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STATEMENT OF ADDITIONAL INFORMATION
January 31, 2000
Delaware Decatur Equity Income Fund Delaware Blue Chip Fund
Delaware Growth and Income Fund Delaware Social Awareness Fund
Delaware Diversified Value Fund
1818 Market Street, Philadelphia, PA 19103
For more information about Institutional Classes: 800-510-4015
For Prospectus, Performance and Information on Existing Accounts of
Class A Shares, Class B Shares and Class C Shares: Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY) Nationwide 800-362-7500
Delaware Group Equity Funds II ("Equity Funds II") is a
professionally-managed mutual fund of the series type which currently offers
five series of shares: Delaware Decatur Equity Income Fund, Delaware Growth and
Income Fund, Delaware Blue Chip Fund, Delaware Social Awareness Fund and
Delaware Diversified Value Fund (individually, a "Fund" and collectively, the
"Funds").
Each Fund offers Class A Shares, Class B Shares, Class C Shares (Class
A Shares, Class B Shares and Class C Shares together referred to as the "Fund
Classes"), and Institutional Class shares ("Institutional Classes"). All
references to "shares" in this Part B refer to all Classes of shares of Equity
Funds II, except where noted.
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectus for
the Fund Classes dated January 31, 2000 and the current Prospectus for the
Institutional Classes dated January 31, 2000, 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 relating to
the Fund Classes and a prospectus relating to the Institutional Classes may be
obtained by writing or calling your investment dealer or by contacting each
Fund's national distributor, Delaware Distributors, L.P. (the "Distributor"), at
the above address or by calling the above phone numbers. The Funds' financial
statements, the notes relating thereto, the financial highlights and the report
of independent auditors are incorporated by reference from the Annual
Reports into this Part B. The Annual Reports will accompany any request
for Part B. The Annual Reports can be obtained, without charge, by calling
800-523-1918.
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TABLE OF CONTENTS Page Page
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Cover Page 1 Redemption and Exchange 67
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Investment Restrictions and Policies 2 Dividends and Realized Securities Profits Distributions and 75
Taxes
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Accounting and Tax Issues 23 Investment Management Agreement and Sub-Advisory Agreements 77
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Performance Information 27 Officers and Trustees 81
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Trading Practices and Brokerage 40 General Information 95
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Purchasing Shares 43 Financial Statements 100
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Investment Plans 58 Appendix A--Description of Ratings 101
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Determining Offering Price and Appendix B--Investment Objectives of the Other Funds in the
Net Asset Value 66 Delaware Investments Family 102
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INVESTMENT RESTRICTIONS AND POLICIES
Investment Restrictions
Fundamental Restrictions - Each Fund has adopted the following restrictions
which cannot be changed without approval by the holders of a "majority" of a
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.
Each Fund shall not:
1. Make investments that will result in the concentration (as that term
may be defined in the Investment Company Act of 1940 ("1940 Act"), any rule or
order thereunder, or U.S. Securities and Exchange Commission ("SEC") staff
interpretation thereof) of its investments in the securities of issuers
primarily engaged in the same industry, provided that this restriction does not
limit the Fund from investing in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or in tax-exempt securities or
certificates of deposit.
2. Borrow money or issue senior securities, except as the 1940 Act, any
rule or order thereunder, or SEC staff interpretation thereof, may permit.
3. Underwrite the securities of other issuers, except that the Fund may
engage in transactions involving the acquisition, disposition or resale of its
portfolio securities, under circumstances where it may be considered to be an
underwriter under the Securities Act of 1933 (the "1933 Act").
4. Purchase or sell real estate, unless acquired as a result of
ownership of securities or other instruments and provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
5. Purchase or sell physical commodities, unless acquired as a result
of ownership of securities or other instruments and provided that this
restriction does not prevent the Fund from engaging in transactions involving
futures contracts and options thereon or investing in securities that are
secured by physical commodities.
6. Make loans, provided that this restriction does not prevent the Fund
from purchasing debt obligations, entering into repurchase agreements, loaning
its assets to broker/dealers or institutional investors and investing in loans,
including assignments and participation interests.
Non-fundamental Restrictions - In addition to the fundamental policies and
investment restrictions described above, and the various general investment
policies described in the prospectus, each Fund will be subject to the following
investment restrictions, which are considered non-fundamental and may be changed
by the Board of Trustees without shareholder approval.
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1. Each Fund is permitted to invest in other investment companies,
including open-end, closed-end or unregistered investment companies, either
within the percentage limits set forth in the 1940 Act, any rule or order
thereunder, or SEC staff interpretation thereof, or without regard to percentage
limits in connection with a merger, reorganization, consolidation or other
similar transaction. However, a Fund may not operate as a "fund of funds" which
invests primarily in the shares of other investment companies as permitted by
Section 12(d)(1)(F) or (G) of the 1940 Act, if its own shares are utilized as
investments by such a "fund of funds."
2. Each Fund may not invest more than 15% of its net assets in
securities which it cannot sell or dispose of in the ordinary course of business
within seven days at approximately the value at which the Fund has valued the
investment.
The following are additional non-fundamental investment restrictions:
Delaware Decatur Equity Income Fund shall not:
1. Invest more than 5% of the value of its assets in securities of any
one company (except U.S. government bonds) or purchase more than 10% of the
voting or nonvoting securities of any one company.
2. Acquire control of any company. (Equity Funds II's Certificate of
Incorporation permits control of companies to protect investments already made,
but its policy is not to acquire control.)
3. Purchase or retain securities of a company which has an officer or
trustee who is an officer or trustee of Equity Funds II, or an officer, trustee
or partner of its investment manager if, to the knowledge of Equity Funds II,
one or more of such persons own beneficially more than 1/2 of 1% of the shares
of the company, and in the aggregate more than 5% thereof.
4. Allow long or short positions on shares of the Fund to be taken by
Equity Funds II's officers, trustees or any of its affiliated persons. Such
persons may buy shares of the Fund for investment purposes, however.
5. Purchase any security issued by any other investment company if
after such purchase it would: (a) own more than 3% of the voting stock of such
company, (b) own securities of such company having a value in excess of 5% of
the Fund's assets or (c) own securities of investment companies having an
aggregate value in excess of 10% of the Fund's assets.
6. Invest more than 10% of the value of its total assets in illiquid
assets.
7. Invest in securities of other investment companies except at
customary brokerage commission rates or in connection with mergers,
consolidations or offers of exchange.
8. Make any investment in real estate unless necessary for office
space or the protection of investments already made. (This restriction does not
preclude the Fund's purchase of securities issued by real estate investment
trusts.)
9. Sell short any security or property.
10. Deal in commodities, except that the Fund may invest in financial
futures, including futures contracts on stocks and stock indices, interest rates
and foreign currencies and other types of financial futures that may be
developed in the future, and may purchase or sell options on such futures, and
enter into closing transactions with respect to those activities.
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11. Borrow, except as a temporary measure for extraordinary or
emergency purposes, and then not in excess of 10% of gross assets taken at cost
or market, whichever is lower, and not to pledge more than 15% of gross assets
taken at cost. Any borrowing will be done from a bank, and to the extent that
such borrowing exceeds 5% of the value of the Fund's assets, asset coverage of
at least 300% is required. In the event that such asset coverage shall at any
time fall below 300%, the Fund shall, within three days thereafter (not
including Sunday and holidays) or such longer period as the SEC may
prescribe by rules and regulations, reduce the amount of its borrowings to an
extent that the asset coverage of such borrowings shall be at least 300%. The
Fund shall not issue senior securities as defined in the 1940 Act, except for
notes to banks.
12. Make loans. However, the purchase of a portion of an issue of
publicly distributed bonds, debentures, or other securities, whether or not the
purchase was made upon the original issuance of the securities, and the entry
into "repurchase agreements" are not to be considered the making of a loan by
the Fund and the Fund may loan up to 25% of its assets to qualified
broker/dealers or institutional investors for their use relating to short sales
or other transactions.
13. 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.
14. The Fund may act as an underwriter of securities of other issuers,
but its present policy is not to do so.
In addition, notwithstanding restriction 8 above and although not a
matter of fundamental policy, Equity Funds II has made a commitment that the
Fund's investments in securities issued by real estate investment trusts will
not exceed 10% of its total assets. In addition, the Fund may not concentrate
investments in any particular industry, which means not investing more than 25%
of its assets in any industry.
Delaware Growth and Income 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. However, (i) the purchase of a portion of an issue of
publicly distributed bonds, debentures or other securities, or of other
securities authorized to be purchased by the Fund's investment policies, whether
or not the purchase was made upon the original issuance of the securities, and
the entry into "repurchase agreements" are not to be considered the making of a
loan by the Fund; and (ii) 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 companies which own real estate or in securities secured by
real estate or interests therein.
5. Purchase more than 10% of the outstanding voting or nonvoting
securities of any issuer, or invest in companies for the purpose of exercising
control or management.
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6. Act as an underwriter 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 the purposes of the 1933 Act.
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. Deal in commodities, except that the Fund may invest in financial
futures, including futures contracts on stocks and stock indices, interest rates
and foreign currencies and other types of financial futures that may be
developed in the future, and may purchase or sell options on such futures, and
enter into closing transactions with respect to those activities.
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 the 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, trustee or security holder who is a trustee or officer of Equity Funds
II or of its investment manager if or so long as the trustees and officers of
Equity Funds II 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 value of the Fund's net assets in
repurchase agreements maturing in more than seven days and in 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 SEC 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 1940 Act except for notes to banks.
The application of the investment policy of Delaware Decatur Equity
Income Fund and Delaware Growth and Income Fund will be dependent upon the
judgment of Delaware Management Company (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 a
Fund invests may or may not be listed on a national stock exchange, but if they
are not so listed will generally have an established over-the-counter market.
While management believes that the investment objective of Delaware Decatur
Equity Income Fund and Delaware Growth and Income Fund can be achieved by
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investing primarily in common stocks, each Fund may be invested in other
securities including, but not limited to, convertible securities, preferred
stocks, bonds, warrants and foreign securities. Delaware Decatur Equity Income
Fund may invest up to 15% of its net assets in high yield, high risk securities.
In periods during which the Manager feels that market conditions warrant a more
defensive portfolio positioning, each Fund may also invest in various types of
fixed-income obligations.
Delaware Blue Chip Fund will not:
1. With respect to 75% of its total assets, invest more than 5% of its
total assets in the securities of any one issuer (other than 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.
2. Make any investment in real estate. This restriction does preclude
the Fund's purchase of securities issued by real estate investment 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.
3. Sell short any security or property.
4. Buy or sell commodities or commodity contracts except that the Fund
may enter into futures contracts and options thereon.
5. Borrow money in excess of one-third of the value of its net assets.
Any borrowing will be done in accordance with the rules and regulations
prescribed from time to time by the SEC with respect to open-end investment
companies. Delaware Blue Chip Fund shall not issue senior securities as defined
in the 1940 Act, except for notes to banks.
6. Make loans. However, (i) the purchase of a portion of an issue of
publicly distributed bonds, debentures or other securities, or of other
securities authorized to be purchased by the Fund's investment policies, whether
or not the purchase was made upon the original issuance of the securities, and
the entry into "repurchase agreements" are not to be considered the making of a
loan by the Fund; and (ii) the Fund may loan securities to qualified
broker/dealers or institutional investors for their use relating to short sales
and other security transactions.
7. Act as an underwriter 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 may be deemed to be
an underwriter for purposes of the 1933 Act.
8. Invest more than 25% of its total assets 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.
9. Invest for the purpose of acquiring control of any company.
10. Invest in securities of other investment companies, except 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 at the
time of the investment.
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11. Purchase or retain the securities of any issuer which has an
officer, trustee or security holder who is a trustee or officer of Equity Funds
II or of the Manager or Sub-Adviser if or so long as the trustees and officers
of Equity Funds II and of the Manager and Sub-Adviser together own beneficially
more than 5% of any class of securities of such issuer.
12. Invest in interests in oil, gas and other mineral leases or other
mineral exploration or development programs.
13. Purchase securities on margin except short-term credits that may be
necessary for the clearance of purchases and sales of securities.
Delaware Social Awareness Fund will not:
1. With respect to 75% of its total assets, invest more than 5% of its
total assets in the securities of any one issuer (other than 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.
2. Make any investment in real estate. This restriction does preclude
the Fund's purchase of securities issued by real estate investment 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.
3. Sell short any security or property.
4. Buy or sell commodities or commodity contracts except that the Fund
may enter into futures contracts and options thereon.
5. Borrow money in excess of one-third of the value of its net assets.
Any borrowing will be done in accordance with the rules and regulations
prescribed from time to time by the SEC with respect to open-end investment
companies. Delaware Social Awareness Fund shall not issue senior securities as
defined in the 1940 Act, except for notes to banks.
6. Make loans. However, (i) the purchase of a portion of an issue of
publicly distributed bonds, debentures or other securities, or of other
securities authorized to be purchased by the Fund's investment policies, whether
or not the purchase was made upon the original issuance of the securities, and
the entry into "repurchase agreements" are not to be considered the making of a
loan by the Fund; and (ii) the Fund may loan securities to qualified
broker/dealers or institutional investors for their use relating to short sales
and other security transactions.
7. Act as an underwriter 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 may be deemed to be
an underwriter for purposes of the 1933 Act.
8. Invest more than 25% of its total assets 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.
9. Invest for the purpose of acquiring control of any company.
10. Invest in securities of other investment companies, except 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 at the
time of the investment.
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11. Purchase or retain the securities of any issuer which has an
officer, trustee or security holder who is a trustee or officer of Equity Funds
II or of the Manager or Sub-Adviser if or so long as the trustees and officers
of Equity Funds II and of the Manager or Sub-Adviser together own beneficially
more than 5% of any class of securities of such issuer.
12. Invest in interests in oil, gas and other mineral leases or other
mineral exploration or development programs.
13. Purchase securities on margin except short-term credits that may be
necessary for the clearance of purchases and sales of securities.
Securities will not normally be purchased by a Fund while it has an
outstanding borrowing.
Each Fund may engage in the following investment techniques:
Equity Securities
Equity securities represent ownership interests in a company and
consist of common stocks, preferred stocks, warrants to acquire common stock and
securities convertible into common stock. Investments in equity securities in
general are subject to market risks that may cause their prices to fluctuate
over time. The value of convertible equity securities is also affected by
prevailing interest rates, the credit quality of the issuer and any call
provisions. Fluctuations in the value of equity securities in which a Fund
invests will cause the net asset value of the Fund to fluctuate.
Warrants
Each Fund may purchase warrants and similar rights, which are
privileges issued by corporations enabling the owners to subscribe to and
purchase a specified number of shares of the corporation at a specified price
during a specified period of time. The purchase of warrants involves the risk
that a Fund could lose the purchase value of a warrant if the right to subscribe
to additional shares is not exercised prior to the warrant's expiration. Also,
the purchase of warrants involves the risk that the effective price paid for the
warrant added to the subscription price of the related security may exceed the
value of the subscribed security's market price such as when there is no
movement in the level of the underlying security.
Rule 144A 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 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 a 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 Trustees and the
Manager will continue to monitor the liquidity of that security to ensure that
Delaware Decatur Equity Income Fund and Delaware Growth and Income Fund each has
no more than 10%, and Delaware Blue Chip Fund, Delaware Social Awareness Fund
and Delaware Diversified Value Fund each has no more than 15%, of its net assets
in illiquid securities.
While maintaining oversight, the Board of Directors of Equity Funds II
has delegated to the Manager the day-to-day function of determining whether or
not individual Rule 144A Securities are liquid for purposes of a Fund's
limitation on investments in illiquid assets. The Board has instructed the
Manager to consider the following factors in determining the liquidity of a Rule
144A Security: (i) the frequency of trades and trading volume for the security;
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(ii) whether at least three dealers are willing to purchase or sell the security
and the number of potential purchasers; (iii) whether at least two dealers are
making a market in the security; and (iv) the nature of the security and the
nature of the marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security that was
previously determined to be liquid is no longer liquid and, as a result, a
Fund's holdings of illiquid securities exceed the Fund's limit on investments in
such securities, the Manager will determine what action to take to ensure that
the Fund continues to adhere to such limitation.
Repurchase Agreements
In order to invest its cash reserves or when in a temporary defensive
posture, a 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 Trustees. A repurchase agreement is a short-term
investment in which the purchaser (i.e., a 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 10% of the assets of
each Fund (except Delaware Diversified Value Fund) may be invested in repurchase
agreements of over seven-days' maturity. Not more than 15% of Delaware
Diversified Value Fund's assets may be invested in illiquid assets, including
repurchase agreements of over seven days' maturity. Should an issuer of a
repurchase agreement fail to repurchase the underlying security, the loss to a
Fund, if any, would be the difference between the repurchase price and the
market value of the security. A Fund will limit its investments in repurchase
agreements, to those which the Manager, under the guidelines of the Board of
Trustees, determines to present minimal credit risks and which are of high
quality. In addition, the Fund must have collateral of at least 102% of the
repurchase price, including the portion representing a Fund's yield under such
agreements, which is monitored on a daily basis. Such collateral is held by the
Custodian in book entry form. Such agreements may be considered loans under the
1940 Act, but the Funds consider repurchase agreements contracts for the
purchase and sale of securities, and it seeks to perfect a security interest in
the collateral securities so that it has the right to keep and dispose of the
underlying collateral in the event of a default.
The funds in the Delaware Investments family have obtained an exemption
from the joint-transaction prohibitions of Section 17(d) of the 1940 Act to
allow the funds in the Delaware Investments family jointly to invest cash
balances. Each Fund may invest cash balances in a joint repurchase agreement in
accordance with the terms of the Order and subject generally to the conditions
described above.
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 SEC
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 a Fund involved
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 involved; 3) the Fund must be able to terminate the loan
after notice, at any time; 4) the Fund must receive reasonable interest on any
loan, and any dividends, interest or other distributions on the lent securities,
and any increase in the market value of such securities; 5) the Fund may pay
reasonable custodian fees in connection with the loan; and 6) the voting rights
on the lent securities may pass to the borrower; however, if the trustees of
Equity Funds II 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 trustees to vote
the proxy.
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The major risk to which a Fund would be exposed on a loan transaction
is the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, each Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, under the supervision of
the Board of Trustees, 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.
Options
Each Fund may write call options on a covered basis only and purchase
put options, and will not engage in option writing strategies for speculative
purposes.
Covered Call Writing
Each Fund may write covered call options from time to time on such
portion of its portfolio, without limit, as the Manager determines is
appropriate in seeking to obtain the Fund's investment objective. A call option
gives the purchaser of such option the right to buy, and the writer, in this
case 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 a
Fund and options on stock indices, a Fund may enter into closing purchase
transactions. A closing purchase transaction is one in which a 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 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, a 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,
a 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.
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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.
A Fund will write call options only on a covered basis, which means
that Fund will own the underlying security subject to the call option at all
times during the option period. Unless a closing purchase transaction is
effected, the Fund would be required to continue to hold a security which it
might otherwise wish to sell, or deliver a security it would want to hold.
Options written by a Fund will normally have expiration dates between one and
nine months from the date written. The exercise price of a call option may be
below, equal to or above the current market value of the underlying security at
the time the option is written.
Purchasing Call Options
Delaware Diversified Value Fund may purchase call options to enhance
income or to hedge its portfolio securities. When the 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 writer
of the call option, who receives the premium upon writing the option, has the
obligation, upon exercise of the option, to deliver the underlying security
against payment of the exercise price. The advantage of purchasing call options
is that the Fund may alter portfolio characteristics and modify portfolio
maturities without incurring the cost associated with portfolio transactions.
Delaware Diversified Value Fund may, following the purchase of a call
option, liquidate its positions 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.
Although Delaware Diversified Value Fund will generally purchase only
those call options for which there appears to be an active secondary market,
there is no assurance 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 their 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.
Purchasing Put Options
Each Fund may invest in put options, provided that each of Delaware
Decatur Equity Income Fund and Delaware Growth and Income Fund may invest no
more than 2% of its total assets in the purchase of put options. A Fund will, at
all times during which it holds a put option, own the security covered by such
option. A Fund may invest in put options to enhance income or hedge its
portfolio securities.
Each Fund may 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 a Fund to protect an unrealized gain in an
appreciated security in its portfolio without actually selling the security. If
the security does not drop in value, the Fund will lose the value of the premium
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paid. A 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.
A Fund may sell a put option purchased on individual portfolio
securities or stock indices. Additionally, a Fund 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.
Writing Put Options
A put option written by Delaware Diversified Value Fund obligates it to
buy the security underlying the option at the exercise price during the option
period and the purchaser of the option has the right to sell the security to the
Fund. During the option period, the Fund, as writer of the put option, may be
assigned an exercise notice by the broker/dealer through whom the option was
sold requiring the Fund to make payment of the exercise price against delivery
of the underlying security. The obligation terminates upon expiration of the put
option or at such earlier time at which the writer effects a closing purchase
transaction. Delaware Diversified Value Fund may write put options only if the
Fund will maintain in a segregated account with its Custodian Bank, cash, U.S.
government securities or other assets in an amount not less than the exercise
price of the option at all times during the option period. The amount of cash,
U.S. government securities or other assets held in the segregated account will
be adjusted on a daily basis to reflect changes in the market value of the
securities covered by the put option written by the Fund. Consistent with the
limited purposes for which Delaware Diversified Value Fund intends to engage in
the writing of put options, such put options will generally be written in
circumstances where the investment adviser wishes to purchase the underlying
security for the Fund at a price lower than the current market price of the
security. In such event, Delaware Diversified Value Fund would write a put
option at an exercise price which, reduced by the premium received on the
option, reflects the lower price it is willing to pay.
Following the writing of a put option, Delaware Diversified Value Fund
may wish to terminate the obligation to buy the security underlying the option
by effecting a closing purchase transaction. This is accomplished by buying an
option of the same series as the option previously written. The Fund may not,
however, effect such a closing transaction after it has been notified of the
exercise of the option.
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 a 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.
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As with stock options, a Fund may offset its position in stock index
options prior to expiration by entering into a closing transaction on an
Exchange or it may let the option expire unexercised.
A stock index fluctuates with changes in the market values of the stock
so included. Some stock index options are based on a broad market index such as
the Standard & Poor's 500(R) Composite Stock Price Index ("S&P 500") or the New
York Stock Exchange Composite Index, or a narrower market index such as the
Standard & Poor's 100 ("S&P 100"). Indices are also based on an industry or
market segment such as the AMEX Oil and Gas Index or the Computer and Business
Equipment Index. Options on stock indices are currently traded on the following
Exchanges among others: The Chicago Board Options Exchange, New York Stock
Exchange and American Stock Exchange.
The effectiveness of purchasing or writing stock index options as a
hedging technique will depend upon the extent to which price movements in 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 a 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 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. A Fund will enter into an option position only if there appears
to be a liquid secondary market for such options.
A Fund will not engage in transactions in options on stock indices for
speculative purposes but only to protect appreciation attained, to offset
capital losses and to take advantage of the liquidity available in the option
markets.
Futures Contracts
Each Fund may enter into futures contracts on stocks, stock indices,
interest rates and foreign currencies, and purchase or sell options on such
futures contracts. These activities will not be entered into for speculative
purposes, but rather for hedging purposes and to facilitate the ability to
quickly deploy into the stock market a Fund's positions in cash, short-term debt
securities and other money market instruments, at times when such Fund's assets
are not fully invested in equity securities. Such positions will generally be
eliminated when it becomes possible to invest in securities that are appropriate
for the Fund involved.
A futures contract is a bilateral agreement providing for the purchase
and sale of a specified type and amount of a financial instrument, or for the
making and acceptance of a cash settlement, at a stated time in the future for a
fixed price. By its terms, a futures contract provides for a specified
settlement date on which the securities underlying the contract are delivered,
or in the case of securities index futures contracts, the difference between the
price at which the contract was entered into and the contract's closing value is
settled between the purchaser and seller in cash. Futures contracts differ from
options in that they are bilateral agreements, with both the purchaser and the
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seller equally obligated to complete the transaction. In addition, futures
contracts call for settlement only on the expiration date, and cannot be
"exercised" at any other time during their term.
The purchase or sale of a futures contract also differs from the
purchase or sale of a security or the purchase of an option in that no purchase
price is paid or received. Instead, an amount of cash or cash equivalents, which
varies but may be as low as 5% or less of the value of the contract, must be
deposited with the broker as "initial margin" as a good faith deposit. This
amount is generally maintained in a segregated account at the custodian bank.
Subsequent payments to and from the broker, referred to as "variation margin,"
are made on a daily basis as the value of the index or instrument underlying the
futures contract fluctuates, making positions in the futures contract more or
less valuable, a process known as "marking to the market."
