<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 33-11419
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 16 X
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AND
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 16
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DELAWARE GROUP VALUE FUND, INC.
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(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 255-2923
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George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
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(Name and Address of Agent for Service)
Approximate Date of Public Offering: November 29, 1996
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It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
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on (date) pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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X on November 29, 1996 pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of Rule 485
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Registrant has registered an indefinite amount of securities
under the Securities Act of 1933 pursuant to Section 24(f)
of the Investment Company Act of 1940. Registrant's 24f-2 Notice
for its most recent fiscal year was filed on January 26, 1996.
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
--- C O N T E N T S ---
This Post-Effective Amendment No. 16 to Registration File No. 33-11419 includes
the following:
1. Facing Page
2. Contents Page
3. Cross-Reference Sheet
4. Part A - Prospectuses*
5. Part B - Statement of Additional Information*
6. Part C - Other Information
7. Signatures
* This Post-Effective Amendment relates to the Registrant's Value Fund -
Value Fund A Class, Value Fund B Class, Value Fund C Class and Value
Fund Institutional Class. This Post-Effective Amendment also relates
to the Registrant's Retirement Income Fund - Retirement Income Fund A
Class, Retirement Income Fund B Class, Retirement Income Fund C Class
and Retirement Income Fund Institutional Class. Shares of each Series
are described in separate prospectuses, however, they share a common
Statement of Additional Information and Part C. The Registrant's Value
Fund A Class, B Class and C Class Prospectus and Value Fund
Institutional Class Prospectus dated January 29, 1996, are
incorporated into this filing by reference to the electronic filing of
those Prospectuses made pursuant to Rule 485(b) on January 29, 1996.
The Supplement to the Value Fund A, B and C Class Prospectus dated
March 15, 1996 that was filed with the Commission on March 15, 1996
pursuant to Rule 497(e) is not incorporated by reference into this
filing. That Supplement will be superseded by the Supplement included
with this filing as of the effective date of this filing.
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
CROSS-REFERENCE SHEET*
PART A**
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
- -------- ----------- ------------
<S> <C> <C> <C>
Value Fund
A Class/ Institutional
B Class/ Class
C Class
1 Cover Page.............................................................. Cover Cover
Page Page
2 Synopsis................................................................ Synopsis; Synopsis;
Summary of Summary of
Expenses Expenses
3 Condensed Financial Information......................................... Financial Financial
Highlights Highlights
4 General Description of Registrant ...................................... Investment Investment
Objective and Objective
Policy; Shares and Policy;
Shares
5 Management of the Fund ................................................. Management of Management
the Fund of the Fund
6 Capital Stock and Other Securities ..................................... The Delaware Dividends
Difference; and
Dividends and Distributions
Distributions; Taxes; Taxes;
Shares Shares
7 Purchase of Securities Being Offered.................................... Cover Page; Cover Page;
Buying Shares; Buying
Calculation of Shares;
Offering Price Calculation
and Net Asset of Net Asset
Value Per Share; Value Per
Management of Share;
the Fund Management
of the Fund
</TABLE>
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
CROSS-REFERENCE SHEET*
PART A**
(Continued)
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
- -------- ----------- ------------
<S> <C> <C> <C>
Value Fund
A Class/ Institutional
B Class/ Class
C Class
8 Redemption or Repurchase................................................ Buying Shares; Buying
Redemption and Shares;
Exchange Redemption
and
Exchange
9 Legal Proceedings....................................................... None None
</TABLE>
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
CROSS-REFERENCE SHEET*
PART A**
(Continued)
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
- -------- ----------- ------------
<S> <C> <C> <C>
Retirement Income Fund
A Class/ Institutional
B Class/ Class
C Class
1 Cover Page.............................................................. Cover Page Cover Page
2 Synopsis................................................................ Synopsis; Synopsis;
Summary of Summary of
Expenses Expenses
3 Condensed Financial Information......................................... Financial Financial
Highlights Highlights
4 General Description of Registrant ...................................... Investment Investment
Objective and Objective
Policy; Shares; and Policy;
Other Investment Shares;
Policies and Other
Risk Considerations Investment
Policies and
Risk
Considerations
5 Management of the Fund ................................................. Management of Management
the Fund of the Fund
6 Capital Stock and Other Securities ..................................... The Delaware Dividends
Difference; and
Dividends and Distributions
Distributions; Taxes;
Taxes; Shares Shares
</TABLE>
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
CROSS-REFERENCE SHEET*
PART A**
(Continued)
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
- -------- ----------- ------------
<S> <C> <C> <C>
Retirement Income Fund
A Class/ Institutional
B Class/ Class
C Class
7 Purchase of Securities Being Offered.................................... Cover Page; Cover Page;
How to Buy Shares; How to Buy
Calculation of Shares;
Offering Price Calculation
and Net Asset of Net Asset
Value Per Share; Value Per
Management of Share;
the Fund Management
of the Fund
8 Redemption or Repurchase................................................ How to Buy Shares; How to Buy
Redemption and Shares;
Exchange Redemption
and
Exchange
9 Legal Proceedings....................................................... None None
</TABLE>
* This filing relates to Registrant's Value Fund A Class, Value Fund B
Class, Value Fund C Class and Value Fund Institutional Class of Value Fund
and the Retirement Income Fund A Class, Retirement Income Fund B Class,
Retirement Income Fund C Class and Retirement Income Fund Institutional
Class of Retirement Income Fund. Shares of each Series are described in
separate prospectuses, however, they share a common Statement of
Additional Information and Part C.
** The Registrant's Value Fund A Class, B Class and C Class Prospectus and
Value Fund Institutional Class Prospectus dated January 29, 1996, are
incorporated into this filing by reference to the electronic filing of
those Prospectuses made pursuant to Rule 485(b) on January 29, 1996. The
Supplement to the Value Fund A, B and C Class Prospectus dated March 15,
1996 that was filed with the Commission on March 15, 1996 pursuant to Rule
497(e) is not incorporated by reference into this filing. That Supplement
will be superseded by the Supplement included with this filing as of the
effective date of this filing.
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
CROSS REFERENCE SHEET
PART B
<TABLE>
<CAPTION>
Location in Statement
Item No. Description of Additional Information
- -------- ----------- -------------------------
<S> <C> <C>
10 Cover Page.............................................................. Cover Page
11 Table of Contents....................................................... Table of Contents
12 General Information and History......................................... General Information
13 Investment Objectives and Policies...................................... Investment Policies and
Portfolio Techniques
14 Management of the Registrant............................................ Officers and Directors
15 Control Persons and Principal Holders of
Securities............................................................ Officers and Directors
16 Investment Advisory and Other Services.................................. Plan Under Rule 12b-1
for the Fund Classes (under
Purchasing Shares);
Investment Management
Agreements; Officers
and Directors; General
Information; Financial
Statements
17 Brokerage Allocation.................................................... Trading Practices and
Brokerage
18 Capital Stock and Other Securities...................................... Capitalization and
Noncumulative Voting
(under General Information)
19 Purchase, Redemption and Pricing of Securities
Being Offered......................................................... Purchasing Shares; Determining
Offering Price and Net Asset
Value; Redemption and
Repurchase; Exchange Privilege
20 Tax Status.............................................................. Accounting and Tax
Issues; Distributions
and Taxes
21 Underwriters ........................................................... Purchasing Shares
22 Calculation of Performance Data......................................... Performance Information
23 Financial Statements.................................................... Financial Statements
</TABLE>
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
CROSS REFERENCE SHEET
PART C
<TABLE>
<CAPTION>
Location in
Item No. Description Part C
- -------- ----------- -----------
<S> <C> <C>
24 Financial Statements and Exhibits....................................... Item 24
25 Persons Controlled by or under Common
Control with Registrant............................................... Item 25
26 Number of Holders of Securities......................................... Item 26
27 Indemnification......................................................... Item 27
28 Business and Other Connections of Investment Adviser.................... Item 28
29 Principal Underwriters.................................................. Item 29
30 Location of Accounts and Records........................................ Item 30
31 Management Services..................................................... Item 31
32 Undertakings............................................................ Item 32
</TABLE>
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
The Registrant's Value Fund A Class, B Class and C Class Prospectus and Value
Fund Institutional Class Prospectus dated January 29, 1996, are incorporated
into this filing by reference to the electronic filing of those Prospectuses
made pursuant to Rule 485(b) on January 29, 1996. The Supplement to the Value
Fund A, B and C Class Prospectus dated March 15, 1996 that was filed with the
Commission on March 15, 1996 pursuant to Rule 497(e) is not incorporated by
reference into this filing. That Supplement will be superseded by the Supplement
included with this filing as of the effective date of this filing.
<PAGE>
November 29, 1996
Delaware Group Value Fund, Inc.
Value Fund A Class
Value Fund B Class
Value Fund C Class
Supplement to Prospectus dated January 29, 1996
Additional Series
Delaware Group Value Fund, Inc. consists of two series, the Value Fund series
(the "Fund") and the Retirement Income Fund series. For purposes of the election
of directors of Delaware Group Value Fund, Inc., holders of more than 50% of the
aggregate outstanding shares of the Fund and the Retirement Income Fund series
can elect 100% of the directors if they so choose. Shareholders of more than 10%
of the aggregate outstanding shares of the Fund and the Retirement Income Fund
series may request that a special meeting be called to consider the removal of a
director.
FINANCIAL HIGHLIGHTS
The following unaudited financial highlights for the Value Fund A Class, Value
Fund B Class and Value Fund C Class are derived from the unaudited financial
statements of Delaware Group Value Fund, Inc. for the six-month period ended May
31, 1996. The data should be read in conjunction with the financial statements
and related notes which are incorporated into Part B by reference to the Fund's
Semi-Annual Report for the six months ended May 31, 1996.
<PAGE>
<TABLE>
<CAPTION>
Value Fund Value Fund Value Fund
A Class B Class C Class
Period Period Period
12/1/95 12/1/95 12/1/95
through through through
5/31/96(1) 5/31/96(1) 5/31/96(1)
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Net asset value, beginning of period........................... $22.760 $22.590 $22.760
Income from investment operations
Net investment income (loss)(2) ............................... 0.036 (0.044) (0.043)
Net gains on securities
(both realized and unrealized)........................... 2.574 2.559 2.563
----- ----- -----
Total from investment operations......................... 2.610 2.515 2.520
----- ----- -----
Less distributions
Dividends from net investment income........................... (0.240) (0.095) (0.280)
Distributions from capital gains............................... (0.890) (0.890) (0.890)
Returns of capital ............................................ none none none
Total distributions...................................... (1.130) (0.985) (1.170)
------- ------- -------
Net asset value, end of period................................. $24.240 $24.120 $24.110
======= ======= =======
- --------------------------------------------------
Total return ............................................... 11.97%(3) 11.55%(4) 11.57%(5)
- ------------
- --------------------------------------------------
Ratios/supplemental data
- ------------------------
Net assets, end of period (000's omitted)...................... $186,605 $9,517 $2,111
Ratio of expenses to average daily net assets.................. 1.46% 2.16% 2.16%
Ratio of net investment income (loss) to average daily net
assets ...................................................... 0.31% (0.39%) (0.39%)
Portfolio turnover rate........................................ 95% 95% 95%
</TABLE>
- ----------
(1) Ratios have been annualized but total return has not been annualized.
(2) The six months ended 5/31/96 per share information was based on the average
shares outstanding method.
(3) Does not include current maximum sales charge of 4.75% nor the 1% limited
contingent deferred sales charge that would apply in the event of certain
redemptions within 12 months of purchase.
(4) Does not include contingent deferred sales charge of 1%-4%, depending upon
the holding period.
(5) Does not include contingent deferred sales charge of 1%.
<PAGE>
The following supplements the information that appears in the section of the
Prospectus "Buying Shares":
Until further notice, investors who held shares in any Delaware Group fund as of
December 1, 1995, may purchase Class A Shares of any of the funds referenced
above at net asset value through the Delaware Group Asset Planner service if
such shares are being purchased with proceeds from the redemption of shares of a
fund (other than a money market fund) outside of the Delaware Group of Funds.
The Investment Application and check for such a transaction should note that the
investment is being made under the "NAV/Asset Planner Accommodation Program."
In addition, beginning March 15, 1996, Class A Shares of any of the funds
referenced above, except shares of tax-free funds, may be purchased at net asset
value in an Individual Retirement Account (IRA) through the Delaware Group Asset
Planner service if the assets being invested are being transferred from an
existing IRA held outside of the Delaware Group or are part of a distribution
received from an employer-sponsored or other retirement plan.
Generally, there is a $35 annual maintenance fee per Strategy selected through
the Asset Planner service. However, for all IRA accounts established with the
same Social Security number under the asset planner service, the annual
maintenance fee will be limited to $35 irrespective of the number of Strategies
selected. For example, if a shareholder transfers regular IRA assets and
rollover assets from a qualified plan into an IRA through the Delaware Group
Asset Planner Service and, to avoid commingling, maintains more than one
Strategy registered under the same Social Security number, only one $35 annual
fee needs to be paid.
Exchanges from existing Delaware Group accounts into the Asset Planner service
may be made at net asset value under the circumstances described under
"Investing by Exchange" in the Funds' Prospectuses. Exchanges from existing,
non-retirement Delaware Group accounts into the Asset Planner service require
two business days to be processed in order to minimize the potential taxable
events related to the transfer.
<PAGE>
November 29, 1996
Delaware Group Value Fund, Inc.
Value Fund Institutional Class
Supplement to Prospectus dated January 29, 1996
Additional Series
Delaware Group Value Fund, Inc. consists of two series, the Value Fund series
(the "Fund") and the Retirement Income Fund series. For purposes of the election
of directors of Delaware Group Value Fund, Inc., holders of more than 50% of the
aggregate outstanding shares of the Fund and the Retirement Income Fund series
can elect 100% of the directors if they so choose. Shareholders of more than 10%
of the aggregate outstanding shares of the Fund and the Retirement Income Fund
series may request that a special meeting be called to consider the removal of a
director.
FINANCIAL HIGHLIGHTS
The following unaudited financial highlights for the Value Institutional Class
are derived from the unaudited financial statements of Delaware Group Value
Fund, Inc. for the six-month period ended May 31, 1996. The data should be read
in conjunction with the financial statements and related notes which are
incorporated into Part B by reference to the Fund's Semi-Annual Report for the
six months ended May 31, 1996.
<PAGE>
Value Fund
Institutional
Class
Period
12/1/95
through
5/31/96(1)
(Unaudited)
Net asset value, beginning of period....................... $22.860
Income from investment operations
- ---------------------------------
Net investment income(2)................................... 0.070
Net gains on securities
(both realized and unrealized).......................... 2.580
-----
Total from investment operations........................ 2.650
-----
Less distributions
- ------------------
Dividends from net investment income....................... (0.300)
Distributions from capital gains........................... (0.890)
Returns of capital......................................... none
Total distributions..................................... (1.190)
-------
Net asset value, end of period............................. $24.320
=======
Total return............................................... 12.12%
- ------------
- -------------------------------------------------
Ratios/supplemental data
- -------------------------------------------------
Net assets, end of period (000's omitted).................. $8,223
Ratio of expenses to average daily net assets.............. 1.16%
Ratio of net investment income to average daily net assets. 0.61%
Portfolio turnover rate.................................... 95%
- ------------------------------
(1) Ratios have been annualized but total return has not been annualized.
(2) The six months ended 5/31/96 per share information was based on the average
shares outstanding method.
<PAGE>
- ---------------------------------------------
RETIREMENT INCOME FUND
- ---------------------------------------------
A CLASS
B CLASS
C CLASS
- ---------------------------------------------
PROSPECTUS
- ---------------------------------------------
NOVEMBER , 1996
DELAWARE
GROUP
--------
<PAGE>
The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, tax-free funds, money market funds,
global and international funds and closed-end equity funds give investors the
ability to create a portfolio that fits their personal financial goals. For more
information, contact your financial adviser or call Delaware Group at
800-523-4640.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Bankers Trust Company
One Bankers Trust Plaza
New York, NY 10006
<PAGE>
RETIREMENT INCOME FUND A CLASS SHARES
RETIREMENT INCOME FUND B CLASS SHARES PROSPECTUS
RETIREMENT INCOME FUND C CLASS SHARES NOVEMBER __, 1996
-----------------------------------------
1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance:
Nationwide 800-523-4640
Information on Existing Accounts:
(SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Representatives of Financial Institutions:
Nationwide 800-659-2259
This Prospectus describes the Retirement Income Fund A Class of shares
("Class A Shares"), the Retirement Income Fund B Class of shares ("Class B
Shares") and the Retirement Income Fund C Class of shares ("Class C Shares")
(individually, a "Class" and collectively, the "Classes") of the Retirement
Income Fund series (the "Fund") of Delaware Group Value Fund, Inc. ("Value Fund,
Inc."), a professionally-managed mutual fund of the series type. The objective
of the Fund is to seek to provide investors with high current income and the
potential for capital appreciation.
THIS FUND HAS THE AUTHORITY TO INVEST UP TO ALL OF ITS NET ASSETS IN
LOWER RATED SECURITIES, COMMONLY KNOWN AS "JUNK BONDS" AND "LOWER RATED EQUITY
SECURITIES." SUCH SECURITIES INVOLVE GREATER RISKS, INCLUDING DEFAULT RISKS,
THAN HIGHER RATED SECURITIES. PURCHASERS SHOULD CAREFULLY ASSESS THESE RISKS
BEFORE INVESTING IN THIS FUND. SEE INVESTMENT OBJECTIVE AND POLICIES, SPECIAL
RISK CONSIDERATIONS, AND APPENDIX B--RATINGS.
This Prospectus sets forth information that you should read and
consider before you invest. Please retain it for future reference. Part B of
Value Fund, Inc.'s registration statement, dated November , 1996, as it may be
amended from time to time, contains additional information about the Fund and
has been filed with the Securities and Exchange Commission. Part B is
incorporated by reference into this Prospectus and is available, without charge,
by writing to Delaware Distributors, L.P. at the above address or by calling the
above telephone numbers.
-1-
<PAGE>
The Fund also offers the Retirement Income Fund Institutional Class,
which is available for purchase only by certain investors. A prospectus for the
Retirement Income Fund Institutional Class can be obtained by writing to
Delaware Distributors, L.P. at the above address or by calling the above
numbers.
TABLE OF CONTENTS
Cover Page Classes of Shares
Synopsis How to Buy Shares
Summary of Expenses Redemption and Exchange
Investment Objective and Policies Dividends and Distributions
Suitability Taxes
Investment Strategy Calculation of Offering Price and
Special Risk Considerations Net Asset Value Per Share
High-Yield Securities Management of the Fund
Lower Rated Convertible Securities Other Investment Policies and
and Preferred Stock Risk Considerations
Foreign Securities Appendix A--Investment Illustrations
The Delaware Difference Appendix B--Ratings
Plans and Services Appendix C--Retail Classes Offered
Retirement Planning
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND ARE NOT BANK
OR CREDIT UNION DEPOSITS.
-2-
<PAGE>
SYNOPSIS
Investment Objective
The objective of the Fund is to seek to provide investors with high
current income and an investment that has the potential for capital
appreciation. The Fund seeks to achieve its objective by investing principally
in equity securities which generate income through dividends or otherwise
("income generating equity securities") and debt securities including, but not
limited to, dividend paying common stocks, securities of real estate investment
trusts, preferred stocks, warrants, rights, convertible securities,
non-convertible debt securities, high-yield, high risk securities, investment
grade fixed-income securities, U.S. government securities and foreign equity and
fixed-income securities. For further details, see Investment Objective and
Policies.
Risk Factors
Prospective investors should consider the following:
1. The Fund has the authority to invest up to all of its net assets in
lower rated securities. Up to 45% of its net assets may be invested in
high-yield, higher risk fixed-income securities ("junk bonds"). In addition, the
Fund may invest in certain income generating equity securities such as
convertible securities and preferred stock, rated below investment grade. These
securities generally will have speculative characteristics similar to those of
lower rated fixed-income securities. The Fund may invest an unrestricted portion
of its total assets in such lower rated income generating equity securities.
Such securities may increase the risks of an investment in this Fund. See
High-Yield Securities under Special Risk Considerations.
2. Investing in securities of foreign governments and non-United States
companies which are generally denominated in foreign currencies and the
utilization of forward foreign currency exchange contracts involve certain risk
and opportunity considerations not typically associated with investing in United
States government securities and securities of United States companies. See
Special Risk Considerations and Other Investment Policies and Risk
Considerations.
3. The Fund has the ability to engage in options transactions for
hedging purposes to counterbalance portfolio volatility. While the Fund does not
engage in options transactions for speculative purposes, there are risks which
result from the use of options, and an investor should carefully review the
descriptions of these risks in this Prospectus. Certain options may be
considered to be derivative securities. See Options under Other Investment
Policies and Risk Considerations.
4. The Fund may invest up to 20% of its net assets in issuers organized
or having a majority of their assets or deriving a majority of their operating
income in foreign countries. Investment in foreign securities involve risks
which are in addition to those risks inherent in domestic investments. See
Foreign Securities under Special Risk Considerations.
-3-
<PAGE>
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") furnishes investment
management services to the Fund, subject to the supervision and direction of
Value Fund, Inc.'s Board of Directors. The Manager provides investment
management services to certain other funds in the Delaware Group. Delaware
Distributors, L.P. (the "Distributor") is the national distributor for the Fund
and for all of the other mutual funds in the Delaware Group. Delaware Service
Company, Inc. (the "Transfer Agent") is the shareholder servicing, dividend
disbursing, accounting services and transfer agent for the Fund and for all of
the other mutual funds in the Delaware Group. See Summary of Expenses and
Management of the Fund for other information regarding the Manager and the fees
payable under the Fund's Investment Management Agreement.
Sales Charges
The price of Class A Shares includes a maximum front-end sales charge
of 4.75% of the offering price, which is equivalent to 4.91% of the amount
invested, based on an initial net asset value of $5.50 per share. The front-end
sales charge is reduced on certain transactions of at least $100,000 but under
$1,000,000. There is no front-end sales charge on purchases of $1,000,000 or
more. Class A Shares are subject to annual 12b-1 Plan expenses.
The price of Class B Shares is equal to the net asset value per share.
Class B Shares are subject to a CDSC of: (i) 4% if shares are redeemed within
two years of purchase; (ii) 3% if shares are redeemed during the third or fourth
year following purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; and (iv) 1% if shares are redeemed during the sixth year
following purchase. Class B Shares are subject to annual 12b-1 Plan expenses
for approximately eight years after purchase. See Deferred Sales Charge
Alternative - Class B Shares and Automatic Conversion of Class B Shares under
Classes of Shares.
The price of Class C Shares is equal to the net asset value per share.
Class C Shares are subject to a CDSC of 1% if shares are redeemed within 12
months of purchase. Class C Shares are subject to annual 12b-1 Plan expenses for
the life of the investment.
See Classes of Shares and Distribution (12b-1) and Service under
Management of the Fund.
Purchase Amounts
Generally, the minimum initial investment in any Class is $1,000.
Subsequent investments must generally be at least $100.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. An investor may exceed these maximum purchase
limitations for Class B Shares and Class C Shares by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of
-4-
<PAGE>
$100,000 or more in Class A Shares, and that Class A Shares are subject to lower
annual 12b-1 Plan expenses than Class B and Class C Shares and generally are
not subject to a CDSC. The minimum and maximum purchase amounts for retirement
plans may vary. See How to Buy Shares.
Redemption and Exchange
Class A Shares of the Fund may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange request.
Neither the Fund nor the Distributor assesses a charge for redemptions or
exchanges of Class A Shares, except for certain redemptions of shares purchased
at net asset value, which may be subject to a CDSC if a dealer's commission was
paid in connection with such purchases. See Front-End Sales Charge Alternative -
Class A Shares under Classes of Shares.
Class B Shares and Class C Shares may be redeemed or exchanged at the
net asset value calculated after receipt of the redemption or exchange request
subject, in the case of redemptions, to any applicable CDSC. Neither the Fund
nor the Distributor assesses any charges other than the CDSC for redemptions or
exchanges of Class B or Class C Shares. There are certain limitations on an
investor's ability to exchange shares between the various classes of shares that
are offered. See Redemption and Exchange.
Open-End Investment Company
Value Fund, Inc. was organized as a Maryland corporation in 1987 and is
an open-end management investment company. The Fund's portfolio of assets is
diversified as defined by the Investment Company Act of 1940 (the "1940 Act").
-5-
<PAGE>
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to Class A, Class B and Class C Shares follows:
Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares
- ------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price). . . . . . . . . 4.75% None None
Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of offering price) . . . None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds,
as applicable). . . . . . . . . . . None* 4.00%* 1.00%*
Redemption Fees. . . . . . . . . . . . None** None** None**
Annual Operating Expenses
(as a percentage of Class A Class B Class C
average daily net assets) Shares Shares Shares
- ------------------------------------------------------------------------
Management Fees . . . . . . . . . . .
(after voluntary waivers) 0.00% 0.00% 0.00%
12b-1 Plan Expenses
(including service fees)
(after voluntary waivers). . . . . 0.00%+ 0.00%+ 0.00%+
Other Operating Expenses++. . . . . . 1.25% 1.25% 1.25%
----- ----- -----
Total Operating Expenses+++. . .
(after voluntary waivers) 1.25% 1.25% 1.25%
===== ===== =====
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in each Class will
bear directly or indirectly.
*Class A purchases of $1 million or more may be made at net asset
value. However, if in connection with any such purchase a dealer commission is
paid to the financial adviser through whom such purchase is effected, a CDSC of
1% will be imposed on certain
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<PAGE>
redemptions within 12 months of purchase ("Limited CDSC"). Class B Shares are
subject to a CDSC of: (i) 4% if shares are redeemed within two years of
purchase; (ii) 3% if shares are redeemed during the third or fourth year
following purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; (iv) 1% if shares are redeemed during the sixth year
following purchase; and (v) 0% thereafter. Class C Shares are subject to a CDSC
of 1% if the shares are redeemed within 12 months of purchase. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange; Deferred Sales Charge Alternative -
Class B Shares and Level Sales Charge Alternative - Class C Shares under Classes
of Shares.
**CoreStates Bank, N.A. currently charges $7.50 per redemption for redemptions
payable by wire.
+Class A Shares, Class B Shares and Class C Shares are subject to separate 12b-1
Plans. Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by rules of the National Association
of Securities Dealers, Inc. (the "NASD"). The annual 12b-1 Plan expenses for the
Class A Shares have been set by the Board of Directors at .25% of the average
daily net assets of such Class. The maximum annual 12b-1 Plan expenses permitted
under the 12b-1 Plan for Class A Shares are .30% of the average daily net assets
of such Class. See Distribution (12b-1) and Service under Management of the
Fund.
++Because the Fund has no operating history, "Other Operating Expenses" for all
Classes are estimates based on expenses expected to be incurred during the
Fund's first fiscal year.
+++"Total Operating Expenses" and "Other Operating Expenses" for the Class A
Shares, the Class B Shares and the Class C Shares are based on estimated amounts
for the first full fiscal year of the Classes, after giving effect to the
voluntary expense waiver. The Distributor has elected voluntarily to waive its
right to receive 12b-1 Plan Fees (including service fees) from the commencement
of the public offering of the Classes through _________, 1998. The Manager has
elected voluntarily to waive that portion, if any, of the annual management fees
payable by the Fund and to pay certain expenses of the Fund to the extent
necessary to ensure that the Total Operating Expenses of each Class of the Fund,
excluding each such Class' 12b-1 fees, do not exceed 1.25%, from the
commencement of the public offering of the Classes through ___________, 1998. If
the voluntary expense waivers were not in effect, it is estimated that for the
first full year, the Total Operating Expenses, as a percentage of average daily
net assets, would be 0.00%, 0.00%, and 0.00%, respectively, for the Class A
Shares, the Class B Shares and the Class C Shares, reflecting management fees of
0.75%.
For expense information about the Retirement Income Fund Institutional
Class of shares, see the separate prospectus relating to that class.
-7-
<PAGE>
The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return, (2) redemption and no redemption at the end of each time period
and (3) for Class B Shares and Class C Shares, payment of a CDSC at the time of
redemption, if applicable.
Assuming Redemption Assuming No Redemption
1 year 3 years 1 year 3 years
------ ------- ------ -------
Class A Shares $60(1) $85 $60 $85
Class B Shares(2) $53 $70 $13 $40
Class C Shares $23 $40 $13 $40
(1) Generally, no redemption charge is assessed upon redemption of Class A
Shares. Under certain circumstances, however, a Limited CDSC, which has
not been reflected in this calculation, may be imposed on certain
redemptions within 12 months of purchase. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
(2) At the end of approximately eight years after purchase, Class B Shares
will be automatically converted into Class A Shares. The example above
does not assume conversion of Class B Shares since it reflects figures
only for one and three years. See Automatic Conversion of Class B
Shares under Classes of Shares for a description of the automatic
conversion feature.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
-8-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
SUITABILITY
The Fund may be suitable for the investor interested in high current
income and a potential for capital appreciation. The Manager believes that the
Fund's combined investments in income generating equity securities and debt
securities could provide an income return which would exceed that of an
investment exclusively in equity securities. Because the Fund will invest at
least 50% of its total assets in income generating equity and equity equivalent
securities, the Manager also believes that investors will have the opportunity
to benefit from capital appreciation. The net asset value per share of each
Class may fluctuate in response to the condition of individual companies and
general market and economic conditions and, as a result, the Fund is not
appropriate for a short-term investor. The Fund cannot assure a specific yield,
rate of return or that principal will be protected. However, through the
cautious selection and supervision of its portfolio, the Manager will strive to
achieve the Fund's investment objective.
The types of securities in which the Fund may invest are subject to
price fluctuations particularly due to changes in interest rates. Investors
should consider asset value fluctuation, as well as yield, in making an
investment decision. While investments in unrated, lower-rated and certain
restricted securities have the potential for higher yields, they are more
speculative and increase the credit risk of the Fund's portfolio. Changes in the
market value of portfolio securities will not affect interest income from such
securities, but will be reflected in a Class' net asset value. In addition,
investments in foreign securities involve special risks, including those related
to currency fluctuations, as well as to political, economic and social
situations different from and potentially more volatile than those in the United
States. Investors should be willing to accept the risks, including the risk of
net asset value fluctuations, associated with investing in these types of
securities. See Special Risk Considerations and Other Investment Policies and
Risk Considerations for a complete discussion of the risk factors affecting the
Fund's portfolio securities.
Investors should not consider a purchase of Fund shares as equivalent
to a complete investment or retirement program. The Delaware Group includes a
family of funds generally available through registered investment dealers which
may be used in concert with Fund shares to create a more complete investment or
retirement program.
Ownership of Fund shares can reduce the bookkeeping and administrative
inconveniences that would be connected with direct purchases of the types of
securities in which the Fund invests.
INVESTMENT STRATEGY
The objective of the Fund is to seek to provide investors with high
current income and an investment that has the potential for capital
appreciation. The Manager will seek to achieve this objective by investing in a
combination of income generating equity securities and debt securities
including, but not limited to, dividend paying common stocks, securities of real
estate investment trusts, preferred stocks, warrants, rights, convertible
securities, non-convertible debt securities, high-yield, high risk securities,
investment grade fixed-income
-9-
<PAGE>
securities, U.S. government securities and foreign equity and fixed-income
securities. Under normal circumstances, at least 50% of the Fund's total assets
will be invested in income generating equity securities. In making investments
in income generating equity securities, the Fund may invest an unrestricted
portion of its total assets in convertible securities and preferred stock rated
below investment grade. While debt securities may comprise up to 50% of the
Fund's total assets, no more than 45% of the Fund's total assets will be
invested in high-yield, high risk debt securities. No more than 25% of the
Fund's total assets will be invested in any one industry sector nor, as to 75%
of the Fund's total assets, will more than 5% be invested in securities of any
one issuer. The Fund may invest up to 20% of its total assets in foreign equity
and debt securities. The Fund will not, however, invest more than 5% of its
total assets in securities of issuers principally located or principally
operating in markets of emerging countries.
Within the percentage guidelines set forth above, the Manager will
determine the proportion of the Fund's assets that will be allocated to income
generating equity securities and equity equivalents and to debt securities,
based on its analysis of economic and market conditions and its assessment of
the income and potential for appreciation that can be achieved from investment
in such asset classes. It is expected that the proportion of the Fund's total
assets invested in income generating equity securities and equity equivalent
securities will vary from 50% to 100% of the Fund's total assets. The proportion
of the Fund's total assets in debt securities will correspondingly vary from 0%
to 50% of the Fund's total assets.
The following is a more detailed description of some of the securities
in which the Fund may invest.
Common Stock
Common stock is generally considered to be shares of a corporation that
entitle the holder to a pro-rata share of the profits of the corporation, if
any, without a preference over any other shareholder or class of shareholders,
including holders of the corporation's preferred stock and other senior equity.
Common stock usually carries with it the right to vote and frequently an
exclusive right to do so. Holders of common stock also have the right to
participate in the remaining assets of the corporation after all other claims
are paid, including those of debt securities and preferred stock. In selecting
common stocks for investment, the Manager will focus primarily on a security's
dividend-paying capacity rather than on its potential for appreciation.
Preferred Stock
Generally, preferred stock receives dividends prior to distributions on
common stock and usually has a priority of claim over common stockholders if the
issuer of the stock is liquidated. Unlike common stock, preferred stock does not
usually have voting rights; preferred stock, in some instances, is convertible
into common stock. Dividends on typical preferred stock are cumulative, causing
dividends to accrue even if not declared by the board of directors. There is,
however, no assurance that dividends will be declared by the boards of directors
of issuers of the preferred stocks in which the Fund invests. Preferred stock in
which the Fund may invest may be rated below investment grade (i.e., "Ba" or
lower by
-10-
<PAGE>
Moody's Investors Service, Inc. ("Moody's") or "BB" or lower by Standard &
Poor's Ratings Group ("S&P") or similarly rated by other comparable rating
agencies) or, if unrated, determined to be of comparable quality by the Manager.
Convertible Securities
Traditional convertible securities include corporate bonds, notes and
preferred stocks that may be converted into or exchanged for common stock, and
other securities that also provide an opportunity for equity participation.
These securities are generally convertible either at a stated price or a stated
rate (that is, for a specific number of shares of common stock or other
security). As with other fixed-income securities, the price of a convertible
security to some extent varies inversely with interest rates. While providing a
fixed-income stream (generally higher in yield than the income derivable from a
common stock but lower than that afforded by a non-convertible debt security), a
convertible security also affords the investor an opportunity, through its
conversion feature, to participate in the capital appreciation of the common
stock into which it is convertible. As the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis and so may not experience market value declines to the same extent as the
underlying common stock. When the market price of the underlying common stock
increases, the price of a convertible security tends to rise as a reflection of
the value of the underlying common stock. To obtain such a higher yield, the
Fund may be required to pay for a convertible security an amount in excess of
the value of the underlying common stock. Common stock acquired by the Fund upon
conversion of a convertible security will generally be held for so long as the
Manager anticipates such stock will provide the Fund with opportunities which
are consistent with the Fund's investment objectives and policies. Convertible
securities in which the Fund may invest may be rated below investment grade
(i.e., "Ba" or lower by Moody's or "BB" or lower by S&P or similarly rated by
other comparable rating agencies) or, if unrated, determined to be of comparable
quality by the Manager.
Real Estate Investment Trust Securities
Real Estate Investment Trusts ("REITs") are pooled investment vehicles
which invest primarily in income-producing real estate or real estate related
loans or interests. REITs are generally classified as equity REITs, mortgage
REITs or a combination of equity and mortgage REITs. Equity REITs invest the
majority of their assets directly in real property and derive income primarily
from the collection of rents. Equity REITs can also realize capital gains by
selling properties that have appreciated in value. Mortgage REITs invest the
majority of their assets in real estate mortgages and derive income from the
collection of interest payments. Like investment companies such as Value Fund,
Inc., REITs are not taxed on income distributed to shareholders provided they
comply with several requirements of the Internal Revenue Code (the "Code").
REITs are subject to substantial cash flow dependency, defaults by borrowers,
self-liquidation, and the risk of failing to qualify for tax-free pass-through
of income under the Code, and/or maintain exemptions from the 1940 Act. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended.
-11-
<PAGE>
REITs invest all of their assets in the real estate and real estate
related sectors of the economy, and are subject to the risks of financing
projects. REITs may have limited financial resources, may trade less frequently
and in a limited volume, and are more volatile than the high-yield, high risk
securities in which the Fund may also invest.
High-Yield, High Risk Securities
Debt Securities
High-yield, high risk debt securities, like all debt securities,
represent money borrowed that must be repaid and has a fixed amount, a specific
maturity or maturities and usually a specific rate of interest or original
purchase discount. Unlike common and preferred stock, debt securities, including
high-yield, high risk debt securities, do not represent an equity interest in
the issuer. However, debt securities have a priority claim over stockholders if
the issuer is liquidated. The Fund may invest in a wide variety of debt
securities, although it is anticipated that under normal market conditions, the
Fund primarily will invest in high-yield corporate debt obligations, including
zero coupon bonds and pay-in-kind securities ("PIKs"), debentures, convertible
debentures, corporate notes (including convertible notes) and units consisting
of bonds with stock or warrants to buy stock attached. See Zero Coupon Bonds and
Pay-In-Kind Bonds under Other Investment Policies and Risk Considerations.
The Fund will invest in both rated and unrated bonds. The rated bonds
that the Fund may purchase in this sector of its portfolio will be rated BBB or
lower by Standard & Poor's Ratings Group ("S&P") or Fitch Investors Service,
Inc. ("Fitch"), Baa or lower by Moody's Investors Service, Inc. ("Moody's"), or
similarly rated by another nationally recognized statistical rating
organization. See Appendix B to this Prospectus for more rating information and
High-Yield Securities under Special Risk Considerations for a description of the
risks associated with investing in lower-rated fixed-income securities. Unrated
bonds may be more speculative in nature than rated bonds.
Convertible Securities and Preferred Stock
The Fund may invest in convertible securities and preferred stock rated
below investment grade or which are unrated but are of comparable quality as
determined by the Manager. The Fund includes these securities in its income
generating equity securities category and they are in addition to the
high-yield, high risk debt securities discussed above. Such securities are
judged to have speculative elements and may be subject to greater risks with
respect to the timely repayment of principal and timely payment of interest and
dividends. See Investment Objectives and Policies--Investment Strategy and
Special Risk Considerations. Also see Lower Rated Convertible Securities and
Preferred Stock under Special Risk Considerations.
Foreign Securities
The Fund may invest up to 20% of its total assets in securities of
issuers organized or having a majority of their assets or deriving a majority of
their operating income in foreign
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<PAGE>
countries. These income generating equity securities and debt securities include
foreign government securities, equity securities and debt obligations of foreign
companies, and securities issued by supranational entities. A supranational
entity is an entity established or financially supported by the national
governments of one or more countries to promote reconstruction or development.
Examples of supranational entities include, among others, the International Bank
for Reconstruction and Development (more commonly known as the World Bank), the
European Economic Community, the European Coal and Steel Community, the European
Investment Bank, the Inter-Development Bank, the Export-Import Bank and the
Asian Development Bank.
The Fund may invest in sponsored and unsponsored American Depository
Receipts, European Depositary Receipts, or Global Depositary Receipts
("Depositary Receipts"). Depositary Receipts are receipts typically issued by a
bank or trust company which evidence ownership of underlying securities issued
by a foreign corporation. "Sponsored" Depositary Receipts are issued jointly by
the issuer of the underlying security and a depository, and "unsponsored"
Depositary Receipts are issued without the participation of the issuer of the
deposited security. The Fund may also invest in Brady Bonds, which are described
more fully under Foreign Securities in the Special Risk Considerations section
of this Prospectus.
The Fund may invest in securities issued in any currency and may hold
foreign currencies. Securities of issuers within a given country may be
denominated in the currency of another country or in multinational currency
units, such as the European Currency Unit. The Fund may, from time to time,
purchase or sell foreign currencies and/or engage in forward foreign currency
transactions in order to expedite settlement of Fund transactions and to
minimize currency value fluctuations. See Other Investment Policies and Risk
Considerations for a further description of the Fund's foreign currency
transactions.
While the Fund may purchase securities of issuers in any foreign
country, developed and underdeveloped, no more than 5% of the Fund's assets may
be invested in direct obligations or equity securities of issuers located in
emerging market countries. See Emerging Market Securities under Special Risk
Considerations.
The Fund will invest in both rated and unrated foreign securities. The
rated securities that the Fund may purchase in the international sector of its
portfolio may include those rated BBB or lower by S&P or Fitch, Baa or lower by
Moody's, or similarly rated by another nationally reorganized statistical rating
organization. See Appendix B to this Prospectus for more rating information and
Foreign Securities and High-Yield Securities under Special Risk Considerations
for a description of the risks associated with investing in foreign securities
and lower-rated securities.
The Fund may also invest in zero coupon bonds, purchase shares of other
investment companies and may engage in short sales. See Zero Coupon Bonds and
Pay-In-Kind Bonds and Investment Company Securities under Other Investment
Polices and Risk Considerations.
* * *
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<PAGE>
For a description of the Fund's other investment policies and for a
further description of some of the policies described above, see Other
Investment Policies and Risk Considerations.
In unusual market conditions, in order to meet redemption requests, for
temporary defensive purposes, and pending investment or at such other times when
suitable income generating equity or debt securities are not available, the Fund
may hold a substantial portion of its assets in (i) cash, (ii) debt securities
issued by the U.S. government, its agencies or instrumentalities, (iii)
commercial paper, (iv) certificates of deposit and bankers' acceptances or
repurchase agreements with respect to any of the foregoing investments. The Fund
will only invest in commercial paper of companies rated "A-2" or better by S&P
or "P-2" or better by Moody's or similarly rated by another comparable rating
agency or, if not so rated, of equivalent investment quality as determined by
the Manager. See Appendix B to this Prospectus for more rating information.
Although the Fund will constantly strive to attain its objective, there
can be no assurance that it will be attained.
The Fund's investment objective, and its designation as an open-end
investment company and as a diversified fund, may not be changed unless
authorized by the vote of a majority of the Fund's outstanding voting
securities. A "majority vote of the outstanding voting securities" is the vote
by the holders of the lesser of a) 67% or more of the Fund's voting securities
present in person or represented by proxy if the holders of more than 50% of the
outstanding voting securities of the Fund are present or represented by proxy;
or b) more than 50% of the outstanding voting securities. Part B lists other
more specific investment restrictions of the Fund which may not be changed
without a majority shareholder vote.
The remaining investment policies of the Fund not identified above or
in Part B are not fundamental and may be changed by the Board of Directors of
Value Fund, Inc. without a shareholder vote.
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<PAGE>
SPECIAL RISK CONSIDERATIONS
Generally
The Fund may invest a substantial portion of its assets in fixed-income
securities. The market values of fixed-income securities generally fall when
interest rates rise and, conversely, rise when interest rates fall. Lower-rated
and unrated fixed-income securities tend to reflect short-term corporate and
market developments to a greater extent than higher-rated fixed-income
securities, which react primarily to fluctuations in the general level of
interest rates. These lower-rated or unrated securities generally have higher
yields, but, as a result of factors such as reduced creditworthiness of issuers,
increased risk of default and a more limited and less liquid secondary market,
are subject to greater volatility and risk of loss of income and principal than
are higher-rated securities. The Manager will attempt to reduce such risk
through portfolio diversification, credit analysis, and attention to trends in
the economy, industries and financial markets.
High-Yield Securities
The Fund may invest up to 45% of its total assets in bonds rated BBB or
lower by S&P or Fitch, Baa or lower by Moody's, or similarly rated by another
rating organization, and in unrated corporate bonds. See Appendix B to this
Prospectus for more rating information. Investing in these so-called "junk" or
"high-yield" 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 junk bonds. In
addition to the considerations discussed elsewhere in this Prospectus, those
risks include the following:
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 a Class' net asset value.
Redemptions. If, as a result of volatility in the high-yield market or other
factors, the Fund experiences substantial net redemptions of the Fund's shares
for a sustained period of time (i.e., more shares of the Fund are redeemed than
are purchased), the Fund may be required to sell certain of its high-yield
securities without regard to the investment merits of the securities
-15-
<PAGE>
to be sold. If the Fund sells a substantial number of securities to generate
proceeds for redemptions, the asset base of the Fund will decrease and the
Fund's expense ratios may increase.
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 that 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 privately placed high-yield
securities that the Fund may purchase are particularly susceptible to the
liquidity and valuation risks outlined above.
Lower Rated Convertible Securities and Preferred Stock
The Fund may invest in lower rated convertible securities and preferred
stock (i.e., "Ba" or lower for convertible securities or "ba" or lower for
preferred stock by Moody's or "BB" or lower for convertible securities or
preferred stock by S&P or similarly rated by other comparable rating agencies)
or, if unrated, determined to be of comparable quality by the Manager. The Fund
may have difficulty disposing of such securities because the trading market for
such securities may be thinner than the market for higher rated convertible
securities and preferred stock. To the extent a secondary trading market for
these securities does exist, it generally is not as liquid as the secondary
trading market for higher rated securities. The lack of a liquid secondary
market as well as adverse publicity with respect to these securities, may have
an adverse impact on market price and the Fund's ability to dispose of
particular issues in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
Fund to obtain accurate market quotations for purposes of pricing the Fund's
portfolio and calculating its net asset value. The market behavior of
convertible securities and preferred stocks in lower rating categories is often
more volatile than that of higher quality securities. Lower quality convertible
securities and preferred stocks are judged by Moody's and S&P to have
speculative elements or characteristics; their future cannot be considered as
well assured and earnings and asset protection may be moderate or poor in
comparison to investment grade securities. In addition, such lower quality
securities face major ongoing uncertainties or exposure to adverse business,
financial or economic conditions, which could lead to inadequate capacity to
meet timely
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<PAGE>
payments. A description of the ratings used by Moody's and S&P for such
securities is set forth in Appendix A to this Prospectus. See also Special Risk
Considerations--High-Yield Securities."
Foreign Securities
The Fund has the ability to purchase income generating equity
securities and debt securities in any foreign country. Investors should consider
carefully the substantial risks involved in investing in securities issued by
companies and governments of foreign nations. These risks are in addition to the
usual risks inherent in domestic investments. There is the possibility of
expropriation, nationalization or confiscatory taxation, taxation of income
earned in foreign nations or other taxes imposed with respect to investments in
foreign nations, foreign exchange controls (which may include suspension of the
ability to transfer currency from a given country), default in foreign
government securities, political or social instability or diplomatic
developments which could affect investments in securities of issuers in those
nations.
In addition, in many countries, there is substantially less publicly
available information about issuers than is available in reports about companies
in the United States. Foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, and auditing practices and
requirements may not be comparable to those applicable to United States
companies. Consequently, financial data about foreign companies may not
accurately reflect the real condition of those issuers and securities markets.
Further, the Fund may encounter difficulty or be unable to pursue legal
remedies and obtain judgments in foreign courts. Commission rates on securities
transactions in foreign countries, which are sometimes fixed rather than subject
to negotiation as in the United States, are likely to be higher. Further, the
settlement period of securities transactions in foreign markets may be longer
than in domestic markets, and may be subject to administrative uncertainties. In
many foreign countries, there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the United States, and capital requirements for brokerage firms are
generally lower. The foreign securities markets of many of the countries in
which the Fund may invest may also be smaller, less liquid and subject to
greater price volatility than those in the United States.
Emerging Market Securities. The Fund may invest up to 5% of its assets
in income generating equity securities and debt securities of issuers located in
emerging market nations. Compared to the United States and other developed
countries, emerging countries may have volatile social conditions, relatively
unstable governments and political systems, economies based on only a few
industries and economic structures that are less diverse and mature, and
securities markets that trade a small number of securities, which can result in
a low or nonexistent volume of trading. Prices in these securities markets tend
to be volatile and, in the past, securities in these countries have offered
greater potential for gain (as well as loss) than securities of companies
located in developed countries. Until recently, there has been an absence of a
capital market structure or market-oriented economy in certain emerging
countries. Further, investments and opportunities for investments by foreign
investors are subject to a variety of national policies and restrictions in many
emerging countries. Also, the
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<PAGE>
repatriation of both investment income and capital from several foreign
countries is restricted and controlled under certain regulations, including, in
some cases, the need for certain governmental consents. Countries such as those
in which the Fund may invest may have historically experienced and may continue
to experience, substantial, and in some periods extremely high rates of
inflation for many years, high interest rates, exchange rate fluctuations or
currency depreciation, large amounts of external debt, balance of payments and
trade difficulties and extreme poverty and unemployment. Other factors which may
influence the ability or willingness to service debt include, but are not
limited to, a country's cash flow situation, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of its debt
service burden to the economy as a whole, its government's policy towards the
International Monetary Fund, the World Bank and other international agencies and
the political constraints to which a government debtor may be subject.
See Other Investment Policies and Risk Considerations for a further
description of certain risks associated with certain of the Fund's investments,
including the risks associated with investments in foreign government securities
and engaging in foreign currency transactions and options.
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THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Group of
funds.
SHAREHOLDER PHONE DIRECTORY
Investor Information Center
800-523-4640
Fund Information, Literature Price, Yield and Performance Figures
Shareholder Service Center
800-523-1918
Information on Existing Regular Investment Accounts and Retirement Plan
Accounts, Wire Investments, Wire Liquidations, Telephone Liquidations
and Telephone Exchanges
Delaphone
800-362-FUND
(800-362-3863)
Performance Information
You can call the Investor Information Center at any time for current
yield information. Current yield and total return information may also be
included in advertisements and information given to shareholders. Yields are
computed on an annual basis over a 30-day period.
Shareholder Services
During business hours, you can call the Delaware Group's Shareholder
Service Center. Our representatives can answer any questions about your account,
the Fund, various service features and other funds in the Delaware Group.
Delaphone Service
Delaphone is an account inquiry service for investors with
Touch-Tone(R) phone service. It enables you to get information on your account
faster than the mailed statements and confirmations. Delaphone also provides
current performance information on the Fund, as well as other funds in the
Delaware Group. Delaphone is available seven days a week, 24 hours a day.
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Dividend Payments
Dividends, capital gains and other distributions are automatically
reinvested in your account, unless you elect to receive them in cash. You may
also elect to have the dividends earned in one fund automatically invested in
another Delaware Group fund with a different investment objective, subject to
certain exceptions and limitations.
For more information, see Additional Methods of Adding to Your
Investment -- Dividend Reinvestment Plan under How to Buy Shares or call the
Shareholder Service Center.
MoneyLine Direct Deposit Service
If you elect to have your dividends and distributions paid in cash and
such dividends and distributions are in an amount of $25 or more, you may choose
the MoneyLine Direct Deposit Service and have such payments transferred from
your Fund account to your predesignated bank account. See Dividends and
Distributions. In addition, you may elect to have your Systematic Withdrawal
Plan payments transferred from your Fund account to your predesignated bank
account through this service. See Systematic Withdrawal Plans under Redemption
and Exchange. Your funds will normally be credited to your bank account two
business days after the payment date. There are no fees for this service. You
can initiate the MoneyLine Direct Deposit Service by completing an Authorization
Agreement. If your name and address are not identical to the name and address on
your Fund account, you must have your signature guaranteed. This service is not
available for retirement plans.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling the Shareholder Service Center.
Duplicate Confirmations
If your financial adviser or investment dealer is noted on your
investment application, we will send a duplicate confirmation to him or her.
This makes it easier for your adviser to help you manage your investments.
Tax Information
Each year, Value Fund, Inc. will mail to you information on the tax
status of your dividends and distributions.
Right of Accumulation
With respect to Class A Shares, the Right of Accumulation feature
allows you to combine the value of your current holdings of Class A Shares,
Class B Shares and Class C Shares of the Fund with the dollar amount of new
purchases of Class A Shares of the Fund to qualify for a reduced front-end sales
charge on such purchases of Class A Shares. Under the Combined Purchases
Privilege, you may also include certain shares that you own in other funds in
the Delaware Group. See Classes of Shares.
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<PAGE>
Letter of Intention
The Letter of Intention feature permits you to obtain a reduced
front-end sales charge on purchases of Class A Shares by aggregating certain of
your purchases of Delaware Group fund shares over a 13-month period. See Classes
of Shares and Part B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits you to reinvest proceeds
from a redemption of Class A Shares, within one year of the date of the
redemption, without paying a front-end sales charge. See Part B.
Exchange Privilege
The Exchange Privilege permits shareholders to exchange all or part of
their shares into shares of the other funds in the Delaware Group, subject to
certain exceptions and limitations. For additional information on exchanges, see
Investing by Exchange under How to Buy Shares and Redemption and Exchange.
Wealth Builder Option
You may elect to invest in the Fund through regular liquidations of
shares in your accounts in other funds in the Delaware Group. Investments under
this feature are exchanges and are therefore subject to the same conditions and
limitations as other exchanges of Fund shares. See Additional Methods of Adding
to Your Investment - Wealth Builder Option and Investing by Exchange under How
to Buy Shares, and Redemption and Exchange.
Delaware Group Asset Planner
Delaware Group Asset Planner is an asset allocation service that gives
investors, working with a professional financial adviser, the ability to more
easily design and maintain investments in a diversified selection of Delaware
Group mutual funds. The Asset Planner service offers a choice of four
predesigned allocation strategies (each with a different risk/reward profile)
made up of separate investments in predetermined percentages of Delaware Group
funds. With the guidance of a financial adviser, investors may also tailor an
allocation strategy that meets their personal needs and goals. See How to Buy
Shares.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. Value Fund, Inc.'s fiscal year ends on
November 30.
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RETIREMENT PLANNING
An investment in the Fund may be suitable for tax-deferred retirement
plans. Among the retirement plans noted below, Class B Shares are available for
investment only by Individual Retirement Accounts, Simplified Employee Pension
Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred Compensation
Plans.
Retirement plans may be subject to plan establishment fees, annual
maintenance fees and/or other administrative or trustee fees. Fees are based
upon the number of participants in the plan as well as the services selected.
Additional information about fees is included in retirement plan materials. Fees
are quoted upon request. Certain shareholder investment services available to
non-retirement plan shareholders may not be available to retirement plan
shareholders. Certain retirement plans may qualify to purchase the Retirement
Income Fund Institutional Class. For additional information on any of the plans
and Delaware's retirement services, call the Shareholder Service Center or see
Part B.
Individual Retirement Account ("IRA")
Individuals, even if they participate in an employer-sponsored
retirement plan, may establish their own retirement program for investments in
each of the Classes. Contributions to an IRA may be tax-deductible and earnings
are tax-deferred. Under the Tax Reform Act of 1986, the tax deductibility of IRA
contributions is restricted, and in some cases eliminated, for individuals who
participate in certain employer-sponsored retirement plans and whose annual
income exceeds certain limits. Existing IRAs and future contributions up to the
IRA maximums, whether deductible or not, still earn on a tax-deferred basis.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Offers employers with 25 or fewer eligible employees the ability to
establish a SEP/IRA that permits salary deferral contributions. An employer may
also elect to make additional contributions to this plan. Class B Shares are not
available for purchase by such plans.
403(b)(7) Deferred Compensation Plan
Permits employees of public school systems or of certain types of
non-profit organizations to enter into a deferred compensation arrangement for
the purchase of shares of each of the Classes.
457 Deferred Compensation Plan
Permits employees of state and local governments and certain other
entities to enter into a deferred compensation arrangement for the purchase of
shares of each of the Classes.
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<PAGE>
Prototype Profit Sharing or Money Purchase Pension Plan
Offers self-employed individuals, partnerships and corporations a
tax-qualified plan which provides for the investment of contributions in Class A
Shares or Class C Shares. Class B Shares are not available for purchase by such
plans.
Prototype 401(k) Defined Contribution Plan
Permits employers to establish a tax-qualified plan based on salary
deferral contributions for investment in Class A or Class C Shares. Class B
Shares are not available for purchase by such plans.
Allied Plans
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made available
under a joint venture agreement between the Distributor and another institution
through which mutual funds are marketed and which allow investments in Class A
Shares of designated Delaware Group funds ("eligible Delaware Group fund
shares"), as well as shares of designated classes of non-Delaware Group funds
("eligible non-Delaware Group fund shares"). Class B Shares and Class C Shares
are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Group and eligible non-Delaware Group fund shares
held by the Allied Plan may be combined with the dollar amount of new purchases
by that Allied Plan to obtain a reduced front-end sales charge on additional
purchases of eligible Delaware Group fund shares. See Front-End Sales Charge
Alternative - Class A Shares under Classes of Shares.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Group fund shares for other eligible Delaware Group fund shares or for
eligible non-Delaware Group fund shares at net asset value without payment of a
front-end sales charge. However, exchanges of eligible fund shares, both
Delaware Group and non-Delaware Group, which were not subject to a front-end
sales charge, will be subject to the applicable sales charge if exchanged for
eligible Delaware Group fund shares to which a sales charge applies. No sales
charge will apply if the eligible fund shares were previously acquired through
the exchange of eligible shares on which a sales charge was already paid or
through the reinvestment of dividends. See Investing by Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Group fund shares under an Allied Plan. In determining a financial adviser's
eligibility for a dealer's commission on net asset value purchases of eligible
Delaware Group fund shares in connection with Allied Plans, all participant
holdings in the Allied Plan will be aggregated. See Front-End Sales Charge
Alternative - Class A Shares under Classes of Shares.
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<PAGE>
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described under Waiver of Limited Contingent
Deferred Sales Charge - Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Group and non-Delaware Group fund shares. When
eligible Delaware Group fund shares are exchanged into eligible non-Delaware
Group fund shares, the Limited CDSC will be imposed at the time of the exchange,
unless the joint venture agreement specifies that the amount of the Limited CDSC
will be paid by the financial adviser or selling dealer. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
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<PAGE>
CLASSES OF SHARES
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net
asset value per share, subject to a sales charge which may be imposed, at the
election of the purchaser, at the time of the purchase for Class A Shares
("front-end sales charge alternative"), or on a contingent deferred basis for
Class B Shares ("deferred sales charge alternative") or Class C Shares ("level
sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares, which incur a sales charge when they are
purchased, but generally are not subject to any sales charge when they are
redeemed. Class A Shares are subject to annual 12b-1 Plan expenses of up to a
maximum of .30% (currently, no more than .25% pursuant to Board action) of
average daily net assets of such shares. Certain purchases of Class A Shares
qualify for reduced front-end sales charges. See Front-End Sales Charge
Alternative - Class A Shares. See also Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange and Distribution (12b- 1) and Service under Management
of the Fund.
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares, which do not incur a front-end sales charge
when they are purchased, but are subject to a contingent deferred sales charge
if they are redeemed within six years of purchase. Class B Shares are subject to
annual 12b-1 Plan expenses of up to a maximum of 1% (.25% of which are service
fees to be paid to the Distributor, dealers or others for providing personal
service and/or maintaining shareholder accounts) of average daily net assets of
such shares for approximately eight years after purchase. Class B Shares permit
all of the investor's dollars to work from the time the investment is made. The
higher 12b-1 Plan expenses paid by Class B Shares will cause such shares to have
a higher expense ratio and to pay lower dividends than Class A Shares. At the
end of approximately eight years after purchase, the Class B Shares will
automatically be converted into Class A Shares. See Automatic Conversion of
Class B Shares, below.
Class C Shares. An investor who elects the level sales charge
alternative acquires Class C Shares, which do not incur a front-end sales charge
when they are purchased, but are subject to a contingent deferred sales charge
if they are redeemed within 12 months of purchase. Class C Shares are subject to
annual 12b-1 Plan expenses of up to a maximum of 1% (.25% of which are service
fees to be paid to the Distributor, dealers or others for providing personal
service and/or maintaining shareholder accounts) of average daily net assets of
such shares for the life of the investment. The higher 12b-1 Plan expenses paid
by Class C Shares will cause such shares to have a higher expense ratio and to
pay lower dividends than Class A Shares. Unlike Class B Shares, Class C Shares
do not convert to another class.
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<PAGE>
The alternative purchase arrangements described above permit investors
to choose the method of purchasing shares that is most suitable given the amount
of their purchase, the length of time they expect to hold their shares and other
relevant circumstances. Investors should determine whether, given their
particular circumstances, it is more advantageous to purchase Class A Shares and
incur a front-end sales charge, purchase Class B Shares and have the entire
initial purchase amount invested in the Fund with their investment being subject
to a CDSC if they redeem shares within six years of purchase, or purchase Class
C Shares and have the entire initial purchase amount invested in the Fund with
their investment being subject to a CDSC if they redeem shares within 12 months
of purchase. In addition, investors should consider the level of annual 12b-1
Plan expenses applicable to each Class. In comparing Class B Shares to Class C
Shares, investors should also consider the desirability of an automatic
conversion feature, which is available only for Class B Shares.
As an illustration, investors who qualify for significantly reduced
front-end sales charges on purchases of Class A Shares, as described below,
might choose the front-end sales charge alternative because similar sales charge
reductions are not available for purchases under either the deferred sales
charge alternative or the level sales charge alternative. Moreover, shares
acquired under the front-end sales charge alternative are subject to annual
12b-1 Plan expenses of up to .30% (currently, no more than .25% pursuant to
Board action), whereas Class B Shares acquired under the deferred sales charge
alternative are subject to annual 12b-1 Plan expenses of up to 1% for
approximately eight years after purchase (see Automatic Conversion of Class B
Shares) and Class C Shares acquired under the level sales charge alternative are
subject to annual 12b-1 Plan expenses of up to 1% for the life of the
investment. However, because front-end sales charges are deducted from the
purchase amount at the time of purchase, investors who buy Class A Shares would
not have their full purchase amount invested in the Fund.
Other investors might determine it to be more advantageous to purchase
Class B Shares and have all their money invested initially, even though they
would be subject to a CDSC for up to six years after purchase and annual 12b-1
Plan expenses of up to 1% until the shares are automatically converted into
Class A Shares. Still other investors might determine it to be more advantageous
to purchase Class C Shares and have all of their funds invested initially,
recognizing that they would be subject to a CDSC for just 12 months after
purchase, but that Class C Shares do not offer a conversion feature, so their
shares would be subject to annual 12b-1 Plan expenses of up to 1% for the life
of the investment. The higher 12b-1 Plan expenses on Class B Shares and Class C
Shares will be offset to the extent a return is realized on the additional money
initially invested upon the purchase of such shares. However, there can be no
assurance as to the return, if any, that will be realized on such additional
money.
Prospective investors should refer to Appendix A--Investment
Illustrations in this Prospectus for an illustration of the potential effect
that each of the purchase options may have on a long-term shareholder's
investment.
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<PAGE>
For the distribution and related services provided to, and the expenses
borne on behalf of, the Fund, the Distributor and others will be paid, in the
case of the Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of the Class B Shares and the Class C Shares,
from the proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred
upon redemption. Financial advisers may receive different compensation for
selling Class A, Class B and Class C Shares. INVESTORS SHOULD UNDERSTAND THAT
THE PURPOSE AND FUNCTION OF THE RESPECTIVE 12B-1 PLANS AND THE CDSCS APPLICABLE
TO CLASS B SHARES AND CLASS C SHARES ARE THE SAME AS THOSE OF THE 12B-1 PLAN AND
THE FRONT-END SALES CHARGE APPLICABLE TO CLASS A SHARES IN THAT SUCH FEES AND
CHARGES ARE USED TO FINANCE THE DISTRIBUTION OF THE RESPECTIVE CLASSES. See
12b-1 Distribution Plans - Class A, Class B and Class C Shares.
Dividends paid on Class A, Class B and Class C Shares, to the extent
any dividends are paid, will be calculated in the same manner, at the same time,
on the same day and will be in the same amount, except that the additional
amount of 12b-1 Plan expenses relating to Class B Shares and Class C Shares will
be borne exclusively by such shares. See Calculation of Offering Price and Net
Asset Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. Value Fund, Inc. and the Distributor intend to operate in compliance
with these rules.
Front-End Sales Charge Alternative - Class A Shares
Class A Shares may be purchased at the offering price, which reflects a
maximum front-end sales charge of 4.75%. See Calculation of Offering Price and
Net Asset Value Per Share.
Purchases of $100,000 or more carry a reduced front-end sales charge as
shown in the following table.
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Retirement Income Fund A Class
- --------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge Commission***
as % of as % of
Offering Amount Offering
Amount of Purchase Price Invested** Price
- --------------------------------------------------------------------------------
Less than $100,000 4.75% 0.00% 4.00%
$100,000 but
under $250,000 3.75 0.00 3.00
$250,000 but
under $500,000 2.50 0.00 2.00
$500,000 but
under $1,000,000* 2.00 0.00 1.60
* There is no front-end sales charge on purchases of Class A Shares of $1
million or more but, under certain limited circumstances, a 1% Limited CDSC
may apply upon redemption of such shares.
** Based upon the initial net asset value of $8.50 per share of the Class A
Shares.
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- --------------------------------------------------------------------------------
The Fund must be notified when a sale takes place which would qualify
for the reduced front-end sales charge on the basis of previous or
current purchases. The reduced front-end sales charge will be granted
upon confirmation of the shareholder's holdings by the Fund. Such
reduced front-end sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during
which the Distributor may reallow to dealers up to the full amount of
the front-end sales charge shown above. In addition, certain dealers
who enter into an agreement to provide extra training and information
on Delaware Group products and services and who increase sales of
Delaware Group funds may receive an additional commission of up to .15%
of the offering price. Dealers who receive 90% or more of the sales
charge may be deemed to be underwriters under the Securities Act of
1933.
- --------------------------------------------------------------------------------
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For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers through
whom such purchases are made in accordance with the following schedule:
Dealer's Commission
-------------------
Amount of Purchase (as a percentage of
------------------ amount purchased)
Up to $2 million 1.00%
Next $1 million up to $3 million .75
Next $2 million up to $5 million .50
Amount over $5 million .25
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies may be aggregated with those of the Class A Shares
of the Fund. Financial advisers also may be eligible for a dealer's commission
in connection with certain purchases made under a Letter of Intention or
pursuant to an investor's Right of Accumulation. Financial advisers should
contact the Distributor concerning the applicability and calculation of the
dealer's commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Redemptions of Class A Shares purchased at net asset value may result
in the imposition of a Limited CDSC if the dealer's commission described above
was paid in connection with the purchase of those shares. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange.
Combined Purchases Privilege
By combining your holdings of Class A Shares with your holdings of
Class B Shares and/or Class C Shares of the Fund and shares of the other funds
in the Delaware Group, except those noted below, you can reduce the front-end
sales charges on any additional purchases of Class A Shares. Shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with ownership of
variable insurance products may be combined with other Delaware Group fund
holdings. Shares of other funds that do not carry a front-end sales charge or
CDSC may not be included unless they were acquired through an exchange from a
Delaware Group fund that does carry a front-end sales charge or CDSC.
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<PAGE>
This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under 21 and any trust, fiduciary or
retirement account for the benefit of such family members.
It also permits you to use these combinations under a Letter of
Intention. A Letter of Intention allows you to make purchases over a 13-month
period and qualify the entire purchase for a reduction in front-end sales
charges on Class A Shares.
Combined purchases of $1,000,000 or more, including certain purchases
made at net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may result in the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative - Class A Shares, above.
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under
the Delaware Group Dividend Reinvestment Plan and, under certain circumstances,
the Exchange Privilege and the 12-Month Reinvestment Privilege. See The Delaware
Difference and Redemption and Exchange for additional information.
Purchases of Class A Shares may be made at net asset value by current
and former officers, directors and employees (and members of their families) of
the Manager, any affiliate, any of the funds in the Delaware Group, certain of
their agents and registered representatives and employees of authorized
investment dealers and by employee benefit plans for such entities. Individual
purchases, including those in retirement accounts, must be for accounts in the
name of the individual or a qualifying family member.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of Delaware Group
funds. Officers, directors and key employees of institutional clients of the
Manager or any of its affiliates may purchase Class A Shares at net asset value.
Moreover, purchases may be effected at net asset value for the benefit of the
clients of brokers, dealers and registered investment advisers affiliated with a
broker or dealer, if such broker, dealer or investment adviser has entered into
an agreement with the Distributor providing specifically for the purchase of
Class A Shares in connection with special investment products, such as wrap
accounts or similar fee based programs.
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
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<PAGE>
loans originated from accounts previously maintained by another investment firm
will also be invested at net asset value.
Investors who held shares in any class of any Delaware Group fund as of
December 1, 1995, may currently purchase Class A Shares at net asset value
through the Delaware Group Asset Planner service if such shares are being
purchased with proceeds from the redemption of shares of a fund (other than a
money market fund) outside of the Delaware Group of funds. The Delaware Group
Asset Planner Account Registration Form and check for such a transaction should
note that the investment is being made under the "NAV/Asset Planner
Accommodation Program." Prior notice will be given should this program be
discontinued. Class A Shares may also be purchased at net asset value in an IRA
through the Delaware Group Asset Planner service if the assets being invested
are being transferred from an existing IRA held outside of the Delaware Group or
are part of a distribution received from an employer-sponsored or other
retirement plan. See Delaware Group Asset Planner under How To Buy Shares.
The Fund must be notified in advance that an investment qualifies for
purchase at net asset value.
Group Investment Plans
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, Prototype Profit
Sharing, Pension and 401(k) Defined Contribution Plans) may benefit from the
reduced front-end sales charges available on the Class A Shares set forth in the
table on page , based on total plan assets. In addition, 403(b)(7) and 457
Retirement Plan Accounts may benefit from a reduced front-end sales charge on
Class A Shares based on the total amount invested by all participants in the
plan by satisfying the following criteria: (i) the employer for which the plan
was established has 250 or more eligible employees and the plan lists only one
broker of record, or (ii) the plan includes employer contributions and the plan
lists only one broker of record. If a company has more than one plan investing
in the Delaware Group of funds, then the total amount invested in all plans will
be aggregated to determine the applicable front-end sales charge reduction on
each purchase, both initial and subsequent, if, at the time of each such
purchase, the company notifies the Fund that it qualifies for the reduction.
Employees participating in such Group Investment Plans may also combine the
investments held in their plan account to determine the front-end sales charge
applicable to purchases in non-retirement Delaware Group investment accounts if,
at the time of each such purchase, they notify the Fund that they are eligible
to combine purchase amounts held in their plan account.
For additional information on retirement plans, including plan forms,
applications, minimum investments and any applicable account maintenance fees,
contact your investment dealer or the Distributor.
For other retirement plans and special services, see Retirement
Planning.
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Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than 4% of the dollar
amount purchased. As discussed below, however, Class B Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within six years of purchase, a
CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees makes it possible for the Fund to sell
Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class B Shares
described in this Prospectus, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for the Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the last business day
of the second full week of March, June, September and December (each, a
"Conversion Date"). If the eighth anniversary after a purchase of Class B Shares
falls on a Conversion Date, an investor's Class B Shares will be converted on
that date. If the eighth anniversary occurs between Conversion Dates, an
investor's Class B Shares will be converted on the next Conversion Date after
such anniversary. Consequently, if a shareholder's eighth anniversary falls on
the day after a Conversion Date, that shareholder will have to hold Class B
Shares for as long as three additional months after the eighth anniversary of
purchase before the shares will automatically convert into Class A Shares.
Class B Shares of a fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of that fund (or, in the case
of Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant
Class) pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.
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Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the Fund will invest the full amount of the
investor's purchase payment. The Distributor currently anticipates compensating
dealers or brokers for selling Class C Shares at the time of purchase from its
own assets in an amount equal to no more than 1% of the dollar amount purchased.
