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The Delaware Group includes funds
with a wide range of investment objectives.
Stock funds, income funds, tax-free funds,
money market funds, global and international
funds and closed-end equity funds give
investors the ability to create a portfolio
that fits their personal financial goals.
For more information, shareholders
of the Fund Classes should contact
their financial adviser or call
Delaware Group at 800-523-4640,
in Philadelphia call 215-988-1333
and shareholders of the Institutional Class
should contact Delaware Group at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Chemical Bank
450 West 33rd Street
New York, NY 10001
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DELCAP FUND
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A CLASS
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B CLASS
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C CLASS
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INSTITUTIONAL CLASS
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CLASSES OF DELAWARE GROUP
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DELCAP FUND, INC.
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PART B
STATEMENT OF
ADDITIONAL INFORMATION
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NOVEMBER 29, 1995
DELAWARE
GROUP
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DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 1
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PART B--STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 29, 1995
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DELAWARE GROUP
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DELCAP FUND, INC.
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1818 MARKET STREET
PHILADELPHIA, PA 19103
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FOR MORE INFORMATION ABOUT THE DELCAP FUND
INSTITUTIONAL CLASS: 800-828-5052
FOR PROSPECTUS AND PERFORMANCE OF THE DELCAP FUND
A CLASS, THE DELCAP FUND B CLASS
AND THE DELCAP FUND C CLASS:
NATIONWIDE 800-523-4640
PHILADELPHIA 215-988-1333
INFORMATION ON EXISTING ACCOUNTS OF THE DELCAP FUND
A CLASS, THE DELCAP FUND B CLASS
AND THE DELCAP FUND C CLASS:
(SHAREHOLDERS ONLY)
NATIONWIDE 800-523-1918
PHILADELPHIA 215-988-1241
DEALER SERVICES:
(BROKER/DEALERS ONLY)
NATIONWIDE 800-362-7500
PHILADELPHIA 215-988-1050
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TABLE OF CONTENTS
<TABLE>
<S> <C>
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COVER PAGE 1
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INVESTMENT POLICIES AND PORTFOLIO
TECHNIQUES 2
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ACCOUNTING AND TAX ISSUES 5
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PERFORMANCE INFORMATION 6
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TRADING PRACTICES AND BROKERAGE 9
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PURCHASING SHARES 11
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INVESTMENT PLANS 17
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DETERMINING OFFERING PRICE AND
NET ASSET VALUE 19
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REDEMPTION AND REPURCHASE 20
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DISTRIBUTIONS AND TAXES 23
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INVESTMENT MANAGEMENT AGREEMENT 23
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OFFICERS AND DIRECTORS 24
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EXCHANGE PRIVILEGE 27
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GENERAL INFORMATION 29
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APPENDIX A--DESCRIPTION OF RATINGS 33
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APPENDIX B--IRA INFORMATION 34
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APPENDIX C 38
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FINANCIAL STATEMENTS 39
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</TABLE>
Delaware Group DelCap Fund, Inc. (the "Fund") is a professionally-managed
mutual fund of the series type. This Statement of Additional Information ("Part
B" of the registration statement) supplements the information contained in the
current Prospectuses of the Fund's Concept I Series (the "Series"). The Series
offers four classes (individually, a "Class" and collectively, the "Classes") of
shares-- DelCap Fund A Class (the "Class A Shares"), DelCap Fund B Class (the
"Class B Shares") and DelCap Fund C Class (the "Class C Shares") (together, the
"Fund Classes") and DelCap Fund Institutional Class (the "Institutional Class").
Class B Shares, Class C Shares and Institutional Class shares of the Series may
be purchased at a price equal to the next determined net asset value per share.
Class A Shares may be purchased at the public offering price, which is equal to
the next determined net asset value per share, plus a front-end sales charge.
Class A Shares are subject to a maximum front-end sales charge of 4.75% and
annual 12b-1 Plan expenses of up to .30%. Class B Shares are subject to a
contingent deferred sales charge ("CDSC") which may be imposed on redemptions
made within six years of purchase and annual 12b-1 Plan expenses of up to 1%,
which are assessed against Class B Shares for approximately eight years after
purchase. See Automatic Conversion of Class B Shares under Buying Shares in the
Fund Classes' Prospectus. Class C Shares are subject to a CDSC which may be
imposed on redemptions made within twelve months of purchase and annual 12b-1
Plan expenses of up to 1%, which are assessed against the Class C Shares for the
life of the investment. All references to "shares" in this Part B refer to all
Classes of shares of the Series, except where noted.
This Part B supplements the information contained in the current Prospectus
for the Fund Classes dated November 29, 1995 and the current Prospectus for the
Institutional Class dated November 29, 1995, as they may be amended from time to
time. It should be read in conjunction with the respective Class' Prospectus.
Part B is not itself a prospectus but is, in its entirety, incorporated by
reference into each Class' Prospectus. A Prospectus relating to the Fund Classes
and a Prospectus relating to the Institutional Class may be obtained by writing
or calling your investment dealer or by contacting the Fund's national
distributor, Delaware Distributors, L.P. (the "Distributor"), 1818 Market
Street, Philadelphia, PA 19103.
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DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 2
INVESTMENT POLICIES AND
PORTFOLIO TECHNIQUES
INVESTMENT RESTRICTIONS--The Fund has adopted the following restrictions for
the Series which, along with its investment objective, cannot be changed without
approval by the holders of a "majority" of the Series' outstanding shares, which
is a vote by the holders of the lesser of a) 67% or more of the voting
securities present in person or by proxy at a meeting, if the holders of more
than 50% of the outstanding voting securities are present or represented by
proxy; or b) more than 50% of the outstanding voting securities. The percentage
limitations contained in the restrictions and policies set forth herein apply at
the time of purchase of securities.
The Series shall not:
1. Invest more than 5% of the market or other fair value of its assets in the
securities of any one issuer (other than obligations of, or guaranteed by, the
U.S. Government, its agencies or instrumentalities).
2. Invest in securities of other investment companies except as part of a
merger, consolidation or other acquisition.
3. Make loans, except to the extent that purchases of debt obligations
(including repurchase agreements), in accordance with the Series' investment
objective and policies, are considered loans and except that the Series may loan
up to 25% of its assets to qualified broker/dealers or institutional investors
for their use relating to short sales or other security transactions.
4. Purchase or sell real estate, but this shall not prevent the Series from
investing in securities secured by real estate or interests therein.
5. Purchase more than 10% of the outstanding voting and nonvoting securities
of any issuer, or invest in companies for the purpose of exercising control or
management.
6. Engage in the underwriting of securities of other issuers, except that in
connection with the disposition of a security, the Series may be deemed to be an
"underwriter" as that term is defined in the Securities Act of 1933.
7. Make any investment which would cause more than 25% of the market or other
fair value of its total assets to be invested in the securities of issuers all
of which conduct their principal business activities in the same industry. This
restriction does not apply to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
8. Write or purchase puts, calls or combinations thereof, except that the
Series may write covered call options with respect to any or all parts of its
portfolio securities and purchase put options if the Series owns the security
covered by the put option at the time of purchase, and that premiums paid on all
put options outstanding do not exceed 2% of its total assets. The Series may
sell put options previously purchased and enter into closing transactions with
respect to covered call and put options. In addition, the Series may write call
options and purchase put options on stock indices and enter into closing
transactions with respect to such options.
9. Purchase securities on margin, make short sales of securities or maintain
a net short position.
10. Invest more than 5% of the value of its total assets in securities of
companies less than three years old. Such three-year period shall include the
operation of any predecessor company or companies.
11. Invest in warrants valued at lower of cost or market exceeding 5% of the
Series' net assets. Included in that amount, but not to exceed 2% of the Series'
net assets, may be warrants not listed on the New York Stock Exchange or
American Stock Exchange.
12. Purchase or retain the securities of any issuer which has an officer,
director or security holder who is a director or officer of the Fund or of its
investment manager if or so long as the directors and officers of the Fund and
of its investment manager together own beneficially more than 5% of any class of
securities of such issuer.
13. Invest in interests in oil, gas or other mineral exploration or
development programs.
14. Invest more than 10% of the Series' total assets in repurchase agreements
maturing in more than seven days and other illiquid assets.
15. Borrow money in excess of one-third of the value of its net assets and
then only as a temporary measure for extraordinary purposes or to facilitate
redemptions. The Series has no intention of increasing its net income through
borrowing. Any borrowing will be done from a bank and to the extent that such
borrowing exceeds 5% of the value of the Series' net assets, asset coverage of
at least 300% is required. In the event that such asset coverage shall at any
time fall below 300%, the Series shall, within three days thereafter (not
including Sunday or holidays) or such longer period as the Securities and
Exchange Commission may prescribe by rules and regulations, reduce the amount of
its borrowings to such an extent that the asset coverage of such borrowings
shall be at least 300%. The Series will not pledge more than 10% of its net
assets. The Series will not issue senior securities as defined in the Investment
Company Act of 1940, except for notes to banks. Investment securities will not
normally be purchased while the Series has an outstanding borrowing.
Although not a fundamental investment restriction, the Fund currently does not
invest its assets in real estate limited partnerships.
INVESTMENT POLICIES--The application of the Series' investment policy will be
dependent upon the judgment of Delaware Management Company, Inc. (the
"Manager"). In accordance with the judgment of the Manager, the proportions of
the Series' assets invested in particular industries will vary from time to
time. The securities in which the Series invests may or may not be listed on a
national stock exchange, but if they are not so listed will generally have an
established over-the-counter market. While management believes that the
investment objective can be achieved by investing in common stock, the portfolio
may be invested in other securities including, but not limited to, convertible
securities, preferred stocks, bonds, warrants and foreign securities. In periods
during which the Manager feels that market conditions warrant a more
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DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 3
defensive portfolio positioning, the Series may also invest temporarily in
various types of fixed income obligations.
In addition, from time to time, the Series may also engage in the following
investment techniques:
REPURCHASE AGREEMENTS--While the Series is permitted to do so, it normally
does not invest in repurchase agreements, except to invest cash balances.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the Investment Company Act of
1940 to allow the Delaware Group funds jointly to invest cash balances. The
Series may invest cash balances in a joint repurchase agreement in accordance
with the terms of the Order and subject generally to the conditions described
below.
A repurchase agreement is a short-term investment by which the purchaser
acquires ownership of a debt security and the seller agrees to repurchase the
obligation at a future time and set price, thereby determining the yield during
the purchaser's holding period. Should an issuer of a repurchase agreement fail
to repurchase the underlying security, the loss to the Series, if any, would be
the difference between the repurchase price and the market value of the
security. The Series will limit its investments in repurchase agreements to
those which the Manager, under the guidelines of the Board of Directors,
determines to present minimal credit risks and which are of high quality. In
addition, the Series must have collateral of at least 100% of the repurchase
price, including the portion representing the Series' yield under such
agreements which is monitored on a daily basis.
OPTIONS--The Series may write call options and purchase put options on a
covered basis only, and will not engage in option writing strategies for
speculative purposes.
A. COVERED CALL WRITING--The Series may write covered call options from time
to time on such portion of its portfolio, without limit, as the Manager
determines is appropriate in seeking to obtain the Series' investment objective.
A call option gives the purchaser of such option the right to buy, and the
writer, in this case the Series, has the obligation to sell the underlying
security at the exercise price during the option period. The advantage to the
Series of writing covered calls is that the Series receives a premium which is
additional income. However, if the security rises in value, the Series may not
fully participate in the market appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.
With respect to both options on actual portfolio securities owned by the
Series and options on stock indices, the Series may enter into closing purchase
transactions. A closing purchase transaction is one in which the Series, when
obligated as a writer of an option, terminates its obligation by purchasing an
option of the same series as the option previously written.
Closing purchase transactions will ordinarily be effected to realize a profit
on an outstanding call option, to prevent an underlying security from being
called, to permit the sale of the underlying security or to enable the Series to
write another call option on the underlying security with either a different
exercise price or expiration date or both. The Series may realize a net gain or
loss from a closing purchase transaction depending upon whether the net amount
of the original premium received on the call option is more or less than the
cost of effecting the closing purchase transaction. Any loss incurred in a
closing purchase transaction may be partially or entirely offset by the premium
received from a sale of a different call option on the same underlying security.
Such a loss may also be wholly or partially offset by unrealized appreciation in
the market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
If a call option expires unexercised, the Series will realize a short-term
capital gain in the amount of the premium on the option, less the commission
paid. Such a gain, however, may be offset by depreciation in the market value of
the underlying security during the option period. If a call option is exercised,
the Series will realize a gain or loss from the sale of the underlying security
equal to the difference between the cost of the underlying security, and the
proceeds of the sale of the security plus the amount of the premium on the
option, less the commission paid.
The market value of a call option generally reflects the market price of an
underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the price volatility of the underlying
security and the time remaining until the expiration date.
The Series will write call options only on a covered basis, which means that
the Series will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, the Series would be required to continue to hold a security which it
might otherwise wish to sell, or deliver a security it would want to hold.
Options written by the Series will normally have expiration dates between one
and nine months from the date written. The exercise price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written.
B. PURCHASING PUT OPTIONS--The Series may invest up to 2% of its total assets
in the purchase of put options. The Series will, at all times during which it
holds a put option, own the security covered by such option.
The Series intends to purchase put options in order to protect against a
decline in the market value of the underlying security below the exercise price
less the premium paid for the option ("protective puts"). The ability to
purchase put options will allow the Series to protect unrealized gain in an
appreciated security in its portfolio without actually selling the security. If
the security does not
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DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 4
drop in value, the Series will lose the value of the premium paid. The Series
may sell a put option which it has previously purchased prior to the sale of the
securities underlying such option. Such sales will result in a net gain or loss
depending on whether the amount received on the sale is more or less than the
premium and other transaction costs paid on the put option which is sold.
The Series may sell a put option purchased on individual portfolio securities
or stock indices. Additionally, the Series may enter into closing sale
transactions. A closing sale transaction is one in which the Series, when it is
the holder of an outstanding option, liquidates its position by selling an
option of the same series as the option previously purchased.
OPTIONS ON STOCK INDICES
A stock index assigns relative values to the common stocks included in the
index with the index fluctuating with changes in the market values of the
underlying common stock.
Options on stock indices are similar to options on stocks but have different
delivery requirements. Stock options provide the right to take or make delivery
of the underlying stock at a specified price. A stock index option gives the
holder the right to receive a cash "exercise settlement amount" equal to (i) the
amount by which the fixed exercise price of the option exceeds (in the case of a
put) or is less than (in the case of a call) the closing value of the underlying
index on the date of exercise, multiplied by (ii) a fixed "index multiplier."
Receipt of this cash amount will depend upon the closing level of the stock
index upon which the option is based being greater than (in the case of a call)
or less than (in the case of a put) the exercise price of the option. The amount
of cash received will be equal to such difference between the closing price of
the index and exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Gain or loss to the Series on
transactions in stock index options will depend on price movements in the stock
market generally (or in a particular industry or segment of the market) rather
than price movements of individual securities.
As with stock options, the Series may offset its position in stock index
options prior to expiration by entering into a closing transaction on an
Exchange or it may let the option expire unexercised.
A stock index fluctuates with changes in the market values of the stock so
included. Some stock index options are based on a broad market index such as the
Standard & Poor's 500 or the New York Stock Exchange Composite Index, or a
narrower market index such as the Standard & Poor's 100. Indices are also based
on an industry or market segment such as the AMEX Oil and Gas Index or the
Computer and Business Equipment Index. Options on stock indices are currently
traded on the following Exchanges among others: The Chicago Board Options
Exchange, New York Stock Exchange and American Stock Exchange.
The Series' 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
Series' portfolio securities. Since the Series' portfolio will not duplicate the
components of an index, the correlation will not be exact. Consequently, the
Series 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.
Positions in stock index options may be closed out only on an Exchange which
provides a secondary market. There can be no assurance that a liquid secondary
market will exist for any particular stock index option. Thus, it may not be
possible to close such an option. The inability to close options positions could
have an adverse impact on the Series' ability to effectively hedge its
securities. The Series will enter into an option position only if there appears
to be a liquid secondary market for such options.
The Series will not engage in transactions in options on stock indices for
speculative purposes but only to protect appreciation attained, to offset
capital losses and to take advantage of the liquidity available in the option
markets.
FOREIGN SECURITIES
The Series may invest in securities of foreign companies. However, the Series
will not invest more than 25% of the value of its total assets, at the time of
purchase, in foreign securities (other than securities of Canadian issuers
registered under the Securities Exchange Act of 1934 or American Depository
Receipts, on which there are no such limits).
There has been in the past, and there may be again in the future, an interest
equalization tax levied by the United States in connection with the purchase of
foreign securities such as those purchased by the Series. Payment of such
interest equalization tax, if imposed, would reduce the Series' 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 Series by United States
corporations.
Investors should recognize that investing in foreign corporations involves
certain considerations, including those set forth below, which are not typically
associated with investing in United States corporations. Foreign corporations
are not generally subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to United States
corporations. There may also be less supervision and regulation of foreign stock
exchanges, brokers and listed corporations than exist in the United States. The
Series may be affected either unfavorably or favorably by fluctuations in the
relative rates of exchange as between the currencies of different nations and
exchange control regulations. Furthermore, there may be the possibility of
expropriation of confiscatory taxation, political, economic or social
instability or diplomatic developments which could affect assets of the Series
held in foreign countries.
