<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 33-442
File No. 811-4413
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
-----
-----
Pre-Effective Amendment No. X
----- -----
Post-Effective Amendment No. 24 X
----- -----
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 24
----
DELAWARE GROUP EQUITY FUNDS IV, INC.
(formerly Delaware Group DelCap Fund, Inc.)
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
---------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215)255-2923
George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
-----------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Public Offering: November 30, 1998
-----------------
It is proposed that this filing will become effective:
-----
immediately upon filing pursuant to paragraph (b)
-----
X on November 30, 1998 pursuant to paragraph (b)
-----
60 days after filing pursuant to paragraph (a)(1)
-----
on (date) pursuant to paragraph (a)(1)
-----
75 days after filing pursuant to paragraph (a)(2)
-----
on (date) pursuant to paragraph (a)(2) of Rule 485
-----
Title of Securities Being Registered
------------------------------------
DelCap Fund A Class, DelCap Fund B Class, DelCap Fund C Class, DelCap Fund
Institutional Class, Capital Appreciation Fund A Class, Capital Appreciation
Fund B Class, Capital Appreciation Fund C Class, Capital Appreciation Fund
Institutional Class
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 24 to Registration File No. 33-442 includes
sthe following:
1. Facing Page
2. Contents Page
3. Cross-Reference Sheet
4. Part A - Prospectuses
5. Part B - Statement of Additional Information
6. Part C - Other Information
7. Signatures
<PAGE>
CROSS-REFERENCE SHEET
PART A
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
- ------- ----------- -------------
DelCap Fund
A Class/ Institutional
B Class/ Class
C Class
<S> <C> <C> <C>
1 Cover Page...................................................... Cover Page Cover Page
2 Synopsis........................................................ Synopsis; Synopsis;
Summary of Summary of
Expenses Expenses
3 Condensed Financial Information................................. Financial Financial
Highlights Highlights
4 General Description of Registrant .............................. Investment Investment
Objective and Objective and
Policies; Shares; Policies; Shares;
Other Investment Other Investment
Policies and Risk Policies and Risk
Considerations Considerations
5 Management of the Fund ......................................... Management of Management of
the Fund the Fund
6 Capital Stock and Other Securities ............................. The Delaware Dividends
Difference; and Distributions;
Dividends and Taxes; Shares
Distributions;
Taxes; Shares
7 Purchase of Securities Being Offered............................ Cover Page; Cover Page;
How to Buy How to Buy
Shares; Shares;
Calculation of Calculation of
Offering Price Net Asset Value
and Net Asset Per Share;
Value Per Share; Management of
Management of the Fund
the Fund
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET
PART A
(Continued)
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
- ------- ----------- ------------
DelCap Fund
A Class/ Institutional
B Class/ Class
C Class
<S> <C> <C> <C>
8 Redemption or Repurchase........................................ How to Buy How to Buy
Shares; Shares;
Redemption Redemption
and Exchange and Exchange
9 Legal Proceedings............................................... None None
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET
PART A
(Continued)
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
- -------- ----------- ------------
Capital Appreciation Fund
A Class/ Institutional
B Class/ Class
C Class
<S> <C> <C> <C>
1 Cover Page...................................................... Cover Page Cover Page
2 Synopsis........................................................ Synopsis; Synopsis;
Summary of Summary of
Expenses Expenses
3 Condensed Financial Information................................. Financial Financial
Highlights Highlights
4 General Description of Registrant .............................. Investment Investment
Objective and Objective and
Policies; Shares; Policies; Shares;
Other Investment Other Investment
Policies and Policies and
Risk Risk
Considerations Considerations
5 Management of the Fund ......................................... Management of Management of
the Fund the Fund
6 Capital Stock and Other Securities ............................. The Delaware Dividends
Difference; and Distributions;
Dividends and Taxes; Shares
Distributions;
Taxes; Shares
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET
PART A
(Continued)
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
- -------- ----------- ------------
Capital Appreciation Fund
A Class/ Institutional
B Class/ Class
C Class
<S> <C> <C> <C>
7 Purchase of Securities Being Offered............................ Cover Page; Cover Page;
How to Buy; How to Buy
Shares; Shares;
Calculation of Calculation of
Offering Price Net Asset Value
and Net Asset Per Share;
Value Per Share; Management of
Management of the Fund
the Fund
8 Redemption or Repurchase........................................ How to Buy How to Buy
Shares; Shares;
Redemption Redemption
and Exchange and Exchange
9 Legal Proceedings............................................... None None
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
PART B
<TABLE>
<CAPTION>
Location in Statement
Item No. Description of Additional Information
- -------- ----------- -------------------------
<S> <C> <C>
10 Cover Page...................................................... Cover Page
11 Table of Contents............................................... Table of Contents
12 General Information and History................................. General Information
13 Investment Objectives and Policies.............................. Investment Policies and
Portfolio Techniques
14 Management of the Registrant.................................... Officers and Directors
15 Control Persons and Principal Holders
of Securities................................................... Officers and Directors
16 Investment Advisory and Other Services.......................... Plans Under Rule 12b-1
for the Fund Classes
(under Purchasing Shares);
Investment Management
Agreements; Officers and
Directors; General
Information; Financial
Statements
17 Brokerage Allocation............................................ Trading Practices and Brokerage
18 Capital Stock and Other Securities.............................. Capitalization and
Noncumulative Voting
(under General Information)
19 Purchase, Redemption and Pricing of Securities
Being Offered................................................... Purchasing Shares;
Determining Offering Price
and Net Asset Value;
Redemption and Repurchase;
Exchange Privilege
20 Tax Status...................................................... Accounting and Tax
Issues; Distributions
and Taxes
21 Underwriters ................................................... Purchasing Shares
22 Calculation of Performance Data................................. Performance Information
23 Financial Statements............................................ Financial Statements
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
PART C
<TABLE>
<CAPTION>
Location in
Part C
-----------
<S> <C> <C>
24 Financial Statements and Exhibits.............................. Item 24
25 Persons Controlled by or under Common
Control with Registrant........................................ Item 25
26 Number of Holders of Securities................................ Item 26
27 Indemnification................................................ Item 27
28 Business and Other Connections of
Investment Adviser............................................. Item 28
29 Principal Underwriters......................................... Item 29
30 Location of Accounts and Records............................... Item 30
31 Management Services............................................ Item 31
32 Undertakings................................................... Item 32
</TABLE>
<PAGE>
DELAWARE
INVESTMENTS
- -----------
A CLASS
B CLASS
C CLASS
DELCAP FUND
(DELCAP FUND ILLUSTRATION)
PROSPECTUS NOVEMBER 30, 1998
<PAGE>
Table of
Contents
COVER PAGE..................................................................1
SYNOPSIS....................................................................2
SUMMARY OF EXPENSES.........................................................4
FINANCIAL HIGHLIGHTS........................................................6
INVESTMENT OBJECTIVE AND STRATEGY
Suitability................................................................8
Investment Strategy........................................................8
THE DELAWARE DIFFERENCE
Plans and Services.........................................................9
CLASSES OF SHARES..........................................................11
HOW TO BUY SHARES..........................................................18
REDEMPTION AND EXCHANGE....................................................21
DIVIDENDS AND DISTRIBUTIONS................................................26
TAXES......................................................................27
CALCULATION OF OFFERING PRICE AND
NET ASSET VALUE PER SHARE.................................................29
MANAGEMENT OF THE FUND.....................................................30
OTHER INVESTMENT POLICIES AND
RISK CONSIDERATIONS.......................................................34
<PAGE>
DelCap Fund
A Class/B Class/C Class
November 30, 1998
1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance:
Nationwide 800-523-1918
Information on Existing Accounts:
(SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Representatives of Financial Institutions:
Nationwide 800-659-2265
This Prospectus describes the DelCap Fund series (the "Fund") of Delaware
Group Equity Funds IV, Inc. ("Equity Funds IV, Inc."), a professionally-managed
mutual fund of the series type. The investment objective of the Fund is
long-term capital growth. The strategy will be to invest primarily in common
stocks that, in the judgment of the Manager, are of superior quality and those
securities convertible into such common stocks.
This Prospectus relates only to the Fund's retail classes, DelCap Fund A
Class ("Class A Shares"), DelCap Fund B Class ("Class B Shares") and DelCap
Fund C Class ("Class C Shares") (individually, a "Class" and collectively, the
"Classes"), and sets forth information that you should read and consider before
you invest. Please retain it for future reference. The Statement of Additional
Information ("Part B" of Equity Funds IV, Inc.'s registration statement) dated
November 30, 1998, as it may be amended from time to time, contains additional
information about the Fund and has been filed with the Securities and Exchange
Commission ("SEC"). Part B is incorporated by reference into this Prospectus
and is available, without charge, by writing to Delaware Distributors, L.P. at
the above address or by calling the above numbers. The Fund's financial
statements appear in its Annual Report, which will accompany any response to
requests for Part B. In addition, the SEC maintains a Web site
(http://www.sec.gov) that contains Part B, material we incorporated by
reference, and other information regarding registrants that electronically file
with the SEC.
The Fund also offers DelCap Fund Institutional Class, which is available
for purchase only by certain investors. A prospectus for DelCap Fund
Institutional Class can be obtained by writing to Delaware Distributors, L.P.
at the above address or by calling the above numbers.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. SHARES OF
THE FUND ARE NOT BANK OR CREDIT UNION DEPOSITS.
1
<PAGE>
Synopsis
Investment Objective
The investment objective of the Fund is long-term capital growth. The
strategy will be to invest primarily in common stocks that, in the judgment of
the Manager, are of superior quality and those securities convertible into such
common stocks. For further details, see Investment Objective and Policies and
Other Investment Policies and Risk Considerations.
Risk Factors and Special Considerations
1. Investments in equity securities of small to medium-sized companies in
which the Fund invests may present greater risks than investments in larger
capitalization companies, as the market prices of securities issued by smaller
companies tend to fluctuate, particularly in the short-term, and some smaller
company securities may be speculative. See Suitability under Investment
Objective and Policies, and Other Investment Policies and Risk Considerations.
2. The Fund may enter into options for hedging purposes to counterbalance
portfolio volatility. While the Fund does not engage in options for speculative
purposes, there are risks which result from use of these instruments by the
Fund, and the investor should review the descriptions of such in this
Prospectus. See Investment Strategy under Investment Objective and Policies,
and Other Investment Policies and Risk Considerations.
Investment Manager, Distributor and Transfer Agent
Delaware Management Company (the "Manager") furnishes investment
management services to the Fund, subject to the supervision and direction of
Equity Funds IV, Inc.'s Board of Directors. The Manager also provides
investment management services to certain of the other funds in Delaware
Investments. Delaware Distributors, L.P. (the "Distributor") is the national
distributor for the Fund and for all of the other mutual funds in Delaware
Investments. Delaware Service Company, Inc. (the "Transfer Agent") is the
shareholder servicing, dividend disbursing, accounting services and transfer
agent for the Fund and for all of the other mutual funds in Delaware
Investments. See Summary of Expenses and Management of the Fund for further
information regarding the Manager and fees payable under the Fund's Investment
Management Agreement.
Sales Charges
The price of Class A Shares includes a maximum front-end sales charge of
5.75% of the offering price. The front-end sales charge is reduced on certain
transactions of at least $50,000 but under $1,000,000. For purchases of
$1,000,000 or more, the front-end sales charge is eliminated; if a dealer's
commission is paid in connection with those purchases, a contingent deferred
sales charge ("Limited CDSC") of 1% will be imposed if shares are redeemed
during the first year after the purchase and 0.50% will be imposed if shares
are redeemed during the second year after the purchase. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange. Class A Shares are also subject to annual
12b-1 Plan expenses for the life of the investment.
The price of Class B Shares is equal to the net asset value per share.
Class B Shares are subject to a contingent deferred sales charge ("CDSC") of:
(i) 5% if shares are redeemed within one year of purchase; (ii) 4% if shares
are redeemed within two years of purchase; (iii) 3% if shares are redeemed
during the third or fourth year following purchase; (iv) 2% if shares are
redeemed during the fifth year following purchase; (v) 1% if shares are
redeemed during the sixth year following purchase; and (vi) 0% thereafter.
Class B Shares are subject to annual 12b-1 Plan expenses which are assessed
against such shares for approximately eight years after purchase. See Deferred
Sales Charge Alternative -- Class B Shares and Automatic Conversion of Class B
Shares under Classes of Shares.
The price of Class C Shares is equal to the net asset value per share.
Class C Shares are subject to a CDSC of 1% if shares are redeemed within 12
months of purchase. Class C Shares are subject to annual 12b-1 Plan expenses
for the life of the investment. See Level Sales Charge Alternative -- Class C
Shares under Classes of Shares.
See Classes of Shares and Distribution (12b-1) and Service under
Management of the Fund.
Purchase Amounts
Generally, the minimum initial investment in any Class is $1,000.
Subsequent investments must generally be at least $100.
2
<PAGE>
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. An investor may exceed these maximum purchase
limitations for Class B Shares and Class C Shares by making cumulative
purchases over a period of time. An investor should keep in mind, however, that
reduced front-end sales charges apply to investments of $50,000 or more in
Class A Shares, and that Class A Shares are subject to lower annual 12b-1 Plan
expenses than Class B and Class C Shares and generally are not subject to a
CDSC. The minimum and maximum purchase amounts for retirement plans may vary.
See How to Buy Shares.
Redemption and Exchange
Class A Shares of the Fund may be redeemed or exchanged at the net asset
value calculated after receipt of the redemption or exchange request. Neither
the Fund nor the Distributor assesses a charge for redemptions or exchanges of
Class A Shares, except for certain redemptions of shares purchased at net asset
value, which may be subject to a CDSC if a dealer's commission was paid in
connection with such purchases. See Front-End Sales Charge Alternative -- Class
A Shares under Classes of Shares.
Class B Shares and Class C Shares may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange request
subject, in the case of redemptions, to any applicable CDSC. Neither the Fund
nor the Distributor assesses any charges other than the CDSC for redemptions or
exchanges of Class B or Class C Shares. There are certain limitations on an
investor's ability to exchange shares between the various classes of shares
that are offered. See Redemption and Exchange.
Open-End Investment Company
Equity Funds IV, Inc., which was organized as a Maryland corporation in
1985, is an open-end management investment company and the Fund's portfolio of
assets is diversified as defined by the Investment Company Act of 1940 (the
"1940 Act"). See Shares under Management of the Fund.
3
<PAGE>
Summary of
Expenses
A general comparison of the sales arrangements and other expenses
applicable to Class A Shares, Class B Shares and Class C Shares of the Fund
follows:
<TABLE>
<CAPTION>
Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares
- ------------------------------------------------------------------------------ -------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price). 5.75% None None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of
offering price) ............................................................. None None None
Maximum Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, whichever is lower) ........................... None(1) 5.00%(2) 1.00%(3)
Redemption Fees .............................................................. None(4) None(4) None(4)
</TABLE>
<TABLE>
<CAPTION>
Annual Operating Expenses (as a Class A Class B Class C
percentage of average daily net assets) Shares Shares Shares
- ------------------------------------------------------ -------- ------- -------
<S> <C> <C> <C>
Management Fees (after voluntary waiver) ............. 0.75 % 0.75 % 0.75 %
12b-1 Plan Expenses (including service fees) ......... 0.30%(5) 1.00%(5) 1.00%(5)
Other Operating Expenses ............................. 0.35 % 0.35 % 0.35 %
------- ------- -------
Total Operating Expenses ........................... 1.40 % 2.10 % 2.10 %
======= ======= =======
</TABLE>
(1) Class A purchases of $1 million or more may be made at net asset value.
However, if in connection with any such purchase a dealer commission is paid
to the financial adviser through whom such purchase is effected, a Limited
CDSC of 1% will be imposed on certain redemptions made during the first year
after the purchase and 0.50% will be imposed on certain redemptions made
during the second year after the purchase. Additional Class A purchase
options involving the imposition of a CDSC may be permitted as described in
this Prospectus from time to time. See Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange.
(2) Class B Shares are subject to a CDSC of: (i) 5% if shares are redeemed
within one year of purchase; (ii) 4% if shares are redeemed within two years
of purchase; (iii) 3% if shares are redeemed during the third or fourth year
following purchase; (iv) 2% if shares are redeemed during the fifth year
following purchase; (v) 1% if shares are redeemed during the sixth year
following purchase; and (vi) 0% thereafter. See Deferred Sales Charge
Alternative -- Class B Shares under Classes of Shares.
(3) Class C Shares are subject to a CDSC of 1% if the shares are redeemed within
12 months of purchase. See Level Sales Charge Alternative -- Class C Shares
under Classes of Shares.
(4) First Union National Bank currently charges $7.50 per redemption for
redemptions payable by wire.
(5) Class A Shares, Class B Shares and Class C Shares are subject to separate
12b-1 Plans. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by rules of the
National Association of Securities Dealers, Inc. (the "NASD"). See
Distribution (12b-1) and Service under Management of the Fund.
Investors utilizing the Asset Planner asset allocation service also
typically incur an annual maintenance fee of $35 per Strategy. However,
effective November 1, 1996, the annual maintenance fee is waived until further
notice. Investors who utilize the Asset Planner for an Individual Retirement
Account ("IRA") will pay an annual IRA fee of $15 per Social Security number.
See Asset Planner in Part B.
For expense information about DelCap Fund Institutional Class, see the
separate prospectus relating to that class.
4
<PAGE>
The following example illustrates the expenses that an investor would pay
on a $1,000 investment over various time periods, assuming (1) a 5% annual rate
of return, (2) redemption and no redemption at the end of each time period and
(3) for Class B Shares and Class C Shares, payment of a CDSC at the time of
redemption, if applicable.
<TABLE>
<CAPTION>
Assuming Redemption Assuming No Redemption
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
-------- --------- --------- ---------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares ......... $ 71(1) $99 $130 $ 216 $71 $99 $130 $ 216
Class B Shares ......... $ 71 $96 $133 $ 225(2) $21 $66 $113 $ 225(2)
Class C Shares ......... $ 31 $66 $113 $ 243 $21 $66 $113 $ 243
</TABLE>
(1) Generally, no redemption charge is assessed upon redemption of Class A
Shares. Under certain circumstances, however, a Limited CDSC or other CDSC,
which has not been reflected in this calculation, may be imposed on certain
redemptions. See Contingent Deferred Sales Charge for Certain Redemptions of
Class A Shares Purchased at Net Asset Value under Redemption and Exchange.
(2) At the end of approximately eight years after purchase, Class B Shares of
the Fund will be automatically converted into Class A Shares of the Fund.
The example above assumes conversion of Class B Shares at the end of the
eighth year. However, the conversion may occur as late as three months after
the eighth anniversary of purchase, during which time the higher 12b-1 Plan
fees payable by Class B Shares will continue to be assessed. The ten year
expense numbers for Class B Shares reflect the expenses of Class B Shares
for years one through eight and the expenses of Class A Shares for years
nine and ten. See Automatic Conversion of Class B Shares under Classes of
Shares for a description of the automatic conversion feature.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
The purpose of the above tables is to assist the investor in understanding
the various costs and expenses that an investor in any of the Classes will bear
directly or indirectly.
5
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Group Equity Funds IV, Inc. -- DelCap Fund and have been audited by
Ernst & Young LLP, independent auditors. The data should be read in conjunction
with the financial statements, related notes, and the report of Ernst & Young
LLP, all of which are incorporated by reference into Part B. Further
information about the Fund's performance is contained in its Annual Report to
shareholders. A copy of the Fund's Annual Report (including the report of Ernst
& Young LLP) may be obtained from Equity Funds IV, Inc. upon request at no
charge.
<TABLE>
<CAPTION>
Class A Shares
-------------------------------------------------------------
Year Ended
9/30/98 9/30/97 9/30/96 9/30/95
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 30.450 $ 30.740 $ 28.870 $ 25.570
Income (loss) from investment
operations:
Net investment income (loss)(1) .......... (0.237) (0.234) (0.208) (0.166)
Net realized and unrealized gain
(loss) on investments ................... (1.873) 3.534 5.618 5.296
--------- --------- --------- ---------
Total from investment
operations ............................ (2.110) 3.300 5.410 5.130
--------- --------- --------- ---------
Less dividends and
distributions:
Dividends from net investment
income .................................. none none none none
Distributions from net realized gain
on investments .......................... (5.870) (3.590) (3.540) (1.830)
--------- --------- --------- ---------
Total dividends and
distributions ......................... (5.870) (3.590) (3.540) (1.830)
--------- --------- --------- ---------
Net asset value, end of period ........... $ 22.470 $ 30.450 $ 30.740 $ 28.870
========= ========= ========= =========
- -------------------
Total return(2)........................... ( 8.28%) 12.44% 21.09% 22.04%
- -------------------
Ratios and supplemental
data:
Net assets, end of period
(000's omitted) ......................... $ 566,734 $ 770,207 $ 923,248 $888,571
Ratio of expenses to average daily
net assets .............................. 1.40% 1.36% 1.35% 1.37%
Ratio of net investment income (loss) to
average daily net assets ................ (0.92%) (0.86%) (0.74%) (0.67%)
Portfolio turnover ....................... 115% 105% 72% 51%
Average commission rate paid (3) ......... $ 0.0600 $ 0.0599 $ 0.0600 N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Class A Shares
-------------------------------------------------------------------------------
Year Ended
9/30/94 9/30/93 9/30/92 9/30/91 9/30/90 9/30/89
-------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 26.080 $ 20.730 $ 21.470 $ 15.810 $ 19.060 $ 13.920
Income (loss) from investment
operations:
Net investment income (loss)(1) .......... (0.218) (0.125) (0.059) 0.064 0.419 0.201
Net realized and unrealized gain
(loss) on investments ................... 0.528 5.475 (0.651) 6.496 (3.219) 5.059
-------- --------- -------- -------- -------- --------
Total from investment
operations ............................ 0.310 5.350 (0.710) 6.560 (2.800) 5.260
-------- --------- -------- -------- -------- --------
Less dividends and
distributions:
Dividends from net investment
income .................................. none none (0.030) (0.410) (0.160) (0.120)
Distributions from net realized gain
on investments .......................... (0.820) none none (0.490) (0.290) none
-------- --------- -------- -------- -------- --------
Total dividends and
distributions ......................... (0.820) none (0.030) (0.900) (0.450) (0.120)
-------- --------- -------- -------- -------- --------
Net asset value, end of period ........... $ 25.570 $ 26.080 $ 20.730 $ 21.470 $ 15.810 $ 19.060
======== ========= ======== ======== ======== ========
- -------------------
Total return(2) .......................... 1.17% 25.81% (3.32%) 43.25% (14.99%) 38.15%
- -------------------
Ratios and supplemental
data:
Net assets, end of period
(000's omitted) ......................... $890,787 $1,057,358 $ 993,125 $512,356 $155,392 $138,589
Ratio of expenses to average daily
net assets .............................. 1.35% 1.30% 1.39% 1.43% 1.41% 1.44%
Ratio of net investment income (loss) to
average daily net assets ................ (0.68%) (0.43%) (0.26%) 0.63% 2.61% 1.28%
Portfolio turnover ....................... 34% 51% 24% 33% 45% 42%
Average commission rate paid (3) ......... N/A N/A N/A N/A N/A N/A
</TABLE>
- -----------
(1) The per share information for the years ended 9/30/98, 9/30/97, 9/30/96 and
9/30/95 were based on the average shares outstanding method.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value. Total return does not reflect the maximum front-end sales charge that
is or was in effect for Class A Shares. In addition, total return does not
reflect the Limited CDSC that varies from 0.50% - 1% depending on the
holding period for Class A Shares, applicable to certain redemptions made
within two years after purchase.
(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.
6
<PAGE>
<TABLE>
<CAPTION>
Class B Shares
--------------------------------------------------------------
Year Ended
9/30/98 9/30/97 9/30/96 9/30/95
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 29.750 $ 30.300 $ 28.680 $ 25.560
Income (loss) from investment
operations:
Net investment income (loss)(2) .......... (0.408) (0.418) (0.400) (0.340)
Net realized and unrealized gain
(loss) on investments ................... (1.792) 3.458 5.560 5.290
--------- --------- --------- --------
Total from investment
operations ............................ (2.200) 3.040 5.160 4.950
--------- --------- --------- --------
Less dividends
and distributions:
Dividends from net investment
income ................................ none none none none
Distributions from net realized
gain on investments ................... (5.870) (3.590) (3.540) (1.830)
--------- --------- --------- --------
Total dividends and
distributions ......................... (5.870) (3.590) (3.540) (1.830)
--------- --------- --------- --------
Net asset value, end of period ........... $ 21.680 $ 29.750 $ 30.300 $ 28.680
========= ========= ========= ========
- -------------------
Total return(3) .......................... (8.92%) 11.64% 20.27% 21.34%
- -------------------
Ratios and supplemental
data:
Net assets, end of period
(000's omitted) ......................... $ 18,470 $ 20,706 $ 13,239 $ 2,710
Ratio of expenses to average daily net
assets .................................. 2.10% 2.06% 2.05% 2.07%
Ratio of net investment income (loss) to
average daily net assets (1.62%) (1.56%) (1.44%) (1.37%)
Portfolio turnover rate .................. 115% 105% 72% 51%
Average commission rate paid(4) .......... $ 0.0600 $ 0.0599 $ 0.0600 N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
-------------- -------------------------------------------
Period Period
9/6/94(1) 11/29/95(1)
through Year Ended through
9/30/9(4) 9/30/98 9/30/97 9/30/96
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 25.180 $ 30.050 $ 30.570 $ 28.880
Income (loss) from investment
operations:
Net investment income (loss)(2) .......... (0.008) (0.411) (0.421) ( 0.359)
Net realized and unrealized gain
(loss) on investments ................... 0.388 (1.819) 3.491 5.589
-------- --------- --------- ---------
Total from investment
operations ............................ 0.380 (2.230) 3.070 5.230
-------- --------- --------- ---------
Less dividends
and distributions:
Dividends from net investment
income ................................ none none none none
Distributions from net realized
gain on investments ................... none (5.870) (3.590) ( 3.540)
-------- --------- --------- ---------
Total dividends and
distributions ......................... none (5.870) (3.590) ( 3.540)
-------- --------- --------- ---------
Net asset value, end of period ........... $ 25.560 $ 21.950 $ 30.050 $ 30.570
======== ========= ========= =========
- -------------------
Total return(3) .......................... 1.51% (8.89%) 11.64% 20.38%
- -------------------
Ratios and supplemental
data:
Net assets, end of period
(000's omitted) ......................... $ 287 $ 3,576 $ 3,385 $ 1,947
Ratio of expenses to average daily net
assets .................................. 2.05% 2.10% 2.06% 2.05%
Ratio of net investment income (loss) to
average daily net assets (1.38%) (1.62%) (1.56%) (1.44%)
Portfolio turnover rate .................. 34% 115% 105% 72%
Average commission rate paid4 ............ N/A $ 0.0600 $ 0.0599 $ 0.0600
</TABLE>
- -----------
(1) Date of initial public offering; ratios have been annualized but total
return has not been annualized. Total return for this short of a time period
may not be representative of longer term results.
(2) The per share information for the years ended 9/30/98, 9/30/97, 9/30/96 and
9/30/95 were based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of share
during the period and assumes reinvestment of distributions at net asset
value. Total return does not reflect the CDSC which varies from 1%-5%
depending upon the holding period for Class B Shares and 1% for Class C
Shares redeemed within 12 months from the date of purchase.
(4) 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
commisison charged.
7
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is long-term capital growth. The
strategy will be to invest primarily in common stocks that, in the judgment of
the Manager, are of superior quality and those securities convertible into such
common stocks.
SUITABILITY
The Fund may be suitable for the patient investor interested in long-term
capital appreciation. Investors should be willing to accept the risks
associated with investments in equity securities.
While equity securities of small to medium-sized companies in which the
Fund invests may offer the potential for greater capital appreciation than
securities issued by larger companies, investments in securities of smaller
companies, some of which may be speculative, may present greater risks. The
prices of equity securities, especially of smaller companies, tend to fluctuate
in response to the condition of individual companies as well as general market
and economic conditions. Consequently, the Fund's net asset value will
fluctuate and an investment in the Fund may be inappropriate for the short-term
investor.
Ownership of Fund shares reduces the bookkeeping and administrative
inconvenience connected with direct purchases of the types of securities in
which the Fund invests.
Providing current income is not an objective of the Fund. Any income
produced is expected to be minimal. Investors should not consider purchases of
Fund shares as equivalent to a complete investment program. Delaware
Investments includes a family of funds generally available through registered
investment dealers which may be used in concert to create a more complete
investment program.
INVESTMENT STRATEGY
The Fund will attempt to achieve its objective by exceeding the return of
common stocks as measured by the Russell MidCap Growth Index.
Securities purchased will be of companies whose earnings the Manager
believes will grow more rapidly than the average of those listed in the Russell
MidCap Growth Index. The Manager's emphasis will be on the securities of
companies that, in its judgment, have the characteristics that will enable them
to grow faster than the economy as measured by the Index. This judgment will be
based on the financial strength of the company, the expertise of its management,
the growth potential of the company within its industry and the growth potential
of the industry itself.
The Manager will focus primarily on those securities of companies it
believes have established themselves within their industry while maintaining
growth potential. If the Manager believes that market conditions warrant, the
Fund may employ certain option strategies involving the activities and
instruments described below.
In investing for capital appreciation, the Fund may hold securities for
any period of time.
While management believes its objective may best be attained by investing
in common stocks, the Fund may also invest in other securities including, but
not limited to, convertible securities, warrants, preferred stocks, bonds and
foreign securities.
Should the market warrant a temporary, defensive approach, the Fund may
also invest in fixed-income obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities as well as corporate bonds of
investment quality rated Baa or above by Moody's Investors Service, Inc. or BBB
or above by Standard & Poor's Ratings Group. (Appendix A in Part B describes
these ratings.)
The Fund may write covered call options on individual issues as well as
write call options on stock indices. The Fund may also purchase put options on
individual issues and on stock indices. The Manager may employ these techniques
in an attempt to protect appreciation attained, to offset capital losses and to
take advantage of the liquidity available in the option markets. The ability to
hedge effectively using options on stock indices will depend, in part, on the
correlation between the composition of the index and the Fund's portfolio as
well as the price movement of individual securities. The Manager may also write
covered call options to achieve income to offset the cost of purchasing put
options.
While there is no limit on the amount of the Fund's assets which may be
invested in covered call options, the Fund will not invest more than 2% of its
net assets in
put options.
Although the Fund will constantly strive to attain its investment
objective of long-term capital growth, there can be no assurance that it will
be attained. The investment objective of the Fund may not be changed without
shareholder approval.
For additional information about the Fund's investment policies and
certain risks associated with investments in certain types of securities, see
Other Investment Policies and Risk Considerations.
8
<PAGE>
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Investments
family of funds.
SHAREHOLDER PHONE DIRECTORY
Investor Information Center and Shareholder Service Center
800-523-1918
Fund Information; Literature; Price; Yield and Performance Figures;
Information on Existing Regular Investment Accounts and Retirement Plan
Accounts; Wire Investments; Wire Liquidations; Telephone Liquidations
and Telephone Exchanges
Delaphone
800-362-FUND
(800-362-3863)
Performance Information
During business hours, you can call the Investor Information Center for
current performance information. Current yield and total return information may
also be included in advertisements and information given to shareholders.
Yields are computed on an annualized basis over a 30-day period.
Shareholder Services
During business hours, you can call Delaware Investments' Shareholder
Service Center. Our representatives can answer any questions about your
account, the Fund, various service features and other Delaware Investments
funds.
Automated Shareholder Services
You can purchase, redeem or exchange shares through Delaphone, Delaware
Investments' automated telephone system, or through Delaware Investments' Web
site, www.delawarefunds.com. For more information about how to sign up for
these services, call the Shareholder
Service Center.
Dividend Payments
Dividends, capital gains and other distributions, if any, are
automatically reinvested in your account, unless you elect to receive them in
cash. You may also elect to have the dividends earned in one fund automatically
invested in another Delaware Investments fund with a different investment
objective subject to certain exceptions
and limitations.
For more information, see Additional Methods of Adding to Your Investment
- -- Dividend Reinvestment Plan under How to Buy Shares or call the Shareholder
Service Center.
Retirement Planning
An investment in the Fund may be a suitable investment option for
tax-deferred retirement plans. Delaware Investments offers a full spectrum of
qualified and non-qualified retirement plans, including the popular 401(k)
deferred compensation plan, IRA, and the new Roth IRA. Just call Delaware
Investments at 800-523-1918 for more information.
MoneyLine(SM) Services
Delaware Investments offers the following services for fast and convenient
transfer of funds between your personal bank account and your Delaware
Investments fund account:
1. MoneyLine(SM) Direct Deposit Service
If you elect to have your dividends and distributions paid in cash and
such dividends and distributions are in an amount of $25 or more, you may
choose the MoneyLine(SM) Direct Deposit Service and have such payments
transferred from your Fund account to your predesignated bank account. See
Dividends and Distributions. In addition, you may elect to have your Systematic
Withdrawal Plan payments transferred from your Fund account to your
predesignated bank account through this service. See Systematic Withdrawal
Plans under Redemption and Exchange. This service is not available for certain
retirement plans.
9
<PAGE>
2. MoneyLine(SM) On Demand
You or your investment dealer may request purchases and redemptions of
Fund shares by using MoneyLineSM On Demand. When you authorize the Fund to
accept such requests from you or your investment dealer, funds will be
withdrawn from (for share purchases) or deposited to (for share redemptions)
your predesignated bank account. Your request will be processed the same day if
you call prior to 4 p.m., Eastern time. There is a $25 minimum and a $50,000
maximum limit for MoneyLineSM On Demand transactions. This service is not
available for retirement plans, except for purchases of shares by IRAs.
For each MoneyLineSM Service, it may take up to four business days for the
transactions to be completed. You can initiate either service by completing an
Account Services form. If the name and address on your designated bank account
are not identical to the name and address on your Fund account, you must have
your signature guaranteed. The Fund does not charge a fee for any MoneyLineSM
Service; however, your bank may charge a fee. Please call the Shareholder
Service Center for additional information about these services.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling the Shareholder Service Center.
Duplicate Confirmations
If your financial adviser or investment dealer is noted on your investment
application, we will send a duplicate confirmation to him or her. This makes it
easier for your adviser to help you manage your investments.
Tax Information
Each year, Equity Funds IV, Inc. will mail to you information on the tax
status of your dividends
and distributions.
Right of Accumulation
With respect to Class A Shares, the Right of Accumulation feature allows
you to combine the value of your current holdings of Class A Shares, Class B
Shares and Class C Shares of the Fund with the dollar amount of new purchases
of Class A Shares of the Fund to qualify for a reduced front-end sales charge
on such purchases of Class A Shares. Under the Combined Purchases Privilege,
you may also include certain shares that you own in other funds in Delaware
Investments. See Classes of Shares.
Letter of Intention
The Letter of Intention feature permits you to obtain a reduced front-end
sales charge on purchases of Class A Shares by aggregating certain of your
purchases of Delaware Investments fund shares over a 13-month period. See
Classes of Shares and Part B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits you to reinvest proceeds from
a redemption of Class A Shares, within one year of the date of the redemption,
without paying a front-end sales charge. See Part B.
Exchange Privilege
The Exchange Privilege permits you to exchange all or part of your shares
into shares of other funds in Delaware Investments, subject to certain
exceptions and limitations. For additional information on exchanges, see
Investing by Exchange under How to Buy Shares and Redemption
and Exchange.
Wealth Builder Option
You may elect to invest in the Fund through regular liquidations of shares
in your accounts in other funds in Delaware Investments. Investments under this
feature are exchanges and are therefore subject to the same conditions and
limitations as other exchanges of Fund shares. See Additional Methods of Adding
to Your Investment -- Wealth Builder Option and Investing by Exchange under How
to Buy Shares, and Redemption and Exchange.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. Equity Funds IV, Inc.'s fiscal year
ends on September 30.
10
<PAGE>
CLASSES OF SHARES
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net asset
value per share, subject to a sales charge which may be imposed, at the
election of the purchaser, at the time of the purchase for Class A Shares
("front-end sales charge alternative"), or on a contingent deferred basis for
Class B Shares ("deferred sales charge alternative") or Class C Shares ("level
salescharge alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares, which incur a sales charge when they are
purchased, but generally are not subject to any sales charge when they are
redeemed. Class A Shares are subject to annual 12b-1 Plan expenses of up to a
maximum of 0.30% of average daily net assets of such shares. Certain purchases
of Class A Shares qualify for reduced front-end sales charges. See Front-End
Sales Charge Alternative -- Class A Shares, below. See also Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange and Distribution (12b-1) and Service under
Management of the Fund.
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares, which do not incur a front-end sales
charge when they are purchased, but are subject to a contingent deferred sales
charge if they are redeemed within six years of purchase. Class B Shares are
subject to annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of which
are service fees to be paid to the Distributor, dealers or others for providing
personal service and/or maintaining shareholder accounts) of average daily net
assets of such shares for approximately eight years after purchase. Class B
Shares permit all of the investor's dollars to work from the time the
investment is made. The higher 12b-1 Plan expenses paid by Class B Shares will
cause such shares to have a higher expense ratio and to pay lower dividends
than Class A Shares. At the end of approximately eight years after purchase,
Class B Shares will automatically be converted into Class A Shares and,
thereafter, for the remainder of the life of the investment, the annual 12b-1
Plan fee of up to 0.30% for the Class A Shares will apply. See Automatic
Conversion of Class B Shares, below.
Class C Shares. An investor who elects the level sales charge alternative
acquires Class C Shares, which do not incur a front-end sales charge when they
are purchased, but are subject to a contingent deferred sales charge if they
are redeemed within 12 months of purchase. Class C Shares are subject to annual
12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service fees
to be paid to the Distributor, dealers or others for providing personal service
and/or maintaining shareholder accounts) of average daily net assets of such
shares for the life of the investment. The higher 12b-1 Plan expenses paid by
Class C Shares will cause such shares to have a higher expense ratio and to pay
lower dividends than Class A Shares. Unlike Class B Shares, Class C Shares do
not convert to another class.
The alternative purchase arrangements described above permit investors to
choose the method of purchasing shares that is most suitable given the amount
of their purchase, the length of time they expect to hold their shares and
other relevant circumstances. Investors should determine whether, given their
particular circumstances, it is more advantageous to purchase Class A Shares
and incur a front-end sales charge, purchase Class B Shares and have the entire
initial purchase amount invested in the Fund with their investment being
subject to a CDSC if they redeem shares within six years of purchase, or
purchase Class C Shares and have the entire initial purchase amount invested in
the Fund with their investment being subject to a CDSC if they redeem shares
within 12 months of purchase. In addition, investors should consider the level
of annual 12b-1 Plan expenses applicable to each Class. The higher 12b-1 Plan
expenses on Class B Shares and Class C Shares will be offset to the extent a
return is realized on the additional money initially invested upon the purchase
of such shares. However, there can be no assurance as to the return, if any,
that will be realized on such additional money. In addition, the effect of any
return earned on such additional money will diminish over time. In comparing
Class B Shares to Class C Shares, investors should also consider the duration
of the annual 12b-1 Plan expenses to which each of these classes is subject and
the desirability of an automatic conversion feature, which is available only
for Class B Shares.
11
<PAGE>
For the distribution and related services provided to, and the expenses
borne on behalf of, the Fund, the Distributor and others will be paid, in the
case of Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of Class B Shares and Class C Shares, from the
proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Financial advisers may receive different compensation for selling
Class A, Class B and Class C Shares. Investors should understand that the
purpose and function of the respective 12b-1 Plans and the CDSCs applicable to
Class B Shares and Class C Shares are the same as those of the 12b-1 Plan and
the front-end sales charge applicable to Class A Shares in that such fees and
charges are used to finance the distribution of the respective Classes. See
Distribution (12b-1) and Service under Management of the Fund.
Dividends, if any, paid on Class A, Class B and Class C Shares will be
calculated in the same manner, at the same time, on the same day and will be in
the same amount, except that the additional amount of 12b-1 Plan expenses
relating to Class B Shares and Class C Shares will be borne exclusively by such
shares. See Calculation of Offering Price and Net Asset Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. Equity Funds IV, Inc. and the Distributor intend to operate in
compliance with these rules.
Front-End Sales Charge Alternative -- Class A Shares
Class A Shares may be purchased at the offering price, which reflects a
maximum front-end sales charge of 5.75%. See Calculation of Offering Price and
Net Asset Value Per Share.
Purchases of $50,000 or more carry a reduced front-end sales charge as
shown in the following table.
DelCap Fund A Class
- ---------------------------------------------------------------------
Dealer's
Front-End Sales Charge Commission***
as % of as % of
Offering Amount Offering
Amount of Purchase Price Invested** Price
- ----------------------- ---------- ----------- ---------------
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but under
$100,000 4.75 4.98 4.00
$100,000 but under
$250,000 3.75 3.92 3.00
$250,000 but under
$500,000 2.50 2.58 2.00
$500,000 but under
$1,000,000* 2.00 2.05 1.60
* There is no front-end sales charge on purchases of Class A Shares of
$1,000,000 or more but, under certain limited circumstances, a Limited
CDSC of 1% may apply upon redemption of such shares made during the first
year after the purchase and 0.50% may apply upon redemption of such shares
made during the second year after the purchase.
** Based upon the net asset value per share of the Class A Shares as of the
end of Equity Funds IV, Inc.'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 the front-end sales charge
shown above. In addition, certain dealers who enter into an agreement to
provide extra training and information on Delaware Investments products and
services and who increase sales of Delaware Investments funds may receive an
additional commission of up to 0.15% of the offering price. Dealers who receive
90% or more of the sales charge may be deemed to be underwriters under the
Securities Act of 1933.
- --------------------------------------------------------------------------------
12
<PAGE>
For initial purchases of Class A Shares of $1,000,000 or more, a dealer's
commission may be paid by the Distributor to financial advisers through whom
such purchases are made in accordance with the following schedule:
Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
- -------------------------- --------------------
Up to $5 million 1.00%
Next $20 million up to
$25 million 0.50
Amount over $25 million 0.25
Such Class A Shares are subject to a Limited CDSC of 1% if shares are
redeemed during the first year after the purchase and 0.50% if shares are
redeemed during the second year after the purchase.
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other Delaware Investments
funds as to which a Limited CDSC applies may be aggregated with those of Class
A Shares of the Fund. Financial advisers also may be eligible for a dealer's
commission in connection with certain purchases made under a Letter of
Intention or pursuant to an investor's Right of Accumulation. Financial
advisers should contact the Distributor concerning the applicability and
calculation of the dealer's commission in the case of combined purchases.
An exchange from other Delaware Investments funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The
schedule and program for payment of the dealer's commission are subject to
change or termination at any time by the Distributor at its discretion.
Redemptions of Class A Shares purchased at net asset value may result in
the imposition of a Limited CDSC if the dealer's commission described above was
paid in connection with the purchase of those shares. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
Combined Purchases Privilege
By combining your holdings of Class A Shares with your holdings of Class B
Shares and/or Class C Shares of the Fund and shares of the other funds in
Delaware Investments, except as noted below, you can reduce the front-end sales
charges on any additional purchases of Class A Shares. Shares of Delaware Group
Premium Fund, Inc. beneficially owned in connection with ownership of variable
insurance products may be combined with other Delaware Investments fund
holdings. In addition, assets held by investment advisory clients of the
Manager or its affiliates in any stable value account may be combined with
other Delaware Investments fund holdings. Shares of other funds that do not
carry a front-end sales charge or CDSC may not be included unless they were
acquired through an exchange from a Delaware Investments fund that does carry a
front-end sales charge or CDSC.
This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under 21 and any trust, fiduciary or
retirement account for the benefit of such family members.
This privilege also permits you to use these combinations under a Letter
of Intention. A Letter of Intention allows you to make purchases over a
13-month period and qualify the entire purchase for a reduction in front-end
sales charges on Class A Shares.
Combined purchases of $1,000,000 or more, including certain purchases made
at net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may result in the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative -- Class A Shares, above.
Allied Plans
Class A Shares are available for purchase by participants in certain
defined contribution plans ("Allied Plans") which are made available under a
joint venture agreement between the Distributor and another institution through
which mutual funds are marketed and which allow investments in Class A Shares
of designated Delaware Investments funds ("eligible Delaware Investments fund
shares"), as well as shares of designated classes of non-Delaware Investments
funds ("eligible non-Delaware Investments fund shares"). Class B Shares and
Class C Shares are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Investments and eligible non-Delaware Investments
fund shares held by the Allied Plan may be combined with the dollar amount of
new purchases by that Allied Plan to obtain a reduced front-end sales charge on
additional purchases of eligible Delaware Investments fund shares.
13
<PAGE>
Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments fund
shares or for eligible non-Delaware Investments fund shares at net asset value
without payment of a front-end sales charge. However, exchanges of eligible
fund shares, both Delaware Investments and non-Delaware Investments, which were
not subject to a front-end sales charge, will be subject to the applicable
sales charge if exchanged for eligible Delaware Investments fund shares to
which a sales charge applies. No sales charge will apply if the eligible fund
shares were previously acquired through the exchange of eligible shares on
which a sales charge was already paid or through the reinvestment of dividends.
See Investing by Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Investments fund shares under an Allied Plan. In determining a financial
adviser's eligibility for a dealer's commission on net asset value purchases of
eligible Delaware Investments fund shares in connection with Allied Plans, all
participant holdings in the Allied Plan will be aggregated.
The Limited CDSC is applicable to redemptions of net asset value purchases
from an Allied Plan on which a dealer's commission has been paid. Waivers of
the Limited CDSC, as described under Waiver of Limited Contingent Deferred
Sales Charge -- Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Investments and non-Delaware Investments fund shares.
When eligible Delaware Investments fund shares are exchanged into eligible
non-Delaware Investments fund shares, the Limited CDSC will be imposed at the
time of the exchange, unless the joint venture agreement specifies that the
amount of the Limited CDSC will be paid by the financial adviser or selling
dealer. See Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange.
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under
Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment Privilege.
See The Delaware Difference and Redemption and Exchange for additional
information.
Purchases of Class A Shares may be made at net asset value by current and
former officers, directors and employees (and members of their families) of the
Manager, any affiliate, any of the funds in Delaware Investments, certain of
their agents and registered representatives and employees of authorized
investment dealers and by employee benefit plans for such entities. Individual
purchases, including those in retirement accounts, must be for accounts in the
name of the individual or a qualifying family member.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of Delaware
Investments funds. Purchases of Class A Shares at net asset value may also be
made by bank sponsored retirement plans that are no longer eligible to purchase
Institutional Class Shares as a result of a change in the distribution
arrangements. 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.
Investors may be charged a fee when effecting transactions in Class A Shares
through a broker or agent that offers these special investment products.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase shares of the Institutional
Class of the Fund; and any group retirement plan (excluding defined benefit
pension plans), or such plans of the same employer, for which plan participant
records are maintained on the Retirement Financial Services, Inc.'s (formerly
named Delaware Investment & Retirement Services, Inc.) proprietary record
keeping system that (i) has in excess of $500,000 of plan assets invested in
Class A Shares of funds in the Delaware Investments family and any stable value
product available through Delaware Investments, or (ii) is sponsored by an
employer that has at any point after May 1, 1997 had more than 100 employees
while such plan has held Class A Shares of a fund in the Delaware Investments
family and such employer has properly represented to Retirement Financial
Services, Inc. in writing that it has the requisite number of employees and has
received written confirmation back from Retirement Financial Services, Inc. See
Group Investment Plans for information regarding the applicability of the
Limited CDSC.
Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase
Institutional Class shares or purchase interests in a collective trust as a
result of a change in distribution arrangements.
14
<PAGE>
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
Investments account in connection with loans originated from accounts
previously maintained by another investment firm will also be invested at net
asset value.
Investors in Delaware Investments Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A
Shares of any of the funds in Delaware Investments at net asset value.
The Fund must be notified in advance that an investment qualifies for
purchase at net asset value.
Group Investment Plans
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, SIMPLE IRA, SIMPLE 401(k),
Profit Sharing, Money Purchase Pension, 401(k) Defined Contribution Plans, and
403(b)(7) and 457 Deferred Compensation Plans) may benefit from the reduced
front-end sales charges available on Class A Shares, based on total plan
assets. If a company has more than one plan investing in the funds in the
Delaware Investments family, then the total amount invested in all plans will
be aggregated to determine the applicable front-end sales charge reduction on
each purchase, both initial and subsequent, if, at the time of each such
purchase, the company notifies the Fund that it qualifies for the reduction.
Employees participating in such Group Investment Plans may also combine the
investments held in their plan account to determine the front-end sales charge
applicable to purchases in non-retirement investment accounts in Delaware
Investments if, at the time of each such purchase, they notify the Fund that
they are eligible to combine purchase amounts held in their plan account.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from a fund in the Delaware Investments family.
See Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange.
For additional information on retirement plans, including plan forms,
applications, minimum investments and any applicable account maintenance fees,
contact your investment dealer or the Distributor.
Deferred Sales Charge Alternative -- Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently compensates
dealers or brokers for selling Class B Shares at the time of purchase from its
own assets in an amount equal to no more than 5% of the dollar amount
purchased. In addition, from time to time, upon written notice to all of its
dealers, the Distributor may hold special promotions for specified periods
during which the Distributor may pay additional compensation to dealers or
brokers for selling Class B Shares at the time of purchase. As discussed below,
however, Class B Shares are subject to annual 12b-1 Plan expenses and, if
redeemed within six years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class
B Shares. Payments to the Distributor and others under the Class B 12b-1 Plan
may be in an amount equal to no more than 1% annually. The combination of the
CDSC and the proceeds of the 12b-1 Plan fees makes it possible for the Fund to
sell Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class B Shares
described in this Prospectus, even after the exchange. Such CDSC schedule may
be higher than the CDSC schedule for Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the last business
day of the second full week of March, June, September and December (each, a
"Conversion Date"). If the eighth anniversary after a purchase of Class B
Shares falls on a Conversion Date, an investor's Class B Shares will be
converted on that date. If the eighth anniversary occurs between Conversion
Dates, an investor's Class B Shares will be converted on the next Conversion
Date after such anniversary. Consequently, if a shareholder's eighth
anniversary falls on the day after a Conversion Date, that shareholder will
have to hold Class B Shares for as long as three additional months after the
eighth anniversary of purchase before the shares will automatically convert
into Class A Shares.
15
<PAGE>
Class B Shares of a fund acquired through a reinvestment of dividends will
convert to the corresponding Class A Shares of that fund (or, in the case of
Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant Class)
pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute tax-free
exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative -- Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently compensates
dealers or brokers for selling Class C Shares at the time of purchase from its
own assets in an amount equal to no more than 1% of the dollar amount
purchased. As discussed below, Class C Shares are subject to annual 12b-1 Plan
expenses and, if redeemed within 12 months of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class
C Shares. Payments to the Distributor and others under the Class C 12b-1 Plan
may be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class C Shares
as described in this Prospectus. See Redemption and Exchange.
Contingent Deferred Sales Charge -- Class B Shares and Class C Shares
Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage
of the dollar amount subject to the CDSC. The charge will be assessed on an
amount equal to the lesser of the net asset value at the time of purchase of
the shares being redeemed or the net asset value of those shares at the time of
redemption. No CDSC will be imposed on increases in net asset value above the
initial purchase price, nor will a CDSC be assessed on redemptions of shares
acquired through reinvestments of dividends or capital gains distributions.
For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of the Class B Shares or the
Class C Shares of the Fund, even if those shares are later exchanged for shares
of another Delaware Investments fund. In the event of an exchange of the
shares, the "net asset value of such shares at the time of redemption" will be
the net asset value of the shares that were acquired in the exchange.
The following table sets forth the rates of the CDSC for the Class B
Shares of the Fund:
Contingent Deferred
Sales Charge (as a
Percentage of
Year After Dollar Amount
Purchase Made Subject to Charge)
- --------------------------- ------------------------------
0-1 5%
2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
<PAGE>
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. See Automatic Conversion of Class B Shares, above. Investors are
reminded that Class A Shares into which Class B Shares will convert are subject
to ongoing annual 12b-1 Plan expenses of up to a maximum of 0.30% of average
daily net assets of such shares.
In determining whether a CDSC applies to a redemption of Class B Shares,
it will be assumed that shares held for more than six years are redeemed first,
followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares and Class C
Shares. See Waiver of Contingent Deferred Sales Charge -- Class B Shares and
Class C Shares under Redemption and Exchange.
Other Payments to Dealers -- Class A, Class B and Class C Shares
From time to time at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Classes exceed certain limits, as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of Delaware Investments 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.
16
<PAGE>
Subject to pending amendments to the NASD's Conduct Rules, in connection
with the promotion of Delaware Investments fund shares, the Distributor may,
from time to time, pay to participate in dealer-sponsored seminars and
conferences, reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising and may, from time to time,
pay or allow additional promotional incentives to dealers, which shall include
non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and Exchange Commission.
It is likely that the NASD's Conduct Rules will be amended such that the
ability of the Distributor to pay non-cash compensation as described above will
be restricted in some fashion. The Distributor intends to comply with the
NASD's Conduct Rules as they may be amended.
DelCap Fund Institutional Class
In addition to offering the Class A, Class B and Class C Shares, the Fund
also offers DelCap Fund Institutional Class, which is described in a separate
prospectus and is available for purchase only by certain investors. DelCap Fund
Institutional Class shares generally are distributed directly by the
Distributor and do not have a front-end sales charge, a CDSC or a Limited CDSC,
and are not subject to 12b-1 Plan distribution expenses. To obtain the
prospectus that describes DelCap Fund Institutional Class, contact the
Distributor by writing to the address or by calling the telephone number listed
on the back cover of this Prospectus.
17
<PAGE>
HOW TO BUY SHARES
Purchase Amounts
Generally, the minimum initial purchase is $1,000 for Class A Shares, Class
B Shares and Class C Shares. Subsequent purchases of shares of any Class Roth
IRAs and Education IRAs generally must be $100 or more. For purchases under a
Uniform Gifts to Minors Act or Uniform Transfers to Minors Act or through an
Automatic Investing Plan, there is a minimum initial purchase of $250 and a
minimum subsequent purchase of $25. Minimum purchase requirements do not apply
to retirement plans other than IRAs, Roth IRAs and Education IRAs. For IRAs and
Roth IRAs, there is a minimum initial purchase of $250 and for Education IRAs,
there is a minimum initial purchase of $500; minimum subsequent purchases must
be $25 or more, regardless of which Class is selected.
There is a maximum purchase limitation of $250,000 on each purchase of
Class B Shares. For Class C Shares, each purchase must be in an amount that is
less than $1,000,000. An investor may exceed these maximum purchase limitations
by making cumulative purchases over a period of time. In doing so, an investor
should keep in mind that reduced front-end sales charges are available on
investments of $50,000 or more in Class A Shares, and that Class A Shares (i)
are subject to lower annual 12b-1 Plan expenses than Class B Shares and Class C
Shares and (ii) generally are not subject to a CDSC. For retirement plans, the
maximum purchase limitations apply only to the initial purchase of Class B
Shares or Class C Shares by the plan.
The Fund makes it easy to invest by arrangement with your investment
dealer, by wire and by exchange.
Investing through Your Investment Dealer
You can make a purchase of shares of the Fund through most investment
dealers who, as part of the service they provide, must transmit orders
promptly. They may charge for this service. If you want a dealer but do not
have one, Delaware Investments can refer you to one.
Investing by Mail
1. Initial Purchases--An Investment Application or, in the case of a retirement
plan account, an appropriate retirement plan application, must be completed,
signed and sent with a check payable to DelCap Fund A Class, DelCap Fund B
Class or DelCap Fund C Class, to Delaware Investments at 1818 Market Street,
Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by
mailing a check payable to the specific Fund and Class selected. Your check
should be identified with your name(s) and account number. An investment slip
(similar to a deposit slip) is provided at the bottom of transaction
confirmations and dividend statements that you will receive from Equity Funds
IV, Inc. Use of this investment slip can help expedite processing of your check
when making additional purchases. Your investment may be delayed if you send
additional purchases by certified mail.
Investing by Wire
You may purchase shares by requesting your bank to transmit funds by wire
to First Union National Bank, ABA #031201467, account number 2014128934013
(include your name(s) and your account number for the Class in which you are
investing).
1. Initial Purchases--Before you invest, telephone the Shareholder Service
Center to get an account number. If you do not call first, processing of your
investment may be delayed. In addition, you must promptly send your Investment
Application or, in the case of a retirement plan account, an appropriate
retirement plan application, to the specific Class selected, to Delaware
Investments at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to First Union National Bank, as described above. You should advise the
Shareholder Service Center by telephone of each wire you send.
If you want to wire investments to a retirement plan account, call the
Shareholder Service Center for special wiring instructions.
Investing by Exchange
If you have an investment in another mutual fund in Delaware Investments,
you may write and authorize an exchange of part or all of your investment into
shares of the Fund. If you wish to open an account by exchange, call the
Shareholder Service Center for more information. All exchanges are subject to
the eligibility and minimum purchase requirements set forth in each fund's
prospectus. See Redemption and Exchange for more complete information
concerning your exchange privileges.
18
<PAGE>
Holders of Class A Shares may exchange all or part of their shares for
certain of the shares of other funds in Delaware Investments, including other
Class A Shares, but may not exchange their Class A Shares for Class B Shares or
Class C Shares of the Fund or of any other fund in Delaware Investments.
Holders of Class B Shares of the Fund are permitted to exchange all or part of
their Class B Shares only into Class B Shares of other Delaware Investments
funds. Similarly, holders of Class C Shares of the Fund are permitted to
exchange all or part of their Class C Shares only into Class C Shares of other
Delaware Investments funds. Class B Shares of the Fund and Class C Shares of
the Fund acquired by exchange will continue to carry the CDSC and, in the case
of Class B Shares, the automatic conversion schedule of the fund from which the
exchange is made. The holding period of Class B Shares of the Fund acquired by
exchange will be added to that of the shares that were exchanged for purposes
of determining the time of the automatic conversion into Class A Shares of
the Fund.
Permissible exchanges into Class A Shares of the Fund will be made without
a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were
acquired through the reinvestment of dividends). Permissible exchanges into
Class B Shares or Class C Shares of the Fund will be made without the
imposition of a CDSC by the fund from which the exchange is being made at the
time of the exchange.
See Allied Plans for information on exchanges by participants in an Allied
Plan.
Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if you wish to
use the following services:
1. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly investments
without writing or mailing checks. You may authorize Equity Funds IV, Inc. to
transfer a designated amount monthly from your checking account to your Fund
account. Many shareholders use this as an automatic savings plan. Shareholders
should allow a reasonable amount of time for initial purchases and changes to
these plans to become effective.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) and 457 Deferred
Compensation Plans.
2. Direct Deposit
You may have your employer or bank make regular investments directly to
your account for you (for example: payroll deduction, pay by phone, annuity
payments). The Fund also accepts preauthorized recurring government and private
payments by Electronic Fund Transfer, which avoids mail time and check clearing
holds on payments such as social security, federal salaries, Railroad
Retirement benefits, etc.
* * *
Should investments through an automatic investing plan or by direct
deposit be reclaimed or returned for some reason, Equity Funds IV, Inc. has the
right to liquidate your shares to reimburse the government or transmitting
bank. If there are insufficient funds in your account, you are obligated to
reimburse the Fund.
<PAGE>
3. MoneyLine(SM) On Demand
Through the MoneyLine(SM) On Demand service, you or your investment dealer
may call the Fund to request a transfer of funds from your predesignated bank
account to your Fund account. See MoneyLineSM Services under The Delaware
Difference for additional information about
this service.
4. Wealth Builder Option
You can use our Wealth Builder Option to invest in the Fund through
regular liquidations of shares in your accounts in other funds in Delaware
Investments. You may also elect to invest in other mutual funds in Delaware
Investments through the Wealth Builder Option through regular liquidations of
shares in your Fund account.
Under this automatic exchange program, you can authorize regular monthly
amounts (minimum of $100 per fund) to be liquidated from your account in one or
more funds in Delaware Investments and invested automatically into any other
account in a Delaware Investments mutual fund that you may specify. If in
connection with the election of the Wealth Builder Option, you wish to open a
new account to receive the automatic investment, such new account must meet the
minimum initial purchase requirements described in the prospectus of the fund
that you select. All investments under this option are exchanges and are
therefore subject to the same conditions and limitations as other exchanges
noted above. You can terminate your participation in Wealth Builder at any time
by giving written notice to the fund from which the exchanges are made. See
Redemption and Exchange.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) and 457 Deferred
Compensation Plans.
19
<PAGE>
5. Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your Fund account. Or, you may
invest your distributions in certain other funds in Delaware Investments,
subject to the exceptions noted below as well as the eligibility and minimum
purchase requirements set forth in each fund's prospectus.
Reinvestments of distributions into Class A Shares of the Fund or of other
Delaware Investments funds are made without a front-end sales charge.
Reinvestments of distributions into Class B Shares of the Fund or of other
Delaware Investments funds or into Class C Shares of the Fund or of other
Delaware Investments funds are also made without any sales charge and will not
be subject to a CDSC if later redeemed. See Automatic Conversion of Class B
Shares under Classes of Shares for information concerning the automatic
conversion of Class B Shares acquired by reinvesting dividends.
Holders of Class A Shares of the Fund may not reinvest their distributions
into Class B Shares or Class C Shares of any fund in Delaware Investments,
including the Fund. Holders of Class B Shares of the Fund may reinvest their
distributions only into Class B Shares of the funds in Delaware Investments
which offer that class of shares. Similarly, holders of Class C Shares of the
Fund may reinvest their distributions only into Class C Shares of the funds in
Delaware Investments which offer that class of shares. For more information
about reinvestments, call the Shareholder Service Center.
Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the same Delaware
Investments fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
Purchase Price and Effective Date
The offering price and net asset value of the Class A, Class B and Class C
Shares are determined as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The effective date of a purchase is the date the order is received by the
Fund, its agent or designee. The effective date of a direct purchase is the day
your wire, electronic transfer or check is received, unless it is received
after the time the offering price or net asset value of shares is determined,
as noted above. Purchase orders received after such time will be effective the
next business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a purchase is
canceled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in Delaware Investments. The Fund reserves the right to reject
purchase orders paid by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check drawn on a
foreign financial institution is accepted, you may be subject to additional
bank charges for clearance and currency conversion.
The Fund also reserves the right, following shareholder notification, to
charge a service fee on non-retirement accounts that, as a result of a
redemption, have remained below the minimum stated account balance for a period
of three or more consecutive months. Holders of such accounts may be notified
of their insufficient account balance and advised that they have until the end
of the current calendar quarter to raise their balance to the stated minimum.
If the account has not reached the minimum balance requirement by that time,
the Fund will charge a $9 fee for that quarter and each subsequent calendar
quarter until the account is brought up to the minimum balance. The service fee
will be deducted from the account during the first week of each calendar
quarter for the previous quarter, and will be used to help defray the cost of
maintaining low-balance accounts. No fees will be charged without proper
notice, and no CDSC will apply to such assessments.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.
20
<PAGE>
REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways. The
exchange service is useful if your investment requirements change and you want
an easy way to invest in other equity funds, tax-advantaged funds, bond funds
or money market funds. This service is also useful if you are anticipating a
major expenditure and want to move a portion of your investment into a fund
that has the checkwriting feature. Exchanges are subject to the requirements of
each fund and all exchanges of shares constitute taxable events. See Taxes.
Further, in order for an exchange to be processed, shares of the fund being
acquired must be registered in the state where the acquiring shareholder
resides. You may want to consult your financial adviser or investment dealer to
discuss which funds in Delaware Investments will best meet your changing
objectives, and the consequences of any exchange transaction. You may also call
Delaware Investments directly for fund information.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after the Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
For example, redemption or exchange requests received in good order after the
time the offering price and net asset value of shares are determined will be
processed on the next business day. See Purchase Price and Effective Date under
How to Buy Shares. A shareholder submitting a redemption request may indicate
that he or she wishes to receive redemption proceeds of a specific dollar
amount. In the case of such a request, and in the case of certain redemptions
from retirement plan accounts, the Fund will redeem the number of shares
necessary to deduct the applicable CDSC in the case of Class B and Class C
Shares, and, if applicable, the Limited CDSC in the case of Class A Shares and
tender to the shareholder the requested amount, assuming the shareholder holds
enough shares in his or her account for the redemption to be processed in this
manner. Otherwise, the amount tendered to the shareholder upon redemption will
be reduced by the amount of the applicable CDSC or Limited CDSC. Redemption
proceeds will be distributed promptly, as described below, but not later than
seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in "good order," you
must provide your account number, account registration, and the total number of
shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a redemption or
an exchange by calling the Shareholder Service Center at 800-523-1918. The Fund
may suspend, terminate, or amend the terms of the exchange privilege upon 60
days' written notice to shareholders.
The Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor redemption requests as to shares for which a check
was tendered as payment, but the Fund will not mail the proceeds until it is
reasonably satisfied that the check has cleared, which may take up to 15 days
from the purchase date. You can avoid this potential delay if you purchase
shares by wiring Federal Funds. The Fund reserves the right to reject a written
or telephone redemption request or delay payment of redemption proceeds if
there has been a recent change to the shareholder's address of record.
There is no front-end sales charge or fee for exchanges made between
shares of funds which both carry a front-end sales charge. Any applicable
front-end sales charge will apply to exchanges from shares of funds not subject
to a front-end sales charge, except for exchanges involving assets that were
previously invested in a fund with a front-end sales charge and/or exchanges
involving the reinvestment of dividends.
21
<PAGE>
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in Delaware Investments (in each
case, "New Shares") in a permitted exchange, will not be subject to a CDSC that
might otherwise be due upon redemption of the Original Shares. However, such
shareholders will continue to be subject to the CDSC and, in the case of Class
B Shares, the automatic conversion schedule of the Original Shares as described
in this Prospectus and any CDSC assessed upon redemption will be charged by the
fund from which the Original Shares were exchanged. In an exchange of Class B
Shares from the Fund, the Fund's CDSC schedule may be higher than the CDSC
schedule relating to the New Shares acquired as a result of the exchange. For
purposes of computing the CDSC that may be payable upon a disposition of the
New Shares, the period of time that an investor held the Original Shares is
added to the period of time that an investor held the New Shares. With respect
to Class B Shares, the automatic conversion schedule of the Original Shares may
be longer than that of the New Shares. Consequently, an investment in New
Shares by exchange may subject an investor to the higher 12b-1 fees applicable
to Class B Shares of the Fund for a longer period of time than if the
investment in New Shares were made directly.
Various redemption and exchange methods are outlined below. Except for the
CDSC applicable to certain redemptions of Class B and Class C Shares and the
Limited CDSC applicable to certain redemptions of Class A Shares purchased at
net asset value, there is no fee charged by the Fund or the Distributor for
redeeming or exchanging your shares, but such fees could be charged in the
future. You may have your investment dealer arrange to have your shares
redeemed or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund or its agent.
