-owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. In connection with the merger, a new Investment Management Agreement
between the Fund and the Manager was executed following shareholder approval.
DMH and the Manager are now wholly-owned subsidiaries, and subject to the
ultimate control, of Lincoln National. Lincoln National, with headquarters in
Fort Wayne, Indiana, is a diversified organization with operations in many
aspects of the financial services industry, including insurance and investment
management.
Directors and principal officers of the Fund are noted below along with
their ages and their business experience for the past five years. Unless
otherwise noted, the address of each officer and director is One Commerce
Square, Philadelphia, PA 19103.
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<PAGE>
*Wayne A. Stork (58)
Chairman, President, Chief Executive Officer, Director and/or Trustee of
the Fund, 15 other funds in the Delaware Group (which excludes
Delaware Pooled Trust, Inc) and Delaware Management Holdings, Inc.
Chairman and Director of Delaware Pooled Trust, Inc. and Delaware
Investment Counselors, Inc.
Chairman, Chief Executive Officer, Chief Investment Officer and Director
of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of DMH Corp., Delaware
International Advisers Ltd., Delaware International Holdings Ltd.
and Founders Holdings, Inc.
Director of Delaware Distributors, Inc. and Delaware Service Company,
Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.
Winthrop S. Jessup (50)
Executive Vice President of the Fund and 15 other funds in the Delaware
Group (which excludes
Delaware Pooled Trust, Inc.) and Delaware Management Holdings, Inc.
President and Chief Executive Officer of Delaware Pooled Trust, Inc.
President and Director of Delaware Investment Counselors, Inc.
Executive Vice President and Director of DMH Corp., Delaware Management
Company, Inc.,
Delaware International Holdings Ltd. and Founders Holdings, Inc.
Vice Chairman and Director of Delaware Distributors, Inc.
Vice Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc., Delaware International
Advisers Ltd. and Delaware Management Trust Company.
During the past five years, Mr. Jessup has served in various executive
capacities at different times within the Delaware organization.
Richard G. Unruh, Jr. (56)
Executive Vice President of the Fund and each of the other 16 funds in
the Delaware Group. Executive Vice President and Director of Delaware
Management Company, Inc.
Senior Vice President of Delaware Management Holdings, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.
Walter P. Babich (68)
Director and/or Trustee of the Fund and each of the other 16 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.
___________
*Director affiliated with the investment manager of the Fund and considered an
"interested person" as defined in the Investment Company Act of 1940.
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<PAGE>
Anthony D. Knerr (56)
Director and/or Trustee of the Fund and each of the other 16 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.
Mr. Knerr founded The Publishing Group, Inc. in 1988.
Ann R. Leven (55)
Director and/or Trustee of the Fund and each of the other 16 funds in
the Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of
the Smithsonian Institution, Washington, DC, and from 1975 to 1994,
she was Adjunct Professor of Columbia Business School.
W. Thacher Longstreth (75)
Director and/or Trustee of the Fund and each of the other 16 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.
President, MLW, Associates.
Director, Tasty Baking Company.
Director, Healthcare Services Group.
Charles E. Peck (69)
Director and/or Trustee of the Fund and each of the other 16 funds in
the Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Secretary, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer of
The Ryland Group, Inc., Columbia, MD.
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<PAGE>
David K. Downes (55)
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer of the Fund, each of the other 16 funds in the Delaware
Group and Delaware Management Company, Inc.
Chairman 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 of Delaware
Distributors, L.P.
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer and Director of
Delaware Service Company, Inc.
Chief Financial Officer and Director of Delaware International
Holdings Ltd.
Senior Vice President/Chief Financial Officer/Treasurer of Delaware
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. (48)
Senior Vice President and Secretary of the Fund, each of the other
16 funds in the Delaware Group, Delaware Management Holdings, Inc.,
Delaware Distributors, L.P. and Delaware Investment Counselors, Inc.
Executive Vice President, Secretary and Director of Delaware Management
Trust Company.
Senior Vice President, Secretary and Director of DMH Corp., Delaware
Management Company, Inc.,
Delaware Distributors, Inc. and Delaware Service Company, Inc.