As discussed below, however, Class C Shares are subject to annual 12b-1 Plan
expenses and, if redeemed within 12 months of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class C Shares as
described in this Prospectus. See Redemption and Exchange.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares redeemed within six years of purchase may be subject to
a CDSC at the rates set forth below and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestments of dividends or capital gains distributions. For purposes
of this formula, the "net asset value at the time of purchase" will be the net
asset value at purchase of the Class B Shares or the Class C Shares of the Fund,
even if those shares are later exchanged for shares of another Delaware Group
fund. In the event of an exchange of the shares, the "net asset value of such
shares at the time of redemption" will be the net asset value of the shares that
were acquired in the exchange.
The following table sets forth the rates of the CDSC for the Class B
Shares of the Fund:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
------------------------ ------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
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During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. See Automatic Conversion of Class B Shares, above. Investors are
reminded that the Class A Shares into which the Class B Shares will convert are
subject to ongoing annual 12b-1 Plan expenses of up to a maximum of .30%
(currently, no more than .25% pursuant to Board action) of average daily net
assets of such shares.
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares and Class C
Shares. See Waiver of Contingent Deferred Sales Charge - Class B Shares and
Class C Shares under Redemption and Exchange.
Other Payments to Dealers -- Class A, Class B and Class C Shares
From time to time at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Classes exceed certain limits, as
set by the Distributor, may receive from the Distributor an additional payment
of up to .25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
Subject to pending amendments to the NASD's Rules of Fair Practice, in
connection with the promotion of Delaware Group fund shares, the Distributor
may, from time to time, pay to participate in dealer-sponsored seminars and
conferences, reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising and may, from time to time,
pay or allow additional promotional incentives to dealers, which shall include
non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and Exchange Commission.
It is likely that the NASD's Rules of Fair Practice will be amended such that
the ability of the Distributor to pay non-cash compensation as described above
will be restricted in some fashion. The Distributor intends to comply with the
NASD's Rules of Fair Practice as they may be amended.
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Retirement Income Fund Institutional Class
In addition to offering the Class A, Class B and Class C Shares, the
Fund also offers the Retirement Income Fund Institutional Class, which is
described in a separate prospectus and is available for purchase only by certain
investors. Retirement Income Fund Institutional Class shares generally are
distributed directly by the Distributor and do not have a front-end sales
charge, a CDSC or a Limited CDSC, and are not subject to 12b-1 Plan distribution
expenses. To obtain the prospectus that describes the Retirement Income Fund
Institutional Class, contact the Distributor by writing to the address or by
calling the telephone number listed on the back of this Prospectus.
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HOW TO BUY SHARES
Purchase Amounts
Generally, the minimum initial purchase is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of shares of any Class
generally must be $100 or more. For purchases under a Uniform Gifts to Minors
Act or Uniform Transfers to Minors Act or through an Automatic Investing Plan,
there is a minimum initial purchase of $250 and a minimum subsequent purchase of
$25. Minimum purchase requirements do not apply to retirement plans other than
IRAs, for which there is a minimum initial purchase of $250, and a minimum
subsequent purchase of $25, regardless of which Class is selected.
There is a maximum purchase limitation of $250,000 on each purchase of
Class B Shares. For Class C Shares, each purchase must be in an amount that is
less than $1,000,000. An investor may exceed these maximum purchase limitations
by making cumulative purchases over a period of time. In doing so, an investor
should keep in mind that reduced front-end sales charges are available on
investments of $100,000 or more in Class A Shares, and that Class A Shares (i)
are subject to lower annual 12b-1 Plan expenses than Class B Shares and Class C
Shares and (ii) generally are not subject to a CDSC. For retirement plans, the
maximum purchase limitations apply only to the initial purchase of Class B
Shares or Class C Shares by the plan.
Investing through Your Investment Dealer
You can make a purchase of shares of the Fund through most investment
dealers who, as part of the service they provide, must transmit orders promptly.
They may charge for this service. If you want a dealer but do not have one, we
can refer you to one.
Investing by Mail
1. Initial Purchases--An Investment Application or, in the case of a retirement
account, an appropriate retirement plan application, must be completed, signed
and sent with a check payable to Retirement Income Fund A Class, Retirement
Income Fund B Class or Retirement Income Fund C Class, to Delaware Group at 1818
Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to the specific Fund and Class selected. Your check should be
identified with your name(s) and account number. An investment slip (similar to
a deposit slip) is provided at the bottom of transaction confirmations and
dividend statements that you will receive from Value Fund, Inc. Use of this
investment slip can help expedite processing of your check when making
additional purchases. Your investment may be delayed if you send additional
purchases by certified mail.
Investing by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 0114-2596 (include
your name(s) and your account number for the Class in which you are investing).
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<PAGE>
1. Initial Purchases--Before you invest, telephone the Shareholder Service
Center to get an account number. If you do not call first, processing of your
investment may be delayed. In addition, you must promptly send your Investment
Application or, in the case of a retirement account, an appropriate retirement
plan application, to the specific Fund and Class selected, to Delaware Group at
1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You should advise the
Shareholder Service Center by telephone of each wire you send.
If you want to wire investments to a retirement plan account, call the
Shareholder Service Center for special wiring instructions.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group,
you may write and authorize an exchange of part or all of your investment into
shares of the Fund. If you wish to open an account by exchange, call the
Shareholder Service Center for more information. All exchanges are subject to
the eligibility and minimum purchase requirements set forth in each fund's
prospectus.
Holders of Class A Shares may exchange all or part of their shares for
certain of the shares of other funds in the Delaware Group, including other
Class A Shares, but may not exchange their Class A Shares for Class B Shares or
Class C Shares of the Fund or of any other fund in the Delaware Group. Holders
of Class B Shares of the Fund are permitted to exchange all or part of their
Class B Shares only into Class B Shares of other Delaware Group funds.
Similarly, holders of Class C Shares of the Fund are permitted to exchange all
or part of their Class C Shares only into Class C Shares of other Delaware Group
funds. See Appendix C--Retail Classes Offered for a list of funds that offer
Class A, Class B, Class C and Consultant Class Shares. Class B Shares of the
Fund and Class C Shares of the Fund acquired by exchange will continue to carry
the CDSC and, in the case of Class B Shares, the automatic conversion schedule
of the fund from which the exchange is made. The holding period of Class B
Shares of the Fund acquired by exchange will be added to that of the shares that
were exchanged for purposes of determining the time of the automatic conversion
into Class A Shares of the Fund.
Permissible exchanges into Class A Shares of the Fund will be made
without a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of the Fund will be made without the imposition of a
CDSC by the fund from which the exchange is being made at the time of the
exchange.
See Allied Plans under Retirement Planning for information on exchanges
by participants in an Allied Plan.
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Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if you wish to
use the following services:
1. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly
investments without writing or mailing checks. You may authorize Value Fund,
Inc. to transfer a designated amount monthly from your checking account to your
account. Many shareholders use this as an automatic savings plan. Shareholders
should allow a reasonable amount of time for initial purchases and changes to
these plans to become effective.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
2. Direct Deposit
You may have your employer or bank make regular investments directly to
your Fund account for you (for example: payroll deduction, pay by phone, annuity
payments). The Fund also accepts preauthorized recurring government and private
payments by Electronic Fund Transfer, which avoids mail time and check clearing
holds on payments such as social security, federal salaries, Railroad Retirement
benefits, etc.
* * *
Should investments through an automatic investing plan or by direct
deposit be reclaimed or returned for some reason, Value Fund, Inc. has the right
to liquidate your shares to reimburse the government or transmitting bank. If
there are insufficient funds in your account, you are obligated to reimburse the
Fund.
3. Wealth Builder Option
You can use our Wealth Builder Option to invest in the Fund through
regular liquidations of shares in your accounts in other funds in the Delaware
Group. You may also elect to invest in other mutual funds in the Delaware Group
through the Wealth Builder Option through regular liquidations of shares in your
Fund account.
Under this automatic exchange program, you can authorize regular
monthly amounts (minimum of $100 per fund) to be liquidated from your account in
one or more funds in the Delaware Group and invested automatically into any
other Delaware Group account that you may specify. If in connection with the
election of the Wealth Builder Option, you wish to open a new account to receive
the automatic investment, such new account must meet the minimum initial
purchase requirements described in the prospectus of the fund that you select.
All investments under this option are exchanges and are therefore subject to the
same conditions and limitations as other exchanges noted above. You can
terminate your participation at any time by written notice to the fund from
which the exchanges are made. See Redemption and Exchange.
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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.
4. Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your Fund account. Or, you may
invest your distributions in certain other funds in the Delaware Group, subject
to the exceptions noted below as well as the eligibility and minimum purchase
requirements set forth in each fund's prospectus.
Reinvestments of distributions into Class A Shares of the Fund or of
other Delaware Group funds are made without a front-end sales charge.
Reinvestments of distributions into Class B Shares of the Fund or of other
Delaware Group funds or into Class C Shares of the Fund or of other Delaware
Group funds are also made without any sales charge and will not be subject to a
CDSC if later redeemed. See Automatic Conversion of Class B Shares under Classes
of Shares for information concerning the automatic conversion of Class B Shares
acquired by reinvesting dividends.
Holders of Class A Shares of the Fund may not reinvest their
distributions into Class B Shares or Class C Shares of any fund in the Delaware
Group, including the Fund. Holders of Class B Shares of the Fund may reinvest
their distributions only into Class B Shares of the funds in the Delaware Group
which offer that class of shares (the "Class B Funds"). Similarly, holders of
Class C Shares of the Fund may reinvest their distributions only into Class C
Shares of the funds in the Delaware Group which offer that class of shares (the
"Class C Funds"). See Appendix C--Retail Classes Offered for a list of the funds
offering those classes of shares. For more information about reinvestments, call
the Shareholder Service Center.
Delaware Group Asset Planner
To invest in Delaware Group funds using the Delaware Group Asset
Planner asset allocation service, you should complete a Delaware Group Asset
Planner Account Registration Form, which is available only from a financial
adviser or investment dealer. As previously described, the Delaware Group Asset
Planner service offers a choice of four predesigned asset allocation strategies
(each with a different risk/reward profile) in predetermined percentages in
Delaware Group funds. Or, with the help of a financial adviser, you may design a
customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Group accounts into the Asset Planner service may be made at net asset value
under the circumstances described under Investing by Exchange, above. Also see
Buying Class A Shares at Net Asset Value under Classes of Shares. The minimum
initial investment per Strategy is $2,000; subsequent investments must be at
least $100. Individual fund minimums do not apply to investments made using the
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Asset Planner service. Class A, Class B and Class C Shares are available through
the Asset Planner service. Generally, only shares within the same class may be
used within the same Strategy. However, Class A Shares of the Fund and of other
funds in the Delaware Group may be used in the same Strategy with consultant
class shares that are offered by certain other Delaware Group funds.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30th of each subsequent year.
However, for all IRA accounts established with the same Social Security number
under the Asset Planner service, the annual maintenance fee will be limited to
$35 irrespective of the number of Strategies selected. For example, if you
transfer regular IRA assets and rollover assets from a qualified plan into an
IRA through the Delaware Group Asset Planner service and, to avoid commingling,
maintain more than one Strategy registered under the same Social Security
number, only one $35 annual fee needs to be paid. The fee, payable to Delaware
Service Company, Inc. to defray extra costs associated with administering the
Asset Planner service, will be deducted automatically from one of the funds
within your Asset Planner account if not paid by September 30th. See Part B.
Investors will receive a customized quarterly Strategy Report
summarizing all Delaware Group Asset Planner investment performance and account
activity during the prior period. Confirmation statements will be sent following
all transactions other than those involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
Purchase Price and Effective Date
The offering price and net asset value of the Class A, Class B and
Class C Shares are determined as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open.
The effective date of a purchase made through an investment dealer is
the date the order is received by the Fund. The effective date of a direct
purchase is the day your wire, electronic transfer or check is received unless
it is received after the time the offering price or net asset value of shares is
determined, as noted above. Purchase orders received after such time will be
effective the next business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a purchase
is canceled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in the Delaware Group. The Fund reserves the right to reject
purchase orders paid by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check drawn
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on a foreign financial institution is accepted, you may be subject to additional
bank charges for clearance and currency conversion.
The Fund also reserves the right, following shareholder notification,
to charge a service fee on non-retirement accounts that have remained below the
minimum stated account balance for a period of three or more consecutive months.
Holders of such accounts may be notified of their insufficient account balance
and advised that they have until the end of the current calendar quarter to
raise their balance to the stated minimum. If the account has not reached the
minimum balance requirement by that time, the Fund will charge a $9 fee for that
quarter and each subsequent calendar quarter until the account is brought up to
the minimum balance. The service fee will be deducted from the account during
the first week of each calendar quarter for the previous quarter, and will be
used to help defray the cost of maintaining low-balance accounts. No fees will
be charged without proper notice, and no CDSC will apply to such assessments.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.
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REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways.
The exchange service is useful if your investment requirements change and you
want an easy way to invest in other equity funds, bond funds, tax-advantaged
funds or money market funds. This service is also useful if you are anticipating
a major expenditure and want to move a portion of your investment into a fund
that has the checkwriting feature. Exchanges are subject to the requirements of
each fund and all exchanges of shares constitute taxable events. See Taxes.
Further, in order for an exchange to be processed, shares of the fund being
acquired must be registered in the state where the acquiring shareholder
resides. You may want to consult your financial adviser or investment dealer to
discuss which funds in the Delaware Group will best meet your changing
objectives, and the consequences of any exchange transaction. You may also call
the Delaware Group directly for fund information.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after the Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
Redemption or exchange requests received in good order after the time the
offering price and net asset value of shares are determined, as noted above,
will be processed on the next business day. See Purchase Price and Effective
Date under How to Buy Shares. A shareholder submitting a redemption request may
indicate that he or she wishes to receive redemption proceeds of a specific
dollar amount. In the case of such a request, and in the case of certain
redemptions from retirement plan accounts, the Fund will redeem the number of
shares necessary to deduct the applicable CDSC in the case of Class B and Class
C Shares, and, if applicable, the Limited CDSC in the case of Class A Shares and
tender to the shareholder the requested amount, assuming the shareholder holds
enough shares in his or her account for the redemption to be processed in this
manner. Otherwise, the amount tendered to the shareholder upon redemption will
be reduced by the amount of the applicable CDSC or Limited CDSC. Redemption
proceeds will be distributed promptly, as described below, but not later than
seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Shareholder Service Center at 800-523-1918. The Fund may
suspend, terminate, or amend the terms of the exchange privilege upon 60 days'
written notice to shareholders.
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The Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor redemption requests as to shares for which a check
was tendered as payment, but the Fund will not mail or wire the proceeds until
it is reasonably satisfied that the check has cleared, which may take up to 15
days from the purchase date. You can avoid this potential delay if you purchase
shares by wiring Federal Funds. The Fund reserves the right to reject a written
or telephone redemption request or delay payment of redemption proceeds if there
has been a recent change to the shareholder's address of record.
There is no front-end sales charge or fee for exchanges made between
shares of funds which both carry a front-end sales charge. Any applicable
front-end sales charge will apply to exchanges from shares of funds not subject
to a front-end sales charge, except for exchanges involving assets that were
previously invested in a fund with a front-end sales charge and/or exchanges
involving the reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Group (in each
case, "New Shares") in a permitted exchange, will not be subject to a CDSC that
might otherwise be due upon redemption of the Original Shares. However, such
shareholders will continue to be subject to the CDSC and, in the case of Class B
Shares, the automatic conversion schedule of the Original Shares as described in
this Prospectus and any CDSC assessed upon redemption will be charged by the
Fund from which the Original Shares were exchanged. In an exchange of Class B
Shares from the Fund, the Fund's CDSC schedule may be higher than the CDSC
schedule relating to the New Shares acquired as a result of the exchange. For
purposes of computing the CDSC that may be payable upon a disposition of the New
Shares, the period of time that an investor held the Original Shares is added to
the period of time that an investor held the New Shares. With respect to Class B
Shares, the automatic conversion schedule of the Original Shares may be longer
than that of the New Shares. Consequently, an investment in New Shares by
exchange may subject an investor to the higher 12b-1 fees applicable to Class B
Shares of the Fund for a longer period of time than if the investment in New
Shares were made directly.
Various redemption and exchange methods are outlined below. Except for
the CDSC applicable to certain redemptions of Class B and Class C Shares and the
Limited CDSC applicable to certain redemptions of Class A Shares purchased at
net asset value, there is no fee charged by the Fund or the Distributor for
redeeming or exchanging your shares, but such fees could be charged in the
future. You may have your investment dealer arrange to have your shares redeemed
or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund or its agent.
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Written Redemption
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103
to redeem some or all of your shares. The request must be signed by all owners
of the account or your investment dealer of record. For redemptions of more than
$50,000, or when the proceeds are not sent to the shareholder(s) at the address
of record, the Fund requires a signature by all owners of the account and a
signature guarantee for each owner. Each signature guarantee must be supplied by
an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificate must accompany your request and also be in good order. Certificates
are issued for Class A Shares only if a shareholder submits a specific request.
Certificates are not issued for Class B Shares or Class C Shares.
Written Exchange
You may also write to the Fund (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your shares into another mutual
fund in the Delaware Group, subject to the same conditions and limitations as
other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
certificates.
The Telephone Redemption--Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do not
wish to have such services available with respect to your account. The Fund
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests.
Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
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Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the request. This service is only available to individual,
joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day.
CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted from your
redemption. If you ask for a check, it will normally be mailed the next business
day after receipt of your request to your predesignated bank account. There are
no separate fees for this redemption method, but the mail time may delay getting
funds into your bank account. Simply call the Shareholder Service Center prior
to the time the offering price and net asset value are determined, as noted
above.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in the Delaware Group under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
Systematic Withdrawal Plans
1. Regular Plans
This plan provides shareholders with a consistent monthly (or
quarterly) payment. This is particularly useful to shareholders living on fixed
incomes, since it can provide them with a stable supplemental amount. With
accounts of at least $5,000, you may elect monthly withdrawals of $25 (quarterly
$75) or more. The Fund does not recommend any particular monthly amount, as each
shareholder's situation and needs vary. Payments are normally made by check. In
the alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine Direct Deposit
Service. Your funds will normally be credited to your bank account two business
days after the payment date. There are no separate fees for this redemption
method. See MoneyLine Direct Deposit Service under The Delaware Difference for
more information about this service.
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2. Retirement Plans
For shareholders eligible under the applicable retirement plan to
receive benefits in periodic payments, the Systematic Withdrawal Plan provides
you with maximum flexibility. A number of formulas are available for calculating
your withdrawals depending upon whether the distributions are required or
optional. Withdrawals must be for $25 or more; however, no minimum account
balance is required. The MoneyLine Direct Deposit Service described above is not
available for retirement plans.
* * *
Shareholders should not purchase additional shares while participating
in a Systematic Withdrawal Plan.
Redemptions of Class A Shares via a Systematic Withdrawal Plan may be
subject to a Limited CDSC if the original purchase was made at net asset value
within the 12 months prior to the withdrawal and a dealer's commission was paid
on that purchase. See Contingent Deferred Sales Charge for Certain Redemptions
of Class A Shares Purchased at Net Asset Value, below.
The applicable CDSC for Class B Shares and Class C Shares redeemed via
a Systematic Withdrawal Plan will be waived if, on the date that the Plan is
established, the annual amount selected to be withdrawn is less than 12% of the
account balance. If the annual amount selected to be withdrawn exceeds 12% of
the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subject to the applicable
CDSC. Whether a waiver of the CDSC is available or not, the first shares to be
redeemed for each Systematic Withdrawal Plan payment will be those not subject
to a CDSC because they have either satisfied the required holding period or were
acquired through the reinvestment of distributions. The 12% annual limit will be
reset on the date that any Systematic Withdrawal Plan is modified (for example,
a change in the amount selected to be withdrawn or the frequency or date of
withdrawals), based on the balance in the account on that date. See Waiver of
Contingent Deferred Sales Charge - Class B and Class C Shares, below.
For more information on Systematic Withdrawal Plans, call the
Shareholder Service Center.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
A Limited CDSC will be imposed on certain redemptions of Class A Shares
(or shares into which such Class A Shares are exchanged) made within 12 months
of purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission previously described. See
Classes of Shares.
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The Limited CDSC will be paid to the Distributor and will be equal to
the lesser of 1% of: (1) the net asset value at the time of purchase of the
Class A Shares being redeemed; or (2) the net asset value of such Class A Shares
at the time of redemption. For purposes of this formula, the "net asset value at
the time of purchase" will be the net asset value at purchase of the Class A
Shares even if those shares are later exchanged for shares of another Delaware
Group fund and, in the event of an exchange of Class A Shares, the "net asset
value of such shares at the time of redemption" will be the net asset value of
the shares acquired in the exchange.
Redemptions of such Class A Shares held for more than 12 months will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Group fund will not trigger the imposition of the Limited CDSC
at the time of such exchange. The period a shareholder owns shares into which
Class A Shares are exchanged will count towards satisfying the 12-month holding
period. The Limited CDSC is assessed if such 12-month period is not satisfied
irrespective of whether the redemption triggering its payment is of Class A
Shares of the Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the investment
occurred, will age one month on the last day of that month and each subsequent
month.
Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from the Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"), or due to death of a participant in such a plan; (iii)
redemptions pursuant to the direction of a participant or beneficiary of a
retirement plan qualified under section 401(a) or 401(k) of the Code with
respect to that retirement plan; (iv) distributions from a section 403(b)(7)
Plan or an IRA due to death, disability, or attainment of age 59 1/2; (v)
returns of excess contributions to an IRA; (vi) distributions by other employee
benefit plans to pay benefits; (vii) distributions described in (ii), (iv), and
(vi) above pursuant to a systematic withdrawal plan; and (viii) redemptions by
the classes of shareholders who are permitted to purchase shares at net asset
value, regardless of the size of the purchase (see Buying Class A Shares at Net
Asset Value under Classes of Shares).
Waiver of Contingent Deferred Sales Charge - Class B and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from the
Fund's right to liquidate a
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shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA or 403(b)(7) Deferred Compensation Plan; (iii)
required minimum distributions from an IRA, 403(b)(7) Deferred Compensation Plan
or 457 Deferred Compensation Plan; and (iv) distributions from an account if the
redemption results from the death of all registered owners of the account (in
the case of accounts established under the Uniform Gifts to Minors or Uniform
Transfers to Minors Acts or trust accounts, the waiver applies upon the death of
all beneficial owners) or a total and permanent disability (as defined in
Section 72 of the Code) of all registered owners occurring after the purchase of
the shares being redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, 403(b)(7) Deferred Compensation Plan, Profit
Sharing Plan, Money Purchase Pension Plan or 401(k) Defined Contribution Plan;
(iii) required minimum distributions from an IRA, 403(b)(7) Deferred
Compensation Plan, 457 Deferred Compensation Plan, Profit Sharing Plan, Money
Purchase Pension Plan or 401(k) Defined Contribution Plan; (iv) distributions
from a 403(b)(7) Deferred Compensation Plan, 457 Deferred Compensation Plan,
Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) Deferred Compensation
Plan, 457 Deferred Compensation Plan, Profit Sharing Plan, Money Purchase
Pension Plan or a 401(k) Defined Contribution Plan upon attainment of normal
retirement age under the plan or upon separation from service; (vi)
distributions from an IRA on or after attainment of age 59 1/2; and (vii)
distributions from an account if the redemption results from the death of all
registered owners of the account (in the case of accounts established under the
Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts,
the waiver applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Code) of all registered
owners occurring after the purchase of the shares being redeemed.
In addition, the CDSC will be waived on Class B and Class C Shares
redeemed in accordance with a Systematic Withdrawal Plan if the annual amount
selected to be withdrawn under the Plan does not exceed 12% of the value of the
account on the date that the Systematic Withdrawal Plan was established or
modified.
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DIVIDENDS AND DISTRIBUTIONS
The Fund expects to declare and pay dividends monthly. However, the
Fund does not anticipate declaring or paying dividends during the first few
months following the commencement of its operations. Payment by check of cash
dividends will ordinarily be mailed within three business days after the payable
date. Distributions from net realized securities profits, if any, will be
distributed twice a year. The first payment normally would be made during the
first quarter of the next fiscal year. The second payment would be made near the
end of the calendar year to comply with certain requirements of the Code.
Each Class of the Fund will share proportionately in the investment
income and expenses of the Fund, except that the per share dividends from net
investment income on the Class A Shares, the Class B Shares and the Class C
Shares will vary due to the expenses under the 12b-1 Plan applicable to each
Class. Generally, the dividends per share on Class B Shares and Class C Shares
can be expected to be lower than the dividends per share on Class A Shares
because the expenses under the 12b-1 Plans relating to Class B and Class C
Shares will be higher than the expenses under the 12b-1 Plan relating to Class A
Shares. See Distribution (12b-1) and Service under Management of the Fund.
Both dividends and distributions, if any, are automatically reinvested
in your account at net asset value unless you elect otherwise. Any check in
payment of dividends or other distributions which cannot be delivered by the
United States Post Office or which remains uncashed for a period of more than
one year may be reinvested in your account at the then-current net asset value
and the dividend option may be changed from cash to reinvest. If you elect to
take your dividends and distributions in cash and such dividends and
distributions are in an amount of $25 or more, you may choose the MoneyLine
Direct Deposit Service and have such payments transferred from your Fund account
to your predesignated bank account. This service is not available for retirement
plans. See MoneyLine Direct Deposit Service under The Delaware Difference for
more information about this service.
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TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Fund.
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code (the "Code"). As such, the Fund will
not be subject to federal income tax, or to any excise tax, to the extent its
earnings are distributed as provided in the Code.
The Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to you as ordinary income, whether
received in cash or in additional shares. It is expected that only a nominal
portion of the Fund's dividends will be eligible for the dividends-received
deduction for corporations.
Distributions paid by the Fund from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who are
subject to income taxes as long-term capital gains, regardless of the length of
time an investor has owned shares in the Fund. The Fund does not seek to realize
any particular amount of capital gains during a year; rather, realized gains are
a byproduct of Fund management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year. Also, for
those investors subject to tax, if purchases of shares in the Fund are made
shortly before the record date for a dividend or capital gains distribution, a
portion of the investment will be returned as a taxable distribution.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November or December to shareholders of
record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Fund and received by the shareholder
on December 31 of the calendar year in which they are declared.
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
two mutual funds (or two series or portfolios of a mutual fund). Any loss
incurred on a sale or exchange of the Fund's shares that had been held for six
months or less will be treated as a long-term capital loss to the extent of
capital gain dividends received with respect to such shares. All or a portion of
the sales charge incurred in acquiring Fund shares will be excluded from the
federal tax basis of any of such shares sold or exchanged within 90 days of
their purchase (for purposes of determining gain or loss upon the sale of such
shares) if the sale proceeds are reinvested in the Fund or in another fund in
the Delaware Group of funds and a sales charge that would otherwise apply to the
reinvestment is reduced or eliminated. Any portion of such sales charge excluded
from the tax basis of the shares sold will be added to the tax basis of the
shares acquired in the reinvestment.
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The automatic conversion of Class B Shares into Class A Shares at the
end of approximately eight years after purchase will be tax-free for federal tax
purposes. See Automatic Conversion of Class B Shares under Classes of Shares.
The Fund may be subject to foreign withholding taxes on income from
certain of its foreign securities. If more than 50% in value of the total assets
of the Fund at the end of its fiscal year are invested in securities of foreign
corporations, the Fund may elect to pass-through to its shareholders a pro-rata
share of foreign income taxes paid by the Fund. If this election is made,
shareholders will be (i) required to include in their gross income their
pro-rata share of foreign source income (including any foreign taxes paid by the
Fund),and (ii) entitled to either deduct (as an itemized deduction in the case
of individuals) their share of such foreign taxes in computing their taxable
income or to claim a credit for such taxes against their U.S. income tax,
subject to certain limitations under the Code. Shareholders will be informed by
the Fund at the end of each calendar year regarding the availability of any
credits on and the amount of foreign source income to be included in their
income tax returns.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. government securities may be exempt from
state personal income taxes. Shares of the Fund are exempt from Pennsylvania
county personal property taxes.
Each year, Value Fund, Inc. will mail to you information on the tax
status of the Fund's dividends and distributions. Shareholders will also receive
each year information as to the portion of dividend income that is derived from
U.S. government securities that are exempt from state income tax. Of course,
shareholders who are not subject to tax on their income would not be required to
pay tax on amounts distributed to them by the Fund.
The Fund is required to withhold 31% of taxable dividends, capital
gains distributions, and redemptions paid to shareholders who have not complied
with IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Investment Application your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
See Taxes in Part B for additional information on tax matters relating
to the Fund and its shareholders.
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CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
The net asset value ("NAV") per share is computed by adding the value
of all securities and other assets in the portfolio, deducting any liabilities
(expenses and fees are accrued daily) and dividing by the number of shares
outstanding. Debt securities are priced at fair value by an independent pricing
service using methods approved by Value Fund, Inc.'s Board of Directors.
Short-term investments having a maturity of less than 60 days are valued at
amortized cost, which approximates market value. All other securities are valued
at their fair value as determined in good faith and in a method approved by
Value Fund, Inc.'s Board of Directors.
Class A Shares are purchased at the offering price per share, while
Class B Shares and Class C Shares are purchased at the NAV per share. The
offering price per share of Class A Shares consists of the NAV per share next
computed after the order is received, plus any applicable front-end sales
charges.
The offering price and NAV are computed as of the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on
days when the Exchange is open.
The net asset values of all outstanding shares of each class of the
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Fund represented by the value of shares
of that class. All income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share of a class, based on each class'
percentage in the Fund represented by the value of shares of such classes,
except that the Retirement Income Fund Institutional Class will not incur any of
the expenses under the Fund's 12b-1 Plans and the Class A, Class B and Class C
Shares alone will bear the 12b-1 Plan expenses payable under their respective
Plans. Due to the specific distribution expenses and other costs that will be
allocable to each class, the dividends paid to each class of the Fund and the
NAV per share of each class will vary.
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MANAGEMENT OF THE FUND
Directors
The business and affairs of Value Fund, Inc. are managed under the
direction of its Board of Directors. Part B contains additional information
regarding Value Fund, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On July 31, 1996, the Manager and its affiliates in
the Delaware Group, including Delaware International Advisers Ltd., were
supervising in the aggregate more than $28 billion in assets in the various
institutional or separately managed (approximately $17,646,238,000) and
investment company (approximately $10,764,119,000) accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now indirect, wholly owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management.
The Manager manages the Fund's portfolio and makes investment decisions
for the Fund. The Manager also administers Value Fund, Inc.'s affairs and pays
the salaries of all the directors, officers and employees of Value Fund, Inc.
who are affiliated with the Manager. For these services, the Manager is paid an
annual fee equal to 0.75% on the first $500 million of average daily net assets,
0.725% on the next $500 million and 0.70% on the average daily net assets in
excess of $1 billion.
Babak Zenouzi oversees the Fund's asset allocation strategy and has
primary responsibility for making day-to-day investment decisions for the Fund's
investments in income generating equity securities. Mr. Zenouzi, a Vice
President/Portfolio Manager of Value Fund, Inc., has been a member of the Fund's
management team since its inception. Mr. Zenouzi holds a BS in Finance and
Economics from Babson College in Wellesley, Massachusetts, and an MS in Finance
from Boston College. Prior to joining the Manager in 1992, he was with The
Boston Company where he held the positions of assistant vice president, senior
financial analyst, financial analyst and portfolio accountant.
Gerald T. Nichols has primary responsibility for making day-to-day
investment decisions for the Fund regarding its investments in debt securities.
Mr. Nichols, a Vice President/Senior Portfolio Manager of Value Fund, Inc., has
been a member of the Fund's management team since its inception. Mr. Nichols is
a graduate of the University of Kansas,
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where he received a BS in Business Administration and an MS in Finance. Prior to
joining the Manager, he was a high yield credit analyst at Waddell & Reed, Inc.
and subsequently the investment officer for a private merchant banking firm. He
is a Chartered Financial Analyst.
Portfolio Trading Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length of time they
have been held. The degree of portfolio activity will affect brokerage costs of
the Fund and may affect taxes payable by the Fund's shareholders. Given the
Fund's investment objective, its annual portfolio turnover rate is not expected
to exceed 100%. A turnover rate of 100% would occur, for example, if all the
investments in the Fund's portfolio at the beginning of the year were replaced
by the end of the year.
The Fund uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
to their advisory clients. These services may be used by the Manager in
servicing any of its accounts. Subject to best price and execution, the Fund may
consider a broker/dealer's sales of Fund shares in placing portfolio orders and
may place orders with broker/dealers that have agreed to defray certain Fund
expenses such as custodian fees.
Performance Information
From time to time, the Fund may quote yield or total return performance
of the Classes in advertising and other types of literature.
The current yield for each Class will be calculated by dividing the
annualized net investment income earned by that Class during a recent 30-day
period by the maximum offering price per share on the last day of the period.
The yield formula provides for semi-annual compounding, which assumes that net
investment income is earned and reinvested at a constant rate and annualized at
the end of a six-month period.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value and: (i) in
the case of Class A Shares, the impact of the maximum front-end sales charge at
the beginning of each specified period; and (ii) in the case of Class B Shares
and Class C Shares, the deduction of any applicable CDSC at the end of the
relevant period. Each presentation will include the average annual total return
for one-, five- and ten-year periods, as relevant. The Fund may also advertise
aggregate and average total return information concerning a Class over
additional periods of time. In addition, the Fund may present total return
information that does not reflect the deduction of the maximum front-end sales
charge or any applicable CDSC. In this case, such total return information would
be more favorable than total return information that includes the deductions of
the maximum front-end sales charge or any applicable CDSC.
Yield and net asset value fluctuate and are not guaranteed. Past
performance is not an indication of future results.
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Distribution (12b-1) and Service
The Distributor, Delaware Distributors, L.P., serves as the national
distributor of the Fund's shares under a Distribution Agreement with Value Fund,
Inc. dated as of November 29, 1996.
Value Fund, Inc. has adopted a separate distribution plan under Rule
12b-1 for each of the Class A Shares, Class B Shares and Class C Shares of the
Fund (the "Plans"). The Plans permit the Fund to pay the Distributor from the
assets of the respective Classes a monthly fee for the Distributor's services
and expenses in distributing and promoting sales of shares. These expenses
include, among other things, preparing and distributing advertisements, sales
literature, and prospectuses and reports used for sales purposes, compensating
sales and marketing personnel, holding special promotions for specified periods
of time, and paying distribution and maintenance fees to brokers, dealers and
others. In connection with the promotion of shares of the Classes, the
Distributor may, from time to time, pay to participate in dealer-sponsored
seminars and conferences, and reimburse dealers for expenses incurred in
connection with preapproved seminars, conferences, and advertising. The
Distributor may pay or allow additional promotional incentives to dealers as
part of preapproved sales contests and/or to dealers who provide extra training
and information concerning a Class and increase sales of the Class. In addition,
the Fund may make payments from the 12b-1 plan fees of the respective Class
directly to others, such as banks, who aid in the distribution of Class shares
or provide services in respect of a Class, pursuant to service agreements with
Value Fund, Inc.
The 12b-1 Plan expenses relating to each of the Class B Shares and
Class C Shares of the Fund are also used to pay the Distributor for advancing
the commission costs to dealers with respect to the initial sale of such shares.
The aggregate fees paid by the Fund from the assets of the respective
Classes to the Distributor and others under the Plans may not exceed (i) .30% of
the Class A Shares' average daily net assets in any year, and (ii) 1% (.25% of
which are service fees to be paid to the Distributor, dealers and others for
providing personal service and/or maintaining shareholder accounts) of each of
the Class B Shares' and Class C Shares' average daily net assets in any year.
The Class A, Class B and Class C Shares will not incur any distribution expenses
beyond these limits, which may not be increased without shareholder approval.
Although the maximum fee payable under the Plan relating to the Class A
Shares is .30% of average daily net assets, the Board of Directors has currently
set the annual fee for the Class at .25% of the average daily net assets. The
Board of Directors may increase the fee to the full .30% on all Class A Shares'
assets at any time. See Shares.
While payments pursuant to the Plans may not exceed .30% annually with
respect to the Class A Shares, and 1% annually with respect to each of the Class
B Shares and the Class C Shares, the Plans do not limit fees to amounts actually
expended by the Distributor. It is therefore possible that the Distributor may
realize a profit in any particular year. However,
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the Distributor currently expects that its distribution expenses will likely
equal or exceed payments to it under the Plans. The Distributor may, however
incur such additional expenses and make additional payments to dealers from its
own resources to promote the distribution of shares of the Classes. The monthly
fees paid to the Distributor are subject to the review and approval of Value
Fund, Inc.'s unaffiliated directors, who may reduce the fees or terminate the
Plans at any time.
The Fund's Plans do not apply to the Retirement Income Fund
Institutional Class of shares. Those shares are not included in calculating the
Plans' fees, and the Plans are not used to assist in the distribution and
marketing of the Retirement Income Fund Institutional Class shares.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Fund
pursuant to an agreement dated as of November 29, 1996. The Transfer Agent also
provides accounting services to the Fund pursuant to the terms of a separate
agreement dated as of November 29, 1996. The directors of Value Fund, Inc.
annually review service fees paid to the Transfer Agent.
The Distributor and the Transfer Agent are also indirect, wholly owned
subsidiaries of DMH.
Expenses
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under the Distribution Agreement. The expense ratio of each
Class will reflect the impact of its 12b-1 Plan.
Shares
Value Fund, Inc. is an open-end management investment company. The
Fund's portfolio of assets is diversified as defined by the 1940 Act. Commonly
known as a mutual fund, Value Fund, Inc. was organized as a Maryland corporation
on January 16, 1987. In addition to the Fund, Value Fund, Inc. presently has one
other series, the Value Fund series.
Value Fund, Inc.'s shares have a par value of $0.01, equal voting
rights, except as noted below, and are equal in all other respects. Value Fund,
Inc.'s shares have noncumulative voting rights which means that the holders of
more than 50% of Value Fund, Inc.'s shares voting for the election of directors
can elect 100% of the directors if they choose to do so. Under Maryland law,
Value Fund, Inc. is not required, and does not intend, to hold annual meetings
of shareholders unless, under certain circumstances, it is required to do so
under the 1940 Act. Shareholders of 10% or more of Value Fund, Inc.'s shares may
request that a special meeting be called to consider the removal of a director.
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<PAGE>
In addition to Class A Shares, Class B Shares and Class C Shares, the
Fund also offers the Retirement Income Fund Institutional Class shares. Shares
of each class represent proportionate interests in the assets of the Fund and
have the same voting and other rights and preferences as the other classes of
the Fund, except that shares of the Retirement Income Fund Institutional Class
are not subject to, and may not vote on matters affecting, the Distribution
Plans under Rule 12b-1 relating to the Class A, Class B and Class C Shares.
Similarly, as a general matter, the shareholders of Class A Shares, Class B
Shares and Class C Shares may vote only on matters affecting the 12b-1 Plan that
relates to the class of shares that they hold. However, the Class B Shares may
vote on any proposal to increase materially the fees to be paid by the Fund
under the Rule 12b-1 Plan relating to the Class A Shares.
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<PAGE>
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
U.S. Government Securities
U.S. Treasury securities are backed by the "full faith and credit" of
the United States. Securities issued or guaranteed by federal agencies and U.S.
government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States. In the case of securities not backed by
the full faith and credit of the United States, investors in such securities
look principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment. Agencies which are backed by the full faith and credit of
the United States include the Export-Import Bank, Farmers Home Administration,
Federal Financing Bank, the Federal Housing Administration, the Maritime
Administration, the Small Business Administration, and others. Certain agencies
and instrumentalities, such as the Government National Mortgage Association
("GNMA"), are, in effect, backed by the full faith and credit of the United
States through provisions in their charters that they may make "indefinite and
unlimited" drawings on the Treasury, if needed to service its debt. Debt from
certain other agencies and instrumentalities, including the Federal Home Loan
Bank and Federal National Mortgage Association, are not guaranteed by the United
States, but those institutions are protected by the discretionary authority for
the U.S. Treasury to purchase certain amounts of their securities to assist the
institutions in meeting their debt obligations. Finally, other agencies and
instrumentalities, such as the Farm Credit System, the Tennessee Valley
Authority and the Federal Home Loan Mortgage Corporation, are federally
chartered institutions under U.S. government supervision, but their debt
securities are backed only by the creditworthiness of those institutions, not
the U.S. government.
An instrumentality of a U.S. government agency is a government agency
organized under Federal charter with government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Federal Home Loan
Banks, the Federal Land Banks, Central Bank for Cooperatives, Federal
Intermediate Credit Banks and the Federal National Mortgage Association.
The maturities of such securities usually range from three months to
thirty years. While such securities are guaranteed as to principal and interest
by the U.S. government or its instrumentalities, their market values may
fluctuate and are not guaranteed, which may, along with the other securities in
the Fund's portfolio, cause a Class' daily net asset value to fluctuate.
Brady Bonds
Among the foreign fixed-income securities in which the Fund may invest
are Brady Bonds. Brady Bonds are debt securities issued under the framework of
the Brady Plan, an initiative announced by former U.S. Treasury Secretary
Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their
outstanding external indebtedness (generally commercial bank debt). In so
restructuring its external debt, a debtor nation negotiates with its existing
bank lenders, as well as multilateral institutions such as the World Bank and
the
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<PAGE>
International Monetary Fund, to exchange its commercial bank debt for newly
issued bonds (Brady Bonds). The Manager believes that economic reforms
undertaken by countries in connection with the issuance of Brady Bonds make the
debt of countries which have issued or have announced plans to issue Brady Bonds
an attractive opportunity for investment. Investors, however, should recognize
that the Brady Plan only sets forth general guiding principles for economic
reform and debt reduction, emphasizing that solutions must be negotiated on a
case-by-case basis between debtor nations and their creditors. In addition,
Brady Bonds have been issued only recently and, accordingly, do not have a long
payment history.
Foreign Government Securities
With respect to investment in debt issues of foreign governments,
including Brady Bonds, the ability of a foreign government or government-related
issuer to make timely and ultimate payments on its external debt obligations
will also be strongly influenced by the issuer's balance of payments, including
export performance, its access to international credits and investments,
fluctuations in interest rates and the extent of its foreign reserves. A country
whose exports are concentrated in a few commodities or whose economy depends on
certain strategic imports could be vulnerable to fluctuations in international
prices of these commodities or imports. If foreign government or
government-related issuers cannot generate sufficient earnings from foreign
trade to service its external debt, they may need to depend on continuing loans
and aid from foreign governments, commercial banks and multilateral
organizations, and inflows of foreign investment. The commitment on the part of
these foreign governments, multilateral organizations and others to make such
disbursements may be conditioned on the government's implementation of economic
reforms and/or economic performance and the timely service of its obligations.
Failure to implement such reforms, achieve such levels of economic performance
or repay principal or interest when due may curtail the willingness of such
third parties to lend funds, which may further impair the issuer's ability or
willingness to service its debts in a timely manner. The cost of servicing
external debt generally will also be adversely affected by rising international
interest rates because many external debt obligations bear interest at rates
which are adjusted based upon international interest rates. The ability to
service external debt will also depend on the level of the relevant government's
international currency reserves and its access to foreign exchange. Currency
devaluations may affect the ability of a government issuer to obtain sufficient
foreign exchange to service its external debt. If a foreign governmental issuer
defaults on its obligations, the Fund may have limited legal recourse against
the issuer and/or guarantor.
Zero Coupon Bonds and Pay-In-Kind Bonds
Although the Fund does not intend to purchase a substantial amount of
zero coupon bonds or PIK bonds, from time to time, the Fund may acquire zero
coupon bonds and, to a lesser extent, PIK bonds. Zero coupon bonds are debt
obligations which do not entitle the holder to any periodic payments of interest
prior to maturity or a specified date when the securities begin paying current
interest, and therefore are issued and traded at a discount from their face
amounts or par value. PIK bonds pay interest through the issuance to holders of
additional securities. Zero coupon bonds and PIK bonds are generally considered
to be more
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<PAGE>
interest-sensitive than income bearing bonds, to be more speculative than
interest-bearing bonds, and to have certain tax consequences which could, under
certain circumstances, be adverse to the Fund. For example, with zero coupon
bonds, the Fund accrues, and is required to distribute to shareholders, income
on such bonds. However, the Fund may not receive the cash associated with this
income until the bonds are sold or mature. If the Fund did not have sufficient
cash to make the required distribution of accrued income, the Fund could be
required to sell other securities in its portfolio or to borrow to generate the
cash required.
Borrowings
The Fund may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. The Fund will not borrow money in excess
of one-third of the value of its net assets. 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 Sundays 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, or issue senior securities as defined in
the 1940 Act, except for notes to banks. Investment securities will not be
purchased while the Fund has an outstanding borrowing.
When-Issued and Delayed Delivery Securities
The Fund may purchase securities on a when-issued or delayed delivery
basis. In such transactions, instruments are purchased with payment and delivery
taking place in the future in order to secure what is considered to be an
advantageous yield or price at the time of the transaction. Delivery of and
payment for these securities may take as long as a month or more after the date
of the purchase commitment. The Fund will maintain with its custodian bank a
separate account with a segregated portfolio of liquid securities in an amount
at least equal to these commitments. The payment obligation and the interest
rates that will be received are each fixed at the time the Fund enters into the
commitment and no interest accrues to the Fund until settlement. Thus, it is
possible that the market value at the time of settlement could be higher or
lower than the purchase price if the general level of interest rates has
changed.
Portfolio Loan Transactions
The Fund may loan up to 25% of its assets to qualified broker/dealers
or institutional investors.
The major risk to which the Fund would be exposed on a loan transaction
is the risk that the borrower would become bankrupt at a time when the value of
the security goes up. Therefore, the Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, subject to overall
supervision by the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
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<PAGE>
Rule 144A Securities
The Fund may invest in restricted securities, including privately
placed securities, some of which may be eligible for resale without registration
pursuant to Rule 144A ("Rule 144A Securities") under the Securities Act of 1933.
Rule 144A permits many privately placed and legally restricted securities to be
freely traded among certain institutional buyers such as the Fund. The Fund may
invest no more than 15% of the value of its net assets in illiquid securities.
While maintaining oversight, the Board of Directors has delegated to
the Manager the day-to-day function of determining whether or not individual
Rule 144A Securities are liquid for purposes of the Fund's 15% limitation on
investments in illiquid securities. The Board has instructed the Manager to
consider the following factors in determining the liquidity of a Rule 144A
Security: (i) the frequency of trades and trading volume for the security; (ii)
whether at least three dealers are willing to purchase or sell the security and
the number of potential purchasers; (iii) whether at least two dealers are
making a market in the security; (iv) the nature of the security and the nature
of the marketplace trades (e.g., the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, the
Fund's holdings of illiquid securities exceed the Fund's 15% limit on
investments in such securities, the Manager will determine what action to take
to ensure that the Fund continues to adhere to such limitation.
Investment Company Securities
Any investments that the Fund makes in either closed-end or open-end
investment companies will be limited by the 1940 Act, and would involve an
indirect payment of a portion of the expenses, including advisory fees, of such
other investment companies. Under the 1940 Act's current limitations, the Fund
may not (1) own more than 3% of the voting stock of another investment company;
(2) invest more than 5% of the Fund's total assets in the shares of any one
investment company; nor (3) invest more than 10% of the Fund's total assets in
shares of other investment companies. If the Fund elects to limit its investment
in other investment companies to closed-end investment companies, the 3%
limitation described above is increased to 10%. These percentage limitations
also apply to the Fund's investments in unregistered investment companies.
Repurchase Agreements
In order to invest its short-term cash reserves or when in a temporary
defensive posture, the Fund may enter into repurchase agreements with banks or
broker/dealers deemed to be creditworthy by the Manager, under guidelines
approved by the Board of Directors. A repurchase agreement is a short-term
investment in which the purchaser (i.e. the Fund) 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.
Generally, repurchase agreements are of short duration, often less than one week
but on occasion for longer periods. Not more than 15% of the Fund's assets may
be invested in repurchase agreements of over seven-days' maturity or other
illiquid assets. Should an issuer
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<PAGE>
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 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.
Foreign Currency Transactions
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund will, however, from time to time, purchase or sell
foreign currencies and/or engage in forward foreign currency transactions in
order to expedite settlement of portfolio transactions and to minimize currency
value fluctuations. The Fund may conduct its 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). A forward contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract, agreed upon by the parties, at a
price set at the time of the contract. The Fund will convert currency on a spot
basis from time to time, and investors should be aware of the costs of currency
conversion.
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. By entering into a
forward contract for the purchase or sale, for a fixed amount of U.S. dollars or
foreign currency, of the amount of foreign currency involved in the underlying
security transaction, the Fund will be able to protect itself against a possible
loss resulting from an adverse change in currency exchange rates during the
period between the date the security is purchased or sold and the date on which
payment is made or received.
When the Manager believes that the currency of a particular country may
suffer a significant decline against the U.S. dollar or against another
currency, the Fund may enter into a forward foreign currency 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.
The Fund will not enter into forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of the
value of the Fund's securities or other assets denominated in that currency.
At the maturity of a forward contract, the Fund may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same
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amount of the foreign currency. The Fund may realize a gain or loss from
currency transactions. With respect to forward foreign currency contracts, the
precise matching of forward contract amounts and the value of the securities
involved is generally not possible since the future value of such securities in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date the forward contract is entered into and
the date it matures. The projection of short-term currency strategy is highly
uncertain.
It is impossible to forecast the market value of Fund securities at the
expiration of the contract. Accordingly, it may be necessary for the Fund to
purchase additional foreign currency on the spot market (and bear the expense of
such purchase) if the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver and if a decision is made to
sell the security and make delivery of the foreign currency. Conversely, it may
be necessary to sell on the spot market some of the foreign currency received
upon the sale of a security if its market value exceeds the amount of foreign
currency the Fund is obligated to deliver.
Options
The Manager may employ options techniques in an attempt to protect
appreciation attained and to increase shareholder return by seeking to take
advantage of the liquidity available in the options market. The Fund may
purchase call options on foreign or U.S. securities and indices and enter into
related closing transactions and the Fund may write covered call options on such
securities. The Fund may also purchase put options on such securities and
indices and enter into related closing transactions.
A call option enables the purchaser, in return for the premium paid, to
purchase securities from the writer of the option at an agreed price up to an
agreed date. A covered call option obligates the writer, in return for the
premium received, to sell the securities subject to the option to the purchaser
of the option for an agreed upon price up to an agreed date. The advantage is
that the purchaser may hedge against an increase in the price of securities it
ultimately wishes to buy or take advantage of a rise in a particular index. The
Fund will only purchase call options to the extent that premiums paid on all
outstanding call options do not exceed 2% of its total assets. The Fund may
write covered call options in an amount not to exceed 10% of its total assets.
A put option enables the purchaser of the option, in return for the
premium paid, to sell the security underlying the option to the writer at the
exercise price during the option period, and the writer of the option has the
obligation to purchase the security from the purchaser of the option. The Fund
will only purchase put options to the extent that the premiums on all
outstanding put options do not exceed 2% of its total assets. The advantage is
that the purchaser can be protected should the market value of the security
decline or should a particular index decline.
An option on a securities index gives the purchaser of the option, in
return for the premium paid, the right to receive from the seller cash equal to
the difference between the closing price of the index and the exercise price of
the option.
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<PAGE>
Closing transactions essentially let the Fund offset put options or
call options prior to exercise or expiration. If the Fund cannot effect closing
transactions, it may have to hold a security it would otherwise sell or deliver
a security it might want to hold.
In purchasing put and call options, the premium paid by the Fund plus
any transaction costs will reduce any benefit realized by the Fund upon exercise
of the option. With respect to writing covered call options, the Fund may lose
the potential market appreciation of the securities subject to the option, if
the Manager's judgment is wrong and the price of the security moves in the
opposite direction from what was anticipated.
The Fund may use both Exchange-traded and over-the-counter options.
Certain over-the-counter options may be illiquid. The Fund will only invest in
such options to the extent consistent with its 15% limitation on investment in
illiquid securities. The Fund will comply with Securities and Exchange
Commission asset segregation and coverage requirements when engaging in these
types of transactions.
Futures
Futures contracts are agreements for the purchase or sale for future
delivery of securities. When a futures contract is sold, the Fund incurs a
contractual obligation to deliver the securities underlying the contract at a
specified price on a specified date during a specified future month. A purchase
of a futures contract means the acquisition of a contractual right to obtain
delivery to the Fund of the securities called for by the contract at a specified
price during a specified future month.
While futures contracts provide for the delivery of securities,
deliveries usually do not occur. Contracts are generally terminated by entering
into an offsetting transaction. When the Fund enters into a futures transaction,
it must deliver to the futures commission merchant selected by the Fund an
amount referred to as "initial margin." This amount is maintained by the futures
commission merchant in an account at the Fund's custodian bank. Thereafter, a
"variation margin" may be paid by the Fund to, or drawn by the Fund from, such
account in accordance with controls set for such account, depending upon changes
in the price of the underlying securities subject to the futures contract.
The Fund may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options on securities except that
options on futures give the purchaser the right, in return for the premium paid,
to assume a position in a futures contract, rather than actually to purchase or
sell the futures contract, at a specified exercise price at any time during the
period of the option.
The purpose of the purchase or sale of futures contracts with respect
to a certain security is to protect the Fund against the adverse effects of
fluctuations in interest rates without actually buying or selling that security.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to hedge in anticipation of subsequent purchases of
securities at higher prices.
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<PAGE>
Foreign currency futures contracts operate similarly to futures
contracts related to securities. When the Fund sells a futures contract on a
foreign currency it is obligated to deliver that foreign currency at a specified
future date. Similarly, a purchase by the Fund gives it a contractual right to
receive a foreign currency. This enables the Fund to "lock-in" exchange rates.
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APPENDIX A - INVESTMENT ILLUSTRATIONS
Illustrations of the Potential Impact on Investment Based on Purchase Option
$10,000 Purchase
<TABLE>
<CAPTION>
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
----------------------------------------- --------------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
<C> <C> <C> <C> <C> <C> <C>
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,192 10,625 10,625 10,192 10,225 10,525+
2 10,905 11,289 11,289
3 11,669 11,995 11,995
4 12,485 12,744 12,744
5 13,359 13,541 13,541
6 14,294 14,387 14,387
7 15,295 15,286 15,286
8 16,366+ 16,242 16,242
9 17,511 17,379* 17,257
10 18,737 18,595* 18,335
</TABLE>
<TABLE>
<CAPTION>
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
------------------------------------- ---------------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
<C> <C> <C> <C> <C> <C> <C>
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,192 10,625 10,625 10,192 10,625 10,625
2 10,905 11,289 11,289 10,905 11,289 11,289
3 11,669 11,695 11,995+ 11,669 11,995 11,995
4 12,485 12,744 12,744
5 13,359 13,341 13,541+
6
7
8
9
10
*This assumes that Class B Shares were converted to Class A Shares at the end of the eighth year.
</TABLE>
$250,000 Purchase
<TABLE>
<CAPTION>
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
----------------------------------------- ---------------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
<C> <C> <C> <C> <C> <C> <C>
0 243,750 250,000 250,000 243,750 250,000 250,000
1 260,813 265,625 265,625 260,813 255,625 263,125+
2 279,069 282,227 282,227
3 298,604 299,866 299,866
4 319,507+ 318,607 318,607
5 341,872 338,520 338,520
6 365,803 359,678 359,678
7 391,409 382,158 382,158
8 418,808 406,043 406,043
9 448,124 434,466* 431,420
10 479,493 464,878* 458,384
</TABLE>
<TABLE>
<CAPTION>
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
-------------------------------------- ---------------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
<C> <C> <C> <C> <C> <C> <C>
0 243,750 250,000 250,000 243,750 250,000 250,000
1 260,813 265,625 265,625 260,813 265,625 265,625
2 279,069 282,227 282,227 279,069 282,227 282,227
3 298,604 292,366 300,866+ 298,604 299,866 299,866
4 319,507+ 318,607 318,607
5 341,872 333,520 338,520
6
7
8
9
10
*This assumes that Class B Shares were converted to Class A Shares at the end of the eighth year.
</TABLE>
Assumes a hypothetical return for Class A of 7% per year, a hypothetical return
for Class B of 6.25% for years 1-8 and 7% for years 9-10, and a hypothetical
return for Class C of 6.25% per year. Hypothetical returns vary due to the
different expense structure for each Class and do not represent actual
performance.
Class A purchase subject to appropriate sales charge breakpoint (4.75% @
$10,000; 3.75% @ $100,000; 2.50% @ $250,000).
Class B purchase assessed appropriate CDSC upon redemption (4%-4%-3%-3%-2%-1%
in years 1-2-3-4-5-6).
Class C purchase assessed 1% CDSC upon redemption in year 1.
Figures marked "+" identify which Class offers the greater return potential
based on investment amount, the holding period and the expense structure of each
Class.
<PAGE>
APPENDIX B--RATINGS
The Fund's assets may be invested in securities rated BBB or lower by
S&P or Fitch, Baa or lower by Moody's, in securities similarly rated by another
nationally recognized statistical rating organization, and in unrated securities
that are deemed by the Manager to be comparable in quality to similar rated
securities. Credit ratings evaluate only the safety of principal, interest and
dividends and do not consider the market value risk associated with high-yield
securities.
General Rating Information
Bonds and Convertible Securities
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.
Excerpts from Fitch's description of its bond ratings:
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events; AA--Bonds considered to be
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investment grade and of very high credit quality. The obligor's ability to pay
interest and repay principal is very strong, although not quite as strong as
bonds rated AAA. Because bonds rated in the AAA and AA categories are not
significantly vulnerable to foreseeable future developments, short-term debt of
these issuers is generally rated F-1+; A--Bonds considered to be investment
grade and of high credit quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds with higher
ratings; BBB--Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings; BB--Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements; B--Bonds
are considered highly speculative. While bonds in this class are currently
meeting debt service requirements, the probability of continued timely payment
of principal and interest reflects the obligor's limited margin of safety and
the need for reasonable business and economic activity throughout the life of
the issue; CCC--Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment; CC--Bonds are minimally
protected. Default in payment of interest and/or principal seems probable over
time; C--Bonds are in imminent default in payment of interest or principal; and
DDD-DD- and D--Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the "AAA" category.
Commercial Paper
Excerpts from 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.
Excerpts from S&P's 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.
-67-
<PAGE>
Preferred Stock
The following are excerpts from S&P's description of its preferred
stock ratings:
An S&P preferred stock rating is an assessment of the capacity and
willingness of an issuer to pay preferred stock dividends and any applicable
sinking fund obligations. A preferred stock rating differs from a bond rating
inasmuch as it is assigned to an equity issue, which issue is intrinsically
different from, and subordinated to, a debt issue. Therefore, to reflect this
difference, the preferred stock rating symbol will normally not be higher than
the debt rating symbol assigned to, or that would be assigned to, the senior
debt of the same issuer.
The preferred stock ratings are based on the following considerations:
1. Likelihood of payment--capacity and willingness of the issuer to
meet the timely payment of preferred stock dividends and any applicable sinking
fund requirements in accordance with the terms of the obligation.
2. Nature of, and provisions of, the issue.
3. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangements affecting creditors' rights.
AAA This is the highest rating that may be assigned by S&P to a
preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
AA A preferred stock issue rated "AA" also qualifies as a
high-quality fixed-income security. The capacity to pay
preferred stock obligations is very strong, although not as
overwhelming as for issues rated "AAA."
A An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more
susceptible to the adverse effects of changes in circumstances
and economic conditions.
BBB An issue rated "BBB" is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity to make payments for a
preferred stock in this category than for issues in the "A"
category.
BB, B, Preferred stocks rated "BB," "B" and "CCC" are regarded, on
CCC balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. "BB"
indicates the lowest degree of speculation and "CCC" the
highest degree of speculation. While such issues will likely
have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to
adverse conditions.
-68-
<PAGE>
CC The rating "CC" is reversed for a preferred stock issue in
arrears on dividends or sinking fund payments but that is
currently paying.
C A preferred stock rated "C" is a non-paying issue.
D A preferred stock rated "D" is a non-paying issue with the
issuer in default on debt instruments.
NR indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligations as a matter of policy.
Plus (+) or Minus (-) To provide more detailed indications of preferred
stock quality, the ratings from "AA" to "CCC" may be modified by the addition of
a plus or minus sign to show relative standing within the major rating
categories.
The following are excerpts from Moody's description of its preferred
stock ratings:
"aaa" An issue which is rated "aaa" is considered to be a
top-quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within
the universe of preferred stocks.
"aa" An issue which is rated "aa" is considered a high-grade
preferred stock. This rating indicates that there is a
reasonable assurance the earnings and asset protection will
remain relatively well-maintained in the foreseeable future.
"a" An issue which is rated "a" is considered to be an
upper-medium grade preferred stock. While risks are judged to
be somewhat greater than in the "aaa" and "aa" classification,
earnings and asset protection are, nevertheless, expected to
be maintained at adequate levels.
"baa" An issue which is rated "baa" is considered to be a
medium-grade preferred stock, neither high protected nor
poorly secured. Earnings and asset protection appear adequate
at present but may be questionable over any great length of
time.
"ba" An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured.
Earnings and asset protection may be very moderate and not
well safeguarded during adverse periods. Uncertainty of
position characteristizes preferred stocks in this class.
"b" An issue which is rated "b" generally lacks the
characteristics of a desirable investment. Assurance of
dividend payments and maintenance of other terms of the issue
over any long period of time may be small.
"caa" An issue which is rated "caa" is likely to be in arrears on
dividends payments. This rating designation does not purport
to indicate the future status of payments.
-69-
<PAGE>
"ca" An issue which is rated "ca" is speculative in a high degree
and is likely to be in arrears on dividends with little
likelihood of eventual payments.
"c" This is the lowest rated class of preferred or preference
stock. Issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Moody's applies numerical modifies 1, 2, and 3 in each rating
classification; the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
-70-
<PAGE>
APPENDIX C--RETAIL CLASSES OFFERED
<TABLE>
<CAPTION>
Class A Class B Class C Consultant
Shares Shares Shares Class Shares
<S> <C> <C> <C> <C>
Corporate Income Fund X X X
Decatur Total Return Fund X X X
Decatur Income Fund X X X
Delaware Cash Reserve X X X X
Delaware Fund X X X
DelCap Fund X X X
Delchester Fund X X X
Devon Fund X X X
Emerging Markets Fund X X X
Enterprise Fund X X X
Federal Bond Fund X X X
Global Bond Fund X X X
Global Assets Fund X X X
International Equity Fund X X X
Limited-Term Government Fund X X X
New Pacific Fund X X X
Tax-Free Pennsylvania Fund X X X
Tax-Free USA Fund X X X
Tax-Free Insured Fund X X X
Tax-Free Money Fund X X
Tax-Free USA Intermediate Fund X X X
Trend Fund X X X
U.S. Government Fund X X X
U.S. Government Money Fund X X
U.S. Growth Fund X X X
Value Fund X X X
World Growth Fund X X X
</TABLE>
-71-
<PAGE>
- ----------------------------------------------
RETIREMENT INCOME FUND
- ----------------------------------------------
INSTITUTIONAL
- ----------------------------------------------
P R O S P E C T U S
- ----------------------------------------------
NOVEMBER ___, 1996
DELAWARE
GROUP
--------
<PAGE>
For more information 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,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Bankers Trust Company
One Bankers Trust Plaza
New York, NY 10006
September 10, 1996 10:51PM
<PAGE>
RETIREMENT INCOME FUND PROSPECTUS
INSTITUTIONAL CLASS SHARES NOVEMBER ___, 1996
-------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For more information about
the Retirement Income Fund Institutional Class
call the Delaware Group at 800-828-5052.
This Prospectus describes the Retirement Income Fund Institutional
Class of shares of the Retirement Income Fund series (the "Fund") of Delaware
Group Value Fund, Inc. ("Value Fund, Inc."), a professionally-managed mutual
fund of the series type. The objective of the Fund is to seek to provide
investors with high current income and the potential for capital appreciation.
THIS FUND HAS THE AUTHORITY TO INVEST UP TO ALL OF ITS NET ASSETS IN
LOWER RATED SECURITIES, COMMONLY KNOWN AS "JUNK BONDS" AND "LOWER RATED EQUITY
SECURITIES." SUCH SECURITIES INVOLVE GREATER RISKS, INCLUDING DEFAULT RISKS,
THAN HIGHER RATED SECURITIES. PURCHASERS SHOULD CAREFULLY ASSESS THESE RISKS
BEFORE INVESTING IN THIS FUND. SEE INVESTMENT OBJECTIVE AND POLICIES, SPECIAL
RISK CONSIDERATIONS, AND APPENDIX B--RATINGS.
This Prospectus relates only to the Class and sets forth information
that you should read and consider before you invest. Please retain it for future
reference. Part B of Value Fund, Inc.'s registration statement, dated November ,
1996, as it may be amended from time to time, contains additional information
about the Fund and has been filed with the Securities and Exchange Commission.
Part B is incorporated by reference into this Prospectus and is available,
without charge, by writing to Delaware Distributors, L.P. at the above address
or by calling the above number.
The Fund also offers the Retirement Income Fund A Class of shares, the
Retirement Income Fund B Class of shares and the Retirement Income Fund C Class
of shares. Shares of these classes are subject to sales charges and other
expenses, which may affect their performance. A prospectus for these classes can
be obtained by writing to Delaware Distributors, L.P. at the above address or by
calling 800-523-4640.
-1-
<PAGE>
TABLE OF CONTENTS
Cover Page Retirement Planning
Synopsis Classes of Shares
Summary of Expenses How to Buy Shares
Investment Objective and Policies Redemption and Exchange
Suitability Dividends and Distributions
Investment Strategy Taxes
Special Risk Considerations Calculation of Offering Price and
High-Yield Securities Net Asset Value Per Share
Lower Rated Convertible Securities Management of the Fund
and Preferred Stock Other Investment Policies and
Foreign Securities Risk Considerations
The Delaware Difference Appendix A--Ratings
Plans and Services
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND ARE NOT BANK
OR CREDIT UNION DEPOSITS.
-2-
<PAGE>
SYNOPSIS
Investment Objective
The objective of the Fund is to seek to provide investors with high
current income and an investment that has the potential for capital
appreciation. The Fund seeks to achieve its objective by investing principally
in equity securities which generate income through dividends or otherwise
("income generating equity securities") and debt securities including, but not
limited to, dividend paying common stocks, securities of real estate investment
trusts, preferred stocks, warrants, rights, convertible securities,
non-convertible debt securities, high-yield, high risk securities, investment
grade fixed-income securities, U.S. government securities and foreign equity and
fixed-income securities. For further details, see Investment Objective and
Policies.
Risk Factors
Prospective investors should consider the following:
1. The Fund has the authority to invest up to all of its net assets in
lower rated securities. Up to 45% of its net assets may be invested in
high-yield, higher risk fixed-income securities ("junk bonds"). In addition, the
Fund may invest in certain income generating equity securities such as
convertible securities and preferred stock, rated below investment grade. These
securities generally will have speculative characteristics similar to those of
lower rated fixed-income securities. The Fund may invest an unrestricted portion
of its total assets in such lower rated income generating equity securities.
Such securities may increase the risks of an investment in this Fund. See
High-Yield Securities under Special Risk Considerations.
2. Investing in securities of foreign governments and non-United States
companies which are generally denominated in foreign currencies and the
utilization of forward foreign currency exchange contracts involve certain risk
and opportunity considerations not typically associated with investing in United
States government securities and securities of United States companies. See
Special Risk Considerations and Other Investment Policies and Risk
Considerations.
3. The Fund has the ability to engage in options transactions for
hedging purposes to counterbalance portfolio volatility. While the Fund does not
engage in options transactions for speculative purposes, there are risks which
result from the use of options, and an investor should carefully review the
descriptions of these risks in this Prospectus. Certain options may be
considered to be derivative securities. See Options under Other Investment
Policies and Risk Considerations.
4. The Fund may invest up to 20% of its net assets in issuers organized
or having a majority of their assets or deriving a majority of their operating
income in foreign countries. Investment in foreign securities involve risks
which are in addition to those risks inherent in domestic investments. See
Foreign Securities under Special Risk Considerations.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") furnishes investment
management services to the Fund, subject to the supervision and direction of
Value Fund, Inc.'s Board of Directors. The Manager provides investment
management services to certain other funds in the Delaware Group. Delaware
Distributors, L.P. (the "Distributor") is the national distributor for the Fund
and for all of the other mutual funds in the Delaware Group. Delaware Service
Company, Inc. (the "Transfer Agent") is the shareholder servicing, dividend
disbursing, accounting services and transfer agent for the Fund and for all
-3-
<PAGE>
of the other mutual funds in the Delaware Group. See Summary of Expenses and
Management of the Fund for other information regarding the Manager and the fees
payable under the Fund's Investment Management Agreement.
Purchase Price
Shares of the Class offered by this Prospectus are available at net
asset value, without a front-end or contingent deferred sales charge, and are
not subject to distribution fees under a Rule 12b-1 distribution plan. See
Classes of Shares.
Redemption and Exchange
Shares of the Class are redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request. See Redemption
and Exchange.
Open-End Investment Company
Value Fund, Inc., which was organized as a Maryland corporation in
1987, is an open-end management investment company. The Fund's portfolio of
assets is diversified as defined by the Investment Company Act of 1940 (the
"1940 Act"). See Shares under Management of the Fund.
-4-
<PAGE>
SUMMARY OF EXPENSES
Shareholder Transaction Expenses
- --------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price). . . None
Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of offering price). . . . . . None
Redemption Fees . . . . . . . . . . . . . . . . . None*
Exchange Fees . . . . . . . . . . . . . . . . . . None**
Annual Operating Expenses
(as a percentage of average daily net assets)
- --------------------------------------------------------------------------------
Management Fees (after voluntary waivers) . . . . 0.00%
12b-1 Fees. . . . . . . . . . . . . . . . . . . . None
Other Operating Expenses+ . . . . . . . . . . . . 1.25%
-----
Total Operating Expenses+
(after voluntary waivers) . . . . . . 1.25%
=====
The purpose of this table is to assist the investor in understanding
the various costs and expenses that an investor in the Class will bear directly
or indirectly. Because the Fund has no operating history, "Other Operating
Expenses" are estimated based on expenses expected to be incurred during the
Fund's first fiscal year.
*CoreStates Bank, N.A. currently charges $7.50 per redemption for redemptions
payable by wire.
**Exchanges are subject to the requirements of each fund and a front-end sales
charge may apply.
+"Total Operating Expenses" and "Other Operating Expenses" for the Class are
based on estimated amounts for the first full fiscal year of the Class, after
giving effect to the voluntary expense waiver. The Manager has elected
voluntarily to waive that portion, if any, of the annual management fees payable
by the and to pay certain expenses of the Fund to the extent necessary to ensure
that the "Total Operating Expenses" of the Class, do not exceed 1.25% during the
commencement of the public offering of the Class through ____________, 1998. If
the voluntary expense waivers were not in effect, it is estimated that the
"Total Operating Expenses," as a percentage of average daily net assets, would
be 0.00% for the Class' first full fiscal year, reflecting management fees of
0.75%.
-5-
<PAGE>
For expense information about Retirement Income Fund A Class,
Retirement Income Fund B Class and Retirement Income Fund C Class, see the
separate prospectus relating to those classes.
The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return, and (2) redemption at the end of each time period. As noted in
the table above, the Fund charges no redemption fees.
