<PAGE>
DELAWARE GROUP
DelCap Fund
For Growth of Capital
(various photos demonstrating service and guidance, professional management
and goals)
professional management
service and guidance
goals
1997
Annual
Report
DELAWARE
GROUP
============
<PAGE>
A Commitment
To Our
Investors
Delaware Group's investment tradition dates back to 1929. We have a long and
distinguished history of helping individuals and institutions - including
some of America's largest pension funds - reach their financial goals.
Headquartered in Philadelphia, a block from the nation's oldest stock
exchange, Delaware Group's first mutual fund was established in 1938.
Delaware International Advisers Ltd., our international affiliate, was
established in 1990 and is headquartered in London.
Delaware Group offers a full range of mutual funds. We also manage
variable annuity investments, unit investment trusts and closed-end funds,
and offer retirement plan services for individuals and businesses.
Delaware manages more than $40 billion in mutual fund assets and
institutional advisory accounts for more than half-a-million investors. We're
part of a global financial service and investment management business owned
by Lincoln National Corporation, whose subsidiaries manage more than $120
billion in assets.
(photo of glasses, pen and keyboard)
A TRADITION OF SOUND INVESTING
growth of capital
DelCap Fund's Objective
To seek long-term capital growth by investing in common stocks and securities
convertible into common stocks of companies that have a demonstrated history
of growth and have the potential to support continued growth.
(photo of illustration from Growth of Capital Brochure)
commitment
<PAGE>
professional management
professional
management
MORE THAN 68 YEARS OF INVESTMENT EXPERIENCE has taught us that disciplined
strategies and prudent risk management are a sound approach to any market
environment.
(various photos demonstrating service and guidance, professional
management and goals)
goals
goals
WHATEVER YOUR GOALS, the years ahead will be shaped by choices you make today.
Delaware offers many options that can be an appropriate part of a sound
investment plan.
service and guidance
service and
guidance
DELAWARE BELIEVES THAT THE GUIDANCE of a professional financial adviser is vital
to your long-term success. We are committed to providing you and your adviser
with the highest quality information and service.
<PAGE>
- --------------------------------------------------------------------------------
October 15, 1997
Dear Shareholder:
DELCAP FUND'S 1997 FISCAL YEAR WAS TOUGH AND TRANSITIONAL.
The first half was marked by pronounced weakness in the performance
of small and mid-cap stocks and changes in DelCap's leadership. We
underperformed both our benchmark and our peers by a wide margin.
However, our results have improved substantially since the spring.
DelCap recovered losses that occurred during the first half and for the 12
months ended September 30, 1997, provided a positive total return of +12.44%
(for Class A shares with distributions reinvested at net asset value).
Your Fund's portfolio manager and team have made some investment
strategy refinements that we believe may help the Fund to participate more
fully in the long-term growth potential of medium- and small-size companies.
Under the direction of Gerald S. Frey, your Fund's portfolio management team
has conducted a comprehensive review of DelCap's holdings and reaffirmed a
commitment to fundamental research.
YOUR FUND'S PORTFOLIO MANAGER AND TEAM HAVE MADE SOME INVESTMENT STRATEGY
REFINEMENTS THAT WE BELIEVE MAY HELP THE FUND PARTICIPATE MORE FULLY IN THE
LONG-TERM GROWTH POTENTIAL OF MEDIUM- AND SMALL-SIZE COMPANIES.
Since the end of our fiscal first half, we have:
* Enhanced the Fund's depth of investment experience
by adding two veteran analysts - John A. Heffern and
Marshall T. Bassett;
* Repositioned the Fund's portfolio to give greater weight to
undervalued sectors such as retailing which, in our opinion,
offer strong growth potential;
* Trimmed the number of holdings to concentrate on what the team
believes are the most promising mid-size companies; and,
* Expanded our securities research and conducted more
face-to-face meetings with company executives.
(photo of Wayne A. Stork, Chairman)
1997 annual report
1
<PAGE>
TOTAL RETURN
- --------------------------------------------------------------------------------
Six Months Ended 12 Months Ended
September 30, 1997 September 30, 1997
- --------------------------------------------------------------------------------
DelCap Fund A Class +27.14% +12.44%
- --------------------------------------------------------------------------------
Standard & Poor's 500 Index +26.24% +40.43%
Russell MidCap Growth Index +30.77% +29.64%
- --------------------------------------------------------------------------------
Lipper Mid-Cap Fund Average +32.48% (261 funds) +26.86% (211 funds)
All performance quoted above is based on net asset value without effect of
sales charges and assumes reinvestment of distributions. Performance
information for all classes of DelCap Fund can be found on page 9. Past
performance does not guarantee future results. The Russell MidCap Growth
Index is an unmanaged benchmark of medium-size company stocks that exhibit
growth characteristics as defined by Frank Russell Co.
Our actions have already begun to bear fruit. For the six months
ended September 30, 1997, DelCap's total return at net asset value was
+27.14% (For Class A shares with distributions reinvested), some 90 basis
points (0.90%) higher than the total return of the unmanaged S&P 500 Index.
Still, we will strive to make further progress so that your Fund's results
may be more competitive with its peers and the unmanaged Russell MidCap
Growth Index, our new benchmark as explained on page 3.
During the year, your Fund substantially reduced its exposure to
cyclical consumer businesses such as credit card companies as well as
technology companies whose prospects were unclear. In recent months, DelCap's
management team has also sold health care stocks that they considered
vulnerable to likely changes in federal government reimbursement policies.
On the pages that follow, Mr. Frey reviews the Fund's fiscal 1997
performance. He explains the long-term steps we took to upgrade the stock
selection capability of DelCap Fund's management team. We've realigned
responsibilities and, in our opinion, brought a higher level of focus to your
Fund that is beginning to provide tangible results.
Some experts believe mid-cap and small cap stocks can continue to
outperform those of large multinational companies in the months ahead, and
indeed, there are several technical indicators that suggest investors may
prize domestic-oriented companies that demonstrate the potential for
above-average, consistent earnings growth - the kind of stocks DelCap
typically seeks.
research & discipline
1997 annual report
2
<PAGE>
Throughout its history, DelCap has employed a fundamental approach to
investing - emphasizing long-term earnings growth and careful
company-by-company analysis. This remains our philosophy, one we believe will
enable your Fund to navigate changing investment cycles.