Senior Vice President, Secretary and Director of Founders Holdings, Inc.
Secretary and Director of Delaware International Holdings Ltd.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served in various
capacities at different times within the Delaware organization.
David C. Dalrymple (37)
Vice President/Senior Portfolio Manager of the Fund and seven other
equity funds in the Delaware Group.
Before joining the Delaware Group in 1991, Mr. Dalrymple was an
Assistant Portfolio Manager for Lord Abbett and Company, New York,
N.Y. from 1986 to 1991.
Joseph H. Hastings (45)
Vice President/Corporate Controller of the Fund, each of the other 16
funds in the Delaware Group, Delaware Management Holdings, Inc., DMH
Corp., Delaware Management Company, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc.,
Delaware Investment Counselors, Inc. and Founders Holdings, Inc.
Executive Vice President/Treasurer/Chief Financial Officer of Delaware
Management Trust Company.
Assistant Treasurer of Founders CBO Corporation.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings was Chief
Financial Officer for Prudential Residential Services, L.P., New
York, NY from 1989 to 1992. Prior to that, Mr. Hastings served as
Controller and Treasurer for Fine Homes International, L.P.,
Stamford, CT from 1987 to 1989.
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<PAGE>
Michael P. Bishof (33)
Vice President/Treasurer of the Fund, each of the other 16 funds in the
Delaware Group, Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Distributors, L.P., Delaware Service
Company, Inc., and Founders Holdings, Inc.
Assistant Treasurer of Founders CBO Corporation.
Before joining the Delaware Group in 1995, Mr. Bishof was a Vice
President for Bankers Trust, New York, NY from 1994 to 1995, a Vice
President for CS First Boston Investment Management, New York, NY
from 1993 to 1994 and an Assistant Vice President for Equitable
Capital Management Corporation, New York, NY from 1987 to 1993.
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<PAGE>
The following is a compensation table listing for each director entitled
to receive compensation, the aggregate compensation received from the Fund and
the total compensation received from all Delaware Group funds for the fiscal
year ended November 30, 1994 and an estimate of annual benefits to be received
upon retirement under the Delaware Group Retirement Plan for Directors/Trustees
as of November 30, 1994.
<TABLE>
<CAPTION>
Pension or
Retirement Estimated Total
Benefits Annual Compensation
Aggregate Accrued Benefits from all 17
Compensation as Part of Upon Delaware
Name from Fund Fund Expenses Retirement* Group Funds
<S> <C> <C> <C> <C>
W. Thacher Longstreth $1,606.04 None $18,100 $39,619.35
Ann R. Leven $1,748.13 None $18,100 $44,590.02
Walter P. Babich $1,719.70 None $18,100 $43,595.90
John J. Connolly, Ed.D. $1,606.04 None $18,100 $39,619.35
Anthony D. Knerr $1,834.25 None $18,100 $43,962.29
Charles E. Peck $1,448.04 None $18,100 $36,483.40
John H. Durham $1,290.04 None $18,100 $33,813.40
</TABLE>
* Under the terms of the Delaware Group Retirement Plan for Directors/
Trustees, each disinterested director who, at the time of his or her
retirement from the Board, has attained the age of 70 and served on the
Board for at least five continuous years, is entitled to receive payments
from each fund in the Delaware Group for a period equal to the lesser of the
number of years that such person served as a director or the remainder of
such person's life. The amount of such payments will be equal, on an annual
basis, to the amount of the annual retainer that is paid to directors of
each fund at the time of such person's retirement. If an eligible director
retired as of November 30, 1994, he or she would be entitled to annual
payments totaling $18,100, in the aggregate, from all of the funds in the
Delaware Group, based on the number of funds in the Delaware Group as of
that date.
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<PAGE>
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the Classes and for
shareholders of classes of other funds in the Delaware Group are set forth in
the relevant prospectuses for such classes. The following supplements that
information. The Fund may modify, terminate or suspend the exchange privilege
upon 60 days' notice to shareholders.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses. A shareholder requesting an exchange will be sent a current prospectus
and an authorization form for any of the other mutual funds in the Delaware
Group. Exchange instructions must be signed by the record owner(s) exactly as
the shares are registered.
