Supplement Dated August 29, 1995
to the Current Statements of Additional Information
of the Following Delaware Group Funds
Delaware Group Delaware Fund, Inc., Delaware Group Trend
Fund, Inc., Delaware Group Value Fund, Inc., Delaware Group
Decatur Fund, Inc., Delaware Group DelCap Fund, Inc.,
Delaware Group Global & International Funds, Inc., Delaware
Group Delchester High-Yield Bond Fund, Inc., Delaware Group
Government Fund, Inc., Delaware Group Tax-Free Fund, Inc.,
Delaware Group Limited-Term Government Funds, Inc., Delaware
Group Tax-Free Money Fund, Inc., Delaware Group Cash Reserve,
Inc., DMC Tax-Free Income Trust - Pennsylvania
The exchange policy of the Fund as stated under
"Redemption and Exchange" is amended as follows with regard
to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on
changing economic and market conditions ("Timing Accounts"):
Right To Refuse Timing Accounts
Effective immediately, the Fund reserves the right to
refuse any new Timing Arrangements as well as any new
purchases (as opposed to exchanges) in Delaware Group funds
from Timing Firms.
Restrictions on Timed Exchanges
Effective 60 days from this notice, Timing Accounts
operating under existing Timing Agreements may only execute
exchanges between the following six Delaware Group funds: 1)
Decatur Income Fund, 2) Decatur Total Return Fund, 3)
Delaware Fund, 4) Limited-Term Government Fund, 5) Tax-Free
USA Fund and 6) Delaware Cash Reserve. No other Delaware
Group funds will be available for Timed Exchanges. Assets
redeemed or exchanged out of Timing Accounts in Delaware
Group funds not listed above may not be reinvested back into
that Timing Account.
In addition, 60 days hence, the Fund will terminate,
except as noted above, all exchanges privileges, including
telephone and written redemption privileges, previously made
available to Timing Firms. At such time, only shareholders
and their authorized brokers of record will be permitted to
make exchanges or redemptions.
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PART B--STATEMENT OF ADDITIONAL INFORMATION
JANUARY 30, 1995
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DELAWARE GROUP VALUE FUND, INC.
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1818 Market Street
Philadelphia, PA 19103
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For more information about the
Value Fund Institutional Class:
800-828-5052
For Prospectus and Performance
of the Value Fund A Class and
the Value Fund B Class:
Nationwide 800-523-4640
Philadelphia 988-1333
Information on Existing Accounts
of the Value Fund A Class and
the Value Fund B Class:
(SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Philadelphia 988-1241
Dealer Services:
(BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Philadelphia 988-1050
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TABLE OF CONTENTS
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Cover Page
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Investment Policies and Portfolio Techniques
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Accounting and Tax Issues
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Performance Information
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Trading Practices and Brokerage
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Purchasing Shares
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Investment Plans
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Determining Offering Price and
Net Asset Value
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Redemption and Repurchase
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Distributions and Taxes
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Investment Management Agreement
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Officers and Directors
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Exchange Privilege
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General Information
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Appendix A -- Description of Ratings
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Appendix B -- IRA Information
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Appendix C
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Financial Statements
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Delaware Group Value Fund, Inc. (the "Fund") is a
professionally-managed mutual fund of the series type which
currently offers a single portfolio. The Fund offers three
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")
(together, the "Fund Classes") and Value Fund Institutional
Class (the "Institutional Class"). Class B 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 of the Fund may be purchased at the public
offering price, which is equal to the next determined net
asset value per share, plus a front-end sales charge. The
Class A Shares are subject to a maximum front-end sales
charge of 5.75% and annual 12b-1 Plan expenses. The Class B
Shares are subject to a contingent deferred sales charge
("CDSC") which may be imposed on redemptions made within six
years of purchase and 12b-1 Plan expenses which are higher
than those to which Class A Shares are subject and are
assessed against the Class B Shares for no longer than
approximately eight years after purchase. See Automatic
Conversion of Class B Shares in the Fund Classes' Prospectus.
All references to "shares" in this Statement of Additional
Information ("Part B" of the registration statement) refer to
all Classes of shares of the Fund, except where noted.
This Part B supplements the information contained in the
current Prospectuses for the Fund Classes and the
Institutional Class dated January 30, 1995, as may be amended
from time to time. It should be read in conjunction with the
respective Class' Prospectus. Part B is not itself a
prospectus but is, in its entirety, incorporated by reference
into each Class' Prospectus. A Prospectus relating to the
Fund Classes and a Prospectus relating to the Institutional
Class may be obtained by writing or calling your investment
dealer or by contacting the Fund's national distributor,
Delaware Distributors, L.P. (the "Distributor"), 1818 Market
Street, Philadelphia, PA 19103.
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.
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.
Although it is not a matter of fundamental policy, the
Fund has also made a commitment 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.
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.
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.
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. 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.
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" bonds
entails certain risks, including the risk of loss of
principal, which may be greater than the risks involved in
investment grade bonds, and which should be considered by
investors contemplating an investment in the Fund. Such
bonds are sometimes issued by companies whose earnings at the
time of issuance are less than the projected debt service on
the high-yield bonds. The risks include the following:
A. Youth and Volatility of the High-Yield Market--
Although the market for high-yield bonds 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 bonds, 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 bonds, 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 bonds
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 bonds.
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.
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.
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 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.
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.
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.
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:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order of
$1,000 from which the maximum front-end
sales charge with respect to Class A
Shares, if any, is deducted;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical
$1,000 purchase at the end of the period
after the deduction of the applicable
CDSC, if any, with respect to Class B
Shares.
Aggregate total return is calculated in a similar
manner, except that the results are not annualized. Each
calculation assumes the maximum front-end sales charge, if
any, is deducted from the initial $1,000 investment at the
time it is made with respect to Class A Shares, and that all
distributions are reinvested at net asset value, and, with
respect to the Class B Shares, includes the CDSC that would
be applicable upon complete redemption of such shares. 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 the 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 November 30, 1994 and for the life of the Fund,
computed as described above. The average annual total return
for the Class A Shares at offer reflects the maximum front-
end sales charges paid on the purchase of shares. The
average annual total return for Class A Shares at net asset
value (NAV) does not reflect the payment of the maximum
front-end sales charge of 5.75%. Securities prices
fluctuated during the periods covered and past results should
not be considered as representative of future performance.
Pursuant to applicable regulation, total return shown for the
Institutional Class for the periods prior to the commencement
of operations of such Class is calculated by taking the
performance of the Class A Shares and adjusting it to reflect
the elimination of all sales charges. However, for those
periods no adjustment has been made to eliminate the impact
of 12b-1 payments, and performance would have been affected
had such an adjustment been made.
Average Annual Total Return
Class A Class A Institu-
Shares* Shares tional
(at Offer) (at NAV) Class**
1 year ended
11/30/94 (8.35%) (2.78%) (2.51%)
3 years ended
11/30/94 10.16% 12.35% 12.58%
5 years ended
11/30/94 10.07% 11.38% 11.52%
Period
6/24/87* to
11/30/94 12.48% 13.37% 13.47%
* Date of initial public offering of Class A Shares.
** Date of initial public offering was November 9, 1992.
The performance of the Class B Shares, as shown below,
is the aggregate total return quotation for the period
September 6, 1994 (date of initial public offering) through
November 30, 1994. The aggregate total return for Class B
Shares (Including Deferred Sales Charge) reflects the
deduction of the applicable CDSC that would be paid if the
shares were redeemed at November 30, 1994. The aggregate
total return for Class B Shares (Excluding Deferred Sales
Charge) assumes the shares were not redeemed at November 30,
1994 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*
through 11/30/94 (8.64%) (4.83%)
* Date of initial public offering of Class B Shares; total
return for this short of a time period may not be
representative of longer-term results.
From time to time, the 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
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 also reflect the
maximum sales charge, if any, paid for the illustrated
investment amount, but not any income taxes payable by
shareholders on the reinvested distributions included in the
calculation. Because securities prices fluctuate, past
performance should not be considered as a representation of
the results which may be realized from an investment in the
Fund in the future.
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 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 in the Fund. Any
indices used are not managed for any investment goal.
CDA Technologies, Inc., Lipper Analytical Services,
Inc. and Morningstar, Inc. are performance
evaluation services that maintain statistical
performance databases, as reported by a diverse
universe of independently-managed mutual funds.
Ibbotson Associates, Inc. is a consulting firm that
provides a variety of historical data including
total return, capital appreciation and income on
the stock market as well as other investment asset
classes, and inflation. With their permission,
this information will be used primarily for
comparative purposes and to illustrate general
financial planning principles.
Interactive Data Corporation is a statistical
access service that maintains a database of various
international industry indicators, such as
historical and current price/earning information,
individual equity and fixed income price and return
information.
Compustat Industrial Databases, a service of
Standard & Poor's, may also be used in preparing
performance and historical stock and bond market
exhibits. This firm maintains fundamental
databases that provide financial, statistical and
market information covering more than 7,000
industrial and non-industrial companies.
Russell Indexes is an investment analysis service
that provides both current and historical stock
performance information, focusing on the business
fundamentals of those firms issuing the security.
Salomon Brothers and Lehman Brothers are
statistical research firms that maintain databases
of international market, bond market, corporate and
government-issued securities of various maturities.
This information, as well as unmanaged indices
compiled and maintained by these firms, will be
used in preparing comparative illustrations.
The performance of each Class, as shown below, reflects
maximum sales charges, if any, paid on the purchase or
redemption of shares, as applicable, but not any income taxes
payable by shareholders on the reinvested distributions
included in the calculations. The net asset value of a Class
fluctuates so shares, when redeemed, may be worth more or
less than the original investment, and a Class' results
should not be considered as representative of future
performance.
The following table is an example, for purposes of
illustration only, of cumulative total return performance for
the Class A Shares and the Institutional Class for the three-
, six- and nine-month periods ended November 30, 1994, for
the one-, three- and five-year periods ended November 30,
1994, and for the life of the Fund. Cumulative total return
for the Class B Shares for the period September 6, 1994 (date
of initial public offering) through November 30, 1994 is also
provided below. 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.
Cumulative Total Return
Dow
Class A Institu- Standard Jones NASDAQ
Shares tional & Poor's Indus- Com-
(at Offer) Class* 500 trial posite
3 months
ended
11/30/94 (10.39%) (4.86%) (3.89%) (3.80%) (2.00%)
6 months
ended
11/30/94 (9.89%) (4.25%) 0.84% 0.87% 4.16%
9 months
ended
11/30/94 (12.89%) (7.36%) (0.78%) (0.39%) (5.32%)
1 year
ended
11/30/94 (8.35%) (2.51%) 1.03% 4.28% (0.54%)
3 years
ended
11/30/94 33.68% 42.69% 31.75% 40.71% 43.22%
5 years
ended
11/30/94 61.56% 72.45% 52.86% 61.65% 64.51%
Period
6/24/87**
to
11/30/94 139.77% 155.96% 89.21% 98.43% 76.68%
Class B Class B
Shares Shares
(Including (Excluding Dow
Deferred Deferred Standard Jones NASDAQ
Sales Sales & Poor's Indus- Com-
Charge) Charge) 500 trial posite
Period
9/6/94***
through
11/30/94 (8.64%) (4.83%) (3.89%) (3.80%) (2.00%)
* Date of initial public offering was November 9, 1992.