Some sailors abandon ship during a period of rough seas. But the
lessons of history teach us that financial market uncertainty can be an
opportunity for patient investors. We thank you for your continued long-term
confidence in DelCap Fund as you strive to reach your financial goals.
Sincerely,
/s/ Wayne A. Stork
- ------------------
Wayne A. Stork
Chairman
Performance Review
FISCAL 1997 CONSISTED OF TWO PERIODS OF SHARPLY contrasting performance. From
September 1996 through this past March, many investors flocked to stocks of
large companies amid generally rising domestic interest rates and uncertain
earnings in sectors such as technology. Many small and medium company stocks
failed to keep pace with the ebullient returns of the S&P 500 Index during the
period, and actually declined in value by a substantial amount.
- --------------------------------------------------------------------------------
A New Benchmark
WE NOW USE THE RUSSELL MidCap Growth Index as our primary unmanaged benchmark
rather than the S&P 500 Index. The Russell MidCap Growth Index more closely
reflects the average market capitalization of stocks in your Fund's portfolio,
as shown in the Portfolio Highlights table on page 6. Index stocks are chosen
based on Frank Russell Co.'s definition of medium-size, rapidly growing
companies. We show your Fund's long- and short-term performance relative to this
new benchmark on pages 4 and 9.
- --------------------------------------------------------------------------------
1997 annual report
3
<PAGE>
The spring brought a rebirth of investor interest in mid-cap and
small cap equities as stock prices of some multinational companies grew
excessive. However, prudent stock selection remained critical because the rising
stock market did not lift all boats.
Investors punished companies whose earnings were disappointing and
generally bid up stock prices of businesses that offered pleasant profit
surprises. The U.S. economy's continuing strength also fueled renewed demand
for stocks of consumer-oriented companies, especially retailers. DelCap's
retail sector weighting as of September 30, 1997, was nearly double the level
a year earlier.
INVESTMENT STRATEGY
DelCap Fund's management looks for stocks with a consistent track record of
growth in quarterly earnings and market share. Our investment discipline is
to buy stocks selling at prices that do not reflect the company's earnings
growth rate. We believe consistent growth can signal capital appreciation
potential, especially if a company shows industry leadership.
In fiscal 1997, the complexion of your Fund's holdings shifted to
reflect rapidly changing market conditions. We also capitalized on the
expertise of two analysts who joined DelCap's team this past spring - John A.
Heffern and Marshall T. Bassett.
Mr. Heffern, a veteran bank stock analyst, focuses on financial and
business services stocks while Mr. Bassett, previously an emerging growth
stock specialist with Morgan Stanley, covers consumer stocks.
strategy
OUR STRATEGIC POSITIONING
Retail: Function Rather Than Form
Compared with a year ago, our retail stock holdings consist of more companies
that cater to practical consumers rather than buyers of luxury or leisure
goods. Despite high debt levels, Americans seem prepared
PERFORMANCE BY SECTOR
DELCAP FUND VS. RUSSELL MIDCAP GROWTH INDEX
- --------------------------------------------------------------------------------
OCTOBER 1, 1996, TO SEPTEMBER 30, 1997
Russell MidCap
Industry Group DelCap Fund Growth Index
- --------------------------------------------------------------------------------
Energy +88.3% +50.7%
Financials +43.8% +61.6%
Consumer Goods* +18.8% +26.1%
Consumer Services +17.1% +18.1%
Health Care +12.8% +23.1%
Business Services +10.4% +23.2%
Technology -2.8% +33.4%
Performance is based on total returns of stock holdings and index components
and does not include fund expenses or sales charges. The seven sectors shown
here represent all of DelCap Fund's equity holdings and 82% of the unmanaged
Russell MidCap Growth Index as of September 30, 1997. *Non-durable products
such as processed food, clothing and newspapers. For complete Fund
performance, see page 9. Past performance does not guarantee future results.
1997 annual report
4
<PAGE>
to spend on items they believe add value to their lives. With the lowest
domestic unemployment rate in a generation, robust capital markets and rising
wage levels, many consumers have both the means and the confidence to shop.
CompUSA, the personal computer retailer, was one of our more
successful retail stock selections of the year and DelCap's single largest
holding as of September 30, 1997 (3.4% of net assets). Earnings have been
strong and we believe the company is poised for continued growth through its
"superstore" format. In fiscal 1997, CompUSA and Staples, Inc, a long time
DelCap holding (2.3% of net assets) benefited from the growth of home offices
and the fact that many people and small businesses have been upgrading their
computer software for faster Internet access and more multimedia capability.
Fashion and leisure retailers such as Saks Holdings Inc., Nine West
Group, Bell Sports and Sunglass Hut International did not do well during the
past fiscal year. DelCap's positioning in such apparel and accessories
retailers was a drag on the Fund's returns in fiscal 1997. Overall, our
consumer stock selections did not do as well as the consumer components of
the unmanaged Russell Midcap Growth Index.
WITH THE LOWEST UNEMPLOYMENT RATE IN A GENERATION, ROBUST CAPITAL MARKETS AND
RISING WAGE LEVELS, MANY AMERICAN CONSUMERS HAVE BOTH THE MEANS AND THE
CONFIDENCE TO SHOP.
Despite apparent U.S. prosperity, credit card companies faced growing
loan losses during fiscal 1997. By liquidating our holdings of poorly
performing credit card issuers such as Advanta during the first half of 1997,
we helped preserve capital. Throughout the year, we focused on companies such
as CMAC Investment Inc. which makes loans backed by hard assets such as autos
or real estate.
Health Care:
We Skipped a Beat
Proposals to alter federal Medicare reimbursement to service providers
negatively affected mid-cap health care stocks in 1997. We reduced our
position in companies whose profits we believed were sensitive to changes in
federal health care policy. Instead we emphasized physician practice
management, managed care companies and operators of assisted living centers.
Strong performance from some of the Fund's larger, long-time holdings
such as Health Management Associates (2.6% of net assets) and newer
selections such as Brookdale
(photo of glasses, pen and keyboard)
1997 annual report
5
<PAGE>
Living Communities, Inc. were mitigated by weak returns or price declines in
holdings such as Phycor.
We believe increased competition and regulatory hurdles will
eventually weed out less efficient health care providers, allowing industry
profit margins and stock prices in this sector to gradually rise. Our
confidence in this sector's prospects is reflected in the fact that as of
September 30, 1997, your Fund was overweighted in health care stocks relative
to the Russell MidCap Growth Index.