Written Redemption
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103 to
redeem some or all of your shares. The request must be signed by all owners of
the account or your investment dealer of record. For redemptions of more than
$50,000, or when the proceeds are not sent to the shareholder(s) at the address
of record, the Fund requires a signature by all owners of the account and a
signature guarantee for each owner. A signature guarantee can be obtained from
a commercial bank, a trust company or a member of a Securities Transfer
Association Medallion Program ("STAMP"). A signature guarantee cannot be
provided by a notary public. A signature guarantee is designed to protect the
shareholders, Equity Funds IV, Inc. and its agents from fraud. The Fund
reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Fund may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificate(s) must accompany your request and also be in good order.
Certificates are issued for Class A Shares only if a shareholder submits a
specific request. Certificates are not issued for Class B Shares or Class C
Shares.
Written Exchange
You may also write to the Fund (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your shares into another mutual
fund in Delaware Investments, subject to the same conditions and limitations as
other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
certificate(s).
The Telephone Redemption--Check to Your Address of Record service and the
Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do not
wish to have such services available with respect to your account. The Fund
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an
unusually large volume of telephone requests.
22
<PAGE>
Neither the Fund nor its Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption
or exchange of Fund shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day. First
Union National Bank's fee (currently $7.50) will be deducted from your
redemption proceeds. If you ask for a check, it will normally be mailed the
next business day after receipt of your redemption request to your
predesignated bank account. There are no separate fees for this redemption
method, but the mail time may delay getting funds into your bank account.
Simply call the Shareholder Service Center prior to the time the offering price
and net asset value are determined, as noted above.
MoneyLine(SM) On Demand
Through the MoneyLine(SM) On Demand service, you or your investment dealer
may call the Fund to request a transfer of funds from your Fund account to your
predesignated bank account. See MoneyLineSM Services under The Delaware
Difference for additional information about this service.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to adjust
your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in Delaware Investments under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
Systematic Withdrawal Plans
1. Regular Plans
This plan provides shareholders with a consistent monthly (or quarterly)
payment. This is particularly useful to shareholders living on fixed incomes,
since it can provide them with a stable supplemental amount. With accounts of
at least $5,000, you may elect monthly withdrawals of $25 (quarterly $75) or
more. The Fund does not recommend any particular monthly amount, as each
shareholder's situation and needs vary. Payments are normally made by check. In
the alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLineSM Direct
Deposit Service. Your funds will normally be credited to your bank account up
to four business days after the payment date. There are no separate fees for
this redemption method. See MoneyLine(SM) Services under The Delaware
Difference for more information about this service.
2. Retirement Plans
For shareholders eligible under the applicable retirement plan to receive
benefits in periodic payments, the Systematic Withdrawal Plan provides you with
maximum flexibility. A number of formulas are available for calculating your
withdrawals depending upon whether the distributions are required or optional.
Withdrawals must be for $25 or more; however, no minimum account balance is
required. The MoneyLine(SM) Direct Deposit Service described above is not
available for certain retirement plans.
* * *
Shareholders should not purchase additional shares while participating in
a Systematic Withdrawal Plan.
Redemptions of Class A Shares via a Systematic Withdrawal Plan may be
subject to a Limited CDSC if the original purchase was made at net asset value
within two years prior to the withdrawal and a dealer's commission was paid on
that purchase. See Contingent Deferred Sales Charge for Certain Redemptions of
Class A Shares Purchased at Net Asset Value, below.
23
<PAGE>
The applicable CDSC for Class B Shares and Class C Shares redeemed via a
Systematic Withdrawal Plan will be waived if, on the date that the Plan is
established, the annual amount selected to be withdrawn is less than 12% of the
account balance. If the annual amount selected to be withdrawn exceeds 12% of
the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subject to the applicable
CDSC. Whether a waiver of the CDSC is available or not, the first shares to be
redeemed for each Systematic Withdrawal Plan payment will be those not subject
to a CDSC because they have either satisfied the required holding period or
were acquired through the reinvestment of distributions. The 12% annual limit
will be reset on the date that any Systematic Withdrawal Plan is modified (for
example, a change in the amount selected to be withdrawn or the frequency or
date of withdrawals), based on the balance in the account on that date. See
Waiver of Contingent Deferred Sales Charge -- Class B and Class C Shares,
below.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
For purchases of $1,000,000 or more made on or after July 1, 1998, a
Limited CDSC will be imposed on certain redemptions of Class A Shares (or
shares into which such Class A Shares are exchanged) according to the following
schedule: (1) 1.00% if shares are redeemed during the first year after the
purchase; and (2) 0.50% if such shares are redeemed during the second year
after the purchase, if such purchases were made at net asset value and
triggered the payment by the Distributor of the dealer's commission described
above.
The Limited CDSC will be paid to the Distributor and will be assessed on
an amount equal to the lesser of: (1) the net asset value at the time of
purchase of the Class A Shares being redeemed or (2) the net asset value of
such Class A Shares at the time of redemption. For purposes of this formula,
the "net asset value at the time of purchase" will be the net asset value at
purchase of the Class A Shares even if those shares are later exchanged for
shares of another Delaware Investments fund and, in the event of an exchange of
Class A Shares, the "net asset value of such shares at the time of redemption"
will be the net asset value of the shares acquired in the exchange.
Redemptions of such Class A Shares held for more than two years will not
be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Investments fund will not trigger the imposition of the
Limited CDSC at the time of such exchange. The period a shareholder owns shares
into which Class A Shares are exchanged will count towards satisfying the
two-year holding period. The Limited CDSC is assessed if such two-year period
is not satisfied irrespective of whether the redemption triggering its payment
is of Class A Shares of the Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed that
shares not subject to the Limited CDSC are the first redeemed followed by other
shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the
investment occurred, will age one month on the last day of that month and each
subsequent month.
Waiver of Limited Contingent Deferred Sales Charge -- Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that
result from the Fund's right to liquidate a shareholder's account if the
aggregate net asset value of the shares held in the account is less than the
then-effective minimum account size; (ii) distributions to participants from a
retirement plan qualified under section 401(a) or 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code"), or due to death of a participant
in such a plan; (iii) redemptions pursuant to the direction of a participant or
beneficiary of a retirement plan qualified under section 401(a) or 401(k) of
the Code with respect to that retirement plan; (iv) periodic distributions from
an IRA, SIMPLE IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to
death, disability, or attainment of age 59 1/2, and IRA distributions
qualifying under Section 72(t) of the Code; (v) returns of excess contributions
to an IRA; (vi) distributions by other employee benefit plans to pay benefits;
(vii) distributions described in (ii), (iv), and (vi) above pursuant to a
systematic withdrawal plan; and (viii) redemptions by the classes of
shareholders who are permitted to purchase shares at net asset value,
regardless of the size of the purchase (see Buying Class A Shares at Net Asset
Value under Classes of Shares).
24
<PAGE>
Waiver of Contingent Deferred Sales Charge -- Class B and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in connection
with the following redemptions: (i) redemptions that result from the Fund's
right to liquidate a shareholder's account if the aggregate net asset value of
the shares held in the account is less than the then-effective minimum account
size; (ii) returns of excess contributions to an IRA, SIMPLE IRA, SEP/IRA, or
403(b)(7) or 457 Deferred Compensation Plan, (iii) periodic distributions from
an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, or 403(b)(7) or 457 Deferred Compensation
Plan due to death, disability or attainment of age 59 1/2, and IRA
distributions qualifying under Section 72(t) of the Code; and (iv)
distributions from an account if the redemption results from the death of all
registered owners of the account (in the case of accounts established under the
Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts,
the waiver applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Code) of all registered
owners occurring after the purchase of the shares being redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in
the account is less than the then-effective minimum account size; (ii) returns
of excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution Plan; (iii) periodic distributions from a 403(b)(7) or 457
Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan,
Money Purchase Pension Plan, or 401(k) Defined Contribution Plan upon
attainment of age 70 1/2, and IRA distributions qualifying under Section 72(t)
of the Code; (iv) distributions from a 403(b)(7) or 457 Deferred Compensation
Plan, Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or 401(k)
Defined Contribution Plan upon attainment of normal retirement age under the
plan or upon separation from service; (vi) periodic distributions from an IRA
or SIMPLE IRA on or after attainment of age 59 1/2; and (vii) distributions
from an account if the redemption results from the death of all registered
owners of the account (in the case of accounts established under the Uniform
Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts, the
waiver applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Code) of all registered
owners occurring after the purchase of the shares being redeemed.
In addition, the CDSC will be waived on Class B and Class C Shares
redeemed in accordance with a Systematic Withdrawal Plan if the annual amount
selected to be withdrawn under the Plan does not exceed 12% of the value of the
account on the date that the Systematic Withdrawal Plan was established or
modified.
25
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
The Fund will make payments from net investment income and net realized
securities profits, if any, twice a year. The first payment normally will be
made during the first quarter following the end of Equity Funds IV, Inc.'s
fiscal year. The second payment would be made near the end of the calendar year
if necessary to comply with certain requirements of the Code.
Each class of the Fund will share proportionately in the investment income
and expenses of the Fund, except that the per share dividends from net
investment income on Class A Shares, Class B Shares and Class C Shares will
vary due to the expenses under the 12b-1 Plan applicable to each Class.
Generally, the dividends per share on Class B Shares and Class C Shares can be
expected to be lower than the dividends per share on Class A Shares because the
expenses under the 12b-1 Plans relating to Class B and Class C Shares will be
higher than the expenses under the 12b-1 Plan relating to Class A Shares. See
Distribution (12b-1) and Service under Management of the Fund.
Both dividends and distributions, if any, are automatically reinvested in
your account at net asset value unless you elect otherwise. Any check in
payment of dividends or other distributions which cannot be delivered by the
United States Post Office or which remains uncashed for a period of more than
one year may be reinvested in your account at the then-current net asset value
and the dividend option may be changed from cash to reinvest. If you elect to
take your dividends and distributions in cash and such dividends and
distributions are in an amount of $25 or more, you may choose the MoneyLine(SM)
Direct Deposit Service and have such payments transferred from your Fund
account to your predesignated bank account. This service is not available for
retirement plans. See MoneyLine(SM) Services under The Delaware Difference for
more information about this service.
26
<PAGE>
TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Fund.
On August 5, 1997, the Taxpayer Relief Act of 1997 (the "1997 Act") was
signed into law. This new law made sweeping changes in the Code. Because many
of these changes are complex, and only indirectly affect the Fund and its
distributions to you, they are discussed in Part B. Changes in the treatment of
capital gains, however, are discussed in this section.
The Fund has qualified, and intends to continue to qualify, as a regulated
investment company under Subchapter M of the Code. As such, the Fund will not
be subject to federal income tax, or to any excise tax, to the extent its
earnings are distributed as provided in the Code and it satisfies certain other
requirements relating to the sources of its income and diversification of its
assets.
The Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to those investors who are subject
to income taxes as ordinary income, whether received in cash or in additional
shares. For corporate investors, dividends from net investment income will
generally qualify in part for the corporate dividends-received deduction. The
portion of dividends paid by the Fund that so qualifies will be designated each
year in a notice from Equity Funds IV, Inc. to the Fund's shareholders. For the
fiscal year ended September 30, 1998, 29.92% of the Fund's dividends from net
investment income qualified for the dividends-received deduction to
corporations.
Distributions paid by the Fund from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who
are subject to income taxes as long-term capital gains, regardless of the
length of time an investor has owned shares in the Fund. The Fund does not seek
to realize any particular amount of capital gains during a year; rather,
realized gains are a by-product of Fund management activities. Consequently,
capital gains distributions may be expected to vary considerably from year to
year. Also, for those investors subject to tax, if purchases of shares in the
Fund are made shortly before the record date for a dividend or capital gains
distribution, a portion of the investment will be returned as a taxable
distribution.
The Treatment of Capital Gain Distributions under the Taxpayer Relief Act of
1997
The 1997 Act creates a category of long-term capital gain for individuals
that will be taxed at new lower tax rates. For investors who are in the 28% or
higher federal income tax brackets, these gains will be taxed at a minimum of
20%. For investors who are in the 15% federal income tax bracket, these gains
will be taxed at a maximum of 10%. Capital gain distributions will qualify for
these new maximum tax rates, depending on when the Fund's securities were sold
and how long they were held by the Fund before they were sold. The holding
periods for which the new rates apply were revised by the Internal Revenue
Service Restructuring and Reform Act of 1998 and the Omnibus Consolidated and
Emergency Supplemental Appropriations Act, which included technical corrections
to the 1997 Act. Investors who want more information on holding periods and
other qualifying rules relating to these new rates should review the expanded
discussion in Part B, or should contact their own tax advisers.
Equity Funds IV, Inc. will advise you in its annual information reporting
at calendar year end of the amount of its capital gain distributions which will
qualify for these maximum federal tax rates.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November, or December to shareholders
of record on a specified date in one of those months, but which, for
operational reasons, may not be paid to the shareholder until the following
January, will be treated for tax purposes as if paid by the Fund and received
by the shareholder on December 31 of the calendar year in which they are
declared.
27
<PAGE>
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may
be realized from an ordinary redemption of shares or an exchange of shares
between the Fund and any other funds in Delaware Investments. Any loss incurred
on a sale or exchange of Fund shares that had been held for six months or less
will be treated as a long-term capital loss to the extent of capital gain
dividends received with respect to such shares. All or a portion of the sales
charge incurred in acquiring Fund shares will be excluded from the federal tax
basis of any of such shares sold or exchanged within 90 days of their purchase
(for purposes of determining gain or loss upon sale of such shares) if the sale
proceeds are reinvested in the Fund or in another fund in Delaware Investments
of funds and a sales charge that would otherwise apply to the reinvestment is
reduced or eliminated. Any portion of such sales charge excluded from the tax
basis of the shares sold will be added to the tax basis of the shares acquired
in the reinvestment.
The automatic conversion of Class B Shares into Class A Shares at the end
of approximately eight years after purchase will be tax-free for federal tax
purposes. See Automatic Conversion of Class B Shares under Classes of Shares.
In addition to the federal taxes described above, shareholders may or may
not be subject to various state and local taxes. For example, distributions of
interest income and capital gains realized from certain types of U.S.
government securities may be exempt from state personal income taxes. Because
investors' state and local taxes may be different than the federal taxes
described above, investors should consult their own tax advisers.
Each year, Equity Funds IV, Inc. will mail to you information on the tax
status of the Fund's dividends and distributions. Shareholders will also
receive each year information as to the portion of dividend income, if any,
that is derived from U.S. government securities that are exempt from state
income tax. Of course, shareholders who are not subject to tax on their income
would not be required to pay tax on amounts distributed to them by the Fund.
Equity Funds IV, Inc. is required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to shareholders who have not
complied with IRS taxpayer identification regulations. You may avoid this
withholding requirement by certifying on your Investment Application your
proper Taxpayer Identification Number and by certifying that you are not
subject to backup withholding.
See Accounting and Tax Issues and Distributions and Taxes in Part B for
additional information on tax matters relating to the Fund and its shareholders.
28
<PAGE>
CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
The Net asset value ("NAV") per share is computed by adding the value of
all securities and other assets in the portfolio, deducting any liabilities
(expenses and fees are accrued daily) and dividing by the number of shares
outstanding. Portfolio securities for which market quotations are available are
priced at market value. Foreign securities expressed in foreign currency values
will be converted into U.S. dollar values at the mean between the currencies'
bid and offered quotations. Short-term investments having a maturity of less
than 60 days are valued at amortized cost, which approximates market value. All
other securities are valued at their fair value as determined in good faith and
in a method approved by Equity Funds IV, Inc.'s Board of Directors.
Class A Shares are purchased at the offering price per share, while Class
B Shares and Class C Shares are purchased at the NAV per share. The offering
price per share of Class A Shares consists of the NAV per share next computed
after the order is received, plus any applicable front-end sales charges.
The offering price and NAV are computed as of the close of regular trading
on the New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when
the Exchange is open.
The net asset values of all outstanding shares of each class of the Fund
will be computed on a pro-rata basis for each outstanding share based on the
proportionate participation in the Fund represented by the value of shares of
that class. All income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share of a class, based on each class'
percentage in the Fund represented by the value of shares of such classes,
except that DelCap Fund Institutional Class will not incur any of the expenses
under the Fund's 12b-1 Plans and 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 NAV per share of each class of the Fund will vary.
29
<PAGE>
MANAGEMENT OF THE FUND
Directors
The business and affairs of Equity Funds IV, Inc. are managed under the
direction of its Board of Directors. Part B contains additional information
regarding Equity Funds IV, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the Delaware
Investments funds since 1938. On September 30, 1998, the Manager and its
affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $40 billion in assets
in the various institutional or separately managed (approximately
$23,666,360,000) and investment company (approximately $17,194,990,000)
accounts.
The Manager is a series of Delaware Management Business Trust. The Manager
changed its form of organization from a corporation to a business trust on
March 1, 1998. The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly owned subsidiary of Lincoln National Corporation ("Lincoln National")
was completed. DMH and the Manager are now indirect, wholly owned subsidiaries,
and subject to the ultimate control, of Lincoln National. Lincoln National,
with headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management. In connection with the merger, a new
Investment Management Agreement between Equity Funds IV, Inc. on behalf of the
Fund and the Manager was executed following shareholder approval.
The Manager manages the Fund's portfolio and makes investment decisions
for the Fund, which are implemented by the Fund's Trading Department. The
Manager also administers Equity Funds IV, Inc.'s affairs and pays the salaries
of all the directors, officers and employees of Equity Funds IV, Inc. who are
affiliated with the Manager. For these services, the Manager is paid an annual
fee of 3/4 of 1% of the average daily net assets of the Fund, less the Fund's
proportionate share of all directors' fees paid to unaffiliated directors by
Equity Funds IV, Inc. The Fund's fee is higher than that paid by many other
funds. The fee may be higher or lower than that paid by funds with comparable
investment objectives. Investment management fees paid by the Fund for the
fiscal year ended September 30, 1998 were 0.75% of average daily net assets.
The directors of Equity Funds IV, Inc. annually review fees paid to the
Manager.
Gerald S. Frey has primary responsibility for making day-to-day investment
decisions for the Fund. Mr. Frey has been Vice President/Senior Portfolio
Manager of the Fund since March 1997 and was Co-Manager from June 1996 to March
1997. Mr. Frey holds a BA in Economics from Bloomsburg University and attended
Wilkes College and New York University, and he has 21 years' experience in the
money management business. Prior to joining Delaware Investments in 1996, he
was a Senior Director with Morgan Grenfell Capital Management in New York.
In making investment decisions for the Fund, Mr. Frey regularly consults
with Richard G. Unruh, Jr., Jr., Marshall T. Bassett, John A. Heffern, Jeffrey
W. Hynoski and Lori P. Wachs. A graduate of Brown University, Mr. Unruh received
his MBA from the University of Pennsylvania's Wharton School and joined
Delaware Investments in 1982 after 19 years of investment management experience
with Kidder, Peabody & Co. Inc. Mr. Unruh was named an Executive Vice President
of Equity Funds IV, Inc. in 1994. He is also a member of the Board of the
Manager and was named an Executive Vice President of the Manager in 1994. Mr.
Bassett, Vice President, joined Delaware Investments in 1997. In his most recent
position, he served as Vice President in Morgan Stanley Asset Management's
Emerging Growth Group, where he analyzed small growth companies. Prior to that,
he was a trust officer at Sovran Bank and Trust Company. He received his
bachelor's degree and MBA from Duke University. Mr. Heffern, Vice President,
holds a bachelor's degree and an MBA from the University of North Carolina at
Chapel Hill. He joined Delaware Investments in 1997. Previously, he was a Senior
Vice President, Equity Research at NatWest Securities Corporation's Specialty
Finance Services unit. Prior to that, he was a Principal and Senior Regional
Bank Analyst at Alex. Brown & Sons. Mr. Hynoski is a Vice President. He joined
Delaware Investments in 1998. Previously he served as a Vice President at
Bessemer Trust Company in the mid and large capitalization growth group, where
he specialized in the areas of science, technology, and telecommunications.
Prior to that, Mr. Hynoski held positions at Lord Abbett & Co. and Cowen Asset
Management. Mr. Hynoski holds a BS in Finance from the University of Delaware
and an MBA with a concentration in Investments/Portfolio Management and
Financial Economics from Pace University. Ms. Wachs is a Vice President. She
joined Delaware Investments in 1992 from Goldman Sachs, where she was an equity
analyst for two years. She is a graduate of the University of Pennsylvania's
Wharton School, where she majored in Finance and Oriental Studies.
30
<PAGE>
Portfolio Trading Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length of time they
have been held. The degree of portfolio activity will affect brokerage costs of
the Fund and may affect taxes payable by the Fund's shareholders. Given the
Fund's investment objective, its annual portfolio turnover rate may exceed
100%. A turnover rate of 100% would occur, for example, if all the investments
in the Fund's portfolio at the beginning of the year were replaced by the end
of the year. The turnover rate also may be affected by cash requirements for
redemptions and repurchases of Fund shares.
The Fund uses its best efforts to obtain the best available price and most
favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager
or to its advisory clients. These services may be used by the Manager in
servicing any of its accounts. Subject to best price and execution, the Fund
may consider a broker/dealer's sales of shares of Delaware Investments funds in
placing portfolio orders and may place orders with broker/dealers that have
agreed to defray certain expenses of such funds, such as custodian fees.
Performance Information
From time to time, the Fund may quote the total return performance of the
Classes in advertising and other types of literature.
Total return will be based on a hypothetical $1,000 investment, reflecting
the reinvestment of all distributions at net asset value and: (i) in the case
of Class A Shares, the impact of the maximum front-end sales charge at the
beginning of each specified period; and (ii) in the case of Class B Shares and
Class C Shares, the deduction of any applicable CDSC at the end of the relevant
period. Each presentation will include the average annual total return for
one-, five- and ten-year or life-of fund periods, as relevant. The Fund may
also advertise aggregate and average total return information concerning a
Class over additional periods of time. In addition, the Fund may present total
return information that does not reflect the deduction of the maximum front-end
sales charge or any applicable CDSC. In this case, such total return
information would be more favorable than total return information that includes
deductions of the maximum front-end sales charge or any applicable CDSC.
Because securities prices fluctuate, investment results of the Classes
will fluctuate over time and past performance should not be considered a
guarantee of future results.
Distribution (12b-1) and Service
The Distributor, Delaware Distributors, L.P., serves as the national
distributor of the Fund's shares under a Distribution Agreement with Equity
Funds IV, Inc. dated as of April 3, 1995, as amended on November 29, 1995.
Equity Funds IV, Inc. has adopted a separate distribution plan under Rule
12b-1 for each of the Class A Shares, Class B Shares and Class C Shares (the
"Plans"). The Plans permit the Fund to pay the Distributor from the assets of
the respective Classes a monthly fee for the Distributor's services and
expenses in distributing and promoting sales of shares.
These expenses include, among other things, preparing and distributing
advertisements, sales literature, and prospectuses and reports used for sales
purposes, compensating sales and marketing personnel, holding special
promotions for specified periods of time, and paying distribution and
maintenance fees to brokers, dealers and others. In connection with the
promotion of shares of the Classes, the Distributor may, from time to time, pay
to participate in dealer-sponsored seminars and conferences, and reimburse
dealers for expenses incurred in connection with preapproved seminars,
conferences and advertising. The Distributor may pay or allow additional
promotional incentives to dealers as part of preapproved sales contests and/or
to dealers provide extra training and information concerning a Class and
increase sales of the Class. In addition, the Fund may make payments from the
12b-1 Plan fees of the respective Class directly to others, such as banks, who
aid in the distribution of Class shares or provide services in respect of a
Class, pursuant to service agreements with Equity Funds IV, Inc.
The 12b-1 Plan expenses relating to each of the Class B Shares and the
Class C Shares are also used to pay the Distributor for advancing the
commission costs to dealers with respect to the initial sale of such shares.
The aggregate fees paid by the Fund from the assets of the respective
Classes to the Distributor and others under the Plans may not exceed (i) 0.30%
of the Class A Shares' average daily net assets in any year, and (ii) 1% (0.25%
of which are fees to be paid by the Fund 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
in any year. The Fund's Class A, Class B and Class C Shares will not incur any
distribution expenses beyond these limits, which may not be increased without
shareholder approval.
31
<PAGE>
While payments pursuant to the Plans may not exceed 0.30% annually with
respect to the Class A Shares, and 1% annually with respect to each of the
Class B Shares and the Class C Shares, the Plans do not limit fees to amounts
actually expended by the Distributor. It is therefore possible that the
Distributor may realize a profit in any particular year. However, the
Distributor currently expects that its distribution expenses will likely equal
or exceed payments to it under the Plans. The Distributor may, however, incur
such additional expenses and make additional payments to dealers from its own
resources to promote the distribution of shares of the Classes. The monthly
fees paid to the Distributor under the Plans are subject to the review and
approval of Equity Funds IV, Inc.'s unaffiliated directors, who may reduce the
fees or terminate the Plans at any time.
Equity Funds IV, Inc.'s Plans do not apply to DelCap Fund Institutional
Class. Those shares are not included in calculating the Plans' fees, and the
Plans are not used to assist in the distribution and marketing of DelCap Fund
Institutional Class.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Fund
under an amended and restated agreement dated as of November 29, 1996. Delaware
Service Company, Inc. also provides accounting services to the Fund pursuant to
the terms of a separate Fund Accounting Agreement.
The directors annually review fees paid to the Distributor and the
Transfer Agent. The Distributor and the Transfer Agent are also indirect,
wholly owned subsidiaries of DMH.
* * *
As with other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by its service providers do not properly process and
calculate date-related information from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." Equity Funds IV, Inc. and the Fund
are taking steps to obtain satisfactory assurances that their major service
providers are taking steps reasonably designed to address the Year 2000 Problem
with respect to the computer systems that such service providers use. There can
be no assurances that these steps will be sufficient to avoid any adverse
impact on the business of any of the Fund.
Several European countries are participating in the European Economic and
Monetary Union, which will establish a common European currency for
participating countries. This currency will commonly be known as the "Euro." It
is anticipated that each such participating country will replace its existing
currency with the Euro on January 1, 1999. Additional European countries may
elect to participate after that date. The Fund, if investing in securities of
participating countries, could be adversely affected if the computer systems
used by their major service providers are not properly prepared to handle the
implementation of this single currency or the adoption of the Euro by
additional countries in the future. The Fund is taking steps to obtain
satisfactory assurances that the major service providers are taking steps
reasonably designed to address these matters with respect to the computer
systems that such service providers use. There can be no assurances that these
steps will be sufficient to avoid any adverse impact on the business of the
Fund.
Expenses
The Fund is responsible for all of its own expenses other than those borne
by the Manager under the Investment Management Agreement and those borne by the
Distributor under the Distribution Agreement. The ratio of expenses to average
daily net assets for the fiscal year ended September 30, 1998 was 1.40% for
Class A Shares, 2.10% for Class B Shares and 2.10% for Class C Shares. The
expense ratio of each Class reflects the impact of its 12b-1 Plan.
32
<PAGE>
Shares
Equity Funds IV, Inc. is an open-end management investment company. The
Fund's portfolio of assets is diversified as defined by the 1940 Act. In
addition to the Fund, Equity Funds IV, Inc. currently offers one other series
of shares, the Capital Appreciation Fund. Commonly known as a mutual fund,
Equity Funds IV, Inc. was organized as a Maryland corporation in September
1985.
Equity Funds IV, Inc. shares have a par value of $.01, equal voting
rights, except as noted below, and are equal in all other respects. All Fund
shares have noncumulative voting rights which means that the holders of more
than 50% of Equity Funds IV, Inc.'s shares voting for the election of directors
can elect 100% of the directors if they choose to do so. Under Maryland law,
Equity Funds IV, Inc. is not required, and does not intend, to hold annual
meetings of shareholders unless, under certain circumstances, it is required to
do so under the 1940 Act.
In addition to Class A Shares, Class B Shares and Class C Shares, the Fund
also offers DelCap Fund Institutional Class shares. Shares of each class
represent proportionate interests in the assets of the Fund and have the same
voting and other rights and preferences as the other classes of the Fund,
except that shares of DelCap Fund Institutional Class are not subject to, and
may not vote on matters affecting, the Distribution Plans under Rule 12b-1
relating to the Class A, Class B and Class C Shares. Similarly, as a general
matter, holders of Class A Shares, Class B Shares and Class C Shares may vote
only on matters affecting the 12b-1 Plan that relates to the class of shares
that they hold. However, the Class B Shares may vote on any proposal to
increase materially the fees to be paid by the Fund under the Rule 12b-1 Plan
relating to the Class A Shares.
33
<PAGE>
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
Small to Medium-Sized Companies
The Fund invests its assets in equity securities of small to medium-sized
companies. These stocks have historically been more volatile in price than
larger capitalization stocks, such as those included in the S&P 500 Index. This
is because, among other things, smaller companies have a lower degree of
liquidity and tend to have a greater sensitivity to changing economic
conditions. These companies may have narrow product lines, markets or financial
resources, or may depend on a limited management group. In addition, these
companies are typically subject to a greater degree of changes in their
earnings and prospects. The companies' securities may trade less frequently and
have a smaller trading volume. The securities may be traded only in the
over-the-counter markets or on a regional securities exchange. In addition to
exhibiting greater volatility, smaller capitalization securities may, to some
degree, fluctuate independently of the stocks of larger capitalization
companies. For example, the stocks of smaller capitalization companies may
decline in price as the price of larger company stocks rise, or vice versa.
Foreign Securities
The Fund may invest up to 25% of its assets in foreign securities. Foreign
markets may be more volatile than U.S. markets. Such investments involve
sovereign risk in addition to the normal risks associated with American
securities. These risks include political risks, foreign taxes and exchange
controls and currency fluctuations. For example, foreign portfolio investments
may fluctuate in value due to changes in currency rates (i.e., the value of
foreign investments would increase with a fall in the value of the dollar, and
decrease with a rise in the value of the dollar) and control regulations apart
from market fluctuations. The Fund may also experience delays in foreign
securities settlement.
American Depository Receipts
The Fund 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.
Rule 144A Securities
The Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933. Rule 144A permits many privately
placed and legally restricted securities to be freely traded among certain
institutional buyers such as the Fund. The Fund may invest no more than 10% of
the value of its net assets in illiquid securities.
While maintaining oversight, the Board of Directors has delegated to the
Manager the day-to-day function of determining whether or not individual Rule
144A Securities are liquid for purposes of the Fund's 10% limitation on
investments in illiquid assets. The Board has instructed the Manager to
consider the following factors in determining the liquidity of a Rule 144A
Security: (i) the frequency of trades and trading volume for the security; (ii)
whether at least three dealers are willing to purchase or sell the security and
the number of potential purchasers; (iii) whether at least two dealers are
making a market in the security; (iv) the nature of the security and the nature
of the marketplace trades (e.g., the time needed to dispose of the security,
the method of soliciting offers, and the mechanics of transfer).
34
<PAGE>
If the Manager determines that a Rule 144A Security which was previously
determined to be liquid is no longer liquid and, as a result, the Fund's
holdings of illiquid securities exceed the Fund's 10% limit on investments in
such securities, the Manager will determine what action to take to ensure that
the Fund continues to adhere to such limitation.
Portfolio Loan Transactions
The Fund may loan up to 25% of its assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other security
transactions.
The major risk to which the Fund would be exposed on a loan transaction is
the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, subject to overall
supervision by the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to
be received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
Repurchase Agreements
The Fund may also use repurchase agreements that are at least 102%
collateralized by securities in which the Fund can invest directly. Repurchase
agreements help the Fund to invest cash on a temporary basis. The Fund may
invest cash balances in joint repurchase agreements with other Delaware
Investments funds. Under a repurchase agreement, the Fund acquires ownership
and possession of a security, and the seller agrees to buy the security back at
a specified time and higher price. If the seller is unable to repurchase the
security, the Fund could experience delays in liquidating the securities and
the Fund could incur a loss. That loss, if any, would be the difference between
the repurchase price and the market value of the security. To minimize those
possibilities, the Fund may enter into repurchase agreements with banks and
broker/dealers deemed by the Manager to be creditworthy under guidelines
approved by the Board of Directors and those which the Manager, under such
guidelines, determines to present minimal credit risks and which are of high
quality.
Borrowing
The Fund is permitted under certain circumstances to borrow money.
Investment securities will not normally be purchased while the Fund has an
outstanding borrowing.
Call Options
Writing a Covered Call Option on Securities
A covered call option obligates the Fund to sell one of its securities for
an agreed price up to an agreed date. When the Fund writes a call, it receives
a premium and agrees to sell the callable securities to a purchaser of a
corresponding call during the call period (usually, not more than nine months)
at a fixed price regardless of market price changes during the call period. The
advantage is that the Fund receives premium income for the limited purpose of
offsetting the costs of purchasing put options or offsetting any capital loss
or decline in the market value of the security. However, if the Manager's
forecast is wrong, the Fund may not fully participate in the market
appreciation if the security's price rises.
Writing a Call Option on Stock Indices
Writing a call option on stock indices is similar to the writing of a call
option on an individual stock. Stock indices used will include, but not be
limited to, the S&P 500, the S&P 100 and the S&P Over-The-Counter ("OTC") 250.
Put Options
Purchasing a Put Option
A put option gives the Fund the right to sell one of its securities for an
agreed price up to an agreed date. The advantage is that the Fund can be
protected should the market value of the security decline. However, the Fund
must pay a premium for this right whether or not the put option is exercised.
Purchasing a Put Option on Stock Indices
Purchasing a protective put option on stock indices is similar to the
purchase of protective puts on an individual stock. Indices used will include,
but not be limited to, the S&P 100 and the S&P OTC 250.
Closing Transactions
Closing transactions essentially let the Fund offset a put option or
covered call option prior to its exercise or expiration. If the Fund cannot
effect a closing transaction, it may have to hold a security it would otherwise
sell or deliver a security it might want to hold.
Part B describes certain of these investment policies and risk
considerations. Part B sets forth other investment policies, risk considerations
and more specific investment restrictions.
35
<PAGE>
Delaware Investments includes funds
with a wide range of investment objectives.
Stock funds, income funds, national and
state-specific tax-exempt funds, money market
funds, global and international funds and
closed-end funds give investors the ability to
create a portfolio that fits their personal
financial goals. For more information,
contact your financial adviser or call
Delaware Investments at 800-523-1918.
Investment Manager
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
National Distributor
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
Shareholder Servicing,
Dividend Disbursing,
Accounting Services
and Transfer Agent
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
Legal Counsel
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
Independent Auditors
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
Custodian
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
[GRAPHIC OMITTED]
www.delawarefunds.com
[GRAPHIC OMITTED]
Printed in the U.S.A. on recycled paper.
P-016[--] PP11/98
<PAGE>
- ----------------------------
DELCAP FUND
INSTITUTIONAL CLASS
- ----------------------------
P r o s p e c t u s
November 30, 1998
DELAWARE
INVESTMENTS
- ---------------------
Philadelphia o London
<PAGE>
PROSPECTUS
NOVEMBER 30, 1998
DELCAP FUND
INSTITUTIONAL
-------------------------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For more information about DelCap Fund Institutional Class call
Delaware Investments at 800-510-4015
This Prospectus describes the DelCap Fund series (the "Fund") of Delaware
Group Equity Funds IV, Inc. ("Equity Funds IV, Inc."), a professionally-managed
mutual fund of the series type. The investment objective of the Fund is
long-term capital growth. The strategy will be to invest primarily in common
stocks that, in the judgment of the Manager, are of superior quality and those
securities convertible into such common stocks.
This Prospectus relates only to the Fund's institutional class, DelCap
Fund Institutional Class (the "Class"), and sets forth information that you
should read and consider before you invest. Please retain it for future
reference. The Fund's Statement of Additional Information ("Part B " of Equity
Funds IV, Inc.'s registration statement), dated November 30, 1998, as it may be
amended from time to time, contains additional information about the Fund and
has been filed with the Securities and Exchange Commission ("SEC"). Part B is
incorporated by reference into this Prospectus and is available, without
charge, by writing to Delaware Distributors, L.P. at the above address or by
calling 800-523-1918. The Fund's financial statements appear in its Annual
Report, which will accompany any response to requests for Part B. In addition,
the SEC maintains a Web site (http://www.sec.gov) that contains Part B,
material we incorporated by reference, and other information regarding
registrants that electronically file with the SEC.
The Fund also offers DelCap Fund A Class, DelCap Fund B Class and DelCap
Fund C Class. Shares of these classes are subject to sales charges and other
expenses, which may affect performance. A prospectus for these classes can be
obtained by writing to Delaware Distributors, L.P. at the above address or by
calling 800-523-1918.
<PAGE>
TABLE OF CONTENTS
Cover Page............................................................ 1
Synopsis.............................................................. 2
Summary of Expenses................................................... 3
Financial Highlights.................................................. 4
Investment Objective and Policies..................................... 5
Suitability........................................................... 5
Investment Strategy................................................... 5
Classes of Shares..................................................... 6
How to Buy Shares..................................................... 7
Redemption and Exchange............................................... 8
Dividends and Distributions........................................... 9
Taxes................................................................. 10
Calculation of Net Asset Value Per Share.............................. 11
Management of the Fund................................................ 11
Other Investment Policies and
Risk Considerations................................................. 14
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. SHARES OF
THE FUND ARE NOT BANK OR CREDIT UNION DEPOSITS.
1
<PAGE>
SYNOPSIS
Investment Objective
The investment objective of the Fund is long-term capital growth. The
strategy will be to invest primarily in common stocks that, in the judgment of
the Manager, are of superior quality and those securities convertible into such
common stocks. For further details, see Investment Objective and Policies and
Other Investment Policies and Risk Considerations.
Risk Factors and Special Considerations
1. Investments in equity securities of small to medium- sized companies in
which the Fund invests may present greater risks than investments in larger
capitalization companies, as the market prices of securities issued by smaller
companies tend to fluctuate, particularly in the short-term, and some smaller
company securities may be speculative. See Suitability under Investment
Objective and Policies.
2. The Fund may enter into options for hedging purposes to counterbalance
portfolio volatility. While the Fund does not engage in options for speculative
purposes, there are risks which result from use of these instruments by the
Fund, and the investor should review the descriptions of such in this
Prospectus. See Investment Strategy under Investment Objective and Policies,
and Other Investment Policies and Risk Considerations.
Investment Manager, Distributor and Transfer Agent
Delaware Management Company (the "Manager") furnishes investment
management services to the Fund, subject to the supervision and direction of
Equity Funds IV, Inc.'s Board of Directors. The Manager also provides
investment management services to certain of the other Delaware Investments
funds. Delaware Distributors, L.P. (the "Distributor") is the national
distributor for the Fund and for all of the other mutual funds in Delaware
Investments. Delaware Service Company, Inc. (the "Transfer Agent") is the
shareholder servicing, dividend disbursing, accounting services and transfer
agent for the Fund and for all of the other mutual funds in Delaware
Investments. See Summary of Expenses and Management of the Fund for further
information regarding the Manager and fees payable under the Fund's Investment
Management Agreement.
Purchase Price
Shares of the Class offered by this Prospectus are available at net asset
value, without a front-end or contingent deferred sales charge, and are not
subject to distribution fees under a Rule 12b-1 distribution plan. See Classes
of Shares.
Redemption and Exchange
Shares of the Class are redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request. See Redemption
and Exchange.
Open-End Investment Company
Equity Funds IV, Inc., which was organized as a Maryland corporation in
1985, is an open-end management investment company. The Fund's portfolio of
assets is diversified as defined by the Investment Company Act of 1940 (the
"1940 Act"). See Shares under Management of the Fund.
2
<PAGE>
SUMMARY OF EXPENSES
DelCap Fund
Shareholder Transaction Expenses Institutional
- --------------------------------------- --------------
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) ..................... None
Maximum Sales Charge Imposed on
Reinvested Dividends (as a percentage
of offering price) .................. None
Exchange Fees ......................... None(1)
Annual Operating Expenses
(as a percentage of
average daily net assets)
- -------------------------
Management Fees .................. 0.75%
12b-1 Fees ....................... None
Other Operating Expenses ......... 0.35%
----
Total Operating Expenses ......... 1.10%
====
1 Exchanges are subject to the requirements of each fund and a front-end sales
charge may apply.
For expense information about DelCap Fund A Class, B Class and C Class,
see the separate prospectus relating to those classes.
The following example illustrates the expenses that an investor would pay
on a $1,000 investment over various time periods, assuming (1) a 5% annual rate
of return, and (2) redemption at the end of each time period.
1 year 3 years 5 years 10 years
------ ------- ------- --------
$11 $35 $61 $134
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
The purpose of the above tables is to assist the investor in understanding
the various costs and expenses that an investor in the Class will bear directly
or indirectly.
3
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Group Equity Funds IV, Inc. -- DelCap Fund and have been audited by
Ernst & Young LLP, independent auditors. The data should be read in conjunction
with the financial statements, related notes, and the report of Ernst & Young
LLP, all of which are incorporated by reference into Part B. Further
information about the Fund's performance is contained in its Annual Report to
shareholders. A copy of the Fund's Annual Report (including the report of Ernst
& Young LLP) may be obtained from Equity Funds IV, Inc. upon request at no
charge.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Class Shares
------------------------------------------------------------------
Year Ended
9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C>
Net asset value, beginning of
period ................................ $ 31.010 $ 31.160 $ 29.130 $ 25.710
Income (loss) from investment
operations:
Net investment income (loss)(3) ........ (0.160) (0.152) (0.123) (0.091)
Net realized and unrealized gains
(loss) on investments ................. (1.910) 3.592 5.693 5.341
---------- --------- ---------- ---------
Total from investment
operations ............................ (2.070) 3.440 5.570 5.250
---------- --------- ---------- ---------
Less dividends
and distributions:
Dividends from net investment
income ................................ none none none none
Distributions from net realized
gain on investments ................... (5.870) (3.590) (3.540) (1.830)
---------- --------- ---------- ---------
Total dividends and distributions....... (5.870) (3.590) (3.540) (1.830)
---------- --------- ---------- ---------
Net asset value, end of period ......... $ 23.070 $ 31.010 $ 31.160 $ 29.130
========== ========= ========== =========
- ------------------------------------------------------------------------------------------------------
Total return: .......................... (7.99)% 12.75% 21.44% 22.45%
- ------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
Net assets, end of period (000's
omitted) .............................. $ 95,200 $ 131,319 $ 178,197 $129,378
Ratio of expenses to average
daily net assets ...................... 1.10% 1.06% 1.05% 1.07%
Ratio of net investment income
(loss) to average daily net assets (0.62%) (0.56%) (0.44%) (0.37%)
Portfolio turnover ..................... 115% 105% 72% 51%
Average commission rate paid(5) ........ $ 0.0600 $ 0.0599 $ 0.0600 N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Institutional Class Shares
----------------------------------------------------------------------------------------
Period
11/9/92(1)
through Year Ended
9/30/94 9/30/93 9/30/93(2) 9/30/92(2) 9/30/91(2)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ................................ $ 26.140 $ 22.000 $ 20.730 $ 21.470 $ 15.810
Income (loss) from investment
operations:
Net investment income (loss)(3) ........ (0.080) (0.027) ( 0.125) (0.059) 0.064
Net realized and unrealized gains
(loss) on investments ................. 0.470 4.167 5.475 (0.651) 6.496
--------- -------- ----------- --------- --------
Total from investment operations ....... 0.390 4.140 5.350 (0.710) 6.560
--------- -------- ----------- --------- --------
Less dividends and distributions:
Dividends from net investment income ... none none none (0.030) (0.410)
Distributions from net realized
gain on investments ................... (0.820) none none none (0.490)
--------- -------- ----------- --------- --------
Total dividends and distributions....... (0.820) none none (0.030) (0.900)
--------- -------- ----------- --------- --------
Net asset value, end of period ......... $ 25.710 $ 26.140 $ 26.080 $ 20.730 $ 21.470
========= ======== =========== ========= ========
- -----------------------------------------------------------------------------------------------------------------------------
Total return: .......................... 1.48% 21.31% 25.81%(4) (3.32%)(4) 43.25%(4)
- -----------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
Net assets, end of period (000's
omitted) .............................. $ 110,126 $ 85,588 $1,057,358 $993,125 $512,356
Ratio of expenses to average
daily net assets ..................... . 1.05% 1.02% 1.30% 1.39% 1.43%
Ratio of net investment income
(loss) to average daily net assets (0.38%) (0.15%) (0.43%) (0.26%) 0.63%
Portfolio turnover ..................... 34% 51% 51% 24% 33%
Average commission rate paid(5) ........ N/A N/A N/A N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Institutional Class Shares
-----------------------------
9/30/90(2) 9/30/89(2)
<S> <C> <C>
Net asset value, beginning of
period ................................ $ 19.060 $ 13.920
Income (loss) from investment
operations:
Net investment income (loss)(3) ........ 0.419 0.201
Net realized and unrealized gains
(loss) on investments ................. (3.219) 5.059
--------- --------
Total from investment
operations ............................ (2.800) 5.260
--------- --------
Less dividends and distributions:
Dividends from net investment income ... (0.160) (0.120)
Distributions from net realized
gain on investments ................... (0.290) none
--------- ---------
Total dividends and distributions....... (0.450) (0.120)
--------- ---------
Net asset value, end of period ......... $ 15.810 $ 19.060
========= =========
- -------------------------------------------------------------------------
Total return: .......................... (14.99%)(4) 38.15%(4)
- -------------------------------------------------------------------------
Ratios and supplemental data:
Net assets, end of period (000's
omitted) .............................. $ 155,392 $138,589
Ratio of expenses to average
daily net assets ...................... 1.41% 1.44%
Ratio of net investment income
(loss) to average daily net assets 2.61% 1.28%
Portfolio turnover ..................... 45% 42%
Average commission rate paid(5)......... N/A N/A
</TABLE>
- -----------
(1) Date of initial public offering of the DelCap Fund Institutional Class;
ratios and total return for this period have been annualized.
(2) Data are derived from data of the DelCap Fund A Class and reflect the impact
of Rule 12b-1 distribution expenses paid by the DelCap Fund A Class. DelCap
Fund Institutional Class shares are not subject to Rule 12b-1 distribution
expenses and per share data for periods beginning on and after November 9,
1992 will not reflect the deduction of such expenses.
(3) The per share information for the years ended 9/30/98, 9/30/97, 9/30/96 and
9/30/95 were based on the average shares outstanding method.
(4) Total return data is derived from performance of the DelCap Fund A Class,
but does not reflect the maximum sales charge that is or was in effect nor
the limited contingent deferred sales charge that would apply in the event
of certain redemptions.
(5) 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
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is long-term capital growth. The
strategy will be to invest primarily in common stocks that, in the judgment of
the Manager, are of superior quality and those securities convertible into such
common stocks.
SUITABILITY
The Fund may be suitable for the patient investor interested in long-term
capital appreciation. Investors should be willing to accept the risks
associated with investments in equity securities.
While equity securities of small to medium-sized companies in which the
Fund invests may offer the potential for greater capital appreciation than
securities issued by larger companies, investments in securities of smaller
companies, some of which may be speculative, may present greater risks. The
prices of equity securities, especially of smaller companies, tend to fluctuate
in response to the condition of individual companies as well as general market
and economic conditions. Consequently, the Fund's net asset value will
fluctuate and an investment in the Fund may be inappropriate for the short-term
investor.
Ownership of Fund shares reduces the bookkeeping and administrative
inconvenience connected with direct purchases of the types of securities in
which the Fund invests.
Providing current income is not an objective of the Fund. Any income
produced is expected to be minimal. Investors should not consider a purchase of
Fund shares as equivalent to a complete investment program. Delaware
Investments includes a family of funds generally available through registered
investment dealers which may be used in concert to create a more complete
investment program.
INVESTMENT STRATEGY
The Fund will attempt to achieve its objective by exceeding the return of
common stocks as measured by the Russell MidCap Growth Index.
Securities purchased will be of companies whose earnings the Manager
believes will grow more rapidly than the average of those listed in the Russell
MidCap Growth Index. The Manager's emphasis will be on the securities of
companies that, in its judgment, have the characteristics that will enable them
to grow faster than the economy as measured by the Index.
This judgment will be based on the financial strength of the company, the
expertise of its management, the growth potential of the company within its
industry and the growth potential of the industry itself.
The Manager will focus primarily on those securities of companies it
believes have established themselves within their industry while maintaining
growth potential. If the Manager believes that market conditions warrant, the
Fund may employ certain option strategies involving the activities and
instruments described below.
In investing for capital appreciation, the Fund may hold securities for
any period of time.
While management believes its objective may best be attained by investing
in common stocks, the Fund may also invest in other securities including, but
not limited to, convertible securities, warrants, preferred stocks, bonds and
foreign securities.
<PAGE>
Should the market warrant a temporary, defensive approach, the Fund may
also invest in fixed-income obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities as well as corporate bonds of
investment quality rated Baa or above by Moody's Investors Service, Inc. or BBB
or above by Standard & Poor's Ratings Group. (Appendix A in Part B describes
these ratings.)
The Fund may write covered call options on individual issues as well as
write call options on stock indices. The Fund may also purchase put options on
individual issues and on stock indices. The Manager may employ these techniques
in an attempt to protect appreciation attained, to offset capital losses and to
take advantage of the liquidity available in the option markets. The ability to
hedge effectively using options on stock indices will depend, in part, on the
correlation between the composition of the index and the Fund's portfolio as
well as the price movement of individual securities. The Manager may also write
covered call options to achieve income to offset the cost of purchasing put
options.
While there is no limit on the amount of the Fund's assets which may be
invested in covered call options, the Fund will not invest more than 2% of its
net assets in put options.
Although the Fund will constantly strive to attain its investment objective
of long-term capital growth, there can be no assurance that it will be attained.
The investment objective of the Fund may not be changed without shareholder
approval.
For additional information about the Fund's investment policies and
certain risks associated with investments in certain types of securities, see
Other Investment Policies and Risk Considerations.
5
<PAGE>
CLASSES OF SHARES
The Distributor serves as the national distributor for the Fund. Shares of
the Class may be purchased directly by contacting the Fund or its agent or
through authorized investment dealers. All purchases of shares of the Class are
at net asset value. There is no front-end or contingent deferred sales charge.
Investment instructions given on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees considering purchasing shares of the Class
as part of their retirement program should contact their employer for details.
Shares of the Class are available for purchase only by: (a) retirement
plans introduced by persons not associated with brokers or dealers that are
primarily engaged in the retail securities business and rollover individual
retirement accounts from such plans; (b) tax-exempt employee benefit plans of
the Manager or its affiliates and securities dealer firms with a selling
agreement with the Distributor; (c) institutional advisory accounts of the
Manager or its affiliates and those having client relationships with Delaware
Investment Advisers, an affiliate of the Manager, or its affiliates and their
corporate sponsors, as well as subsidiaries and related employee benefit plans
and rollover individual retirement accounts from such institutional advisory
accounts; (d) a bank, trust company and similar financial institution investing
for its own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing shares
of the Class, except where the investment is part of a program that requires
payment to the financial institution of a Rule 12b-1 Plan fee; and (e)
registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least $1,000,000
entrusted to the adviser for investment purposes, but only if the adviser is not
affiliated or associated with a broker or dealer and derives compensation for
its services exclusively from its clients for such advisory services.
DelCap Fund A Class, DelCap Fund B Class and DelCap Fund C Class
In addition to offering DelCap Fund Institutional Class, the Fund also
offers DelCap Fund A Class, DelCap Fund B Class and DelCap Fund C Class, which
are described in a separate prospectus. Shares of DelCap Fund A Class, DelCap
Fund B Class and DelCap Fund C Class may be purchased through authorized
investment dealers or directly by contacting the Fund or its Distributor. Class
A Shares, Class B Shares and Class C Shares may have different sales charges
and other expenses which may affect performance. To obtain a prospectus
relating to those classes, contact the Distributor by writing to the address or
by calling the phone numbers listed on page 1 of this Prospectus.
6
<PAGE>
HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer. In all instances, investors must
qualify to purchase shares of the Class.
Investing Directly by Mail
1. Initial Purchases--An Investment Application or, in the case of a retirement
plan account, an appropriate retirement plan application, must be completed,
signed and sent with a check payable to DelCap Fund Institutional Class, to
Delaware Investments at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by
mailing a check payable to DelCap Fund Institutional Class. Your check should
be identified with your name(s) and account number.
Investing Directly by Wire
You may purchase shares by requesting your bank to transmit funds by wire
to First Union National Bank, ABA #031201467, account number 2014128934013
(include your name(s) and your account number).
1. Initial Purchases--Before you invest, telephone the Fund's Client Services
Department at 800-510-4015 to get an account number. If you do not call first,
it may delay processing your investment. In addition, you must promptly send
your Investment Application or, in the case of a retirement plan account, an
appropriate retirement plan application, to DelCap Fund Institutional Class, to
Delaware Investments at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to First Union National Bank, as described above. You must advise your
Client Services Representative by telephone at 800-510-4015 prior to sending
your wire.
Investing by Exchange
If you have an investment in another mutual fund in Delaware Investments
and you qualify to purchase shares of the Class, you may write and authorize an
exchange of part or all of your investment into the Fund. However, shares of
DelCap Fund B Class and DelCap Fund C Class and Class B Shares and Class C
Shares of the other Delaware Investments funds offering such a class of shares
may not be exchanged into the Class. If you wish to open an account by
exchange, call your Client Services Representative at 800-510-4015 for more
information. See Redemption and Exchange for more complete information
concerning your exchange privileges.
Investing through Your Investment Dealer
You can make a purchase of Fund shares through most investment dealers
who, as part of the service they provide, must transmit orders promptly. They
may charge for this service.
Purchase Price and Effective Date
The purchase price (net asset value) is determined as of the close of
regular trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open.
The effective date of a purchase is the date the order is received by the
Fund, its agent or designee. The effective date of a direct purchase is the day
your wire, electronic transfer or check is received, unless it is received after
the time the share price is determined, as noted above. Purchase orders received
after such time will be effective the next business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a purchase is
canceled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the Delaware Investments funds. The Fund reserves the right to reject
purchase orders paid by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check drawn on a
foreign financial institution is accepted, you may be subject to additional bank
charges for clearance and currency conversion.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under $250 as a result of
redemptions.
7
<PAGE>
REDEMPTION AND EXCHANGE
Redemption and exchange requests made on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees should therefore contact their employer for
details.
Your shares will be redeemed or exchanged based on the net asset value
next determined after the Fund receives your request in good order. For
example, redemption and exchange requests received in good order after the time
the net asset value of shares is determined will be processed on the next
business day. See Purchase Price and Effective Date under How to Buy Shares.
Except as otherwise noted below, for a redemption request to be in "good
order," you must provide your account number, account registration, and the
total number of shares or dollar amount of the transaction. With regard to
exchanges, you must also provide the name of the fund in which you want to
invest the proceeds. Exchange instructions and redemption requests must be
signed by the record owner(s) exactly as the shares are registered. You may
also request a redemption or an exchange by calling the Fund at 800-510-4015.
Redemption proceeds will be distributed promptly, as described below, but not
later than seven days after receipt of a redemption request.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
The Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor redemption requests as to shares for which a check
was tendered as payment, but the Fund will not mail the proceeds until it is
reasonably satisfied that the check has cleared, which may take up to 15 days
from the purchase date. You can avoid this potential delay if you purchase
shares by wiring Federal Funds. The Fund reserves the right to reject a written
or telephone redemption request or delay payment of redemption proceeds if
there has been a recent change to the shareholder's address of record.
Shares of the Class may be exchanged into any other Delaware Investments
mutual fund, provided: (1) the investment satisfies the eligibility and other
requirements set forth in the prospectus of the fund being acquired, including
the payment of any applicable front-end sales charge; and (2) the shares of the
fund being acquired are in a state where that fund is registered. If exchanges
are made into other shares that are eligible for purchase only by those
permitted to purchase shares of the Class, such exchange will be exchanged at
net asset value. Shares of the Class may not be exchanged into Class B Shares
or Class C Shares of the Delaware Investments funds. The Fund may suspend,
terminate or amend the terms of the exchange privilege upon 60 days' written
notice to shareholders.
Various redemption and exchange methods are outlined below. No fee is
charged by the Fund or the Distributor for redeeming or exchanging your shares
although, in the case of an exchange, a sales charge may apply. You may also
have your investment dealer arrange to have your shares redeemed or exchanged.
Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund or its agent.
Written Redemption and Exchange
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103 to
redeem some or all of your shares or to request an exchange of any or all your
shares into another mutual fund in Delaware Investments, subject to the same
conditions and limitations as other exchanges noted above. The request must be
signed by all owners of the account or your investment dealer of record.
For redemptions of more than $50,000, or when the proceeds are not sent to
the shareholder(s) at the address of record, the Fund requires a signature by
all owners of the account and may require a signature guarantee. A signature
guarantee can be obtained from a commercial bank, a trust company, or a member
of a securities transfer association medallion program ("STAMP"). A signature
guarantee cannot be provided by a notary public. A signature guarantee is
designed to protect the shareholders, the Equity Funds IV, Inc. and its agents
from fraud. The Fund reserves the right to reject a signature guarantee
supplied by an institution based on its creditworthiness. The Fund may require
further documentation from corporations, executors, retirement plans,
administrators, trustees or guardians.
8
<PAGE>
Payment is normally mailed the next business day after receipt of your
redemption request. Certificates are issued for shares only if you submit a
specific request. If your shares are in certificate form, the certificate(s)
must accompany your request and also be in good order.
You also may submit your written request for redemption or exchange by
facsimile transmission at the following number: 215-255-8864.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your shares in certificate form, you may redeem or
exchange only by written request and you must return your certificate(s).
The Telephone Redemption--Check to Your Address of Record service and the
Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do not
wish to have such services available with respect to your account. The Fund
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an
unusually large volume of telephone requests.
Neither the Fund nor its Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption
or exchange of Fund shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be
provided for all purchase, exchange and redemption transactions initiated by
telephone. By exchanging shares by telephone, you are acknowledging prior
receipt of a prospectus for the fund into which your shares are being
exchanged.
Telephone Redemption--Check to Your Address of Record
You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your record address. Checks will be payable to
the shareholder(s) of record. Payment is normally mailed the next business day
after receipt of the redemption request.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must submit a written authorization and you may need to have your
signature guaranteed. For your protection, your authorization must be on file.
If you request a wire, your funds will normally be sent the next business day.
If you ask for a check, it will normally be mailed the next business day after
receipt of your redemption request to your predesignated bank account. There
are no fees for this redemption method, but the mail time may delay getting
funds into your bank account. Simply call your Client Services Representative
prior to the time the net asset value is determined, as noted above.
Telephone Exchange
You or your investment dealer of record can exchange shares into any fund
in Delaware Investments under the same registration. As with the written
exchange service, telephone exchanges are subject to the same conditions and
limitations as other exchanges noted above. Telephone exchanges may be subject
to limitations as to amounts or frequency.
DIVIDENDS AND DISTRIBUTIONS
The Fund will make payments from net investment income and net realized
securities profits, if any, twice a year. The first payment normally will be
made during the first quarter following the end of Equity Funds IV, Inc.'s
fiscal year. The second payment would be made near the end of the calendar year
to comply with certain requirements of the Internal Revenue Code (the "Code").
Both dividends and distributions, if any, are automatically reinvested in your
account at net asset value.
Each class of the Fund will share proportionately in the investment income
and expenses of the Fund, except that the Class will not incur distribution
fees under the 12b-1 Plans which apply to DelCap Fund A Class, DelCap Fund B
Class and DelCap Fund C Class.
9
<PAGE>
TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Fund.
On August 5, 1997, the Taxpayer Relief Act of 1997 (the "1997 Act") was
signed into law. This new law made sweeping changes in the Internal Revenue
Code (the "Code"). Because many of these changes are complex, and only
indirectly affect the Fund and its distributions to you, they are discussed in
Part B. Changes in the treatment of capital gains, however, are discussed in
this section.
The Fund has qualified, and intends to continue to qualify, as a regulated
investment company under Subchapter M of the Code. As such, the Fund will not
be subject to federal income tax, or to any excise tax, to the extent its
earnings are distributed as provided in the Code and it satisfies certain other
requirements relating to the sources of its income and diversification of its
assets.
The Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to those investors who are subject
to income taxes as ordinary income, even though received in additional shares.
For corporate investors, dividends from net investment income will generally
qualify in part for the corporate dividends-received deduction. The portion of
dividends paid by the Fund that so qualifies will be designated each year in a
notice from Equity Funds IV, Inc. to the Fund's shareholders. For the fiscal
year ended September 30, 1998, 29.92% of the Fund's dividends from net
investment income qualified for the dividends-received deduction to
corporations.
Distributions paid by the Fund from long-term capital gains, received in
additional shares, are taxable to those investors who are subject to income
taxes as long-term capital gains, regardless of the length of time an investor
has owned shares in the Fund. The Fund does not seek to realize any particular
amount of capital gains during a year; rather, realized gains are a by-product
of Fund management activities. Consequently, capital gains distributions may be
expected to vary considerably from year to year. Also, for those investors
subject to tax, if purchases of shares in the Fund are made shortly before the
record date for a dividend or capital gains distribution, a portion of the
investment will be returned as a taxable distribution.
The Treatment of Capital Gain Distributions under the
Taxpayer Relief Act of 1997
The 1997 Act creates a category of long-term capital gain for individuals
that will be taxed at new lower tax rates. For investors who are in the 28% or
higher federal income tax brackets, these gains will be taxed at a minimum of
20%. For investors who are in the 15% federal income tax bracket, these gains
will be taxed at a maximum of 10%. Capital gain distributions will qualify for
these new maximum tax rates, depending on when the Fund's securities were sold
and how long they were held by the Fund before they were sold. The holding
periods for which the new rates apply were revised by the Internal Revenue
Service Restructuring and Reform Act of 1998 and the Omnibus Consolidated and
Emergency Supplemental Appropriations Act, which included technical corrections
to the 1997 Act. Investors who want more information on holding periods and
other qualifying rules relating to these new rates should review the expanded
discussion in Part B, or should contact their own tax advisers.
Equity Funds IV, Inc. will advise you in its annual information reporting
at calendar year end of the amount of its capital gain distributions which will
qualify for these maximum federal tax rates.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November, or December to shareholders
of record on a specified date in one of those months, but which, for
operational reasons, may not be paid to the shareholder until the following
January, will be treated for tax purposes as if paid by the Fund and received
by the shareholder on December 31 of the calendar year in which they are
declared.
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may
be realized from an ordinary redemption of shares or an exchange of shares
between the Fund any other fund in Delaware Investments. Any loss incurred on a
sale or exchange of Fund shares that had been held for six months or less will
be treated as a long-term capital loss to the extent of capital gain dividends
received with respect to such shares.
In addition to the federal taxes described above, shareholders may or may
not be subject to various state and local taxes. For example, distributions of
interest income and capital gains realized from certain types of U.S.
government securities may be exempt from state personal income taxes. Because
investors' state and local taxes may be different than the federal taxes
described above, investors should consult their own tax advisers.
10
<PAGE>
Each year, Equity Funds IV, Inc. will mail to you information on the tax
status of the Fund's dividends and distributions. Shareholders will also
receive each year information as to the portion of dividend income, if any,
that is derived from U.S. government securities that are exempt from state
income tax. Of course, shareholders who are not subject to tax on their income
would not be required to pay tax on amounts distributed to them by the Fund.
Equity Funds IV, Inc. is required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to shareholders who have not
complied with IRS taxpayer identification regulations. You may avoid this
withholding requirement by certifying on your Investment Application your
proper Taxpayer Identification Number and by certifying that you are not
subject to backup withholding.
See Accounting and Tax Issues and Distributions and Taxes in Part B for
additional information on tax matters relating to the Fund and its
shareholders.
CALCULATION OF NET ASSET
VALUE PER SHARE
The purchase and redemption price of Class shares is the net asset value
("NAV") per share of Class shares next computed after the order is received.
The NAV is computed as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The NAV per share is computed by adding the value of all securities and
other assets in the portfolio, deducting any liabilities (expenses and fees are
accrued daily) and dividing by the number of shares outstanding. Portfolio
securities for which market quotations are available are priced at market
value. Foreign securities expressed in foreign currency values will be
converted into U.S. dollar values at the mean between the currencies' bid and
offered quotations. Short-term investments having a maturity of less than 60
days are valued at amortized cost, which approximates market value. All other
securities are valued at their fair value as determined in good faith and in a
method approved by Equity Funds IV, Inc.'s Board of Directors.
The net asset values of all outstanding shares of each class of the Fund
will be computed on a pro-rata basis for each outstanding share based on the
proportionate participation in the Fund represented by the value of shares of
that class. All income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share of a class, based on each class'
percentage in the Fund represented by the value of shares of such classes,
except that the Class will not incur any of the expenses under the Fund's 12b-1
Plans and DelCap Fund A, B and C Classes alone will bear the 12b-1 Plan fees
payable under their respective Plans. Due to the specific distribution expenses
and other costs that will be allocable to each class, the NAV per share of each
class of the Fund will vary.
MANAGEMENT OF THE FUND
Directors
The business and affairs of Equity Funds IV, Inc. are managed under the
direction of its Board of Directors. Part B contains additional information
regarding Equity Funds IV, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the Delaware
Investments funds since 1938. On September 30, 1998, the Manager and its
affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $40 billion in assets
in the various institutional or separately managed (approximately
$23,666,360,000) and investment company (approximately $17,194,990,000)
accounts.
The Manager is a series of Delaware Management Business Trust. The Manager
changed its form of organization from a corporation to a business trust on
March 1, 1998. The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly owned subsidiary of Lincoln National Corporation ("Lincoln National")
was completed. DMH and the Manager are now indirect, wholly owned subsidiaries,
and subject to the ultimate control, of Lincoln National. Lincoln National,
with headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management. In connection with the merger, a new
Investment Management Agreement between Equity Funds IV, Inc. on behalf of the
Fund and the Manager was executed following shareholder approval.
11
<PAGE>
The Manager manages the Fund's portfolio and makes investment decisions
for the Fund, which are implemented by the Fund's Trading Department. The
Manager also administers Equity Funds IV, Inc.'s affairs and pays the salaries
of all the directors, officers and employees of Equity Funds IV, Inc. who are
affiliated with the Manager. For these services, the Manager is paid an annual
fee of 3/4 of 1% of the average daily net assets of the Fund, less the Fund's
proportionate share of all directors' fees paid to unaffiliated directors by
Equity Funds IV, Inc. The Fund's fee is higher than that paid by many other
funds. The fee may be higher or lower than that paid by funds with comparable
investment objectives. Investment management fees paid by the Fund for the
fiscal year ended September 30, 1998 were 0.75% of average daily net assets.
The directors of Equity Funds IV, Inc. annually review fees paid to the
Manager.