Pursuant to applicable regulation, total return shown
for the Institutional Class for the periods prior to the
commencement of operations of such Class is calculated
by taking the performance of the Class A Shares and
adjusting it to reflect the elimination of all sales
charges. However, for those periods no adjustment has
been made to eliminate the impact of 12b-1 payments, and
performance would have been affected had such an
adjustment been made.
** Date of initial public offering of the Class A Shares.
***Date of initial public offering of the Class B Shares;
total return for this short of a time period may not be
representative of longer-term results.
Because every investor's goals and risk threshold are
different, the Distributor, as distributor for the Fund and
other mutual funds in the Delaware Group, will provide
general information about investment alternatives and
scenarios that will allow investors to assess their personal
goals. This information will include general material about
investing as well as materials reinforcing various industry-
accepted principles of prudent and responsible personal
financial planning. One typical way of addressing these
issues is to compare an individual's goals and the length of
time the individual has to attain these goals to his or her
risk threshold. In addition, the Distributor will provide
information that discusses the Manager's overriding
investment philosophy and how that philosophy impacts the
Fund's, and other Delaware Group funds', investment
disciplines employed in meeting their objectives. The
Distributor may also from time to time cite general or
specific information about the institutional clients of the
Manager, including the number of such clients serviced by the
Manager.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for
additional Fund shares, your investment is given yet another
opportunity to grow. It's called the Power of Compounding
and the following chart illustrates just how powerful it can
be.
COMPOUNDED RETURNS
Results of various assumed fixed rates of return on a
$10,000 investment compounded monthly for 10 years:
9% Rate 11% Rate 13% Rate
of Return of Return of Return
Dec. '85 $10,938 $11,157 $11,380
Dec. '86 11,964 12,448 12,951
Dec. '87 13,086 13,889 14,739
Dec. '88 14,314 15,496 16,773
Dec. '89 15,657 17,289 19,089
Dec. '90 17,126 19,289 21,723
Dec. '91 18,732 21,522 24,722
Dec. '92 20,489 24,012 28,134
Dec. '93 22,411 26,791 32,017
Dec. '94 24,514 29,891 36,437
These figures are calculated assuming a fixed constant
investment return and assume no fluctuation in the value of
principal. These figures do not reflect payment of
applicable taxes, are not intended to be a projection of
investment results and do not reflect the actual performance
results of any of the Classes.
TRADING PRACTICES AND BROKERAGE
The Fund selects brokers or dealers to execute
transactions for the purchase or sale of portfolio securities
on the basis of its judgment of their professional capability
to provide the service. The primary consideration is to have
brokers or dealers execute transactions at best price and
execution. Best price and execution refers to many factors,
including the price paid or received for a security, the
commission charged, the promptness and reliability of
execution, the confidentiality and placement accorded the
order and other factors affecting the overall benefit
obtained by the account on the transaction. The Fund pays
reasonably competitive brokerage commission rates based upon
the professional knowledge of its trading department as to
rates paid and charged for similar transactions throughout
the securities industry. In some instances, the Fund pays a
minimal share transaction cost when the transaction presents
no difficulty. A number of trades are made on a net basis
where the Fund either buys the securities directly from the
dealer or sells them to the dealer. In these instances,
there is no direct commission charged but there is a spread
(the difference between the buy and sell price) which is the
equivalent of a commission.
During the fiscal years ended 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.
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 Internal Revenue Code and the
Investment Company Act of 1940, when changes in circumstances
or conditions make such a move desirable in light of the
investment objective. The 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.
PURCHASING SHARES
The Distributor serves as the national distributor for
the Fund's three classes of shares - the Class A Shares, the
Class B Shares and the Institutional Class, and has agreed to
use its best efforts to sell shares of the Fund. See the
Prospectuses for 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
for initial investments with respect to the Class A Shares is
$250 and with respect to the Class B Shares is $1,000. For
any subsequent investment, the investment minimum is $25 with
respect to the Class A Shares and $100 with respect to the
Class B Shares. Class B Shares are also subject to a maximum
purchase limitation of $250,000. The Fund will therefore
reject any order for purchase of more than $250,000 of Class
B Shares. (See Investment Plans for minimums applicable to
each of the Fund's master Retirement Plans.) There are no
minimum purchase requirements for the Institutional Class,
but certain eligibility requirements must be satisfied.
Selling dealers have the responsibility of transmitting
orders promptly. The Fund reserves the right to reject any
order for the purchase of its shares if in the opinion of
management such rejection is in the Fund's best interest.
Certificates representing shares purchased are not
ordinarily issued unless a shareholder submits a specific
request. Certificates are not issued in the case of the
Class B Shares. However, purchases not involving the
issuance of certificates are confirmed to the investor and
credited to the shareholder's account on the books maintained
by Delaware Service Company, Inc. (the "Transfer Agent").
The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued.
An investor that is permitted to obtain a certificate may
receive a certificate representing shares purchased by
sending a letter to the Transfer Agent requesting the
certificate. No charge is made for any certificate issued.
Investors who hold certificates representing any of their
shares may only redeem those shares by written request. The
investor's certificate(s) must accompany such request.
The NASD has adopted amendments to its Rules of Fair
Practice relating to investment company sales charges. The
Fund and the Distributor intend to operate in compliance with
these rules.
Class A Shares are purchased at the offering price which
reflects a maximum front-end sales charge of 5.75%; however,
lower front-end sales charges apply for larger purchases.
See the 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 12b-1
Plan expenses which are higher than those to which Class A
Shares are subject and are assessed against the Class B
Shares for no longer than approximately eight years after
purchase. See Automatic Conversion of Class B Shares in the
Fund Classes' Prospectus, and Determining Offering Price and
Net Asset Value and Plans Under Rule 12b-1 for the Fund
Classes in this Part B.
Institutional Class shares are purchased at the net
asset value per share without the imposition of a front-end
or contingent deferred sales charge or 12b-1 Plan expenses.
Institutional Class shares, Class A Shares and Class B Shares
represent a proportionate interest in the Fund's assets and
will receive a proportionate interest in the Fund's income,
before application, as to the Class A and Class B Shares, of
any expenses under the Fund's 12b-1 Plans.
Alternative Purchase Arrangements
The alternative purchase arrangements of the Class A and
Class B Shares permit investors to choose the method of
purchasing shares that is most beneficial given the amount of
their purchase, the length of time they expect to hold their
shares and other relevant circumstances. Investors should
determine whether, under their particular circumstances, it
is more advantageous to purchase the Class A Shares and incur
a front-end sales charge and annual 12b-1 Plan expenses of up
to a maximum of .30% of the average daily net assets of the
Class A Shares or to purchase the Class B Shares and have the
entire initial purchase price invested in the Fund with the
investment thereafter subject to a CDSC if shares are
redeemed within six years of purchase and annual 12b-1 Plan
expenses of 1% (.25% of which are service fees to be paid by
the Fund to the Distributor, dealers or others for providing
personal service and/or maintaining shareholder accounts) of
the average daily net assets of the Class B Shares for no
longer than approximately eight years after purchase.
Class A Shares
Purchases of $100,000 or more of the Class A Shares at
the offering price carry reduced front-end sales charges as
shown in the accompanying table, and may include a series of
purchases over a 13-month period under a Letter of Intention
signed by a purchaser. See Special Purchase Features - Class
A Shares for more information on ways in which investors can
avail themselves of reduced front-end sales charges and other
purchase features.
Class A Shares
-------------------------------------------------------------
Front-End Sales Charge Dealer's
as % of Concession**
Amount of Purchase Offering Amount as % of
Price Invested Offering
Price
-------------------------------------------------------------
Less than $100,000 5.75% 6.10% 5.00%
$100,000 but under $250,000 4.75 4.99 4.00
$250,000 but under $500,000 3.50 3.63 3.00
$500,000 but under $1,000,000* 3.00 3.09 2.60
* There is no front-end sales charge on purchases of $1
million or more but, under certain limited
circumstances, a 1% contingent deferred sales charge may
apply. The contingent deferred sales charge ("Limited
CDSC") that may be applicable to purchases of Class A
Shares arises only in the case of certain net asset
value purchases which have triggered the payment of a
dealer's commission.
-------------------------------------------------------------
The Fund must be notified when a sale takes place which
would qualify for the reduced front-end sales charge on
the basis of previous purchases and current purchases.
The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by the Fund.
Such reduced front-end sales charges are not
retroactive.
From time to time, upon written notice to all of its
dealers, the Distributor may hold special promotions for
specified periods during which the Distributor may
reallow dealers up to the full front-end sales charge
shown above. Dealers who receive 90% or more of the
sales charge may be deemed to be underwriters under the
Securities Act of 1933.
** Financial institutions or their affiliated brokers may
receive an agency transaction fee in the percentages set
forth above.
-------------------------------------------------------------
Certain dealers who enter into an agreement to provide
extra training and information on Delaware Group products and
services and to increase sales of Delaware Group funds may
receive an additional concession of up to .15% of the
offering price in connection with sales of Class A Shares.
Such dealers must meet certain requirements in terms of
organization and distribution capabilities and their ability
to increase sales. The Distributor should be contacted for
further information on these requirements as well as the
basis and circumstances upon which the additional concession
will be paid. Participating dealers may be deemed to have
additional responsibilities under the securities laws.
Dealer's Commission - Class A Shares
For initial purchases of Class A Shares of $1,000,000 or
more made on or after June 1, 1993, a dealer's commission may
be paid by the Distributor to financial advisers through whom
such purchases are effected in accordance with the following
schedule:
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
the Class A Shares of the Fund. Financial advisers should
contact the Distributor concerning the applicability and
calculation of the dealer's commission in the case of
combined purchases. Financial advisers also may be eligible
for a dealer's commission in connection with certain
purchases made under a Letter of Intention or pursuant to an
investor's Right of Accumulation. The Distributor also
should be consulted concerning the availability of and
program for these payments.
An exchange from other Delaware Group funds will not
qualify for payment of the dealer's commission, unless such
exchange is from a Delaware Group fund with assets as to
which a dealer's commission or similar payment has not been
previously paid. The schedule and program for payment of the
dealer's commission are subject to change or termination at
any time by the Distributor in its discretion.