Purchases or sales of stock or bond index futures contracts are used
for hedging purposes to attempt to protect a Fund's current or intended
investments from broad fluctuations in stock or bond prices. For example, a Fund
may sell stock or bond index futures contracts in anticipation of or during a
market decline to attempt to offset the decrease in market value of the Fund's
securities portfolio that might otherwise result. If such decline occurs, the
loss in value of portfolio securities may be offset, in whole or part, by gains
on the futures position. When a Fund is not fully invested in the securities
market and anticipates a significant market advance, it may purchase stock or
bond index futures contracts in order to gain rapid market exposure that may, in
part or entirely, offset increases in the cost of securities that the Fund
intends to purchase. As such purchases are made, the corresponding positions in
stock or bond index futures contracts will be closed out.
Interest rate futures contracts are purchased or sold for hedging
purposes to attempt to protect against the effects of interest rate changes on a
Fund's current or intended investments in fixed-income securities. For example,
if a Fund owned long-term bonds and interest rates were expected to increase,
the Fund might sell interest rate futures contracts. Such a sale would have much
the same effect as selling some of the long-term bonds in the Fund's portfolio.
However, since the futures market is more liquid than the cash market, the use
of interest rate futures contracts as a hedging technique allows the Fund to
hedge its interest rate risk without having to sell its portfolio securities. If
interest rates did increase, the value of the debt securities in the portfolio
would decline, but the value of the Fund's interest rate futures contracts would
be expected to increase at approximately the same rate, thereby keeping the net
asset value of the Fund from declining as much as it otherwise would have. On
the other hand, if interest rates were expected to decline, interest rate
futures contracts could be purchased as a hedge in anticipation of subsequent
purchases of long-term bonds at higher prices. Because the fluctuations in the
value of the interest rate futures contracts should be similar to those of
long-term bonds, the Fund could protect itself against the effects of the
anticipated rise in the value of long-term bonds without actually buying them
until the necessary cash became available or the market had stabilized. At that
time, the interest rate futures contracts could be liquidated, and the Fund's
cash reserve could then be used to buy long-term bonds on the cash market.
Each Fund may purchase and sell foreign currency futures contracts for
hedging purposes to attempt to protect its current or intended investments
denominated in foreign currencies from fluctuations in currency exchange rates.
Such fluctuations could reduce the dollar value of portfolio securities
denominated in foreign currencies, or increase the cost of foreign-denominated
securities to be acquired, even if the value of such securities in the
currencies in which they are denominated remains constant. A Fund may sell
futures contracts on a foreign currency, for example, when it holds securities
denominated in such currency and it anticipates a decline in the value of such
currency relative to the dollar. In the event such decline occurs, the resulting
adverse effect on the value of foreign-denominated securities may be offset, in
whole or in part, by gains on the futures contracts. However, if the value of
the foreign currency increases relative to the dollar, the Fund's loss on the
foreign currency futures contract may or may not be offset by an increase in the
value of the securities because a decline in the price of the security stated in
terms of the foreign currency may be greater than the increase in value as a
result of the change in exchange rates. Conversely, a Fund could protect against
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a rise in the dollar cost of foreign-denominated securities to be acquired by
purchasing futures contracts on the relevant currency, which could offset, in
whole or in part, the increased cost of such securities resulting from a rise in
the dollar value of the underlying currencies. When a Fund purchases futures
contracts under such circumstances, however, and the price of securities to be
acquired instead declines as a result of appreciation of the dollar, the Fund
will sustain losses on its futures position which could reduce or eliminate the
benefits of the reduced cost of portfolio securities to be acquired.
Each Fund may also purchase and write options on the types of futures
contracts in which the Fund may invest, and enter into related closing
transactions. Options on futures are similar to options on securities, as
described below, 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 to actually purchase or sell the futures contract, at a specified exercise
price at any time during the period of the option. In the event that an option
written by the Fund is exercised, the Fund will be subject to all the risks
associated with the trading of futures contracts, such as payment of variation
margin deposits. In addition, the writer of an option on a futures contract,
unlike the holder, is subject to initial and variation margin requirements on
the option position.
At any time prior to the expiration of a futures contract, a trader may
elect to close out its position by taking an opposite position on the contract
market on which the position was entered into, subject to the availability of a
secondary market, which will operate to terminate the initial position.
Likewise, a position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to availability of a secondary market, which is the
purchase or sale of an option of the same series (i.e., the same exercise price
and expiration date) as the option previously purchased or sold. A Fund may
realize a profit or a loss when closing out a futures contract or an option on a
futures contract.
To the extent that interest or exchange rates or securities prices move
in an unexpected direction, a Fund may not achieve the anticipated benefits of
investing in futures contracts and options thereon, or may realize a loss. To
the extent that a Fund purchases an option on a futures contract and fails to
exercise the option prior to the exercise date, it will suffer a loss of the
premium paid. Further, the possible lack of a secondary market could prevent the
Fund from closing out its positions relating to futures.
Options
Each Fund may write covered call options on individual issues. For the
option to be considered to be covered, the Fund writing the option must own the
common stock underlying the option or securities convertible into such common
stock. In addition, each Fund may write call options on stock indices. Each Fund
may also purchase put options on individual issues and on stock indices. The
Manager will employ these techniques in an attempt to protect appreciation
attained, to offset capital losses and to take advantage of the liquidity
available in the option markets. The ability to hedge effectively using options
on stock indices will depend, in part, on the correlation between the
composition of the index and a Fund's portfolio as well as the price movement of
individual securities. The Funds do not currently intend to write or purchase
options on stock indices.
While there is no limit on the amount of a Fund's assets which may be
invested in covered call options, neither Fund will invest more than 2% of its
net assets in put options. The Funds will only use Exchange-traded options.
Foreign and Emerging Market Securities
Each Fund has the ability to invest up to 20% of its total assets in
foreign securities (which, in the case of each Fund except Delaware Blue Chip
Fund and Delaware Social Awareness Fund, include Depositary Receipts, as
described below) 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
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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, a 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 a Fund may invest may also be smaller, less liquid and subject to greater
price volatility than those in the United States.
Each Fund may also invest in 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 a Fund may invest 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.
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 a Fund. Payment of
such interest equalization tax, if imposed, would reduce the Fund's rate of
return on its investment. Dividends paid by foreign issuers may be subject to
withholding and other foreign taxes which may decrease the net return on such
investments as compared to dividends paid to the Fund by United States
corporations. Special rules govern the federal income tax treatment of certain
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
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U.S. dollar. The types of transactions covered by the special rules generally
include the following: (i) the acquisition of, or becoming the obligor under, a
bond or other debt instrument (including, to the extent provided in Treasury
Regulations, preferred stock); (ii) the accruing of certain trade receivables
and payables; and (iii) the entering into or acquisition of any forward
contract, futures contract, option and similar financial instruments other than
any "regulated futures contract" or "nonequity option" marked to market. The
disposition of a currency other than the U.S. dollar by a U.S. taxpayer is also
treated as a transaction subject to the special currency rules. However, foreign
currency-related regulated futures contracts and nonequity options are generally
not subject to the special currency rules, if they are or would be treated as
sold for their fair market value at year-end under the marking to market rules
applicable to other futures contracts, unless an election is made to have such
currency rules apply. With respect to transactions covered by the special rules,
foreign currency gain or loss is calculated separately from any gain or loss on
the underlying transaction and is normally taxable as ordinary gain or loss. A
taxpayer may elect to treat as capital gain or loss foreign currency gain or
loss arising from certain identified forward contracts, futures contracts and
options that are capital assets in the hands of the taxpayer and which are not
part of a straddle. Certain transactions subject to the special currency rules
that are part of a "section 988 hedging transaction" (as defined in the Internal
Revenue Code of 1986, as amended (the "Code"), and the Treasury Regulations)
will be integrated and treated as a single transaction or otherwise treated
consistently for purposes of the Code. The income tax effects of integrating and
treating a transaction as a single transaction are generally to create a
synthetic debt instrument that is subject to the original discount provisions.
It is anticipated that some of the non-U.S. dollar denominated investments and
foreign currency contracts a Fund may make or enter into will be subject to the
special currency rules described above.
Foreign Currency Transactions
Although each Fund values its assets daily in terms of U.S. dollars,
they do not intend to convert holdings of foreign currencies into U.S. dollars
on a daily basis. Each 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. A 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.
A 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 or Sub-Adviser, with respect to Delaware Blue Chip
Fund and Delaware Social Awareness Fund, believes that the currency of a
particular country may suffer a significant decline against the U.S. dollar or
against another currency, a 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.
A 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.
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At the maturity of a forward contract, a 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 a 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.
Depositary Receipts
Each Fund may invest in sponsored and unsponsored American Depositary
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. Holders of unsponsored Depositary Receipts generally bear
all the costs of such facilities and the depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts in respect of the deposited securities.
Therefore, there may not be a correlation between information concerning the
issuer of the security and the market value of an unsponsored Depositary
Receipt. Investments in Depositary Receipts involve risks similar to those
accompanying direct investments in foreign securities.
Investment Company Securities
Any investments that a 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, a 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 a Fund's total assets in
shares of other investment companies. If a 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 a Fund's investments in unregistered investment companies. Among
investment companies in which Delaware Diversified Value Fund may invest subject
to the above limitations are certain exchange traded investment companies which
replicate U.S. or foreign stock indices, such as SPDRs or WWEBs.
Fixed-Income Securities
Fixed-income securities consists of bonds, notes debentures and other
interest-bearing securities that represent indebtedness. The market value of the
fixed-income investments in which a Fund invests will change in response to
interest rate changes and other factors. During periods of falling interest
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rates, the values of outstanding fixed-income securities generally rise.
Conversely, during periods of rising interest rates, the values of such
securities generally decline. Moreover, while securities with longer maturities
tend to produce higher yields, the prices of longer maturity securities are also
subject to greater market fluctuations as a result of changes in interest rates.
Changes by recognized agencies in the rating of any fixed-income security and in
the ability of an issuer to make payments of interest and principal also affect
the value of these investments. Changes in the value of these securities will
not necessarily affect cash income derived from these securities but will affect
a Fund's net asset value.
Money Market Instruments
Each Fund may invest for defensive purposes in corporate government
bonds and notes and money market instruments. Money market instruments in which
the Funds may invest include U.S. government securities; certificates of
deposit, time deposits and bankers' acceptances issued by domestic banks
(including their branches located outside the U.S. and subsidiaries located in
Canada), domestic branches of foreign banks, savings and loan associations and
similar institutions; high grade commercial paper; and repurchase agreements
with respect to the foregoing types of instruments.
Unseasoned Companies
Delaware Blue Chip Fund, Delaware Social Awareness Fund and Delaware
Diversified Value Fund may invest in relatively new or unseasoned companies
which are in their early stages of development, or small companies positioned in
new and emerging industries where the opportunity for rapid growth is expected
to be above average. Securities of unseasoned companies present greater risks
than securities of larger, more established companies. The companies in which a
Fund may invest may have relatively small revenues, limited product lines, and
may have a small share of the market for their products or services. Small
companies may lack depth of management, they may be unable to internally
generate funds necessary for growth or potential development or to generate such
funds through external financing or favorable terms, or they may be developing
or marketing new products or services for which markets are not yet established
and may never become established. Due these and other factors, small companies
may suffer significant losses as well as realize substantial growth, and
investments in such companies tend to be volatile and are therefore speculative.
In addition, as a matter of non-fundamental policy, Delaware Social
Awareness Fund will adhere to a Social Criteria strategy:
The Sub-Adviser will utilize the Social Investment Database published
by KLD in determining whether a company is engaged in any activity precluded by
the Fund's Social Criteria. The Social Investment Database reflects KLD's
determination of the extent to which a company's involvement in the activities
prohibited by the Social Criteria is significant enough to merit a concern or a
major concern. Significance may be determined on the basis of percentage of
revenue generated by, or the size of the operations attributable to, activities
related to such Social Criteria, or other factors selected by KLD. The social
screening undergoes continual refinement and modification.
Pursuant to the Social Criteria presently in effect, the Fund will not
knowingly invest in or hold securities of companies which engage in:
1. Activities which result or are likely to result in damage to the
natural environment;
2. The production of nuclear power, the design or construction of
nuclear power plants, or the manufacture of equipment for the
production of nuclear power;
3. The manufacture of, or contracting for, military weapons;
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4. The alcoholic beverage, tobacco or gambling industries; or
5. Conducting animal testing for cosmetic or personal care products.
Because of its Social Criteria, the Fund may not be able to take the
same advantage of certain investment opportunities as do funds which do not have
Social Criteria. Only securities of companies not excluded by any of the Social
Criteria will be eligible for consideration for purchase by the Fund according
to its objective and policies described in the Fund's Prospectus.
The Fund will commence the orderly sale of securities of a company when
it is determined by the Sub-Adviser that such company no longer adheres to the
Social Criteria. The Fund will sell such securities in a manner so as to
minimize any adverse affect on the Fund's assets. Typically, such sales will be
made within 90 days from the date of the Sub-Adviser's determination, unless a
sale within the 90-day period would produce a significant loss to the overall
value of the Fund's assets.
Convertible Securities
Convertible securities entitle the holder to receive interest paid or
accrued on debt or the dividend paid on preferred stock until the convertible
securities mature or are redeemed, converted or exchanged. Prior to conversion,
convertible securities have characteristics similar to ordinary debt securities
in that they normally provide a stable stream of income with generally higher
yields than those of common stock of the same or similar issuers. Convertible
securities rank senior to common stock in a corporation's capital structure and
therefore generally entail less risk than the corporation's common stock,
although the extent to which such risk is reduced depends in large measure upon
the degree to which the convertible security sells above its value as a
fixed-income security.
The value of convertible securities is a function of their investment
value (determined by yield in comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and
their conversion value (their worth, at market value, if converted into the
underlying common stock). The investment value of convertible securities is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline, and by the
credit standing of the issuer and other factors. The conversion value of
convertible securities is determined by the market price of the underlying
common stock. If the conversion value is low relative to the investment value,
the price of the convertible securities is governed principally by their
investment value. To the extent the market price of the underlying common stock
approaches or exceeds the conversion price, the price of the convertible
securities will be increasingly influenced by their conversion value. In
addition, convertible securities generally sell at a premium over their
conversion value determined by the extent to which investors place value on the
right to acquire the underlying common stock while holding fixed-income
securities.
Capital appreciation for a Fund may result from an improvement in the
credit standing of an issuer whose securities are held in the Fund or from a
general lowering of interest rates, or a combination of both. Conversely, a
reduction in the credit standing of an issuer whose securities are held by a
Fund or a general increase in interest rates may be expected to result in
capital depreciation to the Fund.
In general, investments in non-investment grade convertible securities
are subject to a significant risk of a change in the credit rating or financial
condition of the issuing entity. Investments in convertible securities of medium
or lower quality are also likely to be subject to greater market fluctuation and
to greater risk of loss of income and principal due to default than investments
of higher rated fixed-income securities. Such lower-rated securities generally
tend to reflect short-term corporate and market developments to a greater extent
than higher rated securities, which react more to fluctuations in the general
level of interest rates. A Fund will generally reduce risk to the investor by
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diversification, credit analysis and attention to current developments in trends
of both the economy and financial markets. However, while diversification
reduces the effect on a Fund of any single investment, it does not reduce the
overall risk of investing in lower rated securities.
High Yield, High Risk Securities
Delaware Decatur Equity Income Fund may invest up to 15% of its net
assets in high yield, high risk fixed-income securities. These securities are
rated lower than BBB by Standard & Poor's Ratings Group ("S&P"), Baa by Moody's
Investors Service, Inc. ("Moody's") and/or rated similarly by another rating
agency, or, if unrated, are considered by the Manager to be of equivalent
quality. The Fund will not invest in securities which are rated lower than C by
S&P, Ca by Moody's or similarly by another rating agency, or, if unrated, are
considered by the Manager to be of a quality that is lower than such ratings.
Delaware Diversified Value Fund will invest in convertible fixed-income
securities for their equity characteristics and without respect to investment
ratings. As a result, the Fund may hold convertible fixed-income securities
which are rated below investment grade (i.e., rated below BBB by S&P or Baa by
Moody's). See Appendix A - Ratings for more rating information. Fixed-income
securities of this type are considered to be of poor standing and predominantly
speculative. Such securities are subject to a substantial degree of credit risk.
In the past, in the opinion of the Manager, the high yields from these
bonds have more than compensated for their higher default rates. There can be no
assurance, however, that yields will continue to offset default rates on these
bonds in the future. The Manager intends to maintain an adequately diversified
portfolio of these bonds. While diversification can help to reduce the effect of
an individual default on the Fund, there can be no assurance that
diversification will protect the Fund from widespread bond defaults brought
about by a sustained economic downturn.
Medium and low-grade bonds held by the Fund may be issued as a
consequence of corporate restructurings, such as leveraged buy-outs, mergers,
acquisitions, debt recapitalizations or similar events. Also these bonds are
often issued by smaller, less creditworthy companies or by highly leveraged
(indebted) firms, which are generally less able than more financially stable
firms to make scheduled payments of interest and principal. The risks posed by
bonds issued under such circumstances are substantial.
The economy and interest rates may affect these high yield, high risk
securities differently than other securities. Prices have been found to be less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic changes or individual corporate developments.
Also, during an economic downturn or substantial period of rising interest
rates, highly leveraged issuers may experience financial stress which would
adversely affect their ability to service principal and interest payment
obligations, to meet projected business goals and to obtain additional
financing. Changes by recognized rating agencies in their rating of any security
and in the ability of an issuer to make payments of interest and principal will
also ordinarily have a more dramatic effect on the values of these investments
than on the values of higher-rated securities. Such changes in value will not
affect cash income derived from these securities, unless the issuers fail to pay
interest or dividends when due. Such changes will, however, affect the Fund's
net asset value per share.
When-Issued and Delayed Delivery Securities
Delaware Blue Chip Fund, Delaware Social Awareness Fund and Delaware
Diversified Value 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. Each Fund will designate cash or securities in
amounts sufficient to cover its obligations, and will value the designated
assets daily. The payment obligation and the interest rates that will be
received are each fixed at the time a Fund enters into the commitment and no
interest accrues to such 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. It is a
current policy of each Fund not to enter into when-issued commitments exceeding
in the aggregate 15% of the market value of the its total assets less
liabilities other than the obligations created by these commitments.
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Short Sales
Delaware Diversified Value 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. The Fund may borrow the security sold short
in order to make delivery on the sale. At the time a short sale is effected, the
Fund incurs an obligation to replace the security borrowed at whatever its price
may be at the time the Fund purchases it for redelivery to the lender. The price
at such time may be more or less than the price at which the security was sold
by the Fund. When a short sale transaction is closed out by redelivery of the
security, any gain or loss on the transaction is taxable as capital gain or
loss. 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.
While the short position is open and 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 securities, marked to market
daily, 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. Because the Fund already owns the security, it is not required
to segregate cash and/or securities, although it is required to segregate the
security in the amount sold short against the box.
The ability of the Fund to effect short sales may be limited because of
certain requirements the Fund must satisfy to maintain its status as a regulated
investment company. See Accounting and Tax Issues - Other Tax Requirements.
Concentration
In applying Delaware Diversified Value Fund's policy on concentration:
(i) utility companies will be divided according to their services, for example,
gas, gas transmission, electric and telephone will each be considered a separate
industry; (ii) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and (iii) asset
backed securities will be classified according to the underlying assets securing
such securities.
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ACCOUNTING AND TAX ISSUES
When a Fund writes a call option, an amount equal to the premium
received by it is included in the section of the Fund's assets and liabilities
as an asset and as an equivalent liability. 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 a Fund has written expires on its stipulated expiration date, the Fund
reports a realized gain. If a 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 a 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.
Other Tax Requirements--Each Fund has qualified, and intend to continue
to qualify, and Delaware Diversified Value Fund intends to qualify, as regulated
investment companies under Subchapter M of the Code. As such, a 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 and it satisfies other requirements
relating to the sources of its income and diversification of its assets.
In order to qualify as a regulated investment company for federal
income tax purposes, each Fund must meet certain specific requirements,
including:
(i) Each Fund must maintain a diversified portfolio of securities,
wherein no security (other than U.S. government securities and securities of
other regulated investment companies) can exceed 25% of the Fund's total assets,
and, with respect to 50% of the Fund's total assets, no investment (other than
cash and cash items, U.S. government securities and securities of other
regulated investment companies) can exceed 5% of the Fund's total assets;
(ii) Each Fund must derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or disposition of stock and securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies;
(iii) Each Fund must distribute to its shareholders at least 90% of its
investment company taxable income and net tax-exempt income for each of its
fiscal years, and
(iv) Each Fund must realize less than 30% of its gross income for each
fiscal year from gains from the sale of securities and certain other assets that
have been held by the Fund for less than three months ("short-short income").
The Taxpayer Relief Act of 1997, as amended, (the "1997 Act") repealed the 30%
short-short income test for tax years of regulated investment companies
beginning after August 5, 1997; however, this rule may have continuing effect in
some states for purposes of classifying the Fund as a regulated investment
company.
The Code requires the Funds to distribute at least 98% of its taxable
ordinary income earned during the calendar year and 98% of its capital gain net
income earned during the 12 month period ending November 30 (in addition to
amounts from the prior year that were neither distributed nor taxed to a Fund)
to you by December 31 of each year in order to avoid federal excise taxes. The
Funds intend as a matter of policy to declare and pay sufficient dividends in
December or January (which are treated by you as received in December) but does
not guarantee and can give no assurances that its distributions will be
sufficient to eliminate all such taxes.
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The straddle rules of Section 1092 may apply. Generally, the straddle
provisions require the deferral of losses to the extent of unrecognized gains
related to the offsetting positions in the straddle. Excess losses, if any, can
be recognized in the year of loss. Deferred losses will be carried forward and
recognized in the year that unrealized losses exceed unrealized gains or when
the offsetting position is sold.
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, a Fund must recognize gain (but not loss) on any constructive sale
of an appreciated financial position in stock, a partnership interest or certain
debt instruments. The Fund will generally be treated as making a constructive
sale when it: 1) enters into a short sale on the same or substantially identical
property; 2) enters into an offsetting notional principal contract; or 3) enters
into a futures or forward contract to deliver the same or substantially
identical property. Other transactions (including certain financial instruments
called collars) will be treated as constructive sales as provided in Treasury
regulations to be published. There are also certain exceptions that apply for
transactions that are closed before the end of the 30th day after the close of
the taxable year.
Investment in Foreign Currencies and Foreign Securities--The Funds are
authorized to invest certain limited amounts in foreign securities. Such
investments, if made, will have the following additional tax consequences to
each Fund:
Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time a Fund accrues income
(including dividends), or accrues expenses which are denominated in a foreign
currency, and the time a Fund actually collects such income or pays such
expenses generally are treated as ordinary income or loss. Similarly, on the
disposition of debt securities denominated in a foreign currency and on the
disposition of certain options, futures, forward contracts, gain or loss
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of its disposition are
also treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "Section 988" gains or losses, may increase or decrease the amount
of a Fund's net investment company taxable income, which, in turn, will affect
the amount of income to be distributed to you by a Fund.
If a Fund's Section 988 losses exceed a Fund's other investment company
taxable income during a taxable year, a Fund generally will not be able to make
ordinary dividend distributions to you for that year, or distributions made
before the losses were realized will be recharacterized as return of capital
distributions for federal income tax purposes, rather than as an ordinary
dividend or capital gain distribution. If a distribution is treated as a return
of capital, your tax basis in your Fund shares will be reduced by a like amount
(to the extent of such basis), and any excess of the distribution over your tax
basis in your Fund shares will be treated as capital gain to you.
The 1997 Act generally requires that foreign income be translated into
U.S. dollars at the average exchange rate for the tax year in which the
transactions are conducted. Certain exceptions apply to taxes paid more than two
years after the taxable year to which they relate. This new law may require a
Fund to track and record adjustments to foreign taxes paid on foreign securities
in which it invests. Under a Fund's current reporting procedure, foreign
security transactions are recorded generally at the time of each transaction
using the foreign currency spot rate available for the date of each transaction.
Under the new law, a Fund will be required to record at fiscal year end (and at
calendar year end for excise tax purposes) an adjustment that reflects the
difference between the spot rates recorded for each transaction and the year-end
average exchange rate for all of a Fund's foreign securities transactions. There
is a possibility that the mutual fund industry will be given relief from this
new provision, in which case no year-end adjustments will be required.