An exchange constitutes, for tax purposes, the sale of one fund 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, 215-988-1241) or, in the case
of shareholders of the Institutional Class, their Client Services Representative
at 800-828-5052, to effect an exchange. The shareholder's current Fund account
number must be identified, as well as the registration of the account, the share
or dollar amount to be exchanged and the fund into which the exchange is to be
made. Requests received on any day after the time the offering price and net
asset value are determined will be processed the following day. See Determining
Offering Price and Net Asset Value. Any new account established through the
exchange will automatically carry the same registration, shareholder information
and dividend option as the account from which the shares were exchanged. The
exchange requirements of the fund into which the exchange is being made, such as
sales charges, eligibility and investment minimums, must be met. (See the
prospectus of the fund desired or inquire by calling the Transfer Agent or, as
relevant, your Client Services Representative.) Certain funds are not available
for Retirement Plans.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds in the Delaware Group. Telephone exchanges may be subject to limitations
as to amounts or frequency. The Transfer Agent and the Fund reserve the right to
record exchange instructions received by telephone and to reject exchange
requests at any time in the future.
As described in the Fund's Prospectuses, neither the Fund nor the
Transfer Agent is responsible for any shareholder loss incurred in acting upon
written or telephone instructions for redemption or exchange of Fund shares
which are reasonably believed to be genuine.
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<PAGE>
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Fund 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. The Fund reserves the right to
temporarily or permanently terminate the exchange privilege or reject any
specific purchase order for any person whose transactions seem to follow a
timing pattern who: (i) makes an exchange request out of the Fund within two
weeks of an earlier exchange request out of the Fund, or (ii) makes more than
two exchanges out of the Fund per calendar quarter, or (iii) exchanges shares
equal in value to a least $5 million, or more than 1/4 of 1% of the Fund's net
assets. Accounts under common ownership or control, including accounts
administered so as to redeem or purchase shares based upon certain predetermined
market indicators, will be aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing Timing Agreements may only
execute exchanges between the following eight Delaware Group funds: (1) Decatur
Income Fund, (2) Decatur Total Return Fund, (3) Delaware Fund, (4) Limited-Term
Government Fund, (5) Tax-Free USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund, and (8) Tax-Free Pennsylvania Fund. No other Delaware Group
funds 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. The Fund reserves the right to apply these same
restrictions to the account(s) of any person whose transactions seem to follow a
timing pattern (as described above).
The Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if the
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to the Fund and therefore may be
refused.
The Fund will terminate, except as noted above, all exchange 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.
Following is a summary of the investment objectives of the other Delaware
Group funds:
Delaware Fund seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. Devon Fund
seeks current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks the Manager
believes have the potential for above average dividend increases over time.
Trend Fund seeks long-term growth by investing in common stock issued by
emerging growth companies exhibiting strong capital appreciation potential.
DelCap Fund seeks long-term capital growth by investing in common stocks
and securities convertible into common stocks of companies that have a
demonstrated history of growth and have the potential to support continued
growth.
Decatur Income Fund seeks the highest possible current income by
investing primarily in common stocks that provide the potential for income and
capital appreciation without undue risk to principal. Decatur Total Return Fund
seeks long-term growth by investing primarily in securities that provide the
potential for income and capital appreciation without undue risk to principal.
Delchester Fund seeks as high a current income as possible by investing
principally in corporate bonds, and also in U.S. Government securities and
commercial paper.
U.S. Government Fund seeks high current income by investing primarily in
long-term debt obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
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<PAGE>
Limited-Term Government Fund seeks high, stable income by investing
primarily in a portfolio of short- and intermediate-term securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
instruments secured by such securities. U.S. Government Money Fund seeks maximum
current income with preservation of principal and maintenance of liquidity by
investing only in short-term securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or instrumentalities, and
repurchase agreements collateralized by such securities, while maintaining a
stable net asset value.