Class B Shares
Class B Shares are purchased without the imposition of a
front-end sales charge at the time of purchase. Class B
Shares redeemed within six years of purchase may be subject
to a CDSC at the rates set forth below, charged as a
percentage of the dollar amount subject thereto. The charge
will be assessed on an amount equal to the lesser of the net
asset value at the time of purchase of the shares being
redeemed or the net asset value of the shares at the time of
redemption. Accordingly, no CDSC will be imposed on
increases in net asset value above the initial purchase
price. In addition, no CDSC will be assessed on redemption
of shares received upon reinvestment of dividends or capital
gains. See the Prospectus for the Fund Classes under Buying
Shares - Contingent Deferred Sales Charge for a list of the
instances in which the CDSC is waived.
The following table sets forth the rates of the CDSC for
the Class B Shares of the Fund:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until
converted automatically into Class A Shares of the Series,
the Class B Shares will continue to be subject to annual 12b-
1 Plan expenses of 1% of average daily net assets
representing such shares. At the end of no longer than
approximately eight years after purchase, the investor's
Class B Shares will be automatically converted into Class A
Shares of the Fund. See Automatic Conversion of Class B
Shares in the Fund Classes' Prospectus. Such conversion will
constitute a tax-free exchange for federal income tax
purposes. See Taxes in the Prospectus for the Fund Classes.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the Investment Company Act
of 1940, the Fund has adopted a separate plan for each of the
Class A Shares and the Class B Shares of the Fund (the
"Plans"). The Plan relating to the Class A Shares permits
the Fund to pay for certain distribution, promotional and
related expenses involved in the marketing of only the Class
A Shares. Similarly, the Plan relating to the Class B Shares
permits the Fund to pay for certain distribution, promotional
and related expenses involved in the marketing of only the
Class B Shares. The Plans do not apply to the Institutional
Class of shares. Such shares are not included in calculating
the Plans' fees, and the Plans are not used to assist in the
distribution and marketing of the Institutional Class shares.
Shareholders of the Institutional Class may not vote on
matters affecting the Plans.
The Plans permit the Fund, pursuant to an Amended and
Restated Distribution Agreement, to pay out of the assets of
the Class A Shares and Class B Shares monthly fees to the
Distributor for its services and expenses in distributing and
promoting sales of shares of such classes. These expenses
include, among other things, preparing and distributing
advertisements, sales literature and prospectuses and reports
used for sales purposes, compensating sales and marketing
personnel, and paying distribution and maintenance fees to
securities brokers and dealers who enter into agreements with
the Distributor. The 12b-1 Plan expenses relating to the
Class B Shares are also used to pay the Distributor for
advancing the commission costs to dealers with respect to the
initial sale of such shares.
In addition, the Fund may make payments out of the
assets of the Class A Shares and the Class B Shares directly
to other unaffiliated parties, such as banks, who either aid
in the distribution of shares of the Fund Classes or provide
services to such classes.
The maximum aggregate fee payable by the Fund under the
Plans, and the agreements relating to distribution, is on an
annual basis .30% of the Class A Shares' average daily net
assets for the year, and 1% (.25% of which are service fees
to be paid to the Distributor, dealers and others for
providing personal service and/or maintaining shareholder
accounts) of the Class B Shares' average daily net assets for
the year. The Fund's Board of Directors may reduce these
amounts at any time.
All of the distribution expenses incurred by the
Distributor and others, such as broker/dealers, in excess of
the amount paid on behalf of the Class A and Class B Shares
will be borne by such persons without any reimbursement from
such classes. Subject to seeking best price and execution,
the Fund may, from time to time, buy or sell portfolio
securities from or to firms which receive payments under the
Plans.
From time to time, the Distributor may pay additional
amounts from its own resources to dealers for aid in
distribution or for aid in providing administrative services
to shareholders.
The Plans, the Amended and Restated Distribution
Agreement and the form of dealer's and services agreements
relating thereto have all been approved by the Board of
Directors of the Fund, including a majority of the directors
who are not "interested persons" (as defined in the
Investment Company Act of 1940) of the Fund and who have no
direct or indirect financial interest in the Plans or any
related agreements, by vote cast in person at a meeting duly
called for the purpose of voting on the Plans and such
Agreements. Continuation of the Plans, the Amended and
Restated Distribution Agreement and the form of dealer's and
services agreements must be approved annually by the Board of
Directors in the same manner as specified above.
Each year, the directors must determine whether
continuation of the Plans is in the best interest of
shareholders of, respectively, the Class A Shares and the
Class B Shares and that there is a reasonable likelihood of
the Plan relating to a Fund Class providing a benefit to that
Class. The Plans, the Amended and Restated Distribution
Agreement and the dealer's and services agreements with any
broker/dealers or others relating to a Fund Class may be
terminated at any time without penalty by a majority of those
directors who are not "interested persons" or by a majority
vote of the outstanding voting securities of the relevant
Fund Class. Any amendment materially increasing the
percentage payable under the Plans must likewise be approved
by a majority vote of the outstanding voting securities of
the relevant Fund Class, as well as by a majority vote of
those directors who are not "interested persons." Also, any
other material amendment to the Plans must be approved by a
majority vote of the directors including a majority of the
noninterested directors of the Fund having no interest in the
Plans. In addition, in order for the Plans to remain
effective, the selection and nomination of directors who are
not "interested persons" of the Fund must be effected by the
directors who themselves are not "interested persons" and who
have no direct or indirect financial interest in the Plans.
Persons authorized to make payments under the Plans must
provide written reports at least quarterly to the Board of
Directors for their review.
For the fiscal year ended November 30, 1994, payments
from the Class A Shares pursuant to its Plan amounted to
$521,464 and such amount was broken down as follows: $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 broken down as
follows: $570 - Broker Sales Charges; $405 - Broker Trails;
$88 - Commission to Wholesalers; $620 - Interest on Broker
Sales Charges; $7 - Telephone; and $13 - Promotional-Broker
Meetings.
Other Payments to Dealers - Class A and Class B Shares
From time to time, at the discretion of the Distributor,
all registered broker/dealers whose aggregate sales of Fund
Classes exceed certain limits as set by the Distributor, may
receive from the Distributor an additional payment of up to
.25% of the dollar amount of such sales. The Distributor may
also provide additional promotional incentives or payments to
dealers that sell shares of the Delaware Group of funds. In
some instances, these incentives or payments may be offered
only to certain dealers who maintain, have sold or may sell
certain amounts of shares.
In connection with the sale of Delaware Group fund
shares, the Distributor may, at its own expense, pay to
participate in or reimburse dealers with whom it has a
selling agreement for expenses incurred in connection with
seminars and conferences sponsored by such dealers and may
pay or allow additional promotional incentives, which shall
include non-cash concessions, such as certain luxury
merchandise or a trip to or attendance at a business or
investment seminar at a luxury resort, in the form of sales
contests to dealers who sell shares of the funds. Such
seminars and conferences and the terms of such sales contests
must be preapproved by the Distributor. Payment may be up to
100% of the expenses incurred or awards made in connection
with seminars, conferences or contests relating to the
promotion of fund shares. The Distributor may also pay a
portion of the expense of preapproved dealer advertisements
promoting the sale of Delaware Group fund shares.
Special Purchase Features - Class A Shares
Buying at Net Asset Value
The Class A Shares may be purchased without a front-end
sales charge under the Dividend Reinvestment Plan and, under
certain circumstances, the 12-Month Reinvestment Privilege
and the Exchange Privilege.
Officers, directors and employees (including former
officers and directors and former employees who had been
employed for at least ten years) of the Fund, any other fund
in the Delaware Group, the Manager, any affiliate, any fund
or affiliate that may in the future be created, legal counsel
to the funds and registered representatives and employees of
broker/dealers who have entered into Dealer's Agreements with
the Distributor may purchase Class A Shares and any such
class of shares of any of the funds in the Delaware Group,
including any fund that may be created, at the net asset
value per share. Spouses, parents, brothers, sisters and
children (regardless of age) of such persons at their
direction, and any employee benefit plan established by any
of the foregoing funds, corporations, counsel or
broker/dealers may also purchase shares at net asset value.
Purchases of Class A Shares may also be made by clients of
registered representatives of an authorized investment dealer
at net asset value within six months of a change of the
registered representative's employment, if the purchase is
funded by proceeds from an investment where a front-end sales
charge has been assessed and the redemption of the investment
did not result in the imposition of a contingent deferred
sales charge or other redemption charges. Purchase of Class
A Shares also may be made at net asset value by bank
employees that provide services in connection with agreements
between the bank and unaffiliated brokers or dealers
concerning sales of Class A Shares. Also, officers,
directors and key employees of institutional clients of the
Manager, or any of its affiliates, may purchase Class A
Shares at net asset value. Moreover, purchases may be
effected at net asset value for the benefit of the clients of
brokers, dealers and registered investment advisers
affiliated with a broker or dealer, if such broker, dealer or
investment adviser has entered into an agreement with the
Distributor providing specifically for the purchase of Class
A Shares in connection with special investment products, such
as wrap accounts or similar fee based programs. Such
purchasers are required to sign a letter stating that the
purchase is for investment only and that the securities may
not be resold except to the issuer. Such purchasers may also
be required to sign or deliver such other documents as the
Fund may reasonably require to establish eligibility for
purchase at net asset value. The Fund must be notified in
advance that the trade qualifies for purchase at net asset
value.
Investments in Class A Shares made by plan level and/or
participant retirement accounts that are for the purpose of
repaying a loan taken from such accounts will be made at net
asset value. Loan repayments made to a Delaware Group
account in connection with loans originated from accounts
previously maintained by another investment firm will also be
invested at net asset value.
Letter of Intention
The reduced front-end sales charges described above with
respect to the Class A Shares are also applicable to the
aggregate amount of purchases made by any such purchaser
previously enumerated within a 13-month period pursuant to a
written Letter of Intention provided by the Distributor and
signed by the purchaser, and not legally binding on the
signer or the Fund, which provides for the holding in escrow
by the Transfer Agent of 5% of the total amount of the Class
A Shares intended to be purchased until such purchase is
completed within the 13-month period. A Letter of Intention
may be dated to include shares purchased up to 90 days prior
to the date the Letter is signed. The 13-month period begins
on the date of the earliest purchase. If the intended
investment is not completed, except as noted below, the
purchaser will be asked to pay an amount equal to the
difference between the front-end sales charge on the Class A
Shares purchased at the reduced rate and the front-end sales
charge otherwise applicable to the total shares purchased.