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DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 5
AMERICAN DEPOSITORY RECEIPTS
The Series may make foreign investments through the purchase and sale of
sponsored or unsponsored American Depository Receipts ("ADRs"). 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, whereas "unsponsored" ADRs are issued without 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 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.
PORTFOLIO LOAN TRANSACTIONS
The Series may loan up to 25% of its assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other security
transactions.
It is the understanding of the Manager that the staff of the Securities and
Exchange Commission permits portfolio lending by registered investment companies
if certain conditions are met. These conditions are as follows: 1) each
transaction must have 100% collateral in the form of cash, short-term U.S.
Government securities, or irrevocable letters of credit payable by banks
acceptable to the Fund from the borrower; 2) this collateral must be valued
daily and should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Series; 3) the Fund must be
able to terminate the loan after notice, at any time; 4) the Series 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 Series may pay reasonable custodian fees in connection
with the loan; and 6) the voting rights on the lent securities may pass to the
borrower; however, if the directors of the Fund know that a material event will
occur affecting an investment loan, they must either terminate the loan in order
to vote the proxy or enter into an alternative arrangement with the borrower to
enable the directors to vote the proxy.
The major risk to which the Series would be exposed on a loan transaction is
the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Series will only enter into loan arrangements
after a review of all pertinent facts by the Manager, under the supervision of
the Board of Directors, including the creditworthiness of the borrowing broker,
dealer or institution and then only if the consideration to be received from
such loans would justify the risk. Creditworthiness will be monitored on an
ongoing basis by the Manager.
ACCOUNTING AND TAX ISSUES
When the Series writes a call, or purchases a put option, an amount equal to
the premium received or paid by it is included in the section of the Series'
assets and liabilities as an asset and as an equivalent liability.
In writing a call, the amount of the liability is subsequently "marked to
market" to reflect the current market value of the option written. The current
market value of a written option is the last sale price on the principal
Exchange on which such option is traded or, in the absence of a sale, the mean
between the last bid and asked prices. If an option which the Series has written
expires on its stipulated expiration date, the Series reports a realized gain.
If the Series enters into a closing purchase transaction with respect to an
option which the Series has written, the Series realizes a gain (or loss if the
cost of the closing transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is extinguished. Any such gain or loss
is a short-term capital gain or loss for federal income tax purposes. If a call
option which the Series has written is exercised, the Series realizes a capital
gain or loss (long-term or short-term, depending on the holding period of the
underlying security) from the sale of the underlying security and the proceeds
from such sale are increased by the premium originally received.
The premium paid by the Series for the purchase of a put option is recorded in
the section of the Series' assets and liabilities as an investment and
subsequently adjusted daily to the current market value of the option. For
example, if the current market value of the option exceeds the premium paid, the
excess would be unrealized appreciation and, conversely, if the premium exceeds
the current market value, such excess would be unrealized depreciation. The
current market value of a purchased option is the last sale price on the
principal Exchange on which such option is traded or, in the absence of a sale,
the mean between the last bid and asked prices. If an option which the Series
has purchased expires on the stipulated expiration date, the Series realizes a
short-term or long-term capital loss for federal income tax purposes in the
amount of the cost of the option. If the Series sells the put option, it
realizes a short-term or long-term capital gain or loss, depending on whether
the proceeds from the sale are greater or less than the cost of the option. If
the Series exercises a put option, it realizes a capital gain or loss (long-term
or short-term, depending on the holding period of the underlying security) from
the sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. However, since the purchase of a put
option is treated as a short sale for federal income tax purposes, the holding
period of the underlying security will be affected by such a purchase.
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DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 6
OPTIONS ON CERTAIN STOCK INDICES--Accounting for options on certain stock
indices will be in accordance with generally accepted accounting principles. The
amount of any realized gain or loss on closing out such a position will result
in a realized gain or loss for tax purposes. Such options held by the Series at
the end of each fiscal year will be required to be "marked to market" for
federal income tax purposes. Sixty percent of any net gain or loss recognized on
such deemed sales or on any actual sales will be treated as long-term capital
gain or loss, and the remainder will be treated as short-term capital gain or
loss.
OTHER TAX REQUIREMENTS--The Series has qualified, and intends to continue to
qualify, as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. The Series must meet several requirements to
maintain its status as a regulated investment company. Among these requirements
are that at least 90% of its investment company taxable income be derived from
dividends, interest, payments with respect to securities loans and gains from
the sale or disposition of securities; that at the close of each quarter of its
taxable year at least 50% of the value of its assets consist of cash and cash
items, government securities, securities of other regulated investment companies
and, subject to certain diversification requirements, other securities; and that
less than 30% of its gross income be derived from sales of securities held for
less than three months.
The requirement that not more than 30% of the Fund's gross income be derived
from gains from the sale or other disposition of securities held for less than
three months may restrict the Series in its ability to write covered call
options on securities which it has held less than three months, to write options
which expire in less than three months, to sell securities which have been held
less than three months and to effect closing purchase transactions with respect
to options which have been written less than three months prior to such
transactions. Consequently, in order to avoid realizing a gain within the
three-month period, the Series may be required to defer the closing out of a
contract beyond the time when it might otherwise be advantageous to do so. The
Series may also be restricted in the sale of purchased put options and the
purchase of put options for the purpose of hedging underlying securities because
of the application of the short sale holding period rules with respect to such
underlying securities. The straddle rules of Section 1092 may apply. Generally,
the straddle provisions require the deferral of losses to the extent of
unrecognized gains related to the offsetting positions in the straddle. Excess
losses, if any, can be recognized in the year of loss. Deferred losses will be
carried forward and recognized in the year that unrealized losses exceed
unrealized gains.
PERFORMANCE INFORMATION*
From time to time, the Series may state each Class' total return in
advertisements and other types of literature. Any statements of total return
performance data for a Class will be accompanied by information on 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, if applicable) periods. The
Series 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 is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:
n
P(1+T) = ERV
<TABLE>
<S> <C> <C>
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.
</TABLE>
* In the case of Class A Shares, the Limited CDSC applicable to only certain
redemptions of those shares will not be deducted from any computation of total
return. See the Prospectus for the Fund Classes for a description of the Limited
CDSC and the limited instances in which it applies. All references to contingent
deferred sales charges or a CDSC in this Performance Information Section will
apply to Class B Shares or Class C Shares.
Aggregate or cumulative total return is calculated in a similar manner, except
that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made with respect to Class A Shares, and that all
distributions are reinvested at net asset value, and, with respect to Class B
Shares and Class C Shares, reflects the deduction of the CDSC that would be
applicable upon complete redemption of such shares. In addition, the Series may
present total return information that does not reflect the deduction of the
maximum
front-end sales charge or any applicable CDSC.
The performance of Class A Shares and the Institutional Class, as shown below,
is the average annual total return
- 6
<PAGE> 8
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 7
quotations for the one, three- and five-year periods ended September 30, 1995,
and for the life of these Classes, computed as described above. The average
annual total return for Class A Shares at offer reflects the maximum front-end
sales charges paid on the purchase of shares. The average annual total return
for Class A Shares at net asset value (NAV) does not reflect the payment of the
maximum front-end sales charge of 4.75%. Securities prices fluctuated during the
periods covered and past results should not be considered as representative of
future performance. Pursuant to applicable regulation, total return shown for
the Institutional Class for the periods prior to the commencement of operations
of such Class is calculated by taking the performance of Class A Shares and
adjusting it to reflect the elimination of all sales charges. However, for those
periods, no adjustment has been made to eliminate the impact of 12b-1 payments,
and performance would have been affected had such an adjustment been made.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
CLASS A CLASS A
SHARES SHARES INSTITUTIONAL
(AT OFFER)2 (AT NAV) CLASS3
<S> <C> <C> <C>
1 year ended 9/30/95 16.23% 22.04% 22.45%
3 years ended 9/30/95 13.95% 15.81% 16.15%
5 years ended 9/30/95 15.42% 16.56% 16.76%
Period 3/27/861 through
9/30/95 22.04% 22.67% 22.78%
</TABLE>
1)Date of initial public offering of Class A Shares.
2)Prior to November 29, 1995, the maximum front-end sales charge was 5.75%.
Effective November 29, 1995, the maximum front-end sales charge was reduced to
4.75% and the above performance numbers are calculated using 4.75% as the
applicable sales charge, and are more favorable than they would have been had
they been calculated using 5.75%.
3)Date of initial public offering was November 9, 1992.
The performance of Class B Shares, as shown below, is the average annual total
return quotation for the one-year period ended September 30, 1995 and for the
life of the Class. The average annual total return for Class B Shares including
deferred sales charge reflects the deduction of the applicable CDSC that would
be paid if the shares were redeemed at September 30, 1995. The average annual
total return for Class B Shares excluding deferred sales charge assumes the
shares were not redeemed at September 30, 1995 and therefore does not reflect
the deduction of a CDSC.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
CLASS B SHARES CLASS B SHARES
(INCLUDING (EXCLUDING
DEFERRED DEFERRED
SALES CHARGE) SALES CHARGE)
<S> <C> <C>
1 year ended 9/30/95 17.34% 21.34%
Period 9/6/941 through 9/30/95 17.84% 21.53%
</TABLE>
1)Date of initial public offering of Class B Shares.
Information regarding the performance of Class C Shares is not shown because
such shares were not offered prior to the date of this Part B.
The Series may also state total return performance of each Class in the
form of an average annual return. This average annual return figure will be
computed by taking the sum of annual returns, then dividing that figure by the
number of years in the overall period indicated. The computation will reflect
the impact of the maximum front-end or contingent deferred sales charge, if
any, paid on the illustrated investment amount against the first year's return.
From time to time, the Series may quote actual total return performance in
advertising and other types of literature compared to indices or averages of
alternative financial products available to prospective investors. For example,
the performance comparisons may include the average return of various bank
instruments, some of which may carry certain return guarantees offered by
leading banks and thrifts as monitored by Bank Rate Monitor, and those of
generally-accepted corporate bond and government security price indices of
various durations prepared by Lehman Brothers and Salomon Brothers, Inc. These
indices are not managed for any investment goal.
Total return performance will be computed by adding all reinvested income and
realized securities profits distributions plus the change in net asset value
during a specific period and dividing by the offering price at the beginning of
the period. It will not reflect any income taxes payable by shareholders on the
reinvested distributions included in the calculation. Because securities prices
fluctuate, past performance should not be considered as a representation of the
results which may be realized from an investment in the Series in the future.
From time to time, the Series may also quote each Class' actual total return
performance, dividend results and other performance information in advertising
and other types of literature and may compare that information to, or may
separately illustrate similar information reported by the Standard & Poor's 500
Stock Index and the Dow Jones Industrial Average and other unmanaged indices.
The Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average are
industry-accepted unmanaged indices of generally-conservative securities used
for measuring general market performance. The total return performance reported
for these indices will reflect the reinvestment of all distributions on a
quarterly basis and market price fluctuations. The indices do not take into
account any sales charge or other fees. In seeking a particular investment
objective, the Series' portfolio primarily includes common stocks considered by
the Manager to be more aggressive than those tracked by these indices.
Statistical and performance information and various indices compiled and
maintained by organizations such as the following may also be used in preparing
exhibits comparing certain industry trends and competitive mutual fund
performance to comparable Series activity and performance and in illustrating
general financial planning principles. From time to time, certain mutual fund
performance ranking information, calculated and provided by these
organizations, may also be used in the promotion of sales of the Series. Any
indices used are not managed for any investment goal.
CDA Technologies, Inc., Lipper Analytical Services, Inc. and Morningstar, Inc.
are performance evaluation services that maintain statistical performance
databases, as reported by
- 7
<PAGE> 9
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 8
a diverse universe of independently-managed mutual funds.
Ibbotson Associates, Inc. is a consulting firm that provides a variety of
historical data including total return, capital appreciation and income on the
stock market as well as other investment asset classes, and inflation. With
their permission, this information will be used primarily for comparative
purposes and to illustrate general financial planning principles.
Interactive Data Corporation is a statistical access service that maintains a
database of various international industry indicators, such as historical and
current price/earning information, individual equity and fixed income price
and return information.
Compustat Industrial Databases, a service of Standard & Poor's, may also be
used in preparing performance and historical stock and bond market exhibits.
This firm maintains fundamental databases that provide financial, statistical
and market information covering more than 7,000 industrial and non-industrial
companies.
Russell Indexes is an investment analysis service that provides both current
and historical stock performance information, focusing on the business
fundamentals of those firms issuing the security.
Salomon Brothers and Lehman Brothers are statistical research firms that
maintain databases of international market, bond market, corporate and
government-issued securities of various maturities. This information, as well
as unmanaged indices compiled and maintained by these firms, will be used in
preparing comparative illustrations.
Comparative information on the Consumer Price Index and the CDA Growth Index
may also be included. The Consumer Price Index, as prepared by the U.S. Bureau
of Labor Statistics, is the most commonly used measure of inflation. It
indicates the cost fluctuations of a representative group of consumer goods. It
does not represent a return from an investment. The CDA Growth Index was
developed and is maintained by CDA Technologies, Inc. The Index is comprised of
230 separately-managed, growth-oriented equity mutual funds. It reflects the
reinvestment of any dividend and capital gains distributions paid during a
specified period.
The following table is an example, for purposes of illustration only, of
cumulative total return performance for the Class A Shares and the Institutional
Class for the three-, six- and nine-month periods ended September 30, 1995 for
the one-, three- and five- year periods ended September 30, 1995, and for the
life of these Classes. Cumulative total return for the Class B Shares for the
three-, six- and nine-month periods ended September 30, 1995, the one-year
period ended September 30, 1995 and for the life of this Class is also provided
below. For these purposes, the calculation assumes the reinvestment of any
realized securities profits distributions and income dividends paid during the
period. Comparative information on the Standard & Poor's 500 Stock Index, the
Dow Jones Industrial Average and the Nasdaq Composite Index is also included.
Information regarding the performance of Class C
Shares is not shown because such shares were not offered prior to the date of
this Part B.
The performance of the Class A Shares, the Class B Shares and the
Institutional Class, as shown below, reflects maximum sales charges or
contingent deferred sales charges, if any, but not any income taxes payable by
shareholders on the reinvested distributions included in the calculations. The
performance of Class B Shares is calculated both with the applicable CDSC
included and excluded. The net asset value of a Class fluctuates so shares, when
redeemed, may be worth more or less than the original investment, and a Class'
results should not be considered as representative of future performance.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
CLASS A STANDARD
SHARES INSTITUTIONAL & POOR'S DOW JONES NASDAQ
(AT OFFER)2 CLASS3 500 INDUSTRIAL COMPOSITE
<S> <C> <C> <C> <C> <C>
3 months ended
9/30/95 5.52% 10.89% 7.94% 5.78% 11.79%
6 months ended
9/30/95 11.78% 17.55% 18.23% 16.66% 27.70%
9 months ended
9/30/95 21.26% 27.60% 29.73% 27.39% 38.78%
1 year ended
9/30/95 16.23% 22.45% 29.74% 28.00% 36.54%
3 years ended
9/30/95 47.97% 56.68% 51.97% 59.15% 78.91%
5 years ended
9/30/95 104.87% 116.99% 121.31% 126.67% 202.91%
Period
3/27/861
through
9/30/95 565.31% 604.93% 230.44% 260.61% 179.54%
</TABLE>
- 8
<PAGE> 10
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 9
<TABLE>
<CAPTION>
CLASS B CLASS B
SHARES SHARES
(INCLUDING (EXCLUDING
DEFERRED DEFERRED STANDARD
SALES SALES & POOR'S DOW JONES NASDAQ
CHARGE) CHARGE) 500 INDUSTRIAL COMPOSITE
<S> <C> <C> <C> <C> <C>
3 months ended
9/30/95 6.60% 10.60% 7.94% 5.78% 11.79%
6 months ended
9/30/95 12.97% 16.97% 18.23% 16.66% 27.70%
9 months ended
9/30/95 22.68% 26.68% 29.73% 27.39% 38.78%
1 year ended
9/30/95 17.34% 21.34% 29.74% 28.00% 36.54%
Period 9/6/94(4)
through 9/30/95 19.17% 23.17% 27.47% 26.43% 37.40%
</TABLE>
(1)Date of initial public offering of Class A Shares.
(2)Prior to November 29, 1995, the maximum front-end sales charge was 5.75%.
Effective November 29, 1995, the maximum front-end sales charge was reduced
to 4.75% and the above performance numbers are calculated using 4.75% as the
applicable sales charge, and are more favorable than they would have been had
they been calculated using 5.75%.
(3)Date of initial public offering was November 9, 1992. Pursuant to applicable
regulation, total return shown for the Institutional Class for the periods
prior to the commencement of operations of such Class is calculated by taking
the performance of Class A Shares and adjusting it to reflect the elimination
of all sales charges. However, for those periods, no adjustment has been made
to eliminate the impact of 12b-1 payments, and performance would have been
affected had such an adjustment been made.
(4)Date of initial public offering of Class B Shares.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Fund and other mutual funds in the Delaware
Group, will provide general information about investment alternatives and
scenarios that will allow investors to assess their personal goals. This
information will include general material about investing as well as materials
reinforcing various industry-accepted principles of prudent and responsible
financial planning. One typical way of addressing these issues is to compare an
individual's goals and the length of time the individual has to attain these
goals to his or her risk threshold. In addition, the Distributor will provide
information that discusses the Manager's overriding investment philosophy and
how that philosophy impacts the Fund's, and other Delaware Group funds',
investment disciplines employed in seeking their objectives. The Distributor may
also from time to time cite general or specific information about the
institutional clients of the Manager, including the number of such clients
serviced by the Manager.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Fund shares, your
investment is given yet another opportunity to grow. It's called the Power of
Compounding and the following chart illustrates just how powerful it can be.