Gerald S. Frey has primary responsibility for making day-to-day investment
decisions for the Fund. Mr. Frey has been Vice President/Senior Portfolio
Manager of the Fund since March 1997 and was Co-Manager from June 1996 to March
1997. Mr. Frey holds a BA in Economics from Bloomsburg University and attended
Wilkes College and New York University, and he has 21 years' experience in the
money management business. Prior to joining Delaware Investments in 1996, he
was a Senior Director with Morgan Grenfell Capital Management in New York.
In making investment decisions for the Fund, Mr. Frey regularly consults
with Richard G. Unruh, Jr., Marshall T. Bassett, John A. Heffern, Jeffrey W.
Hynoski and Lori P. Wachs. A graduate of Brown University, Mr. Unruh received
his MBA from the University of Pennsylvania's Wharton School and joined
Delaware Investments in 1982 after 19 years of investment management experience
with Kidder, Peabody & Co. Inc. Mr. Unruh was named an Executive Vice President
of Equity Funds IV, Inc. in 1994. He is also a member of the Board of the
Manager and was named an Executive Vice President of the Manager in 1994. Mr.
Bassett, Vice President, joined Delaware Investments in 1997. In his most recent
position, he served as Vice President in Morgan Stanley Asset Management's
Emerging Growth Group, where he analyzed small growth companies. Prior to that,
he was a trust officer at Sovran Bank and Trust Company. He received his
bachelor's degree and MBA from Duke University. Mr. Heffern, Vice President,
holds a bachelor's degree and an MBA from the University of North Carolina at
Chapel Hill. He joined Delaware Investments in 1997. Previously, he was a Senior
Vice President, Equity Research at NatWest Securities Corporation's Specialty
Finance Services unit. Prior to that, he was a Principal and Senior Regional
Bank Analyst at Alex. Brown & Sons. Mr. Hynoski is a Vice President. He joined
Delaware Investments in 1998. Previously he served as a Vice President at
Bessemer Trust Company in the mid and large capitalization growth group, where
he specialized in the areas of science, technology, and telecommunications.
Prior to that, Mr. Hynoski held positions at Lord Abbett & Co. and Cowen Asset
Management. Mr. Hynoski holds a BS in Finance from the University of Delaware
and an MBA with a concentration in Investments/Portfolio Management and
Financial Economics from Pace University. Ms. Wachs is a Vice President. She
joined Delaware Investments in 1992 from Goldman Sachs, where she was an equity
analyst for two years. She is a graduate of the University of Pennsylvania's
Wharton School, where she majored in Finance and Oriental Studies.
Portfolio Trading Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length of time they
have been held. The degree of portfolio activity will affect brokerage costs of
the Fund and may affect taxes payable by the Fund's shareholders. Given the
Fund's investment objective, its annual portfolio turnover rate may exceed
100%. A turnover rate of 100% would occur, for example, if all the investments
in the Fund's portfolio at the beginning of the year were replaced by the end
of the year. The turnover rate also may be affected by cash requirements for
redemptions and repurchases of Fund shares.
The Fund uses its best efforts to obtain the best available price and most
favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager
or to its advisory clients. These services may be used by the Manager in
servicing any of its accounts. Subject to best price and execution, the Fund
may consider a broker/dealer's sales of shares of Delaware Investments funds in
placing portfolio orders and may place orders with broker/dealers that have
agreed to defray certain expenses of such funds, such as custodian fees.
Performance Information
From time to time, the Fund may quote total return performance of the
Class in advertising and other types of literature.
Total return will be based on a hypothetical $1,000 investment, reflecting
the reinvestment of all distributions at net asset value. Each presentation
will include the average annual total return for one-, five- and ten-year or
life-of-fund periods, as relevant. The Fund may also advertise aggregate and
average total return information concerning the Class over additional periods
of time.
Because securities prices fluctuate, investment results of the Class will
fluctuate over time and past performance should not be considered a guarantee
of future results.
12
<PAGE>
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling your Client Services Representative.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. Equity Funds IV, Inc.'s fiscal year
ends on September 30.
Distribution and Service
The Distributor, Delaware Distributors, L.P., serves as the national
distributor of the Fund's shares under a Distribution Agreement with Equity
Funds IV, Inc. dated April 3, 1995, as amended on November 29, 1995. The
Distributor bears all of the costs of promotion and distribution.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Fund
under an amended and restated agreement dated as of November 29, 1996. The
Transfer Agent also provides accounting services to the Fund pursuant to the
terms of a separate Fund Accounting Agreement. Certain recordkeeping and other
shareholder services that otherwise would be performed by the Transfer Agent
may be performed by certain other entities and the Transfer Agent may elect to
enter into an agreement to pay such other entities for those services. In
addition, participant account maintenance fees may be assessed for certain
recordkeeping provided as part of retirement plan and administration service
packages. These fees are based on the number of participants in the plan and
the various services selected. Fees will be quoted upon request and are subject
to change.
The directors annually review fees paid to the Distributor and the
Transfer Agent. The Distributor and the Transfer Agent are also indirect,
wholly owned subsidiaries of DMH.
* * *
As with other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by its service providers do not properly process and
calculate date-related information from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." Equity Funds IV, Inc. and the Fund
are taking steps to obtain satisfactory assurances that their major service
providers are taking steps reasonably designed to address the Year 2000 Problem
with respect to the computer systems that such service providers use. There can
be no assurances that these steps will be sufficient to avoid any adverse
impact on the business of any of the Fund.
Several European countries are participating in the European Economic and
Monetary Union, which will establish a common European currency for
participating countries. This currency will commonly be known as the "Euro." It
is anticipated that each such participating country will replace its existing
currency with the Euro on January 1, 1999. Additional European countries may
elect to participate after that date. The Fund, if investing in securities of
participating countries, could be adversely affected if the computer systems
used by their major service providers are not properly prepared to handle the
implementation of this single currency or the adoption of the Euro by
additional countries in the future. The Fund is taking steps to obtain
satisfactory assurances that the major service providers are taking steps
reasonably designed to address these matters with respect to the computer
systems that such service providers use. There can be no assurances that these
steps will be sufficient to avoid any adverse impact on the business of
the Fund.
<PAGE>
Expenses
The Fund is responsible for all of its own expenses other than those borne
by the Manager under the Investment Management Agreement and those borne by the
Distributor under the Distribution Agreement. For the fiscal year ended
September 30, 1998, the ratio of operating expenses to average daily net assets
for the Class was 1.10%.
Shares
Equity Funds IV, Inc. is an open-end management investment company. The
Fund's portfolio of assets is diversified as defined by the 1940 Act. Commonly
known as a mutual fund, Equity Funds IV, Inc. was organized as a Maryland
corporation in September 1985. In addition to the Fund, Equity Funds IV, Inc.
presently offers one other series of shares, the Capital Appreciation Fund
series.
Equity Funds IV, Inc.'s shares have a par value of $.01, equal voting
rights, except as noted below, and are equal in all other respects. Equity
Funds IV, Inc.'s shares have noncumulative voting rights which means that the
holders of more than 50% of Equity Funds IV, Inc.'s shares voting for the
election of directors can elect 100% of the directors if they choose to do so.
Under Maryland law, Equity Funds IV, Inc. is not required, and does not intend,
to hold annual meetings of shareholders unless, under certain circumstances, it
is required to do so under the 1940 Act.
In addition to the Class, the Fund also offers DelCap Fund A Class, DelCap
Fund B Class and DelCap Fund C Class. Shares of each class represent
proportionate interests in the assets of the Fund and have the same voting and
other rights and preferences as the other classes of the Fund except that
shares of the Class are not subject to, and may not vote on matters affecting,
the Distribution Plans under Rule 12b-1 relating to DelCap Fund A Class, DelCap
Fund B Class and DelCap Fund C Class.
13
<PAGE>
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
Small to Medium-Sized Companies
The Fund invests its assets in equity securities of small to medium-sized
companies. These stocks have historically been more volatile in price than
larger capitalization stocks, such as those included in the S&P 500 Index. This
is because, among other things, smaller companies have a lower degree of
liquidity and tend to have a greater sensitivity to changing economic
conditions. These companies may have narrow product lines, markets or financial
resources, or may depend on a limited management group. In addition, these
companies are typically subject to a greater degree of changes in their
earnings and prospects. The companies' securities may trade less frequently and
have a smaller trading volume. The securities may be traded only in the
over-the-counter markets or on a regional securities exchange. In addition to
exhibiting greater volatility, smaller capitalization securities may, to some
degree, fluctuate independently of the stocks of larger capitalization
companies. For example, the stocks of smaller capitalization companies may
decline in price as the price of larger company stocks rise, or vice versa.
Foreign Securities
The Fund may invest up to 25% of its assets in foreign securities. Foreign
markets may be more volatile than U.S. markets. Such investments involve
sovereign risk in addition to the normal risks associated with American
securities. These risks include political risks, foreign taxes and exchange
controls and currency fluctuations. For example, foreign portfolio investments
may fluctuate in value due to changes in currency rates (i.e., the value of
foreign investments would increase with a fall in the value of the dollar, and
decrease with a rise in the value of the dollar) and control regulations apart
from market fluctuations. The Fund may also experience delays in foreign
securities settlement.
American Depository Receipts
The Fund 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.
Rule 144A Securities
The Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933. Rule 144A permits many privately
placed and legally restricted securities to be freely traded among certain
institutional buyers such as the Fund. The Fund may invest no more than 10% of
the value of its net assets in illiquid securities.
While maintaining oversight, the Board of Directors has delegated to the
Manager the day-to-day function of determining whether or not individual Rule
144A Securities are liquid for purposes of the Fund's 10% limitation on
investments in illiquid assets. The Board has instructed the Manager to
consider the following factors in determining the liquidity of a Rule 144A
Security: (i) the frequency of trades and trading volume for the security; (ii)
whether at least three dealers are willing to purchase or sell the security and
the number of potential purchasers; (iii) whether at least two dealers are
making a market in the security; (iv) the nature of the security and the nature
of the marketplace trades (e.g., the time needed to dispose of the security,
the method of soliciting offers, and the mechanics of transfer).
14
<PAGE>
If the Manager determines that a Rule 144A Security which was previously
determined to be liquid is no longer liquid and, as a result, the Fund's
holdings of illiquid securities exceed the Fund's 10% limit on investments in
such securities, the Manager will determine what action to take to ensure that
the Fund continues to adhere to such limitation.
Portfolio Loan Transactions
The Fund may loan up to 25% of its assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other security
transactions.
The major risk to which the Fund would be exposed on a loan transaction is
the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, subject to overall
supervision by the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to
be received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
Repurchase Agreements
The Fund may also use repurchase agreements that are at least 102%
collateralized by securities in which the Fund can invest directly. Repurchase
agreements help the Fund to invest cash on a temporary basis. The Fund may
invest cash balances in joint repurchase agreements with other Delaware
Investments funds. Under a repurchase agreement, the Fund acquires ownership
and possession of a security, and the seller agrees to buy the security back at
a specified time and higher price. If the seller is unable to repurchase the
security, the Fund could experience delays in liquidating the securities and
the Fund could incur a loss. That loss, if any, would be the difference between
the repurchase price and the market value of the security. To minimize those
possibilities, the Fund may enter into repurchase agreements with banks and
broker/dealers deemed by the Manager to be creditworthy under guidelines
approved by the Board of Directors and those which the Manager, under such
guidelines, determines to present minimal credit risks and which are of high
quality.
Borrowing
The Fund is permitted under certain circumstances to borrow money.
Investment securities will not normally be purchased while the Fund has an
outstanding borrowing.
Call Options
Writing a Covered Call Option on Securities A covered call option obligates
the Fund to sell one of its securities for an agreed price up to an agreed date.
When the Fund writes a call, it receives a premium and agrees to sell the
callable securities to a purchaser of a corresponding call during the call
period (usually, not more than nine months) at a fixed price regardless of
market price changes during the call period. The advantage is that the Fund
receives premium income for the limited purpose of offsetting the costs of
purchasing put options or offsetting any capital loss or decline in the market
value of the security. However, if the Manager's forecast is wrong, the Fund may
not fully participate in the market appreciation if the security's price rises.
<PAGE>
Writing a Call Option on Stock Indices--Writing a call option on stock
indices is similar to the writing of a call option on an individual stock.
Stock indices used will include, but not be limited to, the S&P 500, the S&P
100 and the S&P Over-The-Counter ("OTC") 250.
Put Options
Purchasing a Put Option--A put option gives the Fund the right to sell one
of its securities for an agreed price up to an agreed date. The advantage is
that the Fund can be protected should the market value of the security decline.
However, the Fund must pay a premium for this right whether or not the put
option is exercised.
Purchasing a Put Option on Stock Indices--Purchasing a protective put
option on stock indices is similar to the purchase of protective puts on an
individual stock. Indices used will include, but not be limited to, the S&P 100
and the S&P OTC 250.
Closing Transactions
Closing transactions essentially let the Fund offset a put option or
covered call option prior to its exercise or expiration. If the Fund cannot
effect a closing transaction, it may have to hold a security it would otherwise
sell or deliver a security it might want to hold.
Part B describes certain of these investment policies and risk
considerations. Part B sets forth other investment policies, risk
considerations and more specific investment restrictions.
15
<PAGE>
[GRAPHIC OMITTED]
For more information, contact
Delaware Investments at 800-510-4015.
Investment Manager
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
National Distributor
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
Shareholder Servicing,
Dividend Disbursing,
Accounting Services
and Transfer Agent
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
Legal Counsel
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
Independent Auditors
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
Custodian
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
www.delawarefunds.com
[GRAPHIC OMITTED]
Printed in the U.S.A. on recycled paper.
P-045[--] PP11/98
<PAGE>
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
A CLASS
B CLASS
C CLASS
- --------------------------------------------------------------------------------
P R O S P E C T U S
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998
DELAWARE
INVESTMENTS
<PAGE>
CAPITAL APPRECIATION FUND A CLASS SHARES
CAPITAL APPRECIATION FUND B CLASS SHARES PROSPECTUS
CAPITAL APPRECIATION FUND C CLASS SHARES NOVEMBER 30, 1998
-----------------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance:
Nationwide 800-523-1918
Information on Existing Accounts:
(SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Representatives of Financial Institutions:
Nationwide 800-659-2265
This Prospectus describes the Capital Appreciation Fund series (the
"Fund") of Delaware Group Equity Funds IV, Inc. ("Equity Funds IV, Inc."), a
professionally-managed mutual fund of the series type. The investment objective
of the Fund is to seek capital appreciation. The Fund will attempt to achieve
its objective by investing primarily in equity securities of small to
medium-sized companies expected to grow over time and, to a lesser extent, in
equity securities of larger, more well established companies presenting growth
potential.
This Prospectus relates only to the Fund's retail classes , Capital
Appreciation Fund A Class ("Class A Shares"), Capital Appreciation Fund B Class
("Class B Shares") and Capital Appreciation Fund C Class ("Class C Shares")
(individually, a "Class" and collectively, the "Classes"), and sets forth
information that you should read and consider before you invest. Please retain
it for future reference. The Statement of Additional Information ("Part B" of
Equity Funds IV, Inc.'s registration statement), dated November 30, 1998, as
it may be amended from time to time, contains additional information about the
Fund and has been filed with the Securities and Exchange Commission ("SEC").
Part B is incorporated by reference into this Prospectus and is available,
without charge, by writing to Delaware Distributors, L.P. at the above address
or by calling the above numbers. The Fund's financial statements appear in its
Annual Report, which will accompany any response to requests for Part B. In
addition, the SEC maintains a Web site (http://www.sec.gov) that contains Part
B, material we incorporated by reference, and other information regarding
registrants that electronically file with the SEC.
The Fund also offers Capital Appreciation Fund Institutional Class,
which is available for purchase only by certain investors. A prospectus for
Capital Appreciation Fund Institutional Class can be obtained by writing to
Delaware Distributors, L.P. at the above address or by calling the above
numbers.
-1-
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page Page
---- ----
<S> <C> <C> <C>
Cover Page How to Buy Shares
Synopsis Redemption and Exchange
Summary of Expenses Dividends and Distributions
Financial Highlights Taxes
Investment Objective and Policies Calculation of Offering Price and
Suitability and Certain Net Asset Value Per Share
Risk Factors
Investment Strategy Management of the Fund
The Delaware Difference Other Investment Policies and
Plans and Services Risk Considerations
Classes of Shares
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. SHARES OF
THE FUND ARE NOT BANK OR CREDIT UNION DEPOSITS.
-2-
<PAGE>
SYNOPSIS
Investment Objective
The investment objective of the Fund is to seek capital appreciation.
The Fund will attempt to achieve its objective by investing primarily in equity
securities of small to medium-sized companies expected to grow over time and, to
a lesser extent, in equity securities of larger, more well established companies
presenting growth potential. See Investment Objective and Policies and Other
Investment Policies and Risk Considerations.
Risk Factors and Special Considerations
1. Investments in equity securities of small to medium-sized companies
may present greater risks than investments in larger capitalization companies,
as the market prices of securities issued by smaller companies tend to
fluctuate, particularly in the short-term and, some smaller company securities
may be speculative. See Suitability and Certain Risk Factors under Investment
Objective and Policies, and Other Investment Policies and Risk Considerations.
2. The Fund may enter into options and futures transactions for hedging
purposes and, among other reasons, to attempt to counterbalance portfolio
volatility. While the Fund does not engage in options and futures for
speculative purposes, there are risks that result from the use of these
instruments. See Futures Contracts and Options under Other Investment Policies
and Risk Considerations.
3. The Fund may invest up to 20% of its total assets directly in
securities of foreign issuers denominated in foreign currencies. Consequently,
the Fund may be affected by changes in currency exchange rates and controls and
may incur costs in connection with conversions between currencies. To hedge the
currency risks associated with investments in securities of foreign companies
denominated in foreign currencies and to expedite settlement of portfolio
transactions, the Fund may enter into certain foreign currency transactions.
These activities pose special risks which do not typically arise in connection
with investments denominated in U.S. dollars. See Foreign Securities, Futures
Contracts and Foreign Currency Transactions under Other Investment Policies and
Risk Considerations.
Investment Manager, Distributor and Transfer Agent
Delaware Management Company (the "Manager") furnishes investment
management services to the Fund, subject to the supervision and direction of
Equity Funds IV, Inc.'s Board of Directors. The Manager also provides investment
management services to certain of the other Delaware Investments funds.
Delaware Distributors, L.P. (the "Distributor") is the national distributor for
the Fund and for all of the other mutual funds in Delaware Investments.
Delaware Service Company, Inc. (the "Transfer Agent") is the shareholder
servicing, dividend disbursing, accounting services and transfer agent for the
Fund and for all of the other mutual funds in Delaware Investments. See
Summary of Expenses and Management of the Fund for further information regarding
the Manager and fees payable under the Fund's Investment Management Agreement.
Sales Charges
The price of Class A Shares includes a maximum front-end sales charge
of 5.75% of the offering price. The front-end sales charge is reduced on
certain transactions of at least $50,000 but under $1,000,000. For purchases
of $1,000,000 or more, the front-end sales charge is eliminated; if a dealer's
commission is paid in connection with those purchases, a contingent deferred
sales charge ("Limited CDSC") of 1% will be imposed if shares are redeemed
during the first year after the purchase and 0.50%
-3-
<PAGE>
will be imposed if shares are redeemed during the second year after the
purchase. See Contingent Deferred Sales Charge for Certain Redemptions of Class
A Shares Purchased at Net Asset Value under Redemption and Exchange. Class A
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment. Class A Shares Purchased at Net Asset Value under Redemption and
Exchange. Class A Shares are also subject to annual 12b-1 Plan expenses for the
life of the investment.
The price of Class B Shares is equal to the net asset value per share.
Class B Shares are subject to a contingent deferred sales charge ("CDSC") of:
(i) 5% if shares are redeemed within one year of purchase; (ii) 4% if shares
are redeemed within two years of purchase; (iii) 3% if shares are redeemed
during the third or fourth year following purchase; (iv) 2% if shares are
redeemed during the fifth year following purchase; (v) 1% if shares are
redeemed during the sixth year following purchase; and (vi) 0% thereafter.
Class B Shares are subject to annual 12b-1 Plan expenses which are assessed
against such shares for approximately eight years after purchase. See Deferred
Sales Charge Alternative - Class B Shares and Automatic Conversion of Class B
Shares under Classes of Shares.
The price of Class C Shares is equal to the net asset value per share.
Class C Shares are subject to a CDSC of 1% if shares are redeemed within 12
months of purchase. Class C Shares are subject to annual 12b-1 Plan expenses for
the life of the investment. See Level Sales Charge Alternative - Class C Shares
under Classes of Shares.
See Classes of Shares and Distribution (12b-1) and Service under
Management of the Fund.
Purchase Amounts
Generally, the minimum initial investment in any Class is $1,000.
Subsequent investments must generally be at least $100.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. An investor may exceed these maximum purchase
limitations for Class B Shares and Class C Shares by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of $50,000 or more in Class A
Shares, and that Class A Shares are subject to lower annual 12b-1 Plan expenses
than Class B and Class C Shares and generally are not subject to a CDSC. The
minimum and maximum purchase amounts for retirement plans may vary. See How to
Buy Shares.
Redemption and Exchange
Class A Shares of the Fund may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange request.
Neither the Fund nor the Distributor assesses a charge for redemptions or
exchanges of Class A Shares, except for certain redemptions of shares purchased
at net asset value, which may be subject to a CDSC if a dealer's commission was
paid in connection with such purchases. See Front-End Sales Charge Alternative
Class A Shares under Classes of Shares.
Class B Shares and Class C Shares may be redeemed or exchanged at the
net asset value calculated after receipt of the redemption or exchange request
subject, in the case of redemptions, to any applicable CDSC. Neither the Fund
nor the Distributor assesses any charges other than the CDSC for redemptions or
exchanges of Class B or Class C Shares. There are certain limitations on an
investor's ability to exchange shares between the various classes of shares that
are offered. See Redemption and Exchange.
-4-
<PAGE>
Open-End Investment Company
Equity Funds IV, Inc., which was organized as a Maryland corporation in
1985, is an open-end management investment company and the Fund's portfolio of
assets is diversified as defined by the Investment Company Act of 1940 (the
"1940 Act"). See Shares under Management of the Fund.
-5-
<PAGE>
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to Class A, Class B and Class C Shares follows:
<TABLE>
<CAPTION>
Capital Appreciation Fund
Shareholder Transaction Expenses Class A Shares Class B Shares Class C Shares
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)..................... 5.75% None None
Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering price)........... None None None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption proceeds, as applicable)..................... None(1) 5.00%(2) 1.00%(3)
Redemption Fees......................................... None(4) None(4) None(4)
Annual Operating Expenses Capital Appreciation Fund
(as a percentage of average daily net assets Class A Shares Class B Shares Class C Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Management Fees (after voluntary waivers)(6)............ 0.00% 0.00% 0.00%
12b-1 Plan Expenses (including service fees)
(after voluntary waivers)............................... 0.00%(5) 0.00%(5) 0.00%(5)
Other Operating Expenses ............................... 0.75% 0.75% 0.75%
Total Operating Expenses
(after voluntary waivers)(6)............................ 0.75% 0.75% 0.75%
</TABLE>
(1) Class A purchases of $1 million or more may be made at net asset value.
However, if in connection with any such purchase a dealer commission is
paid to the financial adviser through whom such purchase is effected, a
Limited CDSC of 1% will be imposed on certain redemptions made during the
first year after the purchase and 0.50% will be imposed on certain
redemptions made during the second year after the purchase. Additional
Class A purchase options involving the imposition of a CDSC may be
permitted as described in this Prospectus from time to time. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased
at Net Asset Value under Redemption and Exchange.
(2) Class B Shares are subject to a CDSC of: (i) 5% if shares are redeemed
within one year of purchase; (ii) 4% if shares are redeemed within two
years of purchase; (iii) 3% if shares are
-6-
<PAGE>
redeemed during the third or fourth year following purchase; (iv) 2% if
shares are redeemed during the fifth year following purchase; (v) 1% if
shares are redeemed during the sixth year following purchase; and (vi) 0%
thereafter. See Deferred Sales Charge Alternative - Class B Shares under
Classes of Shares.
(3) Class C Shares are subject to a CDSC of 1% if the shares are redeemed
within 12 months of purchase. See Level Sales Charge Alternative Class C
Shares under Classes of Shares.
(4) First Union National Bank currently charges $7.50 per redemption for
redemptions payable by wire.
(5) Class A Shares, Class B Shares and Class C Shares are subject to separate
12b-1 Plans. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by rules of the
National Association of Securities Dealers, Inc. (the "NASD"). The
Distributor has elected voluntarily to waive its right to receive 12b-1
Plan fees (including service fees) from the commencement of the public
offering of the Classes through May 31, 1999. In the absence of those
waivers, 12b-1 expenses would equal 0.30% for Class A Shares and 1.00% for
each of the Class B and Class C Shares. See Distribution (12b-1) and
Service under Management of the Fund.
(6) As noted above, the Distributor has elected voluntarily to waive 12b-1 Plan
fees through May 31, 1999. Also, the Manager has elected voluntarily to
waive that portion, if any, of the annual management fees payable by the
Capital Appreciation Fund and to pay certain expenses of the Fund to the
extent necessary to ensure that the "Total Operating Expenses" of each
Class of the Fund, excluding each such Class' 12b-1 fees, do not exceed
0.75%, during the commencement of the public offering of the Classes
through May 31, 1999. If the voluntary expense waivers were not in effect
by the Distributor and the Manager, the "Total Operating Expenses", as a
percentage of average daily net assets, would be 2.28%, 2.98%, and 2.98%,
respectively, for the Class A Shares, the Class B Shares and the Class C
Shares, reflecting management fees of 0.75%.
Investors utilizing the Asset Planner asset allocation service also
typically incur an annual maintenance fee of $35 per Strategy. However,
effective November 1, 1996, the annual maintenance fee is waived until further
notice. Investors who utilize the Asset Planner for an Individual Retirement
Account ("IRA") will pay an annual IRA fee of $15 per Social Security number.
See Asset Planner in Part B.
For expense information about Capital Appreciation Fund Institutional
Class, see the separate prospectus relating to that class.
-7-
<PAGE>
The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return, (2) redemption and no redemption at the end of each time period
and (3) for Class B Shares and Class C Shares, payment of a CDSC at the time of
redemption, if applicable. The following example assumes the voluntary waiver of
the management fee by the Manager and of the 12b-1 Plan fees by the Distributor
as discussed in this Prospectus.
<TABLE>
<CAPTION>
Assuming Redemption Assuming No Redemption
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares $65(1) $80 $97 $145 $65 $80 $97 $145
Class B Shares $58 $54 $62 $93(2) $8 $24 $42 $93(2)
Class C Shares $18 $24 $42 $93 $8 $24 $42 $93
</TABLE>
(1) Generally, no redemption charge is assessed upon redemption of Class A
Shares. Under certain circumstances, however, a Limited CDSC, or other
CDSC which has not been reflected in this calculation, may be imposed
on certain redemptions . See Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value
under Redemption and Exchange.
(2) At the end of approximately eight years after purchase, Class B Shares
will be automatically converted into Class A Shares. The example above
assumes conversion of Class B Shares at the end of the eighth year.
However, the conversion may occur as late as three months after the
eighth anniversary of purchase, during which time the higher 12b-1 Plan
fees payable by Class B Shares will continue to be assessed. The ten
year expense numbers for Class B Shares reflect the expenses of Class B
Shares for years one through eight and the expenses for Class A Shares
for years nine and ten. See Automatic Conversion of Class B Shares
under Classes of Shares for a description of the automatic conversion
feature.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in each Class will
bear directly or indirectly.
-8-
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Group Equity Funds IV, Inc. - Capital Appreciation Fund and have been
audited by Ernst & Young LLP, independent auditors. The data should be read in
conjunction with the financial statements, related notes, and the report of
Ernst & Young LLP, all of which are incorporated by reference into Part B.
Further information about the Fund's performance is contained in its Annual
Report to shareholders. A copy of the Fund's Annual Report (including the report
of Ernst & Young LLP) may be obtained from Equity Funds IV, Inc. upon request at
no charge. Information regarding Class B Shares and Class C Shares has not been
included in the following table because such shares were not offered to the
public prior to the date of this Prospectus.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
A Class
-----------------------------------------
Period
Year 12/2/96(1)
Ended through
9/30/98 9/30/97
------- -----------
<S> <C> <C>
Net asset value, beginning of period........................................... $10.160 $8.500
Income from investment operations:
Net investment income .................................................... 0.082(2) 0.067
Net realized and unrealized gain (loss) on securities..................... (0.755) 1.601
Total from investment operations.......................................... (0.673) 1.668
Less dividends and distributions:
Dividends from net investment income...................................... (0.076) (0.008)
Distributions from net realized gain on investments ...................... (0.421) none
Total dividends and distributions......................................... (0.497) (0.008)
Net asset value, end of period................................................. $8.990 $10.160
Total return(3)(4)............................................................. (6.91%) 19.64%
Ratios and supplemental data:
Net assets, end of period (000's omitted)...................................... $12 $8
Ratio of expenses to average daily net assets............................. 0.75% 0.75%
Ratio of expenses to average daily net assets prior to expense limitation. 2.28% 1.70%
Ratio of net investment income to average daily net assets................ 0.83% 0.91%
Ratio of net investment income (loss) to average daily net assets
prior to expense limitation.......................................... (0.70%) (0.03%)
Portfolio turnover........................................................ 163% 84%
Average commission rate paid (5).......................................... $0.0495 $0.0594
</TABLE>
(1) Date of initial public offering; ratios have been annualized but total
return has not been annualized. Total return for this short of a time
period may not be representative of longer term results.
(2) The per share information for the year ended 9/30/98 was based on the
average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a
share and assumes reinvestment of distributions at net asset value and
does not reflect the maximum front-end sales charge of 5.75% for Class A
Shares. In addition, total investment return does not reflect the Limited
CDSC that varies from 0.50% - 1% depending on the holding period for Class
A Shares, applicable to certain redemptions made within two years after
purchase.
(4) Total return reflects the expense limitations and waivers of 12b-1 Plan
fees referenced under Summary of Expenses.
(5) 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.
-9-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek capital appreciation.
It seeks to achieve that objective by investing, under normal market conditions,
primarily in equity securities of small to mid-sized companies that the Manager
believes exhibit growth potential that significantly exceeds the average
anticipated growth rate of companies included in the Standard & Poor's 500 (R)
Composite Stock Price Index ("S&P 500"). Small to medium-sized companies
generally are those having a current equity market capitalization of less than
$3 billion.
SUITABILITY AND CERTAIN RISK FACTORS
The Fund may be suitable for the patient investor interested in capital
appreciation. Investors should be willing to accept the risks associated with
investments in equity securities issued by domestic and foreign issuers.
While equity securities of small to medium-sized companies may offer
the potential for greater capital appreciation than securities issued by larger
companies, investments in securities of smaller companies, some of which may be
speculative, may present greater risks. The prices of equity securities,
especially of smaller companies, tend to fluctuate in response to the condition
of individual companies as well as general market and economic conditions.
Consequently, the Fund's net asset value will fluctuate and an investment in the
Fund may be inappropriate for the short-term investor.
In addition, investments in securities issued by foreign companies
involve special risks, including those associated with currency fluctuations, as
well as political, economic and social circumstances that may be different from
and more volatile than those present in the U.S. market.
As a result, the Fund of course can not assure a specific rate of
return or that the Fund's principal will be protected. Through cautious
selection and supervision of Fund investments, however, the Manager will strive
to achieve the Fund's objective.
The Fund is designed for capital appreciation; providing current income
is not a goal of the Fund. Any income produced, therefore, is expected to be
minimal. Investors should not consider an investment in the Fund as equivalent
to a complete investment program. Delaware Investments includes a family of
funds generally available through registered investment dealers which may be
used in concert to create a more complete investment program.
INVESTMENT STRATEGY
The Fund also invests in equity securities of larger capitalization
companies that the Manager believes present greater than average growth
potential compared to other S&P 500 companies.
Common stock generally is the principal kind of equity security in
which the Fund invests. The Fund, however, may invest any portion of its assets
in any type of equity security available in the marketplace, including without
limitation, preferred stock, warrants and equity and debt securities convertible
into common stock. See Other Investment Policies and Risks Considerations and
Part B.
The Fund may enter into options and futures transactions for hedging
purposes and, among other reasons, to attempt to counterbalance portfolio
volatility. See Futures Contracts and Options under Other Investment Policies
and Risk Considerations.
-10-
<PAGE>
Up to 20% of the Fund's total assets may be invested directly in equity
securities of foreign companies or indirectly in foreign securities through
investments in American, Global or European Depositary Receipts. In connection
with its investments in foreign securities, the Fund may hold foreign currency
directly and, to hedge the currency risk associated with securities denominated
in foreign currencies, may enter into currency futures transactions and forward
foreign currency transactions. See Foreign Securities, Depositary Receipts,
Foreign Currency Transactions and Futures Contracts under Other Investment
Policies and Risk Considerations.
Should the market warrant a temporary defensive approach, the Fund may
invest all or a substantial part of its assets in fixed-income securities issued
or guaranteed by the U.S. government, its agencies or instrumentalities, as well
as short-term debt, other money-market instruments or corporate bonds rated
investment grade (i.e., rated Baa or above by Moody's Investors Service, Inc.
("Moody's') or BBB or above by Standard & Poor's Ratings Group ("S&P")) or, if
unrated, instruments determined to be of comparable quality by the Manager. The
Fund may also invest in these instruments pending investment in equity
securities appropriate for the Fund of proceeds from new sales of Fund shares
from proceeds of the sale of the Fund's portfolio securities or to maintain
sufficient cash to meet redemptions. See Appendix A of Part B for a description
of those ratings.
The Fund will constantly strive to achieve its investment objective of
capital appreciation and, in investing to do so, may hold securities for any
period of time. There can be no assurance, however, that the Fund will achieve
its investment objective. The Fund's investment objective may be changed
without shareholder approval.
For additional information on the Fund's investment policies and
certain risks associated with investments in certain types of securities, see
Other Investment Policies and Risk Considerations.
-11-
<PAGE>
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Investments
family of funds.
SHAREHOLDER PHONE DIRECTORY
Shareholder Service Center and Investor Information Center
800-523- 1918
Fund Information; Literature Price; Yield and Performance Figures
Information on Existing Regular Investment Accounts and Retirement Plan
Accounts; Wire Investments; Wire Liquidations; Telephone Liquidations
and Telephone Exchanges
Delaphone
800-362-FUND
(800-362-3863)
Performance Information
During business hours, you can call the Investor Information Center
for current yield information. Current yield and total return information may
also be included in advertisements and information given to shareholders. Yields
are computed on an annualized basis over a 30-day period.
Shareholder Services
During business hours, you can call Delaware Investments' Shareholder
Service Center. Our representatives can answer any questions about your account,
the Fund, various service features and other Delaware Investments funds.
Automated Shareholder Services
You can purchase, redeem or exchange shares through Delaphone,
Delaware Investments' automated telephone system, or through Delaware
Investments' Web site, www.delawarefunds.com. For more information about how to
sign up for these services, call the Shareholder Service Center.
Dividend Payments
Dividends, capital gains and other distributions , if any, are
automatically reinvested in your account. You may also elect to have the
dividends earned in one fund automatically invested in another Delaware
Investments fund with a different investment objective subject to certain
exceptions and limitations.
For more information, see Additional Methods of Adding to Your
Investment - Dividend Reinvestment Plan under How to Buy Shares or call the
Shareholder Service Center.
Retirement Planning
An investment in the Fund may be a suitable investment option for
tax-deferred retirement plans. Delaware Investments offers a full spectrum of
qualified and non-qualified retirement plans, including the popular 401(k)
deferred compensation plan, IRA, and the new Roth IRA. Just call Delaware
Investments at 800-523-1918 for more information.
-12-
<PAGE>
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling the Shareholder Service Center.
Duplicate Confirmations
If your financial adviser or investment dealer is noted on your
investment application, we will send a duplicate confirmation to him or her.
This makes it easier for your adviser to help you manage your investments.
Tax Information
Each year, Equity Funds IV, Inc. will mail to you information on the
tax status of your dividends and distributions.
Right of Accumulation
With respect to Class A Shares, the Right of Accumulation feature
allows you to combine the value of your current holdings of Class A Shares,
Class B Shares and Class C Shares of the Fund with the dollar amount of new
purchases of Class A Shares of the Fund to qualify for a reduced front-end sales
charge on such purchases of Class A Shares. Under the Combined Purchases
Privilege, you may also include certain shares that you own in other funds in
Delaware Investments. See Classes of Shares.
Letter of Intention
The Letter of Intention feature permits you to obtain a reduced
front-end sales charge on purchases of Class A Shares by aggregating certain of
your purchases of Delaware Investments fund shares over a 13-month period. See
Classes of Shares and Part B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits you to reinvest proceeds
from a redemption of Class A Shares, within one year of the date of the
redemption, without paying a front-end sales charge. See Part B.
Exchange Privilege
The Exchange Privilege permits you to exchange all or part of your
shares into shares of other funds in Delaware Investments, subject to certain
exceptions and limitations. For additional information on exchanges, see
Investing by Exchange under How to Buy Shares and Redemption and Exchange.
Wealth Builder Option
You may elect to invest in the Fund through regular liquidations of
shares in your accounts in other funds in Delaware Investments. Investments
under this feature are exchanges and are therefore subject to the same
conditions and limitations as other exchanges of Fund shares. See Additional
Methods of Adding to Your Investment - Wealth Builder Option and Investing by
Exchange under How to Buy Shares, and Redemption and Exchange.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. Equity Funds IV, Inc.'s fiscal year ends
on September 30.
-13-
<PAGE>
CLASSES OF SHARES
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net
asset value per share, subject to a sales charge which may be imposed, at the
election of the purchaser, at the time of the purchase for Class A Shares
("front-end sales charge alternative"), or on a contingent deferred basis for
Class B Shares ("deferred sales charge alternative") or Class C Shares ("level
sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares, which incur a sales charge when they are
purchased, but generally are not subject to any sales charge when they are
redeemed. Absent any applicable fee waiver, Class A Shares are subject to annual
12b-1 Plan expenses of up to a maximum of 0.30% of average daily net assets of
such shares. Certain purchases of Class A Shares qualify for reduced front-end
sales charges. See Front-End Sales Charge Alternative - Class A Shares, below.
See also Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange and
Distribution (12b-1) and Service under Management of the Fund.
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares, which do not incur a front-end sales charge
when they are purchased, but are subject to a contingent deferred sales charge
if they are redeemed within six years of purchase. Absent any applicable fee
waiver, Class B Shares are subject to annual 12b-1 Plan expenses of up to a
maximum of 1% (0.25% of which are service fees to be paid to the Distributor,
dealers or others for providing personal service and/or maintaining shareholder
accounts) of average daily net assets of such shares for approximately eight
years after purchase. Class B Shares permit all of the investor's dollars to
work from the time the investment is made. If no waiver of 12b-1 fees is in
effect, the higher 12b-1 Plan expenses paid by Class B Shares will cause such
shares to have a higher expense ratio and to pay lower dividends than Class A
Shares. At the end of approximately eight years after purchase, Class B Shares
will automatically be converted into Class A Shares and, thereafter, for the
remainder of the life of the investment, the annual 12b-1 Plan fees of up to
0.30% for the Class A Shares will apply. See Automatic Conversion of Class B
Shares, below.
Class C Shares. An investor who elects the level sales charge
alternative acquires Class C Shares, which do not incur a front-end sales charge
when they are purchased, but are subject to a contingent deferred sales charge
if they are redeemed within 12 months of purchase. Absent any applicable fee
waiver, Class C Shares are subject to annual 12b-1 Plan expenses of up to a
maximum of 1% (0.25% of which are service fees to be paid to the Distributor,
dealers or others for providing personal service and/or maintaining shareholder
accounts) of average daily net assets of such shares for the life of the
investment. If no waiver of 12b-1 fees is in effect, the higher 12b-1 Plan
expenses paid by Class C Shares will cause such shares to have a higher expense
ratio and to pay lower dividends than Class A Shares. Unlike Class B Shares,
Class C Shares do not convert to another class.
The alternative purchase arrangements described above permit investors
to choose the method of purchasing shares that is most suitable given the amount
of their purchase, the length of time they expect to hold their shares and other
relevant circumstances. Investors should determine whether, given their
particular circumstances, it is more advantageous to purchase Class A Shares and
incur a front-end sales charge, purchase Class B Shares and have the entire
initial purchase amount invested in the Fund with their investment being subject
to a CDSC if they redeem shares within six years of purchase, or purchase Class
C Shares and have the entire initial purchase amount invested in the Fund with
their investment being subject to a CDSC if they redeem shares within 12 months
of purchase. In addition, investors should consider the level of annual 12b-1
Plan expenses applicable to each Class. If no waiver of 12b-1 fees is in effect,
the higher 12b-1 Plan expenses
-14-
<PAGE>
on Class B Shares and Class C Shares will be offset to the extent a return is
realized on the additional money initially invested upon the purchase of such
shares. However, there can be no assurance as to the return, if any, that will
be realized on such additional money. In addition, the effect of any return
earned on such additional money will diminish over time. In comparing Class B
Shares to Class C Shares, investors should also consider the duration of the
annual 12b-1 Plan expenses to which each of the classes is subject and the
desirability of an automatic conversion feature, which is available only for
Class B Shares.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Fund, absent any applicable fee waiver, the Distributor
and others will be paid, in the case of the Class A Shares, from the proceeds of
the front-end sales charge and 12b-1 Plan fees and, in the case of the Class B
Shares and the Class C Shares, from the proceeds of the 12b-1 Plan fees and, if
applicable, the CDSC incurred upon redemption. Financial advisers may receive
different compensation for selling Class A, Class B and Class C Shares.
Investors should understand that the purpose and function of the respective
12b-1 Plans and the CDSCs applicable to Class B Shares and Class C Shares are
the same as those of the 12b-1 Plan and the front-end sales charge applicable to
Class A Shares in that such fees and charges are used to finance the
distribution of the respective Classes. See Distribution (12b-1) and Service
under Management of the Fund.
Dividends, if any, paid on Class A, Class B and Class C Shares will be
calculated in the same manner, at the same time, on the same day and will be in
the same amount, except that, when assessed, the additional amount of 12b-1 Plan
expenses relating to Class B Shares and Class C Shares will be borne exclusively
by such shares. See Calculation of Offering Price and Net Asset Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. Equity Funds IV, Inc. and the Distributor intend to operate in
compliance with these rules.
Front-End Sales Charge Alternative - Class A Shares
Class A Shares may be purchased at the offering price, which reflects a
maximum front-end sales charge of 5.75%. See Calculation of Offering Price and
Net Asset Value Per Share.
Purchases of $50,000 or more carry a reduced front-end sales charge as
shown in the following table.
-15-
<PAGE>
<TABLE>
<CAPTION>
Capital Appreciation Fund A Class
- ------------------------------------------------------------------------------------------------------------------------------------
Dealer's
Commission***
Amount of Purchase Front-End Sales Charge
as % of
Offering Amount Offering
Price Invested** Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.12% 5.00%
$50,000 but under $100,000 4.75 5.01 4.00
$100,000 but under $250,000 3.75 3.89 3.00
$250,000 but under $500,000 2.50 2.56 2.00
$500,000 but under $1,000,000* 2.00 2.00 1.60
</TABLE>
* There is no front-end sales charge on purchases of Class A Shares of
$1,000,000 or more but, under certain limited circumstances, a
Limited CDSC of 1% may apply upon redemption of such shares made
during the first year after the purchase and 0.50% may apply upon
redemption of such shares made during the second year after the
purchase.
** Based upon the net asset value per share of the Class A Shares as of
the end of Equity Funds IV, Inc.'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
the front-end sales charge shown above. In addition, certain dealers
who enter into an agreement to provide extra training and information
on Delaware Investments products and services and who increase sales of
Delaware Investments funds may receive an additional commission of up
to 0.15% of the offering price. Dealers who receive 90% or more of the
sales charge may be deemed to be underwriters under the Securities Act
of 1933.
- -------------------------------------------------------------------------------
-16-
<PAGE>
For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers through
whom such purchases are made in accordance with the following schedule:
Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
------------------ -------------------
Up to $5 million 1.00%
Next $20 million up to $25 million 0.50
Amount over $25 million 0.25
Such Class A Shares are subject to a Limited CDSC of 1% if shares are
redeemed during the first year after the purchase and 0.50% if shares are
redeemed during the second year after the purchase.
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other Delaware Investments
funds as to which a Limited CDSC applies may be aggregated with those of Class A
Shares of the Fund. Financial advisers also may be eligible for a dealer's
commission in connection with certain purchases made under a Letter of Intention
or pursuant to an investor's Right of Accumulation. Financial advisers should
contact the Distributor concerning the applicability and calculation of the
dealer's commission in the case of combined purchases.
An exchange from other Delaware Investments funds will not qualify
for payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Redemptions of Class A Shares purchased at net asset value may result
in the imposition of a Limited CDSC if the dealer's commission described above
was paid in connection with the purchase of those shares. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange.
Combined Purchases Privilege
By combining your holdings of Class A Shares with your holdings of
Class B Shares and/or Class C Shares of the Fund and shares of the other funds
in Delaware Investments, except as noted below, you can reduce the front-end
sales charges on any additional purchases of Class A Shares. Shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with ownership of
variable insurance products may be combined with other Delaware Investments
fund holdings. In addition, assets held by investment advisory clients of the
Manager or its affiliates in any stable value account may be combined with
other Delaware Investments fund holdings. Shares of other funds that do not
carry a front-end sales charge or CDSC may not be included unless they were
acquired through an exchange from a Delaware Investments fund that does carry
a front-end sales charge or CDSC.
This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under 21 and any trust, fiduciary or
retirement account for the benefit of such family members.
-17-
<PAGE>
This privilege also permits you to use these combinations under a
Letter of Intention. A Letter of Intention allows you to make purchases over a
13-month period and qualify the entire purchase for a reduction in front-end
sales charges on Class A Shares.
Combined purchases of $1,000,000 or more, including certain purchases
made at net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may result in the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative -Class A Shares, above.
Allied Plans
Class A Shares are available for purchase by participants in certain
defined contribution plans ("Allied Plans") which are made available under a
joint venture agreement between the Distributor and another institution through
which mutual funds are marketed and which allow investments in Class A Shares of
designated Delaware Investments funds ("eligible Delaware Investments fund
shares"), as well as shares of designated classes of non-Delaware Investments
funds ("eligible non-Delaware Investments fund shares"). Class B Shares and
Class C Shares are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Investments and eligible non-Delaware Investments
fund shares held by the Allied Plan may be combined with the dollar amount of
new purchases by that Allied Plan to obtain a reduced front-end sales charge on
additional purchases of eligible Delaware Investments fund shares.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments fund
shares or for eligible non-Delaware Investments fund shares at net asset value
without payment of a front-end sales charge. However, exchanges of eligible fund
shares, both Delaware Investments and non-Delaware Investments, which were not
subject to a front-end sales charge, will be subject to the applicable sales
charge if exchanged for eligible Delaware Investments fund shares to which a
sales charge applies. No sales charge will apply if the eligible fund shares
were previously acquired through the exchange of eligible shares on which a
sales charge was already paid or through the reinvestment of dividends. See
Investing by Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Investments fund shares under an Allied Plan. In determining a financial
adviser's eligibility for a dealer's commission on net asset value purchases of
eligible Delaware Investments fund shares in connection with Allied Plans, all
participant holdings in the Allied Plan will be aggregated.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described under Waiver of Limited Contingent
Deferred Sales Charge - Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Investments and non-Delaware Investments fund shares.
When eligible Delaware Investments fund shares are exchanged into eligible
non-Delaware Investments fund shares, the Limited CDSC will be imposed at the
time of the exchange, unless the joint venture agreement specifies that the
amount of the Limited CDSC will be paid by the financial adviser or selling
dealer. See Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange.
-18-
<PAGE>
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under
the Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment Privilege.
See The Delaware Difference and Redemption and Exchange for additional
information.
Purchases of Class A Shares may be made at net asset value by current
and former officers, directors and employees (and members of their families) of
the Manager, any affiliate, any of the funds in Delaware Investments, certain
of their agents and registered representatives and employees of authorized
investment dealers and by employee benefit plans for such entities. Individual
purchases, including those in retirement accounts, must be for accounts in the
name of the individual or a qualifying family member.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of Delaware
Investments funds. Officers, directors and key employees of institutional
clients of the Manager or any of its affiliates may purchase Class A Shares at
net asset value. Moreover, purchases may be effected at net asset value for the
benefit of the clients of brokers, dealers and registered investment advisers
affiliated with a broker or dealer, if such broker, dealer or investment adviser
has entered into an agreement with the Distributor providing specifically for
the purchase of Class A Shares in connection with special investment products,
such as wrap accounts or similar fee based programs. Investors may be charged a
fee when effecting transactions in Class A Shares through a broker or agent that
offers these special investment products.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase shares of the Institutional Class
of the fund; and any group retirement plan (excluding defined benefit pension
plans), or such plans of the same employer, for which plan participant records
are maintained on the Retirement Financial Services, Inc.'s (formerly named
Delaware Investment & Retirement Services, Inc.) proprietary record keeping
system that (i) has in excess of $500,000 of plan assets invested in Class A
Shares of Delaware Investments funds and any stable value product available
through Delaware Investments; or (ii) is sponsored by an employer that has at
any point after May 1, 1997 had more than 100 employees while such plan has held
Class A Shares of a Delaware Investments fund and such employer has properly
represented to Retirement Financial Services, Inc. in writing that it has the
requisite number of employees and has received written confirmation back from
Retirement Financial Services, Inc.
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
Investments account in connection with loans originated from accounts
previously maintained by another investment firm will also be invested at net
asset value.
Investors in Delaware Investments Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A Shares
of any of the funds in Delaware Investments at net asset value.
The Fund must be notified in advance that an investment qualifies for
purchase at net asset value.
-19-
<PAGE>
Group Investment Plans
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, SIMPLE IRA, SIMPLE
401(k), Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, and 403(b)(7) and 457 Deferred Compensation Plans) may
benefit from the reduced front-end sales charges available on Class A Shares
based on total plan assets. If a company has more than one plan investing in the
Delaware Investments family of funds, then the total amount invested in all
plans will be aggregated to determine the applicable front-end sales charge
reduction on each purchase, both initial and subsequent, if, at the time of each
such purchase, the company notifies the Fund that it qualifies for the
reduction. Employees participating in such Group Investment Plans may also
combine the investments held in their plan account to determine the front-end
sales charge applicable to purchases in non-retirement Delaware Investments
investment accounts if, at the time of each such purchase, they notify the Fund
that they are eligible to combine purchase amounts held in their plan account.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from a fund in the Delaware Investments family.
See Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange.
For additional information on retirement plans, including plan forms,
applications, minimum investments and any applicable account maintenance fees,
contact your investment dealer or the Distributor.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than 5% of the
dollar amount purchased. In addition, from time to time, upon written notice to
all of its dealers, the Distributor may hold special promotions for specified
periods during which the Distributor may pay additional compensation to dealers
or brokers for selling Class B Shares at the time of purchase. As discussed
below, however, absent any applicable fee waiver, Class B Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within six years of purchase, a
CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees, if any, are paid
to the Distributor and others for providing distribution and related services,
and bearing related expenses, in connection with the sale of Class B Shares.
These payments support the compensation paid to dealers or brokers for selling
Class B Shares. Payments to the Distributor and others under the Class B 12b-1
Plan may be in an amount equal to no more than 1% annually. The combination of
the CDSC and the proceeds of the 12b-1 Plan fees makes it possible for the Fund
to sell Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class B Shares
described in this Prospectus, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for the Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
-20-
<PAGE>
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the last business day
of the second full week of March, June, September and December (each, a
"Conversion Date"). If the eighth anniversary after a purchase of Class B Shares
falls on a Conversion Date, an investor's Class B Shares will be converted on
that date. If the eighth anniversary occurs between Conversion Dates, an
investor's Class B Shares will be converted on the next Conversion Date after
such anniversary. Consequently, if a shareholder's eighth anniversary falls on
the day after a Conversion Date, that shareholder will have to hold Class B
Shares for as long as three additional months after the eighth anniversary of
purchase before the shares will automatically convert into Class A Shares.
Class B Shares of a fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of that fund (or, in the case
of Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant
Class) pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class C Shares at the time of
purchase from its own assets in an amount equal to no more than 1% of the dollar
amount purchased. As discussed below, absent any applicable fee waiver, Class C
Shares are subject to annual 12b-1 Plan expenses and, if redeemed within 12
months of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees, if any, are paid
to the Distributor and others for providing distribution and related services,
and bearing related expenses, in connection with the sale of Class C Shares.
These payments support the compensation paid to dealers or brokers for selling
Class C Shares. Payments to the Distributor and others under the Class C 12b-1
Plan may be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class C Shares as
described in this Prospectus. See Redemption and Exchange.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares Class B
Shares redeemed within six years of purchase may be subject to
a CDSC at the rates set forth below and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestments of dividends or capital gains distributions.
For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of the Class B Shares or the
Class C Shares of the Fund, even if those shares are later exchanged for shares
of another Delaware Investments fund. In the event of an exchange of the
shares, the "net asset
-21-
<PAGE>
value of such shares at the time of redemption" will be the net asset value of
the shares that were acquired in the exchange.
The following table sets forth the rates of the CDSC for the Class B
Shares of the Fund:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
------------------------ -------------------
0-1 5%
2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares, absent any applicable fee waiver. See Automatic Conversion of Class B
Shares, above. Investors are reminded that Class A Shares into which Class B
Shares will convert are subject to ongoing annual 12b-1 Plan expenses of up to a
maximum of 0.30% of average daily net assets of such shares.
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares and Class C
Shares. See Waiver of Contingent Deferred Sales Charge - Class B Shares and
Class C Shares under Redemption and Exchange.
Other Payments to Dealers -- Class A, Class B and Class C Shares
From time to time at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Classes exceed certain limits, as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of Delaware Investments funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
Subject to pending amendments to the NASD's Conduct Rules, in
connection with the promotion of Delaware Investments fund shares, the
Distributor may, from time to time, pay to participate in dealer-sponsored
seminars and conferences, reimburse dealers for expenses incurred in connection
with preapproved seminars, conferences and advertising and may, from time to
time, pay or allow additional
-22-
<PAGE>
promotional incentives to dealers, which shall include non-cash concessions,
such as certain luxury merchandise or a trip to or attendance at a business or
investment seminar at a luxury resort, as part of preapproved sales contests.
Payment of non-cash compensation to dealers is currently under review by the
NASD and the Securities and Exchange Commission. It is likely that the NASD's
Conduct Rules will be amended such that the ability of the Distributor to pay
non-cash compensation as described above will be restricted in some fashion. The
Distributor intends to comply with the NASD's Conduct Rules as they may be
amended.
Capital Appreciation Fund Institutional Class
In addition to offering Class A, Class B and Class C Shares, the Fund
also offers Capital Appreciation Fund Institutional Class, which is described in
a separate prospectus and is available for purchase only by certain investors.
Capital Appreciation Fund Institutional Class shares generally are distributed
directly by the Distributor and do not have a front-end sales charge, a CDSC or
a Limited CDSC, and are not subject to 12b-1 Plan distribution expenses. To
obtain the prospectus that describes Capital Appreciation Fund Institutional
Class, contact the Distributor by writing to the address or by calling the
telephone number listed on the back cover of this Prospectus.
-23-
<PAGE>
HOW TO BUY SHARES
Purchase Amounts
Generally, the minimum initial purchase is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of shares of any Class
generally must be $100 or more. For purchases under a Uniform Gifts to Minors
Act or Uniform Transfers to Minors Act or through an Automatic Investing Plan,
there is a minimum initial purchase of $250 and a minimum subsequent purchase of
$25. Minimum purchase requirements do not apply to retirement plans other than
IRAs, Roth IRAs and Education IRAs. For IRAs and Roth IRAs there is a minimum
initial purchase of $250 and for Education IRAs, there is a minimum initial
purchase of $500 and minimum subsequent purchases must be $25 or more,
regardless of which Class is selected.
There is a maximum purchase limitation of $250,000 on each purchase of
Class B Shares. For Class C Shares, each purchase must be in an amount that is
less than $1,000,000. An investor may exceed these maximum purchase limitations
by making cumulative purchases over a period of time. In doing so, an investor
should keep in mind that reduced front-end sales charges are available on
investments of $50,000 or more in Class A Shares, and that Class A Shares (i)
are subject to lower annual 12b-1 Plan expenses than Class B Shares and Class C
Shares and (ii) generally are not subject to a CDSC. For retirement plans, the
maximum purchase limitations apply only to the initial purchase of Class B
Shares or Class C Shares by the plan.
The Fund makes it easy to invest by arrangement with your investment
dealer, by wire and exchange.
Investing through Your Investment Dealer
You can make a purchase of shares of the Fund through most investment
dealers who, as part of the service they provide, must transmit orders promptly.
They may charge for this service. If you want a dealer but do not have one,
Delaware Investments can refer you to one.
Investing by Mail
1. Initial Purchases--An Investment Application or, in the case of a retirement
plan account, an appropriate retirement plan application, must be completed,
signed and sent with a check payable to Capital Appreciation Fund A Class,
Capital Appreciation Fund B Class or Capital Appreciation Fund C Class, to
Delaware Investments at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to the specific Fund and Class selected. Your check should be
identified with your name(s) and account number. An investment slip (similar to
a deposit slip) is provided at the bottom of transaction confirmations and
dividend statements that you will receive from Equity Funds IV, Inc. Use of this
investment slip can help expedite processing of your check when making
additional purchases. Your investment may be delayed if you send additional
purchases by certified mail.
Investing by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to First Union National Bank, ABA # 031201467, account number
2014128934013 (include your name(s) and your account number for the Class in
which you are investing).
1. Initial Purchases--Before you invest, telephone the Shareholder Service
Center to get an account number. If you do not call first, processing of your
investment may be delayed. In addition, you must promptly send your Investment
Application or, in the case of a retirement plan account, an appropriate
retirement plan
-24-
<PAGE>
application, to the specific Fund and Class selected, to Delaware Investments
at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to First Union National Bank, as described above. You should advise the
Shareholder Service Center by telephone of each wire you send.
If you want to wire investments to a retirement plan account, call the
Shareholder Service Center for special wiring instructions.
Investing by Exchange
If you have an investment in another mutual fund in Delaware
Investments, you may write and authorize an exchange of part or all of your
investment into shares of the Fund. If you wish to open an account by exchange,
call the Shareholder Service Center for more information. All exchanges are
subject to the eligibility and minimum purchase requirements set forth in each
fund's prospectus. See Redemption and Exchange for more complete information
concerning your exchange privileges.
Holders of Class A Shares may exchange all or part of their shares for
certain of the shares of other funds in Delaware Investments, including other
Class A Shares, but may not exchange their Class A Shares for Class B Shares or
Class C Shares of the Fund or of any other fund in Delaware Investments.
Holders of Class B Shares of the Fund are permitted to exchange all or part of
their Class B Shares only into Class B Shares of other Delaware Investments
funds. Similarly, holders of Class C Shares of the Fund are permitted to
exchange all or part of their Class C Shares only into Class C Shares of other
Delaware Investments funds. Class B Shares of the Fund and Class C Shares of
the Fund acquired by exchange will continue to carry the CDSC and, in the case
of Class B Shares, the automatic conversion schedule of the fund from which the
exchange is made. The holding period of Class B Shares of the Fund acquired by
exchange will be added to that of the shares that were exchanged for purposes of
determining the time of the automatic conversion into Class A Shares of the
Fund.
Permissible exchanges into Class A Shares of the Fund will be made
without a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of the Fund will be made without the imposition of a
CDSC by the fund from which the exchange is being made at the time of the
exchange.
See Allied Plans for information on exchanges by participants in an
Allied Plan.
Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if you wish to
use the following services:
1. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly
investments without writing or mailing checks. You may authorize Equity Funds
IV, Inc. to transfer a designated amount monthly from your checking account to
your account. Many shareholders use this as an automatic savings plan.
Shareholders should allow a reasonable amount of time for initial purchases and
changes to these plans to become effective.
-25-
<PAGE>
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans or 403(b)(7) or 457 Deferred
Compensation Plans.
-26-
<PAGE>
2. Direct Deposit
You may have your employer or bank make regular investments directly to
your Fund account for you (for example: payroll deduction, pay by phone, annuity
payments). The Fund also accepts preauthorized recurring government and private
payments by Electronic Fund Transfer, which avoids mail time and check clearing
holds on payments such as social security, federal salaries, Railroad Retirement
benefits, etc.
* * *
Should investments through an automatic investing plan or by direct
deposit be reclaimed or returned for some reason, Equity Funds IV, Inc. has the
right to liquidate your shares to reimburse the government or transmitting bank.
If there are insufficient funds in your account, you are obligated to reimburse
the Fund.
3. Wealth Builder Option
You can use our Wealth Builder Option to invest in the Fund through
regular liquidations of shares in your accounts in other funds in Delaware
Investments. You may also elect to invest in other mutual funds in Delaware
Investments through the Wealth Builder Option through regular liquidations of
shares in your Fund account.
Under this automatic exchange program, you can authorize regular
monthly amounts (minimum of $100 per fund) to be liquidated from your account in
one or more funds in Delaware Investments and invested automatically into any
other account in a Delaware Investments mutual funds that you may specify. If
in connection with the election of the Wealth Builder Option, you wish to open a
new account to receive the automatic investment, such new account must meet the
minimum initial purchase requirements described in the prospectus of the fund
that you select. All investments under this option are exchanges and are
therefore subject to the same conditions and limitations as other exchanges
noted above. You can terminate your participation in Wealth Builder at any time
by giving written notice to the fund from which the exchanges are made. See
Redemption and Exchange.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, 403(b)(7) or 457 Deferred
Compensation Plans.
4. Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or dividend
income) reinvested in your Fund account or invested in certain other funds in
Delaware Investments, subject to the exceptions noted below as well as the
eligibility and minimum purchase requirements set forth in each fund's
prospectus.
Reinvestments of distributions into Class A Shares of the Fund or of
other Delaware Investments funds are made without a front-end sales charge.
Reinvestments of distributions into Class B Shares of the Fund or of other
Delaware Investments funds or into Class C Shares of the Fund or of other
Delaware Investments funds are also made without any sales charge and will not
be subject to a CDSC if later redeemed. See Automatic Conversion of Class B
Shares under Classes of Shares for information concerning the automatic
conversion of Class B Shares acquired by reinvesting dividends.
Holders of Class A Shares of the Fund may not reinvest their
distributions into Class B Shares or Class C Shares of any fund in Delaware
Investments, including the Fund. Holders of Class B Shares of the Fund may
reinvest their distributions only into Class B Shares of the funds in Delaware
Investments which offer that class of shares. Similarly, holders of Class C
Shares of the Fund may reinvest their
-27-
<PAGE>
distributions only into Class C Shares of the funds in Delaware Investments
which offer that class of shares. For more information about reinvestments,
call the Shareholder Service Center.
Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the same Delaware
Investments fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
Purchase Price and Effective Date
The offering price and net asset value of the Class A, Class B and
Class C Shares are determined as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open.
The effective date of a purchase is the date the order is received by
the Fund, its agent or designee. The effective date of a direct purchase is the
day your wire, electronic transfer or check is received unless it is received
after the time the offering price or net asset value of shares is determined, as
noted above. Purchase orders received after such time will be effective the next
business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a purchase
is canceled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in Delaware Investments. The Fund reserves the right to
reject purchase orders paid by third-party checks or checks that are not drawn
on a domestic branch of a United States financial institution. If a check drawn
on a foreign financial institution is accepted, you may be subject to additional
bank charges for clearance and currency conversion.
The Fund also reserves the right, following shareholder notification,
to charge a service fee on non-retirement accounts that, as a result of a
redemption, have remained below the minimum stated account balance for a period
of three or more consecutive months. Holders of such accounts may be notified of
their insufficient account balance and advised that they have until the end of
the current calendar quarter to raise their balance to the stated minimum. If
the account has not reached the minimum balance requirement by that time, the
Fund will charge a $9 fee for that quarter and each subsequent calendar quarter
until the account is brought up to the minimum balance. The service fee will be
deducted from the account during the first week of each calendar quarter for the
previous quarter, and will be used to help defray the cost of maintaining
low-balance accounts. No fees will be charged without proper notice, and no CDSC
will apply to such assessments.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.
-28-
<PAGE>
REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways.
The exchange service is useful if your investment requirements change and you
want an easy way to invest in other bond funds, equity funds, tax-advantaged
funds or money market funds. This service is also useful if you are anticipating
a major expenditure and want to move a portion of your investment into a fund
that has the checkwriting feature. Exchanges are subject to the requirements of
each fund and all exchanges of shares constitute taxable events. See Taxes.
Further, in order for an exchange to be processed, shares of the fund being
acquired must be registered in the state where the acquiring shareholder
resides. You may want to consult your financial adviser or investment dealer to
discuss which funds in Delaware Investments will best meet your changing
objectives, and the consequences of any exchange transaction. You may also call
Delaware Investments directly for fund information.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after the Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
For example, redemption or exchange requests received in good order after the
time the offering price and net asset value of shares are determined will be
processed on the next business day. See Purchase Price and Effective Date under
How to Buy Shares. A shareholder submitting a redemption request may indicate
that he or she wishes to receive redemption proceeds of a specific dollar
amount. In the case of such a request, and in the case of certain redemptions
from retirement plan accounts, the Fund will redeem the number of shares
necessary to deduct the applicable CDSC in the case of Class B and Class C
Shares, and, if applicable, the Limited CDSC in the case of Class A Shares and
tender to the shareholder the requested amount, assuming the shareholder holds
enough shares in his or her account for the redemption to be processed in this
manner. Otherwise, the amount tendered to the shareholder upon redemption will
be reduced by the amount of the applicable CDSC or Limited CDSC. Redemption
proceeds will be distributed promptly, as described below, but not later than
seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a redemption or
an exchange by calling the Shareholder Service Center at 800-523-1918. The Fund
may suspend, terminate, or amend the terms of the exchange privilege upon 60
days' written notice to shareholders.
The Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor redemption requests as to shares for which a check
was tendered as payment, but the Fund will not mail or wire the proceeds until
it is reasonably satisfied that the check has cleared, which may take up to 15
days from the purchase date. You can avoid this potential delay if you purchase
shares by wiring Federal Funds. The Fund reserves the right to reject a written
or telephone redemption request or delay payment of redemption proceeds if there
has been a recent change to the shareholder's address of record.