If such payment is not made within 20 days following the
expiration of the 13-month period, the Transfer Agent will
surrender an appropriate number of the escrowed shares for
redemption in order to realize the difference. Such
purchasers may include the value (at offering price at the
level designated in their Letter of Intention) of all their
shares of the Fund and of any class of any of the other
mutual funds in the Delaware Group (except shares of any
Delaware Group fund which do not carry a front-end sales
charge or contingent deferred sales charge, other than shares
of Delaware Group Premium Fund, Inc. beneficially owned in
connection with the ownership of variable insurance products,
unless they were acquired through an exchange from shares
which do) previously purchased and still held as of the date
of their Letter of Intention toward the completion of such
Letter. For purposes of satisfying an investor's obligation
under a Letter of Intention, Class B Shares of the Fund and
the corresponding class of shares of other Delaware Group
funds which offer such shares may be aggregated with the
Class A Shares of the Fund and the corresponding class of
shares of the other Delaware Group funds.
Employers offering a Delaware Group Retirement Plan may
also complete a Letter of Intention to obtain a reduced
front-end sales charge on investments of the Class A Shares
made by the Plan. The aggregate investment level of the
Letter of Intention will be determined and accepted by the
Transfer Agent at the point of Plan establishment. The level
and any reduction in front-end sales charge will be based on
actual Plan participation and the projected investments in
Delaware Group funds that are offered with a front-end sales
charge or contingent deferred sales charge for a 13-month
period. The Transfer Agent reserves the right to adjust the
signed Letter of Intention based on this acceptance criteria.
The 13-month period will begin on the date this Letter of
Intention is accepted by the Transfer Agent. If actual
investments exceed the anticipated level and equal an amount
that would qualify the Plan for further discounts, any front-
end sales charges will be automatically adjusted. In the
event this Letter of Intention is not fulfilled within the
13-month period, the Plan level will be adjusted (without
completing another Letter of Intention) and the employer will
be billed for the difference in front-end sales charges due,
based on the Plan's assets under management at that time.
Employers may also include the value (at offering price at
the level designated in their Letter of Intention) of all
their shares intended for purchase that are offered with a
front-end sales charge or contingent deferred sales charge of
any class. Class B Shares of the Fund and other Delaware
Group funds which offer a corresponding class of shares may
also be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end
sales charge previously set forth with respect to the Class A
Shares, purchasers may combine the total amount of any
combination of the Fund Classes of the Fund as well as any
other class of any of the other Delaware Group funds (except
shares of any Delaware Group fund which do not carry a front-
end sales charge or contingent deferred sales charge, other
than shares of Delaware Group Premium Fund, Inc. beneficially
owned in connection with the ownership of variable insurance
products, unless they were acquired through an exchange from
shares which do).
The privilege also extends to all purchases made at one
time by an individual; or an individual, his or her spouse
and their children under the age 21; or a trustee or other
fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee
benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end
sales charge with respect to the Class A Shares, purchasers
may also combine any subsequent purchases of the Fund Classes
of the Fund as well as any other class of any of the other
Delaware Group funds which offer such classes (except shares
of any Delaware Group fund which do not carry a front-end
sales charge or contingent deferred sales charge, other than
shares of Delaware Group Premium Fund, Inc. beneficially
owned in connection with the ownership of variable insurance
products, unless they were acquired through an exchange from
shares which do). If, for example, any such purchaser has
previously purchased and still holds Class A Shares and/or
shares of any other of the classes described in the previous
sentence with a value of $40,000 and subsequently purchases
$60,000 at offering price of additional shares of the Class A
Shares, the charge applicable to the $60,000 purchase would
currently be 4.75%. For the purpose of this calculation, the
shares presently held shall be valued at the public offering
price that would have been in effect were the shares
purchased simultaneously with the current purchase.
Investors should refer to the table of sales charges for
Class A Shares to determine the applicability of the Right of
Accumulation to their particular circumstances.
12-Month Reinvestment Privilege
Shareholders of the Class A Shares (and of the
Institutional Class holding shares which were acquired
through an exchange of one of the other mutual funds in the
Delaware Group offered with a front-end sales charge) who
redeem such shares of the Fund have one year from the date of
redemption to reinvest all or part of their redemption
proceeds in Class A Shares of the Fund or in Class A Shares
of any of the other funds in the Delaware Group, subject to
applicable eligibility and minimum purchase requirements, in
states where their shares may be sold, at net asset value
without the payment of a front-end sales charge. This
privilege does not extend to Class A Shares where the
redemption of the shares triggered the payment of a Limited
CDSC. Persons investing redemption proceeds from direct
investments in mutual funds in the Delaware Group offered
without a front-end sales charge will be required to pay the
applicable sales charge when purchasing Class A Shares. The
reinvestment privilege does not extend to redemption of Class
B Shares.
Any such reinvestment cannot exceed the redemption
proceeds (plus any amount necessary to purchase a full
share). The reinvestment will be made at the net asset value
next determined after receipt of remittance. A redemption
and reinvestment could have income tax consequences. It is
recommended that a tax adviser be consulted with respect to
such transactions. Any reinvestment directed to a fund in
which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares.
Consequently, an investor should obtain and read carefully
the prospectus for the fund in which the investment is
proposed to be made before investing or sending money. The
prospectus contains more complete information about the fund,
including charges and expenses.
Investors should consult their financial advisers or the
Transfer Agent, which also serves as the Fund's shareholder
servicing agent, about the applicability of the Limited CDSC
(see Contingent Deferred Sales Charge for Certain Purchases
of Class A Shares Made at Net Asset Value under Redemption
and Exchange in the Fund Classes' Prospectus) in connection
with the features described above.
Group Investment Plans
Group Investment Plans which are not eligible to
purchase shares of the Institutional Class may also benefit
from the reduced front-end sales charges for investments in
Class A Shares set forth in the table on page , based
on total plan assets. If a company has more than one plan
investing in the Delaware Group of funds, then the total
amount invested in all plans would be used in determining the
applicable front-end sales charge reduction. Employees
participating in such Group Investment Plans may also combine
the investments made in their plan account when determining
the applicable front-end sales charge on purchases to non-
retirement Delaware Group investment accounts. For other
Retirement Plans and special services, see Retirement Plans
for the Fund Classes under Investment Plans.
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.
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 for $25 or
more with respect to the Class A Shares and $100 or more with
respect to the Class B Shares; no minimum applies to the
Institutional Class. Such purchases are made for the Class A
Shares at the public offering price and, for the Class B
Shares and Institutional Class at the net asset value, at the
end of the day of receipt. A reinvestment plan may be
terminated at any time. This plan does not assure a profit
nor protect against depreciation in a declining market.
Reinvestment of Dividends in Other Delaware Group Funds
Subject to applicable eligibility and minimum purchase
requirements and the limitations set forth below,
shareholders of the Class A Shares and Class B Shares may
automatically reinvest dividends and/or distributions from
the Fund in any of the other mutual funds in the Delaware
Group, including the Fund, in states where their shares may
be sold. Such investments will be at net asset value at the
close of business on the reinvestment date without any front-
end sales charge or service fee. The shareholder must notify
the Transfer Agent in writing and must have established an
account in the fund into which the dividends and/or
distributions are to be invested. Any reinvestment directed
to a fund in which the investor does not then have an account
will be treated like all other initial purchases of a fund's
shares. Consequently, an investor should obtain and read
carefully the prospectus for 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 the Class A Shares may not be
directed to the Class B Shares of another fund in the
Delaware Group. Dividends from the Class B Shares may only
be directed to the Class B Shares of another fund in the
Delaware Group that offers such class of shares. See Class B
Funds in the Fund Classes' Prospectus for the funds in the
Delaware Group that are eligible for investment by holders of
Fund shares.
This option is not available to participants in the
following plans: SAR/SEP, SEP/IRA, Profit Sharing and Money
Purchase Pension Plans, 401(k) Defined Contribution Plans,
403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors of the Class A
Shares and Class B Shares may arrange for the Fund to accept
for investment, through an agent bank, preauthorized
government or private recurring payments. This method of
investment assures the timely credit to the shareholder's
account of payments such as social security, veterans'
pension or compensation benefits, federal salaries, Railroad
Retirement benefits, private payroll checks, dividends, and
disability or pension fund benefits. It also eliminates
lost, stolen and delayed checks.
Automatic Investing Plan--Shareholders of the Class A
Shares and Class B Shares may make automatic investments by
authorizing, in advance, monthly payments directly from their
checking account for deposit into the Class. This type of
investment will be handled in either of the two ways noted
below. (1) If the shareholder's bank is a member of the
National Automated Clearing House Association ("NACHA"), the
amount of the investment will be electronically deducted from
his or her account by Electronic Fund Transfer ("EFT"). The
shareholder's checking account will reflect a debit each
month at a specified date although no check is required to
initiate the transaction. (2) If the shareholder's bank is
not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks.
Should the shareholder's bank become a member of NACHA in the
future, his or her investments would be handled
electronically through EFT.
This option is not available to participants in the
following plans: SAR/SEP, SEP/IRA, Profit Sharing and Money
Purchase Pension Plans, 401(k) Defined Contribution Plans,
403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans.
* * *
Investments under the Direct Deposit Purchase Plan and
the Automatic Investing Plan must be for $25 or more with
respect to the Class A Shares and $100 or more with respect
to the Class B Shares. An investor wishing to take advantage
of either service must complete an authorization form.
Either service can be discontinued by the shareholder at any
time without penalty by giving written notice.
Payments to the Fund from the federal government or its
agencies on behalf of a shareholder may be credited to the
shareholder's account after such payments should have been
terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government
or its agencies. Similarly, under certain circumstances,
investments from private sources may be subject to
reclamation by the transmitting bank. In the event of a
reclamation, the Fund may liquidate sufficient shares from a
shareholder's account to reimburse the government or the
private source. In the event there are insufficient shares
in the shareholder's account, the shareholder is expected to
reimburse the Fund.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank
or employer, to make investments directly to their Fund
accounts. The Fund will accept these investments, such as
bank-by-phone, annuity payments and payroll allotments, by
mail directly from the third party. Investors should contact
their employers or financial institutions who in turn should
contact the Fund for proper instructions.
Retirement Plans for the Fund Classes
An investment in the Fund may be suitable for tax-
deferred Retirement Plans. Among the Retirement Plans noted
below, Class B Shares are available for investment only by
Individual Retirement Accounts, Simplified Employee Pension
Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred
Compensation Plans. The CDSC may be waived on certain
redemptions of Class B Shares. See the Prospectus for the
Fund Classes under Buying Shares - Contingent Deferred Sales
Charge for a list of the instances in which the CDSC is
waived.
The minimum initial investment for each of the
Retirement Plans described below is $250; subsequent
investments must be at least $25. Many of the Retirement
Plans described below are subject to one-time fees, as well
as annual maintenance fees. Prototype Profit Sharing and
Money Purchase Pension Plans are each subject to a one-time
fee of $200 per plan, or $300 for paired plans. No such fee
is charged for owner-only plans. All Prototype Profit
Sharing and Money Purchase Pension Plans are subject to an
annual maintenance fee of $30 per participant account. Each
of the other Retirement Plans described below (other than
401(k) Defined Contribution Plans) is subject to an annual
maintenance fee of $15 for each participant's account, even
in years when no contributions are made, regardless of the
number of funds selected. Annual maintenance fees for 401(k)
Defined Contribution Plans are based on the number of
participants in the Plan and the services selected by the
employer. Fees are quoted upon request. Annual maintenance
fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others
that provide services to such Plans. Fees are subject to
change.
