<PAGE>
DELAWARE
INVESTMENTS
---------------------
Philadelphia * London
Delaware Technology and Innovation Fund
Class A * Class B * Class C
Prospectus
December 22, 1999
Growth of Capital Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
1
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Table of Contents
Fund profile page 3
Delaware Technology and Innovation Fund
How we manage the Fund page 5
Our investment strategies 5
The securities we typically invest in 6
The risks of investing in the Fund 8
Who manages the Fund page 10
Investment manager 10
Portfolio managers 10
Fund administration (Who's who) 11
About your account page 12
Investing in the Fund 12
Choosing a share class 12
How to reduce your sales charge 14
How to buy shares 15
Retirement plans 16
How to redeem shares 17
Account minimums 18
Special services 19
Exchanges 19
Dividends, distributions and taxes 20
Certain management considerations page 21
Financial highlights page 21
Glossary page 22
2
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Profile: Delaware Technology and Innovation Fund
What are the Fund's goals?
Delaware Technology and Innovation Fund seeks to provide long-term capital
growth. Although the Fund will strive to meet its goal, there is no assurance
that it will.
What are the Fund's main investment strategies?
We invest primarily in stocks we believe will benefit from technological
advances and improvements. We strive to identify companies that offer
above-average opportunities for long-term price appreciation because they are
poised to benefit from the development, advancement and use of technology or
from innovations that may indirectly benefit from technology. The stocks can be
of any size or market capitalization, including securities of emerging or other
growth-oriented companies.
The Fund uses a bottom-up approach to stock selection that seeks companies that
are market leaders, have strong product cycles, innovative concepts or may
benefit from industry trends. We look at estimated growth rates, market
capitalization and cash flows as we strive to determine how attractive a company
is relative to other companies.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected by declines in stock prices. Although the Fund will not invest
more than 25% of its net assets in any one industry, the Fund will be highly
concentrated in the industries that are poised to benefit from technology or
from innovations that may indirectly benefit from technology, and, therefore,
may be particularly sensitive to changes in the general market and other
economic conditions that affect those industries. Companies in the rapidly
changing field of technology and in the fields which may benefit from innovation
and technology often face special risks. For example, their products may not
prove commercially successful or may become obsolete quickly. Earnings
disappointments can result in sharp price declines. A portfolio focused
primarily on these stocks is therefore likely to be much more volatile than one
with exposure to a greater variety of industries, especially over the short run.
In addition, the smaller companies that Delaware Technology and Innovation Fund
may invest in involve greater risk than other companies due to their size,
narrow product lines, limited financial resources and greater sensitivity to
economic conditions. Stocks of smaller companies may experience volatile trading
and price fluctuations, especially over the short term.
Delaware Technology and Innovation Fund is considered "non-diversified" under
the federal laws and rules that regulate mutual funds. That means the Fund may
allocate more of its net assets to investments in single securities than a
"diversified" fund. Thus, adverse effects on an investment held by the Fund may
affect a larger portion of overall assets and subject the Fund to greater risk.
For a more complete discussion of risk, please turn to page 8.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of
companies believed to benefit from technological advances and improvements.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
o Investors unwilling to accept the risks of a non-diversified, more
concentrated fund focusing on companies believed to benefit from technological
advances and improvements.
3
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What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ------------ ---------- ----------
CLASS A B C
- -------------------------------------------------------------- ------------ ---------- ----------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on 5.75% none none
Purchases as a percentage of offering price
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum contingent deferred sales charge (load) none(1) 5%(2) 1%(3)
as a percentage of original purchase price or
Redemption price, whichever is lower
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum sales charge (load) imposed on none none none
Reinvested dividends
- -------------------------------------------------------------- ------------ ---------- ----------
Redemption fees none none none
- -------------------------------------------------------------- ------------ ---------- ----------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets.
<TABLE>
<S> <C> <C> <C>
- -------------------------------------------------------------- ------------ ---------- ----------
Management fees 0.75% 0.75% 0.75%
- -------------------------------------------------------------- ------------ ---------- ----------
Distribution and service (12b-1) fees 0.25%(4) 1.00% 1.00%
- -------------------------------------------------------------- ------------ ---------- ----------
Other expenses(5) 0.78% 0.78% 0.78%
- -------------------------------------------------------------- ------------ ---------- ----------
Total operating expenses 1.78% 2.53% 2.53%
- -------------------------------------------------------------- ------------ ---------- ----------
Fee waivers and payments(6) (0.33%) (0.33%) (0.33%)
- -------------------------------------------------------------- ------------ ---------- ----------
Net expenses 1.45% 2.20% 2.20%
- -------------------------------------------------------------- ------------ ---------- ----------
</TABLE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown. (7) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
-------------- --------------- ------------ ------------------ ---------- --------------------
CLASS(8) A B B (if redeemed) C C (if redeemed)
------------ ----------------- ------------ ------------------ ---------- --------------------
<S> <C> <C> <C> <C> <C>
1 year $714 $228 $723 $228 $323
------------ ----------------- ------------ ------------------ ---------- --------------------
3 years $1,073 $756 $1,056 $756 $756
------------ ----------------- ------------ ------------------ ---------- --------------------
</TABLE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will apply to certain
redemptions. Additional Class A purchase options that involve a contingent
deferred sales charge may be permitted from time to time and will be
disclosed in the prospectus if they are available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Board of Trustees set the 12b-1 plan expenses for the Fund's Class A
shares at 0.25%. Expenses under the 12b-1 plan will not be more than 0.30%.
4
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(5) Other expenses are based on estimated amounts for the current fiscal year.
(6) The investment manager has contracted to waive fees and pay expenses from
the commencement of the Fund's operations through August 31, 2001 in order
to prevent total operating expenses (excluding any 12b-1 plan expenses,
taxes, interest, brokerage fees, and extraordinary expenses) from exceeding
1.20% of average daily net assets.
(7) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. This example reflects the net operating
expenses with expense waivers for year one and the total operating expenses
without expense waivers for years two and three.
(8) Class B shares automatically convert to Class A shares at the end of the
eighth year. The example does not assume this conversion since it only
reflects expenses for one and three years.
9
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How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for the Fund. The following describes of how the portfolio managers
pursue the Fund's investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
We strive to identify companies of any size that offer above-average
opportunities for long-term price appreciation. At least 65% of the Fund's
assets will be invested in common stocks issued by companies that we believe are
poised to benefit from the development, advancement and use of technology or
from innovations that may indirectly benefit from technology. In striving to
identify such companies, we will evaluate a company's managerial skills,
strategic focus, product development, position in its industry or relevant
markets, and innovative concepts.
Some industries likely to be represented in the portfolio are:
o computer software and hardware;
o semiconductor, minicomputers and peripheral equipment;
o telecommunication, media and information services;
o environmental services, chemicals and synthetic materials;
o defense and commercial electronics;
o data storage and retrieval; and
o biotechnology, health care and medical supplies.
The Fund uses a bottom-up approach to stock selection. We look at estimated
growth rates, market capitalization and cash flows of individual companies as we
strive to determine how attractive that company is relative to other companies.
We also rely on our own research in selecting companies for the portfolio. That
research might include one-on-one meetings with executives, company competitors,
industry experts and customers. Our goal is to select companies that are likely
to perform well over an extended time frame.
Delaware Technology and Innovation Fund's investment objective - to seek
long-term capital growth - is non-fundamental. This means that the Board of
Trustees may change the objective without obtaining shareholder approval. If the
objective were changed, we would notify shareholders before the change in the
objective became effective.
10
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The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ---------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of We invest at least 65% of the Fund's total
ownership in a corporation. Stockholders participate in the assets in equity securities (including common stocks and
corporation's profits and losses, proportionate to the number convertible securities). Generally, however, we invest 90%
of shares they own. to 100% of net assets in common stock. The Fund may invest in
common stocks of any market capitalization.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Foreign Securities and American Depositary Receipts: Although the Fund may invest up to 25% of its net assets in
Securities of foreign entities issued directly or, in the case foreign securities, we have no present intention of doing
of American Depositary Receipts, through a U.S. bank. ADRs are so. We may invest without limit in ADRs and will do so when
issued by a U.S. bank and represent a bank's holdings of a we believe they offer greater value and greater appreciation
stated number of shares of a foreign corporation. An ADR potential than U.S. securities.
entitles the holder to all dividends and capital gains earned
by the underlying foreign shares. ADRs are bought and sold the
same as U.S. securities.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Convertible securities: Usually preferred stocks or corporate The Fund may invest in convertible securities and
bonds that can be exchanged for a set number of shares of selects them on the basis of the common stock into which
common stock at a predetermined price. they can be converted, not on the basis of the debt ratings of
the convertible securities.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, Typically, the Fund uses repurchase agreements as a
such as the Fund, and seller of securities in which the seller short-term investment for the Fund's cash position. In
agrees to buy the securities back within a specified time at the order to enter into these repurchase agreements, the Fund
same price the buyer paid for them, plus an amount equal to must have collateral of at least 102% of the repurchase price.
an agreed upon interest rate. Repurchase agreements are often The Fund may not have more than 10% of its total assets in
viewed as equivalent to cash. repurchase agreements with maturities of over seven days.
The Fund will only enter into repurchase agreements in which the
collateral is composed of U.S. government securities.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Restricted securities: Privately placed securities whose resale The Fund may invest without limitation in liquid
is restricted under securities law. privately placed securities that are eligible for resale only
among certain institutional buyers without registration, including
"Rule 144A Securities."
- ----------------------------------------------------------------- ---------------------------------------------------------------
</TABLE>
12
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<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ---------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
Options and futures: Options represent a right to If we have stocks that have unrealized gains because of past
buy or sell a security at an agreed upon price at a future date. appreciation, we would want to protect those gains when we
The purchaser of an option may or may not choose to go anticipate adverse conditions. We might use options or futures
through with the transaction. to neutralize the effect of any price declines, without selling
the security. For example, we might buy a put option giving us
the right to sell the stock at a specific price on a specific
Futures contracts are agreements for the purchase or sale of date in the future. If prices then fell, our decline would be
securities at a specified price, on a specified date. Unlike offset by the gain on the put option. On the other hand, if prices
an option, a futures contract must be executed unless it is rose, we would lose the amount paid for the put option, but we
sold before the settlement date. would still own the stock, and could benefit from the
appreciation.
Certain options and futures may be considered to be derivative Use of these strategies can increase the operating costs of the
securities. Fund and can lead to loss of principal.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Illiquid securities: Securities that do not have a ready The Fund may invest no more than 15% of net assets in
market, and cannot be easily sold within seven days at illiquid securities.
approximately the price that a fund has valued them. Illiquid
securities include repurchase agreements maturing in more than
seven days.
- ----------------------------------------------------------------- ---------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities including warrants, preferred
stocks, and bonds. Please see the Statement of Additional Information for
additional descriptions of these securities as well as other securities in which
the Fund may invest.
Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and investors for
their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
The Fund may buy or sell securities on a when-issued or delayed delivery basis;
that is, paying for securities before delivery or taking delivery at a later
date. The Fund will designate cash or securities in amounts sufficient to cover
its obligations, and will value the designated assets daily.
Temporary defensive positions
In response to unfavorable market conditions, the Fund may make temporary
investments in bonds, cash or cash equivalents. These investments may not be
consistent with the Fund's investment objective.
Portfolio turnover
We anticipate that the Fund will have an annual portfolio turnover of more than
100%. A turnover rate of 100% would occur if the Fund sold and replaced
securities valued at 100% of its net assets within one year. High turnover rate
can result in higher brokerage costs and higher taxable gains for the investor.
13
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. An investment in the Fund typically provides the
best results when held for a number of years. The following chart gives a brief
description of some of the risks of investing in the Fund. Please see the
Statement of Additional Information for additional descriptions and risk
information.
<TABLE>
<CAPTION>
- -------------------------------------------------------- -------------------------------------------------------------------
Risks How we strive to manage them
- -------------------------------------------------------- -------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of the We maintain a long-term approach and
securities in a certain market-like the stock or bond focus on securities that we believe can continue to provide returns
market-will decline in value because of factors such over an extended period of time regardless of interim market
as economic conditions, future expectations or fluctuations. We do not try to predict overall market movements
investor confidence. and generally do not trade for short-term purposes.
We may hold a substantial part of the Fund's assets in cash or
cash equivalents as a temporary, defensive strategy.
- -------------------------------------------------------- -------------------------------------------------------------------
Industry and security risk is the risk that the value Although the Fund will not invest more than 25% of its net assets
of securities in a particular industry or the value of in one industry, it will concentrate its investments in companies
an individual stock or bond will decline because of that we believe will benefit from technological advances and
changing expectations for the performance of that innovation. As a consequence, the value of Fund shares can be
industry or for the individual company issuing the expected to fluctuate in response to factors affecting the industries
stock. in which these companies operate, and may fluctuate more widely than
a fund that invests in a broader range of industries. The Fund may
be more susceptible to any single economic, political or regulatory
occurrence affecting these companies.
To seek to reduce these risks, we limit the amount of the Fund's
assets invested in any one industry and we follow a rigorous
selection process before choosing securities for the Fund.
- -------------------------------------------------------- -------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------- -------------------------------------------------------------------
Risks How we strive to manage them
- -------------------------------------------------------- -------------------------------------------------------------------
<S> <C>
Interest rate risk is the risk that securities, The Fund can invest in small or mid-cap companies and we seek to
particularly bonds with longer maturities, will address the potential interest rate risks associated with those
decrease in value if interest rates rise and increase holdings by analyzing each company's financial situation and its
in value if interest rates fall. However, investments cash flow to determine the company's ability to finance future
in equity securities issued by small and medium sized expansion and operations. The potential impact that rising
companies, which often borrow money to finance interest rates might have on a stock is taken into consideration
operations, may also be adversely affected by rising before a stock is purchased.
interest rates.
- -------------------------------------------------------- -------------------------------------------------------------------
Foreign risk is the risk that foreign securities may The Fund typically invests only a small portion its portfolio in
be adversely affected by political instability, changes foreign securities or ADRs. If we do purchase foreign securities,
in currency exchange rates, foreign economic they are often denominated in U.S. dollars. We also tend to avoid
conditions or inadequate regulatory and accounting markets where we believe accounting principles or the regulatory
standards. structure are underdeveloped.
- -------------------------------------------------------- -------------------------------------------------------------------
Company size risk is the risk that prices of small The Fund seeks opportunities among companies of all sizes.
and medium-size companies may be more volatile However, because the Fund does not concentrate specifically
than larger companies because of limited financial on small or medium size companies, this risk may be balanced by
resources or dependence on narrow product lines. holdings of larger companies.
- -------------------------------------------------------- -------------------------------------------------------------------
Liquidity risk is the possibility that securities We limit exposure to illiquid securities.
cannot be readily sold within seven days at
approximately the price that a fund values them.
- -------------------------------------------------------- -------------------------------------------------------------------
Non-diversified funds are believed to be subject to The Fund will not be diversified under the 1940 Act.
greater risks because adverse effects on their security Non-diversified investment companies have the flexibility to
holdings may affect a larger portion of their overall invest as much as 50% of their assets in as few as two issuers
assets. and no single issuer accounts for more than 25% of the portfolio.
The remaining 50% of the portfolio must be diversified so that no
more than 5% of a fund's assets is invested in the securities of a
single issuer.
- -------------------------------------------------------- -------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------- -------------------------------------------------------------------
Risks How we strive to manage them
- -------------------------------------------------------- -------------------------------------------------------------------
<S> <C>
Futures and options risk is the possibility that a We will not use futures and options for speculative reasons. We
fund may experience a significant loss if it may use futures and options to protect gains in the portfolio
employs an options or futures strategy related to a without actually selling a security. We may also use options and
security or a market index and that security or index futures to quickly invest excess cash so that the portfolio
moves in the opposite direction from what the is generally fully invested.
portfolio manager anticipated. Futures and options also
involve additional expenses, which could reduce any
benefit or increase any loss to a fund from using the
strategy.
- -------------------------------------------------------- -------------------------------------------------------------------
</TABLE>
16
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Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust, which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For its services to the Fund, Delaware Management
Company will receive the following annual fee from the Fund.
----------------------------------------------------------------
Fee based on average daily net assets
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0.75% on the first $500 million;
0.70% on the next $500 million;
0.65% on the next $1.5 billion;
0.60% on assets in excess of $2.5 billion
----------------------------------------------------------------
Portfolio managers
Jeffrey W. Hynoski has primary responsibility for making day-to-day investment
decisions for Delaware Technology and Innovation Fund. In making decisions for
the Fund, Mr. Hynoski regularly consults with Gerald S. Frey, Senior Portfolio
Manager of the growth team.
Jeffrey W. Hynoski, Vice President, Portfolio Manager, joined Delaware
Investments in 1998. Previously, he served as a Vice President at Bessemer Trust
Company in the mid and large capitalization growth equity group, where he
specialized in the areas of science, technology and telecommunications. Prior to
that, Mr. Hynoski held positions at Lord Abbett & Co. and Cowen Asset
Management. Mr. Hynoski holds a BS in Finance from the University of Delaware
and an MBA with a concentration in Investments/Portfolio Management/Financial
Economics from Pace University. Mr. Hynoski has been managing the Fund since its
inception.
Gerald S. Frey, Senior Vice President/Senior Portfolio Manager, has 22 years'
experience in the money management business and holds a BA in Economics from
Bloomsburg University and attended Wilkes College and New York University. Prior
to joining Delaware Investments in 1996, he was a Senior Director with Morgan
Grenfell Capital Management in New York.
17
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Who's who?
Following information shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
<TABLE>
<S> <C> <C> <C>
Board of Trustees
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page 10 for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Financial advisers
Shareholders
</TABLE>
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
18
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About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class
Class A
o Class A shares have an up-front sales charge of up to 5.75% that you pay when
you buy the shares. The offering price for Class A shares includes the
front-end sales charge.
o If you invest $50,000 or more, your front-end sales charge will be reduced.
o You may qualify for other reduced sales charges, as described in "How to
reduce your sales charge," and under certain circumstances the sales charge
may be waived; please see the Statement of Additional Information.
o Class A shares are also subject to an annual 12b-1 fee no greater than 0.30%
(currently 0.25%) of average daily net assets, which is lower than the 12b-1
fee for Class B and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge except in the limited circumstances described in the table below.
Class A sales charges
<TABLE>
<CAPTION>
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Amount of purchase Sales charge as % Sales charge as % Dealer's commission as %
of offering price of amount invested of offering price
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
$50,000 but 4.75% 5.00% 4.00%
under $100,000
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
$100,000 but 3.75% 3.90% 3.00%
under $250,000
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
$250,000 but 2.50% 2.60% 2.00%
under $500,000
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
$500,000 but 2.00% 2.04% 1.60%
under $1 million
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
</TABLE>
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you may have to pay a limited contingent deferred
sales charge of 1% if you redeem these shares within the first year and 0.50% if
you redeem them within the second year.
19
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Amount of purchase Sales charge as % Sales charge as % Dealer's commission as %
of offering price of amount invested of offering price
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
<S> <C> <C> <C>
$1 million up to none none 1.00%
$5 million
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Next $20 million none none 0.50%
Up to $25 million
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Amount over $25 million none none 0.25%
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
About your account (continued)
</TABLE>
Class B
o Class B shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent
deferred sales charge if you redeem your shares within six years after you
buy them.
o If you redeem Class B shares during the first year after you buy them, the
shares will be subject to a contingent deferred sales charge of 5%. The
contingent deferred sales charge is 4% during the second year, 3% during
the third and fourth years, 2% during the fifth year, 1% during the sixth
year, and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately eight years after you buy your Class B shares, absent
12b-1 fee waivers, they are subject to annual 12b-1 fees no greater than 1%
of average daily net assets, of which 0.25% are service fees paid to the
distributor, dealers or others for providing services and maintaining
accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses and
any dividends paid on these shares are lower than dividends on Class A
shares.
o Approximately eight years after you buy them, Class B shares automatically
convert into Class A shares with a 12b-1 fee of no more than 0.30%.
Conversion may occur as late as three months after the eighth anniversary
of purchase, during which time Class B's higher 12b-1 fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
Class C
o Class C shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent
deferred sales charge of 1% if you redeem your shares within 12 months
after you buy them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Class C shares are subject to an annual 12b-1 fee which may not be greater
than 1% of average daily net assets, of which 0.25% are service fees paid
to the distributor, dealers or others for providing services and
maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses and
pay lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at any
one time. The limitation on maximum purchases varies for retirement plans.
Each share class of the Fund has adopted a separate 12b-1 plan that allows it to
pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of the Fund's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
20
<PAGE>
About your account (continued)
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- ----------------------- -------------------------------------- -----------------------------------------------------------------
Program How it works Share class
A B C
- ----------------------- -------------------------------------- --------------- -------------------------------------------------
<S> <C> <C> <C>
Letter of Intent Through a Letter of Intent you X Although the Letter of Intent and Rights of
agree to invest a certain amount Accumulation do not apply to the purchase of
in Delaware Investment Funds Class B and C shares, you can combine your
(except money market funds with purchase of Class A shares with your purchase
no sales charge) over a 13-month of B and C shares to fulfill your Letter of
period to qualify for reduced Intent or qualify for Rights of Accumulation.
front-end sales charges.
- ----------------------- -------------------------------------- ---------------
Rights of You can combine your holdings or X
Accumulation purchases of all funds in the
Delaware Investments family
(except money market funds with
no sales charge) as well as the
holdings and purchases of your
spouse and children under 21 to
qualify for reduced front-end
sales charges.
- ----------------------- -------------------------------------- --------------- -------------------------------------------------
Reinvestment of Up to 12 months after you redeem For Class For Class B, your account Not
redeemed shares shares, you can reinvest the A, you will will be credited with the available.
proceeds with no additional not have to contingent deferred sales
sales charge. pay an charge you previously paid
additional on the amount you are
front-end reinvesting. Your schedule
sales for contingent deferred
charge. sales charges and conversion
to Class A will not start over
again; it will pick up from
the point at which
you redeemed your shares.
- ----------------------- -------------------------------------- --------------- -------------------------------- ----------------
SIMPLE IRA, SEP These investment plans may X There is no reduction in sales charges for
IRA, SARSEP, qualify for reduced sales Class B or Class C shares for group purchases
Prototype Profit charges by combining the by retirement plans.
Sharing, Pension, purchases of all members of the
401(k), SIMPLE group. Members of these groups
401(k), may also qualify to purchase
403(b)(7), and shares without a front-end sales
457 Retirement charge and a waiver of any
Plans contingent deferred sales
charges.
- ----------------------- -------------------------------------- --------------- -------------------------------------------------
</TABLE>
21
<PAGE>
About your account (continued)
How to buy shares
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service. For more information about how to sign up for this service, call our
Shareholder Service Center at 800.523.1918.
22
<PAGE>
About your account (continued)
Once you have completed an application, you can open an account with an initial
investment of $1,000 and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act; or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receives your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on the
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of regular
trading of the New York Stock Exchange each business day that the Exchange is
open. We calculate this value by adding the market value of all the securities
and assets in the Fund's portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The result is the net
asset value per share. We price securities and other assets for which market
quotations are available at their market value. We price fixed-income securities
on the basis of valuations provided to us by an independent pricing service that
uses methods approved by the board of trustees. Any fixed-income securities that
have a maturity of less than 60 days we price at amortized cost. For all other
securities, we use methods approved by the board of trustees that are designed
to price securities at their fair market value.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Fund may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.