-29-
<PAGE>
There is no front-end sales charge or fee for exchanges made between
shares of funds which both carry a front-end sales charge. Any applicable
front-end sales charge will apply to exchanges from shares of funds not subject
to a front-end sales charge, except for exchanges involving assets that were
previously invested in a fund with a front-end sales charge and/or exchanges
involving the reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in Delaware Investments (in each
case, "New Shares") in a permitted exchange, will not be subject to a CDSC that
might otherwise be due upon redemption of the Original Shares. However, such
shareholders will continue to be subject to the CDSC and, in the case of Class B
Shares, the automatic conversion schedule of the Original Shares as described in
this Prospectus and any CDSC assessed upon redemption will be charged by the
fund from which the Original Shares were exchanged. In an exchange of Class B
Shares from the Fund, the Fund's CDSC schedule may be higher than the CDSC
schedule relating to the New Shares acquired as a result of the exchange. For
purposes of computing the CDSC that may be payable upon a disposition of the New
Shares, the period of time that an investor held the Original Shares is added to
the period of time that an investor held the New Shares. With respect to Class B
Shares, the automatic conversion schedule of the Original Shares may be longer
than that of the New Shares. Consequently, an investment in New Shares by
exchange may subject an investor, absent any applicable fee waiver, to the
higher 12b-1 fees applicable to Class B Shares of the Fund for a longer period
of time than if the investment in New Shares were made directly.
Various redemption and exchange methods are outlined below. Except for
the CDSC applicable to certain redemptions of Class B and Class C Shares and the
Limited CDSC applicable to certain redemptions of Class A Shares purchased at
net asset value, there is no fee charged by the Fund or the Distributor for
redeeming or exchanging your shares, but such fees could be charged in the
future. You may have your investment dealer arrange to have your shares redeemed
or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund or its agent.
Written Redemption
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103
to redeem some or all of your shares. The request must be signed by all owners
of the account or your investment dealer of record. For redemptions of more than
$50,000, or when the proceeds are not sent to the shareholder(s) at the address
of record, the Fund requires a signature by all owners of the account and a
signature guarantee for each owner. A signature guarantee can be obtained
from a commercial bank, a trust company or a member of a Securities Transfer
Association Medallion Program ("STAMP"). A signature guarantee cannot be
provided by a notary public. A signature guarantee is designed to protect the
shareholders, Equity Funds IV, Inc. and its agents from fraud. The Fund
reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Fund may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificate(s) must accompany your request and also be in good order.
Certificates are issued for Class A Shares only if a shareholder submits a
specific request. Certificates are not issued for Class B Shares or Class C
Shares.
-30-
<PAGE>
Written Exchange
You may also write to the Fund (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your shares into another mutual
fund in Delaware Investments, subject to the same conditions and limitations
as other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
certificates.
The Telephone Redemption--Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do not
wish to have such services available with respect to your account. The Fund
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests.
Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day. First
Union National Bank's fee (currently $7.50) will be deducted from your
redemption proceeds. If you ask for a check, it will normally be mailed the next
business day after receipt of your request to your predesignated bank account.
There are no separate fees for this redemption method, but the mail time may
delay getting funds into your bank account. Simply call the Shareholder Service
Center prior to the time the offering price and net asset value are determined,
as noted above.
-31-
<PAGE>
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in Delaware Investments under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
For purchases of $1,000,000 or more made on or after July 1, 1998, a
Limited CDSC will be imposed on certain redemptions of Class A Shares (or shares
into which such Class A Shares are exchanged) according to the following
schedule: (1) 1.00% if shares are redeemed during the first year after the
purchase; and (2) 0.50% if such shares are redeemed during the second year after
the purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission described above.
The Limited CDSC will be paid to the Distributor and will be assessed
on an amount equal to the lesser of: (1) the net asset value at the time of
purchase of the Class A Shares being redeemed or (2) the net asset value of such
Class A Shares at the time of redemption. For purposes of this formula, the "net
asset value at the time of purchase" will be the net asset value at purchase of
the Class A Shares even if those shares are later exchanged for shares of
another Delaware Investments fund and, in the event of an exchange of Class A
Shares, the "net asset value of such shares at the time of redemption" will be
the net asset value of the shares acquired in the exchange.
Redemptions of such Class A Shares held for more than two years will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Investments fund will not trigger the imposition of the
Limited CDSC at the time of such exchange. The period a shareholder owns shares
into which Class A Shares are exchanged will count towards satisfying the
two-year holding period. The Limited CDSC is assessed if such two-year
period is not satisfied irrespective of whether the redemption triggering its
payment is of Class A Shares of the Fund or Class A Shares acquired in the
exchange.
In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the investment
occurred, will age one month on the last day of that month and each subsequent
month.
Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from the Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"), or due to death of a participant in such a plan; (iii)
redemptions pursuant to the direction of a participant or beneficiary of a
retirement plan qualified under section 401(a) or 401(k) of the Code with
respect to that retirement plan; (iv) periodic distributions from an IRA, SIMPLE
IRA or 403(b)(7) or 457 Deferred Compensation Plan or due to death, disability,
or attainment of age
-32-
<PAGE>
59 1/2, and IRA distributions qualifying under Section 72(t) of the Code; (v)
returns of excess contributions to an IRA; (vi) distributions by other employee
benefit plans to pay benefits; (vii) distributions described in (ii), (iv), and
(vi) above pursuant to a systematic withdrawal plan; and (viii) redemptions by
the classes of shareholders who are permitted to purchase shares at net asset
value, regardless of the size of the purchase (see Buying Class A Shares at Net
Asset Value under Classes of Shares).
Waiver of Contingent Deferred Sales Charge - Class B and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from the
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective minimum
account size; (ii) returns of excess contributions to an IRA, SIMPLE IRA,
SEP/IRA, or 403(b)(7) or 457 Deferred Compensation Plan, (iii) periodic
distributions from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, or 403(b)(7) or 457
Deferred Compensation Plan due to death, disability or attainment of age 59
1/2, and IRA distributions qualifying under Section 72(t) of the Code; and (iv)
distributions from an account if the redemption results from the death of all
registered owners of the account (in the case of accounts established under the
Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts,
the waiver applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Code) of all registered
owners occurring after the purchase of the shares being redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution Plan; (iii) periodic distributions from a 403(b)(7) or
457 Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing
Plan, Money Purchase Pension Plan, or 401(k) Defined Contribution Plan upon
attainment of age 70 1/2, and IRA distributions qualifying under Section 72(t)
of the Code; (iv) distributions from a 403(b)(7) or 457 Deferred Compensation
Plan, Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or 401(k)
Defined Contribution Plan upon attainment of normal retirement age under the
plan or upon separation from service; (vi) periodic distributions from an IRA or
SIMPLE IRA on or after attainment of age 59 1/2; and (vii) distributions from
an account if the redemption results from the death of all registered owners of
the account (in the case of accounts established under the Uniform Gifts to
Minors or Uniform Transfers to Minors Acts or trust accounts, the waiver applies
upon the death of all beneficial owners) or a total and permanent disability (as
defined in Section 72 of the Code) of all registered owners occurring after the
purchase of the shares being redeemed.
-33-
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
The Fund will make payments from net investment income and net realized
securities profits, if any, twice a year. The first payment normally will be
made during the first quarter following the end of Equity Funds IV, Inc.'s
fiscal year. The second payment would be made near the end of the calendar year
to comply with certain requirements of the Internal Revenue Code (the "Code").
Each Class of the Fund will share proportionately in the investment
income and expenses of the Fund, except that, absent any applicable fee waiver,
the per share dividends from net investment income on Class A Shares, Class B
Shares and Class C Shares will vary due to the expenses under the 12b-1 Plan
applicable to each Class. Generally, except in the absence of a waiver, the
dividends per share on Class B Shares and Class C Shares can be expected to be
lower than the dividends per share on Class A Shares because the expenses under
the 12b-1 Plans relating to Class B and Class C Shares will be higher than the
expenses under the 12b-1 Plan relating to Class A Shares. See Distribution
(12b-1) and Service under Management of the Fund.
Both dividends and distributions, if any, are automatically reinvested
in your account at net asset value.
-34-
<PAGE>
TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Fund.
On August 5, 1997, the Taxpayer Relief Act of 1997 (the "1997 Act")
was signed into law. This new law made sweeping changes in the Code.
Because many of these changes are complex, and only indirectly affect the Fund
and its distributions to you, they are discussed in Part B. Changes in the
treatment of capital gains, however, are discussed in this section.
The Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, the Fund
will not be subject to federal income tax, or to any excise tax, to the extent
its earnings are distributed as provided in the Code and it satisfies certain
other requirements relating to the sources of its income and diversification of
its assets.
The Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to those investors who are subject
to income taxes as ordinary income, whether received in cash or in additional
shares. For corporate investors, dividends from net investment income will
generally qualify in part for the corporate dividends-received deduction. The
portion of dividends paid by the Fund that so qualifies will be designated each
year in a notice from Equity Funds IV, Inc. to the Fund's shareholders. For the
fiscal year ended September 30, 1998, none of the Fund's dividends from net
investment income qualified for the dividends-received deduction to
corporations.
Distributions paid by the Fund from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who are
subject to income taxes as long-term capital gains, regardless of the length of
time an investor has owned shares in the Fund. The Fund does not seek to realize
any particular amount of capital gains during a year; rather, realized gains are
a by-product of Fund management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year. Also, for
those investors subject to tax, if purchases of shares in the Fund are made
shortly before the record date for a dividend or capital gains distribution, a
portion of the investment will be returned as a taxable distribution.
The Treatment of Capital Gain Distributions under the Taxpayer Relief Act
of 1997
The 1997 Act creates a category of long-term capital gain for
individuals that will be taxed at new lower tax rates. For investors who are in
the 28% or higher federal income tax brackets, these gains will be taxed at a
minimum of 20%. For investors who are in the 15% federal income tax bracket,
these gains will be taxed at a maximum of 10%. Capital gain distributions will
qualify for these new maximum tax rates, depending on when the Fund's securities
were sold and how long they were held by the Fund before they were sold. The
holding periods for which the new rates apply were revised by the Internal
Revenue Service Restructuring and Reform Act of 1998 and the Omnibus
Consolidated and Emergency Supplemental Appropriations Act, which included
technical corrections to the 1997 Act. Investors who want more information on
holding periods and other qualifying rules relating to these new rates should
review the expanded discussion in Part B, or should contact their own tax
advisers.
Equity Funds IV, Inc. will advise you in its annual information
reporting at calendar year end of the amount of its capital gain distributions
which will qualify for these maximum federal tax rates.
-35-
<PAGE>
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November or December to shareholders of
record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Fund and received by the shareholder
on December 31 of the calendar year in which they are declared.
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
the Fund any other fund in Delaware Investments. Any loss incurred on a sale
or exchange of Fund shares that had been held for six months or less will be
treated as a long-term capital loss to the extent of capital gain dividends
received with respect to such shares. All or a portion of the sales charge
incurred in acquiring Fund shares will be excluded from the federal tax basis of
any of such shares sold or exchanged within 90 days of their purchase (for
purposes of determining gain or loss upon the sale of such shares) if the sale
proceeds are reinvested in the Fund or in another fund in the Delaware
Investments family of funds and a sales charge that would otherwise apply to
the reinvestment is reduced or eliminated. Any portion of such sales charge
excluded from the tax basis of the shares sold will be added to the tax basis of
the shares acquired in the reinvestment.
The automatic conversion of Class B Shares into Class A Shares at the
end of approximately eight years after purchase will be tax-free for federal tax
purposes. See Automatic Conversion of Class B Shares under Classes of Shares.
In addition to the federal taxes described above, shareholders may or
may not be subject to various state and local taxes. For example, distributions
of interest income and capital gains realized from certain types of U.S.
government securities may be exempt from state personal income taxes. Because
investors' state and local taxes may be different than the federal taxes
described above, investors should consult their own tax advisers.
Each year, Equity Funds IV, Inc. will mail to you information on the
tax status of the Fund's dividends and distributions. Shareholders will also
receive each year information as to the portion of dividend income that is
derived from U.S. government securities that are exempt from state income tax.
Of course, shareholders who are not subject to tax on their income would not be
required to pay tax on amounts distributed to them by the Fund.
Equity Funds IV, Inc. is required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to shareholders who have not
complied with IRS taxpayer identification regulations. You may avoid this
withholding requirement by certifying on your Investment Application your proper
Taxpayer Identification Number and by certifying that you are not subject to
backup withholding.
See Accounting and Tax Issues and Taxes in Part B for additional
information on tax matters relating to the Fund and its shareholders.
-36-
<PAGE>
CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
The net asset value ("NAV") per share is computed by adding the value
of all securities and other assets in the portfolio, deducting any liabilities
(expenses and fees are accrued daily) and dividing by the number of shares
outstanding. Equity securities for which market quotations are available are
priced at market value. Foreign securities expressed in foreign currency values
will be converted into U.S. dollar values at the mean between the currencies'
bid and offered quotations. Debt securities are priced at fair value by an
independent pricing service using methods approved by Equity Funds IV, Inc.'s
Board of Directors. Short-term investments having a maturity of less than 60
days are valued at amortized cost, which approximates market value. All other
securities are valued at their fair value as determined in good faith and in a
method approved by Equity Funds IV, Inc.'s Board of Directors.
Class A Shares are purchased at the offering price per share, while
Class B Shares and Class C Shares are purchased at the NAV per share. The
offering price per share of Class A Shares consists of the NAV per share next
computed after the order is received, plus any applicable front-end sales
charges.
The offering price and NAV are computed as of the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on
days when the Exchange is open.
The net asset values of all outstanding shares of each class of the
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Fund represented by the value of shares
of that class. All income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share of a class, based on each class'
percentage in the Fund represented by the value of shares of such classes,
except that the Capital Appreciation Fund Institutional Class will not incur any
of the expenses under the Fund's 12b-1 Plans and the Class A, Class B and Class
C Shares alone will bear the 12b-1 Plan expenses, if any, payable under their
respective Plans. Due to the specific distribution expenses and other costs that
will be allocated to each class, the NAV per share of each class of the Fund
will vary.
-37-
<PAGE>
MANAGEMENT OF THE FUND
Directors
The business and affairs of Equity Funds IV, Inc. are managed under the
direction of its Board of Directors. Part B contains additional information
regarding Equity Funds IV, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the Delaware
Investments funds since 1938. On September 30, 1998, the Manager and its
affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $40 billion in assets
in the various institutional or separately managed (approximately
$23,666,360,000) and investment company (approximately $17,194,990,000)
accounts.
The Manager is a series of Delaware Management Business Trust. The
Manager changed its form of organization from a corporation to a business trust
on March 1, 1998. The Manager is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between
DMH and a wholly owned subsidiary of Lincoln National Corporation ("Lincoln
National") was completed. DMH and the Manager are now indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National. Lincoln
National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management.
The Manager manages the Fund's portfolio and makes investment decisions
for the Fund, which are implemented by the Fund's Trading Department. The
Manager also administers Equity Funds IV, Inc.'s affairs and pays the salaries
of all the directors, officers and employees of Equity Funds IV, Inc. who are
affiliated with the Manager. For these services, the Manager is paid an annual
fee equal to 0.75% on the first $500 million of average daily net assets, 0.725%
on the next $500 million and 0.70% on the average daily net assets in excess of
$1 billion. For the fiscal year ended September 30, 1998, investment
management fees incurred by the Fund were 0.75% of average daily net assets and
no fees were paid by the Fund due to the voluntary waiver of fees by the
Manager. The directors of Equity Funds IV, Inc. annually review fees paid to the
Manager.
Gerald S. Frey has primary responsibility for making day-to-day
investment decisions for the Fund . Mr. Frey has been Vice President/Senior
Portfolio Manager of the Fund since March 1997 and was Co-Manager from June
1996 to March 1997. Mr. Frey holds a BA in Economics from Bloomsburg University
and attended Wilkes College and New York University, and he has 21 years'
experience in the money management business. Prior to joining Delaware
Investments in 1996, he was a Senior Director with Morgan Grenfell Capital
Management in New York .
In making investment decisions for the Fund, Mr. Frey regularly
consults with Richard G. Unruh, Jr., Marshall T. Bassett, John A. Heffern,
Jeffrey W. Hynoski and Lori P. Wachs. A graduage of Brown University, Mr. Unruh
received his MBA from the University of Pennsylvania's Wharton School and joined
Delaware Investments in 1982 after 19 years of investment management experience
with Kidder, Peabody & Co. Inc. Mr. Unruh was named an Executive Vice President
of Equity Funds IV, Inc. in 1994. He is also a member of the Board of the
Manager and was named an Executive Vice President of the Manager in 1994. Mr.
Bassett, Vice President, joined Delaware Investments in 1997. In his most recent
position, he served as Vice President in Morgan Stanley Asset Management's
Emerging Growth
-38-
<PAGE>
Group, where he analyzed small growth companies. Prior to that, he was a trust
officer at Sovran Bank and Trust Company. He received his bachelor's degree and
MBA from Duke University. Mr. Heffern, Vice President, holds a bachelor's degree
and an MBA from the University of North Carolina at Chapel Hill. He joined
Delaware Investments in 1997. Previously, he was a Senior Vice President, Equity
Research at NatWest Securities Corporation's Specialty Finance Services unit.
Prior to that, he was a Principal and Senior Regional Bank Analyst at Alex.
Brown & Sons. Mr. Hynoski is a Vice President. He joined Delaware Investments in
1998. Previously he served as a Vice President at Bessemer Trust Company in the
mid and large capitalization growth group, where he specialized in the areas of
science, technology, and telecommunications. Prior to that, Mr. Hynoski held
positions at Lord Abbett & Co. and Cowen Asset Management. Mr. Hynoski holds a
BS in Finance from the University of Delaware and an MBA with a concentration in
Investments/Portfolio Management and Financial Economics from Pace University.
Ms. Wachs is a Vice President. She joined Delaware Investments in 1992 from
Goldman Sachs, where she was an equity analyst for two years. She is a graduate
of the University of Pennsylvania's Wharton School, where she majored in Finance
and Oriental Studies.
Robert L. Arnold, Vice President/Portfolio Manager for the Fund, has
had primary responsibility for making investment decisions for the large cap
equity portion of the Fund since March 1997. Prior to this responsibility, he
was a financial analyst in Delaware Investments focusing on the financial
services industry including banks, thrifts, insurance companies and consumer
finance companies. He holds a BS from Carnegie Mellon University and earned an
MBA from the University of Chicago. He began his investment career as a
management consultant with Arthur Young in Philadelphia. Prior to joining
Delaware Investments in March 1992, Mr. Arnold was a planning analyst with
Chemical Bank in New York.
Portfolio Trading Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length of time they
have been held. The degree of portfolio activity will affect brokerage costs of
the Fund and may affect taxes payable by the Fund's shareholders. Given the
Fund's investment objective, its annual portfolio turnover rate is not expected
to exceed 100%. A turnover rate of 100% would occur, for example, if all the
investments in the Fund's portfolio at the beginning of the year were replaced
by the end of the year. The turnover rate may also be affected by cash
requirements for redemption and repurchases of Fund shares.
The Manager uses its best efforts to obtain the best available price
and most favorable execution for portfolio transactions. Orders may be placed
with brokers or dealers who provide brokerage and research services to the
Manager or to their advisory clients. These services may be used by the Manager
in servicing any of its accounts. Subject to best price and execution, the
Manager may consider a broker/dealer's sales of the shares of the funds in the
Delaware Investments family in placing portfolio orders and may place orders
with broker/dealers that have agreed to defray certain expenses of such funds,
such as custodian fees.
Performance Information
From time to time, the Fund may quote total return performance of the
Classes in advertising and other types of literature.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value and: (i) in
the case of Class A Shares, the impact of the maximum front-end sales charge at
the beginning of each specified period; and (ii) in the case of Class B Shares
and Class C Shares, the
-39-
<PAGE>
deduction of any applicable CDSC at the end of the relevant period. Each
presentation will include the average annual total return for one-, five- and
ten-year or life-of-fund periods, as relevant. The Fund may also advertise
aggregate and average total return information concerning a Class over
additional periods of time. In addition, the Fund may present total return
information that does not reflect the deduction of the maximum front-end sales
charge or any applicable CDSC. In this case, such total return information would
be more favorable than total return information that includes the deductions of
the maximum front-end sales charge or any applicable CDSC.
Because securities prices fluctuate, investment results of the Classes
will fluctuate over time and past performance should not be considered a
guarantee of future results.
Distribution (12b-1) and Service
The Distributor, Delaware Distributors, L.P., serves as the national
distributor of the Fund's shares under a Distribution Agreement with Equity
Funds IV, Inc. dated as of November 29, 1996.
Equity Funds IV, Inc. has adopted a separate distribution plan under
Rule 12b-1 for each of the Class A Shares, Class B Shares and Class C Shares
(the "Plans"). The Plans permit the Fund to pay the Distributor from the assets
of the respective Classes a monthly fee for the Distributor's services and
expenses in distributing and promoting sales of shares.
These expenses include, among other things, preparing and distributing
advertisements, sales literature, and prospectuses and reports used for sales
purposes, compensating sales and marketing personnel, holding special promotions
for specified periods of time, and paying distribution and maintenance fees to
brokers, dealers and others. In connection with the promotion of shares of the
Classes, the Distributor may, from time to time, pay to participate in
dealer-sponsored seminars and conferences, and reimburse dealers for expenses
incurred in connection with preapproved seminars, conferences, and advertising.
The Distributor may pay or allow additional promotional incentives to dealers as
part of preapproved sales contests and/or to dealers who provide extra training
and information concerning a Class and increase sales of the Class. In addition,
the Fund may make payments from the 12b-1 Plan fees of the respective Class
directly to others, such as banks, who aid in the distribution of Class shares
or provide services in respect of a Class, pursuant to service agreements with
Equity Funds IV, Inc. The Distributor has elected voluntarily to waive its right
to receive 12b-1 fees (including service fees) from the commencement of the
public offering of the Classes through May 31, 1999.
The 12b-1 Plans applicable to Class B Shares and Class C Shares are
designed to permit an investor to purchase these shares through dealers or
brokers without paying a front-end sales charge while enabling the Distributor
to compensate dealers and brokers for the sale of such shares.
Absent any applicable fee waiver, the aggregate fees paid by the Fund
from the assets of the respective Classes to the Distributor and others under
the Plans may not exceed (i) 0.30% of the Class A Shares' average daily net
assets in any year, and (ii) 1% (0.25% of which are service fees to be paid to
the Distributor, dealers and others for providing personal service and/or
maintaining shareholder accounts) of each of the Class B Shares' and Class C
Shares' average daily net assets in any year. The Fund's Class A, Class B and
Class C Shares will not incur any distribution expenses beyond these limits,
which may not be increased without shareholder approval.
While payments, if any, pursuant to the Plans may not exceed 0.30%
annually with respect to the Class A Shares, and 1% annually with respect to
each of the Class B Shares and the Class C Shares, the Plans do not limit fees
to amounts actually expended by the Distributor. It is therefore possible that
the Distributor may
-40-
<PAGE>
realize a profit in any particular year. However, the Distributor currently
expects that its distribution expenses will likely equal or exceed payments to
it under the Plans. The Distributor may, however, incur such additional expenses
and make additional payments to dealers from its own resources to promote the
distribution of shares of the Classes. The monthly fees paid to the Distributor
are subject to the review and approval of Equity Funds IV, Inc.'s unaffiliated
directors, who may reduce the fees or terminate the Plans at any time.
Equity Funds IV, Inc.'s Plans do not apply to the Capital Appreciation
Fund Institutional Class of shares. Those shares are not included in calculating
the Plans' fees, and the Plans are not used to assist in the distribution and
marketing of the Capital Appreciation Fund Institutional Class shares.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for Equity Funds
IV, Inc. under an amended and restated agreement dated as of November 29, 1996.
Delaware Service Company, Inc. also provides accounting services to the Fund
pursuant to the terms of a separate Fund Accounting Agreement.
The directors annually review fees paid to the Distributor and the
Transfer Agent. The Distributor and the Transfer Agent are also indirect, wholly
owned subsidiaries of DMH.
* * *
As with other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by its service providers do not properly process and
calculate date-related information from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." Equity Funds IV, Inc. and the Fund
are taking steps to obtain satisfactory assurances that their major service
providers are taking steps reasonably designed to address the Year 2000 Problem
with respect to the computer systems that such service providers use. There can
be no assurances that these steps will be sufficient to avoid any adverse impact
on the business of any of the Fund.
Several European countries are participating in the European Economic
and Monetary Union, which will establish a common European currency for
participating countries. This currency will commonly be known as the "Euro." It
is anticipated that each such participating country will replace its existing
currency with the Euro on January 1, 1999. Additional European countries may
elect to participate after that date. The Fund, if investing in securities of
participating countries, could be adversely affected if the computer systems
used by their major service providers are not properly prepared to handle the
implementation of this single currency or the adoption of the Euro by additional
countries in the future. The Fund is taking steps to obtain satisfactory
assurances that the major service providers are taking steps reasonably designed
to address these matters with respect to the computer systems that such service
providers use. There can be no assurances that these steps will be sufficient to
avoid any adverse impact on the business of the Fund.
Expenses
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under the Distribution Agreement. The expense ratio of each
Class will reflect the impact of its 12b-1 Plan. For the fiscal year ended
September 30, 1998, the ratio of expenses to average daily net assets for
Class A Shares was 0.75%, which reflects the voluntary waiver of fees by the
Manager and the voluntary waiver of the 12b-1 fee by the Distributor.
-41-
<PAGE>
Without such waivers, the ratio of operating expenses to average daily net
assets would have been 2.28%. The Class B Shares and Class C Shares have not
commenced operations as of September 30, 1998.
Shares
Equity Funds IV, Inc. is an open-end management investment company,
commonly known as a mutual fund, and the Fund's portfolio of assets is
diversified as defined by the 1940 Act. Equity Funds IV, Inc. was organized as a
Maryland corporation in September 1985. In addition to the Fund, Equity Funds
IV, Inc. currently offers one other series of shares, the DelCap Fund series.
Equity Funds IV, Inc. shares have a par value of $.01, equal voting
rights, except as noted below, and are equal in all other respects. All Fund
shares have noncumulative voting rights which means that the holders of more
than 50% of Equity Funds IV, Inc.'s shares voting for the election of directors
can elect 100% of the directors if they choose to do so. Under Maryland law,
Equity Funds IV, Inc. is not required, and does not intend, to hold annual
meetings of shareholders unless, under certain circumstances, it is required to
do so under the 1940 Act.
In addition to Class A Shares, Class B Shares and Class C Shares, the
Fund also offers Capital Appreciation Fund Institutional Class. Shares of each
class represent proportionate interests in the assets of the Fund and have the
same voting and other rights and preferences as the other classes of the Fund,
except that shares of Capital Appreciation Fund Institutional Class are not
subject to, and may not vote on matters affecting, the Distribution Plans under
Rule 12b-1 relating to Class A, Class B and Class C Shares. Similarly, as a
general matter, the shareholders of Class A Shares, Class B Shares and Class C
Shares may vote only on matters affecting the 12b-1 Plan that relates to the
class of shares that they hold. However, Class B Shares may vote on any proposal
to increase materially the fees to be paid by the Fund under the Rule 12b-1 Plan
relating to Class A Shares.
Lincoln National Corporation Employees' Retirement Trust (the "Trust")
made an investment in the Fund. As of October 31, 1998, the Trust owned
99.46% of the outstanding shares of the Fund. Subject to certain limited
exceptions, there are no limitations on the Trust's ability to redeem its
shares of the Fund and it may elect to do so at any time.
-42-
<PAGE>
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
Small to Medium-Sized Companies
The Fund invests its assets in equity securities of small to
medium-sized companies. These stocks have historically been more volatile in
price than larger capitalization stocks, such as those included in the S&P
500. This is because, among other things, smaller companies have a lower degree
of liquidity and tend to have a greater sensitivity to changing economic
conditions. These companies may have narrow product lines, markets or financial
resources, or may depend on a limited management group. In addition, these
companies are typically subject to a greater degree of change in their
earnings and prospects. The companies' securities may trade less frequently and
have a smaller trading volume. The securities may be traded only in the
over-the-counter markets or on a regional securities exchange. In addition to
exhibiting greater volatility, smaller capitalization securities may, to some
degree, fluctuate independently of the stocks of larger capitalization
companies. For example, the stocks of smaller capitalization companies may
decline in price as the price of larger company stocks rise, or vice versa.
Foreign Securities
The Fund may invest up to 20% of its total assets in foreign
securities. Foreign markets may be more volatile than U.S. markets. Such
investments involve sovereign risk in addition to the normal risks associated
with securities of U.S. issuers. These risks include political risks, foreign
taxes and exchange controls and currency fluctuations. For example, foreign
portfolio investments may fluctuate in value due to changes in currency rates
(i.e., other things being equal, the value of foreign investments would increase
with a fall in the value of the dollar, and decrease with a rise in the value of
the dollar) and control regulations apart from market fluctuations. The Fund may
also experience delays in foreign securities settlement. The Fund currently
intends to limit its investment in foreign securities to those issued by
entities in developed countries.
Depositary Receipts
The Fund may make foreign investments through the purchase and sale of
sponsored or unsponsored American, European and Global Depositary Receipts
("Depositary Receipts"). Depositary Receipts are receipts typically issued by a
U.S. or foreign bank or trust company which evidence ownership of underlying
securities issued by a foreign corporation. "Sponsored" Depositary Receipts are
issued jointly by the issuer of the underlying security and a depository,
whereas "unsponsored" Depositary Receipts are issued without participation of
the issuer of the deposited security. Holders of unsponsored Depositary Receipts
generally bear all the costs of such facilities and the depository of an
unsponsored facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through voting rights to the holders of such receipts in respect of the
deposited securities. Therefore, there may not be a correlation between
information concerning the issuer of the security and the market value of an
unsponsored Depositary Receipt.
Restricted and Illiquid Securities
The Fund may invest in restricted securities, including privately
placed securities, some of which may be eligible for resale without registration
pursuant to Rule 144A ("Rule 144A Securities") under the Securities Act of 1933.
Rule 144A permits many privately placed and legally restricted securities to be
freely traded among certain institutional buyers such as the Fund. The Fund may
invest no more than 15% of the value of its net assets in illiquid securities.
While maintaining oversight, the Board of Directors has delegated to
the Manager the day-to-day function of determining whether or not individual
Rule 144A Securities are liquid for purposes of the Fund's 15% limitation on
investments in illiquid assets. The Board has instructed the Manager to consider
the
-43-
<PAGE>
following factors in determining the liquidity of a Rule 144A Security: (i) the
frequency of trades and trading volume for the security; (ii) whether at least
three dealers are willing to purchase or sell the security and the number of
potential purchasers; (iii) whether at least two dealers are making a market in
the security; and (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, the
Fund's holdings of illiquid securities exceed the Fund's 15% limit on
investments in such securities, the Manager will determine what action to take
to ensure that the Fund continues to adhere to such limitation.
Investment Company Securities
Any investments that the Fund makes in either closed-end or open-end
investment companies are limited by the 1940 Act, and involve an indirect
payment of a portion of the expenses, including advisory fees, of such other
investment companies. Under the 1940 Act's current limitations, the Fund may
not: (1) own more than 3% of the voting stock of another investment company;
(2) invest more than 5% of the Fund's total assets in the shares of any one
investment company; nor (3) invest more than 10% of the Fund's total assets in
shares of other investment companies. If the Fund elects to limit its investment
in other investment companies to closed-end investment companies, the 3%
limitation described above is increased to 10%. These percentage limitations
also apply to the Fund's investments in unregistered investment companies.
Repurchase Agreements
The Fund may also use repurchase agreements that are at least 102%
collateralized by securities in which the Funds can invest directly. Repurchase
agreements help the Fund to invest short-term cash reserves or may be used by
the Fund if a temporary defensive posture is deemed appropriate. The Fund may
invest cash balances in joint repurchase agreements with other Delaware
Investments funds. Under a repurchase agreement, the Fund acquires ownership
and possession of a security, and the seller agrees to buy the security back at
a specified time and higher price. If the seller is unable to repurchase the
security, the Fund could experience delays in liquidating the securities and the
Fund could incur a loss. That loss, if any, would be the difference between the
repurchase price and the market value of the security. To minimize those
possibilities, the Fund may enter into repurchase agreements with banks and
broker/dealers deemed by the Manager to be creditworthy under guidelines
approved by the Board of Directors and to those which the Manager, under such
guidelines, determines to present minimal credit risks and which are of high
quality.
When-Issued and Delayed Delivery Securities
The Fund may purchase securities on a when-issued or delayed delivery
basis. In such transactions, securities are purchased with payment and delivery
taking place in the future in order to secure what is considered to be an
advantageous price at the time of the transaction. Delivery of and payment for
these securities may take as long as a month or more after the date of the
purchase commitment. The Fund will maintain with its custodian bank a separate
account with a segregated portfolio of liquid securities in an amount at least
equal to these commitments. The payment obligation that will be received are
each fixed at the time the Fund enters into the commitment. Thus, it is possible
that the market value at the time of settlement could be higher or lower than
the purchase price.
-44-
<PAGE>
REITs
The Fund may purchase shares of real estate investment trusts
("REITs"). REITs are pooled investment vehicles which invest primarily in
income-producing real estate or real estate related loans or interests. REITs
are generally classified as equity REITs, mortgage REITs or a combination of
equity and mortgage REITs. Equity REITs invest the majority of their assets
directly in real property and derive income primarily from the collection of
rents. Equity REITs can also realize capital gains by selling properties that
have appreciated in value. Mortgage REITs invest the majority of their assets in
real estate mortgages and derive income from the collection of interest
payments. Like investment companies such as Equity Funds IV, Inc., REITs are not
taxed on income distributed to shareholders provided they comply with several
requirements in the Internal Revenue Code. REITs are subject to substantial cash
flow dependency, defaults by borrowers, self-liquidation, and the risk of
failing to qualify for tax-free pass-through of income under the Internal
Revenue Code, and/or to maintain exemptions from the 1940 Act.
Borrowing
The Fund is permitted under certain circumstances to borrow money.
Investment securities will not normally be purchased while the Fund has an
outstanding borrowing.
Portfolio Loan Transactions
The Fund may loan up to 25% of its assets to qualified broker/dealers
or institutional investors. The major risk to which the Fund would be exposed on
a loan transaction is the risk that the borrower would go bankrupt at a time
when the value of the security goes up. Therefore, the Fund will only enter into
loan arrangements after a review of all pertinent facts by the Manager, subject
to overall supervision by the Board of Directors, including the creditworthiness
of the borrowing broker, dealer or institution and then only if the
consideration to be received from such loans would justify the risk.
Creditworthiness will be monitored on an ongoing basis by the Manager.
Foreign Currency Transactions
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund will, however, from time to time, purchase or sell
foreign currencies and/or engage in forward foreign currency transactions in
order to expedite settlement of portfolio transactions and to minimize currency
value fluctuations. The Fund may conduct its foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into contracts to purchase
or sell foreign currencies at a future date (i.e., a "forward foreign currency"
contract or "forward" contract). A forward contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract, agreed upon by the parties, at a
price set at the time of the contract. The Fund will convert currency on a spot
basis from time to time, and investors should be aware of the costs of currency
conversion.
The Fund may enter into forward contracts to "lock in" the price of a
security it has agreed to purchase or sell, in terms of U.S. dollars or other
currencies in which the transaction will be consummated. By entering into a
forward contract for the purchase or sale, for a fixed amount of U.S. dollars or
foreign currency, of the amount of foreign currency involved in the underlying
security transaction, the Fund will be able to protect itself against a possible
loss resulting from an adverse change in currency exchange rates during the
period between the date the security is purchased or sold and the date on which
payment is made or received.
When the Manager believes that the currency of a particular country may
suffer a significant decline against the U.S. dollar or against another
currency, the Fund may enter into a forward foreign currency contract
-45-
<PAGE>
to sell, for a fixed amount of U.S. dollars or other appropriate currency, the
amount of foreign currency approximating the value of some or all of the Fund's
securities denominated in such foreign currency.
The Fund will not enter into forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of the
value of the Fund's securities or other assets denominated in that currency.
As the maturity of a forward contract, the Fund may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Fund may realize a gain or loss from currency
transactions.
The Fund also may purchase and write put and call options on foreign
currencies (traded on U.S. and foreign exchanges or over-the-counter) for
hedging purposes to protect against declines in the U.S. dollar cost of foreign
securities held by the Fund and against increases in the U.S. dollar cost of
such securities to be acquired. Call options on foreign currency written by the
Fund will be covered, which means that the Fund will own the underlying foreign
currency. With respect to put options on foreign currency written by the Fund,
the Fund will establish a segregated account with its custodian bank consisting
of cash, U.S. Government securities or other high-grade liquid debt securities
in an amount equal to the amount the Fund will be required to pay upon exercise
of the put.
As in the case of other kinds of options, the writing of an option on
foreign currency will constitute only a partial hedge, up to the amount of the
premium received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on foreign currency may constitute an effective hedge
against fluctuations in exchange rates, although, in the event of rate movements
adverse to the Fund's position, the Fund may forfeit the entire amount of the
premium plus related transaction costs.
Futures Contracts
The Fund may enter into futures contracts on stocks, stock indices and
foreign currencies, and purchase or sell options on such futures contracts.
These activities will not be entered into for speculative purposes, but rather
for hedging purposes and to facilitate the ability to quickly deploy into the
stock market the Fund's positions in cash, short-term debt securities and other
money market instruments, at times when the Fund's assets are not fully invested
in equity securities. Such positions will generally be eliminated when it
becomes possible to invest in securities that are appropriate for the Fund.
A futures contract is a bilateral agreement providing for the purchase
and sale of a specified type and amount of a financial instrument, or for the
making and acceptance of a cash settlement, at a stated time in the future for a
fixed price. By its terms, a futures contract provides for a specified
settlement date on which the securities underlying the contract are delivered,
or in the case of securities index futures contracts, the difference between the
price at which the contract was entered into and the contract's closing value is
settled between the purchaser and seller in cash. Futures contracts differ from
options in that they are bilateral agreements, with both the purchaser and the
seller equally obligated to complete the transaction. In addition, futures
contracts call for settlement only on the expiration date, and cannot be
"exercised" at any other time during their term.
-46-
<PAGE>
The purchase or sale of a futures contract also differs from the
purchase or sale of a security or the purchase of an option in that no purchase
price is paid or received. Instead, an amount of cash or cash equivalents, which
varies but may be as low as 5% or less of the value of the contract, must be
deposited with the broker as "initial margin" as a good faith deposit. This
amount is generally maintained in a segregated account at the custodian bank.
Subsequent payments to and from the broker, referred to as "variation margin,"
are made on a daily basis as the value of the index or instrument underlying the
futures contract fluctuates, making positions in the futures contracts more or
less valuable, a process known as "marking to the market."
Purchases or sales of stock index futures contracts are used for
hedging purposes to attempt to protect the Fund's current or intended
investments from broad fluctuations in stock prices. For example, the Fund may
sell stock index futures contracts in anticipation of or during a market decline
to attempt to offset the decrease in market value of the Fund's securities
portfolio that might otherwise result. If such decline occurs, the loss in value
of portfolio securities may be offset, in whole or part, by gains on the futures
position. When the Fund is not fully invested in the securities market and
anticipates a significant market advance, it may purchase stock index futures
contracts in order to gain rapid market exposure that may, in part or entirely,
offset increases in the cost of securities that the Fund intends to purchase. As
such purchases are made, the corresponding positions in stock index futures
contracts will be closed out.
The Fund may purchase and sell foreign currency futures contracts for
hedging purposes to attempt to protect its current or intended investments
denominated in foreign currencies from fluctuations in currency exchange rates.
Such fluctuations could reduce the dollar value of portfolio securities
denominated in foreign currencies, or increase the cost of foreign-denominated
securities to be acquired, even if the value of such securities in the
currencies in which they are denominated remains constant. The Fund may sell
futures contracts on a foreign currency, for example, when it holds securities
denominated in such currency and it anticipates a decline in the value of such
currency relative to the dollar. In the event such decline occurs, the resulting
adverse effect on the value of foreign-denominated securities may be offset, in
whole or in part, by gains on the futures contracts. However, if the value of
the foreign currency increases relative to the dollar, the Fund's loss on the
foreign currency futures contract may or may not be offset by an increase in the
value of the securities because a decline in the price of the security stated in
terms of the foreign currency may be greater than the increase in value as a
result of the change in exchange rates.
Conversely, the Fund could protect against a rise in the dollar cost of
foreign-denominated securities to be acquired by purchasing futures contracts on
the relevant currency, which could offset, in whole or in part, the increased
cost of such securities resulting from a rise in the dollar value of the
underlying currencies. When the Fund purchases futures contracts under such
circumstances, however, and the price of securities to be acquired instead
declines as a result of appreciation of the dollar, the Fund will sustain losses
on its futures position which could reduce or eliminate the benefits of the
reduced cost of portfolio securities to be acquired.
The Fund may also purchase and write options on the types of futures
contracts in which the Fund may invest, and enter into related closing
transactions. Options on futures are similar to options on securities, as
described below, except that options on futures give the purchaser the right, in
return for the premium paid, to assume a position in a futures contract, rather
than to actually purchase or sell the futures contract, at a specified exercise
price at any time during the period of the option. In the event that an option
written by the Fund is exercised, the Fund will be subject to all the risks
associated with the trading of futures contracts, such as payment of variation
margin deposits. In addition, the writer of an option on a futures contract,
unlike the holder, is subject to initial and variation margin requirements on
the option position.
-47-
<PAGE>
At any time prior to the expiration of a futures contract, a trader may
elect to close out its position by taking an opposite position on the contract
market on which the position was entered into, subject to the availability of a
secondary market, which will operate to terminate the initial position.
Likewise, a position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to availability of a secondary market, which is the
purchase or sale of an option of the same series (i.e., the same exercise price
and expiration date) as the option previously purchased or sold. The Fund may
realize a profit or a loss when closing out a futures contract or an option on a
futures contract.
To the extent that interest or exchange rates or securities prices move
in an unexpected direction, the Fund may not achieve the anticipated benefits of
investing in futures contracts and options thereon, or may realize a loss. To
the extent that the Fund purchases an option on a futures contract and fails to
exercise the option prior to the exercise date, it will suffer a loss of the
premium paid. Further, the possible lack of a secondary market could prevent the
Fund from closing out its positions relating to futures. See Part B for a
further discussion of this investment technique.
Options
The Fund may write covered call options on individual issues as well as
write call options on stock indices. The Fund may also purchase put options on
individual issues and on stock indices. The Manager will employ these techniques
in an attempt to protect appreciation attained, to offset capital losses and to
take advantage of the liquidity available in the option markets. The ability to
hedge effectively using options on stock indices will depend, in part, on the
correlation between the composition of the index and the Fund's portfolio as
well as the price movement of individual securities. The Manager may also write
covered call options to achieve income to offset the cost of purchasing put
options.
While there is no limit on the amount of the Fund's assets which may be
invested in covered call options, the Fund will not invest more than 2% of its
net assets in put options. The Fund will only use Exchange-traded options.
Call Options
Writing a Covered Call Option on Securities - A covered call option
obligates the Fund to sell one of its securities for an agreed price up to an
agreed date. When the Fund writes a call, it receives a premium and agrees to
sell the callable securities to a purchaser of a corresponding call during the
call period (usually, not more than nine months) at a fixed price regardless of
market price changes during the call period. The advantage is that the Fund
receives premium income for the limited purpose of offsetting the costs of
purchasing put options or offsetting any capital loss or decline in the market
value of the security. However, if the Manager's forecast is wrong, the Fund may
not fully participate in the market appreciation if the security's price rises.
Writing a Call Option on Stock Indices - Writing a call option on stock
indices is similar to the writing of a call option on an individual stock. Stock
indices used will include, but not be limited to, the S&P 500, the S&P 100 and
the S&P Over-The-Counter ("OTC") 250.
-48-
<PAGE>
Put Options
Purchasing a Put Option - A put option gives the Fund the right to sell
one of its securities for an agreed price up to an agreed date. The advantage is
that the Fund can be protected should the market value of the security decline.
However, the Fund must pay a premium whether or not the put option is exercised.
Purchasing a Put Option on Stock Indices - Purchasing a protective put
option on stock indices is similar to the purchase of protective puts on an
individual stock. Indices used will include, but not be limited to, the S&P 500,
the S&P 100 and the S&P OTC 250.
Closing Transactions - Closing transactions essentially let the Fund
offset a put option or covered call option prior to its exercise or expiration.
If the Fund cannot effect a closing transaction, it may have to hold a security
it would otherwise sell or deliver a security it might want to hold.
Part B describes certain of these investment policies and risk
considerations. Part B sets forth other investment policies, risk considerations
and more specific investment restrictions.
-49-
<PAGE>
Delaware Investments includes funds with a wide range of investment
objectives. Stock funds, income funds, national and state-specific tax-exempt
funds, money market funds, global and international funds and closed-end funds
give investors the ability to create a portfolio that fits their personal
financial goals. For more information, contact your financial adviser or call
Delaware Investments at 800-523-1918.
INVESTMENT MANAGER
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
<PAGE>
For more information contact
Delaware Investments at 800-510-4015. --------------------------
CAPITAL APPRECIATION FUND
--------------------------
INSTITUTIONAL CLASS
--------------------------
INVESTMENT MANAGER
Delaware Management Company P R O S P E C T U S
One Commerce Square
Philadelphia, PA 19103 --------------------------
NATIONAL DISTRIBUTOR NOVEMBER 30, 1998
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan DELAWARE
Bank 4 Chase Metrotech Center INVESTMENTS
Brooklyn, NY 11245 -----------
[GRAPHIC OMITTED]
<PAGE>
CAPITAL APPRECIATION FUND PROSPECTUS
INSTITUTIONAL CLASS SHARES NOVEMBER 30, 1998
1818 Market Street, Philadelphia, PA 19103
For more information about
Capital Appreciation Fund Institutional
Class call Delaware Investments at 800-510-4015.
This Prospectus describes the Capital Appreciation Fund series (the
"Fund") of Delaware Group Equity Funds IV, Inc. ("Equity Funds IV, Inc."), a
professionally-managed mutual fund of the series type. The investment objective
of the Fund is capital appreciation. The Fund will attempt to achieve its
objective by investing primarily in equity securities of small to medium-sized
companies expected to grow over time and, to a lesser extent, in equity
securities of larger, more well established companies presenting growth
potential.
This Prospectus relates only to the Fund's institutional class, Capital
Appreciation Fund Institutional Class (the "Class"), and sets forth information
that you should read and consider before you invest. Please retain it for future
reference. The Statement of Additional Information ("Part B" of Equity Funds IV,
Inc.'s registration statement), dated November 30, 1998, as it may be amended
from time to time, contains additional information about the Fund and has been
filed with the Securities and Exchange Commission ("SEC"). Part B is
incorporated by reference into this Prospectus and is available, without charge,
by writing to Delaware Distributors, L.P. at the above address or by calling
800-523-1918. The Fund's financial statements appear in its Annual Report, which
will accompany any response to requests for Part B. In addition, the SEC
maintains a Web site (http://www.sec.gov) that contains Part B, material we
incorporated by reference, and other information regarding registrants that
electronically file with the SEC.
The Fund also offers Capital Appreciation Fund A Class, Capital
Appreciation Fund B Class and Capital Appreciation Fund C Class. Shares of these
classes are subject to sales charges and other expenses, which may affect their
performance. A prospectus for these classes can be obtained by writing to
Delaware Distributors, L.P. at the above address or by calling 800-523-1918.
-2-
<PAGE>
TABLE OF CONTENTS
Page
----
Cover Page .............................................
Synopsis ...............................................
Summary of Expenses ....................................
Financial Highlights ...................................
Investment Objective and Policies
Suitability and Certain Risk Factors ..........
Investment Strategy ...........................
Classes of Shares ......................................
How to Buy Shares ......................................
Redemption and Exchange ................................
Dividends and Distributions ............................
Taxes ..................................................
Calculation of Net Asset Value Per Share ...............
Management of the Fund .................................
Other Investment Policies and Risk Considerations ......
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. SHARES OF
THE FUND ARE NOT BANK OR CREDIT UNION DEPOSITS.
-3-
<PAGE>
SYNOPSIS
Investment Objective
The investment objective of the Fund is to seek capital appreciation.
The Fund will attempt to achieve its objective by investing primarily in equity
securities of small to medium-sized companies expected to grow over time and, to
a lesser extent, in equity securities of larger, more well established companies
presenting growth potential. See Investment Objective and Policies and Other
Investment Policies and Risk Considerations.
Risk Factors and Special Considerations
1. Investments in equity securities of small to medium-sized companies
may present greater risks than investments in larger capitalization companies,
as the market prices of securities issued by smaller companies tend to
fluctuate, particularly in the short-term, and some smaller company securities
may be speculative. See Suitability and Certain Risk Factors under Investment
Objective and Policies.
2. The Fund may enter into options and futures transactions for hedging
purposes and, among other reasons, to attempt to counterbalance portfolio
volatility. While the Fund does not engage in options and futures for
speculative purposes, there are risks that result from the use of these
instruments. See Futures Contracts and Options under Other Investment Policies
and Risk Considerations.
3. The Fund may invest up to 20% of its total assets directly in
securities of foreign issuers denominated in foreign currencies. Consequently,
the Fund may be affected by changes in currency exchange rates and controls and
may incur costs in connection with conversions between currencies. To hedge the
currency risks associated with investments in securities of foreign companies
denominated in foreign currencies and to expedite settlement of portfolio
transactions, the Fund may enter into certain foreign currency transactions.
These activities pose special risks which do not typically arise in connection
with investments denominated in U.S. dollars. See Foreign Securities, Futures
Contracts and Foreign Currency Transactions under Other Investment Policies and
Risk Considerations.
Investment Manager, Distributor and Transfer Agent
Delaware Management Company (the "Manager") furnishes investment
management services to the Fund, subject to the supervision and direction of
Equity Funds IV, Inc.'s Board of Directors. The Manager also provides investment
management services to certain of the other Delaware Investments funds. Delaware
Distributors, L.P. (the "Distributor") is the national distributor for the Fund
and for all of the other mutual funds in Delaware Investments. Delaware Service
Company, Inc. (the "Transfer Agent") is the shareholder servicing, dividend
disbursing, accounting services and transfer agent for the Fund and for all of
the other mutual funds in Delaware Investments. See Summary of Expenses and
Management of the Fund for further information regarding the Manager and fees
payable under the Fund's Investment Management Agreement.
Purchase Price
Shares of the Class offered by this Prospectus are available at net
asset value, without a front-end or contingent deferred sales charge, and are
not subject to distribution fees under a Rule 12b-1 distribution plan.
See Classes of Shares.
-4-
<PAGE>
Redemption and Exchange
Shares of the Class are redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request. See Redemption
and Exchange.
Open-End Investment Company
Equity Funds IV, Inc., which was organized as a Maryland corporation in
1985, is an open-end management investment company. The Fund's portfolio of
assets is diversified as defined by the Investment Company Act of 1940 (the
"1940 Act"). See Shares under Management of the Fund.
-5-
<PAGE>
SUMMARY OF EXPENSES
Shareholder Transaction Expenses
- --------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........................ None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)........................ None
Exchange Fees................................................ None(1)
Annual Operating Expenses
(as a percentage of average daily net assets)
- --------------------------------------------------------------------------------
Management Fees (after voluntary waivers)(2)................. 0.00%
12b-1 Fees................................................... None
Other Operating Expenses..................................... 0.75%
Total Operating Expenses (after voluntary waivers)(2)........ 0.75%
(1) Exchanges are subject to the requirements of each fund and a front-end
sales charge may apply.
(2) The Manager has elected voluntarily to waive that portion, if any, of the
annual management fees payable by the Capital Appreciation Fund and to pay
certain expenses of the Fund to the extent necessary to ensure that the
"Total Operating Expenses" of the Class do not exceed 0.75% during the
commencement of the public offering of the Class through May 31, 1999.
If the voluntary expense waivers were not in effect, the "Total Operating
Expenses," as a percentage of average daily net assets, would be 1.98%
for the Capital Appreciation Fund Institutional Class, reflecting
management fees of 0.75%.
For expense information about Capital Appreciation Fund A Class,
Capital Appreciation Fund B Class and Capital Appreciation Fund C Class, see the
separate prospectus relating to those classes.
-6-
<PAGE>
The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return, and (2) redemption at the end of each time period. The following
example assumes the voluntary waiver of the management fee by the Manager as
discussed in this Prospectus.
1 year 3 years 5 years 10 years
------ ------- ------- --------
$8 $24 $42 $93
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in the Class will
bear directly or indirectly.
-7-
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Group Equity Funds IV, Inc. - Capital Appreciation Fund and have been
audited by Ernst & Young LLP, independent auditors. The data should be read in
conjunction with the financial statements, related notes, and the report of
Ernst & Young LLP, all of which are incorporated by reference into Part B.
Further information about the Fund's performance is contained in its Annual
Report to shareholders. A copy of the Fund's Annual Report (including the report
of Ernst & Young LLP) may be obtained from Equity Funds IV, Inc. upon request at
no charge.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Class
Period
Year 12/2/96(1)
Ended through
9/30/98 9/30/97
<S> <C> <C>
Net asset value, beginning of period................................................... $10.160 $8.500
Income from investment operations:
Net investment income.............................................................. 0.082 (2) 0.067
Net realized and unrealized gain (loss) on investments............................. (0.755) 1.601
Total from investment operations................................................... (0.673) 1.668
Less dividends and distributions:
Dividends from net investment income............................................... (0.076) (0.008)
Distributions from net realized gain on investments................................ (0.421) none
Total dividends and distributions.................................................. (0.497) (0.008)
Net asset value, end of period......................................................... $8.990 $10.160
Total return (3)(4).................................................................... (6.91%) 19.64%
Ratios and supplemental data:
Net assets, end of period (000 omitted)............................................ $2,227 $2,393
Ratio of expenses to average daily net assets...................................... 0.75% 0.75%
Ratio of expenses to average daily net assets prior to expense limitation.......... 1.98% 1.40%
Ratio of net investment income to average daily net assets 0.83% 0.91%
Ratio of net investment income (loss) to average daily net assets prior
to expense limitation........................................................... (0.40%) 0.27%
Portfolio turnover................................................................. 163% 84%
Average commission rate paid (5)................................................... $0.0495 $0.0594
</TABLE>
- ----------
(1) Date of initial public offering; ratios have been annualized but total
return has not been annualized. Total return for this short of a time period
may not be representative of longer term results.
(2) The per share information for the year ended 9/30/98 is based on the
average shares outstanding method. (3) Total investment return is based on
the change in net asset value of a share and assumes reinvestment of
distributions at net asset value.
(4) Total return reflects the expense [limitation] referenced under Summary of
Expenses.
(5) 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.
-8-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek capital appreciation.
It seeks to achieve that objective by investing, under normal market conditions,
primarily in equity securities of small to mid-sized companies that the Manager
believes exhibit growth potential that significantly exceeds the average
anticipated growth rate of companies included in the Standard & Poor's 500 (R)
Composite Stock Price Index ("S&P 500"). Small to medium-sized companies
generally are those having a current equity market capitalization of less than
$3 billion.
SUITABILITY AND CERTAIN RISK FACTORS
The Fund may be suitable for the patient investor interested in capital
appreciation. Investors should be willing to accept the risks associated with
investments in equity securities issued by domestic and foreign issuers.
While equity securities of small to medium-sized companies may offer
the potential for greater capital appreciation than securities issued by larger
companies, investments in securities of smaller companies, some of which may be
speculative, may present greater risks. The prices of equity securities,
especially of smaller companies, tend to fluctuate in response to the condition
of individual companies as well as general market and economic conditions.
Consequently, the Fund's net asset value will fluctuate and an investment in the
Fund may be inappropriate for the short-term investor.
In addition, investments in securities issued by foreign companies
involve special risks, including those associated with currency fluctuations, as
well as political, economic and social circumstances that may be different from
and more volatile than those present in the U.S. market.
As a result, the Fund of course can not assure a specific rate of
return or that the Fund's principal will be protected. Through cautious
selection and supervision of Fund investments, however, the Manager will strive
to achieve the Fund's objective.
The Fund is designed for capital appreciation; providing current income
is not a goal of the Fund. Any income produced, therefore, is expected to be
minimal. Investors should not consider an investment in the Fund as equivalent
to a complete investment program. Delaware Investments includes a family of
funds generally available through registered investment dealers which may be
used in concert to create a more complete investment program.
INVESTMENT STRATEGY
The Fund also invests in equity securities of larger capitalization
companies that the Manager believes present greater than average growth
potential compared to other S&P 500 companies.
Common stock generally is the principal kind of equity security in
which the Fund invests. The Fund, however, may invest any portion of its assets
in any type of equity security available in the marketplace, including without
limitation, preferred stock, warrants and equity and debt securities convertible
into common stock. See Other Investment Policies and Risks Considerations and
Part B.
The Fund may enter into options and futures transactions for hedging
purposes and, among other reasons, to attempt to counterbalance portfolio
volatility. See Futures Contracts and Options under Other Investment Policies
and Risk Considerations.
-9-
<PAGE>
(EQ4/CAF-I)
Up to 20% of the Fund's total assets may be invested directly in equity
securities of foreign companies or indirectly in foreign securities through
investments in American, Global or European Depositary Receipts. In connection
with its investments in foreign securities, the Fund may hold foreign currency
directly and, to hedge the currency risk associated with securities denominated
in foreign currencies, may enter into currency futures transactions and forward
foreign currency transactions. See Foreign Securities, Depositary Receipts,
Foreign Currency Transactions and Futures Contracts under Other Investment
Policies and Risk Considerations.
Should the market warrant a temporary defensive approach, the Fund may
invest all or a substantial part of its assets in fixed-income securities issued
or guaranteed by the U.S. government, its agencies or instrumentalities, as well
as short-term debt, other money-market instruments or corporate bonds rated
investment grade (i.e., rated Baa or above by Moody's Investors Service, Inc.
("Moody's') or BBB or above by Standard & Poor's Ratings Group ("S&P")) or, if
unrated, instruments determined to be of comparable quality by the Manager. The
Fund may also invest in these instruments pending investment in equity
securities appropriate for the Fund of proceeds from new sales of Fund shares
from proceeds of the sale of the Fund's portfolio securities or to maintain
sufficient cash to meet redemptions. See Appendix A of Part B for a description
of those ratings.
The Fund will constantly strive to achieve its investment objective of
capital appreciation and, in investing to do so, may hold securities for any
period of time. There can be no assurance, however, that the Fund will achieve
its investment objective. The Fund's investment objective may be changed
without shareholder approval.
For additional information on the Fund's investment policies and
certain risks associated with investments in certain types of securities, see
Other Investment Policies and Risk Considerations.
-10-
<PAGE>
CLASSES OF SHARES
The Distributor serves as the national distributor for the Fund. Shares
of the Class may be purchased directly by contacting the Fund or its agent or
through authorized investment dealers. All purchases of shares of the Class are
at net asset value. There is no front-end or contingent deferred sales charge.
Investment instructions given on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees considering purchasing shares of the Class
as part of their retirement program should contact their employer for details.
Shares of the Class are available for purchase only by: (a) retirement
plans introduced by persons not associated with brokers or dealers that are
primarily engaged in the retail securities business and rollover individual
retirement accounts from such plans; (b) tax-exempt employee benefit plans of
the Manager or its affiliates and securities dealer firms with a selling
agreement with the Distributor; (c) institutional advisory accounts of the
Manager or its affiliates and those having client relationships with Delaware
Investment Advisers, an affiliate of the Manager, or its affiliates and their
corporate sponsors, as well as subsidiaries and related employee benefit plans
and rollover individual retirement accounts from such institutional advisory
accounts; (d) a bank, trust company and similar financial institution investing
for its own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing shares
of the Class, except where the investment is part of a program that requires
payment to the financial institution of a Rule 12b-1 Plan fee; and (e)
registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least $1,000,000
entrusted to the adviser for investment purposes, but only if the adviser is not
affiliated or associated with a broker or dealer and derives compensation for
its services exclusively from its clients for such advisory services.
Capital Appreciation Fund A Class, Capital Appreciation Fund B Class and
Capital Appreciation Fund C Class
In addition to offering Capital Appreciation Fund Institutional Class,
the Fund also offers Capital Appreciation Fund A Class, Capital Appreciation
Fund B Class and Capital Appreciation Fund C Class, which are described in a
separate prospectus. Shares of Capital Appreciation Fund A Class, Capital
Appreciation Fund B Class and Capital Appreciation Fund C Class may be purchased
through authorized investment dealers or directly by contacting the Fund or its
Distributor. Class A Shares, Class B Shares and Class C Shares may have
different sales charges and other expenses which may affect performance. To
obtain a prospectus relating to such classes, contact the Distributor by writing
to the address or by calling the phone numbers listed on page 1 of this
Prospectus.
-11-
<PAGE>
HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer. In all instances, investors must
qualify to purchase shares of the Class.
Investing Directly by Mail
1. Initial Purchases--An Investment Application, or in the case of a retirement
plan account, an appropriate retirement plan application, must be completed,
signed and sent with a check payable to Capital Appreciation Fund Institutional
Class, to Delaware Investments at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to Capital Appreciation Fund Institutional Class. Your check
should be identified with your name(s) and account number.
Investing Directly by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to First Union National Bank, ABA #031201467, account number
2014128934013 (include your name(s) and your account number).
1. Initial Purchases--Before you invest, telephone the Fund's Client Services
Department at 800-510-4015 to get an account number. If you do not call first,
it may delay processing your investment. In addition, you must promptly send
your Investment Application, or in the case of a retirement plan account, an
appropriate retirement plan application, to Capital Appreciation Fund
Institutional Class, to Delaware Investments at 1818 Market Street,
Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to First Union National Bank, as described above. You must advise your
Client Services Representative by telephone at 800-510-4015 prior to sending
your wire.
Investing by Exchange If you have an investment in another mutual fund
in Delaware Investments and you qualify to purchase shares of the Class, you may
write and authorize an exchange of part or all of your investment into the Fund.
However, shares of Capital Appreciation Fund B Class and Capital Appreciation
Fund C Class and Class B Shares and Class C Shares of the other funds in
Delaware Investments offering such a class of shares may not be exchanged into
the Class. If you wish to open an account by exchange, call your Client Services
Representative at 800-510-4015 for more information. See Redemption and Exchange
for more complete information concerning your exchange privileges.
Investing through Your Investment Dealer
You can make a purchase of Fund shares through most investment dealers
who, as part of the service they provide, must transmit orders promptly. They
may charge for this service.
Purchase Price and Effective Date
The purchase price (net asset value) is determined as of the close of
regular trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open.
-12-
<PAGE>
The effective date of a purchase is the date the order is received by
the Fund, its agent or designee. The effective date of a direct purchase is the
day your wire, electronic transfer or check is received, unless it is received
after the time the share price is determined, as noted above. Purchase orders
received after such time will be effective the next business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a purchase
is canceled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in the Delaware Investments family. The Fund reserves the
right to reject purchase orders paid by third-party checks or checks that are
not drawn on a domestic branch of a United States financial institution. If a
check drawn on a foreign financial institution is accepted, you may be subject
to additional bank charges for clearance and currency conversion.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under $250 as a result of redemptions.
-13-
<PAGE>
REDEMPTION AND EXCHANGE
Redemption and exchange requests made on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees should therefore contact their employer for
details.
Your shares will be redeemed or exchanged based on the net asset value
next determined after the Fund receives your request in good order. For example,
redemption and exchange requests received in good order after the time the net
asset value of shares is determined will be processed on the next business day.
See Purchase Price and Effective Date under How to Buy Shares. Except as
otherwise noted below, for a redemption request to be in "good order," you must
provide your account number, account registration, and the total number of
shares or dollar amount of the transaction. With regard to exchanges, you must
also provide the name of the fund in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a redemption or
an exchange by calling the Fund at 800-510-4015. Redemption proceeds will be
distributed promptly, as described below, but not later than seven days after
receipt of a redemption request.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
The Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor redemption requests as to shares for which a check
was tendered as payment, but the Fund will not mail or wire the proceeds until
it is reasonably satisfied that the check has cleared, which may take up to 15
days from the purchase date. You can avoid this potential delay if you purchase
shares by wiring Federal Funds. The Fund reserves the right to reject a written
or telephone redemption request or delay payment of redemption proceeds if there
has been a recent change to the shareholder's address of record.
Shares of the Class may be exchanged into any other Delaware
Investments mutual fund, provided: (1) the investment satisfies the eligibility
and other requirements set forth in the prospectus of the fund being acquired,
including the payment of any applicable front-end sales charge; and (2) the
shares of the fund being acquired are in a state where that fund is registered.
If exchanges are made into other shares that are eligible for purchase only by
those permitted to purchase shares of the Class, such exchange will be exchanged
at net asset value. Shares of the Class may not be exchanged into Class B Shares
or Class C Shares of the funds in the Delaware Investments family. The Fund may
suspend, terminate or amend the terms of the exchange privilege upon 60 days'
written notice to shareholders.
Various redemption and exchange methods are outlined below. No fee is
charged by the Fund or the Distributor for redeeming or exchanging your shares,
although in the case of an exchange, a sales charge may apply. You may also have
your investment dealer arrange to have your shares redeemed or exchanged. Your
investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund or its agent.
-14-
<PAGE>
Written Redemption and Exchange
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103
to redeem some or all of your shares or to request an exchange of any or all of
your shares into another mutual fund in Delaware Investments, subject to the
same conditions and limitations as other exchanges noted above. The request must
be signed by all owners of the account or your investment dealer of record.
For redemptions of more than $50,000, or when the proceeds are not sent
to the shareholder(s) at the address of record, the Fund requires a signature by
all owners of the account and may require a signature guarantee. A signature
guarantee can be obtained from a commercial bank, a trust company, or a member
of a securities transfer association medallion program ("STAMP"). A signature
guarantee cannot be provided by a notary public. A signature guarantee is
designed to protect the shareholders, the Equity Funds IV, Inc. and its agents
from fraud. The Fund reserves the right to reject a signature guarantee supplied
by an institution based on its creditworthiness. The Fund may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. Certificates are issued for shares only if you submit a
specific request. If your shares are in certificate form, the certificate(s)
must accompany your request and also be in good order.
You also may submit your written request for redemption or exchange by
facsimile transmission at the following number: 215-255-8864.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your shares in certificate form, you may redeem or
exchange only by written request and you must return your certificate(s).
The Telephone Redemption--Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do not
wish to have such services available with respect to your account. The Fund
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests.
Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be provided
for all purchase, exchange and redemption transactions initiated by telephone.
By exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your record address. Checks will be payable to
the shareholder(s) of record. Payment is normally mailed the next business day
after receipt of the redemption request.
-15-
<PAGE>
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must submit a written authorization and you may need to have your
signature guaranteed. For your protection, your authorization must be on file.
If you request a wire, your funds will normally be sent the next business day.
If you ask for a check, it will normally be mailed the next business day after
receipt of your redemption request to your predesignated bank account. There are
no fees for this redemption method, but the mail time may delay getting funds
into your bank account. Simply call your Client Services Representative prior to
the time the net asset value is determined, as noted above.
Telephone Exchange
You or your investment dealer of record can exchange shares into any
fund in Delaware Investments under the same registration. As with the written
exchange service, telephone exchanges are subject to the same conditions and
limitations as other exchanges noted above. Telephone exchanges may be subject
to limitations as to amounts or frequency.