1 year 3 years
------ -------
$13 $40
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
-6-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
SUITABILITY
The Fund may be suitable for the investor interested in high current
income and a potential for capital appreciation. The Manager believes that the
Fund's combined investments in income generating equity securities and debt
securities could provide an income return which would exceed that of an
investment exclusively in equity securities. Because the Fund will invest at
least 50% of its total assets in income generating equity and equity equivalent
securities, the Manager also believes that investors will have the opportunity
to benefit from capital appreciation. The net asset value per share of each
Class may fluctuate in response to the condition of individual companies and
general market and economic conditions and, as a result, the Fund is not
appropriate for a short-term investor. The Fund cannot assure a specific yield,
rate of return or that principal will be protected. However, through the
cautious selection and supervision of its portfolio, the Manager will strive to
achieve the Fund's investment objective.
The types of securities in which the Fund may invest are subject to
price fluctuations particularly due to changes in interest rates. Investors
should consider asset value fluctuation, as well as yield, in making an
investment decision. While investments in unrated, lower-rated and certain
restricted securities have the potential for higher yields, they are more
speculative and increase the credit risk of the Fund's portfolio. Changes in the
market value of portfolio securities will not affect interest income from such
securities, but will be reflected in a Class' net asset value. In addition,
investments in foreign securities involve special risks, including those related
to currency fluctuations, as well as to political, economic and social
situations different from and potentially more volatile than those in the United
States. Investors should be willing to accept the risks, including the risk of
net asset value fluctuations, associated with investing in these types of
securities. See Special Risk Considerations and Other Investment Policies and
Risk Considerations for a complete discussion of the risk factors affecting the
Fund's portfolio securities.
Investors should not consider a purchase of Fund shares as equivalent
to a complete investment or retirement program. The Delaware Group includes a
family of funds generally available through registered investment dealers which
may be used in concert with Fund shares to create a more complete investment or
retirement program.
Ownership of Fund shares can reduce the bookkeeping and administrative
inconveniences that would be connected with direct purchases of the types of
securities in which the Fund invests.
INVESTMENT STRATEGY
The objective of the Fund is to seek to provide investors with high
current income and an investment that has the potential for capital
appreciation. The Manager will seek to achieve this objective by investing in a
combination of income generating equity securities and debt securities
including, but not limited to, dividend paying common stocks, securities of real
estate investment trusts, preferred stocks, warrants, rights, convertible
securities, non-convertible debt securities, high-yield, high risk securities,
investment grade fixed-income securities, U.S. government securities and foreign
equity and fixed-income securities. Under normal circumstances, at least 50% of
the Fund's total assets will be invested in income generating equity securities.
In making investments in income generating equity securities, the Fund may
invest an unrestricted portion of its total assets in convertible securities and
preferred stock rated below investment grade. While debt securities may comprise
up to 50% of the Fund's total assets, no more than 45% of the Fund's total
assets will be invested in high-yield, high risk debt securities. No more than
25%
-7-
<PAGE>
of the Fund's total assets will be invested in any one industry sector nor, as
to 75% of the Fund's total assets, will more than 5% be invested in securities
of any one issuer. The Fund may invest up to 20% of its total assets in foreign
equity and debt securities. The Fund will not, however, invest more than 5% of
its total assets in securities of issuers principally located or principally
operating in markets of emerging countries.
Within the percentage guidelines set forth above, the Manager will
determine the proportion of the Fund's assets that will be allocated to income
generating equity securities and equity equivalents and to debt securities,
based on its analysis of economic and market conditions and its assessment of
the income and potential for appreciation that can be achieved from investment
in such asset classes. It is expected that the proportion of the Fund's total
assets invested in income generating equity securities and equity equivalent
securities will vary from 50% to 100% of the Fund's total assets. The proportion
of the Fund's total assets in debt securities will correspondingly vary from 0%
to 50% of the Fund's total assets.
The following is a more detailed description of some of the securities
in which the Fund may invest.
Common Stock
Common stock is generally considered to be shares of a corporation that
entitle the holder to a pro-rata share of the profits of the corporation, if
any, without a preference over any other shareholder or class of shareholders,
including holders of the corporation's preferred stock and other senior equity.
Common stock usually carries with it the right to vote and frequently an
exclusive right to do so. Holders of common stock also have the right to
participate in the remaining assets of the corporation after all other claims
are paid, including those of debt securities and preferred stock. In selecting
common stocks for investment, the Manager will focus primarily on a security's
dividend-paying capacity rather than on its potential for appreciation.
Preferred Stock
Generally, preferred stock receives dividends prior to distributions on
common stock and usually has a priority of claim over common stockholders if the
issuer of the stock is liquidated. Unlike common stock, preferred stock does not
usually have voting rights; preferred stock, in some instances, is convertible
into common stock. Dividends on typical preferred stock are cumulative, causing
dividends to accrue even if not declared by the board of directors. There is,
however, no assurance that dividends will be declared by the boards of directors
of issuers of the preferred stocks in which the Fund invests. Preferred stock in
which the Fund may invest may be rated below investment grade (i.e., "Ba" or
lower by Moody's Investors Service, Inc. ("Moody's") or "BB" or lower by
Standard & Poor's Ratings Group ("S&P") or similarly rated by other comparable
rating agencies) or, if unrated, determined to be of comparable quality by the
Manager.
Convertible Securities
Traditional convertible securities include corporate bonds, notes and
preferred stocks that may be converted into or exchanged for common stock, and
other securities that also provide an opportunity for equity participation.
These securities are generally convertible either at a stated price or a stated
rate (that is, for a specific number of shares of common stock or other
security). As with other fixed-income securities, the price of a convertible
security to some extent varies inversely with interest rates. While providing a
fixed-income stream (generally higher in yield than the income derivable from a
common
-8-
<PAGE>
stock but lower than that afforded by a non-convertible debt security), a
convertible security also affords the investor an opportunity, through its
conversion feature, to participate in the capital appreciation of the common
stock into which it is convertible. As the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis and so may not experience market value declines to the same extent as the
underlying common stock. When the market price of the underlying common stock
increases, the price of a convertible security tends to rise as a reflection of
the value of the underlying common stock. To obtain such a higher yield, the
Fund may be required to pay for a convertible security an amount in excess of
the value of the underlying common stock. Common stock acquired by the Fund upon
conversion of a convertible security will generally be held for so long as the
Manager anticipates such stock will provide the Fund with opportunities which
are consistent with the Fund's investment objectives and policies. Convertible
securities in which the Fund may invest may be rated below investment grade
(i.e., "Ba" or lower by Moody's or "BB" or lower by S&P or similarly rated by
other comparable rating agencies) or, if unrated, determined to be of comparable
quality by the Manager.
Real Estate Investment Trust Securities
Real Estate Investment Trusts ("REITs") are pooled investment vehicles
which invest primarily in income-producing real estate or real estate related
loans or interests. REITs are generally classified as equity REITs, mortgage
REITs or a combination of equity and mortgage REITs. Equity REITs invest the
majority of their assets directly in real property and derive income primarily
from the collection of rents. Equity REITs can also realize capital gains by
selling properties that have appreciated in value. Mortgage REITs invest the
majority of their assets in real estate mortgages and derive income from the
collection of interest payments. Like investment companies such as Value Fund,
Inc., REITs are not taxed on income distributed to shareholders provided they
comply with several requirements of the Internal Revenue Code (the "Code").
REITs are subject to substantial cash flow dependency, defaults by borrowers,
self-liquidation, and the risk of failing to qualify for tax-free pass-through
of income under the Code, and/or maintain exemptions from the 1940 Act. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended.
REITs invest all of their assets in the real estate and real estate
related sectors of the economy, and are subject to the risks of financing
projects. REITs may have limited financial resources, may trade less frequently
and in a limited volume, and are more volatile than the high-yield, high risk
securities in which the Fund may also invest.
High-Yield, High Risk Securities
Debt Securities
High-yield, high risk debt securities, like all debt securities,
represent money borrowed that must be repaid and has a fixed amount, a specific
maturity or maturities and usually a specific rate of interest or original
purchase discount. Unlike common and preferred stock, debt securities, including
high-yield, high risk debt securities, do not represent an equity interest in
the issuer. However, debt securities have a priority claim over stockholders if
the issuer is liquidated. The Fund may invest in a wide variety of debt
securities, although it is anticipated that under normal market conditions, the
Fund primarily will invest in high-yield corporate debt obligations, including
zero coupon bonds and pay-in-kind securities ("PIKs"), debentures, convertible
debentures, corporate notes (including convertible notes) and units consisting
of
-9-
<PAGE>
bonds with stock or warrants to buy stock attached. See Zero Coupon Bonds and
Pay-In-Kind Bonds under Other Investment Policies and Risk Considerations.
The Fund will invest in both rated and unrated bonds. The rated bonds
that the Fund may purchase in this sector of its portfolio will be rated BBB or
lower by Standard & Poor's Ratings Group ("S&P") or Fitch Investors Service,
Inc. ("Fitch"), Baa or lower by Moody's Investors Service, Inc. ("Moody's"), or
similarly rated by another nationally recognized statistical rating
organization. See Appendix B to this Prospectus for more rating information and
High-Yield Securities under Special Risk Considerations for a description of the
risks associated with investing in lower-rated fixed-income securities. Unrated
bonds may be more speculative in nature than rated bonds.
Convertible Securities and Preferred Stock
The Fund may invest in convertible securities and preferred stock rated
below investment grade or which are unrated but are of comparable quality as
determined by the Manager. The Fund includes these securities in its income
generating equity securities category and they are in addition to the
high-yield, high risk debt securities discussed above. Such securities are
judged to have speculative elements and may be subject to greater risks with
respect to the timely repayment of principal and timely payment of interest and
dividends. See Investment Objectives and Policies--Investment Strategy and
Special Risk Considerations. Also see Lower Rated Convertible Securities and
Preferred Stock under Special Risk Considerations.
Foreign Securities
The Fund may invest up to 20% of its total assets in securities of
issuers organized or having a majority of their assets or deriving a majority of
their operating income in foreign countries. These income generating equity
securities and debt securities include foreign government securities, equity
securities and debt obligations of foreign companies, and securities issued by
supranational entities. A supranational entity is an entity established or
financially supported by the national governments of one or more countries to
promote reconstruction or development. Examples of supranational entities
include, among others, the International Bank for Reconstruction and Development
(more commonly known as the World Bank), the European Economic Community, the
European Coal and Steel Community, the European Investment Bank, the
Inter-Development Bank, the Export-Import Bank and the Asian Development Bank.
The Fund may invest in sponsored and unsponsored American Depository
Receipts, European Depositary Receipts, or Global Depositary Receipts
("Depositary Receipts"). Depositary Receipts are receipts typically issued by a
bank or trust company which evidence ownership of underlying securities issued
by a foreign corporation. "Sponsored" Depositary Receipts are issued jointly by
the issuer of the underlying security and a depository, and "unsponsored"
Depositary Receipts are issued without the participation of the issuer of the
deposited security. The Fund may also invest in Brady Bonds, which are described
more fully under Foreign Securities in the Special Risk Considerations section
of this Prospectus.
The Fund may invest in securities issued in any currency and may hold
foreign currencies. Securities of issuers within a given country may be
denominated in the currency of another country or in multinational currency
units, such as the European Currency Unit. The Fund may, from time to time,
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purchase or sell foreign currencies and/or engage in forward foreign currency
transactions in order to expedite settlement of Fund transactions and to
minimize currency value fluctuations. See Other Investment Policies and Risk
Considerations for a further description of the Fund's foreign currency
transactions.
While the Fund may purchase securities of issuers in any foreign
country, developed and underdeveloped, no more than 5% of the Fund's assets may
be invested in direct obligations or equity securities of issuers located in
emerging market countries. See Emerging Market Securities under Special Risk
Considerations.
The Fund will invest in both rated and unrated foreign securities. The
rated securities that the Fund may purchase in the international sector of its
portfolio may include those rated BBB or lower by S&P or Fitch, Baa or lower by
Moody's, or similarly rated by another nationally reorganized statistical rating
organization. See Appendix B to this Prospectus for more rating information and
Foreign Securities and High-Yield Securities under Special Risk Considerations
for a description of the risks associated with investing in foreign securities
and lower-rated securities.
The Fund may also invest in zero coupon bonds, purchase shares of other
investment companies and may engage in short sales. See Zero Coupon Bonds and
Pay-In-Kind Bonds and Investment Company Securities under Other Investment
Polices and Risk Considerations.
* * *
For a description of the Fund's other investment policies and for a
further description of some of the policies described above, see Other
Investment Policies and Risk Considerations.
In unusual market conditions, in order to meet redemption requests, for
temporary defensive purposes, and pending investment or at such other times when
suitable income generating equity or debt securities are not available, the Fund
may hold a substantial portion of its assets in (i) cash, (ii) debt securities
issued by the U.S. government, its agencies or instrumentalities, (iii)
commercial paper, (iv) certificates of deposit and bankers' acceptances or
repurchase agreements with respect to any of the foregoing investments. The Fund
will only invest in commercial paper of companies rated "A-2" or better by S&P
or "P-2" or better by Moody's or similarly rated by another comparable rating
agency or, if not so rated, of equivalent investment quality as determined by
the Manager. See Appendix B to this Prospectus for more rating information.
Although the Fund will constantly strive to attain its objective, there
can be no assurance that it will be attained.
The Fund's investment objective, and its designation as an open-end
investment company and as a diversified fund, may not be changed unless
authorized by the vote of a majority of the Fund's outstanding voting
securities. A "majority vote of the outstanding voting securities" is the vote
by the holders of the lesser of a) 67% or more of the Fund's voting securities
present in person or represented by proxy if the
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holders of more than 50% of the outstanding voting securities of the Fund are
present or represented by proxy; or b) more than 50% of the outstanding voting
securities. Part B lists other more specific investment restrictions of the Fund
which may not be changed without a majority shareholder vote.
The remaining investment policies of the Fund not identified above or
in Part B are not fundamental and may be changed by the Board of Directors of
Value Fund, Inc. without a shareholder vote.
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SPECIAL RISK CONSIDERATIONS
Generally
The Fund may invest a substantial portion of its assets in fixed-income
securities. The market values of fixed-income securities generally fall when
interest rates rise and, conversely, rise when interest rates fall. Lower-rated
and unrated fixed-income securities tend to reflect short-term corporate and
market developments to a greater extent than higher-rated fixed-income
securities, which react primarily to fluctuations in the general level of
interest rates. These lower-rated or unrated securities generally have higher
yields, but, as a result of factors such as reduced creditworthiness of issuers,
increased risk of default and a more limited and less liquid secondary market,
are subject to greater volatility and risk of loss of income and principal than
are higher-rated securities. The Manager will attempt to reduce such risk
through portfolio diversification, credit analysis, and attention to trends in
the economy, industries and financial markets.
High-Yield Securities
The Fund may invest up to 45% of its total assets in bonds rated BBB or
lower by S&P or Fitch, Baa or lower by Moody's, or similarly rated by another
rating organization, and in unrated corporate bonds. See Appendix B to this
Prospectus for more rating information. Investing in these so-called "junk" or
"high-yield" 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 junk bonds. In
addition to the considerations discussed elsewhere in this Prospectus, those
risks include the following:
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 a Class' net asset value.
Redemptions. If, as a result of volatility in the high-yield market or other
factors, the Fund experiences substantial net redemptions of the Fund's shares
for a sustained period of time (i.e., more shares of the Fund are redeemed than
are purchased), the Fund may be required to sell certain of its high-yield
securities without regard to the investment merits of the securities to be sold.
If the Fund sells a substantial number of securities to generate proceeds for
redemptions, the asset base of the Fund will decrease and the Fund's expense
ratios may increase.
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<PAGE>
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 that 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 privately placed high-yield
securities that the Fund may purchase are particularly susceptible to the
liquidity and valuation risks outlined above.
Lower Rated Convertible Securities and Preferred Stock
The Fund may invest in lower rated convertible securities and preferred
stock (i.e., "Ba" or lower for convertible securities or "ba" or lower for
preferred stock by Moody's or "BB" or lower for convertible securities or
preferred stock by S&P or similarly rated by other comparable rating agencies)
or, if unrated, determined to be of comparable quality by the Manager. The Fund
may have difficulty disposing of such securities because the trading market for
such securities may be thinner than the market for higher rated convertible
securities and preferred stock. To the extent a secondary trading market for
these securities does exist, it generally is not as liquid as the secondary
trading market for higher rated securities. The lack of a liquid secondary
market as well as adverse publicity with respect to these securities, may have
an adverse impact on market price and the Fund's ability to dispose of
particular issues in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
Fund to obtain accurate market quotations for purposes of pricing the Fund's
portfolio and calculating its net asset value. The market behavior of
convertible securities and preferred stocks in lower rating categories is often
more volatile than that of higher quality securities. Lower quality convertible
securities and preferred stocks are judged by Moody's and S&P to have
speculative elements or characteristics; their future cannot be considered as
well assured and earnings and asset protection may be moderate or poor in
comparison to investment grade securities. In addition, such lower quality
securities face major ongoing uncertainties or exposure to adverse business,
financial or economic conditions, which could lead to inadequate capacity to
meet timely payments. A description of the ratings used by Moody's and S&P for
such securities is set forth in Appendix A to this Prospectus. See also Special
Risk Considerations--High-Yield Securities."
Foreign Securities
The Fund has the ability to purchase income generating equity
securities and debt securities in any foreign country. Investors should consider
carefully the substantial risks involved in investing in securities issued by
companies and governments of foreign nations. These risks are in addition to the
usual risks inherent in domestic investments. There is the possibility of
expropriation, nationalization or confiscatory taxation, taxation of income
earned in foreign nations or other taxes imposed with respect to investments
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in foreign nations, foreign exchange controls (which may include suspension of
the ability to transfer currency from a given country), default in foreign
government securities, political or social instability or diplomatic
developments which could affect investments in securities of issuers in those
nations.
In addition, in many countries, there is substantially less publicly
available information about issuers than is available in reports about companies
in the United States. Foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, and auditing practices and
requirements may not be comparable to those applicable to United States
companies. Consequently, financial data about foreign companies may not
accurately reflect the real condition of those issuers and securities markets.
Further, the Fund may encounter difficulty or be unable to pursue legal
remedies and obtain judgments in foreign courts. Commission rates on securities
transactions in foreign countries, which are sometimes fixed rather than subject
to negotiation as in the United States, are likely to be higher. Further, the
settlement period of securities transactions in foreign markets may be longer
than in domestic markets, and may be subject to administrative uncertainties. In
many foreign countries, there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the United States, and capital requirements for brokerage firms are
generally lower. The foreign securities markets of many of the countries in
which the Fund may invest may also be smaller, less liquid and subject to
greater price volatility than those in the United States.
Emerging Market Securities. The Fund may invest up to 5% of its assets
in income generating equity securities and debt securities of issuers located in
emerging market nations. Compared to the United States and other developed
countries, emerging countries may have volatile social conditions, relatively
unstable governments and political systems, economies based on only a few
industries and economic structures that are less diverse and mature, and
securities markets that trade a small number of securities, which can result in
a low or nonexistent volume of trading. Prices in these securities markets tend
to be volatile and, in the past, securities in these countries have offered
greater potential for gain (as well as loss) than securities of companies
located in developed countries. Until recently, there has been an absence of a
capital market structure or market-oriented economy in certain emerging
countries. Further, investments and opportunities for investments by foreign
investors are subject to a variety of national policies and restrictions in many
emerging countries. Also, the repatriation of both investment income and capital
from several foreign countries is restricted and controlled under certain
regulations, including, in some cases, the need for certain governmental
consents. Countries such as those in which the Fund may invest may have
historically experienced and may continue to experience, substantial, and in
some periods extremely high rates of inflation for many years, high interest
rates, exchange rate fluctuations or currency depreciation, large amounts of
external debt, balance of payments and trade difficulties and extreme poverty
and unemployment. Other factors which may influence the ability or willingness
to service debt include, but are not limited to, a country's cash flow
situation, the availability of sufficient foreign exchange on the date a payment
is due, the relative size of its debt service burden to the economy as a whole,
its government's policy towards the International Monetary Fund, the World Bank
and other international agencies and the political constraints to which a
government debtor may be subject.
See Other Investment Policies and Risk Considerations for a further
description of certain risks associated with certain of the Fund's investments,
including the risks associated with investments in foreign government securities
and engaging in foreign currency transactions and options.
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CLASSES OF SHARES
The Distributor serves as the national distributor for Value Fund, Inc.
Shares of the Class may be purchased directly by contacting the Fund or its
agent or through authorized investment dealers. All purchases of shares of the
Class are at net asset value. There is no front-end or contingent deferred sales
charge.
Investment instructions given on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees considering purchasing shares of the Class
as part of their retirement program should contact their employer for details.
Shares of the Class are available for purchase only by: (a) retirement
plans introduced by persons not associated with brokers or dealers that are
primarily engaged in the retail securities business and rollover individual
retirement plans 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.
Retirement Income Fund A Class, Retirement Income Fund B Class and Retirement
Income Fund C Class
In addition to offering the Retirement Income Fund Institutional Class,
the Fund also offers the Retirement Income Fund A Class, the Retirement Income
Fund B Class and the Retirement Income Fund C Class, which are described in a
separate prospectus. Shares of the Retirement Income Fund A Class, the
Retirement Income Fund B Class and the Retirement Income Fund C Class may be
purchased through authorized investment dealers or directly by contacting the
Fund or the Distributor. The Retirement Income Fund A Class carries a front-end
sales charge and has annual 12b-1 expenses equal to a maximum of .30%
(currently, no more than .25% pursuant to Board action). The maximum front-end
sales charge as a percentage of the offering price is 4.75% and is reduced on
certain transactions of $100,000 or more. The Retirement Income Fund B Class and
the Retirement Income Fund C Class have no front-end sales charge but are
subject to annual 12b-1 expenses equal to a maximum of 1%. Shares of the
Retirement Income Fund B Class and the Retirement Income Fund C Class and
certain shares of the Retirement Income Fund A Class may be subject to a
contingent deferred sales charge upon redemption. To obtain a prospectus
relating to such classes, contact the Distributor by writing to the address or
by calling the phone numbers listed on the cover of this Prospectus.
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HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer. In all instances, investors must
qualify to purchase shares of the Class.
Investing Directly by Mail
1. Initial Purchases--An Investment Application, or in the case of a retirement
account, an appropriate retirement plan application, must be completed, signed
and sent with a check payable to Retirement Income Fund Institutional Class, to
Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to Retirement Income Fund Institutional Class. Your check should
be identified with your name(s) and account number.
Investing Directly by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 0114-2596 (include
your name(s) and your account number).
1. Initial Purchases--Before you invest, telephone the Fund's Client Services
Department at 800-828-5052 to get an account number. If you do not call first,
it may delay processing your investment. In addition, you must promptly send
your Investment Application, or in the case of a retirement account, an
appropriate retirement plan application, to Retirement Income Fund Institutional
Class, to Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You must advise your Client
Services Representative by telephone at 800-828-5052 prior to sending your wire.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group
and you qualify to purchase shares of the Class, you may write and authorize an
exchange of part or all of your investment into the Fund. However, shares of the
Retirement Income Fund B Class and Retirement Income Fund C Class and the Class
B Shares and Class C Shares of the other funds in the Delaware Group offering
such a class of shares may not be exchanged into the Class. If you wish to open
an account by exchange, call your Client Services Representative at 800-828-5052
for more information.
Investing through Your Investment Dealer
You can make a purchase of Fund shares through most investment dealers
who, as part of the service they provide, must transmit orders promptly. They
may charge for this service.
Purchase Price and Effective Date
The purchase price (net asset value) is determined as of the close of
regular trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open.
The effective date of a purchase made through an investment dealer is
the date the order is received by the Fund. The effective date of a direct
purchase is the day your wire, electronic transfer or check is received, unless
it is received after the time the share price is determined, as noted above.
Purchase orders received after such time will be effective the next business
day.
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The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a purchase
is canceled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in the Delaware Group. The Fund reserves the right to reject
purchase orders paid by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check drawn on a
foreign financial institution is accepted, you may be subject to additional bank
charges for clearance and currency conversion.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under $250 as a result of redemptions.
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REDEMPTION AND EXCHANGE
Redemption and exchange requests made on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees should therefore contact their employer for
details.
Your shares will be redeemed or exchanged based on the net asset value
next determined after we receive your request in good order. Redemption and
exchange requests received in good order after the time the net asset value of
shares is determined, as noted above, will be processed on the next business
day. See Purchase Price and Effective Date under How to Buy Shares. Except as
otherwise noted below, for a redemption request to be in "good order," you must
provide your Class account number, account registration, and the total number of
shares or dollar amount of the transaction. With regard to exchanges, you must
also provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Fund at 800-828-5052. Redemption proceeds will be
distributed promptly, as described below, but not later than seven days after
receipt of a redemption request.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
The Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor redemption requests as to shares for which a check
was tendered as payment, but the Fund will not mail or wire the proceeds until
it is reasonably satisfied that the check has cleared, which may take up to 15
days from the purchase date. You can avoid this potential delay if you purchase
shares by wiring Federal Funds. The Fund reserves the right to reject a written
or telephone redemption request or delay payment of redemption proceeds if there
has been a recent change to the shareholder's address of record.
Shares of the Class may be exchanged into any other Delaware Group
mutual fund, provided: (1) the investment satisfies the eligibility and other
requirements set forth in the prospectus of the fund being acquired, including
the payment of any applicable front-end sales charge; and (2) the shares of the
fund being acquired are in a state where that fund is registered. If exchanges
are made into other shares that are eligible for purchase only by those
permitted to purchase shares of the Class, such exchange will be exchanged at
net asset value. Shares of the Class may not be exchanged into the Class B
Shares or Class C Shares of the funds in the Delaware Group. The Fund may
suspend, terminate or amend the terms of the exchange privilege upon 60 days'
written notice to shareholders.
Various redemption and exchange methods are outlined below. No fee is
charged by the Fund or the Distributor for redeeming or exchanging your shares.
You may also have your investment dealer arrange to have your shares redeemed or
exchanged. Your investment dealer may charge for this service.
All authorizations, including selection of any of the features
described below, shall continue in effect until such time as a written
revocation or modification has been received by the Fund or its agent.
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<PAGE>
Written Redemption and Exchange
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103
to redeem some or all of your shares or to request an exchange of any or all of
your shares into another mutual fund in the Delaware Group, subject to the same
conditions and limitations as other exchanges noted above. The request must be
signed by all owners of the account or your investment dealer of record.
For redemptions of more than $50,000, or when the proceeds are not sent
to the shareholder(s) at the address of record, the Fund requires a signature by
all owners of the account and may require a signature guarantee. Each signature
guarantee must be supplied by an eligible guarantor institution. The Fund
reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Fund may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.
The redemption request is effective at the net asset value next
determined after it is received in good order. Payment is normally mailed the
next business day after receipt of your request. Certificates are issued for
shares only if you submit a specific request. If your shares are in certificate
form, the certificate must accompany your request and also be in good order.
You also may submit your written request for redemption or exchange by
facsimile transmission at the following number: 215-255-8864.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your shares in certificate form, you may redeem or
exchange only by written request and you must return your certificates.
The Telephone Redemption--Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do not
wish to have such service available with respect to your account. The Fund
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests.
Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be provided
for all purchase, exchange and redemption transactions initiated by telephone.
By exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption-Check to Your Address of Record
You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your record address. Checks will be payable to
the shareholder(s) of record. Payment is normally mailed the next business day
after receipt of the request.
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Telephone Redemption-Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must submit a written authorization and you may need to have your
signature guaranteed. For your protection, your authorization must be on file.
If you request a wire, your funds will normally be sent the next business day.
CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted from your
redemption. If you ask for a check, it will normally be mailed the next business
day after receipt of your request to your predesignated bank account. There are
no fees for this redemption method, but the mail time may delay getting funds
into your bank account. Simply call your Client Services Representative prior to
the time the net asset value is determined, as noted above.
Telephone Exchange
You or your investment dealer of record can exchange shares into any
fund in the Delaware Group under the same registration. As with the written
exchange service, telephone exchanges are subject to the same conditions and
limitations as other exchanges noted above. Telephone exchanges may be subject
to limitations as to amounts or frequency.
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DIVIDENDS AND DISTRIBUTIONS
The Fund expects to declare and pay dividends monthly. However, the
Fund does not anticipate declaring or paying dividends during the first few
months following the commencement of its operations. Payment by check of cash
dividends will ordinarily be mailed within three business days after the payable
date. Distributions from net realized securities profits, if any, will be
distributed twice a year. The first payment normally would be made during the
first quarter of the next fiscal year. The second payment would be made near the
end of the calendar year to comply with certain requirements of the Internal
Revenue Code (the "Code").
Each Class of the Fund will share proportionately in the investment
income and expenses of the Fund, except that the Class will not incur
distribution fees under the Rule 12b-1 Plans which apply to the Retirement
Income Fund A Class, the Retirement Income Fund B Class and the Retirement
Income Fund C Class.
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TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Fund.
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Code. As such, the Fund will not be subject to federal
income tax, or to any excise tax, to the extent its earnings are distributed as
provided in the Code.
The Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to investors who are subject to
income tax as ordinary income, even though received in additional shares. It is
expected that only a nominal portion of the Fund's dividends will be eligible
for the dividends-received deduction for corporations.
Distributions paid by the Fund from long-term capital gains, received
in additional shares, are taxable to those investors who are subject to income
taxes as long-term capital gains, regardless of the length of time an investor
has owned shares in the Fund. The Fund does not seek to realize any particular
amount of capital gains during a year; rather, realized gains are a byproduct of
Fund management activities. Consequently, capital gains distributions may be
expected to vary considerably from year to year. Also, for those investors
subject to tax, if purchases of shares in the Fund are made shortly before the
record date for a dividend or capital gains distribution, a portion of the
investment will be returned as a taxable distribution.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November or December to shareholders of
record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Fund and received by the shareholder
on December 31 of the calendar year in which they are declared.
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
two mutual funds (or two portfolios or series of a mutual fund). Any loss
incurred on a sale or exchange of the Fund's shares that had been held for six
months or less will be treated as a long-term capital loss to the extent of
capital gain dividends received with respect to such shares.
The Fund may be subject to foreign withholding taxes on income from
certain of its foreign securities. If more than 50% in value of the total assets
of the Fund at the end of its fiscal year are invested in securities of foreign
corporations, the Fund may elect to pass-through to its shareholders a pro-rata
share of foreign income taxes paid by the Fund. If this election is made,
shareholders will be (i) required to include in their gross income their
pro-rata share of foreign source income (including any foreign taxes paid by the
Fund), and (ii) entitled to either deduct (as an itemized deduction in the case
of individuals) their share of such foreign taxes in computing their taxable
income or to claim a credit for such taxes against their U.S. income tax,
subject to certain limitations under the Code. Shareholders will be informed by
the Fund at the end of each calendar year regarding the availability of any
credits on and the amount of foreign source income to be included in their
income tax returns.
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In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. government securities may be exempt from
state personal income taxes. Shares of the Fund are exempt from Pennsylvania
county personal property taxes.
Each year, Value Fund, Inc. will mail to you information on the tax
status of the Fund's dividends and distributions. Shareholders will also receive
each year information as to the portion of dividend income that is derived from
U.S. government securities that are exempt from state income tax. Of course,
shareholders who are not subject to tax on their income would not be required to
pay tax on amounts distributed to them by the Fund.
The Fund is required to withhold 31% of taxable dividends, capital
gains distributions, and redemptions paid to shareholders who have not complied
with IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Investment Application your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
See Accounting and Tax Issues and Taxes in Part B for additional
information on tax matters relating to the Fund and its shareholders.
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CALCULATION OF NET ASSET VALUE PER SHARE
The purchase and redemption price of the Class is the net asset value
("NAV") per share of the Class next computed after the order is received. The
NAV is computed as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The NAV is computed by adding the value of all securities and other
assets in the portfolio, deducting any liabilities (expenses and fees are
accrued daily) and dividing by the number of shares outstanding. Debt securities
are priced at fair value by an independent pricing service using methods
approved by Value Fund, Inc.'s Board of Directors. Short-term investments having
a maturity of less than 60 days are valued at amortized cost, which approximates
market value. All other securities are valued at their fair value as determined
in good faith and in a method approved by Value Fund, Inc.'s Board of Directors.
The net asset values of all outstanding shares of each class of the
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Fund represented by the value of shares
of that class. All income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share of a class, based on each class'
percentage in the Fund represented by the value of shares of such classes,
except that the Class will not incur any of the expenses under the Fund's 12b-1
Plans and the Retirement Income Fund A, B and C Classes alone will bear the
12b-1 Plan fees payable under their respective Plans. Due to the specific
distribution expenses and other costs that will be allocable to each class, the
NAV per share of each class of the Fund will vary.
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MANAGEMENT OF THE FUND
Directors
The business and affairs of Value Fund, Inc. are managed under the
direction of its Board of Directors. Part B contains additional information
regarding Value Fund, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On July 31, 1996, the Manager and its affiliates in
the Delaware Group, including Delaware International Advisers Ltd., were
supervising in the aggregate more than $28 billion in assets in the various
institutional or separately managed (approximately $17,646,238,000) and
investment company (approximately $10,764,119,000) accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now indirect, wholly owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management.
The Manager manages the Fund's portfolio and makes investment decisions
for the Fund, which are implemented by the Fund's Trading Department. The
Manager also administers Value Fund, Inc.'s affairs and pays the salaries of all
the directors, officers and employees of Value Fund, Inc. who are affiliated
with the Manager. For these services, the Manager is paid an annual fee equal to
0.75% on the first $500 million of average daily net assets, 0.725% on the next
$500 million and 0.70% on the average daily net assets in excess of $1 billion.
Babak Zenouzi oversees the Fund's asset allocation strategy and has
primary responsibility for making day-to-day investment decisions for the Fund's
investments in income generating equity securities. Mr. Zenouzi, a Vice
President/Portfolio Manager of Value Fund, Inc., has been a member of the Fund's
management team since its inception. Mr. Zenouzi holds a BS in Finance and
Economics from Babson College in Wellesley, Massachusetts, and an MS in Finance
from Boston College. Prior to joining the Manager in 1992, he was with The
Boston Company where he held the positions of assistant vice president, senior
financial analyst, financial analyst and portfolio accountant.
Gerald T. Nichols has primary responsibility for making day-to-day
investment decisions for the Fund regarding its investments in debt securities.
Mr. Nichols, a Vice President/Senior Portfolio Manager of Value Fund, Inc., has
been a member of the Fund's management team since its inception. Mr. Nichols is
a graduate of the University of Kansas, where he received a BS in Business
Administration and an MS in Finance. Prior to joining the Manager, he was a high
yield credit analyst at Waddell & Reed, Inc. and subsequently the investment
officer for a private merchant banking firm. He is a Chartered Financial
Analyst.
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Portfolio Trading Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length of time they
have been held. The degree of portfolio activity will affect brokerage costs of
the Fund and may affect taxes payable by the Fund's shareholders. Given the
Fund's investment objective, its annual portfolio turnover rate is not expected
to exceed 100%. A turnover rate of 100% would occur if all the investments in
the Fund's portfolio at the beginning of the year were replaced by the end of
the year.
The Fund uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
to their advisory clients. These services may be used by the Manager in
servicing any of its accounts. Subject to best price and execution, the Fund may
consider a broker/dealer's sales of Fund shares in placing portfolio orders and
may place orders with broker/dealers that have agreed to defray certain Fund
expenses such as custodian fees.
Performance Information
From time to time, the Fund may quote yield or total return performance
of the Class in advertising and other types of literature.
The current yield for the Class will be calculated by dividing the
annualized net investment income earned by the Class during a recent 30-day
period by the net asset value per share on the last day of the period. The yield
formula provides for semi-annual compounding, which assumes that net investment
income is earned and reinvested at a constant rate and annualized at the end of
a six-month period.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions. Each presentation will include
the average annual total return for one-, five- and ten-year periods, as
relevant. The Fund may also advertise aggregate and average total return
information concerning the Class over additional periods of time.
Yield and net asset value fluctuate and are not guaranteed. Past
performance is not an indication of future results.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling your Client Services Representative.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. The Fund's fiscal year ends on September
30.
Distribution and Service
The Distributor, Delaware Distributors, L.P., serves as the national
distributor of the Fund's shares under a Distribution Agreement dated as of
November , 1996. The Distributor bears all of the costs of promotion and
distribution.
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The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for Value Fund,
Inc. under an agreement dated as of November 29, 1996. The Transfer Agent also
provides accounting services to the Fund pursuant to the terms of a separate
agreement dated as of November 29, 1996. The directors annually review service
fees paid to the Transfer Agent. Certain recordkeeping and other shareholder
services that otherwise would be performed by the Transfer Agent may be
performed by certain other entities and the Transfer Agent may elect to enter
into an agreement to pay such other entities for their services. In addition,
participant account maintenance fees may be assessed for certain recordkeeping
provided as part of retirement plan and administration service packages. These
fees are based on the number of participants in the plan and the various
services selected. Fees will be quoted upon request and are subject to change.
The Distributor and the Transfer Agent are also indirect, wholly owned
subsidiaries of DMH.
Expenses
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under the Distribution Agreement.
Shares
Value Fund, Inc. is an open-end management investment company. The
Fund's portfolio of assets is diversified as defined by the 1940 Act. Commonly
known as a mutual fund, Value Fund, Inc. was organized as a Maryland corporation
on January 16, 1987. In addition to the Fund, Value Fund, Inc. presently has one
other series, the Value Fund series.
Value Fund, Inc.'s shares have a par value of $.01, equal voting
rights, except as noted below, and are equal in all other respects. Value Fund,
Inc.'s shares have noncumulative voting rights which means that the holders of
more than 50% of Value Fund, Inc.'s shares voting for the election of directors
can elect 100% of the directors if they choose to do so. Under Maryland law,
Value Fund, Inc. is not required, and does not intend, to hold annual meetings
of shareholders unless, under certain circumstances, it is required to do so
under the 1940 Act. Shareholders of 10% or more of Value Fund, Inc.'s shares may
request that a special meeting be called to consider the removal of a director.
In addition to the Class, the Fund also offers the Retirement Income
Fund A Class, the Retirement Income Fund B Class and the Retirement Income Fund
C Class. Shares of each class represent proportionate interests in the assets of
the Fund and have the same voting and other rights and preferences as the other
classes of the Fund, except that shares of the Class are not subject to, and may
not vote on matters affecting, the Distribution Plans under Rule 12b-1 relating
to the Retirement Income Fund A Class, the Retirement Income Fund B Class and
the Retirement Income Fund C Class.
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OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
U.S. Government Securities
U.S. Treasury securities are backed by the "full faith and credit" of
the United States. Securities issued or guaranteed by federal agencies and U.S.
government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States. In the case of securities not backed by
the full faith and credit of the United States, investors in such securities
look principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment. Agencies which are backed by the full faith and credit of
the United States include the Export-Import Bank, Farmers Home Administration,
Federal Financing Bank, the Federal Housing Administration, the Maritime
Administration, the Small Business Administration, and others. Certain agencies
and instrumentalities, such as the Government National Mortgage Association
("GNMA"), are, in effect, backed by the full faith and credit of the United
States through provisions in their charters that they may make "indefinite and
unlimited" drawings on the Treasury, if needed to service its debt. Debt from
certain other agencies and instrumentalities, including the Federal Home Loan
Bank and Federal National Mortgage Association, are not guaranteed by the United
States, but those institutions are protected by the discretionary authority for
the U.S. Treasury to purchase certain amounts of their securities to assist the
institutions in meeting their debt obligations. Finally, other agencies and
instrumentalities, such as the Farm Credit System, the Tennessee Valley
Authority and the Federal Home Loan Mortgage Corporation, are federally
chartered institutions under U.S. government supervision, but their debt
securities are backed only by the creditworthiness of those institutions, not
the U.S. government.
An instrumentality of a U.S. government agency is a government agency
organized under Federal charter with government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Federal Home Loan
Banks, the Federal Land Banks, Central Bank for Cooperatives, Federal
Intermediate Credit Banks and the Federal National Mortgage Association.
The maturities of such securities usually range from three months to
thirty years. While such securities are guaranteed as to principal and interest
by the U.S. government or its instrumentalities, their market values may
fluctuate and are not guaranteed, which may, along with the other securities in
the Fund's portfolio, cause a Class' daily net asset value to fluctuate.
Brady Bonds
Among the foreign fixed-income securities in which the Fund may invest
are Brady Bonds. Brady Bonds are debt securities issued under the framework of
the Brady Plan, an initiative announced by former U.S. Treasury Secretary
Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their
outstanding external indebtedness (generally commercial bank debt). In so
restructuring its external debt, a debtor nation negotiates with its existing
bank lenders, as well as multilateral institutions such as the World Bank and
the International Monetary Fund, to exchange its commercial bank debt for newly
issued bonds (Brady Bonds). The Manager believes that economic reforms
undertaken by countries in connection with the issuance of Brady Bonds make the
debt of countries which have issued or have announced plans to issue Brady Bonds
an attractive opportunity for investment. Investors, however, should recognize
that the Brady Plan only sets forth general guiding principles for economic
reform and debt reduction, emphasizing that solutions must be negotiated on a
case-by-case basis between debtor nations and their creditors. In addition,
Brady Bonds have been issued only recently and, accordingly, do not have a long
payment history.
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Foreign Government Securities
With respect to investment in debt issues of foreign governments,
including Brady Bonds, the ability of a foreign government or government-related
issuer to make timely and ultimate payments on its external debt obligations
will also be strongly influenced by the issuer's balance of payments, including
export performance, its access to international credits and investments,
fluctuations in interest rates and the extent of its foreign reserves. A country
whose exports are concentrated in a few commodities or whose economy depends on
certain strategic imports could be vulnerable to fluctuations in international
prices of these commodities or imports. If foreign government or
government-related issuers cannot generate sufficient earnings from foreign
trade to service its external debt, they may need to depend on continuing loans
and aid from foreign governments, commercial banks and multilateral
organizations, and inflows of foreign investment. The commitment on the part of
these foreign governments, multilateral organizations and others to make such
disbursements may be conditioned on the government's implementation of economic
reforms and/or economic performance and the timely service of its obligations.
Failure to implement such reforms, achieve such levels of economic performance
or repay principal or interest when due may curtail the willingness of such
third parties to lend funds, which may further impair the issuer's ability or
willingness to service its debts in a timely manner. The cost of servicing
external debt generally will also be adversely affected by rising international
interest rates because many external debt obligations bear interest at rates
which are adjusted based upon international interest rates. The ability to
service external debt will also depend on the level of the relevant government's
international currency reserves and its access to foreign exchange. Currency
devaluations may affect the ability of a government issuer to obtain sufficient
foreign exchange to service its external debt. If a foreign governmental issuer
defaults on its obligations, the Fund may have limited legal recourse against
the issuer and/or guarantor.
Zero Coupon Bonds and Pay-In-Kind Bonds
Although the Fund does not intend to purchase a substantial amount of
zero coupon bonds or PIK bonds, from time to time, the Fund may acquire zero
coupon bonds and, to a lesser extent, PIK bonds. Zero coupon bonds are debt
obligations which do not entitle the holder to any periodic payments of interest
prior to maturity or a specified date when the securities begin paying current
interest, and therefore are issued and traded at a discount from their face
amounts or par value. PIK bonds pay interest through the issuance to holders of
additional securities. Zero coupon bonds and PIK bonds are generally considered
to be more interest-sensitive than income bearing bonds, to be more speculative
than interest-bearing bonds, and to have certain tax consequences which could,
under certain circumstances, be adverse to the Fund. For example, with zero
coupon bonds, the Fund accrues, and is required to distribute to shareholders,
income on such bonds. However, the Fund may not receive the cash associated with
this income until the bonds are sold or mature. If the Fund did not have
sufficient cash to make the required distribution of accrued income, the Fund
could be required to sell other securities in its portfolio or to borrow to
generate the cash required.
Borrowings
The Fund may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. The Fund will not borrow money in excess
of one-third of the value of its net assets. 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 Sundays or holidays, or such longer
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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, or issue senior securities as defined in
the 1940 Act, except for notes to banks. Investment securities will not be
purchased while the Fund has an outstanding borrowing.
When-Issued and Delayed Delivery Securities
The Fund may purchase securities on a when-issued or delayed delivery
basis. In such transactions, instruments are purchased with payment and delivery
taking place in the future in order to secure what is considered to be an
advantageous yield or price at the time of the transaction. Delivery of and
payment for these securities may take as long as a month or more after the date
of the purchase commitment. The Fund will maintain with its custodian bank a
separate account with a segregated portfolio of liquid securities in an amount
at least equal to these commitments. The payment obligation and the interest
rates that will be received are each fixed at the time the Fund enters into the
commitment and no interest accrues to the Fund until settlement. Thus, it is
possible that the market value at the time of settlement could be higher or
lower than the purchase price if the general level of interest rates has
changed.
Portfolio Loan Transactions
The Fund may loan up to 25% of its assets to qualified broker/dealers
or institutional investors.
The major risk to which the Fund would be exposed on a loan transaction
is the risk that the borrower would become bankrupt at a time when the value of
the security goes up. Therefore, the Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, subject to overall
supervision by the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
Rule 144A Securities
The Fund may invest in restricted securities, including privately
placed securities, some of which may be eligible for resale without registration
pursuant to Rule 144A ("Rule 144A Securities") under the Securities Act of 1933.
Rule 144A permits many privately placed and legally restricted securities to be
freely traded among certain institutional buyers such as the Fund. The Fund may
invest no more than 15% of the value of its net assets in illiquid securities.
While maintaining oversight, the Board of Directors has delegated to
the Manager the day-to-day function of determining whether or not individual
Rule 144A Securities are liquid for purposes of the Fund's 15% limitation on
investments in illiquid securities. The Board has instructed the Manager to
consider the following factors in determining the liquidity of a Rule 144A
Security: (i) the frequency of trades and trading volume for the security; (ii)
whether at least three dealers are willing to purchase or sell the security and
the number of potential purchasers; (iii) whether at least two dealers are
making a market in the security; (iv) the nature of the security and the nature
of the marketplace trades (e.g., the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of transfer).
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If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, the
Fund's holdings of illiquid securities exceed the Fund's 15% limit on
investments in such securities, the Manager will determine what action to take
to ensure that the Fund continues to adhere to such limitation.
Investment Company Securities
Any investments that the Fund makes in either closed-end or open-end
investment companies will be limited by the 1940 Act, and would involve an
indirect payment of a portion of the expenses, including advisory fees, of such
other investment companies. Under the 1940 Act's current limitations, the Fund
may not (1) own more than 3% of the voting stock of another investment company;
(2) invest more than 5% of the Fund's total assets in the shares of any one
investment company; nor (3) invest more than 10% of the Fund's total assets in
shares of other investment companies. If the Fund elects to limit its investment
in other investment companies to closed-end investment companies, the 3%
limitation described above is increased to 10%. These percentage limitations
also apply to the Fund's investments in unregistered investment companies.
Repurchase Agreements
In order to invest its short-term cash reserves or when in a temporary
defensive posture, the Fund may enter into repurchase agreements with banks or
broker/dealers deemed to be creditworthy by the Manager, under guidelines
approved by the Board of Directors. A repurchase agreement is a short-term
investment in which the purchaser (i.e. the Fund) 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.
Generally, repurchase agreements are of short duration, often less than one week
but on occasion for longer periods. Not more than 15% of the Fund's assets may
be invested in repurchase agreements of over seven-days' maturity or other
illiquid assets. 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
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.
Foreign Currency Transactions
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund will, however, from time to time, purchase or sell
foreign currencies and/or engage in forward foreign currency transactions in
order to expedite settlement of portfolio transactions and to minimize currency
value fluctuations. The Fund may conduct its 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). A forward contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract, agreed upon by the parties, at a
price set at the time of the contract. The Fund will convert currency on a spot
basis from time to time, and investors should be aware of the costs of currency
conversion.
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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. By entering into a
forward contract for the purchase or sale, for a fixed amount of U.S. dollars or
foreign currency, of the amount of foreign currency involved in the underlying
security transaction, the Fund will be able to protect itself against a possible
loss resulting from an adverse change in currency exchange rates during the
period between the date the security is purchased or sold and the date on which
payment is made or received.
When the Manager believes that the currency of a particular country may
suffer a significant decline against the U.S. dollar or against another
currency, the Fund may enter into a forward foreign currency 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.
The Fund will not enter into forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of the
value of the Fund's securities or other assets denominated in that currency.
At the maturity of a forward contract, the Fund may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Fund may realize a gain or loss from currency
transactions. With respect to forward foreign currency contracts, the precise
matching of forward contract amounts and the value of the securities involved is
generally not possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency strategy is highly
uncertain.
It is impossible to forecast the market value of Fund securities at the
expiration of the contract. Accordingly, it may be necessary for the Fund to
purchase additional foreign currency on the spot market (and bear the expense of
such purchase) if the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver and if a decision is made to
sell the security and make delivery of the foreign currency. Conversely, it may
be necessary to sell on the spot market some of the foreign currency received
upon the sale of a security if its market value exceeds the amount of foreign
currency the Fund is obligated to deliver.
Options
The Manager may employ options techniques in an attempt to protect
appreciation attained and to increase shareholder return by seeking to take
advantage of the liquidity available in the options market. The Fund may
purchase call options on foreign or U.S. securities and indices and enter into
related closing transactions and the Fund may write covered call options on such
securities. The Fund may also purchase put options on such securities and
indices and enter into related closing transactions.
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A call option enables the purchaser, in return for the premium paid, to
purchase securities from the writer of the option at an agreed price up to an
agreed date. A covered call option obligates the writer, in return for the
premium received, to sell the securities subject to the option to the purchaser
of the option for an agreed upon price up to an agreed date. The advantage is
that the purchaser may hedge against an increase in the price of securities it
ultimately wishes to buy or take advantage of a rise in a particular index. The
Fund will only purchase call options to the extent that premiums paid on all
outstanding call options do not exceed 2% of its total assets. The Fund may
write covered call options in an amount not to exceed 10% of its total assets.
A put option enables the purchaser of the option, in return for the
premium paid, to sell the security underlying the option to the writer at the
exercise price during the option period, and the writer of the option has the
obligation to purchase the security from the purchaser of the option. The Fund
will only purchase put options to the extent that the premiums on all
outstanding put options do not exceed 2% of its total assets. The advantage is
that the purchaser can be protected should the market value of the security
decline or should a particular index decline.
An option on a securities index gives the purchaser of the option, in
return for the premium paid, the right to receive from the seller cash equal to
the difference between the closing price of the index and the exercise price of
the option.
Closing transactions essentially let the Fund offset put options or
call options prior to exercise or expiration. If the Fund cannot effect closing
transactions, it may have to hold a security it would otherwise sell or deliver
a security it might want to hold.
In purchasing put and call options, the premium paid by the Fund plus
any transaction costs will reduce any benefit realized by the Fund upon exercise
of the option. With respect to writing covered call options, the Fund may lose
the potential market appreciation of the securities subject to the option, if
the Manager's judgment is wrong and the price of the security moves in the
opposite direction from what was anticipated.
The Fund may use both Exchange-traded and over-the-counter options.
Certain over-the-counter options may be illiquid. The Fund will only invest in
such options to the extent consistent with its 15% limitation on investment in
illiquid securities. The Fund will comply with Securities and Exchange
Commission asset segregation and coverage requirements when engaging in these
types of transactions.
Futures
Futures contracts are agreements for the purchase or sale for future
delivery of securities. When a futures contract is sold, the Fund incurs a
contractual obligation to deliver the securities underlying the contract at a
specified price on a specified date during a specified future month. A purchase
of a futures contract means the acquisition of a contractual right to obtain
delivery to the Fund of the securities called for by the contract at a specified
price during a specified future month.
While futures contracts provide for the delivery of securities,
deliveries usually do not occur. Contracts are generally terminated by entering
into an offsetting transaction. When the Fund enters into a futures transaction,
it must deliver to the futures commission merchant selected by the Fund an
amount
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<PAGE>
referred to as "initial margin." This amount is maintained by the futures
commission merchant in an account at the Fund's custodian bank. Thereafter, a
"variation margin" may be paid by the Fund to, or drawn by the Fund from, such
account in accordance with controls set for such account, depending upon changes
in the price of the underlying securities subject to the futures contract.
The Fund may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options on securities except that
options on futures give the purchaser the right, in return for the premium paid,
to assume a position in a futures contract, rather than actually to purchase or
sell the futures contract, at a specified exercise price at any time during the
period of the option.
The purpose of the purchase or sale of futures contracts with respect
to a certain security is to protect the Fund against the adverse effects of
fluctuations in interest rates without actually buying or selling that security.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to hedge in anticipation of subsequent purchases of
securities at higher prices.
Foreign currency futures contracts operate similarly to futures
contracts related to securities. When the Fund sells a futures contract on a
foreign currency it is obligated to deliver that foreign currency at a specified
future date. Similarly, a purchase by the Fund gives it a contractual right to
receive a foreign currency. This enables the Fund to "lock-in" exchange rates.
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<PAGE>
APPENDIX A--RATINGS
The Fund's assets may be invested in securities rated BBB or lower by
S&P or Fitch, Baa or lower by Moody's, in securities similarly rated by another
nationally recognized statistical rating organization, and in unrated securities
that are deemed by the Manager to be comparable in quality to similar rated
securities. Credit ratings evaluate only the safety of principal, interest and
dividends and do not consider the market value risk associated with high-yield
securities.
General Rating Information
Bonds and Convertible Securities
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.
Excerpts from Fitch's description of its bond ratings:
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events; AA--Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds rated in
the AAA and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+; A--
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<PAGE>
Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings; BBB--Bonds considered to be
investment grade and of satisfactory credit quality. The obligor's ability to
pay interest and repay principal is considered to be adequate. Adverse changes
in economic conditions and circumstances, however, are more likely to have
adverse impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade is
higher than for bonds with higher ratings; BB--Bonds are considered speculative.
The obligor's ability to pay interest and repay principal may be affected over
time by adverse economic changes. However, business and financial alternatives
can be identified which could assist the obligor in satisfying its debt service
requirements; B--Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue; CCC--Bonds have certain identifiable
characteristics which, if not remedied, may lead to default. The ability to meet
obligations requires an advantageous business and economic environment;
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time; C--Bonds are in imminent default in payment
of interest or principal; and DDD-DD- and D--Bonds are in default on interest
and/or principal payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. "DDD" represents the highest potential for
recovery on these bonds, and "D" represents the lowest potential for recovery.
Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the "AAA" category.
Commercial Paper
Excerpts from 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.
Excerpts from S&P's 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.
Preferred Stock
The following are excerpts from S&P's description of its preferred
stock ratings:
An S&P preferred stock rating is an assessment of the capacity and
willingness of an issuer to pay preferred stock dividends and any applicable
sinking fund obligations. A preferred stock rating differs from a bond rating
inasmuch as it is assigned to an equity issue, which issue is intrinsically
different from, and subordinated to, a debt issue. Therefore, to reflect this
difference, the preferred stock rating symbol will normally not be higher than
the debt rating symbol assigned to, or that would be assigned to, the senior
debt of the same issuer.
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<PAGE>
The preferred stock ratings are based on the following considerations:
1. Likelihood of payment--capacity and willingness of the issuer to
meet the timely payment of preferred stock dividends and any applicable sinking
fund requirements in accordance with the terms of the obligation.
2. Nature of, and provisions of, the issue.
3. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangements affecting creditors' rights.
AAA This is the highest rating that may be assigned by S&P to a
preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
AA A preferred stock issue rated "AA" also qualifies as a
high-quality fixed-income security. The capacity to pay
preferred stock obligations is very strong, although not as
overwhelming as for issues rated "AAA."
A An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more
susceptible to the adverse effects of changes in circumstances
and economic conditions.
BBB An issue rated "BBB" is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity to make payments for a
preferred stock in this category than for issues in the "A"
category.
BB, B, Preferred stocks rated "BB," "B" and "CCC" are regarded, on
CCC balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. "BB"
indicates the lowest degree of speculation and "CCC" the
highest degree of speculation. While such issues will likely
have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to
adverse conditions.
CC The rating "CC" is reversed for a preferred stock issue in
arrears on dividends or sinking fund payments but that is
currently paying.
C A preferred stock rated "C" is a non-paying issue.
D A preferred stock rated "D" is a non-paying issue with the
issuer in default on debt instruments.
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<PAGE>
NR indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligations as a matter of policy.
Plus (+) or Minus (-) To provide more detailed indications of preferred
stock quality, the ratings from "AA" to "CCC" may be modified by the addition of
a plus or minus sign to show relative standing within the major rating
categories.
The following are excerpts from Moody's description of its preferred
stock ratings:
"aaa" An issue which is rated "aaa" is considered to be a
top-quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within
the universe of preferred stocks.
"aa" An issue which is rated "aa" is considered a high-grade
preferred stock. This rating indicates that there is a
reasonable assurance the earnings and asset protection will
remain relatively well-maintained in the foreseeable future.
"a" An issue which is rated "a" is considered to be an
upper-medium grade preferred stock. While risks are judged to
be somewhat greater than in the "aaa" and "aa" classification,
earnings and asset protection are, nevertheless, expected to
be maintained at adequate levels.
"baa" An issue which is rated "baa" is considered to be a
medium-grade preferred stock, neither high protected nor
poorly secured. Earnings and asset protection appear adequate
at present but may be questionable over any great length of
time.
"ba" An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured.
Earnings and asset protection may be very moderate and not
well safeguarded during adverse periods. Uncertainty of
position characteristizes preferred stocks in this class.
"b" An issue which is rated "b" generally lacks the
characteristics of a desirable investment. Assurance of
dividend payments and maintenance of other terms of the issue
over any long period of time may be small.
"caa" An issue which is rated "caa" is likely to be in arrears on
dividends payments. This rating designation does not purport
to indicate the future status of payments.
"ca" An issue which is rated "ca" is speculative in a high degree
and is likely to be in arrears on dividends with little
likelihood of eventual payments.
"c" This is the lowest rated class of preferred or preference
stock. Issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Moody's applies numerical modifies 1, 2, and 3 in each rating
classification; the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
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<PAGE>
The Delaware Group includes funds with a
wide range of investment objectives. Stock funds,
income funds, tax-free funds, money market funds,
global and international funds and closed-end
equity funds give investors the ability to create a
portfolio that fits their personal financial goals. For
more information, shareholders of the Fund Classes
should contact their financial adviser or call
Delaware Group at 800-523-4640 and shareholders
of the Institutional Class should contact Delaware
Group at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIANS
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
Bankers Trust Company
One Bankers Trust Plaza
New York, NY 10006
- ----------------------------------------------
DELAWARE GROUP VALUE FUND, INC.
- ----------------------------------------------
VALUE FUND
- ----------------------------------------------
RETIREMENT INCOME FUND
- ----------------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
- ----------------------------------------------
NOVEMBER 29, 1996
DELAWARE
GROUP
---------
<PAGE>
- --------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 29, 1996
- --------------------------------------------------------------------------------
DELAWARE GROUP VALUE FUND, INC.
- --------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
- --------------------------------------------------------------------------------
For more information about Value Fund Institutional Class and
Retirement Income Fund Institutional Class: 800-828-5052
For Prospectus and Performance of Value Fund A Class,
Value Fund B Class, Value Fund C Class,
Retirement Income Fund A Class,
Retirement Income Fund B Class and
Retirement Income Fund C Class: Nationwide 800-523-4640
Information on Existing Accounts of Value Fund A Class,
Value Fund B Class, Value Fund C Class,
Retirement Income Fund A Class,
Retirement Income Fund B Class and
Retirement Income Fund C Class:
(SHAREHOLDERS ONLY) Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY) Nationwide 800-362-7500
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Cover Page
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Investment Policies and Portfolio Techniques
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Accounting and Tax Issues
- --------------------------------------------------------------------------------
Performance Information
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Trading Practices and Brokerage
- --------------------------------------------------------------------------------
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 Agreements
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Officers and Directors
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Exchange Privilege
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General Information
- --------------------------------------------------------------------------------
Appendix A--IRA Information
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Appendix B
- --------------------------------------------------------------------------------
Financial Statements
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<PAGE>
Delaware Group Value Fund, Inc. ("Value Fund, Inc.") is a
professionally-managed mutual fund of the series type which currently offers two
series: the Value Fund series ("Value Fund") and the Retirement Income Fund
series ("Retirement Income Fund") (individually a "Fund" and collectively the
"Funds").
Each Fund of Value Fund, Inc. offers three retail classes: the Value
Fund A Class and the Retirement Income Fund A Class (the "Class A Shares"); the
Value Fund B Class and the Retirement Income Fund B Class (the "Class B
Shares"); and the Value Fund C Class and the Retirement Income Fund C Class (the
"Class C Shares"). Class A Shares, Class B Shares and Class C Shares are
collectively referred to as the "Fund Classes." Each Fund also offers an
institutional class: the Value Fund Institutional Class and the Retirement
Income Fund Institutional Class (collectively, the "Institutional Classes").
Each class is individually referred to as a "Class" and collectively referred to
as "Classes."
Class B Shares, Class C Shares and Institutional Class shares of each
Fund may be purchased at a price equal to the next determined net asset value
per share. Class A Shares may be purchased at the public offering price, which
is equal to the next determined net asset value per share, plus a front-end
sales charge. Class A Shares are subject to a maximum front-end sales charge of
4.75% and annual 12b-1 Plan expenses of up to .30% (currently, no more than .25%
of the average daily net assets of the Class A Shares of the Retirement Income
Fund, pursuant to Board action). Class B Shares are subject to a contingent
deferred sales charge ("CDSC") which may be imposed on redemptions made within
six years of purchase and annual 12b-1 Plan expenses of up to 1% which are
assessed against Class B Shares for approximately eight years after purchase.
See Automatic Conversion of Class B Shares under Classes of Shares in the
Prospectuses for the Fund Classes. Class C Shares are subject to a CDSC which
may be imposed on redemptions made within 12 months of purchase and annual 12b-1
Plan expenses of up to 1%, which are assessed against the Class C Shares for the
life of the investment.
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectuses of
the Fund Classes for the Value Fund dated January 29, 1996 and the Retirement
Income Fund dated November 29, 1996, and the current Prospectuses of the
Institutional Classes for the Value Fund dated January 29, 1996 and the
Retirement Income Fund dated November 29, 1996, as they may be amended from time
to time. Part B 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 for each
Class may be obtained by writing or calling your investment dealer or by
contacting Value Fund, Inc.'s national distributor, Delaware Distributors, L.P.
(the "Distributor"), 1818 Market Street, Philadelphia, PA 19103.
All references to "shares" in this Part B refer to all Classes of
shares of Value Fund, Inc., except where noted.
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<PAGE>
INVESTMENT POLICIES AND PORTFOLIO TECHNIQUES
Investment Restrictions--The Funds have adopted the following
restrictions which, along with their respective investment objectives, cannot be
changed without approval by the holders of a "majority" of such 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 Value 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.
-3-
<PAGE>
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 (the "1940 Act"), except for notes to banks. Investment securities will
not normally be purchased while the Fund has an outstanding borrowing.
The Value Fund has a policy, which may not be changed without
shareholder approval, that it will not invest in commodities; however, the Fund
reserves the right to invest in financial futures and options thereon, including
stock index futures, to the extent these instruments are considered commodities.
In addition, although not a fundamental investment restriction, the
Value Fund currently does not invest its assets in real estate limited
partnerships.
The Retirement Income Fund shall not:
1. With respect to 75% of its total assets, invest more than 5% of the
value of its assets in securities of any one issuer (except obligations issued,
or guaranteed by, the U.S. government, its agencies or instrumentalities or
certificates of deposit for any such securities, and cash and cash items) or
purchase more than 10% of the voting securities of any one company.
-4-
<PAGE>
2. Invest in securities of other investment companies, except that the
Fund may invest in securities of open-end, closed-end and unregistered
investment companies, in accordance with the limitations contained in the 1940
Act.
3. Make loans, except to the extent that purchases of debt obligations
(including repurchase agreements), in accordance with the Fund's investment
objectives 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. This restriction shall not preclude
the Fund's purchase of securities issued by real estate investments trusts, the
purchase of securities issued by companies that deal in real estate, or the
investment in securities secured by real estate or interests therein.
5. Invest in companies for the purpose of exercising control or
management.
6. Engage in the underwriting of securities of other issuers, except
that the Fund may acquire restricted or not readily marketable securities under
circumstances where, if such securities are sold, the Fund might be deemed to be
an underwriter for purposes of 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 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. Buy or sell commodities or commodity contracts, except that the
Fund may invest in financial futures and options thereon, including stock index
futures, to the extent these instruments are considered commodities.
9. Invest in interests in oil, gas or other mineral exploration or
development programs.
10. Purchase securities on margin, except that the Fund may satisfy
margin requirements with respect to futures transactions.
11. 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 shall not issue senior securities as defined by the 1940
Act, except for notes to banks. Investment securities will not normally be
purchased while the Fund has an outstanding borrowing.
In addition to the above fundamental investment restrictions, the
Retirement Income Fund has the following investment restrictions which may be
amended or changed without approval of shareholders.
-5-
<PAGE>
1. The Retirement Income Fund will not purchase or retain securities of
a company which has an officer or director who is an officer or director of
Value Fund, Inc., or an officer, director or partner of Delaware Management
Company, Inc. (the "Manager") if, to the knowledge of the Fund, one or more of
such persons beneficially owns in the aggregate more than 5% thereof.
2. Other than securities of real estate investment trusts, the
Retirement Income Fund will not invest in the securities of companies which have
a record of less than three years' continuous operation, including any
predecessor company or companies, if such investment at the time of purchase
would cause more than 5% of the Fund's total assets to be invested in the
securities of such company or companies.
Investment Policies--The application of each Fund's investment policy
will be dependent upon the judgment of the Manager. In accordance with the
judgment of the Manager, the proportions of a Fund's assets invested in
particular industries will vary from time to time. The securities in which each
Fund invests may or may not be listed on a national stock exchange, but if they
are not so listed, they will generally have an established over-the-counter
market.
In addition, from time to time, the Funds may also engage in the
following investment techniques:
Repurchase Agreements
While the Funds are permitted to do so, they normally do 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 1940 Act to allow the
Delaware Group funds jointly to invest cash balances. The Funds 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
Funds, if any, would be the difference between the repurchase price and the
market value of the security. Each 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, each Fund must have collateral of at least 100% of the
repurchase price, including the portion representing such Fund's yield under
such agreements which is monitored on a daily basis.
Portfolio Loan Transactions
Each 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
-6-
<PAGE>
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 Funds would be exposed on a loan
transaction is the risk that a borrower would go bankrupt at a time when the
value of the security goes up. Therefore, the Funds 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.
Non-Traditional Equity Securities
The Retirement Income Fund may invest in convertible preferred stocks
that offer enhanced yield features, such as Preferred Equity Redemption
Cumulative Stock ("PERCS"), which provide an investor, such as the Fund, with
the opportunity to earn higher dividend income than is available on a company's
common stock. A PERCS is a preferred stock which generally features a mandatory
conversion date, as well as a capital appreciation limit which is usually
expressed in terms of a stated price. Upon the conversion date, most PERCS
convert into common stock of the issuer (PERCS are generally not convertible
into cash at maturity). Under a typical arrangement, if after a predetermined
number of years the issuer's common stock is trading at a price below that set
by the capital appreciation limit, each PERCS would convert to one share of
common stock. If, however, the issuer's common stock is trading at a price above
that set by the capital appreciation limit, the holder of the PERCS would
receive less than one full share of common stock. The amount of that fractional
share of common stock received by the PERCS holder is determined by dividing the
price set by the capital appreciation limit of the PERCS by the market price of
the issuer's common stock. PERCS can be called at any time prior to maturity,
and hence do not provide call protection. However, if called early, the issuer
may pay a call premium over the market price to the investor. This call premium
declines at a preset rate daily, up to the maturity date of the PERCS.
The Retirement Income Fund may also invest in other enhanced
convertible securities. These include but are not limited to ACES (Automatically
Convertible Equity Securities), PEPS (Participating Equity Preferred Stock),
PRIDES (Preferred Redeemable Increased Dividend Equity Securities), SAILS (Stock
Appreciation Income Linked Securities), TECONS (Term Convertible Notes), QICS
(Quarterly Income Cumulative Securities) and DECS (Dividend Enhanced Convertible
Securities). ACES, PEPS, PRIDES, SAILS, TECONS, QICS, and DECS all have the
following features: they are company-issued convertible preferred stock; unlike
PERCS, they do not have capital appreciation limits; they seek to provide the
investor with high current income, with some prospect of future capital
appreciation; they are typically issued with three to four-year maturities; they
typically have some built-in call protection for the first two to three years;
investors have the right to convert them into shares of common stock at a preset
conversion ratio or hold them until maturity; and upon maturity, they will
automatically convert to either cash or a specified number of shares of common
stock.
* * *
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Restricted Securities
Each 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
Value Fund has no more than 10% and Retirement Income Fund has no more than 15%
of their respective net assets invested in illiquid securities.
Options
The Value 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. The Retirement Income Fund may purchase call and put
options and write call options on a covered basis only. The Funds will not
engage in option strategies for speculative purposes.
A. Covered Call Writing--The Value 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 that Fund's investment
objective. The Retirement Income Fund may write covered call options in an
amount not to exceed 10% of its total assets. A call option gives the purchaser
of such option the right to buy, and the writer, in this case a Fund, has the
obligation to sell the underlying security at the exercise price during the
option period. The advantage to a 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 Funds and options on stock indices, the Funds 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 a Fund
to write another call option on the underlying security with either a different
exercise price or expiration date or both. A 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
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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 Funds will write call options only on a covered basis, which means
that a Fund will own the underlying security subject to a call option at all
times during the option period or securities convertible or exchangeable into
the securities subject to the call option at no additional consideration or a
Fund owns a call option on the relevant securities with an exercise price no
higher than the exercise price on the call option written or subject to any
regulatory restrictions, an amount of cash or liquid high grade debt obligations
at least equal to the current underlying securities. Unless a closing purchase
transaction is effected, a 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 Funds 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 Call Options--The Retirement Income Fund may purchase
call options in an amount not to exceed 2% of its total assets. When the
Retirement Income Fund purchases a call option, in return for a premium paid by
the Fund to the writer of the option, the Fund obtains the right to buy the
security underlying the option at a specified exercise price at any time during
the term of the option. The advantage of purchasing call options is that the
Fund may alter its portfolio's characteristics and modify portfolio maturities
without incurring the cost associated with portfolio transactions.
The Retirement Income Fund may, following the purchase of a call
option, liquidate its position by effecting a closing sale transaction. This is
accomplished by selling an option of the same series as the option previously
purchased. The Fund will realize a profit from a closing sale transaction if the
price received on the transaction is more than the premium paid to purchase the
original call option; the Fund will realize a loss from a closing sale
transaction if the price received on the transaction is less than the premium
paid to purchase the original call option. There is no assurance, however, that
a liquid secondary market on an exchange will exist for any particular option,
or at any particular time, and for some options no secondary market on an
exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the result that the Fund would have to
exercise its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by the Fund may expire without any value
to the Fund.
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C. Purchasing Put Options--Each Fund may invest up to 2% of its total
assets in the purchase of put options. The Funds will, at all times during which
they hold a put option, own the security covered by such option.
The Funds intend 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 Funds to protect an unrealized gain in an
appreciated security in their portfolios without actually selling the security.
If the security does not drop in value, the Funds will lose the value of the
premium paid. Each 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 Funds may sell each put options purchased on individual portfolio
securities or stock indices. Additionally, the Funds may enter into closing sale
transactions. A closing sale transaction is one in which a 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 Funds may offset their positions in stock
index options prior to expiration by entering into closing transactions, on an
Exchange or they may let the options 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.
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The effectiveness of purchasing or writing stock index options as a
hedging technique will depend upon the extent to which price movements in a
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 a 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 each Fund's portfolio will not
duplicate the components of an index, the correlation will not be exact.