Certain shareholder investment services available to
non-retirement plan shareholders may not be available to
Retirement Plan shareholders. Certain Retirement Plans may
qualify to purchase shares of the Institutional Class. See
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.
With respect to the annual maintenance fees per account
referred to above, "account" shall mean any account or group
of accounts within a Plan type identified by a common tax
identification number between or among them. Shareholders
are responsible for notifying the Fund when more than one
account is maintained under a single tax identification
number.
It is advisable for an investor considering any one of
the Retirement Plans described below to consult with an
attorney, accountant or a qualified retirement plan
consultant. For further details, including applications for
any of these Plans, contact your investment dealer or the
Distributor.
Taxable distributions from the Retirement Plans
described below may be subject to withholding.
Please contact your investment dealer or the Distributor
for the special application forms required for the Plans
described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed
individuals, partnerships and corporations which replace the
former Keogh and corporate retirement plans. These Plans
contain profit sharing or money purchase pension plan
provisions. Contributions may be invested only in Class A
Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to
establish an Individual Retirement Account ("IRA") by making
contributions which may be tax-deductible, even if the
individual is already participating in an employer-sponsored
retirement plan. Even if contributions are not deductible
for tax purposes, as indicated below, earnings will be tax-
deferred. In addition, an individual may make contributions
on behalf of a spouse who has no compensation for the year or
elects to be treated as having no compensation for the year.
Investments in each of the Fund Classes are permissible.
The Tax Reform Act of 1986 (the "Act") restructured, and
in some cases eliminated, the tax deductibility of IRA
contributions. Under the Act, the full deduction for IRAs
($2,000 for each working spouse and $2,250 for one-income
couples) was retained for all taxpayers who are not covered
by an employer-sponsored retirement plan. Even if a taxpayer
(or his or her spouse) is covered by an employer-sponsored
retirement plan, the full deduction is still available if the
taxpayer's adjusted gross income is below $25,000 ($40,000
for taxpayers filing joint returns). A partial deduction is
allowed for married couples with incomes between $40,000 and
$50,000, and for single individuals with incomes between
$25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross
income before IRA deductions exceeds $50,000 ($35,000 for
singles) and who are active participants in an employer-
sponsored retirement plan. Taxpayers who are not allowed
deductions on IRA contributions still can make nondeductible
IRA contributions of as much as $2,000 for each working
spouse ($2,250 for one-income couples), and defer taxes on
interest or other earnings from the IRAs. Special rules
apply for determining the deductibility of contributions made
by married individuals filing separate returns.
A company or association may establish a Group IRA for
employees or members who want to purchase shares of the Fund.
Purchases of $1 million or more of the Class A Shares qualify
for purchase at net asset value but may, under certain
circumstances, be subject to a Limited CDSC. See Purchasing
Shares concerning reduced front-end sales charges applicable
to Class A Shares.
Investments generally must be held in the IRA until age
59 1/2 in order to avoid premature distribution penalties, but
distributions generally must commence no later than April 1
of the calendar year following the year in which the
participant reaches age 70 1/2. Individuals are entitled to
revoke the account, for any reason and without penalty, by
mailing written notice of revocation to Delaware Management
Trust Company within seven days after the receipt of the IRA
Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established
more than seven days after receipt of the IRA Disclosure
Statement, the account may not be revoked. Distributions
from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary
income in the year received. Excess contributions removed
after the tax filing deadline, plus extensions, for the year
in which the excess contributions were made are subject to a
6% excise tax on the amount of excess. Premature
distributions (distributions made before age 59 1/2, except for
death, disability and certain other limited circumstances)
will be subject to a 10% excise tax on the amount prematurely
distributed, in addition to the income tax resulting from the
distribution. See Class B Shares under Alternative Purchase
Arrangements concerning the applicability of a CDSC upon
redemption.
See Appendix B for additional IRA information.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established 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 only.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Internal Revenue Code of 1986 (the
"Code") permits employers to establish qualified plans based
on salary deferral contributions. Plan documents are
available to enable employers to establish a plan. An
employer may also elect to make profit sharing contributions
and/or matching contributions with investments in only Class
A Shares or certain other funds in the Delaware Group.
Purchases under the Plan may be combined for purposes of
computing the reduced front-end sales charge applicable to
Class A Shares as set forth in the table on page .
Deferred Compensation Plan for Public Schools and Non-Profit
Organizations ("403(b)(7)")
Section 403(b)(7) of the Code permits public school
systems and certain non-profit organizations to use mutual
fund shares held in a custodial account to fund deferred
compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish
to purchase either of the Fund Classes in conjunction with
such an arrangement. Applicable front-end sales charges with
respect to Class A Shares for such purchases are set forth in
the table on page .
Deferred Compensation Plan for State and Local Government
Employees ("457")
Section 457 of the Code permits state and local
governments, their agencies and certain other entities to
establish a deferred compensation plan for their employees
who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly
state) taxes thereon. Such plans may invest in shares of
either of the Fund Classes. Although investors may use their
own plan, there is available a Delaware Group 457 Deferred
Compensation Plan. Interested investors should contact the
Distributor or their investment dealers to obtain further
information. Applicable front-end sales charges for such
purchases of Class A Shares are set forth in the table on
page .
DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at
the offering price next calculated by the Fund after receipt
of the order by the Fund or its agent. Orders for purchases
of Class B Shares and the Institutional Class are effected at
the net asset value 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 the Class A Shares consists of
the net asset value per share plus any applicable sales
charges. Offering price and net asset value are computed as
of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when such
exchange is open. The New York Stock Exchange is scheduled
to be open Monday through Friday throughout the year except
for New Year's Day, 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 the 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 will bear, pro-rata, all of the common
expenses of the Fund. The net asset values of all
outstanding shares of each Class of the Fund will be computed
on a pro-rata basis for each outstanding share based on the
proportionate participation in the Fund represented by the
value of shares of that Class. All income earned and
expenses incurred by the Fund will be borne on a pro-rata
basis by each outstanding share of a Class, based on each
Class' percentage in the Fund represented by the value of
shares of such Classes, except that the Institutional Class
will not incur any of the expenses under the Fund's 12b-1
Plans and shares of the Fund Classes alone will bear the 12b-
1 Plan fees payable under their respective Plans. Due to the
specific distribution expenses and other costs that will be
allocable to each Class, the net asset value of and dividends
paid to each Class of the Fund will vary.
REDEMPTION AND REPURCHASE
Any shareholder may require the Fund to redeem shares by
sending a written request, signed by the record owner or
owners exactly as the shares are registered, to the Fund,
1818 Market Street, Philadelphia, PA 19103. In addition,
certain expedited redemption methods described below are
available when stock certificates have not been issued. The
Fund does not issue certificates for Class A Shares or
Institutional Class shares, unless a shareholder specifically
requests them. The Fund does not issue certificates for
Class B Shares. If stock certificates have been issued for
shares being redeemed, they must accompany the written
request. For redemptions of $50,000 or less paid to the
shareholder at the address of record, the Fund requires a
request signed by all owners of the shares or the investment
dealer of record, but does not require signature guarantees.
When the redemption is for more than $50,000, or if payment
is made to someone else or to another address, signatures of
all record owners are required and a signature guarantee may
be required. Each signature guarantee must be supplied by an
eligible guarantor institution. The Fund reserves the right
to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Fund may
request further documentation from corporations, retirement
plans, executors, administrators, trustees or guardians.
In addition to redemption of shares by the Fund, the
Distributor, acting as agent of the Fund, offers to
repurchase Fund shares from broker/dealers acting on behalf
of shareholders. The redemption or repurchase price, which
may be more or less than the shareholder's cost, is the net
asset value per share next determined after receipt of the
request in good order by the Fund or its agent, less any
applicable contingent deferred sales charge. This is
computed and effective at the time the offering price and net
asset value are determined. See Determining Offering Price
and Net Asset Value. The Fund and the Distributor end their
business day at 5 p.m., Eastern time. This offer is
discretionary and may be completely withdrawn without further
notice by the Distributor.
Orders for the repurchase of Fund shares which are
submitted to the Distributor prior to the close of its
business day will be executed at the net asset value per
share computed that day (less any applicable contingent
deferred sales charge), if the repurchase order was received
by the broker/dealer from the shareholder prior to the time
the offering price and net asset value are determined on such
day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such
repurchase is then settled as an ordinary transaction with
the broker/dealer (who may make a charge to the shareholder
for this service) delivering the shares repurchased.
Certain redemptions of Class A Shares purchased at net
asset value may result in the imposition of a Limited CDSC.
See Contingent Deferred Sales Charge for Certain Purchases of
Class A Shares Made at Net Asset Value under Redemption and
Exchange in the Prospectus for the Fund Classes. The Class B
Shares are subject to a CDSC of: (i) 4% if shares are
redeemed within two years of purchase; (ii) 3% if shares are
redeemed during the third 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. See Contingent Deferred
Sales Charge under Buying Shares in the Prospectus for the
Fund Classes. Except for such contingent deferred sales
charges and, with respect to the expedited payment by wire
described below, for which there is currently a $7.50 bank
wiring cost, neither the Fund nor the Distributor charges a
fee for redemptions or repurchases, but such fees could be
charged at any time in the future.
Payment for shares redeemed will ordinarily be mailed
the next business day, but in no case later than seven days,
after receipt of a redemption request in good order.
If a shareholder who recently purchased shares by check
seeks to redeem all or a portion of those shares in a written
request, the Fund will honor the redemption request but will
not mail the proceeds until it is reasonably satisfied of the
collection of the investment check. This potential delay can
be avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a
check which is subsequently returned unpaid for insufficient
funds or for any other reason, the Fund will automatically
redeem from the shareholder's account the shares purchased by
the check plus any dividends earned thereon. Shareholders
may be responsible for any losses to the Fund or to the
Distributor.
In case of a suspension of the determination of the net
asset value because the New York Stock Exchange is closed for
other than weekends or holidays, or trading thereon is
restricted or an emergency exists as a result of which
disposal by the Fund of securities owned by it is not
reasonably practical, or it is not reasonably practical for
the Fund fairly to value its assets, or in the event that the
Securities and Exchange Commission has provided for such
suspension for the protection of shareholders, the Fund may
postpone payment or suspend the right of redemption or
repurchase. In such case, the shareholder may withdraw the
request for redemption or leave it standing as a request for
redemption at the net asset value next determined after the
suspension has been terminated.