COMPOUNDED RETURNS
Results of various assumed fixed rates of return on a $10,000 investment
compounded quarterly for 10 years:
<TABLE>
<CAPTION>
8% Rate of Return 10% Rate of Return 12% Rate of Return 14% Rate of Return
<S> <C> <C> <C> <C>
12-'85 $10,824 $11,038 $11,255 $11,475
12-'86 $11,717 $12,184 $12,668 $13,168
12-'87 $12,682 $13,449 $14,258 $15,111
12-'88 $13,728 $14,845 $16,047 $17,340
12-'89 $14,859 $16,386 $18,061 $19,898
12-'90 $16,084 $18,087 $20,328 $22,833
12-'91 $17,410 $19,965 $22,879 $26,202
12-'92 $18,845 $22,038 $25,751 $30,067
12-'93 $20,399 $24,326 $28,983 $34,503
12-'94 $22,080 $26,851 $32,620 $39,593
</TABLE>
These figures are calculated assuming a fixed constant investment return and
assume no fluctuation in the value of principal. These figures, which do not
reflect payment of applicable taxes or any sales charges, are not intended to be
a projection of investment results and do not reflect the actual performance
results of any of the Classes.
TRADING PRACTICES AND BROKERAGE
The Fund selects brokers or dealers to execute transactions on behalf of the
Series for the purchase or sale of portfolio securities on the basis of its
judgment of their professional capability to provide the service. The primary
consideration is to have brokers or dealers execute transactions at best price
and execution. Best price and execution refers to many factors, including the
price paid or received for a security, the commission charged, the promptness
and reliability of execution, the confidentiality and placement accorded the
order and other factors affecting the overall benefit obtained by the account on
the transaction. A number of trades are made on a net basis where the Fund
either buys securities directly from the dealer or sells them to the dealer. In
these instances, there is no direct commission charged but there is a spread
(the difference between the buy and sell price) which is the equivalent of a
commission. When a commission is paid, the Fund pays reasonably competitive
brokerage commission rates based upon the professional knowledge of its trading
department as to rates paid and charged for similar transactions throughout the
securities industry. In some instances, the Fund pays a minimal share
transaction cost when the transaction presents no difficulty.
During the fiscal years ended September 30, 1993, 1994 and 1995, the aggregate
dollar amounts of brokerage commissions paid by the Series were $1,447,091,
$1,030,567 and $899,512, respectively.
The Manager may allocate out of all commission business generated by all of
the funds and accounts under its management, brokerage business to brokers or
dealers who provide brokerage and research services. These services
- 9
<PAGE> 11
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 10
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends; assisting in
determining portfolio strategy; providing computer software and hardware used in
security analyses; and providing portfolio performance evaluation and technical
market analyses. Such services are used by the Manager in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used, or used exclusively, with respect
to the fund or account generating the brokerage.
During the fiscal year ended September 30, 1995, portfolio transactions of the
Series in the amount of $286,801,504, resulting in brokerage commissions of
$592,455 were directed to brokers for brokerage and research services provided.
As provided in the Securities Exchange Act of 1934 and the Series' Investment
Management Agreement, higher commissions are permitted to be paid to
broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, the Fund believes that the
commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In some instances, services may be provided to
the Manager which constitute in some part brokerage and research services used
by the Manager in connection with its investment decision-making process and
constitute in some part services used by the Manager in connection with
administrative or other functions not related to its investment decision-making
process. In such cases, the Manager will make a good faith allocation of
brokerage and research services and will pay out of its own resources for
services used by the Manager in connection with administrative or other
functions not related to its investment decision-making process. In addition, so
long as no fund is disadvantaged, portfolio transactions which generate
commissions or their equivalent are allocated to broker/dealers who provide
daily portfolio pricing services to the Fund and to other funds in the Delaware
Group. Subject to best price and execution, commissions allocated to brokers
providing such pricing services may or may not be generated by the funds
receiving the pricing service.
The Manager may place a combined order for two or more accounts or funds
engaged in the purchase or sale of the same security if, in its judgment, joint
execution is in the best interest of each participant and will result in best
price and execution. Transactions involving commingled orders are allocated in a
manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager and the Fund's
Board of Directors that the advantages of combined orders outweigh the possible
disadvantages of separate transactions.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Fund may place orders with broker/dealers that have agreed to
defray certain Series expenses such as custodian fees, and may, at the request
of the Distributor, give consideration to sales of shares of the Series as a
factor in the selection of brokers and dealers to execute Series portfolio
transactions.
PORTFOLIO TURNOVER
Portfolio trading will be undertaken principally to accomplish the Series'
objective in relation to anticipated movements in the general level of interest
rates. The Series is free to dispose of portfolio securities at any time,
subject to complying with the Internal Revenue Code and the Investment Company
Act of 1940, when changes in circumstances or conditions make such a move
desirable in light of the investment objective. The Series will not attempt to
achieve or be limited to a predetermined rate of portfolio turnover, such a
turnover always being incidental to transactions undertaken with a view to
achieving the Series' investment objective.
The degree of portfolio activity may affect brokerage costs of the Series and
taxes payable by the Series' shareholders. It is anticipated that, given the
Series' investment objective, its annual portfolio turnover rate will be higher
than that of many other investment companies. A turnover rate of 100% would
occur, for example, if all the investments in the Series' portfolio at the
beginning of the year were replaced by the end of the year. In investing for
capital appreciation, the Series may hold securities for any period of time.
Portfolio turnover will also be increased if the Series writes a large number of
call options which are subsequently exercised. To the extent the Series realizes
gains on securities held for less than six months, such gains are taxable to the
shareholder or to the Series at ordinary income tax rates. The turnover rate
also may be affected by cash requirements from redemptions and repurchases of
Series shares. Total brokerage costs generally increase with higher portfolio
turnover rates.
Under certain market conditions, the Series may experience a high rate of
portfolio turnover which could exceed 100%. The portfolio turnover rate of the
Series 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 Series during the particular fiscal year,
exclusive of securities whose maturities at the time of
- 10
<PAGE> 12
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 11
acquisition are one year or less. During the past two fiscal years, the Series'
portfolio turnover rates were 34% and 51% for 1994 and 1995, respectively.
PURCHASING SHARES
The Distributor serves as the national distributor for the Series' four
classes of shares--Class A Shares, Class B Shares, Class C Shares and the
Institutional Class, and has agreed to use its best efforts to sell shares of
the Series. See the Prospectuses for additional information on how to invest.
Shares of the Series are offered on a continuous basis, and may be purchased
through authorized investment dealers or directly by contacting the Fund or its
agent.
The minimum initial investment generally is $1,000 for Class A Shares, Class B
Shares and for Class C Shares. Subsequent purchases generally must be at least
$100. The initial and subsequent minimum investments for Class A Shares will be
waived for purchases by officers, directors and employees of any Delaware Group
fund, the Manager or any of the Manager's affiliates if the purchases are made
pursuant to a payroll deduction program. Class A Shares purchased pursuant to
the Uniform Gifts to Minors Act or Uniform Transfer to Minors Act and Class A
Shares purchased in connection with an Automatic Investing Plan are subject to a
minimum initial purchase of $250 and a minimum subsequent purchase of $25.
Accounts opened under the Delaware Group Asset Planner service are subject to a
minimum initial investment of $2,000 per Asset Planner strategy selected. There
are no minimum purchase requirements for the Institutional Class, but certain
eligibility requirements must be satisfied.
There is a maximum purchase limitation of $250,000 on each purchase of Class B
Shares; for Class C Shares, each purchase must be in an amount that is less than
$1,000,000. (See Investment Plans for purchase limitations applicable to each of
the Fund's master retirement plans.) The Fund will reject any order for purchase
of more than $250,000 of Class B Shares and $1,000,000 or more for Class C
Shares. An investor may exceed these limitations by making cumulative purchases
over a period of time. In doing so, an investor should keep in mind, however,
that reduced front-end sales charges apply to investments of $100,000 or more
of Class A Shares, which are subject to lower annual 12b-1 Plan expenses than
Class B Shares and Class C Shares and generally are not subject to a CDSC.
Selling dealers have the responsibility of transmitting orders promptly. The
Fund reserves the right to reject any order for the purchase of Series shares if
in the opinion of management such rejection is in the Series' best interest.
The NASD has adopted Rules of Fair Practice relating to investment company
sales charges. The Fund and the Distributor intend to operate in compliance with
these rules.
Class A Shares are purchased at the offering price which reflects a maximum
front-end sales charge of 4.75%; however, lower front-end sales charges apply
for larger purchases. See the table below. Class A Shares are also subject to
annual 12b-1 Plan expenses.
Class B Shares are purchased at net asset value and are subject to a CDSC of:
(i) 4% if shares are redeemed within two years of purchase; (ii) 3% if shares
are redeemed during the third or fourth year following purchase; (iii) 2% if
shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class B Shares are
also subject to annual 12b-1 Plan expenses which are higher than those to which
Class A Shares are subject and are assessed against Class B Shares for
approximately eight years after purchase. See Automatic Conversion of Class B
Shares under Buying Shares in the Fund Classes' Prospectus.
Class C Shares are purchased at net asset value and are subject to a CDSC of
1% if shares are redeemed within twelve months following purchase. Class C
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment which are equal to those to which Class B Shares are subject.
Institutional Class shares are purchased at the net asset value per share
without the imposition of a front-end or contingent deferred sales charge or
12b-1 Plan expenses. See Determining Offering Price and Net Asset Value and
Plans Under Rule 12b-1 for the Fund Classes in this Part B.
Institutional Class shares, Class A Shares, Class B Shares and Class C Shares
represent a proportionate interest in the Series' assets and will receive a
proportionate interest in the Series' income, before application, as to the
Class A, Class B and Class C Shares, of any expenses under the Fund's 12b-1
Plans.
Certificates representing shares purchased are not ordinarily issued unless a
shareholder submits a specific request. Certificates are not issued in the case
of Class B Shares or Class C Shares. However, purchases not involving the
issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing shares
purchased by sending a letter to the Transfer Agent requesting the certificate.
No charge is made for any certificate issued. Investors who hold certificates
representing any of their shares may only redeem those shares by written
request. The investor's certificate(s) must accompany such request.
ALTERNATIVE PURCHASE ARRANGEMENTS
The alternative purchase arrangements of Class A, Class B and Class C Shares
permit investors to choose the method of purchasing shares that is most suitable
for his or her needs given the amount of their purchase, the length of time they
expect to hold their shares and other relevant circumstances. Investors should
determine whether, given their particular circumstances, it is more advantageous
to purchase Class A Shares and incur a front-end sales charge and annual 12b-1
Plan expenses of up to a maximum of .30% of the average daily net assets of
Class A Shares, or to purchase either Class B or Class C Shares and have the
entire initial purchase amount invested in the Series with the investment
thereafter subject to a CDSC and annual
- 11
<PAGE> 13
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 12
12b-1 Plan expenses. Class B Shares are subject to a CDSC if the shares are
redeemed within six years of purchase, and Class C Shares are subject to a CDSC
if the shares are redeemed within twelve months of purchase. Class B and Class C
Shares are each subject to annual 12b-1 Plan expenses of up to a maximum of 1%
(.25% of which are service fees to be paid by the Series to the Distributor,
dealers or others for providing personal service and/or maintaining shareholder
accounts) of average daily net assets of the respective Class. Class B Shares
will automatically convert to Class A Shares at the end of approximately eight
years after purchase and, thereafter, be subject to annual 12b-1 Plan expenses
of up to a maximum of .30% of average daily net assets of such shares. Unlike
Class B Shares, Class C Shares do not convert to another class.
CLASS A SHARES
Purchases of $100,000 or more of Class A Shares at the offering price carry
reduced front-end sales charges as shown in the accompanying table, and may
include a series of purchases over a 13-month period under a Letter of Intention
signed by the purchaser. See Special Purchase Features--Class A Shares, below
for more information on ways in which investors can avail themselves of reduced
front-end sales charges and other purchase features.
Class A Shares
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Front-End Sales Dealer's
Charge as % of Concession***
Offering Amount as % of
Amount of Purchase Price Invested** Offering Price
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.75% 4.99% 4.00%
$100,000 but under $250,000 3.75 3.88 3.00
$250,000 but under $500,000 2.50 2.56 2.00
$500,000 but under $1,000,000* 2.00 2.04 1.60
</TABLE>
*There is no front-end sales charge on purchases of Class A Shares $1 million
or more but, under certain limited circumstances, a 1% contingent deferred
sales charge may apply upon redemption of such shares. The contingent
deferred sales charge ("Limited CDSC") that may be applicable arises only in
the case of certain net asset value purchases which have triggered the
payment of a dealer's commission.
**Based on net asset value per share of the Class A Shares as of the end of the
Fund's most recent fiscal year.
***Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- --------------------------------------------------------------------------------
The Fund must be notified when a sale takes place which would qualify for the
reduced front-end sales charge on the basis of previous or current purchases.
The reduced front-end sales charge will be granted upon confirmation of the
shareholder's holdings by the Fund. Such reduced front-end sales charges are not
retroactive.
From time to time, upon written notice to all of its dealers, the Distributor
may hold special promotions for specified periods during which the Distributor
may reallow to dealers up to the full amount of front-end sales charge shown
above. Dealers who receive 90% or more of the sales charge may be deemed to be
underwriters under the Securities Act of 1933.
- --------------------------------------------------------------------------------
Certain dealers who enter into an agreement to provide extra training and
information on Delaware Group products and services and who increase sales of
Delaware Group funds may receive an additional concession of up to .15% of the
offering price in connection with sales of Class A Shares. Such dealers must
meet certain requirements in terms of organization and distribution capabilities
and their ability to increase sales. The Distributor should be contacted for
further information on these requirements as well as the basis and circumstances
upon which the additional concession will be paid. Participating dealers may be
deemed to have additional responsibilities under the securities laws.
DEALER'S COMMISSION
For initial purchases of Class A Shares of $1,000,000 or more, a dealer's
commission may be paid by the Distributor to financial advisers through whom
such purchases are effected in accordance with the following schedule:
<TABLE>
<CAPTION>
AMOUNT OF PURCHASE DEALER'S COMMISSION
- --------------------------------- -------------------
(as a percentage of
amount purchased)
<S> <C>
Up to $2 million 1.00%
Next $1 million up to $3 million .75
Next $2 million up to $5 million .50
Amount over $5 million .25
</TABLE>
In determining a financial adviser's eligibility for the dealer's commission,
purchases of Class A Shares of other Delaware Group funds as to which a Limited
CDSC applies (see Redemption and Repurchase) may be aggregated with those of the
Class A Shares of the Series. Financial advisers also may be eligible for a
dealer's commission in connection with certain purchases made under a Letter of
Intention or pursuant to an investor's Right of Accumulation. Financial advisers
should contact the Distributor concerning the applicability and calculation of
the dealer's commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for payment of
the dealer's commission, unless such exchange is from a Delaware Group fund with
assets as to which a dealer's commission or similar payment has not been
previously paid. The schedule and program for payment of the dealer's commission
are subject to change or termination at any time by the Distributor in its
discretion.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES AND CLASS C SHARES
Class B and Class C Shares are purchased without the imposition of a front-end
sales charge. Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth below and Class C Shares redeemed
within twelve months of purchase may be subject to a CDSC of 1%. CDSC fees are
charged as a percentage of the dollar amount subject to the CDSC. The charge
will be assessed on an amount equal to the lesser of the net asset value at the
time of purchase of the shares being redeemed or the net asset value of those
shares at the time of redemption. No CDSC will be imposed on increases in net
asset value above the initial purchase price. In addition, no CDSC will be
assessed on redemption of shares received through reinvestment of dividends or
capital gains distributions. See the Prospectus for the Fund Classes under
Redemption and Exchange--Waiver of CDSC--Class B and
- 12
<PAGE> 14
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 13
Class C Shares for a list of the instances in which the CDSC is waived.
In addition to the waivers described in the Prospectus, the CDSC on Class B
Shares is waived on redemptions from an account if the redemption results from
the death of all registered owners of the account (in the case of accounts
established under the Uniform Gift 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
Internal Revenue Code) of all registered owners occurring after the purchase of
the shares being redeemed.
The following table sets forth the rates of the CDSC for Class B Shares of the
Series:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
(AS A PERCENTAGE OF
YEAR AFTER DOLLAR AMOUNT
PURCHASE MADE SUBJECT TO CHARGE)
- ----------------- -------------------
<S> <C>
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
</TABLE>
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares of the Series, the Class B Shares will still
be subject to the annual 12b-1 Plan expenses of up to 1% of average daily net
assets of those shares. At the end of approximately eight years after purchase,
the investor's Class B Shares will be automatically converted into Class A
Shares of the Series. See Automatic Conversion of Class B Shares under Buying
Shares in the Fund Classes' Prospectus. Such conversion will constitute a
tax-free exchange for federal income tax purposes. See Taxes in the Prospectus
for the Fund Classes.
PLANS UNDER RULE 12B-1 FOR THE FUND CLASSES
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund has
adopted a separate plan for each of the Class A Shares, the Class B Shares and
the Class C Shares of the Series (the "Plans"). Each Plan permits the Series to
pay for certain distribution, promotional and related expenses involved in the
marketing of only the Class to which the Plan applies. The Plans do not apply to
the Institutional Class of shares. Such shares are not included in calculating
the Plans' fees, and the Plans are not used to assist in the distribution and
marketing of the Institutional Class shares. Shareholders of the Institutional
Class may not vote on matters affecting the Plans.