Consequently, a 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 Funds 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 a Fund's ability to effectively hedge
its securities. Each Fund will enter into an option position only if there
appears to be a liquid secondary market for such options.
The Funds 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
Each of the Funds may invest in securities of foreign companies.
However, the Value 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). The Retirement
Income Fund may, in addition to investing in securities of foreign companies,
invest in foreign government securities. No more than 20% of the value of the
Retirement Income Fund's total assets, at the time of purchase, will be invested
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 Funds. Payment of
such interest equalization tax, if imposed, would reduce a 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 Funds by United States
corporations.
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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 Funds 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
Funds held in foreign countries.
The Funds 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 Funds 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, a 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 that 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 a 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 Funds may incur gains or losses from currency transactions. No type
of foreign currency transaction will eliminate fluctuations in the prices of the
Funds' foreign securities or will prevent loss if the prices of such securities
should decline.
The Value Fund's Custodian for its foreign securities is The Chase
Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245. The Retirement
Income Fund's Custodian for its foreign securities is Bankers Trust Company, One
Bankers Trust Plaza, New York, NY 10006.
Futures and Options on Futures
The Retirement Income Fund may enter into contracts for the purchase or
sale for future delivery of securities. While futures contracts provide for the
delivery of securities, deliveries usually do not occur. Contracts are generally
terminated by entering into an offsetting transaction. When the Retirement
Income Fund enters into a futures transaction, it must deliver to the futures
commission merchant selected by the Fund an amount referred to as "initial
margin." This amount is maintained by the futures commission merchant in an
account at the Fund's Custodian Bank. Thereafter, a "variation margin" may be
paid by the Fund to, or drawn by the Fund from, such account in accordance with
controls set for such account, depending upon changes in the price of the
underlying securities subject to the futures contract.
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The Retirement Income Fund may enter into such futures contracts to
protect against the adverse effects of fluctuations in interest rates without
actually buying or selling securities. For example, if interest rates are
expected to increase, the Fund might enter into futures contracts for the sale
of debt securities. Such a sale would have much the same effect as selling an
equivalent value of the debt securities owned by the Fund. If interest rates did
increase, the value of the debt securities in the portfolio would decline, but
the value of the futures contracts to the Fund would increase at approximately
the same rate, thereby keeping the net asset value of the Fund from declining as
much as it otherwise would have. Similarly, when it is expected that interest
rates may decline, futures contracts may be purchased to hedge in anticipation
of subsequent purchases of securities at higher prices. Because the fluctuations
in the value of futures contracts should be similar to those of debt securities,
the Fund could take advantage of the anticipated rise in value of debt
securities without actually buying them until the market had stabilized. At that
time, the futures contracts could be liquidated and the Fund could then buy debt
securities on the cash market.
With respect to options on futures contracts, when the Fund is not
fully invested, it may purchase a call option on a futures contract to hedge
against a market advance due to declining interest rates. The purchase of a call
option on a futures contract is similar in some respects to the purchase of a
call option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based, or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities.
The writing of a call option on a futures contract constitutes a
partial hedge against the declining price of the security which is deliverable
upon exercise of the futures contract. If the futures price at the expiration of
the option is below the exercise price, the Fund will retain the full amount of
the option premium which provides a partial hedge against any decline that may
have occurred in the Fund's holdings. The writing of a put option on a futures
contract constitutes a partial hedge against the increasing price of the
security which is deliverable upon exercise of the futures contract. If the
futures price at the expiration of the option is higher than the exercise price,
the Fund will retain the full amount of option premium which provides a partial
hedge against any increase in the price of securities which the Fund intends to
purchase.
If a put or call option that the Fund has written is exercised, the
Fund will incur a loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between changes in the value of
its portfolio securities and changes in the value of its futures positions, the
Fund's losses from existing options on futures may, to some extent, be reduced
or increased by changes in the value of portfolio securities. The purchase of a
put option on a futures contract is similar in some respects to the purchase of
protective puts on portfolio securities. For example, the Fund will purchase a
put option on a futures contract to hedge the Fund's securities against the risk
of rising interest rates.
To the extent that interest rates move in an unexpected direction, the
Fund may not achieve the anticipated benefits of futures contracts or options on
futures contracts or may realize a loss. For example, if the Fund is hedged
against the possibility of an increase in interest rates which would adversely
affect the price of securities held in its portfolio and interest rates decrease
instead, the Fund will lose part or all of the benefit of the increased value of
its securities which it has because it will have offsetting losses in its
futures position. In addition, in such situations, if the Fund had insufficient
cash, it may be required to sell securities from its portfolio to meet daily
variation margin requirements. Such sales of securities may, but will not
necessarily, be at increased prices which reflect the rising market.
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The Funds may be required to sell securities at a time when it may be
disadvantageous to do so.
Further, with respect to options on futures contracts, the Fund may
seek to close out an option position by writing or buying an offsetting position
covering the same securities or contracts and have the same exercise price and
expiration date. The ability to establish and close out positions on options
will be subject to the maintenance of a liquid secondary market, which cannot be
assured.
High-Yield, High Risk Securities
Investing in so-called "high-yield" or "high risk" securities entails
certain risks, including the risk of loss of principal, which may be greater
than the risks involved in investment grade securities, and which should be
considered by investors contemplating an investment in the Funds. Such
securities are sometimes issued by companies whose earnings at the time of
issuance are less than the projected debt service on the high-yield securities.
The risks include the following:
A. Youth and Volatility of the High-Yield Market--Although the market
for high-yield securities has been in existence for many years, including
periods of economic downturns, the high-yield market grew rapidly during the
long economic expansion which took place in the United States during the 1980s.
During that economic expansion, the use of high-yield debt securities to fund
highly leveraged corporate acquisitions and restructurings increased
dramatically. As a result, the high-yield market grew substantially during that
economic expansion. Although experts disagree on the impact recessionary periods
have had and will have on the high-yield market, some analysts believe a
protracted economic downturn would severely disrupt the market for high-yield
securities, would adversely affect the value of outstanding bonds and would
adversely affect the ability of high-yield issuers to repay principal and
interest. Those analysts cite volatility experienced in the high-yield market in
the past as evidence for their position. It is likely that protracted periods of
economic uncertainty would result in increased volatility in the market prices
of high-yield securities, an increase in the number of high-yield bond defaults
and corresponding volatility in a Fund's net asset value.
The Value Fund will not ordinarily purchase securities rated below B
by Moody's and S&P. However, it may do so if the Manager believes that capital
appreciation is likely. The Value Fund will not invest more than 25% of its
assets in such securities. While the Retirement Income Fund will not invest more
than 45% of its assets in high-yield, high risk debt securities, it has the
authority to invest up to all of its net assets in lower rated securities, which
would include income generating equity securities such as convertible securities
and preferred stocks.
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 such securities for regulatory, financial or other
reasons, such as the savings and loan crisis. A less liquid secondary market may
have an adverse effect on a Fund's ability to dispose of particular issues, when
necessary, to meet a 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 a 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
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securities markets. 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.
Short Sales
The Retirement Income Fund may make short sales in an attempt to
protect against market declines. Typically, short sales are transactions in
which the Fund sells a security it does not own in anticipation of a decline in
the market value of that security. To complete such a transaction, the Fund must
borrow the security to make delivery to the buyer. The Fund then is obligated to
replace the security borrowed by purchasing it at the market price at the time
of replacement. The price at such time may be more or less than the price at
which the security was sold by the Fund. Until the security is replaced, the
Fund is required to pay to the lender amounts equal to any dividends or interest
which accrue during the period of the loan. To borrow the security, the Fund
also may be required to pay a premium, which would increase the cost of the
security sold. The proceeds of the short sale will be retained by the broker, to
the extent necessary to meet margin requirements, until the short position is
closed out.
Until the Fund replaces a borrowed security in connection with a short
sale, the Fund will be required to maintain daily a segregated account,
containing cash or U.S. government securities, at such a level that (i) the
amount deposited in the account plus the amount deposited with the broker as
collateral will at all times be equal to at least 100% of the current value of
the security sold short and (ii) the amount deposited in the segregated account
plus the amount deposited with the broker as collateral will not be less than
the market value of the security at the time it was sold short.
The Fund will incur a loss as a result of a short sale if the price of
the security sold short increases between the date of the short sale and the
date on which the Fund replaces the borrowed security; conversely, the Fund will
realize a gain if the security declines in price between those dates. This
result is the opposite of what one would expect from a cash purchase of a long
position in a security. The amount of any gain will be decreased, and the amount
of any loss increased, by the amount of any premium or amounts in lieu of
interest the Fund may be required to pay in connection with a short sale.
In addition to the short sales discussed above, the Fund also may make
short sales "against the box," a transaction in which the Fund enters into a
short sale of a security which the Fund owns. The proceeds of the short sale are
held by a broker until the settlement date, at which time the Fund delivers the
security to close the short position. The Fund receives the net proceeds from
the short sale.
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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--Each Fund has qualified, and intends to
continue to qualify, as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). A 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
-16-
<PAGE>
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 a Fund's gross income be
derived from gains from the sale or other disposition of securities held for
less than three months may restrict a 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, a Fund may be required to defer the closing out of a
contract beyond the time when it might otherwise be advantageous to do so. A
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.
-17-
<PAGE>
PERFORMANCE INFORMATION
From time to time, each Fund may state each of its Classes' total
return in advertisements and other types of literature. Any statement of total
return performance data for a Class will be accompanied by information on 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. Each Fund may also advertise aggregate and average total return
information of each Class over additional periods of time. The net asset value
of a Class fluctuates so shares, when redeemed, may be worth more or less than
the original investment, and a Class' results should not be considered as
representative of future performance.
Average annual total rate of return for a Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order of
$1,000 from which, in the case of only
Class A Shares, the maximum front-end sales
charge is deducted;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical
$1,000 purchase at the end of the period
after the deduction of the applicable CDSC,
if any, with respect to Class B Shares and
Class C Shares.
In presenting performance information for Class A Shares, the Limited
CDSC, applicable to only certain redemptions of those shares, will not be
deducted from any computation of total return. See the Prospectus for the Fund
Classes for a description of the Limited CDSC and the limited instances in which
it applies. All references to a CDSC in this Performance Information section
will apply to Class B Shares or Class C Shares.
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made with respect to Class A Shares, and that all
distributions are reinvested at net asset value, and, with respect to Class B
Shares and Class C Shares, reflects the deduction of the CDSC that would be
applicable upon complete redemption of such shares. In addition, the Fund may
present total return information that does not reflect the deduction of the
maximum front-end sales charge or any applicable CDSC.
The performance of Class A Shares and the Institutional Class of Value
Fund, as shown below, is the average annual total return through May 31, 1996,
computed as described above. The average annual total return for Class A Shares
at offer reflects the maximum front-end sales charges paid on the purchase of
shares. The average annual total return for Class A Shares at net asset value
(NAV) does not reflect the payment of any front-end sales charge. Pursuant to
applicable regulation, total return shown for the Value Fund
-18-
<PAGE>
Institutional Class for the periods prior to the commencement of operations of
such Class is calculated by taking the performance of Class A Shares and
adjusting it to reflect the elimination of all sales charges. However, for those
periods, no adjustment has been made to eliminate the impact of 12b-1 payments,
and performance would have been affected had such an adjustment been made.
Average Annual Total Return
Value Fund Value Fund Value Fund
A Class A Class Institutional
(at Offer)(2) (at NAV) Class(3)
1 year
ended
5/31/96 20.26% 26.28% 26.63%
3 years
ended
5/31/96 9.72% 11.53% 11.87%
5 years
ended
5/31/96 14.76% 15.89% 16.13%
Period
6/24/87(1)
through
5/31/96 14.15% 14.78% 14.92%
(1) Date of initial public offering of Value Fund A Class.
(2) Prior to November 29, 1995, the maximum front-end sales charge was 5.75%.
Effective November 29, 1995, the maximum front-end sales charge was reduced
to 4.75% and the above performance figures are calculated using 4.75% as
the applicable sales charge, and are more favorable than they would have
been had they been calculated using 5.75%.
(3) Date of initial public offering of Value Fund Institutional Class was
November 9, 1992.
-19-
<PAGE>
The performance of Class B Shares of Value Fund, as shown below, is the
average annual total return quotation through May 31, 1996. The average annual
total return for Class B Shares including deferred sales charge reflects the
deduction of the applicable CDSC that would be paid if the shares were redeemed
at May 31, 1996. The average annual total return for Class B Shares excluding
deferred sales charge assumes the shares were not redeemed at May 31, 1996 and
therefore does not reflect the deduction of a CDSC.
Average Annual Total Return
Value Fund B Class Value Fund B Class
(Including Deferred (Excluding Deferred
Sales Charge) Sales Charge)
1 year
ended
5/31/96 21.31% 25.31%
Period
9/6/94(1)
through
5/31/96 12.64% 14.73%
(1) Date of initial public offering of Value Fund B Class.
The performance of Class C Shares of Value Fund, as shown below, is the
aggregate total return quotation through May 31, 1996. The aggregate total
return for Class C Shares including deferred sales charge reflects the deduction
of the applicable CDSC that would be paid if the shares were redeemed at May 31,
1996. The aggregate total return for Class C Shares excluding deferred sales
charge assumes the shares were not redeemed at May 31, 1996 and therefore does
not reflect the deduction of a CDSC.
Aggregate Total Return
Value Fund C Class Value Fund C Class
(Including Deferred (Excluding Deferred
Sales Charge) Sales Charge)
Period
11/29/95(1)
through
5/31/96 11.81% 12.81%
(1) Date of initial public offering of Value Fund C Class; total return for
this short of a time period may not be representative of longer-term
results.
-20-
<PAGE>
Securities prices fluctuated during the periods covered and past
results should not be considered as representative of future performance. Total
return for the Retirement Income Fund is not provided because such shares were
not offered prior to the date of this Part B.
From time to time, each Fund may also quote its Classes' 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 2,000 of the smallest
stocks (on the basis of capitalization) in the Russell 3000 Index and is
calculated on a monthly basis. The NASDAQ Composite Index is a market
capitalization price only index that tracks the performance of domestic common
stocks traded on the regular NASDAQ market as well as National Market System
traded foreign common stocks and American Depository Receipts. The total return
performance reported for these indices will reflect the reinvestment of all
distributions on a quarterly basis and market price fluctuations. The indices do
not take into account any sales charge or other fees. In seeking its investment
objective, the Value Fund's portfolio primarily includes common stocks
considered by the Manager to be more aggressive than those tracked by these
indices.
Total return performance of each Class will be computed by adding all
reinvested income and realized securities profits distributions plus the change
in net asset value during a specific period and dividing by the offering price
at the beginning of the period. It will not reflect any income taxes payable by
shareholders on the reinvested distributions included in the calculation.
Because securities prices fluctuate, past performance should not be considered
as a representation of the results which may be realized from an investment in
the Fund in the future.
Each Fund may also state its Classes' 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, each Fund may also quote actual total return
performance for its Classes 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.
-21-
<PAGE>
Statistical and performance information and various indices compiled
and maintained by organizations such as the following may also be used in
preparing exhibits comparing certain industry trends and competitive mutual fund
performance to comparable Fund activity and performance and in illustrating
general financial planning principles. From time to time, certain mutual fund
performance ranking information, calculated and provided by these organizations
may also be used in the promotion of sales of the Funds. 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 following tables are examples, for purposes of illustration only,
of cumulative total return performance for Class A Shares, Class B Shares, Class
C Shares and the Institutional Class of Value Fund through May 31, 1996. 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.
-22-
<PAGE>
Cumulative Total Return
<TABLE>
<CAPTION>
Value
Fund Standard
Value Fund Institu- & Poor's Dow Jones NASDAQ
A Class(2) tional 500 Stock Industrial Composite
(at Offer) Class(3) Index(4) Average(4) Index(4)
<S> <C> <C> <C> <C> <C>
3 months
ended
5/31/96 1.64% 6.76% 5.09% 3.46% 13.03%
6 months
ended
5/31/96 6.62% 12.12% 11.78% 12.49% 17.39%
9 months
ended
5/31/96 12.11% 17.95% 21.19% 24.57% 21.89%
1 year
ended
5/31/96 20.26% 26.63% 28.44% 29.44% 43.82%
3 years
ended
5/31/96 33.24% 40.00% 60.95% 73.16% 77.50%
5 years
ended
5/31/96 99.05% 111.26% 97.33% 114.39% 145.68%
Period
6/24/87(1)
through
5/31/96 226.42% 246.55% 190.36% 211.20% 192.80%
</TABLE>
(1) Date of initial public offering of Value Fund A Class.
(2) Prior to November 29, 1995, the maximum front-end sales charge was 5.75%.
Effective November 29, 1995, the maximum front-end sales charge was reduced
to 4.75% and the above performance figures are calculated using 4.75% as
the applicable sales charge, and are more favorable than they would have
been had they been calculated using 5.75%.
(3) Date of initial public offering of Value Fund Institutional Class was
November 9, 1992. Pursuant to applicable regulation, total return shown for
the Institutional Class for the periods prior to the commencement of
operations of such Class is calculated by taking the performance of Class A
Shares and adjusting it to reflect the elimination of all sales charges.
However, for those periods, no adjustment has been made to eliminate the
impact of 12b-1 payments, and performance would have been affected had such
an adjustment been made.
(4) Source: Interactive Data Corp.
-23-
<PAGE>
Cumulative Total Return
<TABLE>
<CAPTION>
Value Fund Value Fund
B Class B Class
(Including (Excluding Standard
Deferred Deferred & Poor's Dow Jones NASDAQ
Sales Sales 500 Stock Industrial Composite
Charge) Charge) Index(2) Average(2) Index(2)
<S> <C> <C> <C> <C> <C>
3 months
ended
5/31/96 2.49% 6.49% 5.09% 3.46% 13.03%
6 months
ended
5/31/96 7.55% 11.55% 11.78% 12.49% 17.39%
9 months
ended
5/31/96 13.05% 17.05% 21.19% 24.57% 21.89%
1 year
ended
5/31/96 21.31% 25.31% 28.44% 29.44% 43.82%
Period
9/6/94(1)
through
5/31/96 22.92% 26.92% 47.18% 50.80% 62.41%
</TABLE>
(1) Date of initial public offering of Value Fund B Class.
(2) Source: Interactive Data Corp.
-24-
<PAGE>
Cumulative Total Return
<TABLE>
<CAPTION>
Value Fund Value Fund
C Class C Class Standard
(Including (Excluding & Poor's Dow Jones NASDAQ
Deferred Deferred 500 Stock Industrial Composite
Sales Charge) Sales Charge) Index Average Index
<S> <C> <C> <C> <C> <C>
3 months
ended
5/31/96 5.59% 6.59% 5.09% 5.09% 13.03%
Period
11/29/95(1)
through
5/31/96 11.81% 12.81% 11.78% 12.49% 17.39%
</TABLE>
(1) Date of initial public offering of Value Fund C Class; total return for
this short of a time period may not be representative of longer-term
results.
Total return for the Retirement Income Fund is not provided because
such shares were not offered prior to the date of this Part B.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for each Fund and other mutual funds in the Delaware
Group, will provide general information about investment alternatives and
scenarios that will allow investors to assess their personal goals. This
information will include general material about investing as well as materials
reinforcing various industry-accepted principles of prudent and responsible
financial planning. One typical way of addressing these issues is to compare an
individual's goals and the length of time the individual has to attain these
goals to his or her risk threshold. In addition, the Distributor will provide
information that discusses the Manager's overriding investment philosophy and
how that philosophy impacts the Funds', and other Delaware Group funds',
investment disciplines employed in seeking their objectives. The Distributor may
also from time to time cite general or specific information about the
institutional clients of the Manager, including the number of such clients
serviced by the Manager.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly--as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember.
-25-
<PAGE>
Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. Investors also should consider their financial ability
to continue to purchase shares during periods of low fund share prices. Delaware
Group offers three services -- Automatic Investing Program, Direct Deposit
Program and the Wealth Builder Option -- that can help to keep your regular
investment program on track. See Investing by Electronic Fund Transfer - Direct
Deposit Purchase Plan and Automatic Investing Plan under Investment Plans and
Wealth Builder Option under Investment Plans for a complete description of these
services, including restrictions or limitations.
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.
Number
Investment Price Per of Shares
Amount Share Purchased
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $ 5.00 20
Month 4 $100 $10.00 10
---- ------ --
$400 $37.50 48
==== ====== ==
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to
represent the actual performance of a Fund.
-26-
<PAGE>
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Fund
shares, your investment is given yet another opportunity to grow. It's called
the Power of Compounding and the following chart illustrates just how powerful
it can be.
COMPOUNDED RETURNS
Results at various assumed fixed rates of return on a $10,000
investment compounded quarterly for 10 years:
9% 11% 13%
Rate of Rate of Rate of
Return Return Return
------ ------ ------
1 year $10,931 $11,146 $11,365
2 years $11,948 $12,424 $12,916
3 years $13,060 $13,848 $14,679
4 years $14,276 $15,435 $16,682
5 years $15,605 $17,204 $18,959
6 years $17,057 $19,176 $21,546
7 years $18,645 $21,374 $24,487
8 years $20,381 $23,824 $27,829
9 years $22,278 $26,554 $31,627
10 years $24,352 $29,598 $35,943
These figures are calculated assuming a fixed constant investment
return and assume no fluctuation in the value of principal. These figures, which
do not reflect payment of applicable taxes, are not intended to be a projection
of investment results and do not reflect the actual performance results of any
of the Classes.
-27-
<PAGE>
TRADING PRACTICES AND BROKERAGE
Each Fund selects brokers or dealers to execute transactions for the
purchase or sale of portfolio securities on the basis of its judgment of their
professional capability to provide the service. The primary consideration is to
have brokers or dealers execute transactions at best price and execution. Best
price and execution refers to many factors, including the price paid or received
for a security, the commission charged, the promptness and reliability of
execution, the confidentiality and placement accorded the order and other
factors affecting the overall benefit obtained by the account on the
transaction. A number of trades are made on a net basis where a Fund either buys
the securities directly from the dealer or sells them to the dealer. In these
instances, there is no direct commission charged but there is a spread (the
difference between the buy and sell price) which is the equivalent of a
commission. When a commission is paid, a 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, a Fund pays a minimal share transaction
cost when the transaction presents no difficulty.
During the fiscal years ended November 30, 1993, 1994 and 1995, the
aggregate dollar amounts of brokerage commissions paid by the Value Fund were
$252,502, $89,843 and $384,243, 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, 1995, portfolio transactions
of the Value Fund in the amount of $37,590,393, resulting in brokerage
commissions of $135,992, 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 Funds believe 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
-28-
<PAGE>
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 Funds 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 Value Fund,
Inc.'s Board of Directors that the advantages of combined orders outweigh the
possible disadvantages of separate transactions.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Fund may place orders with broker/dealers that have agreed to
defray certain Fund expenses such as custodian fees, and may, at the request of
the Distributor, give consideration to sales of Fund 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 each
Fund's objective in relation to anticipated movements in the general level of
interest rates. Each Fund is free to dispose of portfolio securities at any
time, subject to complying with the Code and the 1940 Act, when changes in
circumstances or conditions make such a move desirable in light of the
investment objective. A 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 Funds may experience high rates 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.
-29-
<PAGE>
The degree of portfolio activity may affect brokerage costs of a 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 a Fund's portfolio at the beginning of the year were replaced by
the end of the year. Portfolio turnover will also be increased if a 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. In investing for capital appreciation, the Value Fund may hold
securities for any period of time.
During the fiscal years ended November 30, 1994 and 1995, Value Fund's
portfolio turnover rates were 14% and 65%, respectively.
-30-
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for each Fund's four
classes of shares - Class A Shares, Class B Shares, Class C Shares and the
Institutional Class, and has agreed to use its best efforts to sell shares of
each Fund. See the Prospectuses for information on how to invest. Shares of each
Fund are offered on a continuous basis and may be purchased through authorized
investment dealers or directly by contacting Value Fund, Inc. or the
Distributor.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases generally must be at
least $100. The initial and subsequent investment minimums for Class A Shares
will be waived for purchases by officers, directors and employees of any
Delaware Group fund, the Manager or any of the Manager's affiliates if the
purchases are made pursuant to a payroll deduction program. Shares purchased
pursuant to the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act
and shares purchased in connection with an Automatic Investing Plan are subject
to a minimum initial purchase of $250 and a minimum subsequent purchase of $25.
Accounts opened under the Delaware Group Asset Planner service are subject to a
minimum initial investment of $2,000 per Asset Planner Strategy selected. There
are no minimum purchase requirements for the Institutional Classes, but certain
eligibility requirements must be satisfied.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. See Investment Plans for purchase limitations
applicable to retirement plans. Value Fund, Inc. will reject any purchase order
for more than $250,000 of Class B Shares and $1,000,000 or more of Class C
Shares. An investor may exceed these limitations by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of $100,000 or more in Class A
Shares, which are subject to lower annual 12b-1 Plan expenses than Class B
Shares and Class C Shares and generally are not subject to a CDSC.
Selling dealers have the responsibility of transmitting orders
promptly. Value Fund, Inc. reserves the right to reject any order for the
purchase of its shares if in the opinion of management such rejection is in the
Funds' best interest.
The NASD has adopted amendments to its Rules of Fair Practice relating
to investment company sales charges. Value Fund, Inc. and the Distributor intend
to operate in compliance with these rules.
Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 4.75%; however, lower front-end sales charges
apply for larger purchases. See the table below. Class A Shares are also subject
to annual 12b-1 Plan expenses.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase; (iii) 2%
if shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class B Shares are
also subject to annual 12b-1 Plan expenses which are higher than those to which
Class A Shares are subject and are assessed against the Class B Shares for
approximately eight years after purchase. See Automatic Conversion of Class B
Shares under Classes of Shares in the Fund Classes' Prospectuses.
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Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Class C
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment which are equal to those to which Class B Shares are subject.
Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales charge,
or 12b-1 Plan expenses. See Determining Offering Price and Net Asset Value and
Plans Under Rule 12b-1 for the Fund Classes in this Part B.
Class A Shares, Class B Shares, Class C Shares and Institutional Class
shares represent a proportionate interest in a Fund's assets and will receive a
proportionate interest in that Fund's income, before application, as to the
Class A, Class B and Class C Shares, of any expenses under that Fund's 12b-1
Plans.
Certificates representing shares purchased are not ordinarily issued
unless a shareholder submits a specific request. Certificates are not issued in
the case of Class B Shares or Class C Shares. However, purchases not involving
the issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing shares
purchased by sending a letter to the Transfer Agent requesting the certificate.
No charge is assessed by Value Fund, Inc. for any certificate issued. Investors
who hold certificates representing any of their shares may only redeem those
shares by written request. The investor's certificate(s) must accompany such
request.
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A, Class B and Class C
Shares permit investors to choose the method of purchasing shares that is most
suitable for their needs given the amount of their purchase, the length of time
they expect to hold their shares and other relevant circumstances. Investors
should determine whether, given their particular circumstances, it is more
advantageous to purchase Class A Shares and incur a front-end sales charge and
annual 12b-1 Plan expenses of up to a maximum of .30% of the average daily net
assets of Class A Shares (currently, no more than .25% of the average daily net
assets of the Class A Shares of Retirement Income Fund, pursuant to Board
action) or to purchase either Class B or Class C Shares and have the entire
initial purchase amount invested in a Fund with the investment thereafter
subject to a CDSC and annual 12b-1 Plan expenses. Class B Shares are subject to
a CDSC if the shares are redeemed within six years of purchase, and Class C
Shares are subject to a CDSC if the shares are redeemed within 12 months of
purchase. Class B and Class C Shares are each subject to annual 12b-1 Plan
expenses of up to a maximum of 1% (.25% of which are service fees to be paid to
the Distributor, dealers or others for providing personal service and/or
maintaining shareholder accounts) of average daily net assets of the respective
Class. Class B Shares will automatically convert to Class A Shares at the end of
approximately eight years after purchase and, thereafter, be subject to annual
12b-1 Plan expenses of up to a maximum of .30% of average daily net assets of
such shares. Unlike Class B Shares, Class C Shares do not convert to another
class.
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Class A Shares - Value Fund and Retirement Income Fund
Purchases of $100,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the accompanying table, and
may include a series of purchases over a 13-month period under a Letter of
Intention signed by the purchaser. See Special Purchase Features - Class A
Shares, below for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
Value Fund
Retirement Income Fund
Class A Shares
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge as % of Commission***
Amount of Purchase Offering Amount as % of
Price Invested** Offering Price
- -------------------------------------------------------------------------------------------------------------------------------
Retirement Income
Value Fund Fund
<S> <C> <C> <C> <C>
Less than $100,000 4.75% 5.01% 0.00% 4.00%
$100,000 but under $250,000 3.75 3.92 0.00 3.00
$250,000 but under $500,000 2.50 2.55 0.00 2.00
$500,000 but under $1,000,000* 2.00 2.03 0.00 1.60
</TABLE>
* There is no front-end sales charge on purchases of $1 million or more of
Class A Shares but, under certain limited circumstances, a 1% contingent
deferred sales charge may apply upon redemption of such shares. The
contingent deferred sales charge ("Limited CDSC") that may be applicable
arises only in the case of certain shares that were purchased at net asset
value and triggered the payment of a dealer's commission.
** Based on the net asset value per share of Class A Shares as of the end of
Value Fund, Inc.'s most recent fiscal year, which for the Retirement Income
Fund is a date that is prior to the commencement of its operations.
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- --------------------------------------------------------------------------------
A Fund must be notified when a sale takes place which would qualify for
the reduced front-end sales charge on the basis of previous or current
purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by such Fund. Such reduced
front-end sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during
which the Distributor may reallow to dealers up to the full amount of
the front-end sales charge shown above. Dealers who receive 90% or more
of the sales charge may be deemed to be underwriters under the
Securities Act of 1933.
- --------------------------------------------------------------------------------
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Certain dealers who enter into an agreement to provide extra training
and information on Delaware Group products and services and who increase sales
of Delaware Group funds may receive an additional commission of up to .15% of
the offering price in connection with sales of Class A Shares. Such dealers must
meet certain requirements in terms of organization and distribution capabilities
and their ability to increase sales. The Distributor should be contacted for
further information on these requirements as well as the basis and circumstances
upon which the additional commission will be paid. Participating dealers may be
deemed to have additional responsibilities under the securities laws.
Dealer's Commission
For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers through
whom such purchases are effected in accordance with the following schedule:
Dealer's Commission
-------------------
Amount of Purchase (as a percentage of
------------------- amount purchased)
Up to $2 million 1.00%
Next $1 million up to $3 million .75
Next $2 million up to $5 million .50
Amount over $5 million .25
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies (see Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value under Redemption and
Exchange in the Fund Classes' Prospectuses) may be aggregated with those of the
Class A Shares of a Fund. Financial advisers also may be eligible for a dealer's
commission in connection with certain purchases made under a Letter of Intention
or pursuant to an investor's Right of Accumulation. Financial advisers should
contact the Distributor concerning the applicability and calculation of the
dealer's commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B and Class C Shares are purchased without a front-end sales
charge. Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below, and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestment of dividends or capital gains distributions. See Waiver of
Contingent Deferred Sales Charge - Class B and Class C Shares under Redemption
and Exchange in the Prospectuses for the Fund Classes for a list of the
instances in which the CDSC is waived.
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The following table sets forth the rates of the CDSC for Class B Shares
of each Fund:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
------------------------ ------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. At the end of approximately eight years after purchase, the investor's
Class B Shares will be automatically converted into Class A Shares of the same
Fund. See Automatic Conversion of Class B Shares under Classes of Shares in the
Fund Classes' Prospectuses. Such conversion will constitute a tax-free exchange
for federal income tax purposes. See Taxes in the Prospectuses for the Fund
Classes.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Value Fund, Inc. has adopted
a separate plan for each of the Class A Shares, Class B Shares and Class C
Shares of each Fund (the "Plans"). Each Plan permits the relevant Fund to pay
for certain distribution, promotional and related expenses involved in the
marketing of only the Class to which the Plan applies. The Plans do not apply to
the Institutional Classes of shares. Such shares are not included in calculating
the Plans' fees, and the Plans are not used to assist in the distribution and
marketing of shares of the Institutional Classes. Shareholders of the
Institutional Classes may not vote on matters affecting the Plans.
The Plans permit a Fund, pursuant to its Distribution Agreement, to pay
out of the assets of the Class A Shares, Class B Shares and Class C Shares
monthly fees to the Distributor for its services and expenses in distributing
and promoting sales of shares of such classes. These expenses include, among
other things, preparing and distributing advertisements, sales literature and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, and paying distribution and maintenance fees to securities
brokers and dealers who enter into agreements with the Distributor. The Plan
expenses relating to Class B and Class C Shares are also used to pay the
Distributor for advancing the commission costs to dealers with respect to the
initial sale of such shares.
In addition, each Fund may make payments out of the assets of the Class
A, Class B and Class C Shares directly to other unaffiliated parties, such as
banks, who either aid in the distribution of shares of, or provide services to,
such classes.
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<PAGE>
The maximum aggregate fee payable by a Fund under its Plans, and the
Fund's Distribution Agreement, is on an annual basis, .30% of the Class A
Shares' average daily net assets for the year (currently, no more than .25% in
the case of the Retirement Income Fund A Class, pursuant to Board action), and
1% (.25% of which are service fees to be paid to the Distributor, dealers and
others for providing personal service and/or maintaining shareholder accounts)
of each of the Class B Shares' and the Class C Shares' average daily net assets
for the year. Value Fund, Inc.'s Board of Directors may reduce these amounts at
any time.
All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf of Class
A, Class B and Class C Shares would be borne by such persons without any
reimbursement from such classes. Subject to seeking best price and execution, a
Fund may, from time to time, buy or sell portfolio securities from or to firms
which receive payments under its Plans.
From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans and the Distribution Agreement, as amended, have been
approved by the Board of Directors of Value Fund, Inc., including a majority of
the directors who are not "interested persons" (as defined in the 1940 Act) of
Value Fund, Inc. and who have no direct or indirect financial interest in the
Plans, by vote cast in person at a meeting duly called for the purpose of voting
on the Plans and such Agreements. Continuation of the Plans and the Distribution
Agreement, as amended, must be approved annually by the Board of Directors in
the same manner as specified above.
Each year, the directors must determine whether continuation of the
Plans is in the best interest of shareholders of, respectively, Class A Shares,
Class B Shares and Class C Shares and that there is a reasonable likelihood of
the Plan relating to a Fund Class providing a benefit to that Class. The Plans
and the Distribution Agreement, as amended, may be terminated with respect to a
Fund Class at any time without penalty by a majority of those directors who are
not "interested persons" or by a majority vote of the outstanding voting
securities of the relevant Fund Class. Any amendment materially increasing the
percentage payable under the Plans must likewise be approved by a majority vote
of the outstanding voting securities of the relevant Fund Class, as well as by a
majority vote of those directors who are not "interested persons." With respect
to the Class A Shares' Plan, any material increase in the maximum percentage
payable thereunder must also be approved by a majority of the outstanding voting
securities of the Class B Shares. Also, any other material amendment to the
Plans must be approved by a majority vote of the directors including a majority
of the noninterested directors of Value Fund, Inc. having no interest in the
Plans. In addition, in order for the Plans to remain effective, the selection
and nomination of directors who are not "interested persons" of Value Fund, Inc.
must be effected by the directors who themselves are not "interested persons"
and who have no direct or indirect financial interest in the Plans. Persons
authorized to make payments under the Plans must provide written reports at
least quarterly to the Board of Directors for their review.
For the fiscal year ended November 30, 1995, payments from the Value
Fund A Class pursuant to its Plan amounted to $524,840 and such amount was used
for the following purposes: $6,948 - Annual/Semi-Annual Reports; $422,983 -
Broker Trails; $35,278 - Commission to Wholesalers; $1,821 - Dealer Service
Expenses; $12,986 - Promotional-Other; $7,731 - Promotional-Broker Meetings;
$8,030 - Prospectus Printing; $26,880 - Wholesaler Expenses; and $2,183 -
Telephone.
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<PAGE>
For the fiscal year ended November 30, 1995, payments from the Value
Fund B Class pursuant to its Plan amounted to $34,976 and such amount was used
for the following purposes: $11,507 - Broker Sales Charges; $8,646 - Broker
Trails; $1,588 - Commission to Wholesalers; $12,975 - Interest on Broker Sales
Charges; $47 - Telephone; and $213 - Promotional-Broker Meetings. For the period
November 29, 1995 (date of initial public offering) through November 30, 1995,
there were no payments from the Class C Shares pursuant to its Plan.
The staff of the Securities and Exchange Commission ("SEC") has
proposed amendments to Rule 12b-1 and other related regulations that could
impact Rule 12b-1 Distribution Plans. Value Fund, Inc. intends to amend the
Plans, if necessary, to comply with any new rules or regulations the SEC may
adopt with respect to Rule 12b-1.
Other Payments to Dealers - Class A, Class B and Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to .25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
Payments to dealers made in connection with seminars, conferences or
contests relating to the promotion of Fund shares may be in an amount up to 100%
of the expenses incurred or awards made. The Distributor may also pay a portion
of the expense of preapproved dealer advertisements promoting the sale of
Delaware Group fund shares.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares may be purchased without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the Exchange
Privilege and the 12-Month Reinvestment Privilege.
Current and former officers, directors and employees of Value Fund,
Inc., any other fund in the Delaware Group, the Manager, or any of the Manager's
affiliates that may in the future be created, legal counsel to the funds and
registered representatives and employees of broker/dealers who have entered into
Dealer's Agreements with the Distributor may purchase Class A Shares and any
such class of shares of any of the funds in the Delaware Group, including any
fund that may be created, at the net asset value per share. Family members of
such persons at their direction, and any employee benefit plan established by
any of the foregoing funds, corporations, counsel or broker/dealers may also
purchase shares at net asset value. Purchases of Class A Shares may also be made
by clients of registered representatives of an authorized investment dealer at
net asset value within 12 months of a change of the registered representative's
employment, if the purchase is funded by proceeds from an investment where a
front-end sales charge, contingent deferred sales charge or other sales charge
has been assessed. Purchases of Class A Shares may also be made at net asset
value by bank employees who provide services in connection with agreements
between the bank and unaffiliated brokers or dealers concerning sales of shares
of Delaware Group funds. Officers, directors and key employees of institutional
clients of the Manager or any of its affiliates may purchase Class A Shares at
net asset value.
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<PAGE>
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 Value Fund, Inc. may reasonably require
to establish eligibility for purchase at net asset value.
Investors who held shares in any class of any Delaware Group fund as of
December 1, 1995 may purchase Class A Shares at net asset value through the
Delaware Group Asset Planner service if such shares are being purchased with
proceeds from the redemption of shares of a fund (other than a money market
fund) outside of the Delaware Group of funds. The Delaware Group Asset Planner
Account Registration Form and check for such a transaction should note that the
investment is being made under the "NAV/Asset Planner Accommodation Program."
Class A Shares may also be purchased at net asset value in an IRA through the
Delaware Group Asset Planner service if the assets being invested are being
transferred from an existing IRA held outside of the Delaware Group or are part
of a distribution received from an employer-sponsored or other retirement plan.
See Delaware Group Asset Planner under How To Buy Shares in the Prospectuses for
the Fund Classes.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Delaware
Group account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset value.
The Funds must be notified in advance that the trade qualifies for
purchase at net asset value.
Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made by
any such purchaser previously enumerated within a 13-month period pursuant to a
written Letter of Intention provided by the Distributor and signed by the
purchaser, and not legally binding on the signer or Value Fund, Inc., 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 a Fund and of any class of any of the other mutual funds in the
Delaware Group (except shares of any Delaware Group fund which do not carry a
front-end sales charge, CDSC or Limited CDSC, other than shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange from
a Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC) previously purchased and still held as of the date of their
Letter of Intention toward the completion of such Letter. For purposes of
satisfying an investor's obligation under a Letter of Intention, Class B Shares
and Class C Shares of a Fund and the corresponding classes of shares of other
Delaware Group funds which offer such shares may be
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aggregated with Class A Shares of the Fund and the corresponding class of shares
of the other Delaware Group funds.
Employers offering a Delaware Group retirement plan may also complete a
Letter of Intention to obtain a reduced front-end sales charge on investments of
Class A Shares made by the plan. The aggregate investment level of the Letter of
Intention will be determined and accepted by the Transfer Agent at the point of
plan establishment. The level and any reduction in front-end sales charge will
be based on actual plan participation and the projected investments in Delaware
Group funds that are offered with a front-end sales charge, CDSC or Limited CDSC
for a 13-month period. The Transfer Agent reserves the right to adjust the
signed Letter of Intention based on this acceptance criteria. The 13-month
period will begin on the date this Letter of Intention is accepted by the
Transfer Agent. If actual investments exceed the anticipated level and equal an
amount that would qualify the plan for further discounts, any front-end sales
charges will be automatically adjusted. In the event this Letter of Intention is
not fulfilled within the 13-month period, the plan level will be adjusted
(without completing another Letter of Intention) and the employer will be billed
for the difference in front-end sales charges due, based on the plan's assets
under management at that time. Employers may also include the value (at offering
price at the level designated in their Letter of Intention) of all their shares
intended for purchase that are offered with a front-end sales charge, CDSC or
Limited CDSC of any class. Class B Shares and Class C Shares of a Fund and other
Delaware Group funds which offer corresponding classes of shares may also be
aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of Class B Shares and/or Class C Shares of the
Funds, as well as shares of any other class of any of the other Delaware Group
funds (except shares of any Delaware Group fund which do not carry a front-end
sales charge, CDSC or Limited CDSC, other than shares of Delaware Group Premium
Fund, Inc. beneficially owned in connection with the ownership of variable
insurance products, unless they were acquired through an exchange from a
Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC).
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of a Fund as well
as shares of any other class of any of the other Delaware Group funds which
offer such classes (except shares of any Delaware Group fund which do not carry
a front-end sales charge, CDSC or Limited CDSC, other than shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange from
a Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC). If, for example, any such purchaser has previously purchased and still
holds Class A Shares and/or shares of any other of the classes described in the
previous sentence with a value of $40,000 and subsequently purchases $60,000 at
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offering price of additional shares of Class A Shares, the charge applicable to
the $60,000 purchase would currently be 3.75%. For the purpose of this
calculation, the shares presently held shall be valued at the public offering
price that would have been in effect were the shares purchased simultaneously
with the current purchase. Investors should refer to the table of sales charges
for Class A Shares to determine the applicability of the Right of Accumulation
to their particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares (and of the Institutional Classes holding
shares which were acquired through an exchange from one of the other mutual
funds in the Delaware Group offered with a front-end sales charge) who redeem
such shares of a Fund have one year from the date of redemption to reinvest all
or part of their redemption proceeds in Class A Shares of that Fund or in Class
A Shares of any of the other funds in the Delaware Group, subject to applicable
eligibility and minimum purchase requirements, in states where shares of such
other funds may be sold, at net asset value without the payment of a front-end
sales charge. This privilege does not extend to Class A Shares where the
redemption of the shares triggered the payment of a Limited CDSC. Persons
investing redemption proceeds from direct investments in mutual funds in the
Delaware Group offered without a front-end sales charge will be required to pay
the applicable sales charge when purchasing Class A Shares. The reinvestment
privilege does not extend to a redemption of either Class B or Class C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is intended to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
Investors should consult their financial advisers or the Transfer
Agent, which also serves as the Funds' shareholder servicing agent, about the
applicability of the Limited CDSC (see Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Fund Classes' Prospectuses) in connection with
the features described above.
Group Investment Plans
Group Investment Plans which are not eligible to purchase shares of the
Institutional Classes may also benefit from the reduced front-end sales charges
for investments in Class A Shares set forth in the table on page 00, based on
total plan assets. If a company has more than one plan investing in the Delaware
Group of funds, then the total amount invested in all plans would be used in
determining the applicable front-end sales charge reduction upon each purchase,
both initial and subsequent, upon notification to the Fund in which the
investment is being made at the time of each such purchase. Employees
participating in such Group Investment Plans may also combine the investments
made in their plan account when determining the applicable front-end sales
charge on purchases to non-retirement Delaware Group investment accounts if they
so notify the Fund in connection with each purchase. For other retirement plans
and special services, see Retirement Plans for the Fund Classes under Investment
Plans.
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The Institutional Classes
The Institutional Class of each Fund 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 accounts 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 Classes are available for purchase at net
asset value, without the imposition of a front-end or contingent deferred sales
charge and are not subject to Rule 12b-1 expenses.
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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
Classes are reinvested in the accounts of the holders of such shares (based on
the net asset value in effect on the reinvestment date). A confirmation of each
dividend payment from net investment income and of distributions from realized
securities profits, if any, will be mailed to shareholders in the first quarter
of the fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to specific Fund
and Class in which shares are being purchased. Such purchases, which must meet
the minimum subsequent purchase requirements set forth in the Prospectuses and
this Part B, are made for Class A Shares at the public offering price and, for
Class B Shares, Class C Shares and the Institutional Classes at the net asset
value, at the end of the day of receipt. A reinvestment plan may be terminated
at any time. This plan does not assure a profit nor protect against depreciation
in a declining market.
Reinvestment of Dividends in Other Delaware Group Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A, Class B
and Class C Shares may automatically reinvest dividends and/or distributions in
any of the mutual funds in the Delaware Group, including the Funds, in states
where their shares may be sold. Such investments will be at net asset value at
the close of business on the reinvestment date without any front-end sales
charge or service fee. The shareholder must notify the Transfer Agent in writing
and must have established an account in the fund into which the dividends and/or
distributions are to be invested. Any reinvestment directed to a fund in which
the investor does not then have an account will be treated like all other
initial purchases of a fund's shares. Consequently, an investor should obtain
and read carefully the prospectus for the fund in which the investment is
intended to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses. See
also Additional Methods of Adding to Your Investment - Dividend Reinvestment
Plan under How to Buy Shares in the Prospectuses for the Fund Classes.
Subject to the following limitations, dividends and/or distributions
from other funds in the Delaware Group may be invested in shares of the Funds,
provided an account has been established. Dividends from Class A Shares may not
be directed to Class B Shares or Class C Shares. Dividends from Class B Shares
may only be directed to other Class B Shares and dividends from Class C Shares
may only be directed to other Class C Shares. See Appendix B in the Fund
Classes' Prospectuses for the funds in the Delaware Group that are eligible for
investment by holders of Fund shares.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
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Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for a Fund to
accept for investment in Class A, Class B or Class C Shares, through an agent
bank, preauthorized government or private recurring payments. This method of
investment assures the timely credit to the shareholder's account of payments
such as social security, veterans' pension or compensation benefits, federal
salaries, Railroad Retirement benefits, private payroll checks, dividends, and
disability or pension fund benefits. It also eliminates lost, stolen and delayed
checks.
Automatic Investing Plan--Shareholders of Class A, Class B and Class C
Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into their Fund
account. This type of investment will be handled in either of the following
ways. (1) If the shareholder's bank is a member of the National Automated
Clearing House Association ("NACHA"), the amount of the investment will be
electronically deducted from his or her account by Electronic Fund Transfer
("EFT"). The shareholder's checking account will reflect a debit each month at a
specified date although no check is required to initiate the transaction. (2) If
the shareholder's bank is not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such Plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to a 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,
a 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. A 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 Value Fund, Inc. for proper
instructions.
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Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Group. Shareholders of the Fund Classes may elect to
invest in one or more of the other mutual funds in the Delaware Group through
the Wealth Builder Option. See Wealth Builder Option and Redemption and Exchange
in the Prospectuses for the Fund Classes.
Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual funds in the Delaware
Group, subject to the conditions and limitations set forth in the Fund Classes'
Prospectuses. The investment will be made on the 20th day of each month (or, if
the fund selected is not open that day, the next business day) at the public
offering price or net asset value, as applicable, of the fund selected on the
date of investment. No investment will be made for any month if the value of the
shareholder's account is less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges. Shareholders can terminate their participation at any time by written
notice to their 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 Classes.
Retirement Plans for the Fund Classes
An investment in either Fund may be suitable for tax-deferred
retirement plans. Among the retirement plans noted below, Class B Shares are
available for investment only by Individual Retirement Accounts, Simplified
Employee Pension Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred
Compensation Plans. The CDSC may be waived on certain redemptions of Class B
Shares and Class C Shares. See Waiver of Contingent Deferred Sales Charge -
Class B and Class C Shares under Redemption and Exchange in the Prospectuses for
the Fund Classes for a list of the instances in which the CDSC is waived.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000 for retirement plans. Each purchase of Class C Shares
must be in an amount that is less than $1,000,000 for such plans. The maximum
purchase limitations apply only to the initial purchase of shares by the
retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans other than Individual Retirement Accounts, for
which there is a minimum initial purchase of $250 and a minimum subsequent
purchase of $25 regardless of which Class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based
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upon the number of participants in the plan as well as the services selected.
Additional information about fees is included in retirement plan materials. Fees
are quoted upon request. Annual maintenance fees may be shared by Delaware
Management Trust Company, the Transfer Agent, other affiliates of the Manager
and others that provide services to such Plans.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Class. See
The Institutional Classes, above. For additional information on any of the plans
and Delaware's retirement services, call the Shareholder Service Center
telephone number.
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the Plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships and corporations which replace the former Keogh and corporate
retirement plans. These plans contain profit sharing or money purchase pension
plan provisions. Contributions may be invested only in Class A and Class C
Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
by making contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year or elects to be treated
as having no compensation for the year. Investments in each of the Fund Classes
are permissible.
The Tax Reform Act of 1986 (the "Act") restructured, and in some cases
eliminated, the tax deductibility of IRA contributions. Under the Act, the full
deduction for IRAs ($2,000 for each working spouse and $2,250 for one-income
couples) was retained for all taxpayers who are not covered by an
employer-sponsored retirement plan. Even if a taxpayer (or his or her spouse) is
covered by an employer-sponsored retirement plan, the full deduction is still
available if the taxpayer's adjusted gross income is below $25,000 ($40,000 for
taxpayers filing joint returns). A partial deduction is allowed for married
couples with incomes between $40,000 and $50,000, and for single individuals
with incomes between $25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross income before IRA
deductions exceeds $50,000 ($35,000 for singles) and who are active participants
in an employer-sponsored retirement plan. Taxpayers who are not allowed
deductions on IRA contributions still can make nondeductible IRA contributions
of as much as $2,000 for each working spouse ($2,250 for one-income couples),
and defer taxes on interest or other earnings from the IRAs. Special rules apply
for determining the deductibility of contributions made by married individuals
filing separate returns.
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<PAGE>
A company or association may establish a Group IRA for employees or
members who want to purchase shares of a Fund. Purchases of $1 million or more
of Class A Shares qualify for purchase at net asset value but may, under certain
circumstances, be subject to a Limited CDSC. See Purchasing Shares for
information on reduced front-end sales charges applicable to Class A Shares.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. See Alternative Purchase Arrangements - Class B Shares and Class C
Shares under Classes of Shares, Contingent Deferred Sales Charge - Class B
Shares and Class C Shares under Classes of Shares, and Waiver of Contingent
Deferred Sales Charge - Class B and Class C Shares under Redemption and Exchange
in the Fund Classes' Prospectuses concerning the applicability of a CDSC upon
redemption.
See Appendix A for additional IRA information.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Fund Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Employers with 25 or fewer eligible employees can establish this plan
which permits employer contributions and salary deferral contributions in Class
A Shares and Class C Shares only.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Plan documents are available to
enable employers to establish a plan. An employer may also elect to make profit
sharing contributions and/or matching contributions with investments in only
Class A Shares and Class C Shares or certain other funds in the Delaware Group.
Purchases under the plan may be combined for purposes of computing the reduced
front-end sales charge applicable to Class A Shares as set forth in the table on
page 00.
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase any of
the Fund Classes in conjunction with such an arrangement. Applicable front-end
sales charges with respect to Class A Shares for such purchases are set forth in
the table on page 00.
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<PAGE>
Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of any of the Fund Classes. Although investors
may use their own plan, there is available a Delaware Group 457 Deferred
Compensation Plan. Interested investors should contact the Distributor or their
investment dealers to obtain further information. Applicable front-end sales
charges for such purchases of Class A Shares are set forth in the table on page
00.
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DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering
price next calculated by the Fund in which shares are being purchased after
receipt of the order by the Fund or its agent. Orders for purchases of Class B
Shares, Class C Shares and the Institutional Classes are effected at the net
asset value per share next calculated after receipt of the order by the Fund in
which shares are being purchased or its agent. Selling dealers have the
responsibility of transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable sales charges. Offering price and net asset value
are computed as of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is open. The New
York Stock Exchange is scheduled to be open Monday through Friday throughout the
year except for New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. When the New York Stock
Exchange is closed, the Funds will generally be closed, pricing calculations
will not be made and purchase and redemption orders will not be processed.
An example showing how to calculate the net asset value per share and,
in the case of Class A Shares, the offering price per share, is included in
Value Fund's financial statements which are incorporated by reference into this
Part B.
Each 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 a Fund's total net assets, portfolio
securities primarily listed or traded on a national or foreign securities
exchange, except for bonds, are valued at the last sales price on that exchange.
Options are valued at the last reported sales price or, if no sales are
reported, at the mean between bid and asked prices. For valuation purposes,
foreign securities initially expressed in foreign currency values will be
converted into U.S. dollar values at the mean between the bid and offered
quotations of such currencies against U.S. dollars as last quoted by any
recognized dealer. Securities not traded on a particular day, over-the-counter
securities, and government and agency securities are valued at the mean value
between bid and asked prices. Money market instruments having a maturity of less
than 60 days are valued at amortized cost. Debt securities (other than
short-term obligations) are valued on the basis of valuations provided by a
pricing service when such prices are believed to reflect the fair value of such
securities. Use of a pricing service has been approved by the Board of
Directors. Prices provided by a pricing service take into account appropriate
factors such as institutional trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics and other
market data. Subject to the foregoing, securities for which market quotations
are not readily available and other assets are valued at fair value as
determined in good faith and in a method approved by the Board of Directors.
Each Class of a Fund will bear, pro-rata, all of the common expenses of
that Fund. The net asset values of all outstanding shares of each Class of a
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 a 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 Classes will not incur any of the expenses under
Value Fund Inc.'s 12b-1 Plans and the Class A, Class B and Class C Shares alone
will bear the 12b-1 Plan expenses payable under their respective Plans. Due to
the specific distribution expenses and other costs that will be allocable to
each Class, the net asset value of each Class of a Fund will vary.
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REDEMPTION AND REPURCHASE
Any shareholder may require a Fund to redeem shares by sending a
written request, signed by the record owner or owners exactly as the shares are
registered, to the Fund at 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. Certificates are issued for Class
A Shares and Institutional Class shares only if a shareholder specifically
requests them. Certificates are not issued for Class B Shares or Class C Shares.
If stock certificates have been issued for shares being redeemed, they must
accompany the written request. For redemptions of $50,000 or less paid to the
shareholder at the address of record, the request must be signed by all owners
of the shares or the investment dealer of record, but a signature guarantee is
not required. When the redemption is for more than $50,000, or if payment is
made to someone else or to another address, signatures of all record owners are
required and a signature guarantee may be required. Each signature guarantee
must be supplied by an eligible guarantor institution. Each Fund reserves the
right to reject a signature guarantee supplied by an eligible institution based
on its creditworthiness. The Funds may request further documentation from
corporations, retirement plans, executors, administrators, trustees or
guardians.
In addition to redemption of shares by a Fund, the Distributor, acting
as agent of the Funds, 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 respective
Fund or its agent, less any applicable CDSC or Limited CDSC. This is computed
and effective at the time the offering price and net asset value are determined.
See Determining Offering Price and Net Asset Value. The Funds and the
Distributor end their business days at 5 p.m., Eastern time. This offer is
discretionary and may be completely withdrawn without further notice by the
Distributor.
Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to the applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Prospectuses for the Fund Classes. Class B Shares
are subject to a CDSC of: (i) 4% if shares are redeemed within two years of
purchase; (ii) 3% if shares are redeemed during the third or fourth year
following purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; and (iv) 1% if shares are redeemed during the sixth year
following purchase. Class C Shares are subject to a CDSC of 1% if shares are
redeemed within 12 months following purchase. See Contingent Deferred Sales
Charge - Class B Shares and Class C Shares under Classes of Shares in the
Prospectuses for the Fund Classes. Except for the applicable CDSC or Limited
CDSC, and with respect to the expedited payment by wire described below for
which there is currently a $7.50 bank wiring cost, neither the Funds nor the
Distributor charges a fee for redemptions or repurchases, but such fees could be
charged at any time in the future.
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Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order; provided, however, that each commitment to mail or wire
redemption proceeds by a certain time, as described below, is modified by the
qualifications described in the next paragraph.
Each Fund will process written or telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. A Fund will honor redemption requests as to shares for which a check
was tendered as payment, but a Fund will not mail or wire the proceeds until it
is reasonably satisfied that the check has cleared. This potential delay can be
avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund involved 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 a 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 a Fund of securities owned by it is not reasonably practical,
or it is not reasonably practical for a 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, a Fund may postpone payment or
suspend the right of redemption or repurchase. In such case, the shareholder may
withdraw the request for redemption or leave it standing as a request for
redemption at the net asset value next determined after the suspension has been
terminated.
Payment for shares redeemed or repurchased may be made in either cash
or kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, Value Fund,
Inc. has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which each Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of each Fund during any 90-day period for
any one shareholder.
The value of a Fund's investments is subject to changing market prices.
Thus, a shareholder reselling shares to a Fund may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
Small Accounts
Before a Fund involuntarily redeems shares from an account that, under
the circumstances noted in the relevant Prospectus, has remained below the
minimum amounts required by Value Fund, Inc.'s Prospectuses and sends the
proceeds to the shareholder, the shareholder will be notified in writing that
the value of the shares in the account is less than the minimum required and
will be allowed 60 days from the date of notice to make an additional investment
to meet the required minimum. See The Conditions of Your Purchase under How to
Buy Shares in the Prospectuses. Any redemption in an inactive account
established with a minimum investment may trigger mandatory redemption. No CDSC
or Limited CDSC will apply to the redemptions described in this paragraph.
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Effective November 29, 1995, the minimum initial investment in Value
Fund A Class was increased from $250 to $1,000. Accounts of Value Fund A Class
that were established prior to November 29, 1995 and maintain a balance in
excess of $250 will not presently be subject to the $9 quarterly service fee
that may be assessed against accounts with balances below the stated minimum nor
subject to involuntary redemption.
* * *
Each Fund has made available certain redemption privileges, as
described below. The Funds reserves the right to suspend or terminate these
expedited payment procedures upon 60 days' written notice to shareholders.
Expedited Telephone Redemptions
Shareholders of the Fund Classes or their investment dealers of record
wishing to redeem any amount of shares of $50,000 or less for which certificates
have not been issued may call the Shareholder Service Center at 800-523-1918 or,
in the case of shareholders of the Institutional Classes, their Client Services
Representative at 800-828-5052 prior to the time the offering price and net
asset value are determined, as noted above, and have the proceeds mailed to them
at the record address. Checks payable to the shareholder(s) of record will
normally be mailed the next business day, but no later than seven days, after
the receipt of the redemption request. This option is only available to
individual, joint and individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can be transferred
to your predesignated bank account by wire or by check by calling the phone
numbers listed above. An authorization form must have been completed by the
shareholder and filed with the relevant Fund before the request is received.
Payment will be made by wire or check to the bank account designated on the
authorization form as follows:
1. Payment by Wire: Request that Federal Funds be wired to the bank
account designated on the authorization form. Redemption proceeds will normally
be wired on the next business day following receipt of the redemption request.
There is a $7.50 wiring fee (subject to change) charged by CoreStates Bank, N.A.
which will be deducted from the withdrawal proceeds each time the shareholder
requests a redemption. If the proceeds are wired to the shareholder's account at
a bank which is not a member of the Federal Reserve System, there could be a
delay in the crediting of the funds to the shareholder's bank account.
2. Payment by Check: Request a check be mailed to the bank account
designated on the authorization form. Redemption proceeds will normally be
mailed the next business day, but no later than seven days, from the date of the
telephone request. This procedure will take longer than the Payment by Wire
option (1 above) because of the extra time necessary for the mailing and
clearing of the check after the bank receives it.
Redemption Requirements: In order to change the name of the bank and
the account number it will be necessary to send a written request to the
relevant Fund and a signature guarantee may be required. Each signature
guarantee must be supplied by an eligible guarantor institution. The Funds
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.
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<PAGE>
If expedited payment under these procedures could adversely affect a
Fund, the Fund may take up to seven days to pay the shareholder.
Neither the Funds nor the Funds' 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, each 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, such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by
shareholders of the Fund Classes are generally tape recorded. A written
confirmation will be provided for all purchase, exchange and redemption
transactions initiated by telephone.
Systematic Withdrawal Plans
Shareholders of Class A, Class B and Class C Shares who own or purchase
$5,000 or more of shares at the offering price, or net asset value, as
applicable, for which certificates have not been issued may establish a
Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or quarterly
withdrawals of $75 or more, although the Funds do not recommend any specific
amount of withdrawal. This $5,000 minimum does not apply for a Fund's prototype
retirement plans. Shares purchased with the initial investment and through
reinvestment of cash dividends and realized securities profits distributions
will be credited to the shareholder's account and sufficient full and fractional
shares will be redeemed at the net asset value calculated on the third business
day preceding the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend) and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the Fund Class at net asset value. This plan is not
recommended for all investors and should be started only after careful
consideration of its operation and effect upon the investor's savings and
investment program. To the extent that withdrawal payments from the plan exceed
any dividends and/or realized securities profits distributions paid on shares
held under the plan, the withdrawal payments will represent a return of capital,
and the share balance may in time be depleted, particularly in a declining
market.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares through a periodic investment program in a fund managed by the Manager
must be terminated before a Systematic Withdrawal Plan with respect to such
shares can take effect, except if the shareholder is a participant in one of our
retirement plans or is investing in Delaware Group funds which do not carry a
sales charge. Redemptions of Class A Shares pursuant to a Systematic Withdrawal
Plan may be subject to a Limited CDSC if the purchase was made at net asset
value and a dealer's commission has been paid on that purchase. Redemptions of
Class B Shares or Class C Shares pursuant to a Systematic Withdrawal Plan may be
subject to a CDSC, unless the annual amount selected to be withdrawn is less
than 12% of the account balance on the date that the Systematic Withdrawal Plan
was
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<PAGE>
established. See Waiver of Contingent Deferred Sales Charge - Class B and Class
C Shares and Waiver of Limited CDSC - Class A Shares under Redemption and
Exchange in the Prospectuses for the Fund Classes. Shareholders should consult
their financial advisers to determine whether a Systematic Withdrawal Plan would
be suitable for them.
An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The Funds reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
The Systematic Withdrawal Plan is not available for the Institutional
Classes.
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<PAGE>
DISTRIBUTIONS AND TAXES
Value Fund has qualified, and intends to continue to qualify, and
Retirement Income Fund intends to qualify as a regulated investment company
under Subchapter M of the Code. As such, a 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 a Fund will share proportionately in the
investment income and expenses of that Fund, except that Class A Shares, Class B
Shares and Class C Shares alone will incur distribution fees under their
respective 12b-1 Plans.
Value Fund intends to pay out substantially all of its net investment
income and net realized capital gains. Retirement Income Fund expects to declare
and pay dividends from net investment income monthly to shareholders of each
Class of the Fund's shares. However, the Fund does not anticipate declaring or
paying dividends during the first few months following the commencement of its
operations. 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 United States Post Office or which remains uncashed for a
period of more than one year may be reinvested in the shareholder's account at
the then-current net asset value and the dividend option may be changed from
cash to reinvest. A Fund may deduct from a shareholder's account the costs of
the Fund's effort to locate a shareholder if a shareholder's mail is returned by
the United States Post Office or the Fund is otherwise unable to locate the
shareholder or verify the shareholder's mailing address. These costs may include
a percentage of the account when a search company charges a percentage fee in
exchange for their location services.
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. Persons not subject to tax will not be required to pay taxes
on distributions.
A portion of each 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 each Fund that so qualifies will be
designated each year in a notice to that Fund's shareholders, and cannot exceed
the gross amount of dividends received by the Fund from domestic (U.S.)
corporations that would have qualified for the dividends-received deduction in
the hands of the Fund if the Fund was a regular corporation. The availability of
the dividends-received deduction is subject to certain holding period and debt
financing restrictions imposed under the Code on the corporation claiming the
deduction. For the fiscal year ended November 30, 1995, 42.37% of Value Fund's
dividends from net investment income was eligible for this deduction.
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<PAGE>
Shareholders will be notified annually by Value Fund, Inc. 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 each Fund will be exempt from Pennsylvania county personal property
taxes.
See also Other Tax Requirements under Accounting and Tax Issues in this
Part B.
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<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to each Fund, subject to the
supervision and direction of Value Fund, Inc.'s Board of Directors.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On July 31, 1996, the Manager and its affiliates
within the Delaware Group, including Delaware International Advisers Ltd., were
supervising in the aggregate more than $28 billion in assets in the various
institutional or separately managed (approximately $17,646,238,000) and
investment company (approximately $10,764,119,000) accounts.
The Investment Management Agreement for Value Fund is dated April 3,
1995, and was approved by shareholders on March 29, 1995. The Investment
Management Agreement for Retirement Income Fund is dated November 29, 1996, and
was approved by the initial shareholder on November 29, 1996. Each Agreement has
an initial term of two years and may be renewed each year only so long as such
renewal and continuance are specifically approved at least annually by the Board
of Directors or by vote of a majority of the outstanding voting securities of a
Fund, and only if the terms and the renewal thereof have been approved by vote
of a majority of the directors of Value Fund, Inc. who are not parties thereto
or interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. Each Agreement is terminable without
penalty on 60 days' notice by the directors of Value Fund, Inc. or by the
Manager. Each Agreement will terminate automatically in the event of its
assignment.
The compensation paid by Value 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, 1995, the total net assets of the Fund
were $27,773,461,000. 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 Value Fund, Inc. Investment management fees
paid by Value Fund for the fiscal years ended November 30, 1993, 1994 and 1995
amounted to $724,137, $1,341,214, and $1,371,155, respectively.
The annual compensation paid by the Retirement Income Fund for
investment management services is equal to 0.75% on the first $500 million of
the Fund's average daily net assets, 0.725% of the next $500 million and 0.70%
of the average daily net assets in excess of $1 billion. The Manager pays the
salaries of all directors, officers and employees who are affiliated with both
the Manager and Value Fund, Inc.
The Manager has elected voluntarily to waive that portion, if any, of
the annual management fees payable by the Retirement Income Fund and to pay
certain expenses of the Fund to the extent necessary to ensure that the total
operating expenses of each Class do not exceed 1.25% (exclusive of taxes,
interest, brokerage commissions, extraordinary expenses and 12b-1 expenses)
during the commencement of the public offering of the Fund through ______.
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<PAGE>
Except for those expenses borne by the Manager under the Investment
Management Agreements and the Distributor under the Distribution Agreements,
each 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 ratios of expenses to average daily net assets of Value Fund A
Class and Value Fund B Class for the fiscal year ended November 30, 1995 were
1.48% and 2.18%, respectively, which reflects the impact of their 12b-1 Plans.
The ratio of expenses to average daily net assets for the Value Fund
Institutional Class for the fiscal year ended November 30, 1995 was 1.18%. Value
Fund anticipates that the ratio of expenses to average daily net assets of the
Class C Shares will be approximately equal to that of the Class B Shares.
By California regulation, the Manager is required to waive certain fees
and reimburse the Fund for certain expenses to the extent that the Fund's annual
operating expenses, exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, exceed 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,
1995, no such reimbursement was necessary or paid for Value Fund.
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 each Fund's shares
under a Distribution Agreement dated April 3, 1995, as amended on November 29,
1995 for Value Fund and under a Distribution Agreement dated November 29, 1996
for Retirement Income Fund. The Distributor is an affiliate of the Manager and
bears all of the costs of promotion and distribution, except for payments by
each Fund on behalf of Class A Shares, Class B Shares and Class C Shares under
their respective 12b-1 Plans. Prior to January 3, 1995, Delaware Distributors,
Inc. ("DDI") served as the national distributor of Value 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 Funds' shareholder servicing, dividend disbursing and transfer agent
pursuant to an agreement dated November 29, 1996. The Transfer Agent also
provides accounting services to the Funds pursuant to the terms of a separate
agreement dated November 29, 1996. The Transfer Agent is also an indirect,
wholly owned subsidiary of Delaware Management Holdings, Inc.
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<PAGE>
OFFICERS AND DIRECTORS
The business and affairs of Value Fund, Inc. are managed under the
direction of its Board of Directors.
Certain officers and directors of Value Fund, Inc. hold identical
positions in each of the other funds in the Delaware Group. On October 31, 1996,
Value Fund Inc.'s officers and directors owned less than 1% of the outstanding
shares of the Class A Shares, Class B Shares, Class C Shares and the
Institutional Class of Value Fund, respectively.
As of October 31, 1996, management believes the following accounts held
5% or more of the outstanding shares of the Class A Shares, Class B Shares,
Class C Shares and the Institutional Class of Value Fund:
DMH Corp., Delaware Management Company, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware International Holdings Ltd., Founders
Holdings, Inc., Delaware International Advisers Ltd., Delaware Capital
Management, Inc. and Delaware Investment & Retirement Services, Inc. are direct
or indirect, wholly owned subsidiaries of Delaware Management Holdings, Inc.
("DMH"). On April 3, 1995, a merger between DMH and a wholly owned subsidiary of
Lincoln National Corporation ("Lincoln National") was completed. In connection
with the merger, a new Investment Management Agreement between Value Fund, Inc.
and the Manager on behalf of Value Fund was executed following shareholder
approval. DMH and the Manager are now indirect, wholly owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management.
Directors and principal officers of Value Fund, Inc. are noted below
along with their ages and their business experience for the past five years.
Unless otherwise noted, the address of each officer and director is One Commerce
Square, Philadelphia, PA 19103.
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<PAGE>
*Wayne A. Stork (59)
Chairman, President, Chief Executive Officer, Director and/or Trustee
of Value Fund, Inc., 16 other investment companies in the
Delaware Group (which excludes Delaware Pooled Trust, Inc.),
Delaware Management Holdings, Inc., DMH Corp., Delaware
International Holdings Ltd. and Founders Holdings, Inc.
Chairman and Director of Delaware Pooled Trust, Inc., Delaware
Distributors, Inc., Delaware Capital Management, Inc. and
Delaware Investment & Retirement Services, Inc.
Chairman, President, Chief Executive Officer, Chief Investment Officer
and Director of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware
International Advisers Ltd.
Director of Delaware Service Company, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware
organization.
Winthrop S. Jessup (51)
Executive Vice President of Value Fund, Inc., 16 other investment
companies in the Delaware Group (which excludes Delaware
Pooled Trust, Inc.) and Delaware Management Holdings, Inc.
President and Chief Executive Officer of Delaware Pooled Trust, Inc.
President and Director of Delaware Capital Management, Inc.
Executive Vice President and Director of DMH Corp., Delaware Managemen
Company, Inc., Delaware International Holdings Ltd. and
Founders Holdings, Inc.
Vice Chairman and Director of Delaware Distributors, Inc.
Vice Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc., Delaware International
Advisers Ltd., Delaware Management Trust Company and Delaware
Investment & Retirement Services, Inc.
During the past five years, Mr. Jessup has served in various
executive capacities at different times within the Delaware
organization.
Richard G. Unruh, Jr. (57)
Executive Vice President of Value Fund, Inc. and each of the other 17
investment companies in the Delaware Group.
Executive Vice President and Director of Delaware Management Company,
Inc. Senior Vice President of Delaware Management Holdings,
Inc. Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware
organization.