Delaware Cash Reserve seeks the highest level of income consistent with
the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
Tax-Free USA Fund seeks high current income exempt from federal income
tax by investing in municipal bonds of geographically-diverse issuers. Tax-Free
Insured Fund invests in these same types of securities but with an emphasis on
municipal bonds protected by insurance guaranteeing principal and interest are
paid when due. Tax-Free USA Intermediate Fund seeks a high level of current
interest income exempt from federal income tax, consistent with the preservation
of capital by investing primarily in municipal bonds.
Tax-Free Money Fund seeks high current income, exempt from federal income
tax, by investing in short-term municipal obligations, while maintaining a
stable net asset value.
Tax-Free Pennsylvania Fund seeks a high level of current interest income
exempt from federal and, to the extent possible, certain Pennsylvania state and
local taxes, consistent with the preservation of capital.
International Equity Fund seeks to achieve long-term growth without undue
risk to principal by investing primarily in international securities that
provide the potential for capital appreciation and income. Global Bond Fund
seeks to achieve current income consistent with the preservation of principal by
investing primarily in global fixed income securities that may also provide the
potential for capital appreciation. Global Assets Fund seeks to achieve
long-term total return by investing in global securities which will provide
higher current income than a portfolio comprised exclusively of equity
securities, along with the potential for capital growth.
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
-53-
<PAGE>
appreciation by investing in small- to mid-cap common stocks whose market values
appear low relative to their underlying value or future earnings and growth
potential. Emphasis will also be placed on securities of companies that may be
temporarily out of favor or whose value is not yet recognized by the market.
Emerging Growth Series seeks long-term capital appreciation by investing
primarily in small-cap common stocks and convertible securities of emerging and
other growth-oriented companies. These securities will have been judged to be
responsive to changes in the 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., also manages the other funds in
the Delaware Group. The Manager, through a separate division, also manages
private investment accounts. While investment decisions for the Fund are made
independently from those of the other funds and accounts, they may make
investment decisions at the same time.
Access persons and advisory persons of the Delaware Group of funds, as
those terms are defined in Rule 17j-1 under the Investment Company Act of 1940,
who provide services to the Manager, Delaware International Advisers Ltd. or
their affiliates, are permitted to engage in personal securities transactions
subject to the exceptions set forth in Rule 17j-1 and the following general
restrictions and procedures: (1) certain blackout periods apply to personal
securities transactions of those persons; (2) transactions must receive advance
clearance and must be completed on the same day as the clearance is received;
(3) certain persons are prohibited from investing in initial public offerings of
securities and other restrictions apply to investments in private placements of
securities; (4) opening positions may only be closed-out at a profit after a
60-day holding period has elapsed; and (5) the Compliance Officer must be
informed periodically of all securities transactions and duplicate copies of
brokerage confirmations and account statements must be supplied to the
Compliance Officer.
The Distributor acts as national distributor for the Fund and for the
other mutual funds in the Delaware Group. As previously described, prior to
January 3, 1995, DDI served as the national distributor for the Fund. In its
capacity as such, DDI received net commissions from the Fund on behalf of Class
A Shares after reallowances to dealers, as follows:
Fiscal Total Amount Amounts Net
Year of Underwriting Reallowed Commission
Ending Commission to Dealers to DDI
- ------ --------------- ----------- -----------
11/30/94 $1,707,818 $1,480,648 $227,170
11/30/93 3,274,016 2,912,033 361,983
11/30/92 936,081 854,815 81,266
During the fiscal year ended November 30, 1994, in its capacity as the
Fund's national distributor, DDI received Limited CDSC payments in the amount of
$12,607 with respect to Class A Shares.
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<PAGE>
For the period September 6, 1994 (date of initial public offering)
through November 30, 1994, DDI also received CDSC payments in the amount of $995
with respect to Class B Shares.
Effective as of January 3, 1995, all such payments described above have
been paid to the Distributor.