23
<PAGE>
About your account (continued)
How to redeem shares
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit, a bank wire fee may be deducted from
your proceeds. Bank information must be on file before you request a wire
redemption.
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service. For
more information about how to sign up for this service, call our Shareholder
Service Center at 800.523.1918.
24
<PAGE>
About your account (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time), you will receive the net asset value as determined on
the business day we receive your request. We will deduct any applicable
contingent deferred sales charges. You may also have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the next
business day, but no later than seven days after we receive your request to sell
your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares--not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs, Uniform Gift to Minors Act accounts or
accounts with automatic investing plans, $500 for Education IRAs) for three or
more consecutive months, you will have until the end of the current calendar
quarter to raise the balance to the minimum. If your account is not at the
minimum by the required time, you will be charged a $9 fee for that quarter and
each quarter after that until your account reaches the minimum balance. If your
account does not reach the minimum balance, the Fund may redeem your account
after 60 days' written notice to you.
25
<PAGE>
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly or quarterly
investments directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as social security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for the same class of shares
in other funds, your new shares will be subject to the same contingent deferred
sales charge as the shares you originally purchased. The holding period for the
CDSC will also remain the same, with the amount of time you held your original
shares being credited toward the holding period of your new shares. You don't
pay sales charges on shares that you acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's Prospectus and read it carefully before buying shares through an
exchange.
26
<PAGE>
About your account (continued)
Special services (continued)
MoneyLine(SM) On Demand Service
Through our MoneyLine(SM) On Demand Service, you or your financial adviser may
transfer money between your Fund account and your predesignated bank account by
telephone request. This service is not available for retirement plans. MoneyLine
has a minimum transfer of $25 and a maximum transfer of $50,000, except for
purchases into IRAs. Delaware Investments does not charge a fee for this
service; however, your bank may assess one.
MoneyLine Direct Deposit Service
Through our MoneyLine Direct Deposit Service you can have $25 or more in
dividends and distributions deposited directly to your bank account. Delaware
Investments does not charge a fee for this service; however, your bank may
assess one. This service is not available for retirement plans.
Systematic Withdrawal Plan
Through our Systematic Withdrawal Plan you can arrange a regular monthly or
quarterly payment from your account made to you or someone you designate. If the
value of your account is $5,000 or more, you can make withdrawals of at least
$25 monthly, or $75 quarterly. You may also have your withdrawals deposited
directly to your bank account through our MoneyLine Direct Deposit Service.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
27
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The Year 2000 Problem may also
adversely affect the issuers of securities in which the Fund invests. The
portfolio managers and investment professionals of the Fund consider Year 2000
compliance (including, but not limited to, any or all of the following: impact
on business; cost of compliance plan review and contingency planning; and vendor
compliance) in the securities selection and investment process. However, there
can be no guarantee that, even with their due diligence efforts, they will be
able to predict the affect of Year 2000 on any company or the performance of its
securities.
Financial highlights
Financial highlights are not shown for the Fund since it commenced operations
after the close of the fiscal year end.
28
<PAGE>
Glossary
How to use this glossary
The glossary includes definitions of investment terms used throughout the
prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical rating organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Contingent deferred sales charge (CDSC)
Fee charged by some mutual funds when shares are redeemed (sold back to the
fund) within a set number of years; an alternative method for investors to
compensate a financial adviser for advice and service, rather than an up-front
commission.
Corporate bond
A debt security issued by a corporation. See bond.
Depreciation
A decline in an investment's value.
29
<PAGE>
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See bonds.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
NASD Regulation, Inc. (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Nationally recognized statistical rating organization (NRSRO)
A company that assesses the credit quality of bonds, commercial paper, preferred
and common stocks and municipal short-term issues, rating the probability that
the issuer of the debt will meet the scheduled interest payments and repay the
principal. Ratings are published by such companies as Moody's Investors Service,
Inc. (Moody's), Standard & Poor's Ratings Group (S&P), Duff & Phelps, Inc.
(Duff), and Fitch IBCA, Inc. (Fitch).
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stock also often pays dividends at a fixed rate
and is sometimes convertible into common stock.
30
<PAGE>
Price/earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
financial advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
31
<PAGE>
Delaware Technology and Innovation Fund
Additional information about the Fund's investments will be available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
Prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in the Fund, you can write to us at 1818 Market Street, Philadelphia, PA 19103,
or call toll-free 800.523.1918. You may also obtain additional information about
the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawareinvestments.com
- ---------------------------
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m.
Eastern time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone redemptions
and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-1485
DELAWARE
INVESTMENTS
Philadelphia * London
P-002 [--] PP 12/99
<PAGE>
DELAWARE
INVESTMENTS
---------------------
Philadelphia * London
Delaware Technology and Innovation Fund
Institutional Class
Prospectus
December 22, 1999
Growth of Capital Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
Table of Contents
Fund profile page 3
Delaware Technology and Innovation Fund
How we manage the Fund page 5
Our investment strategies 5
The securities we typically invest in 6
The risks of investing in the Fund 8
Who manages the Fund page 10
Investment manager 10
Portfolio managers 10
Fund administration (Who's who) 11
About your account page 12
Investing in the Fund 12
How to buy shares 13
How to redeem shares 15
Account minimum 16
Exchanges 16
Dividends, distributions and taxes 16
Certain management considerations page 17
Financial highlights page 17
Glossary page 18
2
<PAGE>
Profile: Delaware Technology and Innovation Fund
What are the Fund's goals?
Delaware Technology and Innovation Fund seeks to provide long-term capital
growth. Although the Fund will strive to meet its goal, there is no assurance
that it will.
What are the Fund's main investment strategies?
We invest primarily in stocks we believe will benefit from technological
advances and improvements. We strive to identify companies that offer
above-average opportunities for long-term price appreciation because they are
poised to benefit from the development, advancement and use of technology or
from innovations that may indirectly benefit from technology. The stocks can be
of any size or market capitalization, including securities of emerging or other
growth-oriented companies.
The Fund uses a bottom-up approach to stock selection that seeks companies that
are market leaders, have strong product cycles, innovative concepts or may
benefit from industry trends. We look at estimated growth rates, market
capitalization and cash flows as we strive to determine how attractive a company
is relative to other companies.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected by declines in stock prices. Although the Fund will not invest
more than 25% of its net assets in any one industry, the Fund will be highly
concentrated in the industries that are poised to benefit from technology or
from innovations that may indirectly benefit from technology, and, therefore,
may be particularly sensitive to changes in the general market and other
economic conditions that affect those industries. Companies in the rapidly
changing field of technology and in the fields which may benefit from innovation
and technology often face special risks. For example, their products may not
prove commercially successful or may become obsolete quickly. Earnings
disappointments can result in sharp price declines. A portfolio focused
primarily on these stocks is therefore likely to be much more volatile than one
with exposure to a greater variety of industries, especially over the short run.
In addition, the smaller companies that Delaware Technology and Innovation Fund
may invest in involve greater risk than other companies due to their size,
narrow product lines, limited financial resources and greater sensitivity to
economic conditions. Stocks of smaller companies may experience volatile trading
and price fluctuations, especially over the short term.
Delaware Technology and Innovation Fund is considered "non-diversified" under
the federal laws and rules that regulate mutual funds. That means the Fund may
allocate more of its net assets to investments in single securities than a
"diversified" fund. Thus, adverse effects on an investment held by the Fund may
affect a larger portion of overall assets and subject the Fund to greater risk.
For a more complete discussion of risk, please turn to page 8.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of
companies believed to benefit from technological advances and improvements.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
o Investors unwilling to accept the risks of a non-diversified, more
concentrated fund focusing on companies believed to benefit from
technological advances and improvements.
3
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
- -------------------------------------------------------------- ------------
Maximum sales charge (load) imposed on
purchases as a percentage of offering price none
- -------------------------------------------------------------- ------------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none
- -------------------------------------------------------------- ------------
Maximum sales charge (load) imposed on
reinvested dividends none
- -------------------------------------------------------------- ------------
Redemption fees none
- -------------------------------------------------------------- ------------
Exchange Fees(1) none
- -------------------------------------------------------------- ------------
Annual fund operating expenses are deducted from the Fund's assets.
- -------------------------------------------------------------- ------------
Management fees 0.75%
- -------------------------------------------------------------- ------------
Distribution and service (12b-1) fees none
- -------------------------------------------------------------- ------------
Other expenses(2) 0.78%
- -------------------------------------------------------------- ------------
Total operating expenses 1.53%
- -------------------------------------------------------------- ------------
Fee waivers and payments(3) (0.33%)
- -------------------------------------------------------------- ------------
Net expenses 1.20%
- -------------------------------------------------------------- ------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(4) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
------------ --------
1 year $122
------------ --------
3 years $451
------------ --------
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange
your shares into a fund that has a front-end sales charge.
(2) Other expenses are based on estimated amounts for the current fiscal
year.
(3) The investment manager has contracted to waive fees and pay expenses from
the commencement of the Fund's operations through August 31, 2001 in
order to prevent total operating expenses (excluding any taxes, interest,
brokerage fees, and extraordinary expenses) from exceeding 1.20% of
average daily net assets.
(4) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. This example reflects the net
operating expenses with expense waivers for year one and the total
operating expenses without expense waivers for years two and three.
4
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for the Fund. The following describes of how the portfolio managers
pursue the Fund's investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
We strive to identify companies of any size that offer above-average
opportunities for long-term price appreciation. At least 65% of the Fund's
assets will be invested in common stocks issued by companies that we believe are
poised to benefit from the development, advancement and use of technology or
from innovations that may indirectly benefit from technology. In striving to
identify such companies, we will evaluate a company's managerial skills,
strategic focus, product development, position in its industry or relevant
markets, and innovative concepts.
Some industries likely to be represented in the portfolio are:
o computer software and hardware;
o semiconductor, minicomputers and peripheral equipment;
o telecommunication, media and information services;
o environmental services, chemicals and synthetic materials;
o defense and commercial electronics;
o data storage and retrieval; and
o biotechnology, health care and medical supplies.
The Fund uses a bottom-up approach to stock selection. We look at estimated
growth rates, market capitalization and cash flows of individual companies as we
strive to determine how attractive that company is relative to other companies.
We also rely on our own research in selecting companies for the portfolio. That
research might include one-on-one meetings with executives, company competitors,
industry experts and customers. Our goal is to select companies that are likely
to perform well over an extended time frame.
Delaware Technology and Innovation Fund's investment objective - to seek
long-term capital growth - is non-fundamental. This means that the Board of
Trustees may change the objective without obtaining shareholder approval. If the
objective were changed, we would notify shareholders before the change in the
objective became effective.
5
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ---------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of ownership in We invest at least 65% of the Fund's total assets in equity
a corporation. Stockholders participate in the corporation's securities (including common stocks and convertible
profits and losses, proportionate to the number of shares they securities). Generally, however, we invest 90% to 100% of
own. net assets in common stock. The Fund may invest in common
stocks of any market capitalization.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Foreign Securities and American Depositary Receipts: Although the Fund may invest up to 25% of its net assets in
Securities of foreign entities issued directly or, in the case foreign securities, we have no present intention of doing
of American Depositary Receipts, through a U.S. bank. ADRs are so. We may invest without limit in ADRs and will do so when
issued by a U.S. bank and represent a bank's holdings of a we believe they offer greater value and greater appreciation
stated number of shares of a foreign corporation. An ADR potential than U.S. securities.
entitles the holder to all dividends and capital gains earned
by the underlying foreign shares. ADRs are bought and sold the
same as U.S. securities.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Convertible securities: Usually preferred stocks or corporate The Fund may invest in convertible securities and selects
bonds that can be exchanged for a set number of shares of them on the basis of the common stock into which they can
common stock at a predetermined price. be converted, not on the basis of the debt ratings of the
convertible securities.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, such as Typically, the Fund uses repurchase agreements as a
the Fund, and seller of securities in which the seller agrees short-term investment for the Fund's cash position. In order to
buy the securities back within a specified time at the same to enter into these repurchase agreements, the Fund must have
price the buyer paid for them, plus an amount equal to an collateral of at least 102% of the repurchase price. The Fund
agreed upon interest rate. Repurchase agreements are often may not have more than 10% of its total assets in repurchase
viewed as equivalent to cash. agreements with maturities of over seven days. The Fund will
only enter into repurchase agreements in which the collateral
is composed of U.S. government securities.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Restricted securities: Privately placed securities whose resale The Fund may invest without limitation in liquid privately
is restricted under securities law. placed securities that are eligible for resale only among
certain institutional buyers without registration, including
"Rule 144A Securities."
- ----------------------------------------------------------------- ---------------------------------------------------------------
Options and futures: Options represent a right to buy or sell a If we have stocks that have unrealized gains because of past
security at an agreed upon price at a future date. The appreciation, we would want to protect those gains when we
purchaser of an option may or may not choose to go through with anticipate adverse conditions. We might use options or
the transaction. futures to neutralize the effect of any price declines,
without selling the security. For example, we might buy a
Futures contracts are agreements for the purchase or sale of put option giving us the right to sell the stock at a
securities at a specified price, on a specified date. Unlike specific price on a specific date in the future. If prices
an option, a futures contract must be executed unless it is then fell, our decline would be offset by the gain on the put
sold before the settlement date. option. On the other hand, if prices rose, we would lose the
amount paid for the put option, but we would still own the
Certain options and futures may be considered to be derivative stock, and could benefit from the appreciation.
securities.
Use of these strategies can increase the operating costs of the
Fund and can lead to loss of principal.
- ----------------------------------------------------------------- ---------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ---------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
Illiquid securities: Securities that do not have a ready The Fund may invest no more than 15% of net assets in
market, and cannot be easily sold within seven days at illiquid securities.
approximately the price that a fund has valued them. Illiquid
securities include repurchase agreements maturing in more than
seven days.
- ----------------------------------------------------------------- ---------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities including warrants, preferred
stocks, and bonds. Please see the Statement of Additional Information for
additional descriptions of these securities as well as other securities in which
the Fund may invest.
Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and investors for
their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
The Fund may buy or sell securities on a when-issued or delayed delivery basis;
that is, paying for securities before delivery or taking delivery at a later
date. The Fund will designate cash or securities in amounts sufficient to cover
its obligations, and will value the designated assets daily.
Temporary defensive positions
In response to unfavorable market conditions, the Fund may make temporary
investments in bonds, cash or cash equivalents. These investments may not be
consistent with the Fund's investment objective.
Portfolio turnover
We anticipate that the Fund will have an annual portfolio turnover of more than
100%. A turnover rate of 100% would occur if the Fund sold and replaced
securities valued at 100% of its net assets within one year. High turnover rate
can result in higher brokerage costs and higher taxable gains for the investor.
7
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. An investment in the Fund typically provides the
best results when held for a number of years. The following chart gives a brief
description of some of the risks of investing in the Fund. Please see the
Statement of Additional Information for additional descriptions and risk
information.
<TABLE>
<CAPTION>
- -------------------------------------------------------- -------------------------------------------------------------------
Risks How we strive to manage them
- -------------------------------------------------------- -------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of the We maintain a long-term approach and focus on securities that we
securities in a certain market-like the stock or bond believe can continue to provide returns over an extended period
market-will decline in value because of factors such of time regardless of interim market fluctuations. We do not try
as economic conditions, future expectations or to predict overall market movements and generally do not trade
investor confidence. for short-term purposes.
We may hold a substantial part of the Fund's assets in cash
or cash equivalents as a temporary, defensive strategy.
- -------------------------------------------------------- -------------------------------------------------------------------
Industry and security risk is the risk that the value Although the Fund will not invest more than 25% of its net assets
of securities in a particular industry or the value of in one industry, it will concentrate its investments in companies
an individual stock or bond will decline because of that we believe will benefit from technological advances and
changing expectations for the performance of that innovation. As a consequence, the value of Fund shares can be
industry or for the individual company issuing the expected to fluctuate in response to factors affecting the
stock. industries in which these companies operate, and may fluctuate
more widely than a fund that invests in a broader range of
industries. The Fund may be more susceptible to any single economic,
political or regulatory occurrence affecting these companies.
To seek to reduce these risks, we limit the amount of the Fund's
assets invested in any one industry and we follow a rigorous
selection process before choosing securities for the Fund.
- -------------------------------------------------------- -------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------- -------------------------------------------------------------------
Risks How we strive to manage them
- -------------------------------------------------------- -------------------------------------------------------------------
<S> <C>
Interest rate risk is the risk that securities, The Fund can invest in small or mid-cap companies and we seek to
particularly bonds with longer maturities, will address the potential interest rate risks associated with those
decrease in value if interest rates rise and increase holdings by analyzing each company's financial situation and its
in value if interest rates fall. However, investments cash flow to determine the company's ability to finance future
in equity securities issued by small and medium sized expansion and operations. The potential impact that rising
companies, which often borrow money to finance interest rates might have on a stock is taken into consideration
operations, may also be adversely affected by rising before a stock is purchased.
interest rates.
- -------------------------------------------------------- -------------------------------------------------------------------
Foreign risk is the risk that foreign securities may The Fund typically invests only a small portion its portfolio in
be adversely affected by political instability, foreign securities or ADRs. If we do purchase foreign securities,
changes in currency exchange rates, foreign economic they are often denominated in U.S. dollars. We also tend to avoid
conditions or inadequate regulatory and accounting markets where we believe accounting principles or the regulatory
standards. structure are underdeveloped.
- -------------------------------------------------------- -------------------------------------------------------------------
Company size risk is the risk that prices of small and The Fund seeks opportunities among companies of all sizes.
medium-size companies may be more volatile than larger However, because the Fund does not concentrate specifically on
companies because of limited financial resources or small or medium size companies, this risk may be balanced by
dependence on narrow product lines. holdings of larger companies.
- -------------------------------------------------------- -------------------------------------------------------------------
Liquidity risk is the possibility that securities We limit exposure to illiquid securities.
cannot be readily sold within seven days at
approximately the price that a fund values them.
- -------------------------------------------------------- -------------------------------------------------------------------
Non-diversified funds are believed to be subject to The Fund will not be diversified under the 1940 Act.
greater risks because adverse effects on their Non-diversified investment companies have the flexibility to
security holdings may affect a larger portion of their invest as much as 50% of their assets in as few as two issuers
overall assets. and no single issuer accounts for more than 25% of the
portfolio. The remaining 50% of the portfolio must be
diversified so that no more than 5% of a fund's assets is
invested in the securities of a single issuer.
- -------------------------------------------------------- -------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------- -------------------------------------------------------------------
Risks How we strive to manage them
- -------------------------------------------------------- -------------------------------------------------------------------
<S> <C>
Futures and options risk is the possibility that a We will not use futures and options for speculative reasons. We
fund may experience a significant loss if it employs may use futures and options to protect gains in the portfolio
an options or futures strategy related to a security without actually selling a security. We may also use options and
or a market index and that security or index moves in futures to quickly invest excess cash so that the portfolio is
the opposite direction from what the portfolio manager generally fully invested.
anticipated. Futures and options also involve
additional expenses, which could reduce any benefit
or increase any loss to a fund from using the strategy.
- -------------------------------------------------------- -------------------------------------------------------------------
</TABLE>
10
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust, which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For its services to the Fund, Delaware Management
Company will receive the following annual fee from the Fund.
----------------------------------------------------------------
Fee based on average daily net assets
----------------------------------------------------------------
0.75% on the first $500 million;
0.70% on the next $500 million;
0.65% on the next $1.5 billion;
0.60% on assets in excess of $2.5 billion
----------------------------------------------------------------
Portfolio managers
Jeffrey W. Hynoski has primary responsibility for making day-to-day investment
decisions for Delaware Technology and Innovation Fund. In making decisions for
the Fund, Mr. Hynoski regularly consults with Gerald S. Frey, Senior Portfolio
Manager of the growth team.
Jeffrey W. Hynoski, Vice President, Portfolio Manager, joined Delaware
Investments in 1998. Previously, he served as a Vice President at Bessemer Trust
Company in the mid and large capitalization growth equity group, where he
specialized in the areas of science, technology and telecommunications. Prior to
that, Mr. Hynoski held positions at Lord Abbett & Co. and Cowen Asset
Management. Mr. Hynoski holds a BS in Finance from the University of Delaware
and an MBA with a concentration in Investments/Portfolio Management/Financial
Economics from Pace University. Mr. Hynoski has been managing the Fund since its
inception.
Gerald S. Frey, Senior Vice President/Senior Portfolio Manager, has 22 years'
experience in the money management business and holds a BA in Economics from
Bloomsburg University and attended Wilkes College and New York University. Prior
to joining Delaware Investments in 1996, he was a Senior Director with Morgan
Grenfell Capital Management in New York.
11
<PAGE>
Who's who?
Following information shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
<TABLE>
<CAPTION>
Board of Trustees
<S> <C> <C>
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page 10 for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
</TABLE>
Shareholders
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
12
<PAGE>
About your account
Investing in the Fund
Institutional Class shares are available for purchase only by the following:
o 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;
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor;
o 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 affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts;
o 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 to the financial institution of a Rule 12b-1 Plan fee; and
o 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.
13
<PAGE>
About your account (continued)
How to buy shares
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014128934013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us at 800.510.4015 so we can assign you an
account number.
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800.510.4015.
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
14
<PAGE>
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on the
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of regular
trading of the New York Stock Exchange each business day that the Exchange is
open. We calculate this value by adding the market value of all the securities
and assets in the Fund's portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The result is the net
asset value per share. We price securities and other assets for which market
quotations are available at their market value. We price fixed-income securities
on the basis of valuations provided to us by an independent pricing service that
uses methods approved by the board of trustees. Any fixed-income securities that
have a maturity of less than 60 days we price at amortized cost. For all other
securities, we use methods approved by the board of trustees that are designed
to price securities at their fair market value.
15
<PAGE>
About your account (continued)
How to redeem shares
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. You can also fax
your written request to 215.255.8864. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on an account.
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. Bank information must be on file before you request a wire redemption.
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
16
<PAGE>
About your account (continued)
How to redeem shares (cont.)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares, you
will receive the net asset value as determined on the business day we receive
your request. We will send you a check, normally the next business day, but no
later than seven days after we receive your request to sell your shares. If you
purchased your shares by check, we will wait until your check has cleared, which
can take up to 15 days, before we send your redemption proceeds.
Account minimum
If you redeem shares and your account balance falls below $250, the Fund may
redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
17
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The Year 2000 Problem may also
adversely affect the issuers of securities in which the Fund invests. The
portfolio managers and investment professionals of the Fund consider Year 2000
compliance (including, but not limited to, any or all of the following: impact
on business; cost of compliance plan review and contingency planning; and vendor
compliance) in the securities selection and investment process. However, there
can be no guarantee that, even with their due diligence efforts, they will be
able to predict the affect of Year 2000 on any company or the performance of its
securities.
Financial highlights
Financial highlights are not shown for the Fund since it commenced operations
after the close of the fiscal year end.