Payment for shares redeemed or repurchased may be made
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
Due to the relatively higher cost of maintaining small
accounts, the Fund reserves the right to redeem shares in any
of its accounts at the then-current net asset value if the
total investment in the Fund has a value of less than $250 as
a result of redemptions. As a consequence, an investor who
makes only the minimum investment in a Class will be subject
to involuntary redemption if any portion of the investment is
redeemed. Before the Fund redeems such shares and sends the
proceeds to the shareholder, the shareholder will be notified
in writing that the value of the shares in the account is
less than $250 and will be allowed 60 days from that date of
notice to make an additional investment to meet the required
minimum of $250. Any redemption in an inactive account
established with a minimum investment may trigger mandatory
redemption. No contingent deferred sales charge will apply
to the redemptions described in this paragraph of the Class A
and the Class B Shares.
Expedited Telephone Redemptions
The Fund has available certain redemption privileges, as
described below. The Fund reserves the right to suspend or
terminate the expedited payment procedures upon 60 days'
written notice to shareholders.
Shareholders of the Fund Classes or their investment
dealers of record wishing to redeem any amount of shares of
$50,000 or less for which certificates have not been issued
may call the Fund at 800-523-1918 (in Philadelphia, 988-1241)
or, in the case of shareholders of the Institutional Class,
their Client Services Representative at 800-828-5052 prior to
the time the offering price and net asset value are
determined, as noted above, and have the proceeds mailed to
them at the record address. Checks payable to the
shareholder(s) of record will normally be mailed the next
business day, but not more than seven days, after receipt of
the redemption request. This option is only available to
individual, joint and individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can
be transferred to your predesignated bank account by wire or
by check by calling the Fund, as described above. An
authorization form must have been completed by the
shareholder and filed with the Fund before the request is
received. Payment will be made by wire or check to the bank
account designated on the authorization form as follows:
1. Payment by Wire: Request that Federal Funds be
wired to the bank account designated on the authorization
form. Redemption proceeds will normally be wired on the next
business day following receipt of the redemption request.
There is a $7.50 wiring fee (subject to change) charged by
CoreStates Bank, N.A. which will be deducted from the
withdrawal proceeds each time the shareholder requests a
redemption. If the proceeds are wired to the shareholder's
account at a bank which is not a member of the Federal
Reserve System, there could be a delay in the crediting of
the funds to the shareholder's bank account.
2. Payment by Check: Request a check be mailed to the
bank account designated on the authorization form.
Redemption proceeds will normally be mailed the next business
day, but no more than seven days, from the date of the
telephone request. This procedure will take longer than the
Payment by Wire option (1 above) because of the extra time
necessary for the mailing and clearing of the check after the
bank receives it.
Redemption Requirements: In order to change the name of
the bank and the account number it will be necessary to send
a written request to the Fund and a signature guarantee may
be required. Each signature guarantee must be supplied by an
eligible guarantor institution. The Fund reserves the right
to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness.
To reduce the shareholder's risk of attempted fraudulent
use of the telephone redemption procedure, payment will be
made only to the bank account designated on the authorization
form.
The Fund will not honor telephone redemptions for shares
recently purchased by check unless it is reasonably satisfied
that the purchase check has cleared.
If expedited payment under these procedures could
adversely affect the Fund, the Fund may take up to seven days
to pay the shareholder.
Neither the Fund nor the Transfer Agent is responsible
for any shareholder loss incurred in acting upon written or
telephone instructions for redemption or exchange of Fund
shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions
communicated by telephone are genuine (including verification
of a form of personal identification) as, if it does not, the
Fund or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent transactions. Telephone
instructions received by shareholders of the Fund Classes are
generally tape recorded. A written confirmation will be
provided for all purchase, exchange and redemption
transactions initiated by telephone.
Systematic Withdrawal Plan
Shareholders of the Class A Shares who own or purchase
$5,000 or more of shares at the offering price for which
certificates have not been issued may establish a Systematic
Withdrawal Plan for monthly withdrawals of $25 or more, or
quarterly withdrawals of $75 or more, although the Fund does
not recommend any specific amount of withdrawal. This $5,000
minimum does not apply for the Fund's prototype Retirement
Plans. Shares purchased with the initial investment and
through reinvestment of cash dividends and realized
securities profits distributions will be credited to the
shareholder's account and sufficient full and fractional
shares will be redeemed at the net asset value calculated on
the third business day preceding the mailing date.
Checks are dated the 20th of the month (unless such date
falls on a holiday or a Sunday) and mailed on or about the
19th of every month. Both ordinary income dividends and
realized securities profits distributions will be
automatically reinvested in additional shares of the Class at
net asset value. This plan is not recommended for all
investors and should be started only after careful
consideration of its operation and effect upon the investor's
savings and investment program. To the extent that
withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held
under the plan, the withdrawal payments will represent a
return of capital, and the share balance may in time be
depleted, particularly in a declining market.
The sale of shares for withdrawal payments constitutes a
taxable event and a shareholder may incur a capital gain or
loss for federal income tax purposes. This gain or loss may
be long-term or short-term depending on the holding period
for the specific shares liquidated. Premature withdrawals
from Retirement Plans may have adverse tax consequences.
Withdrawals under this plan by the holders of Class A
Shares or any similar plan of any other investment company
charging a front-end sales charge made concurrently with the
purchases of the Class A Shares of this or the shares of any
other investment company will ordinarily be disadvantageous
to the shareholder because of the payment of duplicative
sales charges. Shareholders should not purchase Class A
Shares while participating in a Systematic Withdrawal Plan
and a periodic investment program in a fund managed by the
Manager must be terminated before a Systematic Withdrawal
Plan can take effect, except if the shareholder is a
participant in one of our Retirement Plans or is investing in
Delaware Group funds which do not carry a sales charge.
Also, redemptions pursuant to a Systematic Withdrawal Plan
may be subject to a Limited CDSC if the purchase was made at
net asset value and a dealer's commission has been paid on
that purchase.
An investor wishing to start a Systematic Withdrawal
Plan must complete an authorization form. If the recipient
of Systematic Withdrawal Plan payments is other than the
registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee
must be supplied by an eligible guarantor institution. The
Fund reserves the right to reject a signature guarantee
supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the
shareholder or the Transfer Agent at any time by giving
written notice.
The Systematic Withdrawal Plan is not available with
respect to the Class B Shares or the Institutional Class.
Wealth Builder Option
Shareholders of the Fund Classes may elect to invest in
one or more of the other mutual funds in the Delaware Group
through our Wealth Builder Option. Under this automatic
exchange program, shareholders can authorize regular monthly
investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual
funds in the Delaware Group, subject to the conditions and
limitations set forth in the Fund Classes' Prospectus. See
Wealth Builder Option and Redemption and Exchange in the
Prospectus for the Fund Classes.
The investment will be made on the 20th day of each
month (or, if the fund selected is not open that day, the
next business day) at the public offering price or net asset
value, as applicable, of the fund selected on the date of
investment. No investment will be made for any month if the
value of the shareholder's account is less than the amount
specified for investment.
Periodic investment through the Wealth Builder Option
does not insure profits or protect against losses in a
declining market. The price of the fund into which
investments are made could fluctuate. Since this program
involves continuous investment regardless of such fluctuating
value, investors selecting this option should consider their
financial ability to continue to participate in the program
through periods of low fund share prices. This program
involves automatic exchanges between two or more fund
accounts and is treated as a purchase of shares of the fund
into which investments are made through the program. See
Exchange Privilege for a brief summary of the tax
consequences of exchanges.
Shareholders can also use the Wealth Builder Option to
invest in the Fund Classes through regular liquidations of
shares in their accounts in other mutual funds in the
Delaware Group, subject to the conditions and limitations
described in the Fund Classes' Prospectus. Shareholders can
terminate their participation at any time by written notice
to the Fund.
This option is not available to participants in the
following plans: SAR/SEP, SEP/IRA, Profit Sharing and Money
Purchase Pension Plans, 401(k) Defined Contribution Plans,
403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans. This option also is not available to
shareholders of the Institutional Class.
DISTRIBUTIONS AND TAXES
The 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. 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 the Class A Shares and the Class B 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 Value Fund A Class and the
Value Fund Institutional Class, respectively, was paid from
net investment income and a distribution of $0.170 per share
of the Value Fund A Class and the Value Fund 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 Value Fund A Class, the Value Fund B
Class and the Value Fund Institutional Class, respectively,
and a capital gain of $0.250 per share of each Class was paid
from realized securities profits on January 5, 1995 to
shareholders of record 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
dividend-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 dividends from net
investment income of the Class A Shares and the Institutional
Class were 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.
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, dated
June 29, 1988, was approved by shareholders on June 14, 1988,
and renewed for a period of an additional year by the Board
of Directors at a meeting held on January 28, 1995.
The Agreement may be renewed each year only so long as
such renewal and continuance are specifically approved at
least annually by the Board of Directors or by vote of a
majority of the outstanding voting securities of the Fund,
and only if the terms and the renewal thereof have been
approved by 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
Amended and Restated Distribution Agreement, the Fund is
responsible for all of its own expenses. Among others, these
include the Fund's proportionate share of rent and certain
other administrative expenses; the investment management
fees; transfer and dividend disbursing agent fees and costs;
custodian expenses; federal and state securities registration
fees; proxy costs; and the costs of preparing prospectuses
and reports sent to shareholders. The ratio of expenses to
average daily net assets of the 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 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, which reflects the impact of its 12b-1 Plan.
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.
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 an Amended
and Restated Distribution Agreement dated as of September 6,
1994. The Distributor is an affiliate of the Manager and
bears all of the costs of promotion and distribution, except
for payments by the Fund on behalf of the Class A Shares and
Class B Shares under their respective 12b-1 Plans. 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 indirect, wholly-owned
subsidiary of Delaware Management Holdings, Inc.
OFFICERS AND DIRECTORS
The business and affairs of the Fund are managed under
the direction of its Board of Directors.
Certain officers and directors of the Fund hold
identical positions in each of the other funds in the
Delaware Group. On December 31, 1994, the Fund's officers
and directors owned approximately 1% of the Fund's shares
outstanding.
As of December 31, 1994, the Fund believes Merrill
Lynch, Pierce Fenner & Smith, Mutual Fund Operations, P.O.
Box 41621, Jacksonville, FL 32203 held of record 1,019,929
shares (11.01%) of the outstanding shares of the Class A
Shares.
As of the same date, the Fund believes Merrill Lynch,
Pierce Fenner & Smith, Mutual Fund Operations, 4800 Deer Lake
Dr. East, 3rd Fl., Jacksonville, FL 32246 held of record
4,934 shares (5.50%) of the outstanding shares of the Class B
Shares.