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<PAGE>
The Funds may be subject to foreign withholding taxes on income from
certain of its foreign securities. If more than 50% of the total assets of a
Fund at the end of its fiscal year are invested in securities of foreign
corporations, a Fund may elect to pass-through to you your pro rata share of
foreign taxes paid by a Fund. If this election is made, you will be: (i)
required to include in your gross income your pro rata share of foreign source
income (including any foreign taxes paid by a Fund); and (ii) entitled to either
deduct your share of such foreign taxes in computing your taxable income or to
claim a credit for such taxes against your U.S. income tax, subject to certain
limitations under the Code. You will be informed by a Fund at the end of each
calendar year regarding the availability of any such foreign tax credits and the
amount of foreign source income (including any foreign taxes paid by a Fund). If
a Fund elects to pass-through to you the foreign income taxes that it has paid,
you will be informed at the end of the calendar year of the amount of foreign
taxes paid and foreign source income that must be included on your federal
income tax return. If a Fund invests 50% or less of its total assets in
securities of foreign corporations, it will not be entitled to pass-through to
you your pro-rata shares of foreign taxes paid by a Fund. In this case, these
taxes will be taken as a deduction by a Fund, and the income reported to you
will be the net amount after these deductions. The 1997 Act also simplifies the
procedures by which investors in funds that invest in foreign securities can
claim tax credits on their individual income tax returns for the foreign taxes
paid by a Fund. These provisions will allow investors who pay foreign taxes of
$300 or less on a single return or $600 or less on a joint return during any
year (all of which must be reported on IRS Form 1099-DIV from a Fund to the
investor) to claim a tax credit against their U.S. federal income tax for the
amount of foreign taxes paid by a Fund. This process will allow you, if you
qualify, to bypass the burdensome and detailed reporting requirements on the
foreign tax credit schedule (Form 1116) and report your foreign taxes paid
directly on page 2 of Form 1040.
Investment in Passive Foreign Investment Company Securities--The Funds
may invest in shares of foreign corporations which may be classified under the
Code as passive foreign investment companies ("PFICs"). In general, a foreign
corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. If a Fund receives an "excess distribution" with respect
to PFIC stock, the Fund itself may be subject to U.S. federal income tax on a
portion of the distribution, whether or not the corresponding income is
distributed by a Fund to you. In general, under the PFIC rules, an excess
distribution is treated as having been realized ratably over the period during
which a Fund held the PFIC shares. A Fund itself will be subject to tax on the
portion, if any, of an excess distribution that is so allocated to prior Fund
taxable years, and an interest factor will be added to the tax, as if the tax
had been payable in such prior taxable years. In this case, you would not be
permitted to claim a credit on your own tax return for the tax paid by a Fund.
Certain distributions from a PFIC as well as gain from the sale of PFIC shares
are treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
distribution might have been classified as capital gain. This may have the
effect of increasing Fund distributions to you that are treated as ordinary
dividends rather than long-term capital gain dividends.
A Fund may be eligible to elect alternative tax treatment with respect
to PFIC shares. Under an election that currently is available in some
circumstances, a Fund generally would be required to include in its gross income
its share of the earnings of a PFIC on a current basis, regardless of whether
distributions are received from the PFIC during such period. If this election
were made, the special rules, discussed above, relating to the taxation of
excess distributions, would not apply. In addition, the 1997 Act provides for
another election that
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would involve marking-to-market the Fund's PFIC shares at the end of each
taxable year (and on certain other dates as prescribed in the Code), with the
result that unrealized gains would be treated as though they were realized. The
Fund would also be allowed an ordinary deduction for the excess, if any, of the
adjusted basis of its investment in the PFIC stock over its fair market value at
the end of the taxable year. This deduction would be limited to the amount of
any net mark-to-market gains previously included with respect to that particular
PFIC security. If a Fund were to make this second PFIC election, tax at the Fund
level under the PFIC rules would generally be eliminated.
The application of the PFIC rules may affect, among other things, the
amount of tax payable by a Fund (if any), the amounts distributable to you by a
Fund, the time at which these distributions must be made, and whether these
distributions will be classified as ordinary income or capital gain
distributions to you.
You should be aware that it is not always possible at the time shares
of a foreign corporation are acquired to ascertain that the foreign corporation
is a PFIC, and that there is always a possibility that a foreign corporation
will become a PFIC after a Fund acquires shares in that corporation. While a
Fund will generally seek to avoid investing in PFIC shares to avoid the tax
consequences detailed above, there are no guarantees that it will do so and it
reserves the right to make such investments as a matter of its fundamental
investment policy.
Most foreign exchange gains are classified as ordinary income which
will be taxable to you as such when distributed. Similarly, you should be aware
that any foreign exchange losses realized by a Fund, including any losses
realized on the sale of foreign debt securities, are generally treated as
ordinary losses for federal income tax purposes. This treatment could increase
or reduce a Fund's income available for distribution to you, and may cause some
or all of a Fund's previously distributed income to be classified as a return of
capital.
PERFORMANCE INFORMATION
From time to time, each Fund may state 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 the average
annual compounded rate of return for that Class over, as relevant, the most
recent one-, five- and ten-year, or life-of-fund, periods, as applicable. Each
Fund may also advertise aggregate and average total return information for its
Classes over additional periods of time.
In presenting performance information for Class A Shares, the Limited
CDSC, or other CDSC, applicable only to certain redemptions of those shares will
not be deducted from any computation of total return. See the Prospectuses for
the Fund Classes for a description of the Limited CDSC, or other 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.
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The average annual total rate of return for each Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:
n
P (1 + T) = ERV
Where: P = a hypothetical initial purchase order of
$1,000 from which, in the case of Class A
Shares only, the maximum front-end sales
charge is deducted;
T = average annual total return;
n = number of years; and
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.
Total return performance for each Class will be computed by adding all
reinvested income and realized securities profits distributions plus the change
in net asset value during a specific period and dividing by the offering price
at the beginning of the period. It will reflect, as applicable, the maximum
sales charge, or CDSC, paid with respect to the illustrated investment amount,
but not any income taxes payable by shareholders on the reinvested distributions
included in the calculation.
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, each 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, Class B Shares, Class C Shares and
the Institutional Class of Delaware Decatur Equity Income Fund, Delaware Growth
and Income Fund, Delaware Blue Chip Fund and Delaware Social Awareness Fund and
the Class A Shares and Institutional Class of Delaware Diversified Value Fund,
as shown below, is the average annual total return quotations through November
30, 1999, computed as described above.
The average annual total return for Class A Shares at offer reflects
the maximum front-end sales charge of 5.75% 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 Institutional Classes of Delaware Decatur
Equity Income Fund and Delaware Growth and Income Fund for the periods prior to
the commencement of operations of such Classes is calculated by taking the
performance of the respective Class A Shares and adjusting it to reflect the
elimination of all sales charges. However, for those periods for Delaware Growth
and Income Fund Institutional Class, no adjustment has been made to eliminate
the impact of 12b-1 payments by Delaware Growth and Income Fund A Class, and
performance for Delaware Growth and Income Fund Institutional Class would have
been affected had such an adjustment been made.
The average annual total return for Class B Shares and Class C Shares
including deferred sales charge reflects the deduction of the applicable CDSC
that would be paid if the shares were redeemed at November 30, 1999. The average
annual total return for Class B Shares and Class C Shares excluding deferred
sales charge assumes the shares were not redeemed at November 30, 1999 and
therefore does not reflect the deduction of a CDSC.
-27-
<PAGE>
Securities prices fluctuated during the periods covered and past
results should not be considered as representative of future performance.
<TABLE>
<CAPTION>
Average Annual Total Return
Delaware Decatur Equity Income Fund
- ----------------- -------------- -------------- --------------- ------------- -------------- --------------- --------------
Class A Class B Class B Class C Class C
(At Offer) Class A Institutional (Including (Excluding (Including (Excluding
(1)(2) (At NAV) (2) Class CDSC)(3) CDSC) CDSC) CDSC)
- ----------------- -------------- -------------- --------------- ------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year ended (8.12%) (2.50%) (2.27%) (7.29%) (3.27%) (4.06%) (3.25%)
11/30/99
- ----------------- -------------- -------------- --------------- ------------- -------------- --------------- --------------
3 years ended 8.71% 10.87% 11.10% 9.31% 9.98% 9.99% 9.99%
11/30/99
- ----------------- -------------- -------------- --------------- ------------- -------------- --------------- --------------
5 years ended 15.94% 17.32% 17.52% 16.13% 16.34%
11/30/99 N/A N/A
- ----------------- -------------- -------------- --------------- ------------- -------------- --------------- --------------
10 years ended 10.87% 11.53% 11.64%
11/30/99 N/A N/A N/A N/A
- ----------------- -------------- -------------- --------------- ------------- -------------- --------------- --------------
15 years ended 13.36% 13.81% 12.83%
11/30/99 N/A N/A N/A N/A
- ----------------- -------------- -------------- --------------- ------------- -------------- --------------- --------------
12.07% 12.22% 12.25% 14.26% 14.36% 13.17% 13.17%
Life of Fund(4)
- ----------------- -------------- -------------- --------------- ------------- -------------- --------------- --------------
</TABLE>
(1) Effective November 2, 1998, the maximum front-end sales charge is 5.75%. The
above performance numbers are calculated using 5.75% as the applicable sales
charge for all time periods.
(2) Performance figures reflect the applicable Rule 12b-1 distribution expenses
that apply on and after May 2, 1994.
(3) Effective November 2, 1998, the CDSC schedule for Class B Shares increased
as follows: (i) 5% if shares are redeemed within one year of purchase (ii)
4% if shares are redeemed with two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if
shares are redeemed during the fifth year following purchase; (v) 1% if
shares are redeemed during the sixth year following purchase; and (v) 0%
thereafter. The above figures have been calculated using this new schedule.
(4) Date of initial public offering of Delaware Decatur Equity Income Fund
A Class was March 18, 1957; Delaware Decatur Equity Income Fund
Institutional Class was January 13, 1994, Delaware Decatur Equity Income
Fund B Class was September 6, 1994; Delaware Decatur Equity Income Fund
C Class was November 29, 1995.
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
Delaware Growth and Income Fund
- -----------------------------------------------------------------------------------------------------------------------------
Class A Class B Class B Class C Class C
(At Offer) Class A Institutional (Including (Excluding (Including (Excluding
(1) (At NAV) Class CDSC)(2) CDSC) CDSC) CDSC)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year ended (7.65%) (2.00%) (1.68%) (6.99)% (2.72)% (3.57%) (2.71%)
11/30/99
- -----------------------------------------------------------------------------------------------------------------------------
3 years ended 9.27% 11.45% 11.79% 9.89% 10.66% 10.68% 10.68%
11/30/99
- -----------------------------------------------------------------------------------------------------------------------------
5 years ended 17.03% 18.42% 18.78% 17.38% 17.59%
11/30/99 N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------
10 years ended 11.79% 12.46% 12.67%
11/30/99 N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------
Life of Fund(3) 12.59% 13.09% 13.25% 15.40% 15.51% 13.86% 13.86%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Effective November 2, 1998, the maximum front-end sales charge is
5.75%. The above performance numbers are calculated using 5.75% as the
applicable sales charge for all time periods.
(2) Effective November 2, 1998, the CDSC schedule for Class B Shares
increased as follows: (i) 5% if shares are redeemed within one year of
purchase (ii) 4% if shares are redeemed with two years of purchase;
(iii) 3% if shares are redeemed during the third or fourth year
following purchase; (iv) 2% if shares are redeemed during the fifth
year following purchase; (v) 1% if shares are redeemed during the sixth
year following purchase; and (v) 0% thereafter. The above figures have
been calculated using this new schedule.
(3) Date of initial public offering of Growth and Income Fund A Class was
August 27, 1986; Growth and Income Fund Institutional Class was July
26, 1993; Growth and Income Fund B Class was September 6, 1994; Growth
and Income Fund C Class was November 29, 1995.
<TABLE>
<CAPTION>
Average Annual Total Return
Delaware Blue Chip Fund (1)
- -----------------------------------------------------------------------------------------------------------------------------
Class A Class B Class B Class C Class C
(At Offer) Class A Institutional (Including (Excluding (Including (Excluding
(2) (At NAV) Class CDSC)(3) CDSC) CDSC) CDSC)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year ended 9.61% 16.30% 16.70% 10.63% 15.63% 14.63% 15.63%
11/30/99
- -----------------------------------------------------------------------------------------------------------------------------
Life of Fund(4) 13.56% 16.02% 16.39% 14.41% 15.26% 15.26% 15.26%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects voluntary fee waivers and expense payments. In the absence of the
voluntary fee waiver and payment of expenses, performance would have been
affected negatively. See Investment Management Agreement and Sub-Advisory
Agreements for information about fee waivers and expense payments.
(2) Effective November 2, 1998, the maximum front-end sales charge is 5.75%. The
above performance numbers are calculated using 5.75% as the applicable sales
charge for all time periods.
(3) Effective November 2, 1998, the CDSC schedule for Class B Shares increased
as follows: (i) 5% if shares are redeemed within one year of purchase (ii)
4% if shares are redeemed with two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if
shares are redeemed during the fifth year following purchase; (v) 1% if
shares are redeemed during the sixth year following purchase; and (v) 0%
thereafter. The above figures have been calculated using this new schedule.
(4) Each Class commenced operations on February 24, 1997.
-29-
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
Delaware Social Awareness Fund(1)
- ---------------------------------------------------------------------------------------------------------------------------
Class A Class B Class B Class C Class C
(At Offer) Class A Institutional (Including (Excluding (Including (Excluding
(2)(3) (At NAV)(3) Class CDSC)(4) CDSC) CDSC) CDSC)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year ended 8.78% 15.44% 15.74% 9.57% 14.57% 13.57% 14.57%
11/30/99
- ---------------------------------------------------------------------------------------------------------------------------
Life of Fund(5) 14.31% 16.79% 17.05% 15.07% 15.91% 15.91% 15.91%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects voluntary fee waivers and expense payments. In the absence of the
voluntary fee waiver and payment of expenses, performance would have been
affected negatively. See Investment Management Agreements and Sub-Advisory
Agreements for information about fee waivers and expense payments.
(2) Effective November 2, 1998, the maximum front-end sales charge is 5.75%. The
above performance numbers are calculated using 5.75% as the applicable sales
charge for all time periods.
(3) Reflects voluntary 12b-1 fee waivers to limit 12b-1 expenses to 0.25% of
average daily net assets. In the absence of the voluntary fee waiver and
payment of expenses, performance would have been affected negatively.
(4) Effective November 2, 1998, the CDSC schedule for Class B Shares increased
as follows: (i) 5% if shares are redeemed within one year of purchase (ii)
4% if shares are redeemed with two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if
shares are redeemed during the fifth year following purchase; (v) 1% if
shares are redeemed during the sixth year following purchase; and (v) 0%
thereafter. The above figures have been calculated using this new schedule.
(5) Each Class commenced operations on February 24, 1997.
Average Annual Total Return
Delaware Diversified Value Fund(1)
---------------------------------
Institutional
Class
---------------------------------
1 year ended 13.05%
11/30/99
---------------------------------
Life of 21.67%
Fund(1)
---------------------------------
(1) Commenced operations on September 15, 1998.
-30-
<PAGE>
Delaware Decatur Equity Income Fund and Delaware Growth and Income Fund
may also quote their respective Classes' current yield in advertisements and
investor communications.
The yield computation is determined by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period and annualizing the resulting figure,
according to the following formula:
a--b 6
YIELD = 2[(-------- + 1) -- 1]
cd
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends;
d = the maximum offering price per share on the last day of
the period.
The above formula will be used in calculating quotations of yield of each Class,
based on specified 30-day periods identified in advertising by these Funds. The
30-day yields of each Class of each Fund listed below as of November 30, 1999
were as follows:
<TABLE>
<CAPTION>
Delaware Delaware Delaware Delaware
Decatur Growth and Blue Chip Social Awareness
Income Fund Income Fund Fund Fund
<S> <C> <C> <C> <C>
Class A Shares 2.51% 1.27% (0.23%) (0.28%)
Class B Shares 1.90% 0.67% (0.90%) (1.03%)
Class C Shares 1.88% 0.68% (0.94%) (1.04%)
Institutional Class shares 2.89% 1.64% 0.05% (0.05%)
</TABLE>
Yield calculations assume the maximum front-end sales charge and
expense limitations, if any, and do not reflect the deduction of any contingent
deferred sales charge. Actual yield on Class A Shares may be affected by
variations in front-end sales charges on investments. Actual yields on Class A
Shares, Class B Shares and Class C Shares would have been lower had any Limited
CDSC or CDSC been applied.
Past performance, such as reflected in quoted yields, should not be
considered as a representation of the results which may be realized from an
investment in any class of the Funds in the future. Investors should note that
the income earned and dividends paid by each Fund will vary with the fluctuation
of interest rates and performance of the portfolio.
Each of the Delaware Decatur Equity Income Fund's and Delaware Growth
and Income Fund's investment strategy relies on the consistency, reliability and
predictability of corporate dividends. Dividends tend to rise over time, despite
market conditions, and keep pace with rising prices; they are paid out in
"current" dollars. And, just as important, current dividend income can help
lessen the effects of adverse market conditions. This dividend discipline,
coupled with the potential for capital gains, seeks to provide investors with a
consistently higher total-rate-of-return over time.
-31-
<PAGE>
In 1972, Delaware Investment Advisers, a division of the Manager,
offered the time-proven Decatur investment style to the institutional investing
community. As of December 31, 1999, Delaware Investment Advisers managed
approximately $4.9 billion in institutional assets under management in that
style.
From time to time, a Fund may also quote each Class' actual total
return performance, dividend results and other performance information in
advertising and other types of literature. This information may be compared to
that of other mutual funds with similar investment objectives and to stock, bond
and other relevant indices or to rankings prepared by independent services or
other financial or industry publications that monitor the performance of mutual
funds. For example, the performance of a Fund (or Class) may be compared to data
prepared by Lipper Analytical Services, Inc. ("Lipper"), Morningstar, Inc. or to
the S&P 500 or the Dow Jones Industrial Average.
Lipper maintains statistical performance databases, as reported by a
diverse universe of independently-managed mutual funds. Morningstar, Inc. is a
mutual fund rating service that rates mutual funds on the basis of risk-adjusted
performance. Rankings that compare a Fund's performance to another fund in
appropriate categories over specific time periods also may be quoted in
advertising and other types of literature. The S&P 500 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 Russell Top 200 Index
measures the performance of the 200 largest companies in the Russell 1000
Index. 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. A direct investment in an unmanaged index is not possible.
In addition, the performance of multiple indices compiled and
maintained by statistical research firms, such as Salomon Brothers and Lehman
Brothers may be combined to create a blended performance result for comparative
performances. Generally, the indices selected will be representative of the
types of securities in which the Funds may invest and the assumptions that were
used in calculating the blended performance will be described.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides
historical returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the Consumer Price Index), and combinations
of various capital markets. The performance of these capital markets is based on
the returns of different indices. The Funds may use the performance of these
capital markets in order to demonstrate general risk-versus-reward investment
scenarios. Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to those
of a Fund. A Fund may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
-32-
<PAGE>
The Funds may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that describe
general principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting, questionnaires designed to help create a personal
financial profile, worksheets used to project savings needs based on assumed
rates of inflation and hypothetical rates of return and action plans offering
investment alternatives), investment management techniques, policies or
investment suitability of a Fund (such as value investing, market timing, dollar
cost averaging, asset allocation, constant ratio transfer, automatic account
rebalancing, the advantages and disadvantages of investing in tax-deferred and
taxable investments), economic and political conditions, the relationship
between sectors of the economy and the economy as a whole, the effects of
inflation and historical performance of various asset classes, including but not
limited to, stocks, bonds and Treasury bills. From time to time advertisements,
sales literature, communications to shareholders or other materials may
summarize the substance of information contained in shareholder reports
(including the investment composition of a Fund), as well as the views as to
current market, economic, trade and interest rate trends, legislative,
regulatory and monetary developments, investment strategies and related matters
believed to be of relevance to a Fund. In addition, selected indices may be used
to illustrate historic performance of selected asset classes. The Funds may also
include in advertisements, sales literature, communications to shareholders or
other materials, charts, graphs or drawings which illustrate the potential risks
and rewards of investment in various investment vehicles, including but not
limited to, stocks, bonds, treasury bills and shares of a Fund. In addition,
advertisements, sales literature, communications to shareholders or other
materials may include a discussion of certain attributes or benefits to be
derived by an investment in a Fund and/or other mutual funds, shareholder
profiles and hypothetical investor scenarios, timely information on financial
management, tax and retirement planning (such as information on Roth IRAs and
Education IRAs) and investment alternative to certificates of deposit and other
financial instruments. Such sales literature, communications to shareholders or
other materials may include symbols, headlines or other material which highlight
or summarize the information discussed in more detail therein.
Materials may refer to the CUSIP numbers of the Funds and may
illustrate how to find the listings of the Funds in newspapers and periodicals.
Materials may also include discussions of other funds, products, and services.
The Funds may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Funds may compare these measures to
those of other funds. Measures of volatility seek to compare the historical
share price fluctuations or total returns to those of a benchmark. Measures of
benchmark correlation indicate how valid a comparative benchmark may be.
Measures of volatility and correlation may be calculated using averages of
historical data. A Fund may advertise its current interest rate sensitivity,
duration, weighted average maturity or similar maturity characteristics.
Advertisements and sales materials relating to a Fund may include information
regarding the background and experience of its portfolio managers.
The following tables are examples, for purposes of illustration only,
of cumulative total return performance for each Class of each Fund through
November 30, 1999. Pursuant to applicable regulation, total return shown for the
Institutional Classes of Delaware Decatur Equity Income Fund and Delaware Growth
and Income Fund for the periods prior to the commencement of operations of such
Classes is calculated by taking the performance of the respective 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 by Delaware Growth and Income Fund A Class, and performance for
Delaware Growth and Income Fund Institutional Class would have been affected had
such an adjustment been made. For these purposes, the calculations assume the
reinvestment of any realized securities profits distributions and income
dividends paid during the indicated periods, but does not reflect any income
taxes payable by shareholders on the reinvested distributions. The performance
of Class A Shares reflects the maximum front-end sales charge of 5.75% paid on
the purchases of shares but may also be shown without reflecting the impact of
any front-end sales charge.
-33-
<PAGE>
The performance of Class B Shares and Class C Shares is calculated both with the
applicable CDSC included and excluded. Past performance is no guarantee of
future results.
<TABLE>
<CAPTION>
Cumulative Total Return
Delaware Decatur Equity Income Fund
- ----------------------------------------------------------------------------------------------------------------------------
Class A Class B Class B Class C Class C
(At Offer) Class A Institutional (Including (Excluding (Including (Excluding
(1)(2) (At NAV)(2) Class CDSC)(3) CDSC) CDSC) CDSC)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3 months ended
11/30/99 (8.98%) (3.46%) (3.42%) (8.48%) (3.68%) (4.62%) (3.66%)
- ----------------------------------------------------------------------------------------------------------------------------
6 months ended
11/30/99 (11.48%) (6.08%) (5.95%) (11.09%) (6.45%) (7.39%) (6.47%)
- ----------------------------------------------------------------------------------------------------------------------------
9 months ended
11/30/99 (7.53%) (1.89%) (1.72%) (7.26%) (2.45%) (3.40%) (2.43%)
- ----------------------------------------------------------------------------------------------------------------------------
1 year ended
11/30/99 (8.12%) (2.50%) (2.27%) (7.29%) (3.27%) (4.06%) (3.25%)
- ----------------------------------------------------------------------------------------------------------------------------
3 years ended
11/30/99 28.47% 36.30% 37.15% 30.59% 33.01% 33.06% 33.06%
- ----------------------------------------------------------------------------------------------------------------------------
5 years ended
11/30/99 109.50% 122.28% 124.19% N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------
10 years ended
11/30/99 180.74% 197.82% 200.78% N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------
15 years ended
11/30/99 556.37% 596.43% 603.27% N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------
Life of Fund(4) 12,867.60% 13,661.38% 13,796.83% 100.93% 101.93% 64.15% 64.15%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Effective November 2, 1998, the maximum front-end sales charge is 5.75%. The
above performance numbers are calculated using 5.75% as the applicable sales
charge for all time periods.
(2) Performance figures reflect the applicable Rule 12b-1 distribution expenses
that apply on and after May 2, 1994.
(3) Effective November 2, 1998, the CDSC schedule for Class B Shares increased
as follows: (i) 5% if shares are redeemed within one year of purchase (ii)
4% if shares are redeemed with two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if
shares are redeemed during the fifth year following purchase; (v) 1% if
shares are redeemed during the sixth year following purchase; and (v) 0%
thereafter. The above figures have been calculated using this new schedule.