- ----------
*Director affiliated with Value Fund, Inc.s' investment manager and considered
an "interested person" as defined in the 1940 Act.
-59-
<PAGE>
Paul E. Suckow (49)
Executive Vice President/Chief Investment Officer, Fixed Income of
Value Fund, Inc., each of the other 17 investment companies
in the Delaware Group and Delaware Management Company, Inc.
Executive Vice President and Director of Founders Holdings, Inc.
Senior Vice President/Chief Investment Officer, Fixed Income of
Delaware Management Holdings, Inc.
Director of Founders CBO Corporation.
Before returning to the Delaware Group in 1993, Mr. Suckow was
Executive Vice President and Director of Fixed Income for
Oppenheimer Management Corporation, New York, NY from 1985 to
1992. Prior to that, Mr. Suckow was a fixed-income portfolio
manager for the Delaware Group.
Walter P. Babich (69)
Director and/or Trustee of Value Fund, Inc. and each of the other 17
investment companies in the Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton
and from 1988 to 1991, he was a partner of I&L Investors.
Anthony D. Knerr (57)
Director and/or Trustee of Value Fund, Inc. and each of the other 17
investment companies in the Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Founder and Managing Director, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance
and Treasurer of Columbia University, New York. From 1987 to
1989, he was also a lecturer in English at the University. In
addition, Mr. Knerr was Chairman of The Publishing Group,
Inc., New York, from 1988 to 1990. Mr. Knerr founded The
Publishing Group, Inc. in 1988.
Ann R. Leven (56)
Director and/or Trustee of Value Fund, Inc. and each of the other 17
investment companies in the Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal
Officer of the Smithsonian Institution, Washington, DC, and
from 1975 to 1992, she was Adjunct Professor of Columbia
Business School.
W. Thacher Longstreth (76)
Director and/or Trustee of Value Fund, Inc. and each of the other 17
investment companies in the Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
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Charles E. Peck (70)
Director and/or Trustee of Value Fund, Inc. and each of the other 17
investment companies in the Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive
Officer of The Ryland Group, Inc., Columbia, MD.
David K. Downes (56)
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer of Value Fund, Inc., each of the other 17 investment
companies in the Delaware Group and Delaware Management
Company, Inc.
Chairman and Director of Delaware Management Trust Company.
Chief Executive Officer and Director of Delaware Investment &
Retirement Services, Inc.
Executive Vice President/Chief Administrative Officer/Chief Financial
Officer/Treasurer of Delaware Management Holdings, Inc.
Senior Vice President/Chief Financial Officer/Treasurer and Director
of DMH Corp.
Senior Vice President/Chief Administrative Officer and Director of
Delaware Distributors, Inc.
Senior Vice President/Chief Administrative Officer of Delaware
Distributors, L.P.
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer and Director of Delaware Service Company, Inc.
Chief Financial Officer and Director of Delaware International
Holdings Ltd.
Senior Vice President/Chief Financial Officer/Treasurer of Delaware
Capital Management, Inc.
Senior Vice President/Chief Financial Officer and Director of
Founders Holdings, Inc.
Director of Delaware International Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes was Chief
Administrative Officer, Chief Financial Officer and Treasurer
of Equitable Capital Management Corporation, New York, from
December 1985 through August 1992, Executive Vice President
from December 1985 through March 1992 and Vice Chairman from
March 1992 through August 1992.
George M. Chamberlain, Jr. (49)
Senior Vice President and Secretary of Value Fund, Inc., each of the
other 17 investment companies in the Delaware Group, Delaware
Management Holdings, Inc. and Delaware Distributors, L.P.
Executive Vice President, Secretary and Director of Delaware Management
Trust Company.
Senior Vice President, Secretary and Director of DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Founders Holdings, Inc.,
Delaware Investment & Retirement Services, Inc. and Delaware
Capital Management, Inc.
Secretary and Director of Delaware International Holdings Ltd.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served in various
capacities at different times within the Delaware
organization.
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<PAGE>
David C. Dalrymple (38)
Vice President/Senior Portfolio Manager of Value Fund, Inc. and
seven other investment companies in the Delaware Group.
Before joining the Delaware Group in 1991, Mr. Dalrymple was an
Assistant Portfolio Manager for Lord Abbett and Company, New
York, N.Y. from 1986 to 1991.
Gerald T. Nichols (38)
Vice President/Senior Portfolio Manager of Value Fund, Inc., of 12
other investment companies in the Delaware Group and of
Delaware Management Company, Inc.
Vice President of Founders Holdings, Inc.
Assistant Secretary, Treasurer and Director of Founders CBO
Corporation.
During the past five years, Mr. Nichols has served in various
capacities at different times within the Delaware
organization.
Babak Zenouzi (33)
Vice President/Portfolio Manager of Value Fund, Inc. and 10 other
investment companies in the Delaware Group.
Vice President/Assistant Portfolio Manager of Delaware Investment
Advisers.
Before joining the Delaware Group in 1992, he was with The Boston
Company where he held the positions of assistant vice
president, senior financial analyst, financial analyst and
portfolio accountant.
Joseph H. Hastings (46)
Vice President/Corporate Controller of Value Fund, Inc., each of
the other 17 investment companies in the Delaware Group,
Delaware Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc.,
Delaware Capital Management, Inc., Founders Holdings, Inc.
and Delaware International Holdings Ltd.
Chief Financial Officer/Treasurer of Delaware Investment &
Retirement Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company.
Assistant Treasurer of Founders CBO Corporation.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings was Chief
Financial Officer for Prudential Residential Services, L.P.,
New York, NY from 1989 to 1992. Prior to that, Mr. Hastings
served as Controller and Treasurer for Fine Homes
International, L.P., Stamford, CT from 1987 to 1989.
Michael P. Bishof (34)
Vice President/Treasurer of Value Fund, Inc., each of the other 17
investment companies in the Delaware Group, Delaware
Management Company, Inc., Delaware Distributors, Inc.,
Delaware Distributors, L.P., Delaware Service Company, Inc.
and Founders Holdings, Inc.
Vice President/Manager of Investment Accounting of Delaware
International Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation.
Before joining the Delaware Group in 1995, Mr. Bishof was a Vice
President for Bankers Trust, New York, NY from 1994 to 1995,
a Vice President for CS First Boston Investment Management,
New York, NY from 1993 to 1994 and an Assistant Vice
President for Equitable Capital Management Corporation, New
York, NY from 1987 to 1993.
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The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from Value
Fund, Inc. and the total compensation received from all Delaware Group funds for
the fiscal year ended November 30, 1995 and an estimate of annual benefits to be
received upon retirement under the Delaware Group Retirement Plan for
Directors/Trustees as of April 30, 1996.
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Estimated Total
Aggregate Accrued as Annual Compensation
Compensation Part of Value Benefits from all 17
from Value Fund, Inc. Upon Delaware
Name Fund, Inc. Expenses Retirement* Group Funds
<S> <C> <C> <C>
W. Thacher Longstreth $2,178 None $30,000 $58,188
Ann R. Leven $2,474 None $30,000 $66,324
Walter P. Babich $2,502 None $30,000 $67,324
Anthony D. Knerr $2,238 None $30,000 $62,613
Charles E. Peck $2,178 None $30,000 $58,188
</TABLE>
* Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director who, at the time of his or
her retirement from the Board, has attained the age of 70 and served on the
Board for at least five continuous years, is entitled to receive payments
from each fund in the Delaware Group for a period equal to the lesser of
the number of years that such person served as a director or the remainder
of such person's life. The amount of such payments will be equal, on an
annual basis, to the amount of the annual retainer that is paid to
directors of each fund at the time of such person's retirement. If an
eligible director retired as of April 30, 1996, he or she would be entitled
to annual payments totaling $30,000, in the aggregate, from all of the
funds in the Delaware Group, based on the number of funds in the Delaware
Group as of that date.
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<PAGE>
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the Classes and
for shareholders of classes of other funds in the Delaware Group are set forth
in the relevant prospectuses for such classes. The following supplements that
information. The Funds 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 relevant Fund receives written notice from the
shareholder to the contrary.
Shareholders or their investment dealers of record may contact the
Shareholder Service Center at 800- 523-1918 or, in the case of shareholders of
the Institutional Classes, 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
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<PAGE>
the funds in the Delaware Group. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and the Funds 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 Funds' Prospectuses, neither the Funds nor the
Transfer Agent is responsible for any shareholder loss incurred in acting upon
written or telephone instructions for redemption or exchange of Fund shares
which are reasonably believed to be genuine.
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Funds will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Group funds from Timing Firms. A Fund reserves the right to temporarily or
permanently terminate the exchange privilege or reject any specific purchase
order for any person whose transactions seem to follow a timing pattern who: (i)
makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, or (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1/4 of 1% of the Fund's net assets. Accounts
under common ownership or control, including accounts administered so as to
redeem or purchase shares based upon certain predetermined market indicators,
will be aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Group funds: (1) Decatur
Income Fund, (2) Decatur Total Return Fund, (3) Delaware Fund, (4) Limited-Term
Government Fund, (5) Tax-Free USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund and (8) Tax-Free Pennsylvania Fund. No other Delaware Group
funds are available for timed exchanges. Assets redeemed or exchanged out of
Timing Accounts in Delaware Group funds not listed above may not be reinvested
back into that Timing Account. Each Fund reserves the right to apply these same
restrictions to the account(s) of any person whose transactions seem to follow a
timing pattern (as described above).
Each Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if a
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
* * *
Following is a summary of the investment objectives of the other
Delaware Group funds:
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<PAGE>
Delaware Fund seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. Devon Fund
seeks current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks the Manager
believes have the potential for above average dividend increases over time.
Trend Fund seeks long-term growth by investing in common stock issued
by emerging growth companies exhibiting strong capital appreciation potential.
DelCap Fund seeks long-term capital growth by investing in common
stocks and securities convertible into common stocks of companies that have a
demonstrated history of growth and have the potential to support continued
growth.
Decatur Income Fund seeks the highest possible current income by
investing primarily in common stocks that provide the potential for income and
capital appreciation without undue risk to principal. Decatur Total Return Fund
seeks long-term growth by investing primarily in securities that provide the
potential for income and capital appreciation without undue risk to principal.
Delchester Fund seeks as high a current income as possible by investing
principally in high yield, high risk corporate bonds, and also in U.S.
government securities and commercial paper. Strategic Income Fund seeks to
provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high-yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities. In addition, the fund may invest in U.S. equity
securities.
U.S. Government Fund seeks high current income by investing primarily
in long-term debt obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities.
Limited-Term Government Fund seeks high, stable income by investing
primarily in a portfolio of short- and intermediate-term securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities and
instruments secured by such securities. U.S. Government Money Fund seeks maximum
current income with preservation of principal and maintenance of liquidity by
investing only in short-term securities issued or guaranteed as to principal and
interest by the U.S. government, its agencies or instrumentalities, and
repurchase agreements collateralized by such securities, while maintaining a
stable net asset value.
Delaware Cash Reserve seeks the highest level of income consistent with
the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
Tax-Free USA Fund seeks high current income exempt from federal income
tax by investing in municipal bonds of geographically-diverse issuers. Tax-Free
Insured Fund invests in these same types of securities but with an emphasis on
municipal bonds protected by insurance guaranteeing principal and interest are
paid when due. Tax-Free USA Intermediate Fund seeks a high level of current
interest income exempt from federal income tax, consistent with the preservation
of capital by investing primarily in municipal bonds.
Tax-Free Money Fund seeks high current income, exempt from federal
income tax, by investing in short-term municipal obligations, while maintaining
a stable net asset value.
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<PAGE>
(SAI-DGVF/RIF-PART B)
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. Emerging Markets Fund
seeks long-term capital appreciation by investing primarily in equity securities
of issuers located or operating in emerging countries.
Enterprise Fund seeks to provide maximum appreciation of capital by
investing in medium-sized companies which have a dominant position within their
industry, are undervalued, or have potential for growth in earnings. U.S. Growth
Fund seeks to maximize capital appreciation by investing in companies of all
sizes which have low dividend yields, strong balance sheets and high expected
earnings growth rates relative to their industry. World Growth Fund seeks to
maximize total return (capital appreciation and income), principally through
investments in an internationally diversified portfolio of equity securities.
New Pacific Fund seeks long-term capital appreciation by investing primarily in
companies which are domiciled in or have their principal business activities in
the Pacific Basin. Federal Bond Fund seeks to maximize current income consistent
with preservation of capital. The fund attempts to achieve this objective by
investing primarily in securities issued by the U.S. government, its agencies
and instrumentalities. Corporate Income Fund seeks to provide high current
income consistent with preservation of capital. The fund attempts to achieve
this objective primarily by investing in a diversified portfolio of investment
grade fixed-income securities issued by U.S. corporations.
Delaware Group Premium Fund offers ten funds available exclusively as
funding vehicles for certain insurance company separate accounts. Equity/Income
Series seeks the highest possible total rate of return by selecting issues that
exhibit the potential for capital appreciation while providing higher than
average dividend income. High Yield Series seeks as high a current income as
possible by investing in rated and unrated corporate bonds, U.S. government
securities and commercial paper. Capital Reserves Series seeks a high stable
level of current income while minimizing fluctuations in principal by investing
in a diversified portfolio of short- and intermediate-term securities. Money
Market Series seeks the highest level of income consistent with preservation of
capital and liquidity through investments in short-term money market
instruments. Growth Series seeks long-term capital appreciation by investing its
assets in a diversified portfolio of securities exhibiting the potential for
significant growth. Multiple Strategy Series seeks a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. International
Equity Series seeks long-term growth without undue risk to principal by
investing primarily in equity securities of foreign issuers that provide the
potential for capital appreciation and income. Value Series seeks capital
appreciation by investing in small- to mid-cap common stocks whose market values
appear low relative to their underlying value or future earnings and growth
potential. Emphasis will also be placed on securities of companies that may be
temporarily out of favor or whose value is not yet recognized by the market.
Emerging Growth Series seeks long-term capital appreciation by investing
primarily in small-cap common stocks and convertible securities of emerging and
other growth-oriented companies. These securities will have been judged to be
responsive to changes in the marketplace and to have fundamental characteristics
to support growth. Income is not an objective. Global Bond Series
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<PAGE>
seeks to achieve current income consistent with the preservation of principal
by investing primarily in global fixed-income securities that may also provide
the potential for capital appreciation.
For more complete information about any of the Delaware Group funds,
including charges and expenses, you can obtain a prospectus from the
Distributor. Read it carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the
information contained in each fund's prospectus(es).
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<PAGE>
GENERAL INFORMATION
The Manager is the investment manager of each Fund. The Manager also
provides investment management services to certain of the other funds in the
Delaware Group. The Manager, through a separate division, also manages private
investment accounts. While investment decisions of each Fund are made
independently from those of the other funds and accounts, investment decisions
for such other funds and accounts may be made at the same time as investment
decisions for the Funds.
Access persons and advisory persons of the Delaware Group of funds, as
those terms are defined in Rule 17j-1 under the 1940 Act, who provide services
to the Manager, Delaware International Advisers Ltd. or their affiliates, are
permitted to engage in personal securities transactions subject to the
exceptions set forth in Rule 17j-1 and the following general restrictions and
procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance is received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions may only be closed-out at a profit after a 60-day holding
period has elapsed; and (5) the Compliance Officer must be informed periodically
of all securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.
The Distributor acts as national distributor for each 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 Value Fund. In its
capacity as such, DDI received net commissions from Value Fund on behalf of
Class A Shares after reallowances to dealers, as follows:
Fiscal Total Amount Amounts Net
Year of Underwriting Reallowed Commission
Ended Commission to Dealers to DDI
----- ---------- ---------- ------
November 30, 1995 $ 608,374 $ 527,679 $ 80,695
November 30, 1994 1,707,818 1,480,648 227,170
November 30, 1993 3,274,016 2,912,033 361,983
The Distributor and, in its capacity as such, DDI received in the
aggregate Limited CDSC payments with respect to Value Fund A Class as follows:
Fiscal Year Ended Limited CDSC Payments
----------------- ---------------------
November 30, 1995 $218
November 30, 1994 12,607
November 30, 1993 - 0 -
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<PAGE>
The Distributor and, in its capacity as such, DDI received in the
aggregate CDSC payments with respect to Value Fund B Class as follows:
Fiscal Year Ended CDSC Payments
----------------- -------------
November 30, 1995 $14,682
November 30, 1994* 995
*Date of initial public offering was September 6, 1994.
The Distributor received CDSC payments with respect to Value Fund C
Class as follows:
Fiscal Year Ended CDSC Payments
----------------- -------------
November 30, 1995* - $0 -
*Date of initial public offering was November 29, 1995.
Effective as of January 3, 1995, all such payments described above have
been paid to the Distributor.
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for each Fund and for the
other mutual funds in the Delaware Group. The Transfer Agent is paid a fee by
each 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 each Fund's advisory
relationship with the Manager or their distribution relationship with the
Distributor, the Manager and its affiliates could cause Value Fund, Inc. to
delete the words "Delaware Group" from Value Fund, Inc.'s name.
The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn,
NY 11245, is custodian of the Value Fund's securities and cash. Bankers Trust
Company ("Bankers"), One Bankers Trust Plaza, New York, NY 10006, is custodian
for the Retirement Income Fund's securities and cash. As custodian for a Fund,
Chase or, as relevant, Bankers maintains a separate account or accounts for the
Fund; receives, holds and releases portfolio securities on account of the Fund;
receives and disburses money on behalf of the Fund; and collects and receives
income and other payments and distributions on account of the Fund's portfolio
securities.
The legality of the issuance of the shares offered hereby, registered
pursuant to Rule 24f-2 under the 1940 Act, has been passed upon for Value Fund,
Inc. by Stradley, Ronon, Stevens & Young, LLP, Philadelphia, Pennsylvania.
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<PAGE>
Capitalization
Value Fund, Inc. has a present authorized capitalization of five
hundred million shares of capital stock with a $.01 par value per share. The
Board of Directors has allocated _____ shares to Value Fund. Of such _____
shares allocated to Value Fund, one hundred million shares have been allocated
to Value Fund A Class, one hundred million shares have been allocated to Value
Fund B Class, fifty million shares have been allocated to Value Fund C Class and
fifty million shares have been allocated to the Value Fund Institutional Class.
The Board of Directors has allocated _____ shares to Retirement Income Fund. Of
such _____ shares allocated to Retirement Income Fund, ____ shares have been
allocated to Retirement Income Fund A Class, _____ shares have been allocated to
Retirement Income Fund B Class, _____ shares have been allocated to Retirement
Income Fund C Class and _____ shares have been allocated to the Retirement
Income Institutional Class. Each Class represents a proportionate interest in
the assets of a 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 Classes may not vote on any matter affecting a Fund Classes' Plans
under Rule 12b-1. Similarly, as a general matter, shareholders of Class A
Shares, Class B Shares and Class C Shares may vote only on matters affecting the
12b-1 Plan that relates to the class of shares that they hold. However, Class B
Shares may vote on any proposal to increase materially the fees to be paid by a
Fund under the Plan relating to Class A Shares. General expenses of each Fund
will be allocated on a pro-rata basis to the classes according to asset size,
except that expenses of the Plans of Class A, Class B and Class C Shares will be
allocated solely to those classes.
Shares do not have preemptive rights, are fully transferable and, when
issued, are fully paid and nonassessable.
Prior to November 9, 1992, Value Fund, Inc. offered only one class of
shares, the class currently designated Value Fund A Class. Beginning November 9,
1992, Value Fund, Inc. began offering the Value Fund Institutional Class,
beginning September 6, 1994, Value Fund, Inc. began offering the Value Fund B
Class, and beginning November 29, 1995, Value Fund, Inc. began offering the
Value Fund C Class. 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
Value Fund, Inc. shares have noncumulative voting rights which means
that the holders of more than 50% of the aggregate shares of the Funds 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.
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<PAGE>
APPENDIX A--IRA INFORMATION
The Tax Reform Act of 1986 (the "Act") restructured, and in some cases
eliminated, the tax deductibility of IRA contributions. Under the Act, the full
deduction for IRAs ($2,000 for each working spouse and $2,250 for one-income
couples) was retained for all taxpayers who are not covered by an
employer-sponsored retirement plan. Even if a taxpayer (or his or her spouse) is
covered by an employer-sponsored retirement plan, the full deduction is still
available if the taxpayer's adjusted gross income is below $25,000 ($40,000 for
taxpayers filing joint returns). A partial deduction is allowed for married
couples with incomes between $40,000 and $50,000, and for single individuals
with incomes between $25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross income before IRA
deductions exceeds $50,000 ($35,000 for singles) and who are active participants
in an employer-sponsored retirement plan. Taxpayers who were not allowed
deductions on IRA contributions still can make nondeductible IRA contributions
of as much as $2,000 for each working spouse ($2,250 for one-income couples),
and defer taxes on interest or other earnings from the IRAs. Special rules apply
for determining the deductibility of contributions made by married individuals
filing separate returns.
As illustrated in the following tables, maintaining an IRA remains a
valuable opportunity.
For many, an IRA will continue to offer both an up-front tax break with
its tax deduction each year and the real benefit that comes with tax-deferred
compounding. For others, losing the tax deduction will impact their taxable
income status each year. Over the long term, however, being able to defer taxes
on earnings still provides an impressive investment opportunity--a way to have
money grow faster due to tax-deferred compounding.
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<PAGE>
(SAI-DGVF/RIF-PART B)
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 either 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 - $24,000
--------------- Joint - $0 - $40,100
How Much You
End of Cumulative How Much You Have With Full
Year Investment Amount Have Without IRA IRA Deduction
<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%)]
28% Tax Bracket Single - $24,001 - $58,150
--------------- Joint - $40,101 - $96,900
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
1 $ 2,000 $ 1,544 $ 1,584 $ 2,200
5 10,000 8,913 9,670 13,431
10 20,000 21,531 25,245 35,062
15 30,000 39,394 50,328 69,899
20 40,000 64,683 90,724 126,005
25 50,000 100,485 155,782 216,364
30 60,000 151,171 260,559 361,887
35 70,000 222,927 429,303 596,254
40 80,000 324,512 701,067 973,704
</TABLE>
[Without IRA--investment of $1,440 ($2,000 less 28%) earning 7.2% (10% less
28%)]
[With IRA--No Deduction--investment of $1,440 ($2,000 less 28%) earning
10%]
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<PAGE>
<TABLE>
<CAPTION>
31% Tax Bracket Single - $58,151 - $121,300
--------------- Joint - $96,901 - $147,700
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%]
36% Tax Bracket* Single - $121,301 - $263,750
--------------- Joint - $147,701 - $263,750
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
1 $ 2,000 $ 1,362 $ 1,408 $ 2,200
5 10,000 7,739 8,596 13,431
10 20,000 18,292 22,440 35,062
15 30,000 32,683 44,736 69,899
20 40,000 52,308 80,643 126,005
25 50,000 79,069 138,473 216,364
30 60,000 115,562 231,608 361,887
35 70,000 165,327 381,602 596,254
40 80,000 233,190 623,170 973,704
[Without IRA--investment of $1,280 ($2,000 less 36%) earning 6.4% (10% less
36%)]
[With IRA--No Deduction--investment of $1,280 ($2,000 less 36%) earning 10%]
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
39.6% Tax Bracket* Single - over $263,750
----------------- Joint - over $263,750
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,281 $ 1,329 $ 2,200
5 10,000 7,227 8,112 13,431
10 20,000 16,916 21,178 35,062
15 30,000 29,907 42,219 69,899
20 40,000 47,324 76,107 126,005
25 50,000 70,677 130,684 216,364
30 60,000 101,986 218,580 361,887
35 70,000 143,965 360,137 596,254
40 80,000 200,249 588,117 973,704
</TABLE>
[Without IRA--investment of $1,208 ($2,000 less 39.6%) earning 6.04% (10% less
39.6%)]
[With IRA--No Deduction--investment of $1,208 ($2,000 less 39.6%) earning 10%]
* For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate.
In addition, a 10% surtax (not applicable to capital gains) applies to
certain high-income taxpayers. It is computed by applying a 39.6% rate to
taxable income in excess of $263,750. The above tables do not reflect the
personal exemption phaseout nor the limitations of itemized deductions that
may apply.
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<PAGE>
<TABLE>
<CAPTION>
$2,000 SINGLE INVESTMENT AT A RETURN OF 10% COMPOUNDED ANNUALLY
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 $ 3,595 $ 3,719 $ 3,898 $ 4,008 $ 4,522 $ 5,187
15 4,820 5,072 5,441 5,675 6,799 8,354
20 6,463 6,916 7,596 8,034 10,224 13,455
30 11,618 12,861 14,803 16,102 23,117 34,899
40 20,884 23,916 28,849 32,272 52,266 90,519
$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
- ----------------------------------------------------------------------------------------------------------------------------------
10 $ 28,006 $ 28,581 $ 29,400 $ 29,904 $ 32,192 $ 35,062
15 49,514 51,067 53,314 54,714 61,264 69,899
20 78,351 81,731 86,697 89,838 104,978 126,005
30 168,852 180,566 198,360 209,960 269,546 361,887
40 331,537 364,360 415,973 450,711 641,631 973,704
</TABLE>
* For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate.
In addition, a 10% surtax (not applicable to capital gains) applies to
certain high-income taxpayers. It is computed by applying a 39.6% rate to
taxable income in excess of $263,750. The above tables do not reflect the
personal exemption phaseout nor the limitations of itemized deductions that
may apply.
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<PAGE>
THE VALUE OF STARTING YOUR IRA EARLY
The following illustrates how much more you would have contributing
$2,000 each January--the earliest opportunity--compared to contributing on April
15th of the following year--the latest, for each tax year.
After 5 years $3,528 more
10 years $6,113
20 years $17,228
30 years $47,295
Compounded returns for the longest period of time is the key. The above
illustration assumes a 10% rate of return and the reinvestment of all proceeds.
And it pays to shop around. If you get just 2% more per year, it can
make a big difference when you retire. A constant 8% versus 10% return, both
compounded annually, illustrates the point. This chart is based on a yearly
investment of $2,000 on January 1. After 30 years the difference can mean as
much as 50% more!
8% Return 10% Return
--------- ----------
10 years $ 31,291 $ 35,062
20 years $ 98,846 $126,005
30 years $244,692 $361,887
The statistical exhibits above are for illustration purposes only and
do not reflect the actual performance for the Funds, either in the past or in
the future.
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<PAGE>
APPENDIX B
The Company Life Cycle
Traditional business theory contends that a typical company progresses
through basically four stages of development, keyed closely to a firm's sales.
1. Emerging Growth--a period of experimentation in which the company
builds awareness of a new product or firm.
2. Accelerated Development--a period of rapid growth with potentially
high profitability and acceptance of the product.
3. Maturing Phase--a period of diminished real growth due to dependence
on replacement or sustained product demand.
4. Cyclical Stage--a period in which a company faces a potential
saturation of demand for its product. At this point, a firm either diversifies
or becomes obsolete.
Hypothetical Corporate Life Cycle
[CHART APPEARS HERE]
Hypothetical Corporate Life Cycle Chart shows in a line illustration,
the stages that a typical company would go through, beginning with the emerging
state where sales growth continues at a steep pace to the mature phase where
growth levels off to the cyclical stage where sales show more definitive highs
and lows.
The above chart illustrates the path traditionally followed by
companies that successfully survive the growth sequence.
-78-
<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Value Fund,
Inc. and, in its capacity as such, audits the financial statements contained in
Value Fund, Inc.'s Annual Report. Value Fund's Statement of Net Assets,
Statement of Operations, Statements 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, 1995, are included in Value
Fund's Annual Report to shareholders. The financial statements, the notes
relating thereto and the report of Ernst & Young LLP, listed above are
incorporated by reference from the Annual Report into this Part B. Unaudited
financial statements and the notes relating thereto for the six-month period
ended May 31, 1996 are also incorporated by reference from Value Fund's
Semi-Annual Report into this Part B.
-79-
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A - Financial Highlights
* Part B - Statement of Net Assets
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Accountant's Report
* The financial statements and Accountant's Report listed above for
Value Fund for the fiscal year ended November 30, 1995 are
incorporated by reference into Part B from the Registrant's Annual
Report. In addition, the unaudited financial statements for Value
Fund for the six-month period ended May 30, 1996 are incorporated by
reference into Part B from the Registrant's Semi-Annual Report. The
Registrant's Semi-Annual Report was electronically filed with the
Commission on August 5, 1996.
(b) Exhibits:
(1) Articles of Incorporation.
(a) Articles of Incorporation, as amended and supplemented
through November 28, 1995, incorporated into this filing
by reference to Post-Effective Amendment No. 13 filed
September 14, 1995 and Post-Effective Amendment No. 15
filed January 29, 1996.
(b) Form of Articles Supplementary (1996) attached as
Exhibit.
(2) By-Laws. By-Laws, as amended through September 14, 1995,
incorporated into this filing by reference to Post-Effective
Amendment No. 13 filed September 14, 1995.
(3) Voting Trust Agreement. Inapplicable.
i
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
(4) Copies of all Instruments Defining the Rights of Holders.
(a) Articles of Incorporation, Articles of Amendment and
Articles Supplementary.
(i) Article Second of Articles Supplementary (May 27,
1992 and September 6, 1994) and Article Fifth and
Article Eighth of Articles of Incorporation (January
16, 1987) incorporated into this filing by reference
to Post-Effective Amendment No. 13 filed September
14, 1995 and Article Third of Articles Supplementary
(November 28, 1995) incorporated into this filing by
reference to Post-Effective Amendment No. 15 filed
January 29, 1996.
(ii) Form of Articles Supplementary (1996) attached as
Exhibit 24(b)(1)(b).
(b) By-Laws. Article II, Article III, as amended, and Article
XIII, which was subsequently redesignated as Article XIV,
incorporated into this filing by reference to
Post-Effective Amendment No. 13 filed September 14, 1995.
(5) Investment Management Agreement.
(a) Investment Management Agreement between Delaware
Management Company, Inc. and the Registrant (April 3,
1995) on behalf of Value Fund incorporated into this
filing by reference to Post-Effective Amendment No. 13
filed September 14, 1995.
(b) Form of Investment Management Agreement (1996) between
Delaware Management Company, Inc. and the Registrant on
behalf of Retirement Income Fund attached as Exhibit.
(6) (a) Distribution Agreement.
(i) Executed Distribution Agreement between Delaware
Distributors, L.P. and the Registrant (April 3,
1995) and Amendment No. 1 to Distribution Agreement
(November 29, 1995) incorporated into this filing by
reference to Post-Effective Amendment No. 15 filed
January 29, 1996.
(ii) Form of Distribution Agreement (1996) between
Delaware Distributors, L.P. and the Registrant on
behalf of Retirement Income Fund attached as
Exhibit.
ii
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
(b) Administration and Service Agreement. Form of
Administration and Service Agreement (as amended November
1995) incorporated into this filing by reference to
Post-Effective Amendment No. 15 filed January 29, 1996.
(c) Dealer's Agreement. Dealer's Agreement (as amended
November 1995) incorporated into this filing by reference
to Post-Effective Amendment No. 15 filed January 29,
1996.
(d) Mutual Fund Agreement. Mutual Fund Agreement for the
Delaware Group of Funds (as amended November 1995)
incorporated into this filing by reference to
Post-Effective Amendment No. 15 filed January 29, 1996.
(7) Bonus, Profit Sharing, Pension Contracts. Amended and Restated
Profit Sharing Plan (November 17, 1994) incorporated into this
filing by reference to Post-Effective Amendment No. 13 filed
September 14, 1995 and Amendment to Profit Sharing Plan
(December 21, 1995) incorporated into this filing by reference
to Post-Effective Amendment No. 15 filed January 29, 1996.
(8) Custodian Agreement.
(a) Executed Custodian Agreement (May 1, 1996) between The
Chase Manhattan Bank and the Registrant on behalf of
Value Fund included as Module.
(b) Form of Securities Lending Agreement (1996) between The
Chase Manhattan Bank and the Registrant on behalf of
Value Fund attached as Exhibit.
(c) Form of Custodian Agreement (1996) between Bankers Trust
Company and the Registrant on behalf of Retirement Income
Fund attached as Exhibit.
(d) Form of Securities Lending Agreement (1996) between
Bankers Trust Company and the Registrant on behalf of
Retirement Income Fund attached as Exhibit.
iii
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
(9) Other Material Contracts.
(a) Form of Amended and Restated Shareholders Services
Agreement (1996) between Delaware Service Company, Inc.
and the Registrant on behalf of each Fund attached as
Exhibit.
(10) Opinion of Counsel. Filed with letter relating to Rule 24f-2
on January 26, 1996.
(11) Consent of Auditors. Attached as Exhibit.
(12) Inapplicable.
(13) Undertaking of Initial Shareholder. Incorporated into this
filing by reference to Pre-Effective Amendment No. 2 filed
June 17, 1987.
(14) Model Plans. Incorporated into this filing by reference to
Post-Effective Amendment No. 9 filed January 29, 1993,
Post-Effective Amendment No. 10 filed January 28, 1994 and
Post-Effective Amendment No. 13 filed September 14, 1995.
**(15) Plans under Rule 12b-1.
(a) Plan under Rule 12b-1 for Value Fund A Class (November
29, 1995) incorporated into this filing by reference to
Post-Effective Amendment No. 15 filed January 29, 1996.
(b) Plan under Rule 12b-1 for Value Fund B Class (November
29, 1995) incorporated into this filing by reference to
Post-Effective Amendment No. 15 filed January 29, 1996.
(c) Plan under Rule 12b-1 for Value Fund C Class (November
29, 1995) incorporated into this filing by reference to
Post-Effective Amendment No. 15 filed January 29, 1996.
(d) Form of Plan under Rule 12b-1 for Retirement Income Fund
A Class (1996) attached as Exhibit.
** Relates to Value Fund's and Retirement Income Fund's retail
classes only.
iv
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
(e) Form of Plan under Rule 12b-1 for Retirement Income Fund
B Class (1996) attached as Exhibit.
(f) Form of Plan under Rule 12b-1 for Retirement Income Fund
C Class (1996) attached as Exhibit.
** Relates to Value Fund's and Retirement Income Fund's retail
classes only.
(16) Schedules of Computation for each Performance Quotation.
(a) Incorporated into this filing by reference to
Post-Effective Amendment No. 13 filed September 14, 1995
and Post-Effective Amendment No. 15 filed January 29,
1996.
(b) Schedules of Computation for each Performance Quotation
for Value Fund for periods not previously electronically
filed attached as Exhibit.
(17) Financial Data Schedules.
(a) Financial Data Schedules for fiscal year ended November
30, 1995 incorporated into this filing by reference to
Post-Effective Amendment No. 15 filed January 29, 1996.
(b) Financial Data Schedules for six-month period ended May
31, 1996 attached as Exhibit.
(18) Plan under Rule 18f-3. Plan under Rule 18f-3 (as amended May
1, 1996) included as Module.
(19) Other: Directors' Power of Attorney. Incorporated into this
filing by reference to Post-Effective Amendment No. 13 filed
September 14, 1995.
Item 25. Persons Controlled by or under Common Control with Registrant. None.
v
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
Item 26. Number of Holders of Securities.
(1) (2)
Number of
Title of Class Record Holders
Delaware Group Value Fund, Inc.'s
Value Fund:
Value Fund A Class
Common Stock Par Value 13,562 Accounts as of
$.01 Per Share August 31, 1996
Value Fund B Class
Common Stock Par Value 962 Accounts as of
$.01 Per Share August 31, 1996
Value Fund C Class
Common Stock Par Value 125 Accounts as of
$.01 Per Share August 31, 1996
Value Fund Institutional Class
Common Stock Par Value 38 Accounts as of
$.01 Per Share August 31, 1996
Delaware Group Value Fund, Inc.'s
Retirement Income Fund:
Retirement Income Fund A Class
Common Stock Par Value 0 Accounts as of
$.01 Per Share August 31, 1996
Retirement Income Fund B Class
Common Stock Par Value 0 Accounts as of
$.01 Per Share August 31, 1996
* Shares of the Retirement Income Fund classes were not offered prior the
effective date of this Registration Statement.
vi
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
Number of
Title of Class Record Holders*
Retirement Income Fund C Class
Common Stock Par Value 0 Accounts as of
$.01 Per Share August 31, 1996
Retirement Income Fund
Institutional Class
Common Stock Par Value 0 Accounts as of
$.01 Per Share August 31, 1996
* Shares of the Retirement Income Fund classes were not offered
prior the effective date of this Registration Statement.
Item 27. Indemnification. Incorporated into this filing by reference to
initial Registration Statement filed January 23, 1987 and Article VII
of the By-Laws, as amended, incorporated into this filing by reference
to Post-Effective Amendment No. 13 filed September 14, 1995.
Item 28. Business and Other Connections of Investment Adviser.
Delaware Management Company, Inc. (the "Manager") serves as investment
manager or sub-adviser to certain of the other funds in the Delaware Group
(Delaware Group Delaware Fund, Inc., Delaware Group Trend Fund, Inc., Delaware
Group DelCap Fund, Inc., Delaware Group Decatur Fund, Inc., Delaware Group
Income Funds, Inc., Delaware Group Government Fund, Inc., Delaware Group
Limited-Term Government Funds, Inc., Delaware Group Cash Reserve, Inc., Delaware
Group Tax-Free Fund, Inc., DMC Tax-Free Income Trust-Pennsylvania, Delaware
Group Tax-Free Money Fund, Inc., Delaware Group Premium Fund, Inc., Delaware
Group Global & International Funds, Inc., Delaware Pooled Trust, Inc., Delaware
Group Adviser Funds, Inc., Delaware Group Dividend and Income Fund, Inc. and
Delaware Group Global Dividend and Income Fund, Inc.) and provides investment
advisory services to institutional accounts, primarily retirement plans and
endowment funds. In addition, certain directors of the Manager also serve as
directors/trustees of the other Delaware Group funds, and certain officers are
also officers of these other funds. A company owned by the Manager's parent
company acts as principal underwriter to the mutual funds in the Delaware Group
(see Item 29 below) and another such company acts as the shareholder servicing,
dividend disbursing and transfer agent for all of the mutual funds in the
Delaware Group.
vii
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
The following persons serving as directors or officers of the Manager
have held the following positions during the past two years:
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Wayne A. Stork Chairman of the Board, President, Chief Executive Officer,
Chief Investment Officer and Director of Delaware
Management Company, Inc.; President, Chief Executive
Officer, Chairman of the Board and Director of the
Registrant and, with the exception of Delaware Pooled
Trust, Inc., each of the other funds in the Delaware Group,
Delaware Management Holdings, Inc., DMH Corp., Delaware
International Holdings Ltd. and Founders Holdings, Inc.;
Chairman of the Board and Director of Delaware Pooled
Trust, Inc., Delaware Distributors, Inc., Delaware Capital
Management, Inc. and Delaware Investment & Retirement
Services, Inc.; Chairman, Chief Executive Officer and
Director of Delaware International Advisers Ltd.; and
Director of Delaware Service Company, Inc.
Winthrop S. Jessup Executive Vice President and Director of Delaware
Management Company, Inc., DMH Corp., Delaware International
Holdings Ltd. and Founders Holdings, Inc.; Executive Vice
President of the Registrant and, with the exception of
Delaware Pooled Trust, Inc., each of the other funds in the
Delaware Group and Delaware Management Holdings, Inc.;
President and Chief Executive Officer of Delaware Pooled
Trust, Inc.; Vice Chairman of Delaware Distributors, L.P.;
Vice Chairman and Director of Delaware Distributors, Inc.;
Director of Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware International Advisers
Ltd. and Delaware Investment & Retirement Services, Inc.;
and President and Director of Delaware Capital Management,
Inc.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
viii
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Richard G. Unruh, Jr. Executive Vice President and Director of Delaware
Management Company, Inc.; Executive Vice President of
the Registrant and each of the other funds in the
Delaware Group; Senior Vice President of Delaware
Management Holdings, Inc.; and Director of Delaware
International Advisers Ltd.
Board of Directors, Chairman of Finance Committee,
Keystone Insurance Company since 1989, 2040 Market
Street, Philadelphia, PA; Board of Directors, Chairman
of Finance Committee, Mid Atlantic, Inc. since 1989,
2040 Market Street, Philadelphia, PA
Paul E. Suckow Executive Vice President/Chief Investment Officer,
Fixed Income of Delaware Management Company, Inc., the
Registrant and each of the other funds in the Delaware
Group; Senior Vice President/Chief Investment Officer,
Fixed Income of Delaware Management Holdings, Inc.;
Executive Vice President and Director of Founders
Holdings, Inc.; and Director of Founders CBO
Corporation
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
ix
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
David K. Downes Senior Vice President, Chief Administrative Officer
and Chief Financial Officer of Delaware Management
Company, Inc., the Registrant and each of the other
funds in the Delaware Group; Chairman and Director
of Delaware Management Trust Company; Executive Vice
President and Chief Operating Officer of Delaware
Management Holdings, Inc.; Senior Vice President,
Chief Financial Officer, Treasurer and Director of
DMH Corp.; Senior Vice President and Chief
Administrative Officer of Delaware Distributors,
L.P.; Senior Vice President, Chief Administrative
Officer and Director of Delaware Distributors, Inc.;
Senior Vice President, Chief Administrative Officer,
Chief Financial Officer and Director of Delaware
Service Company, Inc.; Chief Financial Officer and
Director of Delaware International Holdings Ltd.;
Senior Vice President, Chief Financial Officer and
Treasurer of Delaware Capital Management, Inc.;
Senior Vice President, Chief Financial Officer and
Director of Founders Holdings, Inc.; Chief Executive
Officer and Director of Delaware Investment &
Retirement Services, Inc.; and Director of Delaware
International Advisers Ltd.
Chief Executive Officer, Chief Financial Officer and
Treasurer of Forewarn, Inc. since 1992, 8 Clayton
Place, Newtown Square, PA
George M. Chamberlain, Jr. Senior Vice President, Secretary and Director of
Delaware Management Company, Inc., DMH Corp.,
Delaware Distributors, Inc., Delaware Service
Company, Inc., Founders Holdings, Inc., Delaware
Capital Management, Inc. and Delaware Investment &
Retirement Services, Inc.; Senior Vice President and
Secretary of the Registrant, each of the other funds
in the Delaware Group, Delaware Distributors, L.P.
and Delaware Management Holdings, Inc.; Executive
Vice President, Secretary and Director of Delaware
Management Trust Company; Secretary and Director of
Delaware International Holdings Ltd.; and Director
of Delaware International Advisers Ltd.
Director of ICI Mutual Insurance Co. since 1992,
P.O. Box 730, Burlington, VT
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
x
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Richard J. Flannery Managing Director/Corporate Tax & Affairs of
Delaware Management Company, Inc., Delaware
Management Holdings, Inc., DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware Management
Trust Company, Founders CBO Corporation, Delaware
Capital Management, Inc. and Delaware Investment &
Retirement Services, Inc.; Vice President of the
Registrant and each of the other funds in the
Delaware Group; Managing Director/Corporate Tax &
Affairs and Director of Founders Holdings, Inc.;
Managing Director and Director of Delaware
International Holdings Ltd.; and Director of
Delaware International Advisers Ltd.
Limited Partner of Stonewall Links, L.P. since 1991,
Bulltown Rd., Elverton, PA; Director and Member of
Executive Committee of Stonewall Links, Inc. since
1991, Bulltown Rd., Elverton, PA
Michael P. Bishof(1) Vice President and Treasurer of Delaware Management
Company, Inc., the Registrant, each of the other
funds in the Delaware Group, Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc. and Founders Holdings, Inc.; Assistant
Treasurer of Founders CBO Corporation; and Vice
President and Manager of Investment Accounting of
Delaware International Holdings Ltd.
Eric E. Miller Vice President and Assistant Secretary of Delaware
Management Company, Inc., the Registrant, each of
the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware
Distributors, L.P., Delaware Distributors Inc.,
Delaware Service Company, Inc., Delaware Management
Trust Company, Founders Holdings, Inc., Delaware
Capital Management, Inc. and Delaware Investment &
Retirement Services, Inc.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xi
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Richelle S. Maestro Vice President and Assistant Secretary of Delaware
Management Company, Inc., the Registrant, each of
the other funds in the Delaware Group, Delaware
Management Holdings, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc., DMH Corp., Delaware Management Trust
Company, Delaware Capital Management, Inc., Delaware
Investment & Retirement Services, Inc. and Founders
Holdings, Inc.; Secretary of Founders CBO
Corporation; and Assistant Secretary of Delaware
International Holdings Ltd.
General Partner of Tri-R Associates since 1989,
10001 Sandmeyer Ln., Philadelphia, PA
John M. Zerr(2) Vice President and Assistant Secretary of Delaware
Management Company, Inc., the Registrant, each of
the other funds in the Delaware Group, DMH Corp.,
Delaware Distributors, L.P., Delaware Capital
Management, Inc. and Delaware Investment &
Retirement Services, Inc.
Joseph H. Hastings Vice President/Corporate Controller of Delaware
Management Company, Inc., the Registrant, each of
the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware Capital
Management, Inc., Founders Holdings, Inc. and
Delaware International Holdings Ltd.; Executive Vice
President, Chief Financial Officer and Treasurer of
Delaware Management Trust Company; Chief Financial
Officer and Treasurer of Delaware Investment &
Retirement Services, Inc.; and Assistant Treasurer
of Founders CBO Corporation
Bruce A. Ulmer Vice President/Director of Internal Audit of
Delaware Management Company, Inc., the Registrant,
each of the other funds in the Delaware Group,
Delaware Management Holdings, Inc., DMH Corp. and
Delaware Management Trust Company; and Vice
President/Internal Audit of Delaware Investment &
Retirement Services, Inc.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xii
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Steven T. Lampe(3) Vice President/Taxation of Delaware Management
Company, Inc., the Registrant, each of the other
funds in the Delaware Group, Delaware Management
Holdings, Inc., DMH Corp., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc., Delaware Management Trust Company,
Founders Holdings, Inc., Founders CBO Corporation,
Delaware Capital Management, Inc. and Delaware
Investment & Retirement Services, Inc.
Lisa O. Brinkley Vice President/Compliance of Delaware Management
Company, Inc., the Registrant, each of the other
funds in the Delaware Group, DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware Management
Trust Company, Delaware Capital Management, Inc. and
Delaware Investment & Retirement Services, Inc.
Rosemary E. Milner Vice President/Legal of Delaware Management Company,
Inc., the Registrant, each of the other funds in the
Delaware Group, Delaware Distributors, L.P. and
Delaware Distributors, Inc.
Douglas L. Anderson Vice President/Operations of Delaware Management
Company, Inc. and Delaware Service Company, Inc.;
and Vice President/Operations and Director of
Delaware Management Trust Company
Michael T. Taggart Vice President/Facilities Management and
Administrative Services of Delaware Management
Company, Inc.
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., each of the tax-exempt
funds, the fixed income funds and the closed-end
funds in the Delaware Group; Vice President of
Founders Holdings, Inc.; and Treasurer, Assistant
Secretary and Director of Founders CBO Corporation
J. Michael Pokorny Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., each of the tax-exempt
funds and the fixed income funds in the Delaware
Group
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., each of the tax-exempt
funds and the fixed income funds in the Delaware
Group and Delaware Capital Management, Inc.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xiii
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., each of the tax-exempt
funds, the fixed income funds and the closed-end
funds in the Delaware Group; Vice President of
Founders Holdings, Inc.; and President and Director
of Founders CBO Corporation
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., each of the tax-exempt
funds and the fixed income funds in the Delaware
Group
Roger A. Early Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., each of the tax-exempt
funds and the fixed income funds in the Delaware
Group
Edward N. Antoian Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant and each of
the other equity funds in the Delaware Group
General Partner of Zeke Investment Partners since
1991, 569 Canterbury Lane, Berwyn, PA
George H. Burwell Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant and each of
the other equity funds in the Delaware Group
John B. Fields Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant, each of
the other equity funds in the Delaware Group and
Delaware Capital Management, Inc.
David C. Dalrymple Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant and each of
the other equity funds in the Delaware Group
Gerald S. Frey(4) Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant and each of
the other equity funds in the Delaware Group
Babak Zenouzi Vice President/Portfolio Manager of Delaware
Management Company, Inc., the Registrant, each of
the other equity funds and the closed-end funds in
the Delaware Group
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xiv
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Faye P. Staples(5) Vice President/Human Resources of Delaware
Management Company, Inc., Delaware Distributors,
L.P. and Delaware Distributors, Inc.; and Vice
President/Director of Human Resources of Delaware
Service Company, Inc.
Daniel H. Carlson(6) Vice President/Marketing Manager of Delaware
Management Company, Inc. and Delaware Distributors,
L.P.
(1) VICE PRESIDENT/GLOBAL INVESTMENT MANAGEMENT OPERATIONS, Bankers Trust and
VICE PRESIDENT, CS First Boston Investment Management prior to June 1995.
(2) ATTORNEY, Ballard Spahr Andrews & Ingersoll prior to July 1995.
(3) TAX MANAGER, Price Waterhouse prior to October 1995.
(4) SENIOR DIRECTOR, Morgan Grenwell Capital Management prior to June 1996.
(5) VICE PRESIDENT/HUMAN RESOURCES, Nova Care prior to September 1995.
(6) PRINCIPAL AND CONSULTANT, Buck Consultants prior to October 1995.
Item 29. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal underwriter for all
the mutual funds in the Delaware Group.
(b) Information with respect to each director, officer or partner of
principal underwriter:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
Delaware Management
Company, Inc. Limited Partner Investment Manager
Delaware Capital
Management, Inc. Limited Partner None
Winthrop S. Jessup Vice Chairman Executive Vice President
Keith E. Mitchell President and Chief None
Executive Officer
David K. Downes Senior Vice President and Senior Vice President/Chief
Chief Administrative Officer Administrative Officer/Chief
Financial Officer
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xv
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
George M. Chamberlain, Jr. Senior Vice President/ Senior Vice President/
Secretary Secretary
J. Lee Cook Senior Vice President/ None
Eastern Sales Division
Thomas E. Sawyer Senior Vice President/ None
Western Sales Division
Stephen H. Slack Senior Vice President/ None
Wholesaler
William F. Hostler Senior Vice President/ None
Marketing Services
Dana B. Hall Senior Vice President/ None
Key Accounts
Minette van Noppen Senior Vice President/ None
Retirement Services
J. Chris Meyer Senior Vice President/ None
Product Development
Richard J. Flannery Managing Director/Corporate Vice President
& Tax Affairs
Eric E. Miller Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
John M. Zerr Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Michael P. Bishof Vice President/Treasurer Vice President/Treasurer
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xvi
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- -----------------------
<S> <C> <C>
Steven T. Lampe Vice President/Taxation Vice President/Taxation
Joseph H. Hastings Vice President/ Vice President/
Corporate Controller Corporate Controller
Lisa O. Brinkley Vice President/ Vice President/
Compliance Compliance
Rosemary E. Milner Vice President/Legal Vice President/Legal
Susan J. Black Vice President/ None
Manager Key Accounts
Daniel H. Carlson Vice President/ None
Marketing Manager
Diane M. Anderson Vice President/ None
Retirement Services
Denise F. Guerriere Vice President/Client Services None
Julia R. Vander Els Vice President/ None
Client Services
Jerome J. Alrutz Vice President/ None
Client Services
Joanne A. Mettenheimer Vice President/ None
National Accounts
Christopher H. Price Vice President/Annuity None
Marketing & Administration
Steven J. DeAngelis Vice President/ None
Product Development
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xvii
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Susan T. Friestedt Vice President/ None
Customer Service
Dinah J. Huntoon Vice President/ None
Product Development
Soohee Lee Vice President/ None
Product Development
Ellen M. Krott Vice President/ None
Communications
Holly W. Riemel Vice President/ None
Telemarketing
Frank Albanese Vice President/Wholesaler None
Terrence L. Bussard Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William S. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
William M. Kimbrough Vice President/Wholesaler None
Mac McAuliffe Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
Henry W. Orvin Vice President/Wholesaler None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xviii
<PAGE>
Form N-1A
File No. 33-11419
Delaware Group Value Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Philip G. Rickards Vice President/Wholesaler None
Michael W. Rose Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
Faye P. Staples Vice President/Human Resources None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Not Applicable.
Item 30. Location of Accounts and Records.
All accounts and records are maintained in Philadelphia at 1818
Market Street, Philadelphia, PA 19103 or One Commerce Square,
Philadelphia, PA 19103.
Item 31. Management Services. None.
Item 32. Undertakings.
(a) Not Applicable.
(b) The Registrant hereby undertakes to file a post-effective
amendment, using financial statements which need not be
certified, within four to six months from the initial public
offering of shares of the Retirement Income Fund.
(c) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
(d) The Registrant hereby undertakes to promptly call a meeting
of shareholders for the purpose of voting upon the question
of removal of any director when requested in writing to do so
by the record holders of not less than 10% of the outstanding
shares.
xix
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
this City of Philadelphia and Commonwealth of Pennsylvania on this 12th day of
September 1996.
DELAWARE GROUP VALUE FUND, INC.
By /s/Wayne A. Stork
-------------------------------------
Wayne A. Stork
President, Chairman of the Board,
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- -------------------------------------------------- ------------------------------------------- ---------------------
<S> <C> <C>
President, Chairman of the Board,
/s/Wayne A. Stork Chief Executive Officer and Director September 12, 1996
- --------------------------------------------------
Wayne A. Stork
Senior Vice President/Chief Administrative
Officer/Chief Financial Officer (Principal
/s/David K. Downes Financial Officer and Principal Accounting
- -------------------------------------------------- Officer September 12, 1996
David K. Downes
/s/Ann R. Leven * Director September 12, 1996
- --------------------------------------------------
Ann R. Leven
/s/Anthony D. Knerr * Director September 12, 1996
- --------------------------------------------------
Anthony D. Knerr
/s/Walter P. Babich * Director September 12, 1996
- --------------------------------------------------
Walter P. Babich
/s/Charles E. Peck * Director September 12, 1996
- --------------------------------------------------
Charles E. Peck
/s/W. Thacher Longstreth * Director September 12, 1996
- --------------------------------------------------
W. Thacher Longstreth
*By /s/Wayne A. Stork
-------------------------------
Wayne A. Stork
as Attorney-in-Fact for
each of the persons indicated
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
EX-99.B1B Form of Articles Supplementary (1996)
EX-99.B5B Form of Investment Management Agreement (1996) between Delaware
Management Company, Inc. and the Registrant on behalf of Retirement Income
Fund
EX-99.B6AII Form of Distribution Agreement (1996) between Delaware Distributors, L.P. and
the Registrant on behalf of Retirement Income Fund
EX-99.B8A Executed Custodian Agreement (May 1, 1996) between The Chase Manhattan Bank
(Module Name and the Registrant on behalf of Value Fund
CHASE_CUST_AGR)
EX-99.B8B Form of Securities Lending Agreement (1996) between The Chase Manhattan Bank
and the Registrant on behalf of Value Fund
EX-99.B8C Form of Custodian Agreement (1996) between Bankers Trust Company and the
Registrant on behalf of Retirement Income Fund
EX-99.B8D Form of Securities Lending Agreement (1996) between Bankers Trust Company
and the Registrant on behalf of Retirement Income Fund
EX-99.B9A Form of Amended and Restated Shareholders Services Agreement (1996) between
Delaware Service Company, Inc. and the Registrant on behalf of each Fund
EX-99.B11 Consent of Auditors
EX-99.B15D Form of Plan under Rule 12b-1 for Retirement Income Fund A Class (1996)
EX-99.B15E Form of Plan under Rule 12b-1 for Retirement Income Fund B Class (1996)
EX-99.B15F Form of Plan under Rule 12b-1 for Retirement Income Fund C Class (1996)
EX-99.B16B Schedules of Computation for each Performance Quotation for Value Fund for
periods not previously electronically filed
EX-27 Financial Data Schedules
EX-99.B18 Plan under Rule 18f-3 (as amended May 1, 1996)
MODULE NAME
(MOD18F3)
</TABLE>
<PAGE>
[FORM]
DELAWARE GROUP VALUE FUND, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
Delaware Group Value Fund, Inc., a Maryland corporation having
its principal office in Baltimore, Maryland (the "Corporation"), hereby
certifies, in accordance with Section 2-208 and Section 2-208.1 of the Maryland
General Corporation Law, to the State Department of Assessments and Taxation of
Maryland that:
FIRST: The Corporation has authority to issue a total of Five
Hundred Million (500,000,000) shares of common stock with a par value of One
Cent ($0.01) per share of the Corporation (the "Common Stock"), having an
aggregate par value of Five Million Dollars ($5,000,000). Of such Five Hundred
Million (500,000,000) shares of Common Stock, Three Hundred Fifty Million
(350,000,000) shares have been allocated to the Series I of the Common Stock as
follows: (1) Fifty Million (50,000,000) shares have been allocated to the Value
Fund (Institutional) class; (2) Fifty Million (50,000,000) shares have been
allocated to the Value Fund C Class; (3) One Hundred Million (100,000,000)
shares have been allocated to the Value Fund B Class; and (4) One Hundred Fifty
Million (150,000,000) shares have been allocated to the Value Fund class.
SECOND: The Board of Directors of the Corporation, at a
meeting held on November __, 1996, adopted resolutions increasing the aggregate
number of shares of Common Stock that the Corporation has authority to issue
from Five Hundred Million (500,000,000) shares to One Billion (1,000,000,000)
shares, designating one additional series of the Corporation's Common Stock as
the Retirement Income Fund Series, and classifying and allocating Two Hundred
Million (200,000,000) shares of authorized, unissued and unclassified Common
Stock to the Retirement Income Fund Series. Of such Two Hundred Million
(200,000,000) shares of the Common Stock, One Hundred Million (100,000,000)
shares of the Retirement Income Fund Series of the Common Stock have been
allocated to the Retirement Income Fund A Class, Fifty Million (50,000,000)
shares of the Retirement Income Fund Series of the Common Stock have been
allocated to the Retirement Income Fund Institutional Class, and Twenty-Five
Million (25,000,000) shares of the Retirement Income Fund Series
-1-
<PAGE>
of the Common Stock have been allocated to each of the Retirement Income Fund B
Class and the Retirement Income Fund C Class. Four Hundred Fifty Million
(450,000,000) shares of the Common Stock remain authorized but unissued and
unallocated shares.
THIRD: As a result of the aforesaid increase in the authorized
Common Stock and classifications, the Corporation has authority to issue One
Billion (1,000,000,000) shares of Common Stock, having an aggregate par value of
Ten Million Dollars ($10,000,000). Of such One Billion (1,000,000,000) shares of
Common Stock, Five Hundred Fifty Million (550,000,000) shares of the Common
Stock have been allocated as follows: Three Hundred Fifty Million (350,000,000)
shares have been allocated to the Series I, and Two Hundred Million
(200,000,000) shares have been allocated to the Retirement Income Fund Series.
Of such Three Hundred Fifty Million (350,000,000) shares of the Corporation's
Common Stock allocated to the Series I, such shares have been further classified
and allocated as follows: (1) Fifty Million (50,000,000) shares have been
allocated to the Value Fund (Institutional) class; (2) Fifty Million
(50,000,000) shares have been allocated to the Value Fund C Class; (3) One
Hundred Million (100,000,000) shares have been allocated to the Value Fund B
Class; and (4) One Hundred Fifty Million (150,000,000) shares have been
allocated to the Value Fund class. Of such Two Hundred Million (200,000,000)
shares of the Corporation's Common Stock allocated to the Retirement Income Fund
Series, such shares have been further classified as follows: (1) One Hundred
Million (100,000,000) shares of the Retirement Income Fund Series of the Common
Stock have been allocated to the Retirement Income Fund A Class, (2) Fifty
Million (50,000,000) shares of the Retirement Income Fund Series of the Common
Stock have been allocated to the Retirement Income Fund Institutional Class, and
(3) Twenty-Five Million (25,000,000) shares of the Retirement Income Fund Series
of the Common Stock have been allocated to each of the Retirement Income Fund B
Class and the Retirement Income Fund C Class.
FOURTH: The shares of the Retirement Income Fund A Class, the
Retirement Income Fund B Class, the Retirement Income Fund C Class and the
Retirement Income Fund Institutional Class of the Retirement Income Fund Series
shall represent proportionate interests in the same portfolio of investments.
The shares of the Retirement Income Fund A Class, the Retirement Income Fund B
Class, the Retirement Income Fund C Class and the Retirement Income Fund
Institutional Class of the Retirement Income Fund Series shall have the same
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption, all as set forth in the Articles of Incorporation of the
Corporation, except for the differences hereinafter set forth:
1. The dividends and distributions of investment income and
capital gains with respect to shares of the
-2-
<PAGE>
Retirement Income Fund A Class, the Retirement Income Fund B
Class, the Retirement Income Fund C Class and the Retirement
Income Fund Institutional Class of the Retirement Income Fund
Series of the Common Stock shall be in such amounts as may be
declared from time to time by the Board of Directors, and such
dividends and distributions may vary with respect to each such
class from the dividends and distributions of investment
income and capital gains with respect to the other classes of
the Retirement Income Fund Series of the Common Stock, to
reflect differing allocations of the expenses of the
Corporation among the classes and any resultant difference
among the net asset values per share of the classes, to such
extent and for such purposes as the Board of Directors may
deem appropriate. The allocation of investment income and
capital gains and expenses and liabilities of the Retirement
Income Fund Series among its four classes of Common Stock
shall be determined by the Board of Directors in a manner that
is consistent with the orders, as applicable, dated April 10,
1987 and September 6, 1994 (Investment Company Act of 1940
Release Nos. 15675 and 20529) issued by the Securities and
Exchange Commission, and any amendments to such orders, any
existing or future order or any Multiple Class Plan adopted by
the Corporation in accordance with Rule 18f-3 under the
Investment Company Act of 1940, as amended, that modifies or
supersedes such orders.
2. Except as may otherwise be required by law, pursuant to any
applicable order, rule or interpretation issued by the
Securities and Exchange Commission, or otherwise, the holders
of shares of each of the Retirement Income Fund A Class, the
Retirement Income Fund B Class, the Retirement Income Fund C
Class and the Retirement Income Fund Institutional Class of
the Retirement Income Fund Series of the Common Stock shall
have (i) exclusive voting rights with respect to any matter
submitted to a vote of stockholders that affects only holders
of shares of the Retirement Income Fund A Class, the
Retirement Income Fund B Class, the Retirement Income Fund C
Class and the Retirement Income Fund Institutional Class of
the Retirement Income Fund Series, respectively, including,
without limitation, the provisions of any Distribution Plan
adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as amended (a "Distribution Plan"), applicable to
shares of the Retirement Income Fund A Class, the Retirement
Income Fund B Class and the Retirement Income Fund C Class,
and (ii) no voting rights with respect to the provisions of
any
-3-
<PAGE>
Distribution Plan applicable to any other class of the
Retirement Income Fund Series of the Common Stock or with
regard to any other matter submitted to a vote of stockholders
which does not affect holders of shares of each of the
Retirement Income Fund A Class, the Retirement Income Fund B
Class, the Retirement Income Fund C Class and the Retirement
Income Fund Institutional Class.
3. (a) Other than shares described in paragraph (3)(b) herein,
each share of the Retirement Income Fund B Class shall be
converted automatically, and without any action or choice on
the part of the holder thereof, into shares of the Retirement
Income Fund A Class on the Conversion Date. The term
"Conversion Date" when used herein shall mean a date set forth
in the prospectus of the Retirement Income Fund B Class, as
such prospectus may be amended from time to time, that is no
later than three months after either (i) the date on which the
eighth anniversary of the date of issuance of the share
occurs, or (ii) any such other anniversary date as may be
determined by the Board of Directors and set forth in the
prospectus of the Retirement Income Fund B Class, as such
prospectus may be amended from time to time; provided that any
such other anniversary date determined by the Board of
Directors shall be a date that will occur prior to the
anniversary date set forth in clause (i) and any such other
date theretofore determined by the Board of Directors pursuant
to this clause (ii); but further provided that, subject to the
provisions of the next sentence, for any shares of the
Retirement Income Fund B Class acquired through an exchange,
or through a series of exchanges, as permitted by the
Corporation as provided in the prospectus of the Retirement
Income Fund B Class, as such prospectus may be amended from
time to time, from another investment company or another
series of the Corporation (an "eligible investment company"),
the Conversion Date shall be the conversion date applicable to
the shares of stock of the eligible investment company
originally subscribed for in lieu of the Conversion Date of
any stock acquired through exchange if such eligible
investment company issuing the stock originally subscribed for
had a conversion feature, but not later than the Conversion
Date determined under (i) above. For the purpose of
calculating the holding period required for conversion, the
date of issuance of a share of the Retirement Income Fund B
Class shall mean (i) in the case of a share of the Retirement
Income Fund B Class obtained by the holder thereof through an
original subscription to the Corporation, the date of the
issuance of such share of the
-4-
<PAGE>
Retirement Income Fund B Class, or (ii) in the case of a share
of the Retirement Income Fund B Class obtained by the holder
thereof through an exchange, or through a series of exchanges,
from an eligible investment company, the date of issuance of
the share of the eligible investment company to which the
holder originally subscribed.
(b) Each share of the Retirement Income Fund B Class
(i) purchased through the automatic reinvestment of a dividend
or distribution with respect to the Retirement Income Fund B
Class or the corresponding class of any other investment
company or of any other series of the Corporation issuing such
class of shares or (ii) issued pursuant to an exchange
privilege granted by the Corporation in an exchange or series
of exchanges for shares originally purchased through the
automatic reinvestment of a dividend or distribution with
respect to shares of capital stock of an eligible investment
company, shall be segregated in a separate sub-account on the
stock records of the Corporation for each of the holders of
record thereof. On any Conversion Date, a number of the shares
held in the separate sub-account of the holder of record of
the share or shares being converted, calculated in accordance
with the next following sentence, shall be converted
automatically, and without any action or choice on the part of
the holder, into shares of the Retirement Income Fund A Class.
The number of shares in the holder's separate sub-account so
converted shall (i) bear the same ratio to the total number of
shares maintained in the separate sub-account on the
Conversion Date (immediately prior to conversion) as the
number of shares of the holder converted on the Conversion
Date pursuant to paragraph (3)(a) hereof bears to the total
number of Retirement Income Fund B Class shares of the holder
on the Conversion Date (immediately prior to conversion) after
subtracting the shares then maintained in the holder's
separate sub-account, or (ii) be such other number as may be
calculated in such other manner as may be determined by the
Board of Directors and set forth in the prospectus of the
Retirement Income Fund B Class, as such prospectus may be
amended from time to time.
(c) The number of shares of the Retirement Income
Fund A Class into which a share of the Retirement Income Fund
B Class is converted pursuant to paragraphs 3(a) and 3(b)
hereof shall equal the number (including for this purpose
fractions of a share) obtained by dividing the net asset value
per share of the Retirement Income Fund B Class for purposes
of sales
-5-
<PAGE>
and redemption thereof on the Conversion Date by the net asset
value per share of the Retirement Income Fund A Class for
purposes of sales and redemption thereof on the Conversion
Date.
(d) On the Conversion Date, the shares of the
Retirement Income Fund B Class converted into shares of the
Retirement Income Fund A Class will no longer be deemed
outstanding and the rights of the holders thereof (except the
right to receive (i) the number of shares of the Retirement
Income Fund A Class into which the shares of the Retirement
Income Fund B Class have been converted and (ii) declared but
unpaid dividends to the Conversion Date or such other date set
forth in the prospectus of the Retirement Income Fund B Class,
as such prospectus may be amended from time to time and (iii)
the right to vote converting shares of the Retirement Income
Fund B Class held as of any record date occurring on or before
the Conversion Date and theretofore set with respect to any
meeting held after the Conversion Date) will cease.
Certificates representing shares of the Retirement Income Fund
A Class resulting from the conversion need not be issued until
certificates representing shares of the Retirement Income Fund
B Class converted, if issued, have been received by the
Corporation or its agent duly endorsed for transfer.
(e) The automatic conversion of the Retirement Income
Fund B Class into the Retirement Income Fund A Class, as set
forth in paragraphs 3(a) and 3(b) of this Article FOURTH shall
be suspended at any time that the Board of Directors
determines (i) that there is not available a reasonably
satisfactory opinion of counsel to the effect that (x) the
assessment of the higher fee under the Distribution Plan with
respect to the Retirement Income Fund B Class does not result
in the Corporation's dividends or distributions constituting a
"preferential dividend" under the Internal Revenue Code of
1986, as amended, and (y) the conversion of the Retirement
Income Fund B Class does not constitute a taxable event under
federal income tax law, or (ii) any other condition to
conversion set forth in the prospectus of the Retirement
Income Fund B Class, as such prospectus may be amended from
time to time, is not satisfied.
(f) The automatic conversion of the Retirement Income
Fund B Class into Retirement Income Fund A Class, as set forth
in paragraphs 3(a) and 3(b) hereof, may also be suspended by
action of the Board of Directors at any time that the Board of
Directors
-6-
<PAGE>
determines such suspension to be appropriate in order to
comply with, or satisfy the requirements of the Investment
Company Act of 1940, as amended, and in effect from time to
time, or any rule, regulation or order issued thereunder
relating to voting by the holders of the Retirement Income
Fund B Class on any Distribution Plan with respect to, as
relevant, the Retirement Income Fund A Class and in effect
from time to time, and in connection with, or in lieu of, any
such suspension, the Board of Directors may provide holders of
the Retirement Income Fund B Class with alternative conversion
or exchange rights into other classes of stock of the
Corporation in a manner consistent with the law, rule,
regulation or order giving rise to the possible suspension of
the conversion right.
4. The shares of the Retirement Income Fund C Class and the
Retirement Income Fund Institutional Class shall not
automatically convert into shares of the Retirement Income
Fund A Class of the Retirement Income Fund Series of the
Common Stock as do the shares of the Retirement Income B Class
of the Retirement Income Fund Series of the Common Stock.
FIFTH: The shares of the Retirement Income Fund A Class, the
Retirement Income Fund B Class, the Retirement Income Fund C Class and the
Retirement Income Fund Institutional Class of the Retirement Income Fund Series
have been classified by the Board of Directors pursuant to authority contained
in the Articles of Incorporation of the Corporation.
SIXTH: The Corporation is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended.
SEVENTH: The total number of shares of Common Stock that the
Corporation has authority to issue has been increased by the Board of Directors
in accordance with Section 2-105(c) of the Maryland General Corporation Law.
EIGHTH: These Articles Supplementary shall become effective on
November __, 1996.
-7-
<PAGE>
IN WITNESS WHEREOF, Delaware Group Value Fund, Inc. has caused
these Articles Supplementary to be signed in its name and on its behalf this
____ day of November, 1996.
DELAWARE GROUP VALUE FUND, INC.
By:_____________________________________
George M. Chamberlain, Jr.
Senior Vice President
ATTEST:
__________________________________
Assistant Secretary
179052.1
-8-
<PAGE>
THE UNDERSIGNED, Senior Vice President of DELAWARE GROUP VALUE
FUND, INC., who executed on behalf of the said Corporation the foregoing
Articles Supplementary, of which this instrument is made a part, hereby
acknowledges, in the name of and on behalf of said Corporation, said Articles
Supplementary to be the corporate act of said Corporation and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the authorization and approval thereof
are true in all material respects, under the penalties of perjury.
-----------------------------------
George M. Chamberlain, Jr.
Senior Vice President
-9-
<PAGE>
FORM OF AGREEMENT
SUBJECT TO BOARD APPROVAL
DELAWARE GROUP VALUE FUND, INC.