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for the Fund and for the other
mutual funds in the Delaware Group. The Transfer Agent is paid a fee by the Fund
for providing these services consisting of an annual per account charge of $5.50
plus transaction charges for particular services according to a schedule.
Compensation is fixed each year and approved by the Board of Directors,
including a majority of the 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, registered
pursuant to Rule 24f-2 under the 1940 Act, has been passed upon for the Fund by
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 Fund offered only one class of shares, the class currently designated
the Class A Shares. Beginning November 9, 1992, the Fund began offering the
Institutional Class, beginning September 6, 1994, the Fund began offering the
Class B Shares, and beginning as of the date of this Part B the Fund began
offering the Class C Shares. Each Class represents a proportionate interest in
the assets of the Fund, and each has the same voting and other rights and
preferences as the other classes of the Fund, except that shares of the
Institutional Class may not vote on any matter affecting the Fund Classes' Plans
under Rule 12b-1. Similarly, as a general matter, shareholders of Class A
Shares, Class B Shares and Class C Shares may vote only on matters affecting the
12b-1 Plan that relates to the class of shares that they hold. However, Class B
Shares may vote on a proposal to increase materially the fees to be paid by the
Fund under the Plan relating to Class A Shares. General expenses of the Fund
will be allocated on a pro-rata basis to the classes according to asset size,
except that expenses of the Plans of Class A, Class B and Class C Shares will be
allocated solely to those classes. The Board of Directors has allocated one
hundred million shares to Class A Shares, one hundred million shares to Class B
Shares, fifty million shares to Class C Shares and fifty million shares to the
Institutional Class. Shares have equal voting rights, no preemptive rights, are
fully transferable and, when issued, are fully paid and nonassessable.
Prior to September 6, 1994, the Value Fund A Class was known as the
Value Fund class and the Value Fund Institutional Class was known as the Value
Fund (Institutional) class.
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<PAGE>
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
Commercial Paper
Excerpts from Standard & Poor's Corporation's ("S&P") description of
its two highest commercial paper ratings: A-1--judged to be the highest
investment grade category possessing the highest relative strength;
A-2--investment grade category possessing less relative strength than the
highest rating.
Excerpts from Moody's Investors Service, Inc.'s ("Moody's") description
of its two highest commercial paper ratings: P-1--the highest grade possessing
greatest relative strength; P-2--second highest grade possessing less relative
strength than the highest grade.
Bonds
Excerpts from Moody's description of its 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; Ba--judged to
have speculative elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B--generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small; Caa--are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca--represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings; C--the lowest
rated class of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Excerpts from S&P's description of its 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; BB, B, CCC, CC--regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; C--reserved
for income bonds on which no interest is being paid; D- -in default, and payment
of interest and/or repayment of principal is in arrears.
-56-
<PAGE>
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. Special rules apply for determining
the deductibility of contributions made by married individuals filing separate
returns.
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.
-57-
<PAGE>
Even if your IRA contribution is no longer deductible, the benefits of
saving on a tax-deferred basis can be substantial. The following tables
illustrate the benefits of tax-deferred versus taxable compounding. Each
reflects a constant 10% rate of return, compounded annually, with the
reinvestment of all proceeds. The tables do not take into account any sales
charges or fees. Of course, earnings accumulated in your IRA will be subject to
tax upon withdrawal. If you choose a mutual fund with a fluctuating net asset
value, like the Fund, your bottom line at retirement could be lower--it could
also be much higher.