(4) Date of initial public offering of Delaware Decatur Equity Income Fund A
Class was March 18, 1957; Delaware Decatur Equity Income Fund Institutional
Class was January 13, 1994, Delaware Decatur Equity Income Fund B Class was
September 6, 1994; Delaware Decatur Equity Income Fund C Class was November
29, 1995.
-34-
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return
Delaware Growth and Income Fund
- ----------------------------------------------------------------------------------------------------------------------------
Class B Class B Class C Class C
Class A Class A Institutional (Including (Excluding (Including (Excluding
(At Offer)(1) (At NAV) Class CDSC)(2) CDSC) CDSC) CDSC)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3 months ended (8.94%) (3.36%) (3.29%) (8.36%) (3.55%) (4.51%) (3.55%)
11/30/99
- ----------------------------------------------------------------------------------------------------------------------------
6 months ended (11.44%) (6.02%) (5.85%) (11.04%) (6.37%) (7.32%) (6.38%)
11/30/99
- ----------------------------------------------------------------------------------------------------------------------------
9 months ended (6.92%) (1.23%) (0.94%) (6.65%) (1.76%) (2.74%) (1.76%)
11/30/99
- ----------------------------------------------------------------------------------------------------------------------------
1 year ended (7.65%) (2.00%) (1.68%) (6.99%) (2.72%) (3.57%) (2.71%)
11/30/99
- ----------------------------------------------------------------------------------------------------------------------------
3 years ended 30.46%% 38.43% 39.69% 32.70% 35.50% 35.59% 35.59%
11/30/99
- ----------------------------------------------------------------------------------------------------------------------------
5 years ended 119.48% 132.85% 136.40% 122.81% 124.81% N/A N/A
11/30/99
- ----------------------------------------------------------------------------------------------------------------------------
10 years ended 204.94% 223.48% 229.67% N/A N/A N/A N/A
11/30/98
- ----------------------------------------------------------------------------------------------------------------------------
381.72% 411.03% 420.79% 111.73% 112.73% 68.18% 68.18%
Life of Fund(3)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Effective November 2, 1998, the maximum front-end sales charge is 5.75%. The
above performance numbers are calculated using 5.75% as the applicable sales
charge for all time periods.
(2) Effective November 2, 1998, the CDSC schedule for Class B Shares increased
as follows: (i) 5% if shares are redeemed within one year of purchase (ii)
4% if shares are redeemed with two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if
shares are redeemed during the fifth year following purchase; (v) 1% if
shares are redeemed during the sixth year following purchase; and (v) 0%
thereafter. The above figures have been calculated using this new schedule.
(2) Date of initial public offering of Delaware Growth and Income Fund A Class
was August 27, 1986; Delaware Growth and Income Fund Institutional Class was
July 26, 1993; Delaware Growth and Income Fund B Class was September 6,
1994; Delaware Growth and Income Fund C Class was November 29, 1995.
-35-
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return
Delaware Blue Chip Fund (1)
- ----------------------------------------------------------------------------------------------------------------------------
Class B Class B Class C Class C
Class A Class A Institutional (Including (Excluding (Including (Excluding
(At Offer)(2) (At NAV) Class CDSC)(3) CDSC) CDSC) CDSC)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3 months ended
11/30/99 -1.70% 4.26% 4.42% -0.86% 4.14% 3.14% 4.14%
- ----------------------------------------------------------------------------------------------------------------------------
6 months ended
11/30/99 0.24% 6.35% 6.51% 0.98% 5.98% 4.98% 5.98%
- ----------------------------------------------------------------------------------------------------------------------------
9 months ended
11/30/99 3.08% 9.37% 9.71% 3.92% 8.92% 7.82% 8.82%
- ----------------------------------------------------------------------------------------------------------------------------
1 year ended
11/30/99 9.61% 16.30% 16.70% 10.63% 15.63% 14.63% 15.63%
- ----------------------------------------------------------------------------------------------------------------------------
Life of Fund(4) 42.17% 50.87% 52.19% 45.15% 48.15% 48.15% 48.15%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects voluntary fee waivers and expense payments. In the absence of the
voluntary fee waiver and payment of expenses, performance would have been
affected negatively. See Investment Management Agreement and Sub-Advisory
Agreements for information about fee waivers and expense payments.
(2) Effective November 2, 1998, the maximum front-end sales charge is 5.75%. The
above performance numbers are calculated using 5.75% as the applicable sales
charge for all time periods.
(3) Effective November 2, 1998, the CDSC schedule for Class B Shares increased
as follows: (i) 5% if shares are redeemed within one year of purchase (ii)
4% if shares are redeemed with two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if
shares are redeemed during the fifth year following purchase; (v) 1% if
shares are redeemed during the sixth year following purchase; and (v) 0%
thereafter. The above figures have been calculated using this new schedule.
(4) Each Class commenced operations on February 24, 1997.
-36-
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return
Delaware Social Awareness Fund (1)
- ----------------------------------------------------------------------------------------------------------------------------
Class A Class B Class B Class C Class C
(At Offer) Class A Institutional (Including (Excluding (Including (Excluding
(2)(3) (At NAV)(3) Class CDSC)(4) CDSC) CDSC) CDSC)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3 months
ended 11/30/99 0.31% 6.47% 6.51% 1.26% 6.26% 5.26% 6.26%
- ----------------------------------------------------------------------------------------------------------------------------
6 months
ended 11/30/99 0.15% 6.29% 6.34% 0.90% 5.90% 4.81% 5.81%
- ----------------------------------------------------------------------------------------------------------------------------
9 months
ended 11/30/99 2.20% 8.42% 8.54% 2.78% 7.78% 6.78% 7.78%
- ----------------------------------------------------------------------------------------------------------------------------
1 year
ended 11/30/99 8.78% 15.44% 15.74% 9.57% 14.57% 13.57% 14.57%
- ----------------------------------------------------------------------------------------------------------------------------
Life of
Fund(5) 44.8% 53.65% 54.60% 47.47% 50.47% 50.47% 50.47%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects voluntary fee waivers and expense payments. In the absence of the
voluntary fee waiver and payment of expenses, performance would have been
affected negatively. See Investment Management Agreements and Sub-Advisory
Agreements for information about fee waivers and expense payments.
(2) Effective November 2, 1998, the maximum front-end sales charge is 5.75%. The
above performance numbers are calculated using 5.75% as the applicable sales
charge for all time periods.
(3) Reflects voluntary 12b-1 fee waivers to limit 12b-1 expenses to 0.25% of
average daily net assets. In the absence of the voluntary fee waiver,
performance would have been affected negatively.
(4) Effective November 2, 1998, the CDSC schedule for Class B Shares increased
as follows: (i) 5% if shares are redeemed within one year of purchase (ii)
4% if shares are redeemed with two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if
shares are redeemed during the fifth year following purchase; (v) 1% if
shares are redeemed during the sixth year following purchase; and (v) 0%
thereafter. The above figures have been calculated using this new schedule.
(5) Each Class commenced operations on February 24, 1997.
Cumulative Total Return
Delaware Diversified Value Fund (1)
----------------------------------------------
3 months ended 11/30/99 2.49%
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6 months ended 11/30/99 0.85%
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9 months ended 11/30/99 10.78%
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1 year ended 11/30/99 13.05%
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Life of Fund(1) 21.67%
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(1) Commenced operations on September 15, 1998.
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Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Funds and other mutual funds available from
the Delaware Investments family will provide general information about
investment alternatives and scenarios that will allow investors to assess their
personal goals. This information will include general material about investing
as well as materials reinforcing various industry-accepted principles of prudent
and responsible personal financial planning. One typical way of addressing these
issues is to compare an individual's goals and the length of time the individual
has to attain these goals to his or her risk threshold. In addition, the
Distributor will provide information that discusses the Manager's overriding
investment philosophy and how that philosophy impacts the investment disciplines
employed in seeking the objectives of the Funds and the other funds in the
Delaware Investments family. The Distributor may also from time to time cite
general or specific information about the institutional clients of an affiliate
of the Manager, including the number of such clients serviced by the affiliate.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly--as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember.
Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. Investors also should consider their financial ability
to continue to purchase shares during periods of high fund share prices.
Delaware Investments 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 Direct Deposit Purchase Plan,
Automatic Investing Plan and Wealth Builder Option under Purchasing Shares -
Investing by Electronic Fund Transfer for a complete description of these
services, including restrictions or limitations.
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The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share of a stock or bond fund over a
period of time will be lower than the average price per share of a Fund 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 or any stock or bond fund in the
Delaware Investments family.
Dollar-cost averaging can be appropriate for investments in shares of
funds that tend to fluctuate in value. Please obtain the prospectus of any fund
in the Delaware Investments family in which you plan to invest through a
dollar-cost averaging program. The prospectus contains additional information,
including charges and expenses. Please read it carefully before you invest or
send money.
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. Each Fund may include illustrations showing the power
of compounding in advertisements and other types of literature.
TRADING PRACTICES AND BROKERAGE
Equity Funds II selects brokers or dealers to execute transactions on
behalf of a Fund 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 execution. Best 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. Some trades are made on a net basis where a Fund
either buys securities directly from the dealer or sells them to the dealer. In
these instances, there is no direct commission charged but there is a spread
(the difference between the buy and sell price) which is the equivalent of a
commission. When a commission is paid, the Fund involved pays reasonably
competitive brokerage commission rates based upon the professional knowledge of
the Manager's trading department as to rates paid and charged for similar
transactions throughout the securities industry. In some instances, the Fund
pays a minimal share transaction cost when the transaction presents no
difficulty. A number of trades are made on a net basis where the Funds either
buy the securities directly from the dealer or sell them to the dealer. In these
instances, there is no direct commission charged but there is a spread (the
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difference between the buy and sell price) which is the equivalent of a
commission.
During the fiscal years ended November 30, 1997, 1998 and 1999, the
aggregate dollar amounts of brokerage commissions paid by Decatur Equity Income
Fund were $3,714,766, $4,579,028 and $4,401,519, respectively. During the same
periods, the aggregate dollar amounts of brokerage commissions paid by Delaware
Growth and Income Fund were $1,634,268, $2,533,774 and $21,674,133,
respectively. For the period February 24, 1997 (commencement of operations)
through November 30, 1997 and the fiscal years ended November 30, 1998 and 1999,
the aggregate dollar amounts of brokerage commissions paid by Delaware Blue Chip
Fund were $4,339, $10,866 and $17,345, respectively. During the same periods,
the aggregate dollar amounts of brokerage commissions paid by Delaware Social
Awareness Fund were $14,989, $79,518 and $57,760,000 respectively. For the
period September 15, 1998 (commencement of operations) through November 30, 1998
and the fiscal year ended November 30, 1999, the aggregate dollar amounts of
brokerage commissions paid by Delaware Diversified Value Fund were $5,090 and
$5,772 respectively.
The Manager may allocate out of all commission business generated by
all of the funds and accounts under its management, brokerage business to
brokers or dealers who provide brokerage and research services. These services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends; assisting in
determining portfolio strategy; providing computer software and hardware used in
security analyses; and providing portfolio performance evaluation and technical
market analyses. Such services are used by the Manager in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used, or used exclusively, with respect
to the fund or account generating the brokerage.
During the fiscal year ended November 30, 1999, portfolio transactions
of Delaware Decatur Equity Income Fund, Delaware Growth and Income Fund,
Delaware Blue Chip Fund and Delaware Social Awareness Fund and in the amounts of
$1,213,296,579, $743,476,475, $23,524,709 $60,068,143, respectively, resulting
in brokerage commissions of $1,445,049, $826,684, $17,227, $57,234 respectively,
were directed to brokers for brokerage and research services provided.
As provided in the Securities Exchange Act of 1934 (the "1934 Act")
and each 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 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 a Fund and to other funds in the Delaware
Investments family. Subject to best execution, commissions allocated to brokers
providing such pricing services may or may not be generated by the funds
receiving the pricing service.
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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 execution. Transactions involving commingled orders are allocated in a
manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager and Equity Funds
II's Board of Trustees that the advantages of combined orders outweigh the
possible disadvantages of separate transactions.
Consistent with the Conduct Rules of NASD Regulation, Inc. (the
"NASD"), and subject to seeking best execution, the Funds may place orders with
broker/dealers that have agreed to defray certain expenses of the funds in the
Delaware Investments family, such as custodian fees, and may, at the request of
the Distributor, give consideration to sales of shares of funds in the Delaware
Investments family 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 a
Fund's objective in relation to anticipated movements in the general level of
interest rates. The Funds are 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. The Funds 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 a Fund's
investment objective.
The degree of portfolio activity may affect brokerage costs of a Fund
and taxes payable by a Fund's shareholders to the extent of any net realized
capital gains. Each Fund's portfolio turnover rate is not expected to exceed
100%; however, under certain market conditions a Fund may experience a rate of
portfolio turnover which could exceed 100%. Each Fund's portfolio turnover rate
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 such Fund during the particular fiscal year,
exclusive of securities whose maturities at the time of acquisition are one year
or less. 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.
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For the past two fiscal years, portfolio turnover rates were as
follows:
------------------------------------------------------------------------
1999 1998
------------------------------------------------------------------------
Delaware Decatur Equity Income Fund 92% 94%
------------------------------------------------------------------------
Delaware Growth and Income Fund 94% 87%
------------------------------------------------------------------------
Delaware Blue Chip Fund 11% 27%
------------------------------------------------------------------------
Delaware Social Awareness Fund 28% 22%
------------------------------------------------------------------------
Delaware Diversified Value Fund(1) 111% 74%(2)
------------------------------------------------------------------------
(1) Delaware Diversified Value Fund commenced operations on September 15, 1998.
(2) Annualized
Each Fund may hold securities for any period of time. A Fund's
portfolio turnover will be increased if the Fund writes a large number of call
options which are subsequently exercised. The portfolio 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.
PURCHASING SHARES
The Distributor serves as the national distributor for each Fund's
shares 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 Equity Funds II or the Distributor.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of such Classes
generally must be at least $100. The initial and subsequent investment minimums
for Class A Shares will be waived for purchases by officers, trustees and
employees of any Delaware Investments 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 Investments 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. Equity Funds II 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. In doing so, an investor should keep in mind, however,
that reduced front-end sales charges apply to investments of $50,000 or more in
Class A Shares, and that Class A Shares are subject to lower annual 12b-1 Plan
expenses than Class B Shares and Class C Shares and generally are not subject to
a CDSC.
Selling dealers are responsible for transmitting orders promptly.
Equity Funds II reserves the right to reject any order for the purchase of its
shares of either Fund if in the opinion of management such rejection is in such
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Fund's best interest. If a purchase is canceled because your check is returned
unpaid, you are responsible for any loss incurred. A 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 Investments family.
Each 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.
Each Fund also reserves the right, following shareholder notification,
to charge a service fee on non-retirement accounts that, as a result of
redemption, have remained below the minimum stated account balance for a period
of three or more consecutive months. Holders of such accounts may be notified of
their insufficient account balance and advised that they have until the end of
the current calendar quarter to raise their balance to the stated minimum. If
the account has not reached the minimum balance requirement by that time, the
Fund will charge a $9 fee for that quarter and each subsequent calendar quarter
until the account is brought up to the minimum balance. The service fee will be
deducted from the account during the first week of each calendar quarter for the
previous quarter, and will be used to help defray the cost of maintaining
low-balance accounts. No fees will be charged without proper notice, and no CDSC
will apply to such assessments.
Each 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.
The NASD has adopted amendments to its Conduct Rules, as amended,
relating to investment company sales charges. Equity Funds II and the
Distributor intend to operate in compliance with these rules.
Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 5.75%; however, lower front-end sales charges
apply for larger purchases. See the table in the Fund Classes' Prospectuses.
Class A Shares are also subject to annual 12b-1 Plan expenses for the life of
the investment.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 5% if shares are redeemed within one year of purchase; (ii) 4% if
shares are redeemed within two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if shares
are redeemed during the fifth year following purchase; and (v) 1% if shares are
redeemed during the sixth year following purchase. Class B Shares are also
subject to annual 12b-1 Plan expenses which are higher than those to which Class
A Shares are subject and are assessed against Class B Shares for approximately
eight years after purchase. See Automatic Conversion of Class B Shares, below.
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 Plans Under Rule 12b-1 for the Fund Classes under
Purchasing Shares, and Determining Offering Price and Net Asset Value 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 Class A,
Class B and Class C Shares, of any expenses under that Fund's 12b-1 Plans.
The Distributor has voluntarily elected to waive the payment of 12b-1
Plan expenses by Diversified Value Fund from the commencement of public offering
through July 31, 2000.
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The Distributor has elected voluntarily to waive its right to receive
12b-1 Plan Expenses with respect to Class A Shares of Social Awareness Fund to
the extent necessary to ensure 12b-1 Plan Expenses for such Class do not exceed
0.25% of average daily net assets for the period February 1, 1998 through July
31, 2000.
Certificates representing shares purchased are not ordinarily issued
unless, in the case of Class A Shares or Institutional Class shares, a
shareholder submits a specific request. Certificates are not issued in the case
of Class B Shares or Class C Shares or in the case of any retirement plan
account including self-directed IRAs. However, purchases not involving the
issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing full
share denominations purchased by sending a letter signed by each owner of the
account to the Transfer Agent requesting the certificate. No charge is assessed
by Equity Funds II for any certificate issued. A shareholder may be subject to
fees for replacement of a lost or stolen certificate, under certain conditions,
including the cost of obtaining a bond covering the lost or stolen certificate.
Please contact a Fund for further information. Investors who hold certificates
representing any of their shares may only redeem those shares by written
request. The investor's certificate(s) must accompany such request.
Alternative Purchase Arrangements - Class A, B and C Shares
The alternative purchase arrangements of Class A Shares, Class B
Shares and Class C Shares permit investors to choose the method of purchasing
shares that is most suitable for their needs given the amount of their purchase,
the length of time they expect to hold their shares and other relevant
circumstances. Investors should determine whether, given their particular
circumstances, it is more advantageous to purchase Class A Shares and incur a
front-end sales charge and annual 12b-1 Plan expenses of up to a maximum of
0.30% of the average daily net assets of Class A Shares, or to purchase either
Class B or Class C Shares and have the entire initial purchase amount invested
in the Fund with the investment thereafter subject to a CDSC and annual 12b-1
Plan expenses. Class B Shares are subject to a CDSC if the shares are redeemed
within six years of purchase, and Class C Shares are subject to a CDSC if the
shares are redeemed within 12 months of purchase. Class B and Class C Shares are
each subject to annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of
which are service fees to be paid to the Distributor, dealers or others for
providing personal service and/or maintaining shareholder accounts) of average
daily net assets of the respective Class. Class B Shares will automatically
convert to Class A Shares at the end of approximately eight years after purchase
and, thereafter, be subject to annual 12b-1 Plan expenses of up to a maximum of
0.30% of average daily net assets of such shares. Unlike Class B Shares, Class C
Shares do not convert to another Class.
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. In addition, the effect of any return earned on such additional money
will diminish over time. In comparing Class B Shares to Class C Shares,
investors should also consider the duration of the annual 12b-1 Plan expenses to
which each of the classes is subject and the desirability of an automatic
conversion feature, which is available only for Class B Shares.
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For the distribution and related services provided to, and the
expenses borne on behalf of, the Funds, the Distributor and others will be paid,
in the case of Class A Shares, from the proceeds of the front-end sales charge
and 12b-1 Plan fees and, in the case of Class B Shares and Class C Shares, from
the proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Financial advisers may receive different compensation for selling
Class A Shares, Class B Shares 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 Plans Under Rule 12b-1 for the Fund Classes.
Dividends, if any, paid on Class A Shares, Class B Shares, Class
C Shares and Institutional Class Shares will be calculated in the same manner,
at the same time and on the same day and will be in the same amount, except that
the amounts of 12b-1 Plan expenses relating to Class A Shares, Class B
Shares and Class C Shares will be borne exclusively by such shares. See
Determining Offering Price and Net Asset Value.
Class A Shares
Purchases of $50,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the table in the Fund Classes'
Prospectuses, 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.
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.
In addition, certain dealers who enter into an agreement to provide extra
training and information on Delaware Investments products and services and who
increase sales of Delaware Investments funds may receive an additional
commission of up to 0.15% of the offering price in connection with sales of
Class A Shares. Such dealers must meet certain requirements in terms of
organization and distribution capabilities and their ability to increase sales.
The Distributor should be contacted for further information on these
requirements as well as the basis and circumstances upon which the additional
commission will be paid. Participating dealers may be deemed to have additional
responsibilities under the securities laws. Dealers who receive 90% or more of
the sales charge may be deemed to be underwriters under the 1933 Act.
Dealer's Commission
As described in the Prospectuses, 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.
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other Delaware Investments
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) 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.
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An exchange from other Delaware Investments funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares and Class C Shares are purchased without a front-end
sales charge. Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth above, 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. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of Class B Shares or Class C
Shares of a Fund, even if those shares are later exchanged for shares of another
Delaware Investments 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. See Waiver of Contingent
Deferred Sales Charge--Class B Shares and Class C Shares under Redemption and
Exchange for the Fund Classes for a list of the instances in which the CDSC is
waived.
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 Share,s below. Such conversion
will constitute a tax-free exchange for federal income tax purposes. Investors
are reminded that the Class A Shares into which Class B Shares will convert are
subject to ongoing annual 12b-1 Plan expenses of up to a maximum of 0.30% of
average daily net assets of such shares.
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
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 compensates
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 5% of the dollar amount purchased.
In addition, from time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which the
Distributor may pay additional compensation to dealers or brokers for selling
Class B Shares at the time of purchase. As discussed below, however, Class B
Shares are subject to annual 12b-1 Plan expenses and, if redeemed within six
years of purchase, a CDSC.
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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 a 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 Class B Shares
described in this Part B, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for 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 18th day or next
business day 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, the Delaware Cash Reserve Fund 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.
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 full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently compensates
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, 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.
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<PAGE>
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class C Shares as
described in this Part B. See Redemption and Exchange.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Equity Funds II 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 of shares to which the Plan applies. The Plans do
not apply to 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 Institutional Classes. Shareholders of
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 Shares and Class C Shares are also used to pay the
Distributor for advancing the commission costs to dealers with respect to the
initial sale of such shares.
In addition, each Fund may make payments out of the assets of Class A
Shares, Class B Shares and Class C Shares directly to other unaffiliated
parties, such as banks, who either aid in the distribution of shares of, or
provide services to, such classes.
The maximum aggregate fee payable by a Fund under its Plans, and a
Fund's Distribution Agreements, is on an annual basis, up to 0.30% of average
daily net assets for the year of Class A Shares, and up to 1% (0.25% of which
are service fees to be paid to the Distributor, dealers and others for providing
personal service and/or maintaining shareholder accounts) of each of the Class B
Shares' and the Class C Shares' average daily net assets for the year.
Although the maximum fee payable under the 12b-1 Plan relating to
Delaware Decatur Equity Income Fund A Class is 0.30% of average daily net assets
of such class, the Board of Trustees has determined that the annual fee, payable
on a monthly basis, under the Plan relating to Delaware Decatur Equity Income
Fund A Class, will be equal to the sum of: (i) the amount obtained by
multiplying 0.30% by the average daily net assets represented by Delaware
Decatur Equity Income Fund A Class shares that were or are acquired by
shareholders on or after May 2, 1994, and (ii) the amount obtained by
multiplying 0.10% by the average daily net assets represented by Delaware
Decatur Equity Income Fund A Class shares that were acquired before May 2, 1994.
While this is the method to be used to calculate the 12b-1 fees to be paid by
Delaware Decatur Equity Income Fund A Class under its Plan, the fee is a Class A
Shares' expense so that all shareholders of Delaware Decatur Equity Income Fund
A Class, regardless of when they purchased their shares, will bear 12b-1
expenses at the same rate. As Class A Shares are sold on or after May 2, 1994,
the initial rate of at least 0.10% will increase over time. Thus as the
proportion of Delaware Decatur Equity Income Fund A Class shares purchased on or
after May 2, 1994 to outstanding Class A Shares of Delaware Decatur Equity
Income Fund increases, the expenses attributable to payments under the Plan will
also increase (but will not exceed 0.30% of average daily net assets). While
this describes the current basis for calculating the fees which will be payable
under Delaware
-48-
<PAGE>
under Delaware Decatur Equity Income Fund A Class' Plan, such Plan permits a
full 0.30% on each Fund's Class A Shares' assets to be paid at any time
following appropriate Board approval. The Distributor has elected voluntarily to
waive its right to receive 12b-1 Plan Expenses with respect to Class A Shares of
Delaware Social Awareness Fund to the extent necessary to ensure 12b-1 Plan
Expenses for such Class do not exceed 0.25% of average daily net assets for the
period February 1, 1998 through July 31, 2000. The Distributor has elected
voluntarily to waive all payments under the 12b-1 Plan for Class A Shares, Class
B Shares and Class C Shares of the Delaware Diversified Value Fund during the
commencement of the public offering of the Fund through July 31, 2000.