The Plans permit the Series, pursuant to the Distribution Agreement, to pay
out of the assets of the Class A Shares, the Class B Shares and the Class C
Shares monthly fees to the Distributor for its services and expenses in
distributing and promoting sales of shares of such classes. These expenses
include, among other things, preparing and distributing advertisements, sales
literature and prospectuses and reports used for sales purposes, compensating
sales and marketing personnel, and paying distribution and maintenance fees to
securities brokers and dealers who enter into agreements with the Distributor.
The Plan expenses relating to Class B and Class C Shares are also used to pay
the Distributor for advancing the commission costs to dealers with respect to
the initial sale of such shares.
In addition, the Series may make payments out of the assets of the Class A,
Class B and Class C Shares directly to other unaffiliated parties, such as
banks, who either aid in the distribution of shares of, or provide services to,
such classes.
The maximum aggregate fee payable by the Series under the Plans, and the
Series' Distribution Agreement, is on an annual basis, up to .30% of the Class A
Shares' average daily net assets for the year, and up to 1% (.25% of which are
service fees to be paid to the Distributor, dealers and others for providing
personal service and/or maintaining shareholder accounts) of each of the Class B
Shares' and the Class C Shares' average daily net assets for the year. The
Fund's Board of Directors may reduce these amounts at any time.
All of the distribution expenses incurred by the Distributor and others, such
as broker/dealers, in excess of the amount paid on behalf of Class A, Class B
and Class C Shares would be borne by such persons without any reimbursement from
such classes. Subject to seeking best price and execution, the Series 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 been approved by
the Board of Directors of the Fund, including a majority of the directors who
are not "interested persons" (as defined in the Investment Company Act of 1940)
of the Fund and who have no direct or indirect financial interest in the Plans
by vote cast in person or at a meeting duly called for the purpose of voting on
the Plans and such Agreements. Continuation of the Plans and the Distribution
Agreement, as amended, must be approved annually by the Board of Directors in
the same manner as specified above.
Each year, the directors must determine whether continuation of the Plans is
in the best interest of shareholders of, respectively, Class A Shares, Class B
Shares and Class C Shares and that there is a reasonable likelihood of the Plan
relating to a Fund Class providing a benefit to that Class. The Plans and the
Distribution Agreement, as amended, may be terminated with respect to a class at
any time without penalty by a majority of those directors who are not
"interested persons" or by a majority vote of the outstanding voting securities
of the relevant Fund Class. Any amendment materially increasing the maximum
percentage payable under the Plans must likewise be approved by a majority vote
of the outstanding voting securities of the relevant Fund Class, as well as by a
majority vote of those directors who are not "interested persons." With respect
to the Class A Share Plan, any material increase in the maximum percentage
payable thereunder must also be approved by a majority of the outstanding voting
Class B Shares. Also, any other material amendment to the Plans must be approved
by a majority vote of the directors including a majority of the noninterested
directors of the Fund having no interest in the Plans. In addition, in order for
the Plans to remain effective, the selection and nomination of directors who are
not "interested persons" of the Fund must be effected by the directors who
themselves are not "interested persons" and who have no direct or indirect
financial interest in the Plans. Persons authorized to make payments under the
Plans must provide
- 13
<PAGE> 15
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 14
written reports at least quarterly to the Board of Directors for their review.
For the fiscal year ended September 30, 1995, payments from the Class A Shares
pursuant to its Plan amounted to $2,526,551 and such payments were used for the
following purposes: Annual/Semi-Annual Reports--$58,614; Broker
Trails--$2,072,932; Commissions to Wholesalers--$100,593; Promotional-Broker
Meetings--$49,028; Promotional-Other--$11,825; Prospectus Printing--$38,545;
Telephone--$14,443; Wholesaler Expenses--$130,123; Dealer Service
Expenses--$50,448.
For the fiscal year ended September 30, 1995, payments from the Class B Shares
pursuant to its Plan amounted to $13,194 and such payments were used for the
following purposes: Broker Trails--$3,202; Commissions on Wholesalers--$615;
Promotional-Broker Meetings--$96; Telephone--$21; Wholesaler Expenses--$25;
Broker Sales Charges--$4,520; Interest on Broker Sales Charges--$4,715.
The staff of the Securities and Exchange Commission ("SEC") has proposed
amendments to Rule 12b-1 and other related regulations that could impact Rule
12b-1 Distribution Plans. The Fund intends to amend the Plans, if necessary, to
comply with any new rules or regulations the SEC may adopt with respect to Rule
12b-1.
OTHER PAYMENTS TO DEALERS--CLASS A, CLASS B AND
CLASS C SHARES
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to .25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
Payments to dealers made in connection with seminars, conferences or contests
relating to the promotion of fund shares may be in an amount up to 100% of the
expenses incurred or awards made. The Distributor may also pay a portion of the
expense of preapproved dealer advertisements promoting the sale of Delaware
Group fund shares.
SPECIAL PURCHASE FEATURES--CLASS A SHARES
BUYING AT NET ASSET VALUE
Class A Shares may be purchased without a front-end sales charge under the
Dividend Reinvestment Plan and, under certain circumstances, the 12-Month
Reinvestment Privilege and the Exchange Privilege.
Current and former officers, directors and employees of the Fund, any other
fund in the Delaware Group, the Manager or any of the Manager's current
affiliates and those that may in the future be created, legal counsel to the
funds and registered representatives, and employees of broker/dealers who have
entered into Dealer's Agreements with the Distributor may purchase Class A
Shares and any such class of shares of any of the funds in the Delaware Group,
including any fund that may be created, at the net asset value per share.
Spouses, parents, brothers, sisters and children (regardless of age) of such
persons at their direction, and any employee benefit plan established by any of
the foregoing funds, corporations, counsel or broker/dealers may also purchase
shares at net asset value. Purchases of Class A Shares may also be made by
clients of registered representatives of an authorized investment dealer at net
asset value within six months of a change of the registered representative's
employment, if the purchase is funded by proceeds from an investment where a
front-end sales charge has been assessed and the redemption of the investment
did not result in the imposition of a contingent deferred sales charge or other
redemption charges. Purchases of Class A Shares also may be made at net asset
value by bank employees who provide services in connection with agreements
between the bank and unaffiliated brokers or dealers concerning sales of Class A
Shares. Officers, directors and key employees of institutional clients of the
Manager, or any of its affiliates, may purchase Class A Shares at net asset
value. Moreover, purchases may be effected at net asset value for the benefit of
the clients of brokers, dealers and registered investment advisers affiliated
with a broker or dealer, if such broker, dealer or investment adviser has
entered into an agreement with the Distributor providing specifically for the
purchase of Class A Shares in connection with special investment products, such
as wrap accounts or similar fee based programs. Such purchasers are required to
sign a letter stating that the purchase is for investment only and that the
securities may not be resold except to the issuer. Such purchasers may also be
required to sign or deliver such other documents as the Fund may reasonably
require to establish eligibility for purchase at net asset value. The Fund must
be notified in advance that the trade qualifies for purchase at net asset value.
Investments in Class A Shares made by plan level and/or participant retirement
accounts that are for the purpose of repaying a loan taken from such accounts
will be made at net asset value. Loan repayments made to a Delaware Group
account in connection with loans originated from accounts previously maintained
by another investment firm will also be invested at net asset value.
Class A Shares may be deposited at net asset value, without payment of a sales
charge with respect to sales of units of a unit investment trust ("Trust"),
organized and sponsored by Prudential Securities Incorporated dealers, whose
portfolio consists of Class A Shares and stripped United States Treasury issued
notes or bonds bearing no current interest ("Treasury Obligations"). Unit
holders of the Trust may elect to invest cash distributions from the Trust in
Class A Shares at net asset value, including: (a) distributions of any dividend
income or other income received by the Trust; (b) distributions of any net
capital gains received in respect of Class A Shares and proceeds of the sale of
Class A Shares not used to redeem units of the Trust; and (c) proceeds from the
maturity of the Treasury Obligations at the termination date of the Trust.
LETTER OF INTENTION
The reduced front-end sales charges described above with respect to Class A
Shares are also applicable to the
- 14
<PAGE> 16
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 15
aggregate amount of purchases made by any such purchaser previously enumerated
within a 13-month period pursuant to a written Letter of Intention provided by
the Distributor and signed by the purchaser, and not legally binding on the
signer or the Fund, which provides for the holding in escrow by the Transfer
Agent, of 5% of the total amount of Class A Shares intended to be purchased
until such purchase is completed within the 13-month period. A Letter of
Intention may be dated to include shares purchased up to 90 days prior to the
date the Letter is signed. The 13-month period begins on the date of the
earliest purchase. If the intended investment is not completed, except as noted
below, the purchaser will be asked to pay an amount equal to the difference
between the front-end sales charge on Class A Shares purchased at the reduced
rate and the front-end sales charge otherwise applicable to the total shares
purchased. If such payment is not made within 20 days following the expiration
of the 13-month period, the Transfer Agent will surrender an appropriate number
of the escrowed shares for redemption in order to realize the difference. Such
purchasers may include the value (at offering price at the level designated in
their Letter of Intention) of all their shares of the Fund and of any class of
any of the other mutual funds in the Delaware Group (except shares of any
Delaware Group fund which do not carry a front-end sales charge, CDSC or Limited
CDSC, other than shares of Delaware Group Premium Fund, Inc. beneficially owned
in connection with the ownership of variable insurance products, unless they
were acquired through an exchange from a Delaware Group fund which carried a
front-end sales charge, CDSC or Limited CDSC) previously purchased and still
held as of the date of their Letter of Intention toward the completion of such
Letter. For purposes of satisfying an investor's obligation under a Letter of
Intention, Class B Shares and Class C Shares of the Series and the corresponding
classes of shares of other Delaware Group funds which offer such shares may be
aggregated with Class A Shares of the Series and the corresponding class of
shares of the other Delaware Group funds.
Employers offering a Delaware Group retirement plan may also complete a Letter
of Intention to obtain a reduced front-end sales charge on investments in Class
A Shares made by the Plan. The aggregate investment level of the Letter of
Intention will be determined and accepted by the Transfer Agent at the point of
Plan establishment. The level and any reduction in front-end sales charge will
be based on actual Plan participation and the projected investments in Delaware
Group funds that are offered with a front-end sales charge, CDSC or Limited CDSC
for a 13-month period. The Transfer Agent reserves the right to adjust the
signed Letter of Intention based on this acceptance criteria. The 13-month
period will begin on the date this Letter of Intention is accepted by the
Transfer Agent. If actual investments exceed the anticipated level and equal an
amount that would qualify the Plan for further discounts, any front-end sales
charges will be automatically adjusted. In the event this Letter of Intention is
not fulfilled within the 13-month period, the Plan level will be adjusted
(without completing another Letter of Intention) and the employer will be billed
for the difference in front-end sales charges due, based on the Plan's assets
under management at that time. Employers may also include the value (at offering
price at the level designated in their Letter of Intention) of all their shares
intended for purchase that are offered with a front-end sales charge, CDSC or
Limited CDSC of any class. Class B Shares and Class C Shares of the Series and
other Delaware Group funds which offer corresponding classes of shares may also
be aggregated for this purpose.
COMBINED PURCHASES PRIVILEGE
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of the Class A Shares, Class B Shares and/or
Class C Shares of the Series, as well as shares of any other class of any of the
other Delaware Group funds (except shares of any Delaware Group fund which do
not carry a front-end sales charge, CDSC or Limited CDSC, other than shares of
Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Group fund which carried a front-end sales charge, CDSC
or Limited CDSC).
The privilege also extends to all purchases made at one time by an individual;
or an individual, his or her spouse and their children under the age 21; or a
trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
RIGHT OF ACCUMULATION
In determining the availability of the reduced front-end sales charge with
respect to Class A Shares, purchasers may also combine any subsequent purchases
of Class A Shares, Class B Shares and Class C Shares of the Series, as well as
shares of any other class of any of the other Delaware Group funds which offer
such classes (except shares of any Delaware Group fund which do not carry a
front-end sales charge, CDSC or Limited CDSC, other than shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange from
a Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC). If, for example, any such purchaser has previously purchased and still
holds Class A Shares and/or shares of any other of the classes described in the
previous sentence with a value of $40,000 and subsequently purchases $60,000 at
offering price of additional shares of Class A Shares, the charge applicable to
the $60,000 purchase would currently be 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.
- 15
<PAGE> 17
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 16
12-MONTH REINVESTMENT PRIVILEGE
Holders of Class A Shares (and of the Institutional Class holding shares which
were acquired through an exchange of one of the other mutual funds in the
Delaware Group offered with a front-end sales charge) who redeem such shares of
the Fund have one year from the date of redemption to reinvest all or part of
their redemption proceeds in Class A Shares of the Series or in Class A Shares
of any of the other funds in the Delaware Group, subject to applicable
eligibility and minimum purchase requirements, in states where shares of such
other funds may be sold, at net asset value without the payment of a front-end
sales charge. This privilege does not extend to Class A Shares where the
redemption of the shares triggered the payment of a Limited CDSC. Persons
investing redemption proceeds from direct investments in mutual funds in the
Delaware Group offered without a front-end sales charge will be required to pay
the applicable sales charge when purchasing Class A Shares. The reinvestment
privilege does not extend to a redemption of either Class B or Class C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any amount
necessary to purchase a full share). The reinvestment will be made at the net
asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is proposed to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
Investors should consult their financial advisers or the Transfer Agent, which
also serves as the Fund's shareholder servicing agent, about the applicability
of the Limited CDSC (see Contingent Deferred Sales Charge for Certain Purchases
of Class A Shares Made at Net Asset Value under Redemption and Exchange in the
Fund Classes' Prospectus) in connection with the features described above.
GROUP INVESTMENT PLANS
Group Investment Plans that are not eligible to purchase shares of the
Institutional Class may also benefit from the reduced front-end sales charges
for investments in Class A Shares set forth in the table on page 8, based on
total plan assets. If a company has more than one plan investing in the Delaware
Group of funds, then the total amount invested in all plans would be used in
determining the applicable front-end sales charge reduction upon each purchase,
both initial and subsequent, upon notification to the Fund at the time of each
such purchase. Employees participating in such Group Investment Plans may also
combine the investments made in their plan account when determining the
applicable front-end sales charge on purchases to non-retirement Delaware Group
investment accounts if they so notify the Fund in connection with each purchase.
For other retirement plans and special services, see Retirement Plans for the
Fund Classes under Investment Plans.
DELCAP FUND INSTITUTIONAL CLASS
The Institutional Class is available for purchase only by: (a) retirement
plans introduced by persons not associated with brokers or dealers that are
primarily engaged in the retail securities business and rollover individual
retirement accounts from such plans; (b) tax-exempt employee benefit plans of
the Manager or its affiliates and securities dealer firms with a selling
agreement with the Distributor; (c) institutional advisory accounts of the
Manager or its affiliates and those having client relationships with Delaware
Investment Advisers, a division of the Manager, or its affiliates and their
corporate sponsors, as well as subsidiaries and related employee benefit plans
and rollover individual retirement accounts from such institutional advisory
accounts; (d) banks, trust companies and similar financial institutions
investing for their own account or for the account of their trust customers for
whom such financial institution is exercising investment discretion in
purchasing shares of the class; and (e) registered investment advisers investing
on behalf of clients that consist solely of institutions and high net-worth
individuals having at least $1,000,000 entrusted to the adviser for investment
purposes, but only if the adviser is not affiliated or associated with a broker
or dealer and derives compensation for its services exclusively from its clients
for such advisory services.
Shares of the Institutional Class are available for purchase at net asset
value, without the imposition of a front-end or contingent deferred sales charge
and are not subject to
Rule 12b-1 expenses.
INVESTMENT PLANS
REINVESTMENT PLAN/OPEN ACCOUNT
Unless otherwise designated by shareholders in writing, dividends from net
investment income and distributions from realized securities profits, if any,
will be automatically reinvested in additional shares of the respective Fund
Class in which an investor has an account (based on the net asset value in
effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of the Institutional Class
are reinvested in the account of the holders of such shares (based on the net
asset value of the Fund in effect on the reinvestment date). A confirmation of
each dividend payment from net investment income and of distributions from
realized securities profits, if any, will be mailed to shareholders in the first
quarter of the fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and add
full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the Series.
Such purchases, which must meet the minimum subsequent purchase requirements set
forth in the Prospectus 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
Class at the net asset value at the end of the
- 16
<PAGE> 18
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 17
day of receipt. A reinvestment plan may be terminated at any time. This plan
does not assure a profit nor protect against depreciation in a declining market.
REINVESTMENT OF DIVIDENDS IN OTHER
DELAWARE GROUP FUNDS
Subject to applicable eligibility and minimum initial purchase requirements,
and the limitations set forth below, holders of Class A, Class B and Class C
Shares may automatically reinvest dividends and/or distributions from the Series
in any of the other mutual funds in the Delaware Group, including the Series, in
states where their shares may be sold. Such investments will be at net asset
value at the close of business on the reinvestment date without any front-end
sales charge or service fee. Nor will such investments be subject to a CDSC or
Limited CDSC. The shareholder must notify the Transfer Agent in writing and must
have established an account in the fund into which the dividends and/or
distributions are to be invested. Any reinvestment directed to a fund in which
the investor does not then have an account will be treated like all other
initial purchases of a fund's shares. Consequently, an investor should obtain
and read carefully the prospectus for the fund in which the investment is
proposed to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses. See
also Dividend Reinvestment Plan in the Prospectus for the Fund Classes.