Technology: 2000 Opportunities
Technology stocks were your Fund's biggest disappointment in fiscal 1997.
DelCap's returns in this sector were mildly negative while our benchmark's
components generally provided strong positive returns.
Two technology companies in your Fund's portfolio merged during the
year - Ascend Communications and Cascade Communications. Unfortunately, the
combined business suffered a sharp setback amid slower-than-expected sales
and technical setbacks in marketing key computer networking products. We sold
our positions, and realized a loss that reduced DelCap Fund's overall returns
by more than 170 basis points (1.7%).
Still, during fiscal 1997, we found opportunities to add what we
believe were high-quality companies at depressed prices. We suffered
short-term pain for our efforts, but we believe we have effectively
positioned your Fund for long-term growth and superior capital appreciation
potential in a dynamic sector of the economy.
A successful selection we made during 1997 was Compuware Corp., a
software systems maker whose products help information technology
professionals develop applications that help run businesses (2.8% of net
assets). In our opinion, despite a substantial amount of spending by
opportunities
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
September 30, 1996 September 30, 1997
- --------------------------------------------------------------------------------
Median Market Capitalization $1.2 billion $1.8 billion
Number of Stocks 103 82
Cash Position* 11.0% 6.4%
Average Stock Price-To-Earnings Ratio** 24.9x 21.0x
Beta*** 1.11 1.01
Portfolio Turnover 72% 105%
*Percent of net assets. **Based on a consensus of analysts' forward earnings
estimates. ***A measure of volatility relative to the S&P 500 Index for the
past three years ended September 30. A number less than 1.0 means a security
has fluctuated in price less than the Index. A number greater than 1.0 means
the security has fluctuated in price more than the Index.
During fiscal 1997, we reduced your Fund's cash position to 6.4% as of
September 30, 1997, from 11% a year earlier. We also trimmed the number of
Fund holdings from 103 to 82.
1997 annual report
6
<PAGE>
YOUR FUND'S SECTOR WEIGHTINGS
- --------------------------------------------------------------------------------
September 30, 1997
Retailing 20.6%
Technology & Telecommunications 19.8%
Healthcare & Pharmaceuticals 13.4%
Other Consumer Products & Services 10.6%
Credit Sensitive 10.1%
Energy & Utilities 6.8%
Cash 6.4%
Leisure, Lodging & Entertainment 5.7%
Environmental Services 5.2%
Other Business Services 1.4%
businesses on technology in recent years, many companies are likely to devote
even more money to upgrade their computer systems in the years ahead. We
focus on what we believe are well-managed businesses that stand to capitalize
on technological change.
For example, many companies need to address "the year 2000 problem" -
the fact that many older computers won't easily adapt to a new millennium.
While some mutual fund managers have been focusing on firms with specific
products to modify old systems, we believe many companies may simply buy new
systems. Our selection of Compuware reflects this belief.
OUTLOOK
Although your Fund's return in fiscal 1997 was in line with the equity
long-term historical average, our short-term performance relative to our
benchmark and our peers was not satisfactory. This weakness can be primarily
attributed to a need to retool the portfolio in light of unexpectedly rough
market conditions for small and mid-cap stocks. We believe we have put these
issues behind us, and that DelCap is well-positioned for the coming months.
IN OUR OPINION, DESPITE A SUBSTANTIAL AMOUNT OF SPENDING BY BUSINESSES ON
TECHNOLOGY IN RECENT YEARS, MANY COMPANIES ARE LIKELY TO DEVOTE EVEN MORE MONEY
TO UPGRADE THEIR COMPUTER SYSTEMS IN THE YEARS AHEAD.
One reason we are optimistic is that we believe the investment
climate appears favorable for America's medium- and small-size companies. The
Federal Reserve Board is not likely to raise its interest rate target
substantially in
1997 annual report
7
<PAGE>
(photo of keyboard)
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
September 30, 1997
Percent of
Company Industry Net Assets
- --------------------------------------------------------------------------------
CompUSA Computer retailer 3.4%
AES Corp. Power generating systems 3.2%
Philip Services Corp. Waste disposal 2.9%
Compuware Corp. Computer software systems 2.8%
Health Management Associates Acute care hospitals 2.6%
CUC International Membership discount services 2.6%
BMC Software Inc. Business management software 2.5%
CMAC Investment Inc. Consumer finance 2.5%
General Nutrition Companies Vitamin, health food retailer 2.4%
Staples, Inc. Office supplies retailer 2.3%
- --------------------------------------------------------------------------------
Total 27.2%
1998, in our opinion. Still, many economists believe that growth in the
country's output of goods and services is likely to continue at a moderate,
sustainable pace. Also, the new federal tax law provides favorable treatment of
long-term capital gains, potentially benefiting investors, especially those
whose primary goal is to build wealth over time. Demand for the type of growth
stocks DelCap typically selects may potentially benefit from this change.
In our opinion, however, the single most important factor that will
affect our future results is that DelCap has a disciplined team working
together toward a common goal. We've upgraded our stock selection capability
while retaining our disciplined, consistent investment approach. We've
brought a higher level of focus to your Fund's portfolio, and we believe this
will make a difference over time.
IN OUR OPINION, THE SINGLE MOST IMPORTANT FACTOR THAT WILL AFFECT OUR FUTURE
RESULTS IS THAT DELCAP HAS A DISCIPLINED TEAM WORKING TOGETHER TOWARD A COMMON
GOAL.
GERALD S. FREY
Senior Portfolio Manager
October 15, 1997
outlook
1997 annual report
8
<PAGE>
A: DelCap Fund's Long-Term Performance
Growth of A $10,000 Investment
August 1, 1987, to September 30, 1997
Russell MidCap Growth Index $42,593
S&P 500 Index $39,496
DelCap Fund A Class $32,021
DelCap Fund A Class Russell MidCap Growth Index S&P 500 Index
Sept. '87 $9528 $10000 $10000
Sept. '88 $9312 $9841 $8763
Sept. '89 $12865 $12943 $11650
Sept. '90 $10937 $10875 $10574
Sept. '91 $15667 $16193 $13861
Sept. '92 $15146 $17687 $15392
Sept. '93 $19055 $21285 $17389
Sept. '94 $19277 $21780 $18030
Sept. '95 $23526 $28242 $23384
Sept. '96 $28487 $32855 $28129
Sept. '97 $32021 $42593 $39496
Chart assumes $10,000 invested on September 30, 1987, and includes the effect
of a 4.75% front-end sales charge and the reinvestment of all distributions.