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 Shares, Class B Shares and Class C Shares would be borne by such persons
without any reimbursement from such Fund Classes. Subject to seeking best
execution, a Fund may, from time to time, buy or sell portfolio securities from
or to firms which receive payments under the Plans.
From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans and the Distribution Agreements, as amended, have all been
approved by the Board of Trustees of Equity Funds II, including a majority of
the trustees who are not "interested persons" (as defined in the 1940 Act) of
Equity Funds II 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
Agreements, as amended, must be approved annually by the Board of Trustees in
the same manner as specified above.
Each year, the trustees 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 of the respective Funds 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 Agreements, as amended, may be
terminated with respect to a Class at any time without penalty by a majority of
those trustees 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 trustees who are not
"interested persons." With respect to each 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 that Fund's B Class. Also, any
other material amendment to the Plans must be approved by a majority vote of the
trustees including a majority of the noninterested trustees of Equity Funds II
having no interest in the Plans. In addition, in order for the Plans to remain
effective, the selection and nomination of trustees who are not "interested
persons" of Equity Funds II must be effected by the trustees 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 Trustees for their review.
-49-
<PAGE>
For the fiscal year ended November 30, 1999, payments from Delaware
Decatur Equity Income Fund A Class, Delaware Decatur Equity Income Fund B Class
and Decatur Equity Income Fund C Class amounted to $4,229,363, $1,697,438 and
$228,318, respectively. Such amounts were used for the following purposes:
<TABLE>
<CAPTION>
Delaware Delaware Delaware
Decatur Equity Decatur Equity Decatur Equity
Income Income Income
Fund A Class Fund B Class Fund C Class
------------ ------------ ------------
<S> <C> <C> <C>
Advertising $15,381 ---- ----
Annual/Semi-Annual Reports $143,542 ---- ----
Broker Trails $3,267,590 $426,062 $126,602
Broker Sales Charges ---- $765,123 $73,535
Dealer Service Expenses ---- ---- ----
Interest on Broker Sales Charges ---- $420,131 $1,803
Commissions to Wholesalers $283,442 $77,064 $16,775
Promotional-Broker Meetings $56,357 $5,154 $699
Promotional-Other $234,601 ---- ----
Prospectus Printing $128,107 ---- ----
Telephone ---- ---- ----
Wholesaler Expenses $100,343 $3,904 $8,904
Other ---- ---- ----
</TABLE>
For the fiscal year ended November 30, 1999, payments from Delaware
Growth and Income Fund A Class, Delaware Growth and Income Fund B Class and
Delaware Growth and Income Fund C Class amounted to $2,942,266, $2,266,969 and
$497,213, respectively. Such amounts were used for the following purposes:
<TABLE>
<CAPTION>
Delaware Delaware Delaware
Growth and Income Growth and Income Growth and Income
Fund A Class Fund B Class Fund C Class
------------ ------------ ------------
<S> <C> <C> <C>
Advertising $8,024 ---- ----
Annual/Semi-Annual Reports $46,776 ---- ----
Broker Trails $2,358,010 $565,225 $255,354
Broker Sales Charges ---- $1,005,996 $192,711
Dealer Service Expenses ---- ---- ----
Interest on Broker Sales Charges ---- $580,882 $4,331
Commissions to Wholesalers $308,840 $114,860 $40,580
Promotional-Broker Meetings $6,615 ---- $1,429
Promotional-Other $126,742 ---- ----
Prospectus Printing $33,715 ---- ----
Telephone ---- ---- ----
Wholesaler Expenses $26,544 ---- $2,808
Other ---- ---- ----
</TABLE>
-50-
<PAGE>
For the fiscal year ended November 30, 1999, payments from Delaware
Blue Chip Fund A Class, Delaware Blue Chip Fund B Class and Delaware Blue Chip
Fund C Class amounted to $32,582, $106,589 and $17,363, respectively. Such
amounts were used for the following purposes:
<TABLE>
<CAPTION>
Delaware Delaware Delaware
Blue Chip Blue Chip Blue Chip
Fund A Class Fund B Class Fund C Class
------------ ------------ ------------
<S> <C> <C> <C>
Advertising ---- ---- ----
Annual/Semi-Annual Reports ---- ---- ----
Broker Trails $26,796 $26,532 $6,697
Broker Sales Charges ---- $44,926 $9,610
Dealer Service Expenses ---- ---- ----
Interest on Broker Sales Charges ---- $29,838 $301
Commissions to Wholesalers $5,786 $5,293 $755
Promotional-Broker Meetings ---- ---- ----
Promotional-Other ---- ---- ----
Prospectus Printing ---- ---- ----
Telephone ---- ---- ----
Wholesaler Expenses ---- ---- ----
Other ---- ---- ----
</TABLE>
For the fiscal year ended November 30, 1999, payments from Delaware
Social Awareness Fund A Class, Delaware Social Awareness Fund B Class and
Delaware Social Awareness Fund C Class amounted to $113,877, $383,899 and
$97,642, respectively. Such amounts were used for the following purposes:
<TABLE>
<CAPTION>
Delaware Delaware Delaware
Social Awareness Social Awareness Social Awareness
Fund A Class Fund B Class Fund C Class
------------ ------------ ------------
<S> <C> <C> <C>
Advertising ---- ---- ----
Annual/Semi-Annual Reports ---- ---- ----
Broker Trails $113,484 $93,656 $40,822
Broker Sales Charges ---- $143,215 $29,536
Dealer Service Expenses ---- ---- ----
Interest on Broker Sales Charges ---- $128,762 $2,395
Commissions to Wholesalers $393 $18,266 $4,889
Promotional-Broker Meetings ---- ---- ---
Promotional-Other ---- ---- ----
Prospectus Printing ---- ---- ----
Telephone ---- ---- ----
Wholesaler Expenses ---- ---- ----
Other ---- ---- ----
</TABLE>
-51-
<PAGE>
Other Payments to Dealers - Class A Shares, Class B Shares and Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Investments family of funds. In some instances, these
incentives or payments may be offered only to certain dealers who maintain, have
sold or may sell certain amounts of shares. The Distributor may also pay a
portion of the expense of preapproved dealer advertisements promoting the sale
of Delaware Investments fund shares.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under the
Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment Privilege.
Purchases of Class A Shares may be made at net asset value by current
and former officers, trustees and employees (and members of their families) of
the Manager, any affiliate, any of the funds in the Delaware Investments family,
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. Class A
Shares may also be purchased at net asset value by current and former officers,
trustees and employees (and members of their families) of the Dougherty
Financial Group LLC.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net 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 funds in the
Delaware Investments family. Officers, trustees 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. Investors may be charged a fee when effecting transactions in Class A
Shares through a broker or agent that offers these special investment products.
Purchases of Class A Shares of each Fund except Delaware Social
Awareness Fund at net asset value may also be made by the following: financial
institutions investing for the account of their trust customers if they are not
eligible to purchase shares of the Institutional Class of a Fund; any group
retirement plan (excluding defined benefit pension plans), or such plans of the
same employer, for which plan participant records are maintained on the
Retirement Financial Services, Inc. (formerly known as Delaware Investment &
Retirement Services, Inc.) proprietary record keeping system that (i) has in
excess of $500,000 of plan assets invested in Class A Shares of funds in the
Delaware Investments family and any stable value account available to investment
advisory clients of the Manager or its affiliates; or (ii) is sponsored by an
employer that has at any point after May 1, 1997 had more than 100 employees
while such plan has held Class A Shares of a fund in the Delaware Investments
family and such employer has properly represented to, and received written
confirmation back from, Retirement Financial Services, Inc. in writing that it
has the requisite number of employees. See Group Investment Plans for
information regarding the applicability of the Limited CDSC.
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<PAGE>
Purchases of Class A Shares of Social Awareness Fund at net asset value
may also be made by the following: financial institutions investing for the
account of their trust customers when they are not eligible to purchase shares
of the Institutional Class of the Fund; and any group retirement plan (excluding
defined benefit pension plans), or such plans of the same employer, that (i) has
in excess of $500,000 of plan assets invested in Class A Shares of funds in the
Delaware Investments family and any stable value product available through
Delaware Investments, or (ii) is sponsored by an employer that has at any point
after May 1, 1997 more than 100 employees while such plan has held Class A
Shares of a Delaware Investments fund and such employer has properly represented
to Retirement Financial Services, Inc. in writing that it has the requisite
number of employees and has received written confirmation back from Retirement
Financial Services, Inc. See Group Investment Plans for information regarding
the applicability of the Limited CDSC.
Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase Institutional
Class Shares or purchase interests in a collective trust as a result of a change
in distribution arrangements.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a fund account
in connection with loans originated from accounts previously maintained by
another investment firm will also be invested at net asset value.
Equity Funds II must be notified in advance that the trade qualifies for
purchase at net asset value.
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 Investments funds ("eligible Delaware Investments
fund shares"), as well as shares of designated classes of non-Delaware
Investments funds ("eligible non-Delaware Investments 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 Investments and eligible non-Delaware Investments
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 Investments fund shares. See Combined
Purchases Privilege, below.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments fund
shares or for eligible non-Delaware Investments fund shares at net asset value
without payment of a front-end sales charge. However, exchanges of eligible fund
shares, both Delaware Investments and non-Delaware Investments, which were not
subject to a front end sales charge, will be subject to the applicable sales
charge if exchanged for eligible Delaware Investments 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
Investments 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 Investments fund shares in connection with Allied Plans, all
participant holdings in the Allied Plan will be aggregated. See Class A Shares,
above.
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 Investments and non-Delaware Investments fund shares.
When eligible Delaware Investments fund shares are exchanged into eligible
non-Delaware Investments 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>
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
within a 13-month period pursuant to a written Letter of Intention provided by
the Distributor and signed by the purchaser, and not legally binding on the
signer or Equity Funds II which provides for the holding in escrow by the
Transfer Agent, of 5% of the total amount of Class A Shares intended to be
purchased until such purchase is completed within the 13-month period. A Letter
of Intention may be dated to include shares purchased up to 90 days prior to the
date the Letter is signed. The 13-month period begins on the date of the
earliest purchase. If the intended investment is not completed, except as noted
below, the purchaser will be asked to pay an amount equal to the difference
between the front-end sales charge on Class A Shares purchased at the reduced
rate and the front-end sales charge otherwise applicable to the total shares
purchased. If such payment is not made within 20 days following the expiration
of the 13-month period, the Transfer Agent will surrender an appropriate number
of the escrowed shares for redemption in order to realize the difference. Such
purchasers may include the value (at offering price at the level designated in
their Letter of Intention) of all their shares of the Funds and of any class of
any of the other mutual funds in Delaware Investments (except shares of any
Delaware Investments fund which do not carry a front-end sales charge, CDSC or
Limited CDSC other than shares of Delaware Group Premium Fund beneficially
owned in connection with the ownership of variable insurance products, unless
they were acquired through an exchange from a Delaware Investments 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.
Employers offering a Delaware Investments 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 Investments 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 Investments 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 A Shares, 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 Investments funds (except shares of any Delaware Investments 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 Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). In addition, assets held by investment advisory
clients of the Manager or its affiliates in a stable value account may be
combined with other Delaware Investments fund holdings.
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<PAGE>
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 the 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 Investments funds
which offer such classes (except shares of any Delaware Investments fund which
do not carry a front-end sales charge, CDSC or Limited CDSC, other than shares
of Delaware Group Premium Fund beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Investments 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 $10,000 at offering price of additional shares of Class A
Shares, the charge applicable to the $10,000 purchase would currently be 4.75%.
For the purpose of this calculation, the shares presently held shall be valued
at the public offering price that would have been in effect were the shares
purchased simultaneously with the current purchase. Investors should refer to
the table of sales charges for Class A Shares to determine the applicability of
the Right of Accumulation to their particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares and Class B Shares of the Fund (and of the
Institutional Class holding shares which were acquired through an exchange from
one of the other mutual funds in the Delaware Investments family offered with a
front-end sales charge) who redeem such shares have one year from the date of
redemption to reinvest all or part of their redemption proceeds in the same
Class of the Fund or in the same Class of any of the other funds in the Delaware
Investments family. In the case of Class A Shares, the reinvestment will not be
assessed a front-end sales charge and in the case of Class B Shares, the amount
of the CDSC previously charged on the redemption will be reimbursed by the
Distributor. The reinvestment will be subject to applicable eligibility and
minimum purchase requirements and must be in states where shares of such other
funds may be sold. This reinvestment 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 Investments family, 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 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. In the case of
Class B Shares, the time that the previous investment was held will be included
in determining any applicable CDSC due upon redemptions as well as the automatic
conversion into Class A Shares.
A redemption and reinvestment of Class B Shares could have income tax
consequences. Shareholders will receive from the Distributor the amount of the
CDSC paid at the time of redemption as part of the reinvested shares, which may
be treated as a capital gain to the shareholder for tax purposes. 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 the 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.
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<PAGE>
Investors should consult their financial advisers or the Transfer
Agent, which also serves as the Fund's shareholder servicing agent, about the
applicability of the Class A Limited CDSC 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 described in the Prospectus, based on total
plan assets. If a company has more than one plan investing in the Delaware
Investments family 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 Investments investment accounts
if they so notify the Fund in which they are investing in connection with each
purchase. See Retirement Plans for the Fund Classes under Investment Plans for
information about Retirement Plans.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from a fund in the Delaware Investments family.
See Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange.
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, an affiliate of the Manager, or its other
affiliates and their corporate sponsors, as well as subsidiaries and related
employee benefit plans and rollover individual retirement accounts from such
institutional advisory accounts; (d) a bank, trust company and similar financial
institution investing for its own account or for the account of its trust
customers for whom such financial institution is exercising investment
discretion in purchasing shares of the Class, except where the investment is
part of a program that requires payment of the financial institution of a Rule
12b-1 Plan fee; and (e) registered investment advisers investing on behalf of
clients that consist solely of institutions and high net-worth individuals
having at least $1,000,000 entrusted to the adviser for investment purposes, but
only if the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services.
Shares of 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.
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 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 Fund Classes of Delaware Diversified Value Fund and the
Institutional Classes of each Fund 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 will
be mailed to shareholders quarterly. A confirmation of any distributions from
realized securities profits will be mailed to shareholders in the first quarter
of the fiscal year.
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Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the 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 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 Investments Family of Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A Shares,
Class B Shares and Class C Shares may automatically reinvest dividends and/or
distributions in any of the mutual funds in the Delaware Investments, 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.
Subject to the following limitations, dividends and/or distributions
from other funds in Delaware Investments 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.
Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the same Delaware
Investments fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
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Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Investments family, you may write and authorize an exchange of part or all of
your investment into shares of a Fund. If you wish to open an account by
exchange, call the Shareholder Service Center for more information. All
exchanges are subject to the eligibility and minimum purchase requirements set
forth in each fund's prospectus. See Redemption and Exchange for more complete
information concerning your exchange privileges.
Holders of Class A Shares of a Fund may exchange all or part of their
shares for certain of the shares of other funds in the Delaware Investments
family, 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 Investments family. Holders of Class B Shares of a Fund are
permitted to exchange all or part of their Class B Shares only into Class B
Shares of other Delaware Investments funds. Similarly, holders of Class C Shares
of a Fund are permitted to exchange all or part of their Class C Shares only
into Class C Shares of other Delaware Investments funds. Class B Shares of a
Fund and Class C Shares of a 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 a 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 that Fund.
Permissible exchanges into Class A Shares of a 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 a 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.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for either Fund to
accept for investment in Class A Shares, Class B Shares 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 Shares, Class B Shares
and Class C Shares may make automatic investments by authorizing, in advance,
monthly or quarterly 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, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
* * *
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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. Either Fund will accept these
investments, such as bank-by-phone, annuity payments and payroll allotments, by
mail directly from the third party. Investors should contact their employers or
financial institutions who in turn should contact Equity Funds II for proper
instructions.
MoneyLine (SM) On Demand
You or your investment dealer may request purchases of Fund Class shares
of Delaware Decatur Equity Income Fund, Delaware Growth and Income Fund,
Delaware Blue Chip Fund and Delaware Social Awareness Fund by phone using
MoneyLine (SM) On Demand. When you authorize a Fund to accept such requests from
you or your investment dealer, funds will be withdrawn from (for share
purchases) your predesignated bank account. Your request will be processed the
same day if you call prior to 4 p.m., Eastern time. There is a $25 minimum and
$50,000 maximum limit for MoneyLine (SM) On Demand transactions.
It may take up to four business days for the transactions to be
completed. You can initiate this service by completing an Account Services form.
If your name and address are not identical to the name and address on your Fund
account, you must have your signature guaranteed. The Funds do not charge a fee
for this service; however, your bank may charge a fee.
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 Investments family. Shareholders of the Fund Classes may
elect to invest in one or more of the other mutual funds in Delaware Investments
family through the Wealth Builder Option. 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.
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
Investments family, 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 Redemption and Exchange for a brief summary of the tax consequences
of exchanges. Shareholders can terminate their participation in Wealth Builder
at any time by giving written notice to the fund from which exchanges are made.
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This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Classes.
Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete an Asset Planner Account Registration
Form, which is available only from a financial adviser or investment dealer.
Effective September 1, 1997, the Asset Planner Service is only available to
financial advisers or investment dealers who have previously used this service.
The Asset Planner service offers a choice of four predesigned asset allocation
strategies (each with a different risk/reward profile) in predetermined
percentages in Delaware Investments funds. With the help of a financial adviser,
you may also design a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Investments accounts into the Asset Planner service may be made at net asset
value under the circumstances described under Investing by Exchange. Also see
Buying Class A Shares at Net Asset Value. The minimum initial investment per
Strategy is $2,000; subsequent investments must be at least $100. Individual
fund minimums do not apply to investments made using the Asset Planner service.
Class A, Class B and Class C Shares are available through the Asset Planner
service. Generally, only shares within the same class may be used within the
same Strategy. However, Class A Shares of a Fund and of other funds in the
Delaware Investments family may be used in the same Strategy with consultant
class shares that are offered by certain other Delaware Investments funds.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30 of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an IRA will continue
to pay an annual IRA fee of $15 per Social Security number. Investors will
receive a customized quarterly Strategy Report summarizing all 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.
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Retirement Plans for the Fund Classes
An investment in the Funds may be suitable for tax-deferred retirement
plans. Delaware Investments offers a full spectrum of retirement plans,
including the 401(k) Defined Contribution Plan, Individual Retirement Account
("IRA") and the new Roth IRA and Education IRA.
Among the retirement plans that Delaware Investments offers, Class B
Shares are available only by Individual Retirement Accounts, SIMPLE IRAs, Roth
IRAs, Education IRAs, Simplified Employee Pension Plans, Salary Reduction
Simplified Employee Pension Plans, and 403(b)(7) and 457 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 Shares and
Class C Shares under Redemption and Exchange for a list of the instances in
which the CDSC is waived.
Purchases of Class B Shares are subject to a maximum purchase limitation
of $250,000 for retirement plans. Purchases of Class C Shares must be in an
amount that is less than $1,000,000 for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans other than Individual Retirement Accounts, for
which there is a minimum initial purchase of $250 and a minimum subsequent
purchase of $25, regardless of which Class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide services
to such Plans.
Certain shareholder investment services available to non-retirement plan
shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Class
shares. See 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, corporations and other eligible forms of organizations. These
plans can be maintained as Section 401(k), profit sharing or money purchase
pension plans. Contributions may be invested only in Class A Shares and Class C
Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
and make 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; however, participation
may be restricted based on certain income limits.
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IRA Disclosures
The Taxpayer Relief Act of 1997 provides new opportunities for
investors. Individuals have five types of tax-favored IRA accounts that can be
utilized depending on the individual's circumstances. A new Roth IRA and
Education IRA are available in addition to the existing deductible IRA and
non-deductible IRA.
Deductible and Non-deductible IRAs
An individual can contribute up to $2,000 in his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income ("AGI") and whether the taxpayer is an active participant
in an employer sponsored retirement plan. Even if a taxpayer is an active
participant in an employer sponsored retirement plan, the full $2,000 is still
available if the taxpayer's AGI is below $30,000 ($50,000 for taxpayers filing
joint returns) for years beginning after December 31, 1997. A partial deduction
is allowed for married couples with income between $50,000 and $60,000, and for
single individuals with incomes between $30,000 and $40,000. These income
phase-out limits reach $80,000-$100,000 in 2007 for joint filers and
$50,000-$60,000 in 2005 for single filers. No deductions are available for
contributions to IRAs by taxpayers whose AGI after IRA deductions exceeds the
maximum income limit established for each year and who are active participants
in an employer sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA contributions still can
make non-deductible IRA contributions of as much as $2,000 for each working
spouse and defer taxes on interest or other earnings from the IRAs.
Under the new law, a married individual is not considered an active
participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant if the couple's combined AGI is
below $150,000. The maximum deductible IRA contribution for a married individual
who is not an active participant, but whose spouse is, is phased out for
combined AGI between $150,000 and $160,000.
Conduit (Rollover) IRAs
Certain individuals who have received or are about to receive eligible
rollover distributions from an employer-sponsored retirement plan or another IRA
may rollover the distribution tax-free to a Conduit IRA. The rollover of the
eligible distribution must be completed by the 60th day after receipt of the
distribution; however, if the rollover is in the form of a direct
trustee-to-trustee transfer without going through the distributee's hand, the
60-day limit does not apply.
A distribution qualifies as an "eligible rollover distribution" if it is
made from a qualified retirement plan, a 403(b) plan or another IRA and does not
constitute one of the following:
(1) Substantially equal periodic payments over the employee's life or
life expectancy or the joint lives or life expectancies of the
employee and his/her designated beneficiary;
(2) Substantially equal installment payments for a period certain of
10 or more years;
(3) A distribution, all of which represents a required minimum
distribution after attaining age 70 1/2;
(4) A distribution due to a Qualified Domestic Relations Order to an
alternate payee who is not the spouse (or former spouse) of the
employee; and
(5) A distribution of after-tax contributions which is not includable
in income.
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Roth IRAs
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $2,000 per year can be made to a new Roth IRA. As a
result of the Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Act"), the $2,000 annual limit will not be reduced by any contributions to
a deductible or nondeductible IRA for the same year. The maximum contribution
that can be made to a Roth IRA is phased out for single filers with AGI between
$95,000 and $110,000, and for couples filing jointly with AGI between $150,000
and $160,000. Qualified distributions from a Roth IRA would be exempt from
federal taxes. Qualified distributions are distributions (1) made after the
five-taxable year period beginning with the first taxable year for which a
contribution was made to a Roth IRA and (2) that are (a) made on or after the
date on which the individual attains age 59 1/2, (b) made to a beneficiary on or
after the death of the individual, (c) attributed to the individual being
disabled, or (d) for a qualified special purpose (e.g., first time homebuyer
expenses).
Distributions that are not qualified distributions would always be
tax-free if the taxpayer is withdrawing contributions, not accumulated earnings.
Taxpayers with AGI of $100,000 or less are eligible to convert an
existing IRA (deductible, nondeductible and conduit) to a Roth IRA. Earnings and
contributions from a deductible IRA are subject to a tax upon conversion;
however, no 10% excise tax for early withdrawal would apply. If the conversion
is done prior to January 1, 1999, then the income from the conversion can be
included in income ratably over a four-year period beginning with the year of
conversion.
Education IRAs
For taxable years beginning after December 31, 1997, an Education IRA
has been created exclusively for the purpose of paying qualified higher
education expenses. Taxpayers can make non-deductible contributions up to $500
per year per beneficiary. The $500 annual limit is in addition to the $2,000
annual contribution limit applicable to IRAs and Roth IRAs. Eligible
contributions must be in cash and made prior to the date the beneficiary reaches
age 18. Similar to the Roth IRA, earnings would accumulate tax-free. There is no
requirement that the contributor be related to the beneficiary, and there is no
limit on the number of beneficiaries for whom one contributor can establish
Education IRAs. In addition, multiple Education IRAs can be created for the same
beneficiaries, however, the contribution limit of all contributions for a single
beneficiary cannot exceed $500 annually.