18
<PAGE>
Glossary
How to use this glossary
The glossary includes definitions of investment terms used throughout the
prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical rating organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Corporate bond
A debt security issued by a corporation. See Bond.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
19
<PAGE>
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bond.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
NASD Regulation, Inc. (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Nationally recognized statistical rating organization (NRSRO)
A company that assesses the credit quality of bonds, commercial paper, preferred
and common stocks and municipal short-term issues, rating the probability that
the issuer of the debt will meet the scheduled interest payments and repay the
principal. Ratings are published by such companies as Moody's Investors Service,
Inc. (Moody's), Standard & Poor's Ratings Group (S&P), Duff & Phelps, Inc.
(Duff), and Fitch IBCA, Inc. (Fitch).
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stock also often pays dividends at a fixed rate
and is sometimes convertible into common stock.
Price-to-earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
20
<PAGE>
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
financial advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
21
<PAGE>
Delaware Technology and Innovation Fund
Additional information about the Fund's investments will be available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
Prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in the Fund, you can write to us at 1818 Market Street, Philadelphia, PA 19103,
or call toll-free 800.523.1918. You may also obtain additional information about
the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawareinvestments.com
- ---------------------------
E-mail
[email protected]
Client Services Representative
800.510.4015
Delaphone Service
800.362.FUND (800.362.3863)
For convenient access to account information or current performance information
on all Delaware Investments Funds seven days a week, 24 hours a day, use this
Touch-Tone service.
Investment Company Act file number: 811-1485
DELAWARE
INVESTMENTS
Philadelphia * London
P-002 [--] PP 12/99
<PAGE>
DELAWARE
INVESTMENTS
---------------------
Philadelphia * London
Delaware American Services Fund
Delaware Research Fund
Delaware Large Cap Growth Fund
Class A * Class B* Class C
Prospectus
December 22, 1999
Growth of Capital Funds
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
Table of Contents
Fund profiles page 3
Delaware American Services Fund 3
Delaware Research Fund 5
Delaware Large Cap Growth Fund 7
How we manage the Funds page 9
Our investment strategies 9
The securities we typically invest in 11
The risks of investing in the Funds 13
Who manages the Funds page 15
Investment manager 15
Portfolio managers 15
Fund administration (Who's who) 17
About your account page 18
Investing in the Funds 18
Choosing a share class 18
How to reduce your sales charge 20
How to buy shares 21
Retirement plans 22
How to redeem shares 23
Account minimums 24
Special services 25
Exchanges 25
Dividends, distributions and taxes 25
Certain management considerations page 26
Financial highlights page 26
Glossary page 27
2
<PAGE>
Profile: Delaware American Services Fund
What are the Fund's goals?
Delaware American Services Fund seeks to provide long-term capital growth.
Although the Fund will strive to meet its goal, there is no assurance that it
will.
What are the Fund's main investment strategies?
We invest primarily in stocks of U.S. companies in the financial services,
business services, and consumer services sectors. The Fund may from time to time
focus more on any one of these sectors over the others and may invest in
securities of companies in other service sectors. The Fund employs a bottom-up
stock selection approach to find companies we believe to be the leading
companies in each of these sectors. We evaluate a
3
<PAGE>
stock's characteristics as well as the individual company's management
capabilities and financial strength. The stocks can be of any size or market
capitalization, including securities of emerging or other growth-oriented
companies.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease according to changes
in the value of the Fund's investments. This Fund will be affected by declines
in stock prices.
Although the Fund will not invest more than 25% of its net assets in any one
industry, the Fund may from time to time be more concentrated in the financial,
business or consumer services sectors. In instances when there is greater
concentration in the financial services sector, the Fund may be particularly
sensitive to changes in the general market and other economic conditions that
affect that sector. Financial services companies are subject to extensive
government regulation which tends to limit the financial commitments that the
companies can make and the interest rates and other fees they can charge. These
limitations can have a significant affect on the profitability of a financial
services company. Also financial services companies may be hurt when interest
rates rise sharply, although not all participants are affected equally. These
stocks may also be vulnerable to rapidly rising inflation. Moreover, government
deregulation of the industry may stall, which could limit the profit potential
of industry participants. In instances where the Fund concentrates more heavily
in the other two sectors, the Fund may be particularly sensitive to the general
market and other economic conditions affecting companies within those sectors.
In addition, the smaller companies that Delaware American Services Fund may
invest in may involve greater risk than other companies due to narrower lines of
products or services, limited financial resources and greater sensitivity to
economic conditions. Stocks of smaller companies may experience volatile trading
and price fluctuations, especially in the short term.
Delaware American Services Fund is considered "non-diversified" under the
federal laws and rules that regulate mutual funds. That means the Fund may
allocate more of its net assets to investments in single securities than a
"diversified" fund. Thus, adverse effects on an investment held by the Fund may
affect a larger portion of overall assets and subject the Fund to greater risk.
For a more complete discussion of risk, please turn to page 13.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of the
service sectors of the market.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
o Investors who are unwilling to accept the risks of a non-diversified more
concentrated fund focusing on companies in limited market sectors.
4
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ------------ ---------- ----------
CLASS A B C
- -------------------------------------------------------------- ------------ ---------- ----------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on 5.75% none none
Purchases as a percentage of offering price
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum contingent deferred sales charge (load) none(1) 5%(2) 1%(3)
as a percentage of original purchase price or
Redemption price, whichever is lower
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum sales charge (load) imposed on none none none
Reinvested dividends
- -------------------------------------------------------------- ------------ ---------- ----------
Redemption fees none none none
- -------------------------------------------------------------- ------------ ---------- ----------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets.
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ------------ ---------- ----------
<S> <C> <C> <C>
Management fees 0.75% 0.75% 0.75%
- -------------------------------------------------------------- ------------ ---------- ----------
Distribution and service (12b-1) fees(4) 0.25% 1.00% 1.00%
- -------------------------------------------------------------- ------------ ---------- ----------
Other expenses(5) 0.30% 0.30% 0.30%
- -------------------------------------------------------------- ------------ ---------- ----------
Total operating expenses(6) 1.30% 2.05% 2.05%
- -------------------------------------------------------------- ------------ ---------- ----------
</TABLE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(7) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
-------------- --------------- ------------ ------------------ ---------- --------------------
<S> <C> <C> <C> <C> <C>
CLASS(8) A B B (if redeemed) C C (if redeemed)
------------ ----------------- ------------ ------------------ ---------- --------------------
1 year $700 $208 $708 $208 $308
------------ ----------------- ------------ ------------------ ---------- --------------------
3 years $963 $643 $943 $643 $643
------------ ----------------- ------------ ------------------ ---------- --------------------
</TABLE>
<PAGE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will apply to certain
redemptions. Additional Class A purchase options that involve a contingent
deferred sales charge may be permitted from time to time and will be
disclosed in the prospectus if they are available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Class A shares are subject to a 12b-1 fee of 0.30% (fixed at 0.25% by
the Board of Trustees) of average daily net assets and Class B and C shares
are each subject to a 12b-1 fee of 1.00% of average daily net assets. The
distributor has agreed to waive these 12b-1 fees through August 31, 2000.
(5) Other expenses are based on estimated amounts for the current fiscal year.
(6) The investment manager has agreed to waive fees and pay expenses from the
commencement of the Fund's operations through August 31, 2000 in order to
prevent total operating expenses (excluding any taxes, interest, brokerage
fees, extraordinary expenses and 12b-1 fees) from exceeding 0.75% of average
daily net assets.
(7) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show. This example does not reflect the voluntary expense waivers described
in footnotes 4 and 6.
(8) Class B shares automatically convert to Class A shares at the end of the
eighth year. The example does not assume this conversion since it only
reflects expenses for one and three years.
5
<PAGE>
Profile: Delaware Research Fund
What are the Fund's goals?
Delaware Research Fund seeks to provide long-term capital growth. Although the
Fund will strive to achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in equity securities, without any limit on size or
capitalization of the companies issuing them. Generally, the Fund will hold only
20 to 30 different stocks. The Fund will be less diversified than other funds
but is designed to capitalize on the best stock opportunities identified by the
portfolio management teams of the Delaware Investments funds. The Fund may
purchase any stock that is held by another Delaware Investments fund. Once the
universe of stocks held by other funds is determined, we rank those stocks using
quantitative models that measure their value, growth and risk characteristics.
Among those falling in the top 25% of the group, we apply a bottom-up analysis
to choose what we consider to be the stocks with the greatest potential for
long-term price appreciation. Both value and growth stocks may be included in
the Fund. We will monitor the stocks held by other funds and confer with the
managers of other funds as needed. If a stock is sold by all of the funds
holding it or if a stock otherwise no longer meets our criteria, the Fund will
sell that stock and replace it with another.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. The Fund
will be affected by declines in stock prices, which could be caused by a drop in
the stock market, problems in the economy or poor performance from particular
companies or industry sectors.
Delaware Research Fund is considered "non-diversified" under the federal laws
and rules that regulate mutual funds. That means the Fund may allocate more of
its net assets to investments in single securities than a "diversified" fund.
Because of the small number of different stocks held by the Fund a change in the
price of any single stock may have a significant effect on the Fund's
performance. Thus, adverse affects on an investment held by the Fund will
subject the Fund to greater risk. Because the Fund will continually purchase and
sell securities according to its screening process and will tend to purchase or
sell securities to maintain an approximately equal weighting for each holding,
portfolio turnover is expected to be high, perhaps between 200% and 300%. High
turnover rate can result in higher brokerage costs and higher taxable gains for
the investor.
The Fund may be highly concentrated in particular industries or in closely
related industries, although it will not invest more than 25% of its net assets
in any one industry. Higher industry concentrations cause the Fund to be more
sensitive to changes in conditions in those industries. In addition, the smaller
companies that Delaware Research Fund may invest in may involve greater risk
than other companies due to their narrow product lines, limited financial
resources and much greater sensitivity to economic conditions.
For a more complete discussion of risk, please turn to page 13.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of both
value and growth sectors of the market in a relatively concentrated
portfolio.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term. o Investors unwilling to accept
the risks of a non-diversified, more concentrated fund.
6
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ------------ ---------- ----------
CLASS A B C
- -------------------------------------------------------------- ------------ ---------- ----------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on 5.75% none none
Purchases as a percentage of offering price
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum contingent deferred sales charge (load) none(1) 5%(2) 1%(3)
as a percentage of original purchase price or
Redemption price, whichever is lower
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum sales charge (load) imposed on none none none
Reinvested dividends
- -------------------------------------------------------------- ------------ ---------- ----------
Redemption fees none none none
- -------------------------------------------------------------- ------------ ---------- ----------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets.
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ------------ ---------- ----------
<S> <C> <C> <C>
Management fees 1.00% 1.00% 1.00%
- -------------------------------------------------------------- ------------ ---------- ----------
Distribution and service (12b-1) fees(4) 0.25% 1.00% 1.00%
- -------------------------------------------------------------- ------------ ---------- ----------
Other expenses(5) 0.31% 0.31% 0.31%
- -------------------------------------------------------------- ------------ ---------- ----------
Total operating expenses(6) 1.56% 2.31% 2.31%
- -------------------------------------------------------------- ------------ ---------- ----------
</TABLE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(7) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
------------ ----------------- ------------ ------------------ ---------- --------------------
<S> <C> <C> <C> <C> <C>
CLASS(8) A B B (if redeemed) C C (if redeemed)
------------ ----------------- ------------ ------------------ ---------- --------------------
1 year $725 $234 $734 $234 $334
------------ ----------------- ------------ ------------------ ---------- --------------------
3 years $1,039 $721 $1,021 $721 $721
------------ ----------------- ------------ ------------------ ---------- --------------------
</TABLE>
<PAGE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will apply to certain
redemptions. Additional Class A purchase options that involve a contingent
deferred sales charge may be permitted from time to time and will be
disclosed in the prospectus if they are available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Class A shares are subject to a 12b-1 fee of 0.30% (fixed at 0.25% by
the Board of Trustees) of average daily net assets and Class B and C shares
are each subject to a 12b-1 fee of 1.00% of average daily net assets. The
distributor has agreed to waive these 12b-1 fees through August 31, 2000.
(5) Other expenses are based on estimated amounts for the current fiscal year.
(6) The investment manager has agreed to waive fees and pay expenses from the
commencement of the Fund's operations through August 31, 2000 in order to
prevent total operating expenses (excluding any taxes, interest, brokerage
fees, extraordinary expenses and 12b-1 fees) from exceeding 0.75% of average
daily net assets.
(7) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show. This example does not reflect the voluntary expense cap described in
footnotes 4 and 6.
(8) Class B shares automatically convert to Class A shares at the end of the
eighth year. The example does not assume this conversion since it only
reflects expenses for one and three years.
7
<PAGE>
Profile: Delaware Large Cap Growth Fund
What are the Fund's goals? Delaware Large Cap Growth Fund seeks to provide
long-term capital growth. Although the Fund will strive to meet its goal, there
is no assurance that it will.
What are the Fund's main investment strategies? We invest primarily in common
stocks of companies that we believe have the potential for high earnings growth
by following a bottom-up approach that focuses on a company's historic or
projected earnings growth rate, price-to-earnings ratio and cash flows. Once
companies with the desired characteristics are identified, the Fund evaluates
further the company's management, its strength within its industry and various
financial and economic factors. The Fund invests in a diversified portfolio of
stocks of companies across a broad range of industry sectors and will normally
invest at least 65% of assets in companies with a market capitalization of $5
billion or more at the time of purchase.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The value of your investment in the Fund will increase and decrease
according to changes in the value of the securities in the Fund's portfolio.
This Fund will be affected by declines in stock prices. Stock prices may be
negatively affected by declines in the stock market or poor performance in
specific industries or companies.
For a more complete discussion of risk, please turn to page 13.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to capital appreciation opportunities across a
broad range of industry sectors and companies.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
8
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ------------ ---------- ----------
CLASS A B C
- -------------------------------------------------------------- ------------ ---------- ----------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on 5.75% none none
Purchases as a percentage of offering price
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum contingent deferred sales charge (load) none(1) 5%(2) 1%(3)
as a percentage of original purchase price or
Redemption price, whichever is lower
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum sales charge (load) imposed on none none none
Reinvested dividends
- -------------------------------------------------------------- ------------ ---------- ----------
Redemption fees none none none
- -------------------------------------------------------------- ------------ ---------- ----------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets.
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ------------ ---------- ----------
<S> <C> <C> <C>
Management fees 0.65% 0.65% 0.65%
- -------------------------------------------------------------- ------------ ---------- ----------
Distribution and service (12b-1) fees(4) 0.25% 1.00% 1.00%
- -------------------------------------------------------------- ------------ ---------- ----------
Other expenses(5) 0.30% 0.30% 0.30%
- -------------------------------------------------------------- ------------ ---------- ----------
Total operating expenses(6) 1.20% 1.95% 1.95%
- -------------------------------------------------------------- ------------ ---------- ----------
</TABLE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(7) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
-------------- --------------- ------------ ------------------ ---------- --------------------
CLASS8 A B B (if redeemed) C C (if redeemed)
------------ ----------------- ------------ ------------------ ---------- --------------------
<S> <C> <C> <C> <C> <C>
1 year $690 $198 $698 $198 $298
------------ ----------------- ------------ ------------------ ---------- --------------------
3 years $934 $612 $912 $612 $612
------------ ----------------- ------------ ------------------ ---------- --------------------
</TABLE>
<PAGE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will apply to certain
redemptions. Additional Class A purchase options that involve a contingent
deferred sales charge may be permitted from time to time and will be
disclosed in the prospectus if they are available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Class A shares are subject to a 12b-1 fee of 0.30% (fixed at 0.25% by
the Board of Trustees) of average daily net assets and Class B and C shares
are each subject to a 12b-1 fee of 1.00% of average daily net assets. The
distributor has agreed to waive these 12b-1 fees through August 31, 2000.
(5) Other expenses are based on estimated amounts for the current fiscal year.
(6) The investment manager has agreed to waive fees and pay expenses from the
commencement of the Fund's operations through August 31, 2000 in order to
prevent total operating expenses (excluding any taxes, interest, brokerage
fees, extraordinary expenses and 12b-1 fees) from exceeding 0.75% of average
daily net assets.
(7) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show. This example does not reflect the voluntary expense cap described in
footnotes 4 and 6.
(8) Class B shares automatically convert to Class A shares at the end of the
eighth year. The example does not assume this conversion since it only
reflects expenses for one and three years.
9
<PAGE>
How we manage the Funds
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for the Funds. The following describes how the portfolio managers
pursue each Fund's investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Delaware American Services Fund
The Fund strives to identify companies that offer the potential for long-term
price appreciation. We invest at least 65% of the Fund's net assets in stocks of
U.S. companies in the financial, business and consumer services industries. From
time to time, the Fund may focus its investments on companies in one of these
sectors over companies in the other two and may invest in companies outside of
these three service sectors.
The Fund employs a bottom-up stock selection approach to find companies we
believe to be the leading companies in the services sectors of the economy. In
our search for such companies, we will evaluate a stock's current valuation by
reviewing such factors as price-to-earnings, price-to-book, price-to-free
cashflow, and revenues, as well as historic and projected earnings and growth
rates. Additional factors including cost of capital and employee utilization
characteristics, such as revenue per employee, may also be taken into account.
Once we identify stocks that have attractive characteristics, we further
evaluate the company. We look at the capability of the management team, the
strength of the company's position within its industry, how high the company's
return on equity is, and how stringent the company's financial and accounting
policies are.
10
<PAGE>
While the Fund may invest in stocks of companies in other service sectors, the
Fund invests primarily in companies in the following three sectors:
o Financial Services
o Business Services
o Consumer Services
The Fund will invest in the common stocks of companies in the financial services
industry. These may include, but are not limited to:
o Regional and money center banks
o Thrift and savings banks
o Insurance companies
o Home, auto, and other specialty finance companies
o Securities brokerage firms
o Investment management firms
o Publicly traded, government-sponsored financial intermediaries
o Financial conglomerates
The Fund will invest in the common stocks of companies in the business services
industry. These may include, but are not limited to:
o Database management companies
o Environmental services companies
o Consulting firms
o Advertising companies
o Contract product distribution companies
o Employment and staffing companies
o Telemarketing firms
o Credit card processing companies
The Fund will invest in the common stocks of companies in the consumer services
industry. These may include, but are not limited to:
o Retail Services
o Cable, Media and Publishing companies
o Leisure, lodging, and entertainment companies
o Telecommunications companies
o Restaurants
Delaware American Services Fund's investment objective - to seek long-term
capital growth - is non-fundamental. This means that the Board of Trustees may
change the objective without obtaining shareholder approval. If the objective
were changed, we would notify shareholders before the change in the objective
became effective.
Delaware Research Fund
The Fund invests primarily in equity securities. Generally, the Fund will limit
its portfolio to 20 to 30 different stocks. The securities we select must pass
through three levels of evaluation.
o First, the only stocks we will consider for purchase are stocks that have
already been selected by our portfolio managers for other funds in the
Delaware Investments Family of Funds.
o Second, we rank these stocks using quantitative models that measure their
value, growth and risk characteristics.
o Third, we perform a bottom-up analysis on the companies in the top 25% of
the ranking and, from those companies, we select 20 to 30 individual
securities for the Fund that we believe have the greatest potential for
capital appreciation. That analysis focuses on the financial condition and
relative competition of each issuer under consideration.
When a security held by the Fund no longer passes any of these levels of review,
it is sold and replaced by a new security that meets our selection criteria. The
Fund may hold both "value" and "growth" stocks. Value stocks generally are those
whose market price appears to be less than its intrinsic value. Growth stocks
generally are those whose earnings have grown rapidly and are expected to
continue doing so.
11
<PAGE>
Delaware Research Fund's investment objective - to seek to provide long-term
capital growth - is non-fundamental. This means that the Board of Trustees may
change the objective without obtaining shareholder approval. If the objective
were changed, we would notify shareholders before the change in the objective
became effective.
Delaware Large Cap Growth Fund
The Fund strives to identify companies that offer the potential for long-term
price appreciation because they are likely to experience high earnings growth.
The Fund will normally invest at least 65% of its assets in companies with a
market capitalization $5 billion or more at the time of purchase. The Fund uses
a bottom-up approach to identify companies that typically exhibit one or more of
the following characteristics:
o A history of high growth in earnings-per-share
o Projections for high future growth or acceleration in earnings-per-share
o A price-to-earnings ratio that is low relative to other stocks o Discounted
cash flows that are high relative to other stocks
Once we identify stocks that have these characteristics, we further evaluate the
company. We look at the capability of the management team, the strength of the
company's position within its industry, whether its internal structure can
support continued growth, how high the company's return on equity is, how much
of the company's profits are reinvested in the company to fuel additional
growth, and how stringent the company's financial and accounting policies are.
All of these give us insight into the outlook for the company, helping us to
identify companies poised for high earnings growth. We believe that this high
earnings growth, if it occurs, would result in price appreciation for the
company's stock.
We maintain a well-diversified portfolio, typically holding a mix of different
stocks, representing a wide array of industries. Delaware Large Cap Growth
Fund's investment objective - to seek to provide long-term capital growth - is
non-fundamental. This means that the Board of Trustees may change the objective
without obtaining shareholder approval. If the objective were changed, we would
notify shareholders before the change in the objective became effective.
12
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ------------------------------------------------------------------
<S> <C>
Securities How we use them
- ----------------------------------------------------------------- ------------------------------------------------------------------
Common stocks: Securities that represent shares of ownership in We invest at least 65% of each Funds total assets in equity
a corporation. Stockholders participate in the corporation's securities (including common stocks and convertible
profits and losses, proportionate to the number of shares they securities). Generally, however, we invest 90% to 100% of
own. net assets in common stock. Delaware Large Cap Growth Fund
will invest in companies with a market capitalization of $5
billion or more at the time of purchase. Delaware American
Services Fund and Delaware Research Fund may invest in common
stocks of any market capitalization.
- ----------------------------------------------------------------- ------------------------------------------------------------------
Foreign Securities and American Depositary Receipts: Securities Although Delaware American Services Fund, Delaware Research Fund
of foreign entities issued directly or, in the case of American and Delaware Large Cap Growth Fund may each invest up to 25% of
Depositary Receipts, through a U.S. bank. ADRs are issued by a its net assets in foreign securities we have no present intention
U.S. bank and represent a bank's holdings of a stated number of of doing so. We may invest without limit in ADRs and will do so
shares of a foreign corporation. An ADR entitles the holder to when we believe they offer greater value and greater appreciation
all dividends and capital gains earned by the underlyingforeign potential than U.S. securities.
shares. ADRs are bought and sold the same as U.S. securities.
- ----------------------------------------------------------------- ------------------------------------------------------------------
Convertible securities: Usually preferred stocks or corporate Each Fund may invest in convertible securities and selects them
bonds that can be exchanged for a set number of shares of common on the basis of the common stock into which they can be
stock at a predetermined price. converted, not on the basis of the debt ratings of the
convertible securities.
- ----------------------------------------------------------------- ------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, such as a Typically, each Fund uses repurchase agreements as a short-term
Fund, and seller of securities in which the seller agrees to buy investment for a Fund's cash position. In order to enter into
the securities back within a specified time at the same price the these repurchase agreements, the Fund must have collateral of at
buyer paid for them, plus an amount equal to an agreed upon least 102% of the repurchase price. (None of the Funds may have
interest rate. Repurchase agreements are often viewed as more than 10% of its total assets in repurchase agreements with
equivalent to cash. maturities of over seven days.) The Funds will only enter into
repurchase agreements in which the collateral is composed of U.S.
government securities.