Performance of other classes of DelCap Fund will vary due to differing
charges and expenses. Past performance does not guarantee future results.
DELCAP FUND PERFORMANCE
AVERAGE ANNUAL RETURN THROUGH SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Lifetime Ten Years Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 3/27/86)
Excluding Sales Charge +21.61% +12.89% +16.16% +12.44%
Including Sales Charge +21.09% +12.35% +15.04% +7.11%
- --------------------------------------------------------------------------------
Class B (Est. 9/6/94)
Excluding Sales Charge +17.82% -- -- +11.64%
Including Sales Charge +17.11% -- -- +7.64%
- --------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +17.43% -- -- +11.64%
Including Sales Charge +17.43% -- -- +10.64%
All performance includes reinvestment of distributions and applicable
sales charges as described below. Return and share value
will fluctuate so that shares, when redeemed, may be worth more or less than
the original cost. Past performance is not a guarantee of future results.
Performance for Class B and Class C shares "excluding sales charge" assumes
the investment was not redeemed.
Class A shares have a 4.75% maximum front-end sales charge and a 12b-1 fee of
up to 0.30%.
Class B shares do not carry a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a deferred
sales charge if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If shares are
redeemed within 12 months, a 1% contingent deferred sales charge applies.
The average annual total returns for the lifetime, ten-year, five-year and
one-year periods ended September 30, 1997, for DelCap Fund's Institutional
Class, which is available without sales or asset-based distribution charges
only to certain eligible institutional accounts, were +21.76%, +13.05%,
+16.49% and +12.75%, respectively. The Institutional Class was initially made
available November 9, 1992; performance prior to that date was adjusted to
eliminate the effect of the sales charge, but not Class A's asset-based
distribution charge.
1997 annual report
9
<PAGE>
Financial Statements
DELAWARE GROUP EQUITY FUNDS IV, INC. -
DELCAP FUND
STATEMENT OF NET ASSETS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
- -------------------------------------------------------------------------------------------
<S>
COMMON STOCK - 97.00%
<S> <C> <C>
Automobiles & Auto Parts - 2.95%
*Avis Rent A Car ........................... 294,600 $ 7,033,575
Hertz ..................................... 260,500 9,817,594
*Republic Industries ....................... 318,600 10,493,888
------------
27,345,057
------------
BANKING, FINANCE & INSURANCE - 9.41%
AMBAC ..................................... 152,600 6,208,912
Bank United ............................... 231,200 10,223,375
Blanch (E.W.) Holdings .................... 361,700 11,190,094
CMAC INVESTMENT ........................... 430,200 23,069,475
*FIRSTPLUS Financial Group ................. 260,500 14,620,563
*Ocwen Financial ........................... 242,400 10,211,100
PartnerRe ................................. 133,900 5,766,069
*Security Capital Group .................... 165,500 5,689,062
------------
86,978,650
------------
BUILDINGS AND MATERIALS - 0.68%
Fastenal .................................. 118,000 6,279,812
------------
6,279,812
------------
CABLE, MEDIA & PUBLISHING - 0.88%
*Snyder Communications ..................... 217,200 5,973,000
*Universal Outdoor Holdings ................ 57,600 2,145,600
------------
8,118,600
------------
COMPUTERS & TECHNOLOGY - 17.78%
*Acxiom .................................... 454,100 7,904,178
*Affiliated Computer Services Class A ...... 397,200 9,830,700
*BA Merchant Services Class A .............. 168,500 3,117,250
*BISYS Group ............................... 518,900 16,653,447
*BMC SOFTWARE .............................. 362,300 23,447,603
*Bay Networks .............................. 321,300 12,410,212
Cognizant ................................. 238,900 9,735,175
*COMPUWARE ................................. 426,800 25,768,050
*DST Systems ............................... 103,900 3,844,300
Dallas Semiconductor ...................... 166,500 7,450,875
*i2 Technologies ........................... 224,400 9,354,675
*J.D. Edwards .............................. 132,600 4,458,675
Linear Technology ......................... 112,300 7,752,209
*Network Solutions ......................... 46,400 997,600
*Rational Software ......................... 285,560 4,560,036
*Sterling Commerce ......................... 376,912 13,545,275
*StorMedia Class A ......................... 638,200 3,749,425
------------
164,579,685
------------
ELECTRONICS & ELECTRICAL - 1.53%
*Altera .................................... 106,200 5,446,069
*Xilinx .................................... 172,300 8,711,919
------------
14,157,988
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
- -------------------------------------------------------------------------------------------
<S>
COMMON STOCK (CONTINUED)
<S> <C> <C>
ENERGY - 3.60%
*Global Industries Ltd. ................... 320,100 $ 12,783,994
*J. Ray McDermott, S.A .................... 181,300 8,883,700
*Marine Drilling .......................... 213,700 6,651,413
*Weatherford Enterra ...................... 94,600 5,043,362
------------
33,362,469
------------
ENVIRONMENTAL SERVICES - 5.16%
*PHILIP SERVICES .......................... 1,464,100 26,719,825
*USA Waste Services ....................... 526,797 21,006,030
------------
47,725,855
------------
FOOD, BEVERAGE & TOBACCO - 2.53%
*Foodmaker ................................ 744,950 14,014,372
*General Cigar Holdings ................... 325,700 9,404,588
------------
23,418,960
------------
HEALTHCARE & PHARMACEUTICALS - 13.39%
*Dura Pharmaceuticals ..................... 244,700 10,720,919
*Genesis Health Ventures .................. 240,400 9,360,575
*HEALTH MANAGEMENT ASSOCIATES CLASS A ..... 767,595 24,275,192
*HEALTHSOUTH .............................. 492,600 13,146,263
*Interim Services ......................... 391,700 11,016,562
*MedPartners .............................. 934,800 20,039,775
*Orthodontic Centers of America ........... 231,300 4,618,772
*Phycor ................................... 661,800 19,254,244
*Quorum Health Group ...................... 471,300 11,546,850
------------
123,979,152
------------
LEISURE, LODGING & ENTERTAINMENT - 5.68%
*HFS ...................................... 237,100 17,649,131
*Interstate Hotels ........................ 211,900 6,913,237
La Quinta Inns ........................... 119,400 2,813,363
*Mirage Resorts ........................... 322,300 9,709,288
*Prime Hospitality ........................ 353,500 7,975,844
Royal Caribbean Cruises .................. 171,100 7,485,625
------------
52,546,488
------------
PACKAGING & CONTAINERS - 0.04%
*Ivex Packaging ........................... 22,900 366,400
------------
366,400
------------
RETAIL - 20.57%
*Bed Bath & Beyond ........................ 577,900 20,262,619
*CUC INTERNATIONAL ........................ 780,705 24,201,855
Circuit City Stores - Circuit City Group . 63,700 2,567,906
*COMPUSA .................................. 911,000 31,885,000
*Corporate Express ........................ 489,500 10,310,094
Dollar General ........................... 69,625 2,371,602
*GENERAL NUTRITION ........................ 752,200 21,860,813
</TABLE>
- ----------
Top 10 holdings, representing 27.2% of net assets, are in boldface.