$2,000 Invested Annually Assuming a 10% Annualized Return
15% Tax Bracket Single - $0-$22,750
--------------- Joint - $0-$38,000
<TABLE>
<CAPTION>
How Much You
End of Cumulative How Much You Have With Full
Year Investment Amount Have Without IRA IRA Deduction
<S> <C> <C> <C>
1 $ 2,000 $ 1,844 $ 2,200
5 10,000 10,929 13,431
10 20,000 27,363 35,062
15 30,000 52,074 69,899
20 40,000 89,231 126,005
25 50,000 145,103 216,364
30 60,000 229,114 361,887
35 70,000 355,438 596,254
40 80,000 545,386 973,704
</TABLE>
[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
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C>
1 $ 2,000 $ 1,544 $ 1,584 $ 2,200
5 10,000 8,913 9,670 13,431
10 20,000 21,531 25,245 35,062
15 30,000 39,394 50,328 69,899
20 40,000 64,683 90,724 126,005
25 50,000 100,485 155,782 216,364
30 60,000 151,171 260,559 361,887
35 70,000 222,927 429,303 596,254
40 80,000 324,512 701,067 973,704
</TABLE>
[Without IRA--investment of $1,440 ($2,000 less 28%) earning 7.2% (10% less
28%)] [With IRA--No Deduction--investment of $1,440 ($2,000 less 28%) earning
10%]
-58-
<PAGE>
31% Tax Bracket Single - $55,101-$115,000
---------------- Joint - $91,851-$140,000
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C>
1 $ 2,000 $ 1,475 $ 1,518 $ 2,200
5 10,000 8,467 9,268 13,431
10 20,000 20,286 24,193 35,062
15 30,000 36,787 48,231 69,899
20 40,000 59,821 86,943 126,005
25 50,000 91,978 149,291 216,364
30 60,000 136,868 249,702 361,887
35 70,000 199,536 411,415 596,254
40 80,000 287,021 671,855 973,704
</TABLE>
[Without IRA--investment of $1,380 ($2,000 less 31%) earning 6.9% (10% less
31%)] [With IRA--No Deduction--investment of $1,380 ($2,000 less 31%) earning
10%]
36% Tax Bracket* Single - $115,001-$250,000
--------------- Joint - $140,001-$250,000
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C>
1 $ 2,000 $ 1,362 $ 1,408 $ 2,200
5 10,000 7,739 8,596 13,431
10 20,000 18,292 22,440 35,062
15 30,000 32,683 44,736 69,899
20 40,000 52,308 80,643 126,005
25 50,000 79,069 138,473 216,364
30 60,000 115,562 231,608 361,887
35 70,000 165,327 381,602 596,254
40 80,000 233,190 623,170 973,704
</TABLE>
[Without IRA--investment of $1,280 ($2,000 less 36%) earning 6.4% (10% less
36%)] [With IRA--No Deduction--investment of $1,280 ($2,000 less 36%) earning
10%]
-59-
<PAGE>
39.6% Tax Bracket* Single - over $250,000
----------------- Joint - over $250,000
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C>
1 $ 2,000 $ 1,281 $ 1,329 $ 2,200
5 10,000 7,227 8,112 13,431
10 20,000 16,916 21,178 35,062
15 30,000 29,907 42,219 69,899
20 40,000 47,324 76,107 126,005
25 50,000 70,677 130,684 216,364
30 60,000 101,986 218,580 361,887
35 70,000 143,965 360,137 596,254
40 80,000 200,249 588,117 973,704
</TABLE>
[Without IRA--investment of $1,208 ($2,000 less 39.6%) earning 6.04% (10% less
39.6%)] [With IRA--No Deduction--investment of $1,208 ($2,000 less 39.6%)
earning 10%]
* For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate.
In addition, a 10% surtax (not applicable to capital gains) applies to
certain high-income taxpayers. It is computed by applying a 39.6% rate to
taxable income in excess of $250,000. The above tables do not reflect the
personal exemption phaseout nor the limitations of itemized deductions that
may apply.
-60-
<PAGE>
$2,000 SINGLE INVESTMENT AT A RETURN OF 10% COMPOUNDED ANNUALLY
<TABLE>
<CAPTION>
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 $ 3,595 $ 3,719 $ 3,898 $ 4,008 $ 4,522 $ 5,187
15 4,820 5,072 5,441 5,675 6,799 8,354
20 6,463 6,916 7,596 8,034 10,224 13,455
30 11,618 12,861 14,803 16,102 23,117 34,899
40 20,884 23,916 28,849 32,272 52,266 90,519
</TABLE>
$2,000 INVESTED ANNUALLY AT A RETURN OF 10% COMPOUNDED ANNUALLY
<TABLE>
<CAPTION>
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 $ 28,006 $ 28,581 $ 29,400 $ 29,904 $ 32,192 $ 35,062
15 49,514 51,067 53,314 54,714 61,264 69,899
20 78,351 81,731 86,697 89,838 104,978 126,005
30 168,852 180,566 198,360 209,960 269,546 361,887
40 331,537 364,360 415,973 450,711 641,631 973,704
</TABLE>
* For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate.