- ----------------------------------------------------------------- ------------------------------------------------------------------
Restricted securities: Privately placed securities whose resale Each Fund may invest without limitation in liquid privately
is restricted under securities law. placed securities that are eligible for resale only among certain
institutional buyers without registration, including "Rule 144A
Securities."
- ----------------------------------------------------------------- ------------------------------------------------------------------
Options and futures: Options represent a right to buy or sell a If we have stocks in the Funds that have unrealized gains because
security at an agreed upon price at a future date. The purchaser of past appreciation, we would want to protect those gains when
of an option may or may not choose to go through with the we anticipate adverse conditions. We might use options or futures
transaction. to neutralize the effect of any price declines, without selling
the security. For example, we might buy a put option giving us
Futures contracts are agreements for the purchase or sale of the right to sell the stock at a specific price on a specific
securities at a specified price, on a specified date. Unlike a date in the future. If an prices then fell, our decline would be
option, a futures contract must be executed unless it is sold offset by the gain on the put option. On the other hand, if
before the settlement date. prices rose, we would lose the amount paid for the put option,
but we would still own the stock, and could benefit from the
Certain options and futures may be considered to be derivative appreciation.
securities.
Use of these strategies can increase the operating costs of a
Fund and can lead to loss of principal.
- ----------------------------------------------------------------- ------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ------------------------------------------------------------------
<S> <C>
Securities How we use them
- ----------------------------------------------------------------- ------------------------------------------------------------------
Illiquid securities: Securities that do not have a ready Each Fund may invest no more than 15% of net assets in
market, and cannot be easily sold within seven days at illiquid securities.
approximately the price that a Fund has valued them. Illiquid
securities include repurchase agreements maturing in more than
seven days.
- ----------------------------------------------------------------- ------------------------------------------------------------------
Real Estate Investment Trusts (REITs): REITs are pooled Delaware Research Fund may invest in REITs consistent with
investment vehicles which invest primarily in income-producing its investment objective and policies.
real estate or real estate related loans or interests. REITs
are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest
the majority of their assets directly in real property and
derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that
have appreciated in value. Mortgage REITs invest the majority
of their assets in real estate mortgages and derive income from
the collection of interest payments.
- ----------------------------------------------------------------- ------------------------------------------------------------------
</TABLE>
Each Fund may also invest in other securities including warrants, preferred
stocks, and bonds. Please see the Statement of Additional Information for
additional descriptions of these securities and other securities in which the
Funds may invest.
Lending securities
Each Fund may lend up to 25% of its assets to qualified dealers and investors
for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
Each Fund may buy or sell securities on a when-issued or delayed delivery basis;
that is, paying for securities before delivery or taking delivery at a later
date. A Fund will designate cash or securities in amounts sufficient to cover
its obligations, and will value the designated assets daily.
Temporary defensive positions
In response to unfavorable market conditions, each Fund may make temporary
investments in bonds, cash or cash equivalents. These investments may not be
consistent with a Fund's investment objective.
Portfolio turnover
We anticipate that each Fund will have an annual portfolio turnover of more than
100%. Delaware Research Fund's portfolio turnover rate may be as high as 200% to
300%. A turnover rate of 100% would occur if a Fund sold and replaced securities
valued at 100% of its net assets within one year. High turnover rate can result
in higher brokerage costs and higher taxable gains for the investor.
14
<PAGE>
The risks of investing in the Funds
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Fund you should
carefully evaluate the risks. An investment in a Fund typically provides the
best results when held for a number of years. The following chart gives a brief
description of some of the risks of investing in the Funds. Please see the
Statement of Additional Information for additional descriptions and risk
information.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ------------------------------------------------------------------
Risks How we strive to manage them
- ----------------------------------------------------------------- ------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of the securities For each Fund we maintain a long-term approach and focus on
in a certain market-like the stock or bond market-will decline in securities that we believe can continue to provide returns over
value because of factors such as economic conditions, future an extended period of time regardless of interim market
expectations or investor confidence. fluctuations. We do not try to predict overall market movements
and generally do not trade for short-term purposes.
We may hold a substantial part of each Fund's assets in cash or
cash equivalents as a temporary, defensive strategy.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Industry and security risk is the risk that the value of Although Delaware American Services Fund will not invest more
securities in a particular industry or the value of an individual than 25% of its net assets in any one industry, it may from time
stock or bond will decline because of changing expectations for to time be more concentrated in the financial, business or
the performance of that industry or for the individual company consumer services sectors. As a consequence, the value of Fund
issuing the stock. shares can be expected to fluctuate in response to factors
affecting companies in those sectors, and may fluctuate more
widely than a fund that invests in a broader range of industries
or sectors. In addition, to the extent that the Fund concentrates
more heavily in the financial services sector, the Fund may be
more susceptible to any single economic, political or regulatory
occurrence affecting the financial services industry.
Although Delaware Research Fund will not invest more than 25% of
its net assets in any one industry, it may from time to time
invest up to that amount in any one industry, and may also, from
time to time be highly concentrated in closely related
industries. As a result, the Fund may be more susceptible to
economic, political or regulatory occurrences affecting a
particular industry or closely related industries that represent
a large percentage of the Fund's assets.
To seek to reduce these risks, we limit the amount of each Fund's
assets invested in any one industry and we follow a rigorous
selection process before choosing securities for the Funds.
- ----------------------------------------------------------------- ------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ------------------------------------------------------------------
Risks How we strive to manage them
- ----------------------------------------------------------------- ------------------------------------------------------------------
<S> <C>
Interest rate risk is the risk that securities, particularly Delaware American Services Fund and Delaware Research Fund can
bonds with longer maturities, will decrease in value if interest invest in small or mid-cap companies and we seek to address the
rates rise and increase in value if interest rates fall. However, potential interest rate risks associated with those holdings by
investments in equity securities issued by small and medium sized analyzing each company's financial situation and its cash flow to
companies, which often borrow money to finance operations, may determine the company's ability to finance future expansion and
also be adversely affected by rising interest rates. Financial operations. The potential impact that rising interest rates might
services companies may also be affected by interest rate changes have on a stock is taken into consideration before a stock is
because it impacts their cost of capital and profitability. purchased. Delaware American Services Fund holds a mix of
different financial companies some of which may be more or less
sensitive to interest rate changes.
- ----------------------------------------------------------------- ------------------------------------------------------------------
Foreign risk is the risk that foreign securities may be adversely Each Fund typically invests only a small portion its portfolio in
affected by political instability, changes in currency exchange foreign securities or ADRs. When we do purchase foreign
rates, foreign economic conditions or inadequate regulatory and securities, they are often denominated in U.S. dollars. We also
accounting standards. tend to avoid markets where we believe accounting principles
orthe regulatory structure are underdeveloped.
- ----------------------------------------------------------------- ------------------------------------------------------------------
Company size risk is the risk that prices of small and Delaware American Services Fund and Delaware Research Fund seek
medium-size companies may be more volatile than larger companies opportunities among companies of all sizes. However, because
because of limited financial resources or dependence on narrow neither Fund concentrates specifically on small or medium size
product lines. companies, this risk may be balanced by holdings of larger
companies.
- ----------------------------------------------------------------- ------------------------------------------------------------------
Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities.
readily sold within seven days at approximately the price that
a fund values them.
- ----------------------------------------------------------------- ------------------------------------------------------------------
Non-diversified funds are believed to be subject to greater risks Delaware American Services Fund and Delaware Research Fund will
because adverse effects on their security holdings may affect a not be diversified under the 1940 Act. Non-diversified investment
larger portion of their overall assets. companies have the flexibility to invest as much as 50% of their
assets in as few as two issuers and no single issuer accounts for
more than 25% of the portfolio. The remaining 50% of the
portfolio must be diversified so that no more than 5% of a fund's
assets is invested in the securities of a single issuer.
Delaware Research Fund will always be invested in at least 20
issuers, and in general will not hold more than a 5% position in
any issuer. Although Delaware American Services Fund will be more
heavily concentrated in a particular industry and related
industries, it will not be heavily invested in any single issuer.
- ----------------------------------------------------------------- ------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ------------------------------------------------------------------
Risks How we strive to manage them
- ----------------------------------------------------------------- ------------------------------------------------------------------
<S> <C>
Futures and options risk is the possibility that a Fund may We will not use futures and options for speculative reasons. We
experience a significant loss if it employs an options or futures may use futures and options to protect gains in the portfolio
strategy related to a security or a market index and that without actually selling a security. We may also use options and
security or index moves in the opposite direction from what the futures to quickly invest excess cash so that the portfolio is
portfolio manager anticipated. Futures and options also involve generally fully invested.
additional expenses, which could reduce any benefit or increase
any loss to a Fund from using the strategy.
- ----------------------------------------------------------------- ------------------------------------------------------------------
</TABLE>
17
<PAGE>
Who manages the Funds
Investment manager
Each Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust, which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for each Fund, manages each Fund's business affairs and provides daily
administrative services. For its services to each Fund, Delaware Management
Company will receive the following annual fee from each Fund.
- ------------------------------------- ------------------------------------------
Fee based on average daily net assets
- ------------------------------------- ------------------------------------------
Delaware American Services Fund 0.75% on the first $500 million
0.70% on the next $500 million
0.65% on the next $1.5 billion
0.60% on assets in excess of $2.5 billion
- ------------------------------------- ------------------------------------------
Delaware Research Fund 1.00% on the first $500 million
0.95% on the next $500 million
0.90% on the next $1.5 billion
0.85% on assets in excess of $2.5 billion
- ------------------------------------- ------------------------------------------
Delaware Large Cap Growth Fund 0.65% on the first $500 million
0.60% on the next $500 million
0.55% on the next $1.5 billion
0.50% on assets in excess of $2.5 billion
- ------------------------------------- ------------------------------------------
Portfolio managers
Delaware American Services Fund
John A. Heffern and Steven T. Lampe have primary responsibility for making
day-to-day investment decisions for Delaware American Services Fund. They have
been managing the Fund since its inception. In making decisions for the Fund,
Mr. Heffern and Mr. Lampe regularly consult with Gerald S. Frey.
John A. Heffern, Vice President, Portfolio Manager, earned bachelors and MBA
degrees at the University of North Carolina at Chapel Hill. He joined Delaware
Investments in 1997. He previously was a Senior Vice President, Equity Research
at NatWest Securities Corporation's Specialty Financial Services unit. Before
that, he was a Principal and Senior Regional Bank Analyst at Alex. Brown & Sons.
18
<PAGE>
Steven T. Lampe, Vice President, Portfolio Manager, received a bachelor's degree
in Economics and an MBA degree with a concentration in Finance from the
University of Pennsylvania's Wharton School. He joined Delaware Investments in
1995 and covers the financial services and business services sectors for small
and mid-capitalization growth stocks. He previously served as a tax/audit
manager at Price Waterhouse, specializing in financial services firms. Mr. Lampe
is a Certified Public Accountant.
Gerald S. Frey, Senior Vice President/Senior Portfolio Manager, has 22 years'
experience in the money management business and holds a BA in Economics from
Bloomsburg University and attended Wilkes College and New York University. Prior
to joining Delaware Investments in 1996, he was a Senior Director with Morgan
Grenfell Capital Management in New York.
19
<PAGE>
Delaware Research Fund
Timothy G. Connors and Paul Dokas have primary responsibility for making
day-to-day investment decisions for Delaware Research Fund. They have been
managing the Fund since its inception.
Timothy G. Connors, Vice President, Senior Portfolio Manager, earned a
bachelor's degree at the University of Virginia and an MBA degree in Finance at
Tulane University. He joined Delaware Investments in 1997 after serving as a
Principal at Miller, Anderson & Sherrerd, where he managed equity accounts,
conducted sector analysis, and directed research. He previously held positions
at CoreStates Investment Advisers and Fauquier National Bank. He is a CFA
Charterholder and a member of the Association for Investment Management and
Research.
J. Paul Dokas, Vice President, Senior Portfolio Manager, is responsible for
producing quantitative research used to develop new global investment services,
refining existing services, and making asset-allocation decisions. He joined
Delaware Investments in 1997. He previously was Director of Trust Investment
Management at Bell Atlantic Corporation. He earned a bachelor's degree at Loyola
College in Baltimore and an MBA degree at the University of Maryland. He is a
CFA Charterholder.
Delaware Large Cap Growth Fund
Gerald S. Frey has primary responsibility for making day-to-day investment
decisions for Delaware Large Cap Growth Fund. Mr. Frey has been managing the
Fund since its inception. When making investment decisions for the Fund, Mr.
Frey regularly consults with Marshall T. Bassett, John A. Heffern, Jeffrey W.
Hynoski, Steven T. Lampe and Lori P. Wachs. Please see Delaware American
Services Fund for biographical information regarding Mr. Frey, Mr. Heffern and
Mr. Lampe.
Marshall T. Bassett, Vice President/Portfolio Manager, joined Delaware
Investments in 1997. In his most recent position, he served as Vice President in
Morgan Stanley Asset Management's Emerging Growth Group, where he analyzed small
growth companies. Prior to that, he was a trust officer at Sovran Bank and Trust
Company. He received a bachelor's degree and an MBA from Duke University.
Jeffrey W. Hynoski, Vice President/Portfolio Manager, joined Delaware
Investments in 1998. Previously, he served as a Vice President at Bessemer Trust
Company in the mid and large capitalization growth group, where he specialized
in the areas of science, technology, and telecommunications. Prior to that, Mr.
Hynoski held positions at Lord Abbett & Co. and Cowen Asset Management. Mr.
Hynoski holds a BS in Finance from the University of Delaware and an MBA with a
concentration in Investments/Portfolio Management and Financial Economics from
Pace University.
Lori P. Wachs, Vice President/Portfolio Manager, joined Delaware Investments in
1992 from Goldman Sachs, where she was an equity analyst for two years. She is a
graduate of the University of Pennsylvania's Wharton School, where she majored
in Finance and Oriental Studies.
20
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
<TABLE>
<CAPTION>
Board of Trustees
<S> <C> <C> <C> <C> <C> <C>
Investment manager The Funds Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio manager Distributor Service agent
(see page 15 for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
</TABLE>
Financial advisers
Shareholders
Board of trustees A mutual fund is governed by a board of trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the board of trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
21
<PAGE>
About your account
Investing in the Funds
You can choose from a number of share classes for the Funds. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class
Class A
o Class A shares have an up-front sales charge of up to 5.75% that you pay
when you buy the shares. The offering price for Class A shares includes the
front-end sales charge.
o If you invest $50,000 or more, your front-end sales charge will be reduced.
o You may qualify for other reduced sales charges, as described in "How to
reduce your sales charge," and under certain circumstances the sales charge
may be waived; please see the Statement of Additional Information.
o Absent 12b-1 fee waivers, Class A shares are also subject to an annual
12b-1 fee no greater than 0.30% of average daily net assets, which is lower
than the 12b-1 fee for Class B and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge except in the limited circumstances described in the table below.
Class A sales charges
<TABLE>
<CAPTION>
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Amount of purchase Sales charge as % Sales charge as % of amount Dealer's commission as %
of offering price invested of offering price
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
$50,000 but 4.75% 5.00% 4.00%
under $100,000
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
$100,000 but 3.75% 3.90% 3.00%
under $250,000
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
$250,000 but 2.50% 2.60% 2.00%
under $500,000
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
$500,000 but 2.00% 2.04% 1.60%
under $1 million
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
As shown below, there is no front-end sales charge when you purchase $1 million or more of Class A shares. However, if
your financial adviser is paid a commission on your purchase, you may have to pay a limited contingent deferred sales
charge of 1% if you redeem these shares within the first year and 0.50% if you redeem them within the second year.
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Amount of purchase Sales charge as % Sales charge as % of amount Dealer's commission as %
of offering price invested of offering price
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
<S> <C> <C> <C>
$1 million up to $5 none none 1.00%
million
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Next $20 million none none 0.50%
Up to $25 million
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Amount over $25 million none none 0.25%
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
</TABLE>
About your account (continued)
Class B
o Class B shares have no up-front sales charge, so the full amount of your
purchase is invested in a Fund. However, you will pay a contingent deferred
sales charge if you redeem your shares within six years after you buy them.
o If you redeem Class B shares during the first year after you buy them, the
shares will be subject to a contingent deferred sales charge of 5%. The
contingent deferred sales charge is 4% during the second year, 3% during
the third and fourth years, 2% during the fifth year, 1% during the sixth
year, and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately eight years after you buy your Class B shares, absent
12b-1 fee waivers, they are subject to annual 12b-1 fees no greater than 1%
of average daily net assets, of which 0.25% are service fees paid to the
distributor, dealers or others for providing services and maintaining
accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses and
any dividends paid on these shares are lower than dividends on Class A
shares.
o Approximately eight years after you buy them, Class B shares automatically
convert into Class A shares with a 12b-1 fee of no more than 0.30%, which
is currently being waived. Conversion may occur as late as three months
after the eighth anniversary of purchase, during which time Class B's
higher 12b-1 fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
Class C
o Class C shares have no up-front sales charge, so the full amount of your
purchase is invested in a Fund. However, you will pay a contingent deferred
sales charge of 1% if you redeem your shares within 12 months after you buy
them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Absent 12b-1 fee waivers, Class C shares are subject to an annual 12b-1 fee
which may not be greater than 1% of average daily net assets, of which
0.25% are service fees paid to the distributor, dealers or others for
providing services and maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses and
pay lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at any
one time. The limitation on maximum purchases varies for retirement plans.
Each share class of a Fund has adopted a separate 12b-1 plan that allows it to
pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of a Fund's assets on an ongoing basis, over time these
fees will increase the cost of your investment and may cost you more than paying
other types of sales charges.
23
<PAGE>
About your account (continued)
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- ----------------------- -------------------------------------- -----------------------------------------------------------------
Program How it works Share class
A B C
- ----------------------- -------------------------------------- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Letter of Intent Through a Letter of Intent you X Although the Letter of Intent and Rights of
agree to invest a certain amount Accumulation do not apply to the purchase of
in Delaware Investment Funds Class B and C shares, you can combine your
(except money market funds with purchase of Class A shares with your purchase
no sales charge) over a 13-month of B and C shares to fulfill your Letter of
period to qualify for reduced Intent or qualify for Rights of Accumulation.
front-end sales charges.
- ----------------------- -------------------------------------- ---------------
Rights of You can combine your holdings or X
Accumulation purchases of all funds in the
Delaware Investments family
(except money market funds with
no sales charge) as well as the
holdings and purchases of your
spouse and children under 21 to
qualify for reduced front-end sales
charges.
- ----------------------- -------------------------------------- --------------- -------------------------------- ----------------
Reinvestment of Up to 12 months after you redeem For Class For Class B, your account Not
redeemed shares shares, you can reinvest the A, you will will be credited with the available.
proceeds with no additional not have to contingent deferred sales
sales charge. pay an charge you previously paid
additional on the amount you are
front-end reinvesting. Your schedule
sales for contingent deferred
charge. sales charges and conversion
to Class A will not start
over again; it will pick up
from the point at which you
redeemed your shares.
- ----------------------- -------------------------------------- --------------- -------------------------------------------------
SIMPLE IRA, SEP These investment plans may X There is no reduction in sales charges for
IRA, SARSEP, qualify for reduced sales Class B or Class C shares for group purchases
Prototype Profit charges by combining the by retirement plans.
Sharing, Pension, purchases of all members of the
401(k), SIMPLE group. Members of these groups
401(k), may also qualify to purchase
403(b)(7), and shares without a front-end sales
457 Retirement charge and a waiver of any
Plans contingent deferred sales
charges.
- ----------------------- -------------------------------------- --------------- -------------------------------------------------
</TABLE>
24
<PAGE>
About your account (continued)
How to buy shares
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service. For more information about how to sign up for this service, call our
Shareholder Service Center at 800.523.1918.
25
<PAGE>
About your account (continued)
Once you have completed an application, you can open an account with an initial
investment of $1,000 and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act; or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receives your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on a
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine a Fund's net asset value (NAV) per share at the close of regular
trading of the New York Stock Exchange each business day that the Exchange is
open. We calculate this value by adding the market value of all the securities
and assets in the Fund's portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The result is the net
asset value per share. We price securities and other assets for which market
quotations are available at their market value. We price fixed-income securities
on the basis of valuations provided to us by an independent pricing service that
uses methods approved by the board of trustees. Any fixed-income securities that
have a maturity of less than 60 days we price at amortized cost. For all other
securities, we use methods approved by the board of trustees that are designed
to price securities at their fair market value.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in a Fund may be suitable for
group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in a Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.
26
<PAGE>
About your account (continued)
How to redeem shares
Through your financial adviser Your financial adviser can handle all the details
of redeeming your shares. Your adviser may charge a separate fee for this
service.
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit, a bank wire fee may be deducted from
your proceeds. Bank information must be on file before you request a wire
redemption.
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service. For
more information about how to sign up for this service, call our Shareholder
Service Center at 800.523.1918.
27
<PAGE>
About your account (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time), you will receive the net asset value as determined on
the business day we receive your request. We will deduct any applicable
contingent deferred sales charges. You may also have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the next
business day, but no later than seven days after we receive your request to sell
your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares--not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs, Uniform Gift to Minors Act accounts or
accounts with automatic investing plans, $500 for Education IRAs) for three or
more consecutive months, you will have until the end of the current calendar
quarter to raise the balance to the minimum. If your account is not at the
minimum by the required time, you will be charged a $9 fee for that quarter and
each quarter after that until your account reaches the minimum balance. If your
account does not reach the minimum balance, a Fund may redeem your account after
60 days' written notice to you.
28
<PAGE>
About your account (continued)
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly or quarterly
investments directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as social security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for the same class of shares
in other funds, your new shares will be subject to the same contingent deferred
sales charge as the shares you originally purchased. The holding period for the
CDSC will also remain the same, with the amount of time you held your original
shares being credited toward the holding period of your new shares. You don't
pay sales charges on shares that you acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from a Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from a Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time a Fund held the assets. In addition, you may be subject to state
and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
29
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, each Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." Each Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The Year 2000 Problem may also
adversely affect the issuers of securities in which the Funds invest. The
portfolio managers and investment professionals of the Funds consider Year 2000
compliance (including, but not limited to, any or all of the following: impact
on business; cost of compliance plan review and contingency planning; and vendor
compliance) in the securities selection and investment process. However, there
can be no guarantee that, even with their due diligence efforts, they will be
able to predict the affect of Year 2000 on any company or the performance of its
securities.
Investments by fund of funds
Delaware Research Fund accepts investments from the series portfolios of
Delaware Group Foundation Funds, a fund of funds. From time to time, the Fund
may experience large investments or redemptions due to allocations or
rebalancings by Foundation Funds. While it is impossible to predict the overall
impact of these transactions over time, there could be adverse effects on
portfolio management. For example, the Fund may be required to sell securities
or invest cash at times when it would not otherwise do so. These transactions
could also have tax consequences if sales of securities result in gains, and
could also increase transaction costs or portfolio turnover. The manager will
monitor transactions by Foundation Funds and will attempt to minimize any
adverse effects on both the Fund and Foundation Funds as a result of these
transactions.