10
1997 annual report
<PAGE>
DELCAP FUND (CONTINUED)
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
- -------------------------------------------------------------------------------------------
<S>
COMMON STOCK (CONTINUED)
RETAIL (CONTINUED)
<S> <C> <C>
*Kohl's .................................... 200,400 $ 14,228,400
*OfficeMax ................................. 269,800 4,097,587
*Outback Steakhouse ........................ 444,400 12,332,100
*Papa John's International ................. 183,100 6,254,009
St. John Knits ............................ 214,400 9,634,600
*STAPLES ................................... 783,537 21,620,724
*Viking Office Products .................... 400,900 8,782,216
------------
190,409,525
------------
TELECOMMUNICATIONS- 3.87%
*CIENA ..................................... 241,800 11,976,656
*Clear Channel Communications .............. 183,100 11,878,612
*Tellabs ................................... 232,100 11,967,656
------------
35,822,924
------------
TEXTILES, APPAREL & FURNITURE - 2.56%
Reebok International ...................... 134,700 6,558,206
*Tefron .................................... 64,400 1,288,000
*Tommy Hilfiger ............................ 317,800 15,870,137
------------
23,716,343
------------
TRANSPORTATION & SHIPPING - 0.73%
*Galileo International ..................... 242,900 6,786,019
------------
6,786,019
------------
UTILITIES - 3.20%
*AES ....................................... 676,380 29,591,625
------------
29,591,625
------------
MISCELLANEOUS- 2.44%
*Corrections Corporation of America ........ 227,000 9,874,500
*Personnel Group of America ................ 154,800 5,301,900
*Sylvan Learning Systems ................... 169,600 7,451,800
------------
22,628,200
------------
Total Common Stock (cost $607,478,406) ... 897,813,752
------------
Principal
Amount
Repurchase Agreements - 6.40%
With J.P. Morgan Securities 6.00% 10/01/97
(dated 9/30/97, collateralized by
$19,523,000 U.S. Treasury Notes
6.625% due 6/30/01, market value
$20,261,571) ........................... 19,834,000 19,834,000
With PaineWebber Securities 6.00% 10/01/97
(dated 9/30/97, collateralized by
$12,135,000 U.S. Treasury Notes
5.875% due 9/30/02, market value
$12,087,684 and $7,797,000
U.S. Treasury Notes 5.375% due
05/31/98, market value $7,924,765) ...... 19,599,000 19,599,000
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Amount Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS (CONTINUED)
With Prudential Securities 6.05% 10/01/97
(dated 9/30/97, collateralized by
$11,807,000 U.S. Treasury Notes
5.875% due 02/28/99, market value
$11,880,944 and $8,338,000
U.S. Treasury Notes 5.875% due
03/31/99, market value $8,357,544) ............. 19,836,000 $ 19,836,000
-------------
Total Repurchase Agreements
(cost $59,269,000) ................................................... 59,269,000
-------------
TOTAL MARKET VALUE OF SECURITIES OWNED - 103.40%
(cost $666,747,406) .................................................. 957,082,752
LIABILITIES NET OF RECEIVABLES
AND OTHER ASSETS - (3.40%) ........................................... (31,465,366)
-------------
NET ASSETS APPLICABLE TO 30,337,554 SHARES
($.01 Par Value) OUTSTANDING - 100.00% ............................... $ 925,617,386
=============
NET ASSET VALUE - DELCAP FUND A CLASS
($770,207,178 / 25,294,733 shares) ................................... $ 30.45
=======
NET ASSET VALUE - DELCAP FUND B CLASS
($20,706,152 / 696,015 shares) ....................................... $ 29.75
=======
NET ASSET VALUE - DELCAP FUND C CLASS
($3,384,955 / 112,643 shares) ........................................ $ 30.05
=======
NET ASSET VALUE - DELCAP FUND INSTITUTIONAL CLASS
($131,319,101 / 4,234,163 shares) .................................... $ 31.01
=======
- ----------
* Non-income producing security for the year ended
September 30, 1997
COMPONENTS OF NET ASSETS AT SEPTEMBER 30, 1997:
Common stock $.01 par value, 1,000,000,000 shares
authorized to the Fund .............................................. $ 488,236,940
Accumulated net realized gain on investments ......................... 147,045,100
Net unrealized appreciation of investments ........................... 290,335,346
-------------
Total net assets ..................................................... $ 925,617,386
=============
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELCAP FUND A CLASS
Net asset value A Class(A)............................................ $30.45
Sales Charge (4.75% of offering price
or 4.99%, of the amount
invested per share)(B)............................................... 1.52
------
Offering price ....................................................... $31.97
======
</TABLE>
- ----------
A Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
B See Buying Shares in the current Prospectus for purchases of $100,000 or
more.