RETIREMENT INCOME FUND
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP VALUE FUND, INC. (the
"Fund"), a Maryland corporation, for its RETIREMENT INCOME FUND series (the
"Series"), and DELAWARE MANAGEMENT COMPANY, INC. (the "Investment Manager"), a
Delaware corporation.
W I T N E S S E T H:
WHEREAS, the Fund has been organized and operates as an investment
company registered under the Investment Company Act of 1940 and engages in the
business of investing and reinvesting its assets in securities; and
WHEREAS, the Investment Manager is a registered Investment Adviser
under the Investment Advisers Act of 1940 and engages in the business of
providing investment management services; and
WHEREAS, the Investment Manager serves as the investment manager for
the other series of the Fund, known as the Value Fund series, pursuant to an
Investment Management Agreement dated as of April 3, 1995, and the Fund desires
to retain the Investment Manager to serve as the investment manager for this
Series effective as of the date of this Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Fund hereby employs the Investment Manager to manage the
investment and reinvestment of the Series' assets and to administer its affairs,
subject to the direction of the Board and officers of the Fund for the period
and on the terms hereinafter set forth. The Investment Manager hereby accepts
such employment and agrees during such period to render the services and assume
the obligations herein set forth for the compensation herein provided. The
Investment Manager shall, for all purposes herein, be deemed to be an
independent contractor, and shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent the Fund in any way, or in
any way be deemed an agent of the Fund. The Investment Manager shall regularly
make decisions as to what securities to purchase and sell on behalf of the
Series, and shall give written instructions to the Trading Department maintained
by the Fund for implementation of such decisions, and shall furnish the Board of
Directors of the Fund with such information and reports regarding the Series'
investments as the Investment Manager deems appropriate or as the Directors of
the Fund may reasonably request.
2. The Fund shall conduct its own business and affairs and shall bear
the expenses and salaries necessary and incidental thereto including, but not in
limitation of the foregoing, the costs incurred in: the maintenance of its
corporate existence; the maintenance of its own books, records and procedures;
dealing with its own shareholders; the payment of dividends; transfer of
-2-
<PAGE>
stock, including issuance, redemption and repurchase of shares; preparation
of share certificates; reports and notices to shareholders; calling
and holding of shareholders' meetings; miscellaneous office expenses; brokerage
commissions; custodian fees; legal and accounting fees; taxes; and federal and
state registration fees. The Series shall bear all of its own organizational
costs.
Directors, officers and employees of the Investment Manager may be
directors, officers and employees of the funds of which Delaware Management
Company, Inc. is Investment Manager. Directors, officers and employees of the
Investment Manager who are directors, officers and/or employees of the funds
shall not receive any compensation from the funds for acting in such dual
capacity.
In the conduct of the respective businesses of the parties hereto and
in the performance of this Agreement, the Fund and Investment Manager may share
facilities common to each, with appropriate proration of expenses between them.
3. (a) The Fund shall place and execute its own orders for the purchase
and sale of portfolio securities with broker/dealers. Subject to the primary
objective of obtaining the best available prices and execution, the Fund will
place orders for the purchase and sale of portfolio securities with such
broker/dealers selected from among those designated from time to time by the
Investment Manager, who provide statistical, factual and financial information
and services to the Fund, to the
-3-
<PAGE>
Investment Manager, or to any other fund for which the Investment Manager
provides investment advisory services and/or with broker/dealers who sell shares
of the Fund or who sell shares of any other fund for which the Investment
Manager provides investment advisory services. Broker/dealers who sell shares of
the funds of which Delaware Management Company, Inc. is investment manager,
shall only receive orders for the purchase or sale of portfolio securities to
the extent that the placing of such orders is in compliance with the Rules of
the Securities and Exchange Commission and the National Association of
Securities Dealers, Inc.
(b) Notwithstanding the provisions of subparagraph (a) above and
subject to such policies and procedures as may be adopted by the Board of
Directors and officers of the Fund, the Investment Manager may ask the Fund, and
the Fund may agree, to pay a member of an exchange, broker or dealer an amount
of commission for effecting a securities transaction in excess of the amount of
commission another member of an exchange, broker or dealer would have charged
for effecting that transaction, in such instances where it, and the Investment
Manager, have determined in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member, broker or dealer, viewed in terms of either that
particular transaction or the Investment Manager's overall responsibilities with
respect to the Fund and to other
-4-
<PAGE>
funds or other advisory accounts for which the Investment Manager exercises
investment discretion.
4. As compensation for the services to be rendered to the Fund by the
Investment Manager under the provisions of this Agreement, the Fund shall pay to
the Investment Manager monthly from the Series' assets a fee based on the
average daily net assets of the Series during the month. Such fee shall be
calculated in accordance with the following schedule.
Equivalent
Monthly Rate Annual Rate Average Daily Net Assets
- ------------ ----------- ------------------------
7.50/120 of 1% 0.750% on the first $500,000,000
7.25/120 of 1% 0.725% on the next $500,000,000
7.00/120 of 1% 0.700% on assets over $1,000,000,000
If this Agreement is terminated prior to the end of any calendar month,
the management fee shall be prorated for the portion of any month in which this
Agreement is in effect according to the proportion which the number of calendar
days during which the Agreement is in effect bears to the number of calendar
days in the month, and shall be payable within 10 days after the date of
termination.
5. The services to be rendered by the Investment Manager to the Fund
under the provisions of this Agreement are not to be deemed to be exclusive, and
the Investment Manager shall be free to render similar or different services to
others so long as its ability to render the services provided for in this
Agreement shall not be impaired thereby.
-5-
<PAGE>
6. The Investment Manager, its directors, officers, employees, agents
and shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Fund or to any other investment company, corporation, association, firm or
individual.
7. In the absence of willful misfeasance, bad faith, gross negligence,
or a reckless disregard of the performance of duties of the Investment Manager
to the Fund, the Investment Manager shall not be subject to liabilities to the
Fund or to any shareholder of the Fund for any action or omission in the course
of, or connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, holding or sale of any security, or otherwise.
8. This Agreement shall be executed and become effective as of the date
written below. It shall continue in effect for a period of two years from such
date and may be renewed thereafter only so long as such renewal and continuance
is specifically approved at least annually by the Board of Directors of the Fund
or by vote of a majority of the outstanding voting securities of the Series and
only if the terms and the renewal hereof have been approved by the vote of a
majority of the Directors of the Fund who are not parties hereto or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. Notwithstanding the foregoing, this
-6-
<PAGE>
Agreement may be terminated by the Fund at any time, without the payment of a
penalty, on sixty days' written notice to the Investment Manager of the Fund's
intention to do so, pursuant to action by the Board of Directors of the Fund or
pursuant to vote of a majority of the outstanding voting securities of the
Series. The Investment Manager may terminate this Agreement at any time, without
the payment of penalty, on sixty days' written notice to the Fund of its
intention to do so. Upon termination of this Agreement, the obligations of all
the parties hereunder shall cease and terminate as of the date of such
termination, except for any obligation to respond for a breach of this Agreement
committed prior to such termination, and except for the obligation of the Fund
to pay to the Investment Manager the fee provided in paragraph 4 hereof,
prorated to the date of termination. This Agreement shall automatically
terminate in the event of its assignment.
9. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
10. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities;" "interested persons;" and "assignment"
shall have the meanings defined in the Investment Company Act of 1940.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
having it signed by their duly authorized officers as of the 29th day of
November, 1996.
DELAWARE GROUP VALUE FUND, INC.
for the RETIREMENT INCOME FUND
By: __________________________________
Name:
Title:
Attest: ______________________________
Name:
Title:
DELAWARE MANAGEMENT COMPANY, INC.
By: __________________________________
Name:
Title:
Attest: ______________________________
Name:
Title:
-8-
<PAGE>
FORM OF AGREEMENT
SUBJECT TO BOARD APPROVAL
DELAWARE GROUP VALUE FUND, INC.
RETIREMENT INCOME FUND
DISTRIBUTION AGREEMENT
Distribution Agreement (the "Agreement") made as of this 29th day of
November, 1996 by and between DELAWARE GROUP VALUE FUND, INC., a Maryland
corporation (the "Fund"), for the RETIREMENT INCOME FUND series (the "Series"),
and DELAWARE DISTRIBUTORS, L.P. (the "Distributor"), a Delaware limited
partnership.
WITNESSETH
WHEREAS, the Fund is an investment company regulated by Federal and
State regulatory bodies, and
WHEREAS, the Distributor is engaged in the business of promoting the
distribution of the securities of investment companies and, in connection
therewith and acting solely as agent for such investment companies and not as
principal, advertising, promoting, offering and selling their securities to the
public, and
WHEREAS, the Fund desires to enter into an agreement with the
Distributor on behalf of the Series, pursuant to which the Distributor shall
serves as the national distributor of the Series' Retirement Income Fund A Class
("Class A Shares"), Retirement Income Fund B Class (the "Class B Shares"),
Retirement Income Fund C Class (the "Class C Shares"), and Retirement Income
Fund Institutional Class (the "Institutional Class Shares"), which Series and
classes may do business under these or such other names
<PAGE>
as the Board of Directors may designate from time to time, on the
terms and conditions set forth below,
NOW, THEREFORE, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. The Fund hereby engages the Distributor to promote the
distribution of the Series' shares and, in connection
therewith and as agent for the Fund and not as principal, to
advertise, promote, offer and sell the Series' shares to the
public.
2. (a) The Distributor agrees to serve as distributor of the
Series' shares and, as agent for the Fund and not as
principal, to advertise, promote and use its best efforts
to sell the Series' shares wherever their sale is legal,
either through dealers or otherwise, in such places and
in such manner, not inconsistent with the law and the
provisions of this Agreement and the Fund's Registration
Statement under the Securities Act of 1933, including the
Prospectuses contained therein, and the Statement of
Additional Information contained therein as may be
mutually determined by the Fund and the Distributor from
time to time.
(b) For the Institutional Class Shares, the Distributor will
bear all costs of financing any activity which is
primarily intended to result in the sale of that class of
shares, including, but not necessarily limited to,
-2-
<PAGE>
advertising, compensation of underwriters, dealers and
sales personnel, the printing and mailing of sales
literature and distribution of that class of shares.
(c) For its services as agent for the Class A Shares, Class
B Shares, and Class C Shares, the Distributor shall be
entitled to compensation on each sale or redemption, as
appropriate, of shares of such classes equal to any
front-end or deferred sales charge described in the
Prospectus from time to time and may allow concessions to
dealers in such amounts and on such terms as are therein
set forth.
(d) For the Class A Shares, Class B Shares, and Class C
Shares, the Fund shall, in addition, compensate the
Distributor for its services as provided in the
Distribution Plan as adopted on behalf of the Class A
Shares, Class B Shares, and Class C Shares, respectively,
pursuant to Rule 12b-1 under the Investment Company Act
of 1940 (the "Plans"), copies of which as presently in
force are attached hereto as, respectively, Exhibit "A,"
"B," and "C."
3. (a) The Fund agrees to make available for sale by the Fund
through the Distributor all or such part of the
authorized but unissued shares of the Series as the
Distributor shall require from time to time, and except
as provided in Paragraph 3(b) hereof, the Fund will not
-3-
<PAGE>
sell Series' shares other than through the efforts of the
Distributor.
(b) The Fund reserves the right from time to time (1) to sell
and issue shares other than for cash; (2) to issue shares
in exchange for substantially all of the assets of any
corporation or trust, or in exchange of shares of any
corporation or trust; (3) to pay stock dividends to its
shareholders, or to pay dividends in cash or stock at the
option of its stockholders, or to sell stock to existing
stockholders to the extent of dividends payable from time
to time in cash, or to split up or combine its
outstanding shares of common stock; (4) to offer shares
for cash to its stockholders as a whole, by the use of
transferable rights or otherwise, and to sell and issue
shares pursuant to such offers; and (5) to act as its own
distributor in any jurisdiction in which the Distributor
is not registered as a broker-dealer.
4. The Fund warrants the following:
(a) The Fund is, or will be, a properly registered investment
company, and any and all Series' shares which it will
sell through the Distributor are, or will be, properly
registered with the Securities and Exchange Commission
("SEC").
(b) The provisions of this Agreement do not violate the terms
of any instrument by which the Fund is bound, nor do they
-4-
<PAGE>
violate any law or regulation of any body having
jurisdiction over the Fund or its property.
5. (a) The Fund will supply to the Distributor a conformed copy
of the Registration Statement, all amendments thereto,
all exhibits, and each Prospectus and Statement of
Additional Information.
(b) The Fund will register or qualify the Series' shares for
sale in such states as is deemed desirable.
(c) The Fund, without expense to the Distributor,
(1) will give and continue to give such financial
statements and other information as may be required
by the SEC or the proper public bodies of the
states in which the Series' shares may be
qualified;
(2) from time to time, will furnish to the Distributor
as soon as reasonably practicable true copies of
its periodic reports to stockholders;
(3) will promptly advise the Distributor in person or
by telephone or telegraph, and promptly confirm
such advice in writing, (a) when any amendment or
supplement to the Registration Statement becomes
effective, (b) of any request by the SEC for
amendments or supplements to the Registration
Statement or the Prospectuses or for additional
information, and (c) of the issuance by the SEC of
any Stop Order suspending the effectiveness of the
Registration Statement, or the initiation of any
proceedings for that purpose;
(4) if at any time the SEC shall issue any Stop Order
suspending the effectiveness of the Registration
Statement, will make every reasonable effort to
obtain the lifting of such order at the earliest
possible moment;
(5) will from time to time, use its best effort to keep
a sufficient supply of Series' shares authorized,
any increases being subject to the approval of
shareholders as may be required;
-5-
<PAGE>
(6) before filing any further amendment to the
Registration Statement or to any Prospectus, will
furnish to the Distributor copies of the proposed
amendment and will not, at any time, whether before
or after the effective date of the Registration
Statement, file any amendment to the Registration
Statement or supplement to any Prospectus of which
the Distributor shall not previously have been
advised or to which the Distributor shall
reasonably object (based upon the accuracy or
completeness thereof) in writing;
(7) will continue to make available to its stockholders
(and forward copies to the Distributor) of such
periodic, interim and any other reports as are now,
or as hereafter may be, required by the provisions
of the Investment Company Act of 1940; and
(8) will, for the purpose of computing the offering
price of Series' shares, advise the Distributor
within one hour after the close of the New York
Stock Exchange (or as soon as practicable
thereafter) on each business day upon which the New
York Stock Exchange may be open of the net asset
value per share of the Series' shares of common
stock outstanding, determined in accordance with
any applicable provisions of law and the provisions
of the Articles of Incorporation, as amended, of
the Fund as of the close of business on such
business day. In the event that prices are to be
calculated more than once daily, the Fund will
promptly advise the Distributor of the time of each
calculation and the price computed at each such
time.
6. The Distributor agrees to submit to the Fund, prior to its
use, the form of all sales literature proposed to be generally
disseminated by or for the Distributor, all advertisements
proposed to be used by the Distributor, all sales literature
or advertisements prepared by or for the Distributor for such
dissemination or for use by others in connection with the sale
of the Series' shares, and the form of dealers' sales contract
the Distributor intends to use in connection with sales of the
Series' shares. The Distributor also agrees that the
-6-
<PAGE>
Distributor will submit such sales literature and
advertisements to the NASD, SEC or other regulatory agency as
from time to time may be appropriate, considering practices
then current in the industry. The Distributor agrees not to
use such form of dealers' sales contract or to use or to
permit others to use such sales literature or advertisements
without the written consent of the Fund if any regulatory
agency expresses objection thereto or if the Fund delivers to
the Distributor a written objection thereto.
7. The purchase price of each share sold hereunder shall be the
offering price per share mutually agreed upon by the parties
hereto, and as described in the Fund's Prospectuses, as
amended from time to time, determined in accordance with any
applicable provision of law, the provisions of its Articles of
Incorporation and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc.
8. The responsibility of the Distributor hereunder shall be
limited to the promotion of sales of Series' shares. The
Distributor shall undertake to promote such sales solely as
agent of the Fund, and shall not purchase or sell such shares
as principal. Orders for Series' shares and payment for such
orders shall be directed to the Fund's agent, Delaware Service
Company, Inc. for acceptance on behalf of the Fund. The
Distributor is not empowered to approve orders for sales of
Series' shares or accept payment for such orders. Sales of
Series' shares shall be deemed to be made when and where
-7-
<PAGE>
accepted by Delaware Service Company, Inc. on behalf of the
Fund.
9. With respect to the apportionment of costs between the Fund
and the Distributor of activities with which both are
concerned, the following will apply:
(a) The Fund and the Distributor will cooperate in preparing
the Registration Statements, the Prospectuses, the
Statement of Additional Information, and all amendments,
supplements and replacements thereto. The Fund will pay
all costs incurred in the preparation of the Fund's
Registration Statement, including typesetting, the costs
incurred in printing and mailing Prospectuses and Annual,
Semi-Annual and other financial reports to its own
shareholders and fees and expenses of counsel and
accountants.
(b) The Distributor will pay the costs incurred in printing
and mailing copies of Prospectuses to prospective
investors.
(c) The Distributor will pay advertising and promotional
expenses, including the costs of literature sent to
prospective investors.
(d) The Fund will pay the costs and fees incurred in
registering or qualifying the Series' shares with the
various states and with the SEC.
(e) The Distributor will pay the costs of any additional
copies of Fund financial and other reports and other Fund
-8-
<PAGE>
literature supplied to the Distributor by the Fund for
sales promotion purposes.
10. The Distributor may engage in other business, provided such
other business does not interfere with the performance by the
Distributor of its obligations under this Agreement.
11. The Fund agrees to indemnify, defend and hold harmless from
the assets of the Series the Distributor and each person, if
any, who controls the Distributor within the meaning of
Section 15 of the Securities Act of 1933, from and against any
and all losses, damages, or liabilities to which, jointly or
severally, the Distributor or such controlling person may
become subject, insofar as the losses, damages or liabilities
arise out of the performance of its duties hereunder except
that the Fund shall not be liable for indemnification of the
Distributor or any controlling person thereof for any
liability to the Fund or its security holders to which they
would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance of their
duties under this Agreement.
12. Copies of financial reports, Registration Statements and
Prospectuses, as well as demands, notices, requests, consents,
waivers, and other communications in writing which it may be
necessary or desirable for either party to deliver or furnish
to the other will be duly delivered or furnished, if delivered
to such party at its address shown below during regular
business hours, or if sent to that party by registered mail or
-9-
<PAGE>
by prepaid telegram filed with an office or with an agent of
Western Union or another nationally recognized telegraph
service, in all cases within the time or times herein
prescribed, addressed to the recipient at 1818 Market Street,
Philadelphia, Pennsylvania 19103, or at such other address as
the Fund or the Distributor may designate in writing and
furnish to the other.
13. This Agreement shall not be assigned, as that term is defined
in the Investment Company Act of 1940, by the Distributor and
shall terminate automatically in the event of its attempted
assignment by the Distributor. This Agreement shall not be
assigned by the Fund without the written consent of the
Distributor signed by its duly authorized officers and
delivered to the Fund. Except as specifically provided in the
indemnification provision contained in Paragraph 11 herein,
this Agreement and all conditions and provisions hereof are
for the sole and exclusive benefit of the parties hereto and
their legal successors and no express or implied provision of
this Agreement is intended or shall be construed to give any
person other than the parties hereto and their legal
successors any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provisions herein
contained.
14. (a) This Agreement shall remain in force for a period of two
years from the date hereof and from year to year
thereafter, but only so long as such continuance is
-10-
<PAGE>
specifically approved at least annually by the Board of
Directors or by vote of a majority of the outstanding
voting securities of the Series and only if the terms and
the renewal thereof have been approved by the vote of a
majority of the Directors of the Fund who are not parties
hereto or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on
such approval.
(b) The Distributor may terminate this Agreement on written
notice to the Fund at any time in case the effectiveness
of the Registration Statement shall be suspended, or in
case Stop Order proceedings are initiated by the SEC in
respect of the Registration Statement and such
proceedings are not withdrawn or terminated within thirty
days. The Distributor may also terminate this Agreement
at any time by giving the Fund written notice of its
intention to terminate the Agreement at the expiration of
three months from the date of delivery of such written
notice of intention to the Fund.
(c) The Fund may terminate this Agreement at any time on at
least thirty days prior written notice to the Distributor
(1) if proceedings are commenced by the Distributor or
any of its partners for the Distributor's liquidation or
dissolution or the winding up of the Distributor's
affairs; (2) if a receiver or trustee of the Distributor
or any of its property is appointed and such appointment
-11-
<PAGE>
is not vacated within thirty days thereafter; (3) if, due
to any action by or before any court or any federal or
state commission, regulatory body, or administrative
agency or other governmental body, the Distributor shall
be prevented from selling securities in the United States
or because of any action or conduct on the Distributor's
part, sales of the shares are not qualified for sale. The
Fund may also terminate this Agreement at any time upon
prior written notice to the Distributor of its intention
to so terminate at the expiration of three months from
the date of the delivery of such written notice to the
Distributor.
-12-
<PAGE>
15. The validity, interpretation and construction of this
Agreement, and of each part hereof, will be governed by the
laws of the Commonwealth of Pennsylvania.
16. In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect
the remainder of the Agreement, which shall continue to be in
force.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
General Partner
Attest:
_____________________________ By: ______________________________________
Name: Name:
Title: Title:
DELAWARE GROUP VALUE FUND, INC.
for the RETIREMENT INCOME FUND
Attest:
_____________________________ By: ______________________________________
Name: Name:
Title: Title:
-13-
<PAGE>
EXHIBIT A
DISTRIBUTION PLAN
DELAWARE GROUP VALUE FUND, INC.
RETIREMENT INCOME FUND
RETIREMENT INCOME FUND A CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule l2b-l under the Investment Company Act of l940 (the "Act") by Delaware
Group Value Fund, Inc. (the "Fund"), for the Retirement Income Fund series (the
"Series") on behalf of the Retirement Income Fund A Class ("Class"), which Fund,
Series and Class may do business under these or such other names as the Board of
Directors of the Fund may designate from time to time. The Plan has been
approved by a majority of the Board of Directors, including a majority of the
Directors who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Directors included
a determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Series and shareholders of the Class. The Plan has been
approved by a majority of the outstanding voting securities of the Class, as
defined in the Act.
A-1
<PAGE>
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, Inc. serves as the Series' investment adviser and manager
pursuant to an Investment Management Agreement. Delaware Service Company, Inc.
serves as the Series' shareholder servicing, dividend disbursing and transfer
agent. Delaware Distributors, L.P. (the "Distributor") is the principal
underwriter and national distributor for the Series' shares, including shares of
the Class, pursuant to the Distribution Agreement between the Distributor and
the Fund on behalf of the Series ("Distribution Agreement").
The Plan provides that:
l. The Fund shall pay to the Distributor a monthly fee not to exceed
0.3% (3/10 of l%) per annum of the Series' average daily net assets represented
by shares of the Class (the "Maximum Amount") as may be determined by the Fund's
Board of Directors from time to time. Such monthly fee shall be reduced by the
aggregate sums paid by the Fund on behalf of the Series to persons other than
broker-dealers (the "Service Providers") who may, pursuant to servicing
agreements, provide to the Series services in the Series' marketing of shares of
the Class.
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph l above to furnish, or cause or encourage others to furnish, services
and incentives in connection with the
A-2
<PAGE>
promotion, offering and sale of Class shares and, where suitable and
appropriate, the retention of Class shares by shareholders.
(b) The Service Providers shall use the monies paid
respectively to them to reimburse themselves for the actual costs they have
incurred in confirming that their customers have received the Prospectus and
Statement of Additional Information, if applicable, and as a fee for (l)
assisting such customers in maintaining proper records with the Fund, (2)
answering questions relating to their respective accounts, and (3) aiding in
maintaining the investment of their respective customers in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under the Plan. The Service
Providers shall inform the Fund monthly and in writing of the amounts each
claims under the Plan; both the Distributor and the Service Providers shall
furnish the Board of Directors of the Fund with such other information as the
Board may reasonably request in connection with the payments made under the Plan
and the use thereof by the Distributor and the Service Providers, respectively,
in order to enable the Board to make an informed determination of the amount of
the Fund's payments and whether the Plan should be continued.
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
A-3
<PAGE>
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund in writing of the commencement of the Plan (the "Commencement
Date"); thereafter, the Plan shall continue in effect for a period of more than
one year from the Commencement Date only so long as such continuance is
specifically approved at least annually by a vote of the Board of Directors of
the Fund, and of the non-interested Directors, cast in person at a meeting
called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the
amount to be spent for distribution pursuant to paragraph l thereof without
approval by the shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
A-4
<PAGE>
This Plan shall take effect on the Commencement Date, as previously
defined.
November 29, 1996
A-5
<PAGE>
EXHIBIT B
DISTRIBUTION PLAN
DELAWARE GROUP VALUE FUND, INC.
RETIREMENT INCOME FUND
RETIREMENT INCOME FUND B CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Value Fund, Inc. (the "Fund"), for the Retirement Income Fund series (the
"Series") on behalf of the Retirement Income Fund B Class (the "Class"), which
Fund, Series and Class may do business under these or such other names as the
Board of Directors of the Fund may designate from time to time. The Plan has
been approved by a majority of the Board of Directors, including a majority of
the Directors who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Directors included
a determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Series and shareholders of the Class. The Plan has been
approved by a vote of the holders of a majority of the outstanding voting
securities of the Class, as defined in the Act.
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and
B-1
<PAGE>
classes of securities and is an open-end management investment company
registered under the Act. Delaware Management Company, Inc. serves as the
Series' investment adviser and manager pursuant to an Investment Management
Agreement. Delaware Service Company, Inc. serves as the Series' shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the Series' shares, including shares of the Class, pursuant to the Distribution
Agreement between the Distributor and the Fund on behalf of the Series
("Distribution Agreement").
The Plan provides that:
1. (a) The Fund shall pay to the Distributor a monthly fee not to
exceed 0.75% (3/4 of 1%) per annum of the Series' average daily net assets
represented by shares of the Class as may be determined by the Fund's Board of
Directors from time to time.
(b) In addition to the amounts described in (a) above, the
Fund shall pay (i) to the Distributor for payment to dealers or others, or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
Series' average daily net assets represented by shares of the Class, as a
service fee pursuant to dealer or servicing agreements.
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses
B-2
<PAGE>
and reports used for sales purposes, as well as compensation related to sales
and marketing personnel, and holding special promotions. In addition, such fees
may be used to pay for advancing the commission costs to dealers with respect to
the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above
shall be used to pay dealers or others for, among other things, furnishing
personal services and maintaining shareholder accounts, which services include
confirming that customers have received the Prospectus and Statement of
Additional Information, if applicable; assisting such customers in maintaining
proper records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Directors of
the Fund with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Fund's payments and whether the Plan should
be continued.
B-3
<PAGE>
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Directors of the Fund, and
of the non-interested Directors, cast in person at a meeting called for the
purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the
amount to be spent for distribution pursuant to paragraph 1 thereof without
approval by the shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested
B-4
<PAGE>
person(s)" and "vote of a majority of the outstanding voting securities,"
respectively, for the purposes of this Plan.
This Plan shall take effect on the Commencement Date, as
previously defined.
November 29, 1996
B-5
<PAGE>
EXHIBIT C
DISTRIBUTION PLAN
DELAWARE GROUP VALUE FUND, INC.
RETIREMENT INCOME FUND
RETIREMENT INCOME FUND C CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Value Fund, Inc. (the "Fund"), for the Retirement Income Fund series (the
"Series) on behalf of the Retirement Income Fund C Class (the "Class"), which
Fund, Series and Class may do business under these or such other names as the
Board of Directors of the Fund may designate from time to time. The Plan has
been approved by a majority of the Board of Directors, including a majority of
the Directors who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Directors included
a determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Series and shareholders of the Class. The Plan has been
approved by a vote of the holders of a majority of the outstanding voting
securities of the Class, as defined in the Act.
C-1
<PAGE>
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, Inc. serves as the Series' investment adviser and manager
pursuant to an Investment Management Agreement. Delaware Service Company, Inc.
serves as the Series' shareholder servicing, dividend disbursing and transfer
agent. Delaware Distributors, L.P. (the "Distributor") is the principal
underwriter and national distributor for the Series' shares, including shares of
the Class, pursuant to the Distribution Agreement between the Distributor and
the Fund on behalf of the Series ("Distribution Agreement").
The Plan provides that:
1.(a) The Fund shall pay to the Distributor a monthly fee not to exceed
0.75% (3/4 of 1%) per annum of the Series' average daily net assets represented
by shares of the Class as may be determined by the Fund's Board of Directors
from time to time.
(b) In addition to the amounts described in paragraph 1(a) above, the
Fund shall pay: (i) to the Distributor for payment to dealers or others or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
Series' average daily net assets represented by shares of the Class, as a
service fee pursuant to dealer or servicing agreements.
2.(a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor
C-2
<PAGE>
under the Plan may be used for, among other things, preparation and
distribution of advertisements, sales literature and prospectuses and reports
used for sales purposes, as well as compensation related to sales and marketing
personnel, and holding special promotions. In addition, such fees may be used to
pay for advancing the commission costs to dealers with respect to the sale of
Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Directors of
the Fund with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board
C-3
<PAGE>
to make an informed determination of the amount of the Fund's payments
and whether the Plan should be continued.
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Directors of the Fund, and
of the non-interested Directors, cast in person at a meeting called for the
purpose of voting on such Plan.
6.(a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 thereof without approval by
the shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
C-4
<PAGE>
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
November 29, 1996
C-5
CHASE
GLOBAL CUSTODY AGREEMENT
AGREEMENT, effective May 1, 1996, between THE CHASE MANHATTAN BANK, N.A.
(the "Bank") and those registered investment companies listed on Schedule A
hereto (each a Customer ) on behalf of certain of their respective series,
as listed on Schedule A (individually and collectively the Series ).
1. Customer Accounts.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer on behalf of each
Series ("Custody Account") for any and all stocks, shares, bonds, debentures,
notes, mortgages or other obligations for the payment of money, bullion, coin
and any certificates, receipts, warrants or other instruments representing
rights to receive, purchase or subscribe for the same or evidencing or
representing any other rights or interests therein and other similar property
whether certificated or uncertificated as may be received by the Bank or its
Subcustodian (as defined in Section 3) for the account of the Customer
("Securities"); and
(b) A deposit account in the name of the Customer on behalf of each
Series ("Deposit Account") for any and all cash in any currency received by
the Bank or its Subcustodian for the account of the Customer, which cash
shall not be subject to withdrawal by draft or check.
The Customer warrants its authority to: 1) deposit the cash and
Securities ("Assets") received in the Accounts and 2) give Instructions (as
defined in Section 11) concerning the Accounts. Such Instructions shall
specifically indicate to which Series such Assets belong or, if such Assets
belong to more than one Series, shall allocate such Assets to the appropriate
Series. The Bank may deliver securities of the same class in place of those
deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional
Accounts under the terms of this Agreement.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable to
the Bank:
(a) Securities will be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
To the extent available and permissible under applicable law and
regulation, Cash held pursuant to Instructions shall be held in interest
bearing accounts. If interest bearing accounts are not available, such cash
may be held in non-interest bearing accounts. The Bank is authorized to
maintain cash balances on deposit for the Customer with itself or one of its
affiliates. Interest bearing accounts shall bear interest at such reasonable
rates of interest as may from time to time be paid on such accounts by the
Bank or its affiliates.
(iii) For each Series that is exclusively a domestic Series, the following
additional provisions shall apply:
(x) In the event that during a given calendar month a Series has maintained
an average daily cash balance greater than zero, the Bank shall provide an
earnings credit against custody fees otherwise owing hereunder by such Series
during such calendar month in an amount equal to the product of (A) 75% of
the 90 day U.S. government Treasury bill rate as quoted in the Wall Street
Journal for the last Business Day (being a day on which the Bank is open
for the transaction of all its ordinary business) of such calendar month, (B)
the average daily cash balance for such month, and (C) the number of days in
such calendar month divided by 365.
(y) In the event that during a given calendar month a Series has maintained
an average daily cash balance less than or equal to zero, the Bank shall be
paid interest on such amount by such Series in an amount equal to the product
of (A) the Overnight Fed Funds Rate (as defined below) plus 25 basis points
for the last Business Day of such calendar month, (B) the average daily cash
balance for such month, and (C) the number of days in such calendar month
divided by 365.
(z) For purposes of (y) above, the term Overnight Fed Funds Rate shall mean
the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers,
as published by the Federal Reserve Bank of New York (with the rate for the
last Business Day of a given calendar month being the rate so published on
the Business Day immediately following such Day), or, if such rate is note so
published, the average quotations, for the last Business Day of a given
calendar month, of such transactions received by the Bank from three Federal
funds brokers of recognized standing selected by the Bank.
If the Customer wishes to have any of its Assets held in the custody of
an institution other than the established Subcustodians as defined in Section
3 (or their securities depositories), such arrangement must be authorized by
a written agreement, signed by the Bank and the Customer.
3. Subcustodians and Securities Depositories.
The Bank may act under this Agreement through the subcustodians listed
in Schedule B of this Agreement with which the Bank has entered into
subcustodial agreements ("Subcustodians"). The Customer authorizes the Bank
to hold Assets in the Accounts in accounts which the Bank has established
with one or more of its branches or Subcustodians. The Bank and
Subcustodians are authorized to hold any of the Securities in their account
with any securities depository in which they participate.
The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule B. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such Subcustodian.
Upon receipt of Instructions, the Bank shall cease using any
Subcustodian with respect to the customer, and arrange for delivery of
Securities held with such Subcustodian to another entity as designated by the
Customer; provided that, the Bank shall have no responsibility for the
performance of such other entity.
4. Use of Subcustodian.
(a) The Bank will identify the Assets on its books as belonging to the
Customer.
(b) A Subcustodian will hold such Assets together with assets belonging
to other customers of the Bank in accounts identified on such Subcustodian's
books as special custody accounts for the exclusive benefit of customers of
the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject
only to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only
to the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding
its customer's assets shall provide that: (i) such assets will not be subject
to any right, charge, security interest, lien or claim of any kind in favor
of such Subcustodian except for safe custody or administration, (ii) the
beneficial ownership of such assets will be freely transferable without the
payment of money or value other than for safe custody or administration;
(iii) adequate records will be maintained identifying the assets held
pursuant to such agreement as belonging to the customers of the Bank; (iv)
subject to applicable law, Subcustodian shall permit independent public
accountants for Bank and customers of the Bank reasonable access to
Subcustodian s books and records as they pertain to the subcustody account in
connection with such accountants' examination of the books and records of
such account; and (v) the Bank will receive periodic reports with respect to
the safekeeping of assets in the subcustody account, including advices and/or
notifications of any transfers to or from such subcustody account. The
foregoing shall not apply to the extent of any special agreement or
arrangement made by the Customer with any particular Subcustodian.
(e) Upon request of the Customer, the Bank shall deliver to the Customer
annually a report stating: (i) the identity of each Subcustodian then acting
on behalf of the Bank and the name and address of the governmental agency or
other regulatory authority that supervises or regulates such Subcustodian;
(ii) the countries in which each Subcustodian is located; and (iii) as long
as Securities and Exchange Commission ("SEC") Rule 17f-5 under the Investment
Company Act of 1940, as amended ("1940 Act"), requires the Customer s Board
of Directors/Trustees directly to approve its foreign custody arrangements,
such other information relating to such Subcustodians as may reasonably be
requested by the Customer to ensure compliance with Rule 17f-5. As long as
Rule 17f-5 requires the Customer s Board of Directors/Trustees directly to
approve its foreign custody arrangements, the Bank shall also furnish
annually to the Customer information concerning such Subcustodians similar in
kind and scope as that furnished to the Customer in connection with the
initial approval hereof. The Bank shall timely advise the Customer of any
material adverse change in the facts or circumstances upon which such
information is based where such changes would affect the eligibility of the
Subcustodian under Rule 17f-5 as soon as practicable after it becomes aware
of any such material adverse change in the normal course of its custodial
activities.
5. Deposit Account Transactions
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required
by the Bank.
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, the Bank, in its
discretion, may advance the Customer such excess amount which shall be deemed
a loan payable on demand, bearing interest at the rate customarily charged by
the Bank on similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or at
any time prior to actual collection and reconciliation to the Deposit
Account, with interest, dividends, redemptions or any other amount due, the
Customer will promptly return any such amount upon oral or written
notification: (i) that such amount has not been received in the ordinary
course of business or (ii) that such amount was incorrectly credited. If the
Customer does not promptly return any amount upon such notification, the Bank
shall be entitled, upon oral or written notification to the Customer, to
reverse such credit by debiting the Deposit Account for the amount previously
credited. The Bank or its Subcustodian shall have no duty or obligation to
institute legal proceedings, file a claim or a proof of claim in any
insolvency proceeding or take any other action with respect to the collection
of such amount, but may act for the Customer upon Instructions after
consultation with the Customer.
6. Custody Account Transactions.
(a) Securities will be transferred, exchanged or delivered by the Bank
or its Subcustodian upon receipt by the Bank of Instructions which include
all information required by the Bank. Settlement and payment for Securities
received for, and delivery of Securities out of, the Custody Account may be
made in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without limitation, delivery of
Securities to a purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery. Delivery of
Securities out of the Custody Account may also be made in any manner
specifically required by Instructions acceptable to the Bank.
(b) The Bank shall credit or debit the Accounts on a contractual
settlement date with cash or Securities with respect to any sale, exchange or
purchase of Securities in those countries set forth in Appendix A hereto;
provided that, the Bank may amend Appendix A from time to time in its sole
discretion and shall advise the Customer of such amendments. Otherwise,
transactions will be credited or debited to the Accounts on the date cash or
Securities are actually received by the Bank and reconciled to the Account.
(i) The Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by the Bank in its discretion, after the contractual
settlement date for the related transaction; provided that, the Bank shall
give Customer prior notification of any such reversal. Where the foregoing
notification is oral, the Bank shall promptly provide written confirmation of
the same (which confirmation may be electronic).
(ii) If any Securities delivered pursuant to this Section 6 are returned
by the recipient thereof, the Bank may reverse the credits and debits of the
particular transaction at any time.
7. Actions of the Bank.
The Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items
which call for payment upon presentation, to the extent that the Bank or
Subcustodian is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian, subject to applicable SEC rules and regulations under the Act.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any
transfers of Assets to or from the Accounts. Such statements, advices or
notifications shall indicate the identity of the entity having custody of the
Assets. Unless the Customer advises the Bank orally and then promptly sends
the Bank a written exception or objection to any Bank statement within 180
days of receipt, the Customer shall be deemed to have approved such
statement.
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of the
Customer. Subject to the standard of care in Section 12 hereof, the Bank shall
have no liability for any loss occasioned by delay in the actual receipt of
notice by the Bank or by its Subcustodians of any payment, redemption or other
transaction regarding Securities in the Custody Account in respect of which
the Bank has agreed to take any action under this Agreement.
8. Corporate Actions; Proxies; Tax Reclaims.
a. Corporate Actions. Whenever the Bank receives information
concerning the Securities which requires discretionary action by the
beneficial owner of the Securities (other than a proxy), such as subscription
rights, bonus issues, stock repurchase plans and rights offerings, or legal
notices or other material intended to be transmitted to securities holders
("Corporate Actions"), the Bank will give the Customer written notice (which
may be electronic) of such Corporate Actions to the extent that the Bank's
central corporate actions department has actual knowledge of a Corporate
Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank will endeavor to obtain
Instructions from the Customer or its Authorized Person (as defined in Section
10 hereof), but if Instructions are not received in time for the Bank to take
timely action, or actual notice of such Corporate Action was received too
late to seek Instructions, the Bank is authorized to sell such rights
entitlement or fractional interest and to credit the Deposit Account with the
proceeds or take any other action it deems, in good faith, to be appropriate
in which case it shall be held harmless for any such action.
b. Proxy Voting. With respect to domestic U.S. and Canadian Securities
(the latter if held in DTC), the Bank will send to the Customer or the
Authorized Person (as defined in Section 10) for a Custody Account, such proxies
(signed in blank, if issued in the name of the Bank's nominee or the nominee
of a central depository) and communications with respect to Securities in the
Custody Account as call for voting or relate to legal proceedings within a
reasonable time after sufficient copies are received by the Bank for
forwarding to its customers. In addition, the Bank will follow coupon
payments, redemptions, exchanges or similar matters with respect to
Securities in the Custody Account and advise the Customer or the Authorized
Person for such Account of rights issued, tender offers or any other
discretionary rights with respect to such Securities, in each case, of which
the Bank has received notice from the issuer of the Securities, or as to
which notice is published in publications routinely utilized by the Bank for
this purpose.
With respect to Securities other than the foregoing, proxy voting
services shall be provided in accordance with separate proxy voting agreement
annexed hereto a Appendix B.
The foregoing proxy voting services may be provided by Bank, in whole or
in part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank), provided that the Bank shall be liable for the
performance of any such third parties to the same extent as the Bank would
have been if it performed such services itself..
c. Tax Reclaims. (i) Subject to the provisions hereof, the Bank will
apply for a reduction of withholding tax and any refund of any tax paid or
tax credits which apply in each applicable market in respect of income
payments on Securities for the benefit of the Customer which the Bank
believes may be available to such Customer. Where such reports are available,
the Bank shall periodically report to Customer concerning the making of
applications for a reduction of withholding tax and refund of any tax paid or
tax credits which apply in each applicable market in respect of income
payments on Securities for the benefit of the Customer.
(ii) The provision of tax reclaim services by the Bank is conditional
upon the Bank receiving from the beneficial owner of Securities (A) a
declaration of its identity and place of residence and (B) certain other
documentation (pro forma copies of which are available from the Bank). The
Bank shall use reasonable means to advise the Customer of the declarations,
documentation and information which the Customer is to provide to the Bank in
order for the Bank to provide the tax reclaim services described herein. The
Customer acknowledges that, if the Bank does not receive such declarations,
documentation and information, additional United Kingdom taxation will be
deducted from all income received in respect of Securities issued outside the
United Kingdom and that U.S. non-resident alien tax or U.S. backup
withholding tax will be deducted from U.S. source income. The Customer shall
provide to the Bank such documentation and information as it may require in
connection with taxation, and warrants that, when given, this information
shall be true and correct in every respect, not misleading in any way, and
contain all material information. The Customer undertakes to notify the Bank
immediately if any such information requires updating or amendment.
(iii) Subject to subsection (vii) hereof, the Bank shall not be liable
to the Customer or any third party for any tax, fines or penalties payable by
the Bank or the Customer, and shall be indemnified accordingly, whether these
result from the inaccurate completion of documents by the Customer or any
third party, or as a result of the provision to the Bank or any third party
of inaccurate or misleading information or the withholding of material
information by the Customer or any other third party, or as a result of any
delay of any revenue authority or any other matter beyond the control of the
Bank.
(iv) The Customer confirms that the Bank is authorized to deduct from
any cash received or credited to the Cash Account any taxes or levies
required by any revenue or governmental authority for whatever reason in
respect of the Securities or Cash Accounts.
(v) The Bank shall perform tax reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified to the
Customer from time to time and the Bank may, by notification in writing, at
its absolute discretion, supplement or amend the markets in which the tax
reclaim services are offered. Other than as expressly provided in this sub-
clause, the Bank shall have no responsibility with regard to the Customer's
tax position or status in any jurisdiction. Except as provided in Section
8(c)(ii) and pursuant to Instructions, the Bank shall take no action in the
servicing of the Customer s Securities which, in and of itself, creates a
taxable nexus for the Customer in any jurisdiction other than with respect to
interest, dividends and capital gains that may otherwise be subject to tax by
such jurisdiction with respect to a foreign investor not otherwise engaged in
a trade or business in such jurisdiction in a given taxable year. Bank shall
not be liable for any tax liability caused, directly or indirectly, by
Customer's actions or status in any jurisdiction.
(vi) In connection with obtaining tax relief, the Customer confirms
that the Bank is authorized to disclose any information requested by any
revenue authority or any governmental body in relation to the Customer or the
Securities and/or Cash held for the Customer. This provision does not
authorize any other voluntary disclosure to any revenue authority or any
governmental body without the prior written consent of Customer.
(vii) Tax reclaim services may be provided by the Bank or, in whole or
in part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank); provided that the Bank shall be liable for the
performance of any such third party to the same extent as the Bank would have
been if it performed such services itself.
9. Nominees.
Securities which are ordinarily held in registered form may be
registered in a nominee name of the Bank, Subcustodian or securities
depository, as the case may be. The Bank may without notice to the Customer
cause any such Securities to cease to be registered in the name of any such
nominee and to be registered in the name of the Customer. In the event that
any Securities registered in a nominee name are called for partial redemption
by the issuer, the Bank may allot the called portion to the respective
beneficial holders of such class of security in any manner the Bank deems to
be fair and equitable. The Customer agrees to hold the Bank, Subcustodians,
and their respective nominees harmless from any liability arising directly or
indirectly from their status as a mere record holder of Securities in the
Custody Account.
10. Authorized Persons.
As used in this Agreement, the term "Authorized Person" means employees
or agents including investment managers as have been designated by written
notice from the Customer or its designated agent to act on behalf of the
Customer under this Agreement. Such persons shall continue to be Authorized
Persons until such time as the Bank receives Instructions from the Customer
or its designated agent that any such employee or agent is no longer an
Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information
system acceptable to the Bank which the Bank reasonably believes in good
faith to have been given by Authorized Persons or which are transmitted with
proper testing or authentication pursuant to terms and conditions which the
Bank may specify. Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until canceled or superseded. For
purposes hereof, reasonableness shall mean compliance with applicable
procedures.
Any Instructions delivered to the Bank by telephone (including cash
transfer instructions as described below) shall promptly thereafter be
confirmed in writing by any two Authorized Persons (which confirmation may
bear the facsimile signature of such Persons), but the Customer will hold the
Bank harmless for the failure of such Authorized Persons to send such
confirmation in writing, the failure of such confirmation to conform to the
telephone instructions received or the Bank's failure to produce such
confirmation at any subsequent time; provided that, where the Bank receives
a telephone Instruction from an Authorized Person requiring the transfer of
cash, prior to executing such Instruction the Bank will, to confirm such
Instruction, call back any one of the individuals on a list of persons
authorized to confirm such oral transfer Instructions (which Person shall be
a person other than the initiator of the transfer Instruction) and the Bank
shall not execute the Instruction until it has received such confirmation.
Either party may electronically record any Instructions given by telephone,
and any other telephone discussions with respect to the Custody Account. The
Customer shall be responsible for safeguarding any testkeys, identification
codes or other security devices which the Bank shall make available to the
Customer or its Authorized Persons.
12. Standard of Care; Liabilities.
(a) The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement or expressly contained in
Instructions which are consistent with the provisions of this Agreement as
follows:
(i) The Bank will use reasonable care with respect to its obligations
under this Agreement and the safekeeping of Assets. The Bank shall be liable
to the Customer for any loss which shall occur as the result of the failure
of a Subcustodian to exercise reasonable care with respect to the safekeeping
of such Assets to the same extent that the Bank would be liable to the
Customer if the Bank were holding such Assets in New York. In the event that
Securities are lost by reason of the failure of the Bank or its Subcustodian
to use reasonable care, the Bank shall be liable to the Customer based on the
market value of the property which is the subject of the loss on the date it
is replaced by the Bank and without reference to any special conditions or
circumstances, it being understood that for purposes of measuring damages
hereunder, the value of Securities which are sold by the Customer prior to
the replacement thereof shall be equal to the sale price thereof less the
expenses of such sale incurred by the Customer. The Bank shall act with
reasonable promptness in making such replacements. In no event shall the
Bank be liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Bank
has been advised of the likelihood of such loss or damage and regardless of
the form of action. Subject to the Bank's obligations pursuant to Section 4(e)
hereof, the Bank will not be responsible for the insolvency of any
Subcustodian which is not a branch or affiliate of Bank.
(ii) The Bank will not be responsible for any act, omission, default or
the solvency of any broker or agent which it or a Subcustodian appoints
unless such appointment was made negligently or in bad faith.
(iii) (a) The Bank shall be indemnified by, and without liability to
the Customer for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise pursuant to this Agreement if such act or omission
was in good faith, without negligence. In performing its obligations under
this Agreement, the Bank may rely on the genuineness of any Customer document
which it reasonably believes in good faith to have been validly executed.
(b) The Bank shall hold Customer harmless from, and shall indemnify Customer
for, any loss, liability, claim or expense incurred by Customer (including,
but not limited to, Customer's reasonable legal fees) to the extent that such
loss, liability, claim or expense arises from the negligence or willful mis-
conduct on the part of the Bank or a Subcustodian; provided that, in no event
shall the Bank be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits),
even if the Bank has been advised of the likelihood of such loss or damage
and regardless of the form of action. Subject to the Bank's obligations
pursuant to Section 4(e) hereof, the Bank will not be responsible for the
insolvency of any Subcustodian which is not a branch or affiliate of Bank.
(iv) The Customer agrees to pay for and hold the Bank harmless from any
liability or loss resulting from the imposition or assessment of any taxes or
other governmental charges, and any related expenses with respect to income
from or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act, upon the advice of
counsel (who may be counsel for the Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
(vi) The Bank need not maintain any insurance for the benefit of the
Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable
for any loss which results from: 1) the general risk of investing, or 2)
investing or holding Assets in a particular country including, but not
limited to, losses resulting from nationalization, expropriation or other
governmental actions; regulation of the banking or securities industry;
currency restrictions, devaluations or fluctuations; and market conditions
which prevent the orderly execution of securities transactions or affect the
value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear
fusion, fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty
or responsibility to:
(i) question Instructions or make any suggestions to the Customer or an
Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or
the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other than a
Security.
(iv) except as may be otherwise provided in any securities lending
agreement between the Customer and the Bank, evaluate or report to the
Customer or an Authorized Person regarding the financial condition of any
broker, agent or other party to which Securities are delivered or payments
are made pursuant to this Agreement;
(v) except for trades settled at DTC where the broker provides to the
Bank the trade confirmation and the Customer provides for the Bank to receive
the trade instruction, review or reconcile trade confirmations received from
brokers. The Customer or its Authorized Persons (as defined in Section 10)
issuing Instructions shall bear any responsibility to review such
confirmations against Instructions issued to and statements issued by the
Bank.
(c) The Customer authorizes the Bank to act, hereunder, in its capacity
as a custodian notwithstanding that the Bank or any of its divisions or
affiliates may have a material interest in a transaction, or circumstances
are such that the Bank may have a potential conflict of duty or interest
including the fact that the Bank or any of its affiliates may provide
brokerage services to other customers, act as financial advisor to the issuer
of Securities, act as a lender to the issuer of Securities, act in the same
transaction as agent for more than one customer, have a material interest in
the issue of Securities, or earn profits from any of the activities listed
herein.
13. Fees and Expenses.
The Customer agrees to pay the Bank for its services under this
Agreement such amount as may be agreed upon in writing ("Fee Schedule"),
together with the Bank's reasonable out-of-pocket or incidental expenses (as
further defined in the Fee Schedule), including, but not limited to, legal
fees. The Bank shall have a lien on and is authorized to charge any Accounts
of the Customer for any amount owing to the Bank under any provision of this
Agreement.
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration of
the Customer's trading and investment activity, the Bank is authorized to
enter into spot or forward foreign exchange contracts with the Customer or an
Authorized Person for the Customer and may also provide foreign exchange
through its subsidiaries, affiliates or Subcustodians. Instructions,
including standing instructions, may be issued with respect to such contracts
but the Bank may establish rules or limitations concerning any foreign
exchange facility made available. In all cases where the Bank, its
subsidiaries, affiliates or Subcustodians enter into a foreign exchange
contract related to Accounts, the terms and conditions of the then current
foreign exchange contract of the Bank, its subsidiary, affiliate or
Subcustodian and, to the extent not inconsistent, this Agreement shall apply
to such transaction.
(b) Certification of Residency, etc. The Customer certifies that it is
a resident of the United States and agrees to notify the Bank of any changes
in residency. The Bank may rely upon this certification or the certification
of such other facts as may be required to administer the Bank's obligations
under this Agreement. The Customer will indemnify the Bank against all
losses, liability, claims or demands arising directly or indirectly from any
such certifications.
(c) Access to Records. Applicable accounts, books and records of the
Bank shall be open to inspection and audit at all reasonable times during
normal business hours upon reasonable advance notice by Customer s
independent public accountants and by employees of Customer designated to the
Bank. All such materials shall, to the extent applicable, be maintained and
preserved in conformity with the Act and the rules and regulations
thereunder, including without limitation, SEC Rules 31a-1 and 31a-2. Subject
to restrictions under applicable law, the Bank shall also obtain an
undertaking to permit the Customer's independent public accountants
reasonable access to the records of any Subcustodian which has physical
possession of any Assets as may be required in connection with the
examination of the Customer's books and records.
(d) Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and
the Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that the
Assets deposited in the Accounts are Mutual Fund assets subject to certain
Securities and Exchange Commission ("SEC") rules and regulations.
This Agreement consists exclusively of this document together with
Schedules A and B, Appendices 1 and 2, Exhibits I - _______ and the following
Rider(s) [Check applicable rider(s)]:
X MUTUAL FUND
----
X SPECIAL TERMS AND CONDITIONS
----
There are no other provisions of this Agreement, and this Agreement
supersedes any other agreements, whether written or oral, between the
parties. Any amendment to this Agreement must be in writing, executed by
both parties.
(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or unenforceable in any respect on the
basis of any particular circumstances or in any jurisdiction, the validity,
legality and enforceability of such provision or provisions under other
circumstances or in other jurisdictions and of the remaining provisions will
not in any way be affected or impaired.
(g) Waiver. Except as otherwise provided in this Agreement, no failure
or delay on the part of either party in exercising any power or right under
this Agreement operates as a waiver, nor does any single or partial exercise
of any power or right preclude any other or further exercise, or the exercise
of any other power or right. No waiver by a party of any provision of this
Agreement, or waiver of any breach or default, is effective unless in writing
and signed by the party against whom the waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses
or such other addresses as may subsequently be given to the other party in
writing:
Bank: The Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Custody Division
or telex:
-------------------------------------
Customer: Delaware Group of Funds
1818 Market St.
Philadelphia, PA 19103
att: Messrs. Bishof and O Conner
or telex:
--------------------------------------
(i) Termination. This Agreement may be terminated by the Customer or
the Bank by giving sixty (60) days written notice to the other, provided that
such notice to the Bank shall specify the names of the persons to whom the
Bank shall deliver the Assets in the Accounts. If notice of termination is
given by the Bank, the Customer shall, within sixty (60) days following
receipt of the notice, deliver to the Bank Instructions specifying the names
of the persons to whom the Bank shall deliver the Assets. In either case the
Bank will deliver the Assets to the persons so specified, after deducting any
amounts which the Bank determines in good faith to be owed to it under
Section 13. If within sixty (60) days following receipt of a notice of
termination by the Bank, the Bank does not receive Instructions from the
Customer specifying the names of the persons to whom the Bank shall deliver
the Assets, the Bank, at its election, may deliver the Assets to a bank or
trust company doing business in the State of New York to be held and disposed
of pursuant to the provisions of this Agreement, or to Authorized Persons, or
may continue to hold the Assets until Instructions are provided to the Bank;
provided that, where the Bank is the terminating party and the Bank had not
notified the Customer that termination was for breach of this Agreement by
the Customer, such 60 day period shall be extended for an additional period
as requested by Customer of up to 120 days.
Termination as to One or More Series. This Agreement may be terminated
as to one or more Series (but less than all the Series) by delivery of an
amended Schedule A deleting such Series, in which case termination as to the
deleted Series shall take effect sixty (60) days after the date of such
delivery. The execution and delivery of an amended Schedule A which deletes
one or more Series, shall constitute a termination hereof only with respect
to such deleted Series, shall be governed by the preceding provisions of
Section 14 as to the identification of a successor custodian and the delivery
of the Assets of the Series so deleted to such successor custodian, and shall
not affect the obligations of the Bank and the Customer hereunder with
respect to the other Series set forth in Schedule A, as amended from time to
time.
(j) Several Obligations of the Series. With respect to any obligations
of the Customer on behalf of the Series and their related Accounts arising
hereunder, the Custodian shall look for payment or satisfaction of any such
obligation solely to the assets and property of the Series and such Accounts
to which such obligation relates as though the Customer had separately
contracted with the Custodian by separate written instrument with respect to
each Series and its Accounts.
CUSTOMER
By: /s/ Michael P. Bishof
---------------------
Title Vice President and Treasurer
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Rosemary M. Stidmon
-----------------------
Title Vice President
STATE OF Pennsylvania)
: ss.
COUNTY OF Philadelphia)
On this 9th day of July, 1996, before me personally came Michael P. Bishof,
to me known, who being by me duly sworn, did depose and say that he resides
in Blue Bell, PA at 110 Spyglass Drive; that he is Vice President/Treasurer
of Delaware Group of Funds, the entity described in and which executed the
foregoing instrument; that he knows the seal of said entity, that the seal
affixed to said instrument is such seal, that it was so affixed by order of
said entity, and that he signed his name thereto by like order.
/s/ Maritza H. Cruzado
-----------------------
Maritza H. Cruzado
Notary
Sworn to before me this 9th
day of July, 1996.
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 24th day of May, 1996, before me personally came Rosemary
Stidmon, to me known, who being by me duly sworn, did depose and say that she
resides in New Providence, NJ at 31 Sagamore Drive; that she is a Vice
President of THE CHASE MANHATTAN BANK, (National Association), the
corporation described in and which executed the foregoing instrument; that
she knows the seal of said corporation, that the seal affixed to said
instrument is such corporate seal, that it was so affixed by order of the
Board of Directors of said corporation, and that she signed her name thereto
by like order.
Sworn to before me this 24th
day of May, 1996.
/s/ Laiyee Ng
- -------------
Laiyee Ng
Notary
Schedule A
Delaware Pooled Trust, Inc. - Global Fixed Income Portfolio
Delaware Pooled Trust, Inc. - International Equity Portfolio
Delaware Pooled Trust, Inc. - Labor Select International Equity Portfolio
Delaware Pooled Trust, Inc. - Real Estate Investment Trust Portfolio
Delaware Pooled Trust, Inc. - High Yield Portfolio
Delaware Pooled Trust, Inc. - International Fixed Income Portfolio
Delaware Pooled Trust, Inc. - Defensive Equity Utility Portfolio
Delaware Group Global & International Funds, Inc. - International Equity Fund
Delaware Group Global & International Funds, Inc. - Global Assets Fund
Delaware Group Global & International Funds, Inc. - Global Bond Fund
Delaware Group Global & International Funds, Inc. - Emerging Markets Fund
Delaware Group Premium Fund, Inc. - International Equity Series
Delaware Group Premium Fund, Inc. - Equity Income Series
Delaware Group Premium Fund, Inc. - High Yield Series
Delaware Group Premium Fund, Inc. - Capital Reserves Series
Delaware Group Premium Fund, Inc. - Money Market Series
Delaware Group Premium Fund, Inc. - Growth Series
Delaware Group Premium Fund, Inc. - Multiple Strategy Series
Delaware Group Premium Fund, Inc. - Value Series
Delaware Group Premium Fund, Inc. - Emerging Growth Series
Delaware Group Premium Fund, Inc. - Global Bond Series
Delaware Group Delchester High-Yield Bond Fund, Inc.
Delaware Group Delaware Fund, Inc. - Delaware Fund
Delaware Group Delaware Fund, Inc. - Devon Fund
Delaware Group Value Fund, Inc.
Delaware Group DelCap Fund, Inc.
Delaware Group Dividend & Income Fund, Inc.
Delaware Group Advisor Funds, Inc. - Enterprise Fund
Delaware Group Advisor Funds, Inc. - U.S. Growth Fund
Delaware Group Advisor Funds, Inc. - World Growth Fund
Delaware Group Advisor Funds, Inc. - New Pacific Fund
Delaware Group Advisor Funds, Inc. - Federal Bond Fund
Delaware Group Advisor Funds, Inc. - Corporate Income Fund
March, 1996 Schedule B
SUB-CUSTODIANS EMPLOYED BY
THE CHASE MANHATTAN BANK, N.A. LONDON, GLOBAL CUSTODY
<TABLE>
<CAPTION>
<S> <C> <C>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
ARGENTINA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Arenales 707, 5th Floor Buenos Aires
De Mayo 130/140
1061Buenos Aires
ARGENTINA
AUSTRALIA The Chase Manhattan Bank The Chase Manhattan Bank
Australia Limited Australia Limited
36th Floor Sydney
World Trade Centre
Jamison Street
Sydney
New South Wales 2000
AUSTRALIA
AUSTRIA Creditanstalt - Bankverein Credit Lyonnais
Schottengasse 6 Vienna
A - 1011, Vienna
AUSTRIA
BANGLADESH Standard Chartered Bank Standard Chartered Bank
18-20 Motijheel C.A. Dhaka
Box 536,
Dhaka-1000
BANGLADESH
BELGIUM Generale Bank Credit Lyonnais Bank
3 Montagne Du Parc Brussels
1000 Bruxelles
BELGIUM
BOTSWANA Barclays Bank of Botswana Limited Barclays Bank of Botswana
Barclays House Gaborone
Khama Crescent
Gaborone
BOTSWANA
BRAZIL Banco Chase Manhattan, S.A. Banco Chase Manhattan S.A.
Chase Manhattan Center Sao Paulo
Rua Verbo Divino, 1400
Sao Paulo, SP 04719-002
BRAZIL
CANADA The Royal Bank of Canada Royal Bank of Canada
Royal Bank Plaza Toronto
Toronto
Ontario M5J 2J5
CANADA
Canada Trust Royal Bank of Canada
Canada Trust Tower Toronto
BCE Place
161 Bay at Front
Toronto
Ontario M5J 2T2
CANADA
CHILE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Agustinas 1235 Santiago
Casilla 9192
Santiago
CHILE
COLOMBIA Cititrust Colombia S.A. Cititrust Colombia S.A.
Sociedad Fiduciaria Sociedad Fiduciaria
Carrera 9a No 99-02 Santafe de Bogota
Santafe de Bogota, DC
COLOMBIA
CZECH REPUBLIC
Ceskoslovenska Obchodni Banka, A.S. Komercni Banka, A.S.,
Na Prikope 14 Praha
115 20 Praha 1
CZECH REPUBLIC
DENMARK Den Danske Bank Den Danske Bank
2 Holmens Kanala DK 1091 Copenhagen
Copenhagen
DENMARK
EGYPT National Bank of Egypt National Bank of Egypt
24 Sherif Street Cairo
Cairo
EGYPT
EUROBONDS Cedel S.A. ECU:Lloyds Bank PLC
67 Boulevard Grande Duchesse Charlotte International Banking Division
LUXEMBOURG London
A/c The Chase Manhattan Bank, N.A. For all other currencies: see
London relevant country
A/c No. 17817
EURO CDS First Chicago Clearing Centre ECU:Lloyds Bank PLC
27 Leadenhall Street Banking Division London
London EC3A 1AA For all other currencies: see
UNITED KINGDOM relevant country
FINLAND Merita Bank KOP Merita Bank KOP
Aleksis Kiven 3-5 Helsinki
00500 Helsinki
FINLAND
FRANCE Banque Paribas Societe Generale
Ref 256 Paris
BP 141
3, Rue D'Antin
75078 Paris
Cedex 02
FRANCE
GERMANY Chase Bank A.G. Chase Bank A.G.
Alexanderstrasse 59 Frankfurt
Postfach 90 01 09
60441 Frankfurt/Main
GERMANY
GHANA Barclays Bank of Ghana Barclays Bank
Barclays House Accra
High Street
Accra
GHANA
GREECE Barclays Bank Plc National Bank of Greece S.A.
1 Kolokotroni Street Athens
10562 Athens A/c Chase Manhattan Bank, N.A.,
GREECE London
A/c No. 040/7/921578-68
HONG KONG The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
40/F One Exchange Square Hong Kong
8, Connaught Place
Central, Hong Kong
HONG KONG
HUNGARY Citibank Budapest Rt. Citibank Budapest Rt.
Vaci Utca 19-21 Budapest
1052 Budapest V
HUNGARY
INDIA The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
52/60 Mahatma Gandhi Road Bombay
Bombay 400 001
INDIA
Deutsche Bank AG, Bombay Branch Deutsche Bank
Securities & Custody Services Bombay
Kodak House
222 D.N. Road, Fort
Bombay 400 001
INDIA
INDONESIA The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
Banking Corporation Limited Jakarta
World Trade Center
J1. Jend Sudirman Kav. 29-31
Jakarta 10023
INDONESIA
IRELAND Bank of Ireland Allied Irish Bank
International Financial Services Centre Dublin
1 Harbourmaster Place
Dublin 1
IRELAND
ISRAEL Bank Leumi Le-Israel B.M. Bank Leumi Le-Israel B.M.
19 Herzl Street Tel Aviv
61000 Tel Aviv
ISRAEL
ITALY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Piazza Meda 1 Milan
20121 Milan
ITALY
JAPAN The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1-3 Marunouchi 1-Chome Tokyo
Chiyoda-Ku
Tokyo 100
JAPAN
JORDAN Arab Bank Limited Arab Bank Limited
P O Box 950544-5 Amman
Amman
Shmeisani
JORDAN
KENYA Barclays Bank of Kenya Barclays Bank of Kenya
Third Floor Nairobi
Queensway House
Nairobi
Kenya
LUXEMBOURG
Banque Generale du Luxembourg S.A. Banque Generale du Luxembourg
50 Avenue J.F. Kennedy S.A.
L-2951 LUXEMBOURG Luxembourg
MALAYSIA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Pernas International Kuala Lumpur
Jalan Sultan Ismail
50250, Kuala Lumpur
MALAYSIA
MAURITIUS Hongkong and Shanghai Banking The Hongkong and Shanghai Banking
Corporation Ltd Corporation Ltd.
Curepipe Road Curepipe
Curepipe
MAURITIUS
MEXICO The Chase Manhattan Bank, S.A. No correspondent Bank
(Equities)Montes Urales no. 470, 4th Floor
Col. Lomas de Chapultepec
11000 Mexico D.F.
(Government Banco Nacional de Mexico, No correspondent Bank
Bonds) Avenida Juarez No. 104 - 11 Piso
06040 Mexico D.F.
MEXICO
MOROCCO Banque Commerciale du Maroc Banque Commerciale du Maroc
2 Boulevard Moulay Youssef Casablanca
Casablanca 20000
MOROCCO
NETHERLANDS
ABN AMRO N.V. Generale Bank
Securities Centre Nederland N.V.
P O Box 3200 Rotterdam
4800 De Breda
NETHERLANDS
NEW ZEALAND
National Nominees Limited National Bank of New Zealand
Level 2 BNZ Tower Wellington
125 Queen Street
Auckland
NEW ZEALAND
NORWAY Den Norske Bank Den Norske Bank
Kirkegaten 21 Oslo
Oslo 1
NORWAY
PAKISTAN Citibank N.A. Citibank N.A.
I.I. Chundrigar Road Karachi
AWT Plaza
Karachi
PAKISTAN
Deutsche Bank Deutsche Bank
Unitowers Karachi
I.I. Chundrigar Road
Karachi
PAKISTAN
PERU Citibank, N.A. Citibank N.A.
Camino Real 457 Lima
CC Torre Real - 5th Floor
San Isidro, Lima 27
PERU
PHILIPPINES
The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
Hong Kong Bank Centre 3/F Manila
San Miguel Avenue
Ortigas Commercial Centre
Pasig Metro Manila
PHILIPPINES
POLAND Bank Polska Kasa Opieki S.A. Bank Polska Kasa Opieki S.A.
Curtis Plaza Warsaw
Woloska 18
02-675 Warsaw
POLAND
For Mutual Funds:
Bank Handlowy W. Warsawie. S.A. Bank Polska Kasa Opieki S.A.
Custody Dept. Warsaw
Capital Markets Centre
Ul, Nowy Swiat 6/12
00-920 Warsaw
POLAND
PORTUGAL Banco Espirito Santo & Comercial Banco Nacional Ultra Marino
de Lisboa Lisbon
Servico de Gestaode Titulos
R. Mouzinho da Silveira, 36 r/c
1200 Lisbon
PORTUGAL
SHANGHAI The Hongkong and Shanghai Citibank
(CHINA) Banking Corporation Limited New York
Shanghai Branch
Corporate Banking Centre
Unit 504, 5/F Shanghai Centre
1376 Nanjing Xi Lu
Shanghai
THE PEOPLE'S REPUBLIC OF CHINA
SHENZHEN The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
(CHINA) Banking Corporation Limited Hong Kong
1st Floor
Central Plaza Hotel
No.1 Chun Feng Lu
Shenzhen
THE PEOPLE'S REPUBLIC OF CHINA
SINGAPORE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Shell Tower Singapore
50 Raffles Place
Singapore 0104
SINGAPORE
SLOVAK REPUBLIC
Ceskoslovenska Obchodni Banka, A.S. Ceskoslovenska Obchodni Banka
Michalska 18 Slovak Republic
815 63 Bratislava
SLOVAK REPUBLIC
SOUTH AFRICA
Standard Bank of South Africa Standard Bank of South Africa
Standard Bank Chambers South Africa
46 Marshall Street
Johannesburg 2001
SOUTH AFRICA
SOUTH KOREA
The Hongkong & Shanghai The Hongkong & Shanghai
Banking Corporation Limited Banking Corporation Limited
6/F Kyobo Building Seoul
#1 Chongro, 1-ka Chongro-Ku,
Seoul
SOUTH KOREA
SPAIN The Chase Manhattan Bank, N.A. Banco Bilbao Vizcaya,
Calle Peonias 2 Madrid
7th Floor
La Piovera
28042 Madrid
SPAIN
SRI LANKA The Hongkong & Shanghai The Hongkong & Shangai
Banking Corporation Limited Banking Corporation Limited
Unit #02-02 West Block, Colombo
World Trade Center
Colombo 1,
SRI LANKA
SWEDEN Skandinaviska Enskilda Banken Svenska Handelsbanken
Kungstradgardsgatan 8 Stockholm
Stockholm S-106 40
SWEDEN
SWITZERLAND
Union Bank of Switzerland Union Bank of Switzerland
45 Bahnhofstrasse Zurich
8021 Zurich
SWITZERLAND
TAIWAN The Chase Manhattan Bank, N.A. No correspondent Bank
115 Min Sheng East Road - Sec 3,
9th Floor
Taipei
TAIWAN
Republic of China
THAILAND The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Bubhajit Building Bangkok
20 North Sathorn Road
Silom, Bangrak
Bangkok 10500
THAILAND
TUNISIA Banque Internationale Arabe de Tunisie Banque Internationale Arabe de
70-72 Avenue Habib Bourguiba Tunisie, Tunisia
P.O. Box 520
1080 Tunis Cedex
Tunisia
TURKEY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Emirhan Cad. No: 145 Istanbul
Atakule, A Blok Kat:11
80700-Dikilitas/Besiktas
Istanbul
Turkey
U.K. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Woolgate House London
Coleman Street
London EC2P 2HD
UNITED KINGDOM
URUGUAY The First National Bank of Boston The First National Bank of Boston
Zabala 1463 Montevideo
Montevideo
URUGUAY
U.S.A. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza New York
New York
NY 10081
U.S.A.
VENEZUELA Citibank N.A. Citibank N.A.
Carmelitas a Altagracia Caracas
Edificio Citibank
Caracas 1010
VENEZUELA
ZAMBIA Barclays Bank of Zambia Barclays Bank of Zambia
Kafue House Lusaka
Cairo Road
P.O.Box 31936
Lusaka
ZAMBIA
ZIMBABWE Barclays Bank of Zimbabwe Barclays Bank of Zimbabwe
Ground Floor Harare
Tanganyika House
Corner of 3rd Street & Union Avenue
Harare
ZIMBABWE
</TABLE>
<PAGE>
SECURITIES LENDING AGREEMENT ("Lending Agreement"), dated as of
, 1996 between ("Lender"), having its principal
place of business at , and The Chase
Manhattan Bank, N.A. ("Chase"), having its principal place of business at One
Chase Manhattan Plaza, New York, New York 10081.