Subject to the following limitations, dividends and/or distributions from
other funds in the Delaware Group may be invested in shares of the Series,
provided an account has been established. Dividends from Class A Shares may not
be directed to Class B Shares or Class C Shares of another fund in the Delaware
Group. Dividends from Class B Shares may only be directed to Class B Shares of
another fund in the Delaware Group that offers such class of shares. Dividends
from Class C Shares may only be directed to Class C Shares of another fund in
the Delaware Group that offers such class of shares. See Class B Funds and Class
C Funds under Buying Shares in the Fund Classes' Prospectus for the funds in the
Delaware Group that are eligible for investment by holders of Series shares.
This option is not available to participants in the following plans: SAR/SEP,
SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans.
INVESTING BY ELECTRONIC FUND TRANSFER
Direct Deposit Purchase Plan--Investors may arrange for the Series to accept
for investment in Class A, Class B or Class C Shares, through an agent bank,
preauthorized government or private recurring payments. This method of
investment assures the timely credit to the shareholder's account of payments
such as social security, veterans' pension or compensation benefits, federal
salaries, Railroad Retirement benefits, private payroll checks, dividends, and
disability or pension fund benefits. It also eliminates lost, stolen and delayed
checks.
Automatic Investing Plan--Shareholders of the Class A, Class B and Class C
Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into their Series
account. This type of investment will be handled in either of the two ways noted
below. (1) If the shareholder's bank is a member of the National Automated
Clearing House Association ("NACHA"), the amount of the investment will be
electronically deducted from his or her account by Electronic Fund Transfer
("EFT"). The shareholder's checking account will reflect a debit each month at a
specified date although no check is required to initiate the transaction. (2) If
the shareholder's bank is not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans: SAR/SEP,
SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans.
* * *
Investments under the Direct Deposit Purchase Plan and the Automatic Investing
Plan must be for $25 or more for Class A Shares and $100 or more for Class B and
Class C Shares. An investor wishing to take advantage of either service must
complete an authorization form. Either service can be discontinued by the
shareholder at any time without penalty by giving written notice.
Payments to the Series from the federal government or its agencies on behalf
of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
the Fund may liquidate sufficient shares from a shareholder's account to
reimburse the government or the private source. In the event there are
insufficient shares in the shareholder's account, the shareholder is expected to
reimburse the Series.
DIRECT DEPOSIT PURCHASES BY MAIL
Shareholders may authorize a third party, such as a bank or employer, to make
investments directly to their Series accounts. The Series will accept these
investments, such as bank-by-phone, annuity payments and payroll allotments, by
mail directly from the third party. Investors should contact their employers or
financial institutions who in turn should contact the Fund for proper
instructions.
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DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 18
RETIREMENT PLANS FOR THE FUND CLASSES
An investment in the Series may be suitable for tax-deferred retirement plans.
Among the retirement plans noted below, Class B Shares are available for
investment only by Individual Retirement Accounts, Simplified Employee Pension
Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares and Class
C Shares. See the Prospectus for the Fund Classes under Redemption and
Exchange--Waiver of CDSC--Class B and Class C Shares for a list of the instances
in which the CDSC is waived.
Each purchase of Class B Shares is subject to a maximum purchase limitation of
$250,000 for retirement plans. Each purchase of Class C Shares must be in an
amount that is less than $1,000,000 for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
Minimum investment limitations generally applicable to other investors do not
apply to retirement plans, other than Individual Retirement Accounts ("IRAs")
for which there is a minimum initial purchase of $250, and a minimum subsequent
purchase of $25, regardless of which class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide services
to such plans.
Certain shareholder investment services available to non-retirement plan
shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Class. See
DelCap Fund Institutional Class above. For additional information on any of the
plans and Delaware's retirement services, call the Shareholder Service Center
telephone number.
IT IS ADVISABLE FOR AN INVESTOR CONSIDERING ANY ONE OF THE RETIREMENT PLANS
DESCRIBED BELOW TO CONSULT WITH AN ATTORNEY, ACCOUNTANT OR A QUALIFIED
RETIREMENT PLAN CONSULTANT. FOR FURTHER DETAILS, INCLUDING APPLICATIONS FOR ANY
OF THESE PLANS, CONTACT YOUR INVESTMENT DEALER OR THE DISTRIBUTOR.
Taxable distributions from the retirement plans described below may be subject
to withholding.
Please contact your investment dealer or the Distributor for the special
application forms required for the plans described below.
PROTOTYPE PROFIT SHARING OR MONEY PURCHASE PENSION PLANS
Prototype Plans are available for self-employed individuals, partnerships and
corporations which replace the former Keogh and corporate retirement plans.
These Plans contain profit sharing or money purchase pension plan provisions.
Contributions for plans of this type may be invested only in Class A and Class C
Shares.
INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
A document is available for an individual who wants to establish an IRA by
making contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year or elects to be treated
as having no compensation for the year. Investments in each of the Fund Classes
are permissible.
The Tax Reform Act of 1986 (the "Act") restructured, and in some cases
eliminated, the tax deductibility of IRA contributions. Under the Act, the full
deduction for IRAs ($2,000 for each working spouse and $2,250 for one-income
couples) was retained for all taxpayers who are not covered by an
employer-sponsored retirement plan. Even if a taxpayer (or his or her spouse) is
covered by an employer-sponsored retirement plan, the full deduction is still
available if the taxpayer's adjusted gross income is below $25,000 ($40,000 for
taxpayers filing joint returns). A partial deduction is allowed for married
couples with incomes between $40,000 and $50,000, and for single individuals
with incomes between $25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross income before IRA
deductions exceeds $50,000 ($35,000 for singles) and who are active participants
in an employer-sponsored retirement plan. Taxpayers who are not allowed
deductions on IRA contributions still can make nondeductible IRA contributions
of as much as $2,000 for each working spouse ($2,250 for one-income couples),
and defer taxes on interest or other earnings from the IRAs. Special rules apply
for determining the deductibility of contributions made by married individuals
filing separate returns.
A company or association may establish a Group IRA for employees or members
who want to purchase shares of the Series. Purchases of $1 million or more of
Class A Shares qualify for purchase at net asset value but may, under certain
circumstances, be subject to a Limited CDSC. See Purchasing Shares concerning
reduced front-end sales charges applicable to Class A Shares.
Investments generally must be held in the IRA until age 59 1/2 in order to
avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable
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DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 19
as ordinary income in the year received. Excess contributions removed after the
tax filing deadline, plus extensions, for the year in which the excess
contributions were made are subject to a 6% excise tax on the amount of excess.
Premature distributions (distributions made before age 59 1/2, except for death,
disability and certain other limited circumstances) will be subject to a 10%
excise tax on the amount prematurely distributed, in addition to the income tax
resulting from the distribution. See Class B Shares and Class C Shares under
Alternative Purchase Arrangements, Contingent Deferred Sales Charge--Class B
Shares and Class C Shares, and Waiver of CDSC--Class B Shares and Class C Shares
in the Fund Classes' Prospectus concerning the applicability of a CDSC upon
redemption.
See Appendix B for additional IRA information.
SIMPLIFIED EMPLOYEE PENSION PLAN ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Fund Classes is available for investment by a
SEP/IRA.
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLAN
("SAR/SEP")
Employers with 25 or fewer eligible employees can establish this plan which
permits employer contributions and salary deferral contributions in Class A
Shares and Class C Shares only.
PROTOTYPE 401(K) DEFINED CONTRIBUTION PLAN
Section 401(k) of the Code permits employers to establish qualified plans
based on salary deferral contributions. Plan documents are available to enable
employers to establish a plan. An employer may also elect to make profit sharing
contributions and/or matching contributions with investments in only Class A
Shares and Class C Shares or certain other funds in the Delaware Group.
Purchases under the plan may be combined for purposes of computing the reduced
front-end sales charge applicable to Class A Shares as set forth in the table on
page 8.
DEFERRED COMPENSATION PLAN FOR PUBLIC SCHOOLS
AND NON-PROFIT ORGANIZATIONS ("403(B)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase any of
the Fund Classes in conjunction with such an arrangement. Applicable front-end
sales charges with respect to Class A Shares for such purchases are set forth in
the table on page 8.
DEFERRED COMPENSATION PLAN FOR STATE AND LOCAL
GOVERNMENT EMPLOYEES ("457")
Section 457 of the Code permits state and local governments, their agencies
and certain other entities to establish a deferred compensation plan for their
employees who wish to participate. This enables employees to defer a portion of
their salaries and any federal (and possibly state) taxes thereon. Such plans
may invest in shares of any of the Fund Classes. Although investors may use
their own plan, there is available a Delaware Group 457 Deferred Compensation
Plan. Interested investors should contact the Distributor or their investment
dealers to obtain further information. Applicable front-end sales charges for
such purchases of Class A Shares are set forth in the table on page 8.
DETERMINING OFFERING PRICE
AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering price next
calculated by the Fund after receipt of the order by the Fund or its agent.
Orders for purchases of Class B Shares, Class C Shares and the Institutional
Class are effected at the net asset value per share next calculated after
receipt of the order by the Fund or its agent. Selling dealers have the
responsibility of transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value per
share plus any applicable sales charges. Offering price and net asset value are
computed as of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is open. The New
York Stock Exchange is scheduled to be open Monday through Friday throughout the
year except for New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. When the New York Stock
Exchange is closed, the Fund will generally be closed, pricing calculations will
not be made and purchase and redemption orders will not be processed.
An example showing how to calculate the net asset value per share and, in the
case of Class A Shares, the offering price per share, is included in the Series'
financial statements which are incorporated by reference into this Part B.
The Series' net asset value per share is computed by adding the value of all
the securities and other assets in the Series' portfolio, deducting any
liabilities of the Series, and dividing by the number of Series shares
outstanding. Expenses and fees are accrued daily. In determining the Series'
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. Options are valued at the last reported sale price or,
if no sales are reported, at the mean between bid and asked prices. For
valuation purposes, foreign securities initially expressed in foreign currency
values will be converted into U.S. dollar values at the mean between the bid and
offered quotations of such currencies against U.S. dollars as last quoted by any
recognized dealer. Securities not traded on a particular day, over-the-counter
securities, and government and agency securities are valued at the mean value
between bid and asked prices. Money market instruments having a maturity of less
than 60 days are valued at amortized cost. Debt securities (other than
short-term obligations) are valued on the basis of valuations provided by a
pricing
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DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 20
service when such prices are believed to reflect the fair value of such
securities. Use of a pricing service has been approved by the Board of
Directors. Prices provided by a pricing service take into account appropriate
factors such as institutional trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics and other
market data. Subject to the foregoing, securities for which market quotations
are not readily available and other assets are valued at fair value as
determined in good faith and in a method approved by the Board of Directors.
Each Class of the Series will bear, pro-rata, all of the common expenses of
the Series. The net asset values of all outstanding shares of each Class of the
Series will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Series represented by the value of shares
of that Class. All income earned and expenses incurred by the Series will be
borne on a pro-rata basis by each outstanding share of a Class, based on each
Class' percentage in the Fund represented by the value of shares of such
Classes, except that the Institutional Class will not incur any of the expenses
under the Fund's 12b-1 Plans and the Class A, Class B and Class C Shares alone
will bear the 12b-1 Plan expenses payable under their respective Plans. Due to
the specific distribution expenses and other costs that will be allocable to
each Class, the net asset value of each Class of the Series will vary.
REDEMPTION AND REPURCHASE
Any shareholder may require the Fund to redeem Series shares by sending a
WRITTEN REQUEST, signed by the record owner or owners exactly as the shares are
registered, to the Fund, 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. The Fund does not issue
certificates for Class A Shares or Institutional Class shares, unless a
shareholder specifically requests them. The Fund does not issue certificates for
Class B Shares or Class C Shares. If stock certificates have been issued for
shares being redeemed, they must accompany the written request. For redemptions
of $50,000 or less paid to the shareholder at the address of record, the Fund
requires a request signed by all owners of the shares or the investment dealer
of record, but does not require signature guarantees. When the redemption is for
more than $50,000, or if payment is made to someone else or to another address,
signatures of all record owners are required and a signature guarantee may be
required. Each signature guarantee must be supplied by an eligible guarantor
institution. The Fund reserves the right to reject a signature guarantee
supplied by an eligible institution based on its creditworthiness. The Fund may
request further documentation from corporations, retirement plans, executors,
administrators, trustees or guardians.
In addition to redemption of Series shares by the Fund, the Distributor,
acting as agent of the Fund, offers to repurchase Series shares from
broker/dealers acting on behalf of shareholders. The redemption or repurchase
price, which may be more or less than the shareholder's cost, is the net asset
value per share next determined after receipt of the request in good order by
the Fund or its agent, less any applicable CDSC or Limited CDSC. This is
computed and effective at the time the offering price and net asset value are
determined. See Determining Offering Price and Net Asset Value.The Fund and the
Distributor end their business day at 5 p.m., Eastern time. This offer is
discretionary and may be completely withdrawn without further notice by the
Distributor.
Orders for the repurchase of Series shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to any applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Certain redemptions of Class A Shares purchased at net asset value may result
in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge for
Certain Purchases of Class A Shares Made at Net Asset Value under Redemption and
Exchange in the Prospectus for the Fund Classes. Class B Shares are subject to a
CDSC of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase; (iii) 2%
if shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class C Shares are
subject to a CDSC of 1% if shares are redeemed within twelve months following
purchase. See Contingent Deferred Sales Charge under Buying Shares in the
Prospectus for the Fund Classes. Except for the applicable CDSC or Limited CDSC
and, with respect to the expedited payment by wire described below, for which
there is currently a $7.50 bank wiring cost, neither the Fund nor the
Distributor charges a fee for redemptions or repurchases, but such fees could be
charged at any time in the future.
Payment for shares redeemed will ordinarily be mailed the next business day,
but in no case later than seven days, after receipt of a redemption request in
good order.
If a shareholder who recently purchased shares by check seeks to redeem all or
a portion of those shares in a written request, the Fund will honor the
redemption request but will not mail the proceeds until it is reasonably
satisfied of the collection of the investment check. This potential delay can be
avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund will automatically redeem from the shareholder's account the Series shares
purchased by the check plus any dividends earned thereon.
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DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 21
Shareholders may be responsible for any losses to the Series or to the
Distributor.
In case of a suspension of the determination of the net asset value because
the New York Stock Exchange is closed for other than weekends or holidays, or
trading thereon is restricted or an emergency exists as a result of which
disposal by the Series of securities owned by it is not reasonably practical, or
it is not reasonably practical for the Series fairly to value its assets, or in
the event that the Securities and Exchange Commission has provided for such
suspension for the protection of shareholders, the Series may postpone payment
or suspend the right of redemption or repurchase. In such case, the shareholder
may withdraw the request for redemption or leave it standing as a request for
redemption at the net asset value next determined after the suspension has been
terminated.
Payment for shares redeemed or repurchased may be made either in cash or kind,
or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, the Fund has
elected to be governed by Rule 18f-1 under the Investment Company Act of 1940
pursuant to which the Fund is obligated to redeem Series shares solely in cash
up to the lesser of $250,000 or 1% of the net asset value of the Series during
any 90-day period for any one shareholder.
The value of the Series' investments is subject to changing market prices.
Thus, a shareholder reselling shares to the Series may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
SMALL ACCOUNTS
Before the Fund involuntarily redeems shares from an account that, under the
circumstances listed in the relevant Prospectus, has remained below the minimum
amounts required by the Series' Prospectuses and sends the proceeds to the
shareholder, the shareholder will be notified in writing that the value of the
shares in the account is less than the minimum required and will be allowed 60
days from the date of notice to make an additional investment to meet the
required minimum. See The Conditions of Your Purchase under Buying Shares in the
Series' Prospectuses. Any redemption in an inactive account established with a
minimum investment may trigger mandatory redemption. No CDSC or Limited CDSC
will apply to the redemptions described in this paragraph.
Effective November 29, 1995, the minimum initial investment in Class A Shares
was increased from $250 to $1,000. Class A accounts that were established prior
to November 29, 1995 and maintain a balance in excess of $250 will not presently
be subject to the $9 quarterly service fee that may be assessed to accounts with
balances below the stated minimum nor subject to involuntary redemption.
* * *
The Fund has available certain redemption privileges, as described below. The
Fund reserves the right to suspend or terminate these expedited payment
procedures upon 60 days' written notice to shareholders.
EXPEDITED TELEPHONE REDEMPTIONS
Shareholders of the Fund Classes or their investment dealers of record wishing
to redeem any amount of shares of $50,000 or less for which certificates have
not been issued may call the Fund at 800-523-1918 (in Philadelphia,
215-988-1241) or in the case of shareholders of the Institutional Class, their
Client Services Representative at 800-828-5052 prior to the time the offering
price and net asset value are determined, as noted above, and have the proceeds
mailed to them at the record address. Checks payable to the shareholder(s) of
record will normally be mailed the next business day, but no later than seven
days, after the receipt of the redemption request. This option is only available
to individual, joint and individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check by calling the Fund, as described
above. An authorization form must have been completed by the shareholder and
filed with the Fund before the request is received. Payment will be made by wire
or check to the bank account designated on the authorization form as follows:
1. PAYMENT BY WIRE: Request that Federal Funds be wired to the bank account
designated on the authorization form. Redemption proceeds will normally be wired
on the next business day following receipt of the redemption request. There is a
$7.50 wiring fee (subject to change) charged by CoreStates Bank, N.A. which will
be deducted from the withdrawal proceeds each time the shareholder requests a
redemption. If the proceeds are wired to the shareholder's account at a bank
which is not a member of the Federal Reserve System, there could be a delay in
the crediting of the funds to the shareholder's bank account.