Financial highlights
Financial highlights are not shown for the Funds since they commenced operations
after the close of the fiscal year end.
30
<PAGE>
Glossary
How to use this glossary
The glossary includes definitions of investment terms used throughout the
prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical rating organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Contingent deferred sales charge (CDSC)
Fee charged by some mutual funds when shares are redeemed (sold back to the
fund) within a set number of years; an alternative method for investors to
compensate a financial adviser for advice and service, rather than an up-front
commission.
Corporate bond
A debt security issued by a corporation. See bond.
Depreciation
A decline in an investment's value.
31
<PAGE>
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See bonds.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
NASD Regulation, Inc. (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Nationally recognized statistical rating organization (NRSRO)
A company that assesses the credit quality of bonds, commercial paper, preferred
and common stocks and municipal short-term issues, rating the probability that
the issuer of the debt will meet the scheduled interest payments and repay the
principal. Ratings are published by such companies as Moody's Investors Service,
Inc. (Moody's), Standard & Poor's Ratings Group (S&P), Duff & Phelps, Inc.
(Duff), and Fitch IBCA, Inc. (Fitch).
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stock also often pays dividends at a fixed rate
and is sometimes convertible into common stock.
32
<PAGE>
Price/earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
financial advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
33
<PAGE>
Delaware American Services Fund
Delaware Research Fund
Delaware Large Cap Growth Fund
Additional information about each Fund's investments will be available in the
Fund's annual and semi-annual reports to shareholders. In a Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about a Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in the Fund, you can write to us at 1818 Market Street, Philadelphia, PA 19103,
or call toll-free 800.523.1918. You may also obtain additional information about
a Fund from your financial adviser.
You can find reports and other information about the Funds on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about each Fund, including its
Statement of Additional Information, can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get information on the public reference room by calling the SEC at
1.800.SEC.0330.
Web site
www.delawareinvestments.com
- ---------------------------
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone
redemptions and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-1485
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
P-002 [--] PP 12/99
34
<PAGE>
DELAWARE
INVESTMENTS
---------------------
Philadelphia * London
Delaware American Services Fund
Delaware Research Fund
Delaware Large Cap Growth Fund
Institutional Class
Prospectus
December 22, 1999
Growth of Capital Funds
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
Table of Contents
Fund profiles page 3
Delaware American Services Fund 3
Delaware Research Fund 5
Delaware Large Cap Growth Fund 7
How we manage the Funds page 9
Our investment strategies 9
The securities we typically invest in 12
The risks of investing in the Funds 14
Who manages the Funds page 16
Investment manager 16
Portfolio managers 16
Fund administration (Who's who) 18
About your account page 19
Investing in the Funds 19
How to buy shares 20
How to redeem shares 22
Account minimum 23
Exchanges 23
Dividends, distributions and taxes 23
Certain management considerations 24
Financial highlights page 24
Glossary page 25
2
<PAGE>
Profile: Delaware American Services Fund
What are the Fund's goals?
Delaware American Services Fund seeks to provide long-term capital growth.
Although the Fund will strive to meet its goal, there is no assurance that it
will.
What are the Fund's main investment strategies?
We invest primarily in stocks of U.S. companies in the financial services,
business services, and consumer services sectors. The Fund may from time to time
focus more on any one of these sectors over the others and may invest in
securities of companies in other service sectors. The Fund employs a bottom-up
stock selection approach to find companies we believe to be the leading
companies in each of these sectors. We evaluate a stock's characteristics as
well as the individual company's management capabilities and financial strength.
The stocks can be of any size or market capitalization, including securities of
emerging or other growth-oriented companies.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected by declines in stock prices.
Although the Fund will not invest more than 25% of its net assets in any one
industry, the Fund may from time to time be more concentrated in the financial,
business or consumer services sectors. In instances when there is greater
concentration in the financial services sector, the Fund may be particularly
sensitive to changes in the general market and other economic conditions that
affect that sector. Financial services companies are subject to extensive
government regulation which tends to limit the financial commitments that the
companies can make and the interest rates and other fees they can charge. These
limitations can have a significant affect on the profitability of a financial
services company. Also financial services companies may be hurt when interest
rates rise sharply, although not all participants are affected equally. These
stocks may also be vulnerable to rapidly rising inflation. Moreover, government
deregulation of the industry may stall, which could limit the profit potential
of industry participants. In instances where the Fund concentrates more heavily
in the other two sectors, the Fund may be particularly sensitive to the general
market and other economic conditions affecting companies within those sectors.
In addition, the smaller companies that Delaware American Services Fund may
invest in may involve greater risk than other companies due to narrower lines of
products or services, limited financial resources and greater sensitivity to
economic conditions. Stocks of smaller companies may experience volatile trading
and price fluctuations, especially in the short term.
Delaware American Services Fund is considered "non-diversified" under the
federal laws and rules that regulate mutual funds. That means the Fund may
allocate more of its net assets to investments in single securities than a
"diversified" fund. Thus, adverse effects on an investment held by the Fund may
affect a larger portion of overall assets and subject the Fund to greater risk.
For a more complete discussion of risk, please turn to page 14.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of the
service sectors of the market.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
o Investors who are unwilling to accept the risks of a non-diversified more
concentrated fund focusing on companies in limited market sectors.
3
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Funds.
- -------------------------------------------------------------- ------------
Maximum sales charge (load) imposed on
Purchases as a percentage of offering price none
- -------------------------------------------------------------- ------------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none
- -------------------------------------------------------------- ------------
Maximum sales charge (load) imposed on
Reinvested dividends none
- -------------------------------------------------------------- ------------
Redemption fees none
- -------------------------------------------------------------- ------------
Exchange fees(1) none
- -------------------------------------------------------------- ------------
Annual fund operating expenses are deducted from the Fund's assets.
- -------------------------------------------------------------- ------------
Management fees 0.75%
- -------------------------------------------------------------- ------------
Distribution and service (12b-1) fees none
- -------------------------------------------------------------- ------------
Other expenses(2) 0.30%
- -------------------------------------------------------------- ------------
Total operating expenses(3) 1.05%
- -------------------------------------------------------------- ------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(4) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
------------ --------
1 year $107
------------ --------
3 years $334
------------ --------
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange
your shares into a fund that has a front-end sales charge.
(2) Other expenses are based on estimated amounts for the current fiscal
year.
(3) The investment manager has agreed to waive fees and pay expenses from the
commencement of the Fund's operations through August 31, 2000 in order to
prevent total operating expenses (excluding any taxes, interest,
brokerage fees, and extraordinary expenses) from exceeding 0.75% of
average daily net assets.
(4) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods
we show. This example does not reflect the voluntary expense cap
described in footnote 3.
4
<PAGE>
Profile: Delaware Research Fund
What are the Fund's goals?
Delaware Research Fund seeks to provide long-term capital growth. Although the
Fund will strive to achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in equity securities, without any limit on size or
capitalization of the companies issuing them. Generally, the Fund will hold only
20 to 30 different stocks. The Fund will be less diversified than other funds
but is designed to capitalize on the best stock opportunities identified by the
portfolio management teams of the Delaware Investments funds. The Fund may
purchase any stock that is held by another Delaware Investments fund. Once the
universe of stocks held by other funds is determined, we rank those stocks using
quantitative models that measure their value, growth and risk characteristics.
Among those falling in the top 25% of the group, we apply a bottom-up analysis
to choose what we consider to be the stocks with the greatest potential for
long-term price appreciation. Both value and growth stocks may be included in
the Fund. We will monitor the stocks held by other funds and confer with the
managers of other funds as needed. If a stock is sold by all of the funds
holding it or if a stock otherwise no longer meets our criteria, the Fund will
sell that stock and replace it with another.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. The Fund
will be affected by declines in stock prices, which could be caused by a drop in
the stock market, problems in the economy or poor performance from particular
companies or industry sectors.
Delaware Research Fund is considered "non-diversified" under the federal laws
and rules that regulate mutual funds. That means the Fund may allocate more of
its net assets to investments in single securities than a "diversified" fund.
Because of the small number of different stocks held by the Fund a change in the
price of any single stock may have a significant effect on the Fund's
performance. Thus, adverse affects on an investment held by the Fund will
subject the Fund to greater risk. Because the Fund will continually purchase and
sell securities according to its screening process and will tend to purchase or
sell securities to maintain an approximately equal weighting for each holding,
portfolio turnover is expected to be high, perhaps between 200% and 300%. High
turnover rate can result in higher brokerage costs and higher taxable gains for
the investor.
The Fund may be highly concentrated in particular industries or in closely
related industries, although it will not invest more than 25% of its net assets
in any one industry. Higher industry concentrations cause the Fund to be more
sensitive to changes in conditions in those industries. In addition, the smaller
companies that Delaware Research Fund may invest in may involve greater risk
than other companies due to their narrow product lines, limited financial
resources and much greater sensitivity to economic conditions.
For a more complete discussion of risk, please turn to page 14.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of
both value and growth sectors of the market in a relatively concentrated
portfolio.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
o Investors unwilling to accept the risks of a non-diversified, more
concentrated fund.
5
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Funds.
- -------------------------------------------------------------- ------------
Maximum sales charge (load) imposed on
Purchases as a percentage of offering price none
- -------------------------------------------------------------- ------------
Maximum contingent deferred sales charge (load)
As a percentage of original purchase price or
Redemption price, whichever is lower none
- -------------------------------------------------------------- ------------
Maximum sales charge (load) imposed on
Reinvested dividends none
- -------------------------------------------------------------- ------------
Redemption fees none
- -------------------------------------------------------------- ------------
Exchange fees(1) none
- -------------------------------------------------------------- ------------
Annual fund operating expenses are deducted from the Fund's assets.
- -------------------------------------------------------------- ------------
Management fees 1.00%
- -------------------------------------------------------------- ------------
Distribution and service (12b-1) fees none
- -------------------------------------------------------------- ------------
Other expenses(2) 0.31%
- -------------------------------------------------------------- ------------
Total operating expenses(3) 1.31%
- -------------------------------------------------------------- ------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(4) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
------------ --------
1 year $133
------------ --------
3 years $415
------------ --------
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange
your shares into a fund that has a front-end sales charge.
(2) Other expenses are based on estimated amounts for the current fiscal
year.
(3) The investment manager has agreed to waive fees and pay expenses from the
commencement of the Fund's operations through August 31, 2000 in order to
prevent total operating expenses (excluding any taxes, interest,
brokerage fees, and extraordinary expenses) from exceeding 0.75% of
average daily net assets.
(4) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods
we show. This example does not reflect the voluntary expense cap
described in footnote 3.
6
<PAGE>
Profile: Delaware Large Cap Growth Fund
What are the Fund's goals?
Delaware Large Cap Growth Fund seeks to provide long-term capital growth.
Although the Fund will strive to meet its goal, there is no assurance that it
will.
What are the Fund's main investment strategies?
We invest primarily in common stocks of companies that we believe have the
potential for high earnings growth by following a bottom-up approach that
focuses on a company's historic or projected earnings growth rate,
price-to-earnings ratio and cash flows. Once companies with the desired
characteristics are identified, the Fund evaluates further the company's
management, its strength within its industry and various financial and economic
factors. The Fund invests in a diversified portfolio of stocks of companies
across a broad range of industry sectors and will normally invest at least 65%
of assets in companies with a market capitalization of $5 billion or more at the
time of purchase.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Fund
will increase and decrease according to changes in the value of the securities
in the Fund's portfolio. This Fund will be affected by declines in stock prices.
Stock prices may be negatively affected by declines in the stock market or poor
performance in specific industries or companies.
For a more complete discussion of risk, please turn to page 14.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to capital appreciation opportunities across a
broad range of industry sectors and companies.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
7
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Funds.
- -------------------------------------------------------------- ------------
Maximum sales charge (load) imposed on
Purchases as a percentage of offering price none
- -------------------------------------------------------------- ------------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none
- -------------------------------------------------------------- ------------
Maximum sales charge (load) imposed on
Reinvested dividends none
- -------------------------------------------------------------- ------------
Redemption fees none
- -------------------------------------------------------------- ------------
Exchange Fees(1) none
- -------------------------------------------------------------- ------------
Annual fund operating expenses are deducted from the Fund's assets.
- -------------------------------------------------------------- ------------
Management fees 0.65%
- -------------------------------------------------------------- ------------
Distribution and service (12b-1) fees none
- -------------------------------------------------------------- ------------
Other expenses(2) 0.30%
- -------------------------------------------------------------- ------------
Total operating expenses(3) 0.95%
- -------------------------------------------------------------- ------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(4) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
------------ --------
1 year $97
------------ --------
3 years $303
------------ --------
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange
your shares into a fund that has a front-end sales charge.
(2) Other expenses are based on estimated amounts for the current fiscal
year.
(3) The investment manager has agreed to waive fees and pay expenses from the
commencement of the Fund's operations through August 31, 2000 in order to
prevent total operating expenses (excluding any taxes, interest,
brokerage fees, and extraordinary expenses) from exceeding 0.75% of
average daily net assets.
(4) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods
we show. This example does not reflect the voluntary expense cap
described in footnote 3.
8
<PAGE>
How we manage the Funds
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for the Funds. The following describes how the portfolio managers
pursue each Fund's investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Delaware American Services Fund
The Fund strives to identify companies that offer the potential for long-term
price appreciation. We invest at least 65% of the Fund's net assets in stocks of
U.S. companies in the financial, business and consumer services industries. From
time to time, the Fund may focus its investments on companies in one of these
sectors over companies in the other two and may invest in companies outside of
these three service sectors.
The Fund employs a bottom-up stock selection approach to find companies we
believe to be the leading companies in the services sectors of the economy. In
our search for such companies, we will evaluate a stock's current valuation by
reviewing such factors as price-to-earnings, price-to-book, price-to-free
cashflow, and revenues, as well as historic and projected earnings and growth
rates. Additional factors including cost of capital and employee utilization
characteristics, such as revenue per employee, may also be taken into account.
Once we identify stocks that have attractive characteristics, we further
evaluate the company. We look at the capability of the management team, the
strength of the company's position within its industry, how high the company's
return on equity is, and how stringent the company's financial and accounting
policies are.
9
<PAGE>
While the Fund may invest in stocks of companies in other service sectors, the
Fund invests primarily in companies in the following three sectors:
o Financial Services
o Business Services
o Consumer Services
The Fund will invest in the common stocks of companies in the financial services
industry. These may include, but are not limited to:
o Regional and money center banks
o Thrift and savings banks
o Insurance companies
o Home, auto, and other specialty finance companies
o Securities brokerage firms
o Investment management firms
o Publicly traded, government-sponsored financial intermediaries
o Financial conglomerates
The Fund will invest in the common stocks of companies in the business services
industry. These may include, but are not limited to:
o Database management companies
o Environmental services companies
o Consulting firms
o Advertising companies
o Contract product distribution companies
o Employment and staffing companies
o Telemarketing firms
o Credit card processing companies
The Fund will invest in the common stocks of companies in the consumer services
industry. These may include, but are not limited to:
o Retail Services
o Cable, Media and Publishing companies
o Leisure, lodging, and entertainment companies
o Telecommunications companies
o Restaurants
Delaware American Services Fund's investment objective - to seek long-term
capital growth - is non-fundamental. This means that the Board of Trustees may
change the objective without obtaining shareholder approval. If the objective
were changed, we would notify shareholders before the change in the objective
became effective.
Delaware Research Fund
The Fund invests primarily in equity securities. Generally, the Fund will limit
its portfolio to 20 to 30 different stocks. The securities we select must pass
through three levels of evaluation.
o First, the only stocks we will consider for purchase are stocks that have
already been selected by our portfolio managers for other funds in the
Delaware Investments Family of Funds.
o Second, we rank these stocks using quantitative models that measure their
value, growth and risk characteristics.
o Third, we perform a bottom-up analysis on the companies in the top 25% of the
ranking and, from those companies, we select 20 to 30 individual securities
for the Fund that we believe have the greatest potential for capital
appreciation. That analysis focuses on the financial condition and relative
competition of each issuer under consideration.
When a security held by the Fund no longer passes any of these levels of review,
it is sold and replaced by a new security that meets our selection criteria. The
Fund may hold both "value" and "growth" stocks. Value stocks generally are those
whose market price appears to be less than its intrinsic value. Growth stocks
generally are those whose earnings have grown rapidly and are expected to
continue doing so.
10
<PAGE>
Delaware Research Fund's investment objective - to seek to provide long-term
capital growth - is non-fundamental. This means that the Board of Trustees may
change the objective without obtaining shareholder approval. If the objective
were changed, we would notify shareholders before the change in the objective
became effective.
Delaware Large Cap Growth Fund
The Fund strives to identify companies that offer the potential for long-term
price appreciation because they are likely to experience high earnings growth.
The Fund will normally invest at least 65% of its assets in companies with a
market capitalization $5 billion or more at the time of purchase. The Fund uses
a bottom-up approach to identify companies that typically exhibit one or more of
the following characteristics:
o A history of high growth in earnings-per-share
o Projections for high future growth or acceleration in earnings-per-share
o A price-to-earnings ratio that is low relative to other stocks
o Discounted cash flows that are high relative to other stocks
Once we identify stocks that have these characteristics, we further evaluate the
company. We look at the capability of the management team, the strength of the
company's position within its industry, whether its internal structure can
support continued growth, how high the company's return on equity is, how much
of the company's profits are reinvested in the company to fuel additional
growth, and how stringent the company's financial and accounting policies are.
All of these give us insight into the outlook for the company, helping us to
identify companies poised for high earnings growth. We believe that this high
earnings growth, if it occurs, would result in price appreciation for the
company's stock.
We maintain a well-diversified portfolio, typically holding a mix of different
stocks, representing a wide array of industries. Delaware Large Cap Growth
Fund's investment objective - to seek to provide long-term capital growth - is
non-fundamental. This means that the Board of Trustees may change the objective
without obtaining shareholder approval. If the objective were changed, we would
notify shareholders before the change in the objective became effective.
11
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ---------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of ownership in We invest at least 65% of each Funds total assets in equity
a corporation. Stockholders participate in the corporation's securities (including common stocks and convertible
profits and losses, proportionate to the number of shares they securities). Generally, however, we invest 90% to 100% of
own. net assets in common stock. Delaware Large Cap Growth Fund
will invest in companies with a market capitalization of $5
billion or more at the time of purchase. Delaware American
Services Fund and Delaware Research Fund may invest in
common stocks of any market capitalization.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Foreign Securities and American Depositary Receipts: Securities Although Delaware American Services Fund, Delaware Research
of foreign entities issued directly or, in the case of American Fund and Delaware Large Cap Growth Fund may each invest up to
Depositary Receipts, through a U.S. bank. ADRs are issued by a 25% of its net assets in foreign securities we have no
U.S. bank and represent a bank's holdings of a stated number of present intention of doing so. We may invest without limit
shares of a foreign corporation. An ADR entitles the holder to in ADRs and will do so when we believe they offer greater
all dividends and capital gains earned by the underlying value and greater appreciation potential than U.S. securities.
foreign shares. ADRs are bought and sold the same as U.S.
securities.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Convertible securities: Usually preferred stocks or corporate Each Fund may invest in convertible securities and selects
bonds that can be exchanged for a set number of shares of them on the basis of the common stock into which they can
common stock at a predetermined price. be converted, not on the basis of the debt ratings of the
convertible securities.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, such as a Typically, each Fund uses repurchase agreements as a
Fund, and seller of securities in which the seller agrees to short-term investment for a Fund's cash position. In order to
buy the securities back within a specified time at the same enter into these repurchase agreements, the Fund must have
price the buyer paid for them, plus an amount equal to an collateral of at least 102% of the repurchase price. (None of
agreed upon interest rate. Repurchase agreements are often the Funds may have more than 10% of its total assets in
viewed as equivalent to cash. repurchase agreements with maturities of over seven days.)
The Funds will only enter into repurchase agreements in which
the collateral is composed of U.S. government securities.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Restricted securities: Privately placed securities whose resale Each Fund may invest without limitation in liquid privately
is restricted under securities law. placed securities that are eligible for resale only among
certain institutional buyers without registration, including
"Rule 144A Securities."
- ----------------------------------------------------------------- ---------------------------------------------------------------
Options and futures: Options represent a right to buy or sell a If we have stocks in the Funds that have unrealized gains
security at an agreed upon price at a future date. The because of past appreciation, we would want to protect those
purchaser of an option may or may not choose to go through with gains when we anticipate adverse conditions. We might use
the transaction. options or futures to neutralize the effect of any price
declines, without selling the security. For example, we
Futures contracts are agreements for the purchase or sale of might buy a put option giving us the right to sell the stock
securities at a specified price, on a specified date. Unlike at a specific price on a specific date in the future. If
an option, a futures contract must be executed unless it is prices then fell, our decline would be offset by the gain on
sold before the settlement date. the put option. On the other hand, if prices rose, we would
lose the amount paid for the put option, but we would still
Certain options and futures may be considered to be derivative own the stock, and could benefit from the appreciation.
securities.
Use of these strategies can increase the operating costs of a
Fund and can lead to loss of principal.
- ----------------------------------------------------------------- ---------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ---------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
Illiquid securities: Securities that do not have a ready Each Fund may invest no more than 15% of net assets in
market, and cannot be easily sold within seven days at illiquid securities.
approximately the price that a Fund has valued them. Illiquid
securities include repurchase agreements maturing in more than
seven days.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Real Estate Investment Trusts (REITs): REITs are pooled Delaware Research Fund may invest in REITs consistent with
investment vehicles which invest primarily in income-producing its investment objective and policies.
real estate or real estate related loans or interests. REITs
are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest
the majority of their assets directly in real property and
derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that
have appreciated in value. Mortgage REITs invest the majority
of their assets in real estate mortgages and derive income from
the collection of interest payments.
- ----------------------------------------------------------------- ---------------------------------------------------------------
</TABLE>
Each Fund may also invest in other securities including warrants, preferred
stocks, and bonds. Please see the Statement of Additional Information for
additional descriptions of these securities and other securities in which the
Funds may invest.
Lending securities
Each Fund may lend up to 25% of its assets to qualified dealers and investors
for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
Each Fund may buy or sell securities on a when-issued or delayed delivery basis;
that is, paying for securities before delivery or taking delivery at a later
date. A Fund will designate cash or securities in amounts sufficient to cover
its obligations, and will value the designated assets daily.
Temporary defensive positions
In response to unfavorable market conditions, each Fund may make temporary
investments in bonds, cash or cash equivalents. These investments may not be
consistent with a Fund's investment objective.
Portfolio turnover
We anticipate that each Fund will have an annual portfolio turnover of more than
100%. Delaware Research Fund's portfolio turnover rate may be as high as 200% to
300%. A turnover rate of 100% would occur if a Fund sold and replaced securities
valued at 100% of its net assets within one year. High turnover rate can result
in higher brokerage costs and higher taxable gains for the investor.
13
<PAGE>
The risks of investing in the Funds
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Fund you should
carefully evaluate the risks. An investment in a Fund typically provides the
best results when held for a number of years. The following chart gives a brief
description of some of the risks of investing in the Funds. Please see the
Statement of Additional Information for additional descriptions and risk
information.