This $500 annual contribution limit for Education IRAs is phased out
ratably for single contributors with modified AGI between $95,000 and $110,000,
and for couples filing jointly with modified AGI of between $150,000 and
$160,000. Individuals with modified AGI above the phase-out range are not
allowed to make contributions to an Education IRA established on behalf of any
other individual.
Distributions from an Education IRA are excludable from gross income to
the extent that the distribution does not exceed qualified higher education
expenses incurred by the beneficiary during the year the distribution is made
regardless of whether the beneficiary is enrolled at an eligible educational
institution on a full-time, half-time, or less than half-time basis.
Any balance remaining in an Education IRA at the time a beneficiary
becomes 30 years old must be distributed, and the earnings portion of such a
distribution will be includible in gross income of the beneficiary and subject
to an additional 10% penalty tax if the distribution is not for qualified higher
education expenses. Tax-free (and penalty-free) transfers and rollovers of
account balances from one Education IRA benefiting one beneficiary to another
Education IRA benefiting a different beneficiary (as well as redesignations of
the named beneficiary) is permitted, provided that the new beneficiary is a
member of the family of the old beneficiary and that the transfer or rollover is
made before the time the old beneficiary reaches age 30 and the new beneficiary
reaches age 18.
A company or association may establish a Group IRA or Group Roth IRA for
employees or members who want to purchase shares of the Fund.
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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. For information concerning the applicability of a CDSC upon
redemption of Class B Shares and Class C Shares, see Contingent Deferred Sales
Charge - Class B Shares and Class C Shares.
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks. In addition, effective January 1, 1998, the new law allows for premature
distribution without a 10% penalty if (i) the amounts are used to pay qualified
higher education expenses (including graduate level courses) of the taxpayer,
the taxpayer's spouse or any child or grandchild of the taxpayer or the
taxpayer's spouse, or (ii) used to pay acquisition costs of a principle
residence for the purchase of a first-time home by the taxpayer, taxpayer's
spouse or any child or grandchild of the taxpayer or the taxpayer's spouse. A
qualified first-time homebuyer is someone who has had no ownership interest in a
residence during the past two years. The aggregate amount of distribution for
first-time home purchases cannot exceed a lifetime cap of $10,000.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may continue to be maintained by employers having 25 or
fewer employees. An employer may elect to make additional contributions to such
existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Effective January 1, 1997,
non-governmental tax-exempt organizations may establish 401(k) plans. 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 Investments family. 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 the Prospectuses for the Fund
Classes.
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 shares
of any of the Classes in conjunction with such an arrangement. 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 the Prospectuses
for the Fund Classes.
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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 the Fund. Although investors may use their
own plan, there is available a Delaware Investments 457 Deferred Compensation
Plan. Interested investors should contact the Distributor or their investment
dealers to obtain further information. 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 in the Prospectuses for the Fund Classes.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis. A SIMPLE IRA is available only to plan sponsors with 100 or
fewer employees.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available
only to plan sponsors 100 or fewer employees and, in exchange for mandatory plan
sponsor contributions, discrimination testing is no longer required. Class B
Shares are not available for purchase by such plans.
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, its agent or certain other authorized persons.
See Distribution and Service under Investment Management Agreement and
Sub-Advisory Agreements. Orders for purchases of Class B Shares, Class C Shares
and Institutional Class shares are effected at the net asset value per share
next calculated by the Fund in which shares are being purchased after receipt of
the order by the Fund, its agent or certain other authorized persons. Selling
dealers are responsible for transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable front-end 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 days on which the following holidays are
observed: New Year's Day, Martin Luther King, Jr.'s Birthday, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. When the New York Stock Exchange is closed, the 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 the
financial statements for the Funds 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 Fund's securities and other assets, deducting any liabilities of the
Fund, and dividing by the number of Fund shares outstanding. Expenses and fees
are accrued daily. Portfolio securities, except for bonds, which are primarily
traded on a national or foreign securities exchange are valued at the last sale
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. Foreign
securities and the prices of foreign securities denominated in foreign
currencies are translated into U.S. dollars at the mean between the bid and
offer quotations of such currencies based on rates in effect as of the close of
the London Stock Exchange. Securities not traded on a particular day,
over-the-counter securities and government and agency securities are valued at
the mean value between bid and asked prices. Money market instruments having a
maturity of less than 60 days are valued at amortized cost. Debt securities
(other than short-term obligations) are valued on the basis of valuations
provided by a pricing service when such prices are believed to reflect the fair
value of such securities. Use of a pricing service has been approved by the
Board of Trustees. Subject to the foregoing, for securities for which market
quotations are not readily available and other assets the Manager uses
methods approved by the Board of Trustees that are designed to price
securities at their fair market value.
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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 that 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 that Fund represented by the value of shares of such Classes,
except that the Institutional Classes will not incur any of the expenses under
the relevant Fund's 12b-1 Plans and Class A Shares, Class B Shares 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.
REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways.
The exchange service is useful if your investment requirements change and you
want an easy way to invest in other equity funds, tax-advantaged funds, bond
funds or money market funds. This service is also useful if you are anticipating
a major expenditure and want to move a portion of your investment into a fund
that has the checkwriting feature. Exchanges are subject to the requirements of
each fund and all exchanges of shares constitute taxable events. 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
Delaware Investments will best meet your changing objectives, and the
consequences of any exchange transaction. You may also call the Delaware
Investments directly for fund information.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after a Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
For example, redemption or exchange requests received in good order after the
time the offering price and net asset value of shares are determined will be
processed on the next business day. 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, a Fund will redeem the number
of shares necessary to deduct the applicable CDSC in the case of Class B Shares
and Class C Shares, and, if applicable, the Limited CDSC in the case of Class A
Shares and tender to the shareholder the requested amount, assuming the
shareholder holds enough shares in his or her account for the redemption to be
processed in this manner. Otherwise, the amount tendered to the shareholder upon
redemption will be reduced by the amount of the applicable CDSC or Limited CDSC.
Redemption proceeds will be distributed promptly, as described below, but not
later than seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a redemption or
an exchange by calling the Shareholder Service Center at 800-523-1918. Each Fund
may suspend, terminate, or amend the terms of the exchange privilege upon 60
days' written notice to shareholders.
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In addition to redemption of Fund shares, 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,
its agent, or certain authorized persons, subject to 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.
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 by the Fund or certain other authorized persons (see Distribution
and Service under Investment Management Agreement and Sub-Advisory Agreements);
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 and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. Each 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 purchase 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. Each 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.
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 SEC 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 either in cash or
kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, Equity Funds
II 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 such Fund during any 90-day period for
any one shareholder.
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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.
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, below.
Class B Shares are subject to a CDSC of: (i) 5% if shares are redeemed within
one year of purchase (ii) 4% if shares are redeemed during the second year
following purchase; (iii) 3% if shares are redeemed during the third or fourth
year following purchase; (iv) 2% if shares are redeemed during the fifth year
following purchase; (v) 1% if shares are redeemed during the sixth year
following purchase; (vi) and 0% thereafter. 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 Purchasing
Shares. Except for the applicable CDSC or Limited CDSC and, with respect to the
expedited payment by wire described below for which, in the case of the Fund
Classes, there may be a bank wire 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.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Investments (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 Part B 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 a 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 a Fund for a longer period of time than if the investment in New
Shares were made directly.
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Written Redemption
You can write to each 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 Funds require a signature by all owners of the account and a
signature guarantee for each owner. A signature guarantee can be obtained from a
commercial bank, a trust company or a member of a Securities Transfer
Association Medallion Program ("STAMP"). Each Fund reserves the right to reject
a signature guarantee supplied by an eligible institution based on its
creditworthiness. The Funds 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 or Institutional Class Shares
are in certificate form, the certificate(s) must accompany your request and also
be in good order. Certificates are issued for Class A Shares and Institutional
Class 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 each Fund (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your shares into another mutual
fund in Delaware Investments, 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 or Institutional Class 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 which you have your account
in writing that you do not wish to have such services available with respect to
your account. Each 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 Funds by telephone during periods when market or economic conditions
lead to an unusually large volume of telephone requests.
Neither the Funds nor their 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 the
Fund Classes are generally tape recorded, and a written confirmation will be
provided for all purchase, exchange and redemption transactions initiated by
telephone. By exchanging shares by telephone, you are acknowledging prior
receipt of a prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
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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 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. 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. A bank wire fee may be deducted from
Fund Class redemption proceeds. If you ask for a check, it will normally be
mailed the next business day after receipt of your redemption request to your
predesignated bank account. There are no separate fees for this redemption
method, but the mail time may delay getting funds into your bank account. Simply
call the Shareholder Service Center prior to the time the offering price and net
asset value are determined, as noted above.
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 Delaware Investments 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.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds in the Delaware Investments family. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and each Fund reserve
the right to record exchange instructions received by telephone and to reject
exchange requests at any time in the future.
MoneyLine (SM) On Demand
You or your investment dealer may request Fund Class redemptions of
Delaware Decatur Equity Income Fund, Delaware Growth and Income Fund, Delaware
Blue Chip Fund and Delaware Social Awareness Fund shares by phone using
MoneyLine (SM) On Demand. When you authorize a Fund to accept such requests from
you or your investment dealer, funds will be deposited to (for share
redemptions) your predesignated bank account. Your request will be processed the
same day if you call prior to 4 p.m., Eastern time. There is a $25 minimum and
$50,000 maximum limit for MoneyLine (SM) On Demand transactions. See MoneyLine
(SM) On Demand under Investment Plans.
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
Investments 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.
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Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Investments funds: (1)
Delaware Decatur Equity Income Fund, (2) Delaware Growth and Income Fund, (3)
Delaware Balanced Fund, (4) Delaware Limited-Term Government Fund, (5) Delaware
Tax-Free USA Fund, (6) Delaware Cash Reserve Fund, (7) Delaware Delchester Fund
and (8) Delaware Tax-Free Pennsylvania Fund. No other Delaware Investments funds
are available for timed exchanges. Assets redeemed or exchanged out of Timing
Accounts in Delaware Investments 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
time 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.
Systematic Withdrawal Plans
Shareholders of Class A Shares, Class B Shares and Class C Shares who
own or purchase $5,000 or more of shares at the offering price, or net asset
value, as applicable, for which certificates have not been issued may establish
a Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or
quarterly withdrawals of $75 or more, although the Funds do not recommend any
specific amount of withdrawal. This is particularly useful to shareholders
living on fixed incomes, since it can provide them with a stable supplemental
amount. 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 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.
Shareholders should not purchase additional shares while participating in a
Systematic Withdrawal Plan.
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 the 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 Investments 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. The
applicable Limited CDSC for Class A Shares and CDSC for Class B and C Shares
redeemed via a Systematic Withdrawal Plan will be waived if the annual amount
withdrawn in each year is less than 12% of the account balance on the date that
the Plan is established. If the annual amount withdrawn in any year exceeds 12%
of the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subjected to the applicable
contingent deferred sales charge, including an assessment for previously
redeemed amounts under the Plan. Whether a waiver of the contingent deferred
sales charge is available or not, the first shares to be redeemed for each
Systematic Withdrawal Plan payment will be those not subject to a contingent
deferred sales charge because they have either satisfied the required holding
period or were acquired through the reinvestment of distributions. See Waiver of
Contingent Deferred Sales Charges, below.
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An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
Systematic Withdrawal Plan payments are normally made by check. In the
alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine (SM) Direct
Deposit Service. Your funds will normally be credited to your bank account up to
four business days after the payment date. There are no separate fees for this
redemption method. It may take up to four business days for the transactions to
be completed. You can initiate this service by completing an Account Services
form. If your name and address are not identical to the name and address on your
Fund account, you must have your signature guaranteed. The Fund does not charge
a fee for any this service; however, your bank may charge a fee. This service is
not available for retirement plans.
The Systematic Withdrawal Plan is not available for Delaware Diversified
Value Fund or the Institutional Classes of the other Funds. Shareholders should
consult with their financial advisers to determine whether a Systematic
Withdrawal Plan would be suitable for them.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value For purchases of $1,000,000 or more made on
or after July 1, 1998, a Limited CDSC will be imposed on certain redemptions of
Class A Shares (or shares into which such Class A Shares are exchanged)
according to the following schedule: (1) 1.00% if shares are redeemed during the
first year after the purchase; and (2) 0.50% if such shares are redeemed during
the second year after the purchase, if such purchases were made at net asset
value and triggered the payment by the Distributor of the dealer's commission as
described in the Prospectus.
The Limited CDSC will be paid to the Distributor and will be assessed on
an amount equal to the lesser 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 Investments 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 two years will not
be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Investments 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 two-year
holding period. The Limited CDSC is assessed if such two year period is not
satisfied irrespective of whether the redemption triggering its payment is of
Class A Shares of a Fund or Class A Shares acquired in the exchange.
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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) periodic distributions from an IRA, SIMPLE
IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to death, disability, or
attainment of age 59 1/2, and IRA distributions qualifying under Section 72(t)
of the Internal Revenue Code; (v) returns of excess contributions to an IRA;
(vi) distributions by other employee benefit plans to pay benefits; (vii)
distributions described in (ii), (iv), and (vi) above pursuant to a systematic
withdrawal plan; (viii) distributions form an account if the redemption results
from a death of a registered owner, or a registered joint owner, 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 disability (as defined in Section 72
of the Code) of all registered owners occurring after the purchase of the shares
being redeemed; and (ix) 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 Purchasing Shares).
Waiver of Contingent Deferred Sales Charge - Class B Shares and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from the
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective minimum
account size; (ii) returns of excess contributions to an IRA, SIMPLE IRA,
SEP/IRA, or 403(b)(7) or 457 Deferred Compensation Plan; (iii) periodic
distributions from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, or 403(b)(7) or 457
Deferred Compensation Plan due to death, disability or attainment of age 59 1/2,
and IRA distributions qualifying under Section 72(t) of the Internal Revenue
Code; and (iv) distributions from an account if the redemption results from the
death of a registered owner, or a registered joint owner, of the account (in the
case of accounts established under the Uniform Gifts to Minors or Uniform
Transfers to Minors Acts or trust accounts, the waiver applies upon the death of
all beneficial owners) or a total and permanent disability (as defined in
Section 72 of the Code) of all registered owners occurring after the purchase of
the shares being redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution plan; (iii) periodic distributions from a 403(b)(7) or 457
Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan,
Money Purchase Plan, 401(k) Defined Contribution Plan upon attainment of age 70
1/2, and IRA distributions qualifying under Section 72(t) of the Internal
Revenue Code; (iv) distributions from a 403(b)(7) or 457 Deferred Compensation
Plan, Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or a 401(k)
Defined Contribution Plan upon attainment of normal retirement age under the
plan or upon separation from service; (vi) periodic distributions from an IRA or
SIMPLE IRA on or after attainment of age 59 1/2; and (vii) distributions from an
account if the redemption results from the death of a registered owner, or a
registered joint owner, 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.
-73-
<PAGE>
In addition, the CDSC will be waived on Class A Shares, Class B Shares
and Class C Shares redeemed in accordance with a Systematic Withdrawal Plan if
the annual amount selected to be withdrawn under the Plan does not exceed 12% of
the value of the account on the date that the Systematic Withdrawal Plan was
established or modified.
DIVIDENDS AND REALIZED SECURITIES PROFITS, DISTRIBUTIONS AND TAXES
Each Class of shares of a Fund will share proportionately in the
investment income and expenses of the Fund, except that Class A Shares, Class B
Shares and Class C Shares alone will incur distribution fees under their
respective 12b-1 Plans.
Delaware Decatur Equity Income Fund intends to pay dividends from net
investment income on a monthly basis. Delaware Growth and Income Fund intends to
pay dividends from net investment income on a quarterly basis. Delaware Blue
Chip Fund, Delaware Social Awareness Fund and Delaware Diversified Value Fund
intend to pay dividends from net investment income on an annual basis.
Distributions of net capital gains, if any, realized on sales of investments
will be distributed annually during the quarter following the close of the
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
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 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. See also Other Tax Requirements under Accounting and
Tax Issues.
Persons not subject to tax will not be required to pay taxes on
distributions.
Dividends from investment income and short-term capital gains
distributions are treated by shareholders as ordinary income for federal income
tax purposes, whether received in cash or in additional shares. 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
described below. 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. Each Fund is treated as a single tax entity and capital gains
for each Fund will be calculated separately.
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<PAGE>
A portion of a Funds' dividends may qualify for the dividends-received
deduction for corporations provided in the federal income tax law. The portion
of dividends paid by a Fund that so qualifies will be designated each year in a
notice mailed to Fund shareholders, and cannot exceed the gross amount of
dividends received by such 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. Under the 1997
Act, the amount that a Fund may designate as eligible for the dividends-received
deduction will be reduced or eliminated if the shares on which the dividends
earned by the Fund were debt-financed or held by the Fund for less than a 46-day
period during a 90-day period beginning 45 days before the ex-dividend date and
ending 45 days after the ex-dividend date. Similarly, if your Fund shares are
debt-financed or held by you for less than a 46-day period during a 90-day
period beginning 45 days before the ex-dividend date and ending 45 days after
the ex-dividend date, then the dividends-received deduction for Fund dividends
on your shares may also be reduced or eliminated. Even if designated as
dividends eligible for the dividends-received deduction, all dividends
(including any deducted portion) must be included in your alternative minimum
taxable income calculation.
Under the Taxpayer Relief Act of 1997 (the "1997 Act"), as revised by
the Internal Revenue Service Restructuring and Reform Act of 1998 (the "1998
Act") and the Omnibus Consolidated and Emergency Supplemental Appropriations
Act, a Fund is required to track its sales of portfolio securities and to report
its capital gain distributions to you according to the following categories:
"Long-term capital gains": gains on securities sold after December 31,
1997 and held for more than 12 months as capital assets in the hands of
the holder are taxed at the 20% rate when distributed to shareholders
(10% for individual investors in the 15% tax bracket).
"Short -term capital gains": Gains on securities sold by a Fund that do
not meet the long-term holdings period are considered short term
capital gains and are taxable as ordinary income.
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
five-year gains are net gains on securities held for more than 5 years
which are sold after December 31, 2000. For individual who are subject
to tax at higher rate brackets, qualified five-year gains are net gains
on securities which are purchased after December 31, 2000 and are held
for more than five years. Taxpayers subject to tax at a higher rate
brackets may also make an election for shares held on January 1, 2001
to recognize gain on their shares in order to qualify such shares as
qualified five-year property. These gains will be taxable to individual
investors at a maximum rate of 18% for investors in the 28% or higher
federal income tax brackets, and at a maximum rate of 8% for investors
in the 15% federal income tax bracket when sold after the five-year
holding period.
Any loss incurred on the redemption or exchange of shares held for six
months or less will be disallowed to the extent of any exempt-interest dividends
distributed to you with respect to your Fund shares and any remaining loss will
be treated as a long-term capital loss to the extent of any long-term capital
gains distributed to you by the Fund on those shares.
All or a portion of any loss that you realize upon the redemption of
your Fund shares will be disallowed to the extent that you buy other shares in
the Fund (through reinvestment of dividends or otherwise) within 30 days before
or after your share redemption. Any loss disallowed under these rules will be
added to your tax basis in the new shares you buy.
-75-
<PAGE>
If you redeem some or all of yours shares in a Fund, and then reinvest
the sales proceeds in such Fund or in another Delaware Investments fund within
90 days of buying the original shares, the sales charge that would otherwise
apply to your reinvestment may be reduced or eliminated. The IRS will require
you to report gain or loss on the redemption of your original shares in a Fund.
In doing so, all or a portion of the sales charge that you paid for your
original shares in a Fund will be excluded from your tax basis in the shares
sold (for the purpose of determining gain or loss upon the sale of such shares).
The portion of the sales charge excluded will equal the amount that the sales
charge is reduced on your reinvestment. Any portion of the sales charge excluded
from your tax basis in the shares sold will be added to the tax basis of the
shares you acquire from your reinvestment.
Each Fund has qualified, and intend to continue to qualify, as
regulated investment companies under Subchapter M of the Code. As such, the
Funds 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 and it satisfies
other requirements relating to the sources of its income and diversification of
its assets. In order to qualify as a regulated investment company for federal
income tax purposes, the Funds must meet certain specific requirements that are
described under Accounting and Tax Issues-- Other Tax Requirements.
INVESTMENT MANAGEMENT AGREEMENT AND SUB-ADVISORY AGREEMENTS
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to the Funds, subject to the
supervision and direction of Equity Funds II's Board of Trustees.
The Manager and its predecessors have been managing the funds in the
Delaware Investments family since 1938. On November 30, 1999, the Manager and
its affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $45 billion in assets in
the various institutional or separately managed (approximately $26,625,560,000)
and investment company (approximately $18,776,030,000) accounts.
The Investment Management Agreement for the Funds is dated November 23,
1999 and was approved by the initial shareholder on that date. The Agreement
provides for 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 Trustees or by vote of a majority of the outstanding voting
securities of the Fund to which the Agreement relates, and only if the terms and
the renewal thereof have been approved by the vote of a majority of the trustees
of Income Funds or by the Manager. The Agreement will terminate automatically in
the event of its assignment.
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<PAGE>
The management fee rate schedule for each Fund is as follows:
<TABLE>
<CAPTION>
----------------------------------------------- ------------------------------------------------
Management Fee Schedule
(as a percentage of average daily net
assets)
Fund Name Annual Rate
----------------------------------------------- ------------------------------------------------
<S> <C> <C>
Delaware Decatur Equity Income Fund 0.65% on first $500 million
0.60% on next $500 million
0.55% on next $1,500 million
0.50% on assets in excess of $2,500 million
----------------------------------------------- ------------------------------------------------
Delaware Growth and Income Fund 0.65% on first $500 million
0.60% on next $500 million
0.55% on next $1,500 million
0.50% on assets in excess of $2,500 million
----------------------------------------------- ------------------------------------------------
Delaware Blue Chip Fund 0.65% on first $500 million
0.60% on next $500 million
0.55% on next $1,500 million
0.50% on assets in excess of $2,500 million
----------------------------------------------- ------------------------------------------------
Delaware Social Awareness Fund 0.75% on first $500 million
0.70% on next $500 million
0.65% on next $1,500 million
0.60% on assets in excess of $2,500 million
----------------------------------------------- ------------------------------------------------
Delaware Diversified Value Fund 0.65% on first $500 million
0.60% on next $500 million
0.55% on next $1,500 million
0.50% on assets in excess of $2,500 million
----------------------------------------------- ------------------------------------------------
</TABLE>
The Manager has contracted to waive that portion, if any, of the annual
management fees payable by Delaware Blue Chip Fund and Delaware Social Awareness
Fund and to pay certain expenses of a Fund to the extent necessary to ensure
that the total operating expenses of that Fund do not exceed 1.25% (exclusive of
taxes, interest, brokerage commissions, extraordinary expenses and applicable
12b-1 expenses) from the period August 1, 1999 through January 31, 2001.
Previously the Manager elected voluntarily to waive that portion, if any,
of the annual management fees payable by Delaware Blue Chip Fund and Delaware
Social Awareness Fund and to pay certain expenses of a Fund to the extent
necessary to ensure that the total operating expenses of that Fund did not
exceed 1.25% (exclusive of taxes, interest, brokerage commissions, extraordinary
expenses and applicable 12b-1 expenses) from the period February 1, 1999 through
July 31, 1999 and 1.20% (exclusive of taxes, interest, brokerage
commissions, extraordinary expenses and applicable 12b-1 expenses) during the
commencement of the public offering of the Fund through January 31, 1999.
The Manager has elected voluntarily to waive that portion, if any, of
the annual management fees payable by Delaware Diversified Value Fund and to pay
certain expenses of the Fund to the extent necessary to ensure that the Total
Operating Expenses of the Fund (exclusive of 12b-1 Plan expenses, taxes,
interest, brokerage commissions and extraordinary expenses) do not exceed, on an
annualized basis, 0.75% of the average daily net assets of each Class from the
commencement of the public offering of Classes through July 31, 2000.
Pursuant to the terms of a Sub-Advisory Agreement with the Manager, the
Sub-Adviser participates in the management of Delaware Blue Chip Fund's and
Delaware Social Awareness Fund's assets, is responsible for day-to-day
investment management of these Funds, makes investment decisions for each of
these Fund in accordance with a Fund's investment objectives and stated policies
and places orders on behalf of the Funds to effect the investment decisions
made. The Manager continues to have ultimate responsibility for all investment
advisory services in connection with the management of the Funds pursuant to the
Investment Management Agreement and supervises the Sub-Adviser's performance of
such services. For the services provided to the Manager, the Manager pays the
Sub-Adviser the following fee with respect to Blue Chip Fund: (i) 0.15% of
average daily net assets averaging one year old or less; (ii) 0.20% of average
daily net assets averaging two years old or less, but greater than one year old;
and (iii) 0.35% of average daily net assets averaging over two years old. For
the services provided to the Manager, the Manager pays the Sub-Adviser the
following fee with respect to Delaware Social Awareness Fund: (i) 0.20% of
average daily net assets averaging one year old or less; (ii) 0.25% of average
daily net assets averaging two years old or less, but greater than one year old;
and (iii) 0.40% of average daily net assets averaging over two years old.