2. PAYMENT BY CHECK: Request a check be mailed to the bank account designated
on the authorization form. Redemption proceeds will normally be mailed the next
business day, but no later than seven days, from the date of the telephone
request. This procedure will take longer than the Payment by Wire option (1
above) because of the extra time necessary for the mailing and clearing of the
check after the bank receives it.
REDEMPTION REQUIREMENTS: In order to change the name of the bank and the
account number it will be necessary to send a written request to the Fund and a
signature guarantee may be required. Each signature guarantee must be supplied
by an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness.
To reduce the shareholder's risk of attempted fraudulent use of the telephone
redemption procedure, payment will be made only to the bank account designated
on the authorization form.
The Fund will not honor telephone redemptions for Series shares recently
purchased by check unless it is reasonably satisfied that the purchase check has
cleared.
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DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 22
If expedited payment under these procedures could adversely affect the Series,
the Fund may take up to seven days to pay the shareholder.
Neither the Fund nor the Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption or
exchange of Series shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by
shareholders of the Fund Classes are generally tape recorded. A written
confirmation will be provided for all purchase, exchange and redemption
transactions initiated by telephone.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders of Class A, Class B and Class C Shares who own or purchase $5,000
or more of shares at the offering price, or net asset value, as applicable, for
which certificates have not been issued may establish a Systematic Withdrawal
Plan for monthly withdrawals of $25 or more, or quarterly withdrawals of $75 or
more, although the Series does not recommend any specific amount of withdrawal.
This $5,000 minimum does not apply for the Series' prototype retirement plans.
Shares purchased with the initial investment and through reinvestment of cash
dividends and realized securities profits distributions will be credited to the
shareholder's account and sufficient full and fractional shares will be redeemed
at the net asset value calculated on the third business day preceding the
mailing date.
Checks are dated either the 1st or the 15th of the month, as selected by the
shareholder, (unless such date falls on a holiday or a weekend) and are normally
mailed within two business days. Both ordinary income dividends and realized
securities profits distributions will be automatically reinvested in additional
shares of the Class at net asset value. This plan is not recommended for all
investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital, and the share
balance may in time be depleted, particularly in a declining market.
The sale of shares for withdrawal payments constitutes a taxable event and a
shareholder may incur a capital gain or loss for federal income tax purposes.
This gain or loss may be long-term or short-term depending on the holding period
for the specific shares liquidated. Premature withdrawals from Retirement Plans
may have adverse tax consequences.
Withdrawals under this plan by the holders of Class A Shares or any similar
plan of any other investment company charging a front-end sales charge made
concurrently with the purchases of Class A Shares of this or the shares of any
other investment company will ordinarily be disadvantageous to the shareholder
because of the payment of duplicative sales charges. Shareholders should not
purchase Class A Shares while participating in a Systematic Withdrawal Plan and
a periodic investment program in a fund managed by the Manager must be
terminated before a Systematic Withdrawal Plan can take effect, except if the
shareholder is a participant in one of our Retirement Plans or is investing in
Delaware Group funds which do not carry a sales charge. Also, redemptions of
Class A Shares pursuant to a Systematic Withdrawal Plan may be subject to a
Limited CDSC if the purchase was made at net asset value and a dealer's
commission has been paid on that purchase. Redemptions of Class B Shares or
Class C Shares pursuant to a Systematic Withdrawal Plan may be subject to a
CDSC, unless the annual amount selected to be withdrawn is less than 12% of the
account balance on the date that the Systematic Withdrawal Plan was established.
See Waiver of CDSC--Class B and Class C Shares and Waiver of Limited CDSC--Class
A Shares under Redemption and Exchange in the Prospectus for the Fund Classes.
An investor wishing to start a Systematic Withdrawal Plan must complete an
authorization form. If the recipient of Systematic Withdrawal Plan payments is
other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
The Systematic Withdrawal Plan is not available for the Institutional Class.
WEALTH BUILDER OPTION
Shareholders of the Fund Classes may elect to invest in one or more of the
other mutual funds in the Delaware Group through our Wealth Builder Option.
Under this automatic exchange program, shareholders can authorize regular
monthly investments (minimum of $100 per fund) to be liquidated from their
account and invested automatically into other mutual funds in the Delaware
Group, subject to the conditions and limitations set forth in the Fund Classes'
Prospectus. See Wealth Builder Option and Redemption and Exchange in the
Prospectus for the Fund Classes.
The investment will be made on the 20th day of each month (or, if the fund
selected is not open that day, the next business day) at the public offering
price or net asset value, as applicable, of the fund selected on the date of
investment. No investment will be made for any month if the value of the
shareholder's account is less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure profits
or protect against losses in a declining market. The price of the fund into
which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund
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DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 23
accounts and is treated as a purchase of shares of the fund
into which investments are made through the program. See Exchange Privilege for
a brief summary of the tax consequences of exchanges.
Shareholders can also use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Group, subject to the conditions and limitations described
in the Fund Classes' Prospectus. Shareholders can terminate their participation
at any time by written notice to the Fund.
This option is not available to participants in the following plans: SAR/SEP,
SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Class.
DISTRIBUTIONS AND TAXES
The Series has qualified, and intends to continue to qualify, as a regulated
investment company under Subchapter M of the Code. As such, the Series will not
be subject to federal income tax on net investment income and net realized
capital gains which are distributed to shareholders.
The Series intends to pay out all of its net investment income and net
realized capital gains. The Fund also intends to meet the calendar year
distribution requirements imposed by the Code to avoid the imposition of any
excise tax. All dividends and any capital gains distributions will be
automatically credited to the shareholder's account in additional shares of the
same class of the Series at net asset value unless, in the case of shareholders
in the Fund Classes, the shareholder requests in writing that such dividends
and/or distributions be paid in cash. Dividend payments of $1.00 or less will be
automatically reinvested, notwithstanding a shareholder's election to receive
dividends in cash. If such a shareholder's dividends increase to greater than
$1.00, the shareholder would have to file a new election in order to begin
receiving dividends in cash again.
Each class of shares of the Series will share proportionately in the
investment income and expenses of the Series, 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. The Series may deduct from a shareholder's account the costs
of the Series' effort to locate a shareholder if a shareholder's mail is
returned by the Post Office or the Series 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.
Persons not subject to tax will not be required to pay taxes on distributions.
Dividends from investment income and short-term
capital gains distributions are treated by shareholders as ordinary income for
federal income tax purposes. Distributions of long-term capital gains, if any,
are taxable to shareholders as long-term capital gains, regardless of the length
of time an investor has held such shares, and these gains are currently taxed at
long-term capital gain rates.
The tax status of dividends and distributions paid to shareholders will not be
affected by whether they are paid in cash or in additional shares. Under the Tax
Reform Act of 1986, if the Fund were to add another series, the Internal Revenue
Service would treat each Series as a single tax entity and capital gains for
each Series would be calculated separately.
Because of the Series' investment policy, only a small portion of the Series'
dividends may qualify for the dividends-received deduction for corporations
provided in the Tax Reform Act of 1986. The portion of dividends paid by the
Series that so qualifies will be designated each year in a notice mailed to the
Series' shareholders, and cannot exceed the gross amount of dividends received
by the Series from domestic (U.S.) corporations that would have qualified for
the dividends-received deduction in the hands of the Series if the Series 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.
Shareholders will be notified annually by the Fund as to the federal income
tax status of dividends and distributions paid by the Series.
Distributions may also be subject to state and local taxes; shareholders are
advised to consult with their tax advisers in this regard. Shares of the Series
will be exempt from Pennsylvania county personal property taxes.
See also Other Tax Requirements under Accounting and Tax Issues in this Part
B.
During the fiscal year ended September 30, 1995, distributions totaling $1.83,
$1.83 and $1.83 per share of the Class A Shares, the Class B Shares and the
Institutional Class were paid from realized securities profits.
INVESTMENT MANAGEMENT
AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103, furnishes
investment management services to the Series, subject to the supervision and
direction of the Fund's Board of Directors.
The Manager and its predecessors have been managing the funds in the Delaware
Group since 1938. The aggregate assets of these funds on September 30, 1995 were
approximately $10,240,754,000. Investment advisory services are also provided to
institutional accounts with assets on September 30, 1995 of approximately
$17,417,567,000.
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<PAGE> 25
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 24
The Investment Management Agreement for the Series is dated April 3, 1995 and
was approved by shareholders on March 29, 1995.
The Agreement has an initial term of two years and may be renewed each year
only so long as such renewal and continuance are specifically approved at least
annually by the Board of Directors or by vote of a majority of the outstanding
voting securities of the Series, and only if the terms of the renewal thereof
have been approved by the vote of a majority of the directors of the Fund who
are not parties thereto or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval. The Agreement is
terminable without penalty on 60 days' notice by the directors of the Fund or by
the Manager. The Agreement will terminate automatically in the event of its
assignment.
The compensation paid by the Series for investment management services is
equal to 1/16 of 1% per month (the equivalent of 3/4 of 1% per year) of the
Series' average daily net assets during the month, less all directors' fees paid
to the unaffiliated directors by the Series. This fee may be higher than that
paid by some other funds. On September 30, 1995, the total net assets of the
Series were $1,020,659,465. Under the general supervision of the Board of
Directors, the Manager makes all investment decisions which are implemented by
the Fund. The Manager pays the salaries of all directors, officers and employees
who are affiliated with both the Manager and the Fund. The investment management
fees paid by the Series for the fiscal years ended September 30, 1993, 1994 and
1995 were $8,349,752, $7,925,137 and $7,128,192, respectively.
Except for those expenses borne by the Manager under the Investment Management
Agreement and the Distributor under the Distribution Agreement, the Series is
responsible for all of its own expenses. Among others, these include the Series'
proportionate share of rent and certain other administrative expenses; the
investment management fees; transfer and dividend disbursing agent fees and
costs; custodian expenses; federal and state securities registration fees; proxy
costs; and the costs of preparing prospectuses and reports sent to shareholders.
The ratio of expenses to average daily net assets for Class A Shares for the
fiscal year ended September 30, 1995 was 1.37%, which reflects the impact of its
12b-1 Plan. The ratio of expenses to average daily net assets for the
Institutional Class was 1.07% for the fiscal year ended September 30, 1995. The
ratio of expenses to average daily net assets for Class B Shares was 2.07% for
the fiscal year ended September 30, 1995, which reflects the impact of its 12b-1
Plan. The Fund anticipates that the ratio of expenses to average daily net
assets of Class C Shares will be identical to that of the Class B Shares.
By California regulation, the Manager is required to waive certain fees and
reimburse the Series for certain expenses to the extent that the Series'
operating expenses, exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, exceed 2 1/2% of its first $30 million of average daily
net assets, 2% of the next $70 million of average daily net assets and 1 1/2% of
any additional average daily net assets. For the fiscal year ended September 30,
1995, no such reimbursement was necessary or paid.
DISTRIBUTION AND SERVICE
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor of Series shares
under a Distribution Agreement dated April 3, 1995, as amended on November 29,
1995. The Distributor is an affiliate of the Manager and bears all of the costs
of promotion and distribution, except for payments by the Series on behalf of
Class A Shares, Class B Shares and Class C Shares under their respective 12b-1
Plans. Prior to January 3, 1995, Delaware Distributors, Inc. ("DDI") served as
the national distributor of the Fund's shares. On that date, Delaware
Distributors, L.P., a newly formed limited partnership, succeeded to the
business of DDI. All officers and employees of DDI became officers and employees
of Delaware Distributors, L.P. DDI is the corporate general partner of Delaware
Distributors, L.P. and both DDI and Delaware Distributors, L.P. are indirect,
wholly-owned subsidiaries of Delaware Management Holdings, Inc.
The Transfer Agent, Delaware Service Company, Inc., another affiliate of the
Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as the
Fund's shareholder servicing, dividend disbursing and transfer agent pursuant to
a Shareholders Services Agreement dated June 29, 1988. The Transfer Agent is
also an indirect, wholly-owned subsidiary of Delaware Management Holdings, Inc.
OFFICERS AND DIRECTORS
The business and affairs of the Fund are managed under the direction of its
Board of Directors.
Certain officers and directors of the Fund hold identical positions in each of
the other funds in the Delaware Group. On October 31, 1995, the Fund's officers
and directors owned less than 1% of the outstanding shares of, respectively, the
Class A Shares, Class B Shares and the Institutional Class.
As of October 31, 1995, the Fund believes the following accounts held 5% or
more of the outstanding shares of the Class A Shares, Institutional Class and
Class B Shares: Merrill, Lynch, Pierce, Fenner & Smith Inc., Mutual Fund
Operations, P.O. Box 41621, Jacksonville, FL 32203 held of record for the
benefit of others 5,696,375 shares (18.8%) of the outstanding shares of the
Class A Shares. Boston Safe Agent for Mellon Bank Trust, State of California
Deferred Compensation Plan 457, A/C CSPF0134002, 1 Cabot Road, Medford MA 02155
held 2,108,427 shares (47.82%); Price Waterhouse, LLP, 401(k) Savings Plan,
National Administrative Center, P.O. Box 30004, Tampa, FL 33630 held 1,282,036
shares (29.07%); and Boston Safe Agent for Mellon Bank Trust, State of
California Thrift Plan 401(k), A/C CSPF0034002, 1 Cabot Road, Medford MA 02155
held 552,553 shares (12.53%) of the outstanding shares of the Institutional
Class. Merrill, Lynch, Pierce, Fenner & Smith Inc., Mutual Fund Operations,
Attention Book Entry, 1800 Deer Lake Drive East, 3rd Fl., Jacksonville, FL 32246
- 24
<PAGE> 26
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 25
held of record for the benefit of others 10,954 shares (10.47%) of the
outstanding shares of the Class B Shares.
DMH Corp., Delaware Management Company, Inc., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware Management
Trust Company, Delaware International Holdings Ltd., Founders Holdings, Inc.,
Delaware International Advisers Ltd. and Delaware Investment Counselors, Inc.
are direct or indirect, wholly-owned subsidiaries of Delaware Management
Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly-owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. In connection with the merger, a new Investment Management Agreement
between the Fund on behalf of the Series and the Manager was executed following
shareholder approval. DMH and the Manager are now wholly-owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management.
Directors and principal officers of the Fund are noted below along with their
ages and their business experience for the past five years. Unless otherwise
noted, the address of each officer and director is One Commerce Square,
Philadelphia, PA 19103.
*WAYNE A. STORK (58)
Chairman, President, Chief Executive Officer, Director and/or Trustee of the
Fund, 15 other funds in the Delaware Group (which excludes Delaware Pooled
Trust, Inc.) and Delaware Management Holdings, Inc.
Chairman and Director of Delaware Investment Counselors, Inc. and Delaware
Pooled Trust, Inc.
Chairman, Chief Executive Officer, Chief Investment Officer and Director of
Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of DMH Corp., Delaware
International Advisers Ltd., Delaware International Holdings Ltd. and
Founders Holdings, Inc.
Director of Delaware Distributors, Inc. and Delaware Service Company, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.
WINTHROP S. JESSUP (50)
Executive Vice President of the Fund, 15 other funds in the Delaware Group
(which excludes Delaware Pooled Trust, Inc.) and Delaware Management
Holdings, Inc.
President and Chief Executive Officer of Delaware Pooled Trust, Inc.
President and Director of Delaware Investment Counselors, Inc.
Executive Vice President and Director of DMH Corp., Delaware Management
Company, Inc., Delaware International Holdings Ltd. and Founders Holdings,
Inc.
Vice Chairman and Director of Delaware Distributors, Inc.
Vice Chairman of Delaware Distributors, L.P.
Director of Delaware Management Trust Company, Delaware Service Company, Inc.
and Delaware International Advisers Ltd.
During the past five years, Mr. Jessup has served in various executive
capacities at different times within the Delaware organization.
RICHARD G. UNRUH, JR. (56)
Executive Vice President of the Fund and each of the other 16 funds in the
Delaware Group.
Executive Vice President and Director of Delaware Management Company, Inc.
Senior Vice President of Delaware Management Holdings, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.
WALTER P. BABICH (68)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from 1988
to 1991, he was a partner of I&L Investors.
ANTHONY D. KNERR (56)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Consultant, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to 1989, he was also
a lecturer in English at the University. In addition, Mr. Knerr was
Chairman of The Publishing Group, Inc., New York, from 1988 to 1990. Mr.
Knerr founded The Publishing Group, Inc. in 1988.
- ------------------
*Director affiliated with the investment manager of the Fund and considered an
"interested person" as defined in the Investment Company Act of 1940.
- 25
<PAGE> 27
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 26
ANN R. LEVEN (55)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of the
Smithsonian Institution, Washington, DC, and from 1975 to 1994, she was
Adjunct Professor of Columbia Business School.
W. THACHER LONGSTRETH (75)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
1617 John F. Kennedy Boulevard, Philadelphia, PA 19103.
Vice Chairman, Packquisition Corp., a financial printing, commercial printing
and information processing firm.
Philadelphia City Councilman.
President, MLW, Associates.
Director, Tasty Baking Company.