As of December 31, 1994 the Fund believes the following
held of record 5% or more of the outstanding shares of the
Institutional Class: The Provident Bank Trst Cort Furniture,
Investment and Retirement Plan, One East Fourth St.,
Cincinnati, OH 45202 -- 147,198 shares (41.54%); Delaware
Management Company Employee Profit Sharing Trust, 1818 Market
Street, Philadelphia, PA 19103 -- 103,847 shares (29.30%);
and Windermere Retirement Plan, 5424 Sand Point Way N.E.,
Seattle, WA 98105 -- 47,901 shares (13.51%). Shares held of
record by the above mentioned were believed to be
beneficially owned by others.
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"). By reason of its percentage ownership of DMH common
stock and through a Voting Trust Agreement with certain other
DMH shareholders, Legend Capital Group, L.P. ("Legend")
controls DMH and its direct and indirect, wholly-owned
subsidiaries. As General Partners of Legend, Leonard M.
Harlan and John K. Castle have the ability to direct the
voting of more than a majority of the shares of DMH and
thereby control DMH and its direct and indirect, wholly-owned
subsidiaries.
On December 12, 1994, DMH entered into a merger
agreement with Lincoln National Corporation ("Lincoln
National") and a newly-formed subsidiary of Lincoln National.
Pursuant to that agreement, the new subsidiary will be merged
with and into DMH. This merger will result in DMH becoming a
wholly-owned subsidiary of Lincoln National. The transaction
is expected to close in the early spring of 1995, subject to
the receipt of all regulatory approvals and satisfaction of
conditions precedent to closing. See Management of the Fund
in the Prospectuses for more information regarding this
merger transaction.
Directors and principal officers of the Fund are noted
below along with their ages and their business experience for
the past five years. Unless otherwise noted, the address of
each officer and director is One Commerce Square,
Philadelphia, PA 19103.
*Wayne A. Stork (57)
Chairman, Director and/or Trustee of the Fund and each
of the other 16 Funds in the Delaware Group.
Chairman, Chief Executive Officer, Chief Investment
Officer and Director of Delaware Management
Company, Inc.
Chairman, President, Chief Executive Officer and
Director of Delaware International Holdings Ltd.
Chairman, Chief Executive Officer and Director of
Delaware Management Holdings, Inc., DMH Corp.,
Delaware International Advisers Ltd. and Founders
Holdings, Inc.
Chairman and Director of Delaware Management Trust
Company.
Director of Delaware Distributors, Inc., Delaware
Service Company, Inc. and Delaware Investment
Counselors, Inc.
During the past five years, Mr. Stork has served in
various executive capacities at different times
within the Delaware organization.
*Brian F. Wruble (51)
President, Chief Executive Officer, Director and/or
Trustee of the Fund and 15 other Funds in the
Delaware Group (which excludes Delaware Pooled
Trust, Inc.).
Director of Delaware Pooled Trust, Inc., Delaware
International Advisers Ltd. and Delaware Investment
Counselors, Inc.
President, Chief Operating Officer and Director of
Delaware Management Holdings, Inc., DMH Corp. and
Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of
Delaware Service Company, Inc.
Chairman and Director of Delaware Distributors, Inc.
Chairman of Delaware Distributors, L.P.
President of Founders Holdings, Inc.
Before joining the Delaware Group in 1992, Mr. Wruble
was Chairman, President and Chief Executive
Officer of Equitable Capital Management Corporation
and Executive Vice President and Chief Investment
Officer of Equitable Life Assurance Society of the
United States. Mr. Wruble has previously held
executive positions with Smith Barney, Harris Upham
and H.C. Wainwright & Co.
Winthrop S. Jessup (49)
Executive Vice President of the Fund and 15 other Funds
in the Delaware Group (which excludes Delaware
Pooled Trust, Inc.).
President and Chief Executive Officer of Delaware Pooled
Trust, Inc.
President and Director of Delaware Investment
Counselors, Inc.
Executive Vice President and Director of Delaware
Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Management Trust
Company, Delaware International Holdings Ltd. and
Founders Holdings, Inc.
Vice Chairman and Director of Delaware Distributors,
Inc.
Vice Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc. and Delaware
International Advisers Ltd.
During the past five years, Mr. Jessup has served in
various executive capacities at different times within
the Delaware organization.
-------------------
* Director affiliated with the investment manager of the Fund
and considered an "interested person" as defined
in the Investment Company Act of 1940.
Richard G. Unruh, Jr. (55)
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.
During the past five years, Mr. Unruh has served in
various executive capacities at different times
within the Delaware organization.
Walter P. Babich (67)
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.
*John K. Castle (54)
Director and/or Trustee of the Fund, each of the other
16 Funds in the Delaware Group and Delaware
Management Holdings, Inc.
150 East 58th Street, New York, NY 10155.
General Partner, Legend Capital Group, L.P.
Chairman, Castle Harlan, Inc., a private merchant bank
in New York City.
Chairman, Castle Harlan Partners II GP, Inc.
President and Chief Executive Officer, Branford Castle,
Inc., an investment holding company.
Chairman, Castle Connolly Medical Ltd.
Director, Sealed Air Corp.
Director, UNC, Inc.
Director, Quantum Restaurant Group, Inc.
Director, INDSPEC Chemical Corporation.
Director, Truck Components, Inc.
Trustee, New York Medical College.
Immediately prior to forming Branford Castle, Inc. in
1986, Mr. Castle was President and Chief
Executive Officer and a director of Donaldson,
Lufkin & Jenrette, which he joined in 1965.
Mr. Castle also served as Chairman of the Board of
the New York Medical College for 11 years and has
served as a director of the Equitable Life
Assurance Society of the United States and as a
member of the Corporation of the Massachusetts
Institute of Technology.
---------------
* Director affiliated with the investment manager of the Fund
and considered an "interested person" as defined
in the Investment Company Act of 1940.
*Leonard M. Harlan (58)
Director and/or Trustee of the Fund, each of the other
16 Funds in the Delaware Group and Delaware
Management Holdings, Inc.
150 East 58th Street, New York, NY 10155.
General Partner, Legend Capital Group, L.P.
President, Castle Harlan, Inc., a private merchant bank
in New York City.
President, Castle Harlan Partners II GP, Inc.
Chairman and Chief Executive Officer, The Harlan
Company, Inc.
Director, Long John Silver's Holdings, Inc.
Director, The Ryland Group, Inc.
Director, SmarteCarte, Inc.
Director, MAG Aerospace Industries, Inc.
Director, Strawberries, Inc.
Trustee, North Country School/CTT.
Trustee, New York City Citizens Budget Commission.
Member, Visiting Committee of the Harvard Business
School.
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 (54)
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.
--------------------
* Director affiliated with the investment manager of the Fund
and considered an "interested person" as defined
in the Investment Company Act of 1940.
W. Thacher Longstreth (74)
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, Packard Press, a financial printing,
commercial printing and information
processing firm.
Philadelphia City Councilman.
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.
Retired.
From 1981 to 1990, Mr. Peck was Chairman and Chief
Executive Officer of The Ryland Group, Inc.,
Columbia, MD.
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.
President/Chief Executive Officer and Director of
Delaware Management Trust Company.
Senior Vice President/Chief Administrative Officer/Chief
Financial Officer/Treasurer of Delaware
Management Holdings, Inc.
Senior Vice President/Chief Financial Officer/Treasurer
and Director of DMH Corp.
Senior Vice President/Chief Administrative Officer and
Director of Delaware Distributors, Inc.
Senior Vice President/Chief Administrative Officer
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.
Chief Financial Officer/Chief Operating Officer of
Delaware Investment Counselors, Inc.
Senior Vice President and Director of Founders Holdings,
Inc.
Director of Delaware International Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes
was Chief Administrative Officer, Chief
Financial Officer and Treasurer of Equitable
Capital Management Corporation, New York, from
December 1985 through August 1992, Executive Vice
President from December 1985 through March 1992,
and Vice Chairman from March 1992 through August
1992.
George M. Chamberlain, Jr. (47)
Senior Vice President and Secretary of the Fund, each of
the other 16 Funds in the Delaware Group,
Delaware Management Holdings, Inc. and Delaware
Distributors, L.P.
Corporate Vice President, Secretary and Director of
Founders Holdings, Inc.
Senior Vice President, Secretary and Director of DMH
Corp., Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Service Company, Inc.
and Delaware Management Trust Company.
Secretary and Director of Delaware International
Holdings Ltd.
Secretary of Delaware Investment Counselors, Inc.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served
in various capacities at different times within the
Delaware organization.
Edward A. Trumpbour (37)
Vice President/Senior Portfolio Manager of the Fund, of
seven other equity funds in the
Delaware Group and of Delaware Management Company,
Inc.
During the past five years, Mr. Trumpbour has served in
such capacity within the Delaware organization.
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. and Founders
Holdings, Inc.
Vice President/Corporate Controller/Treasurer of
Delaware Management Trust Company.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings
was Chief Financial Officer for Prudential
Residential Services, L.P., New York, NY 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.
Eugene J. Cichanowsky (48)
Vice President/Corporate Tax 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., Founders Holdings, Inc. and Delaware
Management Trust Company.
Vice President of Delaware Pooled Trust, Inc.
1818 Market Street, Philadelphia, PA 19103.
During the past five years, Mr. Cichanowsky has served
in various capacities at different times within the
Delaware organization.
Theresa M. Messina (33)
Vice President/Treasurer of the Fund, each of the other
16 Funds in the Delaware Group and Delaware Service
Company, Inc.
Vice President/Treasurer/Chief Financial Officer of
Founders Holdings, Inc.
Vice President/Assistant Treasurer of Delaware
Management Company, Inc., Delaware Distributors,
L.P. and Delaware Distributors, Inc.
Vice President of Delaware International Holdings, Ltd.
Before joining the Delaware Group in 1994, Ms. Messina
was Vice President/Treasurer for Capital
Holdings, Frazer, PA. Prior to that, Ms. Messina
was Vice President/Fund Accounting for SEI
Corporation, Wayne, PA from 1988 to 1994.
The following table provides for each disinterested
director compensation received as of November 30, 1994 from
the Fund, the total compensation received from all Delaware
Group funds, and an estimate of annual benefits to be
received upon retirement under the Delaware Group Retirement
Plan.
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
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
* 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
the Fund 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 the 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.
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of
the Classes and for shareholders of classes of other funds in
the Delaware Group are set forth in the relevant prospectuses
for such classes. The following supplements that
information. The Fund reserves the right to reject exchange
requests at any time. The Fund may modify, terminate or
suspend the exchange privilege upon 60 days' notice to
shareholders.
All exchanges involve a purchase of shares of the fund
into which the exchange is made. As with any purchase, an
investor should obtain and carefully read that fund's
prospectus before buying shares in an exchange. The
prospectus contains more complete information about the fund,
including charges and expenses. A shareholder requesting an
exchange will be sent a current prospectus and an
authorization form for any of the other mutual funds in the
Delaware Group. Exchange instructions must be signed by the
record owner(s) exactly as the shares are registered.