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<PAGE>
The Sub-Adviser, Vantage Investment Advisors, 630 Fifth Avenue, New
York, New York, 10111, is an indirect, wholly-owned subsidiary of Lincoln
National and an affiliate of the Manager. Founded in 1979, it provides
investment advice to pension plans, endowments, insurance and commingled
products and has assets under management, as of November 30, 1999, in excess of
$9 billion. The Sub-Adviser uses a quantitative approach. It evaluates potential
investments utilizing an internally developed statistical model, based on
securities financial characteristics.
On November 30, 1999, the total net assets of Equity Funds II were
$3,307,053,123 broken down as follows:
Delaware Decatur Equity Income Fund $1,918,667,251
Delaware Growth and Income Fund $1,247,345,659
Delaware Blue Chip Fund $38,449,352
Delaware Social Awareness Fund $97,447,961
Delaware Diversified Value Fund $5,142,900
Set forth below is information regarding the amount of investment
advisory fees incurred, paid and waived, if any, by each Fund to the Manager
during the periods indicated.
<TABLE>
<CAPTION>
Investment Investment Investment Advisory
Advisory Fees Advisory Fees Fees
Incurred Paid Waived
------------- ------------- --------------------
<S> <C> <C> <C>
Delaware Decatur Equity
Income Fund
12/1/98-11/30/99 $12,266,738 $12,266,738 N/A
12/1/97-11/30/98 $11,709,268 $11,709,268 N/A
12/1/96-11/30/97 $10,329,490 $10,329,490 N/A
Delaware Growth and Income Fund
12/1/98-11/30/99 $8,188,088 $ 8,188,088 N/A
12/1/97-11/30/98 $7,389,923 $ 7,389,923 N/A
12/1/96-11/30/97 $5,429,552 $ 5,429,552 N/A
</TABLE>
<PAGE>
Delaware Blue Chip Fund
12/1/98-11/30/99 $166,399 $ 49,127 $117,272
12/1/97-11/30/98 $ 65,355 $ 12,163 $ 53,192
2/24/97(1)-11/30/97 $ 18,283 $ -0- $ 18,283
Delaware Social Awareness Fund
12/1/98-11/30/99 $706,897 $563,427 $143,470
12/1/97-11/30/98 $345,435 $315,561 $ 29,874
2/24/97(1)-11/30/97 $ 53,306 $ 13,785 $ 39,521
Delaware Diversified Value Fund
12/1/98-11/30/99 $ 16,073 $ 3,538 $ 12,535
9/15/98(1)-11/30/98 $ 2,794 $ 693 $ 2,101
(1) Commencement of operations.
For the fiscal years ended November 30, 1997, 1998 and 1999, the
Sub-Advisor received fees of $5,416, $16,882 and $39,742, respectively with
respect to Delaware Blue Chip Fund and $14,766, $96,165 and $208,292,
respectively with respect to Delaware Social Awareness Fund.
Under the general supervision of the Board of Trustees, the Manager
makes all investment decisions which are implemented by Equity Funds II's
Trading Department. The Manager pays the salaries of all trustees, officers and
employees of Equity Funds II who are affiliated with the Manager. 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 each 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.
Distribution and Service
The Distributor, Delaware Distributors, L.P., located at 1818 Market
Street, Philadelphia, PA 19103, serves as the national distributor for the Funds
under Distribution Agreements dated November 23, 1999. The Distributor is an
affiliate of the Manager and bears all of the costs of promotion and
distribution, except for payments by the Funds on behalf of Class A Shares,
Class B Shares and Class C Shares under their respective 12b-1 Plans. Delaware
Distributors, Inc. ("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
each Fund's shareholder servicing, dividend disbursing and transfer agent
pursuant to an agreement dated November 23, 1999. The Transfer Agent also
provides accounting services to each Fund pursuant to the terms of a separate
Fund Accounting Agreement. The Transfer Agent is also an indirect, wholly owned
subsidiary of Delaware Management Holdings, Inc.
The Funds have authorized one or more brokers to accept on its behalf
purchase and redemption orders in addition to the Transfer Agent. Such brokers
are authorized to designate other intermediaries to accept purchase and
redemption orders on the behalf of the Funds. For purposes of pricing, the Funds
will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Investors may be charged a fee when effecting transactions through a
broker or agent.
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<PAGE>
OFFICERS AND TRUSTEES
The business and affairs of Equity Funds II are managed under the
direction of its Board of Trustees.
Certain officers and trustees of Equity Funds II hold identical
positions in each of the other funds in the Delaware Investments family. On
December 31, 1999, Equity Funds II's officers and trustees owned less than 1% of
the outstanding shares of each Class of Delaware Decatur Equity Income Fund,
Delaware Growth and Income Fund, Delaware Blue Chip Fund, Delaware Social
Awareness Fund and Delaware Diversified Value Fund.
As of December 31, 1999, management believes the following shareholders
held of record 5% or more of the outstanding shares of a Class. Management does
not have knowledge of beneficial owners.
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Delaware Decatur Equity Merrill Lynch, Pierce, Fenner & Smith
Income Fund B Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246 850,012 9.60%
Delaware Decatur Equity Merrill Lynch, Pierce, Fenner & Smith
Income Fund C Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246 254,107 22.40%
Delaware Decatur Equity Income RS 401(k) Plan
Fund Institutional Class Day & Zimmerman
Attn: Sandy Geist
1818 Market Street
Philadelphia, PA 19103-3638 1,919,022 37.00%
Grace S&W Linton Nelson
Foundation Incorporated 7/5/84
c/o Fred C. Aldridge Jr.
940 W. Valley Rd. Suite 1601
Wayne, PA 19087-1853 1,400,468 27.00%
</TABLE>
-80-
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
<S> <C> <C> <C>
Delaware Decatur Equity Income Ogden Energy Group, Inc.
Fund Institutional Class 40 Lane Road
Fairfield, NJ 07004 447,324 8.62%
RS DMC Employee Profit Sharing Plan
Delaware Fund Employee Profit
Sharing Trust
c/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103-3682 264,246 5.09%
Delaware Growth and Merrill Lynch, Pierce, Fenner & Smith
Income Fund A Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246 2,857.183 5.35%
Delaware Growth and Merrill Lynch, Pierce, Fenner & Smith
Income Fund B Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246 1,296,678 9.87%
Delaware Growth and Merrill Lynch, Pierce, Fenner & Smith
Income Fund C Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246 450,975 16.30%
Delaware Growth and Federated Life Insurance Company
Income Fund Separate Account A
Institutional Class Attn: Tom Koch
P.O. Box 328
Owatonna, MN 55060-0328 2,225,658 31.02%
First Trust NA
Trust Northern States Power
Employee Retirement Savings Plan
Mutual Funds A/C 21736111
P.O. Box 64482
St. Paul, MN 55164-0482 1,932,596 26.93%
Lincoln National Life Insurance Co.
Attn: Karen Gerke
1300 S. Clinton Street
Fort Wayne, IN 46802-3518 1,560,040 21.74%
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
<S> <C> <C> <C>
Delaware Blue Chip Fund James Roy Fitzpatrick and
A Class Janice C. Fitzpatrick Jt Wros
6295 Whitmar Pl. Apt. S
Memphis, TN 38120-4212 95,128 8.49%
Delaware Blue Chip Fund Merrill Lynch, Pierce, Fenner & Smith
B Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246-6484 97,397 5.83%
Delaware Blue Chip Fund Merrill Lynch, Pierce, Fenner & Smith
C Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246-6484 15,484 7.58%
Delaware Blue Chip Fund RS DMC Employee Profit Sharing Plan
Institutional Class Delaware Fund Employee Profit
Sharing Trust
c/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103-3682 29,313 89.60%
Delaware Social Reliance Trust Company
Awareness Fund A Class Cust. FBO Sisters of Mercy NC
P.O. Box 48449
Atlanta, GA 30362-1449 271,703 7.63%
Delaware Social Merrill Lynch, Pierce, Fenner & Smith
Awareness Fund B Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484 162,453 5.04%
Delaware Social Merrill Lynch, Pierce, Fenner & Smith
Awareness Fund C Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484 71,164 9.36%
Advest Inc.
320-12643-18
90 State House Square
Hartford, CT 06103-3702
</TABLE>
-82-
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
<S> <C> <C> <C>
Delaware Social RS DMC Employee Profit Sharing Plan
Awareness Fund Delaware Management Co.
Institutional Class Employee Profit Sharing Trust
c/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103-3682 21,066 83.82%
Delaware Social RS DMTC 457 Deferred Comp. Plan
Awareness Fund PGW 457 Plan
Institutional Class c/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103-3682 3,922 15.60%
Delaware Diversified Delaware Management Business Trust DIA
Value Fund A Class Attn: Joseph H. Hastings
1818 Market Street 16th Floor
Philadelphia, PA 19103-3691 1 100%
Delaware Diversified Lincoln National Life Insurance Co.
Value Fund Institutional Class 1300 S. Clinton Street
Fort Wayne, IN 46802-3518 237,387 49.33%
Chase Manhattan Bank
Custodian for
Delaware Group Foundation Funds
Balance Portfolio
Attn: Marisol Gordan, Global Inv. Ser.
3 Metrotech Center, 8th Floor
Brooklyn, NY 11201-3800 69,837 14.51%
</TABLE>
DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company, Inc., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), 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 Retirement
Financial 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. DMH and the Manager are now indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National. Lincoln
National, with headquarters currently located in Fort Wayne, Indiana, is a
diversified organization with operations in many aspects of the financial
services industry, including insurance and investment management.
-83-
<PAGE>
Certain officers and trustees of Equity Funds II hold identical
positions in each of the other funds in the Delaware Investments family.
Trustees and principal officers of Equity Funds II 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 trustee is One Commerce Square,
Philadelphia, PA 19103.
<TABLE>
<CAPTION>
<S> <C>
Trustee/Officer Business Experience
*Wayne A. Stork (62) Chairman, Trustee and/or Director of Equity Funds II and each of the other 32
investment companies in the Delaware Investments family.
Prior to January 1, 1999, Mr. Stork was Director of Delaware Capital
Management, Inc.; Chairman, President and Chief Executive Officer and
Director/Trustee of DMH Corp., Delaware Distributors, Inc. and Founders
Holdings, Inc.; Chairman, President, Chief Executive Officer, Chief
Investment Officer and Director/Trustee of Delaware Management Company, Inc.
and Delaware Management Business Trust; Chairman, President, Chief Executive
Officer and Chief Investment Officer of Delaware Management Company (a series
of Delaware Management Business Trust); Chairman, Chief Executive Officer and
Chief Investment Officer of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Chairman and Chief Executive Officer of
Delaware International Advisers Ltd.; Chairman, Chief Executive Officer and
Director of Delaware International Holdings Ltd.; Chief Executive Officer of
Delaware Management Holdings, Inc.; President and Chief Executive Officer of
Delvoy, Inc.; Chairman of Delaware Distributors, L.P.; Director of Delaware
Service Company, Inc. and Retirement Financial Services, Inc.
Prior to January 1, 2000, Mr. Stork was Chairman and Director of Delaware
Management Holdings, Inc. and a Director of Delaware International Advisers
Ltd.
In addition, during the five years prior to January 1, 2000, Mr. Stork has served in
various executive capacities at different times within the Delaware organization.
</TABLE>
- ----------------------
*Trustee affiliated with Equity Funds II's investment manager and considered an
"interested person" as defined in the 1940 Act.
-84-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Trustee/Officer Business Experience
*David K. Downes (60) President/Chief Executive Officer, Trustee and/or Director of Equity Funds II
and each of the other 32 investment companies in the Delaware Investments family.
President and Director of Delaware Management Company, Inc.
President of Delaware Management Company (a series of Delaware Management
Business Trust)
President/Chief Executive Officer and Director of Delaware Capital
Management, Inc.
President/Chief Operating Officer/Chief Financial Officer and Director of
Delaware International Holdings Ltd.
Chairman/President/Chief Executive Officer and Director of Delaware Service
Company, Inc.
Chairman and Director of Delaware Management Trust Company and Retirement
Financial Services, Inc.
Executive Vice President/Chief Operating Officer/Chief Financial Officer of Delaware
Management Holdings, Inc., Founders CBO Corporation, Delaware Investment Advisers
(a series of Delaware Management Business Trust) and Delaware Distributors, L.P.
Executive Vice President/Chief Operating Officer/Chief Financial Officer and
Director of DMH Corp., Delaware Distributors, Inc., Founders Holdings, Inc.
and Delvoy, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Downes has served in various executive capacities at
different times within the Delaware organization.
</TABLE>
- ----------------------
*Trustee affiliated with Equity Funds II's investment manager and considered an
"interested person" as defined in the 1940 Act.
-85-
<PAGE>
<TABLE>
<CAPTION>
Officer Business Experience
<S> <C>
Richard G. Unruh, Jr. (60) Executive Vice President/Chief Investment Officer/Chief Financial Officer,
Equity of Equity Funds II, each of the other 32 investment companies in the
Delaware Investments family and Delaware Management Holdings, Inc.
Chief Executive Officer/Chief Investment Officer, DIA-Equity of Delaware
Investment Advisers (a series of Delaware Management Business Trust)
Executive Vice President/Chief Investment Officer DMC-Equity of Delaware
Management Company (a series of Delaware Management Business Trust)
Executive Vice President of Delaware Capital Management, 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.
- ---------------------------------------------- -------------------------------------------------------------------------------
H. Thomas McMeekin (46) Executive Vice President/ Chief Investment Officer, Fixed Income of Equity
Funds II and each of the other 32 investment companies in the Delaware
Investments family.
Director of Delaware Management Holdings, Inc.
Executive Vice President/Chief Investment Officer, DMC-Fixed Income of
Delaware Management Company (a series of Delaware Management Business Trust)
Executive Vice President of Delaware Management Holdings, Inc. and Delaware
Capital Management, Inc.
President and Director of Lincoln Investment Management, Inc.
Mr. McMeekin joined Delaware Investments in 1999. He has been employed in
various executive capacities by Lincoln National Corporation from 1994 to
present.
- ---------------------------------------------- -------------------------------------------------------------------------------
</TABLE>
-86-
<PAGE>
<TABLE>
<CAPTION>
Officer Business Experience
<S> <C>
Richard J. Flannery (42) Executive Vice President/General Counsel of Equity Funds II and each of the
other 32 investment companies in the Delaware Investments family, Delaware
Management Holdings, Inc., Delaware Distributors, L.P., Delaware Management
Company (a series of Delaware Management Business Trust) and Delaware
Investment Advisers (a series of Delaware Management Business Trust),
Founders CBO Corporation, Founders Holdings, Inc., Delvoy, Inc., DMH Corp.,
Delaware Management Company, Inc., Delaware Service Company, Inc., Delaware
Capital Management, Inc., Retirement Financial Services, Inc. and Delaware
Management Trust Company.
Executive Vice President/General Counsel and Director Delaware Distributors,
Inc. and Delaware International Holdings Ltd.
Executive Vice President and Trustee of Delaware Management Business Trust.
Director of Delaware International Advisers Ltd.
Director of HYPPCO Finance Company Ltd.
During the past five years, Mr. Flannery has served in various executive capacities
at different times within the Delaware organization.
</TABLE>
-87-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Trustee Business Experience
Walter P. Babich (72) Trustee and/or Director of Equity Funds II and each of the other 32
investment companies in the Delaware Investments family.
460 North Gulph Road, King of Prussia, PA 19406
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and
from 1988 to 1991, he was a partner of I&L Investors.
John H. Durham (62) Trustee and/or Director of Equity Funds II and 18 other investment companies
in the Delaware Investments family.
Private Investor.
P.O. Box 819, Gwynedd Valley, PA 19437
Mr. Durham served as Chairman of the Board of each fund in the Delaware
Investments family from 1986 to 1991; President of each fund from 1977 to
1990; and Chief Executive Officer of each fund from 1984 to 1990. Prior to
1992, with respect to Delaware Management Holdings, Inc., Delaware Management
Company, Delaware Distributors, Inc. and Delaware Service Company, Inc., Mr.
Durham served as a director and in various executive capacities at different
times. He was also a Partner of Complete Care Services from 1995 to 1999.
Anthony D. Knerr (61) Trustee and/or Director of Equity Funds II and each of the 32 other
investment companies in the Delaware Investments family.
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.
</TABLE>
-88-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Trustee Business Experience
Ann R. Leven (59) Trustee and/or Director of Equity Funds II and each of the other 32 other
investment companies in the Delaware Investments family.
785 Park Avenue, New York, NY 10021
Retired Treasurer, National Gallery of Art
From 1994 to 1999, Mr. Leven was the Treasurer of the National
Gallery of Art and from 1990 to 1994, Ms. Leven was Deputy
Treasurer of the National Gallery of Art. In addition, 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.
Thomas F. Madison (63) Trustee and/or Director of Equity Funds II and each of the other 32
investment companies in the Delaware Investments family
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402
President and Chief Executive Officer, MLM Partners, Inc.
Mr. Madison has also been Chairman of the Board of Communications Holdings,
Inc. since 1996. From February to September 1994, Mr. Madison served as Vice
Chairman--Office of the CEO of The Minnesota Mutual Life Insurance Company
and from 1988 to 1993, he was President of U.S. WEST Communications--Markets.
Charles E. Peck (74) Trustee and/or Director of Equity Funds II and each of the other 32
investment companies in the Delaware Investments family.
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.
</TABLE>
-89-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Trustee Business Experience
Janet L. Yeomans (51) Trustee and/or Director of Equity Funds II and each of the other 32 other
investment companies in the Delaware Investments family.
Building 220-13W-37, St. Paul, MN 55144
Vice President and Treasurer, 3M Corporation.
President, 3M Investment Management Corporation
From 1987-1994, Ms. Yeomans was Director of Benefit Funds and
Financial Markets for the 3M Corporation; Manager of Benefit
Fund Investments for the 3M Corporation, 1985-1987; Manager
of Pension Funds for the 3M Corporation, 1983-1985;
Consultant--Investment Technology Group of Chase Econometrics,
1982-1983; Consultant for Data Resources, 1980-1982; Programmer
for the Federal Reserve Bank of Chicago, 1970-1974.
</TABLE>
-90-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Officer Business Experience
- ---------------------------------------------- -------------------------------------------------------------------------------
Eric E. Miller (46) Senior Vice President/Deputy General Counsel/Secretary of Equity Funds II and
each of the other 32 investment companies in Delaware Investments family.
Senior Vice President/Deputy General Counsel/Assistant Secretary of Delaware
Management Holdings, Inc., DMH Corp., Delvoy, Inc., Delaware Management
Company, Inc., Delaware Management Company (a series of Delaware Management
Business Trust) and Delaware Investment Advisers (a series of Delaware
Management Business Trust), Delaware Service Company, Inc., Delaware Capital
Management, Inc., Retirement Financial Services, Inc., Delaware Distributors,
Inc., Delaware Distributors, L.P. and Founders Holdings, Inc.
During the past five years, Mr. Miller has served in various executive
capacities at different times within Delaware Investments.
- ---------------------------------------------- -------------------------------------------------------------------------------
Joseph H. Hastings (50) Senior Vice President/Corporate Controller of Equity Funds II and each of
the other 32 investment companies in the Delaware Investments family.
Senior Vice President/Treasurer/Corporate Controller of Delaware Management
Holdings, Inc., DMH Corp., Delaware Management Company, Inc., Delaware
Management Business Trust, Delaware Management Company (a series of Delaware
Management Business Trust) and Delaware Investment Advisers (a series of
Delaware Management Business Trust), Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware Capital
Management, Inc., Delaware International Holdings Ltd., Delvoy, Inc., and
Founders Holdings, Inc.
Chief Financial Officer of Retirement Financial Services, Inc.
Executive Vice President/Treasurer/Chief Financial Officer of Delaware
Management Trust Company
Senior Vice President/Assistant Treasurer of Founders CBO Corporation
During the past five years, Mr. Hastings has served in various
executive capacities at different times within Delaware Investments.
</TABLE>
-91-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Officer Business Experience
Michael P. Bishof (37) Senior Vice President/Treasurer of Equity Funds II and each of the other 32
investment companies in the Delaware Investments family.
Senior Vice President/Investment Accounting of Delaware Service Company,
Inc. and Delaware Capital Management, Inc., Delaware Distributors, L.P. and
Delaware Management Company (a series of Delaware Management Business Trust)
Senior Vice President/Treasurer/Investment Accounting of Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Founders Holdings, Inc.
Senior Vice President/Manager of Investment Accounting of Delaware
International Holdings, Inc.
Senior Vice President/Assistant Treasurer of Founders CBO Corporation
Before joining Delaware Investments 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.
- ---------------------------------------------- -------------------------------------------------------------------------------
John B. Fields (54) Senior Vice President/Senior Portfolio Manager of Equity Funds II and each
of the other 32 investment companies in the Delaware Investments family,
Delaware Capital Management, Inc., Delaware Management Company (a series of
Delaware Management Business Trust) and Delaware Investment Advisers (a
series of Delaware Management Business Trust)
Trustee of Delaware Management Business Trust
During the past five years, Mr. Fields has served in various capacities
at different times within Delaware Investments.
- ---------------------------------------------- -------------------------------------------------------------------------------
J. Paul Dokas (40) Vice President/Senior Portfolio Manager of Equity Funds II and each of
the other 32 investment companies in the Delaware Investments family,
Delaware Management Company (a series of Delaware Management Business Trust)
and Delaware Investment Advisers (a series of Delaware Management Business
Trust)
Before joining Delaware Investments in 1997, Mr. Dokas was a Director of Trust
Investments for Bell Atlantic Corporation in Philadelphia, where he held various
positions from 1985 to 1997.
- ---------------------------------------------- -------------------------------------------------------------------------------
</TABLE>
-92-
<PAGE>
The following is a compensation table listing for each trustee entitled to
receive compensation, the following is a compensation table listing for each
trustee entitled to receive compensation, the aggregate compensation received
from Equity Funds II during its fiscal year and the total compensation received
from all investment companies in the Delaware Investments family for which he or
she serves as a trustee or trustee during Equity Funds II's fiscal year and an
estimate of annual benefits to be received upon retirement under the Delaware
Group Retirement Plan for Directors/Trustees as of November 30, 1999. Only the
independent trustees of Equity Funds II receive compensation from Equity Funds
II.
<TABLE>
<CAPTION>
Pension or Total
Aggregate Retirement Estimated Compensation
Compensation Benefits Accrued Annual from the Investment
received as Part of Equity Benefits Companies
from Funds II's Upon in Delaware
Equity Funds II Expenses Retirement(1) Investments(2)
Name(3)
<S> <C> <C> <C> <C>
Ann R. Leven $9,806 None $38,000 $66,043
Walter P. Babich $8,728 None $38,000 $58,150
Anthony D. Knerr $9,600 None $38,000 $65,043
Charles E. Peck $9,338 None $38,000 $63,793
Thomas F. Madison $9,599 None $38,000 $65,043
John H. Durham (3) $8,467 None $32,180 $43,006
Janet L. Yeomans (4) $5,813 None $38,000 $44,191
</TABLE>
(1) Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested trustee/trustee 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 investment company in the Delaware
Investments family for which he or she serves as a director or trustee
for a period equal to the lesser of the number of years that such
person served as a director or trustee 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 director
/trustees of each investment company at the time of such person's
retirement. If an eligible director/trustee retired as of November 30,
1998, he or she would be entitled to annual payments totaling the
amounts noted above, in the aggregate, from all of the investment
companies in the Delaware Investments family for which he or she serves
as a director or trustee, based on the number of investment companies
in the Delaware Investments family as of that date.
(2) Each independent director /trustee (other than John H. Durham)
currently receives a total annual retainer fee of $38,000 for
serving as a director or trustee for all 33 investment companies
in Delaware Investments, plus $3,143 for each Board Meeting attended.
John H. Durham currently receives a total annual retainer fee of
$32,180 for serving as a director or trustee for 19 investment
companies in Delaware Investments, plus $1,810 for each Board Meeting
attended. Ann R. Leven, Anthony D. Knerr, Charles E. Peck and Thomas F.