Director, Healthcare Services Group.
CHARLES E. PECK (69)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Secretary, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer of The
Ryland Group, Inc., Columbia, MD.
DAVID K. DOWNES (55)
Senior Vice President/Chief Administrative Officer/Chief Financial Officer of
the Fund, each of the other 16 funds in the Delaware Group and Delaware
Management Company, Inc.
Chairman and Director of Delaware Management Trust Company.
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer/Treasurer of Delaware Management Holdings, Inc.
Senior Vice President/Chief Financial Officer/Treasurer and Director of DMH
Corp.
Senior Vice President/Chief Administrative Officer/Chief Financial Officer and
Director of Delaware Service Company, Inc.
Senior Vice President/Chief Administrative Officer of Delaware Distributors,
L.P.
Senior Vice President/Chief Administrative Officer and Director of Delaware
Distributors, Inc.
Chief Financial Officer and Director of Delaware International Holdings Ltd.
Senior Vice President/Chief Financial Officer/Treasurer of Delaware Investment
Counselors, Inc.
Senior Vice President and Director of Founders Holdings, Inc.
Director of Delaware International Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes was Chief Administrative
Officer, Chief Financial Officer and Treasurer of Equitable Capital
Management Corporation, New York, from December 1985 through August 1992,
Executive Vice President from December 1985 through March 1992, and Vice
Chairman from March 1992 through August 1992.
GEORGE M. CHAMBERLAIN, JR. (48)
Senior Vice President and Secretary of the Fund, each of the other 16 funds in
the Delaware Group, Delaware Management Holdings, Inc., Delaware
Distributors, L.P. and Delaware Investment Counselors, Inc.
Executive Vice President, Secretary and Director of Delaware Management Trust
Company.
Senior Vice President, Secretary and Director of DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc. and Delaware Service
Company, Inc.
Corporate Vice President, Secretary and Director of Founders Holdings, Inc.
Secretary and Director of Delaware International Holdings Ltd.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served in various capacities
at different times within the Delaware organization.
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<PAGE> 28
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 27
EDWARD N. ANTOIAN (39)
Vice President/Senior Portfolio Manager of the Fund, of seven other equity
funds in the Delaware Group and of Delaware Management Company, Inc.
During the past five years, Mr. Antoian has served in such capacities within
the Delaware organization.
JOSEPH H. HASTINGS (45)
Vice President/Corporate Controller of the Fund, each of the other 16 funds in
the Delaware Group, Delaware Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware Investment
Counselors, Inc. and Founders Holdings, Inc.
Executive Vice President/Treasurer/Chief Financial Officer of Delaware
Management Trust Company.
Assistant Treasurer of Founders CBO Corporation.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings was Chief Financial
Officer for Prudential Residential Services, L.P., New York, NY from 1989
to 1992. Prior to that, Mr. Hastings served as Controller and Treasurer for
Fine Homes International, L.P., Stamford, CT from 1987 to 1989.
MICHAEL P. BISHOF (33)
Vice President/Treasurer of the Fund, each of the other 16 funds in the
Delaware Group, Delaware Management Company, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Founders
Holdings, Inc. and Founders CBO Corporation.
Prior to joining the Delaware Group in 1995, Mr. Bishof was a Vice President
for Bankers Trust, New York, NY from 1994 to 1995, a Vice President for CS
First Boston Investment Management, New York, NY from 1993 to 1994 and an
Assistant Vice President for Equitable Capital Management Corporation, New
York, NY from 1987 to 1993.
The following is a compensation table listing for each director entitled to
receive compensation, the aggregate compensation received from the Fund and the
total compensation received from all Delaware Group funds for the fiscal year
ended September 30, 1995 and an estimate of annual benefits to be received upon
retirement under the Delaware Group Retirement Plan for Directors/Trustees as of
September 30, 1995.
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT ESTIMATED TOTAL
BENEFITS ANNUAL COMPENSATION
AGGREGATE ACCRUED BENEFITS FROM ALL 17
COMPENSATION AS PART OF UPON DELAWARE
NAME FROM FUND FUND EXPENSES RETIREMENT* GROUP FUNDS
<S> <C> <C> <C> <C>
W. Thacher Longstreth $ 2,361.23 None $18,100 $58,187.98
Ann R. Leven $ 2,684.77 None $18,100 $66,323.97
Walter P. Babich $ 2,717.95 None $18,100 $67,323.89
Anthony D. Knerr $ 2,152.50 None $18,100 $55,793.56
Charles E. Peck $ 2,361.23 None $18,100 $58,187.97
</TABLE>
*Under the terms of the Delaware Group Retirement Plan for Directors/Trustees,
each disinterested director who, at the time of his or her retirement from the
Board, has attained the age of 70 and served on the Board for at least five
continuous years, is entitled to receive payments from each fund in the
Delaware Group for a period equal to the lesser of the number of years that
such person served as a director or the remainder of such person's life. The
amount of such payments will be equal, on an annual basis, to the amount of the
annual retainer that is paid to directors of each fund at the time of such
person's retirement. If an eligible director retired as of September 30, 1995,
he or she would be entitled to annual payments totaling $18,100, in the
aggregate, from all of the funds in the Delaware Group, based on the number of
funds in the Delaware Group as of that date.
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the Classes and for
shareholders of classes of other funds in the Delaware Group are set forth in
the relevant prospectuses for such classes. The following supplements that
information. The Fund may modify, terminate or suspend the exchange privilege
upon 60 days' notice to shareholders.
All exchanges involve a purchase of shares of the fund into which the exchange
is made. As with any purchase, an investor should obtain and carefully read that
fund's prospectus before buying shares in an exchange. The prospectus contains
more complete information about the fund, including charges and expenses. A
shareholder requesting an exchange will be sent a current prospectus and an
authorization form for any of the other mutual funds in the Delaware Group.
Exchange instructions must be signed by the record owner(s) exactly as the
shares are registered.
An exchange constitutes, for tax purposes, the sale of one fund or series and
the purchase of another. The sale may involve either a capital gain or loss to
the shareholder for federal income tax purposes.
In addition, investment advisers and dealers may make exchanges between funds
in the Delaware Group on behalf of their clients by telephone or other expedited
means. This service may be discontinued or revised at any time by the Transfer
Agent. Such exchange requests may be rejected if
- 27
<PAGE> 29
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 28
it is determined that a particular request or the total requests at any time
could have an adverse effect on any of the funds. Requests for expedited
exchanges may be submitted with a properly completed exchange authorization
form, as described above.
TELEPHONE EXCHANGE PRIVILEGE
Shareholders owning shares for which certificates have not been issued or
their investment dealers of record may exchange shares by telephone for shares
in other mutual funds in the Delaware Group. This service is automatically
provided unless the Fund receives written notice from the shareholder to the
contrary.
Shareholders or their investment dealers of record may contact the Transfer
Agent at 800-523-1918 (in Philadelphia, 215-988-1241) or, in the case of
shareholders of the Institutional Class their Client Services Representative at
800-828-5052, to effect an exchange. The shareholder's current Series account
number must be identified, as well as the registration of the account, the share
or dollar amount to be exchanged and the fund into which the exchange is to be
made. Requests received on any day after the time the offering price and net
asset value are determined will be processed the following day. See Determining
Offering Price and Net Asset Value. Any new account established through the
exchange will automatically carry the same registration, shareholder information
and dividend option as the account from which the shares were exchanged. The
exchange requirements of the fund into which the exchange is being made, such as
sales charges, eligibility and investment minimums, must be met. (See the
prospectus of the fund desired or inquire by calling the Transfer Agent or, as
relevant, your Client Services Representative.) Certain funds are not available
for Retirement Plans.
The telephone exchange privilege is intended as a convenience to shareholders
and is not intended to be a vehicle to speculate on short-term swings in the
securities market through frequent transactions in and out of the funds in the
Delaware Group. Telephone exchanges may be subject to limitations as to amounts
or frequency. The Transfer Agent and the Fund reserve the right to record
exchange instructions received by telephone and to reject exchange requests at
any time in the future.
As described in the Series' Prospectuses, neither the Fund nor the Transfer
Agent is responsible for any shareholder loss incurred in acting upon written or
telephone instructions for redemption or exchange of Series shares which are
reasonably believed to be genuine.
RIGHT TO REFUSE TIMING ACCOUNTS
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Fund will refuse any new Timing
Arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Group funds from Timing Firms. The Fund reserves the right to temporarily or
permanently terminate the exchange privilege or reject any specific purchase
order for any person whose transactions seem to follow a timing pattern who: (i)
makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, or (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1/4 of 1% of the Fund's net assets. Accounts
under common ownership or control, including accounts administered so as to
redeem or purchase shares based upon certain predetermined market indicators,
will be aggregated for purposes of the exchange limits.
RESTRICTIONS ON TIMED EXCHANGES
Timing Accounts operating under existing Timing Agreements may only execute
exchanges between the following eight Delaware Group funds: (1) Decatur Income
Fund, (2) Decatur Total Return Fund, (3) Delaware Fund, (4) Limited-Term
Government Fund, (5) Tax-Free USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund and (8) Tax-Free Pennsylvania Fund. No other Delaware Group
funds are available for Timed Exchanges. Assets redeemed or exchanged out of
Timing Accounts in Delaware Group funds not listed above may not be reinvested
back into that Timing Account. The Fund reserves the right to apply these same
restrictions to the account(s) of any person whose transactions seem to follow a
timing pattern (as described above).
The Fund also reserves the right to refuse the purchase side of an exchange
request by any Timing Account, person, or group if, in the Manager's judgment,
the Fund would be unable to invest effectively in accordance with its investment
objectives and policies, or would otherwise potentially be adversely affected. A
shareholder's purchase exchanges may be restricted or refused if the Fund
receives or anticipates simultaneous orders affecting significant portions of
the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to the Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers of
record will be permitted to make exchanges or redemptions.
Following is a summary of the investment objectives of the other Delaware
Group funds:
DELAWARE FUND seeks long-term growth by a balance of capital appreciation,
income and preservation of capital. It uses a dividend-oriented valuation
strategy to select securities issued by established companies that are believed
to demonstrate potential for income and capital growth. DEVON FUND seeks current
income and capital appreciation by investing primarily in income-producing
common stocks, with a focus on common stocks the Manager believes have the
potential for above average dividend increases over time.
TREND FUND seeks long-term growth by investing in common stock issued by
emerging growth companies exhibiting strong capital appreciation potential.
VALUE FUND seeks capital appreciation by investing primarily in common stocks
whose market values appear low relative to their underlying value or future
potential.
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<PAGE> 30
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 29
DECATUR INCOME FUND seeks the highest possible current income by investing
primarily in common stocks that provide the potential for income and capital
appreciation without undue risk to principal. DECATUR TOTAL RETURN FUND seeks
long-term growth by investing primarily in securities that provide the potential
for income and capital appreciation without undue risk to principal.
DELCHESTER FUND seeks as high a current income as possible by investing
principally in corporate bonds, and also in U.S. Government securities and
commercial paper.
U.S. GOVERNMENT FUND seeks high current income by investing primarily in
long-term debt obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
LIMITED-TERM GOVERNMENT FUND seeks high, stable income by investing primarily
in a portfolio of short- and intermediate-term securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities and instruments
secured by such securities. U.S. GOVERNMENT MONEY FUND seeks maximum current
income with preservation of principal and maintenance of liquidity by investing
only in short-term securities issued or guaranteed as to principal and interest
by the U.S. Government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities, while maintaining a stable net
asset value.
DELAWARE CASH RESERVE seeks the highest level of income consistent with the
preservation of capital and liquidity through investments in short-term money
market instruments, while maintaining a stable net asset value.
TAX-FREE USA FUND seeks high current income exempt from federal income tax by
investing in municipal bonds of geographically-diverse issuers. TAX-FREE INSURED
FUND invests in these same types of securities but with an emphasis on municipal
bonds protected by insurance guaranteeing principal and interest are paid when
due. TAX-FREE USA INTERMEDIATE FUND seeks a high level of current interest
income exempt from federal income tax, consistent with the preservation of
capital by investing primarily in municipal bonds.
TAX-FREE MONEY FUND seeks high current income, exempt from federal income tax,
by investing in short-term municipal obligations, while maintaining a stable net
asset value.
TAX-FREE PENNSYLVANIA FUND seeks a high level of current interest income
exempt from federal and, to the extent possible, certain Pennsylvania state and
local taxes, consistent with the preservation of capital.
INTERNATIONAL EQUITY FUND seeks to achieve long-term growth without undue risk
to principal by investing primarily in international securities that provide the
potential for capital appreciation and income. GLOBAL BOND FUND seeks to achieve
current income consistent with the preservation of principal by investing
primarily in global fixed income securities that may also provide the potential
for capital appreciation. GLOBAL ASSETS FUND seeks to achieve long-term total
return by investing in global securities which will provide higher current
income than a portfolio comprised exclusively of equity securities, along with
the potential for capital growth.
DELAWARE GROUP PREMIUM FUND offers nine series available exclusively as
funding vehicles for certain insurance company separate accounts. EQUITY/INCOME
SERIES seeks the highest possible total rate of return by selecting issues that
exhibit the potential for capital appreciation while providing higher than
average dividend income. HIGH YIELD SERIES seeks as high a current income as
possible by investing in rated and unrated corporate bonds, U.S. Government
securities and commercial paper. CAPITAL RESERVES SERIES seeks a high stable
level of current income while minimizing fluctuations in principal by investing
in a diversified portfolio of short- and intermediate-term securities. MONEY
MARKET SERIES seeks the highest level of income consistent with preservation of
capital and liquidity through investments in short-term money market
instruments. GROWTH SERIES seeks long-term capital appreciation by investing its
assets in a diversified portfolio of securities exhibiting the potential for
significant growth. MULTIPLE STRATEGY SERIES seeks a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. INTERNATIONAL
EQUITY SERIES seeks long-term growth without undue risk to principal by
investing primarily in equity securities of foreign issuers that provide the
potential for capital appreciation and income. VALUE SERIES seeks capital
appreciation by investing in small- to mid-cap common stocks whose market value
appears low relative to their underlying value or future earnings and growth
potential. Emphasis will also be placed on securities of companies that may be
temporarily out of favor or whose value is not yet recognized by the market.
EMERGING GROWTH SERIES seeks long-term capital appreciation by investing
primarily in small-cap common stocks and convertible securities of emerging and
other growth-oriented companies. These securities will have been judged to be
responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective.
For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus from the Distributor. Read it carefully
before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the information
contained in each fund's prospectus(es).
GENERAL INFORMATION
The Manager is the investment manager of the Series. The Manager or its
affiliate, Delaware International Advisers Ltd., also manages the other funds in
the Delaware Group. The Manager, through a separate division, also manages
private investment accounts. While investment decisions for the Series are made
independently from those of the other funds and accounts, they may make
investment decisions at the same time.
- 29
<PAGE> 31
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 30
Access persons and advisory persons of the Delaware Group of funds, as those
terms are defined in SEC Rule 17j-1 under the 1940 Act, who provide services to
the Manager, Delaware International Advisers Ltd. or their affiliates, are
permitted to engage in personal securities transactions subject to the
exceptions set forth in Rule 17j-1 and the following general restrictions and
procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance is received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions may only be closed-out at a profit after a 60-day holding
period has elapsed; and (5) the Compliance Officer must be informed periodically
of all securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.
The Distributor acts as national distributor for the Fund and for the other
mutual funds in the Delaware Group. As previously described, prior to January 3,
1995, DDI served as the national distributor for the Fund. The Distributor and,
in its capacity as such, DDI received net commissions from the Fund on behalf of
Class A Shares of the Series after reallowances to dealers, as follows:
<TABLE>
<CAPTION>
TOTAL
AMOUNT NET
OF UNDER- AMOUNTS COMMISSION
FISCAL WRITING REALLOWED TO
YEAR ENDING COMMISSION TO DEALERS DISTRIBUTOR
- ----------- ---------- ---------- ----------
<S> <C> <C> <C>
9/30/95 $1,360,871 $1,180,982 $179,889
9/30/94 2,688,927 2,472,670 216,257
9/30/93 6,676,108 6,131,984 544,124
</TABLE>
During the fiscal years ended September 30, 1994 and 1995, the Distributor
and, in its capacity as the Fund's national distributor, DDI received Limited
CDSC payments in the amounts of $7,500 and $14,860 with respect to the Class A
Shares. No amounts were received for the fiscal year ended September 30, 1993
with respect to the Class A Shares.
During the fiscal year ended September 30, 1995, the Distributor and, in its
capacity as the Fund's national distributor, DDI received CDSC payments in the
amount of $1,900 with respect to the Class B Shares. No payments were received
during the fiscal year ended September 30, 1994 with respect to the Class B
Shares.
Effective as of January 3, 1995, all such payments described above have been
paid to the Distributor.
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for the Fund and for the other
mutual funds in the Delaware Group. The Transfer Agent is paid a fee by the
Series for providing these services consisting of an annual per account charge
of $5.50 plus transaction charges for particular services according to a
schedule. Compensation is fixed each year and approved by the Board of
Directors, including a majority of the unaffiliated directors.
The Manager and its affiliates own the name "Delaware Group." Under certain
circumstances, including the termination of the Fund's advisory relationship
with the Manager or its distribution relationship with the Distributor, the
Manager and its affiliates could cause the Fund to delete the words "Delaware
Group" from the Fund's name.