<TABLE>
<CAPTION>
- -------------------------------------------------------- -------------------------------------------------------------------
Risks How we strive to manage them
- -------------------------------------------------------- -------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of the For each Fund we maintain a long-term approach and focus on
securities in a certain market-like the stock or bond securities that we believe can continue to provide returns over
market-will decline in value because of factors such an extended period of time regardless of interim market
as economic conditions, future expectations or fluctuations. We do not try to predict overall market movements
investor confidence. and generally do not trade for short-term purposes.
We may hold a substantial part of each Fund's assets in cash or
cash equivalents as a temporary, defensive strategy.
- -------------------------------------------------------- -------------------------------------------------------------------
Industry and security risk is the risk that the value Although Delaware American Services Fund will not invest more
of securities in a particular industry or the value of than 25% of its net assets in any one industry, it may from time
an individual stock or bond will decline because of to time be more concentrated in the financial, business or
changing expectations for the performance of that consumer services sectors. As a consequence, the value of Fund
industry or for the individual company issuing the shares can be expected to fluctuate in response to factors
stock. affecting companies in those sectors, and may fluctuate more
widely than a fund that invests in a broader range of industries
or sectors. In addition, to the extent that the Fund
concentrates more heavily in the financial services sector, the
Fund may be more susceptible to any single economic, political or
regulatory occurrence affecting the financial services industry.
Although Delaware Research Fund will not invest more than 25% of
its net assets in any one industry, it may from time to time
invest up to that amount in any one industry, and may also, from
time to time be highly concentrated in closely related
industries. As a result, the Fund may be more susceptible to
economic, political or regulatory occurrences affecting a
particular industry or closely related industries that represent
a large percentage of the Fund's assets.
To seek to reduce these risks, we limit the amount of each Fund's
assets invested in any one industry and we follow a rigorous
selection process before choosing securities for the Funds.
- -------------------------------------------------------- -------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------- -------------------------------------------------------------------
Risks How we strive to manage them
- -------------------------------------------------------- -------------------------------------------------------------------
<S> <C>
Interest rate risk is the risk that securities, Delaware American Services Fund and Delaware Research Fund can
particularly bonds with longer maturities, will invest in small or mid-cap companies and we seek to address the
decrease in value if interest rates rise and increase potential interest rate risks associated with those holdings by
in value if interest rates fall. However, investments analyzing each company's financial situation and its cash flow to
in equity securities issued by small and medium sized determine the company's ability to finance future expansion and
companies, which often borrow money to finance operations. The potential impact that rising interest rates
operations, may also be adversely affected by rising might have on a stock is taken into consideration before a stock
interest rates. Financial services companies may also is purchased. Delaware American Services Fund holds a mix of
be affected by interest rate changes because it different financial companies some of which may be more or less
impacts their cost of capital and profitability. sensitive to interest rate changes.
- -------------------------------------------------------- -------------------------------------------------------------------
Foreign risk is the risk that foreign securities may Each Fund typically invests only a small portion its portfolio in
be adversely affected by political instability, foreign securities or ADRs. When we do purchase foreign
changes in currency exchange rates, foreign economic securities, they are often denominated in U.S. dollars. We also
conditions or inadequate regulatory and accounting tend to avoid markets where we believe accounting principles or
standards. the regulatory structure are underdeveloped.
- -------------------------------------------------------- -------------------------------------------------------------------
Company size risk is the risk that prices of small and Delaware American Services Fund and Delaware Research Fund seek
medium-size companies may be more volatile than larger opportunities among companies of all sizes. However, because
companies because of limited financial resources or neither Fund concentrates specifically on small or medium size
dependence on narrow product lines. companies, this risk may be balanced by holdings of larger
companies.
- -------------------------------------------------------- -------------------------------------------------------------------
Liquidity risk is the possibility that securities We limit exposure to illiquid securities.
cannot be readily sold within seven days at
approximately the price that a fund values them.
- -------------------------------------------------------- -------------------------------------------------------------------
Non-diversified funds are believed to be subject to Delaware American Services Fund and Delaware Research Fund will
greater risks because adverse effects on their not be diversified under the 1940 Act. Non-diversified investment
security holdings may affect a larger portion of their companies have the flexibility to invest as much as 50% of their
overall assets. assets in as few as two issuers and no single issuer accounts for
more than 25% of the portfolio. The remaining 50% of the
portfolio must be diversified so that no more than 5% of a fund's
assets is invested in the securities of a single issuer.
Delaware Research Fund will always be invested in at least 20
issuers, and in general will not hold more than a 5% position in
any issuer. Although Delaware American Services Fund will be
more heavily concentrated in a particular industry and related
industries, it will not be heavily invested in any single issuer.
- -------------------------------------------------------- -------------------------------------------------------------------
Futures and options risk is the possibility that a We will not use futures and options for speculative reasons. We
Fund may experience a significant loss if it employs may use futures and options to protect gains in the portfolio
an options or futures strategy related to a security without actually selling a security. We may also use options and
or a market index and that security or index moves in futures to quickly invest excess cash so that the portfolio is
the opposite direction from what the portfolio manager generally fully invested.
anticipated. Futures and options also involve
additional expenses, which could reduce any benefit or
increase any loss to a Fund from using the strategy.
- -------------------------------------------------------- -------------------------------------------------------------------
</TABLE>
15
<PAGE>
Who manages the Funds
Investment manager
Each Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust, which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for each Fund, manages each Fund's business affairs and provides daily
administrative services. For its services to each Fund, Delaware Management
Company will receive the following annual fee from each Fund.
<TABLE>
<CAPTION>
-------------------------------------------------- ---------------------------------------------
Fee based on average daily net assets
-------------------------------------------------- ---------------------------------------------
<S> <C>
Delaware American Services Fund 0.75% on the first $500 million
0.70% on the next $500 million
0.65% on the next $1.5 billion
0.60% on assets in excess of $2.5 billion
-------------------------------------------------- ---------------------------------------------
Delaware Research Fund 1.00% on the first $500 million
0.95% on the next $500 million
0.90% on the next $1.5 billion
0.85% on assets in excess of $2.5 billion
-------------------------------------------------- ---------------------------------------------
Delaware Large Cap Growth Fund 0.65% on the first $500 million
0.60% on the next $500 million
0.55% on the next $1.5 billion
0.50% on assets in excess of $2.5 billion
-------------------------------------------------- ---------------------------------------------
</TABLE>
Portfolio managers
Delaware American Services Fund
John A. Heffern and Steven T. Lampe have primary responsibility for making
day-to-day investment decisions for Delaware American Services Fund. They have
been managing the Fund since its inception. In making decisions for the Fund,
Mr. Heffern and Mr. Lampe regularly consult with Gerald S. Frey.
16
<PAGE>
John A. Heffern, Vice President, Portfolio Manager, earned bachelors and MBA
degrees at the University of North Carolina at Chapel Hill. He joined Delaware
Investments in 1997. He previously was a Senior Vice President, Equity Research
at NatWest Securities Corporation's Specialty Financial Services unit. Before
that, he was a Principal and Senior Regional Bank Analyst at Alex. Brown & Sons.
Steven T. Lampe, Vice President, Portfolio Manager, received a bachelor's degree
in Economics and an MBA degree with a concentration in Finance from the
University of Pennsylvania's Wharton School. He joined Delaware Investments in
1995 and covers the financial services and business services sectors for small
and mid-capitalization growth stocks. He previously served as a tax/audit
manager at Price Waterhouse, specializing in financial services firms. Mr. Lampe
is a Certified Public Accountant.
Gerald S. Frey, Senior Vice President/Senior Portfolio Manager, has 22 years'
experience in the money management business and holds a BA in Economics from
Bloomsburg University and attended Wilkes College and New York University. Prior
to joining Delaware Investments in 1996, he was a Senior Director with Morgan
Grenfell Capital Management in New York.
17
<PAGE>
Delaware Research Fund
Timothy G. Connors and Paul Dokas have primary responsibility for making
day-to-day investment decisions for Delaware Research Fund. They have been
managing the Fund since its inception.
Timothy G. Connors, Vice President, Senior Portfolio Manager, earned a
bachelor's degree at the University of Virginia and an MBA degree in Finance at
Tulane University. He joined Delaware Investments in 1997 after serving as a
Principal at Miller, Anderson & Sherrerd, where he managed equity accounts,
conducted sector analysis, and directed research. He previously held positions
at CoreStates Investment Advisers and Fauquier National Bank. He is a CFA
Charterholder and a member of the Association for Investment Management and
Research.
J. Paul Dokas, Vice President, Senior Portfolio Manager, is responsible for
producing quantitative research used to develop new global investment services,
refining existing services, and making asset-allocation decisions. He joined
Delaware Investments in 1997. He previously was Director of Trust Investment
Management at Bell Atlantic Corporation. He earned a bachelor's degree at Loyola
College in Baltimore and an MBA degree at the University of Maryland. He is a
CFA Charterholder.
Delaware Large Cap Growth Fund
Gerald S. Frey has primary responsibility for making day-to-day investment
decisions for Delaware Large Cap Growth Fund. Mr. Frey has been managing the
Fund since its inception. When making investment decisions for the Fund, Mr.
Frey regularly consults with Marshall T. Bassett, John A. Heffern, Jeffrey W.
Hynoski, Steven T. Lampe and Lori P. Wachs. Please see Delaware American
Services Fund for biographical information regarding Mr. Frey, Mr. Heffern and
Mr. Lampe.
Marshall T. Bassett, Vice President/Portfolio Manager, joined Delaware
Investments in 1997. In his most recent position, he served as Vice President in
Morgan Stanley Asset Management's Emerging Growth Group, where he analyzed small
growth companies. Prior to that, he was a trust officer at Sovran Bank and Trust
Company. He received a bachelor's degree and an MBA from Duke University.
Jeffrey W. Hynoski, Vice President/Portfolio Manager, joined Delaware
Investments in 1998. Previously, he served as a Vice President at Bessemer Trust
Company in the mid and large capitalization growth group, where he specialized
in the areas of science, technology, and telecommunications. Prior to that, Mr.
Hynoski held positions at Lord Abbett & Co. and Cowen Asset Management. Mr.
Hynoski holds a BS in Finance from the University of Delaware and an MBA with a
concentration in Investments/Portfolio Management and Financial Economics from
Pace University.
Lori P. Wachs, Vice President/Portfolio Manager, joined Delaware Investments in
1992 from Goldman Sachs, where she was an equity analyst for two years. She is a
graduate of the University of Pennsylvania's Wharton School, where she majored
in Finance and Oriental Studies.
18
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
<TABLE>
<CAPTION>
Board of Trustees
<S> <C> <C>
Investment manager The Funds Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page 16 for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
</TABLE>
Shareholders
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
19
<PAGE>
About your account
Investing in the Funds
Institutional Class shares are available for purchase only by the following:
o 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;
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor;
o 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 affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts;
o 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
to the financial institution of a Rule 12b-1 Plan fee; and
o 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.
20
<PAGE>
About your account (continued)
How to buy shares
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014128934013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us at 800.510.4015 so we can assign you an
account number.
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800.510.4015.
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
21
<PAGE>
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on a
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine each Fund's net asset value (NAV) per share at the close of regular
trading of the New York Stock Exchange each business day that the Exchange is
open. We calculate this value by adding the market value of all the securities
and assets in each Fund's portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The result is the net
asset value per share. We price securities and other assets for which market
quotations are available at their market value. We price fixed-income securities
on the basis of valuations provided to us by an independent pricing service that
uses methods approved by the board of trustees. Any fixed-income securities that
have a maturity of less than 60 days we price at amortized cost. For all other
securities, we use methods approved by the Board of Trustees that are designed
to price securities at their fair market value.
22
<PAGE>
About your account (continued)
How to redeem shares
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. You can also fax
your written request to 215.255.8864. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on an account.
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. Bank information must be on file before you request a wire redemption.
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
23
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time), you will receive the net asset value as determined on
the business day we receive your request. We will send you a check, normally the
next business day, but no later than seven days after we receive your request to
sell your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
Account minimum
If you redeem shares and your account balance falls below $250, a Fund may
redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from a Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
24
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, each Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." Each Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of a Fund. The Year 2000 problem may
adversely affect the issuers of securities in which the Funds invest. The
portfolio manager and investment professionals of the Fund consider Year 2000
compliance in the securities selection and investment process. However, there
can be no guarantee that, even with their due diligence efforts, they will be
able to predict the affect of Year 2000 on any company or the performance of its
securities.
Investments by fund of funds
Delaware Research Fund accepts investments from the series portfolios of
Delaware Group Foundation Funds, a fund of funds. From time to time, the Fund
may experience large investments or redemptions due to allocations or
rebalancings by Foundation Funds. While it is impossible to predict the overall
impact of these transactions over time, there could be adverse effects on
portfolio management. For example, the Fund may be required to sell securities
or invest cash at times when it would not otherwise do so. These transactions
could also have tax consequences if sales of securities result in gains, and
could also increase transaction costs or portfolio turnover. The manager will
monitor transactions by Foundation Funds and will attempt to minimize any
adverse effects on both the Fund and Foundation Funds as a result of these
transactions.
Financial highlights
Financial highlights are not shown for the Funds since they commenced operations
after the close of the fiscal year end.
25
<PAGE>
Glossary
How to use this glossary
The glossary includes definitions of investment terms used throughout the
prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical rating organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Corporate bond
A debt security issued by a corporation. See Bond.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
26
<PAGE>
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bond.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
NASD Regulation, Inc. (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Nationally recognized statistical rating organization (NRSRO)
A company that assesses the credit quality of bonds, commercial paper, preferred
and common stocks and municipal short-term issues, rating the probability that
the issuer of the debt will meet the scheduled interest payments and repay the
principal. Ratings are published by such companies as Moody's Investors Service,
Inc. (Moody's), Standard & Poor's Ratings Group (S&P), Duff & Phelps, Inc.
(Duff), and Fitch IBCA, Inc. (Fitch).
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stock also often pays dividends at a fixed rate
and is sometimes convertible into common stock.
Price-to-earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
27
<PAGE>
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
financial advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
28
<PAGE>
Delaware American Services Fund
Delaware Research Fund
Delaware Large Cap Growth Fund
Additional information about each Fund's investments will be available in the
Fund's annual and semi-annual reports to shareholders. In a Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about a Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in the Fund, you can write to us at 1818 Market Street, Philadelphia, PA 19103,
or call toll-free 800.523.1918. You may also obtain additional information about
a Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawareinvestments.com
- ---------------------------
E-mail
[email protected]
Client Services Representative
800.510.4015
Delaphone Service
800.362.FUND (800.362.3863)
For convenient access to account information or current performance information
on all Delaware Investments Funds seven days a week, 24 hours a day, use this
Touch-Tone service.
Investment Company Act file number: 811-1485
DELAWARE
INVESTMENTS
Philadelphia * London
P-002 [--] PP 12/99
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
----------------------------------------------------
Delaware Investments includes funds with a wide
range of investment objectives. Stock funds, income funds, DELAWARE GROUP EQUITY FUNDS III
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, Delaware Technology and Innovation Fund
shareholders of the Fund Classes should contact their Delaware American Services Fund
financial adviser or call Delaware Investments at Delaware Research Fund
800-523-1918 and shareholders of the Institutional Classes Delaware Large Cap Growth Fund
should contact Delaware Investments at 800-828-5052.
A CLASS
B CLASS
INVESTMENT MANAGER C CLASS
Delaware Management Company INSTITUTIONAL CLASS
One Commerce Square ----------------------------------------------------
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
PART B
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING, STATEMENT OF
ACCOUNTING SERVICES ADDITIONAL INFORMATION
AND TRANSFER AGENT ----------------------------------------------------
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103 DECEMBER 22, 1999
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 DELAWARE
4 Chase Metrotech Center INVESTMENTS
Brooklyn, NY 11245 ============
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
December 22, 1999
DELAWARE GROUP EQUITY FUNDS III
Delaware Technology and Innovation Fund
Delaware American Services Fund
Delaware Research Fund
Delaware Large Cap Growth Fund
1818 Market Street
Philadelphia, PA 19103
For more information about the Institutional Class: 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 III ("Equity Funds III") is a
professionally-managed mutual fund of the series type. This Statement of
Additional Information ("Part B" of the registration statement) describes shares
of Delaware Technology and Innovation Fund, Delaware American Services Fund,
Delaware Research Fund and Delaware Large Cap Growth Fund (individually a "Fund"
and collectively the "Funds"). Each Fund offers Class A Shares, Class B Shares
and Class C Shares (together referred to as the "Fund Classes") and an
Institutional Class (together referred to as the "Institutional Classes").
Equity Funds III also offers Delaware Trend Fund, which is described in a
separate Part B. All references to "shares" in this Part B refer to all Fund
Classes and Institutional Classes of shares of the Funds, except where noted.
This Part B supplements the information contained in the current
Prospectuses for the Fund Classes dated December 22, 1999 and the current
Prospectuses for the Institutional Classes dated December 22, 1999, 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 a Fund's national distributor, Delaware Distributors, L.P. (the
"Distributor"), at the above address or by calling the above phone numbers. Each
Fund's financial statements, the notes relating thereto, the financial
highlights and the report of independent auditors will be incorporated by
reference from the Annual Report into this Part B. The Annual Report will
accompany any request for Part B. The Annual Report can be obtained, without
charge, by calling 800-523-1918.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
TABLE OF CONTENTS
- -------------------------------------------------------------------------------------------------------------------------
Page Page
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Cover Page 2 Dividends and Realized Securities Profits Distributions 43
- -------------------------------------------------------------------------------------------------------------------------
Investment Policies 3 Taxes 43
- -------------------------------------------------------------------------------------------------------------------------
Performance Information 11 Investment Management Agreement 47
- -------------------------------------------------------------------------------------------------------------------------
Trading Practices and Brokerage 15 Officers and Trustees 49
- -------------------------------------------------------------------------------------------------------------------------
Purchasing Shares 17 General Information 60
- -------------------------------------------------------------------------------------------------------------------------
Investment Plans 28 Financial Statements 61
- -------------------------------------------------------------------------------------------------------------------------
Determining Offering Price and Net Asset Value 35 Appendix A--Investment Objectives of the Funds in 62
the Delaware Investments Family
- -------------------------------------------------------------------------------------------------------------------------
Redemption and Exchange 37
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
INVESTMENT POLICIES
Investment Restrictions
Each Fund has adopted the following restrictions which cannot be
changed without approval by the holders of a "majority" of the Fund's
outstanding shares, which is a vote by the holders of the lesser of a) 67% or
more of the voting securities present in person or by proxy at a meeting, if the
holders of more than 50% of the outstanding voting securities are present or
represented by proxy; or b) more than 50% of the outstanding voting securities.
The percentage limitations contained in the restrictions and policies set forth
herein apply at the time of purchase of securities.
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.
In addition to the fundamental policies and investment restrictions
described above, and the various general investment policies described in the
Prospectuses, a 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.
1. The 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, the 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."
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2. The 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 Funds may make the following investments consistent with their
respective investment objective.
Foreign Securities
Each Fund may invest up to 25% of its net assets in foreign securities,
although none of the Funds presently intends to invest in these securities.
Investors should recognize that investing in foreign corporations involves
certain considerations, including those set forth below, which are not typically
associated with investing in United States corporations.
Foreign corporations are not generally subject to uniform accounting,
auditing and financial standards and requirements comparable to those applicable
to United States corporations. There may also be less supervision and regulation
of foreign stock exchanges, brokers and listed corporations than exist in the
United States. The Funds may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange as between the currencies of
different nations and control regulations. Furthermore, there may be the
possibility of expropriation or confiscatory taxation, political, economic or
social instability or diplomatic developments which could affect assets of the
Funds held in foreign countries.
There has been in the past, and there may be again in the future, an
interest equalization tax levied by the United States in connection with the
purchase of foreign securities such as those purchased by the Funds. Payment of
such interest equalization tax, if imposed, would reduce a Fund's rate of return
on its investment. Dividends paid by foreign issuers may be subject to
withholding and other foreign taxes which may decrease the net return on such
investments as compared to dividends paid to the Funds by United States
corporations.
ADRs
Each Fund may invest in sponsored and unsponsored American Depositary
Receipts ("ADRs") that are actively traded in the United States. ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. "Sponsored"
ADRs are issued jointly by the issuer of the underlying security and a
depository, and "unsponsored" ADRs are issued without the participation of the
issuer of the deposited security. Holders of unsponsored ADRs generally bear all
the costs of such facilities and the depository of an unsponsored ADR facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts in respect of the deposited securities.
Therefore, there may not be a correlation between information concerning the
issuer of the security and the market value of an unsponsored ADR.
Repurchase Agreements
A repurchase agreement is a short-term investment by which the
purchaser acquires ownership of a debt security and the seller agrees to
repurchase the obligation at a future time and set price, thereby determining
the yield during the purchaser's holding period. Should an issuer of a
repurchase agreement fail to repurchase the underlying security, the loss to a
Fund, if any, would be the difference between the repurchase price and the
market value of the security. Each Fund will limit its investments in repurchase
agreements to those which Delaware Management Company (the "Manager") under the
guidelines of the Board of Trustees determines to present minimal credit risks
and which are of high quality. In addition, a Fund must have collateral of at
least 102% of the repurchase price, including the portion representing the
Fund's yield under such agreements which is monitored on a daily basis. While a
Fund is permitted to do so, it normally does not invest in repurchase
agreements, except to invest excess cash balances.
The funds available from 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. The Funds may invest cash balances in a joint repurchase
agreement in accordance with the terms of the Order and subject generally to the
conditions described above.
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Restricted and Illiquid Securities
Each Fund may purchase privately placed securities the resale of which
is restricted under applicable securities laws. Such securities may offer a
higher return than comparably registered securities but involve some additional
risk as they can be resold only in privately negotiated transactions in
accordance with an exemption from the registration requirements under applicable
securities laws or after registration. The Funds will not purchase illiquid
assets, including such restricted securities, if more than 15% of the value of
their respective assets would then consist of illiquid securities.
Certain of the privately placed securities acquired by a Fund will be
eligible for resale by the Fund pursuant to Rule 144A under the 1933 Act ("Rule
144A Securities"). Rule 144A permits many privately placed or legally restricted
securities to be freely traded without restriction among certain institutional
buyers such as the fund.
While maintaining oversight, the Board of Trustees of Equity Funds III
has delegated to the Manager the day-to-day function of determining whether or
not individual Rule 144A Securities are liquid for purposes of each Fund's 15%
limitation in investments in illiquid securities. The Board has instructed the
Manager to consider the following factors in determining the liquidity of a Rule
144A Security: (i) the frequency of trades and trading volume for the security;
(ii) whether at least three dealers are willing to purchase or sell the security
and then number of potential purchasers; (iii) whether at least two dealers are
making a market in the security; and (iv) the nature of the security and the
nature of the marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, a
Fund's holdings of illiquid securities exceed the Fund's 15% limit on
investments in such securities, the Manager will determine what action to take
to ensure that the Fund continues to adhere to such limitation.
Borrowings
Although each Fund is permitted under certain circumstances to borrow
money and invest in investment company securities, it does not normally do so.