An exchange constitutes, for tax purposes, the sale of
one fund or series and the purchase of another. The sale may
involve either a capital gain or loss to the shareholder for
federal income tax purposes.
In addition, investment advisers and dealers may make
exchanges between funds in the Delaware Group on behalf of
their clients by telephone or other expedited means. This
service may be discontinued or revised at any time by the
Transfer Agent. Such exchange requests may be rejected if it
is determined that a particular request or the total requests
at any time could have an adverse effect on any of the funds.
Requests for expedited exchanges may be submitted with a
properly completed exchange authorization form, as described
above.
Telephone Exchange Privilege
Shareholders owning shares for which certificates have
not been issued or their investment dealers of record may
exchange shares by telephone for shares in other mutual funds
in the Delaware Group. This service is automatically
provided unless the Fund receives written notice from the
shareholder to the contrary.
Shareholders or their investment dealers of record may
contact the Transfer Agent at 800-523-1918 (in Philadelphia,
988-1241) or, in the case of shareholders of the
Institutional Class, their Client Services Representative at
800-828-5052, to effect an exchange. The shareholder's
current 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.
Following is a summary of the investment objectives of
the other Delaware Group funds:
Delaware Fund seeks long-term growth by a balance of
capital appreciation, income and preservation of capital. It
uses a dividend-oriented valuation strategy to select
securities issued by established companies that are believed
to demonstrate potential for income and capital growth.
Dividend Growth Fund seeks current income and capital
appreciation by investing primarily in income-producing
common stocks, with a focus on common stocks the Manager
believes have the potential for above average dividend
increases over time.
Trend Fund seeks long-term growth by investing in common
stock issued by emerging growth companies exhibiting strong
capital appreciation potential.
DelCap Fund seeks long-term capital growth by investing
in common stocks and securities convertible into common
stocks of companies that have a demonstrated history of
growth and have the potential to support continued growth.
Decatur Income Fund seeks the highest possible current
income by investing primarily in common stocks that provide
the potential for income and capital appreciation without
undue risk to principal. Decatur Total Return Fund seeks
long-term growth by investing primarily in securities that
provide the potential for income and capital appreciation
without undue risk to principal.
Delchester Fund seeks as high a current income as
possible by investing principally in corporate bonds, and
also in U.S. government securities and commercial paper.
U.S. Government Fund seeks high current income by
investing in long-term U.S. government debt obligations.
Treasury Reserves Intermediate Fund seeks high, stable
income by investing primarily in a portfolio of short- and
intermediate-term securities issued or guaranteed by the U.S.
government, its agencies and instrumentalities. U.S.
Government Money Fund seeks maximum current income with
preservation of principal and maintenance of liquidity by
investing only in short-term securities issued or guaranteed
as to principal and interest by the U.S. government, its
agencies or instrumentalities, and repurchase agreements
collateralized by such securities, while maintaining a stable
net asset value.
Delaware Cash Reserve seeks the highest level of income
consistent with the preservation of capital and liquidity
through investments in short-term money market instruments,
while maintaining a stable net asset value.
Tax-Free USA Fund seeks high current income exempt from
federal income tax by investing in municipal bonds of
geographically-diverse issuers. Tax-Free Insured Fund
invests in these same types of securities but with an
emphasis on municipal bonds protected by insurance
guaranteeing principal and interest are paid when due. Tax-
Free USA Intermediate Fund seeks a high level of current
interest income exempt from federal income tax, consistent
with the preservation of capital by investing primarily in
municipal bonds.
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
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., manages the other funds in the Delaware Group. The
Manager, through a separate division, also manages private
investment accounts. While investment decisions of the Fund
are made independently from those of the other funds and
accounts, they may make investment decisions at the same
time.
The Distributor acts as national distributor for the
Fund and for the other mutual funds in the Delaware Group.
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
the 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 the Class A Shares.
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 the Class B
Shares.
Effective as of January 3, 1995, all such payments
described above will be paid to Delaware Distributors, L.P.
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, pursuant to registration under the Investment Company
Act Rule 24f-2, has been passed upon for the Fund by Messrs.
Stradley, Ronon, Stevens & Young, Philadelphia, Pennsylvania.
Capitalization
The Fund has a present authorized capitalization of five
hundred million shares of capital stock with a $.01 par value
per share. Prior to November 9, 1992, the Fund offered only
one class of shares, the class currently designated the Class
A Shares. Beginning November 9, 1992, the Fund began
offering the Value Fund Institutional Class and beginning
September 6, 1994, the Fund began offering the Value Fund B
Class. Each Class represents a proportionate interest in the
assets of the Fund, and each has the same voting and other
rights and preferences as the other classes of the Fund,
except that shares of the Institutional Class may not vote on
any matter affecting the Fund Classes' Distribution Plans
under Rule 12b-1. Similarly, the shareholders of the Class A
Shares may not vote on matters affecting the Fund's Plan
under Rule 12b-1 relating to the Class B Shares, and the
shareholders of the Class B Shares may not vote on matters
affecting the Fund's Plan under Rule 12b-1 relating to the
Class A Shares. General expenses of the Fund will be
allocated on a pro-rata basis to the classes according to
asset size, except that expenses of the Rule 12b-1 Plans of
the Class A and Class B Shares will be allocated solely to
those classes. The Board of Directors has allocated one
hundred fifty million shares to the Class A Shares, one
hundred fifty million shares to the Class B Shares and fifty
million shares to the Institutional Class. 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.
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.
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.
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
<TABLE>
<CAPTION>
15% Tax Bracket Single - $0-$22,750
Joint - $0-$38,000
How Much You
End of Cumulative How Much You Have With Full
Year Investment Amount Have Without IRA IRA Deduction
<S> <C> <C> <C>
1 $ 2,000 $ 1,844 $ 2,200
5 10,000 10,929 13,431
10 20,000 27,363 35,062
15 30,000 52,074 69,899
20 40,000 89,231 126,005
25 50,000 145,103 216,364
30 60,000 229,114 361,887
35 70,000 355,438 596,254
40 80,000 545,386 973,704
[Without IRA--investment of $1,700 ($2,000 less 15%) earning 8.5% (10%
less 15%)]
<CAPTION>
28% Tax Bracket Single - $22,751-$55,100
Joint - $38,001-$91,850
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,544 $ 1,584 $ 2,200
5 10,000 8,913 9,670 13,431
10 20,000 21,531 25,245 35,062
15 30,000 39,394 50,328 69,899
20 40,000 64,683 90,724 126,005
25 50,000 100,485 155,782 216,364
30 60,000 151,171 260,559 361,887
35 70,000 222,927 429,303 596,254
40 80,000 324,512 701,067 973,704
[Without IRA--investment of $1,440 ($2,000 less 28%) earning 7.2% (10%
less 28%)]
[With IRA--No Deduction--investment of $1,440 ($2,000 less 28%) earning
10%]
<CAPTION>
31% Tax Bracket Single - $55,101-$115,000
Joint - $91,851-$140,000
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,475 $ 1,518 $ 2,200
5 10,000 8,467 9,268 13,431
10 20,000 20,286 24,193 35,062
15 30,000 36,787 48,231 69,899
20 40,000 59,821 86,943 126,005
25 50,000 91,978 149,291 216,364
30 60,000 136,868 249,702 361,887
35 70,000 199,536 411,415 596,254
40 80,000 287,021 671,855 973,704
[Without IRA--investment of $1,380 ($2,000 less 31%) earning 6.9% (10%
less 31%)]
[With IRA--No Deduction--investment of $1,380 ($2,000 less 31%) earning
10%]
<CAPTION>
36% Tax Bracket* Single - $115,001-$250,000
Joint - $140,001-$250,000
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,362 $ 1,408 $ 2,200
5 10,000 7,739 8,596 13,431
10 20,000 18,292 22,440 35,062
15 30,000 32,683 44,736 69,899
20 40,000 52,308 80,643 126,005
25 50,000 79,069 138,473 216,364
30 60,000 115,562 231,608 361,887
35 70,000 165,327 381,602 596,254
40 80,000 233,190 623,170 973,704
[Without IRA--investment of $1,280 ($2,000 less 36%) earning 6.4% (10%
less 36%)]
[With IRA--No Deduction--investment of $1,280 ($2,000 less 36%) earning
10%]
<CAPTION>
39.6% Tax Bracket* Single - over $250,000
Joint - over $250,000
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,281 $ 1,329 $ 2,200
5 10,000 7,227 8,112 13,431
10 20,000 16,916 21,178 35,062
15 30,000 29,907 42,219 69,899
20 40,000 47,324 76,107 126,005
25 50,000 70,677 130,684 216,364
30 60,000 101,986 218,580 361,887
35 70,000 143,965 360,137 596,254
40 80,000 200,249 588,117 973,704
[Without IRA--investment of $1,208 ($2,000 less 39.6%) earning 6.04% (10%
less 39.6%)]
[With IRA--No Deduction--investment of $1,208 ($2,000 less 39.6%) earning
10%]
* 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.
<CAPTION>
$2,000 SINGLE INVESTMENT AT A RETURN OF 10% COMPOUNDED ANNUALLY
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 $ 3,595 $ 3,719 $ 3,898 $ 4,008 $ 4,522 $ 5,187
15 4,820 5,072 5,441 5,675 6,799 8,354
20 6,463 6,916 7,596 8,034 10,224 13,455
30 11,618 12,861 14,8031 6,102 23,117 34,899
40 20,884 23,916 28,8493 2,272 52,266 90,519
<CAPTION>
$2,000 INVESTED ANNUALLY AT A RETURN OF 10% COMPOUNDED ANNUALLY
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 $ 28,006 $ 28,581 $ 29,400 $ 29,904 $ 32,192 $ 35,062
15 49,514 51,067 53,314 54,714 61,264 69,899
20 78,351 81,731 86,697 89,838 104,978 126,005
30 168,852 180,566 198,360 209,960 269,546 361,887
40 331,537 364,360 415,973 450,711 641,631 973,704
* 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.
</TABLE>
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.
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 stage where sales
show more definitive highs and lows.
The above chart illustrates the path traditionally
followed by companies that successfully survive the growth
sequence.
FINANCIAL STATEMENTS
The 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.
The Delaware Group includes 22 different funds with a
wide range of investment objectives. Stock funds, income
funds, tax-free funds, money market funds and closed-end
equity funds give investors the ability to create a portfolio
that fits their personal financial goals. For more
information, shareholders of the Fund Classes should contact
their financial adviser or call the Delaware Group at 800-
523-4640, in Philadelphia 215-988-1333 and shareholders of
the Institutional Class should contact the Delaware Group at
800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, 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
-------------------------------------------------------------
INSTITUTIONAL CLASS
-------------------------------------------------------------
CLASSES OF DELAWARE GROUP
VALUE FUND, INC.
-------------------------------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
JANUARY 30, 1995
DELAWARE
GROUP