See accompanying notes
1997 annual report
11
<PAGE>
DELAWARE GROUP EQUITY FUNDS IV, INC. -
DELCAP FUND
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest ..................................... $ 3,369,661
Dividends .................................... 1,477,190 $ 4,846,851
-------------
EXPENSES:
Management fees .............................. 7,226,204
Distribution expense ......................... 2,616,413
Dividend disbursing and transfer agent fees
and expenses ................................. 2,004,973
Accounting fees and salaries 416,432
Reports and statements to shareholders ....... 164,650
Registration fees ............................ 83,900
Taxes (other than taxes on income) ........... 73,463
Custodian fees ............................... 64,000
Professional fees ............................ 58,600
Directors' fees .............................. 22,230
Other ........................................ 128,944
-----------
12,859,809
-------------
NET INVESTMENT LOSS .......................... (8,012,958)
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain from investment transactions 153,187,709
Net change in unrealized appreciation
on investments ............................... (50,356,803)
-------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ............................... 102,830,906
-------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .............................. $ 94,817,948
=============
</TABLE>
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS IV, INC. -
DELCAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/97 9/30/96
------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment loss .............................. $ (8,012,958) $ (7,244,771)
Net realized gain on investments ................. 153,187,709 141,476,838
Net change in unrealized appreciation ............ (50,356,803) 65,285,809
--------------- ---------------
Net increase in net assets resulting
from operations ................................. 94,817,948 199,517,876
--------------- ---------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net realized gain from security transactions:
DelCap Fund A Class ............................. (106,881,303) (106,000,980)
DelCap Fund B Class ............................. (1,868,016) (422,917)
DelCap Fund C Class ............................. (238,607) (4)
DelCap Fund Institutional Class ................. (20,595,496) (15,970,617)
--------------- ---------------
(129,583,422) (122,394,518)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
DelCap Fund A Class ............................. 759,827,594 317,170,421
DelCap Fund B Class ............................. 10,072,759 10,431,359
DelCap Fund C Class ............................. 2,677,952 1,855,616
DelCap Fund Institutional Class ................. 38,682,667 76,237,748
Net asset value of shares issued upon reinvestment
of distributions from net realized gain on
security transactions:
DelCap Fund A Class ............................. 95,973,989 94,027,731
DelCap Fund B Class ............................. 1,828,325 418,429
DelCap Fund C Class ............................. 228,718 4
DelCap Fund Institutional Class ................. 20,595,496 15,971,018
--------------- ---------------
929,887,500 516,112,326
--------------- ---------------
Cost of shares repurchased:
DelCap Fund A Class ............................ (981,336,159) (439,149,860)
DelCap Fund B Class ............................ (4,776,048) (1,186,427)
DelCap Fund C Class ............................ (1,649,304) (29,965)
DelCap Fund Institutional Class ................ (98,374,823) (56,897,203)
--------------- ---------------
(1,086,136,334) (497,263,455)
--------------- ---------------
(Decrease) increase in net assets derived from
capital share transactions ..................... (156,248,834) 18,848,871
--------------- ---------------
NET (DECREASE) INCREASE IN NET ASSETS ........... (191,014,308) 95,972,229
NET ASSETS:
Beginning of year ............................... 1,116,631,694 1,020,659,465
--------------- ---------------
End of year ..................................... $ 925,617,386 $ 1,116,631,694
=============== ===============
</TABLE>
See accompanying notes
1997 annual report
12
<PAGE>
DELAWARE GROUP EQUITY FUNDS IV, INC. -
DELCAP FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
DelCap Fund A Class
------------------------------------------------------
Year Ended September 30,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................................ $30.740 $28.870 $25.570 $26.080 $20.730
Income from investment operations:
Net investment loss............................................. (0.234)(1) (0.208)(1) (0.166)(1) (0.218) (0.125)
Net realized and unrealized gain from investments............... 3.534 5.618 5.296 0.528 5.475
------ ------ ------ ------ ------
Total from investment operations................................ 3.300 5.410 5.130 0.310 5.350
------ ------ ------ ------ ------
Less distributions:
Distributions from net realized gain on investments transactions (3.590) (3.540) (1.830) (0.820) none
------ ------ ------ ------ ------
Total distributions............................................. (3.590) (3.540) (1.830) (0.820) none
------ ------ ------ ------ ------
Net asset value, end of period...................................... $30.450 $30.740 $28.870 $25.570 $26.080
======= ======= ======= ======= =======
Total return(2)..................................................... 12.44% 21.09% 22.04% 1.17% 25.81%
Ratios and supplemental data:
Net assets, end of period (000 omitted)......................... $770,207 $923,248 $888,571 $890,787 $1,057,358
Ratio of expenses to average net assets......................... 1.36% 1.35% 1.37% 1.35% 1.30%
Ratio of net investment loss to average net assets.............. (0.86%) (0.74%) (0.67%) (0.68%) (0.43%)
Portfolio turnover.............................................. 105% 72% 51% 34% 51%
Average commission rate paid(3)................................. $0.0599 $0.0600 N/A N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DelCap Fund B Class DelCap Fund C Class
------------------- -------------------
Period Period
09/06/94(4) 11/29/95(4)
Year Ended September 30, to Year Ended to
1997 1996 1995 09/30/94 09/30/97 09/30/96
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $30.300 $28.680 $25.560 $25.180 $30.570 $28.880
Income from investment operations:
Net investment loss................................. (0.418)(1) (0.400)(1) (0.340)(1) (0.008) (0.421)(1) (0.359)1
Net realized and unrealized gain from investments 3.458 5.560 5.290 0.388 3.491 5.589
------- ------- ------- ------- ------- -------
Total from investment operations.................... 3.040 5.160 4.950 0.380 3.070 5.230
------- ------- ------- ------- ------- -------
Less distributions:
Distributions from net realized gain on
investments transactions .......................... (3.590) (3.540) (1.830) none (3.590) (3.540)
------- ------- ------- ------- ------- -------
Total distributions................................. (3.590) (3.540) (1.830) none (3.590) (3.540)
------- ------- ------- ------- ------- -------
Net asset value, end of period.......................... $29.750 $30.300 $28.680 $25.560 $30.050 $30.570
======= ======= ======= ======= ======= =======
Total return(5)..................................... 11.64% 20.27% 21.34% 1.51% 11.64% 20.38%
Ratios and supplemental data:
Net assets, end of period (000 omitted)......... $20,706 $13,239 $2,710 $287 $3,385 $1,947
Ratio of expenses to average net assets......... 2.06% 2.05% 2.07% 2.05% 2.06% 2.05%
Ratio of net investment loss to average
net assets .................................... (1.56%) (1.44%) (1.37%) (1.38%) (1.56%) (1.44%)
Portfolio turnover.............................. 105% 72% 51% 34% 105% 72%
Average commission rate paid(3)................. $0.0599 $0.0600 N/A N/A $0.0599 $0.0600
</TABLE>
- ----------
(1) The average shares outstanding method has been applied for per share
information.