-16-
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
The Fund will make payments from the Fund's net investment income and
net realized securities profits, if any, twice a year. The first payment
normally will be made during the first quarter following the end of Equity Funds
IV, Inc.'s fiscal year. The second payment would be made near the end of the
calendar year to comply with certain requirements of the Internal Revenue Code.
Both dividends and distributions are automatically reinvested in your account at
net asset value.
Each Class of the Fund will share proportionately in the investment
income and expenses of the Fund, except that the Class will not incur
distribution fees under the Rule 12b-1 Plans which, absent any applicable fee
waiver, apply to Capital Appreciation Fund A Class, Capital Appreciation Fund B
Class and Capital Appreciation Fund C Class.
-17-
<PAGE>
TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Fund.
On August 5, 1997, the Taxpayer Relief Act of 1997 (the "1997 Act") was
signed into law. This new law made sweeping changes in the Internal Revenue Code
(the "Code"). Because many of these changes are complex, and only indirectly
affect the Fund and its distributions to you, they are discussed in Part B.
Changes in the treatment of capital gains, however, are discussed in this
section.
The Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, the Fund
will not be subject to federal income tax, or to any excise tax, to the extent
its earnings are distributed as provided in the Code and it satisfies certain
other requirements relating to the sources of its income and diversification of
its assets.
The Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to you as ordinary income, whether
received in cash or in additional shares. For corporate investors, dividends
from net investment income will generally qualify in part for the corporate
dividends-received deduction. The portion of dividends paid by the Fund that so
qualifies will be designated each year in a notice from Equity Funds IV, Inc. to
the Fund's shareholders. For the fiscal year ended September 30, 1998, none of
the Fund's dividends from net investment income qualified for the
dividends-received deduction to corporations.
Distributions paid by the Fund from long-term capital gains, received
in additional shares, are taxable to those investors who are subject to income
taxes as long-term capital gains, regardless of the length of time an investor
has owned shares in the Fund. The Fund does not seek to realize any particular
amount of capital gains during a year; rather, realized gains are a by-product
of Fund management activities. Consequently, capital gains distributions may be
expected to vary considerably from year to year. Also, for those investors
subject to tax, if purchases of shares in the Fund are made shortly before the
record date for a dividend or capital gains distribution, a portion of the
investment will be returned as a taxable distribution.
The Treatment of Capital Gain Distributions under the Taxpayer Relief
Act of 1997
The 1997 Act creates a category of long-term capital gain for
individuals that will be taxed at new lower tax rates. For investors who are in
the 28% or higher federal income tax brackets, these gains will be taxed at a
minimum of 20%. For investors who are in the 15% federal income tax bracket,
these gains will be taxed at a maximum of 10%. Capital gain distributions will
qualify for these new maximum tax rates, depending on when the Fund's securities
were sold and how long they were held by the Fund before they were sold. The
holding periods for which the new rates apply were revised by the Internal
Revenue Service Restructuring and Reform Act of 1998 and the Omnibus
Consolidated and Emergency Supplemental Appropriations Act, which included
technical corrections to the 1997 Act. Investors who want more information on
holding periods and other qualifying rules relating to these new rates should
review the expanded discussion in Part B, or should contact their own tax
advisers.
Equity Funds IV, Inc. will advise you in its annual information
reporting at calendar year end of the amount of its capital gain distributions
which will qualify for these maximum federal tax rates.
-18-
<PAGE>
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November or December to shareholders of
record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Fund and received by the shareholder
on December 31 of the calendar year in which they are declared.
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
the Fund and any other fund in the Delaware Investments family. Any loss
incurred on a sale or exchange of Fund shares that had been held for six months
or less will be treated as a long-term capital loss to the extent of capital
gain dividends received with respect to such shares.
In addition to the federal taxes described above, shareholders may or
may not be subject to various state and local taxes. For example, distributions
of interest income and capital gains realized from certain types of U.S.
government securities may be exempt from state personal income taxes. Because
investors' state and local taxes may be different than the federal taxes
described above, investors should consult their own tax advisers.
Each year, Equity Funds IV, Inc. will mail to you information on the
tax status of the Fund's dividends and distributions. Shareholders will also
receive each year information as to the portion of dividend income that is
derived from U.S. government securities that are exempt from state income tax.
Of course, shareholders who are not subject to tax on their income would not be
required to pay tax on amounts distributed to them by the Fund.
Equity Funds IV, Inc. is required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to shareholders who have not
complied with IRS taxpayer identification regulations. You may avoid this
withholding requirement by certifying on your Investment Application your proper
Taxpayer Identification Number and by certifying that you are not subject to
backup withholding.
See Accounting and Tax Issues and Taxes in Part B for additional
information on tax matters relating to the Fund and its shareholders.
-19-
<PAGE>
CALCULATION OF NET ASSET VALUE PER SHARE
The purchase and redemption price of Class shares is the net asset
value ("NAV") per share of Class shares next computed after the order is
received. The NAV is computed as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open.
The NAV per share is computed by adding the value of all securities
and other assets in the portfolio, deducting any liabilities (expenses and fees
are accrued daily) and dividing by the number of shares outstanding. Equity
securities for which market quotations are available are priced at market value.
Foreign securities expressed in foreign currency values will be converted into
U.S. dollar values at the mean between the currencies' bid and offered
quotations. Debt securities are priced on the basis of valuations provided by an
independent pricing service using methods approved by Equity Funds IV, Inc.'s
Board of Directors. Short-term investments having a maturity of less than 60
days are valued at amortized cost, which approximates market value. All other
securities are valued at their fair value as determined in good faith and in a
method approved by Equity Funds IV, Inc.'s Board of Directors.
The net asset values of all outstanding shares of each class of the
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Fund represented by the value of shares
of that class. All income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share of a class, based on each class'
percentage in the Fund represented by the value of shares of such classes,
except that the Class will not incur any of the expenses under the Fund's 12b-1
Plans and Capital Appreciation Fund A, B and C Classes alone will bear the 12b-1
Plan fees payable under their respective Plans.
-20-
<PAGE>
MANAGEMENT OF THE FUND
Directors
The business and affairs of Equity Funds IV, Inc. are managed under the
direction of its Board of Directors. Part B contains additional information
regarding Equity Funds IV, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the Delaware
Investments funds since 1938. On September 30, 1998, the Manager and its
affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $40 billion in assets in
the various institutional or separately managed (approximately $23,666,360,000)
and investment company (approximately $17,194,990,000) accounts.
The Manager is a series of Delaware Management Business Trust. The
Manager changed its form of organization from a corporation to a business trust
on March 1, 1998. The Manager is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between
DMH and a wholly owned subsidiary of Lincoln National Corporation ("Lincoln
National") was completed. DMH and the Manager are now indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National. Lincoln
National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management.
The Manager manages the Fund's portfolio and makes investment decisions
for the Fund, which are implemented by the Fund's Trading Department. The
Manager also administers Equity Funds IV, Inc.'s affairs and pays the salaries
of all the directors, officers and employees of Equity Funds IV, Inc. who are
affiliated with the Manager. For these services, the Manager is paid an annual
fee equal to 0.75% on the first $500 million of average daily net assets, 0.725%
on the next $500 million and 0.70% on the average daily net assets in excess of
$1 billion. For the fiscal year ended September 30, 1998, investment management
fees incurred by the Fund were 0.75% of average daily net assets and no fees
were paid by the Fund due to the voluntary waiver of fees by the Manager. The
directors of Equity Funds IV, Inc. annually review fees paid to the Manager.
Gerald S. Frey has primary responsibility for making day-to-day
investment decisions for the Fund. Mr. Frey has been Vice President/Senior
Portfolio Manager of the Fund since March 1997 and was Co-Manager from June 1996
to March 1997. Mr. Frey holds a BA in Economics from Bloomsburg University and
attended Wilkes College and New York University[, and he has 21 years'
experience in the money management business]. Prior to joining Delaware
[Investments] in 1996, he was a Senior Director with Morgan Grenfell Capital
Management in New York.
In making investment decisions for the Fund, Mr. Frey regularly
consults with Richard G. Unruh, Jr., Marshall T. Bassett, John A. Heffern,
Jeffrey W. Hynoski and Lori P. Wachs. A grduate of Brown University, Mr. Unruh
received his MBA from the University of Pennsylvania's Wharton School and
joined Delaware Investments in 1982 after 19 years of investment management
experience with Kidder, Peabody & Co. Inc. Mr Unruh was named an Executive Vice
President of Equiy Funds IV, Inc. in 1994. He is also a member of the Board of
the Manager and was named an Executive Vice President of the Manager in 1994.
Mr. Bassett, Vice President, joined Delaware Investments in 1997. In his most
-21-
<PAGE>
recent position, he served as Vice President in Morgan Stanley Asset
Management's Emerging Growth Group, where he analyzed small growth companies.
Prior to that, he was a trust officer at Sovran Bank and Trust Company. He
received his bachelor's degree and MBA from Duke University. Mr. Heffern, Vice
President, holds a bachelor's degree and an MBA from the University of North
Carolina at Chapel Hill. He joined Delaware Investments in 1997. Previously, he
was a Senior Vice President, Equity Research at NatWest Securities Corporation's
Specialty Finance Services unit. Prior to that, he was a Principal and Senior
Regional Bank Analyst at Alex. Brown & Sons. Mr. Hynoski is a Vice President. He
joined Delaware Investments in 1998. Previously he served as a Vice President at
Bessemer Trust Company in the mid and large capitalization growth group, where
he specialized in the areas of science, technology, and telecommunications.
Prior to that, Mr. Hynoski held positions at Lord Abbett & Co. and Cowen Asset
Management. Mr. Hynoski holds a BS in Finance from the University of Delaware
and an MBA with a concentration in Investments/Portfolio Management and
Financial Economics from Pace University. Ms. Wachs is a Vice President. She
joined Delaware Investments in 1992 from Goldman Sachs, where she was an equity
analyst for two years. She is a graduate of the University of Pennsylvania's
Wharton School, where she majored in Finance and Oriental Studies.
Robert L. Arnold, Vice President/Portfolio Manager for the Fund, has
had primary responsibility for making investment decisions for the large cap
equity portion of the Fund since March 1997. Prior to this responsibility, he
was a financial analyst in Delaware Investments focusing on the financial
services industry including banks, thrifts, insurance companies and consumer
finance companies. He holds a BS from Carnegie Mellon University and earned an
MBA from the University of Chicago. He began his investment career as a
management consultant with Arthur Young in Philadelphia. Prior to joining
Delaware Investments in March 1992, Mr. Arnold was a planning analyst with
Chemical Bank in New York.
Portfolio Trading Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length of time they
have been held. The degree of portfolio activity will affect brokerage costs of
the Fund and may affect taxes payable by the Fund's shareholders. Given the
Fund's investment objective, its annual portfolio turnover rate is not expected
to exceed 100%. A turnover rate of 100% would occur, for example, if all the
investments in the Fund's portfolio at the beginning of the year were replaced
by the end of the year. The turnover rate may also be affected by cash
requirements for redemptions and repurchases of Fund shares.
The Fund uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
to their advisory clients. These services may be used by the Manager in
servicing any of its accounts. Subject to best price and execution, the Fund may
consider a broker/dealer's sales of shares of funds in the Delaware [Investments
family] in placing portfolio orders and may place orders with broker/dealers
that have agreed to defray certain expenses of such funds, such as custodian
fees.
Performance Information
From time to time, the Fund may quote total return performance of the
Class in advertising and other types of literature.
-22-
<PAGE>
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions. Each presentation will include
the average annual total return for one-, five- and ten-year or life-of-fund
periods, as relevant. The Fund may also advertise aggregate and average total
return information concerning the Class over additional periods of time.
Net asset value fluctuates and is not guaranteed. Past performance is
not a guarantee of future results.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling your Client Services Representative.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. Equity Funds IV, Inc.'s fiscal year ends
on September 30.
Distribution and Service
The Distributor, Delaware Distributors, L.P., serves as the national
distributor of the Fund's shares under a Distribution Agreement with Equity
Funds IV, Inc. dated as of November 29, 1996. The Distributor bears all of the
costs of promotion and distribution.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Fund under
an amended and restated agreement dated as of November 29, 1996. The Transfer
Agent also provides accounting services to the Fund pursuant to the terms of a
separate Fund Accounting Agreement. Certain recordkeeping and other shareholder
services that otherwise would be performed by the Transfer Agent may be
performed by certain other entities and the Transfer Agent may elect to enter
into an agreement to pay such other entities for their services. In addition,
participant account maintenance fees may be assessed for certain recordkeeping
provided as part of retirement plan and administration service packages. These
fees are based on the number of participants in the plan and the various
services selected. Fees will be quoted upon request and are subject to change.
The directors annually review fees paid to the Distributor and the
Transfer Agent. The Distributor and the Transfer Agent are also indirect, wholly
owned subsidiaries of DMH.
* * *
As with other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by its service providers do not properly process and
calculate date-related information from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." Equity Funds IV, Inc. and the Fund
are taking steps to obtain satisfactory assurances that their major service
providers are taking steps reasonably designed to address the Year 2000 Problem
with respect to the computer systems that such service providers use. There can
be no assurances that these steps will be sufficient to avoid any adverse impact
on the business of any of the Fund.
-23-
<PAGE>
Several European countries are participating in the European Economic
and Monetary Union, which will establish a common European currency for
participating countries. This currency will commonly be known as the "Euro." It
is anticipated that each such participating country will replace its existing
currency with the Euro on January 1, 1999. Additional European countries may
elect to participate after that date. The Fund, if investing in securities of
participating countries, could be adversely affected if the computer systems
used by their major service providers are not properly prepared to handle the
implementation of this single currency or the adoption of the Euro by additional
countries in the future. The Fund is taking steps to obtain satisfactory
assurances that the major service providers are taking steps reasonably designed
to address these matters with respect to the computer systems that such service
providers use. There can be no assurances that these steps will be sufficient to
avoid any adverse impact on the business of the Fund.
Expenses
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under the Distribution Agreement. For the fiscal year ended
September 30, 1998, the ratio of operating expenses to average daily net assets
for the Class was 0.75%, which reflects the voluntary waiver of fees by the
Manager. Without such waiver, the ratio of operating expenses to average daily
net assets would have been 1.98%.
Shares
Equity Funds IV, Inc. is an open-end management investment company. The
Fund's portfolio of assets is diversified as defined by the 1940 Act. Commonly
known as a mutual fund, Equity Funds IV, Inc. was organized as a Maryland
corporation in September 1985. In addition to the Fund, Equity Funds IV, Inc.
presently offers one other series of shares, the DelCap Fund series.
Equity Funds IV, Inc.'s shares have a par value of $.01, equal voting
rights, except as noted below, and are equal in all other respects. Equity Funds
IV, Inc.'s shares have noncumulative voting rights which means that the holders
of more than 50% of Equity Funds IV, Inc.'s shares voting for the election of
directors can elect 100% of the directors if they choose to do so. Under
Maryland law, Equity Funds IV, Inc. is not required, and does not intend, to
hold annual meetings of shareholders unless, under certain circumstances, it is
required to do so under the 1940 Act.
In addition to the Class, the Fund also offers Capital Appreciation
Fund A Class, Capital Appreciation Fund B Class and Capital Appreciation Fund C
Class. Shares of each class represent proportionate interests in the assets of
the Fund and have the same voting and other rights and preferences as the other
classes of the Fund, except that shares of the Class are not subject to, and may
not vote on matters affecting, the Distribution Plans under Rule 12b-1 relating
to Capital Appreciation Fund A Class, Capital Appreciation Fund B Class and
Capital Appreciation Fund C Class.
Lincoln National Corporation Employees' Retirement Trust (the "Trust")
made an investment in the Fund. As of October 31, 1998, the Trust owned 99.46%
of the outstanding shares of the Fund. Subject to certain limited exceptions,
there are no limitations on the Trust's ability to redeem its shares of the Fund
and it may elect to do so at any time.
-24-
<PAGE>
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
Small to Medium-Sized Companies
The Fund invests its assets in equity securities of small to
medium-sized companies. These stocks have historically been more volatile in
price than larger capitalization stocks, such as those included in the S&P 500.
This is because, among other things, smaller companies have a lower degree of
liquidity and tend to have a greater sensitivity to changing economic
conditions. These companies may have narrow product lines, markets or financial
resources, or may depend on a limited management group. In addition, these
companies are typically subject to a greater degree of change in their earnings
and prospects. The companies' securities may trade less frequently and have a
smaller trading volume. The securities may be traded only in the
over-the-counter markets or on a regional securities exchange. In addition to
exhibiting greater volatility, smaller capitalization securities may, to some
degree, fluctuate independently of the stocks of larger capitalization
companies. For example, the stocks of smaller capitalization companies may
decline in price as the price of larger company stocks rise, or vice versa.
Foreign Securities
The Fund may invest up to 20% of its total assets in foreign
securities. Foreign markets may be more volatile than U.S. markets. Such
investments involve sovereign risk in addition to the normal risks associated
with securities of U.S. issuers. These risks include political risks, foreign
taxes and exchange controls and currency fluctuations. For example, foreign
portfolio investments may fluctuate in value due to changes in currency rates
(i.e., other things being equal, the value of foreign investments would increase
with a fall in the value of the dollar, and decrease with a rise in the value of
the dollar) and control regulations apart from market fluctuations. The Fund may
also experience delays in foreign securities settlement. The Fund currently
intends to limit its investment in foreign securities to those issued by
entities in developed countries.
Depositary Receipts
The Fund may make foreign investments through the purchase and sale of
sponsored or unsponsored American, European and Global Depositary Receipts
("Depositary Receipts"). Depositary Receipts are receipts typically issued by a
U.S. or foreign bank or trust company which evidence ownership of underlying
securities issued by a foreign corporation. "Sponsored" Depositary Receipts are
issued jointly by the issuer of the underlying security and a depository,
whereas "unsponsored" Depositary Receipts are issued without participation of
the issuer of the deposited security. Holders of unsponsored Depositary Receipts
generally bear all the costs of such facilities and the depository of an
unsponsored facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through voting rights to the holders of such receipts in respect of the
deposited securities. Therefore, there may not be a correlation between
information concerning the issuer of the security and the market value of an
unsponsored Depositary Receipt.
Restricted and Illiquid Securities
The Fund may invest in restricted securities, including privately
placed securities, some of which may be eligible for resale without registration
pursuant to Rule 144A ("Rule 144A Securities") under the Securities Act of 1933.
Rule 144A permits many privately placed and legally restricted securities to be
freely traded among certain institutional buyers such as the Fund. The Fund may
invest no more than 15% of the value of its net assets in illiquid securities.
While maintaining oversight, the Board of Directors has delegated to
the Manager the day-to-day function of determining whether or not individual
Rule 144A Securities are liquid for purposes of the Fund's
-25-
<PAGE>
15% limitation on investments in illiquid assets. The Board has instructed the
Manager to consider the following factors in determining the liquidity of a Rule
144A Security: (i) the frequency of trades and trading volume for the security;
(ii) whether at least three dealers are willing to purchase or sell the security
and the number of potential purchasers; (iii) whether at least two dealers are
making a market in the security; and (iv) the nature of the security and the
nature of the marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, the
Fund's holdings of illiquid securities exceed the Fund's 15% limit on
investments in such securities, the Manager will determine what action to take
to ensure that the Fund continues to adhere to such limitation.
Investment Company Securities
Any investments that the Fund makes in either closed-end or open-end
investment companies are limited by the 1940 Act, and involve an indirect
payment of a portion of the expenses, including advisory fees, of such other
investment companies. Under the 1940 Act's current limitations, the Fund may
not: (1) own more than 3% of the voting stock of another investment company; (2)
invest more than 5% of the Fund's total assets in the shares of any one
investment company; nor (3) invest more than 10% of the Fund's total assets in
shares of other investment companies. If the Fund elects to limit its investment
in other investment companies to closed-end investment companies, the 3%
limitation described above is increased to 10%. These percentage limitations
also apply to the Fund's investments in unregistered investment companies.
Repurchase Agreements
The Fund may also use repurchase agreements that are at least 102%
collateralized by securities in which the Funds can invest directly. Repurchase
agreements help the Fund to invest short-term cash reserves or may be used by
the Fund if a temporary defensive posture is deemed appropriate. The Fund may
invest cash balances in joint repurchase agreements with other Delaware
Investments funds. Under a repurchase agreement, the Fund acquires ownership and
possession of a security, and the seller agrees to buy the security back at a
specified time and higher price. If the seller is unable to repurchase the
security, the Fund could experience delays in liquidating the securities and the
Fund could incur a loss. That loss, if any, would be the difference between the
repurchase price and the market value of the security. To minimize those
possibilities, the Fund may enter into repurchase agreements with banks and
broker/dealers deemed by the Manager to be creditworthy under guidelines
approved by the Board of Directors and to those which the Manager, under such
guidelines, determines to present minimal credit risks and which are of high
quality.
When-Issued and Delayed Delivery Securities
The Fund may purchase securities on a when-issued or delayed delivery
basis. In such transactions, securities are purchased with payment and delivery
taking place in the future in order to secure what is considered to be an
advantageous price at the time of the transaction. Delivery of and payment for
these securities may take as long as a month or more after the date of the
purchase commitment. The Fund will maintain with its custodian bank a separate
account with a segregated portfolio of liquid securities in an amount at least
equal to these commitments. The payment obligation that will be received are
each fixed at the time the Fund enters into the commitment. Thus, it is possible
that the market value at the time of settlement could be higher or lower than
the purchase price.
-26-
<PAGE>
REITs
The Fund may purchase shares of real estate investment trusts
("REITs"). REITs are pooled investment vehicles which invest primarily in
income-producing real estate or real estate related loans or interests. REITs
are generally classified as equity REITs, mortgage REITs or a combination of
equity and mortgage REITs. Equity REITs invest the majority of their assets
directly in real property and derive income primarily from the collection of
rents. Equity REITs can also realize capital gains by selling properties that
have appreciated in value. Mortgage REITs invest the majority of their assets in
real estate mortgages and derive income from the collection of interest
payments. Like investment companies such as Equity Funds IV, Inc., REITs are not
taxed on income distributed to shareholders provided they comply with several
requirements in the Internal Revenue Code. REITs are subject to substantial cash
flow dependency, defaults by borrowers, self-liquidation, and the risk of
failing to qualify for tax-free pass-through of income under the Internal
Revenue Code, and/or to maintain exemptions from the 1940 Act.
Borrowing
The Fund is permitted under certain circumstances to borrow money.
Investment securities will not normally be purchased while the Fund has an
outstanding borrowing.
Portfolio Loan Transactions
The Fund may loan up to 25% of its assets to qualified broker/dealers
or institutional investors. The major risk to which the Fund would be exposed on
a loan transaction is the risk that the borrower would go bankrupt at a time
when the value of the security goes up. Therefore, the Fund will only enter into
loan arrangements after a review of all pertinent facts by the Manager, subject
to overall supervision by the Board of Directors, including the creditworthiness
of the borrowing broker, dealer or institution and then only if the
consideration to be received from such loans would justify the risk.
Creditworthiness will be monitored on an ongoing basis by the Manager.
Foreign Currency Transactions
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund will, however, from time to time, purchase or sell
foreign currencies and/or engage in forward foreign currency transactions in
order to expedite settlement of portfolio transactions and to minimize currency
value fluctuations. The Fund may conduct its foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into contracts to purchase
or sell foreign currencies at a future date (i.e., a "forward foreign currency"
contract or "forward" contract). A forward contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract, agreed upon by the parties, at a
price set at the time of the contract. The Fund will convert currency on a spot
basis from time to time, and investors should be aware of the costs of currency
conversion.
The Fund may enter into forward contracts to "lock in" the price of a
security it has agreed to purchase or sell, in terms of U.S. dollars or other
currencies in which the transaction will be consummated. By entering into a
forward contract for the purchase or sale, for a fixed amount of U.S. dollars or
foreign currency, of the amount of foreign currency involved in the underlying
security transaction, the Fund will be able to protect itself against a possible
loss resulting from an adverse change in currency exchange rates during the
period between the date the security is purchased or sold and the date on which
payment is made or received.
-27-
<PAGE>
When the Manager believes that the currency of a particular country may
suffer a significant decline against the U.S. dollar or against another
currency, the Fund may enter into a forward foreign currency contract to sell,
for a fixed amount of U.S. dollars or other appropriate currency, the amount of
foreign currency approximating the value of some or all of the Fund's securities
denominated in such foreign currency.
The Fund will not enter into forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of the
value of the Fund's securities or other assets denominated in that currency.
As the maturity of a forward contract, the Fund may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Fund may realize a gain or loss from currency
transactions.
The Fund also may purchase and write put and call options on foreign
currencies (traded on U.S. and foreign exchanges or over-the-counter) for
hedging purposes to protect against declines in the U.S. dollar cost of foreign
securities held by the Fund and against increases in the U.S. dollar cost of
such securities to be acquired. Call options on foreign currency written by the
Fund will be covered, which means that the Fund will own the underlying foreign
currency. With respect to put options on foreign currency written by the Fund,
the Fund will establish a segregated account with its custodian bank consisting
of cash, U.S. Government securities or other high-grade liquid debt securities
in an amount equal to the amount the Fund will be required to pay upon exercise
of the put.
As in the case of other kinds of options, the writing of an option on
foreign currency will constitute only a partial hedge, up to the amount of the
premium received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on foreign currency may constitute an effective hedge
against fluctuations in exchange rates, although, in the event of rate movements
adverse to the Fund's position, the Fund may forfeit the entire amount of the
premium plus related transaction costs.
Futures Contracts
The Fund may enter into futures contracts on stocks, stock indices and
foreign currencies, and purchase or sell options on such futures contracts.
These activities will not be entered into for speculative purposes, but rather
for hedging purposes and to facilitate the ability to quickly deploy into the
stock market the Fund's positions in cash, short-term debt securities and other
money market instruments, at times when the Fund's assets are not fully invested
in equity securities. Such positions will generally be eliminated when it
becomes possible to invest in securities that are appropriate for the Fund.
A futures contract is a bilateral agreement providing for the purchase
and sale of a specified type and amount of a financial instrument, or for the
making and acceptance of a cash settlement, at a stated time in the future for a
fixed price. By its terms, a futures contract provides for a specified
settlement date on which the securities underlying the contract are delivered,
or in the case of securities index futures contracts, the difference between the
price at which the contract was entered into and the contract's closing value is
settled between the purchaser and seller in cash. Futures contracts differ from
options in that they are bilateral agreements, with both the purchaser and the
seller equally obligated to complete the transaction. In addition,
-28-
<PAGE>
futures contracts call for settlement only on the expiration date, and cannot be
"exercised" at any other time during their term.
The purchase or sale of a futures contract also differs from the
purchase or sale of a security or the purchase of an option in that no purchase
price is paid or received. Instead, an amount of cash or cash equivalents, which
varies but may be as low as 5% or less of the value of the contract, must be
deposited with the broker as "initial margin" as a good faith deposit. This
amount is generally maintained in a segregated account at the custodian bank.
Subsequent payments to and from the broker, referred to as "variation margin,"
are made on a daily basis as the value of the index or instrument underlying the
futures contract fluctuates, making positions in the futures contracts more or
less valuable, a process known as "marking to the market."
Purchases or sales of stock index futures contracts are used for
hedging purposes to attempt to protect the Fund's current or intended
investments from broad fluctuations in stock prices. For example, the Fund may
sell stock index futures contracts in anticipation of or during a market decline
to attempt to offset the decrease in market value of the Fund's securities
portfolio that might otherwise result. If such decline occurs, the loss in value
of portfolio securities may be offset, in whole or part, by gains on the futures
position. When the Fund is not fully invested in the securities market and
anticipates a significant market advance, it may purchase stock index futures
contracts in order to gain rapid market exposure that may, in part or entirely,
offset increases in the cost of securities that the Fund intends to purchase. As
such purchases are made, the corresponding positions in stock index futures
contracts will be closed out.
The Fund may purchase and sell foreign currency futures contracts for
hedging purposes to attempt to protect its current or intended investments
denominated in foreign currencies from fluctuations in currency exchange rates.
Such fluctuations could reduce the dollar value of portfolio securities
denominated in foreign currencies, or increase the cost of foreign-denominated
securities to be acquired, even if the value of such securities in the
currencies in which they are denominated remains constant. The Fund may sell
futures contracts on a foreign currency, for example, when it holds securities
denominated in such currency and it anticipates a decline in the value of such
currency relative to the dollar. In the event such decline occurs, the resulting
adverse effect on the value of foreign-denominated securities may be offset, in
whole or in part, by gains on the futures contracts. However, if the value of
the foreign currency increases relative to the dollar, the Fund's loss on the
foreign currency futures contract may or may not be offset by an increase in the
value of the securities because a decline in the price of the security stated in
terms of the foreign currency may be greater than the increase in value as a
result of the change in exchange rates.
Conversely, the Fund could protect against a rise in the dollar cost of
foreign-denominated securities to be acquired by purchasing futures contracts on
the relevant currency, which could offset, in whole or in part, the increased
cost of such securities resulting from a rise in the dollar value of the
underlying currencies. When the Fund purchases futures contracts under such
circumstances, however, and the price of securities to be acquired instead
declines as a result of appreciation of the dollar, the Fund will sustain losses
on its futures position which could reduce or eliminate the benefits of the
reduced cost of portfolio securities to be acquired.
The Fund may also purchase and write options on the types of futures
contracts in which the Fund may invest, and enter into related closing
transactions. Options on futures are similar to options on securities, as
described below, except that options on futures give the purchaser the right, in
return for the premium paid, to assume a position in a futures contract, rather
than to actually purchase or sell the futures contract, at a specified exercise
price at any time during the period of the option. In the event that an option
written by the Fund is exercised, the Fund will be subject to all the risks
associated with the trading of futures contracts, such as
-29-
<PAGE>
payment of variation margin deposits. In addition, the writer of an option on a
futures contract, unlike the holder, is subject to initial and variation margin
requirements on the option position.
At any time prior to the expiration of a futures contract, a trader may
elect to close out its position by taking an opposite position on the contract
market on which the position was entered into, subject to the availability of a
secondary market, which will operate to terminate the initial position.
Likewise, a position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to availability of a secondary market, which is the
purchase or sale of an option of the same series (i.e., the same exercise price
and expiration date) as the option previously purchased or sold. The Fund may
realize a profit or a loss when closing out a futures contract or an option on a
futures contract.
To the extent that interest or exchange rates or securities prices move
in an unexpected direction, the Fund may not achieve the anticipated benefits of
investing in futures contracts and options thereon, or may realize a loss. To
the extent that the Fund purchases an option on a futures contract and fails to
exercise the option prior to the exercise date, it will suffer a loss of the
premium paid. Further, the possible lack of a secondary market could prevent the
Fund from closing out its positions relating to futures. See Part B for a
further discussion of this investment technique.
Options
The Fund may write covered call options on individual issues as well as
write call options on stock indices. The Fund may also purchase put options on
individual issues and on stock indices. The Manager will employ these techniques
in an attempt to protect appreciation attained, to offset capital losses and to
take advantage of the liquidity available in the option markets. The ability to
hedge effectively using options on stock indices will depend, in part, on the
correlation between the composition of the index and the Fund's portfolio as
well as the price movement of individual securities. The Manager may also write
covered call options to achieve income to offset the cost of purchasing put
options.
While there is no limit on the amount of the Fund's assets which may be
invested in covered call options, the Fund will not invest more than 2% of its
net assets in put options. The Fund will only use Exchange-traded options.
Call Options
Writing a Covered Call Option on Securities - A covered call option
obligates the Fund to sell one of its securities for an agreed price up to an
agreed date. When the Fund writes a call, it receives a premium and agrees to
sell the callable securities to a purchaser of a corresponding call during the
call period (usually, not more than nine months) at a fixed price regardless of
market price changes during the call period. The advantage is that the Fund
receives premium income for the limited purpose of offsetting the costs of
purchasing put options or offsetting any capital loss or decline in the market
value of the security. However, if the Manager's forecast is wrong, the Fund may
not fully participate in the market appreciation if the security's price rises.
Writing a Call Option on Stock Indices - Writing a call option on stock
indices is similar to the writing of a call option on an individual stock. Stock
indices used will include, but not be limited to, the S&P 500, the S&P 100 and
the S&P Over-The-Counter ("OTC") 250.
-30-
<PAGE>
Put Options
Purchasing a Put Option - A put option gives the Fund the right to sell
one of its securities for an agreed price up to an agreed date. The advantage is
that the Fund can be protected should the market value of the security decline.
However, the Fund must pay a premium whether or not the put option is exercised.
Purchasing a Put Option on Stock Indices - Purchasing a protective put
option on stock indices is similar to the purchase of protective puts on an
individual stock. Indices used will include, but not be limited to, the S&P 500,
the S&P 100 and the S&P OTC 250.
Closing Transactions - Closing transactions essentially let the Fund
offset a put option or covered call option prior to its exercise or expiration.
If the Fund cannot effect a closing transaction, it may have to hold a security
it would otherwise sell or deliver a security it might want to hold.
Part B describes certain of these investment policies and risk
considerations. Part B sets forth other investment policies, risk considerations
and more specific investment restrictions.
-31-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Delaware Investments includes funds --------------------------------------------
with a wide range of investment objectives. Stock funds, DELAWARE GROUP EQUITY FUNDS IV, INC.
income funds, national and state-specific tax-exempt funds,
money market funds, global and international funds and --------------------------------------------
closed-end funds give investors the ability to create a DELCAP FUND
portfolio that fits their personal financial goals. For more --------------------------------------------
information, shareholders of the Fund Classes should contact
their financial adviser or call Delaware Investments CAPITAL APPRECIATION FUND
at 800-523-1918, and shareholders of the Institutional --------------------------------------------
Classes should contact Delaware Investments at 800-510-4015.
A CLASS
B CLASS
C CLASS
INSTITUTIONAL CLASS
--------------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
INVESTMENT MANAGER --------------------------------------------
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
NOVEMBER 30, 1998
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN DELAWARE
The Chase Manhattan Bank INVESTMENTS
4 Chase Metrotech Center -----------
Brooklyn, NY 11245
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
DELAWARE GROUP EQUITY FUNDS IV, INC.
- --------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
- --------------------------------------------------------------------------------
For more information about Institutional Classes: 800-510-4015
For Prospectus and Performance of Class A Shares, Class B Shares and Class C
Shares: Nationwide 800-523-1918
Information on Existing Accounts of Class A Shares, Class B Shares and Class C
Shares: (SHAREHOLDERS ONLY) Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY) Nationwide 800-362-7500
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Cover Page 1
- --------------------------------------------------------------------------------
Investment Policies and Portfolio Techniques 3
- --------------------------------------------------------------------------------
Accounting and Tax Issues
- --------------------------------------------------------------------------------
Performance Information
- --------------------------------------------------------------------------------
Trading Practices and Brokerage
- --------------------------------------------------------------------------------
Purchasing Shares
- --------------------------------------------------------------------------------
Investment Plans
- --------------------------------------------------------------------------------
Determining Offering Price and Net Asset Value
- --------------------------------------------------------------------------------
Redemption and Repurchase
- --------------------------------------------------------------------------------
Distributions and Taxes
- --------------------------------------------------------------------------------
Investment Management Agreements
- --------------------------------------------------------------------------------
Officers and Directors
- --------------------------------------------------------------------------------
Exchange Privilege
- --------------------------------------------------------------------------------
General Information
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
Appendix A--Description of Ratings
- --------------------------------------------------------------------------------
-2-
<PAGE>
Delaware Group Equity Funds IV, Inc. ("Equity Funds IV, Inc.") is a
professionally-managed mutual fund presently offering two series: the DelCap
Fund series ("DelCap Fund") and the Capital Appreciation Fund series ("Capital
Appreciation Fund") (individually, a "Fund" and collectively, the "Funds").
Each Fund of Equity Funds IV, Inc. offers three retail classes: DelCap
Fund A Class and Capital Appreciation Fund A Class (the "Class A Shares");
DelCap Fund B Class and Capital Appreciation Fund B Class (the "Class B
Shares"); and DelCap Fund C Class and Capital Appreciation Fund C Class (the
"Class C Shares"). Class A Shares, Class B Shares and Class C Shares are
collectively referred to as the "Fund Classes." Each Fund also offers an
institutional class: DelCap Fund Institutional Class and Capital Appreciation
Fund Institutional Class (collectively, the "Institutional Classes"). Each Class
is individually referred to as a "Class" and collectively referred to as
"Classes."
Class B Shares, Class C Shares and Institutional Class shares of each
Fund may be purchased at a price equal to the next determined net asset value
per share. Class A Shares may be purchased at the public offering price, which
is equal to the next determined net asset value per share, plus a front-end
sales charge. Class A Shares are subject to front-end sales charges and,
absent any applicable fee waiver, annual Rule 12b-1 Plan ("12b-1 Plan") expenses
of up to 0.30%. 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, absent any applicable fee waiver, annual 12b-1 Plan expenses of up to 1%
which are assessed against Class B Shares for approximately eight years after
purchase. See Automatic Conversion of Class B Shares under Classes of Shares in
the Prospectuses for the Fund Classes. Class C Shares are subject to a CDSC
which may be imposed on redemptions made within 12 months of purchase and,
absent any applicable fee waiver, annual 12b-1 Plan expenses of up to 1%, which
are assessed against the Class C Shares for the life of the investment. The
Capital Appreciation Fund will not pay a 12b-1 fee with respect to any Class
until May 31, 1999.
This Part B supplements the information contained in the current
Prospectuses of the Fund Classes for DelCap Fund and Capital Appreciation Fund,
each dated November 30, 1998, and the current Prospectuses of the
Institutional Class for DelCap Fund and Capital Appreciation Fund, each dated
November 30, 1998, as they may be amended from time to time. Part B should be
read in conjunction with the respective Class' Prospectus. Part B is not itself
a prospectus but is, in its entirety, incorporated by reference into each Class'
Prospectus. A Prospectus for each Class may be obtained by writing or calling
your investment dealer or by contacting the Fund's national distributor,
Delaware Distributors, L.P. (the "Distributor"), 1818 Market Street,
Philadelphia, PA 19103.
All references to "shares" in this Part B refer to all Classes of
shares of Equity Funds IV, Inc., except where noted.
-3-
<PAGE>
INVESTMENT POLICIES AND PORTFOLIO TECHNIQUES
Investment Restrictions--Equity Funds IV, Inc. has adopted the
following restrictions for DelCap Fund which, along with its investment
objective, cannot be changed without approval by the holders of a "majority" of
DelCap Fund's outstanding shares, which is a vote by the holders of the lesser
of a) 67% or more of the voting securities present in person or by proxy at a
meeting, if the holders of more than 50% of the outstanding voting securities
are present or represented by proxy; or b) more than 50% of the outstanding
voting securities. The percentage limitations contained in the restrictions and
policies set forth herein apply at the time of purchase of securities.
DelCap Fund shall not:
1. Invest more than 5% of the market or other fair value of its assets
in the securities of any one issuer (other than obligations of, or guaranteed
by, the U.S. government, its agencies or instrumentalities).
2. Invest in securities of other investment companies except as part of
a merger, consolidation or other acquisition.
3. Make loans, except to the extent that purchases of debt obligations
(including repurchase agreements), in accordance with DelCap Fund's investment
objective and policies, are considered loans and except that DelCap Fund may
loan up to 25% of its assets to qualified broker/dealers or institutional
investors for their use relating to short sales or other security transactions.
4. Purchase or sell real estate, but this shall not prevent DelCap Fund
from investing in securities secured by real estate or interests therein.
5. Purchase more than 10% of the outstanding voting and nonvoting
securities of any issuer, or invest in companies for the purpose of exercising
control or management.
6. Engage in the underwriting of securities of other issuers, except
that in connection with the disposition of a security, DelCap Fund may be deemed
to be an "underwriter" as that term is defined in the Securities Act of 1933.
7. Make any investment which would cause more than 25% of the market or
other fair value of its total assets to be invested in the securities of issuers
all of which conduct their principal business activities in the same industry.
This restriction does not apply to obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
8. Write or purchase puts, calls or combinations thereof, except that
DelCap Fund may write covered call options with respect to any or all parts of
its portfolio securities and purchase put options if DelCap Fund owns the
security covered by the put option at the time of purchase, and that premiums
paid on all put options outstanding do not exceed 2% of its total assets. DelCap
Fund may sell put options previously purchased and enter into closing
transactions with respect to covered call and put options. In addition, DelCap
Fund may write call options and purchase put options on stock indices and enter
into closing transactions with respect to such options.
-4-
<PAGE>
9. Purchase securities on margin, make short sales of securities or
maintain a net short position.
10. Invest more than 5% of the value of its total assets in securities
of companies less than three years old. Such three-year period shall include the
operation of any predecessor company or companies.
11. Invest in warrants valued at lower of cost or market exceeding 5%
of DelCap Fund's net assets. Included in that amount, but not to exceed 2% of
DelCap Fund's net assets, may be warrants not listed on the New York Stock
Exchange or American Stock Exchange.
12. Purchase or retain the securities of any issuer which has an
officer, director or security holder who is a director or officer of Equity
Funds IV, Inc. or of its investment manager if or so long as the directors and
officers of Equity Funds IV, Inc. 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 DelCap Fund's 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. DelCap Fund has no intention of increasing its net income through
borrowing. Any borrowing will be done from a bank and to the extent that such
borrowing exceeds 5% of the value of DelCap Fund's net assets, asset coverage of
at least 300% is required. In the event that such asset coverage shall at any
time fall below 300%, DelCap Fund shall, within three days thereafter (not
including Sunday or holidays) or such longer period as the Securities and
Exchange Commission may prescribe by rules and regulations, reduce the amount of
its borrowings to such an extent that the asset coverage of such borrowings
shall be at least 300%. DelCap Fund will not pledge more than 10% of its net
assets. DelCap Fund will not issue senior securities as defined in the
Investment Company Act of 1940 (the "1940 Act"), except for notes to banks.
Investment securities will not normally be purchased while DelCap Fund has an
outstanding borrowing.
Although not a fundamental investment restriction, DelCap Fund
currently does not invest its assets in real estate limited partnerships.
Equity Funds IV, Inc. has adopted the following restrictions for the
Capital Appreciation Fund which cannot be changed without approval by the
holders of a "majority" of the Capital Appreciation Fund's outstanding shares,
which is a vote by the holders of the lesser of a) 67% or more of the voting
securities present in person or by proxy at a meeting, if the holders of more
than 50% of the outstanding voting securities are present or represented by
proxy; or b) more than 50% of the outstanding voting securities. The percentage
limitations contained in the restrictions and policies set forth herein apply at
the time the Capital Appreciation Fund purchases the securities.
Capital Appreciation Fund shall not:
1. With respect to 75% of its assets, invest more than 5% of the value
of its total assets in the securities of any one issuer (except obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
or certificates of deposit for any such securities, and cash and cash items).
-5-
<PAGE>
2. Make loans, except to the extent that purchases of debt obligations
or other securities (including repurchase agreements), in accordance with
Capital Appreciation Fund's investment objective and policies, are considered
loans and except that Capital Appreciation Fund may loan up to 25% of its assets
to qualified broker/dealers or institutional investors for their use relating to
short sales or other security transactions.
3. Purchase or sell real estate, but this shall not prevent Capital
Appreciation Fund from investing in securities by companies that deal in real
estate or securities secured by real estate or interests therein (including
securities issued by real estate investment trusts).
4. Engage in the underwriting of securities of other issuers, except
that Capital Appreciation Fund may acquire restricted or not readily marketable
securities under circumstances where, if such securities are sold, Capital
Appreciation Fund may be deemed to be an "underwriter" as that term is defined
in the Securities Act of 1933.
5. Make any investment which would cause more than 25% of the market
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.
6. Purchase securities on margin or make short sales of securities
except that Capital Appreciation Fund may obtain such short-term credits as may
be necessary for the clearance of purchases and sales of portfolio securities
may engage in futures and related options transactions and may satisfy margin
requirements relating thereto.
7. Purchase more than 10% of the outstanding voting securities of any
one company.
8. 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. Capital Appreciation Fund has no intention of increasing its net
income through borrowing. Any borrowing will be done from a bank and to the
extent that such borrowing exceeds 5% of the value of Capital Appreciation
Fund's net assets, asset coverage of at least 300% is required. In the event
that such asset coverage shall at any time fall below 300%, Capital Appreciation
Fund shall, within three days thereafter (not including Sundays or holidays) or
such longer period as the Securities and Exchange Commission may prescribe by
rules and regulations, reduce the amount of its borrowings to such an extent
that the asset coverage of such borrowings shall be at least 300%. Capital
Appreciation Fund 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 Capital Appreciation Fund has an outstanding
borrowing.
9. Buy or sell commodities or commodity contracts, except that Capital
Appreciation Fund may engage into futures and related option transactions.
In addition to the above fundamental restrictions, Equity Funds IV,
Inc. has adopted the following non-fundamental investment restrictions on behalf
of Capital Appreciation Fund, which may be amended or changed without approval
of shareholders.
-6-
<PAGE>
Capital Appreciation Fund shall not:
1. Invest in companies for the purpose of exercising control or
management.
2. Invest in interests in oil, gas or other mineral exploration or
development programs.
3. Invest in securities of other investment companies, except that
Capital Appreciation Fund may invest in securities of open-end, closed-end and
unregulated investment companies in compliance with the limitations contained in
the Investment Company Act of 1940 at the time of the investment.
4. Purchase or retain securities of a company which has an officer or
director who is an officer or director of Equity Funds IV, Inc., or an officer,
director or partner of the Manager if, to the knowledge of Capital Appreciation
Fund, one or more such persons owns beneficially more than 1/2 of 1% of the
shares of the company, and in the aggregate more than 5% thereof.
5. 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 the predecessor company or companies. This restriction shall not
apply to Capital Appreciation Fund's investment in the securities of real estate
investment trusts.
6. Invest in warrants valued at lower of cost or market exceeding 5% of
Capital Appreciation Fund's net assets. Included in that amount, but not to
exceed 2% of Capital Appreciation Fund's net assets, may be warrants not listed
on the New York Stock Exchange or American Stock Exchange.
7. Write or purchase puts, calls or combinations thereof, except that
Capital Appreciation Fund may write covered call options with respect to any or
all parts of its portfolio securities if it owns the security covered by the
call option and may purchase put options provided premiums paid on all put
options outstanding do not exceed 2% of its total assets. Capital Appreciation
Fund may sell put options previously purchased and enter into closing
transactions with respect to covered call and put options. In addition, Capital
Appreciation Fund may write call options and purchase put options on stock
indices and enter into closing transactions with respect to such options.
8. Invest more than 15% of Capital Appreciation Fund's total assets in
repurchase agreements maturing in more than seven days and other illiquid
assets.
Although not a fundamental investment restriction, Capital Appreciation
Fund currently does not invest its assets in real estate limited partnerships.
In addition, from time to time, the Funds may also engage in the
following investment techniques:
Repurchase Agreements--While each of the Funds is permitted to do so,
neither normally invests in repurchase agreements, except to invest cash
balances.
The funds in the Delaware Investments family have obtained an
exemption from the joint-transaction prohibitions of Section 17(d) of the 1940
Act to allow the Delaware Investments funds jointly to invest cash balances.
The Funds may invest cash balances in a joint repurchase agreement in accordance
with the terms of the Order and subject generally to the conditions described
below.
-7-
<PAGE>
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, if
any, to the Fund that has entered into the agreement would be the difference
between the repurchase price and the market value of the security. Each Fund
will limit its investments in repurchase agreements to those which Delaware
Management Company (the "Manager") under the guidelines of the Board of
Directors, determines to present minimal credit risks and which are of high
quality. In addition, each Fund must have collateral of at least 102% of the
repurchase price, including the portion representing the Fund's yield under such
agreements which is monitored on a daily basis.
Options--The Funds may write call options and purchase put options on a
covered basis only, and will not engage in option writing strategies for
speculative purposes. The Funds may invest in options that are either
Exchange-listed or traded over-the-counter. Certain over-the-counter options may
be illiquid. Thus, it may not be possible to close options positions and this
may have an adverse impact on a Fund's ability to effectively hedge their
securities. DelCap Fund will not invest more than 10% of its assets in illiquid
securities, and Capital Appreciation Fund will not invest more than 15% of its
assets in illiquid securities.
A. Covered Call Writing--Each Fund may write covered call options from
time to time on such portion of its portfolio, without limit, as the Manager
determines is appropriate in seeking to obtain a Fund's investment objective. A
call option gives the purchaser of such option the right to buy, and the writer,
in this case a Fund, has the obligation to sell the underlying security at the
exercise price during the option period. The advantage to a Fund of writing
covered calls is that it receives a premium which is additional income. However,
if the security rises in value, the Fund may not fully participate in the market
appreciation.
During the option period, a covered call option writer may be assigned
an exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.
With respect to both options on actual portfolio securities owned by a
Fund and options on stock indices, the Fund may enter into closing purchase
transactions. A closing purchase transaction is one in which a Fund, when
obligated as a writer of an option, terminates its obligation by purchasing an
option of the same series as the option previously written.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable a Fund
to write another call option on the underlying security with either a different
exercise price or expiration date or both. A Fund may realize a net gain or loss
from a closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
-8-
<PAGE>
If a call option expires unexercised, a Fund will realize a short-term
capital gain in the amount of the premium on the option, less the commission
paid. Such a gain, however, may be offset by depreciation in the market value of
the underlying security during the option period. If a call option is exercised,
a Fund will realize a gain or loss from the sale of the underlying security
equal to the difference between the cost of the underlying security, and the
proceeds of the sale of the security plus the amount of the premium on the
option, less the commission paid.
The market value of a call option generally reflects the market price
of an underlying security. Other principal factors affecting market value
include supply and demand, interest rates, the price volatility of the
underlying security and the time remaining until the expiration date.
A Fund will write call options only on a covered basis, which means
that the Fund will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, a Fund would be required to continue to hold a security which it might
otherwise wish to sell, or deliver a security it would want to hold. Options
written by a Fund will normally have expiration dates between one and nine
months from the date written. The exercise price of a call option may be below,
equal to or above the current market value of the underlying security at the
time the option is written.
B. Purchasing Put Options--Each Fund may invest up to 2% of its total
assets in the purchase of put options. The DelCap Fund will, at all times during
which it holds a put option, own the security covered by such option.
Each Fund intends to purchase put options in order to protect against a
decline in the market value of the underlying security below the exercise price
less the premium paid for the option ("protective puts"). The ability to
purchase put options will allow a Fund to protect unrealized gain in an
appreciated security in its portfolio without actually selling the security. If
the security does not drop in value, a Fund will lose the value of the premium
paid. A Fund may sell a put option which it has previously purchased prior to
the sale of the securities underlying such option. Such sales will result in a
net gain or loss depending on whether the amount received on the sale is more or
less than the premium and other transaction costs paid on the put option which
is sold.
A Fund may sell a put option purchased on individual portfolio
securities or stock indices. Additionally, a Fund may enter into closing sale
transactions. A closing sale transaction is one in which a Fund, when it is the
holder of an outstanding option, liquidates its position by selling an option of
the same series as the option previously purchased.
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.
-9-
<PAGE>
The amount of cash received will be equal to such difference between the closing
price of the index and exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Gain or loss to the Fund on
transactions in stock index options will depend on price movements in the stock
market generally (or in a particular industry or segment of the market) rather
than price movements of individual securities.
As with stock options, a Fund may offset its position in stock index
options prior to expiration by entering into a closing transaction on an
Exchange or it may let the option expire unexercised.
A stock index fluctuates with changes in the market values of the stock
so included. Some stock index options are based on a broad market index such as
the Standard & Poor's 500 or the New York Stock Exchange Composite Index, or a
narrower market index such as the Standard & Poor's 100. Indices are also based
on an industry or market segment such as the AMEX Oil and Gas Index or the
Computer and Business Equipment Index. Options on stock indices are currently
traded on the following Exchanges among others: The Chicago Board Options
Exchange, New York Stock Exchange and American Stock Exchange.
A Fund's ability to hedge effectively all or a portion of its
securities through transactions in options on stock indices depends on the
degree to which price movements in the underlying index correlate with price
movements in the Fund's portfolio securities. Since a Fund's portfolio will not
duplicate the components of an index, the correlation will not be exact.
Consequently, a Fund bears the risk that the prices of the securities being
hedged will not move in the same amount as the hedging instrument. It is also
possible that there may be a negative correlation between the index or other
securities underlying the hedging instrument and the hedged securities which
would result in a loss on both such securities and the hedging instrument.
Positions in stock index options may be closed out only on an Exchange
which provides a secondary market. There can be no assurance that a liquid
secondary market will exist for any particular stock index option. Thus, it may
not be possible to close such an option. The inability to close options
positions could have an adverse impact on a Fund's ability to effectively hedge
its securities. A Fund will enter into an option position only if there appears
to be a liquid secondary market for such options.
A Fund will not engage in transactions in options on stock indices for
speculative purposes but only to protect appreciation attained, to offset
capital losses and to take advantage of the liquidity available in the option
markets.
Foreign Securities
Each Fund may invest in securities of foreign companies. However,
DelCap Fund and Capital Appreciation Fund, will not invest more than,
respectively, 25% and 20% of the value of their respective 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, as described
below, in certain Depositary Receipts, on which there are no such limits).
There has been in the past, and there may be again in the future, an
interest equalization tax levied by the United States in connection with the
purchase of foreign securities such as those purchased by the Funds. Payment of
such interest equalization tax, if imposed, would reduce a Fund's rate of return
on its investment. Dividends paid by foreign issuers may be subject to
withholding and other foreign taxes which may decrease the net return on such
investments as compared to dividends paid to a Fund by United States
corporations.
-10-
<PAGE>
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. A Fund 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 a
Fund held in foreign countries.
Depositary Receipts
DelCap Fund may make foreign investments through the purchase and sale
of sponsored or unsponsored American Depositary Receipts ("ADRs"), and Capital
Appreciation Fund may, in addition to ADRs, also purchase European and Global
Depositary Receipts ("Depositary Receipts"). ADRs are receipts typically issued
by a U.S. bank or trust company, while Depositary Receipts are issued by a
foreign bank or trust company. ADRs and Depositary Receipts evidence ownership
of underlying securities issued by a foreign corporation. "Sponsored" ADRs and
Depositary Receipts are issued jointly by the issuer of the underlying security
and a depository, whereas "unsponsored" ADRs and Depositary Receipts are issued
without participation of the issuer of the deposited security. Holders of
unsponsored ADRs and Depositary Receipts generally bear all the costs of such
facilities and the depository of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the issuer of
the deposited security or to pass through voting rights to the holders of such
receipts in respect of the deposited securities. Therefore, there may not be a
correlation between information concerning the issuer of the security and the
market value of an unsponsored ADR or Depositary Receipt.
Non-Traditional Equity Securities
Capital Appreciation Fund may invest in convertible preferred stocks
that offer enhanced yield features, such as Preferred Equity Redemption
Cumulative Stock ("PERCS"), which provide an investor, such as the Fund, with
the opportunity to earn higher dividend income than is available on a company's
common stock. A PERCS is a preferred stock which generally features a mandatory
conversion date, as well as a capital appreciation limit which is usually
expressed in terms of a stated price. Upon the conversion date, most PERCS
convert into common stock of the issuer (PERCS are generally not convertible
into cash at maturity). Under a typical arrangement, if after a predetermined
number of years the issuer's common stock is trading at a price below that set
by the capital appreciation limit, each PERCS would convert to one share of
common stock. If, however, the issuer's common stock is trading at a price above
that set by the capital appreciation limit, the holder of the PERCS would
receive less than one full share of common stock. The amount of that fractional
share of common stock received by the PERCS holder is determined by dividing the
price set by the capital appreciation limit of the PERCS by the market price of
the issuer's common stock. PERCS can be called at any time prior to maturity,
and hence do not provide call protection. However, if called early, the issuer
may pay a call premium over the market price to the investor. This call premium
declines at a preset rate daily, up to the maturity date of the PERCS.
Capital Appreciation Fund may also invest in other enhanced convertible
securities. These include but are not limited to ACES (Automatically Convertible
Equity Securities), PEPS (Participating Equity Preferred Stock), PRIDES
(Preferred Redeemable Increased Dividend Equity Securities), SAILS (Stock
Appreciation Income Linked Securities), TECONS (Term Convertible Notes), QICS
(Quarterly Income Cumulative Securities) and DECS (Dividend Enhanced Convertible
Securities). ACES, PEPS, PRIDES, SAILS, TECONS,
-11-
<PAGE>
QICS, and DECS all have the following features: they are company-issued
convertible preferred stock; unlike PERCS, they do not have capital appreciation
limits; they seek to provide the investor with high current income, with some
prospect of future capital appreciation; they are typically issued with three to
four-year maturities; they typically have some built-in call protection for the
first two to three years; investors have the right to convert them into shares
of common stock at a preset conversion ratio or hold them until maturity; and
upon maturity, they will automatically convert to either cash or a specified
number of shares of common stock.
Portfolio Loan Transactions
Each Fund may loan up to 25% of its assets to qualified broker/dealers
or institutional investors for their use relating to short sales or other
security transactions.
It is the understanding of the Manager that the staff of the Securities
and Exchange Commission permits portfolio lending by registered investment
companies if certain conditions are met. These conditions are as follows: 1)
each transaction must have 100% collateral in the form of cash, short-term U.S.
Government securities, or irrevocable letters of credit payable by banks
acceptable to a Fund from the borrower; 2) this collateral must be valued daily
and should the market value of the loaned securities increase, the borrower must
furnish additional collateral to the Fund; 3) the Fund must be able to terminate
the loan after notice, at any time; 4) the Fund must receive reasonable interest
on any loan, and any dividends, interest or other distributions on the lent
securities, and any increase in the market value of such securities; 5) the Fund
may pay reasonable custodian fees in connection with the loan; and 6) the voting
rights on the lent securities may pass to the borrower; however, if the
directors of Equity Funds IV, Inc. 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 a Fund would be exposed on a portfolio loan
transaction is the risk that the borrower would go bankrupt at a time when the
value of the security goes up. Therefore, the Funds will only enter into loan
arrangements after a review of all pertinent facts by the Manager, under the
supervision of the Board of 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.
-12-
<PAGE>
ACCOUNTING AND TAX ISSUES
When a Fund writes a call, or purchases a put option, an amount equal
to the premium received or paid by it is included in the section of the Fund's
assets and liabilities as an asset and as an equivalent liability.
In writing a call, the amount of the liability is subsequently "marked
to market" to reflect the current market value of the option written. The
current market value of a written option is the last sale price on the principal
Exchange on which such option is traded or, in the absence of a sale, the mean
between the last bid and asked prices. If an option which a Fund has written
expires on its stipulated expiration date, the Fund reports a realized gain. If
a Fund enters into a closing purchase transaction with respect to an option
which the Fund has written, the Fund realizes a gain (or loss if the cost of the
closing transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. Any such gain or loss is a
short-term capital gain or loss for federal income tax purposes. If a call
option which a Fund has written is exercised, the Fund realizes a capital gain
or loss (long-term or short-term, depending on the holding period of the
underlying security) from the sale of the underlying security and the proceeds
from such sale are increased by the premium originally received.
The premium paid by a Fund for the purchase of a put option is recorded
in the section of the Fund's assets and liabilities as an investment and
subsequently adjusted daily to the current market value of the option. For
example, if the current market value of the option exceeds the premium paid, the
excess would be unrealized appreciation and, conversely, if the premium exceeds
the current market value, such excess would be unrealized depreciation. The
current market value of a purchased option is the last sale price on the
principal Exchange on which such option is traded or, in the absence of a sale,
the mean between the last bid and asked prices. If an option which a Fund has
purchased expires on the stipulated expiration date, the Fund realizes a
short-term or long-term capital loss for federal income tax purposes in the
amount of the cost of the option. If a Fund sells the put option, it realizes a
short-term or long-term capital gain or loss, depending on whether the proceeds
from the sale are greater or less than the cost of the option. If a Fund
exercises a put option, it realizes a capital gain or loss (long-term or
short-term, depending on the holding period of the underlying security) from the
sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. However, since the purchase of a put
option is treated as a short sale for federal income tax purposes, the holding
period of the underlying security will be affected by such a purchase.
Options on Certain Stock Indices--Accounting for options on certain
stock indices will be in accordance with generally accepted accounting
principles. The amount of any realized gain or loss on closing out such a
position will result in a realized gain or loss for tax purposes. Such options
held by the Fund at the end of each fiscal year will be required to be "marked
to market" for federal income tax purposes. Sixty percent of any net gain or
loss recognized on such deemed sales or on any actual sales will be treated as
long-term capital gain or loss, and the remainder will be treated as short-term
capital gain or loss.
Other Tax Requirements--Each Fund has qualified, and intends to
continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). As such, a Fund will not
be subject to federal income tax, or to any excise tax, to the extent its
earnings are distributed as provided in the Code and it satisfies other
requirements relating to the sources of its income and diversification of its
assets.
-13-
<PAGE>
In order to qualify as a regulated investment company for federal
income tax purposes, each Fund must meet certain specific requirements,
including:
(i) The Fund must maintain a diversified portfolio of securities,
wherein no security (other than U.S. government securities and securities of
other regulated investment companies) can exceed 25% of the Fund's total assets,
and, with respect to 50% of the Fund's total assets, no investment (other than
cash and cash items, U.S. Government securities and securities of other
regulated investment companies) can exceed 5% of the Fund's total assets;
(ii) The Fund must derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or disposition of stock and securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies;
(iii) The Fund must distribute to its shareholders at least 90% of its
net investment income and net tax-exempt income for each of its fiscal years.
The Code requires the Funds to distribute at least 98% of its taxable
ordinary income earned during the calendar year and 98% of its capital gain net
income earned during the 12 month period ending October 31 (in addition to
amounts from the prior year that were neither distributed nor taxed to a Fund)
to you by December 31 of each year in order to avoid federal excise taxes. The
Funds intend as a matter of policy to declare and pay sufficient dividends in
December or January (which are treated by you as received in December) but does
not guarantee and can give no assurances that its distributions will be
sufficient to eliminate all such taxes.
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.
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, the Fund must recognize gain (but not loss) on any constructive
sale of an appreciated financial position in stock, a partnership interest or
certain debt instruments. The Fund will generally be treated as making a
constructive sale when it: 1) enters into a short sale on the same or
substantially identical property; 2) enters into an offsetting notional
principal contract; or 3) enters into a futures or forward contract to deliver
the same or substantially identical property. Other transactions (including
certain financial instruments called collars) will be treated as constructive
sales as provided in Treasury regulations to be published. There are also
certain exceptions that apply for transactions that are closed before the end of
the 30th day after the close of the taxable year.
Investment in Foreign Currencies and Foreign Securities--The Funds are
authorized to invest certain limited amounts in foreign securities. Such
investments, if made, will have the following additional tax consequences to
each Fund:
-14-
<PAGE>
Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time a Fund accrues income
(including dividends), or accrues expenses which are denominated in a foreign
currency, and the time a Fund actually collects such income or pays such
expenses generally are treated as ordinary income or loss. Similarly, on the
disposition of debt securities denominated in a foreign currency and on the
disposition of certain options, futures, forward contracts, gain or loss
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of its disposition are
also treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "Section 988" gains or losses, may increase or decrease the amount
of a Fund's net investment company taxable income, which, in turn, will affect
the amount of income to be distributed to you by a Fund.
If a Fund's Section 988 losses exceed a Fund's other net investment
company taxable income during a taxable year, a Fund generally will not be able
to make ordinary dividend distributions to you for that year, or distributions
made before the losses were realized will be recharacterized as return of
capital distributions of federal income tax purposes, rather than as an ordinary
dividend or capital gain distribution. If a distribution is treated as a return
of capital, your tax basis in your Fund shares will be reduced by a like amount
(to the extent of such basis), and any excess of the distribution over your tax
basis in your Fund shares will be treated as capital gain to you.
The 1997 Act generally requires that foreign income be translated into
U.S. dollars at the average exchange rate for the tax year in which the
transactions are conducted. Certain exceptions apply to taxes paid more than two
years after the taxable year to which they relate. This new law may require a
Fund to track and record adjustments to foreign taxes paid on foreign securities
in which it invests. Under a Fund's current reporting procedure, foreign
security transactions are recorded generally at the time of each transaction
using the foreign currency spot rate available for the date of each transaction.
Under the new law, a Fund will be required to record a fiscal year end (and at
calendar year end for excise tax purposes) an adjustment that reflects the
difference between the spot rates recorded for each transaction and the year-end
average exchange rate for all of a Fund's foreign securities transactions. There
is a possibility that the mutual fund industry will be given relief from this
new provision, in which case no year-end adjustments will be required.
The Funds may be subject to foreign withholding taxes on income from
certain of its foreign securities. If more than 50% of the total assets of a
Fund at the end of its fiscal year are invested in securities of foreign
corporations, a Fund may elect to pass-through to you your pro rata share of
foreign taxes paid by a Fund. If this election is made, you will be: (i)
required to include in your gross income your pro rata share of foreign source
income (including any foreign taxes paid by a Fund); and (ii) entitled to either
deduct your share of such foreign taxes in computing your taxable income or to
claim a credit for such taxes against your U.S. income tax, subject to certain
limitations under the Code. You will be informed by a Fund at the end of each
calendar year regarding the availability of any such foreign tax credits and the
amount of foreign source income (including any foreign taxes paid by a Fund). If
a Fund elects to pass-through to you the foreign income taxes that it has paid,
you will be informed at the end of the calendar year of the amount of foreign
taxes paid and foreign source income that must be included on your federal
income tax return. If a Fund invests 50% or less of its total assets in
securities of foreign corporations, it will not be entitled to pass-through to
you your pro-rata shares of foreign taxes paid by a Fund. In this case, these
taxes will be taken as a deduction by a Fund, and the income reported to you
will be the net amount after these deductions. The 1997 Act also simplifies the
procedures by which investors in funds that invest in foreign securities can
claim tax credits on their individual income tax returns for the foreign taxes
paid by a Fund. These provisions will allow investors who pay foreign taxes of
$300 or less on a single return or $600 or less on a joint return during any
year (all of which must be reported on IRS Form 1099-DIV from a Fund to the
investor) to claim a tax credit against their U.S. federal income tax for the
amount
-15-
<PAGE>
of foreign taxes paid by a Fund. This process will allow you, if you qualify, to
bypass the burdensome and detailed reporting requirements on the foreign tax
credit schedule (Form 1116) and report your foreign taxes paid directly on page
2 of Form 1040. You should note that this simplified procedure will not be
available until calendar year 1998.