It is hereby agreed as follows:
Section 1 - Definitions
Unless the context clearly requires otherwise, the following words
shall have the meanings set forth below when used herein:
a. "Account" shall mean the securities account established and
maintained by Chase on behalf of Lender pursuant to, as the case may be, a
separate custody agreement or a separate directed trust agreement ("Agreement")
between Chase and Lender, which Agreement provides, inter alia, for the
safekeeping of Securities received by Chase from time to time on behalf of
Lender.
b. "Agreement" shall have the meaning assigned thereto in Section 1(a)
hereof.
c. "Authorized Investment" shall mean any type of instrument, security,
participation or other property in which Cash Collateral may be invested or
reinvested, as described in Section 5(f) hereof and Appendix 4 hereto (and as
such Appendix may be amended from time to time by written agreement of the
parties).
d. "Authorized Person" shall mean, except to the extent that Chase is
advised to the contrary by Proper Instruction, any person who is authorized to
give instructions to Chase pursuant to the Agreement and any mandates given to
Chase in connection with such Agreement. An Authorized Person shall continue to
be so until such time as Chase receives Proper Instructions that nay such person
is no longer an Authorized Person.
e. "Borrower" shall mean an entity listed on Appendix 1 hereto, other
than an entity which Chase shall have been instructed to delete from list
pursuant to Written Instructions and as such Appendix may be amended in
accordance with Section 4(b) hereof.
f. "Business Day" shall have the meaning assigned thereto in the
applicable MSLA.
g. "Buy-in" shall have the meaning assigned thereto in Section 7(c)
hereof.
<PAGE>
h. "Cash Collateral" shall mean fed funds, New York Clearing House
Association funds and such non-U.S. currencies as may be pledged by a Borrower
in connection with a particular Loan.
i. "Collateral" shall have the meaning assigned thereto in the
applicable MSLA, together with Cash Collateral.
j. "Collateral Account" shall mean, as the case may be, an account
maintained by Chase with itself, with any Depository or with any Triparty
Institution and designated as a Collateral Account for the purpose of holding
any one or more of Collateral, Authorized Investments, and Proceeds in
connection with Loans hereunder.
k. "Collateral Amount" shall have the meaning assigned thereto in
Section 5(c) hereof.
l. "Collateral Criterion" shall have the meaning assigned thereto in
Section 5(c) hereof.
m. "Depository" shall mean: (1) the Depository Trust Company, the
Participants' Trust Company and any other securities depository or clearing
agency (and each of their respective successors and nominees) registered with
the U.S. Securities and Exchange Commission or registered with or regulated by
the applicable foreign equivalent thereof or otherwise able to act as a
securities depository or clearing agency, (ii) any transnational depository,
(iii) the Federal Reserve book-entry system for the receiving and delivering of
U.S. Government Securities, and (iv) any other national system for the receiving
and delivering of that country's government securities.
n. "Difference" shall have the meaning assigned thereto in Section 7(c)
hereof.
o. "Distributions" shall have the meaning assigned thereto in Section
3(b)(v) hereof.
p. "Dollars" shall have the meaning assigned thereto in Section 7(b)
hereof.
q. "Due Date" shall have the meaning assigned thereto in Section 7(b)
hereof.
r. "Insolvency Event" shall have the meaning assigned thereto in
Section 7(b) hereof.
s. "Letter of Credit" shall have the meaning assigned thereto in the
applicable MSLA and be issued by a bank listed on Appendix 2 hereto (as such
list may be amended by Chase from time to time on notice to Lender), other than
a bank deleted from such list pursuant to Written Instruction.
<PAGE>
t. "Loan" shall mean a loan of Securities hereunder and under the
applicable MSLA.
u. "Loan Fee" shall mean the amount payable by a Borrower to Chase
pursuant to the applicable MSLA in connection with Loans collateralized other
than by Cash Collateral.
v. "Market Value" shall have the meaning assigned thereto in the
applicable MSLA.
w. "MSLA" shall mean a master securities lending agreement between
Chase and a Borrower, pursuant to which Chase as agent lends securities on
behalf of its customers (including Lender) from time to time. A copy of Chase's
standard form of MSLA, including the international addendum thereto, is annexed
as Appendix 3.
x. "Net Assets" shall have the meaning assigned thereto in Section 8
hereof.
y. "Net Realized Income" shall have the meaning thereto in Section 8
hereof.
z. "Oral Instructions" shall have the meaning assigned thereto in
Section 10 hereof.
aa. "Proceeds" shall mean interest, dividends and other payments and
Distributions received by Chase in connection with Authorized Investments.
bb. "Proper Instructions" shall mean Oral Instructions and Written
Instructions.
cc. "Rebate" shall mean the amount payable by Chase on behalf of Lender
to a Borrower in connection with Loans collateralized by Cash Collateral.
dd. "Return Date" shall have the meaning assigned thereto in Section
7(c) hereof.
ee. "Securities" shall mean government securities (including U.S.
Government Securities), equity securities, bonds, debentures, other corporate
debt securities, notes, mortgages or other obligations, and any certificates,
warrants or other instruments representing rights to receive, purchase, or
subscribe for the same, or evidencing or representing any other rights or
interests therein and held pursuant to the Agreement.
ff. "Term Loan" shall have the meaning assigned thereto in Section 5(i)
hereof.
<PAGE>
gg. "Triparty Institution" shall mean a financial institution with
which Chase shall have previously entered a triparty agreement among itself,
such Triparty Institution and a particular Borrower providing, among other
things, for the holding of Collateral in a Collateral Account at such Triparty
Institution in Chase's name on behalf of Chase's lending customers and for the
substitution of Collateral; provided, however, that any substituted Collateral
shall meet the then standards for acceptable Collateral set by Chase.
hh. "U.S. Government Security" shall mean book-entry securities issued
by the U.S. Treasury defined in Subpart 0 of Treasury Department Circular No.
300 and any successor provisions) and any other securities issued or fully
guaranteed by the United States government or any agency, instrumentality or
establishment of the U.S. government, including, without limitation, securities
commonly known as "Ginnie Maes," Sally Maes," "Fannie Maes" and "Freddie Maes".
ii. "Written Instructions" shall have the meaning assigned thereto in
Section 10 hereof.
Section 2 - Appointment, Authority
(a) Appointment. Lender hereby appoints Chase as its agent to lend
Securities in the Account on Lender's behalf on a fully disclosed basis to
Borrowers from time to time in accordance with the terms hereof and on such
terms and conditions and at such times as Chase shall determine and Chase may
exercise all rights and powers provided under any MSLA as may be incidental
thereto, and Chase hereby accepts appointment as such agent and agrees to so
act.
(b) Authority. Lender hereby authorizes and empowers Chase to execute
in Lender's name on its behalf and at its risk all agreements and documents as
may be necessary to carry out any of the powers herein granted to Chase. Lender
grants Chase the authority set forth herein notwithstanding its awareness that
Chase, in its individual capacity or acting in a fiduciary capacity for other
accounts, may have transactions with the same institutions to which Chase may be
lending Securities hereunder, which transactions may give rise to actual or
potential conflict of interest situations. Chase shall not be bound to: (i)
account to Lender for any sum received or profit made by Chase for its own
account or the account of any other person or (ii) disclose or refuse to
disclose any information or take any other action if the same would or might in
Chase's judgment, made in good faith, constitute a breach of any law or
regulation or be otherwise actionable with respect to Chase; provided that, in
circumstances mentioned in (ii) above, Chase shall promptly inform Lender of the
relevant facts (except where doing so would, or might in Chase's judgment, made
in good faith, constitute a breach of any law or regulation or be otherwise
actionable as aforesaid).
<PAGE>
Section 3 - Representation and Warranties
(a) Representations of each party. Each party hereto represents and
warrants to the other that: (i) it has the power to execute and deliver this
Lending Agreement, to enter into the transactions contemplated hereby, and to
perform its obligations hereunder; (ii) it has taken all necessary action to
authorize such execution, delivery, and performance; (iii) this Lending
Agreement constitutes a legal, valid, and binding obligation enforceable against
it; and (iv) the execution, delivery, and performance by it of this Lending
Agreement shall at all times comply with all applicable laws and regulations.
(b) Representations of Lender. Lender represents and warrants to Chase
that: (i) this Lending Agreement is, and each Loan shall be, legally and validly
entered into, and does not and shall not violate any statute, regulation, rule,
order or judgment binding on Lender, or any provision of Lender's charter or
by-laws, or any agreement binding on Lender or affecting its property, and is
enforceable against Lender in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency or similar laws, or by equitable
principles relating to or limiting creditors' rights generally; (ii) the person
executing this Lending Agreement and all Authorized Persons acting on behalf of
Lender has and have been duly and properly authorized to do so; (iii) it is
lending Securities as principal and shall not transfer, assign or encumber its
interest in, or rights with respect to, any Securities available for Loan
hereunder; (iv) it is the beneficial owner of all Securities or otherwise has
the right to lend Securities; and (v) it is entitled to receive all interest,
dividends and other distributions ("Distributions") made by the issuer with
respect thereto. Lender shall promptly identify to Chase by notice, which notice
may be oral, any Securities that are no longer subject to the representations
contained in (b).
Section 4 - Borrowers
(a) MSLA. Lender hereby acknowledges receipt of the form of MSLA and
authorizes Chase to lend Securities in the Account to Borrowers thereunder
pursuant to an agreement substantially in the form thereof.
(b) Borrowers. Securities may be lent to any Borrower selected by Chase
in Chase's sole discretion, in accordance with the terms hereof. In that
connection, Appendix 1 may be amended from time to time by Chase on notice to
Lender.
<PAGE>
Section 5 - Loans
(a) Securities to be lent, Lending opportunities, Loan initiation. All
Securities of Lender held by Chase that are issued, settled or traded in the
markets that have been approved by Chase from time to time for purposes of
Chase's discretionary securities lending program shall be subject to the terms
hereof. Chase shall seek to assure that Lender receives a fair allocation of
lending opportunities vis-a-vis other lenders, taking into account the demand
for and availability of Securities, types of Collateral, eligibility of
Borrowers, limitations on investments of Cash Collateral, tax treatment, and
similar commercial factors. From time to time, Chase may lend to Borrowers
Securities held in the Account (except Securities that are no longer subject to
the representations set forth in Section 3) and shall deliver such Securities
against receipt of Collateral in accordance with the applicable MSLA. Chase
shall have the right to decline to make any Loans to any Borrower and to
discontinue lending to any Borrower in its sole discretion and without notice to
Lender.
(b) Receipt of Collateral, Collateral substitution. For each Loan,
Chase shall receive and hold Letters of Credit received as Collateral and Chase
or a Triparty Institution shall receive and hold all other Collateral required
by the applicable MSLA in a Collateral Account, and Chase is hereby authorized
and directed, without obtaining any further approval from Lender, to invest and
reinvest all or substantially all Cash Collateral. Chase shall credit, or where
applicable shall have a Triparty Institution credit, all Collateral, Authorized
Investments and Proceeds to a Collateral Account and Chase shall not mark its
books and records to identify Lender's interest therein, it being understood,
however, that all monies credited to a Collateral Account may for purposes of
investment be commingled with cash collateral held for other lenders of
securities on whose behalf Chase may act. Chase may, in its sole discretion,
liquidate any Authorized Investment and credit the net proceeds in a Collateral
Account. Chase shall accept substitutions of Collateral in accordance with the
applicable MSLA and shall credit, or where applicable shall have a Triparty
Institution credit, all such substitutions to a Collateral Account.
(c) Mark to market procedures. (i) Chase shall require initial
Collateral for a Loan in an amount determined by applying the then applicable
"Collateral Criterion" (as defined below) to the Market Value of the Security
that is the subject of the Loan. The Collateral Criterion with respect to a
given Security shall be an amount equal to the then applicable percentage
(currently 102% for securities issued in the U.S. and 105% for securities issued
outside of the U.S.) of the Market Value of the Security (plus accrued interest,
if any, with respect to debt securities) which is the subject of a Loan as
determined as of the close of trading on the preceding Business Day. (ii) Each
Business Day Chase shall determine if the Market Value of all Collateral
received by Chase from a given Borrower in connection with all loans to such
Borrower from all lenders is at least equal to the aggregate amount ("Collateral
Amount") determined by applying the applicable Collateral Criterion to each
security on loan to such Borrower from all lenders. (iii) In accordance with
general market practice, the Market Value of certain securities (including,
without limitation, U.S. Government Securities) whether on Loan or received as
Collateral, may be determined on a same day basis by reference to recognized
pricing services.
<PAGE>
(d) Demand for additional Collateral. If the determination made in
Section 5(c)(ii) above demonstrates that the Market Value of all Collateral
received from a given Borrower is not at least equal to the Collateral Amount,
Chase shall demand additional Collateral from such Borrower in accordance with
the applicable MSLA so as to meet the Collateral Amount by making specific
Loans; provided that, Chase may from time to time establish de minimis
guidelines pursuant to which a mark would not be made even where the aggregate
Collateral Amount has not been met.
(e) Changes in procedures applicable to Collateral. The Collateral
procedures set forth in Sections 5(b)-(d) above reflect Chase's current practice
and may be changed by Chase from time to time based on general market conditions
(including volatility of Securities on Loan and of securities Collateral), the
Market Value of Securities on Loan to a given Borrower, and in accordance with
general market practice and regulatory requirements. Chase shall notify Lender
of material revisions to the foregoing procedures.
(f) Investment of Cash Collateral. (i) Chase is hereby authorized to
invest and reinvest cash Collateral in accordance with the investment guidelines
(and the interpretations, procedures and definitions included therewith) annexed
hereto as Appendix 4. (ii) Authorized Investments are made for the account of,
and at the sole risk of, Lender. In that connection, Lender shall pay to Chase
on demand in cash an amount equal to any deficiency in the amount of Collateral
available for return to a Borrower pursuant to an applicable MSLA.
(g) Lender's rights with respect to Securities on Loan; Distribution
and voting rights. (i) An amount equal to the amount of all Distributions paid
with respect to Securities on Loan that Lender would have received had such
Securities not been on Loan shall be credited to Lender's account on the date
such Distributions are delivered by Borrower to Chase. Any non-cash Distribution
on Securities on Loan which is in the nature of a stock split or a stock
dividend, shall be added to the Loan (and shall be considered to constitute
Securities on Loan) as of the date such non-cash Distribution is received by the
Borrower and shall be subject to the provisions of this Lending Agreement;
provided that the Lender may, by giving chase ten (10) Business Days' notice
prior to the date of such non-cash Distribution (or such different amount of
time as Chase may from time to time require on advice to Lender), direct Chase
to request that the Borrower deliver such non-cash Distribution to Chase
pursuant to the applicable MSLA, in which case Chase shall credit such non-cash
Distribution to Lender's account on the date it is delivered to Chase. Without
regard to the reference to "delivered" in the foregoing, the "AutoCredit"
provisions of the Agreement shall apply where a Borrower fails to make a
Distribution payment to Chase, the effect of which would be for Chase to credit
Lender's account with Distributions on the payable date. (ii) During the term of
any Loan, Chase will permit the Securities on Loan to be transferred into the
name of and be voted by the Borrower or others. Lender shall not be entitled to
participate in any dividend reinvestment program or to vote proxies with respect
to Securities that are eligible for Loan (whether or not actually on Loan) as of
the applicable record date for such Securities.
(h) Advances, overdrafts and indebtedness, Security Interest. Chase
may, in its sole discretion, advance funds on behalf of Lender in order to pay
to Borrowers any Rebates
<PAGE>
or to return to Borrowers Cash Collateral to which they are entitled pursuant to
the applicable MSLA. Lender shall repay Chase on demand the amount of any
advance or any other amount owned by Lender hereunder plus accrued interest at a
rate per annum not to exceed the rate customarily charged by Chase for such
loans at the time such loan is made and shall otherwise be on such terms and
conditions as Chase customarily makes such loans available. In order to secure
repayment of any advance or other indebtedness of Lender to Chase arising
hereunder, Chase shall have a continuing lien and security interest in and to
all assets now or hereafter held in the Account and any Collateral Account (to
which Lender is entitled hereunder) and any other property at any time held by
it for the benefit of Lender or in which Lender may have an interest which is
then in Chase's possession or control or in the possession or control of any
third party acting on Chase's behalf. In this regard, Chase shall be entitled to
all the rights and remedies of a pledgee under common law and a secured party
under the New York Uniform Commercial Code and/or any other applicable laws
and/or regulations as then in effect.
(i) Termination of a Loan. (i) Loans shall generally be terminable on
demand. With the prior approval of Lender, however, Loans may be made on the
basis of a reasonably anticipated termination date ("Term Loan") and without
providing for the right of substitution of equivalent Securities. Termination of
a Term Loan prior to its anticipated termination date by either Lender or
Borrower may result in the terminating party having to pay non-terminating
party damages based on the cost of obtaining a replacement loan. (ii) Chase
shall terminate any Loan of Securities to a Borrower as soon as practicable
after (a) receipt by Chase of a notice of termination of the respective MSLA;
(b) receipt by Chase of Written Instructions directing it to terminate a Loan;
(c) receipt by Chase of Written Instructions instructing it to delete from
Appendix 2 the Borrower to whom such Loans was made; (d) receipt by Chase of
Written Instructions advising that the Security subject to a Loan is no longer
subject to the representation contained in Section 3 hereof; (e) receipt by
Chase of notice advising that an Event of Default (as defined in the applicable
MSLA) has occurred and is continuing beyond any applicable grace period; (f)
whenever Chase, in its sole discretion, elects to terminate such Loan other than
a Term Loan; or (g) termination of this Lending Agreement. (iii) If Securities
which are the subject of a Loan being terminated are to be sold by Lender,
Written Instructions shall in no event be given to Chase later than the trade
date established by Lender for such sale or such earlier date of which Chase may
advise Lender from time to time with respect to particular markets. Chase shall
not be liable for any failure of a Borrower to return Securities on Loans in a
time fashion.
(j) Recordkeeping and Reports. Chase shall establish and maintain such
records as are reasonably necessary to account for Loans that are made and the
income derived therefrom. Chase shall provide Lender with a monthly statement
describing the Loans made during the preceding month, and the income derived
from Loans, during the period covered by such statement. A party shall comply
with the reasonable requests of the other party for information necessary to the
requester's performance of its duties hereunder.
Section 6 - Default by Borrower
<PAGE>
(1) Chase may assume (unless it has actual knowledge to the contrary)
that any representations made by a Borrower in connection with any Loan are
true, that no event which is or may become an Event of Default (as defined in
the applicable MSLA) has occurred and that a Borrower has complied with its
obligations under the applicable MSLA. Subject to Sections 7(b)-(d), Chase shall
have no responsibility for the accuracy or completeness of any information
supplied, or for any breach of any obligation, by any Borrower under or in
connection with any MSLA or Loan. Chase shall not be liable as a result of
taking or omitting to take any action provided that Chase shall have carried out
its responsibilities hereunder in good faith. (ii) If any Borrower with respect
to any Loan affected pursuant hereto and pursuant to the applicable MSLA fails
to return any loaned Securities when due thereunder for reasons other than
relating to the solvency of the Borrower, Chase shall then take whatever action
its deems appropriate in accordance with general market practice and Chase's
reasonable judgment, including, but no necessarily limited to, claiming
compensation from such Borrower on behalf of Lender in the event a trade
executed by Lender fails on account of such Borrower's failure timely to have
returned Securities on Loan or, where Chase deems it necessary, such other
action as may be permitted by the applicable MSLA, including collecting any
applicable MSLA fails to return any Securities on Loan when due thereunder for
reasons relating to the solvency of the Borrower, Chase shall take such action
as its deems appropriate in accordance with Chase's reasonable judgment under
the applicable MSLA.
Section 7 - Standard of Care, Liabilities, Indemnification
(a) Standard of care, Liabilities. Except as provided in paragraphs (b)
and (c) hereof, Chase shall be liable for any costs, expenses, damages,
liabilities or claims (including attorneys' and accountants' fees) incurred by
Lender, except those costs, expenses, damages, liabilities and claims arising
out of the negligence, bad faith or willful misconduct of Chase. Chase shall
have no obligation hereunder for: (i) costs, expenses, damages, liabilities or
claims (including attorneys' and accountants' fees), which are sustained or
incurred by Lender by reason of any action or inaction by any pricing service,
any Depository or a Triparty Institution or their respective successors or
nominees; and (ii) any failure to perform any obligation due to any matters
beyond the control of Chase. In no event shall Chase be liable for indirect or
consequential damages or lost profits or loss of business, arising hereunder or
in connection herewith, even if previously informed of the possibility of such
damages and regardless of the form of action.
Except for any costs or expenses incurred by Chase in performing its
obligations pursuant to paragraphs (b) and (c) hereof any ordinary operating
expenses incurred by Chase in providing services hereunder, Lender shall
indemnify Chase and hold it harmless from and against any and all costs,
expenses, damages, liabilities or claims, including reasonable fees and expenses
of counsel, which Chase may sustain or incur or which may be asserted against
Chase by reason of or as a result of any action taken or omitted by Chase in
connection with operating under this Lending Agreement or enforcing Lender's
rights under the applicable MSLA, other than those costs, expenses, damages,
liabilities or claims arising out of the negligence, bad faith or willful
misconduct of Chase. The foregoing indemnity shall be a continuing obligation of
the Lender, its successors and assigns, notwithstanding the
<PAGE>
termination of any Loans hereunder or of this Lending Agreement. Chase may
charge any amounts to which it is entitled hereunder against the Account, and
Lender shall be entitled to an accounting of all amounts so charged. Actions
taken or omitted in reliance upon Proper Instructions, or upon any information,
order, indenture, stock certificate, power of attorney, assignment, affidavit or
other instrument reasonably believed by Chase, in good faith, to be genuine or
bearing the signature of a person or persons believed, in good faith, to be
authorized to sign, countersign or execute the same, shall be conclusively
presumed to have been taken or omitted in good faith.
(b) Indemnification of Lender in respect to Distributions. If the
Borrower in respect of any Loan effected pursuant hereto and pursuant to the
applicable MSLA fails, as a result of its bankruptcy, insolvency,
reorganization, liquidation, receivership or similar event (each an "Insolvency
Event"), to remit to Chase for Lender's account any Distributions on or with
respect to Securities on Loan when due (the "Due Date") in accordance with such
MSLA and such Due Date occurs at least one day prior to an Insolvency Event then
Chase shall at its expense (subject to paragraph (d) hereof) and within one (1)
Business Day of the Due Date, undertake the following: (i) with respect to
Distributions in the form of cash, Chase shall credit Lender's account with the
full amount of such Distributions and (ii) with respect to Distributions in the
form of securities, Chase shall, at its option, either purchase replacement
securities (of an equal amount of the same issue, class, type or series as the
Distributions) on the principal market in which such securities are traded or
credit Lender's account with the market value in United States dollars
("Dollars") of such Distributions on the Due Date as determined by Chase in good
faith. Market value shall be determined by Chase in accordance with the
applicable MSLA, including the computation of Dollar equivalents where
Securities on Loan and/or Collateral (and Proceeds) are denominated in a
currency other than Dollars.
(c) Indemnification of Lender in respect of Securities. If the Borrower
in respect of any Loan effected pursuant hereto and pursuant to the applicable
MSLA fails to return any Securities on Loan to Chase for Lender's account when
due thereunder (the "Return Date") which is the date of default, then Chase
shall, at its expense (subject to paragraph (d) hereof) and within one (1)
Business Day of the Return Date, credit Lender's account in Dollars with the
difference ("Difference") (where a positive number), if any, between (x) the
market value of such lent Securities on the Return Date (including, in the case
of debt Securities, accrued but unpaid interest), and (y) in the case of Loans
collateralized by (i) Cash Collateral, the greater of (A) the Market Value of
the Cash Collateral on the date of initial pledge as adjusted for any subsequent
marks-to-market through the Return Date and (B) the Market Value of Cash
Collateral investments on the Return Date, (ii) non-Cash Collateral comprising
securities Collateral, the greater of the Market Value of such Collateral on the
(A) Business Day immediately preceding the Return Date and (B) Return Date, or
(iii) non-Cash Collateral comprising Letter of Credit Collateral, the Market
Value of the Letter of Credit Collateral on the date of initial pledge as
adjusted for any subsequent marks-to-market through the Return Date. Market
Value shall be determined by Chase in accordance with the applicable MSLA,
including the computation of Dollar equivalents where Securities on Loan and/or
Collateral (and Proceeds) are denominated in a currency other than Dollars.
Where Cash Collateral and non-Cash Collateral have each been allocated to a Loan
as of the Return Date, the Difference payable by Chase shall be computed in
accordance with the foregoing as if there had been
<PAGE>
two Loans in effect on the Return Date, one collateralized by Cash Collateral
and the other collateralized by non-Cash Collateral. In lieu of paying Lender
the Difference, Chase may, at its sole option and expense, purchase for Lender's
account ("Buy-in") replacement securities of the same issue, type, class, and
series as that of the Securities on Loan.
(d) Subrogation. If Chase makes a payment or a purchase pursuant to
Section 7(b) or effects a Buy-in pursuant to Section 7(c), or if Chase effects a
Difference payment pursuant to Section 7(c) on account of a failure to return
Securities on Loan not arising from an Insolvency Event, Chase shall, to the
extent of such payment, purchase, Difference payment or Buy-in, be subrogated
to, and Lender shall assign and be deemed to have assigned to Chase, all of its
rights in, to and against the Borrower (and any guarantor thereof) in respect of
such Loan, any Collateral pledged by the Borrower in respect of such Loan, and
all proceeds of such Collateral. In the event that Lender receives or is
credited with any payment, benefit or value from or on behalf of the Borrower in
respect of rights to which Chase is subrogated as provided herein, Lender shall
promptly remit or pay to Chase the same (or its Dollar equivalent) but only to
the extent that Lender has been paid all amounts owed to it by Borrower.
Section 8 - Chase Compensation
(a) In connection with each Loan hereunder, Lender shall pay to Chase a
fee equal to ___% of (i) earnings (less any Rebate paid by Chase to a Borrower)
derived from Authorized Investments in connection with Loans collateralized by
cash, and (ii) any Securities Loan Fee paid or payable by the Borrower on Loans
not collateralized by cash. (b) The fee payable to Chase for services performed
pursuant to Section 5(f) hereof shall be equal to one tenth of the one percent
(0.1%) of the Fund's average daily Assets (with "Fund" being as defined in
Appendix 4 hereto). All securities in the Fund shall be valued based on their
amortized cost. Fees shall be accrued and charged daily against the Fund's yield
or assets, as appropriate, and shall be payable monthly in arrears on the first
business day of the month following the month in which earned. (c) Chase is
authorized, on a monthly basis, to charge all the foregoing fees (together with
reasonable expenses incurred by Chase hereunder) and any other amounts owed by
Lender hereunder against the Account and/or a Collateral Account.
Section 9 - Taxes
Lender shall be responsible for all filings, tax returns and reports on
any Loans undertaken by Chase on Lender's behalf which are to be made to any
authority whether governmental or otherwise and for the payment of all unpaid
calls, taxes (including, without limitations, any value added tax), imposts,
levies or duties due on any principal or interest, or any other liability or
payments arising out of or in connection with any Securities or any Collateral,
and in so far as Chase is under obligation (whether of a governmental nature or
otherwise) to pay the same on Lender's behalf Chase may do so out of any monies
or assets held by it pursuant to the terms of the Agreement or hereunder.
Section 10 - Instructions
<PAGE>
(a)(i) Written Instructions. "Written Instructions" shall mean written
communications actually received by Chase from an Authorized Person or from a
person reasonably believed by Chase to be an Authorized Person by letter,
memorandum, telegram, cable, telex, telecopy facsimile, computer, video (CRT)
terminal or other on-line system, or any other method reasonably acceptable to
Chase and whereby Chase is able to verify with a reasonable degree of certainty
the identity of the sender of such communications or with communications are
transmitted with proper testing or authentication pursuant to terms and
conditions which Chase may specify. (ii) Oral Instructions. "Oral Instructions"
shall mean oral communications actually received by Chase from an Authorized
Person or from a person reasonably believed by Chase to be an Authorized Person.
Oral Instructions shall promptly thereafter be confirmed in writing by an
Authorized Person (which confirmation may bear the facsimile signature of such
Person), but Lender will hold Chase harmless for the failure of an Authorized
Person to send such confirmation in writing, the failure of such confirmation to
conform to the Oral Instructions received, or Chase's failure to produce such
confirmation at any subsequent time. Lender shall be responsible for
safeguarding any testkeys, identification codes or other security devices which
Chase may make available to Lender or its Authorized Persons.
(b) Unless otherwise expressly provided, all Proper Instructions shall
continue in full force and effect until canceled or superseded.
Section 11 - Pricing Services
Chase may use any pricing service referred to in an applicable MSLA and
any other recognized pricing service (including itself and any of its
affiliates) in order to perform its valuation responsibilities with respect to
Securities, Collateral and Authorized Investments, and Lender shall hold Chase
harmless from and against any loss or damage suffered or incurred as a result of
errors or omissions of any such pricing service.
Section 12 - Termination
This Lending Agreement may be terminated at any time by either party
upon delivery to the other party of notice specifying the date of such
termination, which shall be not less than 30 days after the date of receipt of
such notice. Notwithstanding any such notice, this Lending Agreement shall
continue in full force and effect with respect to all Loans outstanding on the
termination date, which Loans shall, however, be terminated as soon as
reasonably practicable.
Section 13 - Miscellaneous
(a) Legal proceedings. Chase may refrain from bringing any legal action
or proceeding arising out of or in connection with any Loan until it shall have
received such security as it may require for all costs, expenses (including
legal fees) and liabilities which it will or may expend or incur in relation
thereto.
<PAGE>
(b) Integration, Lending Agreement to Govern. This Lending Agreement
and the Agreement contain the complete agreement of the parties with respect to
the subject matter hereof and supersede and replace any previously made
proposals, representations, warranties or agreements with respect thereto by the
parties. In the event of any conflict between this Lending Agreement, and the
Agreement, this Lending Agreement shall govern.
(c) Notice. Unless expressly provided herein to the contrary, notices
hereunder shall be in writing, and delivered by telecopier, overnight express
mail, first-class postage prepaid, delivered personally or by receipt courier
service. All such notices which are mailed shall be deemed delivered upon
receipt. Notices shall be addresses as follows (or to such other address as a
party may from time to time designate on notice duly given in accordance with
this paragraph): notices to Chase shall be addressed to it at 2 Chase Manhattan
Plaza, 19th Floor, New York, New York 10081, Attention: Securities Lending
Division; notices to be given to Lender shall be addressed to it at its offices
at
Attention:
(d) Amendments, Waiver. This Lending Agreement may be modified only by
a written amendment signed by both parties, and no waiver of any provisions
hereof shall be effective unless expressed in a writing signed by the party to
be charged.
(e) Government Law, Consent to Jurisdiction, Waiver of Immunity. This
Lending Agreement shall be construed in accordance with laws of the State of New
York, without regard to the conflict of laws principles thereof. Chase and
Lender each hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and Lender hereby waives any claim of forum non conveniens to the
extent that it may lawfully do so. To the extent that in any jurisdiction Lender
may now or hereafter be entitled to claim, for itself or its assets, immunity
from suit, execution, attachment (before or after judgment) or other legal
process, Lender irrevocably shall not claim, and it hereby waives, such
immunity.
<PAGE>
(f) Counterparts, Headings. This Lending Agreement may be executed in
several counterparts, each one of which shall constitute an original, and all
collectively shall constitute but one instrument. The headings of the sections
hereof are included for convenience of reference only and do not form part of
this Lending Agreement.
(g) Severability. Any provisions of this Lending Agreement which may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceably in any jurisdiction
shall not invalidate or render unenforceable such provisions in any other
jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Lending Agreement as
of the date first above-written.
[Insert name of LENDER] THE CHASE MANHATTAN BANK, N.A.
By: By:
Title: Title:
<PAGE>
Mutual Fund/Business Trust/Series
Form of Agreement
Subject to Board Approval
CUSTODIAN AGREEMENT
AGREEMENT dated as of _____________, 199_ between BANKERS TRUST COMPANY
(the "Custodian") and [name of customer] (the "Customer").
WHEREAS, the Customer may be organized with one or more series of
shares, each of which shall represent an interest in a separate portfolio of
Securities and Cash (each as hereinafter defined) (all such existing and
additional series now or hereafter listed on Exhibit A being hereafter referred
to individually as a "Portfolio" and collectively, as the "Portfolios"); and
WHEREAS, the Customer desires to appoint the Custodian as custodian on
behalf of the Portfolios under the terms and conditions set forth in this
Agreement, and the Custodian has agreed to so act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Employment of Custodian. The Customer hereby employs the Custodian
as custodian of all assets of each Portfolio which are delivered to and accepted
by the Custodian or any Subcustodian (as that term is defined in Section 4) (the
"Property") pursuant to the terms and conditions set forth herein. Without
limitation, such Property shall include stocks and other equity interests of
every type, evidences of indebtedness, other instruments representing same or
rights or obligations to receive, purchase, deliver or sell same and other
non-cash investment property of a Portfolio which is acceptable for deposit
("Securities") and cash from any source and in any currency ("Cash"). The
Custodian shall not be responsible for any property of a Portfolio held or
received by the Customer or others and not delivered to the Custodian or any
Subcustodian.
2. Maintenance of Securities and Cash at Custodian and Subcustodian
Locations. Pursuant to Instructions, the Customer shall direct the Custodian to
(a) settle Securities transactions and maintain cash in the country or other
jurisdiction in which the principal trading market for such Securities is
located, where such Securities are to be presented for payment or where such
Securities are acquired and (b) maintain cash and cash equivalents in such
countries in amounts reasonably necessary to effect the Customer's transactions
in such Securities. Instructions to settle Securities transactions in any
country shall be deemed to authorize the holding of such Securities and Cash in
that country.
<PAGE>
3. Custody Account. The Custodian agrees to establish and maintain one
or more custody accounts on its books each in the name of a Portfolio (each, an
"Account") for any and all Property from time to time received and accepted by
the Custodian or any Subcustodian for the account of such Portfolio. Upon
delivery by the Customer to the Custodian of any Property belonging to a
Portfolio, the Customer shall, by Instructions (as hereinafter defined in
Section 14), specifically indicate which Portfolio such Property belongs or if
such Property belongs to more than one Portfolio shall allocate such Property to
the appropriate Portfolio. The Custodian shall allocate such Property to the
Accounts in accordance with the Instructions; provided that the Custodian shall
have the right, in its sole discretion, to refuse to accept any Property that is
not in proper form for deposit for any reason. The Customer on behalf of each
Portfolio, acknowledges its responsibility as a principal for all of its
obligations to the Custodian arising under or in connection with this Agreement,
warrants its authority to deposit in the appropriate Account any Property
received therefor by the Custodian or a Subcustodian and to give, and authorize
others to give, instructions relative thereto. The Custodian may deliver
securities of the same class in place of those deposited in the Account.
The Custodian shall hold, keep safe and protect as custodian for each
Account, on behalf of the Customer, all Property in such Account. All
transactions, including, but not limited to, foreign exchange transactions,
involving the Property shall be executed or settled solely in accordance with
Instructions (which shall specifically reference the Account for which such
transaction is being settled), except that until the Custodian receives
Instructions to the contrary, the Custodian will:
(a) collect all interest and dividends and all other income and
payments, whether paid in cash or in kind, on the Property, as the same become
payable and credit the same to the appropriate Account;
(b) present for payment all Securities held in an Account which are
called, redeemed or retired or otherwise become payable and all coupons and
other income items which call for payment upon presentation to the extent that
the Custodian or Subcustodian is actually aware of such opportunities and hold
the cash received in such Account pursuant to this Agreement;
(c) (i) exchange Securities where the exchange is purely ministerial
(including, without limitation, the exchange of temporary securities for those
in definitive form and the exchange of warrants, or other documents of
entitlement to securities, for the Securities themselves) and (ii) when
notification of a tender or exchange offer (other than ministerial exchanges
described in (i) above) is received for an Account, endeavor to receive
Instructions, provided that if such Instructions are not received in time for
the Custodian to take timely action, no action shall be taken with respect
thereto;
(d) whenever notification of a rights entitlement or a fractional
interest resulting from a rights issue, stock dividend or stock split is
received for an Account and such rights entitlement or fractional interest bears
an expiration date, if after endeavoring to obtain Instructions such
Instructions are not received in time for the Custodian to take timely action
<PAGE>
or if actual notice of such actions was received too late to seek Instructions,
sell in the discretion of the Custodian (which sale the Customer hereby
authorizes the Custodian to make) such rights entitlement or fractional interest
and credit the Account with the net proceeds of such sale;
(e) execute in the Customer's name for an Account, whenever the
Custodian deems it appropriate, such ownership and other certificates as may be
required to obtain the payment of income from the Property in such Account;
(f) pay for each Account, any and all taxes and levies in the nature of
taxes imposed on interest, dividends or other similar income on the Property in
such Account by any governmental authority. In the event there is insufficient
Cash available in such Account to pay such taxes and levies, the Custodian shall
notify the Customer of the amount of the shortfall and the Customer, at its
option, may deposit additional Cash in such Account or take steps to have
sufficient Cash available. The Customer agrees, when and if requested by the
Custodian and required in connection with the payment of any such taxes to
cooperate with the Custodian in furnishing information, executing documents or
otherwise; and
(g) appoint brokers and agents for any of the ministerial transactions
involving the Securities described in (a) - (f), including, without limitation,
affiliates of the Custodian or any Subcustodian.
4. Subcustodians and Securities Systems. The Customer authorizes and
instructs the Custodian to hold the Property in each Account in custody accounts
which have been established by the Custodian with (a) one of its U.S. branches
or another U.S. bank or trust company or branch thereof located in the U.S.
which is itself qualified under the Investment Company Act of 1940, as amended
("1940 Act"), to act as custodian (individually, a "U.S. Subcustodian"), or a
U.S. securities depository or clearing agency or system in which the Custodian
or a U.S. Subcustodian participates (individually, a "U.S. Securities System")
or (b) one of its non-U.S. branches or majority-owned non-U.S. subsidiaries, a
non-U.S. branch or majority-owned subsidiary of a U.S. bank or a non-U.S. bank
or trust company, acting as custodian (individually, a "non-U.S. Subcustodian";
U.S. Subcustodians and non-U.S. Subcustodians, collectively, "Subcustodians"),
or a non-U.S. depository or clearing agency or system in which the Custodian or
any Subcustodian participates (individually, a "non-U.S. Securities System";
U.S. Securities System and non-U.S. Securities System, collectively, Securities
System"), provided that in each case in which a U.S. Subcustodian or U.S.
Securities System is employed, each such Subcustodian or Securities System shall
have been approved by Instructions; provided further that in each case in which
a non-U.S. Subcustodian or non-U.S. Securities System is employed, (a) such
Subcustodian or Securities System either is (i) a "qualified U.S. bank" as
defined by Rule 17f-5 under the 1940 Act ("Rule 17f-5") or (ii) an "eligible
foreign custodian" within the meaning of Rule 17f-5 or such Subcustodian or
Securities System is the subject of an order granted by the U.S. Securities and
Exchange Commission ("SEC") exempting such agent or the subcustody arrangements
thereto from all or part of the provisions of Rule 17f-5 and (b) the agreement
between the Custodian and such non-U.S. Subcustodian has been approved by
Instructions; it being understood that the Custodian shall have no liability or
responsibility for determining whether the approval of any
<PAGE>
Subcustodian or Securities System has been proper under the 1940 Act or any rule
or regulation thereunder.
Upon receipt of Instructions, the Custodian agrees to cease the
employment of any Subcustodian or Securities System with respect to the
Customer, and if desirable and practicable, appoint a replacement subcustodian
or securities system in accordance with the provisions of this Section. In
addition, the Custodian may, at any time in its discretion, upon written
notification to the Customer, terminate the employment of any Subcustodian or
Securities System.
Upon request of the Customer, the Custodian shall deliver to the
Customer annually a certificate stating: (a) the identity of each non-U.S.
Subcustodian and non-U.S. Securities System then acting on behalf of the
Custodian and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such non-U.S Subcustodian and
non-U.S. Securities System; (b) the countries in which each non-U.S.
Subcustodian or non-U.S. Securities System is located; and (c) so long as Rule
17f-5 requires the Customer's Board of Trustees to directly approve its foreign
custody arrangements, such other information relating to such non-U.S.
Subcustodians and non-U.S. Securities Systems as may reasonably be requested by
the Customer to ensure compliance with Rule 17f-5. So long as Rule 17f-5
requires the Customer's Board of Trustees to directly approve its foreign
custody arrangements, the Custodian also shall furnish annually to the Customer
information concerning such non-U.S. Subcustodians and non-U.S. Securities
Systems similar in kind and scope as that furnished to the Customer in
connection with the initial approval of this Agreement. Custodian agrees to
promptly notify the Customer if, in the normal course of its custodial
activities, the Custodian has reason to believe that any non-U.S. Subcustodian
or non-U.S. Securities System has ceased to be a qualified U.S. bank or an
eligible foreign custodian each within the meaning of Rule 17f-5 or has ceased
to be subject to an exemptive order from the SEC.
5. Use of Subcustodian. With respect to Property in an Account which is
maintained by the Custodian in the custody of a Subcustodian employed pursuant
to Section 4:
(a) The Custodian will identify on its books as belonging to the
Customer on behalf of a Portfolio, any Property held by such Subcustodian.
(b) Any Property in the Account held by a Subcustodian will be subject
only to the instructions of the Custodian or its agents.
(c) Property deposited with a Subcustodian will be maintained in an
account holding only assets for customers of the Custodian.
(d) Any agreement the Custodian shall enter into with a non-U.S.
Subcustodian with respect to the holding of Property shall require that (i) the
Account will be adequately indemnified or its losses adequately insured; (ii)
the Securities are not subject to any right, charge, security interest, lien or
claim of any kind in favor of such Subcustodian or its
<PAGE>
creditors except a claim for payment in accordance with such agreement for their
safe custody or administration and expenses related thereto, (iii) beneficial
ownership of such Securities be freely transferable without the payment of money
or value other than for safe custody or administration and expenses related
thereto, (iv) adequate records will be maintained identifying the Property held
pursuant to such Agreement as belonging to the Custodian, on behalf of its
customers and (v) to the extent permitted by applicable law, officers of or
auditors employed by, or other representatives of or designated by, the
Custodian, including the independent public accountants of or designated by, the
Customer be given access to the books and records of such Subcustodian relating
to its actions under its agreement pertaining to any Property held by it
thereunder or confirmation of or pertinent information contained in such books
and records be furnished to such persons designated by the Custodian.
6. Use of Securities System. With respect to Property in the Account(s)
which are maintained by the Custodian or any Subcustodian in the custody of a
Securities System employed pursuant to Section 4:
(a) The Custodian shall, and the Subcustodian will be required by its
agreement with the Custodian to, identify on its books such Property as being
held for the account of the Custodian or Subcustodian for its customers.
(b) Any Property held in a Securities System for the account of the
Custodian or a Subcustodian will be subject only to the instructions of the
Custodian or such Subcustodian, as the case may be.
(c) Property deposited with a Securities System will be maintained in
an account holding only assets for customers of the Custodian or Subcustodian,
as the case may be, unless precluded by applicable law, rule, or regulation.
(d) The Custodian shall provide the Customer with any report obtained
by the Custodian on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Securities System.
7. Agents. The Custodian may at any time or times in its sole
discretion appoint (or remove) any other U.S. bank or trust company which is
itself qualified under the 1940 Act to act as custodian, as its agent to carry
out such of the provisions of this Agreement as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder.
8. Records, Ownership of Property, Statements, Opinions of Independent
Certified Public Accountants.
(a) The ownership of the Property whether Securities, Cash and/or other
property, and whether held by the Custodian or a Subcustodian or in a Securities
System as authorized herein, shall be clearly recorded on the Custodian's books
as belonging to the appropriate Account and not for the Custodian's own
interest. The Custodian shall keep accurate and detailed accounts of all
investments, receipts, disbursements and other transactions for each
<PAGE>
Account. All accounts, books and records of the Custodian relating thereto shall
be open to inspection and audit at all reasonable times during normal business
hours by any person designated by the Customer. All such accounts shall be
maintained and preserved in the form reasonably requested by the Customer. The
Custodian will supply to the Customer from time to time, as mutually agreed
upon, a statement in respect to any Property in an Account held by the Custodian
or by a Subcustodian. In the absence of the filing in writing with the Custodian
by the Customer of exceptions or objections to any such statement within sixty
(60) days of the mailing thereof, the Customer shall be deemed to have approved
such statement and in such case or upon written approval of the Customer of any
such statement, such statement shall be presumed to be for all purposes correct
with respect to all information set forth therein.
(b) The Custodian shall take all reasonable action as the Customer may
request to obtain from year to year favorable opinions from the Customer's
independent certified public accountants with respect to the Custodian's
activities hereunder in connection with the preparation of the Customer's Form
N-1A and the Customer's Form N-SAR or other periodic reports to the SEC and with
respect to any other requirements of the SEC.
(c) At the request of the Customer, the Custodian shall deliver to the
Customer a written report prepared by the Custodian's independent certified
public accountants with respect to the services provided by the Custodian under
this Agreement, including, without limitation, the Custodian's accounting
system, internal accounting control and procedures for safeguarding Cash and
Securities, including Cash and Securities deposited and/or maintained in a
securities system or with a Subcustodian. Such report shall be of sufficient
scope and in sufficient detail as may reasonably be required by the Customer and
as may reasonably be obtained by the Custodian.
(d) The Customer may elect to participate in any of the electronic
on-line service and communications systems offered by the Custodian which can
provide the Customer, on a daily basis, with the ability to view on-line or to
print on hard copy various reports of Account activity and of Securities and/or
Cash being held in any Account. To the extent that such service shall include
market values of Securities in an Account, the Customer hereby acknowledges that
the Custodian now obtains and may in the future obtain information on such
values from outside sources that the Custodian considers to be reliable and the
Customer agrees that the Custodian (i) does not verify or represent or warrant
either the reliability of such service nor the accuracy or completeness of any
such information furnished or obtained by or through such service and (ii) shall
be without liability in selecting and utilizing such service or furnishing any
information derived therefrom.
9. Holding of Securities, Nominees, etc. Securities in an Account which
are held by the Custodian or any Subcustodian may be held by such entity in the
name of the Customer, on behalf of a Portfolio, in the Custodian's or
Subcustodian's name, in the name of the Custodian's or Subcustodian's nominee,
or in bearer form. Securities that are held by a Subcustodian or which are
eligible for deposit in a Securities System as provided above may be maintained
with the Subcustodian or the Securities System in an account for the Custodian's
or Subcustodian's customers, unless prohibited by law, rule, or regulation. The
<PAGE>
Custodian or Subcustodian, as the case may be, may combine certificates
representing Securities held in an Account with certificates of the same issue
held by it as fiduciary or as a custodian. In the event that any Securities in
the name of the Custodian or its nominee or held by a Subcustodian and
registered in the name of such Subcustodian or its nominee are called for
partial redemption by the issuer of such Security, the Custodian may, subject to
the rules or regulations pertaining to allocation of any Securities System in
which such Securities have been deposited, allot, or cause to be allotted, the
called portion of the respective beneficial holders of such class of security in
any manner the Custodian deems to be fair and equitable.
10. Proxies, etc. With respect to any proxies, notices, reports or
other communications relative to any of the Securities in any Account, the
Custodian shall perform such services and only such services relative thereto as
are (i) set forth in Section 3 of this Agreement, (ii) described in Exhibit B
attached hereto (as such service therein described may be in effect from time to
time) (the "Proxy Service") and (iii) as may otherwise be agreed upon between
the Custodian and the Customer. The liability and responsibility of the
Custodian in connection with the Proxy Service referred to in (ii) of the
immediately preceding sentence and in connection with any additional services
which the Custodian and the Customer may agree upon as provided in (iii) of the
immediately preceding sentence shall be as set forth in the description of the
Proxy Service and as may be agreed upon by the Custodian and the Customer in
connection with the furnishing of any such additional service and shall not be
affected by any other term of this Agreement. Neither the Custodian nor its
nominees or agents shall vote upon or in respect of any of the Securities in an
Account, execute any form of proxy to vote thereon, or give any consent or take
any action (except as provided in Section 3) with respect thereto except upon
the receipt of Instructions relative thereto.
11. Segregated Account. To assist the Customer in complying with the
requirements of the 1940 Act and the rules and regulations thereunder, the
Custodian shall, upon receipt of Instructions, establish and maintain a
segregated account or accounts on its books for and on behalf of a Portfolio.
12. Settlement Procedures. Securities will be transferred, exchanged or
delivered by the Custodian or a Subcustodian upon receipt by the Custodian of
Instructions which include all information required by the Custodian. Settlement
and payment for Securities received for an Account and delivery of Securities
out of such Account may be effected in accordance with the customary or
established securities trading or securities processing practices and procedures
in the jurisdiction or market in which the transaction occurs, including,
without limitation, delivering Securities to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) against a receipt
with the expectation of receiving later payment for such Securities from such
purchaser or dealer, as such practices and procedures may be modified or
supplemented in accordance with the standard operating procedures of the
Custodian in effect from time to time for that jurisdiction or market. The
Custodian shall not be liable for any loss which results from effecting
transactions in accordance with the customary or established securities trading
or securities processing practices and procedures in the applicable jurisdiction
or market.
<PAGE>
Notwithstanding that the Custodian may settle purchases and sales
against, or credit income to, an Account, on a contractual basis, as outlined in
the Investment Manager User Guide provided to the Customer by the Custodian, the
Custodian may, at its sole option, reverse such credits or debits to the
appropriate Account in the event that the transaction does not settle, or the
income is not received in a timely manner, and the Customer agrees to hold the
Custodian harmless from any losses which may result therefrom.
Except as otherwise may be agreed upon by the parties hereto, the
Custodian shall not be required to comply with Instructions to settle the
purchase of any Securities for an Account unless there is sufficient Cash in
such Account at the time or to settle the sale of any Securities in such Account
unless such Securities are in deliverable form. Notwithstanding the foregoing,
if the purchase price of such securities exceeds the amount of Cash in an
Account at the time of settlement of such purchase, the Custodian may, in its
sole discretion, but in no way shall have any obligation to, permit an overdraft
in such Account in the amount of the difference solely for the purpose of
facilitating the settlement of such purchase of securities for prompt delivery
for such Account. The Customer agrees to immediately repay the amount of any
such overdraft in the ordinary course of business and further agrees to
indemnify and hold the Custodian harmless from and against any and all losses,
costs, including, without limitation the cost of funds, and expenses incurred in
connection with such overdraft. The Customer agrees that it will not use the
Account to facilitate the purchase of securities without sufficient funds in the
Account (which funds shall not include the proceeds of the sale of the purchased
securities).
13. Permitted Transactions. The Customer agrees that it will cause
transactions to be made pursuant to this Agreement only upon Instructions in
accordance Section 14 and only for the purposes listed below.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise
become payable.
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment.
(d) Upon conversion of Securities pursuant to their terms into other
securities.
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities.
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts borrowed.
<PAGE>
(h) In connection with any loans, but only against receipt of
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer.
(i) For the purpose of redeeming shares of the capital stock of the
Customer against delivery of the shares to be redeemed to the Custodian, a
Subcustodian or the Customer's transfer agent.
(j) For the purpose of redeeming in kind shares of the Customer against
delivery of the shares to be redeemed to the Custodian, a Subcustodian or the
Customer's transfer agent.
(k) For delivery in accordance with the provisions of any agreement
among the Customer, on behalf of a Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc., relating to compliance with
the rules of The Options Clearing Corporation, the Commodities Futures Trading
Commission and of any registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Customer.
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Custodian of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Custodian will receive the Securities previously deposited from
broker. The Custodian will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due other
than to make proper request for such return.
(m) For spot or forward foreign exchange transactions to facilitate
security trading or receipt of income from Securities related transactions.
(n) Upon the termination of this Agreement as set forth in Section 20.
(o) For other proper purposes.
The Customer agrees that the Custodian shall have no obligation to
verify the purpose for which a transaction is being effected.
14. Instructions. The term "Instructions" means instructions from the
Customer in respect of any of the Custodian's duties hereunder which have been
received by the Custodian at its address set forth in Section 21 below (i) in
writing (including, without limitation, facsimile transmission) or by tested
telex signed or given by such one or more person or persons as the Customer
shall have from time to time authorized in writing to give the particular class
of Instructions in question and whose name and (if applicable) signature and
office address have been filed with the Custodian, or (ii) which have been
transmitted electronically through an electronic on-line service and
communications system offered by the
<PAGE>
Custodian or other electronic instruction system acceptable to the Custodian, or
(iii) a telephonic or oral communication by one or more persons as the Customer
shall have from time to time authorized to give the particular class of
Instructions in question and whose name has been filed with the Custodian; or
(iv) upon receipt of such other form of instructions as the Customer may from
time to time authorize in writing and which the Custodian has agreed in writing
to accept. Instructions in the form of oral communications shall be confirmed by
the Customer by tested telex or writing in the manner set forth in clause (i)
above, but the lack of such confirmation shall in no way affect any action taken
by the Custodian in reliance upon such oral instructions prior to the
Custodian's receipt of such confirmation. Instructions may relate to specific
transactions or to types or classes of transactions, and may be in the form of
standing instructions.
The Custodian shall have the right to assume in the absence of notice
to the contrary from the Customer that any person whose name is on file with the
Custodian pursuant to this Section has been authorized by the Customer to give
the Instructions in question and that such authorization has not been revoked.
The Custodian may act upon and conclusively rely on, without any liability to
the Customer or any other person or entity for any losses resulting therefrom,
any Instructions reasonably believed by it to be furnished by the proper person
or persons as provided above.
15. Standard of Care. The Custodian shall be responsible for the
performance of only such duties as are set forth herein or contained in
Instructions given to the Custodian which are not contrary to the provisions of
this Agreement. The Custodian will use reasonable care with respect to the
safekeeping of Property in each Account and, except as otherwise expressly
provided herein, in carrying out its obligations under this Agreement. So long
as and to the extent that it has exercised reasonable care, the Custodian shall
not be responsible for the title, validity or genuineness of any Property or
other property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement and shall be held harmless in acting upon, and may
conclusively rely on, without liability for any loss resulting therefrom, any
notice, request, consent, certificate or other instrument reasonably believed by
it to be genuine and to be signed or furnished by the proper party or parties,
including, without limitation, Instructions, and shall be indemnified by the
Customer for any losses, damages, costs and expenses (including, without
limitation, the fees and expenses of counsel) incurred by the Custodian and
arising out of action taken or omitted with reasonable care by the Custodian
hereunder or under any Instructions. The Custodian shall be liable to the
Customer for any act or omission to act of any Subcustodian to the same extent
as if the Custodian committed such act itself. With respect to a Securities
System, the Custodian shall only be responsible or liable for losses arising
from employment of such Securities System caused by the Custodian's own failure
to exercise reasonable care. In the event of any loss to the Customer by reason
of the failure of the Custodian or a Subcustodian to utilize reasonable care,
the Custodian shall be liable to the Customer to the extent of the Customer's
actual damages at the time such loss was discovered without reference to any
special conditions or circumstances. In no event shall the Custodian be liable
for any consequential or special damages. The Custodian shall be entitled to
rely, and may act, on advice of counsel (who may be counsel for the Customer) on
all matters and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
<PAGE>
In the event the Customer subscribes to an electronic on-line service
and communications system offered by the Custodian, the Customer shall be fully
responsible for the security of the Customer's connecting terminal, access
thereto and the proper and authorized use thereof and the initiation and
application of continuing effective safeguards with respect thereto and agree to
defend and indemnify the Custodian and hold the Custodian harmless from and
against any and all losses, damages, costs and expenses (including the fees and
expenses of counsel) incurred by the Custodian as a result of any improper or
unauthorized use of such terminal by the Customer or by any others.
All collections of funds or other property paid or distributed in
respect of Securities in an Account, including funds involved in third-party
foreign exchange transactions, shall be made at the risk of the Customer.
Subject to the exercise of reasonable care, the Custodian shall have no
liability for any loss occasioned by delay in the actual receipt of notice by
the Custodian or by a Subcustodian of any payment, redemption or other
transaction regarding Securities in each Account in respect of which the
Custodian has agreed to take action as provided in Section 3 hereof. The
Custodian shall not be liable for any loss resulting from, or caused by, or
resulting from acts of governmental authorities (whether de jure or de facto),
including, without limitation, nationalization, expropriation, and the
imposition of currency restrictions; devaluations of or fluctuations in the
value of currencies; changes in laws and regulations applicable to the banking
or securities industry; market conditions that prevent the orderly execution of
securities transactions or affect the value of Property; acts of war, terrorism,
insurrection or revolution; strikes or work stoppages; the inability of a local
clearing and settlement system to settle transactions for reasons beyond the
control of the Custodian; hurricane, cyclone, earthquake, volcanic eruption,
nuclear fusion, fission or radioactivity, or other acts of God.
The Custodian shall have no liability in respect of any loss, damage or
expense suffered by the Customer, insofar as such loss, damage or expense arises
from the performance of the Custodian's duties hereunder by reason of the
Custodian's reliance upon records that were maintained for the Customer by
entities other than the Custodian prior to the Custodian's employment under this
Agreement.
The provisions of this Section shall survive termination of this
Agreement.
16. Investment Limitations and Legal or Contractual Restrictions or
Regulations. The Custodian shall not be liable to the Customer and the Customer
agrees to indemnify the Custodian and its nominees, for any loss, damage or
expense suffered or incurred by the Custodian or its nominees arising out of any
violation of any investment restriction or other restriction or limitation
applicable to the Customer or any Portfolio pursuant to any contract or any law
or regulation. The provisions of this Section shall survive termination of this
Agreement.
17. Fees and Expenses. The Customer agrees to pay to the Custodian such
compensation for its services pursuant to this Agreement as may be mutually
agreed upon in writing from time to time and the Custodian's reasonable
out-of-pocket or incidental expenses
<PAGE>
in connection with the performance of this Agreement, including (but without
limitation) legal fees as described herein and/or deemed necessary in the
judgment of the Custodian to keep safe or protect the Property in the Account.
The initial fee schedule is attached hereto as Exhibit C. The Customer hereby
agrees to hold the Custodian harmless from any liability or loss resulting from
any taxes or other governmental charges, and any expense related thereto, which
may be imposed, or assessed with respect to any Property in an Account and also
agrees to hold the Custodian, its Subcustodians, and their respective nominees
harmless from any liability as a record holder of Property in such Account. The
Custodian is authorized to charge the applicable Account for such items and the
Custodian shall have a lien on the Property in the applicable Account for any
amount payable to the Custodian under this Agreement, including but not limited
to amounts payable pursuant to the last paragraph of Section 12 and pursuant to
indemnities granted by the Customer under this Agreement. The provisions of this
Section shall survive the termination of this Agreement.
18. Tax Reclaims. With respect to withholding taxes deducted and which
may be deducted from any income received from any Property in an Account, the
Custodian shall perform such services with respect thereto as are described in
Exhibit D attached hereto and shall in connection therewith be subject to the
standard of care set forth in such Exhibit D. Such standard of care shall not be
affected by any other term of this Agreement.
19. Amendment, Modifications, etc. No provision of this Agreement may
be amended, modified or waived except in a writing signed by the parties hereto.
No waiver of any provision hereto shall be deemed a continuing waiver unless it
is so designated. No failure or delay on the part of either party in exercising
any power or right under this Agreement operates as a waiver, nor does any
single or partial exercise of any power or right preclude any other or further
exercise thereof or the exercise of any other power or right.
20. Termination. (a) Termination of Entire Agreement. This Agreement
may be terminated by the Customer or the Custodian by ninety (90) days' written
notice to the other; provided that notice by the Customer shall specify the
names of the persons to whom the Custodian shall deliver the Securities in each
Account and to whom the Cash in such Account shall be paid. If notice of
termination is given by the Custodian, the Customer shall, within ninety (90)
days following the giving of such notice, deliver to the Custodian a written
notice specifying the names of the persons to whom the Custodian shall deliver
the Securities in each Account and to whom the Cash in such Account shall be
paid. In either case, the Custodian will deliver such Securities and Cash to the
persons so specified, after deducting therefrom any amounts which the Custodian
determines to be owed to it under Sections 12, 17, and 23. In addition, the
Custodian may in its discretion withhold from such delivery such Cash and
Securities as may be necessary to settle transactions pending at the time of
such delivery. The Customer grants to the Custodian a lien and right of setoff
against the Account and all Property held therein from time to time in the full
amount of the foregoing obligations. If within ninety (90) days following the
giving of a notice of termination by the Custodian, the Custodian does not
receive from the Customer a written notice specifying the names of the persons
to whom the Custodian shall deliver the Securities in each Account and to whom
the Cash in such Account shall be paid, the Custodian, at its election, may
deliver such Securities and pay such Cash to a bank or trust company doing
business in the State of
<PAGE>
New York to be held and disposed of pursuant to the provisions of this
Agreement, or may continue to hold such Securities and Cash until a written
notice as aforesaid is delivered to the Custodian, provided that the Custodian's
obligations shall be limited to safekeeping.
(b) Termination as to One or More Portfolios. This Agreement may be
terminated by the Customer or the Custodian as to one or more Portfolios (but
less than all of the Portfolios) by delivery of an amended Exhibit A deleting
such Portfolios, in which case termination as to such deleted Portfolios shall
take effect ninety (90) days after the date of such delivery, or such earlier
time as mutually agreed. The execution and delivery of an amended Exhibit A
which deletes one or more Portfolios shall constitute a termination of this
Agreement only with respect to such deleted Portfolio(s), shall be governed by
the preceding provisions of Section 20 as to the identification of a successor
custodian and the delivery of Cash and Securities of the Portfolio(s) so deleted
to such successor custodian, and shall not affect the obligations of the
Custodian and the Customer hereunder with respect to the other Portfolios set
forth in Exhibit A, as amended from time to time.
21. Notices. Except as otherwise provided in this Agreement, all
requests, demands or other communications between the parties or notices in
connection herewith (a) shall be in writing, hand delivered or sent by telex,
telegram, cable, facsimile or other means of electronic communication agreed
upon by the parties hereto addressed, if to the Customer, to:
if to the Custodian, to:
or in either case to such other address as shall have been furnished to the
receiving party pursuant to the provisions hereof and (b) shall be deemed
effective when received, or, in the case of a telex, when sent to the proper
number and acknowledged by a proper answerback.
22. Several Obligations of the Portfolios. With respect to any
obligations of the Customer on behalf of each Portfolio and each of its related
Accounts arising out of this Agreement, the Custodian shall look for payment or
satisfaction of any obligation solely to the assets and property of the
Portfolio and such Accounts to which such obligation relates as though the
Customer had separately contracted with the Custodian by separate written
instrument with respect to each Portfolio and its related Accounts.
23. Security for Payment. To secure payment of all obligations due
hereunder, the Customer hereby grants to Custodian a continuing security
interest in and right of setoff against each Account and all Property held
therein from time to time in the full amount of such obligations; provided that,
if there is more than one Account and the obligations secured
<PAGE>
pursuant to this Section can be allocated to a specific Account or the Portfolio
related to such Account, such security interest and right of setoff will be
limited to Property held for that Account only and its related Portfolio. Should
the Customer fail to pay promptly any amounts owed hereunder, Custodian shall be
entitled to use available Cash in the Account or applicable Account, as the case
may be, and to dispose of Securities in the Account or such applicable Account
as is necessary. In any such case and without limiting the foregoing, Custodian
shall be entitled to take such other action(s) or exercise such other options,
powers and rights as Custodian now or hereafter has as a secured creditor under
the New York Uniform Commercial Code or any other applicable law.
24. Representations and Warranties.
(a) The Customer hereby represents and warrants to the Custodian that:
(i) the employment of the Custodian and the allocation of
fees, expenses and other charges to any Account as herein provided, is not
prohibited by law or any governing documents or contracts to which the Customer
is subject;
(ii) the terms of this Agreement do not violate any obligation
by which the Customer is bound, whether arising by contract, operation of law or
otherwise;
(iii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be binding upon the Customer and
each Portfolio in accordance with its terms; and
(iv) the Customer will deliver to the Custodian such evidence
of such authorization as the Custodian may reasonably require, whether by way of
a certified resolution or otherwise.
(b) The Custodian hereby represents and warrants to the Customer that:
(i) the terms of this Agreement do not violate any obligation
by which the Custodian is bound, whether arising by contract, operation of law
or otherwise;
(ii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be binding upon the Custodian in
accordance with its terms;
(iii) the Custodian will deliver to the Customer such evidence
of such authorization as the Customer may reasonably require, whether by way of
a certified resolution or otherwise; and
(iv) Custodian is qualified as a custodian under Section 26(a)
of the 1940 Act and warrants that it will remain so qualified or upon ceasing to
be so qualified shall promptly notify the Customer in writing.
<PAGE>
25. Governing Law and Successors and Assigns. This Agreement shall be
governed by the law of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and the
Custodian.
26. Publicity. Customer shall furnish to Custodian at its office
referred to in Section 21 above, prior to any distribution thereof, copies of
any material prepared for distribution to any persons who are not parties hereto
that refer in any way to the Custodian. Customer shall not distribute or permit
the distribution of such materials if Custodian reasonably objects in writing
within ten (10) business days of receipt thereof (or such other time as may be
mutually agreed) after receipt thereof. The provisions of this Section shall
survive the termination of this Agreement.
27. Representative Capacity and Binding Obligation. A copy of the
[Declaration of Trust/Trust Instrument] of the Customer is on file with The
Secretary of the [Commonwealth of Massachusetts/ State of Delaware], and notice
is hereby given that this Agreement is not executed on behalf of the Trustees of
the Customer as individuals, and the obligations of this Agreement are not
binding upon any of the Trustees, officers or shareholders of the Customer
individually but are binding only upon the assets and property of the
Portfolios.
The Custodian agrees that no shareholder, trustee or officer of the
Customer may be held personally liable or responsible for any obligations of the
Customer arising out of this Agreement.
28. Submission to Jurisdiction. Any suit, action or proceeding arising
out of this Agreement may be instituted in any State or Federal court sitting in
the City of New York, State of New York, United States of America, and the
Customer irrevocably submits to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding and waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any such suit, action or proceeding brought in such a court and any
claim that such suit, action or proceeding was brought in an inconvenient forum.
29. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
each of the parties hereto.
30. Confidentiality. The parties hereto agree that each shall treat
confidentially the terms and conditions of this Agreement and all information
provided by each party to the other regarding its business and operations. All
confidential information provided by a party hereto shall be used by any other
party hereto solely for the purpose of rendering services pursuant to this
Agreement and, except as may be required in carrying out this Agreement, shall
not be disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is publicly
available when provided or thereafter becomes publicly available other than
through a breach of this Agreement, or that is required or requested to be
disclosed by any bank or other regulatory
<PAGE>
examiner of the Custodian, Customer, or any Subcustodian, any auditor of the
parties hereto, by judicial or administrative process or otherwise by applicable
law or regulation.
31. Severability. If any provision of this Agreement is determined to
be invalid or unenforceable, such determination shall not affect the validity or
enforceability of any other provision of this Agreement.
32. Headings. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
[NAME OF CUSTOMER]
By: __________________________
Name: _______________________
Title: _______________________
BANKERS TRUST COMPANY
By: __________________________
Name: ________________________
Title: _______________________
<PAGE>
EXHIBIT A
To Custodian Agreement dated as of ______________, 199_ between Bankers
Trust Company and ____________________.
LIST OF PORTFOLIOS
The following is a list of Portfolios referred to in the first WHEREAS
clause of the above-referred to Custodian Agreement. Terms used herein as
defined terms unless otherwise defined shall have the meanings ascribed to them
in the above-referred to Custodian Agreement.
Dated as of: [NAME OF CUSTOMER]
By: __________________________
Name: ________________________
Title: _______________________
BANKERS TRUST COMPANY
By: __________________________
Name: ________________________
Title: _______________________
<PAGE>
EXHIBIT B
To Custodian Agreement dated as of _____________, 199_ between Bankers
Trust Company and ___________________.
PROXY SERVICE
The following is a description of the Proxy Service referred to in
Section 10 of the above referred to Custodian Agreement. Terms used herein as
defined terms shall have the meanings ascribed to them therein unless otherwise
defined below.
The Custodian provides a service, described below, for the transmission
of corporate communications in connection with shareholder meetings relating to
Securities held in Argentina, Australia, Austria, Canada, Denmark, Finland,
France, Germany, Greece, Hong Kong, Indonesia, Ireland, Italy, Japan, Korea,
Malaysia, Mexico, Netherlands, New Zealand, Pakistan, Poland, Singapore, South
Africa, Spain, Sri Lanka, Sweden, United Kingdom, United States, and Venezuela.
For the United States and Canada, the term "corporate communications" means the
proxy statements or meeting agenda, proxy cards, annual reports and any other
meeting materials received by the Custodian. For countries other than the United
States and Canada, the term "corporate communications" means the meeting agenda
only and does not include any meeting circulars, proxy statements or any other
corporate communications furnished by the issuer in connection with such
meeting. Non-meeting related corporate communications are not included in the
transmission service to be provided by the Custodian except upon request as
provided below.
The Custodian's process for transmitting and translating meeting
agendas will be as follows:
1) If the meeting agenda is not provided by the issuer in the English
language, and if the language of such agenda is in the official language of the
country in which the related security is held, the Custodian will as soon as
practicable after receipt of the original meeting agenda by a Subcustodian
provide an English translation prepared by that Subcustodian.
2) If an English translation of the meeting agenda is furnished, the
local language agenda will not be furnished unless requested.
Translations will be free translations and neither the Custodian nor
any Subcustodian will be liable or held responsible for the accuracy thereof or
any direct or indirect consequences arising therefrom, including without
limitation arising out of any action taken or omitted to be taken based thereon.
<PAGE>
- 2 -
If requested, the Custodian will, on a reasonable efforts basis,
endeavor to obtain any additional corporate communication such as annual or
interim reports, proxy statements, meeting circulars, or local language agendas,
and provide them in the form obtained.
Timing in the voting process is important and, in that regard, upon
receipt by the Custodian of notice from a Subcustodian, the Custodian will
provide a notice to the Customer indicating the deadline for receipt of its
instructions to enable the voting process to take place effectively and
efficiently. As voting procedures will vary from market to market, attention to
any required procedures will be very important. Upon timely receipt of voting
instructions, the Custodian will promptly forward such instructions to the
applicable Subcustodian. If voting instructions are not timely received, the
Custodian shall have no liability or obligation to take any action.
For Securities held in markets other than those set forth in the first
paragraph, the Custodian will not furnish the material described above or seek
voting instructions. However, if requested to exercise voting rights at a
specific meeting, the Custodian will endeavor to do so on a reasonable efforts
basis without any assurance that such rights will be so exercised at such
meeting.
If the Custodian or any Subcustodian incurs extraordinary expenses in
exercising voting rights related to any Securities pursuant to appropriate
instructions or direction (e.g., by way of illustration only and not by way of
limitation, physical presence is required at a meeting and/or travel expenses
are incurred), such expenses will be reimbursed out of the Account containing
such Securities unless other arrangements have been made for such reimbursement.