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 the Fund from
the borrower; 2) this collateral must be valued daily and should the market
value of the loaned securities increase, the borrower must furnish additional
collateral to the Fund; 3) the Fund must be able to terminate the loan after
notice, at any time; 4) the Fund must receive reasonable interest on any loan,
and any dividends, interest or other distributions on the lent securities, and
any increase in the market value of such securities; 5) the Fund may pay
reasonable custodian fees in connection with the loan; and 6) the voting rights
on the lent securities may pass to the borrower; however, if the trustees of the
Fund know that a material event will occur affecting an investment loan, they
must either terminate the loan in order to vote the proxy or enter into an
alternative arrangement with the borrower to enable the trustees to vote the
proxy.
The major risk to which a Fund would be exposed on a portfolio loan
transaction is the risk that the borrower would go bankrupt at a time when the
value of the security goes up. Therefore, the Funds will only enter into loan
arrangements after a review of all pertinent facts by the Manager, under the
supervision of the Board of 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.
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Options on Securities
The Funds may write call options and purchase put options on a covered
basis only, and will not engage in option writing strategies for speculative
purposes. The Funds may invest in options that are either Exchange-listed or
traded over-the-counter. Certain over-the-counter options may be illiquid. Thus,
it may not be possible to close options positions and this may have an adverse
impact on a Fund's ability to effectively hedge their securities. Each Fund will
not invest more than 15% of its assets in illiquid securities.
A. 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 a 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 it receives a premium which is additional income. 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 options on actual portfolio securities owned by a Fund,
the 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.
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 the Fund will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, a Fund would be required to continue to hold a security which it might
otherwise wish to sell, or deliver a security it would want to hold. Options
written by 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.
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B. Purchasing Put Options--Each Fund may invest up to 2% of its total
assets in the purchase of put options. Each Fund will, at all times during which
it holds a put option, own the security covered by such option.
Each Fund intends to purchase put options in order to protect against a
decline in the market value of the underlying security below the exercise price
less the premium paid for the option ("protective puts"). The ability to
purchase put options will allow a Fund to protect unrealized gain in an
appreciated security in its portfolio without actually selling the security. If
the security does not drop in value, a Fund will lose the value of the premium
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. 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.
Options on Stock Indices
Each Fund may also engage in transactions involving options on stock
indices. A stock index assigns relative values to the common stocks included in
the index with the index fluctuating with changes in the market values of the
underlying common stock.
Options on stock indices are similar to options on stocks but have
different delivery requirements. Stock options provide the right to take or make
delivery of the underlying stock at a specified price. A stock index option
gives the holder the right to receive a cash "exercise settlement amount" equal
to (i) the amount by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by (ii) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
The amount of cash received will be equal to such difference between the closing
price of the index and exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Gain or loss to the Fund on
transactions in stock index options will depend on price movements in the stock
market generally (or in a particular industry or segment of the market) rather
than price movements of individual securities.
As with stock options, 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 or the New York Stock Exchange Composite Index, or a
narrower market index such as the Standard & Poor's 100. Indices are also based
on an industry or market segment such as the AMEX Oil and Gas Index or the
Computer and Business Equipment Index. Options on stock indices are currently
traded on the following Exchanges among others: The Chicago Board Options
Exchange, New York Stock Exchange and American Stock Exchange.
A Fund's ability to hedge effectively all or a portion of its
securities through transactions in options on stock indices depends on the
degree to which price movements in the underlying index correlate with price
movements in the Fund's portfolio securities. 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.
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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 and Options on Futures Contracts
Each Fund may enter into futures contracts on stocks and stock indices,
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 the 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 a Fund.
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
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.
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 contracts more or
less valuable, a process known as "marking to the market." A Fund will designate
cash or securities in amounts sufficient to cover its obligations, and will
value the designated assets daily.
Purchases or sales of stock index futures contracts are used for
hedging purposes to attempt to protect a Fund's current or intended investments
from broad fluctuations in stock prices. For example, a Fund may sell stock
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 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 index futures contracts
will be closed out.
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Each Fund may also purchase and write options on the types of futures
contracts in which a 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 a 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. The 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 a
Fund from closing out its positions relating to futures.
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REITs
Each Fund may invest in REITs. REITs are pooled investment vehicles
which invest primarily in income-producing real estate or real estate related
loans or interests. REITs are generally classified as equity REITs, mortgage
REITs or a combination of equity and mortgage REITs. Equity REITs invest the
majority of their assets directly in real property and derive income primarily
from the collection of rents. Equity REITs can also realize capital gains by
selling properties that have appreciated in value. Mortgage REITs invest the
majority of their assets in real estate mortgages and derive income from the
collection of interest payments. Like investment companies, REITs are not taxed
on income distributed to shareholders provided they comply with several
requirements in the Internal Revenue Code. REITs are subject to substantial cash
flow dependency, defaults by borrowers, self-liquidation, and the risk of
failing to qualify for tax-free pass-through of income under the Code, and/or to
maintain exemptions from the 1940 Act.
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The Fund's investments in REITs present certain further risks that are
unique and in addition to the risks associated with investing in the real estate
industry in general. Equity REITs may be affected by changes in the value of the
underlying property owned by the REITs, while mortgage REITs may be affected by
the quality of any credit extended. REITs are dependent on management skills,
are not diversified, and are subject to the risks of financing projects. REITs
whose underlying assets include long-term health care properties, such as
nursing, retirement and assisted living homes, may be impacted by federal
regulations concerning the health care industry.
REITs (especially mortgage REITs) are also subject to interest rate
risks -- when interest rates decline, the value of a REIT's investment in fixed
rate obligations can be expected to rise. Conversely, when interest rates rise,
the value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
REITs may have limited financial resources, may trade less frequently
and in a limited volume, and may be subject to more abrupt or erratic price
movements than other securities.
Securities of Companies in the Financial Services Industry
Certain provisions of the federal securities laws permit investment
portfolios to invest in companies engaged in securities-related activities only
if certain conditions are met. Purchases of securities of a company that derived
15% or less of gross revenues during its most recent fiscal year from
securities-related activities (i.e., broker, dealer, underwriting, or investment
advisory activities) are subject only to the same percentage limitations as
would apply to any other securities a Fund may purchase.
Each Fund may also purchase securities (not limited to equity or debt
individually) of an issuer that derived more than 15% of its gross revenues in
its most recent fiscal year from securities-related activities if the following
conditions are met: (1) immediately after the purchase of any securities
issuer's equity and debt securities, the purchase cannot cause more than 5% of
the Fund's total assets to be invested in securities of that securities issuer;
(2) immediately after a purchase of equity securities of a securities issuer, a
Fund may not own more than 5% of the outstanding securities of that class of the
securities issuer's equity securities; and (3) immediately after a purchase of
debt securities of a securities issuer, a Fund may not own more than 10% of the
outstanding principal amount of the securities issuer's debt securities.
In applying the gross revenue test, an issuer's gross revenues from its
own securities-related activities should be combined with its ratable share of
the securities-related activities of enterprises of which its owns a 20% or
greater voting or equity interest. All of the above percentage limitations are
applicable at the time of purchase as well as the issuer's gross revenue test.
With respect to warrants, rights, and convertible securities, a determination of
compliance with the above limitations must be made as though such warrant,
right, or conversion privilege had been exercised.
The following transactions would not be deemed to be an acquisition of
securities of a securities-related business: (i) receipt of stock dividends on
securities acquired in compliance with the conditions described above; (ii)
receipt of securities arising from a stock-for-stock split on securities
acquired in compliance with the conditions described above; (iii) exercise of
options, warrants, or rights acquired in compliance with the federal securities
laws; (iv) conversion of convertible securities acquired in compliance with the
conditions described above; (v) the acquisition of demand features or guarantees
(puts) under certain circumstances.
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In addition, Delaware American Services Fund is generally prohibited
from purchasing or otherwise acquiring any security (not limited to equity or
debt individually) issued by any insurance company if the Fund and any company
controlled by the Fund own in the aggregate or, as a result of the purchase,
will own in the aggregate more than 10% of the insurance company. Certain state
insurance laws impose similar limitations.
Concentration
In applying a Fund's fundamental policy concerning concentration that
is described above, it is a matter of non-fundamental policy that: (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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PERFORMANCE INFORMATION
From time to time, each Fund may state each Class' 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 of each
Class over additional periods of time.
The average annual total rate of return for each Class will be 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. Performance information for the Funds is not shown
because they have not commenced operation as of the date of this Part B.
n
P(1 + T) = ERV
Where: P = a hypothetical initial purchase order of $1,000 from
which, in the case of only Class A Shares, the maximum
front-end sales charge is deducted;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical $1,000
purchase at the end of the period after the
deduction of the applicable CDSC, if any, with
respect to Class B Shares and Class C Shares.
In presenting performance information for Class A Shares, the contingent
deferred sales charge applicable only to certain redemptions of those shares
("Limited CDSC" or "other CDSC") 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.
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 not reflect any income taxes payable by
shareholders on the reinvested distributions included in the calculation.
Because securities prices fluctuate, past performance should not be considered
as a representative of the results which may be realized from an investment in a
Fund in the future.
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, a Fund may present total return
information that does not reflect the deduction of the maximum front-end sales
charge or any applicable CDSC.
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Total return performance for the Classes will be computed by adding all
reinvested income and realized securities profits distributions plus the change
in net asset value during a specific period and dividing by the offering price
at the beginning of the period. It will also reflect, 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. Because securities prices fluctuate, past
performance should not be considered as a representation of the results that may
be realized from an investment in a Fund in the future.
From time to time, a Fund may also quote its Classes' 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 Fund Class) may be compared to data
prepared by Lipper Analytical Services, Inc., Morningstar, Inc. or to the S&P
500 Index or the Dow Jones Industrial Average.
Lipper Analytical Services, Inc. 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
Stock Index and the Dow Jones Industrial Average are industry-accepted unmanaged
indices of generally-conservative securities used for measuring general market
performance. The total return performance reported 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 a Fund 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. A Fund 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.
Each Fund 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
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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. A Fund 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 a Fund and may illustrate how
to find the listings of the Fund in newspapers and periodicals. Materials may
also include discussions of other funds, products, and services.
Each Fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, a Fund 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.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for each Fund 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 a Fund 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 Delaware Investment
Advisers ("DIA"), an affiliate of the Manager, including the number of such
clients serviced by DIA.
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 Investment Plans 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. A Fund may include illustrations showing the power of
compounding in advertisements and other types of literature.
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TRADING PRACTICES AND BROKERAGE
Each Fund selects brokers, dealers and banks 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, dealers or banks 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. When a
commission is paid, a Fund 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, a Fund pays a minimal share transaction cost when
the transaction presents no difficulty. A number of trades are made on a net
basis where a Fund either buys the securities directly from the dealer or sells
them to the dealer. In these instances, there is no direct commission charged
but there is a spread (the difference between the buy and sell price) which is
the equivalent of a commission.
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.
As provided in the Securities Exchange Act of 1934 (the "1934 Act") and
the Funds' 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, each Fund believes that the
commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In some instances, services may be provided to
the Manager which constitute in some part brokerage and research services used
by the Manager in connection with its investment decision-making process and
constitute in some part services used by the Manager in connection with
administrative or other functions not related to its investment decision-making
process. In such cases, the Manager will make a good faith allocation of
brokerage and research services and will pay out of its own resources for
services used by the Manager in connection with administrative or other
functions not related to its investment decision-making process. In addition, so
long as no fund is disadvantaged, portfolio transactions which generate
commissions or their equivalent are allocated to broker/dealers who provide
daily portfolio pricing services to 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.
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 III's Board of
Trustees that the advantages of combined orders outweigh the possible
disadvantages of separate transactions.
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Consistent with the Conduct Rules of NASD Regulation, Inc. (the "NASD"),
and subject to seeking best execution, a Fund 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 the funds in the
Delaware Investments family as a factor in the selection of brokers and dealers
to execute Fund portfolio transactions.
Portfolio Turnover
In investing for capital appreciation, a Fund may hold securities for any
period of time. It is anticipated that, given each Fund's investment objective,
its annual portfolio turnover rate will be higher than that of many other
investment companies. The Delaware Research Fund's portfolio turnover rate may
be as high as 200% to 300%. 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. The degree of portfolio activity will affect
brokerage costs of a Fund and may affect taxes payable by the Fund's
shareholders. Total brokerage costs generally increase with higher portfolio
turnover rates. To the extent a Fund realizes gains on securities held for less
than six months, such gains are taxable to the shareholder or to the Fund at
ordinary income tax rates. The turnover rate also may be affected by cash
requirements from redemptions and repurchases of Fund shares.
The portfolio turnover rate of a Fund is calculated by dividing the lesser
of purchases or sales of portfolio securities for the particular fiscal year by
the monthly average of the value of the portfolio securities owned by the Fund
during the particular fiscal year, exclusive of securities whose maturities at
the time of acquisition are one year or less.
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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 a Fund. See the
Prospectuses for information on how to invest. Shares of the Funds are offered
on a continuous basis and may be purchased through authorized investment dealers
or directly by contacting Equity Funds III 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, directors 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 III 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 III reserves the right to reject any order for the purchase of its shares
of any Fund if in the opinion of management such rejection is in the 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.
A 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.
A 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, a 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.
A 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 III and the Distributor intend
to operate in compliance with these rules.
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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' Prospectus.
Absent applicable fees waivers, 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. Absent applicable fee
waivers, 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. Absent
applicable fee waivers, 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 Delaware American Services Fund, Delaware Research Fund and Delaware
Large Cap Growth Fund from the commencement of the public offering through
August 31, 2000.
The Board of Trustees of Equity Funds III has set the 12b-1 Plan fee
payable by Class A Shares of Delaware Technology and Innovation Fund at 0.25% of
average daily net assets.
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 III 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, Class B and Class 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
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Class B or Class C Shares and have the entire initial purchase amount invested
in a Fund with the investment thereafter subject to a CDSC and annual 12b-1 Plan
expenses. Class B Shares are subject to a CDSC if the shares are redeemed within
six years of purchase, and Class C Shares are subject to a CDSC if the shares
are redeemed within 12 months of purchase. Class B and Class C Shares are each
subject to annual 12b-1 Plan expenses of up to a maximum of 1% (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.
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 and Class C
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 additional amount of 12b-1
Plan expenses relating to 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.
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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.
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 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 same Fund.
See Automatic Conversion of Class B Shares 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.
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Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently 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.
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 same Fund (or, in the case
of Delaware Group Cash Reserve, the Delaware Cash Reserve Fund Consultant Class)
pro-rata with Class B Shares of the Fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without 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.
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.
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Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Equity Funds III has adopted
a separate 12b-1 Plan for each of Class A Shares, Class B Shares and Class C
Shares of the Funds (the "Plans"). Each Plan permits the Funds 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 Class of shares. Such shares are not included in calculating the
Plans' fees, and the Plans are not used to assist in the distribution and
marketing of 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 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, holding special promotions for specified periods of time
and paying distribution and maintenance fees to brokers, dealers and others. In
connection with the promotion of shares of the Classes, the Distributor may,
from time to time, pay to participate in dealer-sponsored seminars and
conferences, and reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising. The Distributor may pay or
allow additional promotional incentives to dealers as part of preapproved sales
contests and/or to dealers who provide extra training and information concerning
a Class and increase sales of the Class. In addition, a Fund may make payments
from the 12b-1 Plan fees of its respective Classes directly to others, such as
banks, who aid in the distribution of Class shares or provide services in
respect of a Class, pursuant to service agreements with Equity Funds III. 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.
The maximum aggregate fee payable by a Fund under the Plans, and a
Fund's Distribution Agreement, is on an annual basis, up to 0.30% of average
daily net assets 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 Class C Shares' average daily net assets for the year. Equity Funds III's
Board of Trustees may reduce these amounts at any time. The Distributor has
elected voluntarily to waive all payments under the 12b-1 Plan for each Class of
Delaware American Services Fund, Delaware Research Fund and Delaware Large Cap
Growth Fund during the commencement of the Funds operations through August 31,
2000. The Board of Trustees of Equity Funds III has set the 12b-1 Plan fee for
Class A Shares of Delaware Technology and Innovation Fund at 0.25% of average
daily net assets.
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 Agreement, as amended, have all been
approved by the Board of Trustees of Equity Funds III, including a majority of
the trustees who are not "interested persons" (as defined in the 1940 Act) of
Equity Funds III 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 Agreement. Continuation of the Plans and the Distribution
Agreement, 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 a Fund and that there is a reasonable
likelihood of the Plan relating to a Class providing a benefit to that Class.
The Plans and the Distribution Agreement, as amended, may be terminated with
respect to a Class at any time without penalty by a majority of those trustees
who are not "interested persons" or by a majority vote of the relevant Class'
outstanding voting securities. Any amendment materially increasing the
percentage payable under the Plans must likewise be approved by a majority vote
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<PAGE>
of the relevant Class' outstanding voting securities, 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 the 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 III 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 III
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.
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 a 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, directors 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,
directors 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, directors and key employees of
institutional clients of the Manager or any of its affiliates may purchase Class
A Shares at net asset value. Moreover, purchases may be effected at net asset
value for the benefit of the clients of brokers, dealers and registered
investment advisers affiliated with a broker or dealer, if such broker, dealer
or investment adviser has entered into an agreement with the Distributor
providing specifically for the purchase of Class A Shares in connection with
special investment products, such as wrap accounts or similar fee based
programs. Such purchasers are required to sign a letter stating that the
purchase is for investment only and that the securities may not be resold except
to the issuer. Such purchasers may also be required to sign or deliver such
other documents as a Fund may reasonably require to establish eligibility for
purchase at net asset value. 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 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
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Shares of a fund 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 in
writing to Retirement Financial Services, Inc. that it has the requisite number
of employees and 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 III 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.
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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Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made by
any such purchaser previously enumerated within a 13-month period pursuant to a
written Letter of Intention provided by the Distributor and signed by the
purchaser, and not legally binding on the signer or Equity Funds III 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 a Fund 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. For purposes of satisfying an
investor's obligation under a Letter of Intention, Class B Shares and Class C
Shares of a Fund and the corresponding classes of shares of other funds in the
Delaware Investments family which offer such shares may be aggregated with Class
A Shares of the Fund and the corresponding class of shares of the other funds in
the Delaware Investments family.
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 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 Delaware Investment Advisers, the Manager's affiliate, or any of the
Manager's other affiliates in a stable value account may be combined with other
Delaware Investments fund holdings.
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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 $10,000 and
subsequently purchases $40,000 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 a 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.
Investors should consult their financial advisers or the Transfer
Agent, which also serves as each Fund's shareholder servicing agent, about the
applicability of the Class A Limited CDSC in connection with the features
described above.
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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, 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 Class
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 the Institutional Classes are available for purchase at net
asset value, without the imposition of a front-end or contingent deferred sales
charge and are not subject to Rule 12b-1 expenses.
INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by Fund Class shareholders of Delaware
Technology and Innovation Fund, dividends from net investment income and
distributions from realized securities profits, if any, will be automatically
reinvested in additional shares of the respective Class in which an investor has
an account (based on the net asset value in effect on the reinvestment date) and
will be credited to the shareholder's account on that date. A confirmation of
each dividend payment from net investment income and of distributions from
realized securities profits, if any, will be mailed to shareholders in the first
quarter of the fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the 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.
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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 Delaware Investments, including a
Fund, in states where their shares may be sold. Such investments will be at net
asset value at the close of business on the reinvestment date without any
front-end sales charge or service fee. The shareholder must notify the Transfer
Agent in writing and must have established an account in the fund into which the
dividends and/or distributions are to be invested. Any reinvestment directed to
a fund in which the investor does not then have an account will be treated like
all other initial purchases of 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.
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.
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 a 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 the same 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 any 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.
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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.
* * *
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 account. A Fund will accept these
investments, such as bank-by-phone, annuity payments and payroll allotments, by
mail directly from the third party. Investors should contact their employers or
financial institutions who in turn should contact Equity Funds III for proper
instructions.
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.
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Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See 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.
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 Class.
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 a Fund 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.
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.
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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.
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).
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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 includable 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 a Fund.
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.
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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 are 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.
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 a 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.
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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 after receipt of the order by a Fund, its agent or certain
other authorized persons. See Distribution and Service under Investment
Management Agreement. 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 after receipt of the order by a 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 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 when 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, will be included in
a Fund's financial statements which will be incorporated by reference into this
Part B.
A Fund's net asset value per share is computed by adding the value of
all the securities and other assets in a Fund's portfolio, deducting any
liabilities of the Fund, and dividing by the number of Fund shares outstanding.
Expenses and fees are accrued daily. In determining a Fund's total net assets,
portfolio securities primarily listed or traded on a national or foreign
securities exchange, except for bonds, are valued at the last sale price on that
exchange. Exchange traded options are valued at the last reported sale price or,
if no sales are reported, at the mean between bid and asked prices. Non-exchange
traded options are valued at fair value using a mathematical model. Futures
contracts are valued at their daily quoted settlement price. 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. Foreign securities and
the prices of foreign securities denominated in foreign currencies are
translated to 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. Use of a pricing service has been approved by the Board of Trustees.
Prices provided by a pricing service take into account appropriate factors such
as institutional trading in similar groups of securities, yield, quality, coupon
rate, maturity, type of issue, trading characteristics and other market data.
Subject to the foregoing, securities for which market quotations are not readily
available and other assets are valued at fair value as determined in good faith
and in a method approved by the Board of Trustees.
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Each Class of a Fund will bear, pro-rata, all of the common expenses of
the Fund. The net asset values of all outstanding shares of each Class of a Fund
will be computed on a pro-rata basis for each outstanding share based on the
proportionate participation in the Fund represented by the value of shares of
that Class. All income earned and expenses incurred by a Fund, will be borne on
a pro-rata basis by each outstanding share of a Class, based on each Class'
percentage in the Fund represented by the value of shares of such Classes,
except that Institutional Class will not incur any of the expenses under Equity
Funds III'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.
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REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways.
The exchange service is useful if your investment requirements change and you
want an easy way to invest in other equity funds, 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. See the Prospectuses. 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.
In addition to redemption of Fund shares, the Distributor, acting as
agent of a Fund, offers to repurchase Fund shares from broker/dealers acting on
behalf of shareholders. The redemption or repurchase price, which may be more or
less than the shareholder's cost, is the net asset value per share next
determined after receipt of the request in good order by a 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 a Fund or certain other authorized persons (see Distribution
and Service under Investment Management Agreement); 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.
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Each Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. A Fund will honor redemption requests as to shares for which a check
was tendered as payment, but the 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 the Fund or to the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by 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, the Fund may postpone payment or suspend the right of redemption
or repurchase. In such case, the shareholder may withdraw the request for
redemption or leave it standing as a request for redemption at the net asset
value next determined after the suspension has been terminated.
Payment for shares redeemed or repurchased may be made either in cash
or kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, Equity Funds
III has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which a 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.
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
after 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 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 wiring cost, neither the Funds nor the Distributor charge 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
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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.
Written Redemption
You can write to a 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"). A Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. A Fund may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares 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 a 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 a Fund 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 are 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, a 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.
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Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day. 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 the Funds reserve
the right to record exchange instructions received by telephone and to reject
exchange requests at any time in the future.