(2) Does not include maximum sales charge of 4.75% nor the 1% limited
contingent deferred sales charge that would apply in the event of certain
redemptions within 12 months of purchase of A Class shares.
(3) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
(4) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(5) Does not include contingent deferred sales charge which varies from 1%-4%
for DelCap Fund B Class and 1% for DelCap Fund C Class depending upon the
holding period.
1997 annual report
13
<PAGE>
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
DelCap Fund Institutional Class
-------------------------------------------------------------------
Period(1)
11/09/92
Year Ended September 30, to
1997 1996 1995 1994 09/30/93
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................. $31.160 $29.130 $25.710 $26.140 $22.000
Income from investment operations:
Net investment loss................................. (0.152)(2) (0.123)(2) (0.091)(2) (0.080) (0.027)
Net realized and unrealized gain
from investments................................... 3.592 5.693 5.341 0.470 4.167
------- ------- ------- ------- -------
Total from investment operations..................... 3.440 5.570 5.250 0.390 4.140
------- ------- ------- ------- -------
Less distributions:
Distributions from net realized gain on
investments transactions .......................... (3.590) (3.540) (1.830) (0.820) none
------- ------- ------- ------- -------
Total distributions................................ (3.590) (3.540) (1.830) (0.820) none
------- ------- ------- ------- -------
Net asset value, end of period....................... $31.010 $31.160 $29.130 $25.710 $26.140
======= ======= ======= ======= =======
Total return......................................... 12.75% 21.44% 22.45% 1.48% 21.31%
Ratios and supplemental data:
Net assets, end of period (000 omitted)............. $131,319 $178,197 $129,378 $110,126 $85,588
Ratio of expenses to average net assets............. 1.06% 1.05% 1.07% 1.05% 1.02%
Ratio of net investment loss to average net assets.. (0.56%) (0.44%) (0.37%) (0.38%) (0.15%)
Portfolio turnover.................................. 105% 72% 51% 34% 51%
Average commission rate paid(3)..................... $0.0599 $0.0600 N/A N/A N/A
</TABLE>
- ----------
(1) Date of initial public offering; ratios and total return have been
annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
1997 annual report
14
<PAGE>
DELAWARE GROUP EQUITY FUNDS IV, INC. -
DELCAP FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Delaware Group Equity Funds IV, Inc. - DelCap Fund, formerly known as
Delaware Group DelCap Fund, Inc. - Concept I Series (The "Fund") is
registered as a diversified open-end investment company under the
Investment Company Act of 1940, as amended. The Fund is organized as a
Maryland Corporation and offers four classes of shares. The DelCap Fund A
Class carries a front-end sales charge of 4.75%. The DelCap Fund B Class
carries a back-end sales charge. The DelCap Fund C Class carries a level
load deferred sales charge and DelCap Fund Institutional Class has no sales
charge. The Fund's objective is to seek long-term capital growth by
investing in common stocks and securities convertible into common stocks of
companies that have a demonstrated history of growth and have the potential
to support continued growth.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally
accepted accounting principles and are consistently followed by the Fund.
Security Valuation - Securities listed on an exchange are valued at the last
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Money market instruments having less than 60
days to maturity are valued at amortized cost which approximates market value.
Federal Income Taxes - The Fund intends to continue to qualify as a
regulated investment company and make the requisite distributions to
shareholders. Accordingly, no provision for federal income taxes has been
made in the financial statements. Income and capital gain distributions are
determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles.
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes
of the Fund on the basis of daily net assets of each class. Distribution
expenses relating to a specific class are charged directly to that class.
Repurchase Agreements - The Fund may invest in a pooled cash account
along with other members of the Delaware Group of Funds. The aggregate
daily balance of the pooled cash account is invested in repurchase
agreements secured by obligations of the U.S. government. The respective
collateral is held by the Fund's custodian bank until the maturity of the
respective repurchase agreements. Each repurchase agreement is at least
100% collateralized. However, in the event of default or bankruptcy by the
counterparty to the agreement, realization of the collateral may be subject
to legal proceedings.
Other - Expenses common to all Funds within the Delaware Group of Funds
are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased
or sold (trade date). Costs used in calculating realized gains and losses
on the sale of investment securities are those of the specific securities
sold. Dividend income is recorded on the ex-dividend date and interest
income is recorded on the accrual basis. The Fund declares and pays
dividends from net investment income and capital gains annually.
<PAGE>
Certain Fund expenses are paid through "soft dollar" arrangements with
brokers. The amount of these expenses is less than 0.01% of the Fund's
average daily net assets.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the
Fund pays Delaware Management Company, Inc. (DMC), the Investment Manager
of the Fund, an annual fee which is calculated daily at the rate of 0.75%
on the average daily net assets of the Fund less the fees paid to the
unaffiliated directors. For the year ended September 30, 1997, the Fund had
a liability for Investment Management fees and other expenses payable to
DMC for $151,069.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate
of DMC, to serve as dividend disbursing, transfer agent and accounting
agent for the Fund. For the year ended September 30, 1997, the Fund
expensed $2,004,973 for dividend disbursing and transfer agent services and
$313,195 for accounting services. At September 30, 1997, the Fund had a
liability for such fees and other expenses payable to DSC for $54,273.
Pursuant to the Distribution Agreement, the Fund pays Delaware
Distributors, L.P. (DDLP), the Distributor and an affiliate of DMC, an
annual fee not to exceed 0.30% of the average daily net assets of the A
Class and 1.00% of the average daily net assets of the B and C Class. For
the year ended September 30, 1997, DDLP earned $166,037 for commissions on
sales of the Fund A Class shares.
Certain officers of DMC, DSC and DDLP are officers, directors and/or
employees of the Fund. These officers, directors and employees are paid no
compensation by the Fund.
3. Investments
During the year ended September 30, 1997, the Fund made purchases of
$949,938,290 and sales of $1,185,027,888 of investment securities other
than U.S. government securities and temporary cash investments.
At September 30, 1997, the aggregate cost of securities for federal
income tax purposes was $670,025,420.
At September 30, 1997, net unrealized appreciation for federal income tax
purposes aggregated $287,057,332 of which $299,200,371 related to
unrealized appreciation of securities and $12,143,039 related to unrealized
depreciation of securities.