In addition, a 10% surtax (not applicable to capital gains) applies to
certain high-income taxpayers. It is computed by applying a 39.6% rate to
taxable income in excess of $250,000. The above tables do not reflect the
personal exemption phaseout nor the limitations of itemized deductions that
may apply.
-61-
<PAGE>
THE VALUE OF STARTING YOUR IRA EARLY
The following illustrates how much more you would have contributing
$2,000 each January--the earliest opportunity--compared to contributing on April
15th of the following year--the latest, for each tax year.
After 5 years $3,528 more
10 years $6,113
20 years $17,228
30 years $47,295
Compounded returns for the longest period of time is the key. The above
illustration assumes a 10% rate of return and the reinvestment of all proceeds.
And it pays to shop around. If you get just 2% more per year, it can
make a big difference when you retire. A constant 8% versus 10% return, both
compounded annually, illustrates the point. This chart is based on a yearly
investment of $2,000 on January 1. After 30 years the difference can mean as
much as 50% more!
8% Return 10% Return
10 years $31,291 $35,062
20 years 98,846 126,005
30 years 244,692 361,887
The statistical exhibits above are for illustration purposes only and
do not reflect the actual performance for the Fund, either in the past or in the
future.
-62-
<PAGE>
APPENDIX C
The Company Life Cycle
Traditional business theory contends that a typical company progresses
through basically four stages of development, keyed closely to a firm's sales.
1. Emerging Growth--a period of experimentation in which the company
builds awareness of a new product or firm.
2. Accelerated Development--a period of rapid growth with potentially
high profitability and acceptance of the product.
3. Maturing Phase--a period of diminished real growth due to dependence
on replacement or sustained product demand.
4. Cyclical Stage--a period in which a company faces a potential
saturation of demand for its product. At this point, a firm either diversifies
or becomes obsolete.
Hypothetical Corporate Life Cycle
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 state where sales show more definitive highs
and lows.
The above chart illustrates the path traditionally followed by
companies that successfully survive the growth sequence.
-63-
<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the
independent auditors for the Fund and, in its capacity as such, audits the
financial statements contained in the Fund's Annual Report. The Fund's Statement
of Net Assets, Statement of Operations, Statement of Changes in Net Assets and
Notes to Financial Statements, as well as the report of Ernst & Young LLP,
independent auditors, for the fiscal year ended November 30, 1994, are included
in the Fund's Annual Report to shareholders. The financial statements, the notes
relating thereto and the report of Ernst & Young LLP, listed above are
incorporated by reference from the Annual Report into this Part B. Unaudited
financial statements and the notes relating thereto for the six-month period
ended May 31, 1995 are also incorporated by reference from the Fund's
Semi-Annual Report into this Part B.
-64-
<PAGE>
The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, tax-free funds, money market funds,
global and international funds and closed-end equity funds give investors the
ability to create a portfolio that fits their personal financial goals. For more
information, shareholders of the Fund Classes should contact their financial
adviser or call Delaware Group at 800-523-4640, in Philadelphia call
215-988-1333 and shareholders of the Institutional Class should contact Delaware
Group at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
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
- ---------------------------------------------------------
VALUE FUND
- ---------------------------------------------------------
A CLASS
- ---------------------------------------------------------
B CLASS
- ---------------------------------------------------------
C CLASS
- ---------------------------------------------------------
INSTITUTIONAL CLASS
=========================================================
CLASSES OF DELAWARE GROUP
VALUE FUND, INC.
- ---------------------------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
- ---------------------------------------------------------
November 29, 1995
DELAWARE
GROUP
=========