Investment in Passive Foreign Investment Company securities--The Funds
may invest in shares of foreign corporations which may be classified under the
Code as passive foreign investment companies ("PFICs"). In general, a foreign
corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. If a Fund receives an "excess distribution" with respect
to PFIC stock, the Fund itself may be subject to U.S. federal income tax on a
portion of the distribution, whether or not the corresponding income is
distributed by a Fund to you. In general, under the PFIC rules, an excess
distribution is treated as having been realized ratably over the period during
which a Fund held the PFIC shares. A Fund itself will be subject to tax on the
portion, if any, of an excess distribution that is so allocated to prior Fund
taxable years, and an interest factor will be added to the tax, as if the tax
had been payable in such prior taxable years. In this case, you would not be
permitted to claim a credit on your own tax return for the tax paid by a Fund.
Certain distributions from a PFIC as well as gain from the sale of PFIC shares
are treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
distribution might have been classified as capital gain. This may have the
effect of increasing Fund distributions to you that are treated as ordinary
dividends rather than long-term capital gain dividends.
A Fund may be eligible to elect alternative tax treatment with respect
to PFIC shares. Under an election that currently is available in some
circumstances, a Fund generally would be required to include in its gross income
its share of the earnings of a PFIC on a current basis, regardless of whether
distributions are received from the PFIC during such period. If this election
were made, the special rules, discussed above, relating to the taxation of
excess distributions, would not apply. In addition, the 1997 Act provides for
another election that would involve marking-to-market the Fund's PFIC shares at
the end of each taxable year (and on certain other dates as prescribed in the
Code), with the result that unrealized gains would be treated as though they
were realized. The Fund would also be allowed an ordinary deduction for the
excess, if any, of the adjusted basis of its investment in the PFIC stock over
its fair market value at the end of the taxable year. This deduction would be
limited to the amount of any net mark-to-market gains previously included with
respect to that particular PFIC security. If a Fund were to make this second
PFIC election, tax at the Fund level under the PFIC rules would generally be
eliminated.
The application of the PFIC rules may affect, among other things, the
amount of tax payable by a Fund (if any), the amounts distributable to you by a
Fund, the time at which these distributions must be made, and whether these
distributions will be classified as ordinary income or capital gain
distributions to you.
You should be aware that it is not always possible at the time shares
of a foreign corporation are acquired to ascertain that the foreign corporation
is a PFIC, and that there is always a possibility that a foreign corporation
will become a PFIC after a Fund acquires shares in that corporation. While a
Fund will generally seek to avoid investing in PFIC shares to avoid the tax
consequences detailed above, there are no guarantees that it will do so and it
reserves the right to make such investments as a matter of its fundamental
investment policy.
-16-
<PAGE>
Most foreign exchange gains are classified as ordinary income which
will be taxable to you as such when distributed. Similarly, you should be aware
that any foreign exchange losses realized by a Fund, including any losses
realized on the sale of foreign debt securities, are generally treated as
ordinary losses for federal income tax purposes. This treatment could increase
or reduce a Fund's income available for distribution to you, and may cause some
or all of a Fund's previously distributed income to be classified as a return of
capital.
-17-
<PAGE>
PERFORMANCE INFORMATION
From time to time, each Fund may state each of its Classes' total
return in advertisements and other types of literature. Any statement of total
return performance data for a Class will be accompanied by information on 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.
Each Fund may also advertise aggregate and average total return information for
its Classes 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
Where: P = a hypothetical initial purchase order of $1,000 from which,
in the case of only Class A Shares, the maximum front-end sales
charge is deducted;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical $1,000 purchase
at the end of the period after the deduction of the
applicable CDSC, if any, with respect to Class B Shares
and Class C Shares.
In presenting performance information for Class A Shares, the Limited
CDSC applicable to only certain redemptions of those shares will not be deducted
from any computation of total return. See the Prospectuses for the Fund Classes
for a description of the Limited CDSC and the limited instances in which it
applies. All references to a CDSC in this Performance Information section will
apply to Class B Shares or Class C Shares.
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made with respect to Class A Shares, and that all
distributions are reinvested at net asset value, and, with respect to Class B
Shares and Class C Shares, reflects the deduction of the CDSC that would be
applicable upon complete redemption of such shares. In addition, each Fund may
present total return information that does not reflect the deduction of the
maximum front-end sales charge or any applicable CDSC.
The performance of each Class of DelCap Fund, as shown below, is the
average annual total return quotations through September 30, 1998. The average
annual total return for Class A Shares at offer reflects the maximum front-end
sales charge of 5.75% paid on the purchase of shares. The average annual total
return for Class A Shares at net asset value (NAV) does not reflect the payment
of any front-end sales charge. Pursuant to applicable regulation, total return
shown for the DelCap Fund Institutional Class for the periods prior to the
commencement of operations of such Class is calculated by taking the performance
of DelCap Fund A Class 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. The average annual total return for Class B and C
Shares including CDSC reflects the deduction of the applicable CDSC that would
be
-18-
<PAGE>
paid if the shares were redeemed at September 30, 1998. The average annual total
return for Class B and C Shares excluding CDSC assumes the shares were not
redeemed at September 30, 1998 and therefore does not reflect the deduction of a
CDSC. Securities prices fluctuated during the periods covered and past results
should not be considered as representative of future performance.
<TABLE>
<CAPTION>
Average Annual Total Return
DelCap Fund
Class B Class B Class C Class C
Class A Class A Shares Shares Shares Shares
Shares Shares Institutional (including (excluding (including (excluding
(at offer)(2) (at NAV) Class Shares CDSC)(3) CDSC) CDSC) CDSC)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year ended
9/30/98 (13.57%) (8.28%) (7.99%) (12.56%) (8.92%) (9.62%) (8.89%)
- --------------------------------------------------------------------------------------------------------------------------
3 years ended
9/30/98 5.58% 7.68% 8.00% 6.28% 6.94% N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
5 years ended
9/30/98 7.76% 9.04% 9.38% N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
10 years ended
9/30/98 11.51% 12.17% 12.37% N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Life of Fund 18.34% 18.90% 19.07% 10.28% 10.59% 7.39% 7.39%
(1)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class A Shares commenced operations on March 27, 1986. Institutional
Class Shares commenced operations on November 9, 1992. Class B Shares
commenced operations on September 6, 1994. Class C Shares commenced
operations on November 29, 1995.
(2) Prior to November 30, 1998, the maximum front-end sales charge was
4.75%. Effective November 30, 1998, the maximum front-end sales charge
was increased to 5.75% and the above performance numbers are calculated
using 5.75% as the applicable sales charge.
(3) Effective November 2, 1998, the CDSC schedule for Class B Shares
increased as follows: (i) 5% if shares are redeemed within one year of
purchase (ii) 4% if shares are redeemed with two years of purchase;
(iii) 3% if shares are redeemed during the third or fourth year
following purchase; (iv) 2% if shares are redeemed during the fifth
year following purchase; (v) 1% if shares are redeemed during the sixth
year following purchase; and (v) 0% thereafter. The above figures have
been calculated using this new schedule.
The performance of Class A Shares and Institutional Class shares of
Capital Appreciation Fund, as shown below, is the average annual total return
quotations through September 30, 1998. The average annual or aggregate total
return for Class A Shares at offer reflects the maximum front-end sales charge
of 5.75% paid on the purchase of shares. The average annual total return for
Class A Shares at net asset value (NAV) does not reflect the payment of any
front-end sales charge. The average annual total return for Class B and C Shares
including CDSC reflects the deduction of the applicable CDSC that would be paid
if the shares were redeemed at September 30, 1998. The average annual total
return for Class B and C Shares excluding CDSC assumes the shares were not
redeemed at September 30, 1998 and therefore does not reflect the deduction of a
CDSC. Securities prices fluctuated during the periods covered and past results
should not be considered as representative of future performance.
-19-
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
Capital Appreciation Fund(1)
- ----------------------------------------------------------------------------------------------
Class A Shares Class A Shares Institutional Class
(at offer)(2)(3) (at NAV)(3) Shares
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 year ended 9/30/98 (12.26%) (6.91%) (6.91%)
- ----------------------------------------------------------------------------------------------
Life of Fund (4) 2.68% 6.07% 6.07%
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) Returns reflect the voluntary waiver of fees and payments of expenses by
the Manager. See Investment Management Agreements. In the absence of such
voluntary fee waivers and expense payments, performance would have been
affected negatively.
(2) Prior to November 2, 1998, the maximum front-end sales charge was 4.75%.
Effective November 2, 1998, the maximum front-end sales charge was
increased to 5.75% and the above performance numbers are calculated using
5.75% as the applicable sales charge.
(3) Returns reflect the voluntary waiver of 12b-1 fees by the Distributor. See
Distribution and Service under Investment Management Agreements. In the
absence of such voluntary waiver, performance would have been affected
negatively.
(4) Class A Shares and Institutional Class Shares commenced operations on
December 2, 1996.
From time to time, each Fund may also quote its Classes' actual total
return performance, dividend results and other performance information in
advertising and other types of literature. This information may be compared to
that of other mutual funds with similar investment objectives and to stock, bond
and other relevant indices or to rankings prepared by independent services or
other financial or industry publications that monitor the performance of mutual
funds. For example, the performance of a Fund (or Fund Class) may be compared to
data prepared by Lipper Analytical Services, Inc., Morningstar, Inc. or to the
S&P 500 Index or the Dow Jones Industrial Average.
Lipper Analytical Services, Inc. maintains statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds. Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare a Fund's
performance to another fund in appropriate categories over specific time periods
also may be quoted in advertising and other types of literature. The S&P 500
Stock Index and the Dow Jones Industrial Average are industry-accepted unmanaged
indices of generally-conservative securities used for measuring general market
performance. The Russell 2000 Index TR is a total return weighted index which is
comprised of 2,000 of the smallest stocks (on the basis of capitalization) in
the Russell 3000 Index and is calculated on a monthly basis. The NASDAQ
Composite Index is a market capitalization price only index that tracks the
performance of domestic common stocks traded on the regular NASDAQ market as
well as National Market System traded foreign common stocks and American
Depository Receipts. The total return performance reported for these indices
will reflect the reinvestment of all distributions on a quarterly basis and
market price fluctuations. The indices do not take into account any sales charge
or other fees. A direct investment in an unmanaged index is not possible.
In addition, the performance of multiple indices compiled and
maintained by statistical research firms, such as Salomon Brothers and Lehman
Brothers may be combined to create a blended performance result for comparative
performances. Generally, the indices selected will be representative of the
types of securities in which a Fund may invest and the assumptions that were
used in calculating the blended performance will be described.
-20-
<PAGE>
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides
historical returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the Consumer Price Index), and combinations
of various capital markets. The performance of these capital markets is based on
the returns of different indices. A Fund may use the performance of these
capital markets in order to demonstrate general risk-versus-reward investment
scenarios. Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to those
of a Fund. A Fund may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
Each Fund may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that describe
general principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting, questionnaires designed to help create a personal
financial profile, worksheets used to project savings needs based on assumed
rates of inflation and hypothetical rates of return and action plans offering
investment alternatives), investment management techniques, policies or
investment suitability of the Fund (such as value investing, market timing,
dollar cost averaging, asset allocation, constant ratio transfer, automatic
account rebalancing, the advantages and disadvantages of investing in
tax-deferred and taxable investments), economic and political conditions, the
relationship between sectors of the economy and the economy as a whole, the
effects of inflation and historical performance of various asset classes,
including but not limited to, stocks, bonds and Treasury bills. From time to
time advertisements, sales literature, communications to shareholders or other
materials may summarize the substance of information contained in shareholder
reports (including the investment composition of a Fund), as well as the views
as to current market, economic, trade and interest rate trends, legislative,
regulatory and monetary developments, investment strategies and related matters
believed to be of relevance to the Fund. In addition, selected indices may be
used to illustrate historic performance of selected asset classes. Each Fund may
also include in advertisements, sales literature, communications to shareholders
or other materials, charts, graphs or drawings which illustrate the potential
risks and rewards of investment in various investment vehicles, including but
not limited to, stocks, bonds, treasury bills and shares of the Fund. In
addition, advertisements, sales literature, communications to shareholders or
other materials may include a discussion of certain attributes or benefits to be
derived by an investment in a Fund and/or other mutual funds, shareholder
profiles and hypothetical investor scenarios, timely information on financial
management, tax and retirement planning (such as information on Roth IRAs and
Education IRAs) and investment alternative to certificates of deposit and other
financial instruments. Such sales literature, communications to shareholders or
other materials may include symbols, headlines or other material which highlight
or summarize the information discussed in more detail therein.
Materials may refer to the CUSIP numbers of a Fund and may illustrate
how to find the listings of the Fund in newspapers and periodicals. Materials
may also include discussions of other funds, products, and services.
Each Fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, a Fund may compare these measures to
those of other funds. Measures of volatility seek to compare the historical
share price fluctuations or total returns to those of a benchmark. Measures of
benchmark correlation indicate how valid a comparative benchmark may be.
Measures of volatility and correlation may be calculated using averages of
historical data. Each Fund may advertise its current
-21-
<PAGE>
interest rate sensitivity, duration, weighted average maturity or similar
maturity characteristics. Advertisements and sales materials relating to the
Fund may include information regarding the background and experience of its
portfolio managers.
-22-
<PAGE>
The following tables are an example, for purposes of illustration only,
of cumulative total return performance for Class A Shares, Institutional Class,
Class B Shares and Class C Shares of DelCap Fund and Class A Shares and the
Institutional Class of Capital Appreciation Fund through September 30, 1998.
The performance figures reflect maximum sales charges or contingent deferred
sales charges, if any. Performance of Class A Shares may also be shown without
reflecting the impact of any front-end sales charge. Performance of Class B
Shares and Class C Shares will be calculated both with the applicable CDSC
included and excluded. In addition, the calculations assume the reinvestment of
any realized securities profits distributions and income dividends paid during
the period, but not any income taxes payable by shareholders on the reinvested
distributions.
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 a guarantee of future performance.
<TABLE>
<CAPTION>
Cumulative Total Return
DelCap Fund
- ------------------------------------------------------------------------------------------------------------
Class B Class B Class C Class C
Class A Shares Shares Shares Shares
Shares Institutional (including (excluding (including (excluding
(at offer)(2) Class Shares CDSC)(3) CDSC) CDSC) CDSC)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
3 months
ended (21.10%) (16.24%) (20.61%) (16.43%) (17.25%) (16.41%)
9/30/98
- ------------------------------------------------------------------------------------------------------------
6 months
ended (19.81%)(4) (14.81%) (19.46%) (15.22%) (16.07%) (15.22%)
9/30/98
- ------------------------------------------------------------------------------------------------------------
9 months
ended (11.01%) (5.38%) (10.77%) (6.07%) (6.98%) (6.04%)
9/30/98
- ------------------------------------------------------------------------------------------------------------
1 year ended
9/30/98 (13.57%) (7.99%) (12.56%) (8.92%) (9.62%) (8.89%)
- ------------------------------------------------------------------------------------------------------------
3 years ended
9/30/98 17.69% 25.98% 20.03% 22.30% N/A N/A
- ------------------------------------------------------------------------------------------------------------
5 years ended
9/30/98 45.31% 56.54% N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------
10 years ended
9/30/98 197.31% 221.06% N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------
Life of Fund 722.54% 788.11% 48.91% 50.63% 22.44% 22.44%
(1)
------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class A Shares commenced operations on March 27, 1986. Institutional
Class Shares commenced operations on November 9, 1992. Pursuant to
applicable regulation, total return shown for the DelCap Fund
Institutional Class for the periods prior to the commencement of
operations of such Class is calculated by taking the performance of
DelCap Fund A Class 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. Class B Shares
commenced operation on September 6, 1994. Class C Shares commenced
operations on November 29, 1995.
(2) Prior to November 2, 1998, the maximum front-end sales charge was
4.75%. Effective November 2, 1998, the maximum front-end sales charge
was increased to 5.75% and the above performance numbers are calculated
using 5.75% as the applicable sales charge.
-23-
<PAGE>
(3) Effective November 2, 1998, the CDSC schedule for Class B Shares
increased as follows: (i) 5% if shares are redeemed within one year of
purchase (ii) 4% if shares are redeemed with two years of purchase;
(iii) 3% if shares are redeemed during the third or fourth year
following purchase; (iv) 2% if shares are redeemed during the fifth
year following purchase; (v) 1% if shares are redeemed during the sixth
year following purchase; and (v) 0% thereafter. The above figures have
been calculated using this new schedule.
(4) Cumulative total return for Class A Shares at NAV for the six months
ended September 30, 1998 was (14.92%).
-24-
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return
Capital Appreciation Fund(1)
- -----------------------------------------------------------------------------------------------
Class A Shares Class A Shares Institutional Class
(at offer)(2)(3) (at NAV)(3) Shares
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
3 months ended 9/30/98 (16.99%) (11.95%) (11.95%)
- -----------------------------------------------------------------------------------------------
6 months ended 9/30/98 (17.45%)(4) (12.38%) (12.38%)
- -----------------------------------------------------------------------------------------------
9 months ended 9/30/98 (9.38%) (3.85%) (3.85%)
- -----------------------------------------------------------------------------------------------
1 year ended 9/30/98 (12.26%) (6.91%) (6.91%)
- -----------------------------------------------------------------------------------------------
Life of Fund (4) 4.96% 11.38% 11.38%
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Returns reflect the voluntary waiver of fees and payments of expenses
by the Manager. See Investment Management Agreements. In the absence of
such voluntary fee waivers and expense payments, performance would have
been affected negatively.
(2) Prior to November 30, 1998, the maximum front-end sales charge was
4.75%. Effective November 30, 1998, the maximum front-end sales charge
was increased to 5.75% and the above performance numbers are calculated
using 5.75% as the applicable sales charge.
(3) Returns reflect the voluntary waiver of 12b-1 fees by the Distributor.
See Distribution and Service under Investment Management Agreements. In
the absence of such voluntary waiver, performance would have been
affected negatively.
(4) Class A Shares and Institutional Class Shares commenced operations on
December 2, 1996.
(5) Cumulative total return for Class A Shares at NAV for the six months
ended September 30, 1998 was (12.38%).
Total return performance for Class B and Class C Shares of Capital
Appreciation Fund is not provided because such shares have not commenced
operations as of the date of this Part B.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for each Fund and other mutual funds in Delaware
Investments, 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 a Fund's, and other Delaware Investments funds',
investment disciplines employed in seeking their objectives. The Distributor may
also from time to time cite general or specific information about the
institutional clients of the Manager, including the number of such clients
serviced by the Manager.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly--as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember.
-25-
<PAGE>
Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. You also should consider your financial ability to
continue to purchase shares during periods of high fund share prices. Delaware
Investments offers three services -- Automatic Investing Program, Direct
Deposit Program and the Wealth Builder Option -- that can help to keep your
regular investment program on track. See Investing by Electronic Fund Transfer -
Direct Deposit Purchase Plan, Automatic Investing Plan and Wealth Builder Option
under Investment Plans for a complete description of these services, including
restrictions or limitations.
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.
- --------------------------------------------------------------------------------
Number
Investment Price Per of Shares
Amount Share Purchased
- --------------------------------------------------------------------------------
Month 1 $100 $10.00 10
- --------------------------------------------------------------------------------
Month 2 $100 $12.50 8
- --------------------------------------------------------------------------------
Month 3 $100 $ 5.00 20
- --------------------------------------------------------------------------------
Month 4 $100 $10.00 10
- --------------------------------------------------------------------------------
Total $400 $37.50 48
- --------------------------------------------------------------------------------
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to
represent the actual performance of the Funds or any stock or bond fund in the
Delaware Investments family. Dollar-cost averaging can be appropriate for
investments in shares of funds that tend to fluctuate in value. Please obtain
the prospectus of any fund in the Delaware Investments family in which you plan
to invest through a dollar-cost averaging program. The prospectus contains
additional information, including charges and expenses. Please read it carefully
before you invest or send money.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Fund
shares, your investment is given yet another opportunity to grow. It's called
the Power of Compounding. The Funds may include illustrations showing the power
of compounding in advertisements and other types of literature.
-26-
<PAGE>
TRADING PRACTICES AND BROKERAGE
Equity Funds IV, Inc. selects brokers or dealers to execute
transactions on behalf of each Fund for the purchase or sale of portfolio
securities on the basis of its judgment of their professional capability to
provide the service. The primary consideration is to have brokers or dealers
execute transactions at best price and execution. Best price and execution
refers to many factors, including the price paid or received for a security, the
commission charged, the promptness and reliability of execution, the
confidentiality and placement accorded the order and other factors affecting the
overall benefit obtained by the account on the transaction. A number of trades
are made on a net basis where a Fund either buys securities directly from the
dealer or sells them to the dealer. In these instances, there is no direct
commission charged but there is a spread (the difference between the buy and
sell price) which is the equivalent of a commission. When a commission is paid,
a Fund pays reasonably competitive brokerage commission rates based upon the
professional knowledge of Equity Funds IV, Inc.'s trading department as to rates
paid and charged for similar transactions throughout the securities industry. In
some instances, a Fund pays a minimal share transaction cost when the
transaction presents no difficulty.
During the fiscal years ended September 30, 1996, 1997 and 1998,
the aggregate dollar amounts of brokerage commissions paid by DelCap Fund were
$1,513,495, $2,224,779 and $2,027,792 respectively. For the period December
2, 1996 (date of initial public offering) through September 30, 1997 and the
fiscal year ended September 30, 1998, the aggregate dollar amounts of
brokerage commissions paid by Capital Appreciation Fund were $4,599 and
$6,662, respectively.
The Manager may allocate out of all commission business generated by
all of the funds and accounts under its management, brokerage business to
brokers or dealers who provide brokerage and research services. These services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends; assisting in
determining portfolio strategy; providing computer software and hardware used in
security analyses; and providing portfolio performance evaluation and technical
market analyses. Such services are used by the Manager in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used, or used exclusively, with respect
to the fund or account generating the brokerage.
During the fiscal year ended September 30, 1998, portfolio
transactions of DelCap Fund in the amount of $44,593,262, resulting in
brokerage commissions of $45,108, were directed to brokers for brokerage and
research services provided. For the fiscal year ended September 30, 1998,
portfolio transactions of Capital Appreciation Fund in the amount of
$1,318,475, resulting in brokerage commissions of $2,500, were directed to
brokers for brokerage and research services provided.
As provided in the Securities Exchange Act of 1934 and each Fund's
Investment Management Agreement, higher commissions are permitted to be paid to
broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, Equity Funds IV, Inc. 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
-27-
<PAGE>
Manager which constitute in some part brokerage and research services used by
the Manager in connection with its investment decision-making process and
constitute in some part services used by the Manager in connection with
administrative or other functions not related to its investment decision-making
process. In such cases, the Manager will make a good faith allocation of
brokerage and research services and will pay out of its own resources for
services used by the Manager in connection with administrative or other
functions not related to its investment decision-making process. In addition, so
long as no fund is disadvantaged, portfolio transactions which generate
commissions or their equivalent are allocated to broker/dealers who provide
daily portfolio pricing services to a Fund and to other funds in Delaware
Investments. 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 Equity Funds
IV, Inc.'s Board of Directors that the advantages of combined orders outweigh
the possible disadvantages of separate transactions.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, a Fund may place orders with broker/dealers that have agreed to
defray certain expenses of the funds in the Delaware Investments family, such
as custodian fees, and may, at the request of the Distributor, give
consideration to sales of shares of such funds as a factor in the selection of
brokers and dealers to execute Fund portfolio transactions.
Portfolio Turnover
Portfolio trading will be undertaken principally to accomplish each
Fund's objective in relation to anticipated movements in the general level of
interest rates. A Fund 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. A Fund will not attempt to
achieve or be limited to a predetermined rate of portfolio turnover, such a
turnover always being incidental to transactions undertaken with a view to
achieving the Fund's investment objective.
The degree of portfolio activity may affect brokerage costs of a Fund
and taxes payable by the Fund's shareholders. A turnover rate of 100% would
occur, for example, if all the investments in a Fund's portfolio at the
beginning of the year were replaced by the end of the year. In investing for
capital appreciation, each Fund may hold securities for any period of time.
Portfolio turnover will also be increased if a Fund writes a large number of
call options which are subsequently exercised. To the extent a Fund realizes
gains on securities held for less than six months, such gains are taxable to the
shareholder or to a Fund at ordinary income tax rates. The turnover rate also
may be affected by cash requirements from redemptions and repurchases of Fund
shares. Total brokerage costs generally increase with higher portfolio turnover
rates.
Under certain market conditions, DelCap Fund may experience a high rate
of portfolio turnover which could exceed 100%. Capital Appreciation Fund is
expected to have a portfolio turnover rate that is less than
-28-
<PAGE>
100%. The portfolio turnover rate of each Fund is calculated by dividing the
lesser of purchases or sales of portfolio securities for the particular fiscal
year by the monthly average of the value of the portfolio securities owned by
the Fund during the particular fiscal year, exclusive of securities whose
maturities at the time of acquisition are one year or less. During the past two
fiscal years, DelCap Fund's portfolio turnover rates were 105% and 115% for
1997 and 1998, respectively. During the period December 2, 1996 (date of
initial public offering) through September 30, 1997 and the fiscal year ended
1998, Capital Appreciation Fund's portfolio turnover rates were 84%
(annualized) and 163%, respectively.
-29-
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for each Fund's four
classes of shares - Class A Shares, Class B Shares, Class C Shares and the
Institutional Class, and has agreed to use its best efforts to sell shares of
each Fund. See the Prospectuses for information on how to invest. Shares of each
Fund are offered on a continuous basis and may be purchased through authorized
investment dealers or directly by contacting Equity Funds IV, Inc. or the
Distributor.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases generally must be at
least $100. The initial and subsequent investment minimums for Class A Shares
will be waived for purchases by officers, directors and employees of any
Delaware Investments fund, the Manager or any of the Manager's affiliates if
the purchases are made pursuant to a payroll deduction program. Shares purchased
pursuant to the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act
and shares purchased in connection with an Automatic Investing Plan are subject
to a minimum initial purchase of $250 and a minimum subsequent purchase of $25.
Accounts opened under the Asset Planner service are subject to a minimum initial
investment of $2,000 per Asset Planner strategy selected. There are no minimum
purchase requirements for the Institutional Classes, but certain eligibility
requirements must be satisfied.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. See Investment Plans for purchase limitations
applicable to retirement plans. Equity Funds IV, Inc. will reject any purchase
order for more than $250,000 of Class B Shares and $1,000,000 or more of Class C
Shares. An investor may exceed these limitations by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of $50,000 or more in Class A
Shares and that, absent any applicable fee waiver, Class A Shares are subject to
lower annual 12b-1 Plan expenses than Class B Shares and Class C Shares and
generally are not subject to a CDSC.
Selling dealers are responsible for transmitting orders promptly.
Equity Funds IV, Inc. reserves the right to reject any order for the purchase of
shares of either Fund if in the opinion of management such rejection is in such
Fund's best interest.
The NASD has adopted amendments to certain rules relating to investment
company sales charges. Equity Funds IV, Inc. and the Distributor intend to
operate in compliance with these rules.
Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 5.75%; however, lower front-end sales
charges apply for larger purchases. See the table of front-end sales charges in
the Prospectuses for the Fund Classes. Class A Shares, absent any applicable
fee waiver, 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) 5% if shares are redeemed within one year of purchase; (ii) 4%
if shares are redeemed within two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if shares
are redeemed during the fifth year following purchase; (v) 1% if shares are
redeemed during the sixth year following purchase; and (vi) 0% thereafter.
Class B Shares are also subject to annual 12b-1 Plan expenses which, absent any
applicable fee waiver, are higher than those to which Class A Shares are subject
and are
-30-
<PAGE>
assessed against the Class B Shares for approximately eight years after
purchase. See Automatic Conversion of Class B Shares under Classes of Shares in
the Fund Classes' Prospectuses.
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Class C
Shares, absent any applicable fee waiver, 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.
The distributor has voluntarily elected to waive the payment of 12b-1
Plan expenses by the Capital Appreciation Fund from the commencement of the
public offering through May 31, 1999.
Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses. See Determining Offering Price and Net Asset Value and
Plans Under Rule 12b-1 for the Fund Classes in this Part B.
Class A Shares, Class B Shares, Class C Shares and Institutional Class
shares represent a proportionate interest in a Fund's assets and will receive a
proportionate interest in that Fund's income, before application, as to the
Class A, Class B and Class C Shares, of any expenses, if any, under that Fund's
12b-1 Plans.
Certificates representing shares purchased are not ordinarily issued
unless, in the case of Class A Shares or Institutional Class shares, a
shareholder submits a specific request. Certificates are not issued in the case
of Class B Shares or Class C Shares or in the case of any retirement plan
account including self-directed IRAs. However, purchases not involving the
issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing full
share denominations purchased by sending a letter signed by each owner of the
account to the Transfer Agent requesting the certificate. No charge is assessed
by Equity Funds IV, Inc. for any certificate issued. A shareholder may be
subject to fees for replacement of a lost or stolen certificate, under certain
conditions, including the cost of obtaining a bond covering the lost or stolen
certificate. Please contact the Fund for further information. Investors who hold
certificates representing any of their shares may only redeem those shares by
written request. The investor's certificate(s) must accompany such request.
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A Shares, Class B
Shares and Class C Shares permit investors to choose the method of purchasing
shares that is most suitable for their needs given the amount of their purchase,
the length of time they expect to hold their shares and other relevant
circumstances. Investors should determine whether, given their particular
circumstances, it is more advantageous to purchase Class A Shares and incur a
front-end sales charge and, absent any applicable fee waiver, annual 12b-1 Plan
expenses of up to a maximum of 0.30% of the average daily net assets of Class A
Shares or to purchase either Class B Shares or Class C Shares and have the
entire initial purchase amount invested in the Fund with the investment
thereafter subject to a CDSC and, absent any applicable fee waiver, annual 12b-1
Plan expenses.
Class A Shares - DelCap Fund and Capital Appreciation Fund
Purchases of $50,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges and may include a series of purchases over
a 13-month period under a Letter of Intention signed by the purchaser. See
Front-End Sales Charge Alternative - Class A Shares in the Prospectuses
-31-
<PAGE>
for the Fund Classes for a table illustrating reduced front-end sales charges.
See also 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.
Certain dealers who enter into an agreement to provide extra training
and information on Delaware Investments products and services and who increase
sales of funds in the Delaware Investments family may receive an additional
commission of up to 0.15% of the offering price in connection with sales of
Class A Shares. Such dealers must meet certain requirements in terms of
organization and distribution capabilities and their ability to increase sales.
The Distributor should be contacted for further information on these
requirements as well as the basis and circumstances upon which the additional
commission will be paid. Participating dealers may be deemed to have additional
responsibilities under the securities laws.
Dealer's Commission
As described in the Prospectuses for the Fund Classes, 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. See Front-End Sales Charge Alternative - Class A Shares in the
Prospectuses for the Fund Classes for the applicable schedule and further
details.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B and Class C Shares are purchased without a front-end sales
charge. Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below, and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestment of dividends or capital gains distributions. See Waiver of
Contingent Deferred Sales Charge - Class B and Class C Shares under Redemption
and Exchange in the Prospectuses for the Fund Classes for a list of the
instances in which the CDSC is waived.
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares, absent any applicable fee
waiver, 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 the same Fund. See Automatic Conversion of Class B
Shares under Classes of Shares in the Fund Classes' Prospectuses. Such
conversion will constitute a tax-free exchange for federal income tax purposes.
See Taxes in the Prospectuses for the Fund Classes.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Equity Funds IV, Inc. has
adopted a separate plan for each of the Class A Shares, the Class B Shares and
the Class C Shares of each Fund (the "Plans"). Each Plan permits the Fund to pay
for certain distribution, promotional and related expenses involved in the
marketing of only the Class to which the Plan applies. The Plans do not apply to
the Institutional Classes of shares. Such shares are not included in calculating
the Plans' fees, and the Plans are not used to assist in the distribution and
marketing
-32-
<PAGE>
of shares of the Institutional Classes. Shareholders of the Institutional
Classes may not vote on matters affecting the Plans.
The Plans permit a Fund, pursuant to the Distribution Agreement, to pay
out of the assets of the Class A Shares, Class B Shares and Class C Shares
monthly fees to the Distributor for its services and expenses in distributing
and promoting sales of shares of such classes. These expenses include, among
other things, preparing and distributing advertisements, sales literature and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, and paying distribution and maintenance fees to securities
brokers and dealers who enter into agreements with the Distributor. The Plan
expenses relating to Class B and Class C Shares are also used to pay the
Distributor for advancing the commission costs to dealers with respect to the
initial sale of such shares.
In addition, absent any applicable fee waiver, each Fund may make
payments out of the assets of the Class A, Class B and Class C Shares directly
to other unaffiliated parties, such as banks, who either aid in the distribution
of shares of, or provide services to, such classes.
The maximum aggregate fee payable by a Fund under the Plans, and a
Fund's Distribution Agreement, is on an annual basis, up to 0.30% of the Class A
Shares' average daily net assets for the year, and up to 1% (0.25% of which are
service fees to be paid to the Distributor, dealers and others for providing
personal service and/or maintaining shareholder accounts) of each of the Class B
Shares' and the Class C Shares' average daily net assets for the year. Equity
Funds IV, Inc.'s Board of Directors may reduce these amounts at any time. The
Distributor has elected voluntarily to waive all payments under the 12b-1 Plan
for the Class A Shares, Class B Shares and Class C Shares of the Capital
Appreciation Fund during the commencement of the public offering of the Fund
through May 31, 1999.
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 Fund Classes. Subject to seeking best price and
execution, a Fund may, from time to time, buy or sell portfolio securities from
or to firms which receive payments under the Plans.
From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans and the Distribution Agreements, as amended, have been
approved by the Board of Directors of Equity Funds IV, Inc., including a
majority of the directors who are not "interested persons" (as defined in the
1940 Act) of Equity Funds IV, Inc. 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 Agreements, 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 Agreements, as amended, may be terminated with respect to a
Fund Class at any time without penalty by a majority of those directors who are
not "interested persons" or by a majority vote of the outstanding voting
securities of the relevant Fund Class. Any amendment materially increasing the
maximum percentage payable under the Plans must likewise be approved by a
majority vote of the outstanding voting securities of the relevant
-33-
<PAGE>
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 securities of Class B. 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 Equity Funds
IV, Inc. having no interest in the Plans. In addition, in order for the Plans to
remain effective, the selection and nomination of directors who are not
"interested persons" of Equity Funds IV, Inc. must be effected by the directors
who themselves are not "interested persons" and who have no direct or indirect
financial interest in the Plans. Persons authorized to make payments under the
Plans must provide written reports at least quarterly to the Board of Directors
for their review.
For the fiscal year ended September 30, 1998, payments from the Class
A Shares, Class B Shares and Class C Shares of DelCap Fund pursuant to their
respective 12b-1 Plans amounted to $2,157,405, $210,164 and $36,379,
respectively. Such amounts were used for the following purposes:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
DelCap Fund A DelCap Fund B DelCap Fund C
Class Class Class
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Advertising $7,368 -0- -0-
- ------------------------------------------------------------------------------------------------------------------
Annual/Semi-Annual Reports $30,607 -0- -0-
- ------------------------------------------------------------------------------------------------------------------
Broker Trails $1,736,358 $51,901 $14,791
- ------------------------------------------------------------------------------------------------------------------
Broker Sales Charges -0- $86,734 $13,415
- ------------------------------------------------------------------------------------------------------------------
Dealer Service Expenses $3,047 $698 $311
- ------------------------------------------------------------------------------------------------------------------
Interest on Broker Sales Charges -0- $60,562 $414
- ------------------------------------------------------------------------------------------------------------------
Commissions to Wholesalers $154,838 $9,177 $5,063
- ------------------------------------------------------------------------------------------------------------------
Promotional-Broker Meetings $44,562 $661 $246
- ------------------------------------------------------------------------------------------------------------------
Promotional-Other $118,289 -0- -0-
- ------------------------------------------------------------------------------------------------------------------
Prospectus Printing $30,677 -0- -0-
- ------------------------------------------------------------------------------------------------------------------
Telephone $4,337 -0- $9
- ------------------------------------------------------------------------------------------------------------------
Wholesaler Expenses $27,322 $431 $2,130
- ------------------------------------------------------------------------------------------------------------------
Other -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
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 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the funds in the Delaware Investments family. In some instances,
these incentives or payments may be offered only to certain dealers
-34-
<PAGE>
who maintain, have sold or may sell certain amounts of shares. The Distributor
may also pay a portion of the expense of preapproved dealer advertisements
promoting the sale of Delaware Investments fund shares.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares may be purchased without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the Exchange
Privilege and the 12-Month Reinvestment Privilege.
Current and former officers, directors and employees of Equity Funds
IV, Inc., any other fund in Delaware Investments, the Manager, the Manager's
affiliates, or any of the Manager's affiliates that may in the future be
created, legal counsel to the funds and registered representatives and employees
of broker/dealers who have entered into Dealer's Agreements with the Distributor
may purchase Class A Shares and any such class of shares of any of the funds in
Delaware Investments, including any fund that may be created, at the net asset
value per share. Family members (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. Class A Shares may also be purchased at net asset value by current
and former officers, directors and employees (and members of their families) of
the Dougherty Financial Group LLC.
Investors in Delaware Investments Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A Shares
of any of the funds in Delaware Investments at net asset value.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the
purchase is funded by proceeds from an investment where a front-end sales
charge, contingent deferred sales charge or other sales charge has been
assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of funds in the
Delaware Investments family. Officers, directors and key employees of
institutional clients of the Manager or any of its affiliates may purchase Class
A Shares at net asset value. Moreover, purchases may be effected at net asset
value for the benefit of the clients of brokers, dealers and registered
investment advisers affiliated with a broker or dealer, if such broker, dealer
or investment adviser has entered into an agreement with the Distributor
providing specifically for the purchase of Class A Shares in connection with
special investment products, such as wrap accounts or similar fee based
programs. Such purchasers are required to sign a letter stating that the
purchase is for investment only and that the securities may not be resold except
to the issuer. Such purchasers may also be required to sign or deliver such
other documents as Equity Funds IV, Inc. may reasonably require to establish
eligibility for purchase at net asset value.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase shares of the Institutional
Class of a Fund; any group retirement plan (excluding defined benefit pension
plans), or such plans of the same employer, for which plan participant records
are maintained on the Retirement Financial Services, Inc. (formerly known as
Delaware Investment & Retirement Services, Inc.) proprietary
-35-
<PAGE>
record keeping system that (i) has in excess of $500,000 of plan assets invested
in Class A Shares of funds in the Delaware Investments family and any stable
value product available through Delaware Investments, or (ii) is sponsored by
an employer that has at any point after May 1, 1997 had more than 100 employees
while such plan has held Class A Shares of a Delaware Investments fund and
such employer has properly represented to Retirement Financial Services, Inc.
in writing that it has the requisite number of employees and has received
written confirmation back from Retirement Financial Services, Inc.
Purchases of Class A Shares of DelCap Fund at net asset value may also
be made by bank sponsored retirement plans that are no longer eligible to
purchase Institutional Class shares or purchase interests in a collective trust
as a result of a change in distribution arrangements.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Delaware
Investments account in connection with loans originated from accounts
previously maintained by another investment firm will also be invested at net
asset value.
DelCap Fund A Class 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.
Equity Funds IV, Inc. must be notified in advance that the trade
qualifies for purchase at net asset value.
Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made
within a 13-month period pursuant to a written Letter of Intention provided by
the Distributor and signed by the purchaser, and not legally binding on the
signer or Equity Funds IV, Inc., which provides for the holding in escrow by the
Transfer Agent, of 5% of the total amount of the Class A Shares intended to be
purchased until such purchase is completed within the 13-month period. A Letter
of Intention may be dated to include shares purchased up to 90 days prior to the
date the Letter is signed. The 13-month period begins on the date of the
earliest purchase. If the intended investment is not completed, except as noted
below, the purchaser will be asked to pay an amount equal to the difference
between the front-end sales charge on the Class A Shares purchased at the
reduced rate and the front-end sales charge otherwise applicable to the total
shares purchased. If such payment is not made within 20 days following the
expiration of the 13-month period, the Transfer Agent will surrender an
appropriate number of the escrowed shares for redemption in order to realize the
difference. Such purchasers may include the value (at offering price at the
level designated in their Letter of Intention) of all their shares of the Funds
and of any class of any of the other mutual funds in Delaware Investments
(except shares of any Delaware Investments fund which do not carry a front-end
sales charge, CDSC or Limited CDSC, other than shares of Delaware Group Premium
Fund, Inc. beneficially owned in connection with the ownership of variable
insurance products, unless they were acquired through an exchange from a
Delaware Investments fund which carried a front-end
-36-
<PAGE>
sales charge, CDSC or Limited CDSC) previously purchased and still held as of
the date of their Letter of Intention toward the completion of such Letter.
Employers offering a Delaware Investments retirement plan may also
complete a Letter of Intention to obtain a reduced front-end sales charge on
investments of Class A Shares made by the plan. The aggregate investment level
of the Letter of Intention will be determined and accepted by the Transfer Agent
at the point of plan establishment. The level and any reduction in front-end
sales charge will be based on actual plan participation and the projected
investments in Delaware Investments funds that are offered with a front-end
sales charge, CDSC or Limited CDSC for a 13-month period. The Transfer Agent
reserves the right to adjust the signed Letter of Intention based on this
acceptance criteria. The 13-month period will begin on the date this Letter of
Intention is accepted by the Transfer Agent. If actual investments exceed the
anticipated level and equal an amount that would qualify the plan for further
discounts, any front-end sales charges will be automatically adjusted. In the
event this Letter of Intention is not fulfilled within the 13-month period, the
plan level will be adjusted (without completing another Letter of Intention) and
the employer will be billed for the difference in front-end sales charges due,
based on the plan's assets under management at that time. Employers may also
include the value (at offering price at the level designated in their Letter of
Intention) of all their shares intended for purchase that are offered with a
front-end sales charge, CDSC or Limited CDSC of any class. Class B Shares and
Class C Shares of a Fund and other Delaware Investments funds which offer
corresponding classes of shares may also be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of Class B Shares and/or Class C Shares of the
Funds, as well as shares of any other class of any of the other Delaware
Investments funds (except shares of any Delaware Investments fund which do
not carry a front-end sales charge, CDSC or Limited CDSC, other than shares of
Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). In addition, assets held by investment advisory
clients of the Manager or its affiliates in a stable value account may be
combined with other Delaware Investments fund holdings.
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of a Fund as well
as shares of any other class of any of the other Delaware Investments funds
which offer such classes (except shares of any Delaware Investments fund which
do not carry a front-end sales charge, CDSC or Limited CDSC, other than shares
of Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). 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 $30,000 and
subsequently purchases $20,000 at offering price of additional shares of Class
A Shares, the charge applicable to the $20,000 purchase would currently be
4.75%. For the purpose of this calculation,
-37-
<PAGE>
the shares presently held shall be valued at the public offering price that
would have been in effect were the shares purchased simultaneously with the
current purchase. Investors should refer to the table of sales charges for Class
A Shares to determine the applicability of the Right of Accumulation to their
particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares of a Fund (and of the Institutional Class
holding shares which were acquired through an exchange from one of the other
mutual funds in Delaware Investments offered with a front-end sales charge)
who redeem such shares have one year from the date of redemption to reinvest all
or part of their redemption proceeds in Class A Shares of that Fund or in Class
A Shares of any of the other funds in Delaware Investments, 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
Delaware Investments offered without a front-end sales charge will be required
to pay the applicable sales charge when purchasing Class A Shares. The
reinvestment privilege does not extend to a redemption of either Class B or
Class C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is intended to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
Investors should consult their financial advisers or the Transfer
Agent, which also serves as the Funds' shareholder servicing agent, about the
applicability of the Limited CDSC (see Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Fund Classes' Prospectuses) in connection with
the features described above.
Group Investment Plans
Group Investment Plans which are not eligible to purchase shares of the
Institutional Classes may also benefit from the reduced front-end sales charges
for investments in Class A Shares set forth in the Prospectuses for the Fund
Classes, based on total plan assets. If a company has more than one plan
investing in the Delaware Investments family of funds, then the total amount
invested in all plans would be used in determining the applicable front-end
sales charge reduction upon each purchase, both initial and subsequent, upon
notification to the Fund in which the investment is being made at the time of
each such purchase. Employees participating in such Group Investment Plans may
also combine the investments made in their plan account when determining the
applicable front-end sales charge on purchases to non-retirement Delaware
Investments investment accounts if they so notify the Fund in connection with
each purchase. For other retirement plans and special services, see Retirement
Plans for the Fund Classes under Investment Plans.
The Institutional Classes
The Institutional Class of each Fund is available for purchase only by:
(a) retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
-38-
<PAGE>
rollover individual retirement accounts from such plans; (b) tax-exempt employee
benefit plans of the Manager or its affiliates and securities dealer firms with
a selling agreement with the Distributor; (c) institutional advisory accounts of
the Manager or its affiliates and those having client relationships with
Delaware Investment Advisers, an affiliate of the Manager, or its affiliates
and their corporate sponsors, as well as subsidiaries and related employee
benefit plans and rollover individual retirement accounts from such
institutional advisory accounts; (d) a bank, trust company and similar financial
institution investing for its own account or for the accounts of its trust
customers for whom such financial institution is exercising investment
discretion in purchasing shares of the Class, except where the investment is
part of a program that requires payment to the financial institution of a Rule
12b-1 fee; and (e) registered investment advisers investing on behalf of clients
that consist solely of institutions and high net-worth individuals having at
least $1,000,000 entrusted to the adviser for investment purposes, but only if
the adviser is not affiliated or associated with a broker or dealer and derives
compensation for its services exclusively from its clients for such advisory
services.
Shares of the Institutional Classes are available for purchase at net
asset value, without the imposition of a front-end or contingent deferred sales
charge and are not subject to Rule 12b-1 expenses.
-39-
<PAGE>
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 of the DelCap Fund in which an investor has an account (based on the
net asset value in effect on the reinvestment date) and will be credited to the
shareholder's account on that date. All dividends and distributions of the
Institutional Classes of each Fund and the Fund Classes of the Capital
Appreciation Fund are reinvested in the accounts of the holders of such shares
(based on the net asset value in effect on the reinvestment date). A
confirmation of each dividend payment from net investment income and of
distributions from realized securities profits, if any, will be mailed to
shareholders in the first quarter of the fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the specific
Fund and Class in which shares are being purchased. Such purchases, which must
meet the minimum subsequent purchase requirements set forth in the Prospectuses
and this Part B, are made for Class A Shares at the public offering price and,
for Class B Shares, Class C Shares and the Institutional Classes at the net
asset value, at the end of the day of receipt. A reinvestment plan may be
terminated at any time. This plan does not assure a profit nor protect against
depreciation in a declining market.
Reinvestment of Dividends in Other Delaware Investments Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A, Class B
and Class C Shares may automatically reinvest dividends and/or distributions in
any of the mutual funds in Delaware Investments, including the Funds, in
states where their shares may be sold. Such investments will be at net asset
value at the close of business on the reinvestment date without any front-end
sales charge or service fee. The shareholder must notify the Transfer Agent in
writing and must have established an account in the fund into which the
dividends and/or distributions are to be invested. Any reinvestment directed to
a fund in which the investor does not then have an account will be treated like
all other initial purchases of a fund's shares. Consequently, an investor should
obtain and read carefully the prospectus for the fund in which the investment is
intended to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses. See
also Additional Methods of Adding to Your Investment - Dividend Reinvestment
Plan under How to Buy Shares in the Prospectuses for the Fund Classes.
Subject to the following limitations, dividends and/or distributions
from other funds in Delaware Investments may be invested in shares of the
Funds, provided an account has been established. Dividends from Class A Shares
may not be directed to Class B Shares or Class C Shares. Dividends from Class B
Shares may only be directed to other Class B Shares and dividends from Class C
Shares may only be directed to other Class C Shares.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, 403(b)(7) Deferred
Compensation Plans or 457 Deferred Compensation Plans.
-40-
<PAGE>
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for a Fund to
accept for investment in Class A, Class B or Class C Shares, through an agent
bank, preauthorized government or private recurring payments. This method of
investment assures the timely credit to the shareholder's account of payments
such as social security, veterans' pension or compensation benefits, federal
salaries, Railroad Retirement benefits, private payroll checks, dividends, and
disability or pension fund benefits. It also eliminates lost, stolen and delayed
checks.
Automatic Investing Plan--Shareholders of Class A, Class B and Class C
Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into their Fund
account. This type of investment will be handled in either of the following
ways. (1) If the shareholder's bank is a member of the National Automated
Clearing House Association ("NACHA"), the amount of the investment will be
electronically deducted from his or her account by Electronic Fund Transfer
("EFT"). The shareholder's checking account will reflect a debit each month at a
specified date although no check is required to initiate the transaction. (2) If
the shareholder's bank is not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, 403(b)(7) Deferred
Compensation Plans or 457 Deferred Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such Plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to a Fund from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
a Fund may liquidate sufficient shares from a shareholder's account to reimburse
the government or the private source. In the event there are insufficient shares
in the shareholder's account, the shareholder is expected to reimburse the Fund.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer,
to make investments directly to their Fund accounts. A Fund will accept these
investments, such as bank-by-phone, annuity payments and payroll allotments, by
mail directly from the third party. Investors should contact their employers or
financial institutions who in turn should contact Equity Funds IV, Inc. for
proper instructions.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in Delaware Investments. Shareholders
-41-
<PAGE>
of the Fund Classes may elect to invest in one or more of the other mutual funds
in Delaware Investments through the Wealth Builder Option. See Wealth Builder
Option and Redemption and Exchange in the Prospectuses for the Fund Classes.
Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual funds in Delaware
Investments, subject to the conditions and limitations set forth in the Fund
Classes' Prospectuses. The investment will be made on the 20th day of each month
(or, if the fund selected is not open that day, the next business day) at the
public offering price or net asset value, as applicable, of the fund selected on
the date of investment. No investment will be made for any month if the value of
the shareholder's account is less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges. Shareholders can terminate their participation in Wealth Builder at
any time by giving written notice to the fund from which exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, 403(b)(7) Deferred
Compensation Plans or 457 Deferred Compensation Plans. This option also is not
available to shareholders of the Institutional Classes.
Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete an Asset Planner Account Registration
Form, which is available only from a financial adviser or investment dealer.
Effective September 1, 1997, the Asset Planner Service is only available to
financial advisers or investment dealers who have previously used this service.
The Asset Planner service offers a choice of four predesigned asset allocation
strategies (each with a different risk/reward profile) in predetermined
percentages in Delaware Investments funds. With the help of a financial
adviser, you may also design a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Investments accounts into the Asset Planner service may be made at net asset
value under the circumstances described under Investing by Exchange in the
Prospectus. The minimum initial investment per Strategy is $2,000; subsequent
investments must be at least $100. Individual fund minimums do not apply to
investments made using the Asset Planner service. Class A, Class B and Class C
Shares are available through the Asset Planner service. Generally, only shares
within the same class may be used within the same Strategy. However, Class A
Shares of the Fund and of other funds in Delaware Investments may be used in
the same Strategy with consultant class shares that are offered by certain other
Delaware Investments funds.
-42-
<PAGE>
An annual maintenance fee, currently $35 per Strategy, is typically due
at the time of initial investment and by September 30 of each subsequent year.
The fee, payable to Delaware Service Company, Inc. to defray extra costs
associated with administering the Asset Planner service, will be deducted
automatically from one of the funds within your Asset Planner account if not
paid by September 30th. However, effective November 1, 1996, the annual
maintenance fee is waived until further notice. Investors using the Asset
Planner for an IRA will continue to pay an annual IRA fee of $15 per Social
Security number.
Investors will receive a customized quarterly Strategy Report
summarizing all Asset Planner investment performance and account activity during
the prior period. Confirmation statements will be sent following all
transactions other than those involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
Retirement Plans for the Fund Classes
An investment in the Fund may be suitable for tax-deferred retirement
plans. Delaware Investments offers a full spectrum of retirement plans,
including the 401(k) Defined Contribution Plan, Individual Retirement Account
("IRA") and the new Roth IRA.
Among the retirement plans that Delaware Investments offers, Class B
Shares are available only by Individual Retirement Accounts, SIMPLE IRAs, Roth
IRAs, Education IRAs, Simplified Employee Pension Plans, Salary Reduction
Simplified Employee Pension Plans, and 403(b)(7) and 457 Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares and Class
C Shares. See Waiver of Contingent Deferred Sales Charge - Class B Shares and
Class C Shares under Redemption and Exchange in the Prospectuses for the Fund
Classes for a list of the instances in which the CDSC is waived.
Purchases of Class B Shares are subject to a maximum purchase
limitation of $250,000 for retirement plans. Purchases of Class C Shares must be
in an amount that is less than $1,000,000 for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans other than Individual Retirement Accounts, for
which there is a minimum initial purchase of $250 and a minimum subsequent
purchase of $25, regardless of which Class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide services
to such plans.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Classes.
See Institutional Classes, above. For additional information on any of the plans
and Delaware's retirement services, call the Shareholder Service Center
telephone number.
-43-
<PAGE>
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships , corporations and other eligible forms of organizations. These
plans can be maintained as Section 401(k), profit sharing or money purchase
pension plans. Contributions may be invested only in Class A Shares and Class
C Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
and make contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year ; however,
participation may be restricted based on certain income limits.
IRA Disclosures
The 1997 Act provides new opportunities for investors. Individuals have
five types of tax-favored IRA accounts that can be utilized depending on the
individual's circumstances. A new Roth IRA and Education IRA are available in
addition to the existing deductible IRA and non-deductible IRA.
Deductible and Non-deductible IRAs
An individual can contribute up to $2,000 in his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income ("AGI") and whether the taxpayer is an active participant
in an employer sponsored retirement plan. Even if a taxpayer is an active
participant in an employer sponsored retirement plan, the full $2,000 is still
available if the taxpayer's AGI is below $30,000 ($50,000 for taxpayers filing
joint returns) for years beginning after December 31, 1997. A partial deduction
is allowed for married couples with income between $50,000 and $60,000, and for
single individuals with incomes between $30,000 and $40,000. These income
phase-out limits reach $80,000-$100,000 in 2007 for joint filers and
$50,000-$60,000 in 2005 for single filers. No deductions are available for
contributions to IRAs by taxpayers whose AGI after IRA deductions exceeds the
maximum income limit established for each year and who are active participants
in an employer sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA contributions still can
make non-deductible IRA contributions of as much as $2,000 for each working
spouse and defer taxes on interest or other earnings from the IRAs.
Under the new law, a married individual is not considered an active
participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant if the couple's combined AGI is
below $150,000. The maximum deductible IRA contribution for a married individual
-44-
<PAGE>
who is not an active participant, but whose spouse is, is phased out for
combined AGI between $150,000 and $160,000.
Conduit (Rollover) IRAs
Certain individuals who have received or are about to receive eligible
rollover distributions from an employer-sponsored retirement plan or another IRA
may rollover the distribution tax-free to a Conduit IRA. The rollover of the
eligible distribution must be completed by the 60th day after receipt of the
distribution; however, if the rollover is in the form of a direct
trustee-to-trustee transfer without going through the distributee's hand, the
60-day limit does not apply.
A distribution qualifies as an "eligible rollover distribution" if it
is made from a qualified retirement plan, a 403(b) plan or another IRA and does
not constitute one of the following:
(i) Substantially equal periodic payments over the employee's life or
life expectancy or the joint lives or life expectancies of the employee and
his/her designated beneficiary;
(ii) Substantially equal installment payments for a period certain of
10 or more years;
(iii) A distribution, all of which represents a required minimum
distribution after attaining age 70 1/2;
(iv) A distribution due to a Qualified Domestic Relations Order to an
alternate payee who is not the spouse (or former spouse) of the employee; and
(v) A distribution of after-tax contributions which is not includable
in income.
Roth IRAs
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $2,000 per year can be made to a new Roth IRA. As a
result of the Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Act"), the $2,000 annual limit will not be reduced by any contributions to
a deductible or nondeductible IRA for the same year. The maximum contribution
that can be made to a Roth IRA is phased out for single filers with AGI between
$95,000 and $110,000, and for couples filing jointly with AGI between $150,000
and $160,000. Qualified distributions from a Roth IRA would be exempt from
federal taxes. Qualified distributions are distributions (1) made after the
five-taxable year period beginning with the first taxable year for which a
contribution was made to a Roth IRA and (2) that are (a) made on or after the
date on which the individual attains age 59 1/2, (b) made to a beneficiary on or
after the death of the individual, (c) attributed to the individual being
disabled, or (d) for a qualified special purpose (e.g., first time homebuyer
expenses).
Distributions that are not qualified distributions would always be
tax-free if the taxpayer is withdrawing contributions, not accumulated earnings.
Taxpayers with AGI of $100,000 or less are eligible to convert an
existing IRA (deductible, nondeductible and conduit) to a Roth IRA. Earnings and
contributions from a deductible IRA are subject to a tax upon conversion;
however, no 10% excise tax for early withdrawal would apply. If the conversion
is done prior to January 1, 1999, then the income from the conversion can be
included in income ratably over a four-year period beginning with the year of
conversion.
-45-
<PAGE>
Education IRAs
For taxable years beginning after December 31, 1997, an Education IRA
has been created exclusively for the purpose of paying qualified higher
education expenses. Taxpayers can make non-deductible contributions up to $500
per year per beneficiary. The $500 annual limit is in addition to the $2,000
annual contribution limit applicable to IRAs and Roth IRAs. Eligible
contributions must be in cash and made prior to the date the beneficiary reaches
age 18. Similar to the Roth IRA, earnings would accumulate tax-free. There is no
requirement that the contributor be related to the beneficiary, and there is no
limit on the number of beneficiaries for whom one contributor can establish
Education IRAs. In addition, multiple Education IRAs can be created for the same
beneficiaries, however, the contribution limit of all contributions for a single
beneficiary cannot exceed $500 annually.
This $500 annual contribution limit for Education IRAs is phased out
ratably for single contributors with modified AGI between $95,000 and $110,000,
and for couples filing jointly with modified AGI of between $150,000 and
$160,000. Individuals with modified AGI above the phase-out range are not
allowed to make contributions to an Education IRA established on behalf of any
other individual.
Distributions from an Education IRA are excludable from gross income to
the extent that the distribution does not exceed qualified higher education
expenses incurred by the beneficiary during the year the distribution is made
regardless of whether the beneficiary is enrolled at an eligible educational
institution on a full-time, half-time, or less than half-time basis.
Any balance remaining in an Education IRA at the time a beneficiary
becomes 30 years old must be distributed, and the earnings portion of such a
distribution will be includible in gross income of the beneficiary and subject
to an additional 10% penalty tax if the distribution is not for qualified higher
educations expenses. Tax-free (and penalty-free) transfers and rollovers of
account balances from one Education IRA benefiting one beneficiary to another
Education IRA benefiting a different beneficiary (as well as redesignations of
the named beneficiary) is permitted, provided that the new beneficiary is a
member of the family of the old beneficiary and that the transfer or rollover is
made before the time the old beneficiary reaches age 30 and the new beneficiary
reaches age 18.
A company or association may establish a Group IRA or Group Roth IRA
for employees or members who want to purchase shares of the Fund.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. For information concerning the applicability of a CDSC upon
redemption of
-46-
<PAGE>
Class B Shares and Class C Shares, see Contingent Deferred Sales Charge -
Class B Shares and Class C Shares under Classes of Shares in the Prospectuses
for the Fund Classes.
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks. In addition, effective January 1, 1998, the new law allows for premature
distribution without a 10% penalty if (i) the amounts are used to pay qualified
higher education expenses (including graduate level courses) of the taxpayer,
the taxpayer's spouse or any child or grandchild of the taxpayer or the
taxpayer's spouse, or (ii) used to pay acquisition costs of a principle
residence for the purchase of a first-time home by the taxpayer, taxpayer's
spouse or any child or grandchild of the taxpayer or the taxpayer's spouse. A
qualified first-time homebuyer is someone who has had no ownership interest in a
residence during the past two years. The aggregate amount of distribution for
first-time home purchases cannot exceed a lifetime cap of $10,000.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may continue to be maintained by employers having 25 or
fewer employees. An employer may elect to make additional contributions to such
existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Effective January 1, 1997,
non-governmental tax-exempt organizations may establish 401(k) plans. Plan
documents are available to enable employers to establish a plan. An employer may
also elect to make profit sharing contributions and/or matching contributions
with investments in only Class A Shares and Class C Shares or certain other
funds in the Delaware Investments family. Purchases under the Plan may be
combined for purposes of computing the reduced front-end sales charge applicable
to Class A Shares as set forth in the table the Prospectuses for the Fund
Classes.
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase shares
of any of the Classes in conjunction with such an arrangement. Purchases under
the Plan may be combined for purposes of computing the reduced front-end sales
charge applicable to Class A Shares as set forth in the table the Prospectuses
for the Fund Classes.
Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of the Fund. Although investors may use their
own plan, there is available a Delaware
-47-
<PAGE>
Investments 457 Deferred Compensation Plan. Interested investors should
contact the Distributor or their investment dealers to obtain further
information. Purchases under the Plan may be combined for purposes of computing
the reduced front-end sales charge applicable to Class A Shares as set forth in
the table in the Prospectuses for the Fund Classes.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k)
Plan but is easier to administer than a typical 401(k) Plan. It requires
employers to make contributions on behalf of their employees and also has a
salary deferral feature that permits employees to defer a portion of their
salary into the plan on a pre-tax basis. A SIMPLE IRA is available only to plan
sponsors with 100 or fewer employees.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available
only to plan sponsors with 100 or fewer employees and, in exchange for
mandatory plan sponsor contributions, discrimination testing is no longer
required. Class B Shares are not available for purchase by such plans.
-48-
<PAGE>
DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering
price next calculated by the Fund in which shares are being purchased after
receipt of the order by the Fund, its agent or certain other authorized
persons. See Distribution and Service under Investments Management Agreements.
Orders for purchases of Class B Shares, Class C Shares and the Institutional
Classes are effected at the net asset value per share next calculated after
receipt of the order by the Fund, its agent or certain other authorized
persons. Selling dealers are responsible for transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable sales charges. Offering price and net asset value
are computed as of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is open. The New
York Stock Exchange is scheduled to be open Monday through Friday throughout the
year except for days when the following holidays are observed: New Year's Day,
Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. When the New York Stock
Exchange is closed, the Funds will generally be closed, pricing calculations
will not be made and purchase and redemption orders will not be processed.
An example showing how to calculate the net asset value per share and,
in the case of Class A Shares, the offering price per share, is included in
each Fund's financial statements which are incorporated by reference into this
Part B.
Each Fund's net asset value per share is computed by adding the value
of all the securities and other assets in the portfolio, deducting any
liabilities, and dividing by the number of shares outstanding. Expenses and fees
are accrued daily. In determining a Fund's total net assets, portfolio
securities primarily listed or traded on a national or foreign securities
exchange, except for bonds, are valued at the last 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
currencies and foreign securities denominated in foreign currency values will be
converted into U.S. dollars values at the mean between the bid and offered
quotations of such currencies against U.S. dollars based on rates in effect that
day. Securities not traded on a particular day, over-the-counter securities, and
government and agency securities are valued at the mean value between bid and
asked prices. Money market instruments having a maturity of less than 60 days
are valued at amortized cost. Debt securities (other than short-term
obligations) are valued on the basis of valuations provided by a pricing service
when such prices are believed to reflect the fair value of such securities. Use
of a pricing service has been approved by the Board of Directors. Prices
provided by a pricing service take into account appropriate factors such as
institutional trading in similar groups of securities, yield, quality, coupon
rate, maturity, type of issue, trading characteristics and other market data.
Subject to the foregoing, securities for which market quotations are not readily
available and other assets are valued at fair value as determined in good faith
and in a method approved by the Board of Directors.
Each Class of a Fund will bear, pro-rata, all of the common expenses of
that Fund. The net asset values of all outstanding shares of each Class of a
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in that Fund represented by the value of shares
of that Class. All income earned and expenses incurred by a Fund will be borne
on a pro-rata basis by each outstanding share of a Class, based on each Class'
percentage in the Fund represented by the value of shares of such Classes,
except
-49-
<PAGE>
that the Institutional Classes will not incur any of the expenses under Equity
Funds IV, Inc.'s 12b-1 Plans and the Class A, Class B and Class C Shares alone
will bear any 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 DelCap Fund will vary.
During the period the current waivers of 12b-1 Plan expenses by the Distributor
in connection with the distribution of Class A, Class B and Class C Shares of
Capital Appreciation Fund remain applicable, no such variance shall arise.
-50-
<PAGE>
REDEMPTION AND REPURCHASE
Any shareholder may require a Fund to redeem shares by sending a
written request, signed by the record owner or owners exactly as the shares are
registered, to the Fund at 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. Certificates are issued for Class
A Shares and Institutional Class shares only if a shareholder specifically
requests them. Certificates are not issued for Class B Shares or Class C Shares.
If stock certificates have been issued for shares being redeemed, they must
accompany the written request. For redemptions of $50,000 or less paid to the
shareholder at the address of record, the request must be signed by all owners
of the shares or the investment dealer of record, but a signature guarantee is
not required. When the redemption is for more than $50,000, or if payment is
made to someone else or to another address, signatures of all record owners are
required and a signature guarantee may be required. A signature guarantee can
be obtained from a commercial bank, a trust company or a member of a securities
transfer association medallion program ("STAMP"). A signature guarantee cannot
be provided by a notary public. A signature guarantee is designed to protect the
shareholders, Equity Funds IV, Inc. and its agents from fraud. Each Fund
reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Funds may request further
documentation from corporations, retirement plans, executors, administrators,
trustees or guardians.
In addition to redemption of shares by a Fund, the Distributor, acting
as agent of the Funds, offers to repurchase Fund shares from broker/dealers
acting on behalf of shareholders. The redemption or repurchase price, which may
be more or less than the shareholder's cost, is the net asset value per share
next determined after receipt of the request in good order by the respective
Fund or its agent, or certain other authorized persons, subject to any
applicable CDSC or Limited CDSC. See Distribution and Service under Investment
Management Agreements. This is computed and effective at the time the offering
price and net asset value are determined. See Determining Offering Price and Net
Asset Value. The Funds and the Distributor end their business days at 5 p.m.,
Eastern time. This offer is discretionary and may be completely withdrawn
without further notice by the Distributor.
Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to the applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Prospectuses for the Fund Classes. Class B Shares
are subject to a CDSC of: (i) 5% if shares are redeemed during the first year
after purchase; (ii) 4% if shares are redeemed during the second year after
purchase; (iii) 3% if shares are redeemed during the third or fourth year
following purchase; (iv) 2% if shares are redeemed during the fifth year
following purchase; (v) 1% if shares are redeemed during the sixth year
following purchase; and (vi) 0% thereafter. Class C Shares are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. See
Contingent Deferred Sales Charge - Class B Shares and Class C Shares under
Classes of Shares in the Prospectuses for the Fund Classes. Except for the
applicable CDSC or Limited CDSC and, with respect
-51-
<PAGE>
to the expedited payment by wire described below for which, in the case of the
Fund Classes, there is currently a $7.50 bank wiring cost, neither the Funds nor
the Distributor charges a fee for redemptions or repurchases, but such fees
could be charged at any time in the future.
Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order by a Fund or certain authorized persons (see Distribution and
Service under Investment Management Agreements) provided, however, that each
commitment to mail or wire redemption proceeds by a certain time, as described
below is modified by the qualifications described in the next paragraph.
Each Fund will process written or telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. A Fund will honor redemption requests as to shares for which a check
was tendered as payment, but a Fund will not mail or wire the proceeds until it
is reasonably satisfied that the check has cleared. This potential delay can be
avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund involved will automatically redeem from the shareholder's account the
shares purchased by the check plus any dividends earned thereon. Shareholders
may be responsible for any losses to a Fund or to the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by a Fund of securities owned by it is not reasonably practical,
or it is not reasonably practical for a Fund fairly to value its assets, or in
the event that the Securities and Exchange Commission has provided for such
suspension for the protection of shareholders, a Fund may postpone payment or
suspend the right of redemption or repurchase. In such case, the shareholder may
withdraw the request for redemption or leave it standing as a request for
redemption at the net asset value next determined after the suspension has been
terminated.
Payment for shares redeemed or repurchased may be made in either cash
or kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, Equity Funds
IV, Inc. has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which each Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of such Fund during any 90-day period for
any one shareholder.
The value of a Fund's investments is subject to changing market prices.
Thus, a shareholder reselling shares to a Fund may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
Small Accounts
Before a Fund involuntarily redeems shares from an account that, under
the circumstances noted in the relevant Prospectus, has remained below the
minimum amounts required by the Funds' Prospectuses and sends the proceeds to
the shareholder, the shareholder will be notified in writing that the value of
the shares in the account is less than the minimum required and will be allowed
60 days from the date of notice to make an additional investment to meet the
required minimum. See The Conditions of Your Purchase under How to Buy
-52-
<PAGE>
Shares in the Prospectuses. Any redemption in an inactive account established
with a minimum investment may trigger mandatory redemption. No CDSC or Limited
CDSC will apply to the redemptions described in this paragraph.
Effective November 29, 1995, the minimum initial investment in DelCap
Fund A Class was increased from $250 to $1,000. Accounts of DelCap Fund A Class
that were established prior to November 29, 1995 and maintain a balance in
excess of $250 will not presently be subject to the $9 quarterly service fee
that may be assessed against accounts with balances below the stated minimum nor
subject to involuntary redemption.
* * *
Each Fund has made available certain redemption privileges, as
described below. The Funds reserve the right to suspend or terminate these
expedited payment procedures upon 60 days' written notice to shareholders.
Expedited Telephone Redemptions
Shareholders of the Fund Classes or their investment dealers of record
wishing to redeem any amount of shares of $50,000 or less for which certificates
have not been issued may call the Shareholder Service Center at 800-523-1918 or,
in the case of shareholders of the Institutional Classes, their Client Services
Representative at 800-828-5052 prior to the time the offering price and net
asset value are determined, as noted above, and have the proceeds mailed to them
at the record address. Checks payable to the shareholder(s) of record will
normally be mailed the next business day, but no later than seven days, after
the receipt of the redemption request. This option is only available to
individual, joint and individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can be transferred
to your predesignated bank account by wire or by check by calling the phone
numbers listed above. An authorization form must have been completed by the
shareholder and filed with the relevant Fund before the request is received.
Payment will be made by wire or check to the bank account designated on the
authorization form as follows:
1. Payment by Wire: Request that Federal Funds be wired to the bank
account designated on the authorization form. Redemption proceeds will normally
be wired on the next business day following receipt of the redemption request.
There is a $7.50 wiring fee (subject to change) charged by First Union
National Bank which will be deducted from the withdrawal proceeds each time the
shareholder requests a redemption from Class A Shares, Class B Shares and Class
C Shares. If the proceeds are wired to the shareholder's account at a bank which
is not a member of the Federal Reserve System, there could be a delay in the
crediting of the funds to the shareholder's bank account.
2. Payment by Check: Request a check be mailed to the bank account
designated on the authorization form. Redemption proceeds will normally be
mailed the next business day, but no later than seven days, from the date of the
telephone request. This procedure will take longer than the Payment by Wire
option (1 above) because of the extra time necessary for the mailing and
clearing of the check after the bank receives it.
Redemption Requirements: In order to change the name of the bank and
the account number it will be necessary to send a written request to the
relevant Fund and a signature guarantee may be required. Each signature
guarantee must be supplied by an eligible guarantor institution. The Funds
reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness.
-53-
<PAGE>
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.
If expedited payment under these procedures could adversely affect a
Fund, the Fund may take up to seven days to pay the shareholder.
Neither the Funds nor the Funds' Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, each Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by
shareholders of the Fund Classes are generally tape recorded. A written
confirmation will be provided for all purchase, exchange and redemption
transactions initiated by telephone.
Systematic Withdrawal Plans
Shareholders of Class A, Class B and Class C Shares of DelCap Fund 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 DelCap Fund does not
recommend any specific amount of withdrawal. This $5,000 minimum does not apply
for that Fund's prototype retirement plans. Shares purchased with the initial
investment and through reinvestment of cash dividends and realized securities
profits distributions will be credited to the shareholder's account and
sufficient full and fractional shares will be redeemed at the net asset value
calculated on the third business day preceding the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend) and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the Class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital, and the share
balance may in time be depleted, particularly in a declining market.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares of DelCap Fund through a periodic investment program in a fund managed
by the Manager must be terminated before a Systematic Withdrawal Plan with
respect to such shares can take effect, except if the shareholder is a
participant in one of our retirement plans or is investing in Delaware
Investments funds which do not carry a sales charge. Redemptions of Class A
Shares pursuant to a Systematic Withdrawal Plan may be subject to a Limited CDSC
if the purchase was made at net asset value and a dealer's commission has been
paid on that purchase. Redemptions of Class B Shares or Class C Shares pursuant
to a Systematic Withdrawal Plan may be subject to a
-54-
<PAGE>
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 Contingent Deferred Sales Charge - Class B and Class C Shares and
Waiver of Limited Contingent Deferred Sales Charge - Class A Shares under
Redemption and Exchange in the Prospectuses for the Fund Classes. Shareholders
should consult their financial advisers to determine whether a Systematic
Withdrawal Plan would be suitable for them.
An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. DelCap 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
Classes or, currently, any of the Fund Classes of Capital Appreciation Fund.
-55-
<PAGE>
DISTRIBUTIONS AND TAXES
Each Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, the Funds
will not be subject to federal income tax on net investment income and net
realized capital gains which are distributed to shareholders.
Each Fund intends to pay out all of its net investment income and net
realized capital gains. Each 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 Fund at net asset value unless, in the case of shareholders in
the Fund Classes of DelCap Fund, 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 a Fund will share proportionately in the
investment income and expenses of such Fund, except that, absent any applicable
fee waiver, Class A Shares, Class B Shares and Class C Shares alone will incur
distribution fees under their respective 12b-1 Plans.
Any check in payment of dividends or other distributions which cannot
be delivered by the United States Post Office or which remains uncashed for a
period of more than one year may be reinvested in the shareholder's account at
the then-current net asset value and the dividend option may be changed from
cash to reinvest. A Fund may deduct from a shareholder's account the costs of
the Fund's effort to locate a shareholder if a shareholder's mail is returned by
the United States Post Office or the Fund is otherwise unable to locate the
shareholder or verify the shareholder's mailing address. These costs may include
a percentage of the account when a search company charges a percentage fee in
exchange for their location services.
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 described below. The tax status of dividends and
distributions paid to shareholders will not be affected by whether they are paid
in cash or in additional shares. Each Fund is treated as a single tax entity and
capital gains for each Fund will be calculated separately.
Under the 1997 Act, as revised by the 1998 Act and the Omnibus
Consolidated and Emergency Supplemental Appropriations Act, a Fund is required
to track its sales of portfolio securities and to report its capital gain
distributions to you according to the following categories of holding periods:
"Mid-term capital gains" or "28 percent rate gain": securities sold
by a Fund after July 28, 1997 that were held more than one year
but not more than 18 months. These gains will be taxable to individual
investors at a maximum rate of 28%. This category of gains applied
only to gains and distributions in 1997.
-56-
<PAGE>
"1997 Act long-term capital gains" or "20 percent rate gain":
securities sold between May 7, 1997 and July 28, 1997 that were held
for more than 12 months, and securities sold by the Fund after July 28,
1997 that were held for more than 18 months. As revised by the 1998
Act, this rate applies to securities held for more than 12 months and
sold in tax years beginning after December 1, 1997. These gains will
be taxable to individual investors at a maximum rate of 20% for
investors in the 28% or higher federal income tax brackets, and at a
maximum rate of 10% for investors in the 15% federal income tax
bracket. The Omnibus Consolidated and Emergency Supplemental
Appropriations Act passed in October of 1998 included technical
corrections to the 1998 Act. The effect of this correction is that
essentially all capital gain distributions paid to shareholders during
1998 will be taxed at a maximum rate of 20%.
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
five-year gains are net gains on securities held for more than 5
years which are sold after December 31, 2000. For individual who are
subject to tax at higher rate brackets, qualified five-year gains are
net gains on securities which are purchased after December 31, 2000 and
are held for more than five years. Taxpayers subject to tax at a
higher rate brackets may also make an election for shares held on
January 1, 2001 to recognize gain on their shares in order to qualify
such shares as qualified five-year property. These gains will be
taxable to individual investors at a maximum rate of 18% for investors
in the 28% or higher federal income tax brackets, and at a maximum rate
of 8% for investors in the 15% federal income tax bracket when sold
after the five-year holding period.
Because of each Fund's investment policy, only a small portion of a
Fund's dividends may qualify for the dividends-received deduction for
corporations. The portion of dividends paid by the Fund that so qualifies will
be designated each year in a notice mailed to the Fund's shareholders, and
cannot exceed the gross amount of dividends received by the Fund from domestic
(U.S.) corporations that would have qualified for the dividends-received
deduction in the hands of the Fund if the Fund was a regular corporation. The
availability of the dividends-received deduction is subject to certain holding
period and debt financing restrictions imposed under the Code on the corporation
claiming the deduction. Under the 1997 Act, the amount that the Fund may
designate as eligible for the dividends-received deduction will be reduced or
eliminated if the shares on which the dividends earned by the Fund were
debt-financed or held by the Fund for less than a 46-day period during a 90-day
period beginning 45 days before the ex-dividend date and ending 45 days after
the ex-dividend date. Similarly, if your Fund shares are debt-financed or held
by you for less than a 46-day period during a 90-day period beginning 45 days
before the ex-dividend date and ending 45 days after the ex-dividend date, then
the dividends-received deduction for Fund dividends on your shares may also be
reduced or eliminated. Even if designated as dividends eligible for the
dividends-received deduction, all dividends (including any deducted portion)
must be included in your alternative minimum taxable income calculation. For the
fiscal year ended September 30, 1998, 29.92% of DelCap Fund's and none of
Capital Appreciation Fund's dividends from net investment income qualified for
the dividends-received deduction to corporations.
Shareholders will be notified annually by Equity Funds IV, Inc. as to
the federal income tax status of dividends and distributions paid by their Fund.
-57-
<PAGE>
In addition to the federal taxes described above, shareholders may or
may not be subject to various state and local taxes. Because shareholders' state
and local taxes may be different than the federal taxes described above,
shareholders should consult their own tax advisers.
See also Other Tax Requirements under Accounting and Tax Issues in this
Part B.
-58-
<PAGE>
INVESTMENT MANAGEMENT AGREEMENTS
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to each Fund, subject to the
supervision and direction of Equity Funds IV, Inc.'s Board of Directors.
The Manager and its predecessors have been managing the funds in
Delaware Investments since 1938. On September 30, 1998, the Manager and its
affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $40 billion in assets
in the various institutional or separately managed (approximately
$23,666,360,000) and investment company (approximately $17,194,990,000)
accounts.
The Investment Management Agreement for DelCap Fund is dated April 3,
1995 and was approved by shareholders on March 29, 1995. The Investment
Management Agreement for Capital Appreciation Fund is dated November 29, 1996
and was approved by the initial shareholder on November 29, 1996. Each Agreement
has an initial term of two years and may be renewed each year only so long as
such renewal and continuance are specifically approved at least annually by the
Board of Directors or by vote of a majority of the outstanding voting securities
of the Fund to which the Agreement relates, and only if the terms of the renewal
thereof have been approved by the vote of a majority of the directors of Equity
Funds IV, Inc. who are not parties thereto or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. Each Agreement is terminable without penalty on 60 days' notice by the
directors of Equity Funds IV, Inc. or by the Manager. Each Agreement will
terminate automatically in the event of its assignment.
The compensation paid by DelCap Fund for investment management services
is equal to 1/16 of 1% per month (the equivalent of 3/4 of 1% per year) of the
Fund's average daily net assets during the month, less DelCap Fund's
proportionate share of all directors' fees paid to the unaffiliated directors by
the Fund. This fee may be higher than that paid by some other funds. On
September 30, 1998, the total net assets of DelCap Fund were $683,979,641.
Under the general supervision of the Board of Directors, the Manager makes all
investment decisions which are implemented by DelCap Fund. The Manager pays the
salaries of all directors, officers and employees who are affiliated with both
the Manager and Equity Funds IV, Inc. The investment management fees paid by
DelCap Fund for the fiscal years ended September 30, 1996, 1997 and 1998
were $7,751,575, $7,226,204 and $6,278,318, respectively.
The annual compensation paid by Capital Appreciation Fund for
investment management services is equal to 0.75% on the first $500 million of
the Fund's average daily net assets, 0.725% of the next $500 million and 0.70%
of the average daily net assets in excess of $1 billion. This fee may be higher
than that paid by some other funds. On September 30, 1998, the total net
assets of Capital Appreciation Fund were $2,238,562. 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 Equity Funds IV, Inc. The investment management fee incurred by Capital
Appreciation Fund for the period December 2, 1996 (date of initial public
offering) through September 30, 1997 was $12,953 and $1,811 was paid as a result
of the voluntary waiver of fees by the Manager. For the fiscal year ended
September 30, 1998, the investment management fee incurred by Capital
Appreciation Fund was $18,019 and no fees were paid as a result of the voluntary
waiver of fees by the Manager.
-59-
<PAGE>
The Manager has elected voluntarily to waive that portion, if any, of
the annual management fees payable by Capital Appreciation Fund and to pay
certain expenses of the Fund to the extent necessary to ensure that the total
operating expenses of each Class do not exceed 0.75% (exclusive of taxes,
interest, brokerage commissions, extraordinary expenses and 12b-1 expenses)
during the commencement of the public offering of the Fund through May 31,
1999.
Except for those expenses borne by the Manager under the Investment
Management Agreements and the Distributor under the Distribution Agreement, the
Funds are responsible for all of their own expenses. Among others, these include
a Fund's proportionate share of rent and certain other administrative expenses;
the investment management fees; transfer and dividend disbursing agent fees and
costs; custodian expenses; federal and state securities registration fees; proxy
costs; and the costs of preparing prospectuses and reports sent to shareholders.
Distribution and Service
The Distributor, Delaware Distributors, L.P., located at 1818 Market
Street, Philadelphia, PA 19103, serves as the national distributor of each
Fund's shares under a Distribution Agreement dated April 3, 1995, as amended on
November 29, 1995 for DelCap Fund and under a separate Distribution Agreement
dated November 29, 1996 for Capital Appreciation Fund. The Distributor is an
affiliate of the Manager and bears all of the costs of promotion and
distribution, except for payments by each Fund on behalf of Class A Shares,
Class B Shares and Class C Shares under their respective 12b-1 Plans. Delaware
Distributors, Inc. ("DDI") is the corporate general partner of Delaware
Distributors, L.P. and both DDI and Delaware Distributors, L.P. are indirect,
wholly owned subsidiaries of Delaware Management Holdings, Inc. The Distributor
has elected voluntarily to waive payments under the 12b-1 Plan for the Class A
Shares, the Class B Shares and the Class C Shares of Capital Appreciation Fund
during the commencement of the public offering of the Fund through May 31,
1999.
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
the Funds' shareholder servicing, dividend disbursing and transfer agent
pursuant to an Amended and Restated Shareholders Services Agreement dated
November 29, 1996. The Transfer Agent also provides accounting services to the
Funds pursuant to the terms of a separate Fund Accounting Agreement. The
Transfer Agent is also an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc.
The Funds have authorized one or more brokers to accept on its behalf
purchase and redemption orders in addition to the Transfer Agent. Such brokers
are authorized to designate other intermediaries to accept purchase and
redemption orders on the behalf of the Funds. For purposes of pricing, the Funds
will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Investors may be charged a fee when effecting transactions through a
broker or agent.
-60-
<PAGE>
OFFICERS AND DIRECTORS
The business and affairs of Equity Funds IV, Inc. are managed under the
direction of its Board of Directors.
Certain officers and directors of Equity Funds IV, Inc. hold identical
positions in each of the other funds in Delaware Investments. On October 31,
1998, Equity Funds IV, Inc.'s officers and directors owned approximately less
than 1% of the outstanding shares of, respectively, the Class A Shares, Class B
Shares, Class C Shares and the Institutional Class of DelCap Fund.
As of October 31, 1998, management believes the following accounts
held 5% or more of the outstanding shares of the Class A Shares, Class B Shares,
Class C Shares and the Institutional Class of each fund:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Class Name and Address of Account Share Amount Percentage
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DelCap Fund A Class MLPF&S for the Sole Benefit of its Customers 3,492,946 13.84%
Attention: Fund Administration
4800 Deer Lake Drive East - 2nd Floor
Jacksonville, FL 32246
- -----------------------------------------------------------------------------------------------------------------------------
DelCap Fund B Class MLPF&S for the Sole Benefit of its Customers 101,847 11.89%
Attention: Fund Administration
4800 Deer Lake Drive East - 2nd Floor
Jacksonville, FL 32246
- -----------------------------------------------------------------------------------------------------------------------------
DelCap Fund C Class RS 401(k) Plan 2,041,296 49.77%
Price Waterhouse LLP
Savings Plan
c/o DelPac 16th Floor
1818 Market St.
Philadelphia, PA 19103-3638
- -----------------------------------------------------------------------------------------------------------------------------
DelCap Fund Boston Safe Agent for Mellon Bank 1,155,923 28.18%
Institutional Class Trst. State of California Deferred
Compensation Plan
457 A/C CSPF0134002
Attention: Bob Stein, Mail Code 028-004N
1 Cabot Road
Medford, MA 02155
- -----------------------------------------------------------------------------------------------------------------------------
Boston Safe Agent for Mellon Bank 421,777 10.28%
Trst. State of California Thrift Plan
401K A/C CSPF0034002
Attention: Bob Stein, Mail Code
028-004N
1 Cabot Road
Medford, MA 02155
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-61-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Class Name and Address of Account Share Amount Percentage
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Appreciation DMTC C/F the 403(b)(7) plan of 533 39.83%
Fund A Class Jerauld D. Myers
468 County Road, 3A
Greene, NY 13778
- -----------------------------------------------------------------------------------------------------------------------------
Bonnie Sue Rockhill and 366 27.34%
Roger William Rockhill
220 Spout Spring Ave.
Mount Holly, NJ 08060
- -----------------------------------------------------------------------------------------------------------------------------
Douglas W. Degenhardt 314 23.47%
237 Marple Rd.
Haverford, PA 19041
- -----------------------------------------------------------------------------------------------------------------------------
Capital Appreciation Chicago Trust Co. 247,789 99.99%
Fund Institutional Class FBO Lincoln National Corp.
Empl. Ret. Pln
c/o Marshall & Ilsley Trust Co.
P.O. Box 2977
Milwaukee, WI 53201
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-62-
<PAGE>
DMH Corp., Delvoy, Inc., Delaware Management Company, Inc., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company, Inc.,
Delaware Management Trust Company, Delaware International Holdings Ltd.,
Founders Holdings, Inc., Delaware International Advisers Ltd., Delaware Capital
Management, Inc. and Retirement Financial Services, Inc. are direct or
indirect, wholly owned subsidiaries of Delaware Management Holdings, Inc.
("DMH"). On April 3, 1995, a merger between DMH and a wholly owned subsidiary of
Lincoln National Corporation ("Lincoln National") was completed. In connection
with the merger, a new Investment Management Agreement between Equity Funds IV,
Inc. and the Manager on behalf of DelCap Fund was executed following shareholder
approval. DMH and the Manager are now indirect, wholly owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management.
Directors and principal officers of Equity Funds IV, Inc. are noted
below along with their ages and their business experience for the past five
years. Unless otherwise noted, the address of each officer and director is One
Commerce Square, Philadelphia, PA 19103.
*Wayne A. Stork (61)
Chairman and Director and/or Trustee of Equity Funds IV, Inc. and
33 other investment companies in the Delaware Investments family
and Delaware Capital Management, Inc.
Chairman, President, Chief Executive Officer and Director of DMH Corp.,
Delaware Distributors, Inc. and Founders Holdings, Inc.
Chairman, President, Chief Executive Officer, Chief Investment Officer
and Director/Trustee of Delaware Management Company, Inc. and
Delaware Management Business Trust
Chairman, President, Chief Executive Officer and Chief Investment
Officer of Delaware Management Company (a series of Delaware
Management Business Trust)
Chairman, Chief Executive Officer and Chief Investment Officer of
Delaware Investment Advisers (a series of Delaware Management
Business Trust)
Chairman,Chief Executive Officer and Director of Delaware
International Advisers Ltd., Delaware International Holdings
Ltd. and Delaware Management Holdings, Inc.
President and Chief Executive Officer of Delvoy, Inc.
Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc. and Retirement Financial
Services, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware
organization.
- ----------------------
* Director affiliated with Equity Funds IV, Inc.'s investment manager and
considered an "interested person" as defined in the 1940 Act.
-63-
<PAGE>
* Jeffrey J. Nick (45)
President, Chief Executive Officer and Director and/or Trustee of
Equity Funds IV, Inc. and 33 other investment companies in
the Delaware Investments family
President and Director of Delaware Management Holdings, Inc.
President, Chief Executive Officer and Director of Lincoln National
Investment Companies, Inc. Director of Delaware International
Advisers Ltd.
From 1992 to 1996, Mr. Nick was Managing Director of Lincoln
National UK plc and from 1989 to 1992, he was Senior Vice
President responsible for corporate planning and development
for Lincoln National Corporation.
Richard G. Unruh, Jr. (59)
Executive Vice President of Equity Funds IV, Inc. and 33 other
investment companies in the Delaware Investments family,
Delaware Management Holdings, Inc., Delaware Management
Company (a series of Delaware Management Business Trust) and
Delaware Capital Management, Inc.
President of Delaware Investment Advisers (a series of Delaware
Management Business Trust) Executive Vice President and
Director/Trustee of Delaware Management Company, Inc. and
Delaware Management Business Trust
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware
organization.
Paul E. Suckow (51)
Executive Vice President/Chief Investment Officer, Fixed Income of
Equity Funds IV, Inc. and 33 other investment companies in
the Delaware Investments family, Delaware Management
Company, Inc., Delaware Management Company (a series of
Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust) and
Delaware Management Holdings, Inc.
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Capital Management, Inc. and
Delaware Management Business Trust
Director of Founders CBO Corporation
Director of HYPPCO Finance Company Ltd.
Before returning to Delaware Investments in 1993, Mr. Suckow was
Executive Vice President and Director of Fixed Income for
Oppenheimer Management Corporation, New York, NY from 1985 to
1992. Prior to that, Mr. Suckow was a fixed-income portfolio
manager for Delaware Investments.
- ----------------------
* Director affiliated with Equity Fund IV, Inc.'s investment manager and
considered an "interested person" as defined in the 1940 Act.
-64-
<PAGE>
David K. Downes (58)
Executive Vice President, Chief Operating Officer, Chief Financial
Officer of Equity Funds IV, Inc. and 33 other investment
companies in the Delaware Investments family, Delaware
Management Holdings, Inc, Founders CBO Corporation, Delaware
Capital Management, Inc., Delaware Management Company (a
series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business
Trust) and Delaware Distributors, L.P.
Executive Vice President, Chief Financial Officer, Chief Administrative
Officer and Trustee of Delaware Management Business Trust
Executive Vice President, Chief Operating Officer, Chief Financial
Officer and Director of Delaware Management Company, Inc., DMH
Corp., Delaware Distributors, Inc., Founders Holdings, Inc.
and Delvoy, Inc.
President, Chief Executive Officer, Chief Financial Officer and
Director of Delaware Service Company, Inc.
President, Chief Operating Officer, Chief Financial Officer and
Director of Delaware International Holdings Ltd.
Chairman, Chief Executive Officer and Director of Delaware Management
Trust Company and Retirement Financial Services, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Downes has served in various
executive capacities at different times within the Delaware
organization.
Walter P. Babich (71)
Director and/or Trustee of Equity Funds IV, Inc. and 33 other
investment companies in the Delaware Investment family 460
North Gulph Road, King of Prussia, PA 19406
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and
from 1988 to 1991, he was a partner of I&L Investors.
John H. Durham (61)
Director and/or Trustee of Equity Funds IV, Inc. and 18 other
investment companies in the Delaware Investments family
Partner, Complete Care Services
120 Gibraltar Road, Horsham, PA 19044
Mr. Durham served as Chairman of the Board of each fund in the
Delaware Investments family from 1986 to 1991; President of
each fund from 1977 to 1990; and Chief Executive Officer of
each fund from 1984 to 1990. Prior to 1992, with respect to
Delaware Management Holdings, Inc., Delaware Management
Company, Delaware Distributors, Inc. and Delaware Service
Company, Inc., Mr. Durham served as a director and in various
executive capacities at different times.
-65-
<PAGE>
Anthony D. Knerr (59)
Director and/or Trustee of Equity Funds IV, Inc. and 33 other
investment companies in the Delaware Investments family
500 Fifth Avenue, New York, NY 10110
Founder and Managing Director, Anthony Knerr & Associates
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance
and Treasurer of Columbia University, New York. From 1987 to
1989, he was also a lecturer in English at the University. In
addition, Mr. Knerr was Chairman of The Publishing Group,
Inc., New York, from 1988 to 1990. Mr. Knerr founded The
Publishing Group, Inc. in 1988.
Ann R. Leven (58)
Director and/or Trustee of Equity Funds IV, Inc. and 33 other
investment companies in the Delaware Investments family
785 Park Avenue, New York, NY 10021
Treasurer, National Gallery of Art
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer
of the Smithsonian Institution, Washington, DC, and from 1975
to 1992, she was Adjunct Professor of Columbia Business
School.
W. Thacher Longstreth (78)
Director and/or Trustee of Equity Funds IV, Inc. and 33 other
investment companies in the Delaware Investments family
City Hall, Philadelphia, PA 19107
Philadelphia City Councilman
Thomas F. Madison (62)
Director and/or Trustee of Equity Funds IV, Inc. and 33 other
investment companies in the Delaware Investments family
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402
President and Chief Executive Officer, MLM Partners, Inc.
Mr. Madison has also been Chairman of the Board of
Communications Holdings, Inc. since 1996.
From February to September 1994, Mr. Madison served as Vice
Chairman--Office of the CEO of The Minnesota Mutual Life
Insurance Company and from 1988 to 1993, he was President of
U.S. WEST Communications--Markets.
-66-
<PAGE>
Charles E. Peck (73)
Director and/or Trustee of Equity Funds IV, Inc. and 33 other
investment companies in the Delaware Investments family
P.O. Box 1102, Columbia, MD 21044
Retired.
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive
Officer of The Ryland Group, Inc., Columbia, MD.
George M. Chamberlain, Jr. (51)
Senior Vice President, Secretary and General Counsel of Equity Funds
IV, Inc. and 33 other investment companies in the Delaware
Investments family.
Senior Vice President and Secretary of Delaware Distributors, L.P.,
Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and Delaware Management
Holdings, Inc.
Senior Vice President, Secretary and Director/Trustee of DMH Corp.,
Delaware Management Company, Inc., Delaware Distributors,
Inc., Delaware Service Company, Inc., Founders Holdings, Inc.,
Retirement Financial Services, Inc., Delaware Capital
Management, Inc., Delvoy, Inc. and Delaware Management
Business Trust
Executive Vice President, Secretary and Director of Delaware Management
Trust Company
Senior Vice President 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
executive capacities at different times within the Delaware
organization.
Joseph H. Hastings (48)
Senior Vice President/Corporate Controller of Equity Funds IV, Inc.
and 33 other investment companies in the Delaware
Investments family and Founders Holdings, Inc.
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management
Company, Inc., Delaware Management Company (a series of
Delaware Management Business Trust), Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company,
Inc., Delaware Capital Management, Inc., Delaware
International Holdings Ltd., Delvoy, Inc. and Delaware
Management Business Trust
Chief Financial Officer/Treasurer of Retirement Financial
Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company
Senior Vice President/Assistant Treasurer of Founders CBO Corporation
During the past five years, Mr. Hastings has served in various
executive capacities at different times within the Delaware
organization.
-67-
<PAGE>
Michael P. Bishof (36)
Senior Vice President/Treasurer of Equity Funds IV, Inc. and 33
other investment companies in the Delaware Investments
family and Founders Holdings, Inc.
Senior Vice President/Investment Accounting of Delaware Management
Company, Inc., Delaware Management Company (a series of
Delaware Management Business Trust) and Delaware Service
Company, Inc.
Senior Vice President and Treasurer/Manager of Investment Accounting
of Delaware Distributors, L.P. and Delaware Investment
Advisers (a series of Delaware Management Business Trust)
Senior Vice President and Manager of Investment Accounting of
Delaware International Holdings Ltd.
Senior Vice President and Assistant Treasurer of Founders CBO
Corporation Before joining Delaware Investments in 1995, Mr.
Bishof was a Vice President for Bankers Trust, New York, NY
from 1994 to 1995, a Vice President for CS First Boston
Investment Management, New York, NY from 1993 to 1994 and an
Assistant Vice President for Equitable Capital Management
Corporation, New York, NY from 1987 to 1993.
Gerald S. Frey (52)
Vice President/Senior Portfolio Manager of Equity Funds IV, Inc.,
of nine other investment companies in Delaware Investments
and of Delaware Management Company, Inc.
Before joining Delaware Investments in 1996, Mr. Frey was a Senior
Director with Morgan Grenfell Capital Management, New York, NY
from 1986 to 1995.
Robert L. Arnold (34)
Vice President/Portfolio Manager of Equity Funds IV, Inc. and two
other investment companies in Delaware Investments.
Before joining Delaware Investments in 1992, Mr. Arnold was a
planning analyst with Chemical Bankin New York.
-68-
<PAGE>
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from
Equity Funds IV, Inc. and the total compensation received from all
investment companies in the Delaware Investments family for which he or she
serves as a director or trustee for the fiscal year ended September 30, 1998
and an estimate of annual benefits to be received upon retirement under the
Delaware Investments Retirement Plan for Directors/Trustees as of September
30, 1998. Only the independent directors of Equity Funds IV, Inc. receive
compensation from the Funds.
<TABLE>
<CAPTION>
Pension or Estimated Total Compensation
Aggregate Retirement Annual from the Investment
Compensation Benefits Accrued Benefits Companies in
from Equity as Part of Upon Delaware
Name Funds IV, Inc. Fund Expenses Retirement(1) Investments(2)
- ---- -------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
W. Thacher Longstreth $2,757 None $38,500 $63,487
Ann R. Leven $3,074 None $38,500 $69,732
Walter P. Babich $3,022 None $38,500 $68,571
Anthony D. Knerr $3,022 None $38,500 $68,571
Charles E. Peck $2,757 None $38,500 $63,487
Thomas F. Madison $2,841 None $38,500 $65,154
John H. Durham(3) $1,362 None $31,000 $25,506
</TABLE>
(1) Under the terms of the Delaware Investments Retirement Plan for
Directors/Trustees, each disinterested director/trustee who, at the
time of his or her retirement from the Board, has attained the age of
70 and served on the Board for at least five continuous years, is
entitled to receive payments from each investment company in the
Delaware Investments family for which he or she serves as a director or
trustee for a period equal to the lesser of the number of years that
such person served as a director or trustee or the remainder of such
person's life. The amount of such payments will be equal, on an annual
basis, to the amount of the annual retainer that is paid to
directors/trustees of each investment company at the time of such
person's retirement. If an eligible director/trustee retired as of
September 30, 1998, he or she would be entitled to annual payments
totaling the amount noted above, in the aggregate, from all of the
investment companies in the Delaware Investments family for which he
or she served as director or trustee, based on the number of
investment companies in the Delaware Investments family as of that
date.
(2) Each independent director/trustee (other than John H. Durham) currently
receives a total annual retainer fee of $38,500 for serving as a
director or trustee for all 34 investment companies in Delaware
Investments, plus $3,145 for each Board Meeting attended. John H.
Durham currently receives a total annual retainer fee of $31,000 for
serving as a director or trustee for 19 investment companies in
Delaware Investments, plus $1,757.50 for each Board Meeting attended.
Ann R. Leven, Walter P. Babich, Anthony D. Knerr and Thomas F. Madison
serve on the Fund's audit committee; Ms. Leven is the chairperson.
Members of the audit committee currently receive additional annual
compensation of $5,000 from all investment companies, in the aggregate,
with the exception of the chairperson, who receives $6,000.
(3) John H. Durham joined the Board of Directors of the Fund and 18 other
investment companies in Delaware Investments on April 16, 1998.
-69-
<PAGE>
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the Classes and
for shareholders of classes of other funds in Delaware Investments are set
forth in the relevant prospectuses for such classes. The following supplements
that information. The Funds may modify, terminate or suspend the exchange
privilege upon 60 days' notice to shareholders.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses. A shareholder requesting an exchange will be sent a current prospectus
and an authorization form for any of the other mutual funds in Delaware
Investments. 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 Delaware Investments on behalf of their clients by telephone or other
expedited means. This service may be discontinued or revised at any time by the
Transfer Agent. Such exchange requests may be rejected if it is determined that
a particular request or the total requests at any time could have an adverse
effect on any of the funds. Requests for expedited exchanges may be submitted
with a properly completed exchange authorization form, as described above.
Telephone Exchange Privilege
Shareholders owning shares for which certificates have not been issued
or their investment dealers of record may exchange shares by telephone for
shares in other mutual funds in Delaware Investments. This service is
automatically provided unless the relevant Fund receives written notice from the
shareholder to the contrary.
Shareholders or their investment dealers of record may contact the
Shareholder Service Center at 800-523-1918 or, in the case of shareholders of
the Institutional Classes, their Client Services Representative at 800-
510-4015, to effect an exchange. The shareholder's current Fund account number
must be identified, as well as the registration of the account, the share or
dollar amount to be exchanged and the fund into which the exchange is to be
made. Requests received on any day after the time the offering price and net
asset value are determined will be processed the following day. See Determining
Offering Price and Net Asset Value. Any new account established through the
exchange will automatically carry the same registration, shareholder information
and dividend option as the account from which the shares were exchanged. The
exchange requirements of the fund into which the exchange is being made, such as
sales charges, eligibility and investment minimums, must be met. (See the
prospectus of the fund desired or inquire by calling the Transfer Agent or, as
relevant, your Client Services Representative.) Certain funds are not available
for retirement plans.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds in Delaware Investments. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and the Funds reserve
the right to record exchange instructions received by telephone and to reject
exchange requests at any time in the future.
-70-
<PAGE>
As described in the Funds' Prospectuses, neither the Funds nor the
Transfer Agent is responsible for any shareholder loss incurred in acting upon
written or telephone instructions for redemption or exchange of Fund shares
which are reasonably believed to be genuine.
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Funds will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Investments funds from Timing Firms. A Fund reserves the right to temporarily
or permanently terminate the exchange privilege or reject any specific purchase
order for any person whose transactions seem to follow a timing pattern who: (i)
makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, or (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1/4 of 1% of the Fund's net assets. Accounts
under common ownership or control, including accounts administered so as to
redeem or purchase shares based upon certain predetermined market indicators,
will be aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Investments 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
Investments funds are available for timed exchanges. Assets redeemed or
exchanged out of Timing Accounts in Delaware Investments funds not listed
above may not be reinvested back into that Timing Account. Each Fund reserves
the right to apply these same restrictions to the account(s) of any person whose
transactions seem to follow a timing pattern (as described above).
Each Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if a
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
* * *
Following is a summary of the investment objectives of the other
Delaware Investments 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.
-71-
<PAGE>
Trend Fund seeks long-term growth by investing in common stocks issued
by emerging growth companies exhibiting strong capital appreciation potential.
Small Cap Value Fund seeks capital appreciation by investing primarily
in common stocks whose market values appear low relative to their underlying
value or future potential.
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.
Blue Chip Fund seeks to achieve long-term capital appreciation. Current income
is a secondary objective. It seeks to achieve these objectives by investing
primarily in equity securities and any securities that are convertible into
equity securities. Social Awareness Fund seeks to achieve long-term capital
appreciation. It seeks to achieve this objective by investing primarily in
equity securities of medium- to large-sized companies expected to grow over time
that meet the Fund's "Social Criteria" strategy.
Delchester Fund seeks as high a current income as possible by investing
principally in high yield, high risk corporate bonds, and also in U.S.
government securities and commercial paper. Strategic Income Fund seeks to
provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities. High-Yield Opportunities Fund seeks to provide
investors with total return and, as a secondary objective, high current income.
Corporate Bond Fund seeks to provide investors with total return by investing
primarily in corporate bonds. Extended Duration Bond Fund seeks to provide
investors with total return by investing primarily in corporate bonds.
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.
Delaware Cash Reserve seeks the highest level of income consistent with
the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
REIT Fund seeks to achieve maximum long-term total return with capital
appreciation as a secondary objective. It seeks to achieve its objectives by
investing in securities of companies primarily engaged in the real estate
industry.
Foundation Funds are "fund of funds" which invest in other funds in
the Delaware Investments family (referred to as "Underlying Funds"). Foundation
Funds Income Portfolio seeks a combination of current income and preservation of
capital with capital appreciation by investing primarily in a mix of fixed
income and domestic equity securities, including fixed income and domestic
equity Underlying Funds. Foundation Funds Balanced Portfolio seeks capital
appreciation with current income as a secondary objective by investing primarily
in domestic equity and fixed income securities, including
-72-
<PAGE>
domestic equity and fixed income Underlying Funds. Foundation Funds Growth
Portfolio seeks long term capital growth by investing primarily in equity
securities, including equity Underlying Funds, and, to a lesser extent, in fixed
income securities, including fixed-income Underlying Funds.
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 New Jersey Fund seeks a high level of current interest income
exempt from federal income tax and New Jersey state and local taxes, consistent
with preservation of capital. Tax-Free Ohio Fund seeks a high level of current
interest income exempt from federal income tax and Ohio state and local taxes,
consistent with preservation of capital. Tax-Free Pennsylvania Fund seeks a high
level of current interest income exempt from federal income tax and Pennsylvania
state and local taxes, consistent with the preservation of capital.
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 Equity Fund seeks to achieve
long-term total return by investing in global securities that provide the
potential for capital appreciation and income. Emerging Markets Fund seeks
long-term capital appreciation by investing primarily in equity securities of
issuers located or operating in emerging countries.
U.S. Growth Fund seeks to maximize capital appreciation by investing in
companies of all sizes which have low dividend yields, strong balance sheets and
high expected earnings growth rates relative to their industry. Overseas Equity
Fund seeks to maximize total return (capital appreciation and income),
principally through investments in an internationally diversified portfolio of
equity securities. New Pacific Fund seeks long-term capital appreciation by
investing primarily in companies which are domiciled in or have their principal
business activities in the Pacific Basin.
Delaware Group Premium Fund, Inc. offers 16 funds available
exclusively as funding vehicles for certain insurance company separate accounts.
Decatur Total Return Series seeks the highest possible total rate of return by
selecting issues that exhibit the potential for capital appreciation while
providing higher than average dividend income. Delchester Series seeks as high a
current income as possible by investing in rated and unrated corporate bonds,
U.S. government securities and commercial paper. Capital Reserves Series seeks a
high stable level of current income while minimizing fluctuations in principal
by investing in a diversified portfolio of short- and intermediate-term
securities. Cash Reserve Series seeks the highest level of income consistent
with preservation of capital and liquidity through investments in short-term
money market instruments. DelCap Series seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. Delaware 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
-73-
<PAGE>
growth. International Equity Series seeks long-term growth without undue risk to
principal by investing primarily in equity securities of foreign issuers that
provide the potential for capital appreciation and income. Small Cap Value
Series seeks capital appreciation by investing in primarily small-cap common
stocks whose market values appear low relative to their underlying value or
future earnings and growth potential. Emphasis will also be placed on securities
of companies that may be temporarily out of favor or whose value is not yet
recognized by the market. Trend Series seeks long-term capital appreciation by
investing primarily in small-cap common stocks and convertible securities of
emerging and other growth-oriented companies. These securities will have been
judged to be responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. Global Bond
Series seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. Strategic Income Series seeks
high current income and total return by using a multi-sector investment
approach, investing primarily in three sectors of the fixed-income securities
markets: high-yield, higher risk securities; investment grade fixed-income
securities; and foreign government and other foreign fixed-income securities.
Devon Series seeks current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on common stocks that
the investment manager believes have the potential for above-average dividend
increases over time. Emerging Markets Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of issuers located or
operating in emerging countries. Convertible Securities Series seeks a high
level of total return on its assets through a combination of capital
appreciation and current income by investing primarily in convertible
securities. Social Awareness Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series' "Social
Criteria" strategy. REIT Series seeks to achieve maximum long-term total
return, with capital appreciation as a secondary objective, by investing in
securities of companies primarily engaged in the real estate industry.
Delaware-Voyageur US Government Securities Fund seeks to provide a high
level of current income consistent with the prudent investment risk by investing
in U.S. Treasury bills, notes, bonds, and other obligations issued or
unconditionally guaranteed by the full faith and credit of the U.S. Treasury,
and repurchase agreements fully secured by such obligations.
Delaware-Voyageur Tax-Free Arizona Insured Fund seeks to provide a high
level of current income exempt from federal income tax and the Arizona personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Minnesota Insured Fund seeks to provide a high level of current income exempt
from federal income tax and the Minnesota personal income tax, consistent with
the preservation of capital.
Delaware-Voyageur Tax-Free Minnesota Intermediate Fund seeks to provide
a high level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.
Delaware-Voyageur Tax-Free California Insured Fund seeks to provide a
high level of current income exempt from federal income tax and the California
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Florida Insured Fund seeks to provide a high level of
current income exempt from federal income tax, consistent with the preservation
of capital. The Fund will seek to select investments that will enable its shares
to be exempt from the Florida intangible personal property tax.
Delaware-Voyageur Tax-Free Florida Fund seeks to provide a high level of current
income exempt from
-74-
<PAGE>
federal income tax, consistent with the preservation of capital. The Fund will
seek to select investments that will enable its shares to be exempt from the
Florida intangible personal property tax. Delaware-Voyageur Tax-Free Kansas Fund
seeks to provide a high level of current income exempt from federal income tax,
the Kansas personal income tax and the Kansas intangible personal property
tax, consistent with the preservation of capital. Delaware-Voyageur Tax-Free
Missouri Insured Fund seeks to provide a high level of current income exempt
from federal income tax and the Missouri personal income tax, consistent with
the preservation of capital. Delaware-Voyageur Tax-Free New Mexico Fund seeks to
provide a high level of current income exempt from federal income tax and the
New Mexico personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Oregon Insured Fund seeks to provide a high level of
current income exempt from federal income tax and the Oregon personal income
tax, consistent with the preservation of capital. Delaware-Voyageur Tax-Free
Utah Fund seeks to provide a high level of current income exempt from federal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free Washington Insured Fund seeks to provide a high level of current income
exempt from federal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Arizona Fund seeks to provide a high level
of current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware-Voyageur Tax-Free
California Fund seeks to provide a high level of current income exempt from
federal income tax and the California personal income tax, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Iowa Fund seeks to provide a
high level of current income exempt from federal income tax and the Iowa
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Idaho Fund seeks to provide a high level of current
income exempt from federal income tax and the Idaho personal income tax,
consistent with the preservation of capital. Delaware-Voyageur Minnesota High
Yield Municipal Bond Fund seeks to provide a high level of current income exempt
from federal income tax and the Minnesota personal income tax primarily through
investment in medium and lower grade municipal obligations. National High Yield
Municipal Fund seeks to provide a high level of income exempt from federal
income tax, primarily through investment in medium and lower grade municipal
obligations. Delaware-Voyageur Tax-Free New York Fund seeks to provide a high
level of current income exempt from federal income tax and the personal income
tax of the state of New York and the city of New York, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Wisconsin Fund seeks to
provide a high level of current income exempt from federal income tax and the
Wisconsin personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Colorado Fund seeks to provide a high level
of current income exempt from federal income tax and the Colorado personal
income tax, consistent with the preservation of capital.
Aggressive Growth Fund seeks long-term capital appreciation, which the
Fund attempts to achieve by investing primarily in equity securities believed to
have the potential for high earnings growth. Although the Fund, in seeking its
objective, may receive current income from dividends and interest, income is
only an incidental consideration in the selection of the Fund's investments.
Growth Stock Fund has an objective of long-term capital appreciation. The Fund
seeks to achieve its objective from equity securities diversified among
individual companies and industries. Tax-Efficient Equity Fund seeks to obtain
for taxable investors a high total return on an after-tax basis. The Fund will
attempt to achieve this objective by seeking to provide a high long-term
after-tax total return through managing its portfolio in a manner that will
defer the realization of accrued capital gains and minimize dividend income.
-75-
<PAGE>
Delaware-Voyageur Tax-Free Minnesota Fund seeks to provide a high level
of current income exempt from federal income tax and the Minnesota personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free North Dakota Fund seeks to provide a high level of current income
exempt from federal income tax and the North Dakota personal income tax,
consistent with the preservation of capital.
For more complete information about any of the funds in the Delaware
Investments family, including charges and expenses, you can obtain a
prospectus from the Distributor. Read it carefully before you invest or forward
funds.
Each of the summaries above is qualified in its entirety by the
information contained in each fund's prospectus(es).
-76-
<PAGE>
GENERAL INFORMATION
The Manager is the investment manager of the Funds. The Manager also
provides investment management services to certain of the other funds in
Delaware Investments. An affiliate of the Manager also manages private
investment accounts. While investment decisions of the Funds are made
independently from those of the other funds and accounts, investment decisions
for such other funds and accounts may be made at the same time as investment
decisions for the Funds.
The Manager, or its affiliate Delaware International Advisers Ltd.,
also manages the investment options for Delaware MedallionSM III Variable
Annuity. Medallion is issued by Allmerica Financial Life Insurance and Annuity
Company (First Allmerica Financial Life Insurance Company in New York and
Hawaii.) Delaware Medallion offers a variety of investment series ranging from
domestic equity funds, international equity and bond funds and domestic fixed
income funds. Each investment series available through Medallion utilizes an
investment strategy and discipline the same as or similar to one of the Delaware
Investments mutual funds available outside the annuity. See Delaware Group
Premium Fund, Inc., above.
Access persons and advisory persons of the Delaware Investments
family of funds, as those terms are defined in SEC Rule 17j-1 under the 1940
Act, who provide services to the Manager, Delaware International Advisers Ltd.
or their affiliates, are permitted to engage in personal securities transactions
subject to the exceptions set forth in Rule 17j-1 and the following general
restrictions and procedures: (1) certain blackout periods apply to personal
securities transactions of those persons; (2) transactions must receive advance
clearance and must be completed on the same day as the clearance is received;
(3) certain persons are prohibited from investing in initial public offerings of
securities and other restrictions apply to investments in private placements of
securities; (4) opening positions may only be closed-out at a profit after a
60-day holding period has elapsed; and (5) the Compliance Officer must be
informed periodically of all securities transactions and duplicate copies of
brokerage confirmations and account statements must be supplied to the
Compliance Officer.
The Distributor acts as national distributor for each Fund and for the
other mutual funds in Delaware Investments. The Distributor received net
commissions from DelCap Fund and Capital Appreciation Fund on behalf of Class A
Shares after reallowances to dealers, as follows:
DelCap Fund
<TABLE>
<CAPTION>
Total
Amount of Amounts Net
Underwriting Reallowed Commission
Fiscal Year Ended Commission to Dealers to Distributor
----------------- ---------- ---------- --------------
<S> <C> <C> <C>
September 30, 1998 $581,650 $477,907 $103,743
September 30, 1997 1,003,867 837,830 166,037
September 30, 1996 1,380,612 1,161,576 219,036
</TABLE>
-77-
<PAGE>
Capital Appreciation Fund
Total
Amount of Amounts Net
Underwriting Reallowed Commission
Fiscal Year Ended Commission to Dealers to DDLP
----------------- ------------ ---------- ----------
September 30, 1998 --- --- ---
September 30, 1997* --- --- ---
* Commenced operations on December 2, 1997.
The Distributor received Limited CDSC payments with respect to
DelCap Fund and Capital Appreciation Fund A Class as follows:
Fiscal Year Ended Limited CDSC Payments
---------------------------------------
Del Cap Fund Capital Appreciation Fund*
------------ --------------------------
September 30, 1998 --- N/A
September 30, 1997 $2,088 N/A
September 30, 1996 374 N/A
* Commenced operations on December 2, 1997.
The Distributor received CDSC payments with respect to DelCap Fund B
Class as follows:
Fiscal Year Ended CDSC Payments
----------------- -------------
September 30, 1998 $70,197
September 30, 1997 57,254
September 30, 1996 13,677
The Distributor received CDSC payments with respect to the DelCap Fund
C Class as follows:
Fiscal Year Ended CDSC Payments
----------------- -------------
September 30, 1998 $ 679
September 30, 1997 1,715
September 30, 1996* 207
*Date of initial public offering was November 29, 1995.
-78-
<PAGE>
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for each Fund and for the
other mutual funds in Delaware Investments. The Transfer Agent is paid a fee
by each Fund for providing these services consisting of an annual per account
charge of $5.50 plus transaction charges for particular services according to a
schedule. Compensation is fixed each year and approved by the Board of
Directors, including a majority of the unaffiliated directors. The Transfer
Agent also provides accounting services to the Funds. Those services include
performing all functions related to calculating each Fund's net asset value and
providing all financial reporting services, regulatory compliance testing and
other related accounting services. For its services, the Transfer Agent is paid
a fee based on total assets of all funds in Delaware Investments for which it
provides such accounting services. Such fee is equal to 0.25% multiplied by the
total amount of assets in the complex for which the Transfer Agent furnishes
accounting services, where such aggregate complex assets are $10 billion or
less, and 0.20% of assets if such aggregate complex assets exceed $10 billion.
The fees are charged to each fund, including the Funds, on an aggregate pro-rata
basis. The asset-based fee payable to the Transfer Agent is subject to a minimum
fee calculated by determining the total number of investment portfolios and
associated classes.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of the Funds' advisory
relationship with the Manager or their distribution relationship with the
Distributor, the Manager and its affiliates could cause Equity Funds IV, Inc. to
delete the words "Delaware Group" from Equity Funds IV, Inc.'s name.
The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn,
NY 11245, is custodian of each Fund's securities and cash. As custodian for a
Fund, Chase maintains a separate account or accounts for the Fund; receives,
holds and releases portfolio securities on account of the Fund; receives and
disburses money on behalf of the Fund; and collects and receives income and
other payments and distributions on account of the Fund's portfolio securities.
Capitalization
Equity Funds IV, Inc. has a present authorized capitalization of one
billion shares of capital stock with a $.01 par value per share. The Board of
Directors has allocated one hundred fifty 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 of DelCap
Fund and one hundred million shares to the Class A Shares, twenty-five million
shares to the Class B Shares, twenty-five million shares to the Class C Shares
and fifty million shares to the Institutional Class of Capital Appreciation
Fund.
Each Class of a Fund represents a proportionate interest in the assets
of that Fund, and each has the same voting and other rights and preferences as
the other classes, except that shares of an 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 of a
Fund may vote only on matters affecting the 12b-1 Plan that relates to the class
of shares that they hold. However, Class B Shares of a Fund may vote on any
proposal to increase materially the fees to be paid by the Fund under the Rule
12b-1 Plan relating to its Class A Shares. General expenses of a Fund will be
allocated on a pro-rata basis to the classes according to asset size, except
that expenses of the Rule 12b-1 Plans of each Fund's Class A, Class B and Class
C Shares will be allocated solely to those classes. While shares of Equity Funds
IV, Inc. have equal voting rights on matters affecting both Funds, a Fund would
vote separately on any matter which it is directly affected by, such as any
change in its own investment objective and policy or action to dissolve the Fund
and as otherwise prescribed by the 1940 Act. Shares of a Fund have a priority in
that Fund's assets, and in gains on
-79-
<PAGE>
and income from the portfolio of the Fund. Shares do not have preemptive rights,
are fully transferable and, when issued, are fully paid and nonassessable.
Beginning November 9, 1992, DelCap Fund began offering DelCap Fund
Institutional Class; beginning September 6, 1994, DelCap Fund began offering the
Class B Shares; and beginning November 29, 1995, DelCap Fund began offering
DelCap Fund C Class.
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. Prior to November 29, 1996, Delaware Group
Equity Funds IV, Inc. was known as Delaware Group DelCap Fund, Inc. and DelCap
Fund series was known as Concept I Series.
Noncumulative Voting
Equity Funds IV, Inc. shares have noncumulative voting rights which
means that the holders of more than 50% of the shares of Equity Funds IV, Inc.
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.
-80-
<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Delaware Group
Equity Funds IV, Inc. and, in its capacity as such, audits the financial
statements contained in the Funds' Annual Reports. Each Fund's Statement of Net
Assets, Statement of Operations, Statement of Changes in Net Assets, Financial
Highlights and Notes to Financial Statements, as well as the report of Ernst &
Young LLP, independent auditors, for the fiscal year ended September 30, 1998
are included in each its Annual Report to shareholders. The financial
statements, the notes relating thereto, the financial highlights and the reports
of Ernst & Young LLP listed above are incorporated by reference from the Annual
Reports into this Part B.
-81-
<PAGE>
APPENDIX A--DESCRIPTION OF RATINGS
Bonds
Excerpts from Moody's Investors Service, Inc.'s description of its bond
ratings: Aaa--judged to be the best quality. They carry the smallest degree of
investment risk; Aa--judged to be of high quality by all standards; A--possess
favorable attributes and are considered "upper medium" grade obligations;
Baa--considered as medium grade obligations. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Excerpts from Standard & Poor's Ratings Group's description of its bond
ratings: AAA--highest grade obligations. They possess the ultimate degree of
protection as to principal and interest; AA--also qualify as high grade
obligations, and in the majority of instances differ from AAA issues only in a
small degree; A--strong ability to pay interest and repay principal although
more susceptible to changes in circumstances; BBB--regarded as having an
adequate capacity to pay interest and repay principal.
Excerpts from Fitch IBCA, Inc.'s description of its bond ratings:
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events; AA--Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds rated in
the AAA and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+; A--Bonds
considered to be investment grade and of high credit quality. The obligor's
ability to pay interest and repay principal is considered to be strong, but may
be more vulnerable to adverse changes in economic conditions and circumstances
that bonds with higher ratings; BBB--Bonds considered to be investment grade and
of satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.
Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the "AAA" category.
Commercial Paper
Excerpts from Moody's description of its two highest commercial paper
ratings: P-1--the highest grade possessing greatest relative strength;
P-2--second highest grade possessing less relative strength than the highest
grade.
Excerpts from S&P's description of its two highest commercial paper
ratings: A-1--judged to be the highest investment grade category possessing the
highest relative strength; A-2--investment grade category possessing less
relative strength than the highest rating.
-82-
<PAGE>
PART C
------
Other Information
-----------------
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A - Financial Highlights
*Part B - Statement of Net Assets
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Accountant's Report
* The financial statements and Accountant's Report
listed above for DelCap Fund and Capital Appreciation
Fund are incorporated into Part B by reference from
the Registrant's Annual Reports for the fiscal year
ended September 30, 1998.
(b) Exhibits:
(1) Articles of Incorporation.
(a) Articles of Incorporation, as amended
and supplemented through November 22,
1995, incorporated into this filing by
reference to Post-Effective Amendment
No. 18 filed November 22, 1995.
(b) Executed Articles Supplementary
(November 28, 1995) incorporated into
this filing by reference to
Post-Effective Amendment No. 21 filed
November 27, 1996.
(c) Executed Articles Supplementary
(November 27, 1996) incorporated into
this filing by reference to
Post-Effective Amendment No. 22 filed
April 30, 1997.
(d) Executed Articles of Amendment
(November 26, 1996) incorporated into
this filing by reference to
Post-Effective Amendment No. 22 filed
April 30, 1997.
(2) By-Laws. By-Laws, as amended to date,
incorporated into this filing by reference to
Post-Effective Amendment No. 18 filed November
22, 1995.
(3) Voting Trust Agreement. Inapplicable.
<PAGE>
PART C - Other Information
(Continued)
(4) Copies of All Instruments Defining the Rights of
Holders.
(a) Articles of Incorporation and Articles
Supplementary.
(i) Article Third of Articles
Supplementary (May 27, 1992),
Article Second of Articles
Supplementary (September 6,
1994), Article Fifth of
Articles of Incorporation
(September 18, 1985) and
Article Eighth of Articles of
Incorporation (September 18,
1985), which was subsequently
redesignated as Article Ninth
(July 31, 1989), incorporated
into this filing by reference
to Post-Effective Amendment No.
18 filed November 22, 1995.
(ii) Article Third of Articles
Supplementary (November 28,
1995) incorporated into this
filing by reference to
Post-Effective Amendment No. 19
filed September 23, 1996.
(iii) Executed Article Fifth of
Articles Supplementary
(November 27, 1996)
incorporated into this filing
by reference to Post-Effective
Amendment No. 22 filed April
30, 1997.
(b) By-Laws. Article II, Article III, as
amended, and Article XIII, which was
subsequently redesignated as Article
XIV, incorporated into this filing by
reference to Post-Effective Amendment
No. 18 filed November 22, 1995.
(5) Investment Management Agreement.
(a) Investment Management Agreement (April
3, 1995) between Delaware Management
Company, Inc. and the Registrant on
behalf of DelCap Fund incorporated into
this filing by reference to
Post-Effective Amendment No. 18 filed
November 22, 1995.
(b) Executed Investment Management
Agreement (November 29, 1996) between
Delaware Management Company, Inc. and
the Registrant on behalf of Capital
Appreciation Fund incorporated into
this filing by reference to
Post-Effective Amendment No. 22 filed
April 30, 1997.
(6) (a) Distribution Agreement.
(i) Executed Distribution
Agreement (April 3, 1995)
between Delaware
Distributors, L.P. and the
Registrant on behalf of
DelCap Fund incorporated
into this filing by
reference to Post-Effective
Amendment No. 21 filed
November 27, 1996.
<PAGE>
PART C - Other Information
(Continued)
(ii) Executed Amendment No. 1 to
Distribution Agreement
(November 29, 1995) between
Delaware Distributors, L.P.
and the Registrant on behalf
of DelCap Fund incorporated
into this filing by
reference to Post-Effective
Amendment No. 21 filed
November 27, 1996.
(iii) Executed Distribution
Agreement (November 29,
1996) between Delaware
Distributors, L.P. and the
Registrant on behalf of
Capital Appreciation Fund
incorporated into this
filing by reference to
Post-Effective Amendment No.
22 filed April 30, 1997.
(b) Administration and Service Agreement.
Form of Administration and Service
Agreement (as amended November 1995)
incorporated into this filing by
reference to Post-Effective Amendment
No. 18 filed November 22, 1995.
(c) Dealer's Agreement. Dealer's Agreement
(as amended November 1995) incorporated
into this filing by reference to
Post-Effective Amendment No. 18 filed
November 22, 1995.
(d) Mutual Fund Agreement. Mutual Fund
Agreement for the Delaware Group of
Funds (as amended November 1995)
incorporated into this filing by
reference to Post-Effective Amendment
No. 19 filed September 23, 1996.
(7) Bonus, Profit Sharing, Pension Contracts.
(a) Amended and Restated Profit Sharing
Plan (November 17, 1994) incorporated
into this filing by reference to
Post-Effective Amendment No. 18 filed
November 22, 1995.
(b) Amendment to Profit Sharing Plan
(December 21, 1995) incorporated into
this filing by reference to
Post-Effective Amendment No. 19 filed
September 23, 1996.
(8) Custodian Agreement.
(a) Executed Custodian Agreement (May 1,
1996) (Module) between The Chase
Manhattan Bank and the Registrant on
behalf of each Fund incorporated into
this filing by reference to
Post-Effective Amendment No. 21 filed
November 27, 1996.
(i) Executed Amendment to
Custodian Agreement
(November 29, 1996) between
The Chase Manhattan Bank and
the Registrant on behalf of
each Fund incorporated into
this filing by reference to
Post-Effective Amendment No.
22 filed April 30, 1997.
<PAGE>
PART C - Other Information
(Continued)
(ii) Executed Amendment to
Custodian Agreement
(November 20, 1997) between
the Chase Manhattan Bank and
the Registrant on behalf of
each Fund attached as
Exhibit.
(b) Form of Securities Lending Agreement
(1996) between The Chase Manhattan Bank
and the Registrant on behalf of DelCap
Fund incorporated into this filing by
reference to Post-Effective Amendment
No. 21 filed November 27, 1996.
(c) Form of Securities Lending Agreement
(1996) between The Chase Manhattan Bank
and the Registrant on behalf of Capital
Appreciation Fund incorporated into
this filing by reference to
Post-Effective Amendment No. 21 filed
November 27, 1996.
(9) Other Material Contracts.
(a) Executed Amended and Restated
Shareholders Services Agreement
(November 29, 1996) between Delaware
Service Company, Inc. and the
Registrant on behalf of each Fund
incorporated into this filing by
reference to Post-Effective Amendment
No. 22 filed April 30, 1997.
(i) Amended Schedule A to
Shareholder Services Agreement
incorporated into this filing
by reference to Post-Effective
Amendment No. 23 filed November
26, 1997.
(ii) Amended Schedule A to
Shareholder Services Agreement
incorporated into this filing
by reference to Post-Effective
Amendment No. 23 filed November
26, 1997.
(iii) Amended Schedule A to
Shareholder Services Agreement
incorporated into this filing
by reference to Post-Effective
Amendment No. 23 filed November
26, 1997.
(b) Executed Fund Accounting Agreement
(August 19, 1996) between Delaware
Service Company, Inc. and the
Registrant on behalf of each Fund
incorporated into this filing by
reference to Post-Effective Amendment
No. 21 filed November 27, 1996.
(i) Executed Amendment No. 7
(October 14, 1998) to Schedule
A to Delaware Group of Funds
Fund Accounting Agreement
attached as Exhibit.
(ii) Executed Amendment No. 8
(December 18, 1998) to
Schedule A to Delaware Group of
Funds Fund Accounting Agreement
attached as Exhibit.
(iii) Executed Amendment No. 9
(March 31, 1998) to Schedule A
to Delaware Group of Funds Fund
Accounting Agreement attached
as Exhibit.
<PAGE>
PART C - Other Information
(Continued)
(10) Opinion of Counsel. Attached as Exhibit.
(11) Consent and Report of Auditors. Attached as
Exhibit.
(12) Inapplicable.
(13) Investment Letter of Initial Shareholder.
Incorporated into this filing by reference to
Pre-Effective Amendment No. 2 filed March 26,
1986.
(14) Model Plans. Inapplicable.
**(15) Plans under Rule 12b-1.
(a) Plan under Rule 12b-1 for DelCap Fund A
Class (November 29, 1995) incorporated
into this filing by reference to
Post-Effective Amendment No. 21 filed
November 27, 1996.
(b) Plan under Rule 12b-1 for DelCap Fund B
Class (November 29, 1995) incorporated
into this filing by reference to
Post-Effective Amendment No. 21 filed
November 27, 1996.
(c) Plan under Rule 12b-1 for DelCap Fund C
Class (November 29, 1995) incorporated
into this filing by reference to
Post-Effective Amendment No. 21 filed
November 27, 1996.
(d) Plan under Rule 12b-1 for Capital
Appreciation Fund A Class (November 29,
1996) incorporated into this filing by
reference to Post-Effective Amendment
No. 22 filed April 30, 1997.
(e) Plan under Rule 12b-1 for Capital
Appreciation Fund B Class (November 29,
1996) incorporated into this filing by
reference to Post-Effective Amendment
No. 22 filed April 30, 1997.
(f) Plan under Rule 12b-1 for Capital
Appreciation Fund C Class (November 29,
1996) incorporated into this filing by
reference to Post-Effective Amendment
No. 22 filed April 30, 1997.
**Relates to DelCap Fund's and Capital Appreciation Fund's retail classes of
shares only.
<PAGE>
PART C - Other Information
(Continued)
(16) Inapplicable.
(17) Financial Data Schedules.
(a) Financial Data Schedules for the fiscal
year ended September 30, 1998 attached
as Exhibit.
(18) Plan under Rule 18f-3.
(a) Amended Plan under Rule 18f-3
(September 18, 1997) incorporated into
this filing by reference to
Post-Effective Amendment No. 23 filed
November 16, 1997.
(i) Amended Appendix A (December
18, 1997) to Plan under Rule
18f-3 attached as Exhibit.
(19) Other: Directors' Power of Attorney.
(a) Power of Attorney dated December 18,
1997 attached as Exhibit.
(b) Power of Attorney for John H. Durham
dated April 16, 1998 attached as
Exhibit.
Item 25.Persons Controlled by or under Common Control with Registrant. None.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Item 26. Number of Holders of Securities.
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Delaware Group Equity Funds IV, Inc.'s
DelCap Fund:
DelCap Fund A Class
Common Stock Par Value 45,041 Accounts as of
$.01 Per Share October 31, 1998
DelCap Fund B Class
Common Stock Par Value 2,593 Accounts as of
$.01 Per Share October 31, 1998
DelCap Fund C Class
Common Stock Par Value 607 Accounts as of
$.01 Per Share October 31, 1998
DelCap Fund Institutional Class
Common Stock Par Value 83 Accounts as of
$.01 Per Share October 31, 1998
Delaware Group Equity Funds IV, Inc.'s
Capital Appreciation Fund:
Capital Appreciation Fund A Class
Common Stock Par Value 8 Accounts as of
$.01 Per Share October 31, 1998
Capital Appreciation Fund B Class
Common Stock Par Value 0 Accounts as of
$.01 Per Share October 31, 1998
Capital Appreciation Fund C Class
Common Stock Par Value 0 Accounts as of
$.01 Per Share October 31, 1998
Capital Appreciation Fund
Institutional Class
Common Stock Par Value 5 Accounts as of
$.01 Per Share October 31, 1998
</TABLE>
Item 27. Indemnification. Incorporated into this filing by reference to
initial Registration Statement filed September 24, 1985 and
Article VII of the By-Laws, as amended, incorporated into this
filing by reference to Post-Effective Amendment No. 18 filed
November 22, 1995.