1997 annual report
15
<PAGE>
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
4. Capital Stock
Transactions in capital stock shares were as follows:
Year Ended Year Ended
09/30/97 09/30/96
----------- -----------
Shares sold:
DelCap Fund A Class ................ 27,964,673 11,382,634
DelCap Fund B Class ................ 372,656 368,919
DelCap Fund C Class ................ 100,577 64,725
DelCap Fund Institutional Class .... 1,403,623 2,690,557
----------- -----------
Shares issued upon reinvestment of
distributions of realized gains from
security transactions:
DelCap Fund A Class ................ 3,610,768 3,634,623
DelCap Fund B Class ................ 69,997 16,313
DelCap Fund C Class ................ 8,670 --
DelCap Fund Institutional Class .... 762,796 610,514
----------- -----------
34,293,760 18,768,285
----------- -----------
Shares repurchased:
DelCap Fund A Class ................ (36,317,715) (15,762,489)
DelCap Fund B Class ................ (183,534) (42,795)
DelCap Fund C Class ................ (60,285) (1,044)
DelCap Fund Institutional Class .... (3,651,898) (2,022,635)
----------- -----------
(40,213,432) (17,828,963)
----------- -----------
Net Increase (decrease) ........... (5,919,672) 939,322
=========== ===========
At September 30, 1997, the Fund had a payable of $31,814,497 for fund shares
redeemed.
5. Lines of Credit
The Fund has a committed line of credit for $41.4 million. No amount
was outstanding at September 30, 1997, or at any time during the fiscal year.
- --------------------------------------------------------------------------------
DELAWARE GROUP EQUITY FUNDS IV, INC. -
DELCAP FUND
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
DELAWARE GROUP EQUITY FUNDS IV, INC. -
DELCAP FUND
We have audited the accompanying statement of net assets of Delaware Group
Equity Funds IV, Inc. - DelCap Fund as of September 30, 1997, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of September 30, 1997, by correspondence with the Fund's
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Equity Funds IV, Inc. - DelCap Fund at September 30, 1997, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods indicated therein, in conformity with generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
Philadelphia, Pennsylvania
October 24, 1997
1997 annual report
16
<PAGE>
DELAWARE GROUP OF FUNDS
FOR GROWTH OF CAPITAL
Aggressive Growth Fund
Trend Fund
DelCap Fund
Small Cap Value Fund
U.S. Growth Fund
Growth Stock Fund
Tax-Efficient Equity Fund
FOR TOTAL RETURN
Quantum Fund
Blue Chip Fund
Devon Fund
Decatur Total Return Fund
Decatur Income Fund
REIT Fund
Delaware Fund
FOR INTERNATIONAL DIVERSIFICATION
Emerging Markets Fund
New Pacific Fund
Overseas Equity Fund
International Equity Fund
Global Assets Fund
Global Bond Fund
FOR CURRENT INCOME
Delchester Fund
Strategic Income Fund
U.S. Government Fund
Delaware-Voyageur
U.S. Government Securities Fund
Limited-Term Government Fund
FOR TAX-EXEMPT CURRENT INCOME
National High Yield Municipal Bond Fund
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
State Tax-Free Funds*
MONEY MARKET FUNDS
Delaware Cash Reserve
U.S. Government Money Fund
Tax-Exempt Money Fund
* Available for the following states: Arizona, California, Colorado, Florida,
Idaho, Iowa, Kansas, Minnesota, Missouri, North Dakota, New Jersey, New
Mexico, New York, Ohio, Oregon, Pennsylvania, Utah, Washington and
Wisconsin. Insured and intermediate bond funds are available in selected
states.
funds
Complete information on any Delaware Group fund can be found in each fund's
current prospectus. Prospectuses for all Delaware Group funds are available
from your financial adviser. Please read the prospectus carefully before you
invest or send money.
(photo of keyboard)
<PAGE>
THIS ANNUAL REPORT IS FOR THE INFORMATION OF DELCAP FUND SHAREHOLDERS, but it
may be used with prospective investors when preceded or accompanied by a
current Prospectus for DelCap Fund, which sets forth details about charges,
expenses, investment objectives and operating policies of the Fund. You
should read the prospectus carefully before you invest. Summary investment
results are documented in the Fund's current Statement of Additional
Information. The figures in this report represent past results which are not
a guarantee of future results. The return and principal value of an
investment in the Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
Board of Directors
WAYNE A. STORK
Chairman
Delaware Group of Funds
Philadelphia, PA
JEFFREY J. NICK
President and Chief Executive Officer
Delaware Group of Funds
Philadelphia, PA
WALTER P. BABICH
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
ANTHONY D. KNERR
Consultant, Anthony Knerr & Associates
New York, NY
ANN R. LEVEN
Treasurer, National Gallery of Art
Washington, DC
W. THACHER LONGSTRETH
City Councilman
Philadelphia, PA
THOMAS F. MADISON
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
CHARLES E. PECK
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA
Affiliated Officers
DAVID K. DOWNES
Executive Vice President, Chief Financial Officer
and Chief Operating Officer
Delaware Group of Funds
Philadelphia, PA
GEORGE M. CHAMBERLAIN, JR.
Senior Vice President, Secretary
and General Counsel
Delaware Group of Funds
Philadelphia, PA
BRUCE D. BARTON
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA
(photo of globes)
directors & officers
INVESTMENT MANAGER
Delaware Management Company, Inc.
Philadelphia, Pennsylvania
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
London, England
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia, Pennsylvania
1818 Market Street
Philadelphia, PA 19103-3682
<PAGE>
This report must be preceded or accompanied by a current DelCap Fund
prospectus and the Delaware Group Fund Performance Update for the most
recently completed calendar quarter. For a prospectus of any other Delaware
Group fund, contact your financial adviser or Delaware Group.
(photo of globes)
FOR SHAREHOLDERS
1.800.523.1918
FOR SECURITIES DEALERS
1.800.362.7500
FOR FINANCIAL INSTITUTIONS REPRESENTATIVES ONLY
1.800.659.2265
DELAWARE
GROUP
=========
Philadelphia o London
Printed in the USA on
recycled paper
(300)
AR-016[9/97]TKO11/97
Be sure to consult your financial adviser when making investments. Mutual
funds can be a valuable part of your financial plan; however, shares of the
Fund are not FDIC or NCUSIF insured, are not guaranteed by any bank or any
credit union, and involve investment risk, including the possible loss of the
principal amount invested. Shares of the Fund are not bank or credit union
deposits.
Copy Rights Delaware Distributors, L.P.