Chemical Bank, 450 West 33rd Street, New York, NY 10001, is custodian of the
Fund's securities and cash. As custodian for the Fund, Chemical Bank maintains a
separate account or accounts for the Fund; receives, holds and releases
portfolio securities on account of the Fund; receives and disburses money on
behalf of the Fund; and collects and receives income and other payments and
distributions on account of the Fund's portfolio securities.
Morgan Guaranty Trust Company of New York, located at 60 Wall Street, New
York, NY 10260, provides similar services with respect to the Fund's investments
in foreign securities.
The legality of the issuance of the shares offered hereby, registered pursuant
to Rule 24f-2 under the Investment Company Act of 1940, has been passed upon for
the Fund by Stradley, Ronon, Stevens & Young, Philadelphia, Pennsylvania.
CAPITALIZATION
The Fund has a present authorized capitalization of five hundred million
shares of capital stock with a $.01 par value per share. Prior to November 9,
1992, the Series offered only one class of shares, the class referred to herein
as the Class A Shares. Beginning November 9, 1992, the Series began offering the
Institutional Class; beginning September 6, 1994, the Series began offering the
Class B Shares; and beginning as of the date of this Part B the Series began
offering the Class C Shares. Each Class represents a proportionate interest in
the assets of the Series, and each have the same voting and other rights and
preferences as the other classes, except that shares of the Institutional Class
may not vote on any matter affecting the Fund's 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 the Series under
the Rule 12b-1 Plan relating to Class A Shares. General expenses of the Fund
will be allocated on a pro-rata basis to the classes according to asset size,
except that expenses of the Rule 12b-1 Plans of Class A, Class B and Class C
Shares will be allocated solely to those classes. The Board of Directors has
allocated one hundred million shares to the Class A Shares, one hundred million
shares to the Class B Shares, fifty million shares to the Class C Shares and
fifty million shares to the Institutional Class. While shares of the Series have
equal voting rights on matters affecting the entire Fund, the Series would vote
separately on any matter which affects only this Series, such as any change in
its own investment objective and policy or action to dissolve the Series and as
otherwise prescribed by the Investment Company Act of 1940. Shares of the Series
have a priority in the Series' assets, and in gains on and income from the
portfolio of the Series. Shares have no preemptive rights, are
- 30
<PAGE> 32
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 31
fully transferable and, when issued, are fully paid and nonassessable.
Prior to September 6, 1994, the DelCap Fund A Class was known as the DelCap
Fund class and the DelCap Fund Institutional Class was known as the DelCap Fund
(Institutional) class.
NONCUMULATIVE VOTING
THESE SHARES HAVE NONCUMULATIVE VOTING RIGHTS WHICH MEANS THAT THE HOLDERS OF
MORE THAN 50% OF THE SHARES OF
THE FUND VOTING FOR THE ELECTION OF DIRECTORS CAN ELECT ALL THE DIRECTORS IF
THEY CHOOSE TO DO SO, AND, IN SUCH EVENT, THE HOLDERS OF THE REMAINING SHARES
WILL NOT BE ABLE TO ELECT ANY DIRECTORS.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the Securities and Exchange
Commission.
- 31
<PAGE> 33
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 32
APPENDIX A--DESCRIPTION OF RATINGS
BONDS
Excerpts from Moody's Investors Service, Inc.'s description of its four
highest bond ratings: AAA--judged to be the best quality. They carry the
smallest degree of investment risk; AA--judged to be of high quality by all
standards; A--possess favorable attributes and are considered "upper medium"
grade obligations; BAA--considered as medium grade obligations. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable over
any great length of time.
Excerpts from Standard & Poor's Rating Group's description of its four highest
bond ratings: AAA--highest grade obligations. They possess the ultimate degree
of protection as to principal and interest; AA--also qualify as high grade
obligations, and in the majority of instances differ from AAA issues only in a
small degree; A--strong ability to pay interest and repay principal although
more susceptible to changes in circumstances; BBB--regarded as having an
adequate capacity to pay interest and repay principal.
- 32
<PAGE> 34
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 33
APPENDIX B--IRA INFORMATION
The Tax Reform Act of 1986 restructured, and in some cases eliminated, the tax
deductibility of IRA contributions. Under the Act, the full deduction for IRAs
($2,000 for each working spouse and $2,250 for one-income couples) was retained
for all taxpayers who are not covered by an employer-sponsored retirement plan.
Even if a taxpayer (or his or her spouse) is covered by an employer-sponsored
retirement plan, the full deduction is still available if the taxpayer's
adjusted gross income is below $25,000 ($40,000 for taxpayers filing joint
returns). A partial deduction is allowed for married couples with incomes
between $40,000 and $50,000, and for single individuals with incomes between
$25,000 and $35,000. The Act does not permit deductions for contributions to
IRAs by taxpayers whose adjusted gross income before IRA deductions exceeds
$50,000 ($35,000 for singles) and who are active participants in an
employer-sponsored retirement plan. Taxpayers who were not allowed deductions on
IRA contributions still can make nondeductible IRA contributions of as much as
$2,000 for each working spouse ($2,250 for one-income couples), and defer taxes
on interest or other earnings from the IRAs. Special rules apply for determining
the deductibility of contributions made by married individuals filing separate
returns.
As illustrated in the following tables, maintaining an Individual Retirement
Account remains a valuable opportunity.
For many, an IRA will continue to offer both an up-front tax break with its
tax deduction each year and the real benefit that comes with tax-deferred
compounding. For others, losing the tax deduction will impact their taxable
income status each year. Over the long term, however, being able to defer taxes
on earnings still provides an impressive investment opportunity--a way to have
money grow faster due to tax-deferred compounding.
- 33
<PAGE> 35
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 34
Even if your IRA contribution is no longer deductible, the benefits of saving
on a tax-deferred basis can be substantial. The following tables illustrate the
benefits of tax-deferred versus taxable compounding. Each reflects a constant
10% rate of return, compounded annually, with the reinvestment of all proceeds.
The tables do not take into account any sales charges or fees. Of course,
earnings accumulated in your IRA will be subject to tax upon withdrawal. If you
choose a mutual fund with a fluctuating net asset value, like the Series, your
bottom line at retirement could be lower--it could also be much higher.
$2,000 INVESTED ANNUALLY ASSUMING A 10% ANNUALIZED RETURN
15% Tax Bracket Single -- $0-$22,750
Joint -- $0-$38,000
<TABLE>
<CAPTION>
HOW MUCH YOU
END OF CUMULATIVE HOW MUCH YOU HAVE WITH FULL IRA
YEAR INVESTMENT AMOUNT HAVE WITHOUT IRA DEDUCTION
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------
1 $ 2,000 $ 1,844 $ 2,200
------------------------------------------------------------------------------------------------
5 10,000 10,929 13,431
------------------------------------------------------------------------------------------------
10 20,000 27,363 35,062
------------------------------------------------------------------------------------------------
15 30,000 52,074 69,899
------------------------------------------------------------------------------------------------
20 40,000 89,231 126,005
------------------------------------------------------------------------------------------------
25 50,000 145,103 216,364
------------------------------------------------------------------------------------------------
30 60,000 229,114 361,887
------------------------------------------------------------------------------------------------
35 70,000 355,438 596,254
------------------------------------------------------------------------------------------------
40 80,000 545,386 973,704
------------------------------------------------------------------------------------------------
</TABLE>
[Without IRA--investment of $1,700 ($2,000 less 15%) earning 8.5% (10% less
15%)]
28% Tax Bracket Single -- $22,751-$55,100
Joint -- $38,001-$91,850
<TABLE>
<CAPTION>
HOW MUCH YOU
END OF CUMULATIVE HAVE WITHOUT HOW MUCH YOU HAVE WITH FULL IRA
YEAR INVESTMENT AMOUNT IRA NO DEDUCTION DEDUCTION
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------
1 $ 2,000 $ 1,544 $ 1,584 $ 2,200
--------------------------------------------------------------------------------------------------
5 10,000 8,913 9,670 13,431
--------------------------------------------------------------------------------------------------
10 20,000 21,531 25,245 35,062
--------------------------------------------------------------------------------------------------
15 30,000 39,394 50,328 69,899
--------------------------------------------------------------------------------------------------
20 40,000 64,683 90,724 126,005
--------------------------------------------------------------------------------------------------
25 50,000 100,485 155,782 216,364
--------------------------------------------------------------------------------------------------
30 60,000 151,171 260,559 361,887
--------------------------------------------------------------------------------------------------
35 70,000 222,927 429,303 596,254
--------------------------------------------------------------------------------------------------
40 80,000 324,512 701,067 973,704
--------------------------------------------------------------------------------------------------
</TABLE>
[Without IRA--investment of $1,440 ($2,000 less 28%) earning 7.2% (10% less
28%)]
[With IRA--No Deduction--investment of $1,440 ($2,000 less 28%) earning 10%]
31% Tax Bracket Single -- $55,101-$115,000
Joint -- $91,851-$140,000
<TABLE>
<CAPTION>
HOW MUCH YOU
END OF CUMULATIVE HAVE WITHOUT HOW MUCH YOU HAVE WITH FULL IRA
YEAR INVESTMENT AMOUNT IRA NO DEDUCTION DEDUCTION
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------
1 $ 2,000 $ 1,475 $ 1,518 $ 2,200
--------------------------------------------------------------------------------------------------
5 10,000 8,467 9,268 13,431
--------------------------------------------------------------------------------------------------
10 20,000 20,286 24,193 35,062
--------------------------------------------------------------------------------------------------
15 30,000 36,787 48,231 69,899
--------------------------------------------------------------------------------------------------
20 40,000 59,821 86,943 126,005
--------------------------------------------------------------------------------------------------
25 50,000 91,978 149,291 216,364
--------------------------------------------------------------------------------------------------
30 60,000 136,868 249,702 361,887
--------------------------------------------------------------------------------------------------
35 70,000 199,536 411,415 596,254
--------------------------------------------------------------------------------------------------
40 80,000 287,021 671,855 973,704
--------------------------------------------------------------------------------------------------
</TABLE>
[Without IRA--investment of $1,380 ($2,000 less 31%) earning 6.9% (10% less
31%)]
[With IRA--No Deduction--investment of $1,380 ($2,000 less 31%) earning 10%]
- 34
<PAGE> 36
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 35
36% Tax Bracket* Single -- $115,001-$250,000
Joint -- $140,001-$250,000
<TABLE>
<CAPTION>
HOW MUCH YOU
END OF CUMULATIVE HAVE WITHOUT HOW MUCH YOU HAVE WITH FULL IRA
YEAR INVESTMENT AMOUNT IRA NO DEDUCTION DEDUCTION
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------
1 $ 2,000 $ 1,362 $ 1,408 $ 2,200
--------------------------------------------------------------------------------------------------
5 10,000 7,739 8,596 13,431
--------------------------------------------------------------------------------------------------
10 20,000 18,292 22,440 35,062
--------------------------------------------------------------------------------------------------
15 30,000 32,683 44,736 69,899
--------------------------------------------------------------------------------------------------
20 40,000 52,308 80,643 126,005
--------------------------------------------------------------------------------------------------
25 50,000 79,069 138,473 216,364
--------------------------------------------------------------------------------------------------
30 60,000 115,562 231,608 361,887
--------------------------------------------------------------------------------------------------
35 70,000 165,327 381,602 596,254
--------------------------------------------------------------------------------------------------
40 80,000 233,190 623,170 973,704
--------------------------------------------------------------------------------------------------
</TABLE>
[Without IRA--investment of $1,280 ($2,000 less 36%) earning 6.4% (10% less
36%)]
[With IRA--No Deduction--investment of $1,280 ($2,000 less 36%) earning 10%]
39.6% Tax Bracket* Single -- over $250,000
Joint -- over $250,000
<TABLE>
<CAPTION>
HOW MUCH YOU
END OF CUMULATIVE HAVE WITHOUT HOW MUCH YOU HAVE WITH FULL IRA
YEAR INVESTMENT AMOUNT IRA NO DEDUCTION DEDUCTION
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------
1 $ 2,000 $ 1,281 $ 1,329 $ 2,200
--------------------------------------------------------------------------------------------------
5 10,000 7,227 8,112 13,431
--------------------------------------------------------------------------------------------------
10 20,000 16,916 21,178 35,062
--------------------------------------------------------------------------------------------------
15 30,000 29,907 42,219 69,899
--------------------------------------------------------------------------------------------------
20 40,000 47,324 76,107 126,005
--------------------------------------------------------------------------------------------------
25 50,000 70,677 130,684 216,364
--------------------------------------------------------------------------------------------------
30 60,000 101,986 218,580 361,887
--------------------------------------------------------------------------------------------------
35 70,000 143,965 360,137 596,254
--------------------------------------------------------------------------------------------------
40 80,000 200,249 588,117 973,704
--------------------------------------------------------------------------------------------------
</TABLE>
[Without IRA--investment of $1,208 ($2,000 less 39.6%) earning 6.04% (10% less
39.6%)]
[With IRA--No Deduction--investment of $1,208 ($2,000 less 39.6%) earning 10%]
<TABLE>
<CAPTION>
$2,000 SINGLE INVESTMENT AT A RETURN OF 10% COMPOUNDED ANNUALLY
TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
10 $ 3,595 $ 3,719 $ 3,898 $ 4,008 $ 4,522 $ 5,187
------------------------------------------------------------------------------------------------------
15 4,820 5,072 5,441 5,675 6,799 8,354
------------------------------------------------------------------------------------------------------
20 6,463 6,916 7,596 8,034 10,224 13,455
------------------------------------------------------------------------------------------------------
30 11,618 12,861 14,803 16,102 23,117 34,899
------------------------------------------------------------------------------------------------------
40 20,884 23,916 28,849 32,272 52,266 90,519
------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
$2,000 INVESTED ANNUALLY AT A RETURN OF 10% COMPOUNDED ANNUALLY
TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
10 $ 28,006 $ 28,581 $ 29,400 $ 29,904 $ 32,192 $ 35,062
------------------------------------------------------------------------------------------------------
15 49,514 51,067 53,314 54,714 61,264 69,899
------------------------------------------------------------------------------------------------------
20 78,351 81,731 86,697 89,838 104,978 126,005
------------------------------------------------------------------------------------------------------
30 168,852 180,566 198,360 209,960 269,546 361,887
------------------------------------------------------------------------------------------------------
40 331,537 364,360 415,973 450,711 641,631 973,704
------------------------------------------------------------------------------------------------------
</TABLE>
*For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate. In
addition, a 10% surtax (not applicable to capital gains) applies to certain
high-income taxpayers. It is computed by applying a 39.6% rate to taxable
income in excess of $250,000. The above tables do not reflect the personal
exemption phaseout nor the limitations of itemized deductions that may apply.
- 35
<PAGE> 37
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 36
THE VALUE OF STARTING YOUR IRA EARLY
The following illustrates how much more you would have contributing $2,000
each January--the earliest opportunity-- compared to contributing on April 15th
of the following year--the latest, for each tax year.
<TABLE>
<C> <S>
After 5 years $3,528 more
10 years $6,113
20 years $17,228
30 years $47,295
</TABLE>
Compounded returns for the longest period of time is the key. The above
illustration assumes a 10% rate of return and the reinvestment of all proceeds.
And it pays to shop around. If you get just 2% more per year, it can make a
big difference when you retire. A constant 8% versus 10% return, compounded
annually, illustrates the point. This chart is based on a yearly investment of
$2,000 on January 1. After 30 years the difference can mean as much as 50% more!
8% 10%
10 years $ 31,291 $ 35,062
20 years 98,846 126,005
30 years 244,692 361,887
The statistical exhibits above are for illustration purposes only and do not
reflect the actual performance for the Series either in the past or in the
future.
- 36
<PAGE> 38
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 37
APPENDIX C
THE COMPANY LIFE CYCLE
Traditional business theory contends that a typical company progresses through
basically four stages of development, keyed closely to a firm's sales.
1. EMERGING GROWTH--a period of experimentation in which the company builds
awareness of a new product or firm.
2. ACCELERATED DEVELOPMENT--a period of rapid growth with potentially high
profitability and acceptance of the product.
3. MATURING PHASE--a period of diminished real growth due to dependence on
replacement or sustained product demand.
4. CYCLICAL STAGE--a period in which a company faces a potential saturation of
demand for its product. At this point, a firm either diversifies or becomes
obsolete.
The Series concentrates on seeking and actively managing the potentials held
by firms entering phase 2 of this development cycle. The following illustration
of a firm's hypothetical development is intended to graphically depict the full
development cycle.
[CHART -- HYPOTHETICAL CORPORATE LIFE CYCLE]
Hypothetical Corporate Life Cycle Chart shows in a line illustration, the stages
that a typical company would go through, beginning with the emerging state where
sales growth continues at a steep pace to the mature phase where growth levels
off to the cyclical stage where sales show more definitive highs and lows.
The above chart illustrates the path traditionally followed by companies that
successfully survive the growth sequence.
- 37
<PAGE> 39
DELAWARE GROUP DELCAP FUND, INC.-PART B--PAGE 38
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for the Fund and, in its
capacity as such, audits the financial statements contained in the Series'
Annual Report. The Series' Statement of Net Assets, Statement of Operations,
Statement of Changes in Net Assets, and Notes to Financial Statements, as well
as the report of Ernst & Young LLP, independent auditors, for the fiscal year
ended September 30, 1995 are included in the Series' Annual Report to
shareholders. The financial statements, the notes relating thereto and the
report of Ernst & Young LLP, listed above are incorporated by reference from the
Annual Report into this Part B.
- 38