<PAGE>
PART C - Other Information
(Continued)
Item 28. Business and Other Connections of Investment Adviser.
Delaware Management Company, a series of Delaware Management
Business Trust, (the "Manager") serves as investment manager to the Registrant
and also serves as investment manager or sub-adviser to certain of the other
funds in the Delaware Investments family (Delaware Group Equity Funds I, Inc.,
Delaware Group Equity Funds II, Inc., Delaware Group Equity Funds III, Inc.,
Delaware Group Equity Funds V, Inc., Delaware Group Government Fund, Inc.,
Delaware Group Income Funds, Inc., Delaware Group Limited-Term Government Funds,
Inc., Delaware Group State Tax-Free Income Trust, Delaware Group Tax-Free Money
Fund, Inc., Delaware Group Premium Fund, Inc., Delaware Group Global &
International Funds, Inc., Delaware Pooled Trust, Inc., Delaware Group Adviser
Funds, Inc., Delaware Group Dividend and Income Fund, Inc., Delaware Group
Global Dividend and Income Fund, Inc., Delaware Group Foundation Funds, Voyageur
Intermediate Tax Free Funds, Inc., Voyageur Tax Free Funds, Inc., Voyageur
Funds, Inc., Voyageur Insured Funds, Inc., Voyageur Investment Trust, Voyageur
Investment Trust II, Voyageur Mutual Funds, Inc., Voyageur Mutual Funds II,
Inc., Voyageur Mutual Funds III, Inc., Voyageur Arizona Municipal Income Fund,
Inc., Voyageur Colorado Insured Municipal Income Fund, Inc., Voyageur Florida
Insured Municipal Income Fund, Voyageur Minnesota Municipal Fund, Inc., Voyageur
Minnesota Municipal Fund II, Inc. and Voyageur Minnesota Municipal Fund III,
Inc.). In addition, certain officers of the Manager also serve as
directors/trustees of the other funds in the Delaware Investments family, and
certain officers are also officers of these other funds. A company indirectly
owned by the Manager's indirect parent company acts as principal underwriter to
the mutual funds in the Delaware Investments family (see Item 29 below) and
another such company acts as the shareholder services, dividend disbursing,
accounting servicing and transfer agent for all of the mutual funds in the
Delaware Investments family.
<PAGE>
PART C - Other Information
(Continued)
The following persons serving as directors or officers of the
Manager have held the following positions during the past two years:
Name and Principle Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Wayne A. Stork Chairman of the Board, President, Chief Executive
Officer, Chief Investment Officer and Director of
Delaware Management Company (a series of Delaware
Management Business Trust); Chairman of the Board,
President, Chief Executive Officer, Chief
Investment Officer and Director/Trustee of
Delaware Management Company, Inc.; Chairman of the
Board, President, Chief Executive Officer and
Director of DMH Corp., Delaware Distributors, Inc.
and Founders Holdings, Inc.; Chairman, Chief
Executive Officer and Chief Investment Officer of
Delaware Investment Advisers (a series of Delaware
Management Business Trust); Chairman, Chief
Executive Officer and Director of Delaware
International Holdings, Ltd. and Delaware
International Advisers Ltd.; Chairman of the Board
and Director of the Registrant, each of the other
funds in the Delaware Investments family, Delaware
Management Holdings, Inc., and Delaware Capital
Management, Inc.; Chairman of Delaware
Distributors, L.P.; President and Chief Executive
Officer of Delvoy, Inc.; and Director and/or
Trustee of Delaware Service Company, Inc. and
Retirement Financial Services, Inc.
Richard G. Unruh, Jr. Executive Vice President of the Registrant, each
of the other funds in the Delaware Investments
family, Delaware Management Holdings, Inc.;
Delaware Capital Management, Inc; and Delaware
Management Company (a series of Delaware
Management Business Trust) Executive Vice
President and Director/Trustee of Delaware
Management Company, Inc. and Delaware Management
Business Trust; President of Delaware Investment
Advisers (a series of Delaware Management Business
Trust); and Director of Delaware International
Advisers Ltd.
Board of Directors, Chairman of Finance
Committee, Keystone Insurance Company
since 1989, 2040 Market Street,
Philadelphia, PA; Board of Directors,
Chairman of Finance Committee, AAA Mid
Atlantic, Inc. since 1989, 2040 Market
Street, Philadelphia, PA; Board of
Directors, Metron, Inc. since 1995, 11911
Freedom Drive, Reston, VA
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Name and Principle Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Paul E. Suckow Executive Vice President/Chief Investment Officer,
Fixed Income of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), the Registrant, each of the other funds in
the Delaware Investments family and Delaware
Management Holdings, Inc.; Executive Vice
President and Director of Founders Holdings, Inc.;
Executive Vice President of Delaware Capital
Management, Inc. and Delaware Management Business
Trust; and Director of Founders CBO Corporation
Director, HYPPCO Finance Company Ltd.
David K. Downes Executive Vice President, Chief Operating Officer
and Chief Financial Officer of the Registrant and
each of the other funds in the Delaware
Investments family, Delaware Management Holdings,
Inc., Founders CBO Corporation, Delaware Capital
Management, Inc., Delaware Management Company (a
series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust) and Delaware
Distributors, L.P.; Executive Vice President,
Chief Operating Officer, Chief Financial Officer
and Director of Delaware Management Company, Inc.,
DMH Corp, Delaware Distributors, Inc., Founders
Holdings, Inc. and Delvoy, Inc.; Executive Vice
President, Chief Financial Officer, Chief
Administrative Officer and Trustee of Delaware
Management Business Trust; President, Chief
Executive Officer, Chief Financial Officer and
Director of Delaware Service Company, Inc.;
President, Chief Operating Officer, Chief
Financial Officer and Director of Delaware
International Holdings Ltd.; Chairman, Chief
Executive Officer and Director of Retirement
Financial Services, Inc.; Chairman and Director of
Delaware Management Trust Company; Director of
Delaware International Advisers Ltd.
Chief Executive Officer and Director of Forewarn,
Inc. since 1993, 8 Clayton Place, Newtown Square,
PA
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Name and Principle Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Richard J. Flannery Executive Vice President and General Counsel of
Delaware Management Holdings, Inc., DMH Corp.,
Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Distributors, L.P.,
Delaware Management Trust Company, Delaware
Capital Management, Inc., Delaware Service
Company, Inc., Delaware Management Company (a
series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust), Founders CBO
Corporation and Retirement Financial Services,
Inc.; Executive Vice President/General Counsel and
Director of Delaware International Holdings Ltd.,
Founders Holdings, Inc. and Delvoy, Inc.; Senior
Vice President of the Registrant and each of the
other funds in the Delaware Investments family;
Director of Delaware International Advisers Ltd.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since
1991, Bulltown Rd., Elverton, PA; Director and
Member of Executive Committee of Stonewall Links,
Inc. since 1991, Bulltown Rd., Elverton, PA
George M. Senior Vice President, Secretary and General
Chamberlain, Jr. Counsel of the Registrant, each of the other
funds in the Delaware Investments family, Senior
Vice President and Secretary of Delaware
Distributors, Inc., Delaware Management Company (a
series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust) and Delaware Management
Holdings, Inc.; Senior Vice President, Secretary
and Director/Trustee of Delaware Management
Company, Inc., DMH Corp., Delaware Distributors,
Inc., Delaware Service Company, Inc., Founders
Holdings, Inc., Delaware Capital Management, Inc.,
Retirement Financial Services, Inc., Delvoy, Inc.
and Delaware Management Business Trust; Senior
Vice President and Director of Delaware
International Holdings Ltd.; Executive Vice
President, Secretary and Director of Delaware
Management Trust Company; Director of Delaware
International Advisers Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Michael P. Bishof Senior Vice President and Treasurer of the
Registrant, each of the other funds in the
Delaware Investments family and Founders Holdings,
Inc.; Senior Vice President/Investment Accounting
of Delaware Management Company, Inc. Delaware
Management Company (a series of Delaware
Management Business Trust) and Delaware Service
Company, Inc.; Senior Vice President and
Treasurer/ Manager, Investment Accounting of
Delaware Distributors, L.P. and Delaware
Investment Advisers; Assistant Treasurer of
Founders CBO Corporation; and Senior Vice
President and Manager of Investment Accounting of
Delaware International Holdings Ltd.
Joseph H. Hastings Senior Vice President/Corporate Controller and
Treasurer of Delaware Management Holdings, Inc.,
DMH Corp., Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Capital
Management, Inc., Delaware Distributors, L.P.,
Delaware Service Company, Inc., Delaware
International Holdings Ltd., Delaware Management
Company (a series of Delaware Management Business
Trust), Delvoy, Inc. and Delaware Management
Business Trust; Senior Vice President/Corporate
Controller of the Registrant, each of the other
funds in the Delaware Investments family and
Founders Holdings, Inc.; Executive Vice President,
Chief Financial Officer and Treasurer of Delaware
Management Trust Company; Chief Financial Officer
and Treasurer of Retirement Financial Services,
Inc.; Senior Vice President/Assistant Treasurer of
Founders CBO Corporation
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Name and Principle Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Michael T. Taggart Senior Vice President/Facilities Management and
Administrative Services of Delaware Management
Company, Inc. and Delaware Management Company (a
series of Delaware Management Business Trust)
Douglas L. Anderson Senior Vice President/Operations of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust); Retirement Financial Services, Inc. and
Delaware Service Company, Inc.; Senior Vice
President/Operations and Director of Delaware
Management Trust Company
James L. Shields Senior Vice President/Chief Information Officer of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust); Delaware Service
Company, Inc. and Retirement Financial Services,
Inc.
Eric E. Miller Vice President, Assistant Secretary and Deputy
General Counsel of the Registrant and each of the
other funds in the Delaware Investments family,
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), Delaware Management Holdings, Inc., DMH
Corp., Delaware Distributors, L.P., Delaware
Distributors Inc., Delaware Service Company, Inc.,
Delaware Management Trust Company, Founders
Holdings, Inc., Delaware Capital Management, Inc.
and Retirement Financial Services, Inc.; and Vice
President and Assistant Secretary of Delvoy, Inc.
Richelle S. Maestro Vice President and Assistant Secretary of the
Registrant, each of the other funds in the
Delaware Investments family, Delaware Management
Company, Inc., Delaware Management Company (a
series of Delaware Management Business Trust);
Delaware Investment Advisers, Delaware Management
Holdings, Inc., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service
Company, Inc., DMH Corp., Delaware Management
Trust Company, Delaware Capital Management, Inc.,
Retirement Financial Services, Inc., Founders
Holdings, Inc. and Delvoy, Inc.; Secretary of
Founders CBO Corporation; and Assistant Secretary
of Delaware International Holdings Ltd.
Partner of Tri-R Associates since 1989, 10001
Sandmeyer Lane, Philadelphia, PA
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Name and Principle Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Richard Salus(1) Vice President/Assistant Controller of Delaware
Management Company, Inc. and Delaware Management
Trust Company
Bruce A. Ulmer Vice President/Director of LNC Internal Audit of
Delaware Management Company, Inc., the Registrant,
each of the other funds in the Delaware Group,
Delaware Management Holdings, Inc., DMH Corp.,
Delaware Management Trust Company and Retirement
Financial Services, Inc.; Vice President/Director
of Internal Audit of Delvoy, Inc.
Joel A. Ettinger(2) Vice President/Director of Taxation of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), the Registrant, each of the other funds in
the Delaware Investments family, Delaware
Management Holdings, Inc.
Christopher Adams Vice President/Business Manager, Equity Department
of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust) and Delaware Service
Company, Inc.
Dennis J. Mara(3) Vice President/Acquisitions of Delaware Management
Company, Inc. and Delaware Management Company (a
series of Delaware Management Business Trust)
Scott Metzger Vice President/Business Development of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust) and Delaware Service Company, Inc.
Lisa O. Brinkley Vice President/Compliance of Delaware Management
Company, Inc., Delaware Management Company (a
series of Delaware Management Business Trust), the
Registrant, each of the other funds in the
Delaware Investments family, DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware Capital
Management, Inc. and Retirement Financial
Services, Inc.; Vice President of Delvoy, Inc.
Mary Ellen Carrozza Vice President/Client Services of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust) and Delaware Pooled Trust, Inc.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Name and Principle Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Gerald T. Nichols Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), the fixed-income investment companies in
the Delaware Investments family; Vice President of
Founders Holdings, Inc.; and Treasurer, Assistant
Secretary and Director of Founders CBO Corporation
Paul A. Matlack Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), the fixed-income investment companies in
the Delaware Investments family; Vice President of
Founders Holdings, Inc.; and President and
Director of Founders CBO Corporation.
Gary A. Reed Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), the fixed-income investment companies in
the Delaware Investments family and Delaware
Capital Management, Inc.
Patrick P. Coyne Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), the fixed-income investment companies in
the Delaware Investments family and Delaware
Capital Management, Inc.
Roger A. Early Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), the fixed-income funds in the Delaware
Investments family
Mitchell L. Conery(4) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. Delaware
Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), and the fixed-income investment companies
in the Delaware Investments family
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Name and Principle Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
George H. Burwell Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), the Registrant and the other equity
investment companies in the Delaware Investments
family
John B. Fields Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), the Registrant and the other equity
investment companies in the Delaware Investments
family and Delaware Capital Management, Inc.
Gerald S. Frey Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), the Registrant and the other equity
investment companies in the Delaware Investments
family
Christopher Beck(5) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), the Registrant and the other equity
investment companies in the Delaware Investments
family
Elizabeth H. Howell(6) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), and the fixed-income investment companies
in the Delaware Investments family
Andrew M. McCullagh(7) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), and the fixed-income investment companies
in the Delaware Investments family
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Name and Principle Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Babak Zenouzi Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), the Registrant and the other equity
investment companies in the Delaware Investments
family
Paul Grillo Vice President/Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), and the
fixed-income investment companies in the Delaware
Investments family
John Heffern Vice President/Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), the
Registrant and the other equity investment
companies in the Delaware Investments family
Cynthia I. Isom Vice President/Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust) and the fixed-income investment companies
in the Delaware Investments family
J. Paul Dokas(8) Vice President/Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), the Registrant and the other equity
investment companies in the Delaware Investments
family
Marshall T. Bassett(9) Vice President/Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), the
Registrant and the other equity investment
companies in the Delaware Investments family
John A. Heffern(10) Vice President/Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), the Registrant and the other equity
investment companies in the Delaware Investments
family
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Name and Principle Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Lori P. Wachs Vice President/Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), the Registrant and the other investment
companies in the Delaware Investments family
1 SENIOR MANAGER, Ernst & Young LLP prior to December 1996.
2 TAX MANAGER, Ernst & Young LLP prior to April 1998.
3 CORPORATE CONTROLLER, IIS prior to July 1997 and DIRECTOR,
FINANCIAL PLANNING, Decision One prior to March 1996.
4 INVESTMENT OFFICER, Travelers Insurance prior to January 1997.
5 SENIOR PORTFOLIO MANAGER, Pitcairn Trust Company prior to May
1997.
6 SENIOR PORTFOLIO MANAGER, Voyageur Fund Managers, Inc. prior to
May 1997.
7 SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, Voyageur Asset
Management LLC prior to May 1997.
8 DIRECTOR OF TRUST INVESTMENTS, Bell Atlantic Corporation prior
to February 1997.
9 VICE PRESIDENT, Morgan Stanley Asset Management prior to March
1997.
10 SENIOR VICE PRESIDENT, EQUITY RESEARCH, NatWest Securities
Corporation prior to March 1997.
Item 29. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal
underwriter for all the mutual funds in the
Delaware Group.
(b) Information with respect to each director, officer
or partner of principal underwriter:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
Delaware Investment
Advisers Limited Partner None
Delaware Capital
Management, Inc. Limited Partner None
Wayne A. Stork Chairman Chairman
Bruce D. Barton President and Chief Executive None
Officer
David K. Downes Executive Vice President, Executive Vice President,
Chief Operating Officer Chief Operating Officer and
and Chief Financial Officer Chief Financial Officer
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Richard J. Flannery Executive Vice President/ Senior Vice President
General Counsel
George M. Chamberlain, Jr. Senior Vice President/Secretary Senior Vice President/
Secretary/General Counsel
Joseph H. Hastings Senior Vice President/Corporate Senior Vice President/
Controller & Treasurer Corporate Controller
Terrence P. Cunningham Senior Vice President/Financial None
Institutions
Thomas E. Sawyer Senior Vice President/ None
National Sales Director
Mac McAuliffe Senior Vice President/Sales None
Manager, Western Division
J. Chris Meyer Senior Vice President/ None
Director Product Management
William M. Kimbrough Senior Vice President/Wholesaler None
Daniel J. Brooks Senior Vice President/Wholesaler None
Bradley L. Kolstoe Senior Vice President/Western None
Division Sales Manager
Henry W. Orvin Senior Vice President/Eastern None
Division Sales Manager
Michael P. Bishof Senior Vice President and Treasurer/ Senior Vice
Manager, Investment Accounting President/Treasurer
Eric E. Miller Vice President/Assistant Secretary/ Vice President/Assistant
Deputy General Counsel Secretary/Deputy General
Counsel
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Lisa O. Brinkley Vice President/Compliance Vice President/Compliance
Daniel H. Carlson Vice President/Strategic Marketing None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Diane M. Anderson Vice President/Plan Record Keeping None
and Administration
Anthony J. Scalia Vice President/Defined Contribution None
Sales, SW Territory
Courtney S. West Vice President/Defined Contribution None
Sales, NE Territory
Denise F. Guerriere Vice President/Client Services None
Gordon E. Searles Vice President/Client Services None
Lori M. Burgess Vice President/Client Services None
Julia R. Vander Els Vice President/Participant Services None
Jerome J. Alrutz Vice President/Retail Sales None
Scott Metzger Vice President/Business Vice President/Business
Development Development
Larry Carr Vice President/Sales Manager None
Stephen C. Hall Vice President/Institutional Sales None
Gregory J. McMillan Vice President/National Accounts None
Holly W. Reimel Senior Vice President/Manager, None
National Accounts
Christopher H. Price Vice President/Manager, None
Insurance
Stephen J. DeAngelis Senior Vice President, National None
Director/Manager Account Services
Andrew W. Whitaker Vice President/Financial Institutions None
Jesse Emery Vice President/Marketing None
Communications
Darryl S. Grayson Vice President, Broker/Dealer None
Internal Sales
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
Dinah J. Huntoon Vice President/Product None
Manager Equity
Soohee Lee Vice President/Fixed Income None
Product Management
Michael J. Woods Vice President/UIT Product None
Management
Ellen M. Krott Vice President/Marketing None
Dale L. Kurtz Vice President/Marketing Support None
David P. Anderson Vice President/Wholesaler None
Lee D. Beck Vice President/Wholesaler None
Gabriella Bercze Vice President/Wholesaler None
Larry D. Birdwell Vice President/Wholesaler None
Terrence L. Bussard Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William L. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Joseph Gallagher Vice President/Wholesaler None
Thomas C. Gallagher Vice President/Wholesaler None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Douglas R. Glennon Vice President/Wholesaler None
Ronald A. Haimowitz Vice President/Wholesaler None
Edward J. Hecker Vice President/Wholesaler None
Christopher L. Johnston Vice President/Wholesaler None
Michael P. Jordan Vice President/Wholesaler None
Jeffrey A. Keinert Vice President/Wholesaler None
Thomas P. Kennett Vice President/Wholesaler None
Theodore T. Malone Vice President/Wholesaler None
Debbie A. Marler Vice President/Wholesaler None
Nathan W. Medin Vice President/Wholesaler None
Roger J. Miller Vice President/Wholesaler None
Andrew Morris Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
Scott Naughton Vice President/Wholesaler None
Stephen C. Nell Vice President/Wholesaler None
Julia A. Nye Vice President/Wholesaler None
Joseph T. Owczarek Vice President/Wholesaler None
Mary Ellen Pernice-Fadden Vice President/Wholesaler None
Mark A. Pletts Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
Laura E. Roman Vice President/Wholesaler None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Linda Schulz Vice President/Wholesaler None
Edward B. Sheridan Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Julia A. Stanton Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
Edward J. Wagner Vice President/Wholesaler None
Wayne W. Wagner Vice President/Wholesaler None
John A. Wells Vice President/Marketing None
Technology
Scott Whitehouse Vice President/Wholesaler None
(c) Not Applicable.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Item 30. Location of Accounts and Records.
All accounts and records are maintained in Philadelphia at 1818
Market Street, Philadelphia, PA 19103 or One Commerce Square,
Philadelphia, PA 19103.
Item 31. Management Services. None.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
(d) Not Applicable.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia and Commonwealth of Pennsylvania on
this 23rd day of November, 1998.
DELAWARE GROUP EQUITY FUNDS IV, INC.
By /s/Wayne A. Stork
------------------
Wayne A. Stork
Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------------------ --------------------------------------- --------------------
<S> <C> <C>
/s/ Wayne A. Stork Chairman and Director November 23, 1998
- ------------------------------------------------
Wayne A. Stork
Executive Vice President/Chief
Operating Officer/Chief Financial
Officer (Principal Financial Officer and
/s/ David K. Downes Principal Accounting Officer) November 23, 1998
- -------------------------------------------------
David K. Downes
/s/Walter P. Babich * Director November 23, 1998
- -------------------------------------------------
Walter P. Babich
/s/John H. Durham * Director November 23, 1998
- -------------------------------------------------
John H. Durham
/s/Anthony D. Knerr * Director November 23, 1998
- -------------------------------------------------
Anthony D. Knerr
/s/Ann R. Leven * Director November 23, 1998
- -------------------------------------------------
Ann R. Leven
/s/W. Thacher Longstreth * Director November 23, 1998
- -------------------------------------------------
W. Thacher Longstreth
/s/Thomas F. Madison * Director November 23, 1998
- -------------------------------------------------
Thomas F. Madison
/s/Jeffrey J. Nick * Director November 23, 1998
- -------------------------------------------------
Jeffrey J. Nick
/s/Charles E. Peck * Director November 23, 1998
- -------------------------------------------------
Charles E. Peck
*By /s/ Wayne A. Stork
-------------------------
Wayne A. Stork
as Attorney-in-Fact for
each of the persons indicated
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit
- ----------- -------
EX-99.B8BII Executed Amendment to Custodian Agreement
(November 20, 1997) between the Chase
Manhattan Bank and the Registrant of each
Fund
EX-99.B9BI Executed Amendment No. 7 (October 14,
1997) to Schedule A to Delaware Group of
Funds Fund Accounting Agreement
EX-99.B9BII Executed Amendment No. 8 (December 18,
1997) to Delaware Group of Funds
Fund Accounting Agreement
EX-99.B9BIII Executed Amendment No. 9 (March 31, 1998)
to Delaware Group of Funds
Fund Accounting Agreement
EX-99.B10 Opinion of Counsel
EX-99.B11 Consent of Auditors
EX-99.B18AI Amended Appendix A (December 18, 1997) to
Plan under Rule 18f-3
EX-99.B19A Power of Attorney dated December 18, 1997
EX-99.B19B Power of Attorney for John H. Durham
dated April 16, 1998
EX-27 Financial Data Schedules
<PAGE>
EX-99.B8BII
Exhibit 24(b)(8)(b)(2)
AMENDMENT, dated November 20, 1997 to the May 1, 1996 custody agreement
("Agreement"), between those registered investment companies listed on Schedule
A to the Agreement (each a "Customer"), having a place of business at 1818
Market Street, Philadelphia, PA 19103 and The Chase Manhattan Bank ("Bank"),
having a place of business at 270 Park Ave., New York, N.Y.
10017-2070.
It is hereby agreed as follows:
Section 1. Except as modified hereby, the Agreement is confirmed in all
respects. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Agreement.
Section 2. The Agreement is amended by deleting the mutual fund rider
thereto and inserting, in lieu thereof, the following mutual fund rider:
1. Add a new Section 15 to the Agreement as follows:
15. COMPLIANCE WITH SEC RULE 17F-5 ("RULE 17F-5").
(a) Customer's board of directors (or equivalent body) (hereinafter
"Board") hereby delegates to Bank, and Bank hereby accepts the delegation to it,
of the obligation to perform as Customer's "Foreign Custody Manager" (as that
term is defined in Rule 17f-5(a)(2)) adopted under the Investment Company Act of
1940 ("Act"), as amended ("1940 Act"), the following responsibilities in a
manner consistent with Rule 17f-5, to: (i) select Eligible Foreign Custodians
(as that term is defined in Rule 17f-5(a)(1), and as the same may be amended
from time to time, or that have otherwise been made exempt pursuant to an SEC
exemptive order); (ii) enter into written contracts with such Eligible Foreign
Custodians that are banks or trust companies and with Eligible Foreign
Custodians that are "Securities Depositories" (as defined in Rule 17f-5(a)(6))
and that are not Compulsory Depositories (as defined below) where the Depository
has such a contract; and (iii) to monitor the appropriateness of maintaining
Assets of the series of the Customer with such Eligible Foreign Custodians;
provided that, Bank shall not be responsible for these duties with respect to
any compulsory Securities Depository ("Compulsory Depository"). A Compulsory
Depository shall mean a Securities Depository or clearing agency the use of
which is compulsory because: (1) its use is required by law or regulation or (2)
maintaining securities outside the depository is not consistent with prevailing
custodial practices in the country which the Depository serves. Compulsory
Depositories used by Chase as of the date hereof are set forth in Appendix 1-A
hereto. Appendix 1-A may be amended on notice to
<PAGE>
Customer from time to time. In that connection, Bank shall notify Customer
promptly of pending changes to Appendix 1-A.
(b) In connection with the foregoing, Bank shall:
(i) provide written reports to Customer's Board upon the placement of
Assets with a particular Eligible Foreign Custodian and of any Material
Change (as defined below) in the arrangements with such Eligible Foreign
Custodians, with such reports to be provided to Customer's Board at such
times as the Board deems reasonable and appropriate based on the
circumstances of Customer's foreign custody arrangements (and until further
notice from Customer such reports shall be provided within 30 days after
Bank becomes aware of any such Material Change. For purposes of the
foregoing, a Material Change shall include, but shall not be limited to,
Bank's decision to remove Customer's Assets from a particular Eligible
Foreign Custodian, an event that has a material adverse affect on an
Eligible Foreign Custodian's financial or operational strength, any
non-compliance by an Eligible Foreign Custodian with a "Material Term" of
Bank's subcustodian agreement with such Eligible Foreign Custodian (as
defined below) or any failure by an Eligible Foreign Custodian to meet the
requirements for its status as such under Rule 17f-5. A Material Term shall
mean a term which provides that (a) the Customer will be adequately
indemnified or its Assets adequately insured, or an adequate combination
thereof, in the event of loss; (b) the Assets of the Series will not be
subject to any right, charge, security interest, lien or claim of any kind
in favor of an Eligible Foreign Custodian or such Eligible Foreign
Custodian's creditors, except a claim of payment for their safe custody or
administration, or in the case of cash deposits, liens or rights in favor
of creditors of the Eligible Foreign Custodian arising under bankruptcy,
insolvency or similar laws; (c) beneficial ownership for the Assets of the
Series will be freely transferable without the payment of money or value
other than for safe custody or administration of the Assets of the Series;
(d) adequate records will be maintained identifying the Assets as belonging
to the Customer or the Series or as being held by a third party for the
benefit of the Customer or the Series; (e) the independent auditors for the
Customer will be given access to those records or confirmation of the
contents of those records; and (f) the Customer will receive periodic
reports with respect to the safekeeping of the Series' Assets, including,
but not necessarily limited to, notification of any transfer to or from the
Customer's account or a third party account containing Assets held for the
benefit of the Customer. In addition, in the event that a contract with an
Eligible Foreign Custodian does not include any or all of the terms
described in (a) through (f) of this paragraph 15(b)(i), a Material Term
shall mean a term which, in the Bank's judgment, if not complied with,
would cause the contract not to provide the same or greater level of care
and protection for Customer's Assets than if the contract contained the
provisions described in (a) through (f) of this paragraph 15(b)(i).
<PAGE>
(ii) exercise such reasonable care, prudence and diligence in performing as
Customer's Foreign Custody Manager as a person having responsibility for
the safekeeping of Assets would exercise;
(iii) in selecting an Eligible Foreign Custodian, first have determined
that Assets placed and maintained in the safekeeping of such Eligible
Foreign Custodian shall be subject to reasonable care, based on the
standards applicable to custodians in the relevant market, after having
considered all factors relevant to the safekeeping of such Assets,
including, without limitation, those factors set forth in Rule
17f-5(c)(1)(i)-(iv);
(iv) determine that the written contract with the Eligible Foreign
Custodian (or, in the case of an Eligible Foreign Custodian that is a
Securities Depository or clearing agency, such contract, the rules or
established practices or procedures of the depository, or any combination
of the foregoing) requires that the Eligible Foreign Custodian will provide
reasonable care for Assets based on the standards applicable to custodians
in the relevant market.
(v) have established a system to monitor the continued appropriateness of
maintaining Assets with particular Eligible Foreign Custodians based on the
standards set forth herein and of the governing contractual arrangements
based on the standards set forth in Rule 17f-5(c)(2), as it may be amended
from time to time.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
Assets on behalf of Customer with Eligible Foreign Custodians pursuant to a
written contract which either contains the terms described in Rule
17f-5(c)(2)(i) or which, in lieu of any or all of the terms described in Rule
17f-5(c)(2)(i), contains such other provisions which the Bank determines will
provide in their entirety, the same or a greater level of care and protection
for the Customer's Assets as the provisions of Rule 17f-5(c)(2)(i) in their
entirety. The written contract shall be in such form as deemed appropriate by
Bank. In addition, with respect to Eligible Foreign Custodians that are
non-compulsory Securities Depositories, reliance may be had on such a contract,
the rules or established practices and procedures of such Depository or any
combination thereof.
(c) Except as expressly provided herein, Customer shall be solely
responsible to assure that the maintenance of Assets hereunder complies with the
rules, regulations, interpretations and exemptive orders promulgated by or under
the authority of the
<PAGE>
SEC which are applicable to Fund's business or which have been granted to Fund.
Bank shall advise Customer of any exemptive orders which it obtains which may
have an impact on Bank's relationship with Customer.
(d) Bank represents to Customer that it is a U.S. Bank as defined in Rule
17f-5(a)(7). Customer represents to Bank that: (1) the Assets being placed and
maintained in Bank's custody are subject to the 1940 Act, as the same may be
amended from time to time; (2) its Board has determined that it is reasonable to
rely on Bank to perform as Customer's Foreign Custody Manager. Nothing contained
herein shall require Bank, on Customer's behalf, to make any selection regarding
countries in which Customer invests or to engage in any monitoring of Customer's
decision to invest in any particular country in which Bank selects , contracts
and monitors Eligible Foreign Custodians, as Customer's Foreign Custody Manager
pursuant to the Agreement.
(e) Bank shall provide to Customer such information as is specified in
Appendix 1-B hereto. Customer hereby acknowledges that: (i) such information is
solely designed to inform Customer of market conditions and procedures, but is
not intended to influence Customer's investment decisions; and (ii) Bank has
gathered the information from sources it considers reliable, but that Bank shall
have no responsibility for inaccuracies or incomplete information except to the
extent that Bank was negligent in selecting the sources of such information.
2. Add the following after the first sentence of Section 3 of the
Agreement:
At the request of Customer, Bank may, but need not, add to Schedule A an
Eligible Foreign Custodian that is either a bank or a non-Compulsory
Depository where Bank has not acted as Foreign Custody Manager with respect
to the selection thereof. Bank shall notify Customer in the event that it
elects not to add any such entity.
3. Add the following language to the end of Section 3 of the Agreement:
The term Subcustodian as used herein shall mean the following:
(a) a "U.S. Bank," which shall mean a U.S. bank as defined in Rule
17f-5(a)(7); and (b) with respect to Securities for which the primary
market is outside the U.S. an "Eligible Foreign Custodian," shall mean (i)
a banking institution or trust company, incorporated or organized under the
laws of a country other than the United States, that is regulated as such
by that country's government or an agency thereof, (ii) a majority-owned
direct or indirect subsidiary of a U.S. Bank or bank
<PAGE>
holding company which subsidiary is incorporated or organized under the
laws of a country other than the United States; (iii) a Securities
Depository or clearing agency (other than a Compulsory Depository),
incorporated or organized under the laws of a country other than the United
States, that acts as a system for the central handling of securities or
equivalent book-entries in that country and that is regulated by a foreign
financial regulatory autho rity as defined under section 2(a)(50) of the
1940 Act, (iv) a Securities Depository or clearing agency organized under
the laws of a country other than the United States that acts as a
transnational system ("Transnational Depository") for the central handling
of securities or equivalent book-entries, and (v) any other entity that
shall have been so qualified by exemptive order, rule or other appropriate
action of the SEC.
The term Subcustodian as used in Section 12(a)(i) (except the last sentence
thereof) shall not include any Eligible Foreign Custodians as to which Bank
has not acted as Foreign Custody Manager, any Compulsory Depository and any
Transnational Depository.
4. Add the following after the word "administration" at the end of
Subsection 4(d)(i): "or, in the case of cash deposits, liens or rights in favor
of creditors of Subcustodian arising under bankruptcy, insolvency, or similar
laws".
5. Delete all of Subsection 4(e) after the word "located" in (ii) thereof
and add the word "and" between "Subcustodian" and "(ii)".
*********************
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
Customer THE CHASE MANHATTAN BANK
By: /s/ Michael P. Bishof By: /s/ Rosemary M. Stidmon
Name: Michael P. Bishof Name: Rosemary M. Stidmon
Title: Senior Vice President/ Title: Vice President
Treasurer
Date: Nov. 20, 1997 Date: Nov. 20, 1997
<PAGE>
APPENDIX A
Delaware Group Adviser Funds, Inc.
U.S. Growth Fund
Overseas Equity Fund
New Pacific Fund
Delaware Group Equity Funds I, Inc.
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc.
Blue Chip Fund
Quantum Fund
Delaware Group Equity Funds IV, Inc.
DelCap Fund
Capital Appreciation Fund
Delaware Group Equity Funds V, Inc.
Retirement Income Fund
Small Cap Value Fund
Delaware Pooled Trust, Inc.
The International Equity Portfolio
The International Fixed Income Portfolio
The Global Equity Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Real Estate Investment Trust Portfolio II
The Emerging Markets Portfolio
Delaware Group Global & International Funds, Inc.
Emerging Markets Series
Global Assets Series
Global Bond Series
Global Equity Series
International Equity Series
International Small Cap Series
Delaware Group Premium Fund, Inc.
Convertible Securities Series
Devon Series
Emerging Markets Series
Quantum Series
Strategic Income Series
Global Bond Series
DelCap Series
International Equity Series
Delaware Series
Value Series
Voyageur Mutual Funds III, Inc.
Tax-Efficient Equity Fund
Dated: November 20, 1997
<PAGE>
Appendix 1-A
COMPULSORY DEPOSITORIES
Argentina Caja de Valores Equity, Corporate &
Government Debt
Australia Austraclear Ltd. Corporate Debt, Money
Market & Semi-Government Debt
CHESS Equity
(Clearing House Electronic Sub-
register System)
RITS Government Debt
(Reserve Bank Information and
Transfer System)
Austria Oesterreichische Kontrolbank AG Equity, Corporate +
Government Debt
Belgium CIK Equity + Corporate
(Caisse Interprofessionnelle de Debt
Depots et de Virements de Titres)
Banque Nationale de Belgique Treasury Bills +
Government Debt
<PAGE>
Brazil BOVESPA Equity
(Bolsa de Valores de Sao Paolo)
BVRJ Equity
(Bolsa de Valores de Rio de
Janeiro)
Canada CDS Equity, Corporate +
(Canadian Depository for Government Debt
Securities)
China, SSCCRC Equity
Shanghai (Shanghai Securities Central
Clearing and Registration Corp.)
China, SSCC Equity
Shenzhen (Shenzhen Securities
Registration Co., Ltd.)
Czech SCP Equity + Long-Term
Republic (Securities Center) Government Debt
TKD Treasury Bills +
(Trh Kratkododich Dlluhopisu or Money Market
Short-Term Bond Market)
Denmark VP Equity, Corporate +
(Vaerdipapircentralen) Government Debt
Egypt Misr Clearing & Sec. Dep. Equity
Estonia EVK Equity
(Estonian Central Depository for
Securities Ltd.)
Euromarket Cedel & Euroclear Euro-Debt
Finland CSR Equity + Government
(Central Share Registry Finland) Debt
Helsinki Money Market Center Money Market
Ltd.
France SICOVAM Equity + Corporate
(Banque de France) Debt.
France SATURNE Government Debt.
(Banque de France)
Germany DKV Equity, Corporate +
(Deutscher Kassenverein) Government Debt
Greece Apothetirio Titlon A.E. Equity
Bank of Greece Government Debt
<PAGE>
Hong Kong CCASS Equity
(Central Clearing and
Settlement System)
CMU Corporate +
(Central Moneymarkets Unit) Government Debt
Hungary Keler Ltd. Equity + Government
Debt
Ireland CREST Equity
GSO Government Debt
(Gilt Settlement Office)
Israel TASE Clearing House Equity, Corporate +
(Tel Aviv Stock Exchange Government Debt
Clearing House)
Italy Monte Titoli Equity + Corporate Debt
Bank of Italy Government Debt
Japan Bank of Japan Registered Government
Debt
Latvia LCD Equity + Government
(Latvian Central Depository) Debt
Lebanon Midclear Equity
(Custodian and Clearing Center
of Lebanon and the Middle East)
Luxembourg Cedel Equity
Malaysia MCD Equity
(Malaysian Central Depository
Snd Bhd)
Mauritius CDS Equity
(Central Depository System)
Mexico Indeval Equity, Corporate +
(Institucion para el Deposito Government Debt.
de Valores)
Morocco Maroclear Equity + Corporate Debt
Bank Al'Maghrib Government Debt
Netherlands NECIGEF/KAS Associate NV Equity, Corp. + Govt. D
De Nederlandsche Bank N.V. Money Market
<PAGE>
Netherlands NIEC Premium Bonds
(Nederlands Interpforessioneel
Effectencentrum B.V.)
New Zealand Austraclear New Zealand Equity, Corporate +
Government Debt
Norway VPS Equity, Corporate +
(Verdipapirsentralen) Government Debt
Oman NONE
Pakistan CDC Equity
(Central Depository Company of
Pakistan Ltd.)
Peru CAVALI Equity
(Caja de Valores)
Philippines PCD Equity
(Philippine Central Depository)
Poland NDS Equity, Long-Term
(National Securities Government Debt +
Depository) Vouchers
CRT Treasury-Bills
(Central Registry of Treasury-
Bills)
Portugal Interbolsa Equity, Corporate +
Government Debt
Romania SNCDD - RASDAQ Equity
(National Company for Clearing,
Settlement and Depository for
Securities)
Budapest Stock Exchange Equity
Registry
National Bank of Romania Treasury-Bills
Russia MICEX GKO's
(Moscow Interbank Currency (Gosudarstvennye
Exchange) Kratkosrochnye
Obyazatelstva [T-
Bills])
OFZ's
(Obligatsyi
Federalnogo Zaima
[Federal Loan Bonds])s
<PAGE>
Singapore CDP Equity + Corporate
(Central Depository Pte. Ltd.) Debt and Malaysian
equities traded on CLOB
Monetary Authority of Singapore Government Debt
Slovak SCP Equity + Government
Republic (Stredisko Cennych Papiru) Debt
National Bank of Slovakia Treasury-Bills
So. Africa CD Corporate + Government
(Central Depository) Debt
So. Korea KSD Equity, Corporate +
Government Debt
Spain SCLV Equity + Corporate
(Servicio de Compensacion y Debt.
Liquidacion de Valores)
CBEO Government Debt
(Central Book Entry Office)
Sri Lanka CDS Equity
(Central Depository System
(Private) Ltd.)
Sweden VPC Equity, Corporate +
(Vardepapperscentralen AB) Government Debt
Switzerland SEGA Equity, Corporate +
(Schweizerische Effekten-Giro Government Debt
AG)
Taiwan TSCD Equity + Government
(Taiwan Securities Central Debt
Depository Co., Ltd.)
Thailand TSDC Equity, Corporate +
(Thailand Securities Depository Government Debt
Company Ltd.)
Tunisia STICODEVAM Equity
(Societe Tunisienne
Interprofessionnelle pour la
Compensation et le Depot des
Valeurs Mobilieres)
Ministry of Finance Government Debt
tradable on the stock
exchange (BTNBs)
Central Bank of Tunisia Government Debt not
tradable on the stock
exchange (BTCs)
<PAGE>
Turkey Takas Bank Equity + Corporate
Debt
Central Bank of Turkey Government Debt
United CREST Equity + Corp. Debt
Kingdom
CMO Sterling CDs & CP
(Central Moneymarket Office)
CGO Gilts
(Central Gilts Office)
United DTC Equity + Corporate
States (Depository Trust Company) Debt
PTC Mortgage Back Debt
(Participants Trust Company)
Fed Book-Entry Government Debt.
Zambia LuSE Equity + Government
(LuSE Central Shares Depository Debt
Ltd.)
Appendix 1-B
Information Regarding Country Risk
1. To aid Customer's board in its determinations regarding Country Risk,
Bank shall furnish board annually and upon the initial placing of Assets into a
country the following information (check items applicable):
A Opinions of local counsel concerning:
___ i. Whether applicable foreign law would restrict the access afforded
Customer's independent public accountants to books and records kept by
an eligible foreign custodian located in that country.
___ ii. Whether applicable foreign law would restrict the Customer's
ability to recover its assets in the event of the bankruptcy of an
Eligible Foreign Custodian located in that country.
___ iii. Whether applicable foreign law would restrict the Customer's
ability to recover assets that are lost while under the control of an
Eligible Foreign Custodian located in the country.
<PAGE>
B. Written information concerning:
___ i. The likelihood of expropriation,
nationalization, freezes, or confiscation of
Customer's assets.
___ ii. Whether difficulties in converting Customer's
cash and cash equivalents to U.S. dollars are
reasonably foreseeable.]
C. A market report with respect to the following topics:
(i) securities regulatory environment, (ii) foreign ownership restrictions,
(iii) foreign exchange, (iv) securities settlement and registration, (v)
taxation, and (vi) compulsory depositories (including depository
evaluation).
2. To aid Customer's board in monitoring Country Risk, Bank shall furnish
board the following additional information:
Market flashes, including with respect to changes in the information in
market reports.
<PAGE>
EX-99.B9BI
Exhibit 24 (b)(9)(b)(i)
AMENDMENT NO.7
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
2
<PAGE>
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of October 14, 1997
DELAWARE SERVICE COMPANY, INC.
/s/ David K. Downes
By: ---------------------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED -TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
/s/Wayne A. Stork
By: ---------------------------------------------------------------
Wayne A. Stork
Chairman
5
<PAGE>
EX-99.B9BII
Exhibit 24(b)(9)(b)(ii)
AMENDMENT NO. 8
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly The Fixed Income Portfolio)
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)
2
<PAGE>
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of December 18, 1997
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
---------------------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/ Wayne A. Stork
------------------------------------------------------------------
Wayne A. Stork
Chairman
5
<PAGE>
EX-99.B9BIII
Exhibit 24(b)(9)(b)(iii)
AMENDMENT NO. 9
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly The Fixed Income Portfolio)
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)
2
<PAGE>
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of March 31, 1998
DELAWARE SERVICE COMPANY, INC.
/s/David K. Downes
By: --------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
/s/ Wayne A. Stork
By: --------------------------------------------
Wayne A. Stork
Chairman
5
<PAGE>
EX-99.B10
Exhibit 24(b)(10)
Law Office
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000
Direct Dial: (215) 564-8115
November 24, 1998
Delaware Group Equity Funds IV, Inc.
1818 Market Street
Philadelphia, PA 19103
Re: Legal Opinion-Securities Act of 1933
Ladies and Gentlemen:
We have examined the Articles of Incorporation, as amended and
supplemented (the "Articles"), of Delaware Group Equity Funds IV Inc. (the
"Fund"), a series corporation organized under Maryland law, the By-Laws of the
Fund, and its proposed form of Share Certificates (if any), all as amended to
date, and the various pertinent corporate proceedings we deem material. We have
also examined the Notification of Registration and the Registration Statements
filed under the Investment Company Act of 1940 as amended, (the "Investment
Company Act") and the Securities Act of 1933 as amended, (the "Securities Act"),
all as amended to date, as well as other items we deem material to this opinion.
The Fund is authorized by the Articles to issue one billion
(1,000,000,000) shares of common stock at a par value of $0.01 and currently
issues shares of the Capital Appreciation Fund and DelCap Fund series. The
Articles also empower the Board to designate any additional series or classes
and allocate shares to such series or classes.
The Fund has filed with the U.S. Securities and Exchange
Commission, a registration statement under the Securities Act, which
registration statement is deemed to register an indefinite number of shares of
the Fund pursuant to the provisions of Section 24(f) of the Investment Company
Act. You have further advised us that the Fund has filed, and each year
hereafter will timely file, a Notice pursuant to Rule 24f-2 under the Investment
Company Act perfecting the registration of the shares sold by the Fund during
each fiscal year during which such registration of an indefinite number of
shares remains in effect.
<PAGE>
You have also informed us that the shares of the Fund have
been, and will continue to be, sold in accordance with the Fund's usual method
of distributing its registered shares, under which prospectuses are made
available for delivery to offerees and purchasers of such shares in accordance
with Section 5(b) of the Securities Act.
Based upon the foregoing information and examination, so long
as the Fund remains a valid and subsisting entity under the laws of its state of
organization, and the registration of an indefinite number of shares of the Fund
remains effective, the authorized shares of the Fund when issued for the
consideration set by the Board of Directors pursuant to the Articles, and
subject to compliance with Rule 24f-2, will be legally outstanding, fully-paid,
and non-assessable shares, and the holders of such shares will have all the
rights provided for with respect to such holding by the Articles and the laws of
the State of Maryland.
We hereby consent to the use of this opinion, in lieu of any
other, as an exhibit to the Registration Statement of the Fund, along with any
amendments thereto, covering the registration of the shares of the Fund under
the Securities Act and the applications, registration statements or notice
filings, and amendments thereto, filed in accordance with the securities laws of
the several states in which shares of the Fund are offered, and we further
consent to reference in the registration statement of the Fund to the fact that
this opinion concerning the legality of the issue has been rendered by us.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
BY: Bruce G. Leto
----------------
Bruce G. Leto
<PAGE>
EX-99.B11
Exhibit 24(b)(11)
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 24 to the Registration Statement (Form N-1A) (No.
33-442) of Delaware Group Equity Funds IV, Inc. of our reports dated October 30,
1998, included in the 1998 Annual Reports to shareholders.
Philadelphia, Pennsylvania
November 24, 1998
<PAGE>
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 (the "Fund") as of September 30, 1998, 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, 1998, 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, 1998, 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 its financial highlights
for each of the periods indicated therein, in conformity with generally accepted
accounting principles.
Philadelphia, Pennsylvania
October 30, 1998
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Equity Funds IV, Inc. - Capital Appreciation Fund
We have audited the accompanying statement of net assets of Delaware Group
Equity Funds IV, Inc. - Capital Appreciation Fund (the "Fund") as of September
30, 1998, and the related statement of operations for the year then ended, and
the statements of changes in net assets and 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, 1998, 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. - Capital Appreciation Fund at September
30, 1998, the results of its operations for the year then ended, and the changes
in its net assets and its financial highlights for each of the periods indicated
therein, in conformity with generally accepted accounting principles.
Philadelphia, Pennsylvania
October 30, 1998
<PAGE>
EX-99.B18AI
Exhibit 24(b)(18)(a)(i)
APPENDIX A
(As revised December 18, 1997)
List of Funds and Their Classes
1. Delaware Group Equity Funds I, Inc.
Delaware Fund
Delaware Fund A Class
Delaware Fund B Class
Delaware Fund C Class
Delaware Fund Institutional Class
Devon Fund
Devon Fund A Class
Devon Fund B Class
Devon Fund C Class
Devon Fund Institutional Class
2. Delaware Group Equity Funds II, Inc.
Decatur Income Fund
Decatur Income Fund A Class
Decatur Income Fund B Class
Decatur Income Fund C Class
Decatur Income Fund Institutional Class
Decatur Total Return Fund
Decatur Total Return Fund A Class
Decatur Total Return Fund B Class
Decatur Total Return Fund C Class
Decatur Total Return Fund Institutional Class
Blue Chip Fund (Added February 24, 1997)
Blue Chip Fund A Class
Blue Chip Fund B Class
Blue Chip Fund C Class
Blue Chip Fund Institutional Class
<PAGE>
Quantum Fund (Added February 24, 1997)
Quantum Fund A Class
Quantum Fund B Class
Quantum Fund C Class
Quantum Fund Institutional Class
3. Delaware Group Equity Funds III, Inc. (Formerly Trend)
Trend Fund
Trend Fund A Class
Trend Fund B Class
Trend Fund C Class
Trend Fund Institutional Class
4. Delaware Group Equity Funds IV, Inc.
DelCap Fund
DelCap Fund A Class
DelCap Fund B Class
DelCap Fund C Class
DelCap Fund Institutional Class
Capital Appreciation Fund (Added November 29, 1996)
Capital Appreciation Fund A Class
Capital Appreciation Fund B Class
Capital Appreciation Fund C Class
Capital Appreciation Fund Institutional Class
5. Delaware Group Equity Funds V, Inc. (Formerly Value)
Small Cap Value Fund (Formerly Value Fund)
Small Cap Value Fund A Class
Small Cap Value Fund B Class
Small Cap Value Fund C Class
Small Cap Value Fund Institutional Class
Retirement Income Fund (Added November 29, 1996)
Retirement Income Fund A Class
Retirement Income Fund B Class
Retirement Income Fund C Class
Retirement Income Fund Institutional Class
<PAGE>
6. Delaware Group Global & International Funds, Inc.
International Equity Series
International Equity Fund A Class
International Equity Fund B Class
International Equity Fund C Class
International Equity Fund Institutional Class
Global Bond Series
Global Bond Fund A Class
Global Bond Fund B Class
Global Bond Fund C Class
Global Bond Fund Institutional Class
Global Assets Series
Global Assets Fund A Class
Global Assets Fund B Class
Global Assets Fund C Class
Global Assets Fund Institutional Class
Emerging Markets Series (Added May 1, 1996)
Emerging Markets Fund A Class
Emerging Markets Fund B Class
Emerging Markets Fund C Class
Emerging Markets Fund Institutional Class
7. Delaware Group Income Funds, Inc.
Strategic Income Fund (Added September 30, 1996)
Strategic Income Fund A Class
Strategic Income Fund B Class
Strategic Income Fund C Class
Strategic Income Fund Institutional Class
8. Delaware Pooled Trust, Inc.
The Real Estate Investment Trust Portfolio (added October 14, 1997)
REIT Fund A Class
REIT Fund B Class
REIT Fund C Class
REIT Fund Institutional Class
<PAGE>
9. Delaware Group Foundation Funds (added December 18, 1997)
Income Portfolio
Income Fund A Class
Income Fund B Class
Income Fund C Class
Income Fund Institutional Class
Balanced Portfolio
Balanced Fund A Class
Balanced Fund B Class
Balanced Fund C Class
Balanced Fund Institutional Class
Growth Portfolio
Growth Fund A Class
Growth Fund B Class
Growth Fund C Class
Growth Fund Institutional Class
<PAGE>
EX-99.B19A
Exhibit 24(b)(19)(a)
POWER OF ATTORNEY
Each of the undersigned, a member of the Boards of Directors/Trustees
of the Delaware Group Funds listed on Exhibit A to this Power of Attorney,
hereby constitutes and appoints on behalf of each of the Funds listed on Exhibit
A, Wayne A. Stork, Jeffrey J. Nick and Walter P. Babich and any one of them
acting singly, his true and lawful attorneys-in-fact, in his name, place, and
stead, to execute and cause to be filed with the Securities and Exchange
Commission and other federal or state government agency or body, such
registration statements, and any and all amendments thereto as either of such
designees may deem to be appropriate under the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, and all other
applicable federal and state securities laws.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
this 18th day of December, 1997.
/s/Walter P. Babich /s/Thomas F. Madison
- --------------------------- --------------------------
Walter P. Babich Thomas F. Madison
/s/Anthony D. Knerr /s/Jeffrey J. Nick
- --------------------------- --------------------------
Anthony D. Knerr Jeffrey J. Nick
/s/Ann R. Leven /s/Charles E. Peck
- --------------------------- --------------------------
Ann R. Leven Charles E. Peck
/s/W. Thacher Longstreth /s/Wayne A. Stork
- --------------------------- --------------------------
W. Thacher Longstreth Wayne A. Stork
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE GROUP FUNDS
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP FOUNDATION FUNDS
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
VOYAGEUR TAX FREE FUNDS, INC.
VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC.
VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC.
VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC.
<PAGE>
EX-99.B19B
Exhibit 24(b)(19)(b)
POWER OF ATTORNEY
The undersigned, a member of the Boards of Directors/Trustees of the
Delaware Group Funds listed on Exhibit A to this Power of Attorney, hereby
constitutes and appoints on behalf of each of the Funds listed on Exhibit A,
Wayne A. Stork, Jeffrey J. Nick and Walter P. Babich and any one of them acting
singly, his true and lawful attorneys-in-fact, in his name, place, and stead, to
execute and cause to be filed with the Securities and Exchange Commission and
other federal or state government agency or body, such registration statements,
and any and all amendments thereto as either of such designees may deem to be
appropriate under the Securities Act of 1933, as amended, the Investment Company
Act of 1940, as amended, and all other applicable federal and state securities
laws.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
this 16th day of April, 1998.
/s/ John H. Durham
- ------------------
John H. Durham
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE GROUP FUNDS
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP FOUNDATION FUNDS
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000778108
<NAME> DELAWARE GROUP EQUITY FUNDS IV, INC.
<SERIES>
<NUMBER> 011
<NAME> DELCAP FUND A CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 580,851,566
<INVESTMENTS-AT-VALUE> 688,039,550
<RECEIVABLES> 5,290,024
<ASSETS-OTHER> 13,925
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 693,342,869
<PAYABLE-FOR-SECURITIES> 7,305,796
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,057,433
<TOTAL-LIABILITIES> 9,363,228
<SENIOR-EQUITY> 47,248
<PAID-IN-CAPITAL-COMMON> 472,435,707
<SHARES-COMMON-STOCK> 25,218,084
<SHARES-COMMON-PRIOR> 25,294,733
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 104,308,702
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 107,187,984
<NET-ASSETS> 683,979,641
<DIVIDEND-INCOME> 1,640,425
<INTEREST-INCOME> 2,217,062
<OTHER-INCOME> 156,233
<EXPENSES-NET> 11,571,544
<NET-INVESTMENT-INCOME> (7,557,824)
<REALIZED-GAINS-CURRENT> 141,132,991
<APPREC-INCREASE-CURRENT> (183,147,362)
<NET-CHANGE-FROM-OPS> (49,572,195)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 148,118,430
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 32,840,217
<NUMBER-OF-SHARES-REDEEMED> 38,439,982
<SHARES-REINVESTED> 5,523,116
<NET-CHANGE-IN-ASSETS> (241,637,745)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 147,045,100
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,278,318
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11,571,544
<AVERAGE-NET-ASSETS> 701,702,994
<PER-SHARE-NAV-BEGIN> 30.450
<PER-SHARE-NII> (0.237)
<PER-SHARE-GAIN-APPREC> (1.873)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (5.870)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22.470
<EXPENSE-RATIO> 1.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000778108
<NAME> DELAWARE GROUP EQUITY FUNDS IV, INC.
<SERIES>
<NUMBER> 012
<NAME> DELCAP FUND B CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 580,851,566
<INVESTMENTS-AT-VALUE> 688,039,550
<RECEIVABLES> 5,290,024
<ASSETS-OTHER> 13,925
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 693,342,869
<PAYABLE-FOR-SECURITIES> 7,305,796
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,057,433
<TOTAL-LIABILITIES> 9,363,228
<SENIOR-EQUITY> 47,248
<PAID-IN-CAPITAL-COMMON> 472,435,707
<SHARES-COMMON-STOCK> 852,036
<SHARES-COMMON-PRIOR> 696,015
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 104,308,702
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 107,187,984
<NET-ASSETS> 683,979,641
<DIVIDEND-INCOME> 1,640,425
<INTEREST-INCOME> 2,217,062
<OTHER-INCOME> 156,233
<EXPENSES-NET> 11,571,544
<NET-INVESTMENT-INCOME> (7,557,824)
<REALIZED-GAINS-CURRENT> 141,132,991
<APPREC-INCREASE-CURRENT> (183,147,362)
<NET-CHANGE-FROM-OPS> (49,572,195)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 148,118,430
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 239,372
<NUMBER-OF-SHARES-REDEEMED> 255,596
<SHARES-REINVESTED> 172,245
<NET-CHANGE-IN-ASSETS> (241,637,745)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 147,045,100
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,278,318
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11,571,544
<AVERAGE-NET-ASSETS> 701,702,994
<PER-SHARE-NAV-BEGIN> 29.750
<PER-SHARE-NII> (0.408)
<PER-SHARE-GAIN-APPREC> (1.792)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (5.870)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.680
<EXPENSE-RATIO> 2.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000778108
<NAME> DELAWARE GROUP EQUITY FUNDS IV, INC.
<SERIES>
<NUMBER> 013
<NAME> DELCAP FUND C CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 580,851,566
<INVESTMENTS-AT-VALUE> 688,039,550
<RECEIVABLES> 5,290,024
<ASSETS-OTHER> 13,925
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 693,342,869
<PAYABLE-FOR-SECURITIES> 7,305,796
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,057,433
<TOTAL-LIABILITIES> 9,363,228
<SENIOR-EQUITY> 47,248
<PAID-IN-CAPITAL-COMMON> 472,435,707
<SHARES-COMMON-STOCK> 162,923
<SHARES-COMMON-PRIOR> 112,643
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 104,308,702
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 107,187,984
<NET-ASSETS> 683,979,641
<DIVIDEND-INCOME> 1,640,425
<INTEREST-INCOME> 2,217,062
<OTHER-INCOME> 156,233
<EXPENSES-NET> 11,571,544
<NET-INVESTMENT-INCOME> (7,557,824)
<REALIZED-GAINS-CURRENT> 141,132,991
<APPREC-INCREASE-CURRENT> (183,147,362)
<NET-CHANGE-FROM-OPS> (49,572,195)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 148,118,430
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 70,658
<NUMBER-OF-SHARES-REDEEMED> 47,001
<SHARES-REINVESTED> 26,623
<NET-CHANGE-IN-ASSETS> (241,637,745)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 147,045,100
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,278,318
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11,571,544
<AVERAGE-NET-ASSETS> 701,702,994
<PER-SHARE-NAV-BEGIN> 30.050
<PER-SHARE-NII> (0.411)
<PER-SHARE-GAIN-APPREC> (1.819)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (5.870)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.950
<EXPENSE-RATIO> 2.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000778108
<NAME> DELAWARE GROUP EQUITY FUNDS IV, INC.
<SERIES>
<NUMBER> 014
<NAME> DELCAP FUND INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 580,851,566
<INVESTMENTS-AT-VALUE> 688,039,550
<RECEIVABLES> 5,290,024
<ASSETS-OTHER> 13,925
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 693,342,869
<PAYABLE-FOR-SECURITIES> 7,305,796
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,057,433
<TOTAL-LIABILITIES> 9,363,228
<SENIOR-EQUITY> 47,248
<PAID-IN-CAPITAL-COMMON> 472,435,707
<SHARES-COMMON-STOCK> 4,127,042
<SHARES-COMMON-PRIOR> 4,234,162
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 104,308,702
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 107,187,984
<NET-ASSETS> 683,979,641
<DIVIDEND-INCOME> 1,640,425
<INTEREST-INCOME> 2,217,062
<OTHER-INCOME> 156,233
<EXPENSES-NET> 11,571,544
<NET-INVESTMENT-INCOME> (7,557,824)
<REALIZED-GAINS-CURRENT> 141,132,991
<APPREC-INCREASE-CURRENT> (183,147,362)
<NET-CHANGE-FROM-OPS> (49,572,195)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 148,118,430
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 707,764
<NUMBER-OF-SHARES-REDEEMED> 1,757,200
<SHARES-REINVESTED> 942,315
<NET-CHANGE-IN-ASSETS> (241,637,745)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 147,045,100
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,278,318
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11,571,544
<AVERAGE-NET-ASSETS> 701,702,994
<PER-SHARE-NAV-BEGIN> 31.010
<PER-SHARE-NII> (0.160)
<PER-SHARE-GAIN-APPREC> (1.910)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (5.870)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.070
<EXPENSE-RATIO> 2.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000778108
<NAME> DELAWARE GROUP EQUITY FUNDS IV, INC.
<SERIES>
<NUMBER> 021
<NAME> CAPITAL APPRECIATION FUND A CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 2,125,520
<INVESTMENTS-AT-VALUE> 2,254,569
<RECEIVABLES> 52,227
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,306,796
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68,234
<TOTAL-LIABILITIES> 68,234
<SENIOR-EQUITY> 213
<PAID-IN-CAPITAL-COMMON> 2,130,160
<SHARES-COMMON-STOCK> 1,337
<SHARES-COMMON-PRIOR> 799
<ACCUMULATED-NII-CURRENT> 15,956
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 36,816
<ACCUM-APPREC-OR-DEPREC> 129,049
<NET-ASSETS> 2,238,562
<DIVIDEND-INCOME> 24,083
<INTEREST-INCOME> 13,996
<OTHER-INCOME> 0
<EXPENSES-NET> 18,005
<NET-INVESTMENT-INCOME> 20,074
<REALIZED-GAINS-CURRENT> 44,489
<APPREC-INCREASE-CURRENT> (231,381)
<NET-CHANGE-FROM-OPS> (166,818)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17,963
<DISTRIBUTIONS-OF-GAINS> 99,508
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 619
<NUMBER-OF-SHARES-REDEEMED> 125
<SHARES-REINVESTED> 44
<NET-CHANGE-IN-ASSETS> (162,706)
<ACCUMULATED-NII-PRIOR> 13,845
<ACCUMULATED-GAINS-PRIOR> 18,203
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 18,019
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 47,449
<AVERAGE-NET-ASSETS> 2,391,576
<PER-SHARE-NAV-BEGIN> 10.160
<PER-SHARE-NII> 0.082
<PER-SHARE-GAIN-APPREC> (0.755)
<PER-SHARE-DIVIDEND> (0.076)
<PER-SHARE-DISTRIBUTIONS> (0.421)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.990
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000778108
<NAME> DELAWARE GROUP EQUITY FUNDS IV, INC.
<SERIES>
<NUMBER> 022
<NAME> CAPITAL APPRECIATION FUND B CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 2,125,520
<INVESTMENTS-AT-VALUE> 2,254,569
<RECEIVABLES> 52,227
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,306,796
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68,234
<TOTAL-LIABILITIES> 68,234
<SENIOR-EQUITY> 213
<PAID-IN-CAPITAL-COMMON> 2,130,160
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 15,956
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 36,816
<ACCUM-APPREC-OR-DEPREC> 129,049
<NET-ASSETS> 2,238,562
<DIVIDEND-INCOME> 24,083
<INTEREST-INCOME> 13,996
<OTHER-INCOME> 0
<EXPENSES-NET> 18,005
<NET-INVESTMENT-INCOME> 20,074
<REALIZED-GAINS-CURRENT> 44,489
<APPREC-INCREASE-CURRENT> (231,381)
<NET-CHANGE-FROM-OPS> (166,818)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (162,706)
<ACCUMULATED-NII-PRIOR> 13,845
<ACCUMULATED-GAINS-PRIOR> 18,203
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 18,019
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 47,449
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000778108
<NAME> DELAWARE GROUP EQUITY FUNDS IV, INC.
<SERIES>
<NUMBER> 023
<NAME> CAPITAL APPRECIATION FUND C CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 2,125,520
<INVESTMENTS-AT-VALUE> 2,254,569
<RECEIVABLES> 52,227
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,306,796
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68,234
<TOTAL-LIABILITIES> 68,234
<SENIOR-EQUITY> 213
<PAID-IN-CAPITAL-COMMON> 2,130,160
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 15,956
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 36,816
<ACCUM-APPREC-OR-DEPREC> 129,049
<NET-ASSETS> 2,238,562
<DIVIDEND-INCOME> 24,083
<INTEREST-INCOME> 13,996
<OTHER-INCOME> 0
<EXPENSES-NET> 18,005
<NET-INVESTMENT-INCOME> 20,074
<REALIZED-GAINS-CURRENT> 44,489
<APPREC-INCREASE-CURRENT> (231,381)
<NET-CHANGE-FROM-OPS> (166,818)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (162,706)
<ACCUMULATED-NII-PRIOR> 13,845
<ACCUMULATED-GAINS-PRIOR> 18,203
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 18,019
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 47,449
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000778108
<NAME> DELAWARE GROUP EQUITY FUNDS IV, INC.
<SERIES>
<NUMBER> 024
<NAME> CAPITAL APPRECIATION FUND INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 2,125,520
<INVESTMENTS-AT-VALUE> 2,254,569
<RECEIVABLES> 52,227
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,306,796
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68,234
<TOTAL-LIABILITIES> 68,234
<SENIOR-EQUITY> 213
<PAID-IN-CAPITAL-COMMON> 2,130,160
<SHARES-COMMON-STOCK> 247,790
<SHARES-COMMON-PRIOR> 235,520
<ACCUMULATED-NII-CURRENT> 15,956
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 36,816
<ACCUM-APPREC-OR-DEPREC> 129,049
<NET-ASSETS> 2,238,562
<DIVIDEND-INCOME> 24,083
<INTEREST-INCOME> 13,996
<OTHER-INCOME> 0
<EXPENSES-NET> 18,005
<NET-INVESTMENT-INCOME> 20,074
<REALIZED-GAINS-CURRENT> 44,489
<APPREC-INCREASE-CURRENT> (231,381)
<NET-CHANGE-FROM-OPS> (166,818)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17,963
<DISTRIBUTIONS-OF-GAINS> 99,508
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14,862
<NUMBER-OF-SHARES-REDEEMED> 14,862
<SHARES-REINVESTED> 12,270
<NET-CHANGE-IN-ASSETS> (162,706)
<ACCUMULATED-NII-PRIOR> 13,845
<ACCUMULATED-GAINS-PRIOR> 18,203
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 18,019
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 47,449
<AVERAGE-NET-ASSETS> 2,391,576
<PER-SHARE-NAV-BEGIN> 10.160
<PER-SHARE-NII> 0.082
<PER-SHARE-GAIN-APPREC> (0.755)
<PER-SHARE-DIVIDEND> (0.076)
<PER-SHARE-DISTRIBUTIONS> (0.421)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.990
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