Madison serve on the Fund's audit committee; Ms. Leven is the
chairperson. Members of the audit committee currently receive
additional annual compensation of $5,000 from all investment companies,
in the aggregate, with the exception of the chairperson, who receives
$6,000.
(3) W. Thacher Longstreth served as an independent trustee of Equity Funds
II during its last fiscal year for the period December 1, 1998
through March 17, 1999, the date on which he retired. For this period,
Mr. Longstreth received $2,844 from Equity Funds II and $18,994 from
all investment companies in the Delaware Investments family.
(4) Janet L. Yeomans joined the Board of Trustees of all investment
companies in the Delaware Investments family in March 1999 for some
funds and in April 1999 for other funds.
-93-
<PAGE>
GENERAL INFORMATION
Equity Funds II is an open-end management investment company. Each
Fund's portfolio of assets is diversified as defined by the Investment Company
Act of 1940. Equity Funds II was first organized as a Delaware corporation in
1956 and was subsequently reorganized as a Maryland corporation on March 4, 1983
and as a Delaware business trust on November 23, 1999.
The Manager is the investment manager of the Funds. The Manager also
provides investment management services to certain of the other funds available
from the Delaware Investments family. An affiliate of the Manager manages
private investment accounts. While investment decisions of the Funds 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.
The Manager and its affiliate Delaware International Advisers Ltd.,
manage the investment options for Delaware-Lincoln Choice Plus and Delaware
Medallion (SM) III Variable Annuities. Choice Plus is issued and distributed by
Lincoln National Life Insurance Company. Choice Plus offers a variety of
different investment styles managed by leading money managers. Medallion is
issued by Allmerica Financial Life Insurance and Annuity Company (First
Allmerica Financial Life Insurance Company in New York and Hawaii). Delaware
Medallion offers various investment series ranging from domestic equity funds,
international equity and bond funds and domestic fixed income funds. Each
investment series available through Choice Plus and Medallion utilizes an
investment strategy and discipline the same as or similar to one of the Delaware
Investments mutual funds available outside the annuity. The Manager or Delaware
International Advisers Ltd. also manages many of the investment options for the
Delaware-Lincoln Choice Plus Variable Annuity. Choice Plus is issued and
distributed by Lincoln National Life Insurance Company. Choice Plus offers a
variety of different investment styles managed by ten leading money managers.
See Delaware Group Premium Fund, in Appendix B.
Access persons and advisory persons of the Delaware Investments family
of funds, as those terms are defined in SEC Rule 17j-1 under the 1940 Act, who
provide services to the Manager, Delaware International Advisers Ltd. or their
affiliates, are permitted to engage in personal securities transactions subject
to the exceptions set forth in Rule 17j-1 and the following general restrictions
and procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance is received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions by certain covered persons in certain securities 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 of the Funds and
for the other mutual funds in the Delaware Investments family. The Distributor
received net commissions from each Fund on behalf of their respective Class A
Shares, after reallowances to dealers, as follows:
Delaware Decatur Equity Income Fund
Fiscal Total Amount Amounts Net
Year of Underwriting Reallowed Commission
Ended Commission to Dealers to DDLP
----- --------------- ---------- -------
11/30/99 $1,530,808 $231,746 $1,299,062
11/30/98 2,260,967 1,880,809 380,158
11/30/97 2,632,798 2,164,821 467,977
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<PAGE>
Delaware Growth and Income Fund
Fiscal Total Amount Amounts Net
Year of Underwriting Reallowed Commission
Ended Commission to Dealers to DDLP
----- ------------- ------------ ----------
11/30/99 $1,898,852 $268,466 $1,630,386
11/30/98 2,881,036 2,398,246 482,790
11/30/97 2,530,072 2,104,851 425,221
Delaware Blue Chip Fund
Fiscal Total Amount Amounts Net
Year of Underwriting Reallowed Commission
Ended Commission to Dealers to DDLP
----- --------------- ---------- -------
11/30/99 $140,682 $120,705 $19,977
11/30/98 118,681 98,864 19,817
11/30/97* 71,225 63,548 7,677
*Commenced operations on February 24, 1997.
Delaware Social Awareness Fund
Fiscal Total Amount Amounts Net
Year of Underwriting Reallowed Commission
Ended Commission to Dealers to DDLP
----- --------------- ---------- -------
11/30/99 $450,807 $388,197 $62,610
11/30/98 759,935 634,359 125,576
11/30/97* 258,024 224,473 33,551
*Commenced operations on February 24, 1997.
Delaware Diversified Value Fund
Fiscal Total Amount Amounts Net
Year of Underwriting Reallowed Commission
Ended Commission to Dealers to DDLP
----- --------------- ---------- -------
11/30/99 $-0- $-0- $-0-
11/30/98* - 0- -0- -0-
*Commenced operations on September 15, 1998.
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<PAGE>
The Distributor received Limited CDSC payments with respect to
Class A Shares of each Fund as follows:
<TABLE>
<CAPTION>
Limited CDSC Payments
Delaware Delaware
Decatur Growth Delaware Delaware Delaware
Fiscal Equity Income and Income Blue Chip Social Awareness Diversified
Year Ended Fund A Class Fund A Class Fund A Class* Fund A Class* Value Fund A Class**
---------- ------------ ------------ ------------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
11/30/99 $151 $-0- $-0- $-0- $-0-
11/30/98 ---- 1,095 -0- 260 ----
11/30/97 ---- 2,399 ---- ---- N/A
*Commenced operations on February 24, 1997.
**Commenced operations on September 15, 1998.
The Distributor received CDSC payments with respect to Class B Shares
of each Fund as follows:
CDSC Payments
Delaware Delaware
Decatur Growth Delaware Delaware Delaware
Fiscal Equity Income and Income Blue Chip Social Awareness Diversified Value
Year Ended Fund B Class Fund B Class Fund B Class* Fund B Class* Fund B Class**
- ---------- ------------ ------------ ------------ ------------ ------------
11/30/99 $592,768 $760,022 $57,320 $143,690 ----
11/30/98 321,946 311,926 5,052 31,703 ----
11/30/97 150,241 171,099 757 2,387 N/A
*Commenced operations on February 24, 1997.
**Commenced operations on September 15, 1998.
The Distributor received CDSC payments with respect to Class C Shares
of each Fund as follows:
CDSC Payments
Delaware Delaware
Decatur Growth Delaware Delaware Delaware
Fiscal Equity Income and Income Blue Chip Social Awareness Diversified Value
Year Ended Fund C Class Fund C Class Fund C Class* Fund C Class* Fund C Class**
- ---------- ------------ ------------ ------------ ------------ ------------
11/30/99 $5,195 $18,561 $600 $12,563 ----
11/30/98 4,581 12,445 161 1,382 ----
11/30/97 3,768 5,019 -0- 10 N/A
</TABLE>
*Commenced operations on February 24, 1997.
**Commenced operations on September 15, 1998.
-96-
<PAGE>
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 Investments family. 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 Trustees, including a majority of the unaffiliated trustees. The
Transfer Agent also provides accounting services to each Fund. Those services
include performing all functions related to calculating each Fund's net asset
value and providing all financial reporting services, regulatory compliance
testing and other related accounting services. For its services, the Transfer
Agent is paid a fee based on total assets of all funds in the Delaware
Investments family for which it provides such accounting services. Such fee is
equal to 0.25% multiplied by the total amount of assets in the complex for which
the Transfer Agent furnishes accounting services, where such aggregate complex
assets are $10 billion or less, and 0.20% of assets if such aggregate complex
assets exceed $10 billion. The fees are charged to each fund, including each
Fund, on an aggregate pro-rata basis. The asset-based fee payable to the
Transfer Agent is subject to a minimum fee calculated by determining the total
number of investment portfolios and associated classes.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of Equity Funds II's advisory
relationship with the Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause Equity Funds II to
delete the words "Delaware Group" from Equity Funds II's name.
The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn,
NY 11245, is custodian of each Fund's securities and cash. As custodian for a
Fund, Chase 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.
Capitalization
Equity Funds II has an unlimited authorized number of shares of
beneficial interest with no par value allocated to each Class. Each fund offers
four classes of shares, each representing a proportionate interest in the assets
of that Fund, and each having the same voting and other rights and preferences
as the other classes, except that shares of a fund's Institutional Class may not
vote on matters affecting that fund's Distribution Plans under Rule 12b-1.
Similarly, as a general matter, shareholders of Class A Shares, Class B Shares
and Class C Shares of a fund may vote only on matters affecting the 12b-1 Plan
that relates to the class of shares that they hold. However, Class B Shares of a
fund may vote on any proposal to increase materially the fees to be paid by the
Fund under the Rule 12b-1 Plans relating to its Class A Shares. General expenses
of a fund will be allocated on a pro-rata basis to the classes according to
asset size, except that expenses of the Rule 12b-1 Plans of each Fund's Class A,
Class B and Class C Shares will be allocated solely to those classes.
All shares have no preemptive rights, are fully transferable and, when
issued, are fully paid and nonassessable and, except as described above, have
equal voting rights.
While shares of Equity Funds II have equal voting rights on matters
affecting the Funds, each Fund would vote separately on any matter which it is
directly affected by, such as any change in its fundamental investment policies
and as otherwise prescribed by the 1940 Act. Shares of each Fund have a priority
in that Fund's assets, and in gains on and income from the portfolio of that
Fund.
Shares of each Class of a Fund represent a proportionate interest in
the assets of such Fund, and have the same voting and other rights and
preferences as the other classes of that Fund, except that shares of a Fund's
Institutional Class may not vote on any matter affecting the Fund Classes' Plans
under Rule 12b-1. Similarly, as a general matter, shareholders of Class A
Shares, Class B Shares and Class C Shares of a Fund 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
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<PAGE>
vote on any proposal to increase materially the fees to be paid by a Fund under
the 12b-1 Plan relating to its Class A Shares. General expenses of a Fund will
be allocated on a pro-rata basis to the classes according to asset size, except
that expenses of the 12b-1 Plans of each Fund's Class A Shares, Class B Shares
and Class C Shares will be allocated solely to those classes.
Prior to January 13, 1994, Delaware Decatur Equity Income Fund offered
only one class of shares, the class currently designated Class A Shares.
Beginning January 13, 1994, Delaware Decatur Equity Income Fund began offering
its Institutional Class, beginning September 6, 1994, Delaware Decatur Equity
Income Fund began offering its Class B Shares, and beginning November 29, 1995,
Delaware Decatur Equity Income Fund began offering its Class C Shares. Prior to
July 26, 1993, Delaware Growth and Income Fund offered only one class of shares,
the class currently designated Class A Shares. Beginning July 26, 1993, Delaware
Growth and Income Fund began offering its Institutional Class, beginning
September 6, 1994, Delaware Growth and Income Fund began offering its Class B
Shares, and beginning November 29, 1995, Delaware Growth and Income Fund began
offering its Class C Shares.
Prior to May 2, 1994, the Decatur Equity Income Fund series was named
the Decatur I Series (which was known and did business as Decatur Fund I). From
May 2, 1994 to September 5, 1994, Decatur Equity Income Fund A Class was known
as the Decatur Income Fund class and prior to May 2, 1994, it was known as the
Decatur Fund I class. From May 2, 1994 to September 5, 1994, Decatur Equity
Income Fund Institutional Class was known as the Decatur Income Fund
(Institutional) class and prior to May 2, 1994, it was known as the Decatur Fund
I (Institutional) class.
Prior to May 2, 1994, the Growth and Income Fund series was named the
Decatur II Series (which was known and did business as Decatur Fund II). From
May 2, 1994 to September 5, 1994, Growth and Income Fund A Class was known as
the Decatur Total Return Fund class and prior to May 2, 1994, it was known as
the Decatur Fund II class. From May 2, 1994 to September 5, 1994, Growth and
Income Fund Institutional Class was known as the Decatur Total Return Fund
(Institutional) class and prior to May 2, 1994, it was known as the Decatur Fund
II (Institutional) class.
Effective as of the close of business on February 21, 1997, the name
Delaware Group Decatur Fund, Inc. was changed to Delaware Group Equity Funds II,
Inc. Effective as of the close of business on January 28, 1998, the name of
Quantum Fund series and its classes were renamed Social Awareness Fund.
Effective as of the close of business on January 28, 1999, the name of
Decatur Income Fund and its Classes changed to Decatur Equity Income Fund and
the name of Decatur Total Return Fund and its Classes changed to Growth and
Income Fund.
Effective as of the close of business on August 16, 1999, the name of
Decatur Equity Income Fund and its Classes changed to Delaware Decatur Equity
Income Fund; Growth and Income Fund and its Classes changed to Delaware Growth
and Income Fund; Blue Chip Fund and its classes changed to Delaware Blue Chip
Fund; Social Awareness and its Classes changed to Delaware Social Awareness
Fund; and Diversified Growth Fund and its Classes changed to Delaware
Diversified Growth Fund.
Effective November 23, 1999, Delaware Group Equity Funds II, Inc.
changed its name to Delaware Group Equity Funds II.
Noncumulative Voting
Equity Funds II's shares have noncumulative voting rights which means
that the holders of more than 50% of the shares of Equity Funds II voting for
the election of trustees can elect all the trustees if they choose to do so,
and, in such event, the holders of the remaining shares will not be able to
elect any trustees.
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This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC.
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Delaware Group
Equity Funds II and, in its capacity as such, audits the annual financial
statements of the Funds. Each Fund's Statement of Net Assets, Statement of
Operations, Statement of Changes in Net Assets, Financial Highlights and Notes
to Financial Statements, as well as the report of Ernst & Young LLP, for the
fiscal year ended November 30, 1999 are included in each Fund's II Annual Report
to shareholders. The financial statements and financial highlights, the notes
relating thereto and the reports of Ernst & Young LLP listed above are
incorporated by reference from the Annual Reports into this Part B.
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APPENDIX A--RATINGS
Bonds
Excerpts from Moody's Investors Service, Inc. ("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 Standard & Poor's ("S&P") 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.
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APPENDIX B - INVESTMENT OBJECTIVES OF THE OTHER FUNDS IN THE DELAWARE
INVESTMENTS FAMILY
Delaware Balanced 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. Delaware 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.
Delaware Trend Fund seeks long-term growth by investing in common
stocks issued by emerging growth companies exhibiting strong capital
appreciation potential.
Delaware Small Cap Value Fund seeks capital appreciation by investing
primarily in common stocks whose market values appear low relative to their
underlying value or future potential.
Delaware 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.
Delaware 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. Delaware 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. Delaware High-Yield Opportunities Fund seeks to provide
investors with total return and, as a secondary objective, high current income.
Delaware Corporate Bond Fund seeks to provide investors with total return by
investing primarily in corporate bonds. Delaware Extended Duration Bond Fund
seeks to provide investors with total return by investing primarily in corporate
bonds
Delaware American Government Bond 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.
Delaware 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.
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.
REIT Fund seeks to achieve maximum long-term total return with capital
appreciation as a secondary objective. it seeks to achieve its objectives by
investing in securities of companies primarily engaged in the real estate
industry.
Delaware Tax-Free USA Fund seeks high current income exempt from
federal income tax by investing in municipal bonds of geographically-diverse
issuers. Delaware 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. Delaware 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.
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Delaware 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.
Delaware Tax-Free New Jersey Fund seeks a high level of current
interest income exempt from federal income tax and New Jersey state and local
taxes, consistent with preservation of capital. Delaware Tax-Free Ohio Fund
seeks a high level of current interest income exempt from federal income tax and
Ohio state and local taxes, consistent with preservation of capital. Delaware
Tax-Free Pennsylvania Fund seeks a high level of current interest income exempt
from federal income tax and Pennsylvania state and local taxes, consistent with
the preservation of capital.
Delaware Foundation Funds are "fund of funds" which invest in other
funds in the Delaware Investments family (referred to as "Underlying Funds").
Delaware Foundation Funds Income Portfolio seeks a combination of current income
and preservation of capital with capital appreciation by investing primarily in
a mix of fixed income and domestic equity securities, including fixed income and
domestic equity Underlying Funds. Delaware Foundation Funds Balanced Portfolio
seeks capital appreciation with current income as a secondary objective by
investing primarily in domestic equity and fixed income securities, including
domestic equity and fixed income Underlying Funds. Delaware Foundation Funds
Growth Portfolio seeks long term capital growth by investing primarily in equity
securities, including equity Underlying Funds, and, to a lesser extent, in fixed
income securities, including fixed-income Underlying Funds.
Delaware 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.
Delaware 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.
Delaware Global Equity Fund seeks to achieve long-term total return by investing
in global securities that provide the potential for capital appreciation and
income. Delaware Emerging Markets Fund seeks long-term capital appreciation by
investing primarily in equity securities of issuers located or operating in
emerging countries.
Delaware 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. Delaware Overseas Equity Fund seeks to maximize total return (capital
appreciation and income), principally through investments in an internationally
diversified portfolio of equity securities. Delaware 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.
Delaware Group Premium Fund offers various funds available exclusively
as funding vehicles for certain insurance company separate accounts. Growth and
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. Delchester Series seeks as high a current
income as possible by investing in rated and unrated corporate bonds, U.S.
government securities and commercial paper. Capital Reserves Series seeks a high
stable level of current income while minimizing fluctuations in principal by
investing in a diversified portfolio of short- and intermediate-term securities.
Cash Reserve Series seeks the highest level of income consistent with
preservation of capital and liquidity through investments in short-term money
market instruments. DelCap Series seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. Delaware Balanced 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. Small Cap Value
Series seeks capital appreciation by investing primarily in small-cap common
stocks whose market values appear low relative to their underlying value or
future earnings and growth potential. Emphasis
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will also be placed on securities of companies that may be temporarily out of
favor or whose value is not yet recognized by the market. Trend Series seeks
long-term capital appreciation by investing primarily in small-cap common stocks
and convertible securities of emerging and other growth-oriented companies.
These securities will have been judged to be responsive to changes in the market
place and to have fundamental characteristics to support growth. Income is not
an objective. Global Bond Series seeks to achieve current income consistent with
the preservation of principal by investing primarily in global fixed-income
securities that may also provide the potential for capital appreciation.
Strategic Income Series seeks high current income and total return by using a
multi-sector investment approach, investing primarily in three sectors of the
fixed-income securities markets: high-yield, higher risk securities; investment
grade fixed-income securities; and foreign government and other foreign
fixed-income securities. Devon Series seeks current income and capital
appreciation by investing primarily in income-producing common stocks, with a
focus on common stocks that the investment manager believes have the potential
for above-average dividend increases over time. Emerging Markets Series seeks to
achieve long-term capital appreciation by investing primarily in equity
securities of issuers located or operating in emerging countries. Convertible
Securities Series seeks a high level of total return on its assets through a
combination of capital appreciation and current income by investing primarily in
convertible securities. Social Awareness Series seeks to achieve long-term
capital appreciation by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series' "Social
Criteria" strategy. REIT Series seeks to achieve maximum long-term total return,
with capital appreciation as a secondary objective, by investing in securities
of companies primarily engaged in the real estate industry. Aggressive Growth
Series seeks long-term capital appreciation. The Series attempts to achieve its
investment objective by investing primarily in equity securities of companies
which the manager believes have the potential for high earnings growth. U.S.
Growth Series seeks to maximize capital appreciation. The Series seeks to
achieve its investment objective 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.
Delaware U.S. Government Securities Fund seeks to provide a high level
of current income consistent with the prudent investment risk by investing in
U.S. Treasury bills, notes, bonds, and other obligations issued or
unconditionally guaranteed by the full faith and credit of the U.S. Treasury,
and repurchase agreements fully secured by such obligations.
Delaware Tax-Free Arizona Insured Fund seeks to provide a high level of
current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware Minnesota Insured
Fund seeks to provide a high level of current income exempt from federal income
tax and the Minnesota personal income tax, consistent with the preservation of
capital.
Delaware Tax-Free Minnesota Intermediate Fund seeks to provide a high
level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.
Delaware Tax-Free California Insured Fund seeks to provide a high level
of current income exempt from federal income tax and the California personal
income tax, consistent with the preservation of capital. Delaware Tax-Free
Florida Insured Fund seeks to provide a high level of current income exempt from
federal income tax, consistent with the preservation of capital. The Fund will
seek to select investments that will enable its shares to be exempt from the
Florida intangible personal property tax. Delaware Tax-Free Florida Fund seeks
to provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital. The Fund will seek to select
investments that will enable its shares to be exempt from the Florida intangible
personal property tax. Delaware Tax-Free Kansas Fund seeks to provide a high
level of current income exempt from federal income tax, the Kansas personal
income tax and the Kansas intangible personal property tax, consistent with the
preservation of capital. Delaware Tax-Free Missouri Insured Fund seeks to
provide a high level of current income exempt from federal income tax and the
Missouri personal income tax, consistent with the preservation of capital.
Delaware Tax-Free New Mexico Fund seeks to provide a high level of current
income exempt from federal income tax and the New Mexico personal income
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tax, consistent with the preservation of capital. Delaware Tax-Free Oregon
Insured Fund seeks to provide a high level of current income exempt from federal
income tax and the Oregon personal income tax, consistent with the preservation
of capital.
Delaware Tax-Free Arizona Fund seeks to provide a high level of current
income exempt from federal income tax and the Arizona personal income tax,
consistent with the preservation of capital. Delaware Tax-Free California Fund
seeks to provide a high level of current income exempt from federal income tax
and the California personal income tax, consistent with the preservation of
capital. Delaware Tax-Free Iowa Fund seeks to provide a high level of current
income exempt from federal income tax and the Iowa personal income tax,
consistent with the preservation of capital. Delaware Tax-Free Idaho Fund seeks
to provide a high level of current income exempt from federal income tax and the
Idaho personal income tax, consistent with the preservation of capital. Delaware
Minnesota High-Yield Municipal Bond Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax primarily through investment in medium and lower grade municipal
obligations. Delaware National High-Yield Municipal Fund seeks to provide a high
level of income exempt from federal income tax, primarily through investment in
medium and lower grade municipal obligations. Delaware Tax-Free New York Fund
seeks to provide a high level of current income exempt from federal income tax
and the personal income tax of the state of New York and the city of New York,
consistent with the preservation of capital. Delaware Tax-Free Wisconsin Fund
seeks to provide a high level of current income exempt from federal income tax
and the Wisconsin personal income tax, consistent with the preservation of
capital. Delaware Montana Municipal Bond Fund seek as high a level of current
income exempt from federal income tax and from the Montana personal income tax,
as is consistent with preservation of capital.
Delaware Tax-Free Colorado Fund seeks to provide a high level of
current income exempt from federal income tax and the Colorado personal income
tax, consistent with the preservation of capital.
Delaware Select Growth Fund seeks long-term capital appreciation, which
the Fund attempts to achieve by investing primarily in equity securities
believed to have the potential for high earnings growth. Although the Fund, in
seeking its objective, may receive current income from dividends and interest,
income is only an incidental consideration in the selection of the Fund's
investments. Delaware Growth Stock Fund has an objective of long-term capital
appreciation. The Fund seeks to achieve its objective from equity securities
diversified among individual companies and industries. Delaware Tax-Efficient
Equity Fund seeks to obtain for taxable investors a high total return on an
after-tax basis. The Fund will attempt to achieve this objective by seeking to
provide a high long-term after-tax total return through managing its portfolio
in a manner that will defer the realization of accrued capital gains and
minimize dividend income.
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Delaware Tax-Free Minnesota Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax, consistent with the preservation of capital. Delaware Tax-Free North Dakota
Fund seeks to provide a high level of current income exempt from federal income
tax and the North Dakota personal income tax, consistent with the preservation
of capital.
For more complete information about any of the funds in the Delaware
Investments family, 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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Delaware Investments includes funds with a wide range of investment
objectives. Stock funds, income funds, national and state-specific tax-exempt
funds, money market funds, global and international funds and closed-end 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 Investments at 800-523-1918,
and shareholders of the Institutional Class should contact Delaware Investments
at 800-510-4015.
INVESTMENT MANAGER
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
SUB-ADVISER
Delaware Blue Chip Fund and
Delaware Social Awareness Fund:
Vantage Investment Advisors
630 Fifth Avenue
New York, NY 10111
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
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
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DELAWARE DECATUR EQUITY INCOME FUND
DELAWARE GROWTH AND INCOME FUND
DELAWARE BLUE CHIP FUND
DELAWARE SOCIAL AWARENESS FUND
DELAWARE DIVERSIFIED VALUE FUND
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A CLASSES
B CLASSES
C CLASSES
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INSTITUTIONAL CLASSES
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DELAWARE GROUP EQUITY FUNDS II
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PART B
STATEMENT OF
ADDITIONAL INFORMATION
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JANUARY 31, 2000
DELAWARE(SM)
INVESTMENTS
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