It is the intent of the Custodian to expand the Proxy Service to
include jurisdictions which are not currently included as set forth in the
second paragraph hereof. The Custodian will notify the Customer as to the
inclusion of additional countries or deletion of existing countries after their
inclusion or deletion and this Exhibit B will be deemed to be automatically
amended to include or delete such countries as the case may be.
Dated as of: [NAME OF CUSTOMER]
By: __________________________
Name: ________________________
Title: _______________________
BANKERS TRUST COMPANY
<PAGE>
- 3 -
By: __________________________
Name: ________________________
Title: _______________________
<PAGE>
EXHIBIT C
To Custodian Agreement dated as of ______________, 199_ between Bankers
Trust Company and ____________________.
CUSTODY FEE SCHEDULE
<PAGE>
This Exhibit C shall be amended upon delivery by the Custodian of a new Exhibit
C to the Customer and acceptance thereof by the Customer and shall be effective
as of the date of acceptance by the Customer or a date agreed upon between the
Custodian and the Customer.
<PAGE>
EXHIBIT D
To Custodian Agreement dated as of ______________, 199_ between Bankers
Trust Company and ____________________.
TAX RECLAIMS
Pursuant to Section 18 of the above referred to Custodian Agreement,
the Custodian shall perform the following services with respect to withholding
taxes imposed or which may be imposed on income from Property in any Account.
Terms used herein as defined terms shall unless otherwise defined have the
meanings ascribed to them in the above referred to Custodian Agreement.
When withholding tax has been deducted with respect to income from any
Property in an Account, the Custodian will actively pursue on a reasonable
efforts basis the reclaim process, provided that the Custodian shall not be
required to institute any legal or administrative proceeding against any
Subcustodian or other person. The Custodian will provide fully detailed
advices/vouchers to support reclaims submitted to the local authorities by the
Custodian or its designee. In all cases of withholding, the Custodian will
provide full details to the Customer. If exemption from withholding at the
source can be obtained in the future, the Custodian will notify the Customer and
advise what documentation, if any, is required to obtain the exemption. Upon
receipt of such documentation from the Customer, the Custodian will file for
exemption on the Customer's behalf and notify the Customer when it has been
obtained.
In connection with providing the foregoing service, the Custodian shall
be entitled to apply categorical treatment of the Customer according to the
Customer's nationality, the particulars of its organization and other relevant
details that shall be supplied by the Customer. It shall be the duty of the
Customer to inform the Custodian of any change in the organization, domicile or
other relevant fact concerning tax treatment of the Customer and further to
inform the Custodian if the Customer is or becomes the beneficiary of any
special ruling or treatment not applicable to the general nationality and
category or entity of which the Customer is a part under general laws and treaty
provisions. The Custodian may rely on any such information provided by the
Customer.
<PAGE>
In connection with providing the foregoing service, the Custodian may
also rely on professional tax services published by a major international
accounting firm and/or advice received from a Subcustodian in the jurisdictions
in question. In addition, the Custodian may seek the advice of counsel or other
professional tax advisers in such jurisdictions. The Custodian is entitled to
rely, and may act, on information set forth in such services and on advice
received from a Subcustodian, counsel or other professional tax advisers and
shall be without liability to the Customer for any action reasonably taken or
omitted pursuant to information contained in such services or such advice.
<PAGE>
Dated as of: [NAME OF CUSTOMER]
By: __________________________
Name: ________________________
Title: _______________________
BANKERS TRUST COMPANY
By: __________________________
Name: _________________________
Title: _______________________
<PAGE>
Form of Agreement
Subject to Board Approval
___________, 1996
Bankers Trust Company
One Bankers Trust Plaza
New York, NY 10006
USA
RE: Securities Lending Agreement
Dear Sirs:
This letter will confirm our agreement, as set forth below, pursuant to
which Bankers Trust Company ("BTC") will be authorized to lend on our behalf
certain securities held by BTC as trustee and/or custodian:
1. Appointment of Agent
(a) Until this Agreement is terminated pursuant to Section 11, BTC is
authorized as our agent to lend on a disclosed basis our securities held in
custody by BTC to such borrowers as appear on your approved list of borrowers, a
copy of which you may obtain at any time upon request, at the time of any loan
and on such terms as BTC shall in its sole discretion decide. Such borrowers may
include Bankers Trust International PLC, an affiliate of BTC, if we provide BTC
with our authorization in the form attached as Exhibit A hereto, and certain
United Kingdom entities, if we provide BTC with our authorization in the form
attached hereto as Exhibit B. BTC shall further be authorized as our agent to
sign agreements with borrowers, ownership or other certificates as may be
required by the Internal Revenue Service or any other tax authorities, and to
take any other actions necessary to effect such loans.
(b) We acknowledge that BTC acts as agent for other securities lending
clients who may hold some of the same securities as we may hold and,
accordingly, that any given loan to a borrower may be allocated among several of
BTC's clients. We agree that BTC shall have full discretion to allocate such
loans among BTC's clients as it deems appropriate and shall have no obligation
to include us in any such allocation.
<PAGE>
(c) We represent that:(i) [COMPANY] is a ________________ established
pursuant to _____________________; (ii) we have and will have the right to lend
the securities subject to loans hereunder; (iii) the assets subject to this
Agreement [do / do not] consist of assets which are deemed to be plan assets
under the Employee Retirement Income Security Act of 1974, or the Internal
Revenue Code of 1986, each as amended; (iv) the execution, delivery and
performance of this Agreement are within our powers, have been and remain duly
authorized by all necessary action and will not violate or constitute a default
under any applicable law or regulation or of any decree, order, judgment,
agreement or instrument binding on us; (v) no consent (including, but not
limited to, exchange control consents) of any applicable governmental authority
or body is necessary, except for such consents as have been obtained and are in
full force and effect, and all conditions of which have been duly complied with;
and (vi) this Agreement constitutes a legal, valid and binding obligation
enforceable against us in accordance with its terms.
2. Remuneration
Unless otherwise agreed, BTC shall pay us a fee for each loan equal to
an agreed percentage of (a) in the case of loans not collateralized by cash, the
fee paid by the borrower to BTC with respect to each loan, and (b) in the case
of loans collateralized by cash, the difference between (i) the net realized
income derived from approved investments of the cash collateral, minus (ii) the
borrower's rebate. BTC shall receive any fee paid by the borrower and, provided
that BTC shall have actually received payment of such fees from the borrower,
credit our portion of such fees to our account monthly.
3. Statements of Loan Activity and Fees
BTC shall promptly advise us by written or electronic means of any loan
entered into by BTC on our behalf. In addition, BTC shall send us a monthly
statement summarizing securities lending activity (including revenues therefrom)
for the previous month effected by BTC on our behalf.
4. Distributions on Loaned Securities and Collateral
All borrowers shall be required to pay or otherwise deliver to BTC all
substitute payments in respect of interest payments, dividends, or other
distributions made on the loaned securities. Such payments shall be credited by
BTC to our account upon receipt by BTC of such payments from the borrower,
unless otherwise agreed upon by the parties. We authorize BTC to pay, provided
that the borrower is not in default under its agreement with BTC, to the
borrower all interest payments received by BTC on Government
<PAGE>
Securities (as defined in Section 6(a)) held by BTC as collateral for our loans.
5. Recalls of Securities
(a) Unless otherwise agreed by us, we may instruct BTC to terminate any
loan in whole or in part by giving BTC written notice thereof (a "Recall
Notice"). BTC shall thereupon promptly recall the securities from the borrower,
within the recall period specified by BTC's agreement with the borrower, which
shall not be later than the fifth business day (but, in the case of U.S. equity
securities, the third business day, and, in the case of Government Securities,
the first business day) following the business day on which BTC gives a notice
recalling the securities to the borrower (the "Recall Period"). If, on the day
BTC receives the Recall Notice, (i) the borrower is closed for business or (ii)
the principal market for the loaned securities is closed for trading, the Recall
Period will commence on the next business day on which both the borrower and the
principal trading market are open.
(b) If any loaned security is not returned by a borrower by the
expiration of the applicable recall period, BTC shall notify us of such fact.
BTC shall take all steps which BTC deems appropriate to secure the prompt return
of the securities pursuant to BTC's agreement with the borrower (which may
include the liquidation of collateral and the purchase of replacement
securities).
6. Collateral
(a) Unless otherwise indicated to us by BTC, prior to or simultaneously
with the delivery of our securities to a borrower, BTC shall obtain and hold on
our behalf collateral having a value not less than the value (the "Margin
Requirement") specified in Exhibit C hereto. The collateral shall consist of (i)
cash, (ii) securities issued or guaranteed by the United States Government or
its agencies ("Government Securities"), or (iii) letters of credit issued by
banks as may be acceptable to BTC.
(b) BTC will mark to market loaned securities and collateral (if the
collateral is represented by Government Securities) on a daily basis, and if on
any day, the aggregate market value of the collateral held by BTC for loans made
to any one borrower is less than the Margin Requirement, BTC shall obtain from
such borrower pursuant to BTC's agreement with the borrower such additional
collateral so that the aggregate market value of
<PAGE>
the collateral is not less than the Margin Requirement. We understand that BTC
may be obligated to release collateral in excess of the Margin Requirement to
the borrower when so required by BTC's agreement with the borrower.
(c) We authorize BTC to invest, on our behalf and for our account, any
cash collateral received from a borrower in any of the instruments described in
Exhibit C hereto, including any such instrument issued by, purchased through or
entered into with BTC or its affiliates. We acknowledge that such cash
collateral is invested at our risk, and if, upon termination of any loan, the
cash collateral held by BTC for our account is less than the amount required to
be returned to the borrower under BTC's agreement with the borrower, we will
provide BTC with cash in the amount of any such deficiency.
7. Indemnification
(a) In the event that any loan is terminated and the loaned Securities
or any portion thereof shall not have been returned to BTC by or on behalf of
Borrower within the time specified by BTC's agreement with the borrower, BTC
shall at its expense (i) within one (1) business day after the expiration of the
Recall Period, replace the loaned Securities (or any portion thereof not so
returned) with a like amount of the loaned securities of the same issuer, class
and denomination, and hold us harmless from any brokerage commission, fees, and
New York State or City transfer taxes incurred by BTC in the purchase of such
replacement securities or (ii) if BTC is unable to purchase such securities on
the open market, credit our account with an amount of cash in U.S. dollars equal
to the Market Value (as defined below) of such unreturned loaned Securities
determined at the close of business as of the date on which the loaned
Securities should have been returned plus, until such time as the events in (i)
or (ii) are consummated, all financial benefits derived from the beneficial
ownership of the loaned Securities which have accrued on the loaned Securities
whether or not received from Borrower. The Market Value of any securities listed
on a national securities exchange will be the last sales price on the principal
exchange on which trading occurred on the date the Market Value is determined
or, if there was no sale on any such exchange on such date, the last bid price
quoted. The Market Value of securities traded in the over-the-counter market
will be the last quoted bid price in the over-the-counter market as reported by
the National Quotation Bureau Incorporated or any successor organization. The
Market Value of Government Securities shall be the price as quoted by a
generally recognized pricing service for the business day preceding the date of
determination (or, if not so quoted on such
<PAGE>
day, the next preceding day on which they were so quoted). The Market
Value of securities the principal trading market for which is outside the United
States will be the last sale price on the principal exchange on which they are
traded, or if there was no sale on that date, the last sale price on the next
preceding day on which there was such a sale on such exchange, all as quoted in
the DataSheet Service of the Interactive Data Corporation, or, if not therein
quoted, then as quoted by any such exchange; the foreign exchange rate used to
calculate the Market Value of foreign securities not denominated in U.S. dollars
shall be the foreign exchange rate quoted by Bankers Trust Company at the close
of business in New York on the preceding day. The Market Value of securities for
which market quotations are not readily available over a reasonable period of
time, will be the average of values quoted by three major investment banking
firms which are mutually agreeable to BTC and us.
(b) In the event that BTC shall be required to make any payment to us
or shall incur any loss or expense pursuant to (a) above, it shall, to the
extent of such payment or loss or expense, be subrogated to, and succeed to, all
of our rights against the borrower and to the collateral involved; to the extent
the collateral consists of cash or Government Securities, we shall
contemporaneously with any such payment to us by BTC surrender same to BTC for
its sole disposition.
(c) Except as provided in this Section 7, BTC shall have no liability
to us for any failure of a borrower to return loaned securities.
8. BTC's Relationship with a Borrower.
We acknowledge that BTC and/or its affiliates may be a creditor of, for
its own account or in a fiduciary capacity, or generally engage in any kind of
commercial or investment banking business with, a borrower to whom BTC has lent
our securities. Without limiting the generality of the foregoing, BTC shall not
be required to disclose to us any financial information about a borrower
obtained in the course of its relationship with such borrower.
9. Notices
All notices under this Agreement, including Recall Notices, shall be in
writing and sent by mail or facsimile, addressed as follows:
<PAGE>
If to BTC:
Bankers Trust Company
c/o BTNY Services, Inc.
34 Exchange Place
Jersey City, NJ 07302
U.S.A.
Attention: Securities Lending Unit
Facsimile No.: (201) 860-2587
If to us:
[CLIENT NAME]
[ADDRESS]
ATTENTION:
FACSIMILE NO.:
Notices shall be effective upon receipt. The address indicated above
for either party may be changed by prior written notice to the other party.
10. Indemnification and Reimbursement of Agent, etc.
(a) We agree to indemnify BTC and to hold BTC harmless from any
liabilities, losses, costs or expenses (including reasonable attorneys' fees)
which BTC may incur in connection with this Agreement or the transactions
contemplated hereby; provided that such indemnification shall not extend to
liabilities, losses, costs or expenses to the extent that such liabilities,
losses, costs or expenses (i) are found by a final judgment of a court of
competent jurisdiction to have resulted from BTC's own willful misconduct or
gross negligence or (ii) result from BTC's indemnity provided in Section 7.
(b) We agree that BTC's duties and responsibilities shall only be those
expressly set forth herein and that BTC may consult with counsel and be fully
protected with respect to any action taken or omitted to be taken in good faith
upon advice of such counsel.
(c) We agree that BTC may rely on any certificate, statement, request,
consent, agreement or other instrument which it believes to be genuine and to
have been signed or presented by a proper person or persons.
11. Termination
<PAGE>
Either party may terminate this Agreement by giving not less than five
business days written notice to the other party. Such termination shall be
effective on the date specified therein, provided that such termination notice
shall not constitute a notice pursuant to Section 5 unless so specified by us,
and further provided that this Agreement shall continue to govern all
outstanding loans until the termination thereof.
12. Governing Law and Legal Proceedings
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York (without giving effect to conflicts of
laws principles thereof).
(b) We hereby agree that any legal action or proceeding arising out of
or relating to this Agreement may be brought in the courts of the State of New
York, the courts of the United States of America located in the City of New York
or in any other court having jurisdiction with respect thereto, and we hereby
irrevocably consent to service of process in any said action or proceeding in
any of such courts by the mailing of copies thereof, postage prepaid, to us at
[ADDRESS OF DESIGNATED AGENT FOR SERVICE OF PROCESS IN NEW YORK], such service
to be effective 10 days after such mailing. We hereby waive, in relation to any
such action or proceeding, [any sovereign immunity or other immunity to suit or
to the execution or attachment (whether before or after judgment) to which we or
any of our property may be or become entitled, or](1) any defense to any action
or proceeding based on venue or that the action has been brought in an
inconvenient forum.
13. Force Majeure
Notwithstanding any other provision contained herein, BTC shall not be
liable for any action taken, or any failure to take any action required to be
taken hereunder or otherwise to fulfill BTC's obligations hereunder in the event
and to the extent that the taking of such action or such failure arises out of
or is caused by acts of governmental authorities (whether de jure or de facto),
including nationalization, expropriation, the imposition of currency
restrictions, war, insurrection, riot, revolution, terrorism or civil commotion;
acts of God, accident, fire, water damage, explosion, hurricane, cyclone,
earthquake, volcanic
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1 Can delete for U.S. Clients
<PAGE>
eruption, nuclear fusion, fission, or radioactivity; mechanical breakdown,
computer or system failure or computer virus, failure or malfunctioning of any
communications media for whatever reason; interruption (whether partial or
total) of power supplies or other utility or service; strike or other stoppage
(whether partial or total) of labor; any law, decree, regulation or order of any
government or governmental body (including any court or tribunal); or any other
cause (whether similar or dissimilar to any of the foregoing) whatsoever beyond
BTC's control.
14. Miscellaneous
This Agreement constitutes the entire agreement of the parties with
respect to BTC's acting as our agent in connection with the loan of our
securities which we have placed in custody with BTC, and supersedes all prior
understandings, written or oral, or any previous agreement with respect thereto.
Neither party shall be bound by any modifications of this Agreement unless it
has so agreed in writing.
If the terms hereof accurately reflect our agreement, please so
indicate by signing below.
[CLIENT NAME]
By: _____________________
Name:
Title:
AGREED TO AND ACCEPTED BY
AS OF THE DATE HEREOF:
BANKERS TRUST COMPANY
By: _______________________
Name:
Title:
<PAGE>
Exhibit A
Authorization to Lend to Bankers Trust International PLC
The following procedures will be employed to ensure that each loan to
Bankers Trust International ("BTI"), wholly owned subsidiary established under
English law of Bankers Trust Company ("Bankers Trust"), is made in conformity
with the requirements of the Department of Labor.
1. Loans of securities to BTI will be competitively negotiated. Each
prospective transaction with BTI will be evaluated by comparing rates and terms
offered by BTI to those offered by other unrelated borrowers on our approved
list of borrowers. Any loan of securities to BTI will be at market rates and in
no event less favorable than a loan of such securities, if such loan could be
made at the same time under the same circumstances to an unaffiliated borrower.
2. Bankers Trust will maintain transactional and market records which
contain information to assure that all loans made to BTI are effectively at
arms-length terms. These records will contain data pertaining to loans made to
BTI and other bids, if any, made for such loans or other rates on similar loans
by unaffiliated borrowers. You may obtain a copy of such records upon written
request.
3. As is the case with loans to unrelated approved borrowers, if
prevailing market interest or rebate rates change, the rates on outstanding
loans to BTI will be adjusted accordingly.
4. All loans to BTI will be made on terms which are substantively
identical to those contained in the standard Bankers Trust UK Securities Lending
Agreement ("the Securities Lending Agreement"), which is our contract for loans
to unrelated approved UK borrowers. Among other things, the Securities Lending
Agreement with BTI will provide the lending client with all right, title and
interest in the collateral delivered by the borrower.
A copy of the BTI Securities Lending Agreement is available to
you at any time upon request. We will provide you at least thirty (30) days
advance written notice of any substantive amendments or changes to the
Securities Lending Agreement with BTI.
5. As is Bankers Trust's present policy for all loans to unrelated
borrowers, any and all loans to BTI will be:
<PAGE>
(a) Collateralized for each loan transaction in an amount
equal to the agreed upon percentage, which shall be at least 102% of the market
value of securities, plus accrued interest (in the case of debt securities). We
will mark loans to market on a daily basis to ensure that the loan collateral is
maintained at the agreed upon percentage.
As is the case with loans to unrelated approved borrowers,
permissible collateral will include any combination of the following:
- Cash collateral which will be invested for you if you so
request by Bankers Trust, in the investment vehicle that you have chosen for the
investment of your cash collateral, a current description of which is available
upon request.
- Securities issued or guaranteed by the United States
Government or any agency thereof.
- Letters of credit issued by banks as may be acceptable to
Bankers Trust (a current list of such institutions is available upon request, at
any time.) In no event will Bankers Trust, or any affiliate of Bankers Trust, be
the issuer of a letter of credit in connection with the securities lending
program.
(b) Cancelable by you or by Bankers Trust at any time. Upon
termination of a loan, the securities are required to be returned to us as your
agent on the day that would be the standard settlement day in the principal
market in which securities are traded, for transactions effected on the business
day on which Bankers Trust as your agent gives notice of termination to BTI, in
no event to exceed 5 business days in the market in which the security is
traded.
6. You may receive a copy of BTI's most recent available audited and
unaudited financial statements upon request. Should we believe there to be any
material adverse change in the financial condition of BTI, we will promptly
advise you of such change and ask you for your approval to continue lending to
BTI.
7. In case of a default by BTI in any securities loan
transaction, Bankers Trust will promptly notify you of such fact and use all
appropriate means as your agent to enforce your rights under the BTI Securities
Lending Agreement against BTI. In such event, you may, if you so choose, at your
expense, assume the rights of Bankers Trust to enforce the terms of the BTI
Securities Lending Agreement against BTI.
<PAGE>
8. The current monthly report furnished to you, covering all securities
loans outstanding in the previous month, enables you to review all lending
activity for your account, including BTI loans and all other loan transactions.
The format includes a list of outstanding loans and loans that terminated during
the prior month, showing the number of securities involved, value of securities
and collateral, daily and monthly rate of interest or rebate rates and number of
days securities have been out on loan. A weekly report of specific outstanding
loans is also available, upon request.
By:__________________________
Name:
Title:
<PAGE>
Exhibit B
LOANS TO UK COUNTERPARTIES
Certain of the borrowers to which Bankers Trust Company ("BTC") may
loan our securities held in trust and/or custody are entities which are
organized and existing under the laws of the United Kingdom ("UK
Counterparties"). Loans to UK Counterparties will be made by BTC as our agent
pursuant to a form of securities lending agreement governed by the laws of the
United Kingdom (the "UK Agreement") which is available to us upon request.
[In order to ensure that securities loans to such UK Counterparties
which do not at the present time meet the requirements of Prohibited Transaction
Exemption 81-6 or another available exemption do not result in a prohibited
transaction under ERISA, BTC will require such borrowers to represent to BTC
that they are not a "party in interest" within the meaning of ERISA with respect
to any pension or retirement plan the assets of which are being lent.](2)
By signing this authorization, we grant our consent to BTC making, on
our behalf, the following representations and warranties to such UK
Counterparties:
(1) We are duly authorized and empowered to perform our
respective duties and obligations under the UK Agreement;
(2) We are not restricted under the terms of our constitution or
in any other manner from lending securities in accordance with
the UK Agreement or from otherwise performing our obligations
thereunder; and
(3) We are absolutely entitled to pass full beneficial ownership
of all securities loaned under the UK Agreement to the
applicable UK Counterparty free from all liens, charges and
encumbrances.
We authorize BTC as our agent to(a) disclose our name to the UK Inland
Revenue for approval of us as an approved lender to a UK Counterparty and (b)
undertake to the Inland Revenue on our behalf to lend securities on certain
specified terms, with which BTC as our agent will comply. We agree to provide
BTC with all documents, certificates or other information necessary to enable
BTC to make the appropriate filings on our behalf with the Inland Revenue to
become an approved lender to UK Counterparties. [We understand such
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2 For ERISA clients.
<PAGE>
approval is necessary to enable the UK Counterparty to make manufactured
payments in respect of interest, dividends or other distributions on the loaned
securities without deduction of [UK] withholding tax.](3) [We understand such
approval is necessary in order to prevent certain UK tax costs arising for the
UK Counterparty.](4)
In order to make loans to UK Counterparties, we understand that we will be
required to submit to the non-exclusive jurisdiction of the courts of England in
connection with any disputes which may arise out of or in connection with the UK
Agreement, and waive any objection to proceedings in such courts whether on the
grounds of sovereignty, venue or that the proceedings have been brought in an
inconvenient forum. By signing this authorization, we also consent to BTC's
entering into such agreements on our behalf.
Except as specifically described above, all provisions of the
Securities Lending Agreement between us and BTC shall be applicable to loans to
UK Counterparties.
THE LENDING OF SECURITIES TO UK COUNTERPARTIES IS AUTHORIZED UNDER
THE PROCEDURES DESCRIBED ABOVE SUBJECT TO ANY LIMITATIONS SET FORTH
BELOW.
By:________________________
Name:
Title:
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3 For use with clients resident and subject to tax in a jurisdiction having a
double tax treaty with the UK containing an "other income" article exempting
such income from UK tax.
4 For use with other clients.
<PAGE>
EXHIBIT C
I. Margin Requirements Referred to in Section 6(a)
For loans of securities the principal trading market for which is in
the United States, 102%, and for loans of securities the principal trading
market for which is outside the United States, 105%, of the aggregate market
value of the loaned securities plus any accrued but unpaid distributions
thereon.
II. Investment Vehicles Referred to in Section 6 (c)
[List]
<PAGE>
___________, 1996
Bankers Trust Company
One Bankers Trust Plaza
New York, NY 10004
U.S.A.
Re: Securities Lending Agreement
Dear Sirs:
In accordance with Section 2 of the securities lending agreement
between you and us dated ___________ 1996, we hereby confirm our agreement that
the fee paid by the borrower with respect to each loan of securities thereunder
shall be apportioned between us as __% for us and __% for BTC.
Very truly yours,
[CUSTOMER]
By: _____________________
Name:
Title:
AGREED TO AND ACCEPTED:
BANKERS TRUST COMPANY
By: _______________________
Name:
Title:
<PAGE>
FORM OF AGREEMENT
SUBJECT TO BOARD APPROVAL
DELAWARE GROUP VALUE FUND, INC.
FIRST AMENDED AND RESTATED SHAREHOLDERS SERVICES AGREEMENT
THIS AGREEMENT, made as of this 29th day of November, 1996 by and
between DELAWARE GROUP VALUE FUND, INC. (the "Fund"), a Maryland Corporation,
for the VALUE FUND series and the RETIREMENT INCOME FUND series (collectively
"the Series"), and DELAWARE SERVICE COMPANY, INC. ("DSC"), a Delaware
Corporation, each having its principal office and place of business at 1818
Market Street, Philadelphia, Pennsylvania 19103.
W I T N E S S E T H:
WHEREAS, the Investment Management Agreements between the Fund and
Delaware Management Company, Inc. provide that the Fund shall conduct its own
business and affairs and shall bear the expenses and salaries necessary and
incidental thereto including, but not in limitation of the foregoing, the costs
incurred in: the maintenance of its corporate existence; the maintenance of its
own books, records and procedures; dealing with its own shareholders; the
payment of dividends; transfers of stock, including issuance and redemption of
shares; reports and notices to stockholders; calling and holding of stockholder
meetings; miscellaneous office expenses; brokerage commissions; legal and
accounting fees; taxes; and federal and state registration fees; and
WHEREAS, the Fund and DSC desire to have a written agreement concerning
the
<PAGE>
performance of the foregoing services and providing compensation therefor; and
WHEREAS, the Fund and DSC previously entered into a Shareholder
Services Agreement dated ____________________ providing for the provision of
services to the Value Fund series; and
WHEREAS, the Fund and DSC desire to amend and restate their Shareholder
Services Agreement dated as of __________________ to include the Fund's new
series, the Retirement Income Fund series.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:
I. APPOINTMENT AS AGENT
1.1 The Fund hereby appoints DSC Shareholder Services Agent for the
Series to provide as agent for the Fund services as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent and DSC hereby accepts such
appointment and agrees to provide the Fund, as its agent, the services described
herein.
1.2 The Fund shall pay DSC and DSC shall accept, for the services
provided hereunder, the compensation provided for in Section VIII hereof. The
Fund also shall reimburse DSC for expenses incurred or advanced by it for the
Fund in connection with its services hereunder.
II. DOCUMENTATION
2.1 The Fund represents that it has provided or made available to DSC
(or has given DSC an opportunity to examine) copies of, and DSC represents that
it has received from the Fund (or is otherwise familiar with), the following
documents:
2
<PAGE>
(a) The Articles of Incorporation or other documents
evidencing the Fund's form of organization and any current amendments or
supplements thereto.
(b) The By-Laws of the Fund;
(c) Any resolution or other action of the Fund or the Board of
Directors of the Fund establishing or affecting the rights, privileges or other
status of each class or series of shares of the Fund, including those relating
to the Series or altering or abolishing each such class or series;
(d) A certified copy of a resolution of the Board of Directors
of the Fund appointing DSC as Shareholder Services Agent for the Series and
authorizing the execution of this Agreement;
(e) The forms of share certificates of the Series in the forms
approved by the Board of Directors of the Fund;
(f) A copy of the Fund's currently effective Prospectuses and
Statement of Additional Information under the Securities Act of 1933, if
effective;
(g) Copies of all account application forms and other
documents relating to stockholder accounts in the Series;
(h) Copies of documents relating to Plans of the Fund for the
purchase, sale or repurchase of its shares, including periodic payment or
withdrawal plans, reinvestment plans or retirement plans;
(i) Any opinion of counsel to the Fund relating to the
authorization and validity of the shares of the Series issued or proposed to be
issued under the law of the State of the Fund's organization, including the
status thereof under any applicable securities laws;
3
<PAGE>
(j) A certified copy of any resolution of the Board of
Directors of the Fund authorizing any person to give instructions to DSC under
this Agreement (with a specimen signature of such person if not already
provided), setting forth the scope of such authority; and
(k) Any amendment, revocation or other documents altering,
adding, qualifying or repealing any document or authority called for under this
Section 2.1.
2.2 The Fund and DSC may consult as to forms or documents that may be
required in performing services hereunder.
2.3 The Fund shall provide or make available to DSC a certified copy of
any resolution of the stockholders or the Board of Directors of the Fund
providing for a dividend, capital gains distribution, distribution of capital,
stock dividend, stock split or other similar action affecting the authorization
or issuance of shares of the Fund or the payment of dividends.
2.4 In the case of any recapitalization or other capital adjustment
requiring a change in the form of stock certificates or the books recording the
same, the Fund shall deliver or make available to DSC:
(a) A certified copy of any document authorizing or effecting
such change;
(b) Written instructions from an authorized officer
implementing such change; and
(c) An opinion of counsel to the Fund as to the validity of
such action, if requested by DSC.
2.5 The Fund warrants the following:
(a) The Fund is, or will be, a properly registered investment
company under the Investment Company Act of 1940 and any and all Series' shares
which it issues will be
4
<PAGE>
properly registered and lawfully issued under applicable federal and state laws.
(b) The provisions of this contract do not violate the terms
of any instrument by which the Fund is bound; nor do they violate any law or
regulation of any body having jurisdiction over the Fund or its property.
2.6 DSC warrants the following:
(a) DSC is and will be properly registered as a transfer agent
under the Securities and Exchange Act of 1934 and is duly authorized to serve,
and may lawfully serve as such.
(b) The provisions of this contract do not violate the terms
of any instrument by which DSC is bound; nor do they violate any law or
regulation of any body having jurisdiction over DSC or its property.
III. STOCK CERTIFICATES
3.1 The Fund shall furnish or authorize DSC to obtain, at the Fund's
expense, a sufficient supply of blank stock certificates for the Series, and
from time to time will replenish such supply upon the request of DSC. The Fund
agrees to indemnify and exonerate, save and hold DSC harmless, from and against
any and all claims or demands that may be asserted against DSC concerning the
genuineness of any stock certificate supplied to DSC pursuant to this Section.
3.2 DSC shall safeguard, and shall account to the Fund, upon its demand
for, all such stock certificates: (a) as issued, showing to whom issued, or (b)
as unissued, establishing the safekeeping, cancellation or destruction thereof.
3.3 The Fund shall promptly inform DSC in writing of any change in the
officers
5
<PAGE>
authorized to sign stock certificates or in the form thereof. If an officer
whose manual or facsimile signature is affixed to any blank share certificate
shall die, resign or be removed prior to the issuance of such certificate, DSC
may nevertheless issue such certificate notwithstanding such death, resignation
or removal, and the Fund shall with respect thereto promptly provide to DSC any
approval, adoption or ratification as may be required by DSC.
IV. TRANSFER AGENT
4.1 As Transfer Agent for the Fund, DSC shall issue, redeem and
transfer shares of the Series, and, in connection therewith but not in
limitation thereof, it shall:
(a) Upon receipt of authority to issue shares, determine the
total shares to be issued and issue such shares by crediting shares to accounts
created and maintained in the registration forms provided; as applicable,
prepare, issue and deliver stock certificates.
(b) Upon proper transfer authorization, transfer shares by
debiting transferor-stockholder accounts and crediting such shares to accounts
created and/or maintained for transferee-stockholders; if applicable, issue
and/or cancel stock certificates.
(c) Upon proper redemption authorization, determine the total
shares redeemed and to be redeemed; determine the total redemption payments made
and to be made; redeem shares by debiting stockholder accounts; as applicable
receive and cancel stock certificates for shares redeemed; and remit or cause to
be remitted the redemption proceeds to stockholders.
(d) Create and maintain accounts; reconcile and control cash
due and paid, shares issued and to be issued, cash remitted and to be remitted
and shares debited and credited to accounts; provide such notices, instructions
or authorizations as the Fund may require.
4.2 DSC shall not be required to issue, transfer or redeem Series'
shares upon receipt
6
<PAGE>
of DSC from the Fund, or from any federal or state regulatory agency or
authority, written notice that the issuance, transfer or redemption of Series'
shares has been suspended or discontinued.
V. DIVIDEND DISBURSING AGENT
5.1 As Dividend Disbursing Agent for the Series, DSC shall disburse and
cause to be disbursed to stockholders of each Series dividends, capital gains
distributions or any payments from other sources as directed by the Fund. In
connection therewith, but not in the limitation thereof, DSC shall:
(a) Calculate the total disbursement due and payable and the
disbursement to each stockholder as to shares owned, in accordance with the
Fund's authorization.
(b) Calculate the total disbursements for each stockholder, as
aforesaid, to be disbursed in cash; prepare and mail checks therefor.
(c) Calculate the total disbursement for each stockholder of
each Series, as aforesaid, for which Series' shares are to be issued and
authorized and instruct the issuance of Series' shares therefor in accordance
with Section IV hereof.
(d) Prepare and mail or deliver such forms and notices
pertaining to disbursements as required by federal or state authority.
(e) Create and maintain records, reconcile and control
disbursements to be made and made, both as to cash and shares, as aforesaid;
provide such notices, instruction or authorization as the Fund may require.
5.2 DSC shall not be required to make any disbursement upon the receipt
of DSC from the Fund, or from any federal or state agency or authority, written
notice that such disbursement shall not be made.
7
<PAGE>
VI. SHAREHOLDER SERVICING AGENT
6.1 As Shareholder Servicing Agent for the Series, DSC shall provide
those services ancillary to, but in implementation of, the services provided
under Sections I through V hereof, and those generally defined and accepted as
shareholder services. In connection therewith, but not in limitation thereof,
DSC shall:
(a) Except where instructed in writing by the Fund not to do
so, and where in compliance with applicable law, accept orders on behalf of the
Fund; receive and process investments and applications; remit to the Fund or its
custodian payments for shares acquired and to be issued; and direct the issuance
of shares in accordance with Section IV hereof.
(b) Receive, record and respond to communications of
stockholders and their agents.
(c) As instructed by the Fund, prepare and mail stockholder
account information, mail Series stockholder reports and Series prospectuses.
(d) Prepare and mail proxies and material for Fund stockholder
meetings, receive and process proxies from stockholders, and deliver such
proxies as directed by the Fund.
(e) Administer investment plans offered by the Fund to
investors and stockholders of each Series, including retirement plans, including
activities not otherwise provided in Section I through V of this Agreement.
VII. PERFORMANCE OF DUTIES
7.1 The parties hereto intend that Series stockholders and their
stockholdings shall be confidential, and any information relating thereto shall
be released by DSC only to those persons or authorities who DSC has reason to
believe are authorized to receive such information; or, as
8
<PAGE>
instructed by the Fund.
7.2 DSC may, in performing this Agreement, require the Fund or the
Fund's distributor to provide it with an adequate number of copies of
prospectuses, reports or other documents required to be furnished to investors
or stockholders.
7.3 DSC may request or receive instructions from the Fund and may, at
the Fund's expense, consult with counsel for the Fund or its own counsel with
respect to any matter arising in connection with the performance of its duties
hereunder, and shall not be liable for any action taken or omitted by it in good
faith in accordance with such instructions or opinions of counsel.
7.4 DSC shall maintain reasonable insurance coverage for errors and
omissions and reasonable bond coverage for fraud.
7.5 Upon notice thereof to the Fund, DSC may employ others to provide
services to DSC in its performance of this Agreement.
7.6 Personnel and facilities of DSC used to perform services hereunder
may be used to perform similar services to other funds of the Delaware Group and
to others, and may be used to perform other services for the Fund, the other
funds of the Delaware Group and others.
7.7 DSC shall provide its services as transfer agent hereunder in
accordance with Section 17 of the Securities Exchange Act of 1934, and the rules
and regulations thereunder. Further, the parties intend that the processes,
procedures, safeguards and controls employed should be those generally applied
and accepted for the type services provided hereunder by other institutions
providing the same or similar services, and, those which should provide
efficient, safe and economical services so as to promote promptness and accuracy
and to maintain the integrity of the Fund's records.
9
<PAGE>
7.8 The Fund and DSC may, from time to time, set forth in writing
Guidelines For Selective Procedures to be applicable to the services hereunder.
VIII. COMPENSATION
8.1 The Fund and DSC acknowledge that because DSC has common ownership
and close management ties with the Fund's investment advisor and the Fund's
distributor and serves the other funds of the Delaware Group (DSC having been
originally established to provide the services hereunder for the funds of the
Delaware Group), advantages and benefits to the Fund in the employment of DSC
hereunder can be available which may not generally be available to it from
others providing similar services.
8.2 The Fund and DSC further acknowledge that the compensation by the
Fund to DSC is intended to induce DSC to provide services under this Agreement
of a nature and quality which the Board of Directors of the Fund, including a
majority who are not parties to this Agreement or interested person of the
parties hereto, has determined after due consideration to be necessary for the
conduct of the business of the Fund, in the best interests of the Fund, the
Series and their stockholders.
8.3 Compensation by the Fund to DSC hereunder shall be determined in
accordance with Schedule A hereto as it shall be amended from time to time as
provided for herein and which is incorporated herein as a part hereof.
8.4 Compensation as provided in Schedule A shall be reviewed and
approved in the manner set forth in Section 10.1 hereof by the Board of
Directors of the Fund at least annually and may be reviewed and approved more
frequently at the request of either party. The Board may request, and DSC shall
provide, such information as the Board may reasonably require to
10
<PAGE>
evaluate the basis of and approve the compensation.
IX. STANDARD OF CARE
9.1 The Fund acknowledges that DSC shall not be liable for, and in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of the performance of its duties under this Agreement, agrees to
indemnify DSC against, any claim or deficiency arising from the performance of
DSC's duties hereunder, including DSC's costs, counsel fees and expenses
incurred in investigation or defending any such claim or any administrative or
other proceeding, and acknowledges that any risk of loss or damage arising from
the conduct of the Fund's affairs in accordance herewith or in accordance with
Guidelines or instructions given hereunder, shall be borne by the Fund.
X. CONTRACTUAL STATUS
10.1 This Agreement shall be executed and become effective on the date
first written above if approved by a vote of the Board of Directors of the Fund,
including an affirmative vote of a majority of the non-interested members of the
Board, cast in person at a meeting called for the purpose of voting on such
approval. It shall continue in effect for an indeterminate period, and is
subject to termination on sixty (60) days notice by either party unless earlier
terminated or amended by agreement among the parties. Compensation under this
Agreement shall require approval by a majority vote of the Board of Directors of
the Fund, including an affirmative vote of the majority of the non-interested
members of the Board cast in person at a meeting called for the purpose of
voting on such approval.
10.2 This Agreement may not be assigned without the approval of the
Fund.
10.3 This Agreement shall be governed by the laws of the Commonwealth
of
11
<PAGE>
Pennsylvania.
DELAWARE SERVICE COMPANY, INC.
ATTEST: _________________ By: _______________________________________
Title: Eric E. Miller David K. Downes
Vice President and Senior Vice President, Chief Administrative
Assistant Secretary Officer, Chief Financial Officer
DELAWARE GROUP VALUE FUND, INC.
for its VALUE FUND and
RETIREMENT INCOME FUND
ATTEST: _________________ By: _______________________________________
Title: John M. Zerr Wayne A. Stork
Vice President and Chairman, President and
Assistant Secretary Chief Executive Officer
12
<PAGE>
SCHEDULE A
DELAWARE GROUP VALUE FUND, INC.
FIRST AMENDED AND RESTATED
SHAREHOLDERS SERVICES AGREEMENT
COMPENSATION SCHEDULE
1. Delaware Service Company, Inc. ("DSC") will determine and report to the
Fund, at least annually, the compensation for services to be provided to
the Fund for DSC's forthcoming fiscal year or period.
2. In determining such compensation, DSC will fix and report a fee to be
charged per account and/or transaction, as may be applicable, for services
provided. DSC will bill, and the Fund will pay, such compensation monthly.
3. For the period commencing on November 29, 1996, the charge will consist of
two charges for each Series, an annual charge and a per transaction charge
for each account on the transfer agent's records and each account on an
automated retirement processing system. These charges are as follows:
A. ANNUAL CHARGE
Value Fund $5.50 Per Annum
Retirement Income Fund $5.50 Per Annum
Merrill Lynch - Omnibus Accounts
Regular Accounts $11.00 Per Annum
Accounts with a Contingent
Deferred Sales Charge $14.00 Per Annum
Networked Accounts $3.00 - 6.00 Per Annum
<PAGE>
SCHEDULE A
DELAWARE GROUP VALUE FUND, INC.
FIRST AMENDED AND RESTATED
SHAREHOLDERS SERVICES AGREEMENT
COMPENSATION SCHEDULE
B. TRANSACTION CHARGE
Transaction Charge
----------- ------
1. Dividend Payment $0.25
2. New Account $6.00
3. Purchase:
a. Wire $8.00
b. Automated $1.50
c. Other $2.60
4. Transfer $8.00
5. Certificate Issuance $4.00
6. Liquidations
a. Wires $12.25
b. Drafts $0.75
c. Money Market Regular $4.50
d. Other Regular $4.50
7. Exchanges
a. Dividend Exchanges $3.00
b. Other $10.00
<PAGE>
Consent of Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 16 to the Registration Statement (Form N-1A) (No.
33-11419) of Delaware Group Value Fund, Inc. of our report dated January 5,
1996, included in the 1995 Annual Report to Shareholders of Delaware Group Value
Fund, Inc.
Ernst & Young LLP
Philadelphia, Pennsylvania
September 10, 1996
<PAGE>
EXHIBIT A
DISTRIBUTION PLAN
DELAWARE GROUP VALUE FUND, INC.
RETIREMENT INCOME FUND
RETIREMENT INCOME FUND A CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule l2b-l under the Investment Company Act of 1940 (the "Act") by Delaware
Group Value Fund, Inc. (the "Fund"), for the Retirement Income Fund series (the
"Series") on behalf of the Retirement Income Fund A Class ("Class"), which Fund,
Series and Class may do business under these or such other names as the Board of
Directors of the Fund may designate from time to time. The Plan has been
approved by a majority of the Board of Directors, including a majority of the
Directors who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Directors included
a determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Series and shareholders of the Class. The Plan has been
approved by a majority of the outstanding voting securities of the Class, as
defined in the Act.
A-1
<PAGE>
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, Inc. serves as the Series' investment adviser and manager
pursuant to an Investment Management Agreement. Delaware Service Company, Inc.
serves as the Series' shareholder servicing, dividend disbursing and transfer
agent. Delaware Distributors, L.P. (the "Distributor") is the principal
underwriter and national distributor for the Series' shares, including shares of
the Class, pursuant to the Distribution Agreement between the Distributor and
the Fund on behalf of the Series ("Distribution Agreement").
The Plan provides that:
1. The Fund shall pay to the Distributor a monthly fee not to exceed
0.3% (3/10 of l%) per annum of the Series' average daily net assets represented
by shares of the Class (the "Maximum Amount") as may be determined by the Fund's
Board of Directors from time to time. Such monthly fee shall be reduced by the
aggregate sums paid by the Fund on behalf of the Series to persons other than
broker-dealers (the "Service Providers") who may, pursuant to servicing
agreements, provide to the Series services in the Series' marketing of shares of
the Class.
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph 1 above to furnish, or cause or encourage others to furnish, services
and incentives in connection with the
A-2
<PAGE>
promotion, offering and sale of Class shares and, where suitable and
appropriate, the retention of Class shares by shareholders.
(b) The Service Providers shall use the monies paid respectively to
them to reimburse themselves for the actual costs they have incurred in
confirming that their customers have received the Prospectus and Statement of
Additional Information, if applicable, and as a fee for (1) assisting such
customers in maintaining proper records with the Fund, (2) answering questions
relating to their respective accounts, and (3) aiding in maintaining the
investment of their respective customers in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under the Plan. The Service
Providers shall inform the Fund monthly and in writing of the amounts each
claims under the Plan; both the Distributor and the Service Providers shall
furnish the Board of Directors of the Fund with such other information as the
Board may reasonably request in connection with the payments made under the Plan
and the use thereof by the Distributor and the Service Providers, respectively,
in order to enable the Board to make an informed determination of the amount of
the Fund's payments and whether the Plan should be continued.
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
A-3
<PAGE>
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund in writing of the commencement of the Plan (the "Commencement
Date"); thereafter, the Plan shall continue in effect for a period of more than
one year from the Commencement Date only so long as such continuance is
specifically approved at least annually by a vote of the Board of Directors of
the Fund, and of the non-interested Directors, cast in person at a meeting
called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to be
spent for distribution pursuant to paragraph 1 thereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
A-4
<PAGE>
This Plan shall take effect on the Commencement Date, as previously
defined.
November 29, 1996
<PAGE>
EXHIBIT B
DISTRIBUTION PLAN
DELAWARE GROUP VALUE FUND,INC.
RETIREMENT INCOME FUND
RETIREMENT INCOME FUND B CLASS
DISTRIBUTION PLAN DELAWARE GROUP VALUE FUND, INC. RETIREMENT INCOME
FUND RETIREMENT INCOME FUND B CLASS The following Distribution Plan (the "Plan")
has been adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Act") by Delaware Group Value Fund, Inc. (the "Fund"), for the Retirement
Income Fund series (the "Series") on behalf of the Retirement Income Fund B
Class (the "Class"), which Fund, Series and Class may do business under these or
such other names as the Board of Directors of the Fund may designate from time
to time. The Plan has been approved by a majority of the Board of Directors,
including a majority of the Directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related thereto ("non-interested Directors"), cast in
person at a meeting called for the purpose of voting on such Plan. Such approval
by the Directors included a determination that in the exercise of reasonable
business judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Series and shareholders of the Class.
The Plan has been approved by a vote of the holders of a majority of the
outstanding voting securities of the Class, as defined in the Act.
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and
B-1
<PAGE>
classes of securities and is an open-end management investment company
registered under the Act. Delaware Management Company, Inc. serves as the
Series' investment adviser and manager pursuant to an Investment Management
Agreement. Delaware Service Company, Inc. serves as the Series' shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the Series' shares, including shares of the Class, pursuant to the Distribution
Agreement between the Distributor and the Fund on behalf of the Series
("Distribution Agreement").
The Plan provides that:
1. (a) The Fund shall pay to the Distributor a monthly fee not to
exceed 0.75% (3/4 of 1%) per annum of the Series' average daily net assets
represented by shares of the Class as may be determined by the Fund's Board of
Directors from time to time.
(b) In addition to the amounts described in (a) above, the Fund shall
pay (i) to the Distributor for payment to dealers or others, or (ii) directly to
others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the Series'
average daily net assets represented by shares of the Class, as a service fee
pursuant to dealer or servicing agreements.
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses
B-2
<PAGE>
and reports used for sales purposes, as well as compensation related to
sales and marketing personnel, and holding special promotions. In addition, such
fees may be used to pay for advancing the commission costs to dealers with
respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Directors of
the Fund with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Fund's payments and whether the Plan should
be continued.
B-3
<PAGE>
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a tten report of the amounts
expended under the Plan and the purposes for which such expenditures were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Directors of the Fund, and
of the non-interested Directors, cast in person at a meeting called for the
purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to be
spent for distribution pursuant to paragraph 1 thereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested
B-4
<PAGE>
person(s)" and "vote of a majority of the outstanding voting securities,"
respectively, for the purposes of this Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
November 29, 1996
B-5
<PAGE>
EXHIBIT C
DISTRIBUTION PLAN
DELAWARE GROUP VALUE FUND, INC.
RETIREMENT INCOME FUND
RETIREMENT INCOME FUND C CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Value Fund, Inc. (the "Fund"), for the Retirement Income Fund series (the
"Series) on behalf of the Retirement Income Fund C Class (the "Class"), which
Fund, Series and Class may do business under these or such other names as the
Board of Directors of the Fund may designate from time to time. The Plan has
been approved by a majority of the Board of Directors, including a majority of
the Directors who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Directors included
a determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Series and shareholders of the Class. The Plan has been
approved by a vote of the holders of a majority of the outstanding voting
securities of the Class, as defined in the Act.
C-1
<PAGE>
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, Inc. serves as the Series' investment adviser and manager
pursuant to an Investment Management Agreement. Delaware Service Company, Inc.
serves as the Series' shareholder servicing, dividend disbursing and transfer
agent. Delaware Distributors, L.P. (the "Distributor") is the principal
underwriter and national distributor for the Series' shares, including shares of
the Class, pursuant to the Distribution Agreement between the Distributor and
the Fund on behalf of the Series ("Distribution Agreement").
The Plan provides that:
1.(a) The Fund shall pay to the Distributor a monthly fee not to exceed
0.75% (3/4 of 1%) per annum of the Series' average daily net assets represented
by shares of the Class as may be determined by the Fund's Board of Directors
from time to time.
(b) In addition to the amounts described in paragraph 1(a) above, the
Fund shall pay: (i) to the Distributor for payment to dealers or others or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
Series' average daily net assets represented by shares of the Class, as a
service fee pursuant to dealer or servicing agreements.
2.(a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor
C-2
<PAGE>
under the Plan may be used for, among other things, preparation and distribution
of advertisements, sales literature and prospectuses and reports used for sales
purposes, as well as compensation related to sales and marketing personnel, and
holding special promotions. In addition, such fees may be used to pay for
advancing the commission costs to dealers with respect to the sale of Class
shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Directors of
the Fund with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board
C-3
<PAGE>
to make an informed determination of the amount of the Fund's payments and
whether the Plan should be continued.
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Directors of the Fund, and
of the non-interested Directors, cast in person at a meeting called for the
purpose of voting on such Plan.
6.(a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to be
spent for distribution pursuant to paragraph 1 thereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
C-4
<PAGE>
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
November 29, 1996
C-5
<PAGE>
DELAWARE GROUP VALUE FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $22.62
Initial Shares 44.209
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 44.209 $0.000 0.000 44.209
- --------------------------------------------------------------------------------
Ending Shares 44.209
Ending NAV x $24.11
---------
$1,065.88
Less: Cdsc $10.00
---------
Investment Return: $1,055.88
Total Return Performance
------------------------
Investment Return $1,055.88
Less Initial Investment $1,000.00
---------
$55.88/$1,000.00 x 100
Total Return: 5.59%
<PAGE>
DELAWARE GROUP VALUE FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $22.62
Initial Shares 44.209
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 44.209 $0.000 0.000 44.209
- --------------------------------------------------------------------------------
Ending Shares 44.209
Ending NAV x $24.11
---------
$1,065.88
Total Return Performance
------------------------
Investment Return $1,065.88
Less Initial Investment $1,000.00
---------
$65.88/$1,000.00 x 100
Total Return: 6.59%
<PAGE>
DELAWARE GROUP VALUE FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $22.51
Initial Shares 44.425
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 44.425 $1.170 2.364 46.789
- --------------------------------------------------------------------------------
Ending Shares 46.789
Ending NAV x $24.11
---------
$1,128.08
Less: Cdsc $10.00
---------
Investment Return: $1,118.08
Total Return Performance
------------------------
Investment Return $1,118.08
Less Initial Investment $1,000.00
---------
$118.08/$1,000.00 x 100
Total Return: 11.81%
<PAGE>
DELAWARE GROUP VALUE FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $22.51
Initial Shares 44.425
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1996 44.425 $1.170 2.364 46.789
- --------------------------------------------------------------------------------
Ending Shares 46.789
Ending NAV x $24.11
---------
$1,128.08
Total Return Performance
------------------------
Investment Return $1,128.08
Less Initial Investment $1,000.00
---------
$128.08/$1,000.00 x 100
Total Return: 12.81%
<PAGE>
The Delaware Group of Funds
Multiple Class Plan Pursuant to Rule 18f-3
This Multiple Class Plan (the "Plan") has been adopted by a
majority of the Board of Directors of each of the investment companies listed on
Appendix A as may be amended from time to time (each individually a "Fund," and
collectively, the "Funds"), including a majority of the Directors who are not
interested persons of each Fund, pursuant to Rule 18f-3 under the Investment
Company Act of 1940, as amended (the "Act"). The Board of each Fund has
determined that the Plan, including the allocation of expenses, is in the best
interests of the Fund as a whole, each series of shares offered by such Fund
(individually and collectively the "Series") where the Fund offers its shares in
multiple series, and each class of shares offered by the Fund or Series, as
relevant. The Plan sets forth the provisions relating to the establishment of
multiple classes of shares for each Fund and, if relevant, its Series. To the
extent that a subject matter set forth in this Plan is covered by a Fund's
Articles of Incorporation or By-Laws, such Articles of Incorporation or By-Laws
will control in the event of any inconsistencies with descriptions contained in
this Plan.
The term "Portfolio," when used in this Plan in the context of
a Fund that offers only a single series of shares, shall be a reference to the
Fund, and when used in the context of a Fund that offers multiple series of
shares, shall be a reference to each series of such Fund.
CLASSES
1. Appendix A to this Plan describes the classes to be issued
by each Portfolio and identifies the names of such classes.
FRONT-END SALES CHARGE
2. Class A shares carry a front-end sales charge as described
in the Funds' relevant prospectuses; and Class B, Class C and Institutional
Class shares are sold without a front-end sales charge.
CONTINGENT DEFERRED SALES CHARGE
3. Class A shares are not subject to a contingent deferred
sales charge ("CDSC"), except in the following limited circumstances. On
<PAGE>
investments of $1 million or more for which a dealer's commission is paid by the
Fund's principal underwriter, a CDSC of 1.00% of the lesser of (i) the net asset
value at the time of redemption, or (ii) the original net asset value at the
time of purchase applies to redemptions of those investments within the
contingency period of 12 months from the month of purchase.
4. Class B shares redeemed within six years of their purchase
shall be assessed a CDSC at the following rate: (i) 4.00% if shares are redeemed
within two years of purchase; (ii) 3.00% if shares are redeemed during the third
or fourth year following purchase; (iii) 2.00% if shares are redeemed during the
fifth year following purchase; (iv) 1.00% if shares are redeemed during the
sixth year following purchase; and (vi) 0% thereafter.
5. Class C shares redeemed within twelve months of their
purchase shall be assessed a CDSC at the rate of 1.00% of the lesser of (i) the
net asset value at the time of redemption, or (ii) the original net asset value
at the time of purchase.
6. The CDSC for each class is waived in certain circumstances,
as described in the Funds' relevant prospectuses. Shares that are subject to a
CDSC age one month at the end of the month in which the shares were purchased,
regardless of the specific date during the month that the shares were purchased.
7. Institutional Class shares are not subject to a CDSC.
RULE 12b-1 PLANS
8. In accordance with the Rule 12b-1 Plan for the Class A
shares of each Portfolio, the Fund shall pay to Delaware Distributors, L.P. (the
"Distributor") a monthly fee not to exceed 0.30% per annum of such Portfolio's
average daily net assets represented by Class A shares as may be determined by
the Fund's Board of Directors from time to time. The monthly fee shall be
reduced by the aggregate sums paid by or on behalf of such Portfolio to persons
other than broker-dealers (the "Service Providers") pursuant to servicing
agreements.
9. In accordance with the Rule 12b-1 Plan for the Class B
shares of each Portfolio, the Fund shall pay to the Distributor a monthly fee
not to exceed 0.75% per annum of such Portfolio's average daily net assets
represented by Class B shares as may be determined by the Fund's Board of
Directors from time to time. In addition to these amounts, the Fund shall pay
(i) to the Distributor for payment to dealers or others, or (ii) directly to
others, an amount not to exceed 0.25% per annum of such Portfolio's average
daily net assets represented by Class B shares, as a service fee pursuant to
dealer or servicing agreements.
-2-
<PAGE>
10. In accordance with the Rule 12b-1 Plan for the Class C
shares of each Portfolio, the Fund shall pay to the Distributor a monthly fee
not to exceed 0.75% per annum of such Portfolio's average daily net assets
represented by Class C shares as may be determined by the Fund's Board of
Directors from time to time. In addition to these amounts, the Fund shall pay
(i) to the Distributor for payment to dealers or others, or (ii) directly to
others, an amount not to exceed 0.25% per annum of such Portfolio's average
daily net assets represented by Class C shares, as a service fee pursuant to
dealer or servicing agreements.
11. A Rule 12b-1 Plan has not been adopted for the
Institutional Class shares of any Portfolio.
ALLOCATION OF EXPENSES
12. The Fund shall allocate to each class of shares of a
Portfolio any fees and expenses incurred by the Fund in connection with the
distribution or servicing of such class of shares under a Rule 12b-1 Plan, if
any, adopted for such class. In addition, the Fund reserves the right, subject
to approval by the Fund's Board of Directors, to allocate fees and expenses of
the following nature to a particular class of shares of a Portfolio (to the
extent that such fees and expenses actually vary among each class of shares or
vary by types of services provided to each class of shares of the Portfolio):
(i) transfer agency and other recordkeeping costs;
(ii) Securities and Exchange Commission and blue sky
registration or qualification fees;
(iii) printing and postage expenses related to printing and
distributing class specific materials, such as
shareholder reports, prospectuses and proxies to
current shareholders of a particular class or to
regulatory authorities with respect to such class of
shares;
(iv) audit or accounting fees or expenses relating
solely to such class;
(v) the expenses of administrative personnel and
services as required to support the shareholders
of such class;
(vi) litigation or other legal expenses relating solely
to such class of shares;
-3-
<PAGE>
(vii) Directors' fees and expenses incurred as a result
of issues relating solely to such class of shares;
and
(viii) other expenses subsequently identified and
determined to be properly allocated to such class
of shares.
13. Except for any expenses that are allocated to a particular
class as described in paragraph 11 above, all expenses incurred by a Portfolio
will be allocated to each class of shares of such Portfolio on the basis of the
net asset value of each such class in relation to the net asset value of the
Portfolio.
ALLOCATION OF INCOME AND GAINS
14. Income and realized and unrealized capital gains and
losses of a Portfolio will be allocated to each class of shares of such
Portfolio on the basis of the net asset value of each such class in relation to
the net asset value of the Portfolio.
CONVERSIONS
15. (a) Except for shares acquired through a reinvestment of
dividends or distributions, Class B shares held for eight years after purchase
are eligible for automatic conversion into Class A shares of the same Portfolio
in accordance with the terms described in the relevant prospectus. Class B
shares acquired through a reinvestment of dividends or distributions will
convert into Class A shares of the same Portfolio pro rata with the Class B
shares that were not acquired through the reinvestment of dividends and
distributions.
(b) The automatic conversion feature of Class B
shares shall be suspended at any time that the Board of Directors of the Fund
determines that there is not available a reasonably satisfactory opinion of
counsel to the effect that (i) the assessment of the higher fee under the Fund's
Rule 12b-1 Plan for Class B does not result in the Fund's dividends or
distributions constituting a preferential dividend under the Internal Revenue
Code of 1986, as amended, and (ii) the conversion of Class B shares into Class A
shares does not constitute a taxable event under federal income tax law. In
addition, the Board of Directors of a Fund may suspend the automatic conversion
feature by determining that any other condition to conversion set forth in the
relevant prospectus, as amended from time to time, is not satisfied.
(c) The Board of Directors of a Fund may also suspend the
automatic conversion of Class B shares if it determines that suspension is
-4-
<PAGE>
appropriate to comply with the requirements of the Act, or any rule or
regulation issued thereunder, relating to voting by Class B shareholders on the
Fund's Rule 12b-1 Plan for Class A or, in the alternative, the Board of
Directors may provide Class B shareholders with alternative conversion or
exchange rights.
16. Class A, Class C and Institutional Class shares do not
have a conversion feature.
EXCHANGES
17. Exchanges are permitted between Class A Shares and
Institutional Class Shares of a Portfolio or of any other Portfolio in the
Delaware Group funds; Class B shares of a Portfolio may only be exchanged for
Class B shares of any other Portfolio in the Delaware Group; Class C shares of a
Portfolio may only be exchanged for Class C shares of any other Portfolio in the
Delaware Group. All exchanges are subject to the eligibility and minimum
purchase requirements set forth in the Funds' prospectuses. Exchanges cannot be
made between open-end and closed-end funds within the Delaware Group.
18. Each class will vote separately with respect to the Rule
12b-1 Plan related to that class; provided, however, that Class B shares of a
Portfolio may vote on any proposal to materially increase the fees to be paid by
the Fund under the Rule 12b-1 Plan for the Class A shares of the same Portfolio.
19. On an ongoing basis, the Directors, pursuant to their
fiduciary responsibilities under the Act and otherwise, will monitor the
Portfolio for the existence of any material conflicts between the interests of
all the classes of shares offered by such Portfolio. The Directors, including a
majority of the Directors who are not interested persons of the Fund, shall take
such action as is reasonably necessary to eliminate any such conflict that may
develop. The Manager and the Distributor shall be responsible for alerting the
Board to any material conflicts that arise.
20. As described more fully in the Funds' relevant
prospectuses, broker-dealers that sell shares of a Portfolio will be compensated
differently depending on which class of shares the investor selects.
21. Each Fund reserves the right to increase, decrease or
waive the CDSC imposed on any existing or future class of shares of a Portfolio
within the ranges permissible under applicable rules and regulations of the
Securities and Exchange Commission (the "SEC") and the rules of the National
Association of Securities Dealers, Inc. (the "NASD"), as such rules may be
amended or adopted from time to time. Each Fund may in the future alter the
terms of the existing classes of such Portfolio or create new classes in
compliance with applicable rules and regulations of the SEC and the NASD.
-5-
<PAGE>
22. All material amendments to this Plan must be approved by a
majority of the Directors of each Fund affected by such amendments, including a
majority of the Directors who are not interested persons of the Fund.
Effective as of November 29, 1995
-6-
<PAGE>
APPENDIX A
List of Funds and Their Classes
1. Delaware Group Delaware Fund, Inc.
Delaware Fund
Delaware Fund A Class
Delaware Fund B Class
Delaware Fund C Class
Delaware Fund Institutional Class
Devon Fund
Devon Fund A Class
Devon Fund B Class
Devon Fund C Class
Devon Fund Institutional Class
2. Delaware Group Trend Fund, Inc.
Trend Fund A Class
Trend Fund B Class
Trend Fund C Class
Trend Fund Institutional Class
3. Delaware Group Value Fund, Inc.
Value Fund A Class
Value Fund B Class
Value Fund C Class
Value Fund Institutional Class
4. Delaware Group DelCap Fund, Inc.
DelCap Fund A Class
DelCap Fund B Class
DelCap Fund C Class
DelCap Fund Institutional Class
5. Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Income Fund A Class
Decatur Income Fund B Class
Decatur Income Fund C Class
Decatur Income Fund Institutional Class
<PAGE>
Decatur Total Return Fund
Decatur Total Return Fund A Class
Decatur Total Return Fund B Class
Decatur Total Return Fund C Class
Decatur Total Return Fund Institutional Class
6. Delaware Group Global & International Funds, Inc.
International Equity Series
International Equity Fund A Class
International Equity Fund B Class
International Equity Fund C Class
International Equity Fund Institutional Class
Global Bond Series
Global Bond Fund A Class
Global Bond Fund B Class
Global Bond Fund C Class
Global Bond Fund Institutional Class
Global Assets Series
Global Assets Fund A Class
Global Assets Fund B Class
Global Assets Fund C Class
Global Assets Fund Institutional Class
Emerging Market Series
Emerging Markets Fund A Class
Emerging Markets Fund B Class
Emerging Markets Fund C Class
Emerging Markets Fund Institutional Class
-8-
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<NAME> DELAWARE GROUP VALUE FUND, INC.
<SERIES>
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<NAME> VALUE FUND A CLASS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 173,369,989
<INVESTMENTS-AT-VALUE> 202,965,944
<RECEIVABLES> 5,419,856
<ASSETS-OTHER> 42,146
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 208,427,946
<PAYABLE-FOR-SECURITIES> 1,889,439
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 82,852
<TOTAL-LIABILITIES> 1,972,291
<SENIOR-EQUITY> 85,178
<PAID-IN-CAPITAL-COMMON> 152,877,158
<SHARES-COMMON-STOCK> 7,697,670
<SHARES-COMMON-PRIOR> 7,776,729
<ACCUMULATED-NII-CURRENT> 320,928
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 23,577,684
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29,594,707
<NET-ASSETS> 186,605,271
<DIVIDEND-INCOME> 1,357,776
<INTEREST-INCOME> 388,849
<OTHER-INCOME> 0
<EXPENSES-NET> 1,455,237
<NET-INVESTMENT-INCOME> 291,388
<REALIZED-GAINS-CURRENT> 23,732,978
<APPREC-INCREASE-CURRENT> (1,663,748)
<NET-CHANGE-FROM-OPS> 22,360,618
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,863,274
<DISTRIBUTIONS-OF-GAINS> 6,909,642
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 738,941
<NUMBER-OF-SHARES-REDEEMED> 1,194,067
<SHARES-REINVESTED> 376,067
<NET-CHANGE-IN-ASSETS> 16,358,080
<ACCUMULATED-NII-PRIOR> 2,017,066
<ACCUMULATED-GAINS-PRIOR> 7,285,169
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 734,964
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,455,237
<AVERAGE-NET-ASSETS> 181,390,555
<PER-SHARE-NAV-BEGIN> 22.760
<PER-SHARE-NII> 0.036
<PER-SHARE-GAIN-APPREC> 2.574
<PER-SHARE-DIVIDEND> 0.240
<PER-SHARE-DISTRIBUTIONS> 0.890
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 24.240
<EXPENSE-RATIO> 1.460
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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<SERIES>
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<NAME> VALUE FUND B CLASS
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 173,369,989
<INVESTMENTS-AT-VALUE> 202,965,944
<RECEIVABLES> 5,419,856
<ASSETS-OTHER> 42,146
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 208,427,946
<PAYABLE-FOR-SECURITIES> 1,889,439
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 82,852
<TOTAL-LIABILITIES> 1,972,291
<SENIOR-EQUITY> 85,178
<PAID-IN-CAPITAL-COMMON> 152,877,158
<SHARES-COMMON-STOCK> 394,513
<SHARES-COMMON-PRIOR> 256,143
<ACCUMULATED-NII-CURRENT> 320,928
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 23,577,684
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29,594,707
<NET-ASSETS> 9,517,126
<DIVIDEND-INCOME> 1,357,776
<INTEREST-INCOME> 388,849
<OTHER-INCOME> 0
<EXPENSES-NET> 1,455,237
<NET-INVESTMENT-INCOME> 291,388
<REALIZED-GAINS-CURRENT> 23,732,978
<APPREC-INCREASE-CURRENT> (1,663,748)
<NET-CHANGE-FROM-OPS> 22,360,618
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 25,335
<DISTRIBUTIONS-OF-GAINS> 237,353
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 161,363
<NUMBER-OF-SHARES-REDEEMED> 34,466
<SHARES-REINVESTED> 11,473
<NET-CHANGE-IN-ASSETS> 16,358,080
<ACCUMULATED-NII-PRIOR> 2,017,066
<ACCUMULATED-GAINS-PRIOR> 7,285,169
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 734,964
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,455,237
<AVERAGE-NET-ASSETS> 7,504,953
<PER-SHARE-NAV-BEGIN> 22.590
<PER-SHARE-NII> (0.044)
<PER-SHARE-GAIN-APPREC> 2.559
<PER-SHARE-DIVIDEND> 0.095
<PER-SHARE-DISTRIBUTIONS> 0.890
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 24.120
<EXPENSE-RATIO> 2.160
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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<SERIES>
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 173,369,989
<INVESTMENTS-AT-VALUE> 202,965,944
<RECEIVABLES> 5,419,856
<ASSETS-OTHER> 42,146
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 208,427,946
<PAYABLE-FOR-SECURITIES> 1,889,439
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 82,852
<TOTAL-LIABILITIES> 1,972,291
<SENIOR-EQUITY> 85,178
<PAID-IN-CAPITAL-COMMON> 152,877,158
<SHARES-COMMON-STOCK> 87,568
<SHARES-COMMON-PRIOR> 221
<ACCUMULATED-NII-CURRENT> 320,928
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 23,577,684
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29,594,707
<NET-ASSETS> 2,110,967
<DIVIDEND-INCOME> 1,357,776
<INTEREST-INCOME> 388,849
<OTHER-INCOME> 0
<EXPENSES-NET> 1,455,237
<NET-INVESTMENT-INCOME> 291,388
<REALIZED-GAINS-CURRENT> 23,732,978
<APPREC-INCREASE-CURRENT> (1,663,748)
<NET-CHANGE-FROM-OPS> 22,360,618
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 67
<DISTRIBUTIONS-OF-GAINS> 214
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 87,788
<NUMBER-OF-SHARES-REDEEMED> 454
<SHARES-REINVESTED> 13
<NET-CHANGE-IN-ASSETS> 16,358,080
<ACCUMULATED-NII-PRIOR> 2,017,066
<ACCUMULATED-GAINS-PRIOR> 7,285,169
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 734,964
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,455,237
<AVERAGE-NET-ASSETS> 587,806
<PER-SHARE-NAV-BEGIN> 22.760
<PER-SHARE-NII> (0.043)
<PER-SHARE-GAIN-APPREC> 2.563
<PER-SHARE-DIVIDEND> 0.280
<PER-SHARE-DISTRIBUTIONS> 0.890
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 24.110
<EXPENSE-RATIO> 2.160
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 173,369,989
<INVESTMENTS-AT-VALUE> 202,965,944
<RECEIVABLES> 5,419,856
<ASSETS-OTHER> 42,146
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 208,427,946
<PAYABLE-FOR-SECURITIES> 1,889,439
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 82,852
<TOTAL-LIABILITIES> 1,972,291
<SENIOR-EQUITY> 85,178
<PAID-IN-CAPITAL-COMMON> 152,877,158
<SHARES-COMMON-STOCK> 338,082
<SHARES-COMMON-PRIOR> 319,080
<ACCUMULATED-NII-CURRENT> 320,928
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 23,577,684
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29,594,707
<NET-ASSETS> 8,222,291
<DIVIDEND-INCOME> 1,357,776
<INTEREST-INCOME> 388,849
<OTHER-INCOME> 0
<EXPENSES-NET> 1,455,237
<NET-INVESTMENT-INCOME> 291,388
<REALIZED-GAINS-CURRENT> 23,732,978
<APPREC-INCREASE-CURRENT> (1,663,748)
<NET-CHANGE-FROM-OPS> 22,360,618
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 98,850
<DISTRIBUTIONS-OF-GAINS> 293,254
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 168,114
<NUMBER-OF-SHARES-REDEEMED> 166,873
<SHARES-REINVESTED> 17,761
<NET-CHANGE-IN-ASSETS> 16,358,080
<ACCUMULATED-NII-PRIOR> 2,017,066
<ACCUMULATED-GAINS-PRIOR> 7,285,169
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 734,964
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,455,237
<AVERAGE-NET-ASSETS> 7,755,344
<PER-SHARE-NAV-BEGIN> 22.860
<PER-SHARE-NII> 0.070
<PER-SHARE-GAIN-APPREC> 2.580
<PER-SHARE-DIVIDEND> 0.300
<PER-SHARE-DISTRIBUTIONS> 0.890
<RETURNS-OF-CAPITAL> 0.000
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