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"), a Fund 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 a Fund within two weeks of an earlier exchange
request out of the Fund, or (ii) makes more than two exchanges out of a Fund per
calendar quarter, or (iii) exchanges shares equal in value to at least $5
million, or more than 1/4 of 1% of the Fund's net assets. Accounts under common
ownership or control, including accounts administered so as to redeem or
purchase shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Investments funds: (1)
Delaware Decatur Equity Income Fund, (2) Delaware Growth and Income Fund, (3)
Delaware Small Cap Value Fund, (4) Delaware Limited-Term Government Fund, (5)
Delaware Trend 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. A 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.
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Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
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 described above.
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.
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.
Waivers of Contingent Deferred Sales Charges
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 a 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).
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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 a
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 a 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.
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DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
Each Fund will make payments from its net investment income and net
realized securities profits, if any, once a year.
All dividends and any capital gains distributions will be automatically
reinvested for the shareholder in additional shares of the same Class at net
asset value, unless in the case of the Fund Classes of Delaware Technology and
Innovation Fund shareholders request otherwise.
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.
Any check in payment of dividends or other distributions which cannot
be delivered by the United States Post Office or which remains uncashed for a
period of more than one year may be reinvested in the shareholder's account at
the then-current net asset value and the dividend option may be changed from
cash to reinvest. A Fund may deduct from a shareholder's account the costs of
the Fund's effort to locate a shareholder if a shareholder's mail is returned by
the United States Post Office or the Fund is otherwise unable to locate the
shareholder or verify the shareholder's mailing address. These costs may include
a percentage of the account when a search company charges a percentage fee in
exchange for their location services.
TAXES
It is each Fund's policy to pay out substantially all net investment
income and net realized gains to shareholders to relieve itself of federal
income tax liability on that portion of its income paid to shareholders under
Subchapter M of the Code. Such distributions are taxable as ordinary income or
capital gain to those shareholders who are liable for federal income tax. Each
Fund also intends to meet the calendar year distribution requirements imposed by
the Code to avoid the imposition of a 4% excise tax.
Distributions may also be subject to state and local taxes;
shareholders are advised to consult with their tax advisers in this regard.
Shares of each Fund will be exempt from Pennsylvania personal property taxes.
Dividends representing net investment income or short-term capital
gains are taxable to shareholders as ordinary income. Distributions of long-term
capital gains, if any, are taxable as long-term capital gain regardless of the
length of time an investor has held such shares, and these gains are currently
taxed at long-term capital gain rates. The tax status of dividends and
distributions will not be affected by whether they are paid in cash or in
additional shares. A portion of these distributions may be eligible for the
dividends-received deduction for corporations. The portion of dividends, if any,
paid by a Fund that so qualifies will be designated each year in a notice mailed
to the Fund's shareholders, and cannot exceed the gross amount of dividends
received by the Fund from domestic (U.S.) corporations that would have qualified
for the dividends-received deduction in the hands of the Fund if the Fund was a
regular corporation. The availability of the dividends-received deduction is
subject to certain holding period and debt financing restrictions imposed under
the Code on the corporation claiming the deduction. 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. Advice as to the tax status of each year's dividends
and distributions, when paid, will be mailed annually.
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If the net asset value of shares were reduced below a shareholder's
cost by distribution of gain realized on sale of securities, such distribution
would be a return of investment though taxable as stated above.
Prior to purchasing shares of a Fund, you should carefully consider the
impact of dividends or realized securities profits distributions which have been
declared but not paid. Any such dividends or realized securities profits
distributions paid shortly after a purchase of shares by an investor will have
the effect of reducing the per share net asset value of such shares by the
amount of the dividends or realized securities profits distributions. All or a
portion of such dividends or realized securities profits distributions, although
in effect a return of capital, are subject to taxes which may be at ordinary
income tax rates. The purchase of shares just prior to the ex-dividend date has
an adverse effect for income tax purposes.
Under the Taxpayer Relief Act of 1997, as revised by 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 of holding
periods:
"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
holders are taxed at the 20% rate when distributed to shareholders (10% for
individual investors in the 15% bracket).
"Short-term capital gains": gains on securities sold by a Fund that do
not meet the long-term holding period are considered short-term capital gains
and are taxed 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 individuals 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.
If you redeem some or all of your 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 intends to qualify as a regulated investment company under
Subchapter M of the Code. As such, a Fund will not be subject to federal income
tax, 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, a Fund must meet
certain specific requirements, including:
(i) The 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;
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(ii) The 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) The 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) The 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 (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 a Fund 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 October 31 (in addition to
amounts from the prior year that were neither distributed nor taxed to the Fund)
to shareholders by December 31 of each year in order to avoid federal excise
taxes. Each Fund intends as a matter of policy to declare and pay sufficient
dividends in December or January (which are treated by shareholders as received
in December) but does not guarantee and can give no assurances that its
distributions will be sufficient to eliminate all such taxes.
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. A 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--A Fund is
authorized to invest certain limited amounts in foreign securities. Such
investments, if made, will have the following additional tax consequences to a
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 the 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 the Fund.
If a Fund's Section 988 losses exceed the Fund's other investment
company taxable income during a taxable year, the 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.
47
<PAGE>
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. 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 the 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.
A Fund may be subject to foreign withholding taxes on income from
certain of its foreign securities. If more than 50% of the total assets of the
Fund at the end of its fiscal year are invested in securities of foreign
corporations, the Fund may elect to pass-through to you your pro rata share of
foreign taxes paid by the 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 the 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 the
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 the 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 the 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 the 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--A Fund 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, a 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 the Fund to you. In general, under the PFIC rules, an excess
distribution is treated as having been realized ratably over the period during
which the 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 the 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, the 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 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
48
<PAGE>
were realized. A 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
the 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 the 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.
INVESTMENT MANAGEMENT AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to each Fund, subject to the
supervision and direction of Equity Funds III's Board of Trustees.
The Manager and its predecessors have been managing the funds in the
Delaware Investments family since 1938. On September 30, 1999, the Manager and
its affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $46 billion in assets in
various institutional or separately managed (approximately $27,671,110,000) and
investment company (approximately $18,401,910,000) accounts.
The Investment Management Agreement for each Fund is dated December 22,
1999 and was approved by the initial shareholder of each Fund on that date. The
Agreement has an initial term of two years and may be renewed 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 a Fund, and only if the terms and the renewal thereof have been approved by
the vote of a majority of the trustees of Equity Funds III who are not parties
thereto or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. The Agreement is terminable
without penalty on 60 days' notice by the trustees of Equity Funds III or by the
Manager. The Agreement will terminate automatically in the event of its
assignment.
49
<PAGE>
The annual compensation paid by each Fund for investment management
services is equal to the following fee rate which is based on the average daily
net assets of a Fund.
<TABLE>
<CAPTION>
<S> <C>
------------------------------------------------------------------------------------------------
Delaware Large Cap Growth Fund 0.65% on the first $500 million;
0.60% on the next $500 million;
0.55% on the next $1.5 billion;
0.50% on assets in excess of $2.5 billion
------------------------------------------------------------------------------------------------
Delaware Technology and Innovation Fund 0.75% on the first $500 million;
Delaware American Services Fund 0.70% on the next $500 million;
0.65% on the next $1.5 billion;
0.60% on assets in excess of $2.5 billion
------------------------------------------------------------------------------------------------
Delaware Research Fund 1.00% on the first $500 million;
0.95% on the next $500 million;
0.90% on the next $1.5 billion;
0.85% on assets in excess of $2.5 billion
------------------------------------------------------------------------------------------------
</TABLE>
Under the general supervision of the Board of Trustees, the Manager makes
all investment decisions which are implemented by a Fund. The Manager pays the
salaries of all trustees, officers and employees who are affiliated with both
the Manager and each Fund.
Except for those expenses borne by the Manager under the Investment
Management Agreement and the Distributor under the Distribution Agreements, each
Fund is responsible for all of its own expenses. Among others, these include a
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 of each
Fund's shares under separate Distribution Agreements dated as of December 22,
1999. The Distributor is an affiliate of the Manager and bears all of the costs
of promotion and distribution, except for payments by each Fund on behalf of
Class A Shares, Class B Shares and Class C Shares under their respective 12b-1
Plans. Delaware Distributors, L.P. is an indirect, wholly owned subsidiary 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 Amended and Restated Shareholders Services Agreement dated as of
December 22, 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.
Each Fund has 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 a Fund. For purposes of pricing, each Fund
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.
50
<PAGE>
OFFICERS AND TRUSTEES
The business and affairs of Equity Funds III are managed under the
direction of its Board of Trustees.
Certain officers and trustees of Equity Funds III hold identical
positions in each of the other funds in the Delaware Investments family. On
November 30, 1999, Equity Funds III's officers and trustees owned less than 1%
of the outstanding shares of Class A Shares, Class B Shares, Class C Shares and
the Institutional Class of each Fund.
As of November 30, 1999, management believes the following accounts
held 5% or more of the outstanding shares of each Class of Equity Funds III.
Equity Funds III has no knowledge of beneficial ownership.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Class Name and Address of Account Share Amount Percentage
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Delaware Trend Fund A Shares Merrill Lynch, Pierce, Fenner & Smith
Attn: Fund Administration SEC#974N5
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484 1,715,499.590 6.18%
- ---------------------------------------------------------------------------------------------------------------------
Delaware Trend Fund B Shares Merrill Lynch, Pierce, Fenner & Smith
Attn: Fund Administration SEC#97FA1
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484 587,782.470 10.07%
- ---------------------------------------------------------------------------------------------------------------------
Delaware Trend Fund C Shares Merrill Lynch, Pierce, Fenner & Smith
Attn: Fund Administration SEC#97HY3
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484 288,079.980 20.24%
- ---------------------------------------------------------------------------------------------------------------------
Delaware Trend Fund Fidelity Investments - Institutional Operations
Institutional Class CO FIICO as Agent
For Certain Employee Benefit Plans
100 Magellan Way KW1C
Covington, KY 41015-1987 1,228,584.900 22.68%
- ---------------------------------------------------------------------------------------------------------------------
La Crosse and Co.
311 Main Street
La Crosse WI 54601-3251 1,089,784.240 20.11%
- ---------------------------------------------------------------------------------------------------------------------
Fifth Third Bank
Benefits & PPA
P.O. Box 630074
Cincinnati, OH 45263-0001 785,326,630 14.49%
- ---------------------------------------------------------------------------------------------------------------------
Bank of New York 639,159.110 11.79%
TRST First Hospital Corp.
Retirement Plan
Attn: Michael Polis
1 Wall Street
New York, NY 10005-2500
- ---------------------------------------------------------------------------------------------------------------------
Marquette Trust Co.
Cust. State of Hawaii Defined Contribution Plan
3405 Annapolis Lane N. Suite. 100
Plymouth MN 55447-5326 342,989.400 6.33%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
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 in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management.
Trustees and principal officers of the Equity Funds III 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>
- ---------------------------------------------------------------------------------------------------------------------------
Trustee/Officer Business Experience
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
*Wayne A. Stork (62) Chairman, Trustee/Director of Equity Funds III and each of the other 32
investment companies in the Delaware Investments family.
Chairman and Director of Delaware Management Holdings, Inc.
Director of Delaware International Advisers Ltd.
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.
In addition, during the five years prior to January 1, 1999, Mr. Stork
has served in various executive capacities at different times within
Delaware Investments.
- ---------------------------------------------------------------------------------------------------------------------------
- ----------------------
*Trustee affiliated with Equity Funds III's investment manager and considered an "interested person" as defined in the
1940 Act.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Trustee/Officer Business Experience
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
*David K. Downes (59) President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer and Trustee/Director of Equity Funds III 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.
Chairman, President, Chief Executive Officer and Director of Delaware
Service Company, Inc.
President, Chief Operating Officer, Chief Financial Officer and Director of
Delaware International Holdings Ltd.
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 Financial Officer, Chief Administrative
Officer and Trustee of Delaware Management Business Trust
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 Delaware Investments.
- ---------------------------------------------------------------------------------------------------------------------------
- ----------------------
*Trustee affiliated with Equity Funds III's investment manager and considered an "interested person" as defined in the
1940 Act.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Trustee Business Experience
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Walter P. Babich (72) Trustee/Director of Equity Funds III 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/Director of Equity Funds III 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/Director of Equity Funds III 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>
54
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Trustee
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Ann R. Leven (59) Trustee/Director of Equity Funds III 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, Ms. 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/Director of Equity Funds III 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/Director of Equity Funds III 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.
- ---------------------------------------------------------------------------------------------------------------------------
Janet L. Yeomans (51) Trustee/Director of Equity Funds III and each of the other 32 investment
companies in the Delaware Investments family.
Building 220-13W-37, St. Paul, MN 55144
Vice President and Treasurer, 3M 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>
55
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Officer Business Experience
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Richard G. Unruh, Jr. (60) Executive Vice President and Chief Investment Officer, Equities of Equity
Funds III, each of the other 32 investment companies in the Delaware
Investments family Delaware Management Holdings, Inc., Delaware Management
Company (a series of Delaware Management Business Trust) and Delaware Capital
Management, Inc.
Chief Executive Officer/Chief Investment Officer/DIA Equity of Delaware
Investment Advisers (a series of Delaware Management Business Trust)
Executive Vice President and Director/Trustee of Delaware Management Company,
Inc. and Delaware Management Business Trust
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within Delaware Investments.
- ---------------------------------------------------------------------------------------------------------------------------
H. Thomas McMeekin (46) Executive Vice President and Chief Investment Officer, Fixed Income of Equity
Funds III and each of the other 32 investment companies in the Delaware
Investments family.
Director of Delaware Management Holdings, Inc. and Founders CBO Corporation.
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust) and
Delaware Capital Management, Inc.
Mr. McMeekin joined Delaware Investments in 1999. During the past five
years, he has also served in various executive capacities for Lincoln
National Corporation.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Officer Business Experience
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Richard J. Flannery (42) Executive Vice President/General Counsel of Equity Funds III 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), Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Founders CBO
Corporation.
Executive Vice President/General Counsel and Director of Delaware
International Holdings Ltd., Founders Holdings, Inc., Delvoy, Inc., DMH
Corp., Delaware Management Company, Inc., Delaware Service Company, Inc.,
Delaware Capital Management, Inc., Retirement Financial Services, Inc.,
Delaware Distributors, Inc. and Delaware Management Business Trust.
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 Delaware Investments.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Officer Business Experience
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Eric E. Miller (46) Senior Vice President/Deputy General Counsel and Secretary of Equity Funds
III and each of the other 32 investment companies in Delaware Investments.
Senior Vice President/Deputy General Counsel and Assistant Secretary of
Delaware Management Holdings, Inc., DMH Corp., Delvoy, Inc., Delaware
Management Company, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust), 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 Income Funds and each of the
other 32 investment companies in the Delaware Investments family.
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management Company, Inc.,
Delaware Management Company (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., Retirement Financial Services, Inc., Founders
Holdings, Inc. and Delaware Management Business Trust
Executive Vice President/Chief Financial Officer/Treasurer 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.
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</TABLE>
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<TABLE>
<CAPTION>
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Officer Business Experience
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<S> <C>
Michael P. Bishof (37) Senior Vice President and Treasurer of Equity Funds III 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.
Senior Vice President and Treasurer/ Investment Accounting of Delaware
Distributors, L.P., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust) Delaware International Holdings, Inc. and Founders
Holdings, Inc.
Senior Vice President and 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.
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Gerald S. Frey (53) Senior Vice President/Senior Portfolio Manager of Equity Funds III and each
of the other 32 investment companies in the Delaware Investments family,
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).
Before joining Delaware Investments in 1996, Mr. Frey was a Senior Trustee
with Morgan Grenfell Capital Management, New York, NY from 1986 to 1995.
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J. Paul Dokas (40) Vice President/Senior Portfolio Manager of Equity Funds III 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, he was a Director of Trust
Investments for Bell Atlantic Corporation in Philadelphia.
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</TABLE>
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<TABLE>
<CAPTION>
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Officer Business Experience
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<S> <C>
Marshall T. Bassett (45) Vice President/Portfolio Manager of Equity Funds III, 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 series of Delaware Management
Business Trust).
Prior to joining Delaware Investments in 1997, Mr. Basset served as Vice
President in Morgan Stanley Asset Management's Emerging Growth Group, where he
analyzed small growth companies. Prior to that, he was a trust officer at
Sovran Bank and Trust Company.
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John A. Heffern (38) Vice President/Portfolio Manager of Equity Funds III, 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 series of Delaware Management
Business Trust).
Prior to joining Delaware Investments in 1997, Mr. Heffern was a Senior Vice
President, Equity Research at NatWest Securities Corporation's Specialty
Finance Services unit. Prior to that, he was a Principal and Senior Regional
Bank Analyst at Alex. Brown & Sons.
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Jeffrey W. Hynoski (37) Vice President/Portfolio Manager of Equity Funds III 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 series of Delaware Management Business
Trust).
Prior to joining Delaware Investments in 1998, Mr. Hynoski served as a Vice
President at Bessemer Trust Company in the mid and large capitalization
growth group, where he specialized in the areas of science, technology, and
telecommunications. Prior to that, Mr. Hynoski held positions at Lord Abbett
& Co. and Cowen Asset Management.
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Lori P. Wachs (30) Vice President/Portfolio Manager of the Fund, and 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 series of Delaware Management Business Trust).
During the past five years, Ms. Wachs has served in various capacities at
different times within the Delaware organization.
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Steven T. Lampe (31) Vice President/Portfolio Manager of Equity Funds III 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).
Prior to joining Delaware Investments in 1995, Mr. Lampe served as a manager
at Price Waterhouse.
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</TABLE>
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The following is a compensation table listing for each trustee entitled to
receive compensation, the aggregate compensation received from Equity Funds III
and the total compensation received from all investment companies in the
Delaware Investments family for which he or she serves as a trustee/director or
trustee for the fiscal year ended June 30, 1999 and an estimate of annual
benefits to be received upon retirement under the Delaware Group Retirement Plan
for Trustees/Directors as of June 30, 1999. Only the independent trustees of
Equity Funds III receive compensation from Equity Funds III.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Pension or
Retirement Benefits Total Compensation
Aggregate Accrued Estimated Annual from the Investment
Compensation from as Part of Benefits Companies in
Equity Funds III Fund Expenses Upon Retirement(1) Delaware
Name(3) Investments(2)
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<S> <C> <C> <C> <C>
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Walter P. Babich $1,995 None $38,000 $60,442
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John H. Durham $1,898 None $32,180 $52,526
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Anthony D. Knerr $2,143 None $38,000 $65,251
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Ann R. Leven $2,177 None $38,000 $66,251
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Thomas F. Madison $2,158 None $38,000 $65,668
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Charles E. Peck $2,026 None $38,000 $61,917
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Janet L. Yeomans(4) $586 None $38,000 $18,929
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</TABLE>
(1) Under the terms of the Delaware Group Retirement Plan for
Trustees/Directors, each disinterested trustee/director 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 trustee/director
for a period equal to the lesser of the number of years that such person
served as a trustee/director or the remainder of such person's life. The
amount of such payments will be equal, on an annual basis, to the amount of
the annual retainer that is paid to trustees/directors of each investment
company at the time of such person's retirement. If an eligible
trustee/director retired as of June 30, 1999, he or she would be entitled to
annual payments totaling the amount noted above, in the aggregate, from all
of the investment companies in the Delaware Investments family for which he
or she served as trustee/director, based on the number of investment
companies in the Delaware Investments family as of that date.
(2) Each independent trustee/director (other than John H. Durham) currently
receives a total annual retainer fee of $38,000 for serving as a
trustee/director 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
trustee/director for 19 investment companies in Delaware Investments, plus
$1,810 for each Board Meeting attended. Ann R. Leven, Charles E. Peck,
Anthony D. Knerr and Thomas F. Madison serve on the funds' 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 III
during its last fiscal year for the period July 1, 1998 through March 17,
1999, the date on which he retired. For this period, Mr. Longstreth received
$1,583 from Equity Funds III and $47,631 for all investment companies in the
Delaware Investments family.
(4) Janet L. Yeomans joined the Boards of all investment companies in the
Delaware Investments family in March 1999 for some funds and in April 1999
for other funds.
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GENERAL INFORMATION
Equity Funds III is an open-end management investment company. Delaware
Technology and Innovation Fund, Delaware American Services Fund and Delaware
Research Fund will not be diversified under the 1940 Act. Delaware Large Cap
Growth Fund will be diversified as defined by the 1940 Act. Equity Funds III
originally was organized as a Delaware corporation in 1966. It was subsequently
reorganized as a Maryland corporation on March 4, 1983 and as a Delaware
business trust on August 27, 1999.
The Manager is the investment manager of each Fund. 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 a Fund are made
independently from those of the other funds and accounts, investment decisions
for such other funds and accounts may be made at the same time as investment
decisions for the Fund.
Delaware or Delaware International also manages 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. See Delaware Group Premium Fund in Appendix A.
Access persons and advisory persons of the funds in the Delaware
Investments family, 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 Fund and for the
other mutual funds in the Delaware Investments family.
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 disinterested 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 a 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.
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The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of Equity Funds III's advisory
relationship with the Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause Equity Funds III to
delete the words "Delaware Group" from Equity Funds III's name.
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 III has a present unlimited authorized number of shares of
beneficial interest with no par value allocated to each Class. Each Class
represents a proportionate interest in the assets of a Fund, and each has the
same voting and other rights and preferences as the other classes of the Fund,
except that shares of the Institutional Class may not vote on any matter that
affects a Fund Classes' Distribution Plans under Rule 12b-1. Similarly, as a
general matter, shareholders of Class A Shares, Class B Shares and Class C
Shares may vote only on matters affecting the 12b-1 Plan that relates to the
class of shares that they hold. However, Class B Shares may vote on any proposal
to increase materially the fees to be paid by a Fund under the Rule 12b-1 Plan
relating to 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 Plans of Class A Shares, Class B Shares 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.
Noncumulative Voting
Equity Funds III shares have noncumulative voting rights which means that
the holders of more than 50% of the shares of Equity Funds III 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.
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 III and, in its capacity as such, will audit the annual financial
statements of the Funds.
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APPENDIX A--INVESTMENT OBJECTIVES OF THE FUNDS IN THE DELAWARE INVESTMENTS
FAMILY
Following is a summary of the investment objectives of the
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 Decatur Equity Income Fund seeks the highest possible current
income by investing primarily in common stocks that provide the potential for
income and capital appreciation without undue risk to principal. Delaware Growth
and Income Fund seeks long-term growth by investing primarily in securities that
provide the potential for income and capital appreciation without undue risk to
principal. Delaware Blue Chip Fund seeks to achieve long-term capital
appreciation. Current income is a secondary objective. It seeks to achieve these
objectives by investing primarily in equity securities and any securities that
are convertible into equity securities. Delaware Social Awareness Fund seeks to
achieve long-term capital appreciation. It seeks to achieve this objective by
investing primarily in equity securities of medium- to large-sized companies
expected to grow over time that meet the Fund's "Social Criteria" strategy.
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 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 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 Cash Reserve Fund 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.
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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.
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
65
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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 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
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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 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 Montana Municipal Bond Fund seeks to provide a high level
of current income exempt from federal income tax and the Montana personal income
tax, consistent with the preservation of capital. 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 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 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.
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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.
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.
